TEXT-Moody's release on AES Gener

(The following statement was released by the rating agency)

April 21 - Moody's Investors Service changed the rating outlook for AES
Gener S.A. CHG.SN (Gener) to negative from 1stable and affirmed Gener's
existing Baa3 senior unsecured rating.
"The change in Gener's rating outlook reflects a weaker-than-expected financial
profile" said Moody's Vice President Scott Solomon. "Gener's near-term
financial profile is expected to remain weak as the company manages through
expected further gas curtailments and a significant construction program" said
Solomon.
An increase in natural gas curtailments and, to a lesser extent, weak hydrology
conditions negatively impacted Gener's consolidated operating margins and cash
flow during 2007 resulting in weaker-than-expected financial metrics. This is
evidenced by Gener's ratio of adjusted consolidated cash from operations
(before changes in working capital) to adjusted consolidated debt, as
calculated by Moody's, which fell to approximately 18% at year-end 2007
compared to approximately 26% in the prior comparable period. While we expected
financial metrics to be pressured in 2007 relative to 2006-levels, our prior
rating outlook assumed that this particular metric would be no lower than 20%.
The rating action also takes into account Gener's sizeable capital requirements
associated with the construction of new coal-fired generating facilities in
Chile to meet growing demand and to lessen dependence on natural gas supply
from Argentina. Gener's coal plant construction program currently includes the
267-megawatt Nueva Ventanas facility that is expected to achieve commercial
operation in 2010 and the 540- megawatt Angamos facility (2011). While this new
generating capacity has been largely contracted, non-recourse debt financing
for these facilities is expected to cause Gener's consolidated debt balances to
double by 2011. Moody's anticipates that Gener will fund its coal plant
construction program with an appropriate amount of equity. To that end, it is
expected that Gener will issue up to $350 million of incremental common equity
during the second quarter of 2008, primarily to fund Angamos. Failure to issue
a suitable amount of equity to help fund its coal plant construction programs
in Moody's opinion would increase strong downward pressure on the ratings.
Gener intends to seek approval to construct additional generating capacity.
While positive from the point of diversifying fuel supplies away from natural
gas, additional construction further exposes Gener to the possibility of delays
in construction as well as further increasing the overall business risk profile
of the company.
Gener's Baa3 senior unsecured rating is supported by a base level of cash flow
derived from long-term contracts with financially sound counterparties, an
adequate liquidity profile and an expectation for an improving consolidated
financial profile upon completion of its construction program. Nevertheless,
various factors could pressure Gener's rating in the interim. These include,
among others, further unexpected weakening of its consolidated cash flow,
failure to complete its common equity offering, construction delays or the
incurrence of incremental indebtedness beyond what has been communicated.
Headquartered in Santiago de Chile, AES Gener is Chile's second-largest
electricity generation company and is 80%-owned by The AES Corporation (CFR:
B1) and 20% by Chilean public shareholders.
(New York Ratings Team)