Fitch Affirms Chilquinta Energia Finance Co. LLC Notes at 'AAA' & IDR at 'BB

The rating action follows the proposed purchase of PSEG Energy Holdings' 50% indirect interest in Chilquinta Energia and 37.9% indirect interest in Luz del Sur by Ashmore Energy International (AEI; rated 'BB' by Fitch) for US$685 million. Following completion of the acquisition, Fitch does not anticipate any material change to the existing financial structure and that AEI's presence as a partner in the ownership of these assets does not weaken the financing structure and the credit quality of the underlying operating companies. The rating of Finance Co. is based on cash flow available for debt service of Chilquinta Energia - the Chilean distribution company plus 50% of dividends available from Luz del Sur - the Peruvian distribution company. Sempra Energy and a direct subsidiary of AEI also provide a combined US$50 million of equity support to the transaction (equivalent to approximately two years of interest expense), which may be used in the event of cash shortfalls for debt service.

The ratings also reflect the inherent strengths of Chilquinta Energia and Luz del Sur. Both companies are electric distribution companies essentially operated as natural monopolies in Chile and Peru, which provides stability to cash flow and lowers operating risk. Operating efficiencies continue to improve at both companies. Energy losses are moderate for Chilquinta Energia and Luz del Sur at approximately 9.5% and 7.8%, respectively. Combined financial results, reflecting operating income from Chilquinta and dividends from Luz del Sur, as well as expectations for future performance, are consistent with the rating.

Coverage ratios at the combined entity measured in dollar terms by EBITDA/Int Expense moderately improved to 4.5 times (x) as of September 2007 from 4.2x as of September 2006. Debt/EBITDA decreased to 2.8x from 3.2x for the same periods, due to a small increase in EBITDA at both companies. Debt levels remained stable at the combined entity. Chilquinta Energia for its part has shown an improving trend in its financial profile by successfully reducing operating expenses, and increasing volume sales. Volume sales grew a 8.4% to 1,781 Gwh (gigawatt hours) as of September 2007 versus 1,642 Gwh as of September 2006. Natural gas volume sales were diminished by 56% with an effect of US$2 million on the EBITDA. Chilquinta's EBITDA and debt were US$67 million and $332 million as of September 2007, respectively.

Luz del Sur improved its operating results by increasing volume sales. EBITDA improved to US$98 million as of September 2007 compared to US$86 million as of September 2006, and energy volume sales grew 8.4% to 3,737 GWh as of September 2007. Debt was US$209 million, mainly represented by local bonds with maturities between 1 to 3 years, which are expected to be refinanced at maturity.

Chilquinta Energia is an electricity distribution company in Chile, which serves 454,140 clients and distributed 1,781 GWh for the first nine months of 2007. Luz del Sur is the second largest distribution company in Peru and serves a concession area of approximately 3,000 square kilometers with 3.2 million inhabitants. The company's service territory includes Lima's most important commercial and residential areas, and contains numerous industrial and manufacturing companies; serves 775,873 clients, and distributed 3,737 GWh for the first nine months of 2007.

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