RPT-Law, not grain price, hits biofuel output -Abengoa

(Repeating with no changes to text)

By Martin Roberts

SEVILLE, May 13 (Reuters) - Legislation and low wholesale prices for ethanol are squeezing biofuel production margins rather than high grain prices, Spain's leading bioethanol producer Abengoa (ABG.MC: Quote, Profile, Research, Stock Buzz) said on Tuesday.

Javier Salgado, chief executive of Abengoa's renewables unit, said Spain had failed to introduce legislation to mandate minimum levels of bioethanol use in petrol, in line with a target of 5.75 percent by 2010 recommended by the European Union.

"All we are asking the government to do is abide by the directive and to legislate," Salgado said at the opening of a biofuels convention in southern Spanish city of Seville.

The second problem was that energy companies were paying lower wholesale prices for ethanol than for petrol, but selling them at the same retail price to the consumer.

"That is the monstrosity, and the main driver for why margins in the bioethanol industry are suffering," Salgado added.

Abengoa halted production last September at its 158,000-tonne a year bioethanol plant -- the country's largest -- in the central province of Salamanca.

Asked how long the Salamanca plant could remain closed in the absence of suitable legislation, Salgado answered, "Frankly, forever."