CHICAGO, Dec. 21, 2000 (BUSINESS WIRE)Fitch has affirmed the ‘BBB’ senior unsecured local and foreign currency ratings of ElectroAndina S.A. ElectroAndina’s ‘BBB’ rating is based on its long-term purchased power agreements with strong mining companies, continued service territory demand growth, new owned low-cost gas-fired generating plant, sound operating strategy, and solid financial profile.
The rating reflects the significant competitive pressures for new supply contracts and lower spot prices for electricity. The credit profile of ElectroAndina benefits from the inherent support from its controller, Tractebel, and its commitment to the Chilean market as evidenced by its recent acquisition of additional equity in ElectroAndina and Compania Electrica Colbun Machicura S.A. (Colbun).
ElectroAndina operates in the extremely competitive electricity supply sector in northern Chile. These competitive risks are mitigated by the company’s practice of selling capacity under long-term contractual arrangements to financially strong, unregulated, industrial and mining customers. Competition has become even more fierce as new gas-fired generation has been developed in 1999 and 2000 in Chile’s Northern Interconnected System (SING). As defined by the Chilean electricity regulation, lower marginal cost gas- fired units will be dispatched prior to coal- and diesel- fired plants, which represents the majority of ElectroAndina’s existing generation portfolio.
The company’s contract-based strategy, supported by aggressive management of energy costs, should allow the company to maintain stable earnings and cash flow by balancing contractual sales obligations with estimated production capacity and availability, including spot purchases. ElectroAndina is one of the best-positioned generators in the SING due to its strong contracted power sales, which should support credit protection measures through the current overcapacity situation in the region. Going forward, increased fuel supply and transport costs associated with the operation of the Tocopilla plant and low spot prices should only moderately reduce credit protection measures to levels consistent with the rating category. Interest coverages are expected to decline to the mid-3 times for the next few years and slowly improve thereafter.
ElectroAndina is the largest generator in Chile’s northern interconnected transmission system and the third largest overall with installed capacity of 1,028 MW, including the recently constructed 400 MW Tocopilla combined-cycle unit which should begin commercial operations in the first quarter of 2001. The company is owned by Inversiones Tocopilla Ltda, which has control, and Codelco. Inversiones Tocopilla is controlled by the consortium Inversora Electrica Andina, which is 100%-owned by Tractebel. Tractebel is an experienced operator and has a proven track record of successfully operating private electric utilities worldwide.