Argentine power company Edelap, which is controlled by U.S.-based AES Corp. (AES), plans to invest ARS300 million ($87 million) to improve and expand its distribution network.

The investment program, which was announced late Sunday, comes about a week after Argentina's electricity regular, ENRE, filed charges against Edelap in a federal criminal court, accusing it of "irregular" accounting practices.

ENRE said "grave" accounting practices had benefited AES while leaving Edelap without enough money to improve its distribution network.

In a statement issued late Sunday, Edelap said that after meeting with government officials, AES decided to revise its investment plan.

"The plan aims to improve the quality of service, the growth of installed high-tension capacity to supply the region and create new direct and indirect jobs," Edelap said. "This electric plan will be developed in agreement with ENRE, municipal authorities, and will keep the community permanently informed of its advances."

Edelap said it spent six months looking at ways to improve power distribution after a constant increase in demand. The company said it has reconsidered its "current configuration and has come up with the present plan."

The plan entails the construction of three sub-power stations, the amplification of three others, extending the grid by 700 kilometers (440 miles), and the modernization of 190 medium and high-tension power transformers, Edelap said.

Edelap also will boost its call-center capacity so it can better deal with consumers affected by power outages.

Last week Edelap issued a detailed denial of ENRE's charges and said its accounting practices are transparent and adhere to Argentine law and the most respected norms.

Edelap also said its actions have improved its local financing situation.

Until recently, power rates in Argentina were frozen since 2001. Energy analysts say this rate freeze made it hard for utility companies to make money and discouraged them from investing in production and distribution capacity.

A few months ago, the government has began letting rates rise for residential and commercial customers, but analysts say the new rate are insufficient to spur major investment.

Officials at Argentina's power distribution companies say they are hopeful - but not certain - that the government will raise rates again in February.

Last week local media reported that the government would only raise rates for those companies that have announced new investment plans.

-By Taos Turner, Dow Jones Newswires; 5411-4590-2421; taos.turner@dowjones.com

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