Fitch: Enersis Americas' Acquisition of CELG D Neutral to Credit Quality

CHICAGO--()--Fitch Ratings believes Enersis Americas' acquisition of Celg Distribuicao SA (CELG D) is consistent with Enersis Americas' growth strategy and neutral to its credit profile.

Through this acquisition, Enersis Americas continues pursuing its plan to maintain a geographic and asset diversified portfolio. Enersis Americas was recently awarded the acquisition of 95% equity stake in CELG D. CELG D will be acquired at a price of USD640 million plus the assumption of approximately USD800 million in debt, roughly or approximately a 1.6x enterprise value (EV) to 2016 Net regulatory asset base (RAB).

Enersis Americas' cash disbursement will be financed with the company's cash on hand related to the 2012 capital increase. The transaction is expected to close by January 2017. During 2013, CELG D generated approximately USD178 million in EBITDA, Fitch expects CELG D's EBITDA annual generation will be USD110 to USD260 million over the next three years as the company focuses on reducing losses and improving quality and efficiency gains.

Initially, the transaction will likely result in slightly higher debt leverage on a consolidated (proforma) basis at the close of the transaction, but still considered conservative for the rating level. Over the medium term, Fitch expects Enersis Americas' leverage to be below 2.0x, with the majority of its EBITDA related to the company's operations in Peru and Colombia.

Despite the increased concentration in Brazil, the company's EBITDA generated in investment grade countries is robust enough to cover the company's debt service denominated in USD, and as a result, Brazil's country ceiling is not a ratings constraint. As the company enters into more diversified geographical areas and businesses, this threshold may change depending on the stability and predictability of the company's cashflow generation, i.e. new distribution assets acquisitions successfully incorporated into the portfolio and improved geographical diversification.

Fitch expects capex investment for 2017 - 2019 to amount to approximately USD4 billion, with maintenance and growth capex evenly distributed, most of the capex will be invested mainly in distribution to reduce losses, which would improve the company's results. Fitch also believes the company's investment plan should not require additional significant indebtedness given its solid free cash flow (FCF) generation.

CELG D is an electricity distribution company in Brazil formerly controlled by Centrais Eletricas Brasileiras SA (Eletrobras: 'BB-'/Stable Outlook) serving 237 municipalities and 391 districts in the Brazilian state of Goias and providing service to a population of approximately 2.9 million habitants. The company covers an area of approximately 337,000 square kilometres of distribution lines. During 2015, CELG D sold 12,040 GWh, providing 2.5% of the total energy consumed in Brazil.

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Contacts

Fitch Ratings
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+1-312-606-2373
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or
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Associate Director
+562 2499 3340
or
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Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Cinthya Ortega
Director
+1-312-606-2373
70 W. Madison Street
Chicago, IL 60602
or
Francisco Mercadal
Associate Director
+562 2499 3340
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com