Fitch Ratings Affirms AES Gener at 'BB'

Business Wire, Sept 6, 2005

CHICAGO -- Fitch Ratings has affirmed the international senior unsecured local and foreign currency ratings of AES Gener S.A. (Gener) and the US$400 million senior notes due 2014 at 'BB'. The Rating Outlook for these ratings remains Stable.

The ratings reflect the successful financial strategy implemented by the company and subsidiaries during 2004, which resulted in an improved capital structure and increased financial flexibility, consistent with Fitch's expectations. In 2005, Gener has continued to optimize its financial performance, improving liquidity. The ratings of Gener are also supported by its position as the largest thermal generator in Chile, its operating strategy to optimize contract electricity sales, diversify operations, a constructive regulatory environment, and experienced management. The rating also considers the current exposure to natural gas supply availability from Argentina, variations in hydrology, commodity price risks, and currency risks.

During 2004, Gener focused on strengthening its financial profile, reducing debt and improving liquidity. The company refinanced US$700 million of debt under more favorable terms and reduced total debt by US$300 million. In addition to its recapitalization, Gener also renegotiated US$151 million of consolidated debt associated with the TermoAndes and InterAndes projects to extend maturities to 2010, improving the amortization schedule and reducing debt by US$62 million. Chivor, Gener's Colombian subsidiary also successfully refinanced US$260 million debt extending debt maturities up to 2014.

During the first half of 2005, Gener handled the impact of the natural gas curtailments -- which affected gas-fueled thermoelectric plants in Chile, including Gener's subsidiary Electrica Santiago owner of the 370 MW natural gas and diesel combined cycle in the Central Interconnected System (SIC), Nueva Renca -- by implementing natural gas swaps agreements with Argentinean generators and natural gas transfer agreements with other Chilean generators. In addition, Nueva Renca's dual-fuel capability allowed the plant to continue operating even during the most severe curtailments by switching from gas to diesel oil without removing the plant from service. The effect of the gas restrictions in the SIC was counteracted by an improvement in the operating results in the two other systems in which it is present, the Northern Interconnected System in Chile and Colombia.

AES Gener reported EBITDA-to-interest of 3.2 times (x) for the 12 month period ended in June 2005, compared to 2.7x for the same period ended June 2004. The ratios were constrained by lower natural gas availability to the SIC, the SIC's drier hydrology in the first half and the evolution of fuel prices which resulted in high electricity spot prices, combined with its current contractual position. In the second half, Fitch expects the company to benefit from an increase in node prices related to a recent approved electricity law, improved natural gas availability and better hydrology as a result of the rainfall in the SIC recorded between June and August of this year. The company has lowered its contractual exposure thereby limiting the financial impact of future natural gas restrictions.

Gener is the second-largest electricity-generation group in Chile in terms of operating revenue and generating capacity with an installed capacity of 2,428 MW, composed of 2,157 MW of thermal and 271 MW hydro generating capacity. The company currently participates in electricity generation in Colombia (1,000 MW), Argentina (642.8 MW)and the Dominican Republic (a 25% participation in a 586.5 MW thermo generation plant), as well as natural gas transportation in Chile and Argentina. The company is 98.79% owned by AES.