A few days ago Gas Natural Fenosa was pleased for having achieved a 500 million euro bond issue to 10 years with an annual coupon of 1.375%, the lowest of a Spanish corporate issuer to this term, and Iberdrola followed the trail, yesterday placing bonds for 600 million to eight years with a coupon of 1.125%. But why do they need so much money?
It certainly is very good news to know that the Spanish utilities have at last the ability to achieve financing at historically low interest rates in international markets, but it also raises the question of why do they need it if they have already announced that they will not make any investment in Spain in the coming years and only in the first half of 2014, Gas Natural Fenosa, for example, posted a net profit of 932 million, up 19.5% on the same period last year, or in the case of Iberdrola at the end of the first half of 2014, the liquidity of the company amounted to 10,100 million euro, equivalent to more than 35 months the financing needs of the company.
“Despite generating cash, with more than 6,000 million euro in profit, it is surprising that they need even more money,” explains Jorge Morales de Labra, an expert in the energy sector to EnergyNews, “which shows its great weakness, especially if we think that last year they could securitize the tariff deficit and now we all pay it, because banks have assumed that debt, and they are not going to make any investment in Spain this year. “
For the financial expert Federico Rodriguez, “utilities have always had large investment needs, and have a structural debt, but today this is due to other factors, because not only have the two large utilities come to the capital markets, but many Spanish companies have done so, such as Santander, who see the possibility of getting funding because the investment community agrees that Spain starts to be trusted again, “and he adds” we only need to look at the Spanish bond yield which is at historic minimal, and is the reference interest rate “.
“The good news,” continues Rodriguez, “is that low interest rates are a sign that international investors rely on the proper functioning of the Spanish economy, but in the case of utilities it would be recommendable to see what do they require such a great capital injection for. “
4,000 million euro for GNF
Gas Natural Fenosa closed on Monday a bond issue in the amount of 500 million euro to 10 years with an annual coupon of 1.375%, the lowest of a Spanish corporate issuer to this period, the company reported in a statement.
The issue price of the new bonds is 98.948% of face value, and demand for the transaction amounted to 4,000 million euro, eight times the offer. The issue thus received orders of 300 institutional investors from 24 countries, and about 90% of the issue was signed with foreign investors.
Funds received against this operation will serve to optimize the financial structure of the company, by increasing the weight of the capital market, extending debt life and improving maturity profile, increasing the company’s liquidity. Since June 2009, Gas Natural Fenosa has carried out public issues in excess of 13,000 million euro, of which the vast majority have been conducted in European markets.
3,600 million euro for Iberdrola
Iberdrola, meanwhile, has closed a bond issue on the Euromarket for a final amount of 600 million euro to eight years, until 2023.
The differential is set at 65 basis points over ‘midswap’ and coupon stood at 1.125% per annum, the lowest fixed by a Spanish company to public operations in euro at more than five years, said the utility.
This operation will allow the company to extend the average maturity of its debt, laminate the maturity profile planned for the coming years and continue to improve its liquidity. The issue was placed among 250 investors, over 85% international, and has received a demand that has exceeded six times the initial offer.