Fitch affirms Rede

Fitch Ratings said it affirmed the ratings of Rede Empresas de Energia Eletrica SA (Rede) and its subsidiaries Centrais Eletricas Matogrossenses SA (Cemat) and Centrais Eletricas do Para SA (Celpa), including the local- and foreign-currency issuer default ratings at B, the long-term national ratings at BBB(bra) and Rede's $400 million perpetual notes and Cemat and Celpa's B/RR4 $100 million notes units due 2012 at B/RR4.

The outlook is stable.

The agency said the ratings are supported by the company's market position as an important player in the electric distribution segment in Brazil. Fitch expects strengthening of credit protection measures of the group over the next few years to be supported by continued growth in operational results and cash flow and a reduction of annual debt service via lower-financing-cost debt.

The ratings also reflect the relatively high leverage of the group when compared to other electricity companies in the Brazilian market and the regulatory risks inherent in the Brazilian power sector, Fitch said.

Rede's adjusted total debt-to-EBITDA ratio was 5.3x at the end of March, compared with 3.9x at the end of fiscal 2005.

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