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Despite record production, wind energy business in Spain fell 46% and Ebitda by 46%, as a consequence of regulatory measures


Solid operating performance, particularly from international businesses, partially offset the negative impact of regulatory measures in Spain


  • Group EBITDA came to €3,745 million, in line with the same period last year. Excluding exchange rate factors, it was up slightly at 0.7
  • Net investments were €1.2 billion in the period, allocated mainly to international networks and renewables businesses
  • Net debt was reduced by €2,254 million and gearing to 41.8% from 44.3% in the same period last year
  • First half performance and expected trends for the second half confirm the Company’s  projections for the full year, and put it on track to meet goals in its 2014-2016 Outlook
  • The Company confirmed its commitment to shareholders  with a €0.144 per share payment in July which, added to the €0.126 disbursed in January and the €0.005 per share AGM attendance bonus make a total dividend for the year of €0.275

IBERDROLA’s first half net earnings came to €1,503.1 million, down 13%, while Ebitda was in line with the same period last year at €3,744.7 million. Solid business performance, especially international businesses, again mitigated the negative impact of regulatory and fiscal measures in Spain which came to €369 million at gross margin level during the period.

Taking into account regulatory changes since 2011 the accumulated negative impact on 2014 results as a whole will be a gross €1,395 million. The impact in Spain was partially offset by a more efficient generation mix, good performance from gas businesses and a 3.5% rise in production to 73,062 gigawatt hours (GWh).

Gross margin was in line with the same period of 2013 at €6,170.8 million (down 0.8%). Group Ebitda totalled €3,744.7 million, of which 66% came from regulated businesses. Excluding the negative impact of exchange rate fluctuations, Ebitda would have risen 0.7%.

Net operating expenses were 4.2% higher at €1,689 million, due to higher costs in the second quarter reflecting increased activity in the UK and other non-recurring costs which Iberdrola expects to be mitigated in the second half of the year  through operating efficiency measures. Levies came to €737.1 million, 13.7% lower, of which 60% or €449.6 million correspond to Spain.

As a result, net Group earnings for the six months declined 13%, reflecting both the impact of regulatory decisions in Spain and also a non-recurrent balance sheet adjustment for Spain activities in the first half of 2013 under Law 16/2012.

Operating cash flow (FFO) came to €2,855.7 million, down 3.9%, and exceeded investments among all Group businesses which came to a net €1,199.0 million. The bulk of this was allocated to international networks and renewables businesses.

First half results conform to IFRS 11 accounting norms, by which businesses consolidate by the equity accounting method instead of the proportional method utilized previously.

These results, as well as prospects for the second half of the year enable the Group to confirm its projections both for this year and also the 2014-2016 period. Group activities are founded on three pillars: a business portfolio centred on regulated businesses and geographical diversification; an investment strategy based on security, profitability, execution periods and cash flow generation; and thirdly on sustaining financial strength by reducing debt, improving solvency ratios and controlling interest rate and exchange rate risk.

Thereby, and despite an uncertain and changing business environment, the Company has been able to achieve positive results and maintain shareholder remuneration: a €0.144 gross payment per share in a new edition of the Iberdrola Flexible Dividend plan, plus the €0.126 gross per share paid in January. With the €0.005 per share AGM attendance bonus the total remuneration comes to €0.275 per share.

Solid balance sheet management

In the first half, net debt was reduced by €2,254 million over the same period last year to €25,682 million. This includes €1,324 million pending receipt from the tariff deficit as well as €121 million corresponding to generation taxes pending liquidation procedure. Excluding these amounts, adjusted net debt came to €24,237 million. The reduction in net debt had a positive effect on net financial costs which fell 7% to €510.6 million.

Gearing was 41.8% at the end of June, including the mentioned amounts pending, compared to 44.3% at the same time last year. Excluding this debt, gearing was 40.4% against 42.4% at the same time last year. The debt reduction and consequent drop in gearing was made possible by divestments that for the first half of the year came to €868 million.

As a result financial ratios continued to improve. The net debt/Ebitda ratio was times 3.6, while net debt/operating cash flow (FFO) and retained cash flow (RCF)/net debt were 22.7% and 19.6% respectively, all exclusive of the tariff deficit.

Group liquidity came to €10,178 million at the end of June, sufficient to cover financing needs for more than 35 months. The average life of debt was maintained above 6 years.

Key operating aspects of the first half of 2014


Ebitda from networks was 4.5% lower at €1,654.6 million, reflecting the impact of regulatory measures in Spain, drought in Brazil and exchange rate factors. The Company expects results to improve in the second half of the year due to the levelling out of the regulatory impact in Spain and compensation via tariffs in Brazil for the impact on distribution companies of the drought.

By country, Ebitda from Spanish networks was 7.5% lower as a result of the lower level of revenues established under Royal Decree-Law 9/2013 which was not yet in force in the first half of 2013. In the UK, Ebitda from this business rose 6.8% due to higher revenues obtained from a larger asset base following investments there, and appreciation of pound sterling.

Elsewhere, the US maintained Ebitda levels (-0.2%) with increased revenues from the Maine Power Reliability Program (MPRP), connecting the US and Canada. In Brazil, Ebitda fell 52% as a result of the drought and depreciation of the Real, although Iberdrola expects improvement on the tariff front in the second half of the year.


This business registered Ebitda of €1,451.7 million in the period, a 27% increase thanks to solid operating performance. In Spain, Ebitda rose 39.8% helped by a 13.6% rise in production and lower procurement costs. There was also a positive €111 million impact from a ruling on the withdrawal of CO2 emission rights.

In the UK, Ebitda from generation and supply rose 8.6% thanks to improved margins and lower levies, and despite the introduction of a carbon tax and higher non-energy costs. In Mexico, Ebitda was 26.5% lower as a consequence of the renegotiation of certain contracts, while in the US it increased by €46 million in the period.


Renewables business recorded Ebitda of €712.8 million, down 20.3% over the same period last year, reflecting the regulatory and fiscal measures adopted in Spain where Ebitda fell 46% and net earnings by 50%, despite record wind energy output.

These results contrast with those obtained in other countries. In the UK, Ebitda rose 11% driven by increased operating capacity and an 11.2% rise in production.

In the US, Ebitda was 8% higher in large part due to a 2.1% rise in output. In Latin America, Ebitda rose 80% thanks to a 97% rise in installed capacity in Brazil and one of 11% in Mexico, driving production up by 34%.  In the rest of the world, Ebitda fell 41% reflecting the sale of wind assets in Poland last year.

The Company confirms its 2014 projections

Results in the first half enable the company to confirm its projections for the year as a whole and advance towards meeting its 2014-2016 Outlook. As regards networks, the Company does not expect new regulatory impacts and that the effect of the drought in Brazil will be progressively offset through tariffs and other measures.

In generation and supply, the Group expects conditions to normalize, both in power generation and also in the gas market, while in renewables the business will continue to benefit from increased operating capacity in Mexico and the US. No further significant impacts from regulatory decisions in Spain are expected in renewables for the rest of the year.

The Company also expects to continue implementing efficiency measures and thereby progress in commitments set for the 2014-2016 period.


This announcement is not an offer for sale or exchange of securities or request for ofers for sale or exchange of securities. Shares in IBERDROLA S.A may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act, as amended.


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