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Spain Won't Levy More Taxes on Solar Power

Spain Won't Levy More Taxes on Solar Power

Abengoa SA, the biggest recipient of subsidies for solar-thermal power in Spain, rose to a five-month high, leading industry gainers, after Budget Minister Cristobal Montoro said he'll stop plans to claw back money from companies.

Abengoa advanced as much as 5.7 percent in Madrid to the highest since March 28 and rival solar-thermal developer Acciona SA gained as much as 5.2 percent. Montoro said in an interview he’s ready to veto the Industry Ministry proposals that aim to raise revenue to help reduce the debts of Spain’s power system.

By taxing solar generation, Industry Minister Jose Manuel Soria seeks to raise funds from Spain’s most heavily subsidized energy source. Montoro said the plans would breach European law and Spain should focus on efforts to rein in its budget deficit.

“This is certainly good news for the cleaner generators,” said Shai Hill, an energy-company analyst at Macquarie Capital Europe Ltd. in London. “Solar and solar-thermal is the focus.”

Abengoa climbed 4.3 percent to 14.10 euros by 2:34 p.m. in Madrid trading, Acciona gained 3.3 percent to 39.165 euros, while the benchmark Ibex 35 index was down 0.4 percent.

Spain’s second recession in three years is shrinking tax revenues, while the Budget Minister has announced more than 100 billion euros of spending cuts and tax increases since December. Unemployment reached a record 25 percent in the second quarter.

“We have much bigger issues facing us as a country and as a government,” Montoro said. “We shouldn’t get distracted. We need to guarantee we meet the budget in the short term.”

Surprisingly Frank

While Montoro sees the energy industry as a source of tax revenue that’s unable to flee overseas, Soria fears the power system’s own deficit needs to be resolved before it ends up dumped on the state, adding to the nation’s debt, Hill said.

“This is a very senior politician opening up a discord from within the cabinet,” Hill said. “I’m surprised he’s spoken so frankly.”

The industry minister aims to prevent 24 billion euros ($30 billion) of power-system debt winding up on government books as Spain’s state-controlled power market threatens to deteriorate. The exposure could reach 50 billion euros within four years unless the government reduces subsidies, Soria said July 11.

“Then we wouldn’t in the end have a problem in the energy industry, we’d have a problem in the financial system of a similar magnitude to what we face currently,” he said.

Power Deficit

Spain’s power system spends about 6 billion euros a year more than it receives from consumers after previous governments piled subsidies for clean energy, idle gas-fired plants, poor families and island dwellers who would otherwise face higher electricity prices on top of the cost of generation and transmission. Soria in July sketched out his plan to curb the deficit by imposing higher taxes on renewable-energy producers.

“For a minister or a department to go public saying there’s agreement is a technique I’m used to, that’s normal,” Montoro said in the interview, asked about Soria’s proposals.

He also denied reports the Industry Ministry planned to impose an environmental tax on natural-gas customers. “It’s not decided,” he said. “They have decided to float the idea in the media but I have the final say on the creation of taxes.”

State guarantees to the power industry are part of the debt mountain left from Spain’s decade long economic boom. Prime Minister Mariano Rajoy was already forced to seek a 100 billion-euro lifeline for the banks. His government may need more budget cuts before the European Union’s rescue fund can buy Spanish debt, European Central Bank President Mario Draghi said Aug. 2.

Spain’s 10-year bond yields reached a euro-era high of 7.75 percent last month as investors doubted it could pay its debts.

Abengoa, based in Seville, has forecast earnings before interest, taxes, depreciation and amortization of 169 million euros ($210 million) from Spanish solar plants from 2014. It uses mirrors to focus the sun’s rays to power steam turbines.

CURRENT MAGAZINE ISSUE

03/01/2015
Volume 18, Issue 3
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