S&P: Latin American utilities see power surge

Ongoing favorable economic conditions in Latin America have led Standard & Poor's to upgrade various electric utilities in the region during the past 12 months, continuing the positive trend that began in 2003, according to an agency report titled "Industry Report Card: A Power Surge For Many Latin American Utilities."

As elements of the trend, the report cited growing power demand; the combination of higher power sales and strong local currencies, which led to better debt service coverage ratios; and the better market environment, which raised local-currency debt in the domestic markets and thus improved the utilities' debt maturity profiles and reduced financing costs.

"While Latin American electric utilities continue to take advantage of these positive market conditions by improving their financial profiles, they remain exposed to the region's volatile politics and economics," S&P credit analyst Sergio Fuentes said in the report.

"However, the companies' financial profiles are becoming more solid in the face of a potentially more difficult market environment deriving from increasing interest rates worldwide and/or a potential economic slowdown."

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