Fitch Rates Nueva Transelec's Proposed UF19.5MM Issuance 'A(chl)'.SANTIAGO, Chile -- 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 national scale rating of 'A(chl)', Outlook Stable to Nueva Transelec S.A.'s (formerly HQI HQI Habitat Quality Index HQI Housing Quality Indicator Transelec Chile S.A. (Transelec)) proposed issue of UF19.5 million, or approximately US$672 million. The proceeds from the proposed issuance are expected to be used to refinance existing debt of UF6 million due in March 2007 and to refinance US$450million of the holding company debt. The rating reflects the leveraging effects of Transelec's acquisition by a consortium of investors led by Brookfield Asset Management  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . (BAM Bam (bäm), town (1996 pop. 70,100), Kerman prov., SE Iran, on the intermittent Bam River. Located on the western edge of the Dasht-e Lut, Bam is a trade center in a henna-growing region. Dates and other fruits are also grown; camels are raised. ), which added US$600 million of new consolidated debt to existing debt of US$900 million. Nueva Transelec's proposed debt issuance will occur at the operating company operating company A business that engages in transactions with outsiders. level and is targeted to refinance $450 million of the $600 million of acquisition debt held at the holding company, which will increase leverage and weaken the company's credit protection measures. Operating company leverage is expected to be consistent with the 'A(chl)' rating category and given Nueva Transelec's low risk operating profile. The remaining holding company debt of US$150 million will be structurally subordinated to the debt at Nueva Transelec. New and existing operating company creditors are being provided additional protections in the form a covenant package that includes limitations on additional indebtedness, a negative pledge Negative Pledge An agreement in which the borrower agrees not to pledge any of its assets as security and/or not to incur further indebtedness. on assets and a six-month debt service reserve account. Operating debt to 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 is expected to increase to 6.5 times (x) at June 30, 2006 on as proforma basis as operating company debt climbs from US$921 million at June 30, 2006 to US$1,371 million. Nueva Transelec's holding company consolidated debt to operating EBITDA ratio is expected to increase from 4.3 times (x) at June 2006 to close to 7.0x on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, including holding company debt; debt is estimated to climb from US$921 million at June 30, 2006 to US$1,521 million. Nueva Transelec's investment grade ratings reflect the company's low business risk profile as an electric transmission utility, the improved regulatory environment since the approval of the Short Law in early 2004, and high financial leverage. The company's revenues and cash flow are extremely stable and are concentrated in financially solid generation companies. The majority of the revenues received are under long term contracts (approximately 62%), with the remaining coming from regulated tariffs. Revenues are not exposed to market based risk such as price and volume. As contract revenues roll-off and are replaced with regulated tariffs, the Short Law should result in greater certainty in the determination of regulated transmission revenues and returns on future investments. Fitch expects Nueva Transelec will continue to generate predictable revenues and maintain a stable cost structure, resulting in a stable EBITDA close to US$200 million. Nueva Transelec's EBITDA is expected to gradually increase by 2007, reflecting the addition of six trunk-line upgrade projects (approximately an US$84 million investment), and two new projects (approximately US$20 million), which would be financed with cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . Through June 30, 2006, Transelec's financial profile continued to show stable and predictable cash flow generation. Transelec reported EBITDA-to-interest expense of 3.0x, and debt-to-EBITDA of 4.3x compared with 2.8x and 4.5x at June 30 2005, respectively. Nueva Transelec faces debt maturity of US$202 million in March 2007 from a total debt of US$921 million. The company has manageable capital expenditures, which are expected to be funded with internal cash flows. The BAM consortium includes Brookfield Asset Management Inc. (27.6%) who leads the consortium, the Canada Pension Plan The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program. It forms one of the two major components of Canada's public retirement income system, the other component being Old Age Security (OAS). Investment Board (27.6%), British Columbia Investment Management Corporation (26.3%), and other investor (18.4%). BAM is an asset management company, focused on property, power and infrastructure assets, which currently has US$50 billion assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. . BAM's current power operations include 3,500 MW of hydro generating plants located in North America and Brazil, and regulated transmission and distribution business in northern Ontario. Nueva Transelec owns and operates most of the electricity transmission lines and substations of Chile's trunk transmission system in the Central Interconnected System (SIC), as well as a portion of the high-tension lines in the Northern Interconnected System (SING). Transelec is 100%-owned by BAM Consortium. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. 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