Endesa bears brunt of Kyoto cuts

Washington (Platts)--29Nov2004

Spanish power companies including Endesa, Union Fenosa and Hidro-Cantbrico are
preparing for a 21% cut in their permitted greenhouse gas emissions from
coal-fired power plants between 2005 and 2007 under proposals published by
Spains ministry of environment.
Ministry officials have launched a 15-day consultation exercise on plans to
cap greenhouse gas emissions from Spanish coal-fired power plants at 43.6
million mt in 2007 from 55.4 million mt in 2005, a reduction of 21%.
Individual power plants are also to be given emissions quotas and the Spanish
government appears to be favoring a switch to gas from coal as gas plants will
be allowed increased emissions limits of 28 million mt in 2007 compared with
17 million in 2005.
Endesa seems to be the biggest loser in this decision. Union Fenosa and other
Spanish power companies are also affected but to a lesser extent, said
Deutsche Bank power market analyst Virginia Sanz De Madrid in a briefing note.
Madrid estimates that Endesa will have to buy rights to 7 million mt
equivalent of carbon emissions quotas, which at todays prices of ~8-~10/mt,
would equate to a potential cost of ~56-~70 million next year or around 4% of
the companys pre-tax earnings.
European governments are trying to phase in the Kyoto agreement emissions
limits with a two-year transition period from 2005-7. Power companies will
face fines if they breach their allocated carbon emissions quotas.
After 2007, the situation will get much tougher, and with Endesa having half
of its generating capacity in fossil fuel plants this is a worrying aspect,
commented Madrid.
Rival Spanish power company, Iberdrola which is less dependent on fossil
fuels, backs the Spanish governments tough approach.

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