“Spain induced our clients to invest billions of euros in the PV sector and, once it received the benefit of that investment, it simply reneged on its end of the deal.”
A group of foreign energy investors is seeking arbitration in a dispute with the Spanish government over Madrid’s unexpected cuts in solar energy tariffs last year – only the second case of its kind taken up against a western European government.
In a letter seen by the Financial Times, 14 infrastructure and energy investment groups have written to the Spanish government to seek “hundreds of millions of euros” in compensation for retroactive changes made to the tariffs in March last year.
The current Socialist government, forecast to be ejected from power in general elections on Sunday, axed subsidy tariffs for solar photovoltaic (PV) electricity technology projects in December last year. Spain is the world’s largest per capita wind energy producer, with subsidies for renewable energy having fostered a €20bn sector that has become a pillar of state energy policy.
The 14 investors include KGAL, Whiteowl Capital and Impax Asset Management, and between them manage over $30bn of assets. They argue that they were encouraged to invest in PV projects due to the subsidy introduced by the government in 2007, and had already committed $2bn.
The government argues that the action was needed to reduce the financial deficit in Spain’s electricity market, where end-user prices have been consistently too low to cover suppliers’ costs.
Stephen Jagusch of Allen & Overy, which is representing the group, said: “Thanks to this tariff regime and investors like our clients, Spain now possesses a state-of-the-art PV generation infrastructure … In short, Spain induced our clients to invest billions of euros in the PV sector and, once it received the benefit of that investment, it simply reneged on its end of the deal.”