Experiencing Increase Electricity System Cost
The tariff deficit is a debt of more than 13,500 million Euros caused because the electrical system costs are higher than income, and must be paid by electricity consumers. With the securitization market, consumers will return this debt to the power to make bond buyers.
Merrill Lynch analysts question whether bondholders will demand enough to place before the end of the year a first tranche of between 2,000 and 3,000 million Euros, and if the Government is willing to assume an interest rate of 5% “while a couple of months ago was close to 4%.”
These analysts also show their “concern” over the “structural” problems of the electrical system, making the deficit “continues to grow due to the lack of increase in rates access” of light. “The biggest difference in the bond interest rate could increase even more the system costs and thereby increasing the deficit,” he added.
For Nomura, the record in the CMNV Fund Debt Repayment Electric (Fade) is good news for power, especially for Iberdrola, but comes at a time of “sovereign risk and high volatility in the markets.”
“We still hope that there is a placement before year end”, but “there will be pressure to sound out the market over the next ten days, before they settle down before the Christmas holidays,” he says. “The current environment,” he adds, “is far from benign.”
For its part, Credit Suisse cited as a negative aspect of “market volatility”, but stresses the “commitment of the parties to conduct issue.” Also, remember that bonds have a life of between one and 16 years.
Finally, analysts at JP Morgan attributed the risks of the operation to the “macro-economic crisis” and doubt whether the market will have the capacity to address the issue. “Uncertainty remains as to whether markets are open to any placement,” they warn.