S&P lifts Electricidad de Caracas

Standard & Poor's said it raised CA La Electricidad de Caracas' long-term corporate credit rating to BB- from B and removed it from CreditWatch with developing implications, where it was placed on Feb. 13, 2007.

The outlook is stable.

The affirmation follows S&P's review of Electricidad de Caracas' operating and financial prospects under its new ownership. On May 15, Petroleos de Venezuela SA purchased 93.61% of Electricidad de Caracas' capital stock. On Feb. 8, 2007, the Bolivarian Republic of Venezuela, through PDVSA, and the AES Corp. signed a memorandum of understanding by which the former agreed to purchase the latter's stake in Electricidad de Caracas for $739.2 million.

In the agency's view, the ratings on PDVSA, and therefore Venezuela, and Electricidad de Caracas are now tightly linked. S&P said it believes Electricidad de Caracas is a public policy-based institution that plays a central role in meeting the government's political and economic objectives, given de facto franchise to distribute electricity in the Caracas metropolitan area, which is the largest city in Venezuela and the nation's capital.

The original CreditWatch placement also reflected Venezuelan president Hugo Chavez's announcement of his intention to nationalize the country's electrical and telecommunications companies. In S&P's view, Electricidad de Caracas' debt is not disadvantaged in any way as a result of the nationalization process.

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