11.12.2012 16:57
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EDA - Electricidade dos Acores, S.A. -- Moody's downgrades Electricidade dos Acores's rating to B1; maintains rating under review for downgrade

London, 11 December 2012 -- Moody's Investors Service has today downgraded to B1 from Ba3 the issuer rating of EDA -- Electricidade dos Acores S.A. (EDA). The rating remains under review for further downgrade.

RATINGS RATIONALE

Moody's one-notch downgrade of EDA's rating to B1 reflects the increased refinancing risk associated with the company's approaching debt maturities. These maturities mainly include a EUR50 million bond due in Q3 2013 and a EUR20 million commercial paper (CP) programme maturing in Q4 2013. Whilst Moody's notes that EDA has recently concluded a new CP programme of EUR25 million, thus reducing refinancing needs, the company's 2013 maturities are not fully covered and remain relatively sizeable in the context of its debt profile. In addition, EDA will have to continue to renew short-term lines (currently totalling EUR39.5 million) to ensure an adequate liquidity profile.

In addition to the 2013 maturities, EDA has material funding needs in 2014, including the refinancing of EUR40 million of CP programmes, which have however been renewed in the past, and a second bond amounting to EUR50 million. Thus, Moody's downgrade of EDA's rating reflects the increased risk to the company's financial profile resulting from its sizeable refinancing requirements, particularly in the context of the current macroeconomic and financial pressures in Portugal.

The downgrade of EDA's rating also reflects delays in payment to the company of outstanding receivables, which is constraining its liquidity profile. More specifically, Moody's notes the continued delays in the repayment of overdue amounts by the Portuguese government, totalling approximately EUR41 million. In Moody's view, the pressures at the sovereign level reduce visibility in respect of the timing and likelihood of the repayment of these amounts. The constrained sovereign situation is also causing delays in the context of the finalisation of a new EUR80 million EIB loan for EDA, for which the company is providing a Portuguese government guarantee.

The continuing review for downgrade of EDA's rating reflects the risks associated with the company's approaching debt maturities in the context of the challenging macroeconomic and financial conditions resulting from sovereign pressures. The review will focus on the company's plans to remedy this situation, and the progress in achieving this.

WHAT COULD CHANGE THE RATING UP/DOWN

Given the continued review for downgrade, Moody's does not expect upward rating pressure in the short-term. Moody's would confirm EDA's rating at current levels if the company were able to strengthen its liquidity position and reduce its refinancing risk, as a result of finalising new long-term lines, extending existing facilities and/or reducing the amount of its overdue receivables.

Moody's would consider a further downgrade of EDA's rating if the company makes no near-term progress in executing a plan for refinancing its 2013 debt maturities.

PRINCIPAL METHODOLOGIES

The principal methodology used in this rating was Regulated Electric and Gas Utilities published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

EDA is the dominant vertically integrated utility in Azores. As of December 2011, the company reported revenues of EUR214 million, operating profit of EUR27 million and gross debt of EUR325 million.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

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Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Raffaella AltamuraAsst Vice President - Analyst Infrastructure Finance One Canada SquareCanary WharfLondon E14 5FA United KingdomAndrew Blease Senior Vice President Infrastructure Finance JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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