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Iberdrola Sets 2014-2016 Investment At €9.6BN, Centred On The UK, US And Mexico


The Company projects minimum shareholder remuneration of at least €0.27 per share gross


Strategy focused on consolidating financial strength, investing in regulated businesses and abroad with continuing efficiency gains


  • Iberdrola sets goal of reducing debt by €1.8 billion to €25 billion and gearing to 40%
  • The Company will assign the largest share of investments to the UK (41%), followed by Latin America, especially Mexico, next with 23% and the US third with 17%
  • By business area, networks businesses take the biggest amount with 57% of the total, followed by renewable energy (22%) and generation (19%), mainly in regulated activities


  • Net profit was €2,572 million, down 7% and affected by energy reform and fiscal measures in Spain
  • The year was marked by a 33% increase in levies to €1,577 million, of which €1,044 million  were in Spain (+99%)

IBERDROLA plans to adopt the same strategic principles for the 2014-2016 period that have sustained the Company through the global economic and financial crisis: a balanced risk profile, financial strength and operating efficiency to achieve sustainable returns for shareholders.  

In this respect the Company has set an objective for shareholder remuneration of €0.27 per share gross with scope for improvement in line with earnings trends, with a payout of between 65-75%. This is in a scenario projecting a more than 4% annual increase in Ebitda and net profit during the period over 2014 levels.

The Company expects to achieve this with a strategy based on an increased focus on international activity, for which it will invest a net €9.6 billion centred in regulated businesses and on the UK, US and Mexico. It will also continue efficiency programmes and steps to strengthen its financial base with a €1.8 billion fall in net debt to €25 billion at the end of the period.

Focus on markets with stable and predictable regulation

IBERDROLA will carry out an intensive investment programme between 2014 and 2016 amounting to a net €9.6 billion (gross €11.2 billion) focused on projects and countries enjoying stable and predictable regulatory frameworks. Of this amount 46% (€4.4 billion) will be allocated to new infrastructure and the remaining 54% (€5.2 billion) to maintenance and improvements.

The Company will allocate the largest share of investments to the UK with 41%, followed by Latin America (nearly 23%) with most of this in Mexico and the United States (17%).

  • UK: a period of expanded activity in transmission and distribution, as well as in offshore wind energy projects 
  • US: growth in networks and in new onshore wind projects
  • Latin America: the Company will consolidate its position as the largest private sector generator of electricity in Mexico, while in Brazil it anticipates several years of growth in hydroelectric projects. 

Investments will be conditioned on favourable market and regulatory frameworks existing in each country, with a progressive reduction in Spain until the investment climate improves. The negative impact of Spanish energy reforms on Group accounts is projected at €1.31 billion in Ebitda in 2014.

IBERDROLA considers that in many countries in Continental Europe, among them Spain, the worst decisions have been taken in relation to the three basic pillars of any energy policy. Firstly they have created an oversupply leading to the closure of several efficient installations. Secondly, they have incentivised the most expensive technologies such as solar, to the detriment of cheaper ones such as nuclear, hydro and wind. Finally, they have imposed the use of the most contaminating thermal source, coal, instead of modern CCGT  installations.

Group investments will concentrate on electricity transmission and distribution with 57% of the total, followed by renewables with 22%, and other generation with 19%. Regulated businesses - networks, renewables and regulated generation - account for 88% of total net investments.

The Company's central goal is to focus on activities with growth potential, and strategy will accordingly centre on:

  • Generation and supply: growth in this area will come from Mexico and Brazil
  • Networks: the most significant activity will be in the US, the UK and Brazil, with potential opportunities in Mexico. In Spain, work will continue on smart grids through the STAR project.
  • Renewables: new installations in he US, UK, Mexico and Brazil 

Management flexibility, key to future results

IBERDROLA expects Ebitda and net profit growth to come to a significant degree from management decisions on investments in  regulated generation capacity, renewables and networks, as well as in controlling operating expenses and financial costs. There is also a potential improvement in market conditions as a result of increasing costs of CO2 emission rights, making clean technologies, in which IBERDROLA is a world leader, more profitable.

The Company also plans to implement additional efficiency measures aimed at improving the ratio between net operating expenses to gross margin to 29% in 2016. Wage costs will remain stable while the workforce will be reduced to close to 27,000 as a result of natural wastage estimated at 1,000 employees. New hires will only be incorporated to meet the needs of new projects.

Further economies will be obtained by containing external services costs through full development of synergies available from the Single Corporation project which set up global business areas to coordinate activities in each region with a local management focus.

IBERDROLA will cut debt by €1.8 billion to €25 billion with gearing falling from 43% to 40%. The Company will divest assets in non-core businesses and markets totalling €500 million during the three years, to achieve accumulated total divestments of €2.5 billion between 2012-2016.

Financial ratios will be improved under the plan with net debt to Ebitda falling to less than 3.5 times in 2016, while operating cash flow (FFO) to net debt will rise to a little above 22%.

Significant projects during the period:

  • Elecricity transmission: in addition to smart grid development in several countries, IBERDROLA will continue major transmission and distribution infrastructure projects in the US, including the Maine Power Reliability Program which connects to Canada, and the UK with the first subsea HVDC link between Scotland and Wales.
  • Renewable energy: new wind energy capacity will come on stream during the period through offshore projects at West of Duddon Sands (UK), expected to be commissioned in 2014, and new onshore wind farms in the US, UK, Mexico and Brazil.
  • Regulated generation: the Company has major developments under way in Mexico to expand CCGT capacity, with recent project awards at Baja California and Norte III and expansion of the Monterrey plant. In Brazil, through Neoenergia in which Iberdrola has a 39% stake, it will start up new capacity at the Belo Monte, Teles Pires y Baixo Iguaçu hydro projects.

More than a decade of international growth

IBERDROLA has undergone a profound transformation since the beginning of this century, allowing it to become Spain's largest energy group, one of the five largest European electricity companies by market capitalization and the world leader in operating wind energy. The Group has achieved total installed capacity of 45,000 MW and supplies 211,000 GWh a year to around 100 million people around the world.

This achievement has meant investments between 2001-2013 of €80.35 billion, with two defined stages:

  • 2001-2006: a focus on energy business, especially growth in Spain and Latin America. By the end of this period, the Company succeeded in doubling both in size and in results. Installed capacity rose from 16,500 MW to 30,500 MW while net earnings came to €1.66 billion in 2006.
  • 2007-2013: strong international expansion and consolidation of new assets. IBERDROLA integrated ScottishPower, Energy East (now Iberdrola USA) and Elektro in Brazil, as well as managing a significant growth of renewable energy activities where installed capacity stands at nearly 14,250 MW.

2013 net profit €2,571.8

IBERDROLA recorded net earnings for 2013 of €2,571.8 million, a 7% decline resulting from the impact of Spanish energy reform and fiscal measures, while Ebitda was 6.8% lower at €7,205 million of which 77% came from regulated businesses.

Results were significantly affected by a 33% increase in levies to €1,577 million, of which €1,044 million were in Spain. The Group was able to mitigate the negative impact on net earnings from regulatory decisions, which is estimated at €801 million.

Gross margin was flat compared with 2012 at €12,576.7 million with a 6.4% reduction in procurement reflecting lower costs. Net operating expenses were also held close to 2012 levels at €3,795.2 million (+0.2%), as a result of cost control and efficiency programmes.

Levies at group level were 33% higher at €1,577 million, with those in Spain jumping 99% to €1,044 million as a reflection the negative impact of Royal Decree Laws 9/2013 and 15/2012.
Of this amount, taxes on generation and renewables came to €413 million and €73 million, respectively. In the UK they totalled €251 million, while in the rest of the world they came to €282 million.

Operating cash flow was 9.8% lower at €5,619.3 million but exceeded the investment figure for all businesses of €3,053 million.

Solid balance sheet

Prudent financial management enabled the Company to maintain a solid balance sheet. Debt was reduced by more than €2.25 billion over the year with adjusted net debt standing at €26,482 million at December 2013, excluding €1,571 million pending receipt from tariff deficit recoveries. Including this figure, debt stood at €28,053 million, with gearing reduced to 44.2% from 47.7% in 2012.
IBERDROLA improved financial ratios with funds from operations (FFO) to net debt at 20% and net debt to Ebitda and to retained cash flow at 3.9 times and 16.9% respectively.

The Company maintained a solid liquidity position of more than €10.8 billion at the year-end, although levels were beginning to come down with the goal of reducing financial costs.

Key operating aspects during the period


Ebitda from networks businesses was 2.3% lower at €3,685.3 million, due to a 30.2% decline in Brazil which offset an average 5.5% improvement in other countries. Gross margin was 1.7% lower at €5,571.1 million with growth of 2.6%, 3.5% and 3.3% in Spain, UK and US, respectively.

In Brazil, gross margin was down 18.7% despite a 6.5% increase in demand, due to the negative  impact of a tariff review (-€183 million) and higher costs as a consequence of the drought (-€3 million after financing by the Brazilian government) that will be recovered through tariffs in the next few years.


Ebitda from generation and supply came to €2,017.8 million, down 14.3% on the previous year. A 2.1% rise in gross margin to €4,511.6 million and a 3.5% reduction in net operating expenses were insufficient to compensate a 57.7% rise in levies to €999.7 million.

By countries, Spain achieved a 7.8% improvement in margins due to better hydraulic conditions that increased hydro output by 64%, compensating a 44% fall in thermal energy generation and a 12% drop in nuclear output.
In the UK, gross margin was down 3.5%, due to increased non-energy costs related to environmental programmes and energy efficiency, as well as lower coal-fired generation.


Ebitda from renewables was 2.9% lower at €1,573.1 million, while gross margin was 0.9% higher at €2,304.4 million and net operating expenses were down 2.8% at €560.1 million. These results were not enough to compensate for the impact of Royal Decree Laws 9/2013 and 15/2012. Levies during the year rose 93.7% to €171.2 million.

Installed renewables capacity was up 1.5% at 14,247 megawatts (MW), compensating sales of non-strategic renewables assets during the year. Production was up 6.7%.

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