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Quantum matters – Fifth loss for Spain in a solar case

Sarah May Sarah May

On 14 November 2018, an SCC Tribunal ordered Spain to pay €39 million in compensation to Foresight and Greentech for the loss in value of their investments in three solar photovoltaic facilities.


Between May 2009 and January 2011, Foresight, GWM Renewable Energy and Greentech (the Claimants), based in Luxembourg, Italy and Denmark, acquired three photovoltaic (PV) facilities in Spain. These facilities benefited from Spanish Royal Decree RD 661/2007, which enabled renewable energy producers to sell electricity produced by registered PV facilities to the grid for feed-in-tariffs (FIT) for their entire operational lifetime.

In 2012 and 2013, the Kingdom of Spain (Spain or the Respondent) enacted various laws which altered the remuneration regime from 20 June 2014 onwards. During 2015 and 2016 the Claimants sold their three PV facilities at values lower than the purchase prices.

The Claimants claimed compensation under the Energy Charter Treaty (ECT) for unfair and inequitable treatment, and expropriation.

On liability, the Majority of the Tribunal found in favour of the Claimants. This article considers the quantum aspects.

Position of the parties

The parties did not agree on the appropriate valuation method. The Claimants used a Discounted Cash Flow (DCF) method to calculate the hypothetical market value of the Claimants’ investments had Spain not introduced the changes to the FIT. The Respondent contended that the DCF method was inappropriate because it is too speculative and proposed an asset-based valuation instead.

Claimants’ approach

The Claimants sought damages for the diminution in the market value of their investments and claimed for losses of €58.2 million. The Claimants also claimed pre-award and post-award interest.

The Claimants calculated the loss of value of their investment as the difference between the actual market value of the facilities on the valuation date (actual position) and their value had they continued to receive the RD 661/2007 FIT for their assumed 35-year operating life (counterfactual position). The Claimants used the DCF method as the PV facilities had stable and predictable revenues for their lifetime, and relatively low and predictable operating costs.

The Claimants considered the valuation date to be 30 June 2014, the quarter end after Spain enacted its new remuneration regime.

Respondent’s approach

It was the Respondent’s case that the Claimants were only ever entitled to earn a “reasonable rate of return” and not the FIT under RD 661/2007.

The Respondent’s damages calculation relied primarily on an asset-based approach. The regulatory asset base was calculated considering the cost of efficient market investment and a multiple was applied to reflect the return demanded by the market. The Respondent assumed that these two measures would be the same in both the actual and counterfactual position, and therefore concluded that the value of the Claimants’ investments did not change as a result of the new remuneration regime and no losses were suffered.

The Respondent also calculated the losses using a DCF method assuming a reasonable rate of return was earned, not the FIT.

In a second DCF calculation the Respondent adjusted the assumptions made in the Claimant’s DCF, applying a premium for risk of system collapse by increasing the discount rate and reducing the useful life to 30 years.

Approach taken by the Tribunal

The Majority of the Tribunal agreed with the Claimant that the DCF method was appropriate in this case because the future performance of operating solar PV plants was relatively predictable.

The Majority of the Tribunal adopted the Claimant’s DCF calculation with two adjustments:

  • the Tribunal considered that the Respondent’s assumption of a useful operating life of 30 years was more reasonable and reduced the award of damages by €11.2 million accordingly
  • the Majority of the Tribunal considered that Spain only violated the Energy Charter Treaty from June 2014 onwards and excluded all historical losses from the damages calculation (€8 million).

Therefore, the Majority of the Tribunal determined that the Claimants were entitled to an award of compensation of €39 million.

The Majority of the Tribunal also determined that interest should be paid at a rate of 1.4% (the Respondent’s cost of borrowing represented by five-year Spanish government bonds) compounded monthly from 30 June 2014 to the date of the Award, and at 3.5% (the Claimants’ cost of debt) compounded monthly from the date of the Award until payment has been made.

A dissenting opinion was given by Dr Raúl Emilio Vinuesa. He found in favour of the Respondent on liability and therefore concluded that no damages were owed to the Claimants.


The Majority of the Tribunal found that the DCF method is appropriate where businesses have an established operational record and where any variables may be forecast appropriately, which they considered was the case with the three PV plants.

The Majority of the Tribunal excluded all historical losses from the damages calculation because the Claimants did not provide a breakdown of the individual impact of each of the disputed measures. The Majority of the Tribunal acknowledged that the historical losses may include certain losses that are attributable to the retroactive effect of the new remuneration regime.

Case information


Foresight Luxembourg Solar 1 S.A.R.L.

Foresight Luxembourg Solar 2 S.A.R.L.

Greentech Energy Systems A/S

GWM Renewable Energy I S.P.A.

GWM Renewable Energy II S.P.A

Respondent: The Kingdom of Spain

Case ref: SCC Arbitration V (2015/150)


Dr Michael Moser, Chairperson

Prof Dr Klaus Michael Sachs, Co-Arbitrator

Dr Raúl Emilio Vinuesa, Co-Arbitrator

Mr Paul Barker, Administrative Secretary to the Tribunal


1. SCC ARBITRATION V (2015/150), italaw, 2018

For further information, please contact Sarah May.

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