Fitch Ratings has affirmed the foreign and local currency Issuer Default Ratings (IDRs) of Enersis S.A. at 'BBB+' and its long-term national scale rating at 'AA(cl)'. In addition, Fitch has affirmed Enersis' short-term national scale rating at 'F1+/AA(cl)' and its national Equity Rating at 'Primera Clase Nivel 1'. These rating actions affect approximately USD600 million of outstanding Yankee bonds and USD63 million of domestic bonds. The Rating Outlook is Stable.
Enersis' ratings reflect its solid business platform with a strong degree of business and geographic diversification across the electricity chain, and good financial metrics. The company's regulated business represents 46% of EBITDA providing a degree of earning stability as it operates under supportive regulatory environments. Geographic diversification through Latin America provides a natural hedge to different regulations and weather conditions. The Stable Outlook is driven by Enersis' adequate liquidity profile and credit metrics and the expectation that a balanced mix between generation and distributions businesses will be maintained.
Credit risks associated with the company include pressures from the shareholder Enel S.p.a. ('A-' IDR by Fitch) to increase dividends, possible environmental and/or political issues which could result in cost overruns or modifications of projects under construction, and regulatory uncertainties in Argentina (which only represents 2% of EBITDA), although these risks appear manageable. The ratings also consider the company's dependence on dividend payments from its subsidiaries to repay its own debt and incorporate the seasonal and regional cash flow volatility.
Balanced Profile
Enersis enjoys a strong business platform underpinned by a balanced portfolio of regulated and non-regulated activities and a well diversified geographic presence. Enersis' cash generation is evenly split between its power generation and power distribution businesses which represented 54% and 46% of consolidated EBITDA as of September 2011, respectively. In the generation business, operations are concentrated in its subsidiary Endesa Chile ('BBB+' IDR by Fitch). Endesa Chile's conservative commercial policy is a key strength to reduce the company's exposure to hydrology risk as hydropower generation represents 58% of its generation matrix. EBITDA streams are well diversified amongst Chile (30%), Colombia (25%) and Brazil (33%).
On the distribution side of the business, Enersis controls Chilectra S.A. (Chile) which provides it with very predictable cash flows; Chilectra has no debt outstanding. The cash flow stability and reliability of its other regional distribution companies is also sound, yet distributions to the holding company are more difficult to predict as they might be subject to legal restrictions of each country and the willingness of the other shareholders to distribute operating cash.
Strong Credit Metrics
As of September 2011, Enersis maintained strong credit metrics with an EBITDA-to-interest of 4.9 times (x) and net debt-to-EBITDA of 1.4x. EBITDA for the latest 12 months (LTM) was USD4.1 billion. Free cash flow during 2011 was positive, despite capital expenditures of USD 1 billion and consolidated dividends payments of USD 1.2billion. Enersis individual dividend payments are in the range of USD 500 million per anum.
Fitch expects Enersis to moderately increase its EBITDA to a level of USD4.7 billion in 2012-2013, mainly due to the organic growth of its distribution segment. Cash flows from its generation business unit are expected to remain stable in the range of USD2 billion per annum. Consolidated capital expenditures are estimated at approximately USD1 billion during the next few years and are expected to be funded with the company's own cash flow generation. Free cash flow is expected to remain positive.
Good Liquidity
Enersis' credit profile is supported by ample consolidated liquidity with USD 1.8 billion of cash as of September 2011 and access to a USD792 million of committed credit lines. Consolidated debt maturities are manageable of USD406 million due in 4Q'11, USD1 billion due in 2012 and USD1 billion due in 2013. Fitch expects the company will refinance a portion of its debt maturities, while interest coverage, as measured by EBITDA-to-interest is above 5.0x and leverage as measures by net debt-to-EBITDA to remain below 2.0x, between 2011-2014.
Enersis is one of the largest private electricity utility groups in Latin America. The company has varying ownership interests in electric generation, distribution and transmission companies in Argentina, Brazil, Chile, Colombia and Peru. Enersis is currently 60.62% owned by Endesa Spain ('A-' IDR by Fitch), Spain's largest electrical utility. Beyond its direct investment in Enersis, Endesa Spain holds stakes in many investments as a partner of Enersis and Endesa Chile. Endesa Spain's ratings are linked to and capped by those of its majority shareholder (92%), Enel SpA ('A-' IDR by Fitch), based on strong legal, operational and strategic links.
Fitch has affirmed the following debt instruments of Enersis:
--Senior unsecured notes USD350 million due 2016 at 'BBB+';
--Senior unsecured notes USD350 million due 2014 at 'BBB+';
--Senior unsecured notes USD150 million due 2026 at 'BBB+';
--Commercial paper USD35 million at 'F1+/AA(cl)';
--Commercial paper USD45 million at 'F1+/AA(cl)';
--Commercial paper USD75 million at 'F1+/AA(cl)';
--Commercial paper USD45 million at 'F1+/AA(cl)';
--Senior unsecured CLF2.5 million notes due 2022 at 'AA(cl)';
--Medium-term notes program CLF12.5 million at 'AA(cl)'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology', dated Aug. 12, 2011;
--'Parent and Subsidiary Rating Linkage', dated Aug. 12, 2011.
For the national ratings Fitch used the methodologies filed with the local regulator.
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
Parent and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Contacts:
Fitch Ratings
Primary Analyst
Ana Paula Ares, +54-11-5235 8121
Senior
Director
Fitch Argentina Calificadora de Riesgo S.A.
Sarmiento
663, 7th floor
Buenos Aires, Argentina
or
Secondary
Analyst
Paula Garcia Uriburu, +56-2-499 3300
Director
or
Committee
Chairperson
Rina Jarufe, +56-2-499 3300
Senior Director
or
Media
Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
