Spanish Utilities Fall After New Regulations Proposed -- Update

--Regulator proposed cuts to utility remuneration

--Utilities have until Aug. 9 to respond to proposals

--Shares in gas companies fall sharply

 
   By Nathan Allen

Shares in Spanish utilities fell Friday after Spain's National Commission on Markets and Competition published draft proposals for a new way of calculating the compensation received for operating the country's gas and electricity grids.

The commission, known as the CNMC, proposed cutting remuneration by nearly 22% for regasification and gas-transportation activities, and by 7% for electricity distribution.

The proposals are the first step toward establishing new regulatory frameworks for Spain's electricity and gas markets, which are due to come into force in 2020 and 2021 respectively. Affected companies have until Aug. 9 to submit their comments.

At 1434 GMT shares in Naturgy Energy Group SA (NTGY.MC) and Enagas SA (ENG.MC)--the two companies with the most exposure to Spain's regulated gas market--were trading down 4.4% and 7.8% respectively. Grid operator Red Electrica Corp. SA (REE.MC) fell 3.7%, while more diversified energy groups like Iberdrola SA (IBE.MC) Endesa SA (ELE.MC) fell by less than 2%.

Gas companies had already fallen on Thursday after Spain's Cinco Dias newspaper reported that the drafts could include a 30% cut to the remuneration received by gas distributors. Analysts at Bankinter said investors were expecting a milder reduction of around 15%.

Naturgy said it will present its views on the proposal during the presentation of its first-half results on July 24. Enagas said it will study the draft and make proposals that best represent the interests of its shareholders and the gas system, but didn't specify when it would submit its comments.

Around 37% of Naturgy's earnings before interest, taxes, depreciation and amortization come from Spanish gas and electricity networks, while Enagas generates 75% of Ebitda from Spanish gas transportation, according to Bankinter.

Write to Nathan Allen at nathan.allen@dowjones.com

(END) Dow Jones Newswires

July 05, 2019 11:02 ET (15:02 GMT)

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