Fitch Upgrades AES Argentina's IDR to 'B-'; Outlook Stable

Published: 2026-05-13 05:51:21 ET AES

Published on 05/13/2026 at 05:51 am EDT

Fitch Ratings has upgraded AES Argentina Generacion S.A.'s (AAG) Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) to 'B-' from 'CCC+'.

The Rating Outlook is Stable.

AAG's ratings reflect the company's exposure to the Argentine sovereign (B-/Stable) due to the electricity sector's exposure to CAMMESA, as its main counterparty. CAMMESA has paid its obligations to AAG on schedule the last two years. Fitch assesses AAG's ratings on a standalone basis from its parent, The AES Corporation (BBB-/Stable). The parent does not provide legal guarantees and has low strategic and operational incentives to support AAG.

Key Rating Drivers

Counterparty Exposure Improved: AAG's counterparty exposure has improved with the upgrade of the Argentine sovereign IDR to (B-/Stable) from (CCC+). AAG relies on payments from CAMMESA, which receives government subsidies and represents electricity generators, transmission, distribution and large consumers or wholesale market participants known as Mercado Mayorista Electrico. In the last 12 months as of FY2025, CAMMESA paid invoices in about 48 days, close to the 42-day contracted payment period. Fitch assumes CAMMESA will pay 52 days after billing. Prolonged payment delays would pressure AAG financially, as occurred in previous years.

Improved Regulatory Risk: Fitch expects the gradual liberalization of the electricity sector to have a neutral effect in the medium term. The process has positive elements, including a gradual reduction of CAMMESA's role, but Fitch does not expect material changes in AAG's margins. On Nov. 1, 2025, Resolution 400/2025 set guidelines for the gradual normalization of the electricity sector under a more decentralized approach.

Generators can manage their own fuel supply and declare variable production cost based on established reference values by CAMMESA. Remuneration involves defining prices for demand and the implementation of marginal cost signals for energy traded in the spot markets. Additionally, generators may contract directly with private offtakers. Fitch will monitor developments as the regulatory framework evolves.

Strong Credit Metrics: As of December 2025, USD-based leverage was 1.3x, while EBITDA interest coverage was 3.5x. Fitch expects USD-denominated leverage for YE2026 to be 1.8x, including around USD170 million in debt and USD90 million in EBITDA. We expect FCF to be negative in 2026 including capex for the wind expansion and dividend payments of about USD3 million and turn positive in 2027 and 2028. Fitch projects the company to average below 2.0x EBITDA over the rating horizon.

Renewable's Driving Expansion: Fitch projects a 100 MW wind expansion project at the Vientos Bonarenses plant to come online in 1Q2027. The new capacity will to be contracted with private industrial customers and should offset the hydro expirations with projected incremental revenue of around USD20 million. AAG will fund the expansion with around USD40 million in equity and USD120 million in debt with a mix of development and commercial banks.

Parent Linkage: The ratings are based on AAG's standalone credit profile, because overall legal, operational and strategic incentives for its parent to support AAG, if needed, are low. AAG is fully owned by AES, but there are no guarantees from the parent or cross-default clauses. Strategic incentives are low, as AAG does not provide a significant financial contribution to AES. While both entities have the same core business and there is some common material management, operational benefits to the parent are not material. Fitch rates AAG on a standalone basis because all three linkage factors are low.

Peer Analysis

AAG's ratings reflect exposure to CAMMESA as an offtaker, which is reliant on subsidies from the Argentine government. This is also the case for Argentine utility and energy peers Pampa Energia S.A. (Pampa; B/Positive) and MSU Energy S.A. (CCC+). AAG is concentrated only in the electricity generation sector, presenting a balanced portfolio between thermal, wind and hydro assets.

MSU's 750MW is fully contracted with PPAs with CAMMESA. The first PPA will expire at the end of 2027, when they will be exposed to the spot market unless new PPAs are signed.

Pampa has a more diversified business profile as a leading company in electricity generation, distribution, transmission, gas production and transportation. MSU and GEMSA have only thermal operations and are mainly exposed to CAMMESA. In terms of credit metrics, Fitch forecasts AAG's USD-based 2026 YE leverage at 1.8x, compared with Pampa at 2.4x and MSU Energy S.A. at 3.9x. On a net basis, AAG's leverage was 0.8x at FY2025, reflecting USD48 million of cash and equivalents. Fitch estimates AAG's projected gross leverage will average below 2.0x through 2028.

Fitch's Key Rating-Case Assumptions

Gross generation totaling 4,725 (GWh), in 2026 and 4,833 (GWh) in 2027 and 2028

CAMMESA making payments in 52 days through 2028

Additional 100MW of wind capacity coming online in 2027 at a price of USD58/MWh

Incremental debt of USD120 related to wind farm taken in 2026 at a rate of 9.5%

U.S. dollar-denominated receivables related to FONINVEMEM of about USD15 million in 2026, all related to Guillermo Brown

Dividend payments of 30% of previous year NI

Growth capex of USD120 million in 2026 and maintenance capex of USD15million from 2026-2028

Capacity remuneration price to average around 6,400 USD/MWh and 8,000 USD/MWh at Parana and San Nicolas plants from 2026-2028, respectively

AAG achieves generation capacity factors of 13% for thermal assets, 20% for hydro and 40% for wind during the rating horizon

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP):

Business and financial profile factors (assessment, relative importance): management ('bbb', Lower), sector characteristics ('bb-', Moderate), market and competitive positioning ('b+', Moderate), diversification and asset quality ('bb', Moderate), company operational characteristics ('b', Higher), profitability ('b+', Moderate), financial structure ('bbb+', Lower), and financial flexibility ('b-', Higher).

The quantitative financial subfactors are based on custom CRT financial period parameters: 40% weight for the historical year 2025, 40% for the forecast year 2026 and 20% for the forecast year 2027.

B+ to CC considerations apply in our analysis and has no impact.

The governance assessment of 'good' has no impact.

The operating environment assessment of 'ccc+' results in an adjustment of -1 notch(es).

The SCP is 'b-'.

To derive the Long-Term IDR:

Application of Fitch's Parent Subsidiary Linkage Rating Criteria results in a standalone approach and an IDR of 'B-'.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A downgrade to the ratings of Argentina could result in a negative rating action;

Significant and sustained delayed payments by CAMMESA.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An upgrade to the ratings of Argentina could result in a positive rating action, as long as the SCP is in-line or above Argentina's IDR;

Reduction in exposure to CAMMESA through the ongoing electricity market liberalization in Argentina.

Liquidity and Debt Structure

As of Dec. 31, 2025, AAG reported available cash of ARS72.1 billion (USD48 million) and no committed lines of credit. The company's main debt is their Class 2 USD120 million bond, which began its four semi-annual amortizations in 1Q26. AAG also expects to incur USD120 million of debt to fund the 100 MW wind expansion.

USD-denominated FONINVEMEM payments will be fully paid in 2Q of this year, totaling USD15 million. Following the repayment, the company will own an equity stake of up to 30% in Guillermo Brown, which the funds paid to the company were used invested for the construction.

Issuer Profile

AES Argentina Generacion S.A. (AAG), which is 100% owned by the AES Corporation (BBB-/Stable), is an electricity generation company in Argentina with an installed capacity of 1,951MW.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The Climate.VS for 2035 for AES Argentina S.A. is 55 due to its coal transition period for energy generation. The company's 675MW San Nicolas plant burns majority coal but can also burn fuel oil and gas. Fitch expects the company to continue to consume majority coal at the San Nicolas plant over the rating horizon. However, this does not affect their current ratings as the company has flexibility in which fuel to burn, as well as the expansion on wind renewables.

For further information on how Fitch views climate-related risks in the utilities sector, see 'Utilities - Long-Term Climate Vulnerability Signals Update.'

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

RATING ACTIONS

Entity / Debt

Rating

Prior

AES Argentina Generacion S.A.

LT IDR

B-

Upgrade

CCC+

LC LT IDR

B-

Upgrade

CCC+

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of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Parent and Subsidiary Linkage Rating Criteria (pub. 28 Jun 2025)

Corporate Rating Criteria (pub. 10 Jan 2026) (including rating assumption sensitivity)

Sector Navigators - Addendum to the Corporate Rating Criteria (pub. 10 Jan 2026)

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

Corporate Monitoring & Forecasting Model (COMFORT Model), v8.2.0 (1)

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