S&P lowers Ence Energia

Standard & Poor’s said it lowered the long-term corporate credit rating on Ence Energia y Celulosa to BB- from BB.

The agency also said it lowered the rating on Ence’s €250 million senior secured notes and revised the recovery rating on the senior secured debt to 4 from 3, indicating 30% to 50% expected default recovery.

The outlook is negative.

The downgrades reflect Ence’s volatile operational performance in 2014, primarily stemming from adverse changes in the Spanish regulatory framework for renewable energy, but also due to the declining pulp price, S&P said.

Previously, the agency said it expected the energy business to provide stability to Ence’s operations and to an extent counterbalance the inherent cyclicality associated with its pulp sales.

However, the final version of the Spanish energy reform led to significant negative effects for Ence because it made it much less beneficial to produce electricity from biomass sources, S&P said.

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