Fitch Ratings Affirms Transelec's 'A-' Rating.CHICAGO -- 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 affirmed the 'A-' rating assigned to HQI HQI Habitat Quality Index HQI Housing Quality Indicator Transelec Chile S.A.'s (Transelec) US$465 million senior unsecured notes. Fitch has also affirmed Transelec's 'A-' foreign and local currency ratings and the 'AA(chl)' national scale rating. The Rating Outlook for all these ratings remains Stable. The assigned ratings reflect Transelec's position as the dominant transmission company in Chile, stable cash flow generation, low operating risk Operating risk The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk. and the improved regulatory environment since approval of the Ley LEY. This word is old French, a corruption of loi, and signifies law; for example, Termes de la Ley, Terms of the Law. In another, and an old technical sense, ley signifies an oath, or the oath with compurgators; as, il tend sa ley aiu pleyntiffe. Brit. c. 27. Corta (Short Law) in early 2004. Credit protection measures are expected to improve over the next couple of years as revenues from internally funded expansion projects come on line and reflecting anticipated debt reduction of approximately US$1.5 million in 2006. Transelec also benefits from an experienced management team and shareholders in Hydro-Quebec (HQ, rated 'AA-' by Fitch Ratings, 90% owner) and International Finance Corporation (IFC (Internet Foundation Classes) A class library from Netscape that provides an application framework and graphical user interface (GUI) routines for Java programmers. IFC was later made part of the Java Foundation Classes (JFC). See JFC, AFC and AWT. See also ICF. , 10% owner). The ratings additionally reflect the concentration of revenues and lower average credit quality of the generation companies from which Transelec receives the majority of its income; these risks are mitigated by the required use of Transelec?s lines by market participants, lack of competitive pressures and regulated determination of its revenue base. Through June 30, 2005, Transelec reported EBITDA-to-interest expense of 2.8 times (x) up from 2.5x as of June 2004, and net debt-to-EBITDA of 3.8x versus 4.8x, respectively, for the comparable periods. Transelec?s operating results improved during the first quarter of 2005 primarily due to the addition of certain projects in 2004. The Ancoa-Itahue transmission line started operations in February and the investments related to Ralco, Endesa-Chile's new hydroelectric plant, began operations in July. These two projects have contributed a combined US$15 million per year to Transelec?s 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 . Revenue and cash flow are expected to increase further by 2007 reflecting the addition of eight trunk-line upgrade projects (approximately US$79 million investment) to 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 . Capital expenditures are expected to be relatively low in 2005 and increase in 2006 and 2007, when the eight projects are expected to be constructed. 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 90%-owned by Hydro-Quebec International Transmision Sudamerica S.A., a subsidiary of Hydro-Quebec (HQ), and 10%-owned by IFC. 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. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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