A solid business model provided the foundation for improved results, despite deterioration in Spain
IBERDROLA NET PROFIT EXCEEDS €2.8 BILLION IN 2009
- Ebitda rose 6.3% to €6,815 million, driven by international businesses, especially regulated activities and renewables, and net recurring profit rose 7.7%
- Operating profit rose despite a difficult business environment, especially a decline in Spain, by weak demand, falling prices and the impact of the sterling exchange rate
- Production rose 1.1% to 142,700 million kWh, thanks to increased wind generation which now accounts for 15% of the Group total
- Iberdrola increased operational cash flow by 11%, achieved efficiency gains and strengthened Group liquidity
- The Company again met its targets on results, with a 7% rise in recurring profit, allowing it to maintain dividend per share
BALANCE SHEET STRENGTH
- Debt was reduced by 4.2% (excluding the tariff deficit), financial ratios improved and liquidity maintained, helping consolidate Iberdrola’s A rating
- Gearing improved from 50.3% at the start of the year to 46.2%, while equity funds rose 13% to €29 billion
IBERDROLA recorded net profit of €2,824 million in 2009, in line with the previous year (-1.3%), sustained by the Group’s business model with regulated business and renewables performing well. Additional contributing factors were well diversified assets, efficiency gains, a strong balance sheet and the benefits of investments over recent years.
Despite an adverse business environment, especially a deterioration in Spain, with falling demand and prices, the Company increased Ebitda by 6.3% to €6,815.3 million and recurring net profit by 7.2% to €2,602 million (excluding extraordinary revenues). Ebit rose 5.8% to €4,509.2 million, gross margin by 8% to €10,788 million, and operating cash flow by 11.2% to €4,873 million.
Regulated businesses and renewables contributed two-thirds of total Group operating profit, with an 11.8% rise in Renewables Ebitda. By geographical area, energy business in Spain contributed 35% to Group Ebitda, down two percentage points on the previous year, ScottishPower 21%, Iberdrola Renovables 19%, Iberdrola USA 7%, Latin America 13% and other businesses 5%.
Businesses in all countries increased earnings in local currency terms compared to 2008, with the exception of traditional business and renewables in Spain.
These results were achieved amid difficult operating and financial circumstances, with falling demand and price erosion for energy raw materials. Economic recession , difficulty in accessing financial markets and negative sterling exchange rate movements also affected business.
Despite this adverse scenario, the strength and depth of IBERDROLA’s assets around the globe allowed it to raise production by 1.1% to 142,776 million kilowatt hours (kWh), due to a 26% rise in wind power generation which now accounts for 15% of the Group total. The Company has continued to diversify and expand its generation assets, notable for a low CO2 emission level and flexible costs, to 43,667 megawatts (MW).
IBERDROLA’s focus in 2009 was to conserve the Group’s strong financial foundations. This was achieved through efficiency gains, where operating expenses fell 4.1% in like for like terms, asset sales and a capital increase which provided €2.6 billion, and access to the capital markets on competitive terms with operations totalling €3.4 billion, £500 million and $2 billion, respectively.
The Company has also adjusted 2009 investments in line with the economic environment, investing a total of €4,221 million. With these measures, the Company has been able to achieve a comfortable liquidity situation (€9 billion) and maintain its A credit rating.
As an additional result, IBERDROLA reduced its financial gearing from 50.3% at the beginning of 2009 to 46.2% at the end of the year (excluding the tariff deficit impact). Net debt (excluding the tariff deficit) came to €24,894 million, a decline of 4.2% on the €25,998 million at the end of 2008, while equity rose 13% to €29,026 million.
Shareholder remuneration maintained
These results, which enabled shareholder remuneration to be maintained in line with the previous year, are the fruit of a sustained investments totalling €62 billion between 2000-2009. In this period, IBERDROLA tripled installed capacity, multiplied production by 2.7 and clean energy output by 11. The Company now employs 33,000 people, while creating more than 35,000 indirect jobs, carrying out purchases totalling €27 billion, investing €100 million a year in R+D and building one of the largest energy engineering companies in the world.
IBERDROLA focused in 2009 on consolidating in the United States and the United Kingdom, the two markets where it has cemented a strong and diversified profile in deregulated markets that are best positioned to resist and rebound from the recession. This international expansion has placed the Group among the largest electricity companies in the world, global leader in wind power and 4th largest on the Spanish stock Exchange by market cap.
The solid operating profit obtained in 2009, in a complex environment, fully met expectations amid a sharp economic deceleration.
In 2010, the Company expects performance to pick up as a result of an improving economic environment, stabilizing demand and increased generating capacity. Additional measures will be taken to improve the profile of operating and financial expenses, adjusting investments to cash flow, and continuing asset sales and steps to strengthen the balance sheet.
IBERDROLA is thus well placed to face the economic downturn with a generation mix mostly independent of raw material price fluctuations, and its geographical and business diversification.
Key operational aspects in 2009
1) SPAIN, FALLING PRICES AND DEMAND
A significant decline in wholesale prices in Spain, as well as a 4.6% drop in electricity demand, affected business in Spain last year, although with signs of demand picking up slightly in the final months. This led to Ebitda declining 0.4%).
Production in Spain fell 3.4% to 65,316 million kWh, although renewable energy increased 12.9% to 10,208 million kWh and large-scale hydroelectricity by 5.4% to 9,633 million kWh.
Emissions to the atmosphere fell 6% from 170 grammes of CO2 per kWh to 160 grammes, with emissions free production in Spain amounting to more than 65% of the total. Total capacity in Spain came to 25,705 MW at the year end.
In the regulatory arena, the positive impact of the liberalisation process made it posible for the Company to have increased recourse to forward markets, as a result of which it has already sold 75% of expected production for 2010.
The tariff deficit in Spain is in the final stages of being resolved, with €3,619 million corresponding to the Group which it hopes to receive in the coming months.
2) INCREASED PRODUCTION, CAPACITY AND DISTRIBUTION
International diversification and increased clean energy production in recent years is reflected in the fact that more tan 50% of total production of 142,776 million kWh last year came from abroad. The 77,460 million kWh generated abroad broke down into 38,160 million in Latin America (up 2.5% on 2008), 26,264 million from the United Kingdom (-1%), 11,249 million from the United States (+31.3%) and 1,787 million kWh from the rest of the world (+35.3%).
IBERDROLA’s generating capacity rose to 43,667 MW in 2009 from 43,327 MW at the end of 2008, with combined cycles making up 30.2% of the total, hydroelectricity 22.5%, renewables 24.6%, thermal power 10.7%, nuclear 7.7%, fuel oil 1.6% and cogeneration 2.7%.
As a result of the Company’s strategy of expansion in basic energy activities while respecting the environment, it has become a leader in combating climate change. This will continue in coming years with new renewable energy and hydroelectricity installations coming on stream.
3) IBERDROLA RENOVABLES, INTERNATIONAL GROWTH
The Company consolidated its leadership of the world wind power sector in 2009 * and increased Ebitda by 11.8% to €1,325,3 million, due to increased production and an increasing contribution from international business. Net profit was 4.9% lower at €371.1 million, due to a smaller contribution from Spain.
Production rose 26.4% to 21.490 million kWh, while installed capacity increased 1,450 MW in the year to 10,752 MW, of which more than 50% was outside Spain. A total of 3,591 MW was in the United States, where the Company received $577 million in U.S. Treasury grants in the framework of the Stimulus Bill.
4) UNITED KINGDOM, AFFECTED BY EXTERNAL FACTORS
ScottishPower Ebitda came to €1,451.2 million (-3,5%) in 2009, contributing 21% to the Group total. In local currency terms, Ebitda rose 7.9% to £1,293.5 million.
IBERDROLA’s installed capacity in the UK rose 1.7% in 2009 to 6,818 MW, with the startup of new renewable energy installations. Production was 1% lower at 26,264 million kWh, with a noteworthy 43.8% increase in renewable energy to 1,764 million kWh.
5) UNITED STATES: IBERDROLA USA CONTRIBUTES FOR FULL YEAR
Iberdrola USA contributed €451.3 million to Group Ebitda in 2009, 7% of total gross operating profit.
IBERDROLA’s U.S. presence was also reinforced last year by significant expansion at the renewable energy subsidiary there. The Group now has installed capacity in the U.S. of 4,525 MW, a rise of 715 MW on the previous year, of which 3,591 MW was wind power.
As a result of this increased capacity, IBERDROLA’s U.S. production rose 31.3% to 11,249 million kWh. Energy distributed came to 36,786 million kWh, 18% of all electricity distributed by the Group.
The Company currently operates in 25 States, both in regulated businesses (gas and electricity distribution networks), and also gas storage, conventional generation and wind power.
6) LATIN AMERICA: STABLE CONTRIBUTION
Gross operating profit in Latin America was 3.7% lower at €859.7 million, making up 13% of total Group Ebitda in the period.
With installed capacity of 5,536 MW, production rose 2.5% to 38,160 million kWh, 26.7% of total Group output. Distributed energy rose 3.3% to 3,.895 million kW, 15.5% of the total.
* Source: Bloomberg New Energy Finance