The Company is offering a dividend yield above 5% at current share prices
IBERDROLA EARNS A NET €1,831 MILLION IN THE FIRST 9 MONTHS AND MAINTAINS SHAREHOLDER REMUNERATION LEVELS
EBITDA rose 1.4% to €5,211 million driven by strong operating performance and investments in previous years, offsetting the impact of regulatory measures in Spain
Ebitda showed a positive trend for the period, compensating for the regulatory impact on renewables in Spain and drought in Brazil
The Group expects this trend to continue with Ebitda exceeding €6.6 billion for 2014, thereby advancing towards achieving goals in the 2014-2016 Outlook
Gross investments, assigned mostly to regulated businesses, came to €2,344 million
Net debt –excluding €1.58 billion pending from the tariff deficit – was €24,673 million, ahead of the objective for 2016
These results reinforce IBERDROLA’s commitment to offer shareholders a minimum annual remuneration of €0.27 gross per share
The Board approved a new edition of the ‘Iberdrola Flexible Dividend’ plan, corresponding to what would have been the 2014 interim dividend and payable in December with a minimum guaranteed fixed price of €0.125 gross per free subscription right. The final 2014 payment will be made next July after approval by the AGM
IBERDROLA 9-month net earnings came to €1,831.4 million, down 19.5%, but Ebitda was up 1.4% at €5,211 million, reflecting solid operating performance during the quarter after a flat trend in the first six months.
The results reflect solid operating performance in the businesses. The negative impact of regulatory measures in Spain and the drought in Brazil are partially offset by a 2.5% increase in production, efficiencies from the production mix and improved performance from renewables in the US, UK and Latin America following investments there in recent years.
Revenues were 3.1% lower at 22,196.8 million while gross margin improved 0.5% to €8,874.2 million as a result of lower purchases. Net operating expenses were 3.6% higher at €2,528.8 million. Levies were 9.5% lower at €1,134.7 million, of which 63% or €716.8 million corresponded to Spain.
Ebitda rose 1.4% to €5,210.7 million with regulated businesses accounting for 69% of the total. Generation, supply and gas was up 26.4%, offsetting a 20.1% drop in renewables while networks were flat at -0.5%. This result and a positive contribution from the businesses in the third quarter and current exchange rates have led IBERDROLA to raise its Ebitda guidance for the full year to above €6.6 billion.
Despite the good operating results, net earnings were down 19.5% at €1,831.3 million, reflecting not only regulatory measures but also the one-off revaluation of balance sheet assets in the first half of 2013 under Law 16/2012.
Operating cash flow was down 10.3% at €3,998.4 million but exceeded gross investments of €2,344 million.
Shareholder remuneration maintained
This performance has allowed the Company to maintain its commitment to offering shareholders a minimum annual remuneration of €0.27 gross per share. This is equivalent to a dividend yield above 5% at current share prices.
The Board of IBERDROLA has approved execution of a second capital increase approved by shareholders at the Annual General Meeting last March in Bilbao. A new edition of the Iberdrola Flexible Dividend plan has been launched, corresponding to what would have been the interim dividend for 2014.
This gives shareholders the option of receiving new shares without cost or a cash payment. For those choosing cash, IBERDROLA offers a guaranteed fixed price of a minimum €0.125 gross per share, equal to the minimum set for the January 2014 edition of the plan. The final dividend will be paid in July 2015 following approval by the AGM.
To compensate for the dilutive effect of the capital increases, the Group will continue its share repurchase programme. These shareholder returns are founded on Group strategy focused on the three pillars of regulated businesses, geographical diversification and balance sheet strength.
A solid balance sheet
The Company continued to make progress in its programme of sustaining balance sheet strength. Net debt was reduced to €24,673 million, ahead of the €25 billion target set for the 2014-2016 period. This excludes €1,359 million still pending receipt from the tariff deficit owed at the end of September and €221 million pending payment from generation taxes under the liquidation mechanism in Spain. Including these amounts, net debt was €26,253 million at the end of September, €1,192 million below the same period last year.
Gearing, excluding the tariff deficit, stood at 40.6% as against 42.1% at the same date last year. Including the tariff deficit, the figure was 42.2% compared with 44% previously. Net financing costs were down 4% at €817.3 million and the average life of debt was above 6 years.
This enabled IBERDROLA to continue improving its financial ratios, with net debt to Ebitda at 3.6 and operating cash flow (FFO) to net debt at 20.8%. Net debt to retained cash flow (RCF) was 17.9%. These figures exclude the tariff deficit. Group liquidity stood at €9,950 million, sufficient to cover financing needs for 32 months.
Key operating aspects
1) NETWORKS: OPERATING PERFORMANCE COMPENSATES SITUATION IN BRAZIL
EBITDA from networks was 0.5% lower at €2,486 million, but excluding Brazil it would have risen 4.6%. Networks business in the UK recorded a 10.6% rise in Ebitda reflecting higher investments and sterling appreciation.
In Spain, networks Ebitda rose 3.8%, due to compensation for the negative impact of Royal Decree 9/2013 and investments made in previous years.
Ebitda from US networks was flat (-0.7%), with higher revenues from the Maine Power Reliability Program (MPRP) connecting the US and Canada, offset by exchange rate factors. In Brazil the drought continued to weigh negatively on the business, with Ebitda down 61%.
2) GENERATION, SUPPLY AND GAS: GOOD OPERATING PERFORMANCE
Ebitda from this business was up 26.4% at €1,885.3 million, reflecting strong operating performance. In Spain there was a 27.4% increase driven by an 8.4% rise in production, a more efficient generation mix, and the positive impact of a ruling on CO2 allowances.
Ebitda in the UK was €304.4 million, reflecting improved margins. In Mexico, it was 13.6% lower, with the drop mitigated by new contracts.
3) RENEWABLES: REGULATORY IMPACT IN SPAIN
Ebitda from renewables was 20.1% lower at €927.5 million. This included a 103% increase in Latin America driven by higher installed capacity in Mexico and Brazil and a 49% rise in production.
In the UK it was 11% higher with offshore wind generation now making a contribution and positive exchange rate movements. In the US, Ebitda rose 2% with a 0.8% rise in production and favourable weather conditions.
Spain however registered a 44% drop in Ebitda, as a consequence of regulatory measures and a lower load factor compared with the excellent wind conditions in the third quarter of 2013. In the rest of the world, Ebitda was down 39% as a result of the sale of 184 MW of capacity in Poland during 2013.
The company improves guidance for 2014
The good performance over the nine months, reflecting in large part investments made in previous years, has led the Company to improve its projections for 2014. Ebitda is now expected to exceed €6.6 billion for the full 2014 year.
The Company also expects this year to achieve its 2016 target for net debt set under the Company's 2014-2016 Outlook, once the tariff deficit for 2013 is reimbursed, as expected, by the end of 2014. As a result, ratios are expected to improve for operating cash flow (FFO) to net debt and net debt to Ebitda.
The solid results and progress made in achieve goals for 2014-2016 will enable the Group to maintain shareholder remuneration at a minimum of €0.27 gross per share.