ALLENTOWN, Pa., Aug. 22, 2002 — Due to the recent denial of emergency rate relief and the inability to obtain support from creditors for a proposed sale, PPL Corp. Brazilian electric distribution company, Companhia Energetica do Maranhao (CEMAR), recently filed a concordata preventiva, the Brazilian equivalent of a U.S. Chapter 11 bankruptcy, with a state court in Brazil.
William Hecht, PPL’s chairman, president and chief executive officer, said that recently’s action is consistent with PPL’s previously announced plans to exit CEMAR. “This action will have no impact upon PPL’s previously announced earnings guidance for 2002, of between $3.30 and $3.50 per share from core operations,” said Hecht.
In January of this year, PPL announced that it intended to write off its entire investment in CEMAR as the result of a prolonged drought, electricity rationing, an uncertain regulatory climate and a malfunctioning wholesale electricity market. The company wrote off $217 million in reporting its fourth quarter 2001 earnings and then the remaining $100 million in the first two quarters of this year. As a result, Hecht said, the company has written down its investment in Brazil to zero.
In announcing the write-offs, the company said that it was pursuing a workout plan, which included a possible sale of CEMAR, but that this workout would not extend beyond the end of 2002.
The workout plan included a request for emergency tariff relief, which was turned down by Brazil’s National Electrical Energy Agency (ANEEL), and a proposed sale of CEMAR. “During the concordata period, PPL will continue to explore the possible sale of CEMAR,” Hecht said.
Last month, PPL announced a proposal for the sale of its 90 percent interest in CEMAR to Franklin Park Energy LLC of McLean, Va.
While that transaction still is under review by ANEEL, the concordata filing has been precipitated by conditions imposed on the sale by CEMAR’s creditors, according to Hecht. “Unfortunately, these conditions have left CEMAR with no choice but to pursue a concordata,” said Hecht.
CEMAR provides electricity delivery service to more than 1 million customers in the northeastern Brazilian state of Maranhao. PPL’s other Latin American electricity distribution companies, located in Chile, Bolivia and El Salvador, are unaffected by the situation in Brazil.
PPL Corporation, headquartered in Allentown, Pa., controls nearly 11,500 megawatts of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity to customers in Pennsylvania, the United Kingdom and Latin America.
SOURCE: PPL Corporation