It is not news that the government changes the rules of the game, the energy ministry not willing to maintain the current level of what is known as 'reasonable profitability', at the end of the first regulatory period 2014-2019 that established the electrical reform of José Manuel Soria.
The Executive is referring to the different employers of the sector that will act for 2020 so that the interest it currently pays to the plants, which already represented a strong cut in premiums previously committed to investors, is reduced by 7,38% for the investment made, as confirmed by several sources close to the Government.
The regulations established in 2013 linked profitability of green power plants to the Treasury obligation at 10 years plus 300 basis points. Thus the interest was set at 7,38%. At the end of 2019, you can review the remuneration parameters, the value that revolves around what they create a reasonable return.
Unfortunately, the Executive will review the value of the bond, but is not willing to modify the differential of three percentage points as requested by the sector to remain as it has been up to now, which leads renewable investors to another new discount of profitability.
In addition, it does not want to modify the royal decree that prevents these investments from before 2010 from depending on the price of the sovereign bond before 2020.
For the next review of the remuneration of renewable plants, the Executive has to add a differential to the average price of the bond during the 24 months prior to May 2019. If the Government maintains this differential at 300 points, no one in the sector is aware that its profitability since 2020 faces a new reduction.
Given the low profitability of Spanish debt, the best forecasts made by financial experts estimate that the bonus over 2% (which means a drop of more than two percentage points of profitability between the one granted in 2014 and the one that will be from 2020).
Currently, the interest on the Spanish bond stands at 1,3%. Since 2014, experts already predicted a sharp drop in it, given the strong interest drops thanks to massive debt purchases by the ECB.
According to different associations and renewable energy companies, if the reasonable profitability of the projects is revised downwards at the end of 2019, the sector could be in a "Near bankruptcy".
If this new cut is confirmed, those responsible for the various employers assure that financial problems will intensify, dragged by many of the plants that were built with a very high percentage of bank credit. According to bank calculations, there are more than 40.000 million committed in this type of renewable energy investments with various financial entities.
The supposed new cut would affect about 20.000 megawatts of installed power of different technologies (photovoltaic, wind, solar thermal, etc.) at the end of the last decade, under the promise of a remuneration contract of the government for 25 years.
The reform implemented by the former minister Soria (With society to Panama), put some standard conditions to reward all the plants that entered within the specific regime. Unfortunately, many engineers point out that these conditions do not occur in most plants, so the assumed 'reasonable profitability'does not reach the promised 7,38% figure.
“If they cut their pay even more, there will be plants that they won't be able to move on and their business plans will blow up ”, say several experts with knowledge of the photovoltaic business in Spain. 'The problem could extend beyond banks, because after all these years banks that accumulate problem assets of this type may have started to take them off their balance sheet », to reduce the capital requirements demanded by these types of loans.
This new profitability cut to renewables would add fuel to the various trials that are underway. Do not forget that recently the CIADI condemned Spain before the claim of an international investor, for the successive and repeated cuts in pay at its plants.
If profitability is revised downwards in 2020, investors would have one more reason to report their situation to justice. To try to avoid more problems, there are even state attorneys who would be recommending that profitability be maintained at the current level, something that today does not pass through Minister Nadal's plans. Other sources assure that if the profitability is lowered from the current 7,38%, demands will rain again against the government of Mariano Rajoy.
