TEXT-S&P affirms Golden Americas 'B-' credit rating

Fri Dec 14, 2012 4:46pm EST

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Overview
     -- In November 2012, Golden Gate Energy Investments (GGEI) announced its 
integration with Termocandelaria Power Ltd. (TPL), a company that owns a 
314-megawatt electricity generating facility near the city of Cartagena, along 
Colombia's Caribbean Coast.
     -- We view the merger as neutral for the rating on Golden Americas Ltd., 
which has an indirect stake in Termobarranquilla S.A. E.S.P. (TEBSA) through 
its 26.3% participation in GGEI, mainly because it was in TEBSA's original 
shareholder agreement and we do not expect a major impact from a financial nor 
from an operational perspective.
     -- We are affirming our 'B-' corporate credit and senior secured debt 
ratings on GA.
     -- The stable outlook reflects our expectation that GA will be able to 
upstream enough cash from Golden Gate to service its interest and principal. 
Because the management fees would cover some 60% of interest payments, we 
believe that GA could bridge the gap even if TEBSA can continue to pay only a 
fraction of the interest payments on the subordinated debt.

Rating Action
On Dec. 14, 2012, Standard & Poor's Ratings Services affirmed its 'B-' 
corporate credit and senior secured debt ratings on Cayman Islands-based 
special-purpose vehicle Golden Americas Ltd. (GA). The outlook is stable.

Rationale
Our ratings on GA reflect our assessment of the company's business risk 
profile as "fair", given GA's investment in Colombia-based electric generation 
company Termobarranquilla S.A. E.S.P. (TEBSA; not rated). The ratings also 
reflect a "highly leveraged" financial profile. GA's repayment capacity 
depends on its ability to upstream funds from TEBSA. GA receives these funds 
through management fees, which we view as having at least a similar priority 
as TEBSA's senior debt; and through payments of subordinated debt from TEBSA 
to Golden Gate Energy Investments Ltd. (GG; not rated), which in turn go to 
GA. Because the flows of subordinated debt from TEBSA, which cover 40% of debt 
service until 2016, are a weaker source of cash flow, we consider GA's 
creditworthiness weaker than TEBSA's. The rated debt at GA also benefits from 
a debt service reserve account, which covers the next two coupon payments.

TEBSA's revenues have been decreasing during the past four years, as a result 
of the structure of the power purchase agreement (PPA) it holds with 
Generadora y Comercializadora de Energia del Caribe S.A. E.S.P. (Gecelca). In 
2012, revenue decreased about 10%. Cash from operations has been also 
decreasing in line with this negative trend. Financial expenses increased 
mostly because TEBSA devoted around $20 million each year to service 
subordinated debt interest.

Based on the shareholders' agreement signed between Termocandelaria S.C.A and 
Americas Energy Fund I L.P. (AEF, not rated) in 2010, the parties would 
initiate actions to integrate GGEI and TPL before the fifth anniversary of the 
agreement. TPL owns 100% of Termocandelaria S.C.A., a 314-megawatt (MW) 
electricity generating facility, located near the city of Cartagena. In 
September 2011, the company started the process in order to carry on the 
merger of the described companies, and finally in November 2012, announced the 
conclusion of the transaction. We believe that the merger will strengthen the 
company's competitive position, as we expect it will become the fifth-largest 
power generator in the Colombian market, with about 8% of market share. The 
integration will lead, in our opinion, to positive synergies between TEBSA and 
Termocandelaria S.C.A., especially given the similar characteristics of both 
thermal plants. We do not expect major changes from an operational or 
managerial standpoint. Additionally, all liquidity enhancement and corporate 
guarantees will remain in place.

For analytical purposes, GA's cash flow streams can be divided into two 
periods. Until the PPA between Gecelca and TEBSA expires in 2016, GA receives 
a management fee of $918,000 plus dividends from Golden Gate, funded from the 
partial interest payment on subordinated debt. In our base case, this should 
result in an average fixed-charge coverage ratio of about 1.3x for GA's debt. 
As now, GA has been receiving all the management-related fees and dividends 
from Golden Gate in a timely manner. From 2016 through 2018, TEBSA's ability 
to cancel subordinated debt will depend on energy prices, the dispatch rate, 
and availability payments. Lower-than-expected dispatch rates, prices, or 
availability payments would result in refinancing risks for principal.
We have assessed TEBSA's business profile as fair and its financial profile as 
highly leveraged. We view as positive that almost 85% of TEBSA's debt is 
subordinated and owed to related parties. TEBSA is an energy generation 
project that operates a 128- MW gas-fired power plant and a 790-MW 
combined-cycle power plant near Barranquilla, Colombia.

Cayman Islands-incorporated Golden Americas is a special-purpose vehicle (SPV) 
that Americas Energy Fund I L.P., an Ontario-based limited partnership, used 
to acquire a stake in TEBSA. GA has a 26.3% stake in Golden Gate, another SPV, 
which in turn owns 57.34% of TEBSA and 100% of Los Amigos Leasing Co. Ltd. 
(not rated), a company created to provide power generation units to TEBSA. 
TEBSA's ownership structure also includes Colombian state-owned company 
Gecelca (42.514%) and others (0.146%).

Although GA doesn't control Golden Gate, it has a shareholder agreement with 
the controlling shareholder that requires four out of five directors to 
approve decisions at Golden Gate. Because GA can appoint two out of the five 
directors, we believe it has a certain indirect control over TEBSA's financial 
policy through Golden Gate. It can make no changes to the subordinated debt 
without GA's consent. Also, the shareholders' agreement establishes that 
Golden Gate has to distribute to shareholders all funds flowing into 
it--another factor relevant to GA's repayment capacity.

Liquidity
We believe that GA has adequate liquidity to meet its needs over the next two 
years. Relevant aspects of our assessment of the company's liquidity include:
     -- Our expectation that sources of liquidity (including cash balances, a 
management fee of $918,000, and dividends from GG) will exceed uses by at 
least 1.2x over the next two years;
     -- The company's debt service reserve account, which covers the next two 
coupon payments; and
     -- GA's expected compliance with the financial covenants included in its 
debt instruments.

GA had cash and cash equivalents of about $1.7 million as of September 2012, 
compared with short-term interest payments of about $1.4 million each year 
until its final debt maturity in 2018. We expect no other significant expenses 
at the GA level in the next few years.

Outlook
The stable outlook reflects our expectation that GA will be able to upstream 
enough cash from Golden Gate to service its interest and principal. Because 
the management fees would cover some 60% of interest payments, we believe that 
GA could bridge the gap even if TEBSA can continue to pay only a fraction of 
the interest payments on the subordinated debt. We also believe that TEBSA 
will be able to improve its revenue structure after the PPA expires, 
generating enough cash flow to repay subordinated debt and dividends, and 
allowing GA to repay principal.

The credit quality of the underlying operating company, TEBSA, which generates 
the cash flow, limits rating upside. Ratings could suffer if TEBSA's costs 
increase, further reducing its ability to service subordinated debt; or if 
potential additional debt issuance at TEBSA's level jeopardizes its financial 
risk profile and GA's cash availability does not increases in the 
short-to-medium term.

Related Criteria And Research
     -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, 
Sept. 18, 2012
     -- Methodology and Assumptions: Standard and Poor's Liquidity Descriptors 
for Global Corporate Issuers, Sept. 2011
     -- "Key Credit Factors: Business and Financial Risks In The 
Investor-Owned Utilities Industry" Nov.8, 2008
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
     -- Corporate Criteria--Parent/Subsidiary Links; General Principles; 
Subsidiaries/Joint Ventures/Nonrecourse Projects; Finance Subsidiaries; Rating 
Link to Parent, Oct. 28, 2004


Ratings List
Ratings Affirmed

Golden Americas Ltd.
 Corporate Credit Rating                B-/Stable/--       
 Senior Secured                         B-                 
 

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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