Isagen S.A. E.S.P

Overview Key strengths Key risks Robust competitive position being the second-largest generator in Colombia, representing around 24% of the nation's demand Growth strategy based on clean energy--mostly solar and wind--and in line with Brookfield Renewables? investment plan Operates solely in Colombia, which is rated speculative-grade (BB+/Stable/B) Low maintenance investments in existing assets and no exposure to construction risk for newly acquired assets Cash flow exposed to hydrological conditions and energy spot market prices, although with a contract base of about 70% in 2023. We anticipate that Isagen's EBITDA margin will remain solid at 55%-60% in 2023 and 2024, mainly driven by better spot energy prices; higher hydrology energy production, mostly explained by greater hydrological conditions; and the recent incorporation of

...We expect Isagen will maintain solid credit metrics amid higher energy prices in Colombia in the next two years. We anticipate that Isagen's EBITDA margin will remain solid at 55%-60% in 2023 and 2024, mainly driven by better spot energy prices; higher hydrology energy production, mostly explained by greater hydrological conditions; and the recent incorporation of new operating plants. New assets started operating last year, such as two wind power plants in La Guajira (32 MW) and two solar farms in Meta (38 MW), which we believe will support the company's increasing footprint in the Colombian market while helping it to balance its contracted position and enhance cash flow predictability. According to management's plans, Isagen will conduct low maintenance investments in existing assets, which should result in robust credit metrics--we forecast a net debt to EBITDA ratio of around 2.5x-3.0x and funds from operations (FFO) of nearly 20%-25% in 2023 and 2024. Isagen's conservative commercial...

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