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Rating Action:

Moody's upgrades Enel Generacion Chile to Baa1, outlook stable

23 May 2018

New York, May 23, 2018 -- Moody's Investors Service ("Moody's") upgraded today the senior unsecured debt ratings of Enel Generacion Chile S.A. (EOCC) to Baa1 from Baa2. The outlook is stable. The upgrade recognizes maintenance of strong credit metrics and lower uncertainty over the company's long term capital structure following the major restructuring of the Enel Group's Latin American operations in 2016, followed by the absorption of Enel Green Power Latin America S.A.'s (EGPLA) Chilean operations by EOCC's parent company Enel Chile S.A., in April 2018.

The stable outlook reflects our expectation that EOCC will continue to successfully execute its commercial policy and maintain a balanced financial policy, with a dividend payout ratio that does not exceed 70%.

Upgrades:

..Issuer: Enel Generacion Chile S.A.

....Senior Unsecured Regular Bonds/Debentures, Upgraded to Baa1 from Baa2

Outlook Actions:

..Issuer: Enel Generacion Chile S.A.

....Outlook, Remains Stable

RATINGS RATIONALE

The credit view further reflects the company's leading position in the Chilean generation market, combined to a strong commercial policy, reflective of a relatively comfortable contracted position at average prices which are substantially above the system's marginal costs. The company's contracted position remains strong, with more than 20TWh per year contracted at weighted average prices above $85/MWh until 2022.

Recontracting risks elevate as of 2025, with the ongoing transformation of the Chilean energy generation matrix and lower development costs of renewable energy projects leading to a downward shift in long-term prices. However, the addition of further energy generation capacity into the system that operates at low marginal costs, combined with the completion of the electric system interconnection between the North and Central regions, are also expected to lead to lower marginal spot prices in the long run.

Event risks that lead to major plant unavailability or a substantial increase in marginal spot prices are mitigated by the company's efficient energy generation fleet, diversified by fuel/resource type, with energy generation capacity above its contracted position.

The company's capital program is modest, and covered with operating cash flow generation. EOCC is expected to continue to post very strong credit metrics, with CFO pre W/C to debt and interest coverage exceeding 50% and 9.0x, respectively, over the medium term. In 2016, the company had announced an increase in the dividend payout ratio in increments of 5% per year until it reaches 70% in 2020, and is not expected to further increase as a result of debt incurred at its parent company.

Liquidity risks are low, with no significant maturities over the next five years. In addition to a comfortable cash position of more than 10x short term obligations, the company also maintains committed credit facilities for approximately US$325 million.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The rating could experience positive momentum should the company further extend its contracted position at high price levels, leading to long-term expectation of improved credit metrics, such that:

• Interest coverage ratio exceeds 10x on a sustainable basis

• CFO pre WC to debt exceeds 60% on a sustainable basis.

• Retained cash flow to debt exceeds 25% on a sustainable basis

Downwards rating pressure could surface upon a substantial increase in indebtness or a material change in dividend payout policy such that:

• Interest coverage ratio is below 6.0x on a sustainable basis

• CFO pre WC to debt is below 35% on a sustainable basis.

• Retained cash flow to debt falls below 17% on a sustainable basis

The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Santiago, Chile, Enel Generacion Chile is an operating holding company, engaged in the power generation sector in Chile, which also holds majority direct and indirect interest stakes in other power generation companies. As of March 31, 2018, the company has total installed capacity of 6,351 MW in which 55% is hydro, 44% thermal and 1% wind power generation. EOCC is a company derived from Empresa Nacional de Electricidad S.A ("Endesa Chile") following the spin-off transaction which has segregated the Chilean energy generation business from the non-Chilean companies. With the conclusion of its organizational structure simplification, the company currently owns Pehuenche (93%) and Gas Atacama (97%).

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.

Bernardo Costa
Vice President - Senior Analyst
Corporate Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 800 891 2518
Client Service: 1 212 553 1653

Michael J. Mulvaney
MD - Project Finance
Corporate 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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