Fitch Affirms AES Gener's IDRs at 'BBB' & National Rating at 'A+(cl)';
CHICAGO -- September 4, 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 USD537 million of outstanding Yankee bonds and USD361 million of
domestic bonds. The Rating Outlook is Stable.
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
Credit risks include possible environmental and/or political issues, which
could result in cost overruns or additional 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 manageable.
The Stable Outlook is driven by Gener's adequate credit metrics and liquidity
KEY RATING DRIVERS
Good Financial Performance
Despite a slightly over contracted position relative to the company's
efficient energy generation in Chile in 2012, Gener's credit quality measures
were within guidelines for its rating category. For the last twelve months
ended June 30, 2013, the company's consolidated EBITDA coverage and
debt-to-EBITDA metrics were 4.7x and 3.4x, respectively. Excluding the
non-recourse debt of Angamos power plant, Gener's debt-to-EBITDA was solid at
2.5x. Consolidated EBITDA was USD697 million in June 30, 2013, consistent with
Fitch's expectations. In year-end 2013, EBITDA is expected to remain at
Rising Capital Expenditures
Gener initiated construction in March of 2013 of its 532MW Cochrane coal
project in SING, with estimated investment of approximately USD1.3 billion.
This project will 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
expects to start construction before the end of 2013.
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 is mitigated by solid counterparties and/or the
existence of guarantees. In Alto Maipo, Gener incorporated Antofagasta
Minerals S.A., a Chilean mining company, as 40% shareholder.
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 4.3x. 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.
As of June 30, 2013, Gener's consolidated liquidity was USD367 million,
enhanced by access to committed credit lines for USD270 million. USD 170
milion of the liquidity is restricted. Short-term debt was USD128 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 in 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 21% of the country's total generating capacity (3,437MW, including
its investments in Guacolda). 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 capacity.
Fitch has affirmed Gener's ratings as follows:
--US$400 million, 2014 notes at 'BBB',
--US$400 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)';
--US$196 million, 2019 notes Series Q at 'A+(cl)',
--US$200 million Bond Program at 'A+(cl)',
--US$400 million Bond Program at 'A+(cl)'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012).
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
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. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.
Daniel R. Kastholm, +1 312-368-2070
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
Paula Garcia Uriburu, +562-499-3300
Rina Jarufe, +562 499 3300
Elizabeth Fogerty, +1 212-908-0526
Press spacebar to pause and continue. Press esc to stop.