Fitch Ratings placed Dominican Power’s long-term national rating S.A. (DPP) ‘AA (sun)’ in Negative Observation. Likewise, it placed in Negative Observation the rating of its issuance of corporate bonds of ‘AA (dom)’. The rating action incorporates the unplanned shutdown of its sister company AES Andrés that suffered an accident on 3 September 2018 supposedly when it was struck by lighting. There is no date for the plant to re-enter the national electrical grid.
As reported by Fitch Ratings, DPP and Andrés jointly guarantee an international issuance of USD270 million due in 2026 (rated by Fitch on an international scale in BB-), which relates the credit profiles of both companies.
Last week, Fitch Ratings risk assessment firm had already reported that it was placing AES Andres on a negative watch list while it decided whether or not to reduce its investment grade after the exit of the generating system supposedly do to a lightning strike.
Fitch said: “This action regarding the investment grade affects US $270 million in payments to be carried out in 2026 that have been graded BB, which have also been placed on Rating Watch Negative.”
The negative observation by Fitch means that the electric company has a 50% chance of seeing its investment grade reduced over the next three months, depending on the advances that are to be seen in its situation and it “reflects the uncertainty with regard to the financial impacts in the short-term of a lightning strike which knocked out the generation units of AES Andres on 3 September.”
The risk assessment firm pointed out that the company has insurance for the interruption of business because of damage to the property but that until the technical evaluation of the damage is not completed, the related costs and the duration of the interruption of the facility are not clear.
Fitch said that it would be necessary to determine the responsibility of AES Andres under its existing PPAs, which provide exceptions for overwhelming force/force majeure, or acts of God. (PPA = Power Purchase Agreement).
Dominican authorities from the Public Electricity Corporation (CDEEE) have stated that AES Andrés is liable for the additional cost of energy purchases because of the shutdown of its facility because of an overwhelming event inside of its facilities and this represents an exception to their contract.
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Fitch Ratings
25 September 2018
