2008-05-30 23:46:22 -

- Fitch ratings has affirmed today the long-term foreign and local currency Issuer Default Ratings (IDRs) of Transener at 'B'. Fitch has also affirmed the senior unsecured issue rating at 'B' reflecting a recovery expectation in the 'RR4' category. The Rating Outlook for all corporate ratings is Stable.

Transener's ratings reflect solid credit quality, which stems from stable and

predictable operating cash flows and its sound financial profile. The ratings are tempered by the company's exposure to the local weak regulatory environment, to growing inflation and to currency mismatch between revenues and debt.

The Stable Outlook is based on Fitch's expectations that Transener's credit metrics will remain within the parameters for its current rating category. Transener is expected to maintain adequate credit ratios despite the negative effects of cost increases and frozen tariffs. For the latest 12 months (LTM) ended March 2008, the company had funds from operations (FFO) coverage of 2.7 times (x) and net debt-to-EBITDA of 3.8x. Fitch expects the credit metrics to remain within that range over the medium term.

Transener's regulated segment provides a stable cash flow but faces a significant regulatory risk. The company's full tariff review has been indefinitely suspended by the government and no tariff adjustments to recognize increases in its cost structures have been approved. Conversely, growing inflation has affected the operating margin of the regulated segment and will continue to do so absent any tariff increases. Future non-regulated revenues are expected to benefit from the Federal Plan to expand the high-voltage transmission lines carried out mainly by the federal and provincial governments. Overall, both business segments are highly dependent on the local government.

Transener enjoys an adequate long-term debt structure with no material debt maturities between 2008 and 2012. During that period Fitch expects an average annual Free Cash Flow (FCF) of USD17 million (after interest expenses) that compares to a similar amount of capital investments. From 2013 onwards, absent any tariff increases FCF would decrease and Transener will require financing for the USD220 million notes that begin amortizing.

Transener's financial profile is characterized by adequate interest coverage and a moderate leverage. Through March 2008 (LTM) consolidated EBITDA of USD57 million was slightly weaker than in 2007, reflecting the hike in its cost structure. Conversely, EBITDA margin decreased to 36% from 45% in 2006. However, through 2008-2013 the company will benefit from supervision and operating fees associated with the Federal Plan which are expected to initially offset the impact of inflation on FFO, absent any tariff increases. Fitch expects FFO-interest-coverage on the range of 2.5x-3x over that period, consistent with the current ratings.

Transener S.A. has an exclusive concession to operate the main national high-voltage transmission grid (currently 9.100 kilometers) until 2088. Also, the company, through its 90% stake in Transba S.A., has the exclusive concession until 2092 of the transmission grid in the Province of Buenos Aires (approximately 6000 kilometers). Jointly, Transener and Transba account for approximately 95% of the national high-voltage grid. In addition, the company has non-regulated revenues associated with services provided to third parties both locally and internationally. Transener's controlling shareholder is Citelec S.A. with a 52.7% participation, while the remaining 47.3% is publicly traded. Since December 2007 Citelec is 50% owned by Pampa Holding S.A. (through Transelec Argentina S.A.), 25% by Energia Argentina S.A. (state owned company) and 25% by Electroingenieria S.A. (local company). Fitch does not expect any material impact in the operations of Transener as a result of the change in its ownership structure.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings
Ana Paula Ares, 11 5235 8100 (Buenos Aires)
Cecilia Minguillon, 11 5235 8100 (Buenos Aires)
Gianna Bern, 312-368-3217 (Chicago)
Christopher Kimble, 212-908-0226
(Media Relations, New York)