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Moody's: CE Casecnan positive
Moody's Investors Service said it has changed to positive from stable its B2 rating outlook for CE Casecnan Water and Energy Co. Inc.'s senior secured notes.
The outlook change follows the agreement reached between CE and its construction contractor which settles all the claims and counterclaims between the two before the International Chamber of Commerce. The Contractor had initiated the case in February 2001.
Moody's understands that the agreement involves the contractor paying CE US$18.9 million, which is additional to the about US$6 million previously received by CE from demands made on bank guarantees posted as security under the contractor's construction contract. The parties have furthermore executed mutual releases and have agreed to end the arbitration case.
Moody's said the positive outlook reflects the fact that the settlement reduces the uncertainties created by the arbitration case. At the same time the completion last year of negotiations with the National Irrigation Authority regarding its offtake contract with Casecnan should result in a relatively stable operating environment for the company and provide more certainty to growing cashflow coverages of debt in coming years.
However, Moody's noted that some uncertainties persist as reform of the Philippines' power sector remains incomplete and there remains the risk that reform could yet impact on the contractual structure of Casecan, albeit there is no indication of this currently. Moody's further says that CE's rating could be upgraded if it sees greater clarity in the reform process, such that it translates into more certainty and stability for CE's future cash flows.
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