EMPLOYMENT AGREEMENT

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Exhibit 10.18

EMPLOYMENT AGREEMENT

        AGREEMENT made on or about February 28, 2004 (the "Effective Date"), between The AES Corporation, a Delaware corporation (the "Company"), and Joseph C. Brandt (the " Executive ").

        WHEREAS, the Executive is currently employed by the Company in the position of Executive Vice President and Chief Operating Officer and the Company wishes to ensure the continued employment of the Executive with the Company;

        WHEREAS, the parties desire to enter into this agreement setting forth the terms and conditions of the continuing employment relationship of the Executive with the Company (this "Agreement");

        NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

        1.      Employment .    The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue to serve the Company, on the terms and conditions set forth herein.

        2.      Term .    The term of this Agreement (the "Term") shall commence as of the Effective Date and shall end on December 31, 2005, provided, however, that commencing on January 1, 2005, and on each subsequent January 1 (each such January 1, a " Renewal Date "), the Term shall automatically be extended for one (1) additional year unless, not later than the date which is six (6) months prior to such Renewal Date, the Company or the Executive shall have given notice not to extend the Term for such one (1) additional year; and further, provided, that if a Change in Control (as hereinafter defined) occurs during the Term, the Term shall not end prior to the second anniversary of such Change in Control.

        3.      Position and Duties .    The Executive shall serve as Executive Vice President and Chief Operating Officer of the Company and shall have such responsibilities, duties and authorities consistent with such position as may from time to time be assigned to the Executive by the Chief Executive Officer of the Company (the "CEO"). The Executive shall report to the CEO. The Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company; provided, however , that the Executive will be permitted to serve as a director to other for-profit and not-for-profit organizations and corporations so long as (a) such service does not materially interfere with the performance of his obligations hereunder, (b) such organizations and corporations are not competitive in any business area in which the Company is engaged during the Employment Period and (c) such service, if first assumed after the Effective Date, is approved by the Board of Directors of the Company (the "Board") prior to the commencement of such service. The Executive shall furnish to the Company a list of each such entity on the Effective Date and shall update such list as appropriate.

        4.      Place of Performance .    In connection with the Executive's employment by the Company, the Executive shall initially perform his duties and conduct his business, and his initial principal place of employment shall be, at the Executive's principal place of employment immediately prior to the Effective Date, except for required travel on the Company's business. From and after the Effective Date, and prior to the occurrence of a Change in Control (as defined in Section 8(h) hereof), the Company shall have the ability, consistent with its overall business needs, to change the Executive's principal place of employment.

        5.      Compensation and Related Matters .    

        (a)      Salary .    During the period of the Executive's employment hereunder, the Company shall pay to the Executive an annual base salary at a rate of $465,000, which salary shall be reviewed annually by the Board (or a committee thereof) for possible increase but not decrease; provided, however , that once the Executive's annual base salary is increased, it may not thereafter be

decreased during the Term, as such Term may be extended pursuant to the terms hereof (such salary, as it may be increased, the " Base Salary "). The Base Salary shall be paid in substantially equal installments, no less frequently than monthly, in accordance with the Company's standard payroll practices.

        (b)      Annual Bonuses .    With respect to each fiscal year of the Company during the Term, the Executive shall be eligible to receive an annual bonus with a target of 105% of his Base Salary, payable based on the achievement of corporate performance goals and/or other conditions that are established by the Compensation Committee of the Board and which are generally applicable with respect to annual bonuses for other senior executive officers of the Company. For purposes of the preceding sentence, the annual bonus in respect of fiscal year 2002 shall apply for the six-month period commencing July 1, 2002 and shall be pro rated accordingly.

        (c)      Long-Term Compensation .    The Executive shall be eligible to participate in all of the Company's long-term cash and equity award and equity-based grant programs applicable to, and on a basis no less favorable than, other senior executive officers of the Company, in accordance with the terms and conditions of such plans.

        (d)      Other Benefits .    The Executive shall be eligible to participate in all employee benefit plans and arrangements of the Company applicable to, and on a basis no less favorable than, other senior executive officers (including, without limitation, medical, dental, vision, hospitalization, life insurance, short-term disability, long-term disability, accidental death and dismemberment protection, travel accident insurance plans, fringe benefits and perquisites).

        (e)      Vacations .    The Executive shall be entitled to four (4) weeks of vacation in each calendar year.

        (f)      Expenses .    During the term of the Executive's employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable and customary expenses incurred by the Executive in performing services hereunder, subject to submission of appropriate documentation in accordance with Company policy.

        (g)      Indemnification .    The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a " Proceeding "), by reason of the fact that he is or was a director or employee of the Company or is or was serving at the request of the Company as a director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's certificate of incorporation or bylaws or resolutions of the Company's Board of Directors or, if greater, by the laws of the State of Delaware against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, employee or agent of the Company or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators.

        6.      Directorships/Other Offices .    The Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of any of the Company's subsidiaries and in one or more executive offices of any of the Company's subsidiaries, provided that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is from time to time provided by the Company or any of its subsidiaries to its other directors and senior executive officers.

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        7.      Termination .    Subject to the provisions of this Agreement, the Executive's employment hereunder may be terminated under the following circumstances:

        (a)      Death .    The Executive's employment shall terminate upon his death.

        (b)      Disability .    If, the Executive is unable, due to physical or mental incapacity, to substantially perform his full time duties and responsibilities under this Agreement for a period of six (6) consecutive months (as determined by a medical doctor selected by Company and Executive) the Company may terminate the Executive's employment for "Disability". If the parties cannot agree on a medical doctor for purposes of such determination of Disability, each party shall select a medical doctor and the two doctors shall select a third who shall be the approved medical doctor for this purpose.

        (c)      Termination by the Company/Cause .    

        (i)    The Company may terminate the Executive's employment (A) for Cause or (B) without Cause.

        (ii)    For purposes of this Agreement, " Cause " shall mean (A) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive's incapability due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason), after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes that the Executive has not substantially performed his duties, or (B) the willful engaging by the Executive in misconduct which is demonstrably and materially injurious to the Company, monetarily or otherwise (including, but not limited to, conduct that constitutes a violation of Section 11 hereof). No act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause without (1) reasonable notice from the Board to Executive setting forth the reasons for Company's intention to terminate for Cause and (2) delivery to the Executive of a Notice of Termination, which shall include a resolution duly adopted by the affirmative vote of two-thirds or more of the Board then in office at a meeting of the Board called and held for such purpose, and at which the Executive, together with his counsel, is given an opportunity to be heard, finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in this section and specifying the particulars thereof in detail.

        (d)      Termination by the Executive .    

        (i)    The Executive may terminate his employment for (A) Good Reason or (B) without Good Reason.

        (ii)    For purposes of this Agreement, " Good Reason " shall mean, without the Executive's written consent, any material breach of this Agreement by the Company which is not cured within ten (10) days of a written notice by the Executive. A material breach of this Agreement shall include, but not be limited to, (A) the failure by the Company to have any successor to all or substantially all of the business and/or assets of the Company expressly assume and agree to perform this Agreement in accordance with Section 12 hereof, (B) the Company requiring the Executive to report to any person other than the CEO, (C) following a Change in Control, the relocation of the Executive's principal place of employment to a site outside of the metropolitan area of the Executive's previous principal place of employment, (D) following a Change in Control, any significant adverse change in the Executive's overall responsibilities, duties and authorities from those in place immediately prior to such Change

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in Control, provided that the fact that the Executive continues to report to the CEO following a Change in Control will not preclude the Executive from claiming that a significant adverse change in the Executive's overall responsibilities, duties and authorities has occurred, and (E) following a Change in Control, the failure by the Company to continue the Executive's participation in a long-term cash or equity award or equity-based grant program (or in a comparable substitute program) on a basis not materially less favorable than that provided to the Executive immediately prior to such Change in Control. For purposes of any determination regarding the existence of Good Reason following a Change in Control, any good faith claim by the Executive that Good Reason exists shall be presumed to be correct unless the Company establishes by clear and convincing evidence that Good Reason does not exist.

        (e)      Notice of Termination .    Any termination of the Executive's employment by the Company or by the Executive (other than a termination by reason of death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated.

        (f)      Date of Termination .    " Date of Termination " shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

        8.      Compensation Upon Certain Events .    

        (a)      Any Termination of Employment .    Subject to Section 19 hereof, if the Executive's employment with the Company is terminated for any reason, in addition to any amounts and benefits provided pursuant to the remainder of this Section 8, the Company shall pay or provide to the Executive (i) any fully earned but unpaid bonus for completed periods, subject to any deferral election that the Executive has made with respect to such amounts, (ii) any expense reimbursements owed to the Executive by the Company and (iii) all compensation and benefits that are due to the Executive under the terms of the Company's compensation and benefit plans, programs and arrangements in accordance with the terms of such plans, programs and arrangements.

        (b)      Disability .    Subject to Section 19 hereof, if the Executive's employment with the Company is terminated by reason of the Executive's Disability, then (i) the Executive shall receive disability benefits in accordance with the terms of the long-term disability program then in effect for senior executives of the Company, (ii) the Company shall pay to the Executive his Base Salary through the end of the month immediately preceding the month in which such disability benefits commence and (iii) the Company shall pay to the Executive at the time bonuses are customarily paid to senior executive officers a bonus for the year in which such termination of employment occurs equal to the Executive's annual bonus for such year, as described in Section 5(b) hereof, multiplied by a fraction, the numerator of which is the number of days during such year that the Executive was employed by the Company and the denominator of which is 365 (the " Pro Rata Bonus ").

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        (c)      Death .    If the Executive's employment is terminated by reason of the Executive's death, then (i) the Company shall pay to his legal representative the Executive's Base Salary through the Date of Termination (the "Earned Salary") and (ii) the Company shall pay to the Executive's legal representative the Pro Rata Bonus.

        (d)      By the Company for Cause .    Subject to Section 19 hereof, if the Executive's employment with the Company shall be terminated by the Company for Cause, then the Company shall pay to the Executive the Earned Salary.

        (e)      By the Company other than for Disability or Cause; By the Executive for Good Reason .    Subject to Section 19 hereof, if the Company shall terminate the Executive's employment other than for Disability or Cause or the Executive shall terminate his employment for Good Reason, then:

        (i)    the Company shall pay to the Executive the Earned Salary;

        (ii)    the Company shall pay to the Executive the Pro Rata Bonus;

        (iii)    except as provided in paragraph (g) below, the Company shall pay to the Executive, within ten (10) days following the Date of Termination, a cash lump sum equal to the product of (A) one (1) and (B) the sum of (1) the annual Base Salary rate in effect for the Executive immediately preceding the Date of Termination, disregarding any reduction in annual Base Salary which constitutes Good Reason hereunder and (2) the Executive's target bonus for the year in which the Date of Termination occurs;

        (iv)    except as provided in paragraph (g) below, for the twelve (12) month period immediately following the Date of Termination, the Executive shall continue to participate in all medical, dental, hospitalization, life insurance and other welfare, fringe benefit and perquisite plans and programs, in each case in which he was participating on the Date of Termination (or, if any such plan or program does not permit his participation, the Company shall provide the Executive with the economic equivalent on an after-tax basis). Benefits or payments otherwise receivable by the Executive pursuant to this Section 8(e)(iv) shall be reduced to the extent benefits of the same type are received by or made available to the Executive by a subsequent employer during the twelve (12) month period following the Date of Termination (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive); and

        (v)    except as provided in paragraph (g) below, each option to acquire common stock of the Company granted under a Company incentive plan or other arrangement that is held by the Executive on the Date of Termination shall remain outstanding, and shall continue to vest according to its terms as if the Executive remained employed by the Company, until the earlier of (i) the end of the original term of such option or (ii) the second anniversary of the Date of Termination.

        (f)      Upon Termination of Employment by the Executive Other Than for Good Reason or Other Than by Reason of Death .    Subject to Section 19 h