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Iberdrola Calls For Pan-European Energy Regulator And Promises Further Major Investments In UK

28/03/2014

March 28, 2014, Bilbao: Ignacio Galán, the Chairman of Iberdrola and ScottishPower, has called for a pan-European energy regulator to be established to create an environment that can attract the major investment needed to deliver energy supply security and cut carbon emissions.

Speaking at Iberdrola’s annual general meeting in Bilbao, Galán also confirmed investments in wind power through its ScottishPower subsidiary under current regulatory conditions. “We will continue investing in wind energy projects, both onshore and offshore, for which there is a clear framework for installations that will begin operations up to 2017,” he said.

ScottishPower currently has approximately 1,420MW of onshore wind generation capacity in the UK, including the most recent project, the 136MW Harestanes windfarm in Dumfries and Galloway.

Galán said this will be increased further with the 389MW, £1.6 billion, off-shore West of Duddon Sands windfarm south west of Barrow in Furness, “which we expect to be fully operational this year.”

He said growth in the UK will come principally from investments in electricity networks which have a defined regulatory framework up to 2021 for transmission and to 2015 for distribution, with discussions under way for a new period up to 2023. In this regard, he highlighted the subsea HVDC cable connecting Scotland and Wales providing a 600,000 volt interconnection that will be the longest of its kind in the world.

Shareholders were also told by Galán at the AGM that the crisis in the European energy sector was illustrated by the fact that European electricity bills were now more than double those in the United States, which has led to a major competitive disadvantage for many EU industrial manufacturers.

He emphasised that the reason for this large difference in energy costs was due to the fact that in Europe energy bills have been used by governments as a catch-all for various costs unrelated to producing energy such as social, environmental and fiscal charges. In some EU countries these costs make up around 50% of bills, against less than 10% in the US.

However, at the same time around $2.6 trillion (€1.9 trillion) of new investment in energy infrastructure will be needed in Europe over the next 20 years, according to the International Energy Agency.

Galán said it was vital to create a single European regulator to promote a stable, predictable and coherent framework that could attract investment, ensuring compliance by all member states with established norms, at the same time as agreeing a common energy policy whose priority objective was to reconcile sustainability and competitiveness.

He said: “We are at a turning point. Both the European Commission and some Member States have begun to understand the magnitude of the problem and realise it is essential to reach a European agreement regarding all energy policy objectives.”

Iberdrola recently announced that it would invest a total of €9.6 billion from 2014-16 across its global business, of which the largest proportion, 41% or €3.9 billion, would be in the UK. Between 2012-14, Iberdrola invested around €4 billion in the UK.

Iberdrola announced last month that its net profit after tax for 2013 totalled €2.57 billion. It also said that net debt had been reduced by €2.25 billion to €26.4 billion with a further targeted €1.8 billion reduction in debt planned for 2014-16. The goal is for shareholders a to receive a dividend of €0.27 per share.

Galán stressed that Iberdrola is an engine for economic growth in the countries and communities where it operates. He said: “Iberdrola contributes to the creation of jobs and wealth in all territories where it is present. In 2013, the Group made purchases of more than €4.4 billion and sustained some 150,000 direct and indirect jobs worldwide.”

Separately, Iberdrola was named this week as best European utility company in the annual survey of around 2,000 investors/analysts by Institutional Investor Research Group. It came second overall across all sectors behind Airbus. Also the Iberdrola chairman Ignacio Galan was named as best CEO among European utilities in the same survey.

This ranking has been reflected in the group’s share price performance during 2013, when the shares rose 10.5%, outperforming the Eurostoxx Utilities index and most European competitors.

Iberdrola has around 650,000 shareholders, of which over 100,000 are in the UK. For the first time, the proportion of Iberdrola shares held outside Spain recently increased to more than half.

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