Investing.com -- Moody’s Ratings has upgraded the baseline credit assessment (BCA) of Centrais Eletricas Brasileiras SA-Eletrobras (Eletrobras) from ba3 to ba2, and its Long Term Corporate Family Ratings (CFR) and Senior Unsecured Foreign Currency debt rating from Ba2 to Ba1. The outlook for the company remains stable.

The upgrade is a reflection of Eletrobras’ sustained progress in its corporate strategy to improve profitability. The rating decision also takes into account recent resolutions on negotiations with the government regarding disputes from the company’s privatization. Moody’s anticipates that Eletrobras will maintain substantial liquidity to support investments without significant refinancing needs for the next three to five years.

Eletrobras’ Ba1 Corporate Family Rating, as a government-related issuer (GRI), takes into account the application of Moody’s Joint Default Analysis. This analysis includes the upgraded BCA, a high degree of default dependence between the company and the Government of Brazil, and a moderate likelihood of extraordinary government support in case of need.

Following its privatization in June 2022, Eletrobras has successfully executed on a corporate simplification strategy, targeting cost reduction and de-risking. The company has reduced the amount of compulsory loans to BRL13.1 billion in March 2025 from BRL26.2 billion in June 2022. The number of special purpose entities (SPEs) it controls has been reduced to 62 in March 2025 from 81 in December 2021. The company has also made significant cost reductions in personnel, material, services and other expenses, which amounted to BRL7.6 billion in 2024, a 24% reduction from BRL10.0 billion in 2022. Further reductions of 7% are expected by 2026.

In July 2024, Furnas Centrais Elétricas S.A. was incorporated into Eletrobras for synergies and tax optimization. These initiatives have supported a significant leverage reduction with the debt to EBITDA ratio dropping to 4.4x in December 2024 from 6.6x in December 2022. Moody’s forward-looking view is that credit metrics will continue to gradually improve.

The ratings agency expects Eletrobras to maintain prudent liquidity management over the foreseeable future. As per the most recent liquidity assessment, Eletrobras will have sufficient buffers to operate over a 24 month period without the need to access the debt market, other than for opportunistic liability management.

The rating action also reflects recent advancements in governance through the settlement of an arbitration dispute with the Federal Government around Eletrobras’ voting structure, and the reduction in exposure to the Angra 3 nuclear power project.

The stable outlook reflects Moody’s view that the company will maintain its strong liquidity and competitive position as the market leader in Brazil’s power generation business, with a meaningful share of transmission activities supporting the stability of its revenue base over the next 12-to-18 months.

An upgrade would depend on further reduction on the company’s leverage trajectory, along with maintenance of adequate liquidity. On the other hand, the rating could be downgraded if there is a strategic shift toward a more aggressive financial policy that encompasses higher dividend payouts or leveraged acquisitions. Evidence of detrimental government or regulatory intervention would also increase negative rating pressure.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.