Banc Sabadell | The Royal Decree on energy has been approved and the electricity companies are still asking that in Spain profits are taxed and not revenues. Yesterday the Cabinet approved the Decree which includes:
Cut in VAT on gas from 21% to 5% up to December (which could be extended until 2023).
Application of the “Iberian exception” to co-generation plants (600 installations)
Service mechanism for rapid demand response, allowing industries to ask in 15 minutes for a three hour cut in the electricity supply.
New criteria to speed up and reduce the adminstrative procedures to boost the development of renewables.
Meanwhile, in the IV Congress of Aelec (Association of electric utilities), the big companies asked the EU to limit the price of gas, as they consider it to be the origin of the problem. They also asked for the Spanish tax on energy companies to be adapted to the European one on hydrocarbons (tax on profits and not revenues).
Valuation:
The measures included in the Royal Decree were expected. Meanwhile, the request from the electricity companies to adapt the current tax on energy to the one which the EU proposes for hydrocarbons is reasonable, taking into account the potential greater impact of taxing revenues.
We recall that the tax on 1.2% of revenues, according to our calculations, would represent for two years: -0.7% capitalisation in Iberdrola (479 million euros); -2.9% in Endesa (538 million euros); -1.5% in Naturgy (392 million euros) and -0.5% in Acciona Energía (66 M euros).
On the other hand, if we apply the current EU proposal (at least 33% of windfall profits, taking into account pre-tax profits in 2022 which are more than 20% higher than the average 2019/2021, during one year) the impact would be as follows: no impact on Iberdrola and very reduced in Endesa (-1.5% capitalisation, 281 million euros). Naturgy (-0.4% capitalisation, 90 million euros) and Acciona Energía (100 million euros, -0.7% capitalisation).
In the sector, we maintain our preference for Iberdrola, Ecoener and Acciona Energía.
