Category: Chile

Chilean power company Gener, a division of AES, is seeking a capital increase of $350m, to be approved by shareholders on a meeting to be held March 4. The company looks to continue local expansion and refinance debt.

Chile is about to go through a serious energy shortage that may develop into a full-blown crunching crisis if events go against it, says Hallgarten & Company, the research boutique. “2008 GDP and growth figures are almost certain to be affected by events of the coming months, and the knock-on effects of copper production shortfalls into an already tight metals market are likely to be felt around the world,” says the shop. According to Hallgarten, electricity generation costs will be substantially higher than in 2007 due to lack of hydro generation supply and lower natural gas deliveries from Argentina. It warns that even if Chile manages to supply higher cost fuel to all its thermal electric power stations and they run non-stop, it is likely supply will still not be enough to meet the demand required to sustain macro growth at forecast levels. Hallgarten’s realistic case scenario calls for substantially higher energy costs for the country that will eat into GDP growth and stoke inflation. The worst case scenario implies severe across-the board disruptions that would markedly affect the economy. “The only thing that remains to be seen is not whether the country goes through an energy crisis, but how deep that crisis will be,” Hallgarten concludes.

The Chilean central bank kept its benchmark interest rate unchanged at 6.25% Thursday, following two consecutive increases in the previous two months. The decision was expected by analysts, who point to slowing inflation and the continuation of stable growth trends in the country.

Chilean state copper miner Codelco plans to invest a record $2bn this year in 550 projects mostly aimed at maintaining copper output and building future production, according to the company’s CEO Jose Pablo Arellano. This is an increase from the $1.69bn the company invested last year and includes expansion of the Andina division as well as the new Gaby mine. Base metals have been in a protracted bull market, but Codelco does not fear a copper downturn. “The market is still seeing strong demand and low inventory levels, which produces a very favorable situation for the industry,” says Arellano.

Cuprum, the Chilean pension fund manager controlled by the Penta group, is close to being sold to one of a handful of bidders, say bankers away from the deal. JPMorgan is heard to be advising the AFP on the sale. Local financial daily Diario Financiero reported Penta is heard requesting a $1bn price tag for the pension fund whose market cap stood at $567m Tuesday. HSBC and MetLife are among the rumored bidders for Cuprum, says the paper. The company’s stock has risen 78% in the past year, with the most recent 20% run beginning on January 29. Last year ING bought Santander’s pension fund businesses in Mexico, Chile, Colombia and Uruguay for $1.3bn.

Enrique Perez, CFO of Chile’s Corpbanca, is resigning “for personal reasons and to pursue other interests,” the bank said. He will continue in his position until mid-February. No immediate announcement was made regarding his successor. Corpbanca, controlled by the Saieh group, has long been viewed as an acquisition target. It has missed market share targets set after a 2002 IPO and Corpbanca has repeatedly said it is not for sale. But Alvaro Saieh, the main controller, has a history of buying banks, making them profitable before selling.

Scotiabank has agreed to acquire assets from Chile’s Grupo Altas Cumbres. Scotia will get Altas’ Banco de Antigua in Guatemala and select assets of Banco de Ahorro y Credito Altas Cumbres in the Dominican Republic. In addition, Scotia has the option to purchase Banco del Trabajo in Peru. The bank did not disclose terms of the transaction, which is expected to be finalized within days.

Chilean electric power and natural gas utility Colbun issued yesterday a waiver requesting that one of its bank debt covenants be suspended until April, according an executive familiar with the situation. The company may consider using the next three months to renegotiate terms on up to $700m in outstanding debt, says the person. Contacted by LatinFinance, Colbun’s CFO Jaime Fuenzalida Alessandri confirmed a notice had been sent out to banks but declined to elaborate. He said any discussion on debt restructuring was still in its early stages. Colbun has a $320m syndicated loan led by Calyon which, in the first three quarters of last year, paid an average margin of 5.54%, according to a statement with the SVS. Banco Chile, Santander, WestLB, Banco Credito y Inversiones, SCH Overseas Bank and BBVA are also participants. In 2006, the company extended the final maturity date of the amortizing loan by two years to 2011 from 2009. The company also has three series of outstanding UF-denominated local bonds. Analysts in Chile tell LatinFinance they have been expecting Colbun to trip its interest coverage ratio covenant when its Q4 financials came out. The deteriorating ratio is a result of a severe drought which led to lower generation capacity, and, as a result, lower Ebitda. Expenses also rose due to the lack of Argentine natural gas. The utility had to use oil to power its generation, which led to a surge in operational costs, thus affecting interest coverage, say the analysts.

Bear Stearns has placed an overweight recommendation on Chilean equities, taking somewhat of a contrarian view given Wall Street’s consensus on the direction of that country’s assets. “It’s a little bit of a contrarian view given that interest rates may still go up. I’d say it’s an early view on being more bullish on Chile,” Thierry Wizman, Bear’s LatAm equity analyst, tells LatinFinance. The call is based on the overall sense that valuations have come down in the past several months and may be poised for a rebound. The IPSA has dropped 25% since its peak in 2007 in local currency terms. Rates may still rise, but peak out in Q1, notes the report, which also highlights negatives, such as high electricity prices and political roadblocks. Of key importance for an improvement is the potential for local investors to resume buying in the stock market. Chile’s market regulator increased the limits of foreign asset holdings from 35% to 40% in December and may boost that to 45% by the first half. Once the AFPs have reallocated abroad to reflect the new limits, they may resume local buying, says Bear. The shop tips Endesa Chile, based on the positive outlook for tariff implementations; LAN, which Bear views as undervalued now, and Cencosud, which is a good way to be exposed to retail during a period of economic growth, it says.

Chilean shipping company Compania Sudamericana de Vapores says it plans to ask shareholders to approve a capital increase of up to $200m. CSAV shareholders will vote April 25 on the increase, to be done via share issuance.