S&P changes AES Gener outlook to developing

Standard & Poor's revised its outlook on AES Gener SA to developing from negative and confirmed its ratings including its corporate credit at B.

S&P said the revised outlook reflects that the ratings could be raised or downgraded depending on the evolution of AES Gener's currently weak liquidity.

The credit markets closed to AES Gener in late 2001 partly because of parent AES Corp.'s financial difficulties. In addition, the need to refinance two put options on an outstanding debt of approximately $120 million exercised by Bank of America and ABN Amro in 2002 further strained AES Gener's weak liquidity.

However, improvements in financial performance and the collateralization of the intercompany credit with Inversiones Cachagua Ltda. (wholly owned by AES Corp.) signaled improvements in the company's situation, S&P said. In May, Inversiones Cachagua pledged its 98.65% equity stake in AES Gener in favor of AES Gener to guaranty the repayment of an intercompany debt of about $300 million due on Feb. 28, 2004. This event increases AES Gener's chances to collect the intercompany credit with Inversiones Cachagua although it is still highly uncertain how and when collection is going to take place.

If the collection of these funds takes place, AES Gener's financial performance, liquidity, and financial flexibility should significantly improve, S&P said. Absent debt reductions either through the collection of the funds or other financing strategies, liquidity would continue to be tight but still would allow AES Gener to fund operations and service debt throughout 2003 and 2004.

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