Power Engineering - AES Completes Brazil Restructurings

29 December 2003 - The AES Corporation announced today that several of its Brazilian subsidiaries have reached agreement regarding the successful restructuring of approximately $2.3 billion of non-recourse debt associated with those businesses.

Negotiations with Banco Nacional de Desenvolvimento Economico e Social (BNDES) to restructure approximately $1.2 billion in outstanding loans owed to BNDES by several of AES's Brazilian subsidiaries have been completed. The parties signed definitive documentation in Rio de Janeiro, concluding nearly eighteen months of negotiations. As a result of the restructuring, AES and BNDES have created a new company, Brasiliana Energia, which will hold AES' direct and indirect interests in AES Eletropaulo, AES Uruguaiana and AES Tiete. AES Sul will be contributed upon the successful completion of its financial restructuring.

Pursuant to the shareholders' agreement signed between AES and BNDES, AES controls Brasiliana Energia through its ownership of a majority of the voting shares of the company. AES will own 50.1% of the common shares and BNDES will own 49.9% of the common shares plus non-voting preferred shares that will provide BNDES with approximately 53% of the total capital of Brasiliana Energia. AES equity interests in Eletropaulo, Uruguaiana and AES Tiete together with $90 million contributed by AES and its Brazilian subsidiaries will be applied to reduce the outstanding debt owed to BNDES from $1.2 billion to $510 million. The remaining outstanding balance of $510 million (which remains non-recourse to AES) will be payable over an 11 year period.

Closing of the transaction is subject only to approval from Agencia Nacional de Energia Eletrica (ANEEL) and the Brazilian Central Bank, both of which are expected to be received no later than January 2004.

AES also announced today that Eletropaulo had reached agreement with its private creditors to reschedule approximately 2.3 billion reais ($787 million) of outstanding debt over the next five years. The agreement with Eletropaulo creditors resolves all outstanding defaults and accelerations with its operating company lenders. As the result of this transaction, 70% of the reprofiled debt will be demoninated in Brazilian Reais (compared with 34% today). Additionally, as a result of the reprofiling transaction, approximately 75% of Eletropaulo's debt will be denominated in Brazilian Reais (compared with 58% today). Closing of the Eletropaulo reprofiling transaction is subject to definitive documentation to be entered into no later than February 16, 2004.

Lastly, AES Tiete Holding, Ltd through its subsidiary AES IHB Cayman, Ltd has reached agreement with $300 million aggregate principal amount of 11.5% trust certificates due December 2015 to obtain the required consents for the transaction with BNDES and to restructure various payment terms of the obligations.

Paul Hanrahan, President and Chief Executive Officer of AES, stated, " We are extremely pleased that all of the hard work over these last 18 months has concluded by reaching these significant milestones. Our agreement with BNDES is particularly important to us because we now have the stability necessary to move forward with our businesses in an attractive and promising electricity market in South America's largest economy. The Brazilian government has made great strides over the past year to reconstitute a stable electricity market that once again will be attractive for new investment."

"With the completion of these transactions, we now have a sustainable capital structure for our Brazilian businesses. Throughout these difficult months, BNDES has constructively engaged with us in a search for mutually acceptable solutions." said Joseph C. Brandt, Executive Vice President and Chief Operating Officer of AES. "We are enthusiastic about working together as partners. We also appreciate the hard work, expression of confidence and support shown to us by the commercial banks and bondholders at Eletropaulo and Tiete. "

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