Voir pdf

Under the 5G Auction Regulation, the objectives of the auction are, among others, to promote greater competition in the electronic communications market. To achieve this objective, the auction was designed to promote the entry of new entrants through the application of asymmetric coverage obligations and prices.

With the bidding phase concluded, it remains to be seen what operators and consumers in the communications market can expect. For this purpose, it is important to understand the importance of the specific bidding phase for new entrants - which corresponded to the reserve price in the first phase and in subsequent phases to the value determined by ANACOM's Board of Directors.

New entrants and incumbents

Allocation of radio spectrum rights

In January 2021, after merely 44 rounds, four 2 x 5MHz frequency bands in the 900MHz and 1.8 GHz were awarded for approximately 84 million euro, ensuring these entrants will be able to provide IMT2000 based services, while being permitted to bid in the main bidding stage.

The allotment of non 5G spectrum for new entrants, accompanied by low coverage obligations, unusually generous payment terms, is consistent with ANACOM’s understanding that the number of mobile network providers should increase to counter what regulators have been arguing to be an excessively concentrated market. The hypothesis of excessive concentration is fiercely disputed by incumbent operators, who in general argue that the said concentration is not the result of an unfair advantage but rather of the market structure itself.

In any case, as mentioned above, it is not the first time that ANACOM tries to force the entrance of new players by what it perceives to be a levelling of the playing field.

To this end while it is providing new entrants with spectrum that allows for the immediate provision of services, it is also imposing other obligations. Thus, in the 700 MHz bands, holders of spectrum will be required to provide 25% mobile broadband service coverage by 2025:

• On each of the country's highways;
• On each of the main road routes in the country; and
• On each of the railway routes included in the “Atlantic Corridor”, for the part relating to national territory (essentially a railway connection between the country’s largest seaports from Sines in the South to Oporto), the Braga-Lisbon link, the Lisbon-Faro link and the urban and suburban links of Lisbon and Porto.

ANACOM considered it appropriate to impose on new entrants benefiting from these 'advantages', gradual coverage, and the maintenance of a level of investment which, without discouraging new entry, is also intended to contribute to the robustness of the network offer and to increase the benefits of these allocations for end users.

Access to national roaming

New entrants will also have access to the networks of incumbent operators, irrespective of the amount of spectrum acquired. For this purpose, incumbent operators will be obliged to enter into commercial agreements for national roaming with the new entrants (‘roaming’).

As above, new entrants benefiting from national roaming will be subject to mobile coverage obligations. For the purposes of compliance with coverage obligations in locations or buildings where only the installation of infrastructures of one of the holders of rights of use of frequencies in the 700 MHz band is permitted, the operators shall be obliged to enter into national roaming agreements, under non-discriminatory conditions, to enable other holders of rights of use of frequencies in the 700 MHz band to provide services in such locations.

Operators entering into roaming agreements will be subject to an obligation to provide mobile coverage of 25% and 50% of the national population by using the frequencies allocated to them respectively within 3 and 6 years from the conclusion of those agreements.

It should be noted that compliance with these coverage obligations may be achieved by using any frequency band assigned under the auction or consigned until the date of entry into force of the Regulation.

5G and consumers

The holders of rights of use of frequencies are subject to compliance with the conditions of article 27 and 32 of the Electronic Communications Law, namely:

• Transparency obligations of public communications network operators offering publicly available electronic communications services in order to ensure end-to-end connectivity;
• Maintenance of the integrity of public networks;
• Public authorities’ terms of use for communications to the general public for warning for imminent threats and mitigating the consequences of major disasters;
• Security of public networks against unauthorised access;
• Providing a service or using a type of technology including, where appropriate, coverage and quality requirements; and
• Network development and fixed voice signal augmentation.

Given the delay, it could be several months before operators' commercial offers involve 5G tariffs.

Transfer or lease of rights of use

The rights of use of frequencies may only be transferred or leased by the respective holders after 2 years from the date of commencement of the provision of publicly available electronic communications services using the frequencies assigned to them provided that ANACOM has not prohibited such transfer.

Nevertheless, there is a duty of prior communication to ANACOM of the intention to transmit or lease the rights of use of frequencies, as well as the conditions under which they intend to do so.

ANACOM has, within 45 working days, the right to prohibit the transfer or assignment if the following conditions are not met:

• The transfer or lease does not distort competition, namely due to the accumulation of rights of use;
• The frequencies are used efficiently and effectively;
• The intended use of the frequencies is in line with what has been harmonised through the implementation of Decision No 676/2002/EC of the European Parliament and of the Council of 7 March 2002 (Radio Spectrum Decision) or other EU measures; or
• Legal restrictions in relation to radio and television broadcasting are safeguarded.

In conclusion, the need to enhance the competitiveness of the country and of all its regions associated to 5G is thus perceived. Moreover, ANACOM believes that the obligations associated with the coverage of municipalities with low population density, in the Autonomous Regions of Madeira and the Azores, may be ensured, with efficiency gains in these areas through national roaming agreements.

To learn more, please read the extended version of this paper with extra content on our PDF down bellow.

Voir pdf

With the massification of the "Covid-19" vaccination in Portugal, with 83,5% of the population fully vaccinated, the last quarter of 2021 promises to be a resume to work. But this time, everything points to a return to work stressed by what we used to call "Future of Work".

The Future is already among us, and it has a name: Hybrid Work. A powerful combination of remote and in-person work.
This is the big new trend in Western economies: the United States, Canada, Australia, Brazil and Europe are investing heavily in hybrid work models that combine work at the premises (vertical or horizontal) with the remote work that characterized the pandemic.

Remote work and telework, as we already know, has tremendous advantages for all stakeholders and for the community:

1. For companies, it reduces costs with installations and generates a greater capacity to recruit employees geographically distant, besides allowing the stability of the operation in confinement phases;
2. For workers, it guarantees them greater freedom of action, better work-life balance, the ability to work for companies located in different geographies, and the reduction of costs and time associated with commuting;
3. For the community, it is a huge factor in reducing commuting, a tool for reducing CO2 emissions; a tremendous opportunity for development of previously forgotten and abandoned rural areas; and an important factor in containing new pandemic outbreaks that may continue to occur, due to the Delta variant or others that may come.

But exclusive remote work also has obvious disadvantages: it heightens social isolation; makes career progress more difficult; separates workers from their representatives and union structures; and reduces group work, the exchange of ideas, and the resulting creativity. Exclusive remote work alienates people and human contact.
Because of this, the hybrid model, in professions that do not require constant physical presence, can enhance the advantages of remote work, and minimize its disadvantages. It ensures employee turnover and less crowding workplaces, allowing employees to benefit from two complementary realities: in-person work and remote work.

However, for it to work well, there are some precautions to take:

1. Planning: companies and their HR departments must plan intelligently and clearly the distribution of hybrid work among their employees; in some cases, for example, employees work 2 days a week in face-to-face work and 3 days in remote work; in others, it may be the other way around; or we may have entire weeks of in-person work and others of remote work;
2. Communication: planning must be properly communicated to employees in advance, so that they can plan their lives and know what to expect; the worst that can happen in an organization is lack of communication and the use of "Chinese walls" about the model to be adopted; uncertainty and lack of communication about how the future will be generates anxiety, unnecessary "noise" and lower productivity;
3. Involvement: employees must be involved in the solution; not necessarily by consulting or issuing prior opinions, but at least through good explanation of the rules adopted and constant and effective communication mechanisms;
4. Adaptation: hybrid work plans should not be definitive; they should be flexible, follow the evolution of the pandemic and the adaptation to this new way of working; they can (and should) be changed and recalibrated, to the extent that this is justified; and workers should be aware of the temporary nature of the plans to be adopted.

We know that the Future of Work is not going backwards and will involve hybrid work, digital nomadism, work on digital platforms, lots of digitization, and the use of algorithms. It will bring new opportunities, but also new risks and challenges that must be guarded against.

The solution is not in trying to prohibit or decree a return to the past; the solution is in regulating these new trends, in the name of the Decent Work Agenda. The Future of Work in Portugal must be cultivated and regulated so that it can bring new opportunities, decent and better paid jobs, with more freedom and less precariousness.

Voir pdf

With the development of the digital economy, new economic and financial assets, like tokens and cryptocurrencies, were created. Because of their high (potential) returns, they have become a refuge for investors, leading more and more people to invest in them.
This type of asset is not subject to the limits of monetary and exchange rate policies defined and controlled by central banks, and this lack of regulatory control encourages volatility and speculation. The innovation of these instruments involves significant legislative challenges, particularly regarding their legal nature, the regulation of the respective market and the taxation of their holders’ profits.
Concerns such as money laundering and terrorist financing led to the publication of the report "Taxing Virtual Currencies", by OECD, in October 2020, which addresses the existing legislative gaps for the main types of taxes and gives countries that want to strengthen their tax policy in this area some recommendations. Among OECD's recommendations there was the need to provide guides on tax treatment of virtual currencies that are clear, regularly updated, and consistent with the treatment of other assets. In Portugal, unlike many other European countries, such regulation was not yet implemented.

But is there a tax regime in Portugal?

In Portugal, the law is silent as to how this type of asset is taxed.
Between March and May 2020, the purchase and sale of cryptocurrencies in Portugal increased by 60% compared to the same period in the previous year. However, against what would be expected, neither the Government nor the Parliament have been following this growth through a clear and adequate legislative framework.
More recently and following the announcement that the Bank of Portugal has taken over the supervision of entities managing cryptocurrencies and the approval of anti-money laundering rules specifically addressed to transactions on these assets, there have been rumors of a change in the position of the Portuguese Tax Authorities to consider that this income should be taxed as capital income (at a rate of 28% or 35% if from a "tax haven"). But no amendments have been approved (yet).

… so how are they currently taxed?

In the absence of an express taxation, and after being questioned by several taxpayers, Tax Authorities took the only position that would be acceptable under the law.
In what concerns Personal Income Tax (“PIT”), the Tax Authorities confirmed that the income from this type of assets is presumably not taxable, unless the income arises from the performance of constant, regular professional activity. However, it has not been clarified when there is a regular performance of a professional activity for this purpose, which creates uncertainty.
Tax Authorities have not yet disclosed any kind of understanding regarding Corporate Income Tax (“CIT”). But, as the taxable profit of legal persons is based on the net profit recorded in the company’s financial statements for the period and any income earned by a company must be registered in its accounts, the income arising from transactions on bitcoins should be subject to CIT.
Regarding VAT treatment of the transactions on bitcoins, Tax Authorities considered, following the understanding of CJEU in the Hedqvist case (C-264/14), that bitcoins are comparable to fiduciary currency and their exchange for fiduciary currency, or vice versa, carried out for consideration, although characterized as a supply of services for VAT purposes, will be exempt from Portuguese VAT.

What's next?

At the income tax level, very few countries have considered cryptocurrencies as fiduciary currency because they have limited acceptance, lack intrinsic value (they are not linked to the value of any commodity or foreign currency), are volatile, are not issued by a public authority and are not regulated.
The current tax framework for cryptocurrencies leaves Portugal on the (increasingly short) list of countries that still do not tax income from this type of asset, which makes Portugal an attractive destination for investors of this kind.
But it is difficult to imagine that these gains will escape the tax net in the future. The 2022 State Budget to be presented in the next two months could be a turning point and new tax rules could be approved starting January 1, 2022.

Voir pdf

TAP, S.A, Portugália, S.A., and the fourteen labor unions that represent the airline concluded, between February 5 and 11, eight fundamental emergency agreements to the company’s restructuring .
The emergency agreements were signed under article 502, nº. 2, of the Portuguese Labor Code, that allows the suspension of collective agreements by agreement between employers and unions in the event of a serious business crisis.
The labor restructuring process is part of TAP’s Restructuring Plan, presented by the Portuguese Government in Brussels (DG Competition) as necessary to the approval of State subsidies given to the company. TAP, along with several airline companies worldwide, was deeply affected by the world economic crisis caused by the pandemic.
This process, absolutely remarkable for the year of 2021, was one of the most relevant labor processes in the history of the airline company and maybe even in the history of collective bargaining in Portugal.
As it is known, TAP Group's Restructuring Plan includes fleet restructuring, financial restructuring, and labor restructuring. The labor restructuring, with savings of 1.4 Billion euros, covers a wide range of measures, such as part-time work, unpaid leave, wage reductions, revocation of employment contracts, pre-retirement agreements and, ultimately, collective dismissals.
The emergency agreements, that will last until December 31, 2024, include the following measures:

1. Wage reductions across the entire company, through a 25% wage cut, including both the base salary and all wage supplements (seniority, overtime, night work, annuities, shift subsidies, etc.);
2. Freezing and suspending of all automatic progressions and promotions and any wage increases;
3. Suspension of several clauses of the company agreements and other regulations that were in force in the company, namely the Salary Regulation, Retirement and Social Guarantees and the Work Use and Performance Regulation, in order to guarantee savings and productivity gains for the company in the organization of time off, working hours and in the management of fleet personnel;
4. In the case of crew members and aircraft maintenance technicians, transversal and mandatory application of part-time work, with the following reduction in normal working hours: 15% (2021); 10% (2022); 5% (2023);
5. Suspension of the clause that guaranteed crew members a special allowance corresponding to 15 days per month, in addition to their basic pay, even if they flew less than 15 days. This guarantee will decrease to 6 days in 2021 and cease to apply as of January 1, 2022; flexibility of the airplane crew composition regulation was adjusted as well and, in some cases, will operate with the minimum crew defined by the aircraft manufacturer; for long-haul aircraft, working hours will be defined by European regulations;
6. Increased wage reduction for pilots on the top of the 25% of reduction applied to all workers. The reduction will be progressive: 50% (2021), 45% (2022), 40% (2023) e 35% (2024); annual exercise and seniority fees and the payment of the "fine", that included paying pilots a special remuneration for the months they flew less, were suspended; increased payment for hours on vacation and time off was also suspended; the number of times the company pays a social security supplement in the case of short-term illness was also reduced, being limited to a maximum of 6 events per year (6X3 days); and a mechanism of equitable distribution of working hours and no overtime work, most of the time, as included.

The Agreements also state that the parties should initiate, in the first trimester of 2021, the renegotiation of the company agreements that were suspended to adjust them to the company’s budget targets and environmental sustainability goals for 2025.
The emergency agreements negotiation was concluded in 15 days only, in several negotiating rounds in person and through video conference, that lead to the conclusion of eight agreements with fourteen labor unions, covering pilots, cabin crew and ground employees, including civil aviation and airport workers, aircraft maintenance, metallurgists, commercial aviation managers, economists, handling technicians.

Voir pdf

Law 75/2020 of november 27

A set of exceptional and temporary measures for the recovery of companies in difficult economic situation due to the COVID-19 pandemic has been introduced by Law 75/2020 of November 27.
The said Law:

1. Establishes an exceptional and temporary regime, extending the deadline to conclude negotiations to approve a recovery plan or a payment agreement, and also adapting the insolvency proposal;
2. Extends general privileges over movable property provided in the Insolvency and Corporate Recovery Code (CIRE) to partners, shareholders or any other specially related persons who finance the company's activity during the Special Revitalization Procedure (‘PER’);
3. Provides for the application of the Extrajudicial Regime for the Recovery of Companies (‘RERE’) to companies that are currently in a situation of insolvency caused by the pandemic; and
4. Creates the Extraordinary Viability Process for Companies (‘PEVE’) affected by the economic crisis resulting from the pandemic.

Extraordinary viability process for companies 

PEVE is a process that seeks the judicial homologation of an extrajudicial agreement to ensure the viability of a company, established (out of court) between the company and its creditors.
PEVE is applicable:

1. To companies in a difficult economic situation or in imminent or current insolvency, provided that: (i) they are still viable, (ii) their assets exceed their liabilities as of December 31, 2019 and (iii) they are not under PER or insolvency proceedings;
2. To micro or small enterprises that: (i) are not in a pending PER or insolvency proceeding, (ii) have received rescue aid that has not yet been repaid, or are in a restructuring plan under the State aid measures (even if on December 31, 2019 their assets were not in greater number than their liabilities).
3. To companies that have managed to regularize their insolvency situation through RERE and filed the restructuring agreement in due time, while not having more assets than liabilities on December 31, 2019.

Differences between PER and PEVE 

In comparison with PER (directed to the judicial homologation of a recovery agreement between a company and its creditors), the distinctive notes of PEVE are essentially two:

1. Its application to situations of current insolvency of companies (contrary to PER, which is reserved to companies in a pre-insolvency situation);
2. Its application only to companies in difficult economic situation or imminent or current insolvency caused by the COVID-19 pandemic.

In what concerns the procedure, PEVE has many similarities with PER, with some differences justified by its own purpose - to avoid mass insolvencies caused by the COVID-19 pandemic - and by its exceptional and temporary nature.
PEVE is an urgent proceeding, with priority over other pre-insolvency and insolvency urgent proceedings, including PER and insolvency proceedings.
The proceedings begin with the filing of an application in court to declare the company’s insolvency. The application must be accompanied by the viability agreement (signed by the company and by creditors representing at least the majorities of votes provided for in Article 17-F, paragraph 5 of ‘CIRE’) and by a set of documents that are intended to prove the company's economic situation, including the list of the company's creditors and a declaration by the management body attesting that its situation was caused by the crisis brought by the COVID -19 pandemic and that it meets the necessary conditions for viability.
After filing of the application, the company can request the joinder of other PEVE's filed by companies in a parent-subsidiary or group relationship, as long as their proceedings are also at the preliminary stage. This possibility is not contemplated in PER’s regime.

EFFECTS

Once the application is received, the judge issues an order appointing the provisional judicial administrator. This order has the following effects as well:

1. It prevents the filing of judicial actions for debt collection and suspends pending actions with the same purpose. All these actions are extinguished if the viability agreement is homologated by the court;
2. The company is no longer allowed to perform acts of special relevance without prior authorization of the judicial administrator;
3. Suspends pending insolvency procedures, which are extinguished with the judicial homologation of the viability agreement;
4. Suspends all prescription and limitation periods until the judicial homologation or refusal of the viability agreement;
5. Prevents the suspension of essential public services, such as water, electricity, natural gas, or electronic communications supply.

Relevant proceedings 

PEVE includes a phase to challenge creditors and request the rejection of the viability agreement (within 15 days), on the basis of undue inclusion or exclusion of claims, incorrectness of their amounts or incorrect legal qualification of the recognized claims.
Upon receipt of the oppositions, the judge decides within 10 days: (i) on the objections made; (ii) on the rejection or homologation of the agreement, considering the creditors’ statements and the (non-binding) opinion of the provisional administrator.
The agreement must be homologated by the judge only if, cumulatively: (i) it complies with the majorities provided for in CIRE; (ii) presents reasonable prospects of ensuring the viability of the company; (iii) there are no other circumstances that justify a rejection.
The homologation decision is binding for the company, subscribing creditors and creditors included in the definitive list of creditors, even if the latter did not take part in the negotiations, regarding the credits constituted prior to the appointment of the provisional administrator.
Any creditor not included in the definitive list of creditors has 30 days to accede to the homologated agreement. The company is notified and has five days to accept or reject the inclusion of the creditor, the silence corresponding to non-acceptance.
If the court rejects the agreement, PEVE and all its effects are extinguished. This means that all actions against the company may be resumed, including actions that were suspended with the order appointing the provisional administrator. Contrary to what happens in PER, the rejection of the agreement cannot, in any situation, be equivalent to insolvency proceedings application by the company.
Differently from PER, the rejection of the agreement is not subject to appeal.

Incentives to invest in the recovery of companies

Some of PEVE's incentives to invest in the company's recovery are particularly interesting:

1. Transactions provided for in the agreement to raise the company’s credit availability are not subject to resolution in favor of the insolvent estate, in case the company is declared insolvent after PEVE; and
2. Creditors, partners, shareholders or any other persons especially related to the debtor who, in the extraordinary viability process, finance the company's activity shall enjoy a general privilege over movable property, ranked before the general privilege over movable property granted to employees.

Entry into force and duration

Law No. 75/2020 of November 27, 2020 entered into force on November 28, 2020 and will remain in force until December 31, 2021.
Considering the temporary nature of the aforementioned measures, an increase in pre-insolvency and insolvency situations in the Portuguese business sector is expected at the end of 2021 and at the beginning of 2022. When this time approaches, it may be particularly important to extend the duration of PEVE regime.

Voir pdf

Overview

Portugal and Spain are strongly committed to the decarbonization goals set by the Paris Agreement. After a significative downtime, mainly due to the 2008-2012 economic crisis, there have been significant changes in recent years with strategy refocusing on the development of solar energy comes along, as both countries have two of the highest solar irradiation levels in Europe.
This is a market with high growth potential where, until the end of 2030, Portugal intends on reaching 9 GW of solar photovoltaic ("PV") installed capacity, and Spain has set the objective of reaching 37 GW, against a current installed capacity of, respectively, 1,030 MW and 11,547 MW.
In this article, we have looked into how both countries are addressing the challenges arising of how to combine limited the low availability of network capacity with a high demand from market players. Both countries have launched public tenders for PV capacity and to these challenges have added a political priority of reducing tariffs to final costumers.

The Iberian auction experiences 

The Portuguese National Plan for Energy and Climate 2030 (“PNEC 2030”) established a set of ambitious goals for renewable energy to be met until 2030. According to this plan, renewable energies should represent 47% of national electricity consumption in 2030, with an increase in installed capacity up to 28.8 GW. Particularly in solar, there has been a significant reduction of costs associated with PV technology since 2017 which, alongside with the high level of predictability of solar resources, has led to an increase of the number of requests for energy production licenses in Portugal. Such demand proved to be higher than the installed capacity of the Public Grid (“RESP”).
To deal with a reduced grid capacity, in 2019 the Portuguese Government changed the legal framework of the electricity sector reviewing the whole procedure for allocating power generation licenses. The licensing process was reversed, requiring the promoter to request the granting of a grid capacity title (“RESP Title”) before applying for a power plant production license. Under the 2019 regulatory framework, the RESP Title can be obtained: (i) by request directly to the Portuguese Energy Directorate (“DGEG”) if there is any available network capacity; (ii) by entering into a capacity agreement with the grid operator if there is no available network capacity, where the promoter bears the costs of the grid capacity extension; or (iii) by award in an auction organized by DGEG, where the title is granted after a tendering procedure for the allocation of reserve capacity.
The first Portuguese auction under this new regime, in August 2019, awarded 1150 MW, distributed by 22 projects. Bids were submitted by two different pricing schemes: the guaranteed remuneration tariff where the average result has been of €22,22 p/MWh; and the market scheme, with an average tariff offered of €18.36 p/MWh. This auction was a huge success, with demand outstripping nine times the supply and the lowest ever solar power electricity price bid of €14.8 p/MW. A total of 64 companies participated, including major players in the energy sector, such as EDPR, Galp, Iberdrola, Voltalia, EDF and Finerge. By country, Spain was the big winner country of the auction with the largest lot awarded to JB Capital Markets, with 110 MW. Iberdrola won five lots, corresponding to 149 MW, and Solaria won four lots, with 49 MW.
A subsequent auction of 700 MW held in August 2020 awarded 670 MW composed of 12 lots in Alentejo and Algarve, with an average bid of €0.020/kWh. A total of 35 bidders participated, with demand once again largely outstripping the offer. The big winner was the South Korea's company Hanwha Q-Cells, awarded with 315 MW, while Tag Energy obtained 20 MW. Iberdrola and Endesa gained 69 MW and 99 MW respectively. This second auction was perceived by the Portuguese Government as an even greater success than the one of 2019, with a gain of about 833 thousand Euros for each MW awarded, an increase of about 80% compared with 2019. The Portuguese Government came into this auction expecting to obtain 33.5 thousand euros per MWh, but the winners ended up paying to 37.1 thousand euros per MWh to the system. Also, the World record for the lowest output price was broken once again with a bid of €0.0112/kWh.
In Spain, the development of solar energy started earlier. At the beginning of the new millennium, the country started stimulating the solar energy market with attractive remuneration schemes and subsidies which led to its early development. In 2008, Spain had 2,718 MW of installed solar capacity but the outbreak of the financial crisis, an unexpected increase of PV installations, and the Spanish Government move to contain costs by reducing the sector’s subsidies lead to a severe market contraction. In 2009, requests for injection were in the reduced number of 44 MW.
The turning point came with the Paris Agreement and with Spain’s national action plans to meet new decarbonizations goals. Economic conditions allowed the decline of the PV technology implementation costs, boosting investment in this segment of the energy market, and, as in Portugal, resulting in an increase of requests for energy production licenses exceeding the available grid reception capacity.
Spain launched its first 700 MW renewable energy auction in January 2016 exclusively for wind and biomass technology. In May 2017, a new bigger auction was held: 3,000 MW were awarded. In both Forestalia took the biggest share, with in excess of 1,500 MW of wind and biomass capacity in Aragón.
In the second auction of 2017 (which also comprised solar), 5,037 MW were granted to 40 different companies. The largest share was granted to the Spanish industrial group ACS with 1.55 GW of assigned projects, followed by X-Elio (455 MW), Endesa (338 MW), Forestalia (316 MW), Gas Natural Fenosa (250 MW) and Solaria Energía (250 MW).
In 2020, Spain announced ambitious targets for the development of renewable energy under its proposed Integrated National Energy and Climate Plan (“PNIEC”) 2021-2030, which comprises the installation of around 5,000 MW of new renewable energy capacity per year over the next decade. To achieve these goals and increase competitiveness process, a new remuneration scheme for renewable energy facilities was established through the New Economic Regime for Renewable Energy (“REER”) setting up a long-term guaranteed remuneration price for awarded bidders in an auction.
On January 26, 2021, Spain held the first auction of installed power capacity under the REER, where 84 companies offered bids, and represented a total of 9,700 MW of capacity. There were 32 winning bids, representing a total of 3,034MW of energy capacity awarded: 2,036 MW of solar PV and 998 MW of wind energy. The average price for solar was set at 0.02447/kWh and the lowest bid at €0.01498. The most successful bidder has been X-Elio Energy with 315 MW of PV capacity, followed by Iberdrola subsidiary Iberenova Promociones (243 MW) and Spanish utility Naturgy (196 MW).

Different approaches to auctions

In its auction procedures, Portugal had more restrictive approach than Spain, as only new PV installations were allowed to participate, while in Spain new facilities and enlargements or modifications of existing facilities were eligible.
The application process in Portugal is very simple. Promoters sign up their application through an online platform and provided basic information regarding their company and their bidding capacity intentions. In Spain, it there is more bureaucracy. First, promoters have to be pre-qualified, by submitting a high detailed set of documentation regarding their commercial information electronically. After being pre-qualified, bidders are entitled to participate in the auction for a certain power previous declared. In both countries, promoters must provide a bid bond: 10,000€ p/MW in Portugal and 60,000€ p/MW in Spain.
In the Portuguese bidding stage, promoters submit several bids through an online platform, applying for one of the following remuneration schemes already mentioned above: (i) market scheme without storage where promoters bid for a contribution to be paid to the National Electrical System (“NES”); (ii) a fixed guaranteed tariff structure for a 15-year period, where the bids expressed a discount to the reference feed; and (iii) a market scheme for plants incorporating a storage system, where the bids expressed a discount to an annual fee. The storage mechanism was a new feature compared to the auction held in 2019. This modality has two advantages: since renewable energy production is intermittent, it is essential to increase this storage capacity in order to obtain energy autonomously. On the other hand, concerning price fluctuations, storage ensures that the price of electricity injected into the grid never exceeds a particular value.
In Spain, the capacity is awarded through a competitive sealed-bid auction whereby the awarded bid corresponds to an awarded price. As such, Producers are bound to sell all their energy at their bidding price, with small adjustments concerning wholesale market pricing. In the last auction, promoters were granted a 12-year offtake agreement that could vary in future auctions between 10 and 15 years. The specific remuneration under the ERRE is obtained from its auction price, the remuneration parameters of the technology, the characteristics of each facility and its participation in the energy market. For the 2021 auction, the remuneration parameters included: a minimum number of annual operating hours; a maximum number of annual operating hours; and market adjustment percentages. This auction offered the possibility for bidders to include energy storage in their offers. Although, no winning bids featured such technology. This can be justified by the fact that the storage market in Spain is currently underdeveloped, limited to pilot projects or research facilities and by the fact that the profitability of this model depends exclusively on market prices.
The Portuguese bidding phase is much more competitive than the Spanish one since promoters are entitled to make several bids competing directly and simultaneously with other promoters, and thus, it is no surprise that output price has been breaking records. The Spanish bidding phase is less competitive among the promoters since promoters are only allowed to make one offer (by closed letter), and without knowing the bid offers of the other promoters. On one hand, prices in Spain may not be as low as in Portugal, but on the other hand, winning an auction in Spain is much more uncertain than in Portugal since promoters have a much lesser active role.
In both countries, operators with an awarded bid must provide a performance bond of 60,000€ p/MW and are subject to a strict schedule and the compliance of certain millstones, starting with obtaining the necessary construction licenses and permits. Failure to comply with these obligations would result in the loss of the bond provided after the awarding. The Spanish auction granted, on average, longer deadlines for the compliance of these obligations.
Summarizing the differences between the two countries in relation to solar auctions:

1. The Spanish auction system allows existing installations to participate, while the Portuguese system only new ones.
2. The Portuguese auctions contain various types of remuneration, which allow investors to tailor proposals according to the preferable business model, whereas the Spanish system only permits a fixed guaranteed tariff structure. Also, the Portuguese fixed remuneration scheme offers a 15-year period and the Spanish 12-year period only.
3. The energy storage appears to be more attractive in Portugal than in Spain since the storage bids are granted a capacity payment in exchange for hedging the Portuguese electricity system against high market prices. This capacity payment has been a real advantage for storage bids since the storage system itself was almost free of constraints to operate on the different markets.
4. The Portuguese bidding phase is more competitive than the Spanish closed offer system, since it allows promoters to make several bids competing directly and simultaneously with other promoters. Even though bid prices in Spain are higher than in Portugal, Portuguese Promoters have a more active role and influence the auction prices.

What next?

To achieve decarbonization goals, promotion of renewable energies is paramount. Given the privileged geography and the investment in solar energy of these two countries, we can only expect that new solar auctions follow this year and in the upcoming years taking into account that the auction system ensures for a number of advantages, namely: (i) limitation of investor’s risk (ii) economic efficiency of the winning projects, and (iii) achievement of energy policy goals.
In Portugal, the Government intends to continue to hold solar auctions in the coming years, but there are still no dates for the new solar tenders in 2021. Even so, according to the goals outlined in the PNEC, the country aims to achieve a solar installed capacity of 6,6 GW in 2025, and 9 GW in 2030. In a scenario of strong demand for production licenses and shortage of reception capacity in the grid, auctions will be the main way to meet this demand and to speed investment in new capacity.
The next Portuguese solar auction this year will include floating power plants on reservoirs to circumvent availability of land limitations as well as to reduce costs related to land rights’ acquisition.
In parallel, the Portuguese Government has already announced that it will move forward with the first green hydrogen auctions in 2021, which will not be targeted to producers, but to potential and future consumers of green hydrogen. The outline presentation of the green hydrogen auctions will be made public in the first week of April. Auctions for offshore wind energy in Portugal are also expected to be launched in the near future.
As for Spain, the auction schedule appears to be substantially more solid, with the Spanish government committing to launching one auction per year in the next four years: 4,600 MW in 2022; 6,400 MW in 2023; 8,200 MW in 2024; and 10,000 MW in 2025.

Voir pdf

Earlier in February, the Spanish Government approved an entirely new Energy Storage Strategy (Estrategia de Almacenamiento Energético), which is seen as key to the security of supply, the decrease of energy prices and the transition to an emission-neutral economy. The Strategy sets ten lines of action and 66 measures including storage in the energy system, circular economy, energy communities and ways for citizens to participate, green hydrogen promotion, creation of new business models with the intent of recycling and getting a second life out of batteries, plus policies to remove administrative barriers to facilitate new projects.
Currently, the storage available in Spain comes largely from pumped hydrogen and concentrated solar power (CSP) plants, that the Spanish Government intends to replace with large-scale batteries (at least 400 MW by 2030). The Strategy includes making the most of using the energy available from electric vehicles (26 GWh per year by 2030), additional storage capacity behind the meter as well as utility-scale storage provided by CSP plants. The Strategy predicts the storage capacity will increase from the current 8.3GW level to 20GW by 2030 and to 30GW by 2050 (including both utility-scale and distributed storage). These storage levels were set considering the decarbonization objectives established in the Spanish national energy and climate plan 2021-2030 (Plan Nacional Integrado de Energía y Clima or ’PNIEC’), which sets the share of renewable energy in energy consumption at 42% by the end of the decade. The Strategy follows the obligations taken on under the Paris Agreement as well, and pursues the  design modernizing goals of electricity markets, that the European Commission has been developing under the Clean Energy Package for all Europeans (CEP).
But how ambitious is this Strategy and how advanced is Spain in implementing an energy storage policy when compared to Portugal and other EU countries?
The Portuguese National Energy and Climate Plan 2030 (Plano Nacional de Energia e Clima or ‘PNEC’) envisages an increase in storage capacity, first through hydro pumps and, towards 2030, with the contribution of hydrogen and batteries. Presently, the most developed and promising electric energy storage technology is the use of reversible pumping in hydroelectric plants, with efficiency ratios around 70-80%. However, in the Portuguese 2020 solar auction, 8 of the 12 lots awarded, have already included storage, representing 483 MW, almost 75% of the granted capacity (670 MW).
But, like Portugal, Spain has not yet introduced specific connection rules and tariffs to storage projects. France has recently included a proper definition of energy storage in its regulatory framework to address the issue of connection rules for storage in the near future and a specific target has been defined for the development of pumped hydrogen storage: the expansion of 1 to 2 GW in 2025-2030.
Currently, the European market for Batteries and Energy Storage Systems (BESS) is led by Germany, where energy storage facilities have been near renewable energy-based power plants, as this combination leads to an advantage concerning market premium for the installations plus improved profitability.

Voir pdf

The discussion about taxation over VOD platforms, including so well-known Netflix, HBO and Disney + first started when Portugal transposed the new European Audiovisual Media Services Directive (“Directive”) into National Law by enacting Law no. 74/2020 (“Law 74/2020”). These platforms became subject to an obligation of either acquiring independent European productions’ rights, originally in Portuguese, remastering or single-handedly producing locally.

Other notorious platforms, such as YouTube and Facebook, as video-sharing providers, are now subject to an ad fee of 4%, the same fee movie theaters’ advertising and commercials broadcasted on TV were already subject to.

But the hot topic is VOD platforms being levied on 1% of their relevant income in the previous year, i.e. those arising from audiovisual commercial communications, or subscriptions for conditional access television operators, as well as other types of income.

Law 74/2020 does not define its own concept of “relevant income” and how it will be assessed, collected or paid. There are certain situations, however, that are specifically not included in the definition.

This made it is impossible to determine the relevant income of those who (i) do not have to report it in Portugal, but in other Member States – the elements made available in those countries do not discriminate the income by geographical origin, which does not allow the part of the income obtained in Portugal to be determined; or in cases of (ii) non-disclosure of the legal documents required to enable the correct assessment of ‘relevant income’.

In this short article, we will analyze the challenges resulting from the non-determination of this concept and the effectiveness of charging streaming services this way.

First, is this charge legal?

It should be noted that levies or charges (taxas) are based on the provision of a public service, use of a public space or removal of a legal obstacle to the individuals, which appears not to be the case.

This makes us question if this charge is, in fact, a real tax rather than a levy, since it is based, essentially, on the ability of VOD platforms to pay, through their net worth.

The creation of taxes obeys certain legal principles that appear to not have been respected when this charge was established. One of these principles is the principle of legality that determines that taxes can only be created by law, which must determine who and what is taxed, the rate, and tax benefits for taxpayers. 

Since this charge does not establish specific terms for the settlement and collection of the charge, nor does it specify what “relevant income” means, it is probably going to be challenged by VOD operators.

The Directive itself does not seem to provide a definition of the object of the assessment, simply mentioning that Member States can require media service providers under their jurisdiction to contribute financially to the production of European works, by direct investment in its content and through contributions to national funds.

The vagueness of this concept in Law 74/2020 may cause many uncertainties at the time of determining the tax that is meant to be collected. For example, if the obligation is determined and based on number of subscribers, how will that number be assessed if the operator has had subscriptions interrupted during the year? A more detailed definition of the concept of "relevant income" would help avoid uncertainty in this type of situation.

VOD operators would be penalized and subject to the payment of a charge for an income that has not been obtained by them.

France and Spain, which are planning to introduce an identical charge, intend to calculate it through the turnover of streaming companies and not on the "relevant income".

This way, if the same criterion was applied in Portugal, VOD operators would have a much more realistic estimation of how much they would pay, and they would be effectively taxed for the full value of the services actually provided and not by mere assumptions.

And is this charge a reasonable solution?

We wonder if levying streaming services is the most effective way to promote Portuguese cinema as it is. Since the cinema industry is not highly demanded in the country, maybe it is not wise to increase supply exponentially without there being any demand, instead of promoting consumption first. This considering, of course, the fact that this fee penalizes VOD platforms.

It is understandable to consider whether taxing popular streaming services will significantly reduce the operators’ investment capacity, jeopardize competition within the sector in Portugal and ultimately affect the provision of these kinds of services.

Both from a Competition, Media, or Tax perspective, financially targeting streaming services providers that currently have over two million subscribers in Portugal and which could pose a unique opportunity for an organic development of the media industry within Portuguese territory, is a risky play, especially if we consider that Europe’s main economies had already overloaded digital services with taxes in those jurisdictions. For all that matters, taxing streaming services in hopes of developing local cinema is an opening move for the Portuguese digital services taxation as bold as a Queen’s Gambit in chess.

Voir pdf

A tax wind from Spain

It all started in 2013 when Spain published Ley 15/2012, of 27 December (later amended by Law 9/2013, of 13 July), with a special tax of 7% charged to electricity producers, and the Portuguese Decree-Law no. 74/2013, of June 4 (the “Clawback Law”)) created a mechanism to correct imbalances between electricity producers, caused by distortions resulting from external events or measures taking place in other Member States of the European Union.

The Spanish energy tax has been controversial. The Spanish Supreme Court argued the illegality of this mechanism considering that this tax would not be exclusively an environmental tax, since it would tax all energy producers indiscriminately. Also, it created a possible double taxation issue with the Tax on Economic Activities that energy production was already subject to. Nevertheless, the Spanish Constitutional Court rejected this understanding and decided for the adequacy of the energy tax to the Spanish Constitution.

In 2018, the Spanish authorities decided to suspend the energy tax for six months with the purpose of reducing the electricity prices for costumers. This decision was temporary, and the energy tax was re-enacted in 2019. Again, Spanish electricity companies increased their wholesale prices. This influenced the market price at OMIE (the MIBEL daily market) and allegedly benefited the Portuguese producers integrated in the same market and were not paying the Spanish tax, thus receiving windfall profits.

Lead to a long list of regulations in Portugal

In Portugal, the Government imposed a charge on energy production (the “Clawback Charge”) of EUR 6.5/MWh, through Order no.11566-A/2015, of 3 October, that Order no. 9955/2017, would decrease to EUR 4.75/MWh. This was done under the cover of the Clawback Law, with the above argument that Portuguese producers were receiving windfall profits. Subsequently, the Portuguese Energy Secretary of State suspended the Clawback Charge in the period corresponding to the suspension of the energy tax in Spain, from 1 October 2018 until 31 March 2019.

Decree-Law no. 104/2019, of 9 August, amended the Clawback Law to allow a pre-payment to temporarily mitigate the time lag between the verification of the external event (in this case, the verification that the Spanish energy tax remains in place) and the respective compensation (i.e. the Portuguese Clawback Charge). It also allowed to adjust the external event to the electricity production technology on which it is focused, to avoid distortions of undifferentiated application to different energy production sources. Important to note that new Article 1.º-A of the Clawback Law expressly established that the clawback charges apply to electricity producers.

ERSE, the Portuguese Energy market regulator, was requested by Decree no. 282/2019, of 30 July, to submit, on a yearly basis, a report on the impact on the formation of the average price of electricity in the Portuguese wholesale market for measures and events recorded in the European Union. ERSE published its first report in September 2019, where it considered that the re-enactment of the Spanish energy tax was an event that could cause a market imbalance requiring compensation through the clawback mechanism.

As a consequence, the Clawback Charge on Portuguese producers in respect of the energy output was set at the value at EUR 6.27/MWh for 2018 and at EUR 4.18/MWh for 2019, by Order no. 8521/2019, of 26 September.

The pre-payment for 2020 was adjusted to EUR 2.24/MWh by Order no. 6740/2020 of June 30 to internalize local events that affected the Electric National System (“SEN”) such as the taxation of petroleum products and energy; the extraordinary contribution on the energy sector and; the social tariff for electricity.

Followed by more than simples rulings and clarifications

All this complex regulatory output raised many doubts among producers, first on how the clawback mechanisms would work, as the initial version of the Clawback Law was missing the tools to calculate the amount that would charge to producers. Subsequently, on to whom would the clawback charge apply to.

The Portuguese Energy Secretary of State issued on December 16, 2019 a ruling (the “Ruling”) stating, firstly, that the triggering of the Clawback Law mechanism is limited to external events to the SEN with effects on the formation of wholesale prices in OMIE; in second place that all electricity producers selling electricity at a price by reference to OMIE, regardless of the primary source used by the respective power plants, would be covered by this regime.

On the other hand, electric producers that operate power plants with remuneration not depending directly on the MIBEL daily market are not covered by this mechanism, even if they participate in OMIE, provided that the income obtained by the respective power plants is predetermined in the respective off-taking contracts, and does not change according to the evolution of prices in the MIBEL daily market.

The same understanding should apply to power purchase agreements between electricity producers that do not benefit from any fixed remuneration mechanism and final customers/suppliers, for the physical delivery of electricity at a specific point, at a specific price, since it will not generate any windfall profit.

But if they generate any windfall profit, even though Article 1.º-A of the Clawback Law only established that this charge is to be applied to electricity producers, the Ruling extend the Clawback to electricity suppliers as well.

In an additional clarification, dated of July 27, 2020 (the Clarification”), the Portuguese Energy Secretary of State determined that in the case where the supplier acquires electricity from a producer under a fixed price PPA to sell it at OMIE, receiving the respective marginal price as return, there will be an increase in gain with the nature of a windfall profit in the sphere of the supplier, which must be subject to the Clawback Law mechanism. In these cases, the supplier should pay the Clawback Charge amount to the producer, being the latter responsible for delivering it to the REN (which, as the transport network operator, has been chosen as responsible for the collection of the Clawback Charge).

That disrupted the energy market and the trust in regulators

When it created the Clawback Charge using the Clawback Law for that purpose, the Portuguese Government (and ERSE) assumed that a variation in the Spanish taxation of energy creates an extra-market advantage in Portugal that has to be counter balanced through the Clawback Law mechanism.

This assumption is arguable, to say the least. The Clawback Law intent was to protect the electricity market by the correction distortions not originated by the market itself. But, by their nature, we cannot include in such distortions those caused by any voluntary action of the Iberian Governments, particularly if those actions take the form of a tax. The differences between the Portuguese and Spanish taxes are not eligible to be balanced by the simple clawback mechanism created by the Clawback Law: the lower VAT rates applicable in Spain, are a good example, as they have not yet caused and should not cause the Portuguese Government to provide any incentive to Portuguese energy producers to counterbalance the higher Portuguese VAT rate.

Any charge imposed upon Portuguese energy producers or suppliers to balance a new tax on energy in Spain is in substance a new tax in Portugal, a charge generally imposed by the Portuguese State on a specific type of transactions: in our case, the sale of energy when it is sold at OMIE or at an OMIE related price. In Spain there were never doubts about the tax nature of the substantially identical contribution (even if with a broader scope) that energy producers have been called to pay pursuant to the Spanish energy tax law.

Article 165.º et seq. of the Portuguese Constitution establish that all new taxes, any changes to the scope of a tax or to the tax subjects and tax rates require the enactment of a formal law from the Portuguese Parliament. Consequently, any charge created under the cover of the Clawback Law (which, by the way, is a Decree-law enacted by the Portuguese Government within its legislative powers, and not by the Parliament) that materially corresponds to a new tax, as it happens with the Clawback Charge, violates the Portuguese Constitution.

To make it worse, the Ruling and the Clarification modified the Clawback Charge and extended it to electric energy suppliers, overriding article 1.º-A of the Clawback Law, which clearly states that only the producers are subject to the clawback mechanism, with no reference to suppliers. The Ruling and the Clarification were enacted within the executive powers of the Portuguese Energy Secretary of State, adding a second layer of Constitution issues and legal problems: the Portuguese Energy Secretary of State does not have the legal power to rule on the scope and on the taxable subject of the Clawback Charge, this power belongs to the Portuguese Parliament; nor has he the power to amend a decree-law issued by the Government.

This long succession of events, that we tried to summarise in this article, lead our country to a situation where the Portuguese electricity market competitiveness is being penalised by a random tax which, one day applies only to producers and to a certain kind of transactions but the next day can apply to different transaction types and to other market agents, with variable and unforeseeable tax rates, all by decision of one member of the Government. The Clawback Charge not only undermines the creation of a market for financial PPAs in Portugal, depriving all market agents from its benefits; but it adds, at a time Portugal is putting an enormous effort to foster the national solar photovoltaic production, a high degree of concern, particularly amongst the renewables’ market players who do not know anymore what to expect from the Portuguese decision makers on the taxation of energy.

More importantly, the Clawback Charge has been put in place in a manner which, in our view, disregarded the boundaries for the protection of all taxpayers set up in the Portuguese Constitution. This, of course, creates another kind of concern being felt throughout the World these days, even in places where we still take the principle of separation of powers for granted.

Voir pdf

Published on ECO News.

Portugal is committed to promoting the transition to the digital economy.

More than having a Ministry specifically dedicated to this topic, the Ministry of Economy and Digital Transition, Portugal recently approved the Action Plan for the Digital Transition, through the Resolution of the Council of Ministers No. 30/2020, 21st of April.

Moreover, we have an amazing broadband network, which covers the entire national territory, excellent road structures, security, and a national and universal health system that – at least so far – has been able to respond to the pandemic of Covid-19 disease. But we have more. We have a huge Atlantic coast, villages and cities in rural areas willing to receive new residents, and a World Surf Reserve (Ericeira village) that is a factor of attraction for thousands of digital nomads.

Digital nomads are mainly young (and less young) literate and with financial autonomy, who work under telework and who do so from different parts of the Globe, alternating the countries where they temporarily set themselves. This is an increasingly marked trend that has been encouraged and supported by several global companies, especially technology corporations. Unlike traditional tourism, digital nomads are based in certain countries for prolonged periods, adapting to local culture. They bring knowledge, intelligence, a new way of being, and – of course – they enhance internal consumption. They rent houses, encourage local commerce, occupy co-working spaces, and have the financial capacity to do so. They are working and have financial independence; being paid by the international companies they work for.

Ericeira is an example – at the moment, hundreds of nomads from various parts of the globe, who by force of the pandemic began to work remotely, are living and working from this surf village for different companies and countries, taking advantage of the climate, the ocean, surfing and local products. But they do so informally, without any governmental framework. I do not even know if the Portuguese Government is aware of this movement.

There are several countries that are aware of this trend and are working with professionalism to attract digital nomads.

In a recent Washington Post report, we may find that some countries have created special rules to attract digital nomads from the United States during the pandemic period.

Antigua and Barbuda, for example, launched the “Nomad Digital Residence Program“, which grants visas for up to 2 years to nomads with an income of a minimum of $50,000 USD per year. The cost of issuing this special visa amounts to $1,500 USD per person, $2,000 USD per couple and $3,000USD per family of three or more. Based on this visa, nomads can enter and leave the country as many times as they wish, on condition that they remain resident in this country and present negative tests of Covid-19 disease.

In the same vein, the small island Aruba launched in September the “One Happy Workation“, which creates a “remote work visa”. The visa lasts for 90 days and nomads must guarantee, during this period, accommodation in residences or hotels. The Government promotes packages of accommodation in condominiums or residences, equipped with Wi-Fi, common areas and associated tourist and sports programs (diving, sailing, yogga, etc).

In Europe, the first visa for digital nomads was approved in Estonia. At the height of the pandemic, Estonia launched the new Digital Nomad Visa. Under this new visa, the Government assigns residence permits up to 1 year, requiring nomads to have a monthly minimum wage of €3,000. The new visa was created in June and, according to the Estonian Government, the country has since then received thousands of visa applications from the United States, Canada, Russia, and Asia.

Also in Europe, Georgia launched in July a special program (“Remotely from Georgia“) to attract digital nomads from 95 countries, for periods equal to or greater than 180 days. To this end, they are required to have minimum monthly incomes of €2,000.

Portugal, for the time being, has done nothing in this sense, at least in a structured and integrated way.

But the country should do it.

If we see the digital transition as one of the essential tools of the country’s development strategy and if we want to be a benchmark in this topic, we must retain all those who have come to our country in recent years to attend the Web Summit.

The pandemic is an enemy of tourism and short-term travel, but it can enhance the fixation of all those who started working remotely on a global scale.

Since the focus on domestic consumption is a measure to combat the upcoming economic crisis, why not try (also) this measure?