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AES is in the process of finalizing a cogeneration project located in California that will displace 80,000,000 Kwh's of electricity per year currently being provided by the local utility.

The "cogeneration power purchase agreement" (Cogen PPA) provides for AES to be the owner and operator of cogen systems for on-site, parallel to the grid electric generation for qualifying businesses. cogeneration AES secures long term "take or pay" contracts with the client, cost guarantee's for the equipment and construction, long term performance guarantee's from 3rd party operation or maintenance vendors, availability guarantee's for the installations and long term natural gas strip's in order to fix the expenses while at the same time providing a fixed cost to the client. This concept provides the client with an alternative energy solution that will protect against price volatility while delivering more reliable energy distribution.

The Cogen PPA is designed to provide cost effective alternative energy solutions through the implementation of Distributed Generation Systems. These systems consist of natural gas powered reciprocating engines that are capable of producing both electrical and thermal energy and are being coupled with absorption chillers to provide cooling.

The Cogen PPA is an agrreement that is entered into between the client and AES. The agreement allows the generation and subsequent purchase of a fixed quantity of electric and thermal energy at fixed prices over a fixed term.

Following the execution of the agreement, AES will install, own, operate, and maintain the Distributed Generation System at no cost to the client. The client only is required to purchase the same amount of electricity being used at a site at a lesser price than it is paying today.

While certainly not a new field, DG has been gaining momentum as a result of well-grounded concerns over power reliability, security and the potential for significant economic benefits.