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29 Oct 2010
Approximately $ 400 Million of Debt Securities Affected.
New York, October 29, 2010 -- Moody's Investors Service today placed the Baa3 senior unsecured rating
of AES Gener S.A. (Gener) under review for possible downgrade.
Concurrently, Moody's affirmed the Ba2 corporate family rating
(CFR) of AES Chivor & Cia. S.C.A. E.S.P.
(Chivor) with a stable outlook.
The review for possible downgrade reflects the continued delay in the
completion of the company's 270MW Campiche coal-fired plant.
Construction of the facility has been on hold for sixteen months since
June 2009. The review also reflects the fact that Gener's
projected credit metrics, particularly retained cash flow (RCF)
to debt and free cash flow (FCF) to debt will be somewhat weak for the
rating category reflecting the peak of the company's capital expenditure
program as well as expected pressure from AES Corporation (AES; CFR:
B1;stable) on Gener to make substantial dividend distributions over
the next several years.
Moody's believes that the completion of Campiche is an important
milestone as it enhance the efficiency of its generation fleet and should
improve the predictability and stability of future cash flows.
While we recognize the initiatives taken by the management to offset the
impact of the delay on its cash flows along with efforts to restart construction,
further delays are likely to put downward pressure on the credit metrics
over the medium term.
The review will focus on the ability of Gener to resume construction of
the project in a relatively timely fashion. Given the importance
of this plant to the commercial position of the company, to the
extent that the construction delay persists, the rating is likely
to be downgraded. Conversely, a favorable Court decision
that resolves the current appeals on the construction permits awarded
by the Punchavi Municipality allowing the construction of the plant to
resume may result in a rating confirmation.
The rating affirmation and stable outlook for Chivor considers the review
for possible downgrade of the parent company's rating but also acknowledges
its strong standalone financial performance. This financial performance
coupled with its commercial policy as proven during the severe El Niño
2009/2010 phenomena, offsets Chivor's exposure to single-asset
risk, the modest size of its facilities as well as its fuel source
and geographical concentration. Gener's reliance on Chivor's
dividends to fund the remainder of its capex program further underpins
the interrelation between the ratings of the parent company and Chivor.
Over the medium term, Moody's expects that Chivor will report
strong credit metrics for its current rating category that further offsets
its business risks, such that its RCF to debt and FCF to debt are
at least 15% and 12%, both on a sustainable basis.
To the extent that Gener's rating is confirmed, Chivor's
outlook could be changed to positive.
The principal methodology used in rating Gener and Chivor is the Unregulated
Utilities and Power Companies methodology, published in August 2009.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
The last rating action on Gener occurred on April 21, 2008 when
the outlook was changed to negative. The last rating action on
Chivor occurred on May 21, 2007 when the rating was upgraded to
On Review for Possible Downgrade:
..Issuer: AES Gener S.A.
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Downgrade, currently Baa3
..Issuer: AES Gener S.A.
....Outlook, Changed To Rating Under
Review From Negative
Headquartered in Santiago de Chile, Gener is Chile's second-largest
electricity generation company and is 71%-owned by AES and
29% by Chilean public shareholders. At June 30, 2010,
Gener reported consolidated assets amounting to approximately US$5.5
Headquartered in Bogota, Chivor is a wholesale power generation
company (1,000MW installed capacity) in Colombia (FC Gov.
bond: Ba1). Since 1996, it is a wholly-owned
subsidiary of Gener and since 2001 an indirect subsidiary of AES.
Infrastructure Finance Group
Moody's Investors Service
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's reviews Gener's rating for possible downgrade; affirms Chivor's rating
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