Deficit in Electricity Tariff Securitization
The bond program Sinking Fund Deficit Electric (FADE) provides for a maximum of 25,000 million Euros, of which the Government guarantees a maximum of 13,500 million from the General State Budget 2010. Furthermore, as stated in the prospectus, the fund will have a credit line of 2,000 million Euros.
The bond issue will allow utilities to draw from their accounts receivables that are known to recover the tariff deficit, which is generated since 2000 because the revenues gained through energy bill are not sufficient to cover costs that support the system, as the premiums to renewable supplies to the islands, transport or distribution.
An imbalance that he assured the Minister of Industry, Tourism and Trade Miguel Sebastian, on 16 November in the Senate, is expected to rise to around 4,000 million Euros, 1.000 billion more than the 3.000 million set by the Government for this year.
As stated in the prospectus, after the end of the period of exploration of the demand for the first issue of the fund, which will begin on November 24 and ending expected by 8 December, will be sent to the CNMV and conditions necessary documents for registration, which is expected to occur later than two business days.
According to financial sources said, for the time being “the monitored” market conditions to see when it would be advisable to carry out the first issue, the amount is unknown. BNP Paribas, BBVA, Santander, Deutsche Bank, Goldman Sachs, will be among the banks in charge of the operation.
The measurement agency Standard & Poor’s (S & P) has awarded an AA rating, one of the highest, the bonds to be issued to repay the deficit based on the note that currently has debt of the Kingdom of Spain.
For its part, Fitch believes that the bond issue will be “positive” for power and have no impact on their “rating”, as the amounts to be recovered as envisaged in their accounts (as revenue to be collected).
In a report, the agency stressed that successful implementation of issuance, expected before year end; accounts will improve the liquidity and the dynamics of capital to the affected utilities.
On 9 April the Council of Ministers approved a Royal Decree that regulates the placing on the market through a securitization fund and the endorsement of the state debt of the utilities.
For its part, last year, the Government adopted another royal decree stipulates that, from 2013, you cannot generate more tariff deficit and, therefore, the energy bill should be sufficient to cover costs electrical system that now support large utilities, Iberdrola, Gas Natural Femora, Ends, HC and Eon.