Fitch Affirms AES Gener's IDRs at 'BBB', National Rating at 'A+(cl)';
BUENOS AIRES, Argentina -- March 13, 2013
Fitch Ratings has affirmed the foreign and local currency Issuer Default
Ratings (IDRs) of AES Gener S.A. (Gener) at 'BBB' and its long-term national
scale rating at 'A+ (cl)'. In addition, Fitch has affirmed Gener's national
Equity Rating at 'Primera Clase Nivel 2 (cl)'. These rating actions affect
approximately USD549 million of outstanding Yankee bonds and USD322 million of
domestic bonds. The Rating Outlook is Stable.
KEY RATING DRIVERS
AES Gener's ratings are supported by the company's solid credit metrics,
balanced contracted position and diverse portfolio of generating assets. The
ratings also recognize that its major plants operate under constructive
regulatory environments. Credit risks include possible environmental and/or
political issues, which could result in cost overruns or modifications in new
projects. The credit risks also include the regulatory uncertainties in
Argentina related to Termoandes S.A. and pressures from the controlling
shareholder AES Corp. to increase dividends, although these risks appear
The Stable Outlook is driven by Gener's adequate credit metrics and liquidity
Good Financial Performance: Despite a slightly over contracted position in
Chile in 2012, Gener's credit quality measures were within guidelines for its
rating category. In 2012, the company's consolidated EBITDA coverage and
debt-to-EBITDA metrics were 4.4x and 3.6x, respectively. Excluding the
non-recourse debt of Angamos power plant, Gener's debt-to-EBITDA was solid at
2.4x. Consolidated EBITDA was USD661 million in 2012, below the exceptional
level of USD737 million in 2011, but consistent with Fitch's expectations.
As anticipated by Fitch, operations in the Central Interconnected System (SIC)
in Chile were negatively impacted by a modest over contracted position and the
obligation to supply a portion of the contracts previously held by Campanario
Generacion, which went bankrupt. In the Northern Interconnected System (SING),
sales decreased due to the lack of exports from Termoandes in Argentina. These
were partially offset by larger sales in Colombia related to higher spot
prices and the operation of the Angamos plant during the whole year. In 2013,
EBITDA is expected to increase to over USD700 million, following the startup
of Ventanas IV (Campiche) coal plant, anticipated in March 2013.
Balanced Contracted Position: Following the startup of Ventanas IV, Gener's
contracted position is expected to be balanced with its efficient generation
capacity. In the event of an adverse scenario of an energy shortage, such
deficit could be covered by its Nueva Renca back up unit (should prevailing
hydro conditions result in its dispatch), by its related company Guacolda or
with purchases in the spot market. Long-term contracts with price indexation
mechanisms has reduced Gener's exposure to price fluctuations in the SIC and
will help the company to achieve earnings with less volatility.
Rising Capital Expenditures: Fitch expects Gener to move forward with its
532MW Cochrane coal project in the SING, which estimated investment is
approximately USD1.3 billion. Fitch expects this project to be financed
through a project -finance type debt that will be non-recourse to Gener. The
company is also analyzing the 531MW Alto Maipo hydroelectric project, though
this project is advancing at a slower pace and has not been included in
Fitch's base case scenario.
In the Cochrane project, Gener has incorporated Mitsubishi Corporation as a
shareholder with a 60%/40% stake, respectively. Construction risk is likely to
be mitigated by the selection of the same constructor that the Angamos project
(Posco Engineering & Construction) which completed the project on budget and
before schedule, and was also the constructor of the Nueva Ventanas and
Ventanas IV plants. In addition, the project will be located beside the
Angamos plant, which adds its experience in the port and coal stock
management. Commercial risk could be mitigated by solid counterparties and/or
the existence of guarantees.
Consolidated Leverage to Increase, Non-Recourse Debt Stable: Fitch's base case
projections include the expectation of an increase in Gener's consolidated
leverage during the next couple of years, primarily due to the financing of
the Cochrane project. For 2015, Fitch expects a consolidated net
debt-to-EBITDA to increase to approximately 4x. However, Gener's recourse
debt-to-EBTIDA is expected to be below 3x, which is consistent with Gener's
current ratings. This adjusted analysis excludes non-recourse debt to Gener
(Angamos and Cochrane project finance debt) and considers the dividend stream
from Angamos instead of its EBITDA. Fitch's base case does not include the
Alto Maipo project.
Adequate Liquidity: As of December 2012, Gener's consolidated liquidity was
USD397 million, enhanced by access to committed credit lines for USD285
million. Short-term debt was USD124 million. In 2014, Fitch expects Gener to
refinance its USD380 million debt maturities.
High Dividend Payment: Gener has a track record of high dividend payments.
Cash flow could be pressured during the upcoming expansion phase should this
policy be maintained.
A change in Gener's commercial policy that results in an imbalanced long-term
contractual position, and/or a material and sustained deterioration of credit
metrics (reflected in a non-recourse debt-to-EBITDA ratio greater than 3x and
EBITDA-to-interest coverage below 3x) could result in a negative rating
action. Fitch believes that a positive rating action is limited at this time
due to the expected capacity expansion over the next few years.
Gener is the second largest electricity generation company in Chile, as it
operates 31% of the country's total generating capacity. Gener's installed
capacity totals 4,810 MW, including its investments in AES Chivor, Guacolda
and TermoAndes. The company has ownership interests in electric generation in
Colombia and Argentina. Gener is indirectly owned by AES Corporation (71%).
AES Corporation is one of the world's largest global power companies. With
operations in five continents, the company is active in the generation and
distribution of electricity. The company controls more than 40,000 MW of
Fitch has affirmed Gener's ratings as follows:
--USD400 million, 2014 notes at 'BBB';
--USD400 million, 2021 notes at 'BBB';
--UF$4.4 billion, 2028 notes series N at 'A+(cl)';
--UF$1.2 billion, 2015 notes series O at 'A+(cl)';
--USD196 million, 2019 notes series Q at 'A+(cl)';
--USD200 million bond program at 'A+(cl)';
--USD400 million bond program at 'A+(cl)'.
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:
--'Corporate Rating Methodology' Aug. 8, 2012.
Applicable Criteria and Related Research
Corporate Rating Methodology
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