Fitch Affirms Instituto Costarricense de Electricidad at 'BB+'; Revises Outlook to Negative

Fitch Ratings has affirmed Instituto Costarricense de Electricidad y Subsidiarias' (Grupo ICE) foreign- and local-currency Issuer Default Ratings (IDRs) at 'BB+' as well as its national scale ratings at 'AAA(cri)' and 'AAA(slv)'. The Rating Outlook was revised to Negative from Stable. A complete list of rating actions follows at the end of this release.

These rating actions follow the revision of the sovereign rating of Costa Rica (FC and LC IDRs 'BB+') to Negative from Stable on Jan. 22, 2015. This revision reflects Costa Rica's high structural fiscal deficits, slower economic growth and difficulties in implementing tax reforms over the last decade have led to worsening debt dynamics. The sovereign maintains access to debt markets and multilateral credit lines. However, financing conditions are deteriorating due to the lower absorption capacity of the domestic public sector investor base and the rising pressure on international interest rates.

Grupo ICE's ratings reflect the strong linkage between the company and the government, which derives from government's full ownership and implicit and explicit support. The company holds strategic importance for the government given the growing demand of electricity in the country and government's plans to increase renewable generation. The ratings also reflect company's legal monopolistic position in the electricity industry, moderated indebtedness and aggressive capital expenditure program oriented to increase its generation capacity and to maintain a strong market share in the telecommunications business.

RATINGS SENSITIVITY

--Grupo ICE's ratings could be negatively affected by any combination of the following factors: sovereign downgrades; weakening of legal, operational and/or strategic ties with the government; or regulatory intervention that negatively affects the company's financial performance;

--Grupo ICE's ratings could be positively affected by an upgrade of Costa Rica's sovereign rating, or if the company is materially isolated from government interference.

Fitch has affirmed the following ratings:

--Long-term FC IDR at 'BB+'; Outlook revised to Negative from Stable;

--Long-term LC IDR at 'BB+'; Outlook revised to Negative from Stable;

--Senior unsecured debt at 'BB+';

--Long-term national scale (Costa Rica) at 'AAA(cri)'; Outlook Stable;

--Senior unsecured domestic long-term debt (Costa Rica) at 'AAA(cri)';

--Short-term debt at 'F1+(cri)';

--Long-term national scale (El Salvador) at 'AAA(slv)'; Outlook Stable;

--Senior unsecured domestic long-term debt (El Salvador) at 'AAA(slv)'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=977655

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