Fitch Ratings has affirmed
Fitch has also affirmed the senior unsecured notes co-issued by
GEMSA's ratings continue to reflect its dependence on the country's offtaker and electricity market coordinator,
Key Rating Drivers
High Leverage, Tight Debt Service Coverage: GEMSA's cash flow is relatively stable and predictable provided that CAMMESA continues to pay within its current timeframe of around 70 days (down from a peak of over 100 days in
On a consolidated basis, Fitch estimates GEMSA's leverage will peak at around 9.4x in 2023, and then decline thereafter to around 4.1x over the rating horizon as the company pays off maturing obligations and the Ezeiza, Maranzana, Talara, and Arroyo Seco projects are completed (note: excluding limited recourse debt, Fitch estimates leverage at 7x in 2023). EBITDA interest coverage is projected to be tight at around 1.4x in 2023, before improving to 2.0x in 2024.
EBITDA Margins to
Completion of the Ezeiza plant expansion in late 2023 is estimated to generate about
Refinancing Risk: GEMSA has been able to successfully repay its sizable short-term maturities in 2023 with funds from local debt issuances. But for 4Q23 and 2024, the company still faces roughly
Derivation Summary
GEMSA's rated Argentine utility peers are
GEMSA's expected 2023 gross leverage, measured as total debt/EBITDA, is 9.4x, weaker than
Key Assumptions
Refinancing/financing assumptions based on maintenance of roughly
COD of projects as expected: Talara YE23, Ezeiza YE23, Maranzana mid-2024, and Arroyo Seco
Capex of
Tax deferment through the rating horizon;
Aggregated contracted capacity payments of
Average capacity factor of 55%, and average price of electricity of
Recovery Analysis
Key Recovery Rating Assumptions EBITDA declines 30% in bankruptcy; A 5.0x EBITDA multiple; Administrative claims of 0%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
An upgrade of the Argentine sovereign rating;
Given the issuer's high dependence on CAMMESA subsidies from the national treasury, any further regulatory developments leading to a market less reliant on support from the Argentine government or a sovereign upgrade could positively affect the company's collections/cash flow;
Cumulative cash flow from
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
A downgrade of GEMSA below 'CCC-' could occur if Fitch believes that a default of some kind is probable or a default-like process has begun. This would be represented by a 'CC' or 'C' rating, given that GEMSA's ratings are linked to those of the Argentine sovereign at 'CC', due to the high reliance on government subsidies to the electricity sector.
Liquidity and Debt Structure
Pressured but Improved Liquidity: Fitch expects the company to exhibit tight EBITDA interest coverage of 1.3x in 2023, increasing to 1.8x in 2024 and to 1.9x in 2025. As of
Issuer Profile
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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