News
Lawyers fear tax rises could halt Portuguese
energy M&A boom
International investors, including
pension funds, are targeting energy
assets, particularly renewables, but a
review of government subsidies could
slow deal activity
Though the Portuguese energy
sector has generated some significant
M&A transactions involving major
international investors, corporate
lawyers in Lisbon are concerned
that proposals to increase taxes on
energy companies could jeopardise
further deals.
“In Portugal, we’re seeing M&A
activity in different segments of the
energy sector such as renewables,
distribution and commercialisation,”
says Manuel Santos Vítor, partner
at PLMJ. Similarly, Marcos Sousa
Monteiro, partner at Linklaters
in Lisbon, says that while energy
sector activity is not at 2013 levels,
there are still a considerable number
of transactions taking place in the
area of renewables. “Despite the
market being more dynamic a couple
of years ago and the volume of
transactions having decreased, we’re
still busy across the board in terms of
renewables,” he explains.
As to the type of investor
interested in the Portuguese energy
sector, Francisco Brito e Abreu,
partner of Uría Menéndez-Proença
de Carvalho, says that the market has
been attracting clients ranging from
international investors to pension
funds, in addition to energy sector
companies. He adds: “Domestic
investors have also been very active
chasing opportunities related to
smaller size deals.” Francisco Santos
Costa, partner at Cuatrecasas,
Gonçalves Pereira, highlights
the significant appetite of global
institutional investors for assets in
the Portuguese energy sector. As
evidence, he cites Marubeni and
Toho Gas’ acquisition of a 22.5 per
cent stake in Galp Energia’s wholly
owned gas distribution company
Galp Gás Natural Distribuição,
as well as the sale of Iberwind to
Li-ka-Shing Group for €324 million.
Other significant deals include
the sale of Enel Green Power’s
subsidiary Finerge Gestao de
Projectos Energeticos (which runs
wind farms with a total capacity of
642 MW) to First State Wind Energy
for €900 million. Sousa Monteiro
says the Galp deal demonstrates
that the Portuguese energy sector
is now seeing a different sort of
investor. “On the one hand you
have renewables, but on the other
hand there are now infrastructure
firms interested in a regulated asset
base such as gas,” he says.
Cause for concern?
Ho wever, despite this favourable
investment environment, lawyers
are now concerned that the
Portuguese government might
decide that the renewables sector
and energy companies have been
getting too great a return on
their investment. “It would be
very detrimental to destroy this
positive outlook by imposing new
taxes on the energy sector, as the
government is considering,” says
Santos Vitor. “This would not only
disappoint existing stakeholders
but cause others not to invest
in Portugal.” Sousa Monteiro
says Portugal cannot afford such
measures. “So far, the government
has had a very conscious investorfriendly approach, but they might
start to review situations involving
tariffs and subsidies that could
be perceived as creating a double
income for investors,” he adds.
In terms of the outlook for
energy-related M&A, Santos
Vítor hopes the government will
focus on “further opportunities
for growth and development
as previous governments did”.
Meanwhile, Santos Costa
believes the Portuguese energy
market will remain attractive
to foreign investors looking to
acquire renewables portfolios
as long as there is a low interest
rate environment and a stable
regulatory framework. Sousa
Monteiro is also optimistic. “At
the end of 2016, nothing has been
substantially amended in the way
of measures putting us in jeopardy,
but we’re at a stage in the process
where we need to consider what
the Government might do next.”
€900m
Amount paid by First State Wind
Energy Investments to acquire
Enel Green Power´s Portuguese
subsidiary Finerge Gestao de
Projectos Energeticos.
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10 • IBERIAN LAWYER • November / December 2016
www.iberianlawyer.com