A decision by the Spanish government to curtail profits for renewable power generators by $4.1bn will leave many renewable project developers facing bankruptcy.

That’s the view of four industry lobby groups who are opposed to Industry Minister Jose Manuel Soria’s decision to cut renewable energy subsidies.

“This will lead many installations to bankruptcy because they won’t be able to repay the credit that financed them,” the Spanish Photovoltaic Union, or UNEF, said in a statement.

The decision announced on July 12 calls for half of the savings to come from renewable energy generators and cap the rate of return for the industry at 7.5 per cent before tax. That adds to previous reductions that have slashed state aid to renewables by as much as 40 per cent, the lobby group said.

Prime Minister Mariano Rajoy’s government is seeking to eliminate a 4.5 billion-euro deficit forecast this year for the power industry.

Shai Hill, an analyst at Macquarie Group Ltd. in London told Bloomberg that the change “has serious implications for owners of renewable power plants and we may see a significant number defaulting on their loans.”

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