What aspects should be taken into account when purchasing energy companies?

The process of buying a energy business in Spain

Although the confinement caused by the coronavirus reduced the electricity consumption by 5.6%, 2020 was a good year for renewable energies in Spain. According to the data published by E4E, renewable energies in Spain represent 53% of the installed capacity to generate electricity. This data shows us that our country has great potential for those companies that decide to invest in the energy sector by purchasing an energy company. In today’s article we’ll go over the aspects that should be taken into account in this type of purchase and why it is important to be advised by a company consultancy specialized in the matter.

The Climate Change and Energy Transition Law establishes a series of objectives that promote the use of renewable energies in Spain to be achieved in two phases, which are the following:

First phase – year 2030.

  • To reduce greenhouse gas emissions by at least 20% compared to 1990.
  • To generate at least 74% of the electricity with renewable energies.
  • To ensure that 35% of the final energy consumption comes from alternative sources.
  • To improve the energy efficiency by 35%.

Second phase – year 2050.

  • To generate all the electricity with renewable energies.
  • To reduce greenhouse gas emissions by 90%.

 What steps must be taken in order to acquire an energy company in Spain?

If an overseas firm wants to operate in the renewable energy sector in Spain by acquiring an energy company, these are the steps that must be followed:

  • The first thing that must be done is the purchase of licenses that enable the firm to operate in Spain.
  • Then, the overseas company must buy a company in Spain. For this purpose, a due diligence or legal study must be carried out to identify the legal, accounting and tax aspects of the company to be purchased.

In order to carry out the due diligence mentioned above, it will be necessary to hire a company consultancy such as LEIALTA to study the company to be acquired from a financial and accounting point of view, and to determine the risks of the acquisition. The study to be carried out involves the following steps:

  1.  All the information related to the energy company that wants to be acquired is requested.
  2. The accounting of that company is analyzed in depth to determine the risks involved in the acquisition. The analysis will define the light, medium and high risks that have been found.
  3. It is important to be aware of these risks since the buying company will be the one who takes them later.
  4. The study is usually performed when large overseas companies decide to buy photovoltaic plants in Spain.
  5. If necessary, additional information is requested, a report with all the conclusions regarding the analyzed data is written and presented to the acquiring overseas company.
  6. Finally, the purchase and sale of the company will be carried out through a deed given by a notary.

 Why is it important to carry out a due diligence report on the energy company that is to be acquired?

When an energy company wants to be acquired by a foreign entity to enter the renewable energy sector in Spain, it is important that a specialized company consultancy carries out a due diligence of the company to be acquired because of the following reasons:

  • To know the situation of the energy company to be purchased in depth in order to acknowledge the risks of the acquisition and to find solutions.
  • To avoid having problems with the Tax Agency, such as inspections or penalties, due to mistakes made in previous years.
  • To be fully informed of all the aspects that can influence the purchase when making the decision of acquiring the energy company. If issues or mistakes are detected, it is possible to request that they be corrected before buying the firm, or to establish in the contract of sale or in the public deed the limitations to the responsibility of the acquirer on those problems and errors.

You will need the advisory service in the acquisition of an energy company in Spain if you are the owner of a company that wants to buy a photovoltaic plant in the country, if you want to invest in Spain and your main activity is renewable energies or if you want to acquire a company that already has the relevant licenses and is prepared for the exploitation of renewable energies through SPVs.

In conclusion, it is important to get the help of experts who know in depth the legal and accounting aspects of the energy companies in Spain in order to be able to comply with the law and to buy safely in a sector with great potential for future development in the country.

Leialta website: https://www.leialta.com/en/

Blog for doing business in Spain: https://www.leialta.com/en/blog-for-doing-business-in-spain/

Linkedin: https://www.linkedin.com/company/leialta-s-l-/mycompany/

Contributing Advisors