S&PGR Affirms ‘BB-‘ Rating On AES Panama

Press Release: S&PGR Affirms ‘BB-‘ Rating On AES Panama

The following is a press release from Standard & Poor's: 
     -- AES Panama's operating and financial performance was in line with our 
expectation, as seen in its adjusted EBITDA of approximately $115 million in 
2015 and $30 million in the first quarter of 2016. We expect main credit 
metrics will remain stable and consistent with our aggressive financial risk 
profile in the next couple of years, with a projected debt to EBITDA in the 
4.0x area and funds from operations (FFO) to debt of about 15%. 
     -- We're affirming our 'BB-' ratings on Panama-based power generator and 
on its senior unsecured bonds. 
     -- The outlook remains stable and primarily reflects our expectation of a 
moderately high likelihood of extraordinary support from the Panamanian 
government. It also reflects our belief that hydrology conditions in the 
country would be normal in 2016 and 2017 and the company will maintain a more 
conservative commercial strategy, which would allow to maintain leverage in 
the projected range. 
SAO PAULO (S&P Global Ratings) July 7, 2016--S&P Global Ratings affirmed its 
'BB-' corporate credit and issue-level ratings on AES Panama S.R.L. The 
outlook remains stable. 
The affirmation reflects our expectation that the company's cash flow 
generation will continue to improve in 2016 and afterwards. This would allow 
its financial metrics to remain in line with our aggressive financial risk 
profile, as seen in projected debt to EBITDA and FFO to debt of in the area of 
4.0x and 15%, respectively, in the next two years. The recovery in the 
company's metrics was mainly due to more favorable hydrology conditions and a 
likely lower exposure to the high spot prices. AES Panama adopted a more 
conservative commercial strategy after the drought in 2013 and 2014 impaired 
the company's financial performance. Since then, the company has lowered the 
level of contracted energy, working with a 5%-10% cushion for its firm 
capacity to mitigate hydrology fluctuations, and added 72 megawatts (MW) 
through a diesel-powered barge to its total capacity to diversify its energy 
The ratings continue to incorporate our view that there is a moderately high 
likelihood that the government of Panama would provide timely and sufficient 
extraordinary support to the company in the event of financial distress. In 
accordance with our criteria for government-related entities, our view is 
based on our assessment of AES Panama's role as the largest producer of energy 
and the low-cost power generator in Panama and its strong link to the 
government, which has a majority stake (50.5%) in the company. The AES Corp. 
(BB/Stable/--) holds 49% and AES Panama's employees hold the remaining 0.5%. 
We continue to view AES Panama's business risk profile as fair, reflecting the 
large-scale operations. Combined with AES Changuinola, the company has an 
aggregate installed capacity of 777 MW, representing 26% of the country's 
overall energy installed capacity. We also view positively the company's 
stable revenue, owing to the three- to four-year power purchase agreements 
(PPAs) with large-scale creditworthy clients and the major distribution 
companies in the country, the operating efficiency, as seen in more than 85% 
of availability factors in the past five years, and the low-cost energy 
production at hydro-based plants, which generate 85% of firm capacity. The 
mitigating factor is volatile profitability, due to vulnerability to the 
hydrology risk. 
Related Criteria 
     -- Rating Government-Related Entities: Methodology And Assumptions, March 
25, 2015 
     -- Methodology And Assumptions: Liquidity Descriptors For Global 
Corporate Issuers, Dec. 16, 2014 
     -- Key Credit Factors For The Unregulated Power And Gas Industry, March 
28, 2014 
     -- Corporate Methodology, Nov. 19, 2013 
     -- Corporate Methodology: Ratios and Adjustments, Nov. 19, 2013 
     -- Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013 
     -- Methodology: Industry Risk, Nov. 19, 2013 
     -- Methodology: Management And Governance Credit Factors For Corporate 
Entities And Insurers, Nov. 13, 2012 
     -- Stand-Alone Credit Profiles: One Component of a Rating, Oct. 1, 2010 
     -- 2008 Corporate Criteria: Rating Each Issue, April, 15, 2008 
Certain terms used in this report, particularly certain adjectives used to 
express our view on rating relevant factors, have specific meanings ascribed 
to them in our criteria, and should therefore be read in conjunction with such 
criteria. Please see Ratings Criteria at www.standardandpoors.com for further 
information. Complete ratings information is available to subscribers of 
RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All 
ratings affected by this rating action can be found on the S&P Global Ratings 
public website at www.standardandpoors.com. Use the Ratings search box located 
in the left column. 
Primary Credit Analyst: Julyana Yokota, Sao Paulo +55 11 3039 9731; 
Secondary Contact: Diego Weisvein, Buenos Aires (5411)48912154; 
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Press Release: S&PGR Affirms ‘BB-‘ Rating On AES -2-

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