FADE Set to Issue Spanish Power Deal

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Fondo de Amortizacion del Deficit Electrico (FADE), the securitization vehicle set up to fund the tariff deficit in the Spanish power industry will be selling €110 million of debt securities backed by a Spanish government guarantee.

The €110 million Series 4 notes to be issued have been assigned a provisional rating of ‘Baa3’ by Moody's Investors Service. This latest securitization increases the total amount of Series 4 notes that were first issued in May 2011. With this new issuance, Moody’s said the total Series 4 will increase to €1.51 billion.

The guarantee from the government of Spain, which is currently rated ‘Baa3’ by Moody’s, guarantees the interest and principal payments on the notes. The rating of the notes is fully linked to the rating of the government of Spain, according to Moody’s.

The securitization allows the utility companies to make-up shortfalls created by tariff deficits or the difference between the costs incurred to supply power and the regulated tariffs charged to the end users, Moody’s said.

The compensation is considered a fixed cost and a fixed amount is added to the electricity bills of the consumers in order to cover this deficit over the next 15 years. The Spanish electricity regulator, Comisión Nacional de Energia sets, administers and receives these amounts and passes them on to the specified utilities companies.

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