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Rating Action:

Moody's affirms Alupar's Ba1/Aa2.br corporate family ratings; outlook stable

 The document has been translated in other languages

26 Dec 2013

Sao Paulo, December 26, 2013 -- Moody's America Latina Ltda (Moody's) affirmed Alupar Investimento S.A. (Alupar)'s corporate family ratings of Ba1 on the global scale and Aa2.br on the Brazilian national scale. At the same time, Moody's affirmed the Ba2/Aa3.br ratings of Alupar's four-year BRL 17.8 million unsecured amortizing debentures expiring in December 2014 with a current outstanding balance of BRL 6.0 million as of September 30, 2013. The outlook is stable for all ratings.

RATINGS RATIONALE

The Ba1 and Aa2.br corporate family ratings largely reflect Alupar's predictable and stable cash flows supported by its solid portfolio of transmission concessions, adequate credit metrics for its rating category and satisfactory liquidity. The ratings are constrained by its significant investment program to expand the scope of its activities not only in the electricity transmission business but also into the higher risk power generation business and the inherent risks associated with the construction, completion, and operation of such power projects.

RATINGS OUTLOOK

The stable outlook reflects Moody's expectation that Alupar will maintain solid credit metrics for the Ba1 rating category mostly from the stable cash of its transmission businesses, and that the company will be able to secure long-term financing at the level of the energy and transmission projects.

It also reflects Moody's view that Alupar will maintain adequate liquidity despite the forecasted consolidated negative free cash flow over the next two years and that the company will prudently manage the distribution of dividends and additional capital expenditures so that the credit metrics remain commensurate with the Ba1 corporate family rating.

WHAT COULD CHANGE THE RATING -- UP

The ratings could be upgraded should Alupar's credit profile establish a sustained track record of remaining financially strong, particularly during the current investment and expansion phase, such that FFO interest coverage is greater than 3.0x along with FFO over net debt above 20% on a sustainable basis. This along with the successful implementation mainly of the two major power projects could prompt an upgrade rating action.

WHAT COULD CHANGE THE RATING -- DOWN

The rating or outlook could be downgraded if significant risks arise from its current investment program, such as material delays in the completion of the projects or a material increase in leverage beyond our expectation. Quantitatively, the rating or outlook could come under downward pressure if the FFO interest coverage ratio falls below 2.5x and the FFO stays below 15% for an extended period.

CORPORATE PROFILE

Alupar is a holding in the energy sector, dedicated to the segments of transmission and generation, focusing in the development and investment in infrastructure projects related to the energy sector in Brazil and other countries in Latin America.

Alupar Investimento S.A. (Alupar) is a holding company that participates in the capital of 19 transmission companies in Brazil and one in Chile, with a total extension of 5,665 km, of which 715 km are under construction and are scheduled to start operating in 2015. Alupar also has interests in the generation business with a total installed capacity of 179.4 MW as of September 30, 2013. Alupar is engaged in two major generation projects mainly consisting of a 252 MW hydro-plant scheduled to begin operations in January 2015 and 10 wind power facilities with total installed capacity of 204 MW scheduled to come on stream in January 2016.

Alupar is controlled by Guarupart Participacoes Ltda. (unrated), a family-owned holding company with investments in construction businesses and engineering services in addition to investments in the electricity sector in other Latin American countries.

In the last twelve months ended September 30, 2013, Alupar reported consolidated net sales of BRL 1,191 million (USD 502million), which excludes BRL117 million (BRL49 million) infrastructure construction revenues, and net profit of BRL275 million (USD116 million) in accordance with the international accounting standards (IFRS).

The principal methodology used in this rating was Regulated Electric and Gas Networks published in August 2009. Please see the Credit Policy page on www.moodys.com.br for a copy of this methodology.

Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Methodology published in October 2012 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

REGULATORY DISCLOSURES

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure. Please see the ratings disclosure page on www.moodys.com.br for general disclosure on potential conflicts of interests. Moody's America Latina, Ltda. may have provided Other Permissible Service(s) to the rated entity or its related third parties within the 12 months preceding the credit rating action. Please see the special report "Services provided to entities rated by Moody's America Latina, Ltda." on our website www.moodys.com.br for further information.

Entities rated by Moody's America Latina Ltda. (and the rated entities' related parties) may also receive products/services provided by parties related to Moody's America Latina, Ltda. engaging in credit ratings activities. Please go to www.moodys.com.br for a list of entities receiving products/services from these related entities and the products/services received. This list is updated on a quarterly basis.

The date of the last Rating Action was 19/November/2009.

Moody's ratings are constantly monitored, unless designated as point-in-time ratings in the initial press release. All Moody's ratings are reviewed at least once during every 12-month period.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.br.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see ratings tab on the issuer/entity page on www.moodys.com.br for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.br for further information.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com.br for further information on the meaning of each rating category and the definition of default and recovery.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com.br for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com.br for additional regulatory disclosures for each credit rating.

Jose Soares
VP - Senior Credit Officer
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

William L. Hess
MD - Utilities
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300

Moody's affirms Alupar's Ba1/Aa2.br corporate family ratings; outlook stable
No Related Data.
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