The non-payment of the sentences condemning Spain for the retroactive withdrawal of renewable premiums have led to various embargoes, but also to a scenario of technical non-payment that directly affects four public debt securities. It was in April of last year when Blasket Renewable Investments requested the suspension of payments (default) of four bond issues following the Government’s refusal to pay pending awards, specifically in relation to the Infrared case.
Under this scenario, a team of technicians from the affected companies, especially from the US fund, has made an estimate of the impact that this circumstance has on the financing of the Treasury and the Spanish economy. According to their calculations, from April to December 2023, the extra cost caused by the default is around 2.1 billion. Furthermore, they point out that if this situation of “legal uncertainty” continues, the figure will grow to 4.9 billion at the end of this year.
According to the study, since the ‘default’ request was announced, Treasury bills have increased “notably.” Specifically, in three-month securities, the jump observed from April to December 2023 was from 2.96% to 3.64%; in six-month bonds, the increase was from 3.02% to 3.65%; In nine-month bills, the rate moved from 3.19% to 3.51%; Finally, on the one-year debt, interest went from 3.14% to 3.31%.
Modeling the impact on GDP
For its part, since the rise in the risk profile negatively affects macroeconomic conditions, they also propose modeling the impact it has on GDP. Thus, they affirm that activity would have been reduced by 2,560 million euros during the same period for this reason. “In the absence of solutions, the fall will be an additional 4,780 million throughout 2024,” they warn in the working document titled The cost of legal uncertainty: effects of the impacts on renewable energies in Spain.
In this way, adding both amounts, the impact rises as a whole to 4,660 million euros, and could reach up to 12,240 million if the situation persists throughout 2024. To these figures must be added the 250 million additional judicial costs and financial costs that Spain endures for not paying the sentences. “If Spain wants to finance the energy transition, it must first clear up the legal uncertainty and the shadow of suspicion that has spread this situation. To achieve this, it must sit down and talk to its creditors, respect the compensation included in international rulings and establish a recovery plan. credible payment that allows the matter to be settled and prevent further damage,” the report highlights.
Executive sources claim to have no evidence of any judicial notification. They also point out that after the approval of compensation in 2019, claims have stopped and compensation continues on a downward trend. On the contrary, sources from the sector argue that this is not a judicial process, but rather a financial one, and that is why the Executive is hiring advisory firms. “This damage is economic, not legal,” he responds.
During the 1990s, a bonus system was developed to encourage renewable energy producers in Spain. Subsequently, Royal Decree 661/2007 initiated a range of incentives offered to investors who developed ‘green’ facilities. The mechanism set maximum and minimum limits for the amount of aid received by producers. In this way, if the sum of the premiums and the market price exceeded the ceiling, the generators would receive the established maximum limit. On the other hand, if said sum was less than the minimum price, the predetermined floor payment was protected.
While the costs of these technologies begin to decrease, the premiums remained unchanged, motivating a ‘boom’ in the renewable generation capacity installed in the country. The premiums had been designed to ensure a profitability of between 5% and 9%, although the actual ones were between 10% and 15%. However, especially starting in 2010, these incentives were eliminated. For example, salaries were cut to set a maximum number of production hours per year.
They cling to the Energy Charter Treaty
Likewise, between 2012 and 2013, “more aggressive measures” were deployed, in the words of the authors of the document, with the creation of a 7% generation tax, the non-remuneration of new installations since 2012 or various regulatory cuts. . of the premiums that remained in force. The retroactive modification of the basic conditions governing investments caused many international companies to invoke the Energy Charter Treaty and start dozens of litigations. The horrible procedure is being conducted at the International Center for Settlement of Investment Disputes (ICSID), a court belonging to the World Bank that channels around 70% of disputes globally.
At the end of January of this year, international courts have ruled against Spain in 26 of the open processes, imposing the payment of compensation valued at 1.7 billion euros. Since 80% of the litigation has been resolved in a manner favorable to the interests of the affected companies, it is expected that the final number of convictions will rise to 40 and that the compensation required from Spain will finally be between 2,000 and 2,500 million. . of euros.
The State lost the first of the arbitrations in 2017. The award ruled in favor of the British firm Eiser Infrastructure Limited and its Luxembourg subsidiary Energía Solar Luxembourg. The complaints focus on cuts to solar and solar thermal energy and claim nearly 10 billion euros from the country in different international arbitration bodies for the damages allegedly caused by cuts in renewable energy premiums. According to Government sources, the payments may be contrary to European Union law and constitute illegal State Aid, incompatible with the internal market. In this sense, they indicate that, consequently, when Spain receives an award recognizing compensation, it notifies Brussels and cannot pay before the European Commission makes a ruling.
Seizure of sovereign assets and bank accounts
The arbitrations have already resulted in the precautionary seizure of sovereign assets of the Kingdom of Spain located in the United Kingdom, in the case of the London headquarters of the Cervantes Institute, the building of the Vicente Cañadas International School, a UNED office, an economic promotion headquarters linked to the autonomous community of Catalonia or a bank account
The right to collect compensation for the Prestige oil tanker disaster, valued at more than 900 million euros, has also been partially intervened. On the other hand, in Australia a Supreme Court ruling has already been issued that advances similar processes aimed at compensating the complaining companies, while in the United States there are almost a dozen complaints in the process of being processed and news is expected throughout of the first half of this year.
The last ruling was in favor of Spain
However, not everything is bad news for the State. In the latest known ruling, the ICSID has exonerated Spain from paying the 175 million euros claimed by the Swiss company EBL and the Spanish company Tubo Sol PE2 SL. In fact, the court has ordered the plaintiffs to pay Spain 214,808 dollars (199,000 euros) for the part that was used of the advances that the State made to ICSID, and nearly 1.9 million euros in legal fees. and expenses.
Along the same lines, the French fund Antin has voluntarily desisted from initiating new arbitrations against Spain within the takeover process for the renewable energy company Opdenergy, considering that legal certainty is guaranteed. However, it must be remembered that Antin transferred the rights of the lawsuit to the Luxembourg company Energy Investments.
