Soon after national energy reforms were passed last Friday, an analysis of their impact on companies within the sector began. Early stages of analysis make experts expect that some of the cuts will go toward trimming the tariff deficit, a 16% drop in revenues and a 5% drop in net power production.
Energy stocks have fallen on the news. Acciona suffered the sharpest blow, losing 8.1% on the day while electric companies fared the best. Even though the reform will force equal cutbacks across various subsectors of the power industry, which the EU has confirmed, the impact will be felt most by renewable energy producers. The changes will wind farms most because of their small size. Acciona could lose more than 60 million euros in annual revenues, which is a 59% reduction. Endesa may lose 400 million euros annually, which is 15% of its net revenues.
Reducing future financing costs by trimming the tariff deficit is in in the power companies? best interest. This is without a doubt the best aspect of the energy reforms.
Thermosolar plants have fared much better than expected. More generally, there are worries about how reform cutbacks will affect power company stock dividends and whether the companies will be forced to raise capital by selling assets.
This is Acciona?s problem. The company may have to sell some of its wind farms at a loss, because energy reforms have undermined the profits that the company expected to reap from these farms when it purchased them. Renewable energy companies, which are raising concerns about the legality of the reforms, are looking at a potentially long legal battle that could turn out very costly for the state.
