Corporates

Electric-Corporate
Latin America

Coronavirus Impact on Latin American

Utilities
Portfolio Screener

The utilities sector in Latin America is expected to be one of the

“Although utilities in Latin America will see most resilient in the region amidst the slowdown in economic
activity and pressure on credit metrics resulting from the
pressure from lower electricity demand,
Coronavirus pandemic.
payment holidays and higher working capital
Although the credit quality of utilities in Latin America will face
needs as a result of the Coronavirus outbreak, unavoidable pressure from lower electricity demand, payment
they tend to have high rating headroom, strong holidays and higher working capital needs, these issuers tend to
liquidity and low business risk.” have higher rating headroom, stronger liquidity and lower
business risk than most corporates.
Lucas Aristizabal, Senior Director
The impact of lower electricity demand will vary by country and
business type. Countries where electricity demand is highly linked
to industrial and commercial consumption, which is typical in Latin
America, will see a sharper decrease in demand than countries like
Colombia, where residential consumption represents close to two-
thirds of demand.
Generation companies (GenCos) with high merchant exposure will
be the most at risk due to lower electricity consumption and
expected lower spot prices in 2020.
Contracted GenCos that rely on capacity payments for the
majority of their cash flow generation should be more resilient, yet
could see an increase in working capital needs if distribution
companies (DisCos) delay payments. DisCos’ cash flow will be
affected by lower demand and payment holidays or higher
subsidies.
Electricity transmission and midstream companies will be highly
resilient to lower demand and prices as these businesses are
typically not exposed to volume and price risk. Any credit quality
deterioration for these two industries will likely be the result of
deterioration of the credit quality of their offtakers, which are
mostly DisCos and GenCos.
Related Research Fitch Ratings uses risk classifications of “robust,” “above average,”
Latin American Power Overview (September 2019) “average,” and “low” to illustrate each issuer’s relative liquidity
position, industry risk, FX exposure and rating headroom. The
liquidity profile of 40% of our internationally rated issuers was
designated as robust, 15% was above average, 21% average and 25%
low. (See liquidity risk section beginning on p5.)
Analysts As a result, Fitch expects a contained number of rating actions for
Paula Bunn LatAm utilities apart from sovereign-driven rating actions. Fitch has
+1 312 368-3218 designated a risk category of A, B and C for all corporates in the
paula.bunn@fitchratings.com region, from riskier to less risky, and almost all utilities are in the
lower risk category of C.

Relative Rating Vulnerability

Lucas Aristizabal The majority of utilities in the region have a solid liquidity position
+1 312 368-3260 supported by cash on hand, lines of credit and manageable
lucas.aristizabal@fitchratings.com amortization schedules. Most GenCos’ power purchase
agreements (PPAs) encompass either U.S. dollar-denominated or

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 Corporates
Electric-Corporate
Latin America

U.S.-linked revenues, which limits FX mismatch. DisCos in Latin long-term contracts (>10 years), fully contracted capacity and full
America tend to protect their FX exposure by having their cost pass-through provisions, with capacity payments
liabilities match their cash flow currency exposure. representing a significant portion of annual cash flow, will be
better prepared to face a slowdown in energy demand. Weaker
Real GDP Growth by Country generators present shorter-term contracts (<3 years), are exposed
Chile Peru Mexico to merchant markets and do not have full pass-through provisions.
(%) Colombia Brazil Argentina The latter are more susceptible to lower profitability in the next
6.0 couple of years as economic growth slowly picks up.
4.0
2.0 DisCos are more exposed to declining demand and working capital
0.0 needs, given their high fixed costs and the delay in collections that
(2.0) could arise from regulated and nonregulated customers. Fitch
(4.0) expects this effect to be manageable in the short term as liquidity
(6.0) is supported by cash on hand, lines of credit and manageable debt
2013–17 Av. 2018 2019E 2020F 2021F amortization profiles. These companies may be forced to
E – Estimate. F – Forecast. temporarily cut expansion capex to avoid further pressure on their
Source: Fitch Ratings. capital structures.

The main risk to the sector lies in the complexity and duration of Argentina
demand disruption in an economic recession. This risk could be
Demand by Client Type
exacerbated by increased unemployment, a significant reduction (2018)
in energy demand, counterparty risk and completion delay risk on (%) Residential Industry/Commercial & Others
projects. The eventual impact of the pandemic may differ from 100
current expectations, and will shape Fitch’s views of applicable 32
80
stress cases. 57 51
71 75 67
60 77
Latin America materially contributes to the global commodity
market, and although a slowdown in global demand will pressure 40
68
economic activity, miners in Peru, Chile and Brazil present highly 20 43 49
29 25 33
23
competitive cost structures. As global commodity demand
0
gradually resurges, these miners will likely be the first ones Argentina Brazil Chile Colombia Mexico Peru Latin
restoring production, sustaining higher levels of energy demand in America
the region. Source: Fitch Ratings.

Utility sector ratings with counterparty risk linked to sovereign
ratings or government-related entities are at risk of downgrades
should there be a higher than average number of negative
sovereign actions in 2020 due to the economic effects of the
coronavirus pandemic and associated policy responses.
Fitch expects delays in expansion projects to be manageable as
main supply chains around the world gradually reestablish
operations in the second half of this year. In light of restrictions on
personnel movement, worker safety and tighter liquidity
situations, companies report that the majority of expansionary
capex is on hold for the time being. However, final investment
decisions on additional projects may be postponed indefinitely
given the substantially worsened access to capital markets.
Impact on Latin American Power Markets
Growth in power markets typically follows a country’s GDP
growth rate. Industrial and commercial demand represents around
65%–70% of energy generated in the region. Most of the natural
gas midstream and transmission infrastructure is fully contracted
with strong long-term, fixed capacity payments with highly rated
off-takers limiting its exposure to volume risks even in distressed
scenarios. Additionally, most of these companies have adequate
capital structures.
GenCos often have fixed take-or-pay contracts, limiting volume
exposure, with highly rated off-takers albeit with different
contracted structures. Strongly positioned generators that have
A decrease in demand will not have a material impact on our rated
GenCos. GenCos’ ratings are aligned to the country ceiling of
Argentina (CCC) given that CAMMESA, their sole offtaker, is
supported by the federal government. Additionally, Argentina has
a regulated market. Generators are either remunerated through
capacity payments and/or under a PPA scheme for a defined time
frame, with payments incorporating a flat price per MWh,
depending on plant availability.
Fitch expects Argentine GenCos’ cash flow and liquidity will be
stressed due to payment delays by CAMMESA. AES Argentina
Generacion S.A. (CCC), Capex S.A. (CCC) and Pampa Energia S.A
(CCC) are better positioned to accommodate slower payment
frequency due to strong liquidity and manageable debt maturities.
Albanesi S.A. (CCC) and MSU Energy S.A. could seek bank
financing if payment delays continue in order to support working
capital.
Historically, payments from CAMMESA averaged 45 days after
the close of the period. Payments have slowed to an average of
75 days in recent months. Fitch expects recent payment delays to
continue until the government finalizes its debt restructuring, with
issuers seeking financing to strengthen liquidity.
The effect of the pandemic on the global economy will likely add an
additional stress to the Argentine economy. This risk, coupled with
sovereign debt restructuring, could further pressure the federal
government, which could delay payments to CAMMESA further.

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Argentina is in lockdown from March 21 until April 13.
Brazil
Fitch sees the ratings of several Brazilian electric energy groups
under pressure or weakening in the category without government
support to balance the negative impacts on DisCos. Fitch expects
cash flow generation for the 10 largest groups operating in Brazil's
distribution business to decrease by around BRL13 billion, or 54%,
in 2020. This is as a result of a decrease in demand and lower
collections related to the Coronavirus pandemic.
Positively, the electric energy sector in Brazil presents above
average financial flexibility to raise debt, if needed, and has
historically received supportive treatment from the government in
situations of systemic risk. Fitch believes the Brazilian government
will again support the sector during the current pandemic, and has
already announced actions amounting to 18% of the total impact
estimated by the agency.
On April 7, 2020, Agencia Nacional de Energia Eletrica (Aneel), the
regulatory body, announced BRL1.5 billion for DisCos using
resources from a sectoral fund. The federal government
announced an additional BRL900 million on April 8, 2020, as
subsidies to cover the bills of low income clients from April to June
2020, reducing the potential delinquency impacts on the DisCos.
According to Fitch, cash flow from operations (CFFO) for the
groups would decline by 70% and EBITDA by 20% on average
compared with the previous expected figures for 2020. Fitch
assumed a 20% volume decrease in 2Q20 compared with its
original forecast and delinquencies of 20% during the same period.
In this scenario, DisCos would not be allowed to reduce energy
purchases from generators, becoming over-contracted and selling
the excess energy on the spot market at low prices.
The cash flow impact from lower demand is zero for transmission
and limited for the generation segment. GenCos are highly
contracted under long-term PPAs at pre-established prices,
although there is some flexibility under bilateral PPAs with
industrial and commercial clients to reduce contracted volumes. In
several cases, the portion of uncontracted energy works as an
insurance to mitigate hydrological risk.
As lower demand pressures spot prices downwards, generators
with higher merchant exposure, such as Centrais Eletricas
Brasileiras S.A. (Eletrobras, BB–/Stable), AES Tiete Energia S.A.
(AA+(bra)) and Copel Geracao e Transmissao S.A. (AA(bra)), will
see a significant decrease in revenues in the short term.
Nevertheless, these companies have strong financial flexibility and
robust cash flow generation from their long-term contracts to
withstand the storm without compromising their capital
structures. Electrobras’s ratings are linked to the sovereign
ratings.
We do not expect material delays in the projects under
construction and with contracted funding. The main concern is for
projects that are in the process of contracting the financing as it
may be postponed. Cost of funding may also increase in this
scenario.
Brazil is not in a nationwide lockdown.
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Corporates
Electric-Corporate
Latin America
Central America and the Dominican Republic
In Central America and the Dominican Republic, Fitch expects
highly contracted generation companies with competitive dispatch
positions and solid capital structures, such as AES Panama S.R.L.
(BBB–/Stable), AES Andres B.V. (BB–/Stable) and Empresa
Generadora de Electricidad Itabo S.A. (BB–/Stable) to be well
positioned for a drop in demand. Their strong operating margins
and cash flow generation provide a liquidity buffer in the event of
slower payments from customers. DisCos such as ENERGUATE
Trust (BB/Negative), Elektra Noreste S.A. (BBB/Stable) and AES El
Salvador Trust II (B–/Stable) could see tighter margins and
liquidity if demand were to drop significantly. They are likely to be
helped by lower energy prices.
Electricity DisCos in Central America are anticipating a slowdown
in the collection of receivables from end customers. This is already
occurring in countries that receive significant remittances from
the U.S., such as Guatemala, and payment lags are also expected in
Honduras and Nicaragua.
Some Central American governments are also taking formal steps
to assist customers in paying their electricity bills. Suspended bills
to low income users due to the pandemic can be paid over the
following two years without interest or customer default. DisCos
will be able to delay payments to generators during this time and
pay income tax due in April over the following eight months.
In Guatemala, an additional USD15 million (GTQ120 million)
monthly subsidy was approved to subsidize low-income users. The
assistance will be provided through the state hydroelectric
company to distribution companies who will then adjust
customers’ bills accordingly. The bill has moved to the president
who is expected to sign it.
Panama approved a 50% electricity bill reduction for low-income
consumers and no disconnections are allowed for three months. As
in Guatemala, DisCos anticipate liquidity assistance from the
government in the form of additional subsidies to help cover the
reduced rates. Payment delays to GenCos are anticipated as are
flexible income tax payment plans.
At this moment, the Dominican Republic has not proposed specific
payment relief for end customers. Generators AES Andres B.V.
(BB–/Stable) and Empresa Generadora de Electricidad Itabo
(BB–/Stable) are likely to see a slowdown in payments from end
customers but expect to have the flexibility to delay payment of
income taxes to the government and payments for electricity in
the spot market as necessary.
Chile
Progressive shutdown could reduce energy demand by around
5%–7% yoy in 2020 and affect cash flow of generation companies.
As regulated PPA’s have volume exposure, further reductions in
demand could affect Enel Generacion Chile (A–/Stable), Colbun
(BBB/Positive) and Engie Energia Chile (BBB/Positive), companies
with evenly distributed contracted positions between regulated
and unregulated clients. AES Gener’s (BBB–/Stable) client base is
more inclined toward unregulated clients, with limited volume
exposure, especially on PPA’s from its subsidiaries Empresa
Electrica Angamos (BBB–/Stable) and Empresa Electrica Cochrane
(BBB–/Stable).
fitchratings.com 3

DisCos act as collector’s agents in the electricity system,
specifically for the regulated customer market, which accounts for
approximately 40% of total demand. Recent measures that allow
delays in payments without cutting service while the virus
emergency lasts would impact working capital needs of DisCos,
given that approximately 20% of the total value paid by a
regulated customer corresponds to this segment. An increase in
delinquencies would also put additional pressure on these
companies' cash flows. Fitch rates Enel Distribucion Chile, through
its parent Company Enel Chile S.A. [AA+(cl)/Stable], Chilquinta
Energia S.A. [AA(cl)/Stable] and Compañía General de Electricidad
S.A. [A+(cl)/Stable].
Further depreciation of the Chilean peso could accelerate the
timeline to reach the Price Stabilization Mechanism cap of
USD1.35 billion. As a consequence of October’s social unrest, the
government froze energy prices to end users. Since inception of
this measure, the local currency has depreciated by over 20%. Any
further currency depreciation will increase GenCos accounts
receivables from DisCos potentially reaching the cap sooner than
originally expected (July 2021).
On the positive side, companies in the electricity sector have the
strongest capital structures in the region, coupled with strong
liquidity, which provides them with good access to capital markets.
In Chile, certain cities are in lockdown for a 14-day period. This
period is extendable. Schools are closed until May.
Colombia
Fitch views Colombian utilities as well positioned to overcome the
economic disruption from Coronavirus and the expected decrease
in energy demand during lockdown. Colombian GenCos will see
high cash flow volatility in 2020 as a result of lower than average
hydrology and decrease in electricity demand as a result of
Coronavirus driven lockdown. Credit risk for Fitch-rated GenCos
is mitigated by conservative capital structures and manageable
capex requirements.
GenCos are well prepared to face this adverse scenario given
conservative capital structures and strong liquidity supported by
cash flow visibility. Between 70% and 85% of sales are supported
by contracts with limited exposure to volumetric risk. Some
companies have been able to take short-term contingent credit
lines as a precautionary measure to bolster liquidity. Non-core
capex will likely be delayed, focusing only on maintenance
requirements. The lower electricity demand expected for 2020 is
compounded by currently low hydrological conditions in the
country.
Hydroelectricity GenCos account for nearly 70% of Colombia’s
installed energy capacity. Under normal to high hydrological
conditions, such as those experienced in 2017 and 2018, more
than 80% of the daily electricity demand is met with hydroelectric
assets. Under weak hydrological conditions, such as that
experienced in 2015, hydroelectric generation accounted for 67%
of total supply. During 2019 water levels declined and hydro
generation fell to 72% of total generation. As of March 2020,
energy reservoirs declined to 34.6% of their useful level, 8.83
percentage points lower than in February 2020.
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Corporates
Electric-Corporate
Latin America
Fitch considers conservative capital structures and strong liquidity
will partly offset the exposure of Colombian DisCos to delays in
collections. Delays in the payments of subsidies from the
government could add additional pressure under current
conditions. Energy demand in the country fell by 13% from March
16 to March 29 since businesses started to shut down.
Colombia is in lockdown starting on March 25th until April 26th.
Mexico
Energy demand in Mexico is also linked to U.S. GDP growth and
the results of lower energy consumption are expected to be
manageable for rated issuers. Cometa Energia S.A. (Cometa;
BBB/Stable) and Infraestructura Energetica Nova S.A. de C.V.
(IEnova; BBB+/Stable) are highly contracted with minimal
exposure to recontracting risk and the merchant market.
The most imminent risk to the ratings of Cometa and IEnova would
be related to their counterparty risk. Both companies have
meaningful exposure to Mexican government-related entities such
as Comission Federal de Electricidad (CFE; BBB/Stable), Petroleos
Mexicanos (PEMEX; BB/Negative) and CENAGAS (not rated) as
they represent around 45%–50% of their cash flows. The global
spread of coronavirus and sharp fall in oil prices exacerbate
existing challenges facing major Latin American sovereigns.
The country continues to lag private investment in energy
infrastructure. Slower growth may add more time to modernize
the system, although a more stressed financial market may render
projects more expensive in the near future.
Mexico’s electricity system is currently transitioning to more
efficient technologies as less efficient fuel oil-fired plants retire.
Currently suppressed oil prices and expected delays in additional
projects, as the equipment supply chain is reestablished, should
slow the pace of natural gas and renewables conversion.
Mexico implemented a lockdown for non-essential services
Through April 30.
Peru
Most of the rated entities in Peru have strong liquidity profiles,
offering some cushion to absorb a temporary spike in leverage and
the flexibility to postpone ongoing investment plans.
Lower energy demand should pressure GenCos’ cash flows as
there is usually a margin derived from generation sales. Companies
with diversified assets/technologies, highly contracted and with
more flexible cost structures, should be more insulated from lower
generation demand. That is true of Kallpa Generacion
(BBB–/Negative) and Orazul (BB/Stable). Those that are least
diversified, less contracted and with less flexible cost structures,
such as Fenix Power Peru (BBB–/Stable), could face a more
meaningful hit on EBITDA. The impact on cash flow is mitigated by
adequate cash positions, robust access to the capital markets and
strong shareholder support.
For distribution companies, lower sales and increased
delinquencies expected from customers will pressure working
capital requirements but should be manageable.
In an effort to mitigate cash flow disruption in the sector, the
government approved an emergency decree providing for the
fitchratings.com 4

reprogramming of electricity and natural gas receipts during the
state of emergency. Repayments will be divided for up to 24
months without interest or charge to the low income population.
Interest will be covered by the Energy Social Inclusion Fund (FISE)
for a cumulative term of two years.
Lower economic growth in the next few years due to the global
economic slowdown should reduce energy consumption,
prolonging the period of extremely low spot prices in the country
and affecting companies’ profitability. Generation companies’ cash
flow will also be affected in the medium term if they are to
recontract capacity under the expectation of continuously lower
spot prices.
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Corporates
Electric-Corporate
Latin America
Peru’s generation overcapacity, resulting from increases in
hydroelectric generation capacity in recent years, has rendered
thermal power plants idle during the lockdown. Electricity demand
is down by 30% year over year after the lockdown period started
on March 20. Considering a lockdown period of 37 days and a
gradual increase in activity thereafter, energy demand could
decrease by mid-single digits during 2020.
Peru entered lockdown on March 20 and subsequently extended
the period to April 26 from March 30 originally.
fitchratings.com 5
 Corporates
Electric-Corporate
Latin America

Appendix
Screener: LATAM International Utility Issuers
Risk Priority Industry Liquidity Rating
Issuer Country Rating/Outlook A, B or C Risk Risk FX Risk Headroom
Elevated Risk: Category B Issuer Comparison

AES El Salvador Trust II El Salvador B–/Stable B • • • •

Low Risk: Category C Issuers Comparison

AES Argentina Generacion S.A. Argentina CCC C • • • •

Albanesi S.A. Argentina CCC C • • • •
Capex S.A. Argentina CCC C • • • •
Genneia S.A. Argentina CCC C • • • •
Pampa Energia S.A. Argentina CCC C • • • •
Alupar Investimento S.A. Brazil BB/Stable C • • • •
Centrais Eletricas Brasileiras S.A.
(Eletrobras) Brazil BB–/Stable C • • • N.A.

Companhia de Gas de Sao Paulo - COMGAS Brazil BB/Stable C • • • •

Companhia Energetica de Minas
Gerais (CEMIG) Brazil BB–/Stable C • • • •
Energisa S.A. Brazil BB/Stable C • • • •
Engie Brasil Energia S.A. Brazil BB/Stable C • • • •
Light S.A. Brazil BB–/Stable C • • • •
Transmissora Alianca de Energia Eletrica S.A. Brazil BB/Stable C • • • •
AES Gener S.A. Chile BBB-/Stable C • • • •
Colbun S.A. Chile BBB/Positive C • • • •
Empresa Electrica Angamos S.A. Chile BBB–/Stable C • • • •
Empresa Electrica Cochrane SpA Chile BBB–/Stable C • • • •
Enel Americas S.A. Chile A–/Stable C • • • •
Enel Generacion Chile S.A. Chile A–/Stable C • • • •
Engie Energia Chile S.A. Chile BBB/Positive C • • • •
Guacolda Energia SA Chile BB/Negative C • • • •
Transelec S.A. Chile BBB/Stable C • • • •
Emgesa S.A. E.S.P Colombia BBB/Negative C • • • •
Empresas Publicas de Medellin E.S.P. (EPM) Colombia BBB/RWN C • • • •
Grupo Energia Bogota S.A. E.S.P. (GEB) Colombia BBB/Stable C • • • •
Interconexion Electrica S.A. E.S.P. Colombia BBB+/Stable C • • • •

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 Corporates
Electric-Corporate
Latin America

Screener: LATAM International Utility Issuers

Risk Priority Industry Liquidity Rating
Issuer Country Rating/Outlook A, B or C Risk Risk FX Risk Headroom

Isagen S.A. ESP Colombia BBB/Negative C • • • •

Promigas S.A. E.S.P. Colombia BBB–/Stable C • • • •
TermoCandelaria Power Ltd. Colombia BB+/Stable C • • • •
Transportadora de Gas Internacional S.A.
ESP (TGI) Colombia BBB/Stable C • • • •
Instituto Costarricense de Electricidad y
Subsidiarias Costa Rica B+/Negative C • • • •
Investment Energy Resources Limited Costa Rica B/RWN C • • • •
ENERGUATE Trust Guatemala BB-/Stable C • • • •
Cometa Energia, S.A. de C.V. Mexico BBB/Stable C • • • •
Comision Federal de Electricidad (CFE) Mexico BBB/Stable C • • • N.A.

Fermaca Enterprises, S. de R.L. de C.V. Mexico BBB–/Stable C • • • •

Infraestructura Energetica Nova, S. A. B. de
C. V. y Subsidiarias (IEnova) Mexico BBB+/Stable C • • • •.
AES Panama, S.R.L. Panama BBB–/Stable C • • • •
Elektra Noreste, S.A. Panama BBB/Stable C • • • •
Empresa de Transmision Electrica S.A. Panama BBB/Negative C • • • •
Consorcio Transmantaro S.A. (CTM) Peru BBB–/Positive C • • • •
Fenix Power Peru S.A. Peru BBB–/Stable C • • • •
Gas Natural de Lima y Callao S.A. Peru BBB/Stable C • • • •
Kallpa Generacion S.A. Peru BBB–/Negative C • • • •
Nautilus Inkia Holdings LLC Peru BB/Negative C • • • •
Orazul Energy Peru S.A. Peru BB/Stable C • • • •
Transportadora de gas del Peru, S.A. (TGP) Peru BBB+/Stable C • • • •
N.A. – Not applicable. RWN – Rating Watch Negative.
• • •
Industry Risk: High Above Average Moderate Manageable •
• • • •
Liquidity Risk: Low (Less than 1.0x) Average (1.0x to 2.0x) Above Average (2.0x to 3.0) Robust (Above 3.0x)
• • •
FX Risk: High (Greater than 1.0x) Above Average (0.5x to 1.0x) Average (0.0x to 0.5x) Low (Decline)•
• • • •
Rating Headroom: None (Higher) Limited (0% to 20% Decline) Moderate (20% to 50% Decline) Comfortable (More than 50% Decline)
Source: Fitch Ratings.

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 Corporates
Electric-Corporate
Latin America

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provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of
other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in
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be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued
or affirmed.

The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the
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Special Report │ April 10, 2020

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