S&P Assigns Prelim Rtgs to AES Ocean, EDEN, and EDES.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 16, 2000

Standard & Poor's today assigned its double-'B'-plus preliminary rating to Empresa Distribuidora de Energia Norte S.A.'s (EDEN) US$67 million bank loan and a double-'B'-plus preliminary rating to Empresa Distribuidora de Energia Sur S.A.'s. (EDES) US$23 million bank loan.

At the same time, Standard & Poor's assigned its single-'B'-plus issuer credit rating to AES Ocean Springs Ltd. and its single-'B'-plus preliminary rating to AES Ocean Springs Ltd.'s US$110 million bank loan.

EDEN (issuer credit rating double-'B'-plus/Stable/--) and EDES (issuer credit rating double-'B'-plus/Stable/--) are electricity distribution companies in Argentina. AES Ocean Springs Ltd., is an indirectly wholly owned subsidiary of The AES Corp. (The) (double-'B'/Stable/--); AES Ocean Springs Ltd. indirectly controls EDEN and EDES.

AES Ocean Springs' repayment capacity depends on its proportionate share of dividends (62%) and management fees (66%) paid by EDEN and EDES to its owners. The single-'B' plus rating reflects a relatively weak protection of debt and interest obligations by dividends and fees, supplemented by moderate support from AES in case of any shortfalls.

EDEN's and EDES' facilities are joint and several obligations with each other's debt. EDEN's and EDES' facilities are unsecured; AES Ocean Springs Ltd.'s facility is collateralized by a first-priority, perfected-security interest in EDEN and EDES class B shares and a second-priority, perfected-security interest in the companies' class A shares.

The ratings are preliminary, pending receipt of final documents that will confirm the facilities' covenants as represented, and that the various interholding companies are structured as special-purpose entities.

The ratings of EDEN and EDES incorporate the challenges of operating in Argentina and the relatively high regulatory risk. The challenges include tariffs for residential users that will be adjusted downwards from 1999 to 2002, and then reduced by 1% per year by an efficiency factor from 2003 to 2007. The tariff transition period represents a decrease in revenues, although its negative effect is expected to be offset by higher consumption of electricity, as well as further cost reductions.

These risks are partially offset by the 95-year exclusive distribution concessions to serve attractive service areas in the province of Buenos Aires; a 10-year tariff for the period from 1997 to 2007, calculated in U.S. dollars and adjusted by U.S. inflation; and the pass-through of energy costs to customers. EDEN and EDES also benefit from the stable and profitable sales to the residential sector, and by positive demand growth. However, in the case of EDEN, a disproportionate contribution of industrial revenues compared to the contribution to the company's profitability indicates that industrial sales detract from profitability.

EDEN and EDES are electric distribution companies that serve approximately 280,000 and 140,000 customers, respectively, in service areas that comprise the northern and southern portions, respectively, of the province of Buenos Aires.

Both utilities were privatized in 1997, when the respective 56.66% economic interests were awarded to AESEBA S.A., which is wholly owned by AES Ocean Springs Ltd, a limited liability company organized under the laws of the Cayman Islands; a 33.34% stake is owned by Public Service Electric & Gas Co., Standard & Poor's said. -- CreditWire