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Announcement:

Moody's affirms AES El Salvador at Ba2; outlook stable

Global Credit Research - 30 Jun 2010

Approximately $300 million of senior unsecured Debt Securities Affected

New York, June 30, 2010 -- Moody's Investors Service today affirmed the Ba2 senior unsecured long debt rating and Corporate Family Rating (CFR) of AES El Salvador Trust (Trustco) and also changed the rating outlook to stable from negative. "

"The rating affirmation and change in Trustco's outlook to stable reflects the improved liquidity profile following the guarantors' execution of a new working capital credit facility at the end of 2009, as well as the better than anticipated guarantors' performance and collection data during 2009 despite the recession and the elimination of general electricity subsidies" said Natividad Martel, an analyst at Moody's. "The facility has eased our concerns about the guarantors' ability to meet working capital requirements arising from the semiannual tariff-adjustments associated with the price of electricity given the high reliance on the volatile spot energy markets, " added Martel.

The ratings affirmation takes into consideration that all stakeholders, including the Superintendencia General de Electricidad y Telecomunicaciones (SIGET), are taking steps to address some of the weaknesses in the electric regulatory framework and are pursuing improvements in a cooperative way, while preserving their interests. The ratings are still tempered by some prevailing regulatory uncertainty, and we observe the delays in implementing several measures that Moody's believes could reduce the guarantors' cash flow volatility, further improving the company's liquidity profile and fostering new investment in generation within the country. Those measures include delays in transitioning the spot-price setting-mechanism from a bid-based system to a marginal cost system as well as greater utilization of public auctions to procure a higher proportion of the distribution companies' power requirements under power purchase agreements. However, the ratings already incorporate some degree of uncertainty around a timely and successful implementation of these measures given the complexities of the system and the diverging interests of key stakeholders.

While some of the guarantors' reported credit metrics at year-end 2009 are commensurate with a higher rating, as consolidated CFO before changes in working capital (CFO pre-W/C) represents about 17% of total debt and consolidated CFO pre-W/C coverage of interest expense was around 3.0x, the year-over-year volatility in cash flow, which is extreme, remains commensurate with the current "Ba" speculative grade rating.

Our stable rating outlook reflects our expectation that the current challenges that exist within the El Salvadorian power system are captured today in the Ba2 rating at Trustco, and that the working credit facility expiring early 2011 will be extended or replaced. Prospective credit metrics will depend on the country's economic performance, the success in implementing changes within the regulatory framework that better matches the average of cost of production with the rates charges to end-use customers, the ability of Trustco to recover deferred power costs on a timely basis, and the credit supportiveness of the outcome of the next distribution-tariff review due at the end of 2012. In any case, assuming progress is made on implementing several of these measures, Moody's expects no significant deterioration in the metrics and the rating over the medium term but we will continue monitoring developments along with the related impact on the guarantors' consolidated performance.

For further detail refer to Trustco's Credit Opinion published at www.moodys.com

Moody's last rating action on Trustco was in June 30, 2009 when the senior unsecured rating and CFR were downgraded from Ba1, and a negative outlook was assigned.

The principal methodology used in rating Trustco was Moody's Global Regulated Electric Utilities, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

AES El Salvador Trust (Trustco) is a Panamanian trust set up by AES El Salvador S.A., de C.V. (AES ES) to issue debt for the benefit of four electricity distribution affiliates in El Salvador (El Salvador's government bond rating: Ba1, negative outlook), namely: Compañía de Alumbrado Eléctrico de San Salvador, S.A. de C.V. (CAESS); the 98.32%-owned subsidiary of CAESS, Distribuidora de Eléctrica de Usulutan, S.A. de C.V. (DEUSEM); AES CLESA y Compañia, S.A. de C.V. (CLESA); and Empresa Eléctrica de Oriente, S.A. de C.V. ("EEO"). These four jointly, unconditionally and severally guarantee the debt of Trustco. The guarantors' ultimate parent company is AES Corp (AES; Corporate Family Rating: B1), headquartered in Arlington, Virginia, which holds ownership stakes ranging between 64.15% (CLESA) and 89.11% (EEO), averaging 80% overall. At year-end 2009, the guarantors reported consolidated assets of $753.7 million.

New York
Natividad Martel
Associate Analyst
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
A.J. Sabatelle
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms AES El Salvador at Ba2; outlook stable
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