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Genneia S.A. -- Moody's affirms Genneia's Caa3 ratings; changes outlook to stable

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Rating Action: Moody's affirms Genneia's Caa3 ratings; changes outlook to stableGlobal Credit Research - 19 Apr 2021New York, April 19, 2021 -- Moody's Investors Service, ("Moody's") has today affirmed Genneia S.A.'s Caa3 corporate family rating and senior unsecured ratings and changed the outlook to stable from negative.Approximately $500 million of debt instruments affected.RATINGS RATIONALEGenneia's rating and stable outlook reflect the company's asset base and positioning as one of the main power producers in the renewable space in Argentina, with a solid operating track record and production levels, including average load factor for its wind projects of over 45%. Supporting our expectation of strong cash generation is the long-term contractual base with an average remaining life of contracts of 12 years. After the completion of its investment plan early this year, Moody's anticipates the company will be able to produce a ratio of cash flow from operations before working capital changes (CFO pre-WC) to debt in the range of 20 to 25%, with a progressive debt reduction amid a prudent dividend policy.The rating and outlook also acknowledge the refinancing risk that the company faces given the upcoming maturity of its $500 million notes due January 2022, recognizing that, after achieving the completion of its growth projects early in the year, the management is now fully focused on the refinancing of the notes ahead of the maturity date. We take comfort on the company good track record of accessing external financing, as demonstrated by the several loans it obtained from multilaterals and credit export agencies to finance its expansion plan in recent years, ample access to the local capital markets and the successful exchange of its Class XXI notes at the end of last year without losses to its creditors.The ratings continue to be constrained by the exposure of the company to Cammesa, the agency controlled by the Argentine government (Government of Argentina, Ca, Stable) that manages the wholesale electricity market and Genneia's main off-taker. While Cammesa's payments to Genneia under its Renovar contracts provided to date for better payments' terms than for other peers in the sector because they have a payment guarantee from Foder, given the recent history of government intervention in the electricity market and Cammesa's increased reliance on government transfers we believe other downside risks persist, including the potential risk of unilateral change to the PPA contract's terms and conditions.In addition, Genneias' debt is mostly dollar denominated and while contractual revenues are also dollar-denominated providing a natural hedge, Cammesa payments are made in pesos at the official exchange rate, which exposes bondholders to convertibility risks.Rating OutlookThe stable outlook reflects our expectation that Genneia will prudently manage its upcoming financing needs while maintaining sound operations. Shareholders support evidenced by limited distributions is also a key rating consideration, particularly until the company refinances its upcoming bond maturity.Quantitatively, the stable outlook incorporates our expectation of credit metrics improving steadily as the company reduces leverage to below 3 times debt to EBITDA and CFO pre-WC) to debt in the range of 20-25%.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSGiven the current constraining factors and the exposure to Cammesa, an upgrade of the ratings will require an upgrade of the sovereign.The ratings could come under negative pressure if the company fails to progressively reduce its current debt levels and CFO to debt remains below 15%.ProfileGenneia S.A. is privately held independent power producer company that owns and operates a portfolio of power projects with 1.3 GW of installed capacity. Genneia was the first company to build and operate a wind farm in Argentina in 2012 and is currently the leading renewable power company in the country with 840 MW wind and solar plants, representing around 25% of the renewable market.Genneia's current shareholders include Argentum Investments LLC, a limited liability company incorporated in Delaware and managed by PointState Master Fund LP; LAIG Eolia S.A. a limited liability company incorporated in Uruguay, with investment interest in companies in the energy sector across Latin America; Fintech Energy LLC, incorporated in Delaware and controlled by Fintech Advisory Inc., a New York-based limited liability company with a long-term return strategy focused on emerging markets and the Brito Group that pertains to the Brito and Carballo families, main owners and directors at the board of Banco Macro S.A. (Caa3 stable ), one of the biggest local private banks in Argentina.The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1066389. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Daniela Cuan Vice President - Senior Analyst Infrastructure Finance Group JOURNALISTS: 1 800 666 3506 Client Service: 1 212 553 1653 Cristiane Spercel VP - Senior Credit Officer Infrastructure Finance Group JOURNALISTS: 0 800 891 2518 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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