Spanish pulp producer ENCE Energia y Celulosa (Ence) is facing an increasingly difficult operating environment after a series of amendments to the regulatory framework covering the electricity generated at its pulp mills and stand-alone biomass energy plants. We think that these measures could constrain Ence's profitability and possibly affect the group's expansion plans into renewable energy investments. We are therefore revising our outlook on Ence to negative from stable, and affirming our long-term corporate credit rating on the group at 'BB'. The negative outlook reflects the possibility of us reassessing Ence's business risk profile if we forecast that profitability has sustainably weakened as a result of negative developments in energy regulation. Our assessment will take into account potential efficiency measures
