S&P: CGE outlook negative

Standard & Poor's said it affirmed the BBB+ corporate credit rating of Compañía General de Electricidad SA (CGE) and removed the rating from CreditWatch with negative implications.

The outlook is now negative.

S&P placed the rating on CreditWatch on Sept. 14 after CGE agreed to purchase PPL Energía Chile Limitada's 95.4% equity stake in Empresas Emel SA. CGE was mandated by Chilean law to make a public offer to acquire the remaining 4.6% stake. The CreditWatch reflected the uncertainties related to the transaction's financing, which could have resulted in a sizable deterioration of the company's financial ratios and weaker financial flexibility.

CGE has completed the acquisition of 97.94% of Emel for $678 million, which was financed with a $270 million capital increase and debt. The agency said the structure of the transaction does not significantly affect the company's financial risk profile, but the negative outlook reflects the company's relatively high refinancing risk in 2008 - a sizable portion of Emel's acquisition was financed with short-term debt - and the potential deterioration of its already relatively weak debt service coverage ratios for the rating category.

The BBB+ rating still reflects the company's strong business risk profile derived from its solid position in Chile's growing electricity transmission and distribution sectors, S&P said.

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