Alert - No Compensation for Foreign PV Investors in Spain Following Change in Investment Regime

Retroactive changes to the photovoltaic (PV) sector in Spain. No compesation for foreign investors the losses they will suffer from the changed investment regime.

Last Thursday, the Spanish Congress of Deputies voted against a bill passed by the Spanish Senate on 23 February calling for the repeal of Spain’s retroactive changes to the photovoltaic (PV) sector. This means that foreign investors in Spain’s PV sector will not be compensated for the losses they will suffer from the changed investment regime.

Following a rigorous selection process, Allen & Overy was chosen by fifteen foreign investors to represent them in this matter. The investors include both strategic investors and energy, infrastructure and cleantech funds. The investors are seeking reparation for the retroactive changes introduced by the Spanish Government that materially affect the value of existing investments. Under the original law, PV projects were entitled to sell their entire output for the life of the installations – generally considered 40 years at the full tariff (including a certain tariff for the first 25 years and a lower tariff from year 26 onwards). In November and December 2010 the Spanish Government (i) capped the hours of production eligible for the tariffs at 20-30 percent below existing production for 2011-2013, (ii) imposed lifetime caps on production that affect a large number of projects and (iii) limited the tariff initially to 25 years (though with February amendments it was extended to 30 years).

On Tuesday, 8 March, we served initial demand letters on the Spanish government seeking reparation under international law for Spain’s retroactive changes to the solar photovoltaic (PV) tariff regimes. Our clients hold investments in over 4 billion Euro of Spanish PV projects. These investors manage over 30 billion Dollar on behalf of more than 70 workers pension funds and other institutional and individual investors who collectively manage over 3 trillion Dollar in capital for global investment.

Action required for PV investors

No firm has more knowledge of the Energy Charter Treaty than Allen & Overy. We brought the first claim under the Treaty in 2000 and have since acted in many ground breaking cases. In addition, we have leading experts in our Madrid office, including former state lawyers and public law specialists. We are uniquely placed to act for investors in the solar industry in Spain as our team combines extensive knowledge of the Energy Charter Treaty with leading practitioners in Spanish public law.