The Argentine subsidiary of Moody’s raised the long-term issuer rating in local currency and foreign currency of the electricity distributor Edenor: the note went to A.ar from BBB+.ar.and kept the outlook stable.
The risk rating agency clarified that the increase in Edenor’s ratings “is supported due to improvements in the company’s credit metrics product of the recomposition of rates registered throughout 2024 “which will allow companies in the sector to recover their profitability margins until they reach levels similar to those reported in 2018.”
On the other hand, he highlighted that “Edenor’s ratings are supported by its solid competitive position and its high liquidity position”.
In any case, the rating agency’s decision also incorporates less positive factors than the previous ones. For example, he cites “the company’s moderate level of financial debt” and also “the high historical uncertainty in rates and the Argentine regulatory framework”. This, according to Moody’s, “generates a high volatility in the generation of the company’s cash flows.”
The key to the recovery of the ratios of the electricity distributor in the northern zone of AMBA lies in the tariff increases authorized after the change of national government.
Thus, through the readjustments authorized by Javier Milei’s management, the rating agency estimates that this year “the profitability measured in terms of EBITDA remains at positive levels similar to those reached in 2018. The greater generation of EBITDA will allow the Net Financial Debt to EBITDA metric to be below 1.5x and the Adjusted Debt to EBITDA Ratio to be below 4.5x (includes adjustment for commercial debt with CAMMESA and other debts not current)”.
As another positive fact, the survey highlights that “from April 2024 to date, Edenor You are paying 100% of your energy purchase bills and payment plan installments and is negotiating payment plans for debt not included in current plans.”
Regarding the factors that can generate an improvement in the rating, Moody’s highlighted “an increase in the rating could be due to the materialization of automatic rate adjustments within the framework of a five-year tariff review (RQT) that improves predictability in the company’s cash flow generation.”
But at the same time, it considers that there are factors that can generate a deterioration in the rating and mentions two. On the one hand, a deterioration in the generation of EBITDA and cash flow due to lack of updated rates. And on the other, a significant increase in the company’s financial debt levels.
The scope of the rating upgrade for local currency issues includes Class 4 negotiable obligations that mature in 2025.
Regarding issues in foreign currency, it includes negotiable obligations class 1 that expire in 2025; the ON class 2 and additional ones that expire this yearand the ON class 3 that expire in 2026according to Moody’s prospectus.
The Edenor concession area covers 4,637 square km and extends through the northwest of Greater Buenos Aires and the northern area of the Autonomous City of Buenos Aires.
Edenor’s concession includes CABA and the Buenos Aires districts of Vicente López, San Isidro, San Martín, Tres de Febrero, Morón, Ituzaingó, Hurlingham, Merlo, Marcos Paz.
The company has with 83 transformation substations and 1,563 kilometers of networks high voltage.
Source: Ambito
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