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Moody's changes AES outlook to positive on improved business risk profile

Moody's changed its ratings outlook for AES Corp. to positive from stable, citing the company's ongoing efforts to reduce its business risk as well as its progress on a number of under-construction projects.

"AES is taking steps to reduce its business risk and is increasing the stability and predictability of its cash flows," Moody's senior analyst Natividad Martel said in a March 22 report. "But consolidated financial improvements occur more slowly, and are harder to see due to the complexity of the organizational structure."

The globally diversified power company has renegotiated its construction contract with Strabag AG, a move that reduces the geological risk exposure of subsidiary AES Gener SA's Alto Maipo hydroelectric plant in Chile, Moody's said.

Moreover, the positive outlook takes into account the more contracted nature of the company's new power assets, extending the weighted averaged of the remaining contracts to approximately 10 years from seven years on a pro-forma basis, the rating agency said, noting that the contract lengthening enhances cash flow visibility and predictability of distributions to AES.

Moody's also affirmed AES' Ba2 corporate family rating and senior unsecured rating, its Ba2-PD probability of default rating, its Ba1 senior secured bank credit facility and its speculative grade liquidity rating at SGL-2.

The rating action follows the company's recently completed sale of a 51% equity interest in its Philippines subsidiary to SMC Global Power Holdings Corp. for $1.05 billion.