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9 September 2003 - The AES Corporation said Monday it has entered into a memorandum of understanding with Banco Nacional de Desenvolvimento Economico e Social (BNDES) to restructure the outstanding loans owed to BNDES by several of AES' Brazilian subsidiaries.
The restructuring will include the creation of a new company that will hold AES' interests in AES Eletropaulo, AES Uruguaiana and AES Tiete. AES Sul will be contributed upon the successful completion of its financial restructuring. AES will own 50.1 per cent, and BNDES will own 49.9 per cent, of the new company.
Under the terms of the agreement, 50 per cent of the currently outstanding BNDES debt of $1.2 billion will be converted into 49.9 per cent of the new company. The remaining outstanding balance of $515 million (which remains non-recourse to AES) will be payable over a period of ten to 12 years. AES and its subsidiaries will also contribute $85m as part of the restructuring, of which $60m will be contributed at closing and $25m will be contributed one year after closing.
Closing of the transaction is subject to the negotiation and execution of definitive documentation, certain lender and regulatory approvals and valuation diligence to be conducted by BNDES.
Paul Hanrahan, President and Chief Executive Officer of AES, stated, "We are encouraged by the Brazilian government's recent commitments to address the lingering effects of rationing on the sector. In doing so, Brazil is taking a crucial step toward creating a climate that is conducive to new investment. We look forward to working with BNDES."
"This agreement with BNDES places AES' Brazilian businesses on a financially sound footing and allows AES to renew our commitment to doing business in Brazil," said Joseph C. Brandt, Executive Vice President and Chief Operating Officer of AES. "The past eighteen months have been a difficult period for our investments in Brazil, the Brazilian power sector and our relationship with the Bank. With this agreement, we welcome BNDES as our partner and look forward to the shared successes of these businesses."
The US company, which operates Brazilian generating giant Eletropaulo, ran into problems after the nation's power sector was plunged into crisis last year as large dollar-denominated debts were magnified by a currency slump. Power rationing also slashed revenues.
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