- The Washington Times - Friday, July 26, 2002

Stock in AES Corp. plunged yesterday after the Arlington power conglomerate announced it had lost $115 million in the second quarter and cut its 2002 profit forecast for the second time this year.

The loss was 22 cents a share, compared with net income of $115 million, or 21 cents a share, a year earlier, the company said in a statement. It forecast a per-share profit of $1 to $1.10, down from a forecast of $1.35 to $1.45 in April.

AES, which does business in 33 countries, has seen its stock slip 93 percent in the past year as economic turmoil in several South American countries crippled business. The company and its affiliates have 38,000 employees. About 100 of them work in the Washington area.

Shares in the company, which trades on the New York Stock Exchange, closed at $1.77 yesterday, down from the previous day's close of $2.45 a share.

Paul T. Hanrahan, the company's president and chief executive officer, announced a plan in June to raise $1 billion by the end of 2003, possibly by selling some of the firm's troubled South American plants. The plan to increase liquidity also could come through a combination of asset and equity sales, he said.

Mr. Hanrahan also pledged to freeze spending and reduce debt until the company's bonds return to face value, a level they haven't reached in 10 months.

"More than earnings, our efforts are now focused on cash flow," Mr. Hanrahan said.

The company expects enough cash from units and asset sales to meet its needs through the end of next year, he said.

The company said in a statement that its lower profit forecast "reflects our estimates of continued and sustained weakening of the Brazilian real and Venezuelan bolivar relative to the dollar, and reduced economic activity in Brazil and Venezuela."

Brazil's currency has lost a fifth of its value this year, while Venezuela's has slumped more than 40 percent. This has helped make the past few months difficult for AES:

•On Wednesday, a Brazilian unit of AES said it was trying to renegotiate $18.8 million of debt it can't pay. Earlier this month, Chivor SA, a Colombian unit of AES, filed for bankruptcy as part of an effort to restructure $336 million in loans.

•The World Bank said in July it will withhold financial support for a $550 million AES dam in Uganda until the company shows the proposed project isn't tainted by corruption involving an AES contractor.

•Standard & Poor's and Moody's Investors Service cut AES' credit to three levels below investment grade last month. Standard & Poor's said political instability in Brazil and Venezuela may curb income from businesses in those countries.

AES is banking on its ability to raise $1 billion by selling assets, but the market is tight, according to Craig Shere, an S&P analyst.

"The question is, who's going to buy? If they end up selling their low-risk U.S. interests, they would be able to pay off their debt, but it won't necessarily improve their credit rating," Mr. Shere said.

Moody's said it is "critical" that AES complete the sale of two U.S. businesses so it can pay an $850 million credit line due early in 2003.

This article is based in part on wire service reports.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide