AES to receive US$125mn from LatAm subsidiaries in 2003

05/05/2003 - Source: <a href=www.latintrade.com>LatinTrade-BNamericas US Power company AES Corporation (NYSE: AES) expects to receive US$125mn net income from its Latin American subsidiaries in 2003, the company said in supplementary information to its first quarter results. AES' Latin American subsidiaries contributed only about US$1mn in the first quarter, accounting for less than 1% of the company's US$180mn income from subsidiaries. But by year end AES expects to receive US$30mn from Chilean subsidiary AES Gener, US$30mn from Argentina's Alicura, US$30mn from Puerto Rico, US$20mn from Brazilian thermo plant Uruguaiana, and US$15mn from other income. "The rest is very minimal, we expect nothing else from Brazil, or Argentina," CEO Paul Hanrahan said during a conference call to discuss first quarter results. AES recently announced that it would use its 2002 profits from AES Gener to pay interest on its US$300mn debt to that company, which is due in early 2004. But AES still expects to receive US$30mn net income from its subsidiary by the end of the year. "We have confidence we can do it, but to get that operating cash flow out of the business we have to smooth out the maturities at a Gener level," Hanrahan said. Meanwhile, Venezuela's exchange controls will prevent AES from receiving any income from its power utility Electricidad de Caracas (EDC) this year, Hanrahan said. EDC closed its collection offices during the national strike, and sales were hit by the general reduction in demand, he said, adding that demand has started to recover since the end of the strike in the first quarter and EDC has resumed collecting payments. "The real question is when will exchange controls end, and when will the economy get back on track in terms of growth," Hanrahan said, adding that by 2005 he expects EDC to earn US$150mn-200mn net income annually for AES. In Brazil, AES continues to negotiate with national development bank BNDES to refinance its US$1.2bn debt. The debts were primarily taken on to pay the government for ordinary and preferred shares in Sao Paulo electric power distributor Eletropaulo, in which AES owns a 74% stake. "We are confident that a workable solution could work to the benefit of AES and the Brazilian government," Hanrahan said, but cautioned that, "we are negotiating but there is no assurance we will be successful." According to local newspapers, AES VP Joseph Brandt was scheduled to meet Friday with BNDES to discuss his company's US$1.2bn debts with the bank. Proposals presented until now by both parties have been "minimally acceptable," BNDES finance director Roberto Thimoteo said, quoted by O Estado de Sao Paulo. One of AES' local subsidiaries, AES Elpa, has exceeded a 90-day grace period on its defaulted debts, and BNDES has taken "preliminary" steps to foreclose on the shares that it holds in Eletropaulo, Hanrahan said. Earlier this week, BNDES asked the securities clearinghouse, CBLC to begin the sale process for preferred shares held by a second subsidiary, AES Transgas. The bank is not keen to become a shareholder in Eletropaulo, but will do so if it believes that is the best way to recover the debts, Thimoteo said. AES' Brazil holdings currently represent a negative affect on the company's equity of about US$1bn per year, so the sale of some of its Electropaulo shares would actually have a positive effect on equity, Hanrahan said, adding that BNDES could sell as much as 54% of AES' stake in Electropaulo. AES income from continuing operations fell 38% to US$73mn, or US$0.13 per share, for the first quarter 2003 compared to US$118mn, or US$0.22 per share, in the same period last year. Net income for the quarter was US$93mn up from a US$313mn net loss in the first quarter of 2002. The net loss for 1Q02 included a charge for the cumulative effect of an accounting change. Revenues for the first quarter of 2003 were US$2.2bn.