S&P cuts Guacolda, notes to BB+

Standard & Poor's said it lowered its corporate credit rating on Empresa Electrica Guacolda SA and the issue-level rating on its $500 million senior unsecured notes due 2025 to BB+ from BBB-.

The outlook remains stable.

S&P said the downgrade reflects its revised EBITDA and cash flow estimates due to Guacolda's substantially weaker results in 2015 than the previous base-case forecast of adjusted leverage of 3 times to 4 times.

The company's EBITDA dropped about 30% from the agency’s previous base-case scenario due to the early termination of a power purchase agreement with Compañia Minera Nevada SpA (Pascua Lama) after a long arbitration process initiated by the company and the subsequently greater exposure to the spot market.

Moreover, prices at the spot market dropped about 30% in 2015 and energy demand in Chile lowered, stemming from the commodities price collapse, China's decelerating economy, and a flood in Chile's northern region that contracted the mining output in early 2015, S&P said.

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