Fitch Downgrades AES Eastern Energy's Secured Debt to 'D'

Fitch Ratings has downgraded a total of $433.1 million outstanding secured pass-through trust certificates at AES Eastern Energy LP (AEE) to 'D' from 'C.' The downgrade is due to AEE's Chapter 11 bankruptcy filing that occurred on December 30, 2011. The trust certificate debt is structured to be serviced by cash flow from lease payments made by AEE under two leveraged leases.

Fitch has taken the following rating actions:

AES Eastern Energy Pass-Through Trusts:

--$165 million outstanding series 1999-A certificates, due 2017, downgraded to 'D' from 'C';

--$268 million outstanding series 1999-B certificates, due 2029, downgraded to 'D' from 'C'.

Security

The Series 1999-A and 1999-B trust certificates are issued by two bankruptcy-remote Pass-Through Trusts, which hold the Secured Lessor Notes as their only property. The Secured Lessor Notes are secured by a first priority security interest in the Somerset and Cayuga leases, including the right to receive payments of periodic rent and other payments; an undivided interest in the in the leases; the Participation Agreements of the leases; the Facility Site Lease and Sublease; the Facilities Support Agreements of the leases; a portion of the Rent Reserve and Special Rent Reserve Accounts of the leases; and the Coal Hauling Agreement with Somerset Railroad.

Credit Update

As part of its Chapter 11 reorganization filing, AEE has agreed in principal to sell the Somerset and Cayuga coal-fired power plants to a subset of its existing trust certificate holders under a non-binding term sheet dated Dec. 30, 2011. The two coal-fired plants are expected to remain in operation during the bankruptcy case.

For additional information refer to Fitch Ratings' press release dated December 20, 2011, 'Fitch Downgrades AES Eastern Energy to 'C',' at www.fitchratings.com.

AEE is a special purpose entity that is indirectly wholly owned by AES Corporation, which is rated 'B+' with a Stable Outlook by Fitch. AEE operates four coal-fired electricity generating facilities with a gross capacity of 1,169 megawatts Of the four plants AEE operates, AEE leases two: the Somerset and Cayuga plants. AEE sells electricity into the spot market at prevailing New York Independent System Operator wholesale market prices.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Rating Criteria for Thermal Power Projects' (June 20, 2011);

--'Rating Criteria for Infrastructure and Project Finance' (Aug. 16, 2011).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832

Rating Criteria for Thermal Power Projects

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=639073

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. 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.