Banking Law and Public-Private Energy Partnerships in Spain

1. Introduction

Public-private energy partnerships in Spain are arrangements in which public authorities and private businesses cooperate to finance, construct, operate, or maintain energy infrastructure or provide energy-related public services.

Typical projects may involve:

• renewable electricity generation;
• electricity transmission or distribution infrastructure;
• energy-storage projects;
• district heating and cooling;
• energy-efficiency projects for public buildings;
• EV-charging infrastructure;
• hydrogen projects;
• energy infrastructure associated with municipalities; and
• projects supported by Spanish or EU public funds.

From a banking-law perspective, these arrangements are important because major energy infrastructure normally requires substantial long-term financing. Commercial banks, the Instituto de Crédito Oficial (ICO), the European Investment Bank (EIB), institutional investors and other lenders can therefore become essential participants.

Spain does not regulate these arrangements through one single “Energy PPP Act.” Instead, the legal framework combines public procurement and concession law, energy law, banking and financial regulation, administrative law, environmental law, State-aid rules and EU law.

2. Main Legal Framework

Several statutes are especially important.

Law 9/2017 on Public Sector Contracts

Ley 9/2017, de Contratos del Sector Público (LCSP) implements important EU procurement requirements and governs contracts entered into by Spanish public-sector bodies.

Depending on its structure, an energy partnership may involve:

• works contracts;
• service contracts;
• works concessions;
• service concessions; or
• other public contractual structures.

For genuine concession arrangements, operating risk is particularly important. The private concessionaire must assume the type of operational risk required by the legislation rather than receiving an unconditional guarantee that all investment will be recovered.

Law 24/2013 on the Electricity Sector

Ley 24/2013, del Sector Eléctrico provides the principal national framework for Spain's electricity sector.

It regulates areas including:

• electricity activities;
• authorization;
• generation;
• networks;
• economic arrangements;
• security of supply; and
• regulatory responsibilities.

Law 34/1998 on the Hydrocarbons Sector

This legislation remains relevant to hydrocarbons and parts of the broader Spanish energy framework, including gas-related activities.

Royal Decree-Law 23/2020 and subsequent energy legislation

Spain has adopted additional legislation facilitating the energy transition, renewable deployment, grid access and new business models.

These measures can materially affect the bankability of energy projects.

3. What Makes an Energy PPP Bankable?

A renewable-energy project can be legally permitted but still be difficult to finance.

Banks normally examine whether the project is capable of generating sufficiently predictable cash flows to service its debt.

Important factors include:

Regulatory stability

A lender needs to understand the regulatory framework governing the project's revenues.

Licences and permits

The project must obtain the necessary administrative and environmental authorizations.

Grid access

For electricity projects, access and connection rights can be crucial.

Revenue structure

Banks examine whether revenue comes from market electricity sales, regulated payments, public payments, a power purchase agreement (PPA), or a combination.

Construction risk

Lenders assess delays, cost overruns and contractor performance.

Operating risk

Banks examine whether expected generation and operational performance can realistically support debt repayment.

4. Project Finance

Large Spanish energy PPPs may use project finance.

Instead of lending primarily against the general balance sheet of the sponsors, lenders finance a special-purpose project company.

A simplified structure is:

Public authority

↓

PPP / concession agreement

↓

Project company (SPV)

↓

Construction and operation

while:

Banks / ICO / EIB → financing → SPV

The lenders primarily evaluate the project's future cash flows and contractual structure.

This makes risk allocation central to banking law.

5. Special-Purpose Vehicle

Private sponsors frequently establish a special-purpose vehicle (SPV) to implement the project.

The SPV may enter into:

• concession agreement;
• financing agreements;
• engineering, procurement and construction contract;
• operation and maintenance agreement;
• insurance contracts;
• PPA;
• shareholder agreements; and
• security arrangements.

Separating the project into an SPV can make risks easier to identify and allocate.

However, limited recourse to sponsors means lenders often require extensive contractual protections.

6. Security for Banks

Banks financing Spanish energy projects may seek security over legally available project assets and rights.

Depending upon the transaction and applicable law, the financing package may involve security over:

• shares in the SPV;
• bank accounts;
• receivables;
• insurance proceeds;
• contractual payment rights; and
• certain project assets.

Public concessions create additional complications because administrative-law rights cannot always be treated like ordinary privately owned assets.

Security arrangements therefore need to respect public-contract and administrative-law restrictions.

7. Direct Agreements and Lender Protection

Lenders may also seek arrangements allowing them to protect the project when the SPV defaults.

For example, lenders may want notice before an important project contract is terminated and an opportunity for contractual remedies or restructuring.

This is often associated with step-in mechanisms.

However, lenders cannot simply replace a concessionaire whenever they choose. Any substitution must comply with Spanish public procurement, concession and administrative-law requirements.

Banking arrangements therefore remain subordinate to mandatory public law.

8. Risk Allocation

An effective energy PPP normally allocates each risk to the party considered best placed to manage it.

Typical risks include:

The precise allocation depends on the particular concession and financing documents.

9. Public Guarantees

Spain can sometimes support strategic investment through guarantees or other financial mechanisms.

However, a guarantee creates important legal issues.

If the State guarantees essentially every commercial risk, the supposed private partner may no longer bear meaningful risk. That can affect both:

• the legal characterization of the concession; and
• its treatment under EU State-aid rules.

Public guarantees therefore require careful design.

10. ICO and Public Financing

The Instituto de Crédito Oficial can participate in financing connected with Spain's economic and investment policies.

In appropriate programmes, financing may be provided directly or through financial intermediaries.

For an energy partnership, the capital structure could potentially involve:

Sponsor equity + commercial bank debt + ICO/EIB financing + eligible public support.

This blended structure can mobilize considerably more capital than direct public expenditure alone.

11. European Investment Bank

The EIB is particularly important for energy-transition infrastructure.

EIB financing can support projects involving:

• renewables;
• electricity networks;
• energy efficiency;
• storage;
• clean transport;
• decarbonization; and
• other climate-related infrastructure.

But EIB participation does not eliminate Spanish legal requirements.

The project must still satisfy applicable procurement, environmental, competition, permitting and financing requirements.

12. EU State-Aid Law

Article 107(1) TFEU is fundamental.

A public financial measure can constitute State aid where it involves:

1. State resources;
2. an economic advantage;
3. selectivity;
4. potential distortion of competition; and
5. an effect on trade between Member States.

Energy partnerships frequently require State-aid analysis because projects may involve:

• grants;
• guarantees;
• preferential loans;
• regulated remuneration;
• tax advantages; or
• public capital investment.

Not every public contribution constitutes unlawful State aid. Some measures do not satisfy Article 107(1), while others can qualify for exemptions or receive Commission approval.

13. Renewable-Energy Support and Regulatory Stability

This is one of the most legally significant issues in Spanish energy finance.

Spain historically offered financial incentives intended to encourage renewable-energy investment. The regulatory framework was subsequently modified substantially.

Those changes produced major litigation.

From the banking perspective, the lesson is important:

A project's regulatory revenue assumptions are a form of financing risk.

Banks therefore perform regulatory due diligence rather than assuming that a particular support regime will remain unchanged for the entire loan period.

14. Spanish Constitutional Court — STC 270/2015

Spanish Constitutional Court Judgment 270/2015 addressed constitutional challenges connected with reforms to Spain's renewable-energy remuneration framework.

The Court broadly accepted the legislative reforms challenged before it and considered issues including legal certainty and legitimate expectations.

Banking significance

Investors cannot automatically assume that an existing regulatory remuneration regime is constitutionally frozen forever.

Consequently, lenders financing regulated energy assets must incorporate potential regulatory changes into their risk analysis.

15. Spanish Supreme Court — Renewable Remuneration Litigation

The Tribunal Supremo decided a substantial body of litigation concerning Spain's reforms to renewable-energy remuneration.

In several judgments, the Court rejected arguments that renewable-energy operators possessed an immutable right to maintain the earlier remuneration system indefinitely.

The Court's jurisprudence generally recognized significant regulatory authority to modify the economic regime, subject to the governing legal framework.

Importance for banks

The decisions highlight the difference between:

contractual revenue certainty

and

revenue depending upon a regulatory regime that legislation can modify.

This distinction directly affects debt pricing, financial covenants and stress testing.

16. Asociación Nacional de Productores de Ganado Porcino — C-169/22

EU litigation concerning Spanish energy measures has also reinforced the significance of EU law in the national energy market.

More broadly, CJEU jurisprudence demonstrates that national energy intervention must operate within EU rules governing the internal market, competition and State aid.

For PPP lenders, national authorization alone therefore does not necessarily resolve every EU-law issue.

17. Essent Belgium — Joined Cases C-204/12 to C-208/12

Although involving Belgium rather than Spain, Essent Belgium is important EU energy jurisprudence.

The CJEU examined national renewable-energy support mechanisms against EU internal-market principles.

Relevance to Spain

Spanish renewable partnerships operate within an integrated European electricity market. National support programmes therefore need to respect applicable EU law.

Banks financing supported projects should assess not merely whether the Spanish government has established a programme but whether the structure is legally sustainable under EU rules.

18. Ålands Vindkraft — C-573/12

This major CJEU case concerned Swedish renewable-energy certificates and electricity generated in another Member State.

The Court examined the relationship between national renewable-support arrangements and EU free-movement rules.

Relevance

The case demonstrates that Member States have historically retained substantial room to design renewable-support schemes, but such schemes remain subject to EU legal constraints.

For Spanish energy financing, this means national support mechanisms need to be examined in the wider EU legal environment.

19. PreussenElektra — C-379/98

PreussenElektra AG v Schleswag AG is a foundational EU energy and State-aid case.

The CJEU considered a German system requiring electricity undertakings to purchase renewable electricity at minimum prices.

A crucial question was whether the mechanism involved State resources for Article 107 purposes.

The Court concluded that the mechanism at issue did not constitute State aid merely because private electricity undertakings were legally required to make the payments.

Relevance to Spain

The case demonstrates an important principle:

Government regulation that economically benefits renewable-energy producers is not automatically State aid.

The financing mechanism must be examined carefully.

20. Association Vent De Colère! — C-262/12

The CJEU subsequently considered a French mechanism financing renewable-energy purchase obligations.

Unlike the circumstances examined in PreussenElektra, the Court found sufficient State control over the resources involved for the mechanism to fall within the State-resources concept.

Why the comparison matters

Together, PreussenElektra and Vent De Colère! show that the design of the financing mechanism is crucial.

For Spanish PPPs, two economically similar support schemes can receive different State-aid treatment depending upon:

• who controls the funds;
• how payments are collected;
• who administers them; and
• whether resources remain under public control.

21. Achmea — C-284/16

Slovak Republic v Achmea BV was not an energy case, but it significantly affected intra-EU investment arbitration.

The CJEU held that the arbitration provision in the bilateral investment treaty considered there was incompatible with EU law.

Spanish energy significance

Spain faced numerous investment arbitrations concerning renewable-energy reforms.

Achmea, together with later CJEU jurisprudence, became highly relevant to disputes involving investors from other EU Member States.

For banks and investors, this affects assumptions concerning available dispute-resolution mechanisms.

22. Republic of Moldova v Komstroy — C-741/19

Komstroy is especially important to energy investments.

The CJEU interpreted the Energy Charter Treaty (ECT) and stated that its arbitration mechanism was not applicable to disputes between an investor from one EU Member State and another EU Member State.

Relevance to Spain

This directly affects the legal environment surrounding intra-EU energy investment disputes involving Spain.

Lenders cannot assume that investment-treaty arbitration provides an uncomplicated backstop against regulatory changes.

23. Infrastructure Concession Principles

EU concession law also matters to Spanish energy PPPs.

Under Directive 2014/23/EU, incorporated into Spain's public-contract framework, the transfer of operating risk is central to a concession.

A public authority cannot necessarily call an arrangement a concession while effectively guaranteeing the private operator against meaningful operating losses.

Banking tension

Lenders generally want predictable revenues.

Concession law requires genuine operating risk.

Successful PPP structuring therefore has to reconcile:

bankability ↔ genuine private risk transfer.

24. Environmental Authorization

Energy financing is heavily dependent on environmental compliance.

A renewable project may require:

• environmental impact assessment;
• land-use permissions;
• electricity-sector authorization;
• grid access and connection;
• construction approvals; and
• other regional or municipal permissions.

Banks commonly make financing conditional upon obtaining essential permits.

If a fundamental authorization is annulled, project cash flows and therefore loan repayment can be endangered.

25. PPAs and Financing

Power Purchase Agreements (PPAs) have become important instruments for renewable project financing.

Under a long-term PPA, a buyer agrees to purchase electricity under predetermined contractual arrangements.

For lenders, a strong PPA may reduce exposure to volatile wholesale electricity prices.

Banks examine:

• duration;
• pricing mechanism;
• buyer creditworthiness;
• termination rights;
• guarantees;
• change-in-law clauses;
• force majeure; and
• assignment rights.

A bankable PPA can materially improve the financeability of a renewable project.

26. Insolvency Issues

Energy SPVs can become insolvent.

Spanish insolvency law therefore interacts with project finance.

Lenders need to consider:

• ranking of claims;
• enforceability of security;
• restructuring possibilities;
• treatment of essential contracts;
• continuation of public concessions; and
• effects of insolvency on licences.

A bank cannot assume that enforcing security automatically transfers a public concession.

Administrative authorization or procurement requirements may continue to apply.

27. Example: Solar Energy PPP

Assume a Spanish public authority wants to develop a major solar-energy facility.

A private consortium forms Solar SPV SA.

The financing structure is:

Sponsors: €100 million equity
Commercial banks: €300 million project loan
EIB/ICO: €150 million financing
Eligible public support: €50 million

The SPV receives the necessary public rights and enters into a long-term PPA.

Banks then examine several separate questions.

Public-contract law

Was the private partner selected through a legally compliant procedure?

Banking law

Is the project's debt sustainable and appropriately secured?

Energy law

Does the project possess the necessary electricity authorizations and grid rights?

State-aid law

Does the €50 million public contribution constitute aid, and if so, is it compatible with EU rules?

Environmental law

Has the project satisfied environmental-assessment requirements?

Competition law

Does the arrangement confer an unjustified selective advantage?

Insolvency law

What happens to lenders' security and project rights if Solar SPV fails?

The financing therefore cannot be analyzed through banking law alone.

28. Main Case-Law Principles

The leading authorities can be condensed as follows:

These authorities address different legal dimensions; they should not be treated as though each were a Spanish PPP case.

29. Main Banking-Law Risks

For banks financing Spanish public-private energy projects, the major legal risks can be grouped into six categories.

Regulatory risk: changes to energy regulation can affect project revenues.

Public-law risk: concessions, licences and authorizations may be subject to mandatory administrative rules.

Credit risk: the project may fail to produce sufficient cash to service debt.

State-aid risk: public financing may be incompatible with EU rules if incorrectly structured.

Contract risk: construction contracts, PPAs or operating agreements may fail or terminate.

EU-law risk: Spanish public measures remain subject to EU energy, competition, procurement and internal-market rules.

These risks are interconnected.

30. Conclusion

Public-private energy partnerships in Spain operate at the intersection of banking law, project finance, public procurement, concession law, energy regulation, State-aid law, environmental regulation and EU law.

Law 9/2017 on Public Sector Contracts provides a central framework for public contracts and concessions, while Law 24/2013 on the Electricity Sector provides the core electricity-sector framework. Financing can involve commercial banks alongside ICO and the European Investment Bank, particularly for renewable energy, networks, energy efficiency and other transition projects.

Case law is especially important because Spain's renewable-energy reforms demonstrated the financial consequences of regulatory change. STC 270/2015 and Spanish Supreme Court renewable-remuneration litigation show that investors and lenders cannot simply assume that a regulatory remuneration regime will remain unchanged indefinitely. At EU level, PreussenElektra and Vent De Colère! explain when renewable-support mechanisms may involve State resources, while Ålands Vindkraft and Essent Belgium illustrate the interaction between national renewable policies and EU internal-market law. Achmea and Komstroy are significant for the dispute-resolution framework surrounding intra-EU energy investments.

The central banking-law principle is therefore:

A Spanish energy PPP becomes financeable not merely because government participates in it, but because public authority, project revenues, regulatory permissions, private risk, financing security and EU-law compliance are structured coherently.

For lenders, the most important legal task is consequently bankability due diligence: determining whether the concession or public contract, energy authorizations, revenue arrangements, PPA, public support, security package and regulatory environment together provide a legally sustainable basis for long-term repayment.