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ENERGY

Iberdrola to cut investment in Spain in wake of energy sector reforms

Utility’s earnings fell seven percent last year due to regulatory changes

Company chairman: “We feel more British, Mexican and American than Spanish”

The chairman of Spanish power utility Iberdrola, Ignacio Sánchez Galán, on Wednesday lashed out at the government’s energy policy and announced that his company “will make a testimonial reduction in its investments in Spain in the period 2014-2013” and not invest any more in developing its domestic renewables business, at least until 2016.

Galán said during the three-year period Iberdrola plans to invest 9.6 billion euros, but will concentrate its efforts on Britain, the United States, Mexico and Brazil. Investment in Spain will be reduced to 15 percent of the total. “Iberdrola feels more British, Mexican and American than Spanish,” he said.

The investment plan calls for an increase in renewable energy capacity of 1,200 megawatts, 36 percent of which should come from Britain, plus 31 percent in the United States and 18 percent in Mexico.

Galán made his remarks at a presentation of Iberdrola’s annual financial results for 2013 in London. The company’s net profit declined 7 percent from a year earlier to 2.572 billion euros and calculated the negative impact on pretax earnings owing to regulatory changes made by the government at 801 million euros. It expects a further impact of 1.3 billion euros this year.

Iberdrola’s gross operating profit in the form of EBITDA last year fell 6.7 percent to 7.205 billion euros as sales declined 4.1 percent to 32.807 billion.

The government has cut the premium rates it pays for electricity produced using renewable resources. A number of investors in the renewable sector, including a company controlled by the Abu Dhabi government, have initiated international arbitration proceedings against the Spanish government over the cuts to premiums. However, the Supreme Court has ruled that the cuts do not infringe investors' right to legal security.

The government also abolished a system for determining what consumers pay for electricity that in part depended on the outcome of quarterly auctions in the wholesale market. Galán said the new system introduced by the government for setting regulated rates was unviable and called for a return to a “stable legal framework” for the sector.