The internal impact of the Government on companies: they lower the record of a gas company due to “regulatory uncertainty”

Cuyana Gas Distributor (DGC) is one of 9 companies providing home gas service in the country. Using the Ecogas brand, it supplies Mendoza, San Juan and San Luis. And, despite the fact that, except for fiscal year 2020, “it reported adequate credit score, no financial debt and adequate liquidity”, rating agency Moody’s only downgraded their mark and maintains a negative outlook.

The rating downgrade -in the case of DGC, it went from BBB+ to BBB- confusing companies when it comes to borrowing because it makes them more risky for investors who, therefore, ask for a higher interest rate.

When explaining the note change, Moody’s details that “since 2020 Argentina’s regulatory framework and the adequacy of regulated rates have been more uncertain, which affects the credit evaluation of companies in the sector. Moody’s expects the margins of companies in the sector worsened in 2022 due to the increase in the value of distribution below inflation expected cost “.

Charge increases have become one of the axes of disagreement between Albertists and Christians. Since last year, Minister Martín Guzmán seeks to increase values gas and electricity distributors charge at least equal to inflation. But his intent was to run on the hard wing of government.

This tug-of-war has the most excellent expression on fight between Guzman and Federico Basuldothe leader of ENRE, which is supported by La Cámpora and in favor of freezing rates.

According to Moody’s, Cuyana’s rating downgrade reflects estimates that increases in the distribution value added by Enargas in the latest addendum to the Transitional Tariff Revision ”will be found by below inflation and exchange rate fluctuations in 2022, that is margins continue to worsen EBITDA (gross profit) of the sector, which we expect to decline to an average level of 2.4% in 2022 compared to 5.7% in 2021, ”the firm said.

Internal clashes over whether or not to adjust rates and the feeling that the conflict has not been resolved have caused Moody’s to maintain a negative outlook for Cuyana.

That negative view ”reflects deciding the regulatory framework Argentina, the high uncertainty about the evolution of regulated rates and the lack of clear policies for the sectorwhich could continue to deteriorate the repayment capacity of companies in the sector over the next 12 to 18 months, ”he said.

But while the rating agency sees a gloomy outlook for the company due to the regulatory context, it surprisingly features its order numbers.

“Cuyana has been able to maintain a debt-free balance for many years, which has contributed to strong credit score, even if margins and cash flow generation are negatively affected by frozen ratessaid Moody’s.

From the signature explained, the downgrade may be worse. But Moody’s in favor of Cuyana considers the company’s higher profit margin compared to the sector average, and the efficiency policies on costs and operating costs ”that have allowed increase your level of profitability in 2021 in a context of low tariff increases ”.

NE