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Rating Action:

Moody's changes outlook to negative for 7 Argentine Utilities and Infrastructure Issuers

16 Jul 2019

New York, July 16, 2019 -- Moody's Investors Service ("Moody's") has changed the rating outlooks to negative from stable and affirmed the current ratings on 7 utilities and infrastructure companies operating in Argentina. The outlook change for the affected companies follows the revision of the Government of Argentina's (B2 senior unsecured) outlook to negative from stable on July 12, 2019 and reflects the exposure that these companies have to Argentina's regulations and operating environment.

At the same time, Moody's has downgraded Agua y Saneamientos Argentinos S.A.'s (AYSA) baseline credit assessment (BCA) to b3 from b2, while affirming its B2 rating and changing the outlook to negative.

For more information on the rating action for the sovereign, please refer to https://www.moodys.com/viewresearchdoc.aspx?docid=PR_403831.

Issuers and ratings included in this action are as follows:

1) Empresa Distribuidora de Electricidad Salta

B1 Corporate Family Rating affirmed

B1 $65m Senior Unsecured EURO MEDIUM TERM NOTES due 2021 rating affirmed

Outlook changed to negative from stable

2) Empresa Distribuidora Norte S.A.

B1 Corporate Family Rating affirmed

B1 $176m Senior Unsecured GLOBAL NOTES due 2022 rating affirmed

Outlook changed to negative from stable

3) Albanesi S.A. / Generacion Mediterranea S.A, respectively

B2 Corporate Family Rating affirmed

B2 $336m Backed Senior Unsecured GLOBAL NOTES due 2023 rating affirmed

Outlook changed to negative from stable

4) Transportadora de Gas del Sur S.A.

B1 Corporate Family Rating affirmed

B1 $500m Senior Unsecured Notes due 2025 rating affirmed

Outlook changed to negative from stable

5) Aeropuertos Argentina 2000 S.A.

B1 Corporate Family Rating affirmed

B1 $400m Senior Secured GLOBAL NOTES due 2027 rating affirmed

Outlook changed to negative from stable

6) Agua y Saneamientos Argentinos S.A.

B2 Corporate Family Rating affirmed

B2 $500m Senior Unsecured EURONOTES due 2023 rating affirmed

Outlook changed to negative from stable

7) Genneia S.A.

B2 Corporate Family Rating affirmed

B2 $500m Senior Unsecured GLOBAL NOTES due 2022 rating affirmed

Outlook changed to negative from stable

RATINGS RATIONALE

The outlook revision to negative for the issuers listed above mainly reflects the negative outlook of the sovereign because all of these companies remain subject to government regulations and local operating environment.

Furthermore, the negative outlook for regulated concessions also incorporates uncertainties on the future consistency of the regulatory frameworks and the sufficiency of rates going forward. Increased consumers' criticism, political opposition and the upcoming elections pressured the federal government to postpone a tariff adjustment expected for example for Edenor and TGS during the second half of this year; therefore the negative outlook for regulated concession reflects Moody's expectation on potential adverse policy changes in upcoming years.

The negative outlook for power companies on the other hand reflects their exposure and reliance on the government controlled Cammesa (Compañia Administradora del Mercado Electrico Argentino, the Argentine government's agency overseeing the wholesale electricity market) as their key off-taker. Our negative view for this sector also incorporates liquidity pressures and the challenges these companies face in order to fund their expansion plans in a more difficult economic environment.

The ratings affirmation of Argentina's regulated companies at B1 reflect their relatively strong credit metrics, low leverage and adequate liquidity combined with comfortable debt maturities' profiles.

The B2 rating affirmation and negative outlook in the case of power companies reflect their exposure to Cammesa. Power companies also exhibit weaker credit profiles due to high leverage and tighter liquidity because of the financing needs arising from their investment programs.

The downgrade of AYSA's BCA to b3 from b2 reflects the challenges for future tariff adjustments and the deterioration in the company's standalone cash flows, which are insufficient to carry out its demanding investment plan and service debt, relying instead on its support provider, the Government of Argentina. ). AYSA's B2 rating reflects the application of Moody's joint default analysis (JDA) framework for Government Related Issuer (GRI) , which incorporates the following factors: i) a BCA of b3 as a measure for the rated entity's standalone creditworthiness, ii) the B2 rating of the Government of Argentina as the support provider, as well as iii) Moody's estimates of a high degree of implied government support in the case of financial distress and iv) a very high default dependence between AYSA and the Government of Argentina.

What Could Change the rating up/down

A further downgrade of the sovereign or evidence of a significant negative shift in policies or regulations will likely result in negative rating actions for Argentine infrastructure companies. Liquidity deterioration in a more challenging operating environment could also create negative pressure on ratings, in particular for those companies in the power sector that show higher leverage and face significant investment needs in the next 12 to 18 months.

Given the negative outlook, a rating upgrade is unlikely at this time. However, a rating upgrade or outlook stabilization for Argentina's infrastructure companies would require the stabilization of the sovereign rating outlook.

Furthermore, any upgrade consideration for regulated utilities would require evidence of tariff policy continuity, allowing a timely and regular recovery of utilities' increased costs. For power companies an upgrade of ratings would also require improved liquidity and lower leverage. Quantitatively, we would expect debt to Ebitda ratios in the range of 2 to 3 times and ratios of CFO to debt consistently over 15%.

The principal methodology used in rating Aeropuertos Argentina 2000 S.A. was Privately Managed Airports and Related Issuers published in September 2017. The principal methodologies used in rating Agua y Saneamientos Argentinos S.A. were Regulated Water Utilities published in June 2018, and Government-Related Issuers published in June 2018. The principal methodology used in rating Albanesi S.A., Genneia S.A, and Generacion Mediterranea S.A was Unregulated Utilities and Unregulated Power Companies published in May 2017. The principal methodology used in rating Transportadora de Gas del Sur S.A. was Natural Gas Pipelines published in July 2018. The principal methodology used in rating Empresa Distribuidora de Electricidad Salta and Empresa Distribuidora Norte S.A. was Regulated Electric and Gas Utilities published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

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 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.

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

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.

Daniela Cuan
Vice President - Senior Analyst
Project Finance Group
Moody's Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: 1 800 666 3506
Client Service: 1 212 553 1653

Alejandro Olivo
Associate Managing Director
Sub-Sovereign Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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