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04/05/2011
IBERDROLA, POISED TO TACKLE THE ENERGY TRANSFORMATION CHALLENGE

  • The company boasts extremely solid foundations thanks to the geographic and business diversification pursued during the past decade

IBERDROLA has the know-how and the assets to tackle the energy sector transformation looming in the coming years. Its business model which locks in sustained growth with low earnings risk will translate into growing shareholder remuneration.

In 2010, IBERDROLA gave the financial community broad guidance for 2010-2012. This guidance articulates the company’s response to the new and more complex economic and trading environment in which it is doing business. The company’s vision for the emerging energy landscape is shaped by a decade of major overhaul in which delivery of traditional energy policy targets will require substantial investment.

Environmental sustainability will remain one of the cornerstones of energy policy as the power sector has a leading role to play worldwide in the fight against climate change thanks to its ability to introduce lower carbon technologies and to develop a host of proactive energy efficiency measures. This panorama not only requires the development of a whole new range of power generation assets capable of bringing about a far-reaching shift in the current energy mix, it will also demand complementary investment in transmission networks and the development of smart grids.

Against this backdrop, 2010 was shaped by a still-challenging economic and energy environment. However, the IBERDROLA Group achieved important milestones on many levels, enabled by the following drivers:

  • The ability to tap attractive growth opportunities, such as the acquisition of Elektro in Brazil, the terms of which were signed in January 2011. This deal adds 2.17 million supply points in a market with a promising outlook.
  • An enhanced business portfolio by means of investment in organic growth opportunities, with the US wind power business and the transmission line between New England and Canada standing out, all of which were reinforced by control over capital expenditure in the core business, at a net €4.6 million, and €2 billion in proceeds from non-core asset disposals.
  • The unwavering focus on productivity and management streamlining: the Group’s organisational structure was realigned around global business units, while an efficient and flexible Single Corporation was set up to provide services to the business units.
  • Reinforced financial strength at Group level, of prime importance in the current economic climate.

At Group level, IBERDROLA made some notable achievements in 2010: (i) output rose by 8% thanks to emission-free power production which now accounts for almost half of total output, (ii) EBITDA growth of 11% thanks to cost savings, which enabled bottom-line growth of 5.6%. This earnings performance highlights the positive impact of recent year investments which have endowed the Group with a businesses and markets portfolio capable of delivering sustained growth in any environment.

Guidance for 2010-2012

IBERDROLA has built formidable foundations for tackling the looming transformation of the energy sector, underpinned by its track record in operating all generation technologies. Its efficiency benchmarking and the diversified international platform built up over the years generate more choices for pursuing profitable growth while creating new opportunities for implementing its best business practices.

For the next two years, the Group’s priority target market is what it has termed as the Atlantic Area, which requires major investment in clean generation technology and power grids.

In the UK there is currently unprecedented consensus on the need to replace the bulk of the nation’s generation assets and to take advantage of this opportunity to cut emissions. Similarly, in the US, the Group will remain committed to clean generation and to upgrading power grids.

In Latin America, Brazil’s growth prospects remain intact after a strong 2010. As a result, the Group has increased its exposure to both the network business, with the acquisition of Elektro in Sao Paulo, and to hydro-electric generation. In Spain and Portugal, IBERDROLA plans to continue to invest in hydro-electric and wind power as well as in networks – investments which are underpinned by already-approved capital expenditure programmes. Lastly, in the rest of continental Europe, the Group aims to consolidate its leadership position as a developer of new renewable power capacity, both on-shore and off-shore.

The capital expenditure earmarked for 2010-2012, totalling roughly €16 billion, will enable the Group to meet its targets. Nevertheless, execution of these investment plans will be subject to ongoing compliance with solvency thresholds designed to guarantee preservation of IBERDROLA’s current credit ratings.

These investments, coupled with additional productivity measures planned for the projection period, shape the Group’s earnings guidance for the period: ongoing international diversification driving estimated growth in EBITDA and recurring net profit of 5%-9%, while preserving shareholder remuneration throughout.

TAGS:
  • latin america,
  • investors,
  • shareholders,
  • group,
  • international,
  • sustainability,
  • results,
  • wind power,
  • renewable energy.
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