RREEF Infrastructure and Antin, two major funds linked to Deutsche Bank and BNP respectively, are taking Spain to the World Bank's arbitration agency, the International Centre for Settlement of Investment Disputes (ICSID).
Both funds claim that government subsidy cuts will significantly damage their renewable energy business, and constitute an unfair retroactive change to the rules of the game. At stake are millions of euros in income that was once guaranteed as a way to encourage renewable energy projects in Spain. But the economic crisis has pushed the government to try to save money in an industry where capacity is now significantly in excess of official targets, following a boom in solar energy plant construction toward the end of the last decade.
The decision to slash the subsidies is part of a wider government reform of the electricity sector in which authorities have yet to explain how they will calculate "reasonable profitability," as this concept will determine exactly how much money renewable energy companies receive from now on. Industry sources said that this is likely to launch a new raft of investor complaints and legal action against Spain.
RREEF is an investment vehicle promoted by Deutsche Bank, with investments in wind and solar energy in Spain. Antin is a French infrastructure investment firm with projects in France, Germany, Britain, Italy and Spain. RREEF and Antin bought 90 percent of the solar plants Andasol 1 and Andasol 2 from Spain's ACS, in a transaction valued at 830 million euros, debt included.
The ICSID is the same arbitration agency at which Repsol filed a complaint against Argentina for the expropriation of its YPF unit.