S&P puts Engie Energia Chile on watch

S&P said it placed Engie Energia Chile SA’s BBB ratings on CreditWatch with negative implications.

“More volatile spot energy and fuel prices in 2022, combined with Engie Chile's short position of 4 terawatt hours (TWh) on its PPAs, resulted in a situation where the company had to fulfill its PPAs by buying energy at spot prices, which hurt its EBITDA and liquidity position. As of December 2022, the company had $360 million in bank credit lines due in the next 12 months. This, in addition to its still recovering funds from operations (FFO), will continue to squeeze its liquidity profile, absent any refinancing or repayment strategy,” S&P said in a press release.

The agency noted the company is working to boost its liquidity by monetizing its accounts receivables, which should represent about $320 million in cash, and has signed a mandate for a new 10-year loan with International Finance Corp. for $400 million.

S&P said there is a 50% chance of a downgrade unless it fixes the current liquidity pressures via a successful refinancing plan in the next three months.

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