As expected, controversial energy reforms have received their first rebuttal. Iberdrola announced yesterday that it is firing 1,000 people (pre-retirement layoffs will happen first) and that investment in Spain will drop 28% over the next three years. Company CEO Ignacio Sánchez Galán made it clear that Iberdrola will not focus its investment on Spain because national energy laws are "barely legal."
And he warned that he would continue to withdraw from Spain until the economic situation became favorable again. José Manuel Soria's reforms had a 1.3-billion euro impact on Iberdrola in 2014, accounting for a 7% drop in profit margins. "As a Spaniard, it hurts me to read what people are saying about the sanctity and security of our laws." As Spaniards, it hurts us to read that Galán spoke from London in front of global analysts and sullied the reputation of a country that was just starting to improve its image internationally.
Evidently, some reform issues will end up in the courts. Sector leaders complain that the reforms were backdated to negatively affect them and that two users could pay different prices for the same power. The issue is a headscratcher and a headache at the same time. What is certain is that Spain needs the energy sector reforms and that the national government cannot afford to put the nation by letting the tariff deficit increase much higher. That Iberdrola was the first to pull back the curtain is cause for concern. Other companies might follow its lead. Whatever happens, we should remember that most companies have endured the crisis without financial aid and that we are all still in it. This is not the time to pack our bags.
