SACYR GREEN ENERGY MANAGEMENT, FT

Rating Action

EthiFinance Ratings (“the Agency”) affirms the Fund´s bond issue rating at “BBB+”.

Executive Summary

SACYR GREEN ENERGY MANAGEMENT, FT (the “Issuer” or the “Fund”), is a Special Purpose Vehicle constituted and managed by Intermoney Titulización, S.G.F.T., S.A. (the “Management Company”) under Spanish law. The purpose of the Fund is to advance Sacyr Industrial Operación y Mantenimiento, S.L. (“SIOM” or the “Assignor”) the Present and Future Credit Rights resulting from 9 operation and maintenance agreements (the “O&M Agreements”) entered by the Clients (or the “Debtors”) and the Assignor. The Clients mentioned above are 5 cogeneration plants, 2 industrial olive pomace oil extraction plants, and 2 biomass plants.

The transaction does not constitute a securitization in accordance with Article 2(1) of Regulation (EU) 2017/2402 of the European Parliament and the Council of 12 December 2017, as such, the Assignor has informed the Managing Company that it will not retain any risk related to the Fund.

Rating Fundamentals

• At the end of October 2024, the outstanding nominal value of the initially expected Future Credit Rights was 2,04x the outstanding balance of the Bonds. Also, the Fund over-collateralization is at 2,18x (vs. 2,14x in the previous report) including the Credit Rights, the treasury account, the liquidity fund, which has a balance of 4MM€, and the reserve fund, which has a balance of 60k€, providing the necessary credit enhancement for the Fund’s rating. It is important to note that at the end of this month, the total of the treasury account was 11.2 million, having enough resources to comply with the objective payment of 4.7m at the end of 2024.

• The structure would be able to withstand a level of stress in line with the current rating. The stressed cash flow analysis performed by the Agency determines that the structure in the cashflow analysis scenario will be able to withstand losses up to 29.2%.

• The credit assessments done by EthiFinance Ratings to each of the underlying assets have remained without change from the previous year. The credit assessments remained the same, although we see a recovery in energy production in the cogeneration plants since the fall observed in 2022.

• The energy production of the cogeneration plants changed the downward trend observed in 2022. Energy production during 2023 rose in 59.6% compared with the energy production during 2022, changing the downward trend observed in 2022 when compared with 2021 the energy production fell 46.7%. The changes in energy production affect the assigned credit rights because some CR have a variable part/income dependent on the production of each plant.

• Even though the actual operating hours from seven plants (cogeneration and biomass) increased on average 23,3% from 2022 to 2023, the equivalent operation hours showed a small reduction of -3.1%. This was because the downtime not attributable to SIOM during 2023 was considerably less than the previous year. The equivalent operation hours are the sum of the actual operating hours plus the downtime not attributable to SIOM.

• The Consumer Price Index (CPI) has been higher than initially expected. Initially, the CPI was expected to increase at an annual rate of 1,0% but during 2021 the CPI was 6.5%, during 2022 the CPI was 5.7% and in 2023 it was 3.1%. This has benefited the Fund as the fixed service price of the Credit Rights is updated annually with the CPI. 

• SIOM will compensate the Fund in the case a Debtor decides to terminate its O&M Agreement. The terms of the transaction state that in the case one of the Debtors decides to terminate its contract, SIOM has to compensate the Fund for the expected Future Credit Rights that have not been and will not be assigned to it. Because of this the Fund is not only exposed to the credit risk of the debtors but also exposed to the credit risk of the Assignor.

• EthiFinance Ratings has affirmed the Asignor’s parent company rating at “BBB-”. The Agency affirmed the rating of Sacyr S.A. in June 2024. The rating assigned reflects the favourable fundamentals of the infrastructure sector (including the outstanding levels of profitability, low volatility due to long-term contracts and high barriers to entry), Sacyr’s strong global competitive position within its sector, and our positive assessment of the company’s governance (listed corporation with a diverse shareholder base strengthened by an experienced management team). 

• J&A Garrigues, S.L.P. issued a legal opinion stating that the sale of the Credit Rights to the Fund is considered a true sale under Spanish law. The document also states that the sale is also considered effective against third parties and complete, valid, and unconditional.

• Commingling risk has been mitigated by the bank account pledge agreement signed by SIOM. The agreement states that SIOM pledges the account where the Debtors will pay the Credit Rights in favor of the Fund. There will also be an automatic weekly sweep of the account so that its balance is transferred to the Fund’s Treasury Account.

Sensitivity analysis

Factors that could (individually or collectively) impact the rating

• Positive factors

An increase in the credit assessments of one or more Debtors could have a positive impact on the rating of the Fund. Furthermore, a significant increase in expected Credit Rights, leading to an increase in over-collateralization, would also have a positive effect on the credit rating of the Fund.

• Negative factors

The downgrade of the credit rating of the Assignor or a downgrade in the credit assessments of one or more Debtors, or also negative changes in regulation, would have a negative impact on the Fund. Additionally, the termination of one or more of the Contracts could also have a negative impact on the over-collateralization and therefore on the credit rating.

Description of the Transaction

The Fund’s assets are composed of Present and Future Credit Rights resulting from the 9 O&M Agreements for the operation and management of 5 cogeneration plants, 2 industrial olive pomace oil extraction plants, and 2 biomass plants. Of the 9 Contracts, 6 have a payment scheme consisting of a fixed amount (independent of production) plus a variable amount (dependent on the production). The remaining 3 Contracts have a payment scheme that only consists of an agreed fixed amount.

Main Figures

Participants

Operational Diagram

The Assignor

Established in 2000 and with its registered office in Madrid, Sacyr Industrial Operación y Mantenimiento, S.L.U. (hereinafter, "SIOM", "the transferor" or "the company") is a company engaged in providing management, consulting, and operation and maintenance (O&M) services in the industrial plant sector. 

The company is part of the Grupo Sacyr, whose parent company is Sacyr, S.A., which is ultimately responsible for the actions of its subsidiary. The group is focused on a concession business model that intervenes in the entire value chain of the infrastructure sector (transport, social, renewables, water, waste, and singular building), from bidding, design, and financing to construction, operation, and maintenance of the assets. The strategic businesses in which the group is consolidated are concessions, engineering and infrastructure, and services.

EthiFinance Ratings has affirmed in June 2024 the credit rating of Sacyr, S.A., parent company of Group Sacyr, at “BBB-”, with a stable outlook.

The Underlying Assets

The Fund’s underlying asset portfolio is composed of Credit Rights coming from 9 O&M Agreements signed between the Assignor and the Debtors. The Assignor will issue an invoice to the Debtor for the O&M services rendered, following the terms stipulated in the O&M Agreements, and will then assign this invoice (net of VAT) to the Fund as a Credit Right.

The Credit Rights can be separated into two categories (i) Initial Credit Rights, which were assigned to the Fund at the Date of Incorporation, and (ii) Future Credit Rights, which are all the Credit Rights assigned to the Fund after the Date of Incorporation.