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Danish Pension Funds With $37 Billion Oppose Spanish Solar-Subsidy Cuts
Spain’s plans to reduce the revenue of solar-power plants may deter investors from holding any securities backed by the Spanish state, three Danish pension funds said in a letter to the government.
The move may lead to a “complete and prolonged” freeze in renewable-energy investment in Spain, according to AP Pension, PensionDanmark and PBU. The funds manage more than 30 billion euros ($37 billion), including Spanish solar investments, for 700,000 clients, the letter to Finance Minister Elena Salgado and Industry Minister Miguel Sebastian said.
“We would view a retroactive reduction in solar tariffs as a failure of the Spanish government to abide by its commitments,” according to a copy of the letter provided to Bloomberg. “It would not be prudent for the government to enact such retroactive measures.”
Solar-energy executives said Sebastian told them this week he intends to cut the subsidized revenue that photovoltaic plants earn by 30 percent as part of a plan to reduce the cost of power. The government is looking to boost the competitiveness of Spanish industry and curb public liabilities as it bids to reignite the economy after the worst recession in 60 years.
Investors have dumped Spanish government bonds on concern that a faltering economy will leave the administration struggling to rein in a budget deficit that reached 11.2 percent of gross domestic product last year.
Spread to Bunds
The extra yield that investors demand to hold Spain’s 10- year bonds rather than the benchmark bunds reached a euro-era record of 2.33 percentage points on June 16.
The government, which passed the steepest budget cuts in at least 30 years last month, must trim spending further so that its debts don’t “snowball” in coming years, according to a draft European Commission document seen by Bloomberg this month.
The pension funds took aim at the good faith of Spain’s government in setting subsidies for renewable power, which are passed on to electricity consumers in their monthly bills.
Tariff cuts for existing solar plants would make investors “extremely wary of investing in any assets that rely directly or indirectly on Spanish public sector credit,” AP Pension Deputy Chief Executive Officer Soren Dal Thomsen said in the letter. “In terms of the perception of Spanish risk, our views on a retroactive tariff reduction would be widely shared by the broader investor community.”
PBU Chief Investment Officer Morten Schou and his counterpart at PensionDanmark Claus Stampe also signed the letter dated June 21. The letter’s authenticity was confirmed by AP Pension spokesman Hans Dam.
To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net
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