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Global Credit Research - 25 Feb 2016

Action follows the downgrade of Brazil's issuer and bond ratings to Ba2 with a negative outlook

New York, February 25, 2016 -- Moody´s Investors Service ("Moody's") took the following rating actions on its portfolio of electric utilities as a result of the downgrade of Brazil's issuer and bond ratings to Ba2 from Baa3 and the change of outlook to negative as well as the downgrade of the ratings of the States of Sao Paulo to Ba2 from Baa3 with a negative outlook, Minas Gerais to Ba3 from Ba1 with a negative outlook and Parana to Ba3/A2.br from Ba1/Aa2.br with a stable outlook on the global scale and on the National Scale Rating (NSR), respectively. For more information, please see [https://www.moodys.com/research/Moodys-downgrades-Brazils-issuer-and-bond-ratings-to-Ba2-with--PR_342928]. This rating action concludes the review for downgrade announced on December 10th, 2015

RATINGS RATIONALE

These actions reflect Moody's view that the recent sovereign and sub-sovereign rating actions, as a result of deteriorating economic and fiscal perspectives together with worsening governability and policy paralysis, will negatively affect the credit quality of the following companies:

Centrais Eletricas Brasileiras SA-Eletrobras

Corporate family ratings (CFR) downgraded to Ba3 from Ba2. Outlook changed to negative.

BRL 1,750 million in senior unsecured global bonds maturing in 2021 downgraded to Ba3 from Ba2.Outlook changed to negative.

Itaipu Binacional

Issuer ratings downgraded to Ba2 from Baa3. Outlook changed to negative.

Companhia Energetica de Sao Paulo - CESP

USD1.4 billion senior unsecured MTN program downgraded to (P)Ba2 from (P)Baa3. Outlook changed to negative.

WHAT COULD CHANGE THE RATING UP/DOWN

In light of the current rating action and the negative outlooks, an upgrade of the ratings is unlikely in the near term.

Further deterioration in the respective sovereign or sub-sovereign's credit quality could exert downward pressure on these infrastructure issuers. A downgrade would be triggered if Moody's perceives a further deterioration in the regulatory frameworks under which these companies operate. A sustained deterioration in the relevant credit metrics of the issuer could also exert downward rating pressure. Political interference in the normal course of business of these issuers could also be considered a trigger for a downgrade.

The methodologies used in rating Centrais Eletricas Brasileiras SA-Eletrobras Regulated Electric and Gas Utilities were published in December 2013, and Government-Related Issuers published in October 2014. The principal methodology used in rating ITAIPU Binacional was Unregulated Utilities and Unregulated Power Companies published in October 2014. The methodologies used in rating Companhia Energetica de Sao Paulo were Unregulated Utilities and Unregulated Power Companies published in October 2014, and Government-Related Issuers published in October 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory

 

disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Alexandre De Almeida Leite VP - Senior Credit Officer Infrastructure Finance Group Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601 Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 800-891-2518 SUBSCRIBERS: 55-11-3043-7300

William L. Hess MD - Utilities Infrastructure Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653

Releasing Office:

Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A.

JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653

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