The issue of political risk was underscored Thursday when AES reported its most recent quarterly results.
The electric power company said it recognized a $638 million impairment charge in connection with the forced sale of its equity stake in its Venezuelan subsidiary C.A. La Electricidad de Caracas (EDC). Including these charges, the company reported a net loss of $455 million for the first quarter of 2007. This compares to net income of $348 million in the first quarter of 2006.
Earlier this year, Venezuelan president Hugo Chavez announced that he would nationalize a number of energy assets, including AES, the country’s largest private electric company at the time.
Under a deal signed in February, AES agreed to sell its 82.14 percent stake in EDC for nearly $740 million.
Rafael Ramirez, president of state oil company Petroleos de Venezuela SA., who signed the deal on behalf of the Venezuelan government, said at the time that the entire company was valued at $900 million, according to the Associated Press.
AES purchased a controlling interest in EDC in 2000 in a hostile takeover, according to the Associated Press. EDC was the largest private electric utility in Venezuela. It provides power and light to about one million customers in the Caracas metropolitan area. It had been privately owned since its founding in 1885, according to the AP.