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07 Jun 2011
Approximately BRL 1.5 billion of debt instruments affected
Sao Paulo, June 07, 2011 -- Moody's America Latina Ltda. (Moody's) affirmed Transmissora
Aliança de Energia Eletrica S.A. (TAESA)'s
issuer ratings of Baa3 on the global scale and Aa1.br on the Brazilian
national scale. The outlook is stable.
The affirmation of the ratings follows the announcement by TAESA's
management that the company would be acquiring the shares of five electricity
transmission companies from the Spanish group Abengoa for approximately
BRL 1.1 billion. Abengoa is expected to maintain a 50%
participation in the total and voting capital of four of the five companies
while TAESA will be the sole shareholder in one of the five companies
as described below:
- NTE -- TAESA's share: 100%, Beginning:
Jan-02, Reduction date: Jan-19, Ending:
Jan-32, Length: 386km;
- STE -- TAESA's share: 50%, Beginning:
Dec-02, Reduction date: Jul-19, Ending:
Dec-32, Length: 389km;
- ATE I -- TAESA's share: 50%, Beginning:
Dec-04, Reduction date: Feb-21, Ending:
Feb-34, Length: 370km;
- ATE I I -- TAESA's share: 50%,
Beginning: Mar-05, Reduction date: Nov-21,
Ending: Mar-35, Length: 942km;
- ATE I I I -- TAESA's share: 50%,
Beginning: Apr-06, Reduction date: Apr-23,
Ending: Apr-36, Length: 454km.
Management said that total debt at the target companies was BRL1.2
billion and their cash position was BRL 312 million, as of December
31, 2010. As a result, TAESA would recognize BRL 642
million of debt and BRL164 million of cash in its consolidated financial
statements on a pro-forma basis. Considering the BRL 1.1
billion acquisition price along with the existing net debt at the level
of the target companies, TAESA will pay the equivalent of 7.4x
the estimated annual EBITDA not adjusted by IFRS of the target companies
of BRL 212 million.
Moody's preliminarily projects that the transaction will increase
leverage to an average 26.6% over the next three years,
as measured by FFO over net debt, down from 37.8%
registered in 2010. While there will be some increase in leverage
ratios in short term, TAESA is likely to maintain strong cash flows
going forward given the inherently stable and predictable nature of cash
flows in the transmission business in Brazil. This projection assumes
that new equity capital will be funding most of the acquisition transaction
as indicated by management.
Moody's expects that the deterioration in credit metrics to be relatively
moderate and concentrated mostly in the first twelve months. Moody's
also expects that management will balance its capital expenditures and
the distribution of dividends to maintain its currently solid capital
Should TAESA issue long-term debt to fund this acquisition,
the deterioration in credit metrics would be more pronounced but still
compatible with the Baa rating category. This alternative projection
incorporating debt funding indicates that the FFO over net debt ratio
would average 15.3% over the next three years.
Increased leverage will not be a rating constraint given that TAESA is
currently well positioned in the Baa3 rating category. On the other
hand, Moody's will closely follow how funding arrangements
for paying for this acquisition evolve.
Potentially, an acceleration of long-term debt at the target
companies could lead to additional funding, notably that of BNDES
for an estimated BRL 700 million as BNDES can require the full payment
of its outstanding loans because this acquisition would ultimately breach
a contractual clause on the change of the shareholders.
The financial settlement of this acquisition should occur in six to ten
months with the length depending on the formal approval of creditors,
the regulator ANEEL and the Brazilian administrative council for economic
defense CADE. Management has signaled that it intends to obtain
a BRL 1 billion bridge loan from a group of local banks. Management
then expects to have a follow-on transaction in the Brazilian stock
market for the same amount, which will take out the BRL 1 billion
Despite the potential pressure on the company's liquidity position
stemming from the sizeable short-term debt which could reach as
much as BRL 1.7 billion, Moody's believes that the
proposed financial plan is feasible, given TAESA's proven
resilient access to the local banking and capital markets and the reliability
of its ultimate controlling shareholder, the CEMIG group.
TAESA operates 3,712 km high voltage transmission lines through
8 long-term concessions granted and regulated by ANEEL: Transmissora
Sudeste Nordeste - TSN, Novatrans Energia - NVT,
Empresa de Transmissão Alto Uruguai - ETAU, Empresa
de Transmissão de Energia do Oeste - ETEO, Brasnorte,
Munirah , GTESA and PATESA. In the last twelve months ended
March 31, 2011, TAESA posted consolidated net sales of BRL791
million (USD456 million) and net profit of BRL432 million (USD250 million)
as reported at CVM.
The principal methodology used in this rating was Regulated Electric and
Gas Networks published in August 2009.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's America Latina Ltda.
William L. Hess
MD - Utilities
Infrastructure Finance Group
Moody's Investors Service
Moody's America Latina Ltda.
Moody's affirms TAESA's Baa3 and Aa1.br issuer ratings; Outlook stable
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
No Related Data.
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