Iberdrola Raises First Half 2008 Profit By 78% To €1,959 Million, Driven By New Businesses
The Company advances towards meeting objectives set in the 2008-10 Strategic Plan
IBERDROLA RAISES FIRST HALF 2008 PROFIT BY 78% TO €1,959 MILLION, DRIVEN BY NEW BUSINESSES AND INTERNATIONAL
Earnings per share rose 78% to €0.39 in the first half
POSITIVE BUSINESS PERFORMANCE
All areas performed well, especially new businesses and international which account for nearly two thirds of Ebitda
ScottishPower’s contribution increased to 27% of total Ebitda while Iberdrola Renovables exceeded forecasts with a profit of €194.2 million
Traditional business in Spain, receptor of more than half investments over the past 12 months, contributed 36% of Ebitda compared to 99% in 2000
KEY OPERATING ASPECTS OF THE FIRST HALF
Electricity production rose 27% to 69,158 million kWh, with power stations located outside Spain for the first time generating half of the total.
The Company continued to concentrate on clean energy, with 39% of output emission free worldwide and 66% in Spain
STRONG JANUARY-JUNE GROWTH
Ebitda rose 36.5% to €3.28 billion, product of investments in renewables and international business, while traditional business in Spain showed modest growth
Financial strength was sustained, with a gearing of 41.7% and ample liquidity to cover investments envisaged under the 2008-10 Strategic Plan
IBERDROLA’s focus on new business, especially renewable energy, as well as on international expansion, which have combined to position the Company among the largest energy groups in the world, bore fruit in the first half of 2008.
Building on last year’s integration of ScottishPower and the stock market listing of IBERDROLA RENOVABLES, the Group has achieved record results for the first half of 2008 with a net profit of €1,959 million, up 78% on the same period of 2007.
This advance reflects positive trends in all businesses, especially international where ScottishPower generated €898 million in Ebitda, or 27% of the Group total, and IBERDROLA RENOVABLES which was ahead of forecasts with a net profit of €194.2 million, a rise of 325%.
IBERDROLA’s strategic focus has been vindicated by these strong results, achieved in a period marked by rising fuel prices and preparation for the elimination in Spain of the industrial tariff, which accounts for 50% of the total market.
Ebitda rose 36.5% to €3,280.4 million, of which nearly two-thirds (60%) came from renewable energy and international which between them accounted for 95% of the growth in this item. Traditional business in Spain, which received nearly half of all investments in the last 12 months, accounted for 36% of Ebitda against 99% in 2000. Sales rose 79% to €12,021.7 million, net operating profit (Ebit) by 39.4% to €2,367 million, net profit by 78% to €1,959.3 million and earnings per share by 78% to €0.39.
Group production rose 26.7% to 69,158 million kilowatt hours (kWh) in the first half of 2008, of which more than half, for the first time in IBERDROLA’S history, was generated abroad. The Company has continued to diversify and increase its generating capacity worldwide, with a total of 40,822 megawatts (MW) installed, 3.7% more than the same period last year.
The improved results not only reflect sustained investments over the past few years, both in organic growth and acquisitions, but are also the product of continued efficiency gains. This is in large part due to positive trends in basic margin, which rose 42.8% to €5,138.8 million, increasing faster than net operating costs (+39.6% to €1,489.2 million).
IBERDROLA has reinforced its solid financial base with a gearing of 41.7%, excluding the impact of the tariff deficit, in spite of heavy investments (€5.5 billion in the past 12 months). It not only enjoys a solid A rating, but also enjoys a comfortable situation in treasury liquidity that at the end of June stood at €11.4 billion, ample to meet the objectives of the 2008-10 Strategic Plan.
In Spain, the period was significant for the elimination of electricity tariffs for large customers, which account for 50% of the total market, a development which will help towards eliminating the tariff deficit that has accumulated over the past few years. IBERDROLA has signed more than 18,000 contracts to date with industrial clients representing 10,000 GWh in consumption.
The Company’s performance in 2008 underlines the value of the strategy undertaken over the past few years, and in particular in 2007, when IBERDROLA established itself as one of the world’s largest electricity groups. Financial accounts for the period, in which cash flow rose 33% to €2,279 million, bear testimony to the the potential of a major energy group with a focus on the Atlantic Area (Europe-North America-Latin America).
The platform was laid in 2007 with the friendly integration of ScottishPower, agreement to buy Energy East (which is expected to be completed this summer if regulatory conditions are acceptable) and the stock market listing of IBERDROLA RENOVABLES. Last year, the Group also announced its 2008-10 Strategic Plan, continuing the path initiated in 2001 and setting investments of €24.2 billion to continue growth in basic energy, both in Spain and abroad.
Company objectives centre on a growth strategy based on clean generation, with an expected 18,000 MW in renewable capacity in 2012 and an additional 3,000 MW in hydroelectric power to be installed in Spain, Portugal and Brazil. IBERDROLA at the same time ratifies its commitment to quality of service.
Key aspects of the first half of 2008
With the integration process now complete, the Scottish company has become one of the principle engines of growth in the Group. Ebitda for ScottishPower came to €898.2 million in the first half and accounted for 27.4% of the total for the Group. Significant efficiency improvements have been achieved, driven by synergies and cost savings.
2) IBERDROLA RENOVABLES
The Company consolidated its leadership in the world wind power sector* in the first half of 2008, during which it registered a net profit of €194.2 million, an increase of 325% over the same period last year and ahead of Company projections. Ebitda rose 121.4% to €571.2 million.
IBERDROLA RENOVABLES added 851 MW in new capacity in the first half, of which 82% was outside Spain, at a rate of construction above the historical average, bringing capacity to 7,949 MW at the end of the period. It currently has 1,686 MW under construction and another 526 MW to start in the third quarter, thereby ensuring the goal of installing 2,000 MW a year is achieved. Production rose 83.5% to 8,558 million kilowatt hours (kWh), with significantly higher load factors (+8,8%).
The Company has expanded its project pipeline in the period, as well as diversifying it geographically, lifting the total to 54,100MW and thereby ensuring growth objectives will be met for at least seven years. It has meanwhile covered its turbine requirements to 2012 as a result of contracts signed with leading suppliers.
IBERDROLA RENOVABLES has thus built the platform to meet the objectives of its 2008-12 Strategic Plan, which contemplates investments of €18.8 billion with a view to achieving net profit of approximately €400 million this year and €1 billion in 2012.
3) MORE CAPACITY, PRODUCTION AND DISTRIBUTION
Following the integration with ScottishPower, IBERDROLA has diversified and expanded its generating capacity around the world. It ended the first half of 2008 with installed capacity of 40,822 MW, 3.7% more than the same period of 2007. By energy source, combined cycles accounted for 31.2%, hydro for 23.8%, renewables for 19.5%, thermal energy for 11.5%, nuclear for 8.2%, fuel oil for 4.4% and co-generation for 1.4%.
Capacity in Spain rose from 25,754 MW to 26,010 MW, while the UK acccounted for 6,567 MW (+2.6%), Latin America for 5,553 MW, the U.S. for 1,983 MW (+70.8% and other countries for 710 MW (+47.6%).
This significant increase in capacity has led to Group-wide production rising 26.7% to 69,158 million kWh in the first half of 2008. Of this total, 39% was emission-free, a proportion that rises to 66% in Spain, a direct result of the Company’s focus on clean generating technology. Production in Spain came to 33,473 million kWh, a rise of 2.5%.
Future Projects: 2008-10 Strategic Plan
IBERDROLA’s ambitious international goals are ratified in the 2008-10 Strategic Plan, approved unanimously by the Board last October and now in force. This ratifies a commitment to investors, customers, employees and society in general, with a growth model based on renewable energy, in particular wind power, and quality of supply.
IBERDROLA’s new strategy, which continues the path successfully initiated more than six years ago, envisages €24.2 billion in investment on basic energy. The Company plans to invest €17.8 billion of this in organic growth (2.4 times more than that invested between 2004-06), and €6.4 billion to acquire Energy East.
With implementation of the Strategic Plan and continuing efficiency improvements, the Company expects to more than double the main lines of its income statement with net profit exceeding €3.5 billion in 2010, multiplying by 2.1 the €1.66 billion recorded in 2006. The main drivers will be IBERDROLA RENOVABLES and the consolidation of ScottishPower and Energy East.
* Source: New Energy Finance (December 2007)
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