OREANDA-NEWS. BMI View: RnR Market Research maintain a muted outlook for the Spanish renewables sector this quarter, as substantial cuts to government support and limited visibility over the future direction of energy policy - due to the failure to establish a government after the 2015 general election - will weigh on growth in the sector. While Spain aims to restart growth through the introduction of a competitive subsidy scheme, the first renewables capacity auction in January 2016 suggests that race to the bottom bidding dynamics could heighten the risk of contracted projects being commercially unviable.

Latest Updates And Structural Trends

- Spain is set to embark on a second general election in June 2016, after no workable coalition was established in the December 2015 election. Our Country Risk team believes that a third election will be politically unpalatable, but that the parties nonetheless will be likely to negotiate over months before a workable coalition can be established. This will mean that the Spanish renewables sector will face elevated policy uncertainty over the coming months, while a lack of cross-party consensus on key issues could weigh on long-term policy. As such, we do not expect a rebound in the Spanish renewables sector anytime soon.

- Abengoa, Spain's largest renewable energy company initiated insolvency proceedings in late November 2015. While the outlook for Abengoa has been precarious for a number of years - owing to its significant debt pile, the highly leveraged nature of the company and domestic energy sector woes - the company could now be heading towards bankruptcy. We stress the Spanish banking sector remains exposed to Abengoa's troubles - with the three Spanish banks Santander, CaixaBank and Banco de Sabadell reportedly holding the largest debt shares, which in Santander's case amounts to EUR1.5bn. RnR Market Research expect Abengoa's economic troubles to warrant greater caution on behalf of Spanish banks funding renewables companies over the next years.