Fitch: Recent Events May Pressure Eletrobras' Ratings

SAO PAULO--(BUSINESS WIRE)-- The Agencia Nacional de Energia Eletrica's (ANEEL) decision against Centrais Eletricas Brasileiras S.A. (Eletrobras; 'BB-'/ Outlook Negative) referring to the reimbursement of approximately BRL 7 billion to the Global Reversion Reserve (RGR) Fund, in addition to the company's failure to file its Form 20-F as required by the U.S. Securities and Exchange Commission (SEC), may put pressure on Eletrobras' ratings, according to Fitch Ratings.

On May 10, 2016, ANEEL determined that Eletrobras had failed to return to the RGR Fund the approximately BRL2 billion of loan amortization and financial charges incurred during the period of 1998 to 2011. The regulatory agency also determined that this amount should be adjusted based on the rate of a fund administered by Banco do Brasil S.A., which would be approximately BRL7 billion, and must be paid in 90 days. Eletrobras has stated that it will appeal to the courts seeking annulment of ANEEL's administrative decision.

Fitch foresees increasing liquidity risk for Eletrobras in the short term if the RGR reimbursement materializes, as its cash position and cash generation are tight to support such a cash outflow. As of March 2016, Eletrobras' consolidated cash and equivalents amounted to BRL7.2 billion, while latest 12 months EBITDA was negative at BRL 10.9 billion. Total consolidated debt, according to Fitch methodology, was BRL42.8 billion.

Eletrobras' failure to file its Form 20-F for 2014 and 2015 may affect the company's ability to fund new debt. The prescribed filing dates were originally April 30, 2015 and 2016, respectively. The delay may result in the delisting of the company's ADRs (American Deposit Receipts) listed on the New York Stock Exchange (NYSE) and is the result of the investigation of alleged bribes involving Eletronuclear - an Eletrobras' subsidiary.

Eletrobras' ratings continue to reflect some linkage with the Federal Republic of Brazil's Sovereign rating ('BB'/Outlook Negative). The company is important to the country because of its relevant market share in electricity generation, transmission and distribution, with strong presence in the auctions promoted by the government to reinforce the electric sector in the country. On a standalone basis, Eletrobras' IDRs would be lower due to its still weak consolidated operational cash generation, high capital expenditures program and deteriorated credit metrics.]

Additional information is available on www.fitchratings.com

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Fitch Ratings
Adriane Silva
Associate Director
+55 11 4504-2205
Fitch Ratings Brasil Ltda.
Alameda Santos, 700 - 4 andar
Sao Paulo, SP
or
Mauro Storino
Senior Director
+55 21 4503-2625
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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