(Adds pricing details)
By John Geddie
LONDON, Feb 11 (IFR) - Spain's Electricity Deficit
Amortisation Fund issued more government-guaranteed debt on
Tuesday, amid fears that the country is continuing to struggle
to contain deficits accrued by utility companies because of
Fondo de Amortizacion del Deficit Electrico (FADE) sold a
EUR1.5bn three-year bond, refinancing debt that matured at the
end of last year.
The government - which had to grant FADE an additional
EUR4bn of guarantees last year after anticipated deficits
overran - is working on measures to reform the energy sector, in
the hope that this will prevent any further tariff
deficit-generation this year.
"The government believes the tariff deficit in 2014 should
be zero if all the measures in the planned energy reform are
implemented accordingly," said Javier Serna, credit research at
FADE's previous debt sale in October last year allowed it to
complete its designated funding programme. A month later, the
Spanish government confirmed that all the tariff deficit
receivables had been sold to the fund and therefore new debt
issues would only be used to refinance series of bonds issued
The Spanish industry ministry subsequently proposed that
Spanish gas companies would have to foot the bill for an
unforeseen EUR812m of additional tariff deficit that emerged in
FADE issued the new benchmark bond, maturing in September
2017, at a spread of 18bp over the interpolated Spanish
government bond curve, inside initial price thoughts of 20bp
area, via lead managers BBVA, CA CIB, CaixaBank and Deutsche
Bank. The bond priced at a reoffer yield of 1.946% and carries a
coupon of 1.75%.
FADE has now issued EUR26.7bn in total since its inception,
and its current total outstanding debt amount is EUR24.6bn.
The fund also has a EUR2.5bn bond that falls due in March,
giving it further refinancing needs this year that are likely to
prompt further new debt issues.
FADE's prospectus, updated in November 2013, states its bond
issue facility can have a maximum outstanding balance of
EUR26bn, a level which was raised from EUR22bn in July last
One analyst told IFR, however, that the Spanish government
had been deliberately vague about the maximum amount of debt
FADE is able to accrue, in order to give it future leeway on
The analyst pointed to a report from ratings agency Fitch in
2011, which stated that FADE then had a maximum programme of
EUR25bn, adding that its total limit was now therefore EUR29bn,
given the additional guarantees awarded last year.
FADE did not respond to requests for comment.
(Reporting by John Geddie; Editing by Philip Wright, Julian