Fitch says ECP could be negative for ISA

Company News    Apr 27, 2021 3:36 PM

Fitch Ratings ruled on the plans for the issuance and placement of internal public debt securities of Interconectado Eléctrica S.A. (ISA).

The agency affirmed the ratings of the ISA issuance program for CoP$6.5T at ‘AAA (col)’ and ‘F1 + (col)’, respectively; the outlook is stable, Valora Analitik reported.

Fitch noted that ISA’s ratings reflect the company’s low business risk profile.

The rating agency also considered the geographic diversification of ISA’s income, which, together with the high predictability of its operating cash flow, translates into a strong credit profile.

Fitch said that ISA’s low business risk profile stems from its participation in regulated natural monopolies with no demand risk, as well as its geographic diversification across six countries in Latin America.

In addition, the credit agency said that the rating related to the potential acquisition by Ecopetrol (NYSE: EC) of 51.4% of the shares that Colombia has in ISA, could go from neutral to negative for ISA.

The entity explained that a ECP-mandated change in ISA’s corporate governance or in its business or financial strategies could impose downward pressure on the company, particularly in the event of an increase in dividends.

If the proposed transaction materializes, Fitch’s approach to rating ISA would shift from a government-related entity to a parent and subsidiary link with Ecopetrol.

Bottom-Line: The potential negative rating of the ‘deal of the year’ is one more challenge for the government’s plans for ISA.

The Colombian government will be the only beneficiary of this transaction since the payments are essential to cover the current fiscal gap.

The Ministry of Finance (MinHacienda) could once again insist on this business, due to the poor acceptance that the tax reform has had so far.

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