In 2013, the energy reform in Spain resulted in significantly higher energy costs, with a direct impact on the Group's financial results and limitations on the ability of the Spanish mills to be competitive. Now in 2014, a draft ministerial order on the remuneration model for cogeneration has been released that will again have a negative impact on the costs of an energy-intensive industry that relies on CHP to be efficient, save energy and remain competitive in an increasingly global market.
A loss in competitiveness is a key factor for Torraspapel. The relative importance of the Spanish market is decreasing as consumption of the Group's main product line has been reduced by over 50% in the national market between 2008 and 2013. Exports are crucial to maintaining operations for the company, with six manufacturing sites in Spain, resulting in direct employment for over 2,300 and indirect employment for an additional 12,000.
Recent government decisions regarding the economic treatment of CHP are a blow to Torraspapel as well as to a number of other domestic industry players, representing 20% of Spain's GDP. The new measures will force other CHP plants to close, but, more importantly, will result in the closure of other manufacturing plants and losses in financial results that will endanger and paralyze future investment plans. The result will be a significant loss in jobs and a negative impact on the country's economic development.
Torraspapel has invested over 51 million euros over recent years in cogeneration plants focused on improving efficiency and, especially, operating costs at manufacturing sites. The regulation framework has changed nonetheless, ignoring the needs and voice of active industry members. Torraspapel, and the Lecta Group, will be forced to change their strategy, redirecting future investment and production to manufacturing sites better able to compete in the market.