- The Washington Times - Monday, December 29, 2003

Arlington power company AES Corp. yesterday announced a deal with Brazil to restructure $2.3 billion of its debt associated with three Brazilian subsidiaries.

Banco Nacional de Desenvolvimento Economico e Social, a Rio de Janeiro government bank known as BNDES, agreed to restructure $1.2 billion in outstanding loans for AES Eletropaulo, AES Uruguaiana and AES Tiete.

The owner of power plants in 27 countries originally borrowed the $1.2 billion to purchase Eletropaulo. AES fell behind in loan payments when the subsidiary lost money because of an energy-rationing program maintained by the government in 2001 and 2002.

About 30 AES Eletropaulo creditors agreed to reschedule about $800 million in loans, and about 11.5 percent of trust certificate holders of AES Tiete agreed to restructure $300 million in debt.

Under the terms of the deal with BNDES, the bank will own almost 50 percent in common stock of a new company formed to act as the controlling body for the three subsidiaries, Brasiliana Energia.

AES spokesman Ahmed Pasha said the company will pay off $600 million immediately by giving the bank the stock, which will provide 53 percent of Brasiliana Energia’s total capital.

The company additionally will pay $90 million in cash and pay the remaining $510 million over an 11-year period.

“I think this deal demonstrates the value of our businesses there and has given us the flexibility and stability we need to make those companies successful,” he said.

The company had more stability in negotiations after averting bankruptcy last year and turning substantial losses into profits in the recent financial quarter.

AES reported third-quarter profits ended Sept. 30 of $76 million (12 cents per diluted share) compared with a loss of $315 million (58 cents) in the third quarter of 2002.

The first part of the debt payment is expected to close sometime next month, pending approval from Brazil’s Central Bank and Electricity Regulatory Authority.

Most of the debt also was converted to Brazil’s currency, which lessened the effect to AES, Mr. Pasha said.

Analysts predicted the Brazilian real, which has gained 23 percent this year, will end the year between 2.89 to 2.93 to the dollar.

Despite an encouraging economic outlook, Mr. Pasha said, the electric company has no near-term plans to buy back more of the Brazilian companies.

“As of today, we have no intentions, but we could look at something like that further down the road,” he said.

Christopher Ellinghaus, an electric-utility analyst for New York brokerage firm Williams Capital Group LP, said he doubted AES would invest more in its Brazilian subsidiaries.

“Brazil is a promising country to invest in, but I would have been slightly happier if the company walked away from its assets there,” he said.

Mr. Ellinghaus said the deal would not change his “buy” rating but added that shares had jumped above his $9 target stock price. The stock closed on the New York Stock Exchange yesterday to close at $9.29, up 4 percent from Friday at $8.92.

Williams Capital has past business with AES, and Mr. Ellinghaus owns 400 company shares.

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