According to a report from rating agency Fitch Ratings, the outlook for energy infrastructure as a whole in the EMEA (Europe, Middle East, Africa) region remains “largely stable”.
However, the exception to this is renewable energy projects. Here, the report says, “recently enacted reductions to the incentive frameworks in Italy, for photovoltaic plants, and Spain, for renewables in general, are high-profile examples of the current regulatory instability affecting the renewable energy industry across several European jurisdictions”.
Fitch says its “negative” outlook for renewables in the region reflects regulatory risk and the adaptation the industry must make to “less favourable” operating requirements and economic incentives.
For oil and gas projects, meanwhile, Fitch identifies “key strengths” as being low break-even price levels and the generally firm bases of long-term ‘take or pay’ contracts. These strengths support oil and gas projects’ ability to withstand possibly tougher market conditions brought about by low prices and/or demand contraction.
Gas infrastructure projects are viewed by Fitch as generally stable thanks to stable revenue profiles resulting from regulation or contractual arrangements that isolate the projects from demand and price risks. They are also supported by their “natural monopoly status” in providing an essential service. On the downside, however, there may be transaction-specific issues or regulatory instability.
The report also says that the performance of offshore transmission operators (OFTOs) in the UK remained “positive” with high availability levels above licence threshold requirements.
It notes that a failed transmission cable at Blue Transmission Walney 2 put the project’s regulatory provisions to the test. The regulator’s decision was “in favour of the project and in line with Fitch’s understanding of licence provisions”.