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Hidroelectrica Piedra del Aguila S.A. Summary of Presentation to Noteholders Held April 14, 1999 in Buenos Aires.

BUENOS AIRES, Argentina--(BUSINESS WIRE)--April 14, 1999--

Hidroelectrica Piedra del Aguila S.A (the "Company") filed the following summary with the Buenos Aires Stock Exchange relating to the presentation to its noteholders held today at 11:00 a.m. in Buenos Aires, Argentina.

Analysis of the Current Situation

HPDA had US$423 million in debt outstanding as of December 31, 1998, US$161 million of which will become due during 1999.

Impact of External Factors on the Operations and Financial Situation of the Company

Certain factors have had a negative effect on the Company, including: (i) increase in installed capacity caused by increased competition in the electricity sector (due to deregulation) has led to to a 40% reduction in electricity prices in the last five years; (ii) the Comahue region has experienced historic low precipitation, recording two of the driest years in the last fifty-five years; (iii) because of transmission restrictions from the Comahue region, current installed capacity compared to transmission capacity has caused a price difference of 21% between local pricing and the market price; (iv) tax reforms in effect from December 31, 1998 will cause the Company to incur additional expenses of approximately $20 million in 1999 and $13 million per year thereafter; and (v) the international financial situation has made it difficult to refinance existing debt.

Concession Contract.

The Concession Contract entered into between the Company and the Argentine government provides that if the Company should file for bankruptcy or petition for insolvency proceedings, or file for a pre-bankruptcy agreement, or if bankruptcy should be declared by a court at the instance of a third party, the Concession would automatically terminate without any further government action and would be granted to another party and a new international auction would be called. The new company that wins the Concession will not assume the Company's liabilities.

If an auction occurred in 1999, the Company would be entitled to 38% of the auction proceeds. With such proceeds, the Company will be required to (i) pay bankruptcy costs, (ii) pay taxes and wages to its workers, and (iii) divide the remainder among unsecured bank creditors and noteholders.

Steps to be Taken with Respect to the Company's Notes

Restructuring Approach. The Company's main objective in restructuring is for its creditors be able to maximize the recovery of their loans. The shareholders of the Company would be prepared to make a capital infusion to the Company to facilitate a restructuring, despite having lost a substantial part of their original investment in the Company (US$272 million), and despite the fact that the Company has not distributed any dividends since commencing operations. However, any capital infusion will be conditioned upon (i) the restructuring representing a definitive solution to HPDA's capital structure and (ii) the shareholders receiving a return on capital consistent with the Company's current financial condition. Because of the risk of losing the Concession, effective and expeditious negotiations with creditors is of utmost importance.

Special Considerations with Respect to Banco de la Nacion. In the event of non-payment of the Banco de la Nacion loan, the Argentine government has the right to revoke the Concession. The Company therefore believes that Banco de la Nacion might have preferential treatment in the restructuring process.

Next Steps in Restructuring. Given the need to obtain approvals of different creditors (i.e., Banco de la Nacion, other banks and noteholders), the Company expects to present a restructuring proposal to its noteholders during the coming weeks. The Company expects to complete and effect such restructuring within approximately 90 days.
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Publication:Business Wire
Date:Apr 14, 1999
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