Fitch downgrades Colbún, Essa

The Chilean office of credit rating agency Fitch Ratings has downgraded the local rating on bonds issued by generator Colbún to A+ from AA-, affecting bonds worth 91.5bn pesos (US$154mn) at March 2005. The outlook is stable. The main influence on the rating is uncertainty on the variable generation cost of both Colbún and the grid in general, which makes the cost of resorting to the spot market an expensive one. Similarly, in the context of natural gas restrictions and uncertainty over water levels, the company's own generation to meet contractual commitments is also expensive, Fitch said in a statement. In the first four months of the year Colbún used diesel to generate 20% of its power, costing it US$90/MWh instead of the US$16/MWh costs of a natural gas combined cycle plant. The company's Ebitda margin was 17% in March 2005 compared to 43% in March 2004 and close to 60% in previous years. Colbún's financial strength and moderate debts as well as recent increases in water levels at hydro plants, are factors in its favor, Fitch said. Colbún has 1,912MW installed capacity, some 22% of total capacity in Chile's central grid (SIC). Belgian company Suez Tractebel and Chile's Matte group control Colbún. Also because of Argentine natural gas restrictions, Fitch downgraded the ratings on bonds worth 54.2bn pesos at March 2005 issued by generator Sociedad Eléctrica Santiago (Essa), a subsidiary of local generator AES Gener. Essa used diesel to generate 11% of its 456GWh first quarter production and bought a further 150GWh on the spot market at prices that increased from US$20/MWh in January to US$120/MWh in March. Spot market prices peaked at US$160/MWh in April before rainfall watered them down to US$20/MWh. Fitch put the Essa ratings on ratings watch negative because of uncertainty on the company's cost structure. Essa owns the 370MW Nueva Renca and 100MW Renca plants in Santiago.