Fitch upgrades Petrozuata, Cerro Negro, Sincor, Hamaca

Fitch Ratings upgraded the senior secured debt ratings of the four Venezuelan heavy oil strategic associations, Petrozuata, Cerro Negro, Sincor and Hamaca to B+ from B and removed them from Rating Watch Positive.

Affected debt is Petrozuata Finance Inc.'s $300 million 7.63% series A bonds due 2009, $625 million 8.22% series B bonds due 2017 and $75 million 8.37% series C bonds due 2022; Cerro Negro Finance, Ltd.'s $200 million 7.33% bonds due 2009, $350 million 7.90% bonds due 2020 and $50 million 8.03% bonds due 2028; Sincrudos de Oriente Sincor, CA's $1.2 billion senior bank loans borrowed by the sponsors of Sincor Finance Inc.; and Petrolera Hamaca, SA's $627.8 million senior agency loan due 2018 and $470 million senior bank loan due 2015.

Fitch said the actions reflect the normalization of the operational and financial performance at each of the heavy oil strategic associations following the national strike that virtually paralyzed Venezuela's oil industry between December 2002 and February 2003.

Although the standalone credit profile of each of the four heavy oil projects suggests a rating level significantly higher than that assigned, the Venezuelan sovereign's credit profile continues to constrain their credit quality, Fitch added. Notwithstanding this limitation, legal and structural features of the related financings allow the projects to be rated two notches above the sovereign's assigned long-term foreign currency rating.

The combination of strike-related operational interruptions at PDVSA and the temporary suspension of Venezuela's oil export flows rendered the heavy oil strategic associations unable to generate revenues during a two-month period. Despite the absence of internal cash flows, the projects were able to maintain adequate liquidity, covering ongoing operating and financial obligations during this period, Fitch said. The four strategic heavy oil associations resumed oil exports immediately after the strike ended in late February.

By the second quarter of 2003, production volumes at all four projects had either recovered to, or exceeded, pre-strike levels, Fitch added. It is important to note that the national labor action did not permanently impair any of the projects' facilities, infrastructure or labor force.

S&P upgrades Termoelectrica

Standard & Poor's upgraded Termoelectrica SA including its €125 million 11.25% bonds due 2004 guaranteed by the Republic of Romania to BB from BB-.

S&P upgrades Transelectrica

Standard & Poor's upgraded Transelectrica SA's long-term foreign currency corporate credit rating to BB- from B+. The outlook is positive.

S&P said the action follows the upgrade of the ratings on the Republic of Romania to BB with a positive outlook.

S&P said that after a second upgrade of the sovereign foreign currency rating in 2003 Transelectrica's ability to service its foreign currency-denominated debt is no longer constrained at the B+ level. The foreign currency rating was therefore equalized with the local currency one.

Transelectrica's ratings reflect its strong business position as a strategically important state-owned monopoly electricity transmission grid operator and a supportive regulatory environment. These strengths are balanced, however, by exposure to Romania's still-weak transition economy environment, the company and the regulators' short operating track records, significant debt-funded investment needs, and continuing payment collection problems, S&P said.

S&P confirms Juniper Generation

Standard & Poor's confirmed Juniper Generation LLC's $105 million senior secured notes at B+ with a stable outlook following its periodic review.

The rating reflects that PG&E, Juniper's primary offtaker, is currently in bankruptcy, Juniper's debt is paid after project-level debt service, Juniper may be exposed to merchant power risk when its 5.37 cents per kilowatt-hour energy pricing expires on July 15, 2006.

Strengths are that PG&E has affirmed the offtake contract with the projects, and the bankruptcy court has approved the affirmation; Juniper's current energy pricing of 5.37 cents per kWh is substantially more favorable than the projection provided at the time of the bond issuance; over the past three years, the projects have operated with an average availability factor of 93.6% and a 95.3% on-peak availability factor. The debt service coverage ratio for 2002 was 2.92x; and fuel supply risk at Juniper is mitigated by having El Paso Corp. as the fuel supplier and majority owner.

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