--Foreign and Local currency Issuer Default Ratings (IDRs) at 'B-';
--National scale rating at 'BB+(bra)'.
Fitch has also revised the Rating Outlook to Positive from Stable.
KEY RATING DRIVERS
Celpa's ratings reflect its still high financial leverage and reduced operating cash generation. Fitch believes that the company's progress, achieved mainly in the third quarter of 2013, is in accordance with the agency's initial expectations.
The ratings also incorporate how the extended debt maturity schedule and reduced financial cost benefit the company's credit profile. Fitch views as positive Celpa's parent Equatorial Energia S.A. (Equatorial)'s support through capital injections, capitalization of debts and loans guarantee. Regulatory risk of the power sector is considered moderate and hydrological risk in the sector is currently above average.
The Positive Outlook reflects Fitch's expectation that Celpa will succeed in its challenge to improve operational efficiency, particularly with regards to the high level of energy losses. It also incorporates potential new capitalization of debt from the parent, bringing its credit metrics to more conservative levels.
Weak Cash Generation to Improve
Fitch expects Celpa to generate a more robust operational cash generation in the coming years. The company's credit metrics were weak for the rating category until
Lengthened Debt Maturity Profile
Celpa's debt profile benefits from an extended maturity schedule, low financial cost and reduced foreign exchange risk as a result of the debt renegotiation under the bankruptcy protection process. At the end of
The company presents a moderate liquidity level. The company reported cash and marketable securities of
Positive Shareholder Support
Equatorial has already injected
FCF to Remain Negative
Celpa's free cash flow (FCF) should remain negative at least in the next couple of years. The company's capital expenditures are expected to be high in 2014 in order to support the ambitious operational improvements expected for the coming years. In the LTM ended on
Challenging Loss Reduction
The reduction of energy losses is an important challenge for Celpa. The company's cash flow generation has been negatively impacted by energy losses above the maximum levels established by the regulatory agency and contemplated in its tariffs to end consumers. Actions to reduce losses started effectively in
The ratings can benefit from improvements in Celpa's operational cash flow as expected, supported by losses reduction, combined with growth of energy volumes invoiced and positive results in cost control measures, which would result in more conservative credit metrics. The ratings would be negatively impacted in case of Celpa fails to improve its operating efficiency and cash flow generation, resulting in a leverage reduction below Fitch's expectations.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Metholodogy' (
--'National Scale Ratings Criteria' (
Corporate Rating Methodology - Effective from
National Scale Ratings Criteria
Tel: +1 212-908-0526
Praca XV de Novembro, 20 - 401 B
Source: Fitch Ratings
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