S&P Downgrades Empresa Electrica de Guatemala

S&P has cut its corporate credit rating on Empresa Electrica de Guatemala (EEGSA) to BB minus from BB and placed it on credit watch with negative implications. The downgrade comes after the national energy commission in Guatemala lowered by 55% a component of the 2008-2013 tariff that reimburses the distribution company for its investment, S&P says. “This change will result in deteriorated profitability and cashflow measures as well as limited liquidity during the second half of 2008 and going forward,” the agency says. Any downward rating action would not necessarily be limited to one notch, it adds. The rating is constrained by inherent challenges associated with the operating environment of Guatemala, as well as limited financial flexibility, given undeveloped local capital markets.