Fitch affirms Eletropaulo

Fitch Ratings said it affirmed Brazil-based Eletropaulo Metropolitana Eletricidade de Sao Paulo SA's B+ local and foreign currency ratings and the B+ rating on its $200 million international bond issuance. The BBB(bra) long-term national scale rating and BBB(bra) rating on the eighth and ninth debenture issuances were also affirmed. The outlook is stable.

Fitch said the ratings reflect the company's improving credit-protection measures, which should strengthen over the next year, supported by projected growth in operating income and cash flow and the expected reduction in annual debt service. The debt structure includes an amortization schedule that reduces refinancing risk until 2007.

Eletropaulo should also benefit from the improved outlook for the Brazilian regulatory environment, the agency said. While regulatory risk remains an ongoing credit concern, the approval in 2004 of the new electric energy industry model is positive and provides some certainty with respect to the direction of the sector.

Adjusted EBITDA to total debt was 2.6x for 2005.

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