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Fitch Affs Hidroelectrica Piedra de Aguila's Ratings at `B+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 30, 2000

Fitch has affirmed the credit ratings of Hidroelectrica Piedra del Aguila S.A.'s (HPDA) series I trust notes and series II trust notes at 'B+'. The trust notes are the result of a financial restructuring in November 1999, and represent two of five series of notes outstanding. The Rating Outlook is Stable.

HPDA's current debt structure has improved the company's financial position, lowered future refinancing risks and better matched debt maturities with expected cash flow. Rainfall and snowmelt in 2000 has been sufficient to increase the company's reservoir to normal levels and should result in generation levels consistent with previous expectations. Stable energy prices and sustainable generation in the first half of the year allowed the company to prepay US$1.7 million in debt at June 2000. Continued favorable conditions should allow the company to prepay additional amounts at year-end 2000.

Due to improved hydrological conditions in 2000, HPDA's production returned to normal levels. In addition, the company was able to sell more energy due to the recently completed fourth transmission line from the Comahue region to Buenos Aires. HPDA also benefited from generally stable, and sometimes higher, electricity prices in Buenos Aires as an unusually cold winter boosted energy prices in June and July. As a result of firm prices and sufficient water levels, the company had excess cash flow by June 2000 and prepaid approximately US$1.7 million in combined Banco Nacion and series IV debt according to the payment waterfall as structured in the note documentation.

Year-to-date performance suggests additional prepayments at year-end 2000 are likely. Reservoir levels have returned to normal levels and the company generated approximately 2,600 GWh of electricity through August 2000. Based on YTD rainfall and expected snowmelt, the company expects to generate an average of 500 GWh per month through December 2000, resulting in annual production in line with our previous estimates of 4,600 GWh. Based on revenues and cash flow to date, the company believes it will be able to prepay additional debt at year-end.

Given HPDA's reliance on rainfall and reservoir levels, cash flow from operations will likely remain volatile as energy sales and electricity prices fluctuate from variations in hydrological conditions. Assuming conservative generation levels during normal hydrological years by HPDA of approximately 4,600 GWh to 4,800 GWh annually, interest coverages and debt service coverages are expected to average approximately 2.0 times and 1.1 times, respectively. Positively, in periods of deficit cash flow the terms of the restructured bonds permit HPDA to defer the amortization of up to US$13 million for the notes held by the private bank creditors, and up to US$19 million for the loan held by Banco Nacion. The payment deferral to the banks should provide HPDA with sufficient operating and financial flexibility to pay noteholders in drier years. Those institutions subject to potential payment deferrals also benefit from prepayments in periods of excess cash flow, such as June 2000 and, likely, December 2000.

HPDA is the largest private hydroelectric generator in Argentina. The company holds a concession until Dec. 29, 2023, from the Argentine government to operate its hydroelectric facility and for the generation and sale of electricity. HPDA is located approximately 1,200 km southwest of Buenos Aires on the Limay River on the border between Neuquen and Rio Negro provinces. HPDA is a low marginal cost producer of electricity, which affords it a high dispatch priority. During 1999, HPDA sold 1,462 GWh through contract sales and 1,538 GWh on the spot market.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance markets worldwide.
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Publication:Business Wire
Date:Oct 30, 2000
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