2008-03-25 23:54:30 -

- Fitch ratings has assigned 'BB-' foreign and local currency Issuer Default Ratings (IDRs) to Termocandelaria S.C.A. E.S.P. Concurrently, Fitch has assigned a 'BB-' foreign currency long-term debt to Termocandelaria Power Ltd's outstanding senior secured $90.1 million notes. The Rating Outlook is Stable.

Termocandelaria's ratings reflect the company's guaranteed reliability charges (capacity payments) during the next five years according

to Colombia's recently revised regulatory framework. Resolution CREG-071 of 2006 established a new firm capacity compensation scheme for Colombian generation companies, which favorably affected Termocandelaria and granted the company an approximately $34 to $37 million in annual, dollar linked, capacity payments until December 2012. Furthermore, resolution CREG-019 of 2008 established that existing plants will be allocated 100% of their firm energy after November 2012. Therefore, Termocandelaria is expected to continue receiving firm energy remuneration in the long term, which will equal the current firm energy times the resulting price from the energy auctions. This price is subject to a cap and floor protection for the 3 years proceeding December 2013.

Termocandelaria operates in a highly competitive electricity market dominated by low cost hydro electric generation companies. Therefore, the company does not expect to be regularly dispatched but to be a back-up generation plant for the Colombian electricity interconnected system. Furthermore, the Colombian electricity market's installed capacity sufficiently meets current demand and new capacity is not expected to be needed until 2013.

The company's historically weak financial profile reflects the company's past challenging operating environment. Unfavorable regulatory changes during 2001, coupled with high debt levels, decreasing demand and additional transmission capacity to Termocandelaria's region forced the company to decrease its dispatch to a minimum. Going forward, increased income from capacity payments should improve the company's financial profile.

The ratings do not incorporate the possible plant conversion to combined cycle given that its completion and financing is currently uncertain. The conversion may be considered neutral to negative for the company's credit profile depending on how it is financed. However, capital expenditures for this project are considered significant and might increase leverage.

Post financial restructuring trust structure provides satisfactory protection for note-holders granting them easier access to the company's assets in an event of default. The trust structure also mitigates some Change of Control issues as well as willingness issues by preventing the company from increasing leverage and requiring high debt prepayment fees. This is incorporated into the company's IDRs.

Termocandelaria is a thermoelectric generation company, located near the city of Cartagena, Colombia with a net installed capacity of 314 mega watts (MW). The company has been recently converted to operate with either natural gas or diesel, when initially only used natural gas. The company serves as a back up plant for when the country faces drought seasons and hydroelectric generation capacity is low or when transmission between the interior of the country and the north side is interrupted.

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Fitch Ratings
Lucas Aristizabal, 312-368-3260 (Chicago)
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Christopher Kimble, 212-908-0226 (Media Relations,
New York)