Looking to a new wave of ownership – Garayar Asociados

The overriding issue surrounding Spain’s energy sector is the ability to access finance, which is affecting all levels and may now prompt further diversification of ownership, says Emiliano Garayar, founding partner at prominent Madrid firm Garayar Asociados.

‘Recent changes to Spain’s feed-in tariff rates have brought significant new financial pressures to many in the renewables sector, while even some of the domestic energy giants are facing pressure as they look to finance or refinance existing operations.’

‘La cuestión en cuanto al sector de la energí­a en España es la capacidad para acceder a la financiación, y ésto está afectando a todos los niveles, lo que puede propiciar ahora una posible tendencia a la diversificación de la propiedad,’ comenta Emiliano Garayar, socio del despacho especializado en energí­a Gararayar Asociados.

Fellow partner Javier Montalvo agrees: ‘The impact of legal changes and tariff reductions last September has meant, for example, that the days of solar photovoltaic (PV) projects acting as virtual financial products have gone. Many small operators will inevitably be forced from the sector.’

The OV market particularly, he suggests, may still prove attractive to incumbent or larger operators with cash, but increasingly less attractive to new operators or sponsors. Across the energy sector, many projects have been financed with large amounts of debt, which in many cases, they say, is now due for repayment or requires repackaging.

‘In recent years many companies have borrowed heavily to finance projects or acquisitions, including operators such as Iberdrola, Endesa and more recently Gas Natural in its acquisition of Unión Fenosa. In the current very difficult finance markets, the result is that some operators may see a need to sell some attractive assets.’

The next year, he believes, may therefore see further deal activity including potentially the arrival of larger foreign players into the domestic Spanish market. Italy’s Enel has now finally won ownership of Spain’s number two electricity generator, Endesa, while the merged Gas Natural- Unión Fenosa has to divest assets on competition grounds.

‘Despite some public commentary against ‘selling out’ the country’s assets there are no legal barriers to foreign ownership. The issue is largely a practical one. How desperate are companies to sell and who will offer the best price,’ says Garayar.

The energy sector is one of the few viable areas of the Spanish economy, they say, and unless the government is willing to back companies directly, or through guarantees, then wider ownership is inevitable.