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Rating Action:

Moody's upgrades Argentine Utilities and Infrastructure issuers

 The document has been translated in other languages

21 Apr 2016

Buenos Aires City, April 21, 2016 -- Moody's Latin America Agente de Calificación de Riesgo today upgraded to B3 from Caa1 the global scale debt and issuer ratings for various utilities and infrastructure companies operating in Argentina. Global scale rating for Edenor was also upgraded to B3, from Caa2. The action follows Moody's recent upgrade of the Argentine government's bond rating to B3 from Caa1. The outlook for the affected issuers is now stable.

At the same National scale ratings (NSRs) for the affected issuers are being placed under review direction uncertain pending a potential revision of the Argentina's NSR map. Following the recent upgrade of Argentina's sovereign rating and the increase of its local currency country ceiling to Ba3 from B1, the current mapping of global scale ratings to national scale ratings may no longer adequately serve one of its intended purposes, which is to provide greater credit differentiation among issuers in Argentina than is possible on the global rating scale. As a result, the lowest global scale rating that maps to Aaa.ar is likely to rise to Ba3 in line with the new country ceiling, and the new map is likely to associate lower NSRs with a given global scale rating than does the current map. Assuming the map is revised in line with current expectations, we would anticipate that the large majority of NSRs being placed under review will be confirmed at their current levels when the reviews conclude, though a small number may be raised or lowered.

Issuers and ratings included in this action are as follows:

1) Aeropuertos Argentina 2000 S.A. (AA2000)

Corporate Family Rating, USD 300 million 2020 Senior Unsecured Notes and Class "A" and Class "C" Senior Unsecured Local Notes

Upgraded to B3 from Caa1.The rating outlook is now stable.

Baa1.ar National Scale Rating on review, direction uncertain.

2) Empresa Distribuidora de Electricidad de Salta S.A. (EDESA)

USD 63.00M Senior Unsecured Amortizing Notes:

Upgraded to B3 from Caa1 The rating outlook is now stable.

Baa3.ar National Scale Rating on review, direction uncertain.

3) Camuzzi Gas Pampeana S.A.

Corporate Family rating:

Upgraded to B3 from Caa1 . The rating outlook is now stable.

Baa1.ar National Scale Rating on review, direction uncertain.

4) Gas Natural Ban S.A.

Corporate Family rating:

Upgraded to B3 from Caa1. The rating outlook is now stable.

Baa1.ar National Scale Rating on review, direction uncertain.

5) Transportadora de Gas del Sur S.A. (TGS):

2017 and 2020 Senior Unsecured Notes: Upgraded to B3 from Caa1. The rating outlook is now stable.

Baa1.ar National Scale Rating on review, direction uncertain.

6) Hidroeléctrica El Chocon S.A.

Corporate Family rating:

Upgraded to B3 from Caa1. The rating outlook is now stable.

Baa2.ar National Scale Rating on review, direction uncertain.

7) Genneia S.A.

Senior secured Class 2, 3 and Senior Unsecured Class13 Notes and Corporate Family rating:

Upgraded to B3 from Caa1. The rating outlook is now stable.

Baa2.ar National Scale Rating on review, direction uncertain.

8) Generación Independencia S.A.

Senior Unsecured Class 3 Notes and Corporate Family rating:

Upgraded to B3 from Caa1. The rating outlook is now stable.

Baa2.ar National Scale Rating on review, direction uncertain

9) Empresa Provincial de Energía de Córdoba (EPEC):

USD 565 million Senior Secured Notes and Corporate Family rating:

Upgraded to B3 from Caa1. The rating outlook is now stable.

Ba1.ar National Scale Rating on review, direction uncertain

10) Empresa Distribuidora Norte S.A. (EDENOR)

2017 and 2022 Senior Unsecured Notes and Corporate Family Rating:

Upgraded to B3 from Caa2. The rating outlook is now stable

Ba2.ar National Scale Rating on review, direction uncertain

11) Metrogas S.A.

Corporate Family rating and Debt program for up to US 600 million : Caa1 and (P)Caa1 ratings upgraded to B3 and (P)B3 respectively, outlook changed to stable;

Baa3.ar National Scale Rating on review, direction uncertain

12) Distribuidora de Gas Cuyana S.A. (DGCU)

Corporate Family rating:

Upgraded to B3 from Caa1. The rating outlook is now stable.

Baa1.ar National Scale Rating on review, direction uncertain

RATINGS RATIONALE

The global scale ratings for Argentine infrastructure issuers have been upgraded so they align with Moody's foreign currency bond rating for Argentina. The upgrade also acknowledges the recent positive developments in favor of most of the infrastructure companies in the country, namely: 1) the increase in power prices that reduced energy subsidies thus reducing power companies and Cammesa's (the wholesale electricity market administrator) vulnerabilities; 2) the increase of electricity distribution tariffs for the federal and provincial distribution companies; 3) the increase in the tariffs for both gas distribution and transportation companies. Recent measures will not only improve the affected companies' financial strength in 2016 but also will bring credit-positive structural changes to Argentina's regulatory frameworks in particular for regulated companies. The opening of a one-year period for the regulatory authorities and the companies mandated by the Energy Ministry to put forward a more transparent and predictable framework for tariff reviews (RTI) is in our opinion a clear indication of a positive structural change. The Ministry mandated that regulatory authorities undertake --within a year- an integral review of the current framework, which we expect will increase transparency and predictability. Once in place, we expect the revised framework to set a clear path for the utilities' future tariff revisions and for the timely recovery of their increased costs while providing enough returns to allow required investments in network maintenance, increased efficiency and eventually necessary expansions.

The stable outlook for all these companies mainly reflects Moody's stable outlook for Argentina's government bond rating and Moody's view that the creditworthiness of these companies continues to be highly dependent on the credit quality of the Argentine government.

WHAT COULD CHANGE THE RATINGS UP/DOWN

A further rating upgrade of the sovereign could result in positive rating actions for these companies. We note however that an upgrade for regulated utilities would also require the timely finalization of the RTI.

In light of the recent upgrade and stable outlook, Moody's does not anticipate a rating downgrade in the near term. Yet, the assigned ratings would face downward pressure if the government of Argentina's rating or outlook were to be downgraded. Or if the approved tariff increases does not materialize in improved credit profiles as expected. Quantitatively, if regulated utilities report Interest coverage (FFO + interest to interest) below 2.5 times, CFO pre working capital to debt below 20% and RCF to debt below 10%, there could be negative pressure. Generation companies, on the other hand could experience negative rating momentum if light of ambitious expansion programs that materially increase their leverage. Quantitatively interest coverage below 2 times and cash flow to debt below 10% for an extended period could create negative pressure on power companies' ratings.

Please see www.moodys.com.ar for further details on the recent change in Argentina's foreign currency bond ceiling and government's rating outlook.

The principal methodology used in rating Transportadora de Gas del Sur S.A. was Natural Gas Pipelines published in November 2012. The principal methodology used in rating Camuzzi Gas Pampeana S.A., MetroGas S.A., Gas Natural BAN, S.A., Empresa Distribuidora Norte S.A., Empresa Distribuidora de Electricidad Salta and Distribuidora De Gas Cuyana S.A. was Regulated Electric and Gas Utilities published in December 2013. The methodologies used in rating Empresa Provincial de Energia de Cordoba were Regulated Electric and Gas Utilities published in December 2013 and Government-Related Issuers published in October 2014. The principal methodology used in rating Hidroelectrica El Chocon S.A, Genneia S.A. and Generacion Independencia S.A was Unregulated Utilities and Unregulated Power Companies published in October 2014. The principal methodology used in rating Aeropuertos Argentina 2000 S.A was Privately Managed Airports and Related Issuers published in December 2014. Please see the Ratings Methodologies page on www.moodys.com.ar 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 June 2014 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

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.ar.

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.

For issuers domiciled in Argentina, the regulatory report related to this rating action is available on www.moodys.com.ar.

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

Daniela Cuan
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

William L. Hess
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 5129 2600

Moody's upgrades Argentine Utilities and Infrastructure issuers
No Related Data.
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