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Iberdrola CEO: High tax hurting European energy sector

By CNN Wire staff
updated 2:26 PM EST, Thu February 14, 2013
  • Based in Bilbao, Iberdrola is also the world's largest producer of wind energy
  • Iberdrola reported a 36% fall in net profits in Spain for 2012 despite heavy investment
  • Spain -- where Iberdrola is headquartered -- is the eurozone's fourth-largest economy

(CNN) -- High tax is hurting European competitiveness in the energy sector, according to Iberdrola chief executive Ignacio Galan.

Galan, boss of Spain's largest energy company, said European governments are over-taxing the industry because they believe utility businesses are "too rich."

Galan added the industry: "Is not as competitive as the American one... we are paying approximately 50% taxes when the American system is 10%."

Spain -- where Iberdrola is headquartered -- is the eurozone's fourth-largest economy with unemployment at 26.1%, second only to Greece in the single currency bloc, according to Eurostat data.

Iberdrola combats some of that slump, Galan told CNN. the sector employs "750,000 people directly so we can already help the governments to create wealth and to create jobs."

But in 2012, the company was hit by a 36% fall in earnings within Spain, despite investing 20 billion euros [$27 billion] into the country since 2001.

And Galan stresses that European governments, not just Spain, should consider the impact of taxes on corporate cash flows and reinvestment.

"If they are already taking money in cash flows, in taxes, then this money cannot flow into investment."

Based in the Basque city of Bilbao, Iberdrola is also the world's largest producer of wind energy.

Galan told CNN that today, less than 40% of the Iberdrola's business is dependent on the eurozone as the company diversifies its risk in other countries including the UK, U.S., Mexico and Brazil.

He added that the taxes imposed by European Union governments are not making reinvestment in Europe an attractive option.

"If we are not generating enough cash flows, then we are not going to invest in those areas," he said.

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