Iberdrola will launch a authorized problem in opposition to a “discriminatory” windfall tax imposed by Madrid on Spain’s largest power corporations, following within the footsteps of banks which are combating an identical levy within the courts.

Ignacio Galán, Iberdrola chair, mentioned its “authorized division is already taking motion to defend the pursuits of shareholders” as the corporate prepares to enchantment in opposition to the tax this week at Spain’s Nationwide Excessive Courtroom.

The Spanish group’s problem raises the stakes in a battle between among the nation’s largest corporations and the Socialist-led authorities, which proposed the windfall taxes final 12 months because it seeks funds to mitigate the affect of excessive power prices and inflation on residents.

Spanish lenders together with Santander and BBVA have determined to problem the authorities over the momentary taxes after paying their first instalment, which was due by February 20.

The power windfall tax can be levied on corporations that had revenues of greater than €1bn in 2019, together with electrical energy utilities and oil and fuel teams.

Iberdrola, Europe’s largest utility, has already paid a €100mn windfall tax invoice for 2023, half of the anticipated whole for this 12 months.

Galán questioned the design of the tax for power utilities as a result of it’s a 1.2 per cent levy on their revenues that’s charged no matter income.

“The federal government are saying they’re going to cost based mostly on the windfall revenue. I believe we have now windfall losses,” he mentioned. “We’ve 19 per cent much less revenue than the earlier 12 months [in Spain].”

Gerardo Codes, Iberdrola’s director of authorized providers, mentioned the tax was “arbitrary and discriminatory”, including: “We take into account that [it] is in breach of the Spanish structure and European legislation.” He mentioned the courtroom was not prone to subject a judgment till subsequent 12 months.

Aelec, an power commerce group whose three members are Iberdrola, Endesa and EDP, launched its personal enchantment in opposition to the windfall tax on the Nationwide Excessive Courtroom final week.

The federal government of prime minister Pedro Sánchez argues that massive utilities and banks are making “extraordinary” income and have a duty to assist alleviate the price of dwelling disaster.

María Jesús Montero, Spain’s finance minister, mentioned final week that the federal government was selling “fiscal justice” in order that these with the best earnings “make an effort to assist the bulk in society”.

The federal government has signalled its confidence that the windfall taxes will stand up to authorized challenges.

It’s aiming to boost €4bn in 2023 and 2024 from utilities, which have benefited from a hovering fuel worth that has additionally lifted renewable energy revenues for teams equivalent to Iberdrola due to the way in which market pricing works.

Madrid additionally desires to boost a complete of €3bn from banks, which should pay a 4.8 per cent tax on their earnings from curiosity and commissions. Lenders are benefiting vastly from rising rates of interest, the federal government says, citing their newest bumper quarterly earnings as proof.

Iberdrola generated revenues of €54bn in 2022, up from €39bn within the earlier 12 months, with greater than €16bn made within the ultimate quarter. Sturdy development within the US and Brazil helped the corporate offset weak spot in Europe linked to the area’s power disaster.

Galán informed the Monetary Instances in November that clear power incentives within the US made it a “very a lot” extra interesting place to speculate than the EU. On Wednesday he was extra complimentary in regards to the EU, saying its efforts to create a European model of the US Inflation Discount Act have been “shifting in the proper route”.