Reform of the energy sector relating to renewable energies: corporate, contractual and insolvency issues of interest
On December 28, 2013, the new Electricity Sector Act (Act 24/2013, of December 26) or “LSE” came into force.
The LSE maintains the essence of the rules established under Royal Decree-Law 9/2013, of July 12. Existing renewable energy plants will receive the market price and will be entitled to additional remuneration that, based on investment costs and standard operations costs, will enable them to achieve certain profitability.
This profitability, calculated for “efficient and well-managed” companies, will be reviewed every six years, and the remuneration parameters will be modified every three or six years (depending on the case).
The remuneration regime for renewable energy plants depends on the detailed regulations to be included in laws not yet approved.
The uncertainty of this situation directly affects all renewable energy plants, particularly projects that used project finance structures for their financing, as those structures were created based on their capacity to repay the debt from the income earned by applying the special tariff regime.
This situation leads to corporate, financial and insolvency issues that companies owning renewable energy projects must consider until approval of the implementing regulations establishing how to calculate the remuneration these companies will receive, or once the implementing regulations come into force.
Thus, given the introduction of this new regulatory regime, each company’s situation must be studied in detail.