Moody's may cut Enersul

Moody's Investor Services said it placed Empresa Energetica de Mato Grosso do Sul SA's (Enersul)

Ba2 and Aa3.br issuer ratings on review for possible downgrade as a result of an industry regulator's recent decision to reduce the company's regulatory asset base on a retroactive basis.

The regulator's decision stemmed from an apparent material error in the valuation of the company's regulatory asset base that was determined in 2003, Fitch said.

Assuming the negative impact on cash flow will be spread over a five-year period, preliminary Moody's estimates indicate that Enersul's EBITDA could drop by as much as R115 million per year from 2008 to 2012 and by R60 million per year thereafter.

Moody's said its review will focus on whether the utility's credit metrics will still be appropriate for its rating category after considering the expected future reduction in tariffs.

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