27 Feb 2018 Cases

Tribunal Fully Endorses Dr. Manuel Abdala's Expert Opinion in Renewable Energy Dispute Against Spain

2 minute read


Compass Lexecon expert Dr. Manuel A. Abdala was retained by Novenergia II Energy & Environment (SCA) SICAR (Claimant) as economic and quantum expert in an Energy Charter Treaty arbitration against Spain, held under SCC rules. The dispute centered on several claims affecting the value of Claimant's investments in eight photovoltaic (PV) plants due to certain modifications in Spain's regulatory regime for renewables and the ensuing overhaul of such regime, in mid-2013.

The Tribunal found that the overhaul of the regime in mid-2013, which replaced Feed-in Tariffs (FIT) with a price system based on an allowed rate of return for benchmark PV plants implied a "radical and unexpected" departure from the regulatory regime in place at the time of investment, and that such departure had a "significant damaging economic effect" on Novenergia's plants.

Dr. Abdala's opinions assisted the Tribunal on several fronts. His testimony helped establish that the overhaul of the regime substantially deprived Claimant of its investment value on all of its PV plants, by reducing plant revenues by 24-32% between 2013 and 2016. Dr. Abdala also demonstrated that, despite Spain's experts claim to the contrary, the new regime was not less risky and did not result in higher internal rates of returns to the investor. Thus, the Tribunal ruled out the notion that the change in regime could have been beneficial to Claimant. In doing so, the Tribunal also rejected the regulatory risk premium that Spain's experts had included in the discount rate under the FIT regime.

The arguments and evidence put forward by Dr. Abdala also convinced the Tribunal that no illiquidity discount ought to be included in the valuation, given that the statistics on renewable transactions in Spain showed entirely normal exit times. The Tribunal agreed with Dr. Abdala's opinion on how the operating costs of the plant would have evolved under the FIT regime. In terms of damages valuation, the Tribunal concluded that "...it considers the DCF-model presented by Compass Lexecon to be conventional, robust and sufficiently substantiated to form the basis of the damages evaluation in this case." The Tribunal thus granted damages of €53.3 million due to the overhaul of regime, based on Dr. Abdala's quantification.

Dr. Abdala was supported by a Compass Lexecon team that was led by Carla Chavich, and included Alan Rozenberg and Andres Barrera. Claimants were represented by Fernando Mantilla-Serrano, Antonio Morales, John Adam, Rosa Espin, Aija Lejniece and Nora Fredstie of Latham & Watkins LLP.

A new version of Compass Lexecon is available.