New legislation approved by Italy’s parliament in November, which sets fresh limits on incentives for wind, hydro and biomass projects, are expected to have only a slightly credit negative impact on operators. However, there is the risk of further regulatory intervention, Fitch Ratings said in a note on Friday.
Under law decree no. 268, non-solar operators have two options. They can choose to receive incentives at existing levels for the remainder of the incentive period, but forfeit further subsidies for the following 10 years. The second option allows operators to accept a lower incentive, which will be accompanied by a seven-year extension. Operators have until mid-February 2015 to decide which option they prefer.
“We expect the overall impact to be modest, but the changes still represent a retroactive regulatory intervention,” Fitch stated, noting that the latest reform comes on the heels of changes to feed-in-tariffs payable to solar photovoltaic plants.
According to Fitch, the changes concerning solar PV subsidies are expected to have a greater impact on solar plants, which will have to choose between a reduction of six to eight percent or a greater reduction in exchange for an extension of the incentive period. This will put pressure on plants’ annual cash flows, the ratings agency claims.
Both cases, however, underscore that the risk of further regulatory intervention in renewables remains.
Still, Fitch acknowledges that the measures do improve the incentive system’s sustainability in the long term.