IBERDROLA net earnings rose 1.6% to €2.87 billion in 2010, the highest in its history and an increase in recurring terms of 5.6% (excluding the lower capital gains last year of €289 million against €378 million in 2009). International diversification again helped smooth varying performance among businesses.
Factors driving these results include an 8% rise in electricity output to 154,073 GWh, the highest in its history, of which 50% were CO2 emission free. A 17.5% rise in revenues to a record high €30,431 million helped lift Ebitda by 10.5% to €7,528 million and operating cash flow by 11.3% to € 5,468 million.
Last year the Group achieved an 11% efficiency gain and further strengthened the balance sheet by reducing leverage to 43%, which together with the programme under way to place tariff deficit bonds helped generate sufficient liquidity (€10.6 billion) to sustain growth with a special focus on the U.S., UK, Spain, Brazil and Mexico.
Gross operating income (Ebitda) of €7,528 million was above the range projected for the 2010-2012 period, reflecting the Group’s diversified business portfolio and driven by a 25% increase in regulated businesses and 10% in renewables, offset by a 3% decline in liberalised business due to a lower UK contribution and to higher taxes. Regulated business accounted for 51% of total Ebitda, liberalised for 27%, renewables for 19% and other business 3%.
Production rose 8% to 154,073 million kWh, with a strong contribution from CO2emissions free generation which made up 50% of the total with hydro rising 84.4%, renewables by 18.2% and nuclear by 14.4%. Capacity continued to diversify and increase, totalling 44,991 megawatts.
As a result, gross margin rose 7.9% to €11,645.2 million, while operating costs fell 3.7%. The 11% efficiency gain was fruit in large part of measures taken in the United States.
In a key year for IBERDROLA, efforts focused on optimizing the business portfolio and exploiting business opportunities with gross investments of €5,674 million in basic energy business (renewables and the start of the Maine transmission line) while selling non-strategic assets (gas in the United States and a Guatemala unit) for €2 billion. In 2011 agreement was reached to buy Brazilian electricity distribution company Elektro with 2.17 million points of supply, a transaction designed to secure growth in a strategic market.
The Company also sought last year to improve its debt profile and financial ratios, achieving a liquidity position of €10.6 billion which will grow with the programme under way to place tariff deficit bonds this year, from which it has so far received €1.2 billion. IBERDROLA also reduced its gearing from 46.2% in 2009 to 43.3% (excluding the tariff deficit impact), with net debt at €24,212 million (also excluding the tariff deficit). Group equity stood at €31,663 million against €29,030 million the year before.
Last year’s positive results are expected to support a maintained dividend with a final payment of at least €0.18 per share. In this context, the scrip dividend programme has proved a significant success, with 68% of the share capital taking the most recent dividend in shares.
Last year’s results reinforce the strategy followed in recent years, founded on significant investments, particularly in international expansion. This has led to the Group achieving a presence in 40 countries with a focus on more liberalised sectors and markets better placed to achieve economic recovery. It has also seen IBERDROLA become Spain’s leading energy group, as well as world leader in wind and one of the largest global utilities by market cap.
Key operating aspects of 2010
1. Increased production and capacity with clean energy
The international diversification strategy followed in recent years by IBERDROLA and the increased contribution of clean generation technology contributed to total production rising 8% to 154,073 million kWh. Hydro production in particular rose 84.8% to 22,121 million kWh, 14.3% of all energy generated by the Group in the year.
Renewable energy output also rose strongly by 18.2% to 25,405 million kWh, as did its weighting which stood at 16.5%. Combined cycle plants generated 58,894 million kWh, occupying the largest weighting in Group production with 38.2%. Nuclear generation came to 26,111 million kWh, a rise of 14.4% and 17% of the total.
Emissions came to 256 grammes of CO2 per kWh at Group level, 8% less than the previous year (279 gr. CO2/kWh). Of total Group production48% was CO2 emission free.
IBERDROLA continued to diversify its generating assets during the year, with installed capacity standing at 44,991 MW. By technology, combined cycles accounted for 29.2% of the total, hydro for 22%, renewable energy for 27.9%, thermal for 10.5%, nuclear 7.4%, cogeneration for 2.7% and fuel oil 0.3%.
Capacity rose strongly outside Spain, where the Group has 6,968 MW in the UK, 5,598 MW in the U.S., 5,565 MW in Latin America and 1,270 MW in the rest of the world. In Spain, it came to 25,590 MW.
The Company’s strategy of prioritizing growth through generation assets that respect the environment, transforming it into a leader in combating climate change, will continue in coming years with new renewables and hydro capacity coming on stream both in Spain and also in countries such as Brazil and Portugal.
2. Spain: output rise of 11%
Production rose 10.9% to 72,423 million kWh, with a strong contribution from large hydro (+105.8%, to 19,819 million kWh) and renewables (+13.4%, to 11,571 million kWh). Nuclear power contributed 26,111 million kWh and combined cycle gas 11,082 million kWh.
Emissions during the period fell 38.5% from 164 grammes of CO2 per kWh to 101 grammes. As a consequence of clean generation technologies, nearly 80% of all IBERDROLA production in Spain was CO2 emission free.
Ebitda from traditional business came to €2,847.8 million, of which €1,483.1 million came from liberalized business +11,5%, despite an 83.6% increase in taxes to €396.6 million and €1,389.7 million from regulated business where earnings rose 24.2% reflecting adjusted remuneration for distribution.
As regards regulatory aspects, IBERDROLA reiterates that legal safeguards and regulatory stability are vital for Spain’s electricity sector in order to carry out projected investments. At the close of 2010, the Group’s share of the tariff deficit came to €5,249 million, of which it has so far received €1.2 billion.
3. IBERDROLA RENOVABALES: increased wind production
The Company, world leader in wind power(*), recorded a gross operating profit (Ebitda) of €1,455.7 million, an increase of 9.8%, with renewables Ebitda rising 19.4% to €1,449.3 million. Gross margin rose 11.6% to €2,025.2 million, of which just over half came from international business while net earnings came to €360 million, a decline of 3% reflecting lower results from gas.
Electricity production grew 18.2% to 25,405 million kWh, a result of a 32.1% rise in the United States, one of 13.4% in Spain and 22.2% in the rest of the world. Wind power, the most mature and competitive renewables technology, was again the pillar of Company business contributing 96.5% of total production.
Capacity came to 12,532 MW, with 39 new wind farms starting operations with total capacity of 1,780 MW. Of this new capacity, 60% or 1,043 MW was in the United States, 420 MW in Spain, 130 MW in the UK and 187 MW in the rest of Europe and Latin America. Reflecting the strategy of diversifying in high potential markets, more than half of total capacity was outside Spain.
4. United Kingdom: higher capacity and production
Ebitda from ScottishPower came to €1,349 million, a decline of 7% reflecting deterioriating performance from liberalized business which was partially offset by higher revenues from networks as a result of investments carried out in the context of a new regulatory framework for networks that offers stability up to 2015.
IBERDROLA increased its installed capacity in the United Kingdom last year to 6,968 MW, with the startup of new renewables installations. Electricity production rose 6.5% to 27,968 million kWh.
5. United States: IBERDROLA USA boosts contribution
IBERDROLA USA contributed 9.4% to Group Ebitda, with a 57.5% increase to €710.8 million reflecting efficiency measures adopted during the year and a new electricity tariff structure in the state of New York which gives the business a stable framework until 2014.
Last September the company began construction of one of the key networks projects in the United States in coming years. This project, which will benefit electricity inter-connection between Massachussets, New Hampshire and Maine, as well as between the last-named state and Canada, represents an investment of $1.4 billion.
The Group’s U.S. presence was enhanced by significant growth in the renewable energy subsidiary. The Group now has 5,598 MW capacity in the United States, 1,073 MW more than a year ago, of which 4,634 MW is wind power. With this increase in capacity, IBERDROLA produced 13,635 million kWh in the country, a rise of 21.2%.
The Group has benefited from more than $1 billion in U.S. government incentives for wind power, the largest obtained to date by any renewables company.
6. Latin America: greater contribution from Brazil
Gross operating profit from Latin America rose 12.1% to €963.6 million, accounting for nearly 13% of Group Ebtida. The improvement reflects an 8.1% rise in demand, the contribution of new hydro capacity, divestments and exchange rate gains.
With installed capacity of 5,565 MW, the Company generated 38,023 million kWh in Latin America last year.
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