S&P puts AES Gener on positive watch

Standard & Poor's said it has placed its B local and foreign currency corporate credit ratings on Chile-based power generator AES Gener S.A. on CreditWatch with positive implications.

The rating action follows the company's announcement of a financial strengthening plan including a $300 million capital increase that will be applied to reduce debt, and the refinancing of remaining obligations.

"This plan should strongly improve AES Gener's capital structure and liquidity and significantly extend the average life of its financial debt, alleviating refinancing risk," said S&P credit analyst Sergio Fuentes. "Because the current ratings mainly reflect AES Gener's relatively weak liquidity position, combined with its poor access to credit markets and high refinancing risk, the successful implementation of the plan could result in a rating upgrade."

As of June 30, 2003, AES Gener had about $1 billion of consolidated debt (excluding Chivor's nonrecourse debt). The company faces the maturity of a $500 million convertible bond in March 2005 and a $200 million yankee bond in January 2006.

S&P said that although financial indicators have improved during 2003, given the company's relatively weak liquidity and limited market access, those maturities are a significant concern for S&P.

The new plan announced by AES Gener contemplates a cash infusion of about $300 million from its controlling shareholder, Inversiones Cachagua S.A. (100% owned by AES Corp.). The funds will come from the repayment of an intercompany loan that will be funded with the sale of a non-controlling equity stake in AES Gener and from a capital infusion to be carried out by AES Corp.

These funds plus the proceeds from a new $400 million bond are projected to be applied to repurchase the company's outstanding bonds. The plan also contemplates the refinancing of the outstanding financial debt at the levels of the Argentine-based power generator Termoandes and electric transmission company Interandes.

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