Increase in price of dollar created financial hole at ICE

Institute says that deficit is accounting and will not affect consumers' pockets

Comptroller, Fitch and Moody's alert due high indebtedness in dollars of the Group

September 19th,2014

The rising price of the dollar had a negative result in the Costa Rican Electricity Institute (ICE) and its subsidiaries, in the first half of the year.

The state company had a net loss of ¢ 133.548 million in the period January to July, according to financial statements. It is the first time in the last five years, in which the entity has such a high deficit.

The ICE attributed the loss, exclusively, the increase in the value of its debt by the appreciation of the dollar. In the first six months of the year, the price of the currency rose by 8.6% compared to December 2013, according to estimates by the institution.

"By quantifying the balance of the debt, the new exchange rate, this difference should be reflected as an expense for the exchange rate, which affects the results," he said, in writing, Jesus Orozco, chief financial officer of ICE.

He added that the adjustment is countable and has no effect on their customers, because the debt is canceled when it expires each of the loans.

In the next four years, however, the business group will have maturities of credit denominated in the greenback, for $ 1.305 billion, according to its financial statements.

Ratings agencies Moody's, Fitch Ratings and the General Accounting Office warned the risk to the ICE for its high exposure to currency fluctuations in recent months. At 30 June before the debt of the company was ¢ 2.2 billion, of which 85% is in foreign currency.

The results of the business group include ICE, National Power and Light Company (CNFL) Radiographic Costarricense (Racsa) and Cable Vision.

The ICE had an increase in their debts, exchange rate of ¢ 144,476,000; CNFL ¢ 8.408 million; Racsa ¢ 1,774,000 and ¢ Cable Vision 72 million. In the final result, these amounts down a bit because revenues are offset by other financial.

Other factors that impacted the outcome of the institution were the expenses for investments mainly by Reventazón Hydroelectric Project, and thermal generation. In the latter case, the Regulatory Authority for Public Services (Aresep) recognized an extra set of ¢ 45,696,000 users in 15 months paid.

Alerts. Giancarlo Rubio, risk analyst at Fitch Ratings, said the high dollar debt exposes the Company to changes in the exchange rate.

"Debt ICE is based on their investments and the exchange rate does affect. But what is most striking is that it does not recognize timely tariff adjustments, "Rubio told La Nacion.

Meanwhile, Moody's explained that, for now, the currency exposure does not involve liquidity risk in the company. Although he warned that if the debt ICE Group up significantly in the coming months, they can deteriorate credit metrics.

The Comptroller said that the Institute shows, since 2010, a decline in profits and warned of the rapid growth of borrowing by the company. Obligations currently represent 47% of the assets of the ICE Group; but in 2010 it was 36%.

Source: 'La Nación'