Fitch upgrades AES

Fitch Ratings said it upgraded the issuer default rating of AES Corp. by one notch to BB- from B+ and affirmed the short-term issuer default rating at B.

Fitch also said it affirmed AES' senior secured debt at BB+ and unsecured debt at BB, along with the B+ rating for the trust preferred stock issued by AES Trust III.

The outlook is stable.

The upgrades were driven by a reduction in the company's business risk profile with a shift in management strategy towards reducing geographic scope, selling non-core assets, cutting corporate overhead and pursuing growth in key markets driven by long-term contractual generation assets, Fitch said.

The acquisition of DPL Inc., completed in November 2011, is supportive of AES business profile since it increases the contribution of stable regulated earnings in the overall portfolio mix, the agency said.

The ratings reflect dividend support from subsidiaries that are predominantly engaged in regulated utility operations and contracted power generation, Fitch said.

The ratings are restricted by the company's high degree of leverage, subordination of parent level debt and a large reliance on dividends from subsidiaries in emerging markets, the agency said.

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