Fitch Dwngrs ElectroAndina to 'BB+'; Negative Outlook.Business Editors CHICAGO--(BUSINESS WIRE)--Dec. 5, 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 downgraded the senior unsecured local and foreign currency ratings of ElectroAndina S.A.(ElectroAndina) to 'BB+' from 'BBB-'. Fitch has also revised the Rating Outlook to Negative from Stable. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. and rating outlook primarily reflect a continued deterioration in credit protection measures and medium term liquidity concerns. The material reduction in the company's credit protection measures is primarily the result of low demand growth, high fixed gas transportation costs, regulatory limits on dispatch and significant competitive pressures for new supply contracts. In addition, the company's leverage remains high. Debt levels increased to finance the company's 400 MW 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. Tocopilla plant and the capital investment at the Distrinor subsidiary. Liquidity in the coming years will be tight, as the company's total debt service for 2005 and 2006 will be approximately US$30 million and US$49 million respectively and cash flows from operations has been diminishing, mainly from lower operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . However, continued growth in the region and the expansion of mining activities should contribute to increased cash flow on the next 12 months. Interest coverage ratios supported by the company's long-term power supply agreements have declined primarily due to lower operational results. Costs increased reflecting US$50 million in annual gas transportation costs associated with the Nor Andino Gasoducto pipeline contract and the 220 MW dispatch limitation that forces the company to purchase in the spot market at higher prices. Through September 2003, ElectroAndina reported revenues and 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$143 million and US$25.5 million, respectively. EBITDA covered interest by 2.9 times (x) with total consolidated leverage as measured by debt-to-EBITDA of 6.5x versus 4x and 7.3x respectively as of September 2002. Going forward, Electroandina's EBITDA growth will be dependent on energy demand growth, lower limits on dispatch and lower fuel prices. Energy demand should improve given present copper prices of above US$0.80/lb compared with the last year low prices of US$0.71/lb. ElectroAndina's debt structure is primarily composed of foreign currency denominated syndicated bank loans. At September 2003, total debt was US$220 million, which included a Citibank loan of US$27.2 million which was amortized by US$14 million in November 2003 and will be fully amortized in February 2004; a US$11.3 million KFW KFW Kreditanstalt Für Wiederaufbau (German Development Bank) bank loan with a US$750,000 semiannual amortization; a US$100 million 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. with ABN AMRO ABN AMRO Algemene Bank Nederland-Amsterdam Roterdam Bank (Dutch bank) with an amortization schedule of five equal semiannual installments of principal beginning on July 2005; a US$22.6 million subordinated loan In the field of finance, a subordinated loan is a type of loan which ranks after other debts should a company fall into receivership or be closed. It is also known as subordinated debt, or as junior debt. , with a July 2007 bullet amortization. Other long term loans include a shareholder loan with Codelco (66% owner of ElectroAndina) in an amount of US$45.4 million under the same terms and conditions as the subordinated loan, and other interest bearing liabilities of US$11 million. Upcoming near-term maturities are manageable and consist of US$25 million in 2004. ElectroAndina benefits from its long term purchased power agreements with financially strong, unregulated, industrial and mining companies, new owned low-cost gas-fired generating plant, and a sound operating strategy. The company's credit profile is additionally strengthened by the inherent support from its controllers, Tractebel and other shareholder, Codelco. Both shareholders have actively participated in the capital structure of the company in the form of subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". warrantor WARRANTOR. One who makes a warranty. Touchst, 181. and direct loans, which adds support to the assigned rating of ElectroAndina. Tractebel has also illustrated its commitment to the Chilean market with its recent acquisition of Edelnor, another generation company located in the Sistema Interconectado del Norte Del Norte can refer to multiple things:
In addition to generation, transmission and commercialization of electricity, ElectroAndina also provides port services and transmission lines maintenance services to third parties, and it is involved in the distribution of natural gas through its subsidiary Distrinor which adds approximately US$6 million to cash flow. ElectroAndina is the largest generator in Chile's northern interconnected transmission system and the third largest overall with installed capacity of 1,028 MW, including the recently constructed 400 MW Tocopilla combined-cycle unit which began commercial operations in February 2001. The company is owned by Inversiones Tocopilla Ltda, which has control, and Codelco. Inversiones Tocopilla is controlled by Tractebel Andino, which is 100%-owned by Tractebel. Tractebel is an experienced operator and has a proven track record of successfully operating private electric utilities worldwide. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion