Plans by Chilean utility Compania General de Electricidad S.A. (CGE) to diversify from generation and distribution into development of 400 MW of hydropower is considered a moderate risk by analyst Fitch Ratings.
The credit ratings firm said September 4 that CGE’s rating outlook is stable and that it affirmed CGE’s local and foreign currency issuer default ratings at A-. CGE primarily is involved in operating electricity and gas distribution utilities.
CGE’s development unit, CGE Generacion, signed an agreement in 2006 with MGM International of the United States for sale of carbon credits from the 136-MW Nuble hydropower project. (HNN 4/10/06) Revenue from sale of carbon credits is intended to help finance construction of the run-of-river project on the Nuble River at San Fabian de Alico in the Chile’s Biobio Region.
CGE has water rights to develop a total of 400 MW of hydropower in Chile, which it is investigating through CGE Generacion. Nuble is expected to require an investment of US$185 million and a construction period of three years.
Fitch said the hydro development plans would moderately increase CGE’s business risk and could slow improvements in its debt leverage.
�Increasing business risk in electricity generation, coupled with increasing indebtedness associated with the financing of this project could pressure credit quality in the future,� Fitch said.