Accounting & Tax

AES Restates Earnings to Correct Errors

Utility company also restated in January; latest revisions put it in default under its senior bank credit facility.
Stephen TaubApril 4, 2006

Utility company AES restated its financials for 2003 and 2004 to correct several errors. The restatement reduced earnings by $17 million for 2003 and increased them by $6 million for 2004.

In January, the company had disclosed that following an internal accounting review, it would restate net income downward by $556 million for the 13-month period ending the first quarter of 2005. That same month, AES announced that Victoria Harker would become its chief financial officer and an executive vice president; she succeeded Barry Sharp, whose resignation at year-end 2005 was announced the previous June.

In Tuesday’s announcement, AES corrected minority interest expense related to a foreign subsidiary; corrected the tax expense related to withholding taxes at a foreign subsidiary, and to adjustments to the company’s 2004 income tax return; and corrected the accounting for four cash-flow derivative instruments after reassessing the accounting requirements.

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The company also warned that as of March 31, it was in default under its senior bank credit facility due to the restatement of its 2003 financials. As a result, $200 million of debt under that facility has been classified as current on the balance sheet as of December 31, 2005.

AES added that it is seeking a waiver of the default and an amendment of the representation relating to the 2003 financial statements. “Upon receipt of the waiver and amendment, the company will be able to borrow additional funds under the revolving credit facility, if needed,” it elaborated in a press release.