The Minister of Energy, Tourism and Digital Agenda, Alvaro Nadal, was in favor of lowering the reasonable profitability of renewable plants from 2020, since according to him, this will reduce considerably (between 5 and 10%) the electricity bill.
In an appearance at the Energy, Tourism and Digital Agenda Commission of the Congress of Deputies, the minister affirmed that the Government is in favor of this review suppose «A sensible reduction to the receipt of the electricity of all the Spaniards».
Reasonable profitability
Mr. Nadal defended linking the remuneration to the State bond, as stated in the norm, which would imply a fall in this profitability for renewables compared to the 7,39% set for the current period.
Below we can see several videos about this man
Everyone can draw their conclusions.
Regulation
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.
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.
Bankruptcy
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".
But according to the minister, “Given that it is in the law and that everyone knows the rules of the game, we do want the light of Spanish consumers to drop between 5% and 10%. Everyone can have their opinion and that of the Government is this, "he said. It would have to remember this man contracts signed by thousands of retailers, where the same government guaranteed remuneration for the next 25 years ... This is Spain.
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.
CIADI
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 in the current level, something that today does not go through the plans of Minister Nadal. Other sources assure that if the profitability is lowered from the current 7,38%, demands will rain again against the PP government.