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BMI View: We hold a bleak outlook for the Spanish non-hydropower renewables sector, as a history of
retroactive subsidy cuts and limited visibility into future policy mean that investors will be cautious to enter
the market. The PP party's inability to form a government after two elections cements this view, as the
country will be unable to devise a new strategy for the sector until a new government can pass budgets in
Latest Updates And Structural Trends
? Spain is on the brink of having to embark on a third election - after the political impasse registered after
the first election in December 2015 has occurred again after the second election in June 2016. While the
People's Party (PP) increased their number of seats in , they did not manage to get a majority, despite the
support of Ciudadanos (Citizens). The PP is therefore reliant on the socialists (PSOE) not blocking the
formation of a new government, which to date looks unlikely. Our core view is that a 'grand coalition'
eventually will be formed, which would erode PP's austere renewables policy somewhat. However, the
policy uncertainty registered in the country, and the inherent instability of such a coalition, will dampen
investor interest even should a new government be formed.
? Abengoa, Spain's largest renewable energy company initiated insolvency proceedings in late November
2015. Over the last months, our outlook for the company has improved marginally as it continues
divesting non-core assets and has reached a restructuring agreement with several creditors and investores.
Specifically, Abengoa has negotiated a deal consisting of a EUR1.17bn cash injection from the likes
of Centerbridge Partners, DE Shaw Group, Elliott Management,KKR Credit and Oaktree Capital
Management - in return for a 50% stake in the company post-restructuring. Furthermore, a EUR307mn
in new financial guarantees have been agreed from lenders including Banco Popular, Banco
Santander, Bankia, CaixaBank and Credit Agricole Corporate and Investment Bank The
restructuring plan will ensure that the company becomes more economically sustainable, but the
company that will emerge will be a much smaller global renewables player.