lunes, marzo 10, 2008

Spain's stock market: utilities stocks up

After the elections, the stocks of several utilities traded in the Madrid stock exchange, are going up considerably. This happens because the new government coming out of the elections has a very clear energy policy: no competition (basically: keep the status quo), and sale of assets to foreign (sometimes state-owned) companies. This all implies that a) profits will continue to be strong, and b) there is an acquisition premium priced into those stock levels.

I have little to say about the 2nd issue: as a freemarket supporter, I cannot condemn free sale and purchase of any asset, except for the fact that a free-market requires reciprocity, and it's not possible for anybody to launch an acquisition on a state-controlled utility in France, Italy or Germany.

I am more concerned about the 1st issue though. If the Spanish government continues to ignore that a competitive market is far more efficient than a regulated one, what is going to happen is that consumers will be (again!) the ones who will pay for it. And consumers=voters. I still don't get why a so-called Socialist government is so afraid of market competition in such a critical industry as energy.

Spain is supposed to be a model for other developed countries, because it has managed to create and nurture a local renewable energy industry with global players (windmill producer Gamesa, solar farm developer Acciona, etc.). What is less known is that the prices of energy in Spain are much higher than in the rest of the world, due to the subsidies towards all those "inefficient" energy sources, and to the nuclear moratorium, which forbides any company from building more nuclear plants.

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