AES EASTERN ENERGY LP
EXHIBIT 10.26 - TERMINATION OF L/C AGREEMENT
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<DESCRIPTION>EXHIBIT 10.26 - TERMINATION OF L/C AGREEMENT
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Exhibit 10.26 </U></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[AES Eastern Energy,
L.P. Letterhead] </FONT></P>


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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>October 26, 2004
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>

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<A NAME=A003></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The AES Corporation
<BR>1001 North 19th Street, 20th Floor <BR>Arlington, VA 22209
<BR>Attention:&nbsp;Kyle Hoffman
<BR>Fax&nbsp;No.&nbsp;(703)&nbsp;528-4510 </FONT></P>



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<A NAME=A005></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;Re:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Termination of Letter of Credit and Reimbursement Agreement</U></FONT></P>

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<A NAME=A006></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ladies and Gentlemen: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
is made to the Amended and Restated Letter of Credit and Reimbursement Agreement,
effective as of January 1, 2004 (the &#147;Agreement&#148;), between AES Eastern Energy,
L.P. (the &#147;Borrower&#148;) and The AES Corporation (the &#147;L/C Provider&#148;).
Terms used herein and not otherwise defined shall have the meanings assigned to such terms
in the Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the Agreement, the L/C Provider has caused, from time to time, the issuance of Letters
of Credit or the posting of Cash Collateral to satisfy certain obligations arising in
connection with the Borrower&#146;s sale of electricity. The Borrower no longer requires
the L/C Provider to cause the issuance of Letters of Credit or the posting of Cash
Collateral and as more fully described below, and hereby (1) terminates the L/C
Provider&#146;s Commitment obligations under the Agreement and (2) clarifies the
Borrower&#146;s and the L/C Provider&#146;s remaining rights, obligations and interests
under the Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
as of October 26, 2004, the Borrower will no longer have the right to request from the L/C
Provider the issuance of Letters of Credit (or the posting of Cash Collateral) nor the
right to request the stated expiration date of Letters of Credit (or Cash Collateral
Agreements) be extended or the terms thereof be modified or amended and, effective as of
October 26, 2004, the L/C Provider shall no longer have the obligation to cause the
issuance of Letters of Credit (or the posting of Cash Collateral) nor the obligation to
cause the stated expiration date of Letters of Credit (or Cash Collateral Agreements) to
be extended or the terms thereof to be modified or amended in accordance with the
Agreement. </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Borrower shall remain obligated for the payment of Commitment Fees, as set forth in the
Agreement, on the average daily unused amount of the Commitment for each day through
October 26, 2004, which Commitment Fees, together with all Commitment Fees accrued but
unpaid under the Agreement as of the date hereof, shall be paid by Borrower to the L/C
Provider on the next ensuing Rent Payment Date or on the first date thereafter that the
Borrower is permitted to pay such amounts under the Depository Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Borrower will remain obligated to perform its responsibilities under the Agreement with
respect to any outstanding Letters of Credit or Cash Collateral Agreements, including
obligations with respect to AES Costs, until the earlier of such time as the Borrower
replaces such outstanding Letters of Credit or Cash Collateral Agreements or the stated
expiration date of such Letters of Credit or Cash Collateral Agreements shall occur. The
Borrower shall remain obligated to perform its responsibilities under the Agreement with
respect to any Unreimbursed Drawings notwithstanding the replacement of any Letters of
Credit (or Cash Collateral Agreements) or the occurrence of the stated expiration date
thereof. To the extent outstanding Letters of Credit or Cash Collateral Agreements are not
replaced (and the stated expiration date thereof has not occurred), they shall remain in
effect in accordance with their terms. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Borrower shall cause the original counterpart of any Letter of Credit (and any Cash
Collateral Agreement) replaced by the Borrower to be promptly returned to the custody of
the L/C Provider. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
L/C Provider shall return to the Borrower any Notes executed and delivered by the Borrower
to the L/C Provider pursuant to the Agreement, marked &#147;cancelled&#148; and
&#147;paid&#148; upon final payment by the Borrower to the L/C Provider of all sums owing
under the Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise provided herein, the Agreement shall remain in full force and effect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please confirm
your agreement with the foregoing by signing below where indicated and returning the
original to the undersigned. </FONT></P>

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<A NAME=A007></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Very truly yours, </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AES Eastern Energy, L.P.<BR><BR><BR>By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/
Amy V. Conley&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:&nbsp;&nbsp;&nbsp;
 Amy V. Conley<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:&nbsp;&nbsp;&nbsp;  Vice President </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Confirmed and Agreed this 26th day of
October, 2004 </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE AES CORPORATION
<BR><BR><BR>By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/
Willard C. Hoagland&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:&nbsp;&nbsp;&nbsp;
Willard C. Hoagland<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title:&nbsp;&nbsp;&nbsp; </FONT></P>



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