Part of Spain’s renewable energy sector – particularly purely photovoltaic projects (ie non-hybrid projects, which still make up the majority) – is experiencing financial stress. This situation calls for agile responses at the corporate and transactional levels and from a regulatory standpoint.
This article offers an overview of the opportunities and risks associated with M&A transactions involving distressed renewable energy assets.
Spain has accumulated installed renewable capacity that far exceeds the demand of the electricity system. While average energy demand in Spain has remained stable at around 40 GWh over the past decade, installed capacity now stands at 150 GW. In 2025 alone, 9 GW of photovoltaic capacity was added, bringing the total solar capacity to nearly 50 GW.
The government’s plan called for installing 18 GW between 2020 and 2026; the actual figure has exceeded 40 GW. The result: a structural oversupply that has driven down pool prices.
By 2026, there had already been more than 600 hours of negative prices, and capture ratios – the percentage of the daily average price received by photovoltaic plants – fell below 10% in some months.
This phenomenon is a management problem: solar production is concentrated in a few hours of the day when demand cannot absorb all the energy fed into the grid, generating two interlinked effects: price cannibalization – the more solar power fed into the grid, the lower the marginal price – and curtailment, which forces the system operator to limit generation to preserve grid stability. Technical restrictions due to oversupply have multiplied, especially along the peninsula’s north-south axis, where transmission grid limitations exacerbate the problem.
Added to all of the above is the inadequacy of electricity interconnections with Europe, which prevents the export of surplus generation. Building new interconnection lines would turn Spain into the “solar farm of Europe,” but other neighboring countries, with a heavy reliance on nuclear power, lack clear incentives to facilitate the massive influx of Iberian solar electricity.
Projects financed through project finance were designed based on revenue assumptions that current prices cannot sustain, resulting in non-compliance with debt service coverage ratios (DSCR) and the inability to fund reserve accounts (DSRA), triggering events of default or cash lock-ups. At the same time, many IPPs have accumulated short-term bank debt – originally intended to finance working capital or ready-to-build assets – which has now become structural.
The result is evident on the balance sheets: infrastructure funds are writing down the value of their renewable energy portfolios, venture capital funds are exiting the sector or taking losses, and project sponsors are watching their investments deteriorate.
From a legal perspective, distress is associated with the use of legal restructuring tools to overcome a foreseeable insolvency situation. From this perspective, there is not yet widespread distress, although specific cases already exist: Plenium Partners/Guzman Energía (2024), Soltec (2025), Univergy, and Prodiel (2026), which have had to apply the most powerful restructuring tools.
From a financial perspective, a discount is to distress as salt is to seawater: just as water containing salt is seawater, if there is a discount, it’s possible to speak of a distressed project.
From this viewpoint, solar projects in Spain are already distressed – the market isn’t paying what it would under normal conditions – and have been for at least two years. It’s true, however, that over the past two years we’ve observed some reluctance on the part of portfolio owners to sell at the discounts expected by the market.
The data supports this assessment: M&A activity in the renewable energy sector fell by 30% in the number of transactions and by 25% in value in 2025; mid-cap and small-cap transactions have disappeared, and only funds with deep pockets are acquiring well-balanced portfolios. It’s anticipated that starting in the second half of 2026, IPPs that have resisted selling at a discount will have no choice but to do so.
In solar projects, the pipeline without storage has lost value, and storage capacity has become the main differentiating factor: projects with batteries transform “unmanageable” generation into “manageable” generation, arbitraging between solar hours (low or zero price) and hours of peak demand.
Today, up to 50% storage capacity can be achieved, although CAPEX increases substantially – and this is one of the key issues: the need to inject new CAPEX well above the forecasts initially modeled by investors.
The specific opportunity lies in acquiring existing plants without storage at a discount, investing in their hybridization with batteries, and repositioning the asset as dispatchable, stabilizing its cash flows.
Spain has had a regulatory framework in place since 2020 that allows for hybrid integration (RDL 23/2020 and RD 1183/2020), recognizing storage as a component of the electricity system. Subsequent regulations – CNMC Circular 1/2024, RD 997/2025, and, notably, RDL 7/2026, which creates renewable energy acceleration zones exempt from environmental impact assessments – have gradually streamlined the process.
However, gaps remain: there’s a lack of regulations to incentivize demand – such as industrial electrification, capacity auctions, and the facilitation of data centers – and to address the expansion and digitization of the transmission grid. The lack of capacity access auctions for data centers creates congestion at grid nodes, which blocks large-scale projects.
Capacity markets – systems that compensate generation facilities not only for the energy produced but also for the availability of that capacity – received approval in May 2026 from the European Commission for a EUR9,000 million aid package submitted by the Spanish government. Approval of the final regulations to implement these markets and make them operational is still pending, which will help alleviate the adverse situation facing some projects.
The first – and most desirable – tool is pure contractual renegotiation, using existing financial documentation to reschedule maturities, adjust ratios, or incorporate fresh money (as was the case with Amara Nzero and Capital Energy).
Linked to this approach, Liability Management Exercises (LMEs) are gaining prominence: contractual exercises in which, through the application of certain clauses, the position of specific creditors is structurally subordinated.
The key to many restructuring processes is the injection of new liquidity. Fresh money – new financing provided in the context of a restructuring – is essential for maintaining the project’s operational viability and, where applicable, financing the integration with storage.
Alongside this, whole-business securitizations are being explored: vehicles in which the sponsor contributes present and future credit rights to an SPV that issues bonds to the market, generating additional liquidity without the need to sell assets.
When contractual means are insufficient, Spanish law provides for restructuring plans, which allow for the reorganization of debt or capital structures with enhanced legal protections.
These come in three forms:
There are no magic formulas: the type of plan depends on the degree of stress and the need for new financing. Experience in Europe and Spain since 2020 shows that these plans work once the equity holders, the creditors – or both – take the initiative.
The sale of assets is often the quickest way to generate cash, but it must be safeguarded against future risks. The first precaution is to sell at fair market value (FMV): a market discount is legitimate, but the FMV must be verifiable as such to prevent the transaction from being challenged later and to protect the liability of directors and managers.
The second precaution is the Business Judgment Rule (BJR), which entails establishing an orderly procedure with sufficient information, ensuring that decisions are made in the absence of conflicts of interest and in accordance with independent advice.
Compiling the documentation supporting the BJR – independent valuations, fairness opinions, board minutes – before or concurrently with the sale of the project shields the transaction from subsequent challenges.
An additional source of tension, still in its early stages but growing, is that of Power Purchase Agreements (PPAs).
Many long-term power purchase agreements were signed three or four years ago based on market assumptions that current prices have rendered invalid. In many cases, PPAs aren’t working out for the generator – which committed to supplying power at a price that’s now ruinous relative to its costs – and, in others, for the corporate off-taker, which is paying for power at prices higher than those on the spot market.
Renegotiating PPAs is now a daily reality, and options such as the introduction of caps and floors or the comprehensive restructuring of contracts are being explored. PPAs can be renegotiated, and in distress situations, there are tools available to terminate PPAs if they’re considered a burden on the company’s viability in the short and medium term.
The Spanish renewable energy sector has weathered retroactive regulatory changes, the feed-in tariff deficit crisis – which reached EUR30,000 million – the 2008 financial crisis, and supply chain disruptions caused by recent armed conflicts (Ukraine and Iran). These crises have unfolded in rapid succession in recent years, and the markets and their key players have learned many lessons.
During the 2009 financial crisis, the Spanish financial sector learned a lesson that’s now fully applicable to the renewable energy sector: when the number of companies in distress exceeds creditors’ capacity to respond, creditors allocate “rescue quotas.” They can only save a few projects, not all of them, and the criterion is first come, first served. The companies that disclose their problems in a timely manner, explain them adequately, seek advice, and present a credible plan are the ones that receive attention and successfully restructure.
The main lesson, then, is that being proactive is key. It requires transparency to recognize the situation in time, urgency to act before the “rescue quotas” run out, and planning to avoid financing the restructuring with resources that should be allocated to growth.
Distressed M&A in the renewable energy sector isn’t a problem – it’s a sign that the market is seeking a new equilibrium, and those who understand this first will be the ones to seize the opportunities that are already here.
Written by: Pablo Echenique, Juan Verdugo, José María Barrios and José Marco from DLA Piper
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