S&P puts CGE on watch

Standard & Poor's said it placed Compañía General de Electricidad SA's BBB+ corporate credit rating on CreditWatch with negative implications after the company agreed to purchase PPL Energía Chile Ltda.'s 95.4% equity stake in Empresas Emel SA for $660 million. In addition, according to Chilean law, CGE is mandated to carry out a public offer to acquire the remaining 4.6% of Emel's equity stake.

The agency said that although it considers the acquisition a positive credit factor for CGE's business risk profile, the CreditWatch placement reflects mainly the uncertainties related to the financing of the transaction. The ratings on CGE could be lowered if the transaction is fully debt financed, resulting in a sizable deterioration of the company's financial ratios and potentially affecting its financial flexibility.

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