After Spain’s rescue of its banks and cash-strapped regions, the 2013 budget reveals a bailout of the power industry to cover 25 billion euros ($32 billion) of debt accumulated by the electricity system.
The spending blueprint released two days ago adds 100 billion euros to the nation’s debt from the rescue packages by the end of 2012, driving its ratio to gross domestic product up 16.8 percentage points to 85.3 percent of total output.
Power companies such as Iberdrola SA (IBE) and Gas Natural SDG SA (GAS) booked more revenue than they received from their clients for most of the past decade -- the difference between government-set prices for buyers and sellers -- with the shortfall booked as receivables on their balance sheets.
“Politicians have failed to keep an appropriate distance from the industries they are supposed to regulate and when you look at the budget you see the impact,” Jose Ignacio Torreblanca, head of the Madrid office of the European Council on Foreign Relations, said in a telephone interview. “The government is taking on a whole series of debts and the power industry is a prime example.”
Spanish energy companies have recruited politicians from both main parties. Gas Natural has former Socialist Prime Minister Felipe Gonzalez on its board. Endesa SA (ELE)’s owner Enel SpA has former Finance Minister Pedro Solbes. Solbes’s successor Elena Salgado joined Endesa Chile (ENDESA) as a director this year. Iberdrola has Angel Acebes, who was Interior Minister alongside Rajoy in the last People’s Party administration.
Gas Natural rose as much as 4.3 percent today and traded 3 percent higher at 11.35 euros at 5:18 p.m. Endesa rose 2.3 percent compared with a 1.1 percent gain for the benchmark.
The cost of repaying power debt added 2.1 billion euros to bills this year, driving up the annual deficit. The system’s debts threatened to run out of control, Industry Minister Jose Manuel Soria said in July.
Soria said Sept. 14 the government will cover repayments of power system debt this year alongside a package of tax increases on power companies to break the debt spiral.
Budget Ministry spokesman Jesus Garcia declined to give further details of how Spain is accounting for the rescue or how much it contributed to the jump in borrowing.
The government already backed about 13 billion euros of the debt through a securitization program that began last year. The program took the debt off the balance sheets of utilities including Iberdrola and Enel SpA (ENEL)’s Endesa SA unit by selling it to investors with a government guarantee. It didn’t affect the overall indebtedness of the system.
Spain may borrow about 40 billion euros from the European Union to recapitalize its banks. It underwrote a 35 billion-euro program to bail out local and regional govvernments that hadn’t paid their contractors. There’s also an 18 billion-euro pot for regions including Catalonia and Andalucia that can’t meet their obligations.
“These are one-off measures that won’t have any impact on the structural deficit,” Economy Minister Luis de Guindos said at a press conference in Madrid today.
-- Editors: James Hertling, Francis Harris
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