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The Market Has Over-Reacted to Regulatory Mayhem in Spain, Enel Is Cheap

Tancrede Fulop, CFA Senior Equity Analyst

Analyst Note

| Tancrede Fulop, CFA |

After presenting a draft law in June to implement a CO2 clawback on carbon-free power plants installed before 2005 and as power and gas prices continued to soar during summer, the Spanish government doubled down on Sept. 15 by adopting a royal decree driving the immediate implementation of a gas clawback to reduce end users' bills, which is set to shave EUR 2.60 billion off power producers' profits. This clawback is supposed to apply only in the fourth quarter of 2021 and the first quarter of 2022 as the government expects gas prices to recede after the coming winter. In any case, the risk of extension is mitigated by the chance for utilities to have it repealed in courts. The gas clawback was totally unexpected, leading to overdue market reaction, in our view.

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Company Profile

Business Description

Endesa generates, distributes, and supplies electricity in Spain and Portugal. The company operates 22.7 gigawatts of installed generation capacity split among hydroelectric, nuclear, coal, natural gas, oil, solar, and wind. Endesa also supplies gas to retail and business customers in Spain and France.

Ribera del Loira 60
Madrid, 28042, Spain
T +34 912131000
Sector Utilities
Industry Utilities - Regulated Electric
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 9,274