Fitch Assigns 'BBB' to Empresa Electrica Guacolda US$150MM Issuance.Business Editors NEW YORK--(BUSINESS WIRE)--April 10, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has assigned a foreign currency rating of 'BBB' to the US$150 million, senior secured loan participation certificates due on April 30, 2013, issued by Empresa Electrica Guacolda S.A. The certificates will have an average life of 7.1 years, a 12-month grace period and semiannual interest and amortization payments on April 30 and Oct. 30 of each year. Proceeds from the issuance will be used to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. outstanding debt at Guacolda. The company will purchase all of the US$52 million net outstanding participation certificates in the Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. loan agreement and prepay the US$48.8 million outstanding loan under the Mitsubishi credit facility and the US$35.3 million local syndicated loan Syndicated Loan A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks. Notes: Also known as a "syndicated bank facility. . The remaining proceeds will be used to fund a portion of the reserve amount, pay related expenses, and for general corporate purposes. The rating of Guacolda is supported by its competitive position, sound operating and commercial strategies, long-term contract cover and growing electricity demand in the region. Guacolda's ongoing strategy has been to stabilize revenue streams and reduce competitive risks by entering into long-term contracts for most of its firm capacity, primarily with a financially strong electric distribution company and mining and industrial companies located nearby. At present, 89% of the company's total capacity is committed under contract with an average term of 9.6 years. In 2004 and 2005, approximately 22% of the amount contracted will expire. The majority of these contracts are expected to be renewed. The expectation is supported by the company's competitive position. Uncontracted remaining capacity is sold in the spot market. Guacolda's generating units are two of the lowest marginal cost Marginal cost The increase or decrease in a firm's total cost of production as a result of changing production by one unit. marginal cost The additional cost needed to produce or purchase one more unit of a good or service. coal-fired facilities in the Central Interconnected System (SIC) and are therefore among the first thermoelectric ther·mo·e·lec·tric also ther·mo·e·lec·tri·cal adj. Characteristic of, resulting from, or using electrical phenomena occurring in conjunction with a flow of heat. units to be dispatched in the system. The units are in excellent condition, having recently completed their general maintenance cycles. The company's geographical location, which is in close proximity to its customers, provides Guacolda with a cost advantage relative to other generators located in the south, including the combined cycle A combined cycle is characteristic of a power producing engine or plant that employs more than one thermodynamic cycle. Heat engines are only able to use a portion of the energy their fuel generates (usually less than 50%). The remaining heat from combustion is generally wasted. gas-fired plants located near Santiago. Additional competitive advantages include the following: a low fuel transportation cost profile that is not subject to the restrictions of the fixed contract associated with gas generation facilities, alternative storage of coal near the plants, diversification of fuel sources, flexibility in supply contracts and no exposure to pipeline failure risk. In 2002, Guacolda had operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of US$88 million, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of US$42 million and debt of US$192 million. These figures result in a total debt-to-EBITDA ratio of 4.6 times (x) and an EBITDA-to-interest expense ratio of 2.9x, which are consistent with the assigned rating given the companies many project like characteristics. Following the proposed debt issuance, Fitch expects relatively stable credit-protection measures, primarily reflecting stable operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , low future capital expenditures and a more manageable amortization schedule. Guacolda is a Chilean electric-generating company that operates a 304-MW coal-fired plant (two 152-MW units) in Huasco, which is located in the third region of Chile, 710 km to the north of Santiago, in the northern part of the SIC. Guacolda is owned by Gener (50%, rated 'B+' by Fitch), COPEC (25%, rated 'BBB+' by Fitch) and Ultra Terra (25%). A full copy of the new issue report on Empresa Electrica Guacolda can be found on Fitch Rating's web site, located at 'www.fitchratings.com'. |
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