Cepsa, Spain's second-largest oil company, announced Friday that it will delay investments worth 3 billion euros ($3.25 billion) in green hydrogen it had planned in the south of the country if a temporary tax on energy companies' windfall profits is made permanent.

Oil companies have been among the most vocal critics of the tax, which has also drawn criticism from energy companies such as Endesa.

Cepsa said in a statement sent to Reuters that it would instead "prioritize its international expansion with projects that had initially been planned for the second phase of its transition strategy".

The company said it remained committed to generating more than half of operating profits from sustainable activities by 2030.

In December 2022, Spain imposed a 1.2% levy for two years on energy companies with a turnover of at least €1 billion to ease cost-of-living pressures during a bout of inflation caused in part by the Ukraine war and pandemic-related supply shortages.

The government has since signaled its intention to make a version of the tax permanent.

Last year, a lobby group representing the country's major oil companies warned that an extension of the tax could jeopardize €16.5 billion in investments related to the energy transition.

On Monday, Spanish oil company Repsol told Reuters it was putting on hold planned green hydrogen projects in Spain, with an electrolysis capacity of 350 megawatts, due to an unfavorable regulatory environment.

Green hydrogen, produced from renewable electricity, is considered key to decarbonizing the European economy. However, given their cost, green hydrogen projects are generally not competitive without subsidies.

(1 dollar = 0.9240 euros)

(Reporting by Pietro Lombardi; writing by David Latona; editing by Charlie Devereux and Jane Merriman; edited in Spanish by Benjamín Mejías Valencia)