Fitch: EPM's Telecom Unit Divestiture Neutral to Slightly Positive for Credit Quality

CHICAGO--()--Fitch Ratings views Empresas Publicas de Medellin E.S.P.'s (EPM: foreign and local currency Issuer Default Rating of BBB) intention to divest EPM Telecomunicaciones S.A. E.S.P. as neutral to slightly positive for EPM's credit quality.

According to the announced none-binding memorandum of understanding signed between EPM and Colombia Movil's major shareholder, Millicom, EPM's telecommunication business unit would merge with an intermediate holding company of Colombia Movil. After given effect to the transaction, the ensuing entity would own approximately 75% of Colombia Movil and all of EPM Telecomunicaciones' assets. EPM expects to retain a large, yet, none controlling participation in the ensuing entity.

EPM's credit quality would be neutrally impacted as its telecommunication unit was not considered a core business for the company. EPM's consolidated financial profile would be unaffected, yet it's consolidated EBITDA and total debt could marginally decrease after the transaction as the company would no longer consolidate EPM Telecomunicaciones. As of the last twelve months (LTM) ended Sept. 30, 2012, EPM reported a consolidated EBITDA and total debt of USD2.2 billion and USD3.9 billion, respectively. During the same period, EPM Telecomunicaciones' EBITDA and total deb were USD171 million and USD467 million, respectively. Fitch believes this transaction could slightly positively impact EPM's credit quality if the company received a monetary compensation as part of this transaction and the company uses the proceeds to fund part of its capital expenditures program.

EPM's ratings reflect the company's low business risk resulting from its business diversification and characteristics as a utility service provider. EPM provides electricity, water and sewage water, natural gas distribution services as well as electric generation and telecommunication services. The company's ratings also reflect its solid credit protection measures supported by low leverage, healthy interest coverage and strong liquidity position. EPM's ratings also reflect the company's somewhat aggressive growth strategy as well as the company's exposure to regulatory risk, which is considered moderate.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'National Ratings - Methodology Update' (Jan. 19, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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Contacts

Fitch Ratings
Primary Analyst
Lucas Aristizabal, +1-312-368-3260
Director
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Secondary Analyst
Jorge Yanes, +(571) 3269999
Director
or
Committee Chairperson
Glaucia Calp, +(571) 3269999
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Lucas Aristizabal, +1-312-368-3260
Director
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Secondary Analyst
Jorge Yanes, +(571) 3269999
Director
or
Committee Chairperson
Glaucia Calp, +(571) 3269999
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com