UPDATE 1-Spain's Socialists clear way for minority conservative government
* Vote clears way for minority government (Updates with result, adds details)
Dec 18 - Fitch Ratings has assigned an 'F1+(col)' to Interconexion Electrica's (ISA) proposed commercial paper. These instruments will be included in the company's current local notes program rated 'AAA(col)'. ISA's ratings reflect the company's low business risk profile, which is characteristic of the power transmission business, and the company's natural monopoly position and geographic diversification. The ratings are also underpinned by ISA's comfortable liquidity levels and adequate credit metrics. TRANSMISSION BUSINESS' STABLE CASH FLOW ISA's ratings reflect the company's low business risk level supported by its regulated income and natural monopoly position in the countries in which it has operations. During the last 12 months (LTM) ended Sept. 30, 2012, electric transmission accounted for 78.9% of ISA's consolidated revenues and nearly 83% of ISA's consolidated EBITDA. ISA on a standalone basis accounted for 20.4% of its consolidated EBITDA for the same LTM period. Most of the revenues from electric transmission operations in Colombia (70%) are regulated and its tariffs are reset every five years. Previous tariff resets have not resulted in significant changes, due to the balanced regulatory environment in Colombia, which aims at providing adequate returns on investment. ISA operates in Brazil through a 37.8% indirect controlling stake in Companhia de Transmissao de Energia Eletrica Paulista S.A. (CTEEP; rated 'AA+(bra)' by Fitch). Although ISA's financial results consolidate CTEEP, the company does not fully benefit from this subsidiary's cash flow generation given its ownership position. CTEEP accounts for around 54% of ISA's consolidated EBITDA. ISA also generates cash flow from its investments in Peruvian transmission companies (7% of consolidated EBITDA). Both the Brazilian and Peruvian operations have most of their revenues guaranteed by regulated tariffs adjusted annually by inflation during their concession periods. ROBUST LIQUIDITY ISA's liquidity is considered robust and is characterized by healthy cash on hand levels, manageable debt amortization and adequate access to local and international capital markets. As of Sept. 30, 2012, ISA had approximately USD985 million of consolidated cash on hand (USD120 million at the parent company) and USD785 million of consolidated short-term debt. ISA's maturity profile is manageable, as its long-term debt amortization schedule is spread between 2013 and 2041. ISA's short-term debt has been around 16% of total debt over the years. In the medium term, ISA's liquidity position is expected to remain healthy as a result of the company's stable cash flow generation. As of Sept. 30, 2012, ISA standalone had USD120 million of cash and marketable securities, which will allow the company to meet its USD111 million of current maturities. STRONG BALANCE SHEET SUPPORTS LEVERAGE INCREASE ISA has a strong financial profile, which is characterized by strong cash generation, moderately low debt levels and healthy interest coverage. Despite this, ISA's consolidated credit metrics are somewhat affected by the increase in debt following the company's acquisition of Intervial in Chile. ISA's stand-alone financial profile is strong and consistent with an investment grade rating. During the LTM ended Sept. 30, 2012, the company reported an EBITDA plus dividends of approximately USD383 million and total debt of USD841 million. This translates into a leverage ratio of 2.2x, while the company's interest coverage was 4.9x. For the LTM ended Sept. 30, 2012, ISA reported a consolidated EBITDA of USD1.6 billion and total consolidated adjusted debt of USD6 billion (including USD591 million of ISA Capital preferred shares). This translates into a leverage ratio, as measured by total debt-to-adjusted EBITDA of 3.7x. Interest coverage, as measured by EBITDA-to-interest expense is 2.7x, considered acceptable for ISA's rating category. Fitch expects ISA's consolidated credit metrics to weaken over the short-to-medium term as a consequence of the concession renewal process of the company's subsidiaries in Brazil. CTEEP, ISA's subsidiary in Brazil, accepted the Brazilian government proposal to early renew its main concession for an upfront payment and reduced revenues. CTEEP is expected to repay a significant portion of its non-project finance debt with the proceeds it will receive from the concession renewal process. Leverage could remain high in the interim while some of CTEEP's project finance subsidiaries commence operations. AGGRESSIVE EXPANSION PLAN Fitch considers ISA's expansion plan to be somewhat aggressive as the company expects to have revenues of USD3.5 billion (up from the current USD2.4 billion) over the next four years by investing, for the most part, in electric transmission businesses inside and outside Colombia. In 2016, the company expects to generate approximately 20% of its revenue from businesses other than transmission, such as toll roads and engineering, procurement and construction services. In line with its strategy, ISA acquired 100% of Intervial Chile, the major concession road operator in Chile. During the LTM ended Sept. 30, 2012, Intervial accounted for 17% and 15% of ISA's consolidated revenues and EBITDA, respectively. In Fitch's opinion, the company's incursion into the toll roads infrastructure business does not materially alter ISA's business risk profile as electric transmission is expected to continue generating the majority (80%) of its cash flow. The company's aggressive growth strategy could, however, weaken ISA's consolidated credit metrics. ISA's individual figures would not be affected significantly given that the company expects to execute most of the investment plan at a subsidiary level. Total capital investment over the next four years is expected to amount to approximately USD2.5 billion to be financed 30% with debt and 70% with internal cash flow generation. The company's capital investments and associated financing strategy will marginally increase the company's consolidated leverage, yet is expected to remain within the assigned rating category. A combination of conservative credit metrics and sustained growth in cash flows might result in a positive rating action. Conversely, higher than expected debt levels, deteriorating cash generation or regulatory changes that negatively affect the company's financial performance could lead to a negative rating action. Additional information is available at 'www.fitchratings.com' and 'www.fitchratings.com.co'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Corporate Rating Methodology' Aug. 8, 2012; --'Parent and Subsidiary Rating Linkage' Aug. 8, 2012; --'Liquidity Considerations for Corporate Issuers' June 12, 2007. Applicable Criteria and Related Research: Corporate Rating Methodology Parent and Subsidiary Rating Linkage Liquidity Considerations for Corporate Issuers
* Vote clears way for minority government (Updates with result, adds details)
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