KEY RATING DRIVERS
Itaipu's ratings reflect its strong credit profile linkage with the
The ratings also incorporate Itaipu's adequate liquidity position and cash flow predictability, resulting from the Itaipu Treaty signed between
Cash Flow Predictability
Itaipu's credit profile benefits from its known cash flow. The bi-lateral treaty provides the company with the long-term firm commitment of both countries to remunerate the company for 87% of its installed capacity of 14,000 MW and the total energy production of the plant, besides the annual definition of a tariff sufficient to cover all operating costs, shareholder obligations and debt service, which reduces its cash flow generation risk.
Itaipu's free cash flow (FCF) continues to be robust and approximates annual debt amortizations. Furthermore, the company's financial profile benefits from adequate liquidity to cover any possible cash flow mismatches. In 2013, the company's cash flow from operations (CFFO) was
High Leverage Not a Concern
Itaipu's high financial leverage is quite manageable given the tariff setting mechanism embedded in the bi-lateral treaty between
Fitch expects Itaipu's net debt/EBITDA ratio should remain at around 6.0x to 8.0x until 2017. Itaipu's indebtedness should gradually decline and be fully amortized by 2023. Any unsecured debt issuances that are not directly guaranteed by the
Inexistence of Hydrologic and Regulatory Risks
Itaipu does not have hydrologic or regulatory risks associated with the electric sector in
Future rating actions, either positive or negative, will be highly correlated to the sovereign rating of the
Additional information available at 'www.fitchratings.com' or 'www.fitchratings.com.br'.
--'Corporate Rating Methodology - Including Short-Term Ratings and Linkage Between Holding Companies and Subsidiaries' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Fitch Ratings Brasil Ltda.
Source: Fitch Ratings
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