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Fitch Expects LatAm Electric Sector To Remain Resilient Through Pandemic

Posted OnOctober 29, 2020
By :Loren Moss
Comment: 0
Tag: cfe, comision federal de electricidad, coronavirus, covid-19, electric corporates, electricity sector, elektra noreste, eletrobras, fitch, fitch ratings, gross leverage, latam electric corporates, latin america, pandemic

The Latin American electricity sector is one of the most resilient sectors regarding the coronavirus pandemic and the resulting economic fallout, according to Fitch Ratings. Fitch expects the pandemic to affect overall revenues and leverage, but electric corporates generally have sufficient leverage and liquidity to absorb shocks.

Fitch estimates gross leverage, defined as total debt/EBITDA, to be 3.5x at YE 2020, a 10% increase from the pre-pandemic forecast of 3.2x. Leverage is expected to be 13% higher than prior forecasts, at 3.3x in 2020, and 19% higher in 2022 at 3.2x. Aggregated gross revenues and EBITDA forecasts were adjusted down 10% on average compared with pre-pandemic forecasts, with EBITDA margins staying the same. Fitch estimates 2021 and 2022 revenues and EBITDA to be approximately 9% less than prior estimates, given lower overall demand due to the economic downturn. Post-pandemic capex is expected to follow similar trends in 2020, but increase by 9% in 2021 and 15% in 2022.

Refinancing risk is moderate with Eletrobras, Comision Federal de Electricidad (CFE) and Elektra Noreste, S.A. have international notes maturing in 2021, which Fitch does not expect these issuers to face difficultly refinancing upcoming maturities.

Fitch’s special report “Fitch Rating: Pandemic Progress Check: LatAm Electric Corporates Highlights Resiliency in Managing Coronavirus Pandemic’s Impact” is available at www.fitchratings.com.

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Loren Moss
About the Author
Loren Moss is the founder and publisher of Finance Colombia. He has over 20 years of international business experience, including over a decade of experience in securities, insurance, and commercial real estate, at the institutional and international level.
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