(BN) Spain Delays $18 Billion Power-Bond Program on Yields (Update1)


Spain Delays $18 Billion Power-Bond Program on Yields (Update1)
2010-11-24 12:29:49.696 GMT

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By Ben Sills and Esteban Duarte
Nov. 24 (Bloomberg) -- Spain has frozen the start of its
13.5 billion-euro ($18 billion) program to sell state-guaranteed
power revenue bonds until government debt-market volatility
abates, people with direct knowledge of the transaction said.
Bankers who were authorized yesterday to begin gauging
investor interest in the first tranche of bonds will wait until
the yield stabilizes on Spanish debt, roiled by Ireland's
bailout request, said two people who asked not to be named
because the process is confidential. The sale may proceed after
the yield settles, one of the people said.
"Going ahead with these bonds would have been almost
crazy," said Ivan Comerma, who manages about 3 billion euros as
head of capital markets at Banc International Banca Mora in
Andorra. "It would be better to wait till the waters calm
The spread between Spanish government bonds and German
sovereign debt touched a euro-era record yesterday and today,
reducing potential investor interest in the sale. Spain's
securities regulator authorized the banks to begin seeking
buyers today.
The decision extends a two-year drought for the government
in selling bonds to bridge the so-called tariff deficit as part
of its decade-long policy to subsidize power rates, or tariffs.

Utility Payback Delayed

The proceeds would pay back utilities including Iberdrola
SA and Enel SpA's Endesa unit for using their own funds to cover
regulated costs. By doing so they helped keep increases in
customer prices below or close to the inflation rate.
Spanish utility shares extended losses after the news with
Iberdrola down 1 percent at 5.54 euros and Endesa 1.1 percent
lower at 18.71 euros at 1:17 p.m. in Madrid.
A government Finance Ministry official who declined to be
named in line with policy said there were no new developments.
Iberdrola and Endesa, Spain's biggest power producers, are
owed about 3.7 billion euros and 7.7 billion euros,
respectively, after using their cash and debt to cover the gap
between revenue they receive from customers and what has been
promised by the government. About 3 billion euros is owed to
other Spanish utilities, including Gas Natural SDG SA and the
local units of E.ON AG and EDP-Energias de Portugal SA.

For Related News and Information:
Top fixed-income stories: TOP BON <GO>
Bond Yield forecasts: BYFC <GO>
Power markets: VOLT <GO>
News on global emissions data: EMIS <GO>

--With reporting by Emma Ross-Thomas in Madrid. Editors: Todd
White, Paul Tobin

To contact the reporter on this story:
Ben Sills in Madrid at +34-91-700-9603 or bsills@bloomberg.net

To contact the editor responsible for this story:
Reed Landberg at +44-20-7330-7862 or landberg@bloomberg.net