The transaction announced Wednesday by the Colombian Government that it has sold its 57.6% stake in Isagen S.A. to Brookfield Asset Management, does not reflect an immediate change in the credit profile of the company, according to Fitch Ratings. Over time, Isagen's ratings would be pressured if Brookfield pursues a more aggressive commercial and growth strategy or capital structure.

On January 13, the Government of Colombia announced the sale of its stake in Isagen through an auction process in which Brookfield was the only bidder. The transaction closed at COP 6.5 trillion. The change of control is expected to take place in the later half of January. The new shareholder will also have to offer the same conditions to minority shareholders so it could increase its stake in Isagen in the following months.

The transaction could increase the debt amortization due in 2016 because of the financing provided by the Overseas Private Investment Corporation (OPIC), which has an outstanding balance of COP 367 billion. This debt includes a prepayment clause that could be activated because of a change of control event. If activated, Isagen's debt amortization schedule for 2016 would increase by COP 367 billion, which added to scheduled short-term debt for COP 224 billion (bonds and loans amortization) would drive total amortization to COP 591 billion.

Isagen's current leverage levels and adequate sources of liquidity mitigate the refinancing risk associated with the change of control event. In line with Fitch's expectations, Isagen reduced its leverage levels during 2015, following the startup of the company's Sogamoso 820 MW hydroelectric plant in December 2014. At end of September 2015, leverage levels closed at 3.1x, a reduction from 4.5x at end of 2014. In addition, the company maintains available credit lines that could be used to fund this prepayment.

Isagen's rating reflects its solid competitive position in the electric generation sector in Colombia. The rating also reflects the strengthening of the company's cash flow generation following an expansion in its asset base, and the expectations of moderate leverage after the completion of sizable projects.

Additional information is available at www.fitchratings.com.

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