“Spain is not an energy island” – Iberdrola denounces intervention in the electricity market

The logo of Spanish utility company Iberdrola is seen outside its headquarters in Madrid, Spain May 23, 2018. REUTERS/Sergio Perez/File Photo

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MADRID, April 27 (Reuters) – Global wind energy group Iberdrola (IBE.MC) has slammed moves by its home country of Spain and neighboring Portugal to take nationwide measures to cut prices on Wednesday electricity, arguing that the solution to Europe’s energy crisis lay in coordinated action.

European energy prices hit historic highs as conflict in Ukraine and fears of supply disruptions tightened markets already struggling with the effects of COVID-19.

Governments are scrambling to find ways to protect voters’ pockets, and Iberdrola CEO Ignacio Galan has opposed state decisions in some of its key markets, including Britain, which has capped electricity prices for years.

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This week Spain and Portugal, which have long maintained they are isolated from the rest of Europe’s electricity system, reached an agreement in principle with Brussels to allow them to limit the cost of gas for locally generated electricity.

Spain and Portugal said it would help protect consumers. Galan strongly opposed it.

“Any time Europe has held together, things have gone well,” he told analysts on a conference call. “Instead of trying to create regimes of exceptions like the one proposed by the Iberian market, we must seek common solutions.”

He said the fact that electricity prices in Spain and France could be seen to converge was a factor showing that they were integrated. “Spain is not an energy island.”

Galan said Iberdrola, which recently became Europe’s largest utility by market value, overtaking its Italian counterpart Enel, did not expect the measure to affect its business.

Shares of Spanish power companies were hit last year by government plans to cut their profits. Read more

Iberdrola operates wind farms, solar farms, nuclear reactors and gas-fired power plants in Europe and Latin America, as well as thousands of kilometers of transmission and distribution lines.

Its net profit in Spain, which accounts for less than a third of profits, fell 29% in the first quarter due to weak wind and hydroelectric production and an outage at a nuclear plant, said chief financial officer Jose Sainz. This meant that the company had to buy energy in the feverish open market.

He nevertheless confirmed that he still expects net profit for the full year to reach 4-4.2 billion euros ($4.25-4.46 billion) and sticks to its long-term renewable energy strategy.

“The current crisis demonstrates the need to accelerate the energy transition to achieve energy self-sufficiency in Europe and decarbonize our economy,” Galan said in a statement.

($1 = 0.9412 euros)

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Reporting from Isla Binnie Montage by Louise Heavens and Mark Potter

Our standards: The Thomson Reuters Trust Principles.

Lynn A. Saleh