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Securitisation of the electricity tariff deficit

Last April 30, several measures on the energy sector were adopted under Royal Decree 6/2009. One of the main objectives is to achieve tariff sufficiency, to solve some of the financial difficulties of electricity companies. Current and future tariff deficits have to be financed, and the mechanism chosen has been the securitisation of the collection rights in favour of a Spanish asset securitisation fund.

Under Royal Decree 6/2009, the tariff deficit is defined as the difference between the collected amounts of regulated tariffs, fixed by the government and paid by the end customers for their regulated supplies, plus the access tariffs, fixed by the liberalised market, and the real costs related to such tariffs.

To his respect, also under Royal Decree 6/2009 general measures were also approved to finance the tariff deficit through the assignment of the collection rights (right to receive an amount of the monthly invoices of the access toll of the following years) by their holders to an asset securitisation fund that will be incorporated for that purpose: Fondo de Titulización del Déficit del Sistema Eléctrico.

The fund assets will be: i) existing collection rights as of December 31 2008 not assigned to third parties, up to €10 billion, and ii) collection rights originated between January 1 2009 and December 31 2012.

The structure of the fund, the assignment price of the collection rights, the assignment conditions and the procedure to underwrite and place the securitisation bonds, among other issues, require further regulation, which is expected to be approved shortly.

Additionally, the securitisation bonds to be issued by the fund will be guaranteed by the Government of Spain, and therefore it is expected that they will be rated triple A by Moody's and Fitch, and AA+ by Standard & Poor's.

Given the amount of the transaction (between €10 billion and €20 billion), that the securitisation bonds will be guaranteed by the Spanish Government and that the bonds are expected to be placed in the primary market, this transaction will speed up the securitisation market during the end of this year and 2010.

Jaime de la Torre Viscasillas

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