S&P lifts Eletropaulo view to stable

S&P said it revised the outlook on Eletropaulo Metropolitana Eletricidade de Sao Paulo SA (Eletropaulo) to stable from negative.

The agency also said it affirmed the company's BB- global scale and brA- Brazil national scale ratings.

S&P also said it affirmed the brA- rating on Eletropaulo's 15th debentures issuance of R$200 million maturing in 2018.

The outlook revision reflects a view that the risk of a covenant breach will diminish in the next few quarters because Eletropaulo used higher cash flows in 2016 stemming from the monetization of regulatory assets to reduce debt, the agency said.

Still, the two pending large litigations against it could harm its credit metrics if the court rules against the company, although the timing for a resolution in uncertain, S&P said.

In 2016, Eletropaulo was able to recover a large portion of the higher electricity costs by converting its regulatory assets into cash, the agency noted.

This resulted in a higher-than-expected cash flow generation and lower debt for the company, S&P said.

Nevertheless, the agency said it expect the company to reimburse the R$520 million in regulatory liabilities accumulated until the first quarter of 2017 to its clients in 2017 and 2018.

Therefore, its cash flow generation for these years will likely be lower, S&P said.

© 2015 Prospect News.
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