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Published: 2008-03-26

Subordinated Insurance Assignment - Wuhu Shaoda Electric Power Development Co. Ltd. and AES China Holdings Co. Ltd.



             WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
                                   as Borrower




                                       and




                     AES CHINA HOLDINGS COMPANY (L) LIMITED
                                as Junior Lender









                        SUBORDINATED INSURANCE ASSIGNMENT







                             CHADBOURNE & PARKE LLP
                            AMERICAN ATTORNEYS AT LAW

                           SUITE 3704, PEREGRINE TOWER
                           LIPPO CENTRE, 89 QUEENSWAY
                                    HONG KONG

                                    CONTENTS


Number    Clause Heading                                                   Page
- ------    --------------                                                   ----

1.        Interpretation.....................................................1
2.        Assignment of Insurances...........................................2
3.        Continuing Security................................................3
4.        Representations and Warranties.....................................3
5.        Undertakings.......................................................4
6.        Borrower's Liability...............................................6
7.        Proceeds of Insurances.............................................6
8.        Taxes and Other Deductions.........................................7
9.        Costs, Charges and Expenses........................................7
10.       Indemnity..........................................................8
11.       Further Assurance..................................................8
12.       Power of Attorney..................................................9
13.       Suspense Account...................................................9
14.       Waiver and Severability............................................9
15.       Miscellaneous.....................................................10
16.       Assignment........................................................11
17.       Notices...........................................................11
18.       Governing Law and Jurisdiction....................................12
19.       Subordinated Security.............................................13



Schedule 1    Form of Notice................................................14
Schedule 2    Form of Loss Payable and Notice of Cancellation Clause........16


Execution Block

THIS DEED is made on the                  day of                         1996
                         ----------------        ------------------------


BETWEEN:

(1)        WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity
           joint venture company formed under the Law of the People's Republic
           of China on Joint Ventures Using Chinese and Foreign Investment, with
           its registered office at Commercial Office Building, West Huangshan
           Road, Wuhu, Anhui Province, People's Republic of China (the
           'Borrower'); and

(2)        AES CHINA HOLDINGS COMPANY (L) LIMITED, a Labuan company of Lot A,
           Level 3, Wisma Oceanic, Jalan OKK Awang Besar, 87007, Federal
           Territory of Labuan, Malaysia (the 'Junior Lender').


WHEREAS:

(A)        By the AES Loan Agreement (as defined below), the Junior Lender has
           agreed to make available to the Borrower a term loan facility of up
           to eighteen million Dollars (US$18,000,000), upon the terms set out
           therein.

(B)        It is a condition precedent to the Junior Lender making the Facility
           available to the Borrower that the Borrower enters into this Deed.


NOW THIS DEED WITNESSES as follows:

1.         INTERPRETATION

1.01       Definitions and Construction.  In this Deed, unless the context 
           requires otherwise:

           (a)      terms and expressions defined in or construed for the
                    purposes of the AES Loan Agreement shall have the same
                    meanings or be construed in the same manner when used in
                    this Deed;

           (b)      'AES Loan Agreement' means the loan agreement dated --------
                    1996 and made between the Junior Lender and the Borrower;

           (c)      'Insurances' means all policies or contracts of insurance
                    which are now or may hereafter be effected in respect of the
                    Insured Assets or any part thereof (but expressly excluding
                    any third party liability insurances and any other
                    insurances arranged solely for the benefit of third parties)
                    and all benefits and proceeds thereof, including all claims
                    of whatever nature and returns of premiums;


                                       1


           (d)      'Insured Assets' means the buildings, plant, equipment,
                    machinery, spare parts and other assets owned by the
                    Borrower and used in connection with the Project; and

           (e)      'Junior Secured Indebtedness' means all and any sums
                    (whether principal, interest, fees or otherwise) which are
                    or at any time may become payable by the Borrower under the
                    AES Loan Agreement or any Subordinated Security Document to
                    which it is a party and all other monies hereby secured.

1.02       Successors and Assigns. The expressions 'Borrower' and 'Junior
           Lender' shall where the context permits include their respective
           successors and permitted assigns and any persons deriving title under
           them.

1.03       AES Loan Agreement. To the extent applicable and required by relevant
           law, the terms and conditions of the AES Loan Agreement shall be
           deemed to be incorporated into this Deed by reference and this Deed
           shall be read and construed as if such terms and conditions had been
           set out in full herein.

1.04       Miscellaneous. In this Deed, unless the context requires otherwise,
           references to statutory provisions shall be construed as references
           to those provisions as replaced, amended, modified or re-enacted from
           time to time; words importing the singular include the plural and
           vice versa and words importing a gender include every gender;
           references to this Deed, the AES Loan Agreement, any other
           Subordinated Security Document or any other document referred to
           herein shall be construed as references to such document as the same
           may be amended or supplemented (provided that any required consent or
           approval for such amendment or supplement has been obtained) from
           time to time; unless otherwise stated, references to Clauses are to
           clauses of this Deed. Clause headings are inserted for reference only
           and shall be ignored in construing this Deed.


2.         ASSIGNMENT OF INSURANCES

2.01       Charge and Assignment. In consideration of the Facility being made
           available by the Junior Lender to the Borrower upon the terms and
           conditions of the AES Loan Agreement, the Borrower with full title
           guarantee assigns and grants to the Junior Lender a third-priority
           security interest in absolutely all the Borrower's right, title,
           interest and benefit in and to the Insurances upon the terms herein
           set out as a continuing security for the due and punctual payment of
           the Junior Secured Indebtedness and the due and punctual performance
           and observance by the Borrower of all other obligations of the
           Borrower contained in the AES Loan Agreement or any Subordinated
           Security Document to which it is a party. THIS ASSIGNMENT IS
           SUBORDINATE IN RIGHT TO THE CHARGES CREATED TO SECURE THE OBLIGATIONS
           OF THE

                                       2
 



           BORROWER UNDER THE SENIOR LOAN AGREEMENT, AND THE ENFORCEMENT
           OF THIS ASSIGNMENT SHALL BE LIMITED IN ACCORDANCE WITH THE PROVISIONS
           OF THE SENIOR SUBORDINATION AGREEMENT AND THE PRIORITY DEED.

2.02       Notice. The Borrower will, forthwith upon the execution of this Deed
           (or, if later, upon any policy or contract of insurance comprised in
           the Insurances coming into force), give notice of the assignment
           herein contained to and obtain an acknowledgment from the relevant
           insurers substantially in the form set out in Schedule 1 or, if not
           in that form, in a form satisfactory to the Junior Lender.

2.03       Dealings with Parties. Notwithstanding the assignment herein
           contained but otherwise subject to the terms of this Deed, the Junior
           Lender authorizes the Borrower to continue to deal with the other
           parties to the Insurances and each of them in relation thereto as if
           the Borrower remained solely entitled to all the rights, title,
           interest and benefits thereunder but, save as herein provided, not
           directly to receive any moneys payable under the Insurances, provided
           that if an Event of Default or prospective Event of Default occurs
           and the Junior Lender gives written notice thereof to the Borrower
           the foregoing authority shall immediately cease to have effect.


3.         CONTINUING SECURITY

           This Deed shall be a continuing security and shall remain in full
           force and effect until the Junior Secured Indebtedness has been paid
           in full, notwithstanding the insolvency or liquidation or any
           incapacity or change in the constitution or status of the Borrower or
           any other person or any intermediate settlement of account or other
           matter whatsoever. This Deed is in addition to, and independent of,
           any Charge, guarantee or other security or right or remedy now or at
           any time hereafter held by or available to the Junior Lender.


4.         REPRESENTATIONS AND WARRANTIES

4.01       Representations and Warranties.  The Borrower represents and warrants
           to the Junior Lender that:

           (a)      the Insurances are beneficially owned by the Borrower free
                    from any Charge except as created (i) under or pursuant to
                    this Deed, (ii) to secure the obligations of the Borrower
                    under the Senior Loan Agreement and (iii) in respect of the
                    Guarantee;

           (b)      the Insurances are valid and in full force and effect and
                    are not void or voidable; and



                                      3


           (c)      all premiums and other monies (if any) payable in respect of
                    the Insurances have been duly paid and all covenants, terms
                    and conditions contained in the Insurances have been duly
                    observed and performed.

4.02       Continuing Representation and Warranty. The Borrower also represents
           and warrants to and undertakes with the Junior Lender that the
           foregoing representations and warranties will be true and accurate
           throughout the continuance of this Deed with reference to the facts
           and circumstances existing from time to time.


5.         UNDERTAKINGS

           The Borrower undertakes and agrees with the Junior Lender throughout
           the continuance of this Deed and so long as the Junior Secured
           Indebtedness or any part thereof remains owing that the Borrower
           will, unless the Junior Lender otherwise agrees in writing:

           (a)     procure that a loss payable and notice of cancellation
                   clause, substantially in the form of Schedule 2, and in any
                   event in a form satisfactory to the Junior Lender, is
                   included in each of the policies or contracts of insurance
                   comprised in the Insurances;

           (b)      procure that, on or prior to any policy or contract of
                    insurance comprised in the Insurances coming into force (or,
                    if later, the execution of this Deed), the insurance brokers
                    and insurers in respect of such insurance give their written
                    consent to the assignment pursuant to this Deed and their
                    written undertaking to the Junior Lender:

                    (i)      promptly to advise the Junior Lender:

                             (a)     if any insurer  cancels, purports to cancel
                                     or gives  notice of  cancellation of such 
                                     insurance;

                             (b)     of any  purported or actual alteration in 
                                     or  termination  or expiry of such
                                     insurance;

                             (c)     of any default in the payment of any 
                                     premium or call; and

                             (d)     of any act or  omission  or of any event of
                                     which that  broker or insurer  has
                                     knowledge which might  invalidate or render
                                     unenforceable in whole or in part
                                     such insurance; and

                    (ii)     to make any payments in respect of such insurance 
                             in accordance  with the loss payable
                             provisions set out in Schedule 2; and



                                       4


                    (iii)    to hold all policies, cover notes and other
                             relevant documents issued or hereafter to be issued
                             in respect of such insurance for the benefit of the
                             Junior Lender;

           (c)      pay all premiums and other amounts due in respect of the
                    Insurances (and provide the Junior Lender with receipts
                    therefor) and deliver to the Junior Lender copies of all
                    policies, cover notes and other relevant documents relating
                    to the Insurances, provided that the Borrower shall arrange
                    for the delivery of the originals of such documents to the
                    Junior Lender as soon as all amounts owed to the Senior
                    Financing Parties under the Senior Loan Agreement have been
                    paid in full;

           (d)      take all steps which may be necessary or expedient to keep
                    the Insurances in full force and effect and protect the
                    interests of the Borrower and the Junior Lender in the
                    Insurances;

           (e)      renew all policies or contracts of insurance comprised in
                    the Insurances no later than fourteen (14) days before the
                    expiry of such policies or contracts;

           (f)      reimburse on demand to the Junior Lender any amount paid by
                    the Junior Lender to any insurer of any of the Insurances in
                    respect of any premium or other amount due to such insurer
                    in respect of the Insurances, together with interest thereon
                    from the date of payment to the date of reimbursement at the
                    rate calculated in accordance with clause 15 of the AES Loan
                    Agreement;

            (g)     do or permit to be done every act or thing which the Junior
                    Lender may from time to time require for the purpose of
                    enforcing the rights of the Junior Lender hereunder;

           (h)      contemporaneously with the making of any claim in excess of
                    fifty thousand Dollars (US$50,000) under the Insurances,
                    notify the Junior Lender in writing of the same, such
                    notification to be accompanied by a certified true copy of
                    any form(s) and document(s) submitted to the relevant
                    insurer(s) in respect of such claim and provide such other
                    details in connection with the claim as the Junior Lender
                    may request;

           (i)      not, without the prior written consent of the Junior Lender,
                    waive, release, settle, compromise or abandon any claim
                    under the Insurances or do or omit to do any other act or
                    thing whereby the recovery in full of any amounts in respect
                    of the Insurances as and when they become payable may be
                    impeded;

           (j)      not create or attempt or agree to create or permit to arise
                    or exist any Charge over all or any part of the Insurances
                    or any interest therein or otherwise assign, deal with or
                    dispose of all or any part

                                       5
 

                    of the Insurances (except under
                    or pursuant to this Deed and to secure the obligations of
                    the Borrower under the Senior Loan Agreement and the CPIL
                    Security);

           (k)      except for the relevant Charges created to secure the
                    obligations of the Borrower under the Senior Loan Agreement
                    and the CPIL Security, not do or cause or permit to be done
                    anything which may in any way depreciate, jeopardize or
                    otherwise prejudice the value of the Junior Lender's
                    security hereunder.


6.         BORROWER'S LIABILITY

           Notwithstanding the assignment herein contained, the Borrower shall
           remain liable under the Insurances to observe and perform all the
           obligations assumed by it thereunder and the Junior Lender shall have
           no obligation or liability thereunder. The Junior Lender shall not be
           obliged to make any enquiry as to the nature or sufficiency of any
           payment received by it or to make any claim or take any other action
           to collect any monies or to enforce any rights and benefits hereby
           assigned.


7.         PROCEEDS OF INSURANCES

           If at the time when any insurance proceeds become due and payable,
           any Event of Default or prospective Event of Default has occurred,
           the Junior Lender shall have the right to apply such proceeds in or
           towards satisfaction of the Junior Secured Indebtedness in such
           manner as it may determine. If no Event of Default or prospective
           Event of Default has then occurred:

           (a)      the proceeds of insurance in respect of a claim for an
                    amount not exceeding five hundred thousand Dollars
                    (US$500,000) (or the equivalent in any other currency) shall
                    be payable to the Borrower or (if so required under the
                    terms of the relevant policy) to Anhui Power and shall be
                    applied by the Borrower or Anhui Power, as the case may be,
                    in fully repairing, rebuilding or reinstating that part of
                    the Insured Assets destroyed or damaged and, in any event,
                    the Borrower shall be responsible for ensuring that such
                    proceeds are so applied; and

           (b)      the proceeds of insurance in respect of a claim for an
                    amount exceeding five hundred thousand Dollars (US$500,000)
                    (or the equivalent in any other currency) shall be payable
                    to the Security Agent until such time as all amounts owed
                    under the Senior Loan Agreement have been paid in full and
                    to the Junior Lender thereafter. The Security Agent or the
                    Junior Lender, as the case may be, shall release such
                    proceeds to the Borrower for the purpose of repairing or
                    reinstating the loss or damage in respect of which such
                    proceeds were paid or, at the option of the Security


                                       6


                    Agent or the Junior Lender, as the case may be, such 
                    proceeds shall be paid directly to the person who has made 
                    or is to make such repairs or reinstatement against invoices
                    therefor.


8.         TAXES AND OTHER DEDUCTIONS

           All sums payable by the Borrower under this Deed shall be paid in
           full without set-off or counterclaim or any restriction or condition
           and free and clear of any tax (other than an Excluded Tax) or other
           deductions or withholdings of any nature. If the Borrower or any
           other person is required by any law or regulation to make any
           deduction or withholding (on account of tax (other than an Excluded
           Tax) or otherwise) from any payment for the account of the Junior
           Lender, the Borrower shall, together with such payment, pay such
           additional amount as will ensure that the Junior Lender receives
           (free and clear of any tax (other than an Excluded Tax) or other
           deductions or withholdings) the full amount which it would have
           received if no such deduction or withholding had been required. The
           Borrower shall promptly forward to the Junior Lender copies of
           official receipts or other evidence showing that the full amount of
           any such deduction or withholding has been paid over to the relevant
           taxation or other authority.


9.         COSTS, CHARGES AND EXPENSES

           The Borrower shall from time to time forthwith on demand pay to or
           reimburse the Junior Lender for:

           (a)      all reasonable costs, charges and expenses (including legal
                    and other fees on a full indemnity basis and out of pocket
                    expenses) reasonably incurred by the Junior Lender in
                    connection with the preparation, execution and registration
                    of any amendment to or extension of, or the giving of any
                    consent or waiver in connection with this Deed; and

           (b)      all reasonable costs, charges and expenses (including legal
                    and other fees on a full indemnity basis and out of pocket
                    expenses) reasonably incurred by the Junior Lender in
                    exercising any of its rights or powers hereunder or in suing
                    for or seeking to recover any sums due hereunder or
                    otherwise preserving or enforcing its rights hereunder or in
                    defending any claims brought against it in respect of this
                    Deed or in releasing or re-assigning this Deed upon payment
                    of all monies hereby secured and until payment of the same
                    in full, all such costs, charges and expenses shall be
                    secured by this Deed.

           To the extent practicable, the Junior Lender shall consult the
           Borrower before incurring any major expenditure.



                                       7


10.        INDEMNITY

10.01      General Indemnity. The Borrower shall indemnify the Junior Lender
           against all losses, liabilities, damages, costs and expenses incurred
           by it in the execution or performance of the terms and conditions
           hereof and against all actions, proceedings, claims, demands, costs,
           charges and expenses which may be incurred, sustained or arise in
           respect of the non-performance or non-observance of any of the
           undertakings and agreements on the part of the Borrower herein
           contained or in respect of any matter or thing done or omitted, on
           the part of the Borrower, relating in any way whatsoever to the
           Insurances.

10.02      Currency Indemnity. Dollars shall be the currency of account and of
           payment in respect of sums payable under this Deed. If an amount is
           received in another currency, pursuant to a judgment or order or in
           the liquidation of the Borrower or otherwise, the Borrower's
           obligations under this Deed shall be discharged only to the extent
           that the Junior Lender may purchase Dollars with such other currency
           in accordance with normal banking procedures upon receipt of such
           amount. If the amount in Dollars which may be so purchased, after
           deducting any costs of exchange and any other related costs, is less
           than the relevant sum payable under this Deed, the Borrower shall
           indemnify the Junior Lender against the shortfall. This indemnity
           shall be an obligation of the Borrower independent of and in addition
           to its other obligations under this Deed and shall take effect
           notwithstanding any time or other concession granted to the Borrower
           or any judgment or order being obtained or the filing of any claim in
           the liquidation, dissolution or bankruptcy (or analogous process) of
           the Borrower.

10.03      Payment and Security. The Junior Lender may retain and pay out of any
           money in the Junior Lender's hands all sums necessary to effect the
           indemnity contained in this Clause 10.03 and all sums payable by the
           Borrower under this Clause 10.03 shall form part of the monies hereby
           secured.



11.        FURTHER ASSURANCE

11.01      Further Assurance. The Borrower shall at any time and from time to
           time (whether before or after the security hereby created shall have
           become enforceable) execute such further legal or other mortgages,
           charges or assignments and do all such transfers, assurances, acts
           and things as the Junior Lender may require over or in respect of the
           Insurances to secure all monies, obligations and liabilities hereby
           covenanted to be paid or hereby secured or for the purposes of
           perfecting and completing any assignment of the Junior Lender's
           rights, benefits or obligations hereunder and the Borrower shall also
           give all notices, orders and directions which the Junior Lender may
           require.

                                       8

11.02      Enforcement of Junior Lender's Rights. Subject to the Senior
           Subordination Agreement and the Priority Deed, the Borrower will do
           or permit to be done everything which the Junior Lender may from time
           to time require to be done for the purpose of enforcing the Junior
           Lender's rights hereunder and will allow the name of the Borrower to
           be used as and when required by the Junior Lender for that purpose.


12.        POWER OF ATTORNEY

           The Borrower irrevocably appoints the Junior Lender by way of
           security to be its attorney-in-fact (with full power of substitution)
           and in its name or otherwise on its behalf and as its act and deed to
           sign, seal, execute, deliver, perfect and do all deeds, instruments,
           acts and things which may be required or which the Junior Lender
           shall think proper or expedient for carrying out any obligations
           imposed on the Borrower hereunder or for exercising any of the powers
           hereby conferred or for giving to the Junior Lender the full benefit
           of this security and so that the appointment hereby made shall
           operate to confer on the Junior Lender authority to do on behalf of
           the Borrower anything which it can lawfully do by an
           attorney-in-fact. The Borrower ratifies and confirms and agrees to
           ratify and confirm any deed, instrument, act or thing which such
           attorney-in-fact or substitute may execute or do.


13.        SUSPENSE ACCOUNT

           The Junior Lender may place and keep any monies received by virtue of
           this Deed (whether before or after the insolvency or liquidation of
           the Borrower) to the credit of a suspense account for so long as the
           Junior Lender may think fit in order to preserve the rights of the
           Junior Lender to sue or prove for the whole amount of its claims
           against the Borrower or any other person.


14.        WAIVER AND SEVERABILITY

           No failure or delay by the Junior Lender in exercising any right,
           power or remedy hereunder shall impair such right, power or remedy or
           operate as a waiver thereof, nor shall any single or partial exercise
           of the same preclude any further exercise thereof or the exercise of
           any other right, power or remedy. The rights, powers and remedies
           herein provided are cumulative and do not exclude any other rights,
           powers and remedies provided by law. If at any time any provision of
           this Deed is or becomes illegal, invalid or unenforceable in any
           respect under the law of any jurisdiction, the legality, validity and
           enforceability of such provision under the law of any other
           jurisdiction, and of the remaining provisions of this Deed, shall not
           be affected or impaired thereby.


                                        9


15.        MISCELLANEOUS

15.01      Continuing Obligations. The liabilities and obligations of the
           Borrower under this Deed shall remain in force notwithstanding any
           act, omission, event or circumstance whatsoever, until full, proper
           and valid payment of the Junior Secured Indebtedness.

15.02      Protective  Clauses.  Without  limiting  Clause  15.01,  neither the
           liability  of the Borrower nor the validity or enforceability of 
           this Deed shall be prejudiced, affected or discharged by:

           (a)      the granting of any time or indulgence to the Borrower or
                    any other person;

           (b)      any variation or modification of the AES Loan Agreement, any
                    of the Subordinated Security Documents or any other document
                    referred to therein;

           (c)      the invalidity or unenforceability of any obligation or
                    liability of the Borrower under the AES Loan Agreement or
                    any of the Subordinated Security Documents to which it is a
                    party;

           (d)      any invalidity or irregularity in the execution of this Deed
                    or the AES Loan Agreement or any of the other Subordinated
                    Security Documents;

           (e)      any deficiency in the powers of the Borrower to enter into
                    or perform any of its obligations hereunder or under the AES
                    Loan Agreement or any of the other Subordinated Security
                    Documents to which it is a party or any irregularity in the
                    exercise thereof or any lack of authority by any person
                    purporting to act on behalf of the Borrower;

           (f)      any other Security Document, Charge, guarantee or other
                    security or right or remedy being or becoming held by or
                    available to the Junior Lender or by any of the same being
                    or becoming wholly or partly void, voidable, unenforceable
                    or impaired or by the Junior Lender at any time releasing,
                    refraining from enforcing, varying or in any other way
                    dealing with any of the same or any power, right or remedy
                    the Junior Lender may now or hereafter have from or against
                    the Borrower or any other person;

           (g)      any waiver, exercise, omission to exercise, compromise,
                    renewal or release of any rights against the Borrower or any
                    other person or any compromise, arrangement or settlement
                    with any of the same; or

           (h)      any act, omission, event or circumstance which would or may
                    but for this provision operate to prejudice, affect or
                    discharge this Deed or the liability of the Borrower
                    hereunder.

                                       10


15.03      Unrestricted Right of Enforcement. Subject to the Senior
           Subordination Agreement and the Priority Deed, this Deed may be
           enforced without the Junior Lender first having recourse to any other
           security or rights or taking any other steps or proceedings against
           the Borrower or any other person or may be enforced for any balance
           due after resorting to any one or more other means of obtaining
           payment or discharge of the monies obligations and liabilities hereby
           secured.

15.04      Discharges and Releases. Notwithstanding any discharge, release or
           settlement from time to time between the Junior Lender and the
           Borrower, if any security, disposition or payment granted or made to
           the Junior Lender in respect of the Junior Secured Indebtedness by
           the Borrower or any other person is avoided or set aside or ordered
           to be surrendered, paid away, refunded or reduced by virtue of any
           provision, law or enactment relating to bankruptcy, insolvency,
           liquidation, winding-up, composition or arrangement for the time
           being in force or for any other reason, the Junior Lender shall be
           entitled hereafter to enforce this Deed as if no such discharge,
           release or settlement had occurred.

15.05      Amendment. Any amendment or waiver of any provision of this Deed and
           any waiver of any default under this Deed shall only be effective if
           made in writing and signed by or on behalf of the party against whom
           the amendment or waiver is asserted.


16.        ASSIGNMENT

16.01      The Borrower.  The Borrower shall not assign any of its rights or 
           obligations hereunder.

16.02      The Junior  Lender.  The Junior  Lender may assign or grant 
           participations  in all or any part of their rights under this Deed 
           in accordance with the provisions of clause 20 of the AES Loan 
           Agreement.


17.        NOTICES

17.01      Delivery. Each notice, demand or other communication to be given or
           made under this Deed shall be in writing and delivered or sent to the
           relevant party at its address or telex number or fax number set out
           below (or such other address or telex number or fax number as the
           addressee has by five (5) days' prior written notice specified to the
           other party):

           To the Borrower:         Wuhu Shaoda Electric Power Development
                                    Company Limited
                                    Commercial Office Building
                                    West Huangshan Road
                                    Wuhu, Anhui Province
                                    People's Republic of China


                                       11



                                    Fax Number:           (86-553) 382-3224
                                    Attention:            Zhai Dao Ping


           To the Junior Lender:    AES China Holdings Company (L) Limited
                                    9th Floor, Allied Capital Resources Building
                                    32-38 Ice House Street
                                    Central, Hong Kong

                                    Fax Number:         (852) 2530-1673
                                    Attention:          Jeff Safford
                                                        Chief Financial Officer

17.02      Deemed Delivery. Any notice, demand or other communication so
           addressed to the relevant party shall be deemed to have been
           delivered (a) if given or made by letter, when actually delivered to
           the relevant address; (b) if given or made by telex, when dispatched
           with confirmed answerback and (c) if given or made by fax, when
           dispatched.


18.        GOVERNING LAW AND JURISDICTION

18.01      Law.  This Deed and the rights  and  obligations  of the  parties 
           hereunder  shall be  governed  by and construed in accordance with 
           the laws of England.

18.02      Jurisdiction. The Borrower agrees that any legal action or proceeding
           arising out of or relating to this Deed may be brought in the courts
           of England and irrevocably submits to the non-exclusive jurisdiction
           of such courts.

18.03      Process Agent. The Borrower irrevocably appoints Rowe & Maw
           (Attention: Mr. Bernd Ratzke) of 20 Blackfriars Lane, London EC4V
           6HT, England as its agent to receive and acknowledge on its behalf
           service of any writ, summons, order, judgment or other notice of
           legal process in England. If for any reason the agent named above (or
           its successor) no longer serves as agent of the Borrower for this
           purpose, the Borrower shall promptly appoint a successor agent
           satisfactory to the Junior Lender and notify the Junior Lender
           thereof, provided that until the Junior Lender receives such
           notification, it shall be entitled to treat the agent named above (or
           its said successor) as the agent of the Borrower for the purposes of
           this Clause 18.03. The Borrower agrees that any such legal process
           shall be sufficiently served on it if delivered to such agent for
           service at its address for the time being in England whether or not
           such agent gives notice thereof to the Borrower.

18.04      No Limitation on Right of Action. Nothing herein shall limit the
           right of the Junior Lender to commence any legal action against the
           Borrower and/or its property in any other jurisdiction or to serve
           process in any manner


                                       12


           permitted by law, and the taking of proceedings
           in any jurisdiction shall not preclude the taking of proceedings in
           any other jurisdiction whether concurrently or not.

18.05      Waiver; Final Judgment Conclusive. The Borrower irrevocably and
           unconditionally waives any objection which it may now or hereafter
           have to the choice of England as the venue of any legal action
           arising out of or relating to this Deed. The Borrower also agrees
           that a final judgment against it in any such legal action shall be
           final and conclusive and may be enforced in any other jurisdiction,
           and that a certified or otherwise duly authenticated copy of the
           judgment shall be conclusive evidence of the fact and amount of its
           indebtedness.

18.06      Waiver of Immunity. The Borrower irrevocably waives any immunity to
           which it or its property may at any time be or become entitled,
           whether characterized as sovereign immunity or otherwise, from any
           set-off or legal action in England or elsewhere, including immunity
           from service of process, immunity from jurisdiction of any court or
           tribunal, and immunity of any of its property from attachment prior
           to judgment or from execution of a judgment.


19.        SUBORDINATED SECURITY

           Notwithstanding any other provision to the contrary, this Deed must
           be read and construed in all respects, and the exercise of any rights
           under this Deed and the enforcement of any rights under this Deed
           must be subject in each case to the terms of the:

           (a)      Senior Subordination Agreement; and

           (b)      Priority Deed.

           In the event of any conflict or inconsistency between the terms of
           this Deed of the one part and the Senior Subordination Agreement or
           the Priority Deed of the other part, the latter documents will
           prevail.


IN WITNESS whereof the parties hereto have executed this Deed on the day and
year first above written.

                                       13



                                   Schedule 1

                                 Form of Notice



To:                 [Name of Insurer]


                                                                       [Date]


Dear Sirs,

Re: [Specify relevant policy or contract of insurance]

We refer to the above insurances (the 'Insurances') effected by you in favor of
Wuhu Shaoda Electric Power Development Company Limited and which are the subject
of a Subordinated Insurance Assignment (the 'Assignment') dated , 1996, a copy
of which is attached hereto.

We give you notice that by the Assignment we have assigned and granted to AES
China Holdings Company (L) Limited (the 'Junior Lender') (as that term is
defined in the Assignment) a third-priority security interest in all our right,
title, interest and benefit in and to the Insurances and all payments to be made
by you thereunder.

As stated above, this is a third-priority security interest and the Junior
Lender's rights are subordinated and expressly subject to the Senior
Subordinated Agreement and the Priority Deed.

We instruct you that until further notice all payments in respect of any claim
for an amount which you may be required to make pursuant to the terms of the
Insurances should be made in accordance with the terms set out in the enclosed
form of loss payable and notice of cancellation clause.

These instructions may not be altered or revoked by us without the prior written
consent of the Junior Lender.

Please acknowledge these instructions by signing as indicated and returning to
the Junior Lender the enclosed duplicate of this notice.

Yours faithfully,
For and on behalf of
Wuhu Shaoda Electric Power Development Company Limited




[Enclose form of Loss Payable and Notice of Cancellation Clause]

                                       14



[on duplicate]


To:               AES China Holdings Company (L) Limited
                  9th Floor, Allied Capital Resources Building
                  32-38 Ice House Street
                  Central, Hong Kong

Attn:             Mr. Jeff Safford

(as Junior Lender)




We acknowledge receipt of the above notice and confirm that a loss payable and
notice of cancellation clause in the form enclosed with the notice has been
included in the Insurances and that we will comply with the instructions
contained therein.


Dated                                        .

For and on behalf of
[name of insurer]






Authorized Signature(s)




                                       15



                                   Schedule 2

                            Form of Loss Payable and
                          Notice of Cancellation Clause


By an insurance assignment dated 1996 (the 'Subordinated Insurance Assignment'),
Wuhu Shaoda Electric Power Development Company Limited (the 'Borrower') assigned
and granted a third-priority security interest (which is subject to the Senior
Subordination Agreement and the Priority Deed) in all its right, title, interest
and benefit in and to this policy/contract of insurance and the benefits and
proceeds hereof including all claims of whatever nature to AES China Holdings
Company (L) Limited (the 'Junior Lender'). Terms defined in the Subordinated
Insurance Assignment shall have the same meanings hereunder.

Until notice in writing to the contrary is received by the insurer or the
insurance broker hereunder from the Security Agent, all proceeds of:

(i)      any  settlements of claims  hereunder in respect of an actual or  
         constructive  or compromised or arranged total loss of the Power Plant
         shall be paid to the Security Agent;

(ii)     any other settlements of such claims hereunder which do not exceed
         US$500,000 in any one case shall be paid to the claimant or its order
         (unless the Security Agent otherwise instructs the Company in writing),
         or the Security Agent or its order if the Security Agent shall notify
         the Company in writing that an event of default has occurred under the
         Agreement; and

(iii)    any other settlements of such claims hereunder  exceeding  US$500,000 
         in any one case shall be paid to the Security Agent.

For the purposes of (ii) and (iii) above any claim or number of claims arising
from the same occurrence shall be regarded as one claim.

Until notice in writing to the contrary is received by the insurer or the
insurance broker hereunder from the Junior Lender, the Junior Lender shall be
advised:

(i)      if any insurer under this policy/contract gives notice of cancellation
         of any insurance hereunder, at least thirty (30) days before any such
         cancellation is to take effect;

(ii)     of any proposed alteration in or termination or expiry of any such
         insurance at least thirty (30) days before such alteration, termination
         or expiry is to take effect;

(iii)    promptly of any default in the payment of any premium or call; and

(iv)     promptly of any act or omission or of any event of which any insurer
         hereunder has knowledge and which might invalidate or render
         unenforceable in whole or in part such insurance.

                                       16


No cancellation, termination or expiry of or alteration to any insurance
hereunder shall be effective as against the Junior Lender unless the relevant
provision of this clause have been complied with in full.

The rights of the Junior Lender under this policy/contract of insurance shall
not be prejudiced by any act or neglect of the Borrower or any other person nor
by any proceedings in relation to the Insured Assets.

                                       17

THE BORROWER
- ------------
EXECUTED and DELIVERED as a Deed                )
for and on behalf of                            )
WUHU SHAODA ELECTRIC POWER                      )
DEVELOPMENT COMPANY LIMITED                     )
by                                              )
in the presence of:  /s/ [SIGNATURE ILLEGIBLE]  )

/s/ [SIGNATURE ILLEGIBLE]







THE JUNIOR LENDER
- -----------------
SIGNED for and on behalf of                    )
AES CHINA HOLDINGS                             )
COMPANY (L) LIMITED                            )
by                                             )
in the presence of: /s/ [SIGNATURE ILLEGIBLE]  )

/s/ [SIGNATURE ILLEGIBLE]







                                       18