Utilities warn against halting renewable energy investment due to tax

  • The bosses of electricity, oil and banks charge in storm against the tax.

  • The banks anticipate that the new tax will be an economic burden and that it will cause a contraction in credit concessions in the midst of the crisis.

The big energy companies and the big banks are revolting against the government for the new temporary tax which will make them pay 7 billion euros in two years. The executive’s plan is to tax at 4.8% the commissions and net interest of financial entities with revenues greater than 800 million per year and at 1.2% the sales of energy companies with turnover greater than 1,000 million.

A new tribute which begins its parliamentary process after the presentation of a bill from the PSOE and United Podemos, and which aims for large companies to finance part of the measures adopted to mitigate the impact of the inflationary spiral on households and businesses in the midst of an energy crisis. Major energy companies in the electricity and oil sectors warn that the new tax is a drag on investment in the sector.

The employers of the major electricity companies Aelec – which includes Iberdrola, Endesa and EDP– considers the introduction of the new tax unjustified because the sector does not have the extraordinary advantages that the government wants to cut and warns of its impact on the renewable deployment plans of companies which require investments of several million dollars and , with it, on all economic activity and employment.

“The incorporation of a new tax would introduce a additional corporate uncertainty, weighing on Aelec partners’ ambitious investment plans to accelerate decarbonization of our economy and reduce energy dependence on fossil fuels from abroad & rdquor ;, say the employers of the electricity companies. “The imposition of this type of tax is clearly contrary to the objective of massively integrating renewable energies into the electricity system and facilitating the energy transition.”

The employers of AOP oil companies -which includes major companies in the industry such as Repsol, Cepsa, BP, Galp or Eni- also warns that “the resources of companies in the sector are essential to continue investing to achieve climate neutrality, which will require billions of euros in Spanish refineries with a commitment to industry and employment, despite the uncertainty regulatory surrounding these investments & rdquor;.

The oil companies grouped in AOP have announced “investments of several billion dollars and have launched projects for which the refining system is the most sustainable”, underlines the association. “In order not to jeopardize these investments, a stable legal framework is necessary and a design of the energy transition that allows all alternatives to compete on equal terms.”

No additional benefits?

Iberdrola and Endesathe two largest electricity companies in the country, have already taken advantage of the presentation of their half-year results this Wednesday to notify the Government that it will not find the additional benefits it claims to want to tax prevent big business from profiting from the energy crisis and spiraling price increases. In fact, both companies are directly exploiting the decline in profits they are seeing in the Spanish market so far this year.

Electricity companies have insisted in recent months on denying the existence of the millionaire perks the government says it wants to cut, as they have sold all their electricity production well in advance and at prices well below those set by the electricity market and , therefore, Consequently, they do not benefit from the increases.

Aelec points out that the energy crisis has caused a very significant increase in costs which has reduced margins and profits. “A tax based exclusively on revenues and not taking into account costs, affects revenues which do not translate into higher margins for companies & rdquor ;, whereas the tax proposed by the government would obtain part of its collection in regulated activities such as the regulated electricity tariff (called PVPC) or distribution networks, whose margins are set by the State itself and which have not been affected by the market situation.

AOP points out that the government’s decision to launch a windfall tax is arbitrary and unwarranted. “The profits are not distinguished by their ordinary or extraordinary nature, but are cyclical and result from market conditions reinforced by investments made at risk”, underline the bosses of the oil companies. “What today may seem like extraordinary profits, in 2020 were extraordinary losses (…) Wanting to tax these benefits today makes no sense. Basing the new tax on short-term profits would only make sense if support was provided for short-term losses, such as those incurred in 2020.”

In this context, Iberdrola has caused a clash between the sectors and this week pointed to the gas and oil companies as the winners of the crisis. “The companies that are increasing their profits in Europe are the oil and gas companies, not the integrated power companies,” he said andThe president of Iberdrola, Ignacio Sánchez Galán, during a conference with analysts implicitly designating rivals such as Naturgy or Repsol. “We do not have extraordinary profits. Gas and oil companies are not in the same situation,” he stressed.

Repsol and the rule of law

Repsol, Spain’s largest oil company and now converted into a multi-energy group with a growing presence in electricity and renewables, has warned that it will do everything in its power to “prevent any arbitrary measures & rdquor impact on the business.

“I firmly believe and believe that we live in a safe jurisdiction, and I tell you that I have no doubt that our constitutional framework, the Spanish legal system and European legislation will protect us from any potential arbitrary initiative & rdquor ;, indicated the CEO of Repsol, Josu Joan Imaz. “Against arbitrary measures, the rule of law and legal certainty are fortunately essential in the EU. I will therefore be very clear: I am confident because we know that we have a solid constitutional and legal framework and that the Spanish and European markets are markets that protect business activity from any arbitrary initiative”.

The bank and the blow to credit

The ace employers in the financial sector AEB and CECA They stand together to warn the government that the new tax will not be used to fight inflation and that it will even hinder economic recovery and job creation by stopping the granting of credit by the entities.

According to financial associations, such a measure will affect the credit and risk decisions of the entities themselves, as well as their ability to compete in the European single market. Santander came to quantify the credit contraction at 50,000 million euros in the Spanish market during the two years in which the tax will be in force.

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