Tuesday, October 17, 2006

by Phil Milford

WILMINGTON, USA (Bloomberg): AES Corp., a power producer in 26 countries, is seeking $40 million from France's Alstom SA in a trial of a warranty dispute that began Monday in federal court in Delaware.

An AES unit sued Alstom Power Inc. in 2004, claiming breach of contract over corrosion in pollution-control systems at an $800 million coal-fired power plant in Guyama, Puerto Rico. The potential damage figure was contained in court filings.

Parts of the 454-megawatt plant, which uses steam to generate electricity, "rusted to bits in a year" after it was started up in 2002, AES lawyer Dane Butswinkas, of Washington-based Williams & Connolly, told jurors Monday in his opening statement in Wilmington.

John A. Wolf, a lawyer for Alstom, countered that Arlington, Virginia-based AES "failed to maintain and operate the equipment properly." AES is seeking "hugely inflated" damages for problems that were "self-inflicted," said Wolf, of Ober, Kaler, Grimes & Shriver of Baltimore.

AES said in August that second-quarter profit almost doubled to $169 million as power demand increased in markets such as New York, Chile and Kazakhstan.

Alstom, whose power plants generate a quarter of the world's electricity, returned to profit last year after four years of losses. The Paris-based company said in July that first-quarter orders reached a five-year high with Italian turbine and Hungarian subway car contracts.

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