Moody's rates EPM notes Baa3

Moody's Investors Service said it assigned a Baa3 local-currency issuer rating to Empresas Publicas de Medellin SA ESP and a Baa3 foreign-currency rating to the proposed $500 million senior unsecured notes due 2019.

The outlook is stable.

"The ratings reflect EPM's stable cash flow derived from the relatively predictable and transparent regulatory environment, even though some technical aspects of the regulatory model are evolving," Moody's analyst Natividad Martel said in a statement. "This results in acceptable rates of return and a reasonable ability to recover incurred costs in a timely manner."

Also factored into the ratings is EPM's aggressive strategy of expansion, the agency said, as well as challenges with the current high levels of losses, as well as possible increases in the delinquency rates and deterioration of cash flows in the wake of the current economic crisis, the agency noted.

Ratings are somewhat constrained by EPM's significant reliance on the markets to fund its capital needs, the agency added.

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