Campiche Takes Environmental Hit

Fitch has placed AES Gener’s ratings on watch negative after the Chilean supreme court revoked an environmental impact approval for the $500m Campiche project. The approval was given in April 2008 and construction of the 537MW plant began a month later, but the court says the approval was based on improper zoning of the plant site, so AES Gener is suspending construction. “Given the strategic importance of this project to the Chilean energy matrix, the possibility that a solution is reached cannot be ruled out, but its timing and form remain highly uncertain,” Fitch says. It adds that suspension of the project could raise Gener’s operating and investment costs, pressuring credit quality. On the other hand, Fitch says the company does not have material debt maturities until 2014 and that its cash generation is expected to improve through 2010 as more favorable contracts kick in and the Nueva Ventana project starts. AES Campiche had been seeking a 7-year $220m loan to develop Campiche. The deal was offering 350bp-400bp over Libor.