Near-Bankrupt Spain Targets Renewable Energy Profits

  • Date: 12/02/13
  • Miles Johnson, Financial Times

The Spanish government’s latest bid to cut its growing debts to the country’s energy sector is expected to slash profits at renewable energy companies as Madrid continues to grapple with a €28bn deficit built up through years of subsidies.

Spain’s most recent reform to the energy sector will force renewable energy operators to choose between a fixed price or market price for their power – and remove a previous subsidy – while renewables subsidies will also be delinked from consumer price inflation and instead aligned with Spain’s core inflation measure.

Shares in Acciona, Spain’s second largest wind power operator, have tumbled almost 20 per cent, with Abengoa, Spain’s largest solar thermal power plant developer, also falling sharply since the changes were announced at the end of last week.

Analysts at Mirabaud expect Acciona’s earnings per share to drop by 40 per cent, while Abengoa’s EPS are forecast to drop by 12 per cent. At Iberdrola, where renewables make up a far smaller part of overall earnings, the impact is a fall of 3 per cent. Analysts at Goldman Sachs estimate a 60 per cent hit to Acciona’s EPS.

During the giddy years of Spain’s construction boom a spate of government subsidies and incentives for wind and solar energy made the country one of the world’s most attractive investment destinations for green energy, but the tariffs contributed to an unbalanced energy market and a pile up of state guaranteed power debt.

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