KEY RATING DRIVERS
ITABO's ratings reflect the electricity sector's high dependency on transfers from the central government to service its financial obligations, a condition that links the credit quality of the distribution companies (EDEs) and generation companies to that of the sovereign. Low collections from end-users as well as high electricity losses and subsidies have undermined distribution companies' cash generation capacity, exacerbating generation companies' dependence on public funds to cover the gap produced by insufficient payments received from distribution companies. ITABO's ratings also consider its low-cost generation portfolio, strong balance sheet and well-structured purchased power agreements (PPAs), which contribute to strong cash flow generation and bolster liquidity.
Sector's Dependence on Government Transfers
High energy distribution losses (above 30% in the 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 robust 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 sector's risk, especially at a time of rising fiscal vulnerabilities affecting the Central Government's finances.
Low-Cost Asset Portfolio
ITABO's ratings incorporate its strong competitive position as one of the lowest cost thermoelectric generators in the country, ensuring the company's consistent dispatch of its generation units. The company operates two low-cost coal-fired thermal generating units and a third peaking plant that runs on Fuel Oil #2 (
Adequate Credit Metrics
The company presents strong credit metrics for the rating category. Leverage, measured as total debt to EBITDA, fell to 1.8x at
For the LTM ended in
Debt Structure Adds Flexibility
The company's debt structure is quite manageable with a six-year average life which properly contributes to the reduction of liquidity risk. As of
A positive rating action could follow if the
A negative rating action would follow if the
Fitch has affirmed the following ratings:
--ITABO Dominicana SPV's foreign currency IDR at 'B', Stable Outlook;
--ITABO Dominicana SPV's outstanding notes due in 2020 at 'B/RR4'.
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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