Bloomberg News

Abengoa Says Nuclear, Hydro Swell Power Gap by $4.7 Billion

November 23, 2011

(Updates with CEO’s comment from second paragraph.)

Nov. 23 (Bloomberg) -- Abengoa SA, the largest developer of solar-thermal plants in Spain, said “excessive profits” earned by hydro and nuclear power stations swelled the nation’s energy- system deficit by 3.5 billion euros ($4.7 billion) last year.

The shortfall between the revenue earned from customers and the amount paid to utilities under the Spanish regulatory system would have been 2.1 billion euros, instead of 5.6 billion euros, if nuclear and hydro hadn’t received payments above their costs, according to Abengoa Chief Executive Officer Manuel Sanchez.

“These two sectors, as well as having exaggerated and excessive profits, are monopolies” as the government won’t approve new dams or reactors, Sanchez said today in Madrid. Abengoa is investing in the construction of 10 solar thermal sites in Spain to compete with hydro and nuclear operators.

While the energy regulator estimates costs for hydropower of 0.3 euro cents per kilowatt hour and 1.8 cents for nuclear, the state paid out an average 4.8 cents to utilities last year, adding to the size of the power-system deficit, Sanchez said.

Utilities led by Iberdrola SA and Endesa SA, which own the bulk of the country’s nuclear and hydro plants, must finance the deficit under Spanish law. Companies have increased lobbying of the state before a decision by officials on which generation technologies will see payments cut the most to fund the gap.

Support for solar-thermal plants built by Abengoa should be reduced because the power is too expensive, Iberdrola Chairman Ignacio Galan said on an Oct. 27 conference call with analysts. “Massive deployment of thermosolar plants has no justification, neither from the energy, economic or environmental point of view,” Galan said, according to a transcript of the call.

Mariano Rajoy and his People’s Party this week won the biggest majority in a Spanish election in almost 30 years, on a mandate to slash the budget deficit, overhaul the stagnant economy and reduce the 22 percent jobless rate.

--Editor: Tony Barrett, Alex Devine

To contact the reporter on this story: Ben Sills at bsills@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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