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ENERGY

Feeding frenzy in Spain’s renewable energy sector

A wind of change is blowing on Spain's renewables: companies and investment funds have been on a buying spree, taking advantage of the know-how and growth prospects of a sector still limping out of a crisis.

Feeding frenzy in Spain's renewable energy sector
Sun aplenty and wind-swept regions make the country an ideal candidate for renewables. Photo: AFP

In 2015 “total transactions reached €5 billion ($5.7 billion)”, says Joao Saint-Aubyn, a Madrid-based energy expert at global consultancy Roland Berger.

The biggest by far were the acquisition last year by US private equity firm Cerberus of renewables specialist Renovalia for about one billion euros, and investment group KKR's buy-out of solar group Gestamp Solar for a similar amount.

And the spending frenzy is unlikely to die down, as German giant Siemens eyes up wind power group Gamesa, and Cerberus is thought to be considering joining forces with US billionaire George Soros to devour T-Solar and its solar farms.

“Spain's renewable energy sector is one of the biggest in the world,” says Saint-Aubyn.

Last year, Spain was in fifth position worldwide for wind power, with installed capacity of 23 gigawatts — the equivalent of 23 nuclear reactors — and in eighth place for solar power after China, the United States and Germany.

This high ranking came despite near-zero investment in the sector over the past few years as the economic crisis hit.

Sun aplenty and wind-swept regions make the country an ideal candidate for renewables, but generous subsidies doled out by the former Socialist government of Jose Luis Rodriguez Zapatero really helped get the 70,000-strong sector going, until the financial crisis hit in 2008.

The Socialists were forced to implement spending cuts as the country teetered on the edge of bankruptcy, and the conservatives continued this policy after they came to power in 2011.

Potential investors had balked at the cut in subsidies, and had generally been wary of the general state of the Spanish economy.

No longer, though.

Spain's return to growth — its economy expanded 3.2 percent last year — and pledges by authorities to stop changing the sector's regulations have attracted investors back to the country.

The fact that renewable companies can no longer count on as many subsidies as they once could have reduced the value of their assets, making them more attractive for buyers, says Luis Polo, head of the AEE Spanish Wind Energy Association.

And Spanish companies are “on the cutting-edge internationally,” says Borja Rubio, an analyst for brokers XTB.

Spain has long been associated with windmills thanks to Miguel de Cervantes's famous novel “Don Quixote”, but it now boasts leading research centres such as the giant Almeria Solar Platform in a deserted, arid region in the south of the country.

The country's engineers also continue to innovate, and have for instance developed the prototype for a bladeless wind turbine.

Polo adds that another strong point of Spain's wind energy sector is that companies involved in the entire production line are present in the country.

The know-how of companies has allowed them “to win projects elsewhere in the world,” says Rubio.

Gamesa for instance is among the world's five biggest wind turbine manufacturers and is well established in several emerging countries like India, Brazil and China — of high interest to Siemens.

In order to keep growing, however, they need money.

“But many (wind farm) owners are struggling to cope with their debt,” says the AEE, after the sharp drop in public subsidies.

The situation is hardly any better in the solar sector. 

T-Solar for instance is heavily indebted and renewables giant Abengoa is on the verge of bankruptcy.

In comparison, private equity firms have a lot of cash for acquisitions.

And ultimately, the renewables sector has good prospects, particularly after 175 countries agreed to slow down global warming in a historic deal signed in December in Paris.

ENVIRONMENT

Police operation targets illegal water tapping in Spain

More than 130 people were arrested or placed under investigation for illegal water tapping last year, Spain’s Guardia Civil police said on Wednesday following a huge operation.

Police said most of their operations took place “in fragile and vulnerable areas such as the Doñana natural park”
Police said most of their operations took place “in fragile and vulnerable areas such as the Doñana natural park” in Andalusia. Photo: CRISTINA QUICLER / AFP

During the year-long operation, “133 people were arrested or investigated for extracting water through more than 1,533 illegal infrastructure devices”, the police’s environmental unit said in a statement.

A similar operation in 2019 had targeted 107 people.

Spain is one of the European countries most at risk from the impact of drought caused by global warming, scientists say.

Water usage issues are often at the heart of heated political debates in Spain where intensive agriculture plays an important role in the economy.

Police said most of their operations took place “in fragile and vulnerable areas such as the Doñana natural park” in the southern Andalusia region, one of Europe’s largest wetlands and a Unesco World Heritage bird sanctuary.

They were also operating in “in the basins of Spain’s main rivers”.

In Doñana, police targeted 14 people and 12 companies for the illegal tapping of water for irrigation, a police spokesman said.

Ecologists regularly raise the alarm about the drying up of marshes and lagoons in the area, pointing the finger at nearby plantations, notably growing strawberries, which are irrigated by illegally-dug wells.

“The overexploitation of certain aquifers for many reasons, mainly economic, constitutes a serious threat to our environment,” the Guardia Civil said.

The European Court of Justice rapped Spain over the knuckles in June for its inaction in the face of illegal water extraction in Donana which covers more than 100,000 hectares (250,000 acres) and is home to more than 4,000 species, including the critically endangered Iberian lynx.

According to the government’s last official estimate, which dates back to 2006, there were more than half a million illegal wells in use.

But in a 2018 study, Greenpeace estimated there were twice as many, calculating that the quantity of stolen water was equivalent to that used by 118 million people — two-and-a-half times the population of Spain.

Spanish NGO SEO/Birdlife also on Wednesday raised the alarm about the “worrying” state of Spain’s wetlands.

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