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Rating Action:

Moody's downgrades ratings for 11 Argentine Utilities and Infrastructure Issuers, ratings placed under review for downgrade

03 Sep 2019

New York, September 03, 2019 -- Moody's Investors Service ("Moody's") downgraded the ratings on 11 utilities and infrastructure companies operating in Argentina and placed their ratings under review for downgrade. The rating action follows the downgrade of the Government of Argentina's senior unsecured ratings to Caa2 from B2, and placement of the ratings under review for downgrade and reflects the strong credit linkages and exposure 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 caa2 from b3, while downgrading its B2 rating to Caa2 and placing the ratings under review for downgrade.

For more information on the rating action for the sovereign, please refer to "Moody's downgrades Argentina's ratings to Caa2; places ratings under review for downgrade".

Issuers and ratings included in this action are as follows:

1) Empresa Distribuidora de Electricidad Salta

Corporate Family Rating downgraded to Caa1 from B1

$65m Senior Unsecured EURO MEDIUM TERM NOTES due 2021 rating downgraded to Caa1 from B1.

Ratings placed under review for downgrade.

2) Empresa Distribuidora Norte S.A.

Corporate Family Rating downgraded to Caa1 from B1

$176m Senior Unsecured GLOBAL NOTES due 2022 rating downgraded to Caa1 from B1

Ratings placed under review for downgrade.

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

Corporate Family Rating downgraded to Caa2 from B2

$336m Backed Senior Unsecured GLOBAL NOTES due 2023 rating downgraded to Caa2 from B2

Ratings placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

4) Transportadora de Gas del Sur S.A.

Corporate Family Rating downgraded to Caa1 from B1

$500m Senior Unsecured Notes due 2025 rating downgraded to Caa1 from B1

Ratings placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

5) Aeropuertos Argentina 2000 S.A.

Corporate Family Rating downgraded to Caa1 from B1

$400m Senior Secured GLOBAL NOTES due 2027 rating downgraded to Caa1 from B1

Ratings placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

6) Agua y Saneamientos Argentinos S.A.

Corporate Family Rating downgraded to Caa2 from B2

$500m Senior Unsecured EURONOTES due 2023 rating downgraded to Caa2 from B2

Ratings placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

7) Genneia S.A.

Corporate Family Rating downgraded to Caa2 from B2

$500m Senior Unsecured GLOBAL NOTES due 2022 rating downgraded to Caa2 from B2

Ratings placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

8) MSU Energy S.A.

$600m Senior Secured GLOBAL NOTES due 2025 rating downgraded to Caa2 from B3

Rating placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

9) Stoneway Capital Corporation

$665m Senior Secured GLOBAL NOTES due 2027 rating downgraded to Caa2 from B3

Rating placed under review for downgrade.

Outlook, Changed To Rating Under Review From Positve

10) YPF Energia Electrica S.A.

$400m Senior Unsecured GLOBAL NOTES due 2026 rating downgraded to Caa2 from B2

Rating placed under review for downgrade.

Outlook, Changed To Rating Under Review From Negative

RATINGS RATIONALE

The rating downgrade coupled with the placement under review for downgrade for the issuers listed above mainly reflects the downgrade and placement under review for downgrade of the sovereign, as all these companies remain subject to government regulations and local operating environment. Moody's considers that Argentine Utilities and Infrastructure companies' credit quality is negatively affected by Argentina's deteriorated operating environment.

Furthermore, the regulated concessions ratings also incorporate uncertainties surrounding continuity of policies and the 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 the second half of this year. Nevertheless, the downgrade of Argentina's regulated companies to Caa1, one notch above the sovereign rating, reflects their relatively strong credit metrics, low leverage and adequate liquidity combined with comfortable debt maturities' profiles.

The downgrade of power companies and power projects 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. It also incorporates liquidity pressures and the challenges the companies in this sector face to fund their expansion plans in a more difficult economic environment, and possible lack of market access. 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 caa2 from b3 reflects the rapidly deteriorating environment for future tariff adjustments and our expectation of weakened standalone cash flows, which are currently insufficient to carry out the company's demanding investment plan and service debt, relying instead on its support provider, the Government of Argentina. AYSA's ratings were downgraded to Caa2 from B2 reflecting the application of Moody's joint default analysis (JDA) framework for Government Related Issuer (GRI), which incorporates the following factors: i) a BCA of caa2 as a measure for the rated entity's standalone creditworthiness, ii) the Caa2 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.

Moody's expects the review period to extend beyond the usual three-month horizon. The review will focus on the evolution of policy making at the sovereign level in the current context of market volatility. In addition, the review will focus on the specific liquidity pressures amidst the current macroeconomic conditions and inflationary pressures.

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 for those companies in the power sector that show higher leverage and face significant investment needs in the next 12 to 18 months.

Moody's does not expect upward pressures in the rated Argentinean infrastructure companies in the near to medium term.

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., YPF Energia Electrica 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. The principal methodology used in rating MSU Energy S.A. and Stoneway Capital Corporation was Power Generation Projects published in June 2018. 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, 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.

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

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

The person who approved Empresa Distribuidora de Electricidad Salta, Empresa Distribuidora Norte S.A., Albanesi S.A., Generacion Mediterranea S.A., Transportadora de Gas del Sur S.A., Agua y Saneamientos Argentinos S.A., Genneia S.A., MSU Energy S.A., Stoneway Capital Corporation, YPF Energia Electrica S.A. credit ratings is Michael Mulvaney, Managing Director, Project Finance Group, 1 212 553 0376, Client 1 212 553 1653. The person who approved Aeropuertos Argentina 2000 S.A. credit ratings is A.J. Sabatelle, Associate Managing Director, Project Finance Group, 1 212 553 0376, Client 1 212 553 1653.

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

Michael Mulvaney
MD-Project Finance
Project Finance 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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