- The Washington Times - Tuesday, December 17, 2002

Shares of AES Corp., an Arlington-based electricity supplier, hit their highest level in more than six months after the company announced refinancing that will help it avoid bankruptcy.
The company said Friday that it had refinanced $2.1 billion in bank credit and bonds so that it is essentially debt-free until November 2004.
Its shares rose 14 cents, or 4.3 percent, yesterday to close at $3.39, their highest level since July 12.
"This is a huge deal," said Craig Shere, an equity analyst with Standard and Poor's investment advisory services, who covers energy companies and does not own AES shares. "It keeps them out of bankruptcy and gives them time to resolve a seemingly endless amount of problems."
Power suppliers, particularly unregulated ones, such as AES, have faced significant financial problems in the past 18 months, analysts said. Energy prices have fallen, and economic and political uncertainty worldwide has made constructing power plants difficult.
"You've got weak demand, relatively speaking," said Chris Ellinghaus, a senior energy analyst with Williams Capital Group, who rates AES a "hold" and owns shares. "You've got a collapse in the energy markets in general and you've got too much capacity."
In the case of AES, turmoil in Argentina, Brazil and Venezuela has led to poor profit outlooks from Latin and South America. Making matters worse, AES' largest subsidiary in the United Kingdom, Drax, lost its biggest customer to bankruptcy.
"That's a huge loss for them," Mr. Ellinghaus said.
AES was scheduled to pay off $380 million in debt yesterday, the first of several large payments that analysts said would have put the company on the verge of bankruptcy. But a group of 63 banks and investment funds came through with $1.6 billion in loans due in 2005 and a two-year extension on payment of $500 million in notes originally due to mature this year.
"With the financial stability afforded by this transaction, we now can focus entirely on implementing our business plan," said Paul Hanrahan, president and chief executive officer of AES.
AES announced a net loss of $314 million, or 18 cents per share, in the financial quarter ended Sept. 30. It had earned $3 million, or 1 cent per share, in the comparable quarter last year.
AES is expected to get some free cash from the sale of its three power plants in Australia for $295 million. With the sales, announced Friday, the company will no longer have a presence in Australia. It is trying to sell other assets, but getting out of some of the more volatile and unprofitable nations has proved tougher, analysts said.
Few companies are willing to take on the responsibility of power plants in South and Latin America, owing to the instability there; other nations, including Pakistan, harbor anti-Western sentiment that makes power plants potential terrorist targets.
"The fact that their assets are difficult to sell has been a real reason for their cash crunch," Mr. Shere said. "There's a lot of assets for sale in regions in distress."
But Mr. Ellinhaus said that AES should be able to sell enough assets in the next few years to ensure it will be in better financial shape once it pays off its debts. The refinancing is just what the company needed, he said.
"It gives them enough time to restructure and put the house in good order," Mr. Ellinghaus said. "They will be back to normal."

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