Fitch Ratings has affirmed Enel Americas S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BBB+'.
In addition, Fitch has affirmed the company's Long-Term National Scale rating at 'AA+(cl)' and affirmed the National Equity Rating at 'Primera Clase Nivel 1 (cl)'. The Rating Outlook is Stable.
Enel Americas' operating environments (OE) are a constraining factor for its rating, as it operates in a highly regulated industry. Fitch estimates its weighted average OE to be 'BBB', with Brazil (BB-/Stable) representing approximately 60% of the consolidated EBITDA, while Colombia (BB+/Stable) is estimated to reach up to 30%. Enel Americas is rated one notch above its OE due to its diversified cash flow and business profile, strong leverage profile expected to be around 1.5x during 2023-2026 coupled with ample liquidity.
Key Rating Drivers
Exposure to Non-Investment-Grade Markets: Enel Americas' operating environments are a constraining factor for its rating, given it operates in a highly regulated industry. Fitch deems its weighted average operating environment to be 'BBB', with Brazil representing approximately 60% of the consolidated EBITDA, while Colombia is estimated to reach up to 30%. Enel Americas is rated one notch above its operating environments due to its solid business profile, consistently low leverage and strong liquidity, all of which are commensurate with the 'A' category.
Asset Divesture on Track: Enel Americas' divesture strategy consists of selling all its existing distribution and generation assets in Argentina and Peru, expected to be completed during 2023. It complements the December 2022 sale of its entire stake in the Brazilian power distribution company CELG Distribuicao S.A. - CELG D (Enel Goias) for approximately USD1.3 billion. During February 2023, Enel Americas sold its generation business in Argentina for USD102 million, and during April 2023, the company entered into a share purchase agreement for its distribution business in Peru for approximately USD2.9 billion with China Southern Power Grid International (HK) Co., Ltd, a subsidiary of China Southern Power Grid Co., Ltd (A+/Stable).
Fitch expects the company will complete its divesture during 2023, when selling all its generation assets in Peru and the distribution business in Argentina.
Strong Leverage Metrics: Enel Americas has a strong leverage profile with EBITDA leverage estimated below 2.0x over the rated horizon, in line with the company's historical leverage of 1.4x reached in 2022. Going forward, EBITDA generation will be evenly distributed between Generation and Distribution business and will average approximately USD3.500 million per year during 2023-2025, assuming no additional debt after the divesture process is completed. Fitch anticipates Enel Americas will retain its strong EBITDA coverage, on average around 6.5x during 2023-2025, from an historical 8.0x.
Sustainability Strategy: Fitch believes Enel Americas' long-term sustainability strategy and vision is a credit positive. The divesture of the company's Argentine and Peruvian assets is consistent with its overall strategy to operate in markets where it can be a key player in the modernization and digitalization of distribution networks and improve the quality of service, thereby enabling an energy transition based on electrification.
More than 50% of the company's USD5.0 billion capex plan between 2023-2025 enhances grids in urban areas with a high potential for distribution infrastructure and digitalization. Approximately 30% of Enel Americas' capex plan is geared towards the development of 3.5GW of renewable generation assets and the elimination of existing thermal generation, aiming to have 98% of its installed capacity come from renewable sources by 2025, from 71% as of December 2022.
Parent-Subsidiary Linkage: Fitch rates Enel Americas on a stand-alone basis. Per Fitch's Parent Subsidiary Linkage Criteria, when the rating of the parent and subsidiary are the same, the entities are rated on a stand-alone basis. Nonetheless, Fitch's views Enel Spa (BBB+/Stable) with a stronger business profile of the two entities, given its global footprint, financial structure, strong access to capital, and overall strategic and operational benefits it provides to its subsidiaries.
Equity Rating: Fitch rates Enel America's shares at 'Primera Clase Nivel 1(cl)' based on its solid solvency and free float of 17.7%, according to its ownership structure. In terms of liquidity, it has 100% market presence and average daily traded volumes of approximately USD3.5 million in the last month. Enel Americas is listed in the Selective Stock Price Index (IPSA) of the Santiago Stock Exchange.
Derivation Summary
Enel Americas' ratings are in line with its sister company Enel Chile S.A. (BBB+/Stable) and its peer Colbun (BBB+/Stable) and above its subsidiary Enel Colombia Enel Colombia S.A. E.S.P. (BBB/Stable) and above its peers AES Andes (BBB-/Stable) and Engie Energia Chile S.A. (BBB/Stable). Fitch estimates Enel Americas' EBITDA Leverage will remain below 2.0x over the rated horizon. This is lower than AES Andes's consolidated gross leverage over the rating horizon of 3.5x, and Colbun's at 2.5x and higher than Enel Generacion Chile's average leverage of 1.5x.
Enel Americas' business risk profile is comparable to that of Grupo Energia de Bogota (BBB/Stable), Empresa Publicas de Medellin (EPM; BB+/RWN) and AES Andes (BBB-/Stable). Enel Americas has a riskier geographical mix that is offset by its larger size and balanced distributed EBITDA between generation and distribution business. Enel Americas has a superior business structure that generates more stable margins given the company's EBITDA generation is evenly distributed between the electric generation and distribution businesses in each of the countries it operates, which contributes to a more stable cash flow generation. The company's geographic diversification provides it with greater resilience against economic cycles.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Divesture plan completed by the end of 2023: Enel Ceara in Brazil and fully exiting Argentina and Peru.
EBITDA generation annually in the range of USD3.5 billion after the divesture plan is completed evenly distributed between Generation and Distribution business;
Average annual energy sales between 40,000GWh - 42,500GWh during 2023-2025;
Installed capacity increasing from 9.0GW to 12.4GW during 2023-2025;
Average annual distribution sales in the range of 100,000GWh;
Total capex of USD5.0 billion between 2023 and 2025;
30% of net income dividend pay-out ratio.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Upgrade of Enel SpA may result in an upgrade of Enel Americas;
Although a positive rating action is not expected in the short to medium term given the company's exposure to countries with below-investment-grade ratings, a positive rating action might be considered if the sovereign ratings of Colombia and Brazil are upgraded;
Improvement in the mix of cash flow generation towards higher credit quality markets would be viewed positively.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Multiple notch downgrade of Enel SpA may result in a downgrade of Enel Americas;
Deterioration of the economic environment and macroeconomic conditions in the company's key markets, namely Brazil and Colombia;
EBITDA to interest coverage below 5.0x;
Change in Enel Americas' financial policy resulting in leverage metrics unaligned with its historical EBITDA leverage below 2.0x;
Change in the country ceiling analysis with offshore EBITDA, hard currency available cash and committed credit facilities in hard currency failing to cover the company's hard currency annual interest expense on a consolidated basis based.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
Liquidity and Debt Structure
Solid Liquidity: The company's liquidity continues to be solid. As of March 2023, Enel Americas reported USD2.5 billion of cash and equivalents, where approximately 6% is denominated in USD and the remaining portion allocated in different currencies due to the nature of its operations. The company's liquidity is further buoyed by available committed credit lines totalling USD1.3 billion. The company faces short-term financial debt of USD1.3 billion during the next 12 months.
Issuer Profile
Enel Americas and its subsidiaries generate, transport and distribute energy in South American and Central America. Enel Americas is Latin America's largest privately-owned energy company; Enel SpA owns 82.3%. As of the end of 2022, Enel Americas supplied energy to more than 23.3 million clients with gross energy sales over 88 TWh.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
ENEL AMÉRICAS S.A. 
