Fitch Ratings Affirms AEI (formerly Ashmore Energy International) at 'BB'

--Issuer Default Rating (IDR) at 'BB';

--US$1 billion term loan 'BB';

--US$500 million revolving credit facility 'BB'.

The rating affirmation follows the announcement of AEI's agreement to acquire a 50% indirect interest in Chilquinta Energia S.A. (Chilquinta) and a 37.9% indirect interest in Luz del Sur S.A. (Luz del Sur) and related companies from Public Service Enterprise Group (PSEG) for $685 million as well as various other recently completed and pending acquisitions and investments. The Rating Outlook is Stable.

The affirmation incorporates the leveraging impact the acquisition of Chilquinta and Luz del Sur and the other investments will have on AEI. These transactions are expected to be funded with a combination of balance sheet cash, debt and equity which will increase leverage both on a consolidated, and parent-only basis. Additional debt funded transactions or the absence of expected equity funding may pressure credit quality over the medium term. Other recently completed acquisitions include acquisitions of Calidda, Del Sur as well as the purchase of incremental ownership interests in existing investments including San Felipe (formerly Smith Enron Cogeneration), Puerto Quetzal Power (PQP), and Corinto.

The combination of these transactions is expected to increase proforma (LTM June 30, 2007) total debt to EBITDA to approximately 3.5 times (x) from 3x and net debt to EBITDA to 2.6x from 1.6x assuming an equity offering of US$330 million. Consolidated debt and EBITDA will increase to US$4.8 billion and US$1.4 billion, respectively, on a proforma (LTM June 30, 2007) basis following the closing of these transactions with US$2.8 billion of the debt at the project level. Holding company debt (including the PIK sub-debt) is expected to increase to approximately US$2 billion from US$1.3 billion. Cash to AEI from its subsidiaries was approximately $430 million in 2006 and was approximately $550 million (inclusive of the sale proceeds of BLM) through the end of 3Q07. Parent-only leverage (including PIK sub-debt) is expected to increase to 3.6x from 2.7x in the lower end of the rating category. Parent-level free cash flow is sufficient to service debt. Parent company debt service (interest expense) is expected to be approximately US$125 million. Fitch expects that the company will continue to maintain sufficient cash on the balance sheet to provide adequate liquidity in the business.

Strategically, these investments are positive as they further geographically diversify AEI. In particular, Chilquinta and Luz del Sur represent a significant presence in their respective countries with long-term concession contracts, low- to moderately-low leverage and ample liquidity. This purchase marks AEI's entry into Chile and strengthening of their presence in Peru following the acquisition of Calidda, and further supports the company's strategy of diversifying into stable countries with reasonable regulatory frameworks. Chilquinta is one of the largest power distribution companies in Chile serving over 541,000 customers in region V including the city of Valparaiso. Luz del Sur is the largest power distribution company, by sales, in Peru serving over 800,000 customers in the area of southern Lima. Luz del Sur is a solid asset with low leverage and stable cash flow.

The ratings also reflect AEI's portfolio of energy companies focused in five lines of business including: power distribution, power generation, natural gas transportation and services, natural gas distribution, and retail fuel. AEI's assets consist of 34 energy companies in which AEI has direct or indirect ownership interest. All of the assets are operating and generally performing well. AEI's operating assets have a relatively stable base of revenues and cash flows as more than 90% of its revenues are either from contracted Power Purchase Agreements (PPAs) or from regulated energy businesses. Contract and regulated revenues and cash flows tend to be more stable and have lower business risk. Contracted revenues from long-term PPAs are primarily with government-owned off-takers. In addition, AEI has an experienced operating management team.

Cash flows are geographically concentrated in Brazil (rated 'BB+' by Fitch) and more generally in Latin America. From a portfolio standpoint, as of fiscal 2006, 90% of consolidated cash flows can be attributed to companies located in Latin America and 73% of consolidated cash flows are derived from Brazilian assets. Cash flow is concentrated in non-investment-grade countries and is generally rated in the 'BB+/BB-' range. Additionally, AEI's cash flow is concentrated in four key assets: Elektro (Brazil), Cuiaba (Brazil), Promigas (Colombia), and Trakya (Turkey). Forty percent of 2006 EBITDA is attributed to power distribution, 19% to power generation, 30% to natural gas transportation and services, 4% to natural gas distribution, and 7% to retail fuel.

The largest cash flow contributor is expected to be Brazilian power distribution company, Elektro, which at the end of fiscal 2006 represented approximately 37% of consolidated proforma EBITDA and approximately 66% of AEI's dividend cash flow. Elektro is a very solid, well-managed, moderately low risk electric distribution company serving almost 2 million customers in the State of Sao Paulo. Elektro's credit metrics are strong with low leverage of total debt to EBITDA of 0.9 times (x) for fiscal year-end 2006.

AEI owns and operates a portfolio of energy infrastructure assets in power generation, power distribution, natural gas transportation and services, natural gas distribution and retail fuel. AEI's portfolio, directly or indirectly, consists of 34 companies in 19 countries, most of which are located in Latin America. The company's largest asset is Brazilian electric distribution company, Elektro, which represents approximately 37% of consolidated proforma EBITDA, and 66% of fiscal 2006 consolidated cash flow to parent company AEI.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.