Fitch Affirms Tractebel's IDRs at 'BBB'; Outlook Stable

viernes 25 de abril de 2014 16:00 GYT

(The following statement was released by the rating agency) SAO PAULO, April 25 (Fitch) Fitch Ratings has affirmed Tractebel Energia S.A.'s (Tractebel) ratings as follows: --Local and Foreign Currency Issuer Default Ratings (IDRs) at 'BBB'; --Long-term National Scale Rating at 'AAA(bra)'; --Long-term National Scale Rating of the second debenture issuance due 2014 at 'AAA(bra)'. The Rating Outlook is Stable. KEY RATING DRIVERS Tractebel's ratings reflect its solid consolidated financial profile, underpinned by its strong and predictable operational cash flow generation, low leverage, robust liquidity position and lengthened debt maturity schedule. The ratings already incorporate that credit metrics should moderately deteriorate after the very likely transfer of the hydroelectric plant of Jirau (UHE Jirau) from its parent company GDF-Suez (Suez). The new percentage of this project to be acquired by Tractebel reduced to 40% from 60% previously expected, as Suez has sold part of its stake to Mitsui Corp. The company's consolidated leverage, measured by net adjusted debt-to-EBITDA, should not exceed 3.0 times (x), which is still consistent with its ratings. Fitch considers as positive that the acquisition may occur only in 2016, as UHE Jirau should migrate to Tractebel in its operational phase, reducing execution risks. The ratings are further supported by its prominent market position as the largest private electric energy generation company in Brazil. Tractebel benefits from its positive asset diversification; operational efficiency; and the existence of long-term power purchase agreements with its clients. To a lesser extent, the analysis considered the credit strength and sector expertise of its parent company, GDF-Suez, as a relevant global power company. The analysis also factored in Tractebel's ambitious expansion plans and the risks associated with the construction phase of the greenfield projects, which is somewhat mitigated by the controlling shareholder's strategy of developing relevant projects internally, only transferring them to Tractebel after the main risks associated to construction are mitigated. The ratings incorporate a moderate regulatory risk and the currently above average hydrological risk. Robust Operational Cash Generation Tractebel's credit profile benefits from its strong and predictable cash generation. In 2013, EBITDA of BRL3 billion experienced a reduction of 4% compared to 2012 as the company had its gas supply to William Arjona thermal plant suspended by Petrobras, which led to energy purchases in the spot market at high prices to meet its sales contract. Net revenues of BRL5.6 billion continued to benefit from higher average energy prices, as a result of tariff readjustments and the company's contracts portfolio management, and to a lesser extent, higher energy sales volume. EBITDA margin dropped to 53.3% in comparison to the range of 63%-68% in the last four years. This reduction also reflects the continuously scenario of higher thermoelectric dispatch and higher energy purchases for resale, activity that generates lower margins. Sound Free Cash Flow Despite High Dividents Payout Fitch considers as positive the flexibility that Tractebel has demonstrated in reducing its dividends distribution as a way to preserve cash and provide debt reduction when necessary. In 2013, cash flow from operations (CFFO) remained robust at BRL2.3 billion and was mainly used for dividends payment (BRL1.6 billion) and capital expenditures (BRL547 million), resulting in a free cash flow (FCF) of BRL156 million. The company has historically presented a payout of 95% to 100%, with a temporary reduction in 2009 and 2010 in order to be prepared for the migration of UHE Jirau project to its balance sheet. Since this movement has been postponed, Tractebel resumed the dividends payout of 100%. Solid Credit Metrics to Remain Fitch believes that Tractebel will be able to keep credit metrics consistent with its ratings even after the acquisition of UHE Jirau, with net adjusted debt-to-EBITDA ratio below 3.0x. Positively, this acquisition may occur in 2016, after main project risks are mitigated. Fitch believes that the parent company may also provide some flexibility in transferring this asset in order to avoid liquidity pressure and to respect existing financial covenants for Tractebel's debt. UHE Jirau is a large hydroelectric plant, with expected installed capacity of 3,750 megawatts (MW) and estimated investments at BRL17.4 billion, mainly financed by BNDES, which up to now has been on Suez's balance sheet. As of year-end 2013, Tractebel's consolidated gross leverage reported was 1.3x, while its net debt-to-EBITDA ratio decreased to 0.8x from 0.9x in 2012. As of December 2013, the company's interest coverage, as measured by EBITDA to interest expenses was strong at 13.3x. From 2009 to 2013 the company reported, on average, conservative net leverage and interest coverage ratio of 1.1x and 8.7x, respectively. Credit Profile Benefits from Long-Term PPA's Tractebel is the largest private energy generation company in Brazil, with a total installed capacity of 7,000 MW, to be further increased to 8,500 MW after the acquisition of 40% of the 3,750 MW of UHE Jirau. The company benefits from a successful energy commercialization strategy, the efficient monthly allocation of firm capacity and, to a lesser degree, the dilution of operational risks obtained through its diversified asset base. The potential acquisition of UHE Jirau and the ongoing investments in wind farms reinforce this diversification. Tractebel's energy balance going forward shows a secure contracted volume. Its contracted energy position is strong, above 88% of total available energy until 2016, being 98% in 2014 and 2015, with adequate tariffs. Tractebel is also in a position to capture probable energy prices increases based on a tighter supply and demand balance. Its sales are diversified among distribution companies with long-term contracts and unregulated customers and commercialization companies with shorter-term contracts and flexible conditions. Strong Liquidity Position and Financial Flexibility Tractebel's consolidated figures present a robust liquidity position. As of Dec. 31, 2013, cash and marketable securities amounted to BRL1.2 billion, covering by 1.8x its short-term debt of BRL695 million. The cash and equivalents + CFFO/short-term debt ratio of 5.1x was also strong. The company's debt maturity schedule is adequately distributed along the years and it is consistent with Tractebel's strong cash generating capacity. Fitch notes that Tractebel has financial flexibility and broad access to bank debt and the capital markets, as one of the main companies engaged in the power sector in Brazil. It is important that the company finances its projects with adequate credit lines in terms of payment conditions and financial costs. Given the financial strength of its parent company, greater flexibility is also expected in the payment of dividends or for the acquisition of assets, if necessary. Manageable Investment Plan Tractebel has made sizeable investments in the energy sector, with 87% growth in its generation installed capacity since 1998. In general, investments in new projects have a negative impact on the company's consolidated credit ratios and pressure its cash flow, since they add debt and require resources, while operational cash generation occurs only after the operation starts up. Fitch sees as positive Suez's strategy of first developing sizeable projects and transferring them to Tractebel only after mitigation of the main risks. RATING SENSITIVITIES The ratings could be negatively pressured by sizeable investments or acquisitions currently out of the company's business plan, that could lead to a leverage consistently above 3.5x. A potential rationing scenario could also put pressure on the company's ratings depending on its extension. An upgrade of Tractebel's ratings is unlikely until the UHE Jirau acquisition is concluded or while the conditions for this transference are unknown. After that, a positive rating action will require a net adjusted leverage below 2.0x. Contact: Primary Analyst Adriane Silva Associate Director +55-11-4504-2205 Fitch Brazil Alameda Santos, 700 - 7 andar Sao Paulo, Brazil Secondary Analyst Wellington Senter Analyst +55-21-4503-2606 Committee Chairperson Ricardo Carvalho Senior Director +55-21 4503 2627 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: Additional information is available at ''. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (Aug. 5, 2013); --'National Scale Ratings Criteria' (Oct. 30, 2013). Applicable Criteria and Related Research: Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage here National Scale Ratings Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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