OREANDA-NEWS. Fitch Ratings has affirmed the securitisations backed by Spanish electricity tariff deficit (TD) credit rights, as follows:

Alectra Finance plc (Alectra): affirmed at 'A-sf'; Outlook Stable

Bliksem Funding Ltd (Bliksem): affirmed at 'A-sf'; Outlook Stable

Rayo Finance Ireland (No.1) (Rayo Finance 3) - Series 3: affirmed at 'A-sf'; Outlook Stable

Rayo Finance Ireland (No.1) (Rayo Finance 4) - Series 4: affirmed at 'A-sf'; Outlook Stable

Delta SPARK Limited 2008-1 (Delta Spark): affirmed at 'A-sf'; Outlook Stable

FADE
Series 3 (ES0378641023) affirmed at 'BBB+'; Outlook Stable
Series 4 (ES0378641031) affirmed at 'BBB+'; Outlook Stable
Series 10 (ES0378641098) affirmed at 'BBB+'; Outlook Stable
Series 14 (ES0378641130) affirmed at 'BBB+'; Outlook Stable
Series 16 (ES0378641155) affirmed at 'BBB+'; Outlook Stable
Series 17 (ES0378641163) affirmed at 'BBB+'; Outlook Stable
Series 18 (ES0378641171) affirmed at 'BBB+'; Outlook Stable
Series 19 (ES0378641189) affirmed at 'BBB+'; Outlook Stable
Series 20 (ES0378641197) affirmed at 'BBB+'; Outlook Stable
Series 21 (ES0378641205) affirmed at 'BBB+'; Outlook Stable

The transactions are backed by Spanish TD, which are credit rights recognised by law. Alectra, Bliksem, Rayo Finance 3 & 4 and Delta Spark are pass-through securitisations without an explicit government guarantee. The FADE bonds are explicitly guaranteed by the Kingdom of Spain (BBB+/Stable) and have bullet maturities.

KEY RATING DRIVERS

Net Amortisation of TDs
The regulated cash flows of the Spanish electricity system posted a EUR550m surplus in 2014, a trend that Fitch expects to have continued through last year and to follow in 2016, albeit at a lower amount. This should allow the system to pay down outstanding TDs to close to EUR23bn as of end-2016 (or 130% of regulated revenues) versus the peak balance of around EUR29bn in 2013. Fitch is not incorporating these surpluses in the TD ratios as the deployment of such amounts remains uncertain. Fitch believes the TD balance will continue to amortise as long as the regulatory framework is maintained and potential deviations are compensated with tariff adjustments.

Regulatory Intervention Risks
Fitch believes the Spanish electricity industry regulator (Comision Nacional de los Mercados y la Competencia - CNMC) lacks sufficient powers to act as a truly independent body in setting access tariffs and managing regulated cash flows. This assessment is the main factor that limits the Spanish TD securitisation ratings from achieving a higher rating in accordance with our criteria for utility credit rights, which set the maximum achievable rating at three notches above the sovereign rating.

Key Performance Indicators within Expectations
Leverage and debt service coverage key performance indicators (KPIs) of the Spanish electricity system continued their improving trend in 2015, in line with Fitch's expectations. Furthermore, Fitch expects the outstanding TD relative to regulated revenues to decrease to around 100% by 2018 or 2019 and regulated revenues to be sufficient to cover regulated costs, including TD annuity payments of approximately EUR3bn per annum over the next three years.

FADE Credit Link
The FADE bonds are credit-linked to Spain's Issuer Default Rating (BBB+/Stable) as they benefit from an explicit and irrevocable guarantee from the government. FADE bonds are exposed to refinancing risk because the underlying TD receivables are collected over a horizon of approximately 15 years, while all FADE bonds have bullet maturities and cash flow mismatches between assets and liabilities are expected. In Fitch's view, the FADE programme's ability to roll over its scheduled amortisation is commensurate with Spain's sovereign risk.

RATING SENSITIVITIES
Alectra, Bliksem, Rayo Finance 3 and 4 and Delta Spark could be downgraded if additional regulatory uncertainties arise affecting the electricity system governance framework and its ability to implement corrective measures in times of stress. Moreover, the transactions could be downgraded if electricity KPIs deteriorate beyond Fitch's expectations as a consequence of a sharp and prolonged fall in electricity demand, or if large compensation payments to renewables producers and investors result from on-going litigations.

Alectra, Bliksem, Rayo Finance 3 and 4 and Delta Spark could be upgraded if the regulator strengthens and demonstrates independence, mainly in its ability to set access tariffs, all else being equal.

As the FADE bonds ratings are credit-linked to Spain, a change in the sovereign rating would lead to a change in the bonds' rating. Changes to the terms of the full and unconditional guarantee from the Spanish government could also impact the FADE bonds' ratings.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Prior to the transactions' closing, Fitch did not review the results of a third party assessment conducted on the asset portfolio information.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The sources of information used to assess these ratings were reports from CNMC and transaction investor reports.

REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the new issue reports. In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.