NEW YORK--()--Fitch Ratings views The AES Corporation's (AES) recent announcement of two transactions involving the China sovereign wealth fund China Investment Corporation, Inc. (CIC) as instrumental to accelerating investment rather than improving credit. The transactions consist of: a binding stock purchase agreement for CIC to buy $1.58 billion in new AES equity (approximately a 15% stake in the company), and a letter of intent to sell a 35% stake in AES' wind generation business for $571 million.
The substantial new equity commitments permit AES to adopt an accelerated growth strategy and also support Fitch's current 'B+' Issuer Default Rating for the company. Although cash proceeds could result in some temporary reduction in recourse debt at the parent level, the Rating Outlook remains Stable at this time.
The sale of interest in the wind business is subject to due diligence and regulatory reviews; however, equity investment by the CIC is subject to regulatory reviews only, including review by the Committee on Foreign Investment in the U.S.
Over the past two years, AES reined in growth in response to a global recession and the collapse of the capital markets; a focus on improving plant operations and cash flows and debt management through the second quarter of 2009 allowed AES to stabilize its credit profile. These new capital infusions will alleviate capital constraints on development and merger and acquisition activities. Also, these strategic investments will provide AES opportunities to pursue additional development in Asia, to work with Chinese equipment manufacturers and contractors, and to tap new sources of project equity and debt investment.
Additional information is available at 'www.fitchratings.com'.