Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
15 Jun 2009
Approximately BRL 300 million in debt instruments affected
Sao Paulo, June 15, 2009 -- Moody America Latina's assigned a Ba1 local currency corporate family
rating and Aa2.br corporate family rating on the Brazilian National
Scale to Light S.A ("Light"). At the same time,
Moody's assigned a Ba1 local currency rating and Aa2.br rating
on the Brazilian National Scale to the 2-year BRL 300 million senior
unsecured debentures to be issued in the local market by Light Serviços
de Eletricidade S.A ("Light SESA").
The ratings reflect Light's strong consolidated credit metrics for
the rating category, the relatively stable cash flow derived from
the regulated distribution business of Light SESA and the long-term
supply contracts of the generation segment represented by Light Energia.
The ratings are constrained by a sizeable capital expenditure program,
relatively high dividend pay-out ratios, potential cash flow
drains related to existing contingent liabilities, the uncertainty
over the evolution of the Brazilian regulatory framework and challenges
represented by high levels of electricity losses and delinquency rates.
Light and its subsidiaries have significantly enhanced their capital structures
since 2005 when EDF (Electricité de France), the sole shareholder
at that time, converted around BRL 940 million of inter-company
loans into equity. This was followed by another BRL 800 million
conversion of debt into equity by BNDES Participações S.A.
(BNDESPar, the investment arm of the Brazilian Development Bank
- BNDES) in 2007.
The reduction in the level of indebtedness has been accompanied by an
improvement in operating margins, though these have been below potential
levels because of very low rates of growth for electricity consumption
in 2004 through 2008 and a high level of electricity losses and bad debt
provisions. Light's electricity consumption CAGR (compound
annual growth rate) was just 1.9% from 2004-2008,
compared to a 4.0% CAGR for the Brazilian electricity industry
as a whole. The lower consumption growth rates are largely attributable
to the migration of large industrial consumers from the city of Rio de
Janeiro to other localities. The other classes of electricity users
have basically behaved in line with growth rate patterns for all of Brazil.
Light has posted energy losses of around 20% over the past five
years, a figure much higher than the 15% national average.
Despite the company's investments in new technologies to reduce
energy losses to levels that are more acceptable, these efforts
have not generated any significant improvement and the outlook for further
improvement is not promising. Management has signaled that with
annual investments of BRL 150 million these losses could eventually come
down to around 18% within four years. Light's bad
debt provisions as a percentage of gross revenues have been decreasing
over the last five years from around 5.2% to 2.9%
per year, however it is still much higher than the 0,90%
acknowledged by the regulator.
Projections indicate that Light will post satisfactory cash flow within
the next couple of years in light of prevailing favorable operating margins.
As part of the second periodic tariff review, the regulator granted
Light a 2% tariff increase in November 2008. These periodic
tariff reviews are primarily aimed to adjust a company's tariffs
to generate more efficient operational parameters as determined by the
regulator and transfer back to the consumer the gains in productivity
attained since the last tariff review in 2003.
Like those of other distribution companies in Brazil, Light's
operating margins are expected to decrease going forward; however,
the regulator considered some issues specific to Light's tariff
structure. It increased the regulated level of energy losses from
the prevailing 16% to 19% and compensated the company through
higher tariffs for the migration of three important free consumers from
its distribution network to the basic network starting in 2009.
As a result, the negative impact of the second periodic tariff review
on operating margins will be relatively lower when compared to other Brazilian
distribution utilities, which in most cases had negative tariff
adjustments. In addition to lower operating margins going forward,
sales volumes in the captive (regulated) market are expected to range
between break-even and 1.5% growth in 2009 due to
weak Brazilian GDP growth in 2009.
The generation business is projected to post stable operating margins
and consequently more stable cash flows. This stems from the inherent
long-term nature of Light Energia's electricity supply contracts
which are mostly to the regulated market. These contracts will
begin to expire in 2013, with accumulated expiring contracts representing
approximately 27% of total assured energy by year-end 2013
and 51% by year-end 2014. Thus, starting in
2013, Light is expected to benefit from higher energy prices and
enhanced operating cash flows. Light's average energy prices
are currently around BRL 67 per MWh and preliminary estimates for new
contracts indicate that energy prices could go to over BRL 130 per MWh.
However, Moody's notes that Light's generation subsidiary
is not a guarantor of the rated debenture issuance.
Indebtedness is bound to marginally increase from 2009 through 2012 as
a result of forecasted negative free cash flow in the range of BRL 200
million per year in the next two years. Long-term funding
is expected to make up for the cash flow gap. FFO (Funds From Operations)
are projected to average BRL 1.0 billion in the next two years
or around 28% of total adjusted debt, which compares favorably
with historical performance considering the recent periodic tariff review
and the current economic downturn.
Capital expenditures are forecasted at BRL 700 million per annum in the
next 4-year period. These are largely to reduce energy losses
and expand investment in the generation business. Management announced
the construction of three small hydroelectric power generation units with
an installed capacity of 238MW, which are scheduled to come on stream
from 2011 through 2013. Total investment in generation could reach
BRL 750 million over the next four years. The long-term
funding should come largely from the BNDES in an estimated amount that
could reach BRL 500 million.
Contingent liabilities recognized as long-term liabilities were
BRL 988 million as of March 31, 2009. Out of this amount
around BRL 500 million are associated with tax disputes and could potentially
have a cash impact in 2009 as a result of ongoing judicial settlements
to be concluded within the coming months. Management estimates
that approximately half of the fiscal contingencies can be refinanced
with the federal government for over a five-year period under specific
government programs designed for this purpose. The size of total
contingent liabilities is relatively high at around BRL 4 billion but
the bulk of these liabilities are classified as possible or remote,
and as such are not recognized in financial statements.
Like other Brazilian companies, Light does not maintain committed
credit facilities to face unexpected cash disbursements. Despite
this restriction, Light's liquidity is adequate, as
evidenced by a consolidated cash position of BRL 736 million as of March
31, 2009 that comfortably covers short-term debt of BRL 328
million. Forecasted negative free cash flow of around BRL 100 million
in the next twelve-month period is expected to be mostly funded
with the proceeds of the proposed debentures of around BRL 300 million
and BNDES in the BRL 230 million range.
Light's dividend policy assures a minimum 50% dividend pay-out
to shareholders. Moody's utilized a higher pay-out
ratio of 95% in its base case forecast scenario, in which
internal cash generation and new long term funding, mainly from
BNDES, remain sufficient to cover cash outlays, while indebtedness
is maintained at manageable levels.
The stable outlook captures Moody's view that despite some expected
shrinkage in operating margins, internal cash generation should
be the primary funding source for the company's cash needs and is
likely to be complemented by long-term funding on a timely basis
in the medium term. The overall level of debt should remain virtually
unchanged, remaining compatible with the rating category.
The ratings or outlook could be upgraded as a result of greater visibility
regarding the potential impact of contingent liabilities on cash flow
and leverage. Also important to an upgrade would be progress in
reducing the company's high levels of bad debt provisions (currently
at 2.9% of gross revenues) and energy losses (currently
at 20.8%). Pressure for an upgrade could increase
if Retained Cash Flow (RCF) over Total Adjusted Debt remains higher than
20% (32% in the last twelve months ended March 31,
2009) and interest coverage (CFO before working capital needs over cash
interest) remains higher than 5.0x (7.9x in the last twelve
months ended March 31, 2009) on a sustainable basis.
The ratings or outlook could be downgraded if RCF over adjusted debt ratio
falls below 10% and interest coverage decreases below 3.0x
for an extended period. A change in the supportiveness of the Brazilian
regulatory environment could also trigger a rating action. Moody's
outlined its views regarding the supportiveness of the Brazilian regulatory
environment in the special comment "Regulatory Environment Improves For
Brazilian Utilities" published on August 25, 2008 and available
on www.moodys.com. In addition to being affected
by the above factors, the ratings for the debentures could also
be downgraded without a downgrade of the corporate family ratings at Light
S.A. if there is a significant increase in secured debt
as a proportion of total debt at Light SESA (secured debt currently represents
17% of total adjusted debt).
The principal methodology used in rating Light was Global Regulated Electric
Utilities Rating Methodology (March 2005), which can be found at
www.moodys.com in the Credit Policy & Methodologies
directory, in the Ratings Methodologies subdirectory. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Credit Policy & Methodologies
Light S.A. (Light), headquartered in Rio de Janeiro,
Brazil, is an integrated utility company controlled by Rio Minas
Energia Participações S.A. (RME) with activities
in generation, distribution and commercialization of electricity.
In the last twelve months ended March 31, 2009, the distribution
company Light Serviços de Eletricidade S.A. (Light
SESA) distributed 23,122 GWh of electricity (approximately 6%
of the electricity consumed in Brazil) and represented around 86%
of Light's consolidated EBITDA. Light reported consolidated
net revenues of BRL 5,508 million (USD 2,776 million) and
Net Profit of BRL 1,038 million (USD 523 million) in the last twelve
months ended March 31, 2009. Light SESA reported consolidated
net revenues of BRL 5,237 million (USD 2,639 million) and
Net Profit of BRL 998 million (USD 503 million) in the same period.
Asst Vice President - Analyst
Global Infrastructure Finance
Moody's America Latina Ltda.
Moody's assigns Ba1/Aa2.br ratings to Light SESA's Debentures
William L. Hess
Global Infrastructure Finance
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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 or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.