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Rating Action:

Moody's assigns (P)Baa3 (sf) provisional rating to the notes series 2021-1 to be issued by Chile Electricity PEC SPA

20 Jan 2021

Approximately $489 million of notes rated

New York, January 20, 2021 -- Moody's Investors Service (Moody's) has assigned a provisional rating of (P)Baa3 (sf) to the notes series 2021-1 to be issued by Chile Electricity PEC SPA (CEP or the Issuer). CEP will acquire utility cost recovery charge receivables originated in relation to the Tariff Stabilization Law, 2019 (the TSL) to Chile's electricity generators (GenCos) arising from a temporary cap on electricity prices payable by Chilean households and small businesses (regulated customers).

Issuer: Chile ELECTRICITY PEC SPA

Notes series 2021-1 , Assigned (P)Baa3 (sf)

RATINGS RATIONALE

CEP will finance the receivables purchase, which will be paid through the allocation of future surpluses payable by the DisCos arising from the difference between (i) the stabilized electricity costs paid by regulated customers in Chile under the TSL, and (ii) the lower actual costs payable to the GenCos for that electricity, as lower negotiated generation prices come into effect between January 1, 2021 and January 1, 2023. Notwithstanding any change in cost of the electricity, it is the obligation of the electricity regulator, the National Energy Commission (CNE) under the TSL to set the price payable by regulated customers at a level to ensure sufficient surpluses are generated to pay the receivable in full by December 31, 2027, ahead of the legal final term of the notes established in January 28, 2028.

The (P)Baa3 (sf) rating assigned to the notes reflect our assessment of (1) the strength of the TSL and the related resolutions authorizing the creation and recovery of the receivable which requires the Chilean electricity distribution companies (DisCos) to pay all receivables in full by December 31, 2027; (2) the semi-annual rate setting process that acts as a true-up mechanism; (3) the size, stability and diversity of Chile's ratepayer base; (4) the credit strength of the DisCos as primary obligors under the program, stemming from their integral role in the Chilean electricity industry.

The program as structured and under current law is similar US and Canadian utility cost recovery programs rated by Moody's. However, there is no equivalent mitigant to the risk that future changes to the TSL could adversely affect the outstanding obligations under the CEP program.

The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of assets from the current weak Chilean economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the COVID-19 outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

The principal methodology used in this rating was "Utility Cost Recovery Charge Securitizations Methodology" published in June 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1214099. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the rating:

Any changes in or noncompliance with the Tariff Stabilization Law or the credit quality of the obligors could lead to a change in the ratings on the notes.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 credit rating action on the support provider and in relation to each particular credit 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com 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 for additional regulatory disclosures for each credit rating.

Ely Mizrahi
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No Related Data.
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