AES gets rate increase in Brazil

By the OGJ Online Staff

HOUSTON, Dec. 27, 2001 – Brazilian regulators granted an immediate electricity rate increase to AES Corp. to cover losses incurred during rationing imposed on all electricity consumers earlier this year.

The industry-wide agreement covers losses already occurred to AES’s generation and distribution businesses. It also has a provision that will kick in for future losses in income from rationing as well.

Brazil suffered a drought in early 2001 that reduced reservoirs feeding the nation’s hydroelectric plants. Electricity rationing was instituted in June 2001. Brazil’s government has been encouraging diversification of power generation fuels towards more natural gas fired plants. AES, Arlington, Va., owns and operates gas power plants in that country.

Also, AES reached an agreement with the government that will eliminate delays in the pass-through of certain purchased power and other costs to customers. The price increases will be phased in over a period of 3 to 4 years.

However, AES will receive 90% of the price increase up front in the form of a securitized loan. The proceeds of the price increases will be used to pay down this loan as they are collected from customers.

The tariff increases are effective immediately, the company said.

Investors reacted swiftly to the news. By noon, AES’s share price scooted up 80-, or 5%, to $15.70 in less than an hour of trading after the agreement was announced.

AES executives said the agreement bodes well for future-policy making in the electricity sector in Brazil.

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