Fitch Affirms TGS at 'B'; Outlook Stable

BUENOS AIRES, Argentina & CHICAGO--(BUSINESS WIRE)--

Fitch Ratings has affirmed the following rating of Transportadora de Gas del Sur S.A. (TGS)

--Foreign currency Issuer Default Rating (IDR) at 'B';

--Local currency IDR at 'B+';

--Unsecured debt at 'B/RR4'.

The Rating Outlook is Stable.

TGS's ratings reflect the weak regulatory framework in Argentina and the close linkage between the company's operating risks and its regulatory environment. Despite frozen tariffs for its pipeline business and rising inflation, TGS continues to reduce debt levels and build up cash balances.

As of March 2011, TGS's liquidity was strong, with USD286 million in cash and marketable securities and USD387 million of total debt. The company faces no debt maturities until May 2014 and has annual interest payments of approximately USD30 million. For the latest 12 months (LTM) ended May 31, 2011, the company generated USD162 million of EBITDA and USD86 million of cash flow from operations. Near-term capital expenditure (capex) plans are expected to remain at a level of approximately USD40 million, which should allow the company to generate about USD40 million to USD60 million of free cash flow.

Although natural gas continued to be redirected in Argentina to satisfy residential demand, the company was able to increase its firm contracted capacity by 2.6%. During 2010, the company's pipeline utilization factor remained stable at 79%, while its contracted capacity increased to 80 million cubic meters per day (MMm3/d) from 78 MMm3/d. This growth in contracted capacity was supported by recent investments that increased the company's pipeline capacity by 7 MMm3/d. The company's liquefied natural gas (LNG) processing unit, which represented 61% of 2010 sales and 65% of EBITDA, performed well due to high international prices for LNG. This division is expected to continue to perform well due to the renegotiation of several export contracts during 2010.

TGS is primarily controlled by Compania de Inversiones de Energia (CIESA), which holds 55.3% of the company's common stock and its major shareholder is Petrobras Energia S.A. (PESA). PESA is materially involved in the operations of TGS, as it has a three-year contract to provide technical support until 2011. The remaining 50% of CIESA's equity is distributed between Enron Pipeline Company Argentina (10%) and a trust administered by ABN Ambro Bank N.V. (40%).

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 13, 2010);

--'Parent and Subsidiary Rating Linkage - Fitch's Approach to Rating Entities within a Corporate Group Structure' (July 14, 2010);

--'Rating Corporates Above the Country Ceiling' (Jan. 5, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Parent and Subsidiary Rating Linkage Criteria Report

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=534826

Rating Corporates Above the Country Ceiling

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=594985

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