Latin American utilities future stable despite economy

Latin American power utilities’ credit profile will stay broadly stable in 2015, supported by sufficient liquidity and stable operational cash flow generation, according to Fitch Ratings.

Macroeconomic headwinds are expected to slow electricity demand in the region, given the strong correlation between GDP growth and energy demand in Latin America.

These headwinds should also ease the urgency to add new capacity in some the fastest growing economies of the region. Countries with uncomfortably low energy-reserve margins and/or transmission problems such as Argentina, Mexico, Panama and Venezuela will still need to develop infrastructure in the short term.

The main downside risks along with a slower than expected GDP growth include increased government intervention to curb energy tariffs, substantial shareholder distributions, and challenging hydrology conditions that could be accentuated by the El Nino weather phenomenon effect.

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