KEY RATING DRIVERS
AES Dominicana's ratings reflect the
The upgrade of AES Andres national long-term rating also reflects its improving revenue diversification given its growing sales of natural gas to non-related parties and the fact that the company owns and operate the only LNG import facility in the country.
Sector's Dependence on Government Transfers
High energy distribution losses (above 30% in last five years), low level of collections and important subsidies for end users have created a strong dependence on government transfers. This dependence has been exacerbated by country's exposure to fluctuations in fossil-fuel prices and energy demand growth (4.8% CAGR in 2009 - 2013). The regular delays in government transfers pressure working capital needs of generators and add volatility to their cash flows. This situation increases the risk of the sector, especially at a time of rising fiscal vulnerabilities affecting the Central Government's finances.
High-Quality Asset Base
AES Dominicana's ratings reflect its high-quality generation assets, which consist of
Strong Credit Metrics
The company presents strong credit metrics for the rating category. At
Cash Flow Volatility Persists
The deficit of the sector and delays in government transfers continue to pressure the company's cash flow. For the LTM
Debt Structure Adds Flexibility
The company's debt structure with a single maturity in 2020 provides ample financial flexibility and eliminates liquidity risk. As of
A positive rating action could follow if the DR's sovereign ratings are upgraded or if the electricity sector achieves financial sustainability through proper policy implementation. A further increase of sales of natural gas outside the electricity sector may also impact positively the ratings.
A negative rating action would follow if the DR's sovereign ratings are downgraded, if further deterioration of the sector's key performance indicators reinforces the dependence on government transfers or if the company's operational and financial performance deteriorates to the point of increasing the ratio of Debt-to-EBITDA to 5x for a sustained amount of time.
Fitch has affirmed the following:
--Long-Term FC IDR at 'B'; Outlook Stable;
--Senior Unsecured notes rating at 'B/RR4'.
Fitch has upgraded the following:
--Long-Term National rating to 'A(dom)' from 'A-(dom)'; Outlook Stable.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Alberto Moreno, +52-81-8399-9100
Source: Fitch Ratings
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