Total shareholder return in 2014 was 30.1%, ahead of the company's principal European competitors and the relevant indices (Ibex 35 and Eurostoxx Utilities)
IBERDROLA RECORDS €2,327 MILLION NET PROFIT IN 2014, DRIVEN BY INTERNATIONAL BUSINESS
Ebitda was 3.1% higher at €6,965 million with performance in the UK, US, Brazil and Mexico compensating a 7.4% drop in Spain
The Company further progressed towards meeting objectives in the 2014-2016 Outlook and beat projections for the year
Operating efficiency improved more than 2% due to control of net recurring operating expenses
Gross investments came to €3,716 million, with nearly 90% allocated to regulated businesses, and were held below operating cash flow in all areas
Debt was reduced by around €1.5 billion to €25,344 million, and net debt/Ebitda to 3.6 times, in line with the objective for 2016
The results enable the Company to maintain annual remuneration for shareholders at least €0.27 gross per share
COMMITMENT TO SOCIETY
IBERDROLA paid more than €5.5 billion in taxes in 2014, of which €2.44 billion were directly related to the company (49% of pre-tax profit)
The Group ended the year with 1,800 new contract hires. It sustains 350,000 jobs in countries where it operates
IBERDROLA recorded Ebitda of €6,964.5 million in 2014, a rise of 3.1%, while net profit was 9.5% lower at €2,326.5 million. This decline reflected a lower level of non-recurring income as well the regulatory measures affecting in particular the business in Spain.
These results demonstrate further progress in meeting Ebitda and net earnings projections for the 2014-2016 period, underpinned by a solid business mix, balanced international diversification, active financial management and high operational efficiency.
By country, a highlight in the UK was approval of a regulatory and remunerative framework up to 2023 for distribution and up to 2021 for transmission projects, as a result of which the company expects total investments of around €8.27 billion. Another important milestone was the start up of West of Duddon Sands - the company's first offshore wind farm with 389 megawatts (MW) - and the assignment of capacity under the recent auction (2,261 MW).
In the US, the year was marked by an improved remuneration for networks business in Maine, the final stages of the transmission line connecting the US and Canada, completion of the Baffin wind farm and new projects improving networks reliability in New York.
In Mexico, the company is prepared to take advantage of growth opportunities derived from the energy reform approved by the Mexican government and is building new combined cycle plants and a cogeneration plant, to which a second will be added in the second quarter. IBERDROLA is also building two wind farms in the country where its renewable portfolio stands at 900 MW.
The business in Brazil succeeded in mitigating the impact of the drought through tariff reviews, and will continue work on building new hydro plants, once the 1,800 MW Teles Pires complex has been finalised, as well as on six new wind farms it has been adjudicated.
In Spain, the main highlights were the fact that the structural tariff deficit has been eliminated - leaving only some temporary imbalances pending - and quality of service achieved during the period.
Iberdrola Group results
IBERDROLA revenues came to €30,032.3 million in 2014, a decline of 3.4%, while gross margin was 3.4% higher at €12,179.5 million as a consequence of a 7.5% fall in purchases. Net operating expenses were 4.8% higher at €3,633.8 million, although recurring expenses were only 1.1% higher at €3,506.1 million. Gross margin growth, higher than that of net operating expenses, resulted in a more than 2% improvement in operating efficiency.
Group Ebitda was 3.1% higher at €6,964.5 million, and 5.5% above the objective set for the year. The strong performance reflects a positive contribution from different countries that offset poorer trends in Spain where Ebitda fell 7.4%. Of the total, 75% came from regulated businesses, in line with IBERDROLA's business model of focusing on stable activities with attractive regulatory frameworks. Also noteworthy were the 15.4% rise in generation and supply and 5.6% in networks which compensated a 11.7% fall in renewables.
Operating cash flow (FFO) was 2.3% lower at €5,458.6 million and exceeded net investments in all businesses that came to €2,848 million during the year. Of this amount 87% was allocated to businesses that offered an attractive and stable regulation. By country, 46% was invested in the UK, 24% in the US, 18% in Spain and 12% in Latin America. In gross terms, investments came to €3,376 million.
Results by business
1) NETWORKS: IMPROVEMENT IN ALL COUNTRIES EXCEPT SPAIN
Ebitda from the networks businesses was 5.6% higher at €3,534.8 million in 2014, with all countries presenting a positive trend except Spain where Ebitda came to €1,438.5 million, affected by Royal Decree Law 9/2013. This negative impact was partially compensated by efficiency programmes put in place and investments from previous years.
The UK recorded Ebitda of £826.7 million, driven by higher revenues deriving from a larger asset base from the investments carried out. In the US, new tariff levels in Maine and the contribution from the interconnection between the US and Canada lifted Ebitda to €1,026.7 million.
In Brazil, Ebitda from networks came to R$934.7 million, reflecting the positive effect of new accounting norms for regulated assets, which compensated the impact of the drought.
2) GENERATION AND SUPPLY: OPERATING STRENGTH
This area generated Ebitda of €2,292.2 million, a rise of 15.4% that reflects strong operating performance throughout the year, coinciding with a temporary 6.2% decline in levies. In Spain, higher production (+8.2%) and lower costs compensated for lower prices and lifted Ebitda to €1,517.6 million from this business.
Ebitda in the UK came to £388.3 million, as a consequence of improved operating performance at power stations. The margin of Ebit to sales for generation and supply in the UK continues to be low at 1.3%.
In Mexico, Ebitda came to $465.5 million, driven by new contracts and higher sales to private customers.
3) RENEWABLES: SPAIN, AFFECTED BY REGULATORY MEASURES
Ebitda from this business came to €1,326 million, a fall of 11.7%, which reflects a drop in Spain that could not be offset by positive performance in the UK, the US and Latin America.
In Spain, Ebitda fell 37% to €420.6 million, or €247.8 million lower than the previous year, due fundamentally to the negative impact of regulatory measures in place, which came to €339 million, and to lower prices.
Renewables in the UK recorded Ebitda of £213.9 million in a year marked by an increase in operating capacity and the startup of West of Duddon Sands, IBERDROLA's first offshore wind farm.
In the US, Ebitda from renewables came to $658.7 million, driven by a 0.9% rise in production and by favourable weather conditions during the period. In Latin America, Ebitda came to €71.2 million helped by higher operating capacity in Mexico and Brazil (+28%) and by higher load factors (+45%). In the rest of the world, the business recorded Ebitda of €73.7 million.
Continued improvement in financial strength
IBERDROLA made further progress in strengthening the balance sheet throughout 2014. In line with the 2014-2016 Outlook, the company reduced debt by around €1.5 billion to €25,344 million, adjusted for the cash dividend paid last December.
This improvement in debt levels reflects three drivers: generation of positive cash flows, progress in divestment of non-strategic assets including the sale of stakes in EdP and BBE, and control over investments.
The company thus succeeded in improving its financial ratios, with net debt/Ebitda at 3.6 down from 4, while FFO to net debt and retained cash low (RCF) to net debt were 21.5% and 18.6% respectively. Gearing came to 41.7% at the close of the year compared to 43.2% in December 2013.
The Group's financial management achieved a reduction in net cost of debt to 4.35% and lengthened average maturity to 6.3 years. It also sustained a solid liquidity position of around €9 billion at the end of the year.
The company maintains shareholder remuneration
Performance during the year enabled the Group to maintain its commitment to offering annual shareholder remuneration of at last €0.27 gross per share.
In this respect, the IBERDROLA board of directors yesterday approved two new capital increases which will enable two new editions of the Iberdrola Flexible Dividend programme, to be submitted for shareholder approval at the Annual General Meeting which is expected to be held on first call in Bilbao on March 27. Under this programme, shareholders can choose to receive remuneration in cash or in Company shares.
The Board of Directors will also propose a reduction in capital of up to 2.324% through the amortization of up to 148.483 million in treasury stock, with the objective of maintaining unchanged the number of shares on which earnings per share (EPS) is calculated. It also approved the payment of an attendance bonus for the AGM of €0.005 gross per share (€5 per 1,000 shares), both for shareholders present and represented.
During the year, total shareholder return1 came to 30.1%, above that achieved by IBERDROLA's European competitors and the principle relevant indices, the Eurostoxx Utilities (18.7%) and Ibex 35 (8.5%).
IBERDROLA's contribution to society
IBERDROLA's role as an engine for the economy and job creation is reflected in its fiscal contribution. The Company provided €5,506 million to state treasuries in the different countries where it operates through taxes and levies, including taxes collected from employees and social security, of which nearly 60% (€3,292 million) corresponds to Spain. The company’s direct fiscal contribution was €2,441 million (44.3% of the total) making up 49% of profits before tax and levies. In addition to this direct contribution by the Company, its activities generate around €10.5 billion a year in fiscal contributions including indirect and induced activities.
Throughout 2014, IBERDROLA continued to create quality employment, hiring 1,800 new professionals during the year. In 2014, every employee received an average of 40 hours of training. In total IBERDROLA provides work for 350,000 people around the world, taking into account indirect and induced employment2.
With this business projection, the Company expects that both Ebitda and net profit for 2015 will exceed levels recorded in 2014, while both net debt and the ratio of net debt to Ebitda will decline over the year.
1 Total shareholder return (TSR): includes dividends received by shareholders and share price appreciation.
2 Data in this section correspond to an independent study carried out by Analistas Financieros Internacionales (AFI) based on average activity of the Iberdrola Group between the years 2009 - 2013.