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Fitch: AES' Ratings Unaffected on Preliminary Agreement to Sell EDC

The AES Corporation (NYSE:AES) announced a preliminary agreement to sell its 82.14% interest in La Electricidad de Caracas (EDC) to the government of Venezuela for $739.2 million. The announcement follows on the heels of the Chavez government's pronouncement to nationalize key industries including electricity and telecommunications.

EDC has been a key source of cash flow for AES, representing one of the ten largest sources of distributions to the parent company. At the same time, Venezuela has been a challenging environment in which to operate for some time. As such, EDC's contribution to AES's credit profile has been less than simply its pro rata share of cash flows to the parent company. Given the diversity of cash flow sources for AES, Fitch does not believe the loss of even the 6% or 7% that EDC represented of total cash flows would, by itself, be sufficient to cause a material change in AES' credit profile. Finally, from a portfolio perspective, the sale of EDC will help to realign the company's portfolio to a more balanced mix of businesses.

To date, AES has made no announcements as to anticipated use of proceeds. Fitch would expect that management will use the proceeds to retire parent company debt and/or redeploy in new investments.

AES is one of the world's largest global power companies, with 2005 revenues of $11 billion. With operations in 26 countries on five continents, the company's 14 regulated utilities amassed 2005 annual sales of over 82,000 GWh and its 121 generation facilities have the capacity to generate approximately 44,000 megawatts.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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