Compania de Transporte Energia
Tear Sheet: Transener To Issue New Bond To Fund New Projects Amid Higher Projected Costs Under Current Investment Plan
Fri 06/09/2017 12:44 PM
Relevant Documents:
2-Pager (Reorg Analysis Page)
Investment Plan 2017-2021 (Spanish)
Concession Contract
New Tariff Plan
Argentinean company Transener, the largest high voltage power transmission company in the country, plans to issue a new bond this year to fund capital expenditures related to its five-year investment plan. The company is seeking to raise nearly 3.5 billion Argentine pesos ($220 million) to fund transmission network extensions and maintenance programs demanding higher investing activity throughout year 2021. Proceeds from the new bond could also be used to refinance outstanding liabilities and fund working capital needs.
During Transener’s latest shareholders meeting, the company approved the creation of a new global bond program for a total amount outstanding of up to $500 million ahead of committed investments for the next five years. Jorge Lapeña, Transener’s president of the board, said during the meeting that the new program will allow the company to access both local and international markets “with a more agile instrument to raise funds”, through a bond issuance that could include several series in either U.S. dollars or Argentine peso-denominated bonds.
The company’s plans to issue new bonds after the government granted a tariff increase in March following the public hearings on the country’s regulated electricity transportation tariffs. Under Resolution 66 issued earlier this year, and in force since February, the government granted Transener an increase on the regulated tariff resulting in a ARS 3.3 billion annual increase for the company for the five-year period between 2017 and 2021. In exchange for the tariff update, Transener committed to invest nearly ARS 3.5 billion during the same period to fund capital and operating expenditures to improve and extend the quality and network coverage of the concession, according to the terms of the plan.
After several years of tariff freeze, the update in tariff helped Transener’s profit in the first quarter of 2017 increased to ARS 434 million, from a loss of ARS 112 million in the same period last year. Regulated revenue in the three months to March 31 increased almost four times to ARS 1.1 billion, from the ARS 326 million generated in the first quarter of 2016, driven by a ARS 694 million increase arising from the new tariff plan in force since February. The company generated ARS 663 million of adjusted EBITDA in the quarter compared to ARS 9 million in the same period last year, as costs rose at a lower pace against revenue.
As at 2016 year-end, Transener had ARS 1.6 billion of debt, comprising only its 9.75% bonds due August 2021. Cash balance as at Dec. 31 was ARS 66.5 million while net debt was ARS 1.5 billion as at 2016 year-end. Net leverage on EBITDA and Adjusted EBITDA was 7.1x and 4.4x respectively. The company’s capital structure, as at Dec 31 is shown below.
As part of the tariff review process, under the government's plan to reduce subsidies and reduce costs of energy supply, the company agreed to make ARS 3.3 billion investments during the next five years, of which nearly ARS 1.5 billion are due for this and next year. According to the plan, the company will invest 68% of the total estimated amount in equipment replacement and the rest in civil engineering and construction works, under 2,158 infrastructure works across the country.
Transener expects a rise in operating and investments activities after five years in which “the increase in the costs of the inputs and other services have affected operating activities” hurting maintenance and other investments, as disclosed to regulator to support a tariff increase ahead of the public hearings. The company projects, among other things, a 118% increase in general maintenance costs this year, compared with 2015, and a 58% increase in costs related to equipments during the same period.
Transener operates and maintains a high voltage transmission network covering the country consisting of 14,489 km, of 500kV and 220kV transmission lines of which is the sole and direct operator of 12,383 km, or 85.4% of the country’s high voltage national network. The company also provides technical assistance and supervises independent transmission companies operating the remaining 2,106 km network across several provinces in the country. Through its controlled company Empresa de Transporte de Energía Eléctrica por Distribución Troncal de la Provincia de Buenos Aires, Transba S.A., Transener operates and maintains additional 6.159 km of high voltage transmission lines in the province of Buenos Aires.
The company began operations in July 1993 under the concession contract granted by the government under Decree 2743 issued in 1992 and Decree 1501 passed in 1993 for the operation and maintenance of the argentine Sistema de Transporte de Energía Eléctrica en Extra Alta Tensión, or national high voltage transportation system, in the country. Nearly 54% of the company’s regulated revenue comes from the local energy distribution companies, while the remaining 28% and 18% of regulated income comes from large electricity users and electricity generators, respectively.
In recent years, the company was subject to delays in an agreed plan on tariff updates subject to costs increases, as included in the terms of the concession contract. During the public hearings, Carlos Garcia Pereira, Transner’s representative, said the resulting tariff increase arrived “11 years later than the period established by the government”. This is after signing two agreements to receive compensations on higher costs recognition with the former administration in 2010 and 2013, which were both breached.
Transener’s and subsidiary Transba transmission system network is reproduced below:
Transener is part of Pampa Energia holding group through Pampa’s subsidiary Pampa Participaciones. Transener’s is controlled by Citelec, holder of nearly 53% in the company’s equity stake and voting rights, with the state-controlled oil company Enarsa and social security agency Anses among the largest equity holders in the company. The company’s ownership structure is reproduced below:
2-Pager (Reorg Analysis Page)
Investment Plan 2017-2021 (Spanish)
Concession Contract
New Tariff Plan
Argentinean company Transener, the largest high voltage power transmission company in the country, plans to issue a new bond this year to fund capital expenditures related to its five-year investment plan. The company is seeking to raise nearly 3.5 billion Argentine pesos ($220 million) to fund transmission network extensions and maintenance programs demanding higher investing activity throughout year 2021. Proceeds from the new bond could also be used to refinance outstanding liabilities and fund working capital needs.
During Transener’s latest shareholders meeting, the company approved the creation of a new global bond program for a total amount outstanding of up to $500 million ahead of committed investments for the next five years. Jorge Lapeña, Transener’s president of the board, said during the meeting that the new program will allow the company to access both local and international markets “with a more agile instrument to raise funds”, through a bond issuance that could include several series in either U.S. dollars or Argentine peso-denominated bonds.
The company’s plans to issue new bonds after the government granted a tariff increase in March following the public hearings on the country’s regulated electricity transportation tariffs. Under Resolution 66 issued earlier this year, and in force since February, the government granted Transener an increase on the regulated tariff resulting in a ARS 3.3 billion annual increase for the company for the five-year period between 2017 and 2021. In exchange for the tariff update, Transener committed to invest nearly ARS 3.5 billion during the same period to fund capital and operating expenditures to improve and extend the quality and network coverage of the concession, according to the terms of the plan.
After several years of tariff freeze, the update in tariff helped Transener’s profit in the first quarter of 2017 increased to ARS 434 million, from a loss of ARS 112 million in the same period last year. Regulated revenue in the three months to March 31 increased almost four times to ARS 1.1 billion, from the ARS 326 million generated in the first quarter of 2016, driven by a ARS 694 million increase arising from the new tariff plan in force since February. The company generated ARS 663 million of adjusted EBITDA in the quarter compared to ARS 9 million in the same period last year, as costs rose at a lower pace against revenue.
As at 2016 year-end, Transener had ARS 1.6 billion of debt, comprising only its 9.75% bonds due August 2021. Cash balance as at Dec. 31 was ARS 66.5 million while net debt was ARS 1.5 billion as at 2016 year-end. Net leverage on EBITDA and Adjusted EBITDA was 7.1x and 4.4x respectively. The company’s capital structure, as at Dec 31 is shown below.
As part of the tariff review process, under the government's plan to reduce subsidies and reduce costs of energy supply, the company agreed to make ARS 3.3 billion investments during the next five years, of which nearly ARS 1.5 billion are due for this and next year. According to the plan, the company will invest 68% of the total estimated amount in equipment replacement and the rest in civil engineering and construction works, under 2,158 infrastructure works across the country.
Transener expects a rise in operating and investments activities after five years in which “the increase in the costs of the inputs and other services have affected operating activities” hurting maintenance and other investments, as disclosed to regulator to support a tariff increase ahead of the public hearings. The company projects, among other things, a 118% increase in general maintenance costs this year, compared with 2015, and a 58% increase in costs related to equipments during the same period.
Transener operates and maintains a high voltage transmission network covering the country consisting of 14,489 km, of 500kV and 220kV transmission lines of which is the sole and direct operator of 12,383 km, or 85.4% of the country’s high voltage national network. The company also provides technical assistance and supervises independent transmission companies operating the remaining 2,106 km network across several provinces in the country. Through its controlled company Empresa de Transporte de Energía Eléctrica por Distribución Troncal de la Provincia de Buenos Aires, Transba S.A., Transener operates and maintains additional 6.159 km of high voltage transmission lines in the province of Buenos Aires.
The company began operations in July 1993 under the concession contract granted by the government under Decree 2743 issued in 1992 and Decree 1501 passed in 1993 for the operation and maintenance of the argentine Sistema de Transporte de Energía Eléctrica en Extra Alta Tensión, or national high voltage transportation system, in the country. Nearly 54% of the company’s regulated revenue comes from the local energy distribution companies, while the remaining 28% and 18% of regulated income comes from large electricity users and electricity generators, respectively.
In recent years, the company was subject to delays in an agreed plan on tariff updates subject to costs increases, as included in the terms of the concession contract. During the public hearings, Carlos Garcia Pereira, Transner’s representative, said the resulting tariff increase arrived “11 years later than the period established by the government”. This is after signing two agreements to receive compensations on higher costs recognition with the former administration in 2010 and 2013, which were both breached.
Transener’s and subsidiary Transba transmission system network is reproduced below:
Transener is part of Pampa Energia holding group through Pampa’s subsidiary Pampa Participaciones. Transener’s is controlled by Citelec, holder of nearly 53% in the company’s equity stake and voting rights, with the state-controlled oil company Enarsa and social security agency Anses among the largest equity holders in the company. The company’s ownership structure is reproduced below:
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