Fitch Rates Reventazon Finance Trust's Fixed Rate Notes 'BBB-'; Outlook Stable

Fitch Ratings has rated the US$135 million fixed-rate notes issued by Reventazon Finance Trust (RFT) as follows:

--USD$135,000,000 fixed-rate notes 'BBB-'; Outlook Stable.

The transaction is backed by 100% participation interest in the Inter-American Development Bank's (IDB) B-Loan acquired through a participation agreement. Since IDB continues to be lender of record for this loan, Fitch believes the transaction benefits from IDB's de-facto preferred creditor status.

The B loan is part of the secured debt which finances the design, on-going construction, future operation and maintenance of Instituto Costarricense de Electricidad's (ICE, 'BB+'/Stable Outlook) 305.5 MW hydropower plant Reventazon in Costa Rica (the Project). The project has been structured so construction, operation, and other risks are covered by ICE.

Fitch's rating addresses timely payment of interest and ultimate payment of principal at legal maturity and does not include any potential acceleration amounts.

KEY RATING DRIVERS

The rating reflects:

Preferred Creditor Status of IDB: Historically, sovereigns have prioritized certain obligations, such as obligations from multilateral development banks (MDBs), when the government cannot service all of the country's external debt. While the B-loan is not a direct obligation of the sovereign, Fitch believes treatment of the IDB as a preferred creditor extends to ICE as the debtor, since ICE is a strategic government-owned entity that receives underlying sovereign support. Although Costa Rica has defaulted in the past (for example in 1981), neither the sovereign nor ICE have ever defaulted on debt issued by a preferred creditor.

ICE's involvement in the Project: At closing, ICE entered into a capital contribution and project fund agreement (CCPFA) that contractually requires ICE to pay to the local trust all cash contributions necessary for the project to reach commercial operations, including cost overruns and/or payments on the secured debt. ICE signed a lease agreement (LA) that requires ICE to make lease payments, six months in advance, to cover all the local trust's operating and financial expenses regardless of (Reventazon) plant performance. ICE acts as the project's contractor and operator. Fitch views the credit risk of the local trust as ICE's credit risk.

ICE's linkage to Costa Rica's Sovereign: ICE's ratings are supported by the company's linkage to the sovereign rating of Costa Rica ('BB+'/Stable Outlook/'B'), which stems from the government's ownership, the strategic position as the country's largest electricity company, and the government's implicit and explicit support.

Liquidity: The rated fixed-rate notes benefit from a debt service reserve account equivalent to the next principal and interest payment due amount. This liquidity provides certainty in case the transaction is exposed to temporary liquidity shock.

RATING SENSITIVITIES

The rating of fixed-rate notes is sensitive to the rating of the Government of Costa Rica and ICE. A change in Fitch's assessment of the credit quality of these entities would result in a change in the rating of fixed-rate notes. The rating of the fixed-rate notes may also be sensitive to Fitch's view of IDB as a preferred creditor to Costa Rica.

A detailed new issue report describing the transaction will be available on Fitch's web site shortly at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'. The information and documentation used to assess the rating was provided by BNP Paribas and Instituto Costarricense de Electricidad.

Applicable Criteria and Related Research:

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 2013);

--'Global Structured Finance Rating Criteria' (May 2013).

Applicable Criteria and Related Research:

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=818142

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