MADRID ECONOMIC WEEKLY, NOVEMBER 16-20

UNCLAS SECTION 01 OF 03 MADRID 001115 SIPDIS STATE FOR EUR/WE, EEB/TPP/IPE, EEB/CIP, EEB/IFD/OMA STATE PASS USTR FOR D.WEINER AND J.GROVES STATE PASS U.S. COPYRIGHT OFFICE FOR M.WOODS AND M.PALLANTE COMMERCE FOR 4212/DON CALVERT AND 6990/R.LAYTON COMMERCE ALSO FOR USPTO TREASURY FOR OAI/OEE R.JOHNSTON ENERGY FOR PIA:K.BALLOU E.O. 12958: N/A TAGS: ECON ECPS EFIN EIND EINV ENRG KIPR PGOV SP SUBJECT: MADRID ECONOMIC WEEKLY, NOVEMBER 16-20 REF: A. MADRID 1095 ¶B. MADRID 1052 ¶C. MADRID 434 MADRID 00001115 001.3 OF 003 Contents: EFIN: Central Bank Governor Says At Least 15 Cajas Should Disappear ENRG/EINV: GOS Approves Several Years of Renewable Electricity Projects ENRG: Electricity Commission Says 18% Rate Hike Needed ECPS: Industry Minister Announces Right to Broadband Internet Access KIPR: Intellectual Property Rights-Holders Win Two Court Cases EIND/ENRG: Industry Minister Hosts Electric Vehicle Summit PGOV: TI Public Sector Corruption Ranking Worse Again Central Bank Governor Says At Least 15 Cajas Should Disappear 1.(U) Bank of Spain Governor Miguel Angel Fernandez Ordonez told the Financial Times that he believed at least 15 of Spain,s 45 savings bank ("cajas") should merge with others and disappear as independent entities. He said the central bank was discussing many such mergers, and he expressed hope that by spring the restructuring would be complete. Separately, EC Competition Commissioner Neelie Kroes urged Spain to explain the plans for operation of the Orderly Banking Restructuring Fund (FROB) and said that as soon as the GOS decided and informed the EC, the EC would act as quickly as possible. The Commission has indicated that it will want to approve each operation on a case-by-case basis unless the FROB framework is changed to give authorities less discretion. The GOS would prefer to receive a single blanket approval beforehand. (Financial Times, 11/16; El Pais, 11/19) GOS Approves Several Years of Renewable Electricity Projects 2.(U) On November 13, the Council of Ministers approved a calendar of corporate projects to generate electricity using wind and solar thermal technology. These projects will be eligible for generous feed-in tariffs (guaranteed prices) for the life of the projects. The tariffs will eventually be added to consumers, bills; solar thermal tariffs are significantly higher than those for wind power. Counting 2009 projects, the calendar will add over 7,000 megawatts (MW) of wind capacity by the end of 2012 and about 2,400 MW of solar thermal capacity by the end of 2013. Wind power capacity will grow a little less rapidly than it has averaged over the last several years, while the solar thermal industry is new, with only one project having been in place before this year. Of the 55 solar thermal plants approved, Abengoa will build 13, ACS 6, and Acciona 5. The U.S. firm NextEra received approval for two solar thermal projects totaling 100 MW, and two other projects totaling 70 MW use the technology of U.S. company Infiniasolar. The GOS also envisions almost 2,000 MW of solar photovoltaic projects being added from 2009 to 2012. Wind power has generated almost 13% of Spain,s electricity this year, while the percentage of both forms of solar power combined remains in the low single digits but will rise as the approved projects are built. (Comment: Although the GOS action gives certainty to the companies whose projects were approved, it also appears to make it more difficult for companies to start any other new wind or solar thermal projects in the next few years, even projects that might be less costly if technology improves between now and then.) (Cinco Dias, 11/14, Ministry of Industry, Tourism, and Commerce, 11/13, Embassy) Electricity Commission Says 18% Rate Hike Needed 3.(U) The National Electricity Commission (CNE) has told the Ministry of Industry, Tourism, and Commerce that it will need to raise electricity rates by over 18% in January if it is to pay for planned incentives for the use of domestic coal and keep the 2010 increase in the accumulated "tariff deficit" to the 3 billion euros called for in a June decree. The GOS has been holding retail electricity prices below the cost of production for several years, and its resulting tariff deficit owed to electricity generators is over 16 billion euros. A June decree codified an agreement with producers (Ref C) by which the GOS will gradually raise rates in order MADRID 00001115 002.3 OF 003 to eventually stop adding to the deficit. (Comment: The Ministry is not expected to raise rates by 18%, especially in the current economic situation. The coal incentives are politically important to President Zapatero, so it seems likely that holding the line on the tariff deficit increase will have to give. This discrepancy between costs and rates may be aggravated in future years as more high-tariff solar projects begin operation.) (El Pais, 11/17 and 11/19) Industry Minister Announces Right to Broadband Internet Access 4.(U) Speaking at the opening ceremony of the third annual International Forum on Digital Content (FICOD)(septel), Minister of Industry, Tourism, and Commerce Miguel Sebastian announced that as of January 1, 2011, the universal telecommunications services package to which all citizens are entitled will include Internet access with minimum speed of 1 megabyte per second (mbps). To effect this new entitlement, the government will need to pursue legislative or regulatory changes. While the vast majority of Spaniards already have access faster than 1 mbps, the new rule will require telecoms to provide services in underserved (and unprofitable) rural areas. For this reason, ISP association Redtel has expressed strong opposition to the measure. The government hopes that the change will stimulate ISPs to upgrade their networks and offer more broadband at lower prices. Only 11% of Internet users in Spain have more than 10 mbps service, much lower than in most other European countries, and prices are among the highest in Europe. (El Pais, 11/18; Embassy) Intellectual Property Rights-Holders Win Two Court Cases 5.(U) On November 12, an appellate court in Barcelona ruled against the operators of a website that was making video games available without authorization via peer-to-peer platforms. The operators were seeking to have the case thrown out on the grounds that they were only providing links. The Barcelona Provincial Court cited the 2006 Intellectual Property Law, which states that copies of protected works may be made only so long as they are not for collective or profitable use, and found that the website was earning advertising revenues. This ruling comes on the heels of a similar decision handed down in September by the Murcia Provincial Court (Ref B). In related news, a judge in Pamplona (Navarra) sentenced a man to 15 months in prison for selling pirated copies of video games from his website and altering Play Station 2 consoles to enable them to play pirated games. Content industry representatives see in these cases signs of hope that Spanish courts may be beginning to appreciate the economic harm perpetrated by Internet pirates. (El Pais, 11/14 and 11/17) Industry Minister Hosts Electric Vehicle Summit 6.(U) Industry and Commerce Minister Sebastian and leaders from several government bodies and companies agreed to prepare in the first quarter of 2010 a comprehensive plan for the development of electric and hybrid plug-in vehicles. Sebastian's "Electric Vehicle Summit" included representatives from his ministry, the economy ministry, provincial and municipal governments, leading energy, information technology, communication, and auto companies (including Ford and Opel/GM),and the European Commission. The plan will initially focus on the development of the electric car in urban centers, with future plans for large-scale production. The national government will provide incentives to promote investment and spur demand, while regional and local governments will contribute to the development and installation of charging infrastructure. Companies, efforts will include standardization of systems to facilitate the development of the sector. (Presidency Statement, 11/18; ABC, 11/19) TI Public Sector Corruption Ranking Worse Again 7.(U) Spain tied for the 32nd best score out of 180 countries in Transparency International's annual ranking of perceptions of public sector corruption, released this week. The country's ranking has declined each year since 2006, when it was perceived as the 23rd best. (Comment: Because TI relies on other surveys released during the past two years, the MADRID 00001115 003.3 OF 003 ranking likely does not reflect the impact of recent revelations of corruption by regional and local governments.) (www.transparency.org, 11/17) CHACON