Utility Management Group
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Spain prepares to implement higher tax on electric utilities amid soaring profits.
Spain's government announced this week that it was preparing to pass a windfall tax on the country's electric utilities that have seen record profits amid the heightened demand from a post-pandemic economic rebound and energy prices amid the war in Ukraine.
No timeframe has been set and the country is still working out the technical details. Spain would follow the UK, which announced in May that it would impose a similar windfall tax on utilities at 25% for the next 12 months, expected to bring in 5 billion euros. It seems more western European countries could follow suit, as the U.S. is also considering a windfall tax to finance President Joe Biden's proposed three-month gas tax holiday.
Utilities have pushed back on these proposals, as expected, claiming that such taxes could prevent future investments needed to continue the clean energy transition. Fitch Ratings, one of the "Big 3" credit rating organizations in the U.S., claims that electric utilities in Europe "have sufficient rating headroom and liquidity buffers to withstand windfall tax implementation."
It seems that in the energy sector, we could be gearing up for a heightened battle between the private and public sectors across the globe as the war in Ukraine and energy demand harm consumers and pad the pockets of utilities. It will be a moment to watch.
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