DBRS Confirms Ratings of TAGUS – STC, S.A. (EnergyOn No. 1)

DBRS Ratings Limited (“DBRS”) has reviewed TAGUS – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (EnergyOn No. 1) (“the Issuer”) and confirms the ratings of the Class A1 Notes at BBB (high) (sf).

Based on the DBRS Portuguese Electricity Tariff methodology, the ratings of the above transaction is limited to a two notche increase above the current local currency sovereign rating of the Republic of Portugal. DBRS Sovereign Group recently confirmed the Republic of Portugal Long-Term Issuer Rating at BBB (low) and changed the trend from Negative to Stable (see press release issued on May 23, 2014 “DBRS Confirms the Republic of Portugal at BBB (low), Changes Trend from Negative to Stable).

This is a static cash securitisation of Portuguese electricity tariff receivables assigned to the Issuer by EDP – Serviço Universal (“EDP-SU”). The transaction closed in March 2009.

Pursuant to the Portuguese Decree-law 29/2006, EDP-SU has the right to recover any amounts arising out of the difference between the costs of acquisition of electricity and the sale price of the respective electricity valued according to market prices. The source of funds for the payment of principal and interest on the Class A1 Notes are the legally established right to receive, through the electricity tariffs, the amount of costs with the acquisition of electricity incurred by EDP-SU during 2007 and 2008 that have not yet been reflected into the electricity tariffs, including accrued interest.

The Class A1 Notes are supported by subordination of the Class A2 and Class B Notes. Credit enhancement for the Class A1 Notes has been stable since the DBRS rating in April 2011 and it is currently at 1.75%. An Expenses Reserve, funded with the proceeds of the Class B Notes, covers the transaction costs. The Expenses Reserve amounts to EUR 5.01 million.

The Issuer entered into a swap agreement with Deutsche Bank AG, London branch at closing, in order to mitigate its interest rate risk. Additionally, the swap agreement provides liquidity to the Issuer to pay interest due on the Class A1 Notes for up to three consecutive interest periods.

Deutsche Bank AG, London branch is the account bank and swap counterparty for the transaction. The DBRS private rating of Deutsche Bank AG, London branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A1 Notes, as described in the DBRS Legal Criteria for European Structured Finance. Additionally, the DBRS private rating of Deutsche Bank AG, London branch acting as swap counterparty complies with the current DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Deutsche Bank AG, London branch. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 8 May 2013, when DBRS downgraded the ratings of the Class A1 Notes to BBB (high) (sf) and removed the ratings from Under Review with Negative Implications.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Chuck Weilamann
Initial Rating Date: 8 April 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom

Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

• Legal Criteria for European Structured Finance Transactions.
• Rating Portuguese Electricity Tariff Securitisations
• Derivative Criteria for European Structured Finance Transactions.
• Master European Structured Finance Surveillance Methodology.
• Operational Risk Assessment for European Structured Finance Servicers.
• Unified Interest Rate Model for European Securitisations.