(Adds Iberdrola chairman, minister, analyst quotes)
* Iberdrola H1 core profit 4.1 bln eur, top end of f/casts
* Acciona H1 core profit 677 mln eur vs 668 mln in poll
* Renewable energy offsets weak traditional business
* Taxes in pending energy reform could hurt profits
By Tracy Rucinski
MADRID, July 25 Spanish energy firms Iberdrola
and Acciona relied on renewable energy
businesses for first-half profits in a recessionary home market
-- a sector threatened by looming taxes in a major energy
Spain is expected to introduce new taxes on electricity
generation and renewable energy to reform a dysfunctional sector
that has led to an over 24 billion euro tariff deficit after
years of power being sold to consumers below utilities' costs.
But as Madrid struggles with a deepening sovereign debt
crisis, the reform has been delayed as government officials
debate whether tax proceeds should be used to cut the public
deficit or the energy shortfall.
"The reform is almost done but naturally, it's extremely
complex and involves tax issues so we have to sign it off with
the Treasury Ministry," Industry Minister Jose Manuel Soria said
on a radio interview on Wednesday. "It will come soon."
Meanwhile, Iberdrola and its energy peers have warned that
the government reforms could wipe out their profits.
On Wednesday, Iberdrola's executive chairman said the group
would present a new strategic plan once it has the details of
the reform, while pleading that Prime Minister Mariano Rajoy
pass measures that are "fair" for both companies and consumers.
Spain has already raised electricity prices twice this year.
"I trust he will do everything necessary to end this curse
of a deficit, and as he himself has said, create a financially
and environmentally sustainable model for the sector," Ignacio
Galan said on a conference call.
By 1115 GMT, shares in Iberdrola rose 2.3 percent to 2.7
euros and Acciona gained 2.3 percent to 31.16 euros, tracking
Spain's blue chip index and both recovering from heavy
declines on Tuesday amid energy reform uncertainty.
"Both Iberdrola and Acciona increased renewables production
and prices were good in the first half, but their business is
hanging on the energy reform," Alvaro Navarro, energy analyst at
Both companies expanded into renewables, and outside Spain,
in recent years to compensate for weakness in their traditional
businesses. That bet paid off in the first half, with underlying
profits at the top end of analysts' forecasts.
Iberdrola posted a 2 percent rise in first-half core profit
thanks to diversification away from its energy business in Spain
into new markets like Brazil, the United States and Britain.
Its underlying earnings before interest, taxes, depreciation
and amortisation (EBITDA) reached 4.1 billion euros ($5
billion), at the top end of forecasts in a Reuters poll of
analysts and driven by a 12.2 percent rise in its renewables
Acciona's EBITDA rose 7.2 percent to 677 million euros, as
its renewable energy division offset declines in construction
and real estate, which continue to suffer from a prolonged
property bust after a decade-long boom ended four years ago.
Underlying profit from energy rose 17.2 percent at Acciona,
while the infrastructure business fell 22 percent and real
estate nearly halved, underscoring the depth of the sector's
"We think this is a strong set of results, despite of course
the difficult environment we're in," Acciona Chairman Jose
Manuel Entrecanales said on a conference call.
Both companies said they remain focused on reducing debt and
shoring up their balance sheets, preparing themselves for any
worsening of Spain's financial crisis.
Iberdrola's net debt reached 29.3 billion euros at June 30,
excluding the 2.7 billion pending repayment from the tariff
deficit, while Acciona's debt totalled 7.5 billion euros.
Iberdrola's Galan said the company would cut investments and
sell assets, while ruling out a rights issue. He also said the
company would support floating its Neoenergia unit in Brazil if
the company's other partners were in agreement.
In neighbouring Portugal, renewable energy peer EDP
Renewables posted a forecast-beating 12 percent rise
in its first-half net profit on Wednesday, also thanks to rising
power generation and a higher average price of its energy.
($1 = 0.8275 euros)
(Additional reporting by Clare Kane and Jesus Aguado; Editing
by Julien Toyer, Mark Potter and Stephen Nisbet)