Fitch Affirms AES Gener's IDRs at 'BBB-'; Outlook Stable

martes 26 de agosto de 2014 14:03 GYT
 

(The following statement was released by the rating agency) NEW YORK, August 26 (Fitch) Fitch Ratings has affirmed AES Gener S.A.'s (Gener) ratings as follows: --Foreign and local currency Issuer Default Ratings (IDRs) at 'BBB-'; --International Senior unsecured debt at 'BBB-'; --International Junior subordinated debt at 'BB'; --National long-term ratings at 'A+(cl)'; --Domestic Senior unsecured debt at 'A+(cl)'; --National equity rating at 'Nivel 2(cl)'. The Rating Outlook is Stable. Gener's ratings are supported by the company's solid liquidity given significant capex needs in the short to medium term, a balanced contractual position and a diverse portfolio of generation assets. The ratings also recognize that its major plants operate under constructive regulatory environments in Chile and Colombia. Credit risks include possible environmental and/or political issues, which could result in cost overruns or additional modifications in new and/or existing projects. The credit risks also include the regulatory uncertainties in Argentina related to Termoandes S.A., though these are mitigated given Argentina represented 6% of consolidated EBITDA during the first half of 2014. In addition, the company could face pressure from the controlling shareholder AES Corp. ('BB-'/Outlook Stable) to increase dividends above those forecast by Fitch. KEY RATING DRIVERS DIFFICULT 2014: In the last 12 months (LTM) June 2014 period, Gener reported consolidated adjusted EBITDA of USD574 million, which was 8% weaker versus 2013 results and down 15% versus 2012. The results have so far come in below Fitch's expectations and the main drivers for the weakness seen so far in 2014 are: 1) lower availability of AES Gener's efficient coal plants due to a scheduled maintenance at the Ventanas coal complex during the first quarter of 2014; 2) lower contract prices in Chile; 3) lower energy sales in Argentina. Fitch expects results to improve in the second half of the year given the full availability of the company's coal plants during this period. The plants under maintenance in the Ventanas Complex are now back in service after maintenance work in 1Q14. In addition, contract prices in Chile re-set at the end of the second quarter of 2014, which will help provide tailwinds for Gener's 2H14 results. Fitch expects Argentina sales to continue to be negatively impacted by a continued currency devaluation and economic slowdown. AGGRESSIVE EXPANSION: The company has embarked on an aggressive expansion phase which brings with it significant execution risk (i.e., construction delays, accidents, cost-overruns, etc.). In addition, the expansion plan has resulted in additional pressure on the company's cash flow generation and credit metrics. Positively, the company has extensive history of finishing major projects on time and on budget. Gener's first phase of expansion took place between 2007-2013 in which the company successfully expanded its generation capacity by 48% to reach 5,081 MW of installed capacity at a total investment cost of USD3 billion. The company is in the midst of what it has termed a second phase of expansion, which involves four major projects under construction that will increase installed capacity by 24%. Total investment cost for the second phase will total USD4 billion with project finance debt of USD2.5 billion executed in 2013. The Guacolda V Project will cost USD450 million (152 MW coal-fired with estimated operation date of 3Q15) while Tunjita in Colombia (20 MW run of the river) will cost USD68 million (estimated operation date 1H15). Gener also recently received the Notice to Proceed for the construction of the first phase of the Solar Andes Project (21 MW) whose investment will total USD45 million with an expected operation date in 1H15. The largest projects to be executed are Cochrane (USD1.35 billion) and Alto Maipo (USD2.05 billion). Gener initiated construction in March of 2013 of its 532MW Cochrane coal project in the SING (Sistema Interconectado del Norte Grande), with an estimated investment of approximately USD1.35 billion. In the Cochrane project, Gener has incorporated Mitsubishi Corporation as a shareholder with a 60%:40% equity stake, respectively. For Alto Maipo , Gener incorporated Antofagasta Minerals S.A., a Chilean mining company, as a 40% shareholder. Non-recourse financing has been closed for both projects and the company will use funds from the recently-issued junior subordinated notes (USD300 million) and USD150 million capital increase to fund the equity investments in both projects. NEGATIVE FCF: Primarily due to cash outflows to fund the Cochrane and Alto Maipo projects, Fitch expects the company to generate negative FCF in the 2015-2018 period, with peak capex forecast for 2014-2015 and a return to positive FCF generation in 2019. Fitch estimates that Cochrane will become a positive cash flow contributor in 2017 while Alto Maipo should do so in 2019. The company's financial strategy revolves around maintaining a balance between continuity of funding and financial flexibility through internally generated cash flows, bank loans, bonds, short-term investments, committed credit lines and uncommitted credit lines. PRESSURED CREDIT METRICS: Given Gener is in the midst of an aggressive expansion plan, Fitch expects a weakening of the company's credit quality measures in the short to medium term. For the LTM ended June 30, 2014, the company's consolidated debt-to-EBITDA and EBITDA coverage metrics were 4.7x and 3.4x , respectively. These ratios are weaker versus leverage levels of 4.3x and 3.6x in 2013 and 2012 respectively and coverage ratios of 4.0x and 4.5x during the same periods. Excluding the non-recourse debt of the Angamos, Alto Maipo and Cochrane power plants, Gener's debt-to-EBITDA for the LTM June 2014 period was 2.9x. Fitch expects the company's consolidated leverage levels to remain in the 4.5x-5x range during 2014 and 2015, which is on the weak side for the rating category. Leverage levels should slowly decline to the 4x level starting in 2016 as Cochrane comes on-line and begins generating meaningful cash flows in 2016-2017. SUFFICIENT LIQUIDITY: Fitch believes Gener has adequate liquidity to support its financial needs during the peak capex period in 2014-2015. The company's liquidity is supported by reported cash on hand of USD566 million as of June 30, 2014, which compares favorably with short-term maturities totaling USD362 million. The company's definition of reported cash on hand totals USD576 million as it also adds USD8 million in other financial assets comprised of short-term investments by subsidiary AES Chivor which are restricted given they serve as a guarantee for its bond. Gener also classifies USD35 million in investments with short-term maturities as cash and equivalents. In calculating a pro forma cash and equivalents figure, Fitch conservatively takes a 30% haircut of both investment assets, arriving at a still solid pro forma cash and cash equivalents figure of USD561 million which is 1.5x the level of short-term maturities. The company's liquidity is further buoyed by access to undrawn committed credit lines totaling USD261 million. Gener also has access to unused uncommitted credit lines of approximately USD246 million. Positively, the company's debt outstanding does not have major maturities coming due in the next five years, which cushions the company for the aggressive build-out taking place. HIGH DIVIDEND PAYMENT: Gener has a track record of high dividend payments. Fitch is estimating that the company will continue to payout 100% of Net Income going forward. Cash flow could be further pressured in the upcoming expansion phase should this dividend policy be increased to a payout rate above 100% of net income during peak capex periods. RATING SENSITIVITIES A change in Gener's commercial policy that results in an imbalanced long-term contractual position would be viewed negatively by Fitch. In addition, a material and sustained deterioration of credit metrics reflected in total consolidated debt-to- EBITDA ratios above 4.5x-5x and total non-recourse debt-to-EBITDA ratios above 3x-3.5x on a sustained basis 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. Contact: Primary Analyst Xavier Olave Associate Director +1-212-612-7895 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 60602 Secondary Analyst Paula Garcia Uriburu Director +562-2-499-3316 Committee Chairperson Lucas Aristizabal Senior Director +1-312-368-3260 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (May 28, 2014). Applicable Criteria and Related Research: Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage 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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