TEXT-Fitch: tariff deficit plan may ease pressure on Spain's utilities

(The following statement was released by the rating agency)

Oct 2 - The negative rating pressure on Spanish utilities could be lessened by the government's draft reform for cutting the electricity tariff deficit, Fitch Ratings says. Nevertheless, the Rating Watch Negative on these companies will be maintained until the reform is approved by the parliament and we have carried out a full impact assessment on each issuer.

The recently published measures, under which the state will provide EUR2.2bn annually and allow companies to pass on some new tax charges to customers, are more benign than we previously expected. This has reduced the chances of widespread downgrades - although this also depends on potential additional measures that may be implemented

Utilities with plants powered by fuels affected by the Green Cent tax, which includes coal, natural gas and fuel oil, are likely to be the most negatively affected, unless these companies are able to at least pass a portion of this cost on to their customers. Nuclear power producers may also find it difficult to pass on the increased charge for radioactive waste.

The flat 6% charge for all power generation is likely to be entirely passed on to customers, and Fitch therefore does not expect it to significantly affect utilities' credit profiles.

We expect the draft law to come into effect in January 2013 after being approved. The law does not affect existing tariff deficits, including those securitised in the FADE programmes. The tariff deficit is the gap between the cost of generated power and the tariffs charged to customers.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at


All opinions expressed are those of Fitch Ratings.

(New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging: pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))