OREANDA-NEWS. S&P Global Ratings affirmed its 'BB' corporate credit rating on Inkia Energy Ltd. We also affirmed our 'BB' rating on the company's senior unsecured notes due 2021. The outlook remains stable.

The ratings affirmation reflects our view that Inkia will continue to strengthen its EBITDA generation in the next 12-24 months as a result of the consolidation of its latest acquisitions and the commencement of operations of projects that were under construction. The affirmation also reflects our expectation that due the stable and predictable cash flow generation, backed by medium - to long-term contracts, and a shrinking capital expenditure program, the company will continue to deleverage, as seen in a projected adjusted debt to EBITDA in the 3.0x-3.5x and FFO to debt above the 20% in the next several years.

The stable outlook reflects our expectations that Inkia will generate a relatively stable annual EBITDA of at least $370 million in the 12-24 months thanks to its contractual structure, as most of its generation business is contracted under medium - to long-term PPAs and the distribution business receives highly predictable availability payments. Our base-case scenario assumes an adjusted debt to EBITDA of 3.0x–3.5x and FFO to debt above 15%, excluding the non-recourse debt at the Cerro del Aguila and Samay projects.

We could lower the ratings if the company's financial performance deteriorates, for example due to a lower EBITDA stemming from lower efficiency levels at major power plants (such as Kallpa) or due to a higher exposure to the spot market that in the countries were Inkia operates is experiencing relative lower prices than in the past four years, or if we see higher-than-projected debt, resulting in permanent recourse adjusted debt to EBITDA of more than 5x. We could also lower the ratings if Inkia were to financially support its nonrecourse debt-financed projects. Under such a scenario, we would consolidate its debt or if we perceive a more aggressive acquisition policy that deviate the financial metrics significantly from our base-case projections.

An upgrade would depend mainly on an improvement in main credit metrics, for example if adjusted debt to EBITDA were to drop to 3.0x in the upcoming years or if FFO to debt surpasses the 25% threshold.