Strategy

Spain holds a leading international position in the renewable energies sector, and has registered a huge technological growth and development in the past 15 years.

In terms of technology, the wind sector is the one that has experienced the strongest development. Spain has an installed capacity of 23.000 MW and represents the 21% of the aggregated electrical production. Moreover, a very powerful auxiliary industry has appeared, supported by some of the main turbine manufactures at an international level.

On the other hand, mini hydraulic is a really mature technology, with a very slow growth but with a specialized industry and advanced technology.

Moreover, the solar photovoltaic sector has experienced a huge reduction in costs and a clear improvement in efficiency over the last 10 years. In this way, it has become a competitive technology selling electricity to the market, without any subsidy.

The continuous regulatory changes in recent years have reduced the retribution of renewable energy in Spain. A broad reform was released in 2013, with the publication of RD 9/2013, which included urgent measures in order to guarantee the financial stability of the electrical system. This new law initiated an extensive regulatory development which includes new Electric Sector Law (Law 24/2013), a new Renewable Law (RD 413/2014), regulating the activity of electrical energy production from renewable sources, and finally a Ministerial Decree (Decree IET/1045/2014) which fixed the final retributive parameters applicable to renewable energy plants.

This new framework has removed the Special Regime (the one that until then applied to the renewable energies), and has established that, from this moment all the new plants must sell their energy to the market, without any additional subsidy.

For the already existing plants, the new laws established a calculation methodology based on guaranteeing, during its regulatory life, and based on standard plants typologies, a return on assets, before taxes, of 300 basis points over the 10-year Spanish Treasury bond, which represents for a first regulatory period which comprises form 2014 to 2019, a return of 7,5%.

As a result, subsidies for renewables were reduced in 2014 by 15% and the creation of the electrical tariff deficit has been stopped, the balance of which will be payed over the next 15 years, charged to the electrical tariff. Once this structural problem has been solved, significant changes in the remuneration of renewables are not to be expected in the future, and regulatory uncertainty has largely dissipated. This fact has reactivated transactions in the market, and has unlocked a large number of deals that could not have been closed before due to this circumstance.

Siroco Capital’s strategy consists on taking advantage of the opportunities offered by new regulatory stability, seeking investments in the renewable sector in Spain, with an attractive profitability. The objective is to focus on plants in operation, minimizing the risks of development and construction.

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