Fitch could lower CGE

Fitch Ratings said it placed on Rating Watch negative Cia General de Electricidad SA's foreign- and local-currency issuer default rating at A- and national scale rating AA(chl); CGE Transmision SA's national scale rating AA+(chl); CGE Distribucion SA's national scale rating AA+(chl); Cia Nacional De Fuerza Electrica SA's national scale rating AA+(chl) and Empresas Emel SA's national scale rating AA(chl).

The action follows CGE's agreement to acquire 95.4% of Emel's shares from its current controller, PPL Energia Chile Ltda., for $660 million. The acquisition is expected to be financed through debt and equity.

The Rating Watch negative reflects potential pressure on CGE, its subsidiaries and Emel's credit quality due to possible increases in individual and consolidated debt and financial leverage, which are weak for the rating category. CGE reported a debt-to-EBITDA ratio of 4 times for the 12 months ended June on a consolidated basis.

Fitch said it views the acquisition as strategically positive as it would provide higher concentration in the low-risk electric distribution and transmission businesses, increased geographical diversification in Chile and business synergies.

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