EUR 359.8 million of debt securities rated
Madrid, July 04, 2017 -- Moody's Investors Service has today assigned rating to the following notes
(the "Notes") issued by Telectric 1 DAC (the "Issuer"):
....EUR359.8M Secured Notes due 17
March 2029, Definitive Rating Assigned A1 (sf)
This transaction is a securitisation of Spanish electricity tariff deficit
receivables. The receivables consist of payments made by the Spanish
Comisión Nacional de los Mercados y la Competencia (the "CNMC")
to the electricity utility companies that funded a deficit in the regulated
Spanish electricity sector in 2013 (the "2013 Tariff Deficit").
This deficit was caused by the imbalances between costs and revenues of
the Spanish electricity system which were mainly driven by the remuneration
paid to special regime electricity generators (renewable energies).
The securitised receivables amount represents around 12.78%
of the total recognized amount of the 2013 Tariff Deficit.
RATINGS RATIONALE
Moody's considers the transaction's underlying asset to be of a high quality,
as it benefits from the strength of the specific legislation enacted to
set forth the regulatory claims and repayment mechanisms. Other
factors such as the creditworthiness and strategic role of key counterparties
have been also considered in our analysis. At the same time,
the rating reflects prevailing uncertainty regarding the long-term
containment and sustainability of electricity tariff deficit-related
debt.
The total debt in Spain resulting from electricity tariff deficits is
the highest in Europe. The proportion of outstanding debt over
regulated revenues reached 138% in 2015 (latest information available,
2016 final data have not been published yet). However, the
Spanish government introduced several different reforms over the last
years in order to rebalance the system costs and revenues, achieving
a surplus in 2014 and 2015, for the first time in 15 years.
For these reasons, in the absence of counterparty risk, Moody's
currently positions the ratings for securitisations of Spanish electricity
tariff deficit receivables at A1, which is above the long-term
Baa2 sovereign rating on Spain but below the Aa2 country ceiling for Spain.
Moody's noted that the transaction benefits from a strong legal right
behind the claims. This is due to the certainty that the collection
rights of the Issuer of the compensation entitlement relating to the 2013
Tariff Deficit has been enacted by a specific Royal Decree 1054/2014 (RD
1054/2014) and further detailed in corresponding Ministerial Orders.
In addition, RD 1054/2014 set out an obligation on the Spanish Ministry
of Industry, Energy and Tourism to include the repayment of 2013
Tariff Deficit as part of the regulated tariffs paid for electricity supply
(the "Tariff") and for access to electricity grids (the "Access Tolls")
in order to recover on a linear basis the 2013 Tariff Deficit by 31 December
2028.
There remains, however, certain risks. The Notes do
not benefit from any liquidity or hedging mechanism to protect from any
delays in payments from the CNMC, which is nevertheless mitigated
by the pass-through nature of the payments. In any case,
the transaction strongly relies on the performance of CNMC on channelling
and distributing the monies to the Issuer. In addition, Moody's
notes that there is no explicit guarantee from the Spanish Government
to repay the 2013 Tariff Deficit should there be insufficient amounts
collected from the Spanish electricity sector during the life of the transaction
to repay the 2013 Tariff Deficit in full.
Moody's analysis focused, amongst other factors, on:
• the high quality receivables backing the Notes. The receivables
that secure payments on the Notes are essentially claims on the Spanish
electricity system. This includes the fact that there is significant
historical coverage of fixed costs compared to annual revenues of the
electricity sector. As such, payments under the transactions
primary rely on the ability of the Spanish electricity sector to generate
sufficient revenues during the transaction horizon to repay the receivables
backing the notes in full.
• seniority of Tariff Deficit receivables. Article 16 of RD
1054/2014 sets forth that the 2013 Tariff Deficit as well as the receivables
resulting from any other tariff deficits shall have seniority for payment
over other electricity system costs.
• an evaluation of the legal and structural features of the transaction
including the true up' mechanism whereby outstanding amounts of the 2013
tariff deficit are considered when access tolls are calculated every year,
the pass through interest and principal amounts payable on the Notes (interest
amounts paid on the Notes are calculated as the receivables' interest
proceeds minus senior expenses) and the obligations of the CNMC as regulator
to comply with the settlement procedure laid out under primary and secondary
legislations to repay the Beneficiaries.
• performance of previous transactions: no defaults or losses
have been experienced under the preceding transactions backed by similar
portfolios of credit rights in Spain.
The principal methodology used in this rating was Moody's Global
Approach to Rating Securities Backed by Utility Cost Recovery Charges
published in June 2015. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The underlying assets' credit quality would weaken if any electricity
reforms weaken the terms of the tariff deficit receivables, new
deficits maintain or increase the system's debt level or if the Spanish
government's creditworthiness weakens.
The assets' credit quality would benefit from a stronger-than-expected
macroeconomic environment in Spain, resulting in an improvement
in the government's creditworthiness. They would also benefit from
a positive trend in electricity tariff deficits reduction.
The ratings address the expected loss posed to investors by the legal
final maturity of the Notes. In Moody's opinion, the structure
allows for timely payment of interest and ultimate payment of principal
with respect to the Notes by legal final maturity. Moody's ratings
address only the credit risks associated with the transaction.
Other non-credit risks have not been addressed but may have a significant
effect on yield to investors.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moody's did not use any models, or loss or cash flow analysis,
in its analysis.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Gaston Wieder
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Carole Gintz
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Angel Jimenez
Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
