Endesa SA escaped the sting of legislation in Spain aimed at curbing excessive profits made by low-carbon generators during surging gas prices, and expects a similar outcome around a proposed CO2 clawback law because of government modifications, executives said Nov. 3.
Iberian power prices in the first nine months of 2021 surged 146% year over year, driven by the spiraling cost of gas. Spain is seeing some of Europe's most far-reaching regulatory interventions to protect consumers, with a clawback mechanism proposed on low-carbon operators, including Endesa.
However, a revised version of the policy means that the Enel SpA subsidiary will now not see a material financial impact. In a last-minute amendment on Oct. 26, the clawback was weakened, with an exemption introduced on power sold through fixed-price bilateral agreements.
Without modifications, the impact on Endesa's nine-month gross margin would have been €110 million, effectively from just the two weeks in September in which the law would have applied, CFO Luca Passa told analysts. Because of the amendments, the financial impact on the company is zero.
Endesa was tipped as one of the companies set to be most affected by the policy, alongside Iberdrola SA.
In addition to the gas levy, Spanish policymakers have floated a contentious CO2 price clawback, targeting mainly older low-carbon assets that have supposedly benefited unduly from high power prices before the existence of the EU Emissions Trading System, the bloc's carbon market.
Here, Endesa expects a similar adjustment, with sales agreed with off-takers at fixed prices exempt from the policy, as well as the introduction of a pool price floor, Passa said. The bill is being amended in this direction in a fast-track process and the change it represents compared to the original version could be material, the CFO said, without providing estimates.
"We are aware of the difficulties that customers are facing due to the high energy costs," Endesa CEO José Bogas told analysts, adding that the company is open to discussing further measures with policymakers.
"This year is proving to be one of the most complex in recent years in terms of adverse operational scenarios," the CEO said. Despite this, Endesa posted nine-month EBITDA in line with the same period last year, at €3.1 billion.
The surge in gas prices served as a reminder to curb reliance on fossil fuels faster, Bogas said. In that context, executives announced renewables capacity additions of 700 MW for 2021, targeting 1.4 GW of growth in 2022.
"More than ever, we are convinced that a strong and better commitment to decarbonize our energy mix remains the key," Bogas said.
