Spain’s Sanchez Backtracks to End Impasse With Utilities
(Bloomberg) -- Spanish Prime Minister Pedro Sanchez sought to pull back from his standoff with the country’s major utilities, promising to exempt them from a new windfall tax if they sell power at “reasonable” prices.
“We will tell utilities that if they offer contracts that don’t incorporate the extra income stemming from soaring gas prices, we will not apply” the new rules, Sanchez said in a live interview with the La Sexta television channel. “We will ensure the supply of power at reasonable prices for” energy-intensive industrial users, he said.
Europe has been facing a growing energy crunch due to tight supply and rising natural gas prices, hurting energy firms’ profitability but also consumers and power-intensive industries, such as steelmakers. Spain is especially vulnerable because it has a variable wholesale price-setting system, which is highly exposed to surges in gas prices. The country is also a large importer of pricey liquefied natural gas.
Sanchez’s comments on Thursday contrast with those he made when he announced the new rules during another evening television interview in September. At the time he said it was unacceptable for utilities to profit from surging power prices.
Earlier on Thursday, Congress ratified a government decree to tax the extraordinary income of power firms in an attempt to limit soaring energy bills. During a presentation to lawmakers, Ecological Transition Minister Teresa Ribera, who oversees energy policy, said the rules will be modified in the next few weeks.
The change in stance followed days of pressure from political partners and energy firms. The new exceptions announced by Sanchez have to be published in the government gazette to be enacted.
The government had been told earlier in the week by one of its it key allies, the Basque Nationalist Party, that the proposed energy policy package was harmful for industrial firms and put the economy and the government at risk.
In recent days, Ribera had met with the leaders of top Spanish utilities to discuss policy changes and soaring prices, including meetings with the chairmen of Iberdrola SA and Naturgy Energy Group SA on Wednesday.
Shares of power firms in Spain’s benchmark IBEX 35 index rose Thursday with Iberdrola closing 1.2% up and Endesa SA 2.6% after Ribera’s pledge to change the decree. Since the measure was announced Sept. 13 both companies lost more than 5 billion euros in market value.
©2021 Bloomberg L.P.