Moody's considers electricity reforms in Spain negative for Abengoa

Feb 13, 2013 - Rating agency Moody's considers the measures recently approved by the Spanish government for the energy sector negative for the credit quality of local engineering group Abengoa (MCE:ABG).

According to Moody's, the decree law approved on February 1, which targets to deal with the tariff deficit in the country, implies a cut in the thermal solar business of Abengoa, since the company has 13 plants.

The decision of the government not to revise the feed-in-tariffs according to the consumer price index (CPI), and to eliminate the possibility for a market price plus a premium will reduce the future revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) of the plants of Abengoa, Moody's noted.

These measures add up to the new taxes approved in December 2012 for the energy sector, which include a 7% tax on the production, the so-called "green-cent" on various products, and special taxes on the nuclear and hydroelectric power.

All these actions will result in a decline of between 3% and 4% of Abengoa's EBITDA in 2013 compared to 2012. The company's solar business accounted for some 20% of its revenue and EBITDA in 2012, compared to 8% the previous year.

This additional pressure will confine the company's capacity to reduce the leveraged credit and respond to challenges such as the poor expectations for the biofuel sector.

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