Spanish Utility Deal Sized at $205mn

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Moody's Investors Service assigned a provisional 'Baa3' ratings to the EUR155 million ($205mn)  bonds issued from Fondo de Titulización del Deficit del Sistema Electrico, a securitization vehicle set up to fund the tariff deficit in the Spanish power industry that is backed by a government gurantee.

The deal was first announced in November and was sized at EUR110mn. It builds on the May 2011 Series 4 Notes, and bring the total of Series 4 notes to EUR 1.665 billion.

Moody's assigned the ratings based on an evaluation of the guarantee from the government of Spain, which guarantees the interest and principal payments on the notes. The current rating of the Government of Spain is ‘Baa3’/’P-3’.  “The rating of the notes is fully linked to the rating of the government of Spain, explained analysts. “If the government of Spain failed to make the required payments under the guarantee, this could trigger an event of default if the management company considered this course of action in the best interest of the noteholders.”

The securitization allows Spanish 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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