2 September 2002 – Standard & Poor’s Ratings Services said Thursday that its triple-‘C’ ratings on AES Drax Energy Ltd.’s (Drax Energy) $200m and £135m ($206m) secured subordinated notes remain on CreditWatch with negative implications.
The CreditWatch update takes into account the fact that Drax Energy has now received £8m from AES Corp. (BB-/Negative/–) through a direct capital contribution. Together with the money that is still available in the debt service reserve account at Drax Energy, this is sufficient to make the £15m interest payment due Friday.
The issuer, together with InPower Ltd. and AES Drax Holdings Ltd. (collectively Drax), ultimately provided funds for AES Drax Ltd.’s capitalization after the AES Corp. acquired the 4-gigawatt Drax coal-fired power plant in northern England on Nov. 30, 1999. The ratings on Drax Energy were placed on CreditWatch with negative implications and lowered to triple-‘C’ from single-‘B’-plus on Aug. 20, 2002, reflecting the potential for a default on the Aug. 30, 2002, interest payment on the subordinated debt (see related release).
“Although today’s interest payment will be made, there is still a very high risk of insufficient cash for the next interest payment due Feb. 28, 2003,” said Standard & Poor’s Infrastructure Finance credit analyst Jan Willem Plantagie. “AES Corp. has clearly indicated that there can be no assurance that it will continue to provide funding for future subordinate note interest payments. As such, the notes remain highly vulnerable to the current low U.K. power prices and the structural elements of the overall financing package of Drax,” continued Mr. Plantagie.