Iberdrola Adjusts The Sale Price Of Scottish Power To Drax To Share Risks And Adapt To European Justice

Iberdrola adjusts the sale of Scottish power to Drax to share risks and adapt to European justiceIberdrola's UK scottish power

Iberdrola has agreed to modify the initial agreement to sell part of the electricity power stations of its subsidiary Scottish Power to Drax Group, including the clause in which agreed price of 702M£ (8OOm£) and that will be modified according to the income from assets in the first year. Drax had sought to renegotiate the contract following an ECJ (European Court of Justice) sentence that declared illegal the payments received by the power stations of Scottish Power and other British companies to guarantee the capacity of electricity generation in the UK. Both companies will revise the terms of the contract to mitigate the risk of the capacity payments not being restored for a while.

This decision puts at risk some 156M£ in invoicing for Scottish Power’s assets over the next three years. After hearing about the sentence on 14 November, the British operator of the system froze the payments to the power stations receiving subsidies regarded as state aids. If the government cannot find another formula to guarantee the payment during the first nine months of 2019, Drax will receive compensation of up to 26M£ from Iberdrola.

This mechanism could not include the whole of the potential risk if the capacity payments are not restored, which is why Drax shares fell 1.95% on the London stock market on Tuesday. On the other hand, Iberdrola shares rose 0.42%.

Iberdrola’s sale of Scottish Power Generation forms part of its strategy of rotating assets and converts this UK subsidiary into the first 100% renewable energy company operator in the country, after the sale of 2,566 megawatts (MW) of traditional generation potential, mainly from combined cycle gas plants. After this operation, which forms part of the asset rotation strategy – disinvestments of 3 billion euros foreseen by 2022, of which 1.2 billion euros have already been disinvested -, the British production of the group presided by Ignacio Sánchez Galán will be completely free from of emissions and the company will continue to increase its wind power capacity, with a portfolio of projects in excess of 3 billion MW.