|By Business Wire||
|June 18, 2014 02:27 PM EDT||
Fitch Ratings has affirmed Instituto Costarricense de Electricidad y Subsidiarias' (Grupo ICE) foreign- and local-currency Issuer Default Ratings (IDRs) at 'BB+' as well as its national scale ratings at 'AAA(cri)' and 'AAA(slv)'. The Rating Outlook is Stable.
KEY RATING DRIVERS
Grupo ICE's ratings are supported by the company's linkage to the Sovereign rating of Costa Rica (FC and LC IDRs rated 'BB+'/Stable Outlook by Fitch) which stems from the government ownership and government's implicit and explicit support. The company holds strategic importance for the government given the growing demand of electricity in the country and government's plans to increase renewable generation and to reduce exposure to fluctuations in fossil fuel prices. The ratings also reflect company's diversified portfolio of assets, adequate financial profile, aggressive capital expenditure program oriented to increase renewable generation capacity and maintaining a strong market share position in the telecommunications business.
DIVERSIFIED ASSET PORTFOLIO
Grupo ICE is a vertically integrated monopoly in the electricity industry and the incumbent player in the Telecom industry in Costa Rica. The ratings reflect the company's low business risk resulting from its business diversification and positive characteristics as a utility service provider.
As of year-end 2013, Grupo ICE had an installed electric generation capacity of 2,067 megawatts (MW) (national capacity of 2,731MW) and is the exclusive owner of the national transmission grid. The national electric industry includes private generation, municipal distribution and electric cooperatives that can generate energy in coordination with Grupo ICE or sell their energy to Grupo ICE. The company is expected to remain a leader in the telecommunications industry in the country, notwithstanding recent changes that opened the industry to competition. Although this will increase competition, it is also expected to enhance regulatory transparency. ICE's market share in terms of subscribers was near to 100% in fixed telephony and 70% in mobile at 2013-end.
In YE 2013, the company generated revenues and EBITDAR of USD 2,647 million and 936 million, respectively (USD 2,375 million and USD844 million in 2012). The company's electricity segment represented approximately 59% of revenues, with the telecommunications division contributing the rest. Fitch expects ICE's electricity business to increase its contribution given the current and future expansion projects, as well as relatively stable results in the telecommunications segment.
LEVERAGE DRIVEN BY CAPEX
Grupo ICE's ratings reflect the company's leverage, satisfactory interest coverage and exposure to foreign exchange risk. In the last few years, company leverage weakened as result of the ongoing large capital expenditure program, which is mainly financed with debt. Fitch expects the company will be able to reduce leverage as new generation projects, such as PH Reventazon, become online in the next few years, absent of significant changes in tariffs.
As December 2013, Grupo ICE reported consolidated debt of USD3.7 billion, of which USD423 million was short-term and near 85% was denominated in USD, which exposes the company to fluctuations in the exchange rate. The company benefit from a very favorable debt schedule, approximately 25% of its debt matures in the next five years. Financial leverage ratio, as measured by total adjusted debt-to-EBITDAR, totaled 5.6x.
In the short-term, credit metrics could deteriorate as result of adverse weather conditions and a lag in regulated tariffs to incorporate the costs of thermal generation and net electricity imports. A further devaluation of the local currency may also impact leverage ratios. These factors could reduce company's ability to meet some financial covenants and financial flexibility. A breach of covenants could limit temporarily issuer's ability to take new debt.
AGGRESSIVE CAPITAL EXPENDITURE PLAN
Grupo ICE's capital investment plan is considered aggressive and could weaken the company's financial profile, absent increased cash flow generation and adequate tariff adjustments. The company plans to invest approximately USD3.7 billion over the next five years in order to supply electricity to meet demand and maintain its leadership position in telecommunications in Costa Rica.
Going forward, leverage could increase consistently to over 6.0x if the company finances its capital investment plan heavily with debt and the revenues associated with these investments are delayed beyond the expected ramp-up timeframe or don't received opportunely the tariff adjustments. Grupo ICE expects to finance its investments with a combination of internal cash flow, debt, Build Operate and Transfer (BOT) transactions, project finance vehicles and operating leases.
HIGH EXPOSURE TO REGULATORY AND POLITICAL INTERFERENCE
Grupo ICE is highly exposed to regulatory interference risk given the lack of clear and transparent electricity tariff schedules. The company annually proposes to the regulator electricity tariffs for end-users; in previous years, the regulatory and political interference affected the tariff adjustment process.
Positive for the company's business and financial profile is the approved mechanism to adjust tariffs to reflect fuel cost variations on a quarterly basis, starting in 2013. This change has a positive effect on Grupo ICE's working capital and reduces its exposure to hydrology risk. Before 2012, the regulator approved tariffs that do not fully recognized the company's moderate exposure to fuel prices borne by its thermoelectric generation business (8% - 10% of annual generation on average). Currently the issuer is proposing to modify the existing tariff scheme to incorporate the costs of net electricity imports given ongoing adverse weather conditions.
The recent Telecom regulatory framework considers changes in tariffs and competition rules. Fitch expects that new regulations could enhance regulatory transparency. Nevertheless, telecommunications tariffs have been unchanged since 2006.
Despite the regulatory risk, Grupo ICE has managed to maintain a relative stable cash flow generation. Also, the company is exposed to political interference given that the government appoints and removes ICE's directors and executives, sets and approves the company's tariffs, and regulates its budget.
--Grupo ICE's ratings could be negatively affected by any combination of the following factors: sovereign downgrades; weakening of legal, operational and/or strategic ties with the government; or regulatory intervention that negatively affects the company's financial performance.
--Grupo ICE's ratings could be positively affected by an upgrade of Costa Rica's sovereign rating, or if the company is materially isolated from government interference.
Fitch has affirmed the following ratings for Grupo ICE:
--Long-term FC IDR at 'BB+'; Stable Outlook;
--Long-term LC IDR at 'BB+'; Stable Outlook;
--Senior unsecured debt at 'BB+';
--Long-term national scale (Costa Rica) at 'AAA(cri)'; Stable Outlook;
--Senior unsecured domestic long-term debt (Costa Rica) at 'AAA(cri)';
--Short-term debt at 'F1+(cri)';
--Long-term national scale (El Salvador) at 'AAA(slv)'; Stable Outlook
--Senior unsecured domestic long-term debt (El Salvador) at 'AAA(slv)'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May. 28, 2014).
Applicable Criteria and Related Research:
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Vidyo, Inc., has joined the Alliance for Open Media. The Alliance for Open Media is a non-profit organization working to define and develop media technologies that address the need for an open standard for video compression and delivery over the web. As a member of the Alliance, Vidyo will collaborate with industry leaders in pursuit of an open and royalty-free AOMedia Video codec, AV1. Vidyo’s contributions to the organization will bring to bear its long history of expertise in codec technolo...
Sep. 26, 2016 05:15 PM EDT Reads: 2,539
SYS-CON Events announced today that Secure Channels will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. The bedrock of Secure Channels Technology is a uniquely modified and enhanced process based on superencipherment. Superencipherment is the process of encrypting an already encrypted message one or more times, either using the same or a different algorithm.
Sep. 26, 2016 05:15 PM EDT Reads: 1,571
SYS-CON Events announced today that Bsquare has been named “Silver Sponsor” of SYS-CON's @ThingsExpo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. For more than two decades, Bsquare has helped its customers extract business value from a broad array of physical assets by making them intelligent, connecting them, and using the data they generate to optimize business processes.
Sep. 26, 2016 05:00 PM EDT Reads: 2,710
Traditional on-premises data centers have long been the domain of modern data platforms like Apache Hadoop, meaning companies who build their business on public cloud were challenged to run Big Data processing and analytics at scale. But recent advancements in Hadoop performance, security, and most importantly cloud-native integrations, are giving organizations the ability to truly gain value from all their data. In his session at 19th Cloud Expo, David Tishgart, Director of Product Marketing ...
Sep. 26, 2016 05:00 PM EDT Reads: 1,822
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life sett...
Sep. 26, 2016 04:30 PM EDT Reads: 3,330
Digitization is driving a fundamental change in society that is transforming the way businesses work with their customers, their supply chains and their people. Digital transformation leverages DevOps best practices, such as Agile Parallel Development, Continuous Delivery and Agile Operations to capitalize on opportunities and create competitive differentiation in the application economy. However, information security has been notably absent from the DevOps movement. Speed doesn’t have to negat...
Sep. 26, 2016 04:30 PM EDT Reads: 2,080
If you’re responsible for an application that depends on the data or functionality of various IoT endpoints – either sensors or devices – your brand reputation depends on the security, reliability, and compliance of its many integrated parts. If your application fails to deliver the expected business results, your customers and partners won't care if that failure stems from the code you developed or from a component that you integrated. What can you do to ensure that the endpoints work as expect...
Sep. 26, 2016 04:30 PM EDT Reads: 1,614
The Transparent Cloud-computing Consortium (abbreviation: T-Cloud Consortium) will conduct research activities into changes in the computing model as a result of collaboration between "device" and "cloud" and the creation of new value and markets through organic data processing High speed and high quality networks, and dramatic improvements in computer processing capabilities, have greatly changed the nature of applications and made the storing and processing of data on the network commonplace.
Sep. 26, 2016 04:15 PM EDT Reads: 1,016
Your business relies on your applications and your employees to stay in business. Whether you develop apps or manage business critical apps that help fuel your business, what happens when users experience sluggish performance? You and all technical teams across the organization – application, network, operations, among others, as well as, those outside the organization, like ISPs and third-party providers – are called in to solve the problem.
Sep. 26, 2016 04:00 PM EDT Reads: 2,512
SYS-CON Events announced today that ReadyTalk, a leading provider of online conferencing and webinar services, has been named Vendor Presentation Sponsor at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. ReadyTalk delivers audio and web conferencing services that inspire collaboration and enable the Future of Work for today’s increasingly digital and mobile workforce. By combining intuitive, innovative tec...
Sep. 26, 2016 04:00 PM EDT Reads: 2,831
Cognitive Computing is becoming the foundation for a new generation of solutions that have the potential to transform business. Unlike traditional approaches to building solutions, a cognitive computing approach allows the data to help determine the way applications are designed. This contrasts with conventional software development that begins with defining logic based on the current way a business operates. In her session at 18th Cloud Expo, Judith S. Hurwitz, President and CEO of Hurwitz & ...
Sep. 26, 2016 03:45 PM EDT Reads: 2,900
The vision of a connected smart home is becoming reality with the application of integrated wireless technologies in devices and appliances. The use of standardized and TCP/IP networked wireless technologies in line-powered and battery operated sensors and controls has led to the adoption of radios in the 2.4GHz band, including Wi-Fi, BT/BLE and 802.15.4 applied ZigBee and Thread. This is driving the need for robust wireless coexistence for multiple radios to ensure throughput performance and th...
Sep. 26, 2016 03:30 PM EDT Reads: 1,555
Enterprise IT has been in the era of Hybrid Cloud for some time now. But it seems most conversations about Hybrid are focused on integrating AWS, Microsoft Azure, or Google ECM into existing on-premises systems. Where is all the Private Cloud? What do technology providers need to do to make their offerings more compelling? How should enterprise IT executives and buyers define their focus, needs, and roadmap, and communicate that clearly to the providers?
Sep. 26, 2016 03:00 PM EDT Reads: 1,551
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management solutions, helping companies worldwide activate their data to drive more value and business insight and to transform moder...
Sep. 26, 2016 02:45 PM EDT Reads: 2,605
Much of the value of DevOps comes from a (renewed) focus on measurement, sharing, and continuous feedback loops. In increasingly complex DevOps workflows and environments, and especially in larger, regulated, or more crystallized organizations, these core concepts become even more critical. In his session at @DevOpsSummit at 18th Cloud Expo, Andi Mann, Chief Technology Advocate at Splunk, showed how, by focusing on 'metrics that matter,' you can provide objective, transparent, and meaningful f...
Sep. 26, 2016 02:30 PM EDT Reads: 2,550