Moody's rates Enersul debentures Ba3, A2.br

Moody's America Latina said it assigned Ba3 local-currency and A2.br national scale ratings to Empresa Energetica de Mato Grosso do Sul SA's ("Enersul") proposed R$250 million senior unsecured debentures due 2011 and a Ba3 corporate family rating and an A2.br Brazilian national scale rating to the company. The outlook is stable.

Proceeds from the debentures issuance will be used to refinance existing debt, lengthening the company's debt maturity profile.

Moody's said the ratings incorporate Enersul's essentially monopolistic position in energy distribution in its concession territory, the company's above-average operating margins relative to its local peers, its improved liquidity position following the proposed issuance, the fact that its operations are exclusively related to power distribution and fully regulated, the existence of long-term supply agreements with power generators and its improved corporate governance that results from Energias do Brasil's (the local ultimate holding company) adherence to Bovespa's Novo Mercado governance guidelines.

At the same time, the ratings are constrained by Enersul's high energy losses due to its scattered concession area, by its interest rate risk and by the dependence of the economy of its rural concession territory on volatile commodity prices, the agency said.

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