Iberdrola had warned that the original Spanish government plan for a six-month levy to raise funds to protect end-consumers from the spike in spot-market power prices would cost it around EUR 2bn. In the event, Madrid has excluded power contracts at fixed prices not linked to the spot market from the clawback.

Given Iberdrola sells its power through these types of contracts, the utility now expects a EUR 114m provision it has made in the third quarter to be reversed, with the tax impact of the government’s measures at Sept. 30 standing at EUR 85m.

Enel SpA, the Italian parent of Spanish utility Endesa, has provided less information though it is sticking to an EBITDA forecast for its Spanish activities issued before the energy levy was announced.

Spain’s backtracking brings the country back in line with the rest of the EU where governments have resisted the temptation to impose windfall takes on utilities though some, like France, have provided support for hardest-hit retail customers. See Scope’s 5 October report: Europe’s energy shock: winners & losers Price spike puts energy transition, security trade-offs in spotlight

Leaving government intervention aside, most European utilities lock in prices and spreads for a large portion of their power generation output for rolling 12- to 24-month periods. In today’s market, that ensures only modest benefit for their EBITDA and cash flow this year and next.

“However, we believe that wholesale electricity prices will remain higher for some time, given the limited short-term solutions for reducing commodities prices and increased supply-demand pressure from the continued decommissioning of reliable generation capacity, so we can expect cash flow upside for power generation in 2023 and beyond,” says Anne Grammatico, analyst at Scope.

For more analysis of European utilities including Iberdrola and Enel, please consult the credit ratings exclusively available on investor platform ScopeOne.