CariCRIS reaffirms “adequate creditworthiness” ratings of Saint Lucia Electricity Services Limited

Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the Issuer/Corporate Credit Ratings currently assigned to Saint Lucia Electricity Services Limited (LUCELEC or the Company) at CariBBB- (Foreign and Local Currency Ratings) on the regional rating scale. These ratings indicate that the level of creditworthiness of this obligor, adjudged in relation to other obligors in the Caribbean, is adequate.

CariCRIS has also maintained a stable outlook on the ratings. The stable outlook is based on the high likelihood of continued profitability, albeit at a lower level over the next 12 to 15 months. This is underpinned by continued strong electricity demand supported by good economic conditions in Saint Lucia. Revenue is, however, expected to be tempered by lower electricity prices and a likely increase in administrative expenses. Notwithstanding lower profitability, the Company is expected to generate sufficient cash flows to meet debt obligations coming due.

The ratings reflect LUCELEC’s monopoly position as Saint Lucia’s sole energy transmission and distribution (T&D) company. The ratings are also supported by the Company’s continued good financial performance and adequate cash flows which support the timely repayment of debt obligations. The Company continues to maintain good operating efficiency, supported by its ongoing focus on system enhancements and network improvements. These rating strengths are constrained by significant risk retention via self-insurance of T&D assets, though tempered by parametric hurricane insurance coverage. The ratings are also tempered by concentration risks associated with LUCELEC’s significant exposure to Saint Lucia’s economic environment.

Rating Sensitivity Factors

Factors that could, individually or collectively, lead to an improvement in the Ratings and/ or Outlook include:

• An improvement in the credit rating of the sovereign over the next 12-15 months
• Continued improvements in economic and business conditions over the next 12 months in Saint Lucia, thereby leading to increased electricity sales

Factors that could, individually or collectively, lead to a lowering of the Ratings and/ or Outlook include:

• A deterioration in the credit rating of the sovereign over the next 12-15 months
• A greater than 10% decline in operating revenue sustained for 2 consecutive years
• Trade receivables turnover greater than 65 days sustained for 2 years
• Debt Service Coverage Ratio lower than 2 times sustained for 2 years
• A change in the monopoly position afforded by regulation

For more information on LUCELEC’s ratings, please visit www.caricris.com or contact:

Note:

This rating release is transmitted to you for the sole purpose of dissemination through your agency/newspaper/magazine. You may use this rating release in full or in part without changing the meaning or context thereof, but with due credit to CariCRIS. CariCRIS has the sole right of distribution of its rating releases, for consideration or otherwise, through any media, including websites, portals, etc.