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

CHICAGO–(BUSINESS WIRE)–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.

Additional information is available on www.fitchratings.com.

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