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Fitch downgrades C.A. La Electricidad de Caracas (EDC) to 'B+'; outlook negative
Petroleumworld
CARACAS
Petroleumworld.com 01 11 07
Fitch Ratings has downgraded the senior unsecured foreign and local currency debt ratings and Issuer Default Ratings of C.A. La Electricidad de Caracas (EDC) to 'B+'. The Rating Outlook is Negative. Additionally, Fitch has downgraded the long-term national scale rating of EDC to 'AA(ven)' from 'AA+(ven)' and the short-term national scale rating is downgraded to 'F1(ven)' from 'F1+(ven)'. These rating actions follow the announcement yesterday by President Chavez of his intent to nationalize companies in strategic sectors, such as telecommunication and electricity.
The rating downgrades reflect Fitch's expectation that EDC will be subject to increased government intervention and regulation over the near- to medium-term, which would negatively affect its cash flow generation, investment capabilities and cost of capital. Should the Government of Venezuela move forward to nationalize the targeted sectors, including electricity, the probability of default would be high for EDC. In addition, the expected recovery levels for creditors of EDC would be below average, as it remains highly uncertain that the Venezuelan government would use its financial resources to compensate investors of nationalized companies at a fair market value. The possibility of a higher degree of intervention and the concern about recovery levels in case of nationalization are reflected in the Negative Rating Outlook.
EDC has been a private company for over 100 years. Nevertheless, it is still quite vulnerable to changes in economic policies, currency devaluation and regulatory risk. Throughout its history, EDC has withstood this volatility and has successfully met debt obligations.
EDC is the largest privately-owned electric utility company in Venezuela. EDC transmits, distributes and markets electricity to the metropolitan Caracas area. In June 2000, Arlington, Virginia-based AES Corporation acquired an 87% interest in EDC for US$16 billion in a public-tender offer.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
SOURCE: Fitch Ratings
Fitch Ratings Gianna A.Z. Bern, 312-368-3217 (Chicago) Daniel R. Kastholm, CFA, 312-368-2070 (Chicago) Carlos Fiorillo, +58-212-286-3356 (Caracas) Media Relations: Christopher Kimble, 212-908-0226 (New York)
Petroleumworld 10 01 07
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