Sao Paulo, August 26, 2019 -- Moody´s América Latina Ltda., ("Moody's")
assigned a Ba1 global scale rating and a Aaa.br national scale
rating to Transmissora Alianca de Energia Eletrica (Taesa)'s planned
issuance of BRL450 million senior unsecured debentures with final maturity
in August 2044 (7th issue) to be issued in the form of infrastructure
debentures pursuant to law 12,431. Proceeds from this issuance
will be used to support investments. Taesa's Ba1/Aaa.br
corporate family ratings (CFR) are unaffected by this rating action.
The outlook is stable.
The assigned ratings are based on preliminary documentation. Moody's
does not anticipate changes in the main conditions that the debentures
will carry. Should issuance conditions and/or final documentation
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 assigned to the proposed debentures take
into consideration Taesa's: (i) large scale and high asset diversification;
(ii) its predictable cash flows supported by long term concessions remunerated
with availability based payments; (iii) the adequate credit metrics
for the rating category evidenced by a Funds from Operation (FFO) to Net
Debt above 22%, on a pro forma basis for this transaction;
and (iv) its robust liquidity position in face of a comfortable refinancing
profile. Such strengths are tempered by: (i) Taesa's
exposure to cost overruns and execution risks related to its portfolio
of projects under construction through March 2023, (ii) the expected
reduction in regulated revenues on certain existing assets between 2019
and 2021; and (iii) a track record of high dividend payouts above
90% annual net income generation which absorbs a material part
of cash flow generation.
The BRL450 million senior unsecured debentures will be issued in the form
of infrastructure debentures pursuant to law 12,431. Taesa
will use the issuance proceeds on the reimbursement of expenses and capital
investments related to the construction of the Interligação
Elétrica Paraguaçu S.A. ("Paraguaçu"),
Interligação Elétrica Aimorés S.A.
("Aimorés") and Sant'ana Transmissora de Energia Elétrica
S.A ("Sant'Anna"). The Paraguaçu
project was acquired by Taesa in October 2016 and comprises 338 kilometers
(km) of transmission lines and two substations in the states of Bahia
and Minas Gerais. The Aimorés project was also acquired
in October 2016 and comprises 208 km of transmission lines and two substations
in the state of Minas Gerais. Taesa has a 50% equity stake
on those two projects. Sant'Anna was acquired in December
2018, and consists of five transmission lines totaling 587 km and
five substations in the state of Rio Grande do Sul. Once operating,
those assets will add approximately BRL160 million to the company's
contracted Annual Permitted Revenues (RAP) in updated values for the 2019-2020
cycle. Aimorés, Paraguaçu are scheduled for
completion in February 2022 while Sant'Anna is expected to be concluded
in May 2022.
RATING OUTLOOK
The stable outlook reflects Moody's expectations that Taesa's credit metrics
will remain well positioned to its rating category despite a moderate
increase in debt to fund acquisitions and higher than historical investments,
which is supported by its very stable and predictable cash flow profile.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's views Taesa's credit profile linked to that of the Government
of Brazil (Ba2 stable) to the extent that the company is exposed to the
same economic revenue base and subject to government policies.
As a result, an upgrade of Brazil's Ba2 sovereign bond rating could
result in an upgrade of Taesa's global scale ratings. Conversely,
negative pressure on the sovereign rating or outlook would lead negative
pressure on Taesa's ratings. Deviations from the company's
growth strategy, including overruns of capital spending or delays
in the completion of greenfield projects would also be credit negative.
A material deterioration in the company's liquidity could also lead to
negative rating action. Quantitatively, a prolonged deterioration
in the company's credit metrics, such that FFO to Net Debt falls
below 20% and FFO interest coverage remains sustainably below 3.5x
could prompt a rating downgrade. A significant increase in the
proportion of secured debt or a decrease in the amount of unencumbered
assets that could be used to pay down unsecured debt could also result
in a downgrade of Taesa's unsecured debt ratings.
Taesa is a power transmission company operating and maintaining around
12,726 km of high voltage (230 to 525kV) transmission lines through
36 concessions with a weighted average remaining concession life of 17
years. As of June 2019, the company was directly controlling
10 concessions, and operating the remaining 26 concessions through
equity participations in the operating companies of the TBE Group (through
a 49.9% equity participation -- TBE Group
holds 15 concessions), Brasnorte (88%), Etau (76%),
ATE III (100%) and Sao Gotardo (100%) and the transmission
lines under construction Janaúba (100%), Miracema
(100%), Mariana (100%), Sant'Ana (100%),
Ivaí (50%), Paraguaçu (50%) and Aimores
(50%). In addition, after the four assets acquisition
from Ambar and the planned acquisition of Rialma, Taesa will expand
its portfolio to 13,981 km of transmission lines through 41 concessions.
Taesa is controlled by Companhia Energetica de Minas Gerais - CEMIG
(B1/Baa2.br, stable) and Interconexión Eléctrica
S.A. E.S.P. (Baa2, stable) 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1174796.
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/researchdocumentcontentpage.aspx?docid=PBC_1188605
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The date of the last Credit Rating Action was 20/05/2019.
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Cristiane Spercel
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 0 800 891 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
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