AES Loss Exacerbated by Write-Downs

Tuesday, January 28, 2003; Page E04

AES Corp. in Arlington said it will report a $3.5 billion loss for 2002, reflecting steep write-downs on major energy facilities in Britain and Brazil, and decisions to halt construction on two U.S. power projects, in California and Florida.

The company said the charges do not jeopardize its December agreement with investors and lenders to refinance $2.1 billion in bonds and bank debt until 2005, an extension AES required to stay solvent. "This is reflecting history," said Chief Financial Officer Barry J. Sharp. "There is no impact on our existing financing arrangements."

The fourth-quarter write-downs will total $2.7 billion ($4.96 a share), leaving AES with an annual loss of $6.51 a share for 2002. Excluding the charges, the company said it expects to report a profit from recurring operations of about $550 million (78 cents).

Analysts were not surprised by the news. For more than a year, the global energy company has battled to overcome losses from power operations in drought-plagued Brazil, and from its Drax power plant in Britain, where a long-term power sales contract was canceled last year because of falling electricity prices. The collapse of currencies in Argentina, Venezuela and Brazil, where AES was heavily invested, caused its debt payments to soar.

"It's not good, but it doesn't really add to their plight," said Christopher R. Ellinghaus, a financial analyst at Williams Capital Group. "Cash is the story."

AES said the parent company's operating cash flow last year totaled $1.1 billion, slightly higher than anticipated.