Spain Renewables Report Q1 2013

BMI View: The continued stagnation of the Spanish economy, as well as a more challenging operatingenvironment for renewable energy operators has prompted us to revise down our short-term forecastfor the non-hydropower renewable energy sector in Spain. Our long-term outlook is similarly bleak as wedo not expect operating conditions to improve materially in the long-term, and the Spanish economycontinues to suffer from structural imbalances. We believe that many renewable energy developersalready recognise the poorer prospects in the Spanish market and, thus, are seeking growth from moreattractive foreign markets.

We have revised down our 2013 non-hydropower renewable generation growth forecast for Spain from2.0% to 1.5%. This revision was prompted by the continued stagnation of the Spanish economy, as wellas a more challenging operating environment for renewable energy operators.

We have also revised down our long-term non-hydropower renewable generation growth forecast, andnow expect growth to average 3.2% per annum between 2013 and 2021 (down from 3.9%). This outlookcan be attributed to our expectations for lackluster growth in the Spanish economy, as the countrycontinues to suffer from massive structural imbalances such as a heavily indebted private sector and abloated housing sector. Additionally, we do not expect the operating environment for the renewableenergy sector to improve materially over the long term.

Here are the key trends and regulatory changes in the industry:

The government suspended FiTs for all renewable energy installations indefinitely in January2012. This will have a material impact on the sector in 2013 and 2014.

In September 2012, the Spanish government passed a new regulation requiring all energyproducers to pay a 6% tax on any income they earn from generating energy, including paymentsfrom FiTs.

In August 2012, Spain's EDP Renewables and Repsol Nuevas Energias announced plans tobuild a 1.5GW offshore wind farm in Scotland. This reflects a growing trend among Spanishrenewable energy developers to move overseas.

Iberdrola has emerged as a key player in the Brazilian wind sector, and has announcedplans to develop 10 new onshore wind projects and invest EUR230mn annually in Brazilianrenewable energy group.