Cuts jeopardise solar utility IPO

A green utility company with plans to float on the London stock market is suffering delays due to economic problems in the eurozone

Terry Macalister
The Observer, Sunday 25 April 2010

A plan to set up an innovative "green" utility with a £1bn flotation on the London stock market risks being blown off course due to financial problems in the eurozone.
Engyco, led by former United Utilities boss John Roberts, has admitted that expected cutbacks to subsidies on renewable power projects in Spain would threaten its plan for an initial public offering (IPO). The company was formed as a vehicle for investing in the Spanish solar market with the hope of creating a pure renewables utility that could raise billions in the bond market.
An Engyco spokesman said €3bn of potential investment was at stake if Madrid introduced plans to reduce solar subsidies, which he believed would only save ministers €420m.
"This kind of move would be very damaging for investment in Spain. We need to get clarity about exactly what is going on but we are still confident that it will blow over as similar threats like this have done in the past," said an Engyco spokesman.
City analysts specialising in the clean-technology sector believe there is little chance of Engyco being launched in the next couple of weeks as scheduled given the negative noises coming out of Madrid. "This is nothing less than a catastrophe" for investors, said Stephane Aderca, an energy analyst at Liberum Capital in London. "We had believed that a promise [to pay a certain level of subsidy] is a promise. Going back on a promise brings the whole thing into question."
Spain's government has sucked in an estimated €18bn in solar-power projects since 2008 by offering generous public subsidies but is now looking at cutting back as the economy suffers.
The state has the authority to cut prices paid to operating renewable power plants under a 2007 law, according to an industry ministry spokesman who declined to be identified. All options are being assessed for a new strategic plan this year, he told local media, in comments that led some Spanish solar and wind developer shares to fall over 4% at the end of last week.