Business outlook for year confirm profit growth estimates announced in February
Iberdrola obtains first quarter net profit of €869 million (+3.3%)
- €2,008 million net operating profit (EBITDA) affected by atypical factors that will be offset during the year. Excluding non-recurring issues and despite exchange rate impacts, Ebitda remains stable compared to the same period of 2015
- Recurring net profit grew by 5.1% to €837 million, on track to meet annual targets
- Investment rose by over 50% in the period, up to €896 million, of which over 70% is allocated to growth
- The company has about 5,000 MW under construction in onshore and offshore wind farms and generation power plants with long-term contracts
- Having completed the integration between UIL Holdings and Iberdrola USA, AVANGRID, which is listed on the New York Stock Exchange, ends the quarter with a net profit of US$212 million, up 24% on the first quarter of 2015
- As agreed at the General Shareholders’ Meeting and in keeping with the commitment to offer an annual return of €0.28 gross per share against 2015 earnings, the Board of Directors has approved a new edition of the ‘Iberdrola Flexible Dividend’ scrip dividend scheme, offering at least €0.123 gross per share plus €0.03 gross per share in cash, bringing the second tranche of shareholder remuneration to €0.153 gross per share, a 7% increase from July 2015
- The Board also implemented the 2.46% share capital reduction approved at the AGM to keep total number of shares in Iberdrola at 6.24 billion
Iberdrola recorded a net profit of €868.7 million in the first quarter of 2016, a 3.3% increase on the same period of the previous year.
Net operating profit (EBITDA) stood at €2.008 billion in the first three months, down by 6%.
This drop is due to atypical factors recorded in the quarter, which are likely to be offset during the year. Of the total EBITDA, 73% comes from regulated businesses or long-term energy contracts, in keeping with the group’s strategy.
If aforementioned atypical factors and exchange rate impacts are excluded, EBITDA remains stable (+0.2%).
Recurring net profit, at €836.8 million, is 5.1% higher in keeping with the profit growth estimates announced by the company last February.
Funds from operations (FFO) are up 2.3%, rising to €1,6959 million, while net investments are up 51.1%, standing at €895.6 million, 71% of which were allocated to growth projects.
By business area, 91% of investments were allocated to regulated activities.
Iberdrola also continues to make progress in its commitment to efficiency and on a like-for-like basis – excluding costs related to the merger with UIL Holdings Corporation – net operating expenses remain stable (-0.1%).
Progressing 2016-2020 outlook
Iberdrola is progressing implementation of its Strategic Outlook for 2016-2020, which was presented last February. The company is now working on the construction of new wind farms and regulated generation power plants, with a total capacity of nearly 5,000 megawatts (MW).
The renewable business continues to increase installed capacity which reached 14,812 MW by the end of the first quarter.
Iberdrola laid the first foundations of 350-MW Wikinger offshore wind farm, located in the Baltic Sea off the coast of Germany. It also entered an agreement with Siemens for the supply of the wind turbines for East Anglia One, a 714-MW project located in the North Sea.
In onshore wind, the company has commissioned the Black Law Extension in the United Kingdom. A further 1,346 MW are currently under construction: 744 MW in the United States, 428 MW in the United Kingdom and 174 MW in Brazil.
As well as the new wind power developments, there are also important regulated generation projects underway in Mexico. In Q1 Iberdrola commissioned the 48-MW Ramos Arizpe cogeneration power plant. It was also recently awarded the contract for the construction of the Topolobampo II combined cycle power plant (887 MW).
In Mexico, the company has projects under construction for an aggregate 2,478 MW which, by the end of 2018, will bring Iberdrola’s operating capacity to 8,000 MW.
In the Networks business, the highlights for the period were the approval by the Spanish National Commission for Markets and Competition (CNMC) of the proposed remuneration for 2016 of distribution activities in Spain; the go-ahead from the FERC (U.S. Regulator) to the project to improve the electricity transmission grid in New York State; the expansion of Cooper’s Mills substation in Maine; and progress made in the United Kingdom on transmission and distribution projects and the new revenue models for distribution service upgrades.
Results by business
The EBITDA recorded by Iberdrola in the first quarter of the year – €2.008 billion – was primarily affected atypical factors such as the eco-tax reversal in the Extremadura region. These factors will be offset over the course of the year.
By area, Networks EBITDA amounted to €932.4 million in the period (-3.7%). There was a notable increase in the United States, where the EBITDA for the business rose to US$226.6, up 5.8%, following the merger of UIL Holdings Corporation and Iberdrola USA to create AVANGRID.
In Spain, the EBITDA for Networks stands at €387.4 million (-2.9%), whereas in the United Kingdom it is £222.9 million (-3.6%) and in Brazil it amounts to RS$221.1 million (-5%).
Generation and Retail was affected by the lower gas trading activity in Spain. EBITDA stands at €640.6 million (-18.1%). The breakdown for the various countries is as follows: €296.1 million in Spain (-31.5%); £173.5 million in the U.K.; US$113.1 million in Mexico (-15.3%) and US$18.5 in the U.S. and Canada.
Renewables performed well in the quarter, with EBITDA rising by 3.1% to €441.6 million. In Spain, the higher output (+9.4%) drove EBITDA up by 16.8% to €174.3 million. The business is also performing favourably in the United States and in the RoW division, with EBITDA values of US$115.3 (+30.1%) and €29.3 million (+4.1%) respectively.
The Renewables business remains stable in Latin America, with an EBITDA of €24.5 million. In the United Kingdom, the lower output (-26.8%) had a negative impact on EBITDA, which dropped by 24.7% down to £83.8 million.
AVANGRID, the company resulting from the merger between Iberdrola USA and UIL Holdings Corporation, which is listed on the New York Stock Exchange with a market cap of some US$12 billion, also announced profits for the first quarter of the year. IBERDROLA’s North-American subsidiary posted an EBITDA of US$575 million (+8%), with increased revenue in all its businesses and a net profit of US$212 million, up 24%1.
1 Results expressed according to US GAAP standards.
Maintaining solid financials and achieving a ratings upgrade
Iberdrola’s management has enabled the company to continue to maintain a strong balance sheet. The same conclusion was also reached by the credit rating agencies Standard&Poor’s, which recently upgraded the company’s rating to BBB+ with a stable outlook, and Moody’s, which maintained a Baa1 rating with a positive outlook.
Iberdrola’s net financial debt stands at €28.27 billion at the close of the quarter, compared to the €26.30 billion recorded in March 2015, not including UIL Holdings Corporation – if included it would have been €28.62 billion. If we leave aside the impact of the consolidation of UIL Holdings Corporation, debt would have dropped by 1.2% to €25.98 billion. On a like-for-like basis, leverage stands at 41.3%, compared to 41.7% in the first quarter of 2015.
There have also been positive changes in the financial ratios on a like-for-like basis. Net debt/EBITDA is 3.77; funds from operations (FFO)/ net debt is 21.8% and retained cash flow (RCF)/ net debt is 19.2%.
Iberdrola also continues to shore up its liquidity position, which amounts to some €8.5 billion at the close of the first quarter, enough to cover its finance needs for 24 months.
The group continues to restrict its net financial expenditure, which has dropped 52.6% on the same period of the previous year, down to €140.1 million.
Support from the General Shareholders’ Meeting and shareholder returns
Iberdrola’s General Shareholders’ Meeting was held on 8 April last at the Euskalduna Palace in Bilbao with an attendance of 77.9% and an average of 98.9% voting to support Board proposals.
With the backing of the shareholders, the group’s Board of Directors has signed to a new edition of the Iberdrola Flexible Dividend scheme. Next July, the company will be offering its shareholders the possibility of receiving at least €0.123 gross per share, as well as €0.03 gross per share in cash, bringing the second tranche of shareholder remuneration to €0.153 gross per share, a 7% increase from July 2015.
These amounts are in addition to the €0.127 gross per share paid last January, which means that Iberdrola is making strides in its commitment to offer annual shareholder returns of at least €0.28 gross per share against 2015 earnings.
The Board of Directors also approved a 2.46% reduction in the share capital of Iberdrola, with a view to keeping the total number of the company’s shares at 6.24 billion.
Company confirms outlook for 2016
The levels of performance expected from the businesses in the remainder of 2016 mean that IBERDROLA is in a position to reaffirm its outlook for the end of the year, with an estimated increase in profits of around 5%.
In particular, Iberdrola expects a positive performance in Networks, and for Generation & Retail and Renewables to improve on or at least maintain the results obtained the previous year.
In the case of AVANGRID, the company has also improved its outlook and expects an increase in earnings per share (EPS) for this year, rising to about US$2.10 or US$2.20 per share in 2016, compared to the US$2 per share initially forecasted.