S&P ups Sabesp local currency rating to stable

Ratings agency Standard & Poor's (S&P) has revised its outlook on its BB- local currency rating on Sao Paulo state water utility Sabesp to stable from negative, S&P said in a statement. S&P also affirmed its B+ foreign currency and BB- local currency corporate credit ratings on Sabesp. The outlook on the utility's foreign currency rating is still stable, and the outlook assigned to Sabesp in the Brazil national scale was also revised to stable from negative and its brA was affirmed. "This action reflects the successful renegotiation of Sabesp's large debt maturities during 2003 when Brazilian corporates were still in an unfavorable credit environment," said S&P credit analyst Juliana Gallo. The ratings reflect a volatile economic operating environment; lack of a defined waterworks regulatory framework; high amount of debt; significant refinancing needs for the next years; and challenge to reduce overdue customer receivables. These risks are partially offset by the company's strategic importance as a regional provider of water and wastewater service in the state; virtual monopoly for service, covering a large territory; capacity to progress in the capital program that expanded wastewater collection and treatment capability throughout the system; and strong cash generation. Sabesp is Brazil's largest water utility in terms of users, serving 323 of Sao Paulo state's 645 municipalities. The utility provides water to 25 million residents through a 54,000km network and sewerage service to 16.8 million residents through a 34,000km collection network. Sabesp's five-year investment program calls for investing 550mn-600mn reais/year (US$193mn-210mn) through 2006.