/raid1/www/Hosts/bankrupt/TCRLA_Public/240508.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, May 8, 2024, Vol. 25, No. 93
Headlines
A R G E N T I N A
ARGENTINA: Gets Roadmap for OECD Ascension
B R A Z I L
ACU PETROLEO: Moody's Affirms Ba2 Sr. Sec. Rating, Outlook Now Pos.
BRAZIL: Compensation Offer in Mariana Tragedy at Risk of Rejection
BRAZIL: Industrial Sector Saw Fluctuating Fortunes in March
CENTRAIS ELETRICAS: Moody's Affirms 'Ba2' CFR, Outlook Stable
COMPANHIA ENERGETICA: Moody's Affirms 'Ba2' CFR, Outlook Now Pos.
GERDAU SA: 2024 Turnaround Sparks Investor Interest
TRANSPORTADORA ASSOCIADA: Moody's Affirms Ba1 CFR, Outlook Now Pos.
C A Y M A N I S L A N D S
TRIDENT ENERGY: S&P Assigns 'B-' ICR, On CreditWatch Positive
J A M A I C A
JAMAICA: BOJ Says 3.85 Million RTGS Transactions Processed in 2023
JAMAICA: Gov't. Notes Below Target Tax Revenues
P U E R T O R I C O
ONE ALLIANCE: A.M. Best Affirms B(Fair) Financial Strength Rating
- - - - -
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A R G E N T I N A
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ARGENTINA: Gets Roadmap for OECD Ascension
------------------------------------------
Buenos Aires Times reports that Argentina has been given the
roadmap it must implement if it is to finally become a member of
the Organization for Economic Co-operation and Development, the
institution that brings together the biggest democratic economies
in the world.
Foreign Minister Diana Mondino received the formal roadmap from
OECD Secretary-General Australian Mathias Cormann, during a
ceremony held at the organisation's headquarters in Paris,
according to Buenos Aires Times.
"The process has accelerated very significantly in the last four
months [since President Javier Milei took office]. Now the work
begins in earnest," Mondino told the press afterwards, specifying
that Argentina will establish "its own policies" based on the
advice, the report notes.
Argentina formally applied to join the OECD in 2016 under former
president Mauricio Macri. Six years later - and following the
ejection of a Peronist government from office - the OECD is willing
to start the process, the report relays.
A number of other nations are also in the process of ascension,
including Brazil, Peru, Bulgaria, Croatia and Romania, the reprot
discloses. Unlike those nations, Argentina was not given a road
map in June 2022, despite "positive conversations" with former
president Alberto Fernandez, said Cormann, the report says.
Mondino has been given a document outlining the methods and
conditions for membership. The OECD will examine such areas as
trade, investment, anti-corruption policies and climate change, the
report notes.
"It is about working on all OECD standards and best practices to
help Argentina improve its economic growth and the lives of its
people," said Cormann, who hailed the "historic moment," the report
relays.
The breakthrough in the accession process comes two days after the
government won approval in Congress for President Milei's sweeping
‘omnibus' bill and accompanying fiscal package, which - if they
clear the Senate - would massively deregulate the economy, the
report relates.
Buenos Aires Times discloses that Milei's government won the firm
backing of OECD chief economist Clare Lombardelli, who offered a
presentation of the organisation's take on Argentina, the report
notes.
"The government is now implementing a very restrictive fiscal and
monetary policy to control inflation. It is the right thing to do,
but it will take time to bear fruit," said Lombardelli, the report
relays.
For the British economist, reducing inflation "is the priority to
help people who suffered really hard times," but she acknowledged
that this "will, of course, be a painful process," the report
discloses.
According to the report, Argentina's economy will contract by 3.3
percent this year - a full point worse than previously projected.
The OECD predicts growth of 2.7 percent in 2025, the report says.
Regarding inflation, the OECD projects an annual rate of 208.1
percent in 2024, falling to 71.2 percent in 2025, the report
notes.
"High inflation, a considerable but necessary fiscal adjustment and
political uncertainty will weigh on private consumption and
investment for most of 2024," the report reads, Buenos Aires Times
notes.
The OECD called for continued " fiscal consolidation" and estimated
that "planned reforms to ease regulatory burdens, improve the
business environment and open the economy to international trade"
will help "curb poverty," Buenos Aires Times relays.
Mondino said Argentina is keen to eliminate the "scourge of
inflation" and would establish "clear rules" to foster "growth" and
"development," the report notes.
Four Latin American countries - Chile, Costa Rica, Colombia and
Mexico - are already part of the OECD, which was founded in 1961
and whose 38 members account for around 80 percent of global trade
and investment, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year 2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating.
The outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
===========
B R A Z I L
===========
ACU PETROLEO: Moody's Affirms Ba2 Sr. Sec. Rating, Outlook Now Pos.
-------------------------------------------------------------------
Moody's Ratings has changed to positive from stable the outlook of
Acu Petroleo Luxembourg S.A R.L. At the same time, the Ba2 $600
million backed senior secured rating, guaranteed by Vast
Infraestrutura S.A., was affirmed.
The rating action follows Moody's change in outlook on the Ba2
rating of the Government of Brazil to positive from stable, on May
1, 2024.
RATINGS RATIONALE
RATIONALE FOR POSITIVE OUTLOOK
The change in the outlook to positive reflects the positive outlook
on the Government of Brazil (Ba2 positive) and the likelihood that
Açu Petroleo's rating will be upgraded if the sovereign rating is
upgraded. Açu Petroleo's rating is currently constrained by the
sovereign rating given its indirect reliance on the government
through operating licenses, susceptibility of profit variation with
changes in taxes or other forms of government interference, such as
capital controls.
The positive outlook further incorporates Moody's view that the
project's financial profile will remain strong over the next 12-18
months, with a legal Debt Service Coverage Ratio (DSCR) at or above
2.0x.
RATIONALE FOR RATING AFFIRMATION
The rating affirmation is underpinned by Açu Petroleo's strong
competitive position and service area; and as the only private
terminal of oil transshipment in the country, the project is well
positioned to capture current and future increases in Brazil's
offshore oil production. Brazil's national oil and gas company
Petroleo Brasileiro S.A. – PETROBRAS (Ba1 stable) 2024-28
business plan foresees the beginning of operations of thirteen new
Floating Production Storage and Offloading (FPSO) between 2024 and
2028.
The rating also benefits from its project finance credit
enhancements, such as the six-month debt service and operation and
maintenance reserve accounts (DSRA and OMRA); rights on future
receivables, pledge of the port's assets and shares of the Açu
Petroleo to ensure step-in rights under an event of default.
Although fully amortizing until 2035, the structure also benefits
from a delayed amortization schedule with no mandatory principal
payments before 2026. Additionally, it encompasses a cash sweep
mechanism that allows for a full repayment with excess cash until
2031, along with distribution tests and limitations on the
incurrence of additional debt. As of May 2024, the company has made
all the cash sweep payments and is compliant with the target
amortization schedule.
In addition to the sovereign rating constraint, the rating is
limited by the project's exposure to revenue volatility due to the
lack of long-term take-or-pay contracts, as well as to
re-contracting risk and ultimately to the volatility in oil prices.
The port's ownership structure encompass contractual arrangements
under which Vast Infraestrutura is subject to a Port Access
Contract with rights to use of port facilities held by Ferroport
Logistica Comercial Exportadora S.A. ("Ferroport") subject to a fee
payment. In addition, the debt structure allows for the issuance of
additional debt and incorporation of subsidiaries, subject to
certain financial covenants and ratings affirmation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upgrade of the rating of the Government of Brazil, coupled with
a projected maintenance of Açu Petroleo's legal DSCR above 2.0x,
would result in an upgrade of the rating of Açu Petroleo.
The rating could be downgraded if there is a sustained
deterioration in the Company's operating performance such that
legal DSCR remains below 1.5x on sustained basis. Negative rating
pressure could arise if (i) the expected proportion of long-term
Take or Pay ("ToP") volume declines, (ii) re-contracting the excess
capacity at less favorable terms, or (iii) if there is a
deterioration in the shareholder's or Anglo American Minerio de
Ferro Brasil ("AAMFB") commitment to the port operations that is
detrimental to the credit quality of the Company. Also, negative
pressure on the Notes rating would increase with Moody's perception
of structural subordination arising from non-recourse debt issuance
at permitted project finance subsidiaries of Açu Petroleo, or of a
deterioration in the credit quality of the Eligible Credit
Instrument ("ECI") providers, which are local financial
institutions.
The principal methodology used in this rating was Privately Managed
Ports published in April 2023.
BRAZIL: Compensation Offer in Mariana Tragedy at Risk of Rejection
------------------------------------------------------------------
Iolanda Fonseca at Rio Times Online reports that nearly a decade
after the Mariana dam disaster, Vale and BHP Billiton, partners in
Samarco, are at risk of having their BRL127 billion ($25 billion)
compensation offer rejected.
The potential refusal would come from the governments of Minas
Gerais and Espirito Santo, according to Rio Times Online.
A joint governmental response is anticipated, with expectations
leaning towards disapproval, the report notes.
Initially, the miners had raised their proposal from BRL42 billion
to BRL72 billion. This increase aimed to settle longstanding legal
disputes, the report relays.
Officials criticized the offer as insincere, particularly for the
drastic reduction in planned debris removal from the Rio Doce --
from 9 million to 900,000 cubic meters, the report discloses.
This breach, Brazil's most severe environmental crisis, spilled 40
million tons of waste into the river, severely affecting local
water sources and ecosystems, the report notes.
Now, the potential for a historic environmental reparation
agreement is at risk, contingent on both parties reaching a
consensus, the report relays.
Adding to the strain, the companies publicly disclosed the offer, a
move seen as untrustworthy since it breached confidentiality terms,
the report says.
This proposal included about BRL37 billion already spent by the
Renova Foundation, the report discloses.
Yet, courts have since dictated higher payouts, further
complicating the financial dynamics of the settlement, the report
notes.
Recent rulings have required miners to pay billions more for moral
damages and recovery in newly recognized regions, the report
relays.
These decisions increase demands for larger settlements, urging
firms to reevaluate their financial commitments, the report note.
Vale and BHP Billiton sought to cap future liabilities for damages,
encountering resistance from officials concerned about ongoing
health impacts, the report relays.
This deadlock suggests a potential shift from negotiation tables to
political arenas, possibly involving higher governmental
intervention, the report says.
Despite challenges, Vale, BHP, and Samarco affirm their dedication
to reaching an equitable agreement, the report notes.
They stress their commitment to rectify the harm and restore
environmental conditions, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed
the Government of Brazil's long-term issuer and senior unsecured
bond ratings at Ba2, senior unsecured shelf rating at (P)Ba2 and
changed the outlook to positive from stable. Moody's assesses that
Brazil's real GDP growth prospects are more robust than in the
pre-pandemic years, supported by the implementation of structural
reforms over multiple administrations, as well as the presence of
institutional guardrails that reduce uncertainty around future
policy direction. The outlook change to positive is underpinned
by Moody's assessment that more robust growth combined with
continued, albeit gradual, progress towards fiscal consolidation,
may allow Brazil's debt burden to stabilize. However, there are
risks to the government's execution of continued fiscal
consolidation.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain
a strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. Fitch said Brazil's ratings are supported by its large
and
diverse economy, high per-capita income, and deep domestic markets
and a large cash cushion that support the sovereign's financing
flexibility and its high local-currency debt share. Strong
external
finances support resilience to shocks, underpinned by a flexible
exchange rate, robust international reserves and a sovereign net
external creditor position. The ratings are constrained by weak
economic growth potential, relatively low governance scores, high
and rising government debt/GDP, and budgetary rigidities. A new
fiscal framework introduced this year aims to anchor a gradual
consolidation process and address these fiscal weaknesses, but its
effectiveness is increasingly unclear.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term
Foreign and Local Currency - Issuer Ratings to BB from BB (low).
At the same time, DBRS Morningstar confirmed Brazil's
Short-term Foreign and Local Currency - Issuer Ratings at R-4.
The trend on all ratings is Stable (March 2018).
BRAZIL: Industrial Sector Saw Fluctuating Fortunes in March
-----------------------------------------------------------
Rio Times Online reports that in March 2024, Brazil's industrial
sector saw a modest increase of 0.9% from February, as reported by
the Brazilian stats agency IBGE.
This uptick continued the growth from the previous month's 0.1%
rise, marking the second consecutive monthly increase, according to
Rio Times Online.
However, when compared year-over-year, March experienced a 2.8%
decline, halting a seven-month run of positive results, the report
notes.
The first quarter showed more promising signs, with the sector
expanding by 1.9%, the report relays.
Yet, the annualized growth rate slowed to 0.7%, down from
February's 1.0%, the report discloses.
This mixed performance underscores the ongoing challenges and
resilience within Brazil's industrial landscape, the report notes.
Amidst these fluctuations, only five out of 25 surveyed industrial
sectors saw production increases in March, the report says.
The food products sector grew by 1.0%, textiles by 4.5%, and
printing and reproduction of recorded media jumped by 8.2%, the
report relays.
The extractive industries also saw a modest gain of 0.2%, the
report notes.
These sectors represent bright spots, showing robustness in
specific industries despite broader economic pressures, the report
discloses.
Contrastingly, several sectors faced setbacks, the report says.
Automotive production dropped by 6.0%, and computer, electronic,
and optical products plummeted by 13.3%, the report relays.
The chemical sector shrank by 2.0%, while metallurgy, pulp, paper,
and paper products declined by 2.6% and 2.8%, respectively, the
report says.
Moreover, miscellaneous manufacturing took a significant hit,
dropping by 9.7%, the report relays.
Other declines included leather and travel items (6.0%), apparel
and accessories (4.5%), non-metallic mineral products (3.2%), and
metal products (2.6%), the report discloses.
Despite these downturns, intermediate goods managed an increase of
1.2%, and semi and non-durable consumer goods rose by 0.9%, the
report relays.
However, durable consumer goods and capital goods fell by 4.2% and
2.8%, indicating variability across different product categories,
the report notes.
This pattern of mixed results in Brazil's industrial production
highlights the complex dynamics affecting various sectors,
influenced by both domestic and international economic conditions,
the report relays.
The resilience in some sectors contrasts sharply with the
challenges in others, painting a picture of an industrial landscape
at a crossroads, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed
the Government of Brazil's long-term issuer and senior unsecured
bond ratings at Ba2, senior unsecured shelf rating at (P)Ba2 and
changed the outlook to positive from stable. Moody's assesses that
Brazil's real GDP growth prospects are more robust than in the
pre-pandemic years, supported by the implementation of structural
reforms over multiple administrations, as well as the presence of
institutional guardrails that reduce uncertainty around future
policy direction. The outlook change to positive is underpinned
by Moody's assessment that more robust growth combined with
continued, albeit gradual, progress towards fiscal consolidation,
may allow Brazil's debt burden to stabilize. However, there are
risks to the government's execution of continued fiscal
consolidation.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain
a strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. Fitch said Brazil's ratings are supported by its large
and
diverse economy, high per-capita income, and deep domestic markets
and a large cash cushion that support the sovereign's financing
flexibility and its high local-currency debt share. Strong
external
finances support resilience to shocks, underpinned by a flexible
exchange rate, robust international reserves and a sovereign net
external creditor position. The ratings are constrained by weak
economic growth potential, relatively low governance scores, high
and rising government debt/GDP, and budgetary rigidities. A new
fiscal framework introduced this year aims to anchor a gradual
consolidation process and address these fiscal weaknesses, but its
effectiveness is increasingly unclear.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term
Foreign and Local Currency - Issuer Ratings to BB from BB (low).
At the same time, DBRS Morningstar confirmed Brazil's
Short-term Foreign and Local Currency - Issuer Ratings at R-4.
The trend on all ratings is Stable (March 2018).
CENTRAIS ELETRICAS: Moody's Affirms 'Ba2' CFR, Outlook Stable
-------------------------------------------------------------
Moody's Ratings has affirmed Centrais Eletricas Brasileiras SA -
Eletrobras' (Eletrobras) Corporate Family Rating at Ba2 and
Baseline Credit Assessment (BCA) at ba3, outlook remains stable.
The rating action follows Moody's change in outlook on the Ba2
rating of the Government of Brazil to positive from stable, on May
01, 2024.
RATINGS RATIONALE
RATIONALE FOR RATING AFFIRMATION
As a government-related issuer (GRI), Eletrobras Ba2 Corporate
Family Rating takes into consideration the application of Moody's
Joint Default Analysis. This framework incorporates: (i) the
assigned ba3 BCA, a measure of the company's standalone credit
risk, (ii) Moody's assumption of high degree of default dependence
between the company and the Government of Brazil (Ba2 positive) and
(iii) a Moody's view of moderate likelihood of extraordinary
government support in case of the company's need.
The ba3 BCA acknowledges the company's dominant position in the
local market and its strong business profile following the renewal
of hydropower concessions and the growing share of transmission
revenues, which add predictability to the company's cash flows.
Nonetheless, it also reflects Moody's expectation that the
company's prospective capital structure and future cash flows will
remain challenged by the increasing exposure to uncontracted
revenues, amid lower than anticipated market-based power prices in
Brazil, and growing investment plans that will limit the pace of
deleveraging through 2027. The rating's base case considers the
company's cash flow from operations (CFO) pre-working capital (CFO
pre-WC)/net debt will trend below 10%, with interest coverage
ranging around 2.0x over the next three years. These metrics do not
include BRL25.8 billion off-balance guarantees to debt issued by
unconsolidated subsidiaries and contingencies of around BRL26.5
billion.
A more favorable growth dynamic in the local economy that is
reflected in the Government of Brazil's outlook to positive, will
benefit Eletrobras' power generation business. Nonetheless, the
company's Ba2 CFR, would not be immediately impacted by an upgrade
of the sovereign rating given the company's intrinsic credit risks.
Particularly, its elevated leverage, the execution risks on a large
investment program and its growing recontracting needs.
RATIONALE FOR STABLE OUTLOOK
The stable outlook on Eletrobras' rating incorporates Moody's views
that the company will prudently manage its cash balances over the
next 12 to 18 months to maintain adequate liquidity ahead of
upcoming debt and investment obligations. As of December 2023, the
company reported consolidated cash balance of approximately BRL19
billion, which was further bolstered during the first quarter of
this year with BRL5.5 billion debt issuances in the local capital
market. The proceeds from these transactions along with the cash
balance outstanding are sufficient to cover the company's
consolidated obligations for the upcoming 12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of Eletrobras' Ba2 rating is unlikely over the next
12-18 months because the company's credit metrics will remain
relatively weak for its rating category. An upgrade would depend on
the company's deleveraging trajectory while also maintaining an
adequate liquidity profile. Quantitatively, positive rating
pressure on the standalone credit profile would materialize if:
(i)(CFO pre-WC/net debt stays above 20% on a sustained basis, and
(ii) interest coverage ratio approaches 4.2x on a sustained basis.
A rating's upgrade would also depend on a similar action on the
Government of Brazil's rating.
Conversely, ratings could be downgraded if there is a strategic
shift toward a more aggressive financial policy that encompasses
higher dividend payouts or leveraged acquisitions. Evidence of
detrimental government or regulatory intervention would also
increase negative rating pressure. Quantitatively, a rating
downgrade would be contemplated if the CFO pre-WC to total net debt
ratio persistently remains below 10% and the interest coverage
ratio lingers below 2.8x for a prolonged period.
Headquartered in Rio de Janeiro, Centrais Eletricas Brasileiras SA
- Eletrobras is a holding company in which federal government has a
42.7% stake in the overall share capital. Eletrobras is the
country's largest energy company with a total installed capacity of
43 gigawatts (GW), equivalent to 22% of Brazil's total power
generation segment and interests on a total of 73,789 kilometers
(km) high voltage transmission lines, equivalent to 38% of the
country's electricity network.
Investments are held under separate subsidiaries, being Furnas,
Chesf and Eletronorte the largest ones. In the last twelve months
ended December 30, 2023, the company's net revenues reached BRL37.1
billion, according to Moody's standard adjustments, of which 59%
derived from the generation business and 41% from the transmission
segment.
The company's organizational structure has been evolving in recent
years, as a result of a long-term strategic business plan
incorporating initiatives to enhance internal controls, to improve
operating efficiency and to extract greater synergies from its core
businesses of renewable power generation and transmission.
Following the privatization of Eletrobras, the government
established a new state-owned company called Empresa Brasileira de
Participações em Energia Nuclear e Binacional S.A. (ENBPar) to
retain control of Eletronuclear, operator of nuclear power plant,
and Itaipu, hydropower subsidiary. According to Brazil's
Constitution, the federal government holds a monopoly over nuclear
plant operations, and according to the Itaipu agreement between
Brazil and Paraguay, the Brazilian government is accountable for
the Brazilian stake in the hydroelectric plant. In June 2022,
Eletrobras transferred its entire stake in Itaipu to ENBPar.
Additionally, in the same month, Eletronuclear issued new shares
reducing Eletrobras' ownership interest in the company to 35.9%.
The methodologies used in these ratings were Unregulated Utilities
and Unregulated Power Companies published in December 2023.
COMPANHIA ENERGETICA: Moody's Affirms 'Ba2' CFR, Outlook Now Pos.
-----------------------------------------------------------------
Moody's Ratings has changed to positive from stable the outlook of
Companhia Energetica de Minas Gerais - CEMIG (CEMIG) and its
subsidiaries, Cemig Distribuicao S.A. (CEMIG D) and Cemig Geracao e
Transmissao S.A. (CEMIG GT). Simultaneously, Moody's have affirmed
the Ba2 CFR, ba2 Baseline Credit Assessment (BCA) ratings for CEMIG
and Ba2 long term issuer rating and ba2 BCAs for its subsidiaries.
These rating actions follow Moody's change in outlook on the Ba2
rating of the Government of Brazil to positive from stable, on May
1, 2024.
RATINGS RATIONALE
RATIONALE FOR POSITIVE OUTLOOK
The ratings' outlook change to positive from stable aligns with the
outlook change on the rating of the Government of Brazil (Ba2
positive). This alignment implies that an improvement in the
sovereign rating may lead to a rating of CEMIG and its
subsidiaries' ratings. CEMIG's robust credit profile is currently
constrained by that of the sovereign given its local revenue base
and regulated business profile, among other considerations.
RATIONALE FOR RATING AFFIRMATION
CEMIG's Ba2 Corporate Family Rating results from the application of
Moody's Joint Default Analysis (JDA) framework for
government-related issuers, which considers the following input
factors: a BCA of ba2 as measure of CEMIG standalone credit
worthiness; the B2 rating of the State of Minas Gerais as CEMIG's
controlling shareholder and support provider; Moody's estimate of
moderate implied government support in the case of financial
distress; and a high default dependence between CEMIG and the State
of Minas Gerais. Moody's acknowledges the much weaker credit
quality of the State of Minas Gerais constrains the company's
ability to receive timely financial support, if needed.
Nonetheless, Moody's assume that some form of extraordinary support
from the state or indirectly from the central government would be
forthcoming in a stress scenario given the essential nature of its
regulated services.
CEMIG's BCA of ba2 is based on its consolidated business and
financial profile, encompassing a large scale and diverse
electricity operations that sustain strong credit metrics, despite
the still high interest rates and inflationary challenges in
Brazil. The ratings' base case considers that consolidated leverage
metrics will remain robust for the next three years, with the cash
flow from operations (CFO) pre-working capital (WC)/debt and
interest coverage ratios staying above 30% and 4.0x, respectively.
The analysis also considers the credit linkages with its
controlling shareholder, the State of Minas Gerais (B2, positive),
and with the Government of Brazil (Ba2 positive), given the highly
regulated nature of its businesses, the exposure to local revenue
and the reliance on domestic funding sources.
Constraining CEMIG's credit profile are: (i) the large
off-balance-sheet contingent obligations of BRL3.3 billion related
to non-controlled subsidiaries; (ii) the renewal risk of key hydro
power concessions expiring in 2026 and 2027; and, (iii) and the
large capital expenditure program in excess of BRL5 billion per
year, which will limit the pace of leverage reduction.
CEMIG currently liquidity profile is good. In December 2023, CEMIG
reported a consolidated cash position of BRL2.3 billion, compared
with BRL2.6 billion in debt maturities in 2024. Additionally, CEMIG
has recently raised BRL2 billion via local debentures issuance of
CEMIG D and announced that it will divest its stake in Aliança
Energia S.A. for expected proceeds of approximately BRL2.8 billion.
Aliança divestment is pending regulatory approval and fulfillment
of the precedent conditions. The proceeds from these transactions
along with the cash balance outstanding are sufficient to cover the
company's obligations for the upcoming 12-18 months.
CEMIG D and CEMIG GT Issuer Ratings and BCAs mirror the rating for
the parent's consolidated credit profile, because of corporate
guarantees and cross-default clauses in their debt instruments
outstanding.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade on the ratings will develop if the Government of Brazil
is upgraded. A ratings upgrade will also consider if CEMIG's CFO
pre-WC/debt remains above 20% and interest coverage surpasses 3.5x
for a consistent period.
Conversely, a downgrade could occur if there are increased
liquidity or refinancing risks, such as delays in addressing 2024
debt maturities or a significant leverage increase. If CEMIG's
consolidated CFO pre-WC/debt falls below 13% and interest coverage
stays under 2.5x consistently, a downgrade could be considered.
Negative changes in the operating environment for Brazilian
electricity companies, due to political interference or unfavorable
regulatory changes, could also prompt a downgrade.
Based in Belo Horizonte, Minas Gerais, CEMIG is a top Brazilian
utility company with operations in electricity distribution,
generation, and transmission. It boasts a 5.5 GW installed capacity
and 7,960 km of transmission lines nationwide, including
approximately 2,960 km from its subsidiary, Taesa. The State of
Minas Gerais holds a controlling stake with 50.97% of the voting
capital, followed by FIA Dinamica (32.12%) and BNDESPAR (11.14%),
with other minority shareholders owning the remaining 5.77%. As of
December 2023, CEMIG reported Moody's-adjusted net revenue of
BRL36.8 billion and EBITDA of BRL9.9 billion.
LIST OF AFFECTED RATINGS
Issuer: Companhia Energetica de Minas Gerais - CEMIG
Affirmations:
LT Corporate Family Rating, Affirmed Ba2
Baseline Credit Assessment, Affirmed ba2
Outlook Actions:.
Outlook, Changed To Positive From Stable
Issuer: Cemig Distribuicao S.A.
Affirmations:
LT Issuer Rating, Affirmed Ba2
Baseline Credit Assessment, Affirmed ba2
Outlook Actions:.
Outlook, Changed To Positive From Stable
Issuer: Cemig Geracao e Transmissao S.A.
Affirmations:
LT Issuer Rating, Affirmed Ba2
Baseline Credit Assessment, Affirmed ba2
Outlook Actions:.
Outlook, Changed To Positive From Stable
The principal methodologies used in rating Companhia Energetica de
Minas Gerais – CEMIG and Cemig Distribuicao S.A. were Regulated
Electric and Gas Utilities published in June 2017.
GERDAU SA: 2024 Turnaround Sparks Investor Interest
---------------------------------------------------
The Rio Times reports that in early 2024, Gerdau showcased
resilience, hinting at a significant turnaround, particularly in
North America where demand and profitability remained strong.
Despite tough competition in Brazil, the company is witnessing a
recovery, aligning with the broader market improvements, according
to The Rio Times.
Known globally, Gerdau excels in producing a wide array of long
steel products critical for construction and manufacturing, the
report notes.
The financial health of Gerdau looks promising, with the company
reporting robust figures, The Rio Times relays.
Net revenue stood at BRL68.91 billion ($13.50 billion), and net
profit reached BRL7.53 billion ($1.48 billion), the report says.
Additionally, its EBITDA was BRL12.75 billion ($2.50 billion),
reflecting an 18.5% margin, the report discloses.
These results are supported by a robust asset base valued at
BRL74.88 billion ($14.68 billion), the report relays.
The company also maintains manageable debt levels, with gross and
net debts standing at BRL10.89 billion ($2.13 billion) and BRL5.54
billion ($1.09 billion), respectively, The Rio Times notes.
While facing a short-term cash flow dip due to heavy capital
investments, Gerdau's sales outlook remains optimistic, the report
relays.
The stock's current EV/EBITDA multiple of four times is notably
lower than that of its North American peers, who average eight
times, highlighting Gerdau's investment appeal, the report says.
The company benefits from a strong order book, effective
management, and strategic international presence, the report
notes.
Challenges persist, especially in domestic markets where
uncertainty looms, the report says.
Yet, with over half of its operational results driven by solid U.S.
performance, Gerdau's forward path appears promising, the report
discloses.
This robust U.S. contribution positions Gerdau as an attractive
prospect for investors focused on the steel industry's growth
potential, the report relays.
For detailed financial projections and additional insights,
Gerdau's investor relations website offers essential information
for prospective investors, the report adds.
As reported in the Troubled Company Reporter-Latin America on April
2, 2020, Moody's Investors Service affirmed Gerdau S.A.'s Ba1
corporate family rating and the Ba1 ratings of the debt issues of
Gerdau Trade Inc. (guaranteed by Gerdau S.A. and its operating
subsidiaries in Brazil) and of GTL Trade Finance Inc. (guaranteed
by Gerdau S.A. and its operating subsidiaries in Brazil), as well
as the solid waste disposal bonds issued by St. Paul Port
Authority, MN (guaranteed by Gerdau S.A.). The outlook for the
ratings was changed to stable from positive.
TRANSPORTADORA ASSOCIADA: Moody's Affirms Ba1 CFR, Outlook Now Pos.
-------------------------------------------------------------------
Moody's Ratings has changed to positive from stable the outlook of
Transportadora Associada de Gas S.A. (TAG). At the same time, the
Ba1 Corporate Family Rating was affirmed.
The rating action follows Moody's change in outlook on the Ba2
rating of the Government of Brazil to positive from stable, on May
01, 2024.
RATINGS RATIONALE
RATIONALE FOR POSITIVE OUTLOOK
The change in the outlook to positive from stable encompasses the
outlook change on the Government of Brazil (Ba2 positive). This
suggests a possible TAG rating upgrade if the sovereign rating
improves. Specifically, TAG's robust credit profile indicates a
potential for a higher rating that it is currently constrained by
the sovereign rating given its local revenue base and regulated
business profile.
RATIONALE FOR RATING AFFIRMATION
The credit profile of TAG is indicative of its significant role in
Brazil's natural gas infrastructure, owning 47% of the country's
gas pipelines. It is reinforced by stable, predictable cash flow
driven by long-term, availability based tariff contracts, adjusted
annually for inflation, minimizing volume risk until at least 2025.
TAG's robust margins and modest leverage also contribute positively
to the rating.
Conversely, the dynamic nature of Brazil's gas transportation
sector's regulatory framework restricts the rating. This evolving
landscape presents a certain degree of uncertainty. Additionally,
Moody's projections indicate that the company plans to distribute
most of the surplus cash to its shareholders within the next 12 to
18 months. However, these risks are somewhat buffered by the strong
and recurring cash generation, as well as the strong credit profile
of the shareholders.
The rating also considers direct and indirect credit ties to
Petroleo Brasileiro S.A. - PETROBRAS (Petrobras, Ba1 stable), as
the primary shipper. TAG's credit quality further benefits from the
strength of the guarantees embedded in its contractual framework
for timely revenue collection, which include: (i) a diversified
pool of receivables comprising 13 to 16 Gas Supply Agreements
(GSA); (ii) the assignment of receivables covering at least
120%-140% of TAG's monthly revenue; (iii) a separate cash
collection mechanism for the receivables that is concentrated in an
escrow account at Banco Santander (Brasil) S.A. (long-term deposits
rating Ba1 positive), independent of Petrobras' other revenues;
(iv) the ultimate provision that Petrobras has to directly deposit
the funds to restore the minimum cash balance or present of a bank
guarantee equivalent of 5x the monthly GSA receivables in case of a
default on any GSA payment.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upgrade of the rating of the Government of Brazil would result
in an upgrade of the rating of TAG. A rating upgrade will also
consider the company's ability to recontract volumes expiring in
2025 at prices that are in line or better than the rating
assumptions while maintaining a Funds from operations (FFO)/net
debt ratio above 25%, an interest coverage ratio approaching 4.0x.
A rating downgrade will result from significant a deterioration in
Petrobras credit quality, unfavorable changes in the contractual
guarantees, or adverse shifts in Brazil's regulatory environment.
Weaker shareholder support, marked by higher-than-expected dividend
distributions or a declining liquidity profile, would also increase
negative rating pressure. A downgrade would be considered if the
following credit metrics persist: (i) FFO/debt stays below 15%,
(ii) Interest coverage ratio ((FFO + Interest) / Interest) stays
below 3.0x.
Headquartered in Rio de Janeiro, TAG operates the largest gas
pipeline network in Brazil, covering 4,500 km or 47% of the
country's total pipeline length. The network spans the North,
Northeast, and Southeast regions, cutting through around 200
municipalities in ten states. Roughly 3,700 km of pipelines lie
along the coastline, from Ceará to Rio de Janeiro, with the rest
in Amazonas, connecting Urucu to Manaus. Gas distributors in these
regions depend on TAG's infrastructure. The company also manages
six gas compression stations and subcontracts five, with 14
receiving and 90 delivery gas points servicing integrated
refineries, fertilizers plants, and power plants.
TAG's shareholders include ENGIE SA (32.5%; Baa1 stable), Engie
Brasil Energia (17.5%), and Caisse de depot et placement du Quebec
("CDPQ," 50%; Aaa stable). Launched in 2002 under Petrobras,
Brazil's state-owned oil company, ENGIE and CDPQ acquired 90% of
TAG for BRL32.7 billion in 2019. They purchased the remaining 10%
for BRL1.0 billion in 2020, making TAG the first fully privately
owned Brazilian gas transportation company. As of December 2023,
TAG's net sales stood at BRL9 billion, based on Moody's standard
adjustments.
The principal methodology used in this rating was Natural Gas
Pipelines published in April 2024.
===========================
C A Y M A N I S L A N D S
===========================
TRIDENT ENERGY: S&P Assigns 'B-' ICR, On CreditWatch Positive
-------------------------------------------------------------
S&P Global Ratings assigned its 'B-' issuer and issue credit
ratings to Trident Energy LP (Trident) and its proposed senior
unsecured notes.
S&P placed the issuer credit rating on CreditWatch with positive
implications to reflect that it will likely raise the rating on
Trident by one notch when the group has completed the acquisition
in the coming quarters.
Trident Energy is a small-scale oil producer that operates in
emerging markets. The group operates offshore assets in Brazil (22
kboepd in 2023) and Equatorial Guinea (10 kboepd in 2023). It is
currently among the smallest companies we rate in the oil and gas
sector. S&P said, "It is smaller than Tullow Oil (B-/Negative/--;
63 kboepd in 2023), EnQuest (B/Stable/--; 44 kboepd in 2023), and
significantly smaller that Petro Rio S.A. (BB-/Stable/--), which we
expect will produce up to 110 kboepd this year. That said,
Trident's proved reserves (1P) of 156 million barrels of oil (bbl)
are sufficient to cover its needs for more than 10 years, given the
production rate, which is comparable to that of Petro Rio and
Kosmos Energy. Although we mainly focus on production at this
rating level since it drives cash flow generation, long reserve
lives ensure the group can sustain operations."
In addition to the relatively small size, the 'B-' rating on
Trident also reflects high risks in the group's operating countries
and its ownership by financial sponsors. Equatorial Guinea, whose
country risk is very high, contributed 31% to Trident's production
and almost 50% to EBITDA in 2023. Trident's main owners are two
financial sponsors, Warburg Pincus and Quantum Energy Partners,
with 61% and 24% shareholding, respectively, before the acquisition
in Congo. S&P said, "We typically consider private-equity owners
are more aggressive than strategic owners and therefore reflect the
risk of a less predictable financial policy in our rating. Yet we
view Trident's financial policy as relatively prudent. Its
ownership by financial sponsors currently does not cap the rating
but limits the financial risk profile at highly leveraged. We
understand that the owners are not interested in raising a
significant amount of debt at the group level. Instead, they aim to
keep Trident's net debt to EBITDA (as defined by the group) below
2x. Any increase above this level should be temporary. We expect
the owners might inject additional capital if necessary. We
therefore expect any future dividends should not lead to materially
negative discretionary cash flow. Thanks to Trident's hedging, the
balance sheet should be somewhat protected against sudden drops in
oil prices. We note, however, that the group's hedges generated a
material loss of $89 million in 2023, which we reflect in the
adjusted EBITDA. We do not expect any tangible financial effects
from hedges over 2024-2025, given our view of relatively stable
Brent oil prices over this period."
S&P said, "We think the completion of the acquisition in Congo will
strengthen Trident's business profile and enhance its scale and
diversification. The production of Trident's acquired Congolese
assets exceeded that of its Brazilian assets by about 25% in 2023.
We forecast production in Congo will remain relatively stable and
exceed its 2023 production levels by 10% over 2024-2025. After the
completion of the acquisition, Trident's production rate will be
more comparable with that of 'B' rated peers, such as EnQuest,
Seplat, and Kosmos Energy. Given Congo assets have relatively low
operating expenditure (opex) of about $14/bbl-$15/bbl, we think the
acquisition in Congo will contribute about $700 million to
Trident's full-year EBITDA, based on our view of a Brent oil price
of $80/bbl from 2025.
"After the acquisition in Congo, Trident's EBITDA could increase to
$1.1 billion-$1.2 billion in 2025. Depending on the date of the
completion of the acquisition, we estimate the group's consolidated
EBITDA might be about $700 million in 2024. Based on annual capital
expenditure (capex) of about $300 million-400 million (including
Congo), we expect Trident's generated free operating cash flow
(FOCF) could reach $200 million in 2024 and $500 million in 2025.
After the acquisition, funds from operations (FFO) to debt will
improve to about 20.0% in 2024 and 40.0% in 2025, from 4.3% in
2023. We also note that 30% of the acquisition amount is expected
to be financed by equity provided by the financial sponsors and 70%
by debt. After the acquisition, Trident's capital structure will
include the proposed senior unsecured notes which we rate in line
with the issuer credit rating, a reserve-based lending (RBL)
facility of up to $360 million, and an undrawn $250 million super
senior RBL."
Trident's Brazilian assets might experience organic growth if no
operational issues materialize. The group has been facing
challenges in Brazil since acquiring oil fields in 2020, spending
more than expected and not achieving targeted growth. Challenges
included the integrity of assets, infrastructure bottlenecks,
compliance with regulatory standards, and oil offtake by Petrobras,
leading to pressured uptime (67% in 2022). Even though reserves
remain in the ground and can be recovered later, the group had to
delay some projects, resulting in lower production growth than
anticipated over 2022-2023. To resolve this, the group invested
considerably in infrastructure and wells--which also explains high
opex of $36/bbl in Brazil, compared with $17/bbl in Equatorial
Guinea--and materially improved the uptime to an average of 81% in
2023 and to about 85% now, compared with 95% in Equatorial Guinea.
Management projects further investments over 2024-2025, meaning the
output from Brazilian assets will exceed 30 kboepd, from 22 kboepd
in 2023. S&P thinks this is feasible but recognize at the same time
Trident's challenging track record, which might lead to
fluctuations in uptime and production.
The financial performance of the Brazilian business is exposed to
the discounted market offtake contract with Petrobras. This
contract assumes that the production in Brazil is sold at a
discount to the market price. If combined with Brazil's tax on
sales and services (ICMS), the differential might add up to $20/bbl
and weigh on Trident's earnings. This exposure is likely to stay
there at least until the second half of 2026 when Trident expects
to launch a new floating storage and offloading terminal that will
enable it to sell the produced hydrocarbons outside Brazil at
market prices. S&P views positively management's efforts to
renegotiate the offtake contract conditions to diminish the
differential to the market price.
Production in Equatorial Guinea is lower than in Brazil but the
asset in Equatorial Guinea is more stable and more cost-efficient.
BP helps market oil produced in Equatorial Guinea, meaning Trident
receives better realizations that are close to the Brent price. At
the same time, opex per barrel in Equatorial Guinea was lower than
in Brazil, with about $17/bbl versus about $36/bbl in 2023. After
the acquisition in Congo, we expect operating opex per barrel will
reduce to about $17-$20 in 2025 for the consolidated business.
Trident's combined opex per bbl currently exceeds that of offshore
peers, such as Petro Rio ($11/bbl in 2022), Tullow ($12/bbl), and
EnQuest ($23/bbl).
Adjusted debt is skewed by significant asset retirement
obligations. The group's reported decommissioning liability was
close to $1.35 billion at year-end 2023, which materially exceeded
its financial debt of up to $486 million on the same date. S&P
said, "The asset retirement obligation is our usual adjustment in
the sector, but the size of this obligation is very significant in
Trident's case. That said, we also recognize that the group will
have no decommissioning cash outflows over the next few years,
which is important for a company at this rating level. In
Equatorial Guinea, the decommissioning starts only in the last
three years of the assets' lives. In Brazil, Trident has an
agreement with Petrobras for the reimbursement of a scheduled
program until 2030 (up to a certain limit). As such, we deduct the
expected receivables from Petrobras from our calculation of asset
retirement obligation liabilities, which amounted to $694 million
at year-end 2023."
S&P said, "Our rating reflects high country risks and Trident's
ability to be rated above the sovereign. Given the group's focus on
emerging markets, country risks will always be a challenge. Less
developed regulation, corruption, and piracy are issues that will
require management's attention. In this context, security risks are
less pronounced, given the assets' offshore location. The current
rating on Trident is not constrained by its exposure to lower-rated
sovereigns. Trident's meaningful EBITDA generation in Brazil
currently mitigates its exposure to Equatorial Guinea and Congo. If
the group can boost its production in Brazil and reduce the
discount to the market price, we do not anticipate sovereign
factors to constrain the rating on Trident."
CreditWatch
S&P said, "The CreditWatch positive placement reflects our
expectation that Trident will improve its credit profile when the
announced acquisition of the Congo assets is completed. We think
the increase in the size of reserves and the production scale will
likely enhance the group's scale and diversification of operations
and make it more comparable to 'B' rated peers, such as EnQuest,
Seplat, and Kosmos Energy.
"After the completion of the acquisition the fourth quarter of
2024, we expect Trident's adjusted EBITDA will increase to about
$700 million in 2024 and $1.0 billion-1.2 billion in 2025, from
$226 million in 2023. With annual capex of $300 million-400 million
over 2024-2025, FOCF could increase to $180 million-200 million
this year and up to $500 million next year. The group's credit
metrics could improve to adjusted FFO to debt of 20% in 2024 and
40% in 2025.
"We could affirm the 'B-' issuer and issue credit ratings if the
transaction does not happen. In addition, we will monitor the
operating performance of the production assets in Brazil,
especially in terms of uptime and operating costs. A material
underperformance of the Brazilian assets might put pressure on the
group's cash flow generation and liquidity.
"We could raise the issuer and issue credit ratings to 'B' if
Trident successfully completes the acquisition of the Congo assets
in the coming quarters, with the financing arranged in line with
expectations, which will increase its production profile to about
70.0 kboepd, from 32.5 kboepd in 2023.
"Environmental factors are a negative consideration in our credit
rating analysis of Trident. Similar to other oil producers, Trident
is exposed to climate transition risk, given the increasing
adoption of renewable energy sources that raises concerns about the
trajectory of oil supply and demand. In this respect, Trident's
lack of exposure to gas may put it at a disadvantage, compared with
peers that have a more balanced portfolio, because oil is more
polluting. To mitigate its low gas exposure, the group intends to
construct a floating liquefied natural gas facility. The group's
emission intensity of about 42 kilograms of carbon dioxide
(kgCO2)/boe is well above the industry average of about 17
kgCO2/boe-19 kgCO2/boe, so the group will need to deliver on its
goal of reducing emissions by 50% by 2030 to reduce the gap with
peers. Governance factors are a negative consideration, primarily
reflecting Trident's operations in countries with high-risk
profiles, including bribery and corruption. Our assessment also
takes into account private equity sponsors' generally finite
holding periods and focus on maximizing shareholder returns among
other factors."
=============
J A M A I C A
=============
JAMAICA: BOJ Says 3.85 Million RTGS Transactions Processed in 2023
------------------------------------------------------------------
RJR News reports that the Bank of Jamaica says 3.85 million Real
Time Gross Settlement (RTGS) transactions were processed in 2023.
RTGS transactions allow for real-time settlement of interbank
transactions, according to RJR News.
The figure represents both United States and Jamaica dollar
payments, the report notes.
The central bank says there was a 14.7 per cent increase in the
number of Jamaican dollar RTGS transactions, with a total value of
$35.3 trillion, the report relays.
Some 3,422 US dollar RTGS transactions were processed in 2023,
representing a 21 per cent increase over 2022, the report notes.
These transactions were valued at US$3.2 billion, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
JAMAICA: Gov't. Notes Below Target Tax Revenues
------------------------------------------------
Jamaica Observer reports that Finance Minister Nigel Clarke is now
carefully watching tax intake for the current fiscal year that
began a month ago on April 1 as new data published show the revenue
source declined more than expected.
Tax revenues fell $28 billion below target due mostly to corporate
income tax being $14 billion lower than the Government had expected
in March alone, and already the Government is sounding the alarm
that if the shortfall extends into the months ahead, it could
impact the $1.3 trillion spending plans outlined in the recent
budget debate, according to Jamaica Observer.
"It's something I have to keep my eyes on," Clarke told the Jamaica
Observer shortly after the data was released, the report notes.
"Several entities/individuals who filed did not make the indicated
tax payments within the required timeline. The Government will be
pursuing payment related to these returns via its comprehensive
compliance systems," Clarke wrote in a release, the report relays.
He outlined that the lower revenues were due to changes to the
International Financial Reporting Standards (IFRS) which have
resulted in lower taxes being declared by a number of financial
institutions, the report notes.
"The impact of the changes to the accounting standards is being
closely examined by Tax Administration Jamaica," he said, noting
that "the financial sector reported profit levels below that of the
prior year and therefore lower taxes were remitted in March 2024,"
he added.
On the evidence seen so far, Clarke is already warning that "the
underperformance of revenue in March 2024 has implications for the
programmed revenue estimates for FY 2024/25, the report relays.
The Government has therefore commenced an assessment of the options
to ensure prudent fiscal operations and the attainment of
legislated targets," he said.
Asked to clarify if the information means spending cuts are being
programmed, Clarke told the Business Observer, "This is new
information. This is information we only know April 30 every year
and we have to incorporate this new information in our plans," he
added.
He pointed out that with a lot of companies declaring, but yet to
file tax payments, "we have to see how successful Tax
Administration Jamaica is in chasing those people down," the report
notes.
But all is not gloom. Clarke pointed out that with intake from
general consumption tax up 21 per cent and from personal income tax
up 25 per cent, it shows that spending remains bouyant, the report
discloses.
"It appears that firms can't pass on all their costs, including
interest costs, and so their profit margins are being squeezed, so
we have to examine it in more detail," he added in a short chat
with the Business Observer, the report relays.
But that aside, it was pointed out that despite the development,
the country's debt-to-GDP ratio at the end of March was 72.2 per
cent, which is ahead of target, the report notes. The Government
is aiming to reduce the debt to around 60 per cent of GDP by March
2028. Clarke said the trajectory is that it could reach close to
that level, the mid-60s by March next year, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
=====================
P U E R T O R I C O
=====================
ONE ALLIANCE: A.M. Best Affirms B(Fair) Financial Strength Rating
-----------------------------------------------------------------
AM Best has revised the outlook to positive from stable for the
Financial Strength Rating (FSR) and revised the outlook to positive
from negative for the Long-Term Issuer Credit Rating (Long-Term
ICR) and affirmed the FSR of B (Fair) and the Long-Term ICR of
"bb+" (Fair) of One Alliance Insurance Corporation (One Alliance)
(San Juan, Puerto Rico).
The Credit Ratings (ratings) reflect One Alliance's balance sheet
strength, which AM Best assesses as adequate, as well as its
marginal operating performance, limited business profile and
marginal enterprise risk management.
The positive outlooks reflect the improvement in the company's
operating performance metrics over the past five years. Management
has been able to execute on its strategy, despite being a
relatively new company in a mature and highly competitive market.
One Alliance's underwriting profitability has been achieved in each
of the past three years as it reached some scalability following
significant growth reported prior to 2022, in the initial phase of
its operations. Continued profitable growth continues to depend on
management's ability to achieve its targets and manage its existing
agency and banking relationships to this end. AM Best expects
continued favorable trends over the near to intermediate term,
which could result in a rating upgrade.
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