Sao Paulo, May 30, 2018 -- Moody´s América Latina Ltda., ("Moody´s")
today has assigned a Ba1 global scale rating and a Aaa.br national
scale rating to the BRL400 million senior unsecured debentures due in
2025, to be issued by Transmissora Alianca de Energia Eletrica ("Taesa"
or "the company"). Proceeds from the issuance will
be used to fund capital expenditures. Taesa's Ba1/Aaa.br
corporate family ratings (CFR) are unaffected. The outlook for
the ratings is stable.
The assigned ratings are based on preliminary documentation received by
Moody's as of the rating assignment date. Moody's does not expect
changes to the documentation reviewed over this period nor does it anticipate
changes in the main conditions that the debentures will carry.
Should issuance conditions and/or final documentation of the debentures
deviate from the original ones submitted and reviewed by the rating agency,
Moody's will assess the impact that these differences may have on the
ratings and act accordingly.
RATINGS RATIONALE
The Ba1/Aaa.br ratings for the proposed BRL 400 million debentures
due 2025 reflect their pari passu position within the company's
capital structure which consist exclusively of unsecured debt instruments.
The debentures will be issued at the holding company level, but
will benefit from the substantial cash flow generated by assets directly
integrated at the parent level which together account for over 95%
of Taesa's consolidated operating cash flows, mitigating the
structural subordination of the debentures.
Proceeds from the BRL 400 million issuance will be used to cover capital
needs at the levels of projects that are under construction. The
incremental debt resulting from the issuance will not result in a significant
deterioration in the company's strong credit metrics, as Funds
from Operations (FFO) to Net Debt would drop to 42% on a pro forma
basis from 48% as reported at the end of March 2018.
The assigned ratings also take into consideration (i) the company's
large scale and high geographic diversification of assets, (ii)
robust credit metrics for the rating category evidenced by FFO to net
debt of 47.5% and FFO interest coverage of 7.6x for
the last twelve months ending March 2018, (iii) good access to debt
and capital markets; and (iv) a relatively supportive regulatory
framework.
On the other hand, the ratings are constrained by (i) the expected
increase in capital expenditures following the company's won auctions
which, together with limited track record in implementing large
greenfield projects simultaneously, points to risk of cost overruns,
(ii) the prospects of a reduction in regulated revenues ("RAP")
from 2018 onwards as per the concessions contracts ; (iii) the company's
intention to pursue external growth through debt-financed acquisitions
of brownfield or greenfield projects which could result in a re-leveraging
event; and (iv) a track record of high dividend payouts above 90%
which absorbs a material part of cash flow generation.
The stable outlook reflects Moody's expectations that the company's
credit metrics will remain robust even considering potential debt-funded
acquisitions, driven by Taesa's very stable and predictable
cash flow profile inherent to the transmission sector in Brazil.
Moody's considers Taesa's liquidity as adequate. As
of March 31, 2018, the company had around BRL 901 million
available in cash (including marketable securities) and BRL 432 million
of debt maturities over the next twelve months. In October 2017,
the company issued two debentures for a total of BRL543 million,
the proceeds of which was used to refinance debt maturing in 2017 and
to cover capital expenditures needs. We expect that the company's
strong cash flow profile and ability to reduce historically high dividend
payouts will enable the company to build up its cash position and,
in conjunction with good access to capital markets, to cover its
upcoming debt maturities on a timely basis
WHAT COULD CHANGE THE RATING UP/DOWN
An upgrade of Brazil's sovereign bond rating of Ba2 could result
in an upgrade of Taesa's ratings. Conversely a rapid deterioration
in the company's credit metrics such that FFO to Net Debt falls below
30% and FFO interest coverage remains sustainably below 4.0x
could prompt a rating downgrade. Deterioration in the sovereign's
credit quality could also exert downward pressure on Taesa's ratings.
Taesa is a power transmission company operating and maintaining around
12,140 km of high voltage (230 to 525kV) transmission lines through
35 concessions with an average life of 30-year. The company
directly controls 10 concessions, and operates the remaining 25
concessions through equity participations in the companies TBE (through
a 49.9% equity participation -- company holds 15 concessions),
Brasnorte (39%), Etau (53%), Ate III (100%)
and Sao Gotardo (100%); as well as in 8 other concessions
still in construction phase, including the recent acquisition of
Lot M (EDTE).
Taesa is controlled by Companhia Energetica de Minas Gerais - CEMIG
(B3/B2.br, stable) and Interconexión Eléctrica
S.A. E.S.P (Baa2, negative) which own
21.7% and 14.9% of Taesa's total capital,
respectively. The remaining 63.4% shares are free
float, traded on the local stock market (BM&FBOVESPA).
The principal methodology used in these ratings was Regulated Electric
and Gas Networks published in March 2017. Please see the Rating
Methodologies page on www.moodys.com.br for a copy
of this methodology.
Moody's National Scale Credit 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 credit 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 ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's information.
Information types used to prepare the rating are the following:
financial data, economic and demographic data, debt documentations,
operating data, historical performance data, public information,
and Moody's information.
Sources of Public Information: Moody's considers public information
from many third party sources as part of the rating process. These
sources may include, but are not limited to, the list available
in the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_193459.
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 ratings have 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 go to the
report "Ancillary or Other Permissible Services Provided to Entities Rated
by Moody's America Latina Ltda." in the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1123624
for detailed 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 within the 12 months preceding the credit rating action.
Please go to the link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1123625
for a list of entities receiving products/services from these related
entities and the products/services received.
The date of the last Credit Rating Action was 10/4/2018.
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
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this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
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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
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and whose ratings may change as a result of this credit rating action,
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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
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Consequently, Moody's provides a date that it believes is the most
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Please see the ratings disclosure page on our website www.moodys.com.br
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Please see Moody's Rating Symbols and Definitions on the Ratings Definitions
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
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Please see www.moodys.com.br for any updates on changes
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Please see the ratings tab on the issuer/entity page on www.moodys.com.br
for additional regulatory disclosures for each credit rating.
Paco Debonnaire
AVP - Analyst
Project 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
Client Service: 1 212 553 1653
Michael J. Mulvaney
MD - Project Finance
Project Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
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Brazil
JOURNALISTS: 800 891 2518
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