By: Reuters – Spain’s Iberdrola (IBE.MC) will invest 47 billion euros ($47 billion) in electricity networks, renewable energy production, and customer businesses over the next two years but protecting its balance sheet is a key focus, its chairman said on Wednesday.
Iberdrola is pushing to remain one of the leaders in global renewable power at a time when utilities are facing a challenging transition away from fossil fuels, accelerated by the need to cut energy dependence on Russia.
In a strategy update, Iberdrola said 57% of the investment, or 27 billion euros, would be in electricity networks in Britain, Brazil, Spain, and the United States.
It said 85% of that investment had been secured, with deals already closed or expected to be closed next year.
Some 17 billion euros of the 47 billion total investment will go into renewables. Nearly half of that will be spent on offshore wind.
In its last strategy update, Iberdrola said it planned to invest 75 billion euros in renewable energy, grids, and retail operations from 2020-2025.
“We are in the middle of a storm…the main driver of our strategy update is to protect balance sheet solidity,” executive chairman Ignacio Galan told a capital markets day in London.
Goldman Sachs analysts said they had expected Iberdrola to announce slightly lower investments due to rising funding costs, a balance sheet reaching full utilization, and regulatory uncertainty.
Italian peer Enel, which controls Spanish utility Endesa, has said it plans to spend 160 billion euros from 2020-2030 to become a green ‘super major’, of which 70 billion would be spent on renewables to triple capacity to 120 gigawatts (GW).
Iberdrola said it aims to become carbon neutral by 2030 and reach the tougher net zero emissions standard by 2040.
“The global investment plans we have set out today will help us to bring more self-sufficiency and resilience against potential energy shocks in the countries where we operate, by reducing their dependency on oil and gas and by continuing their path to Net Zero,” Galan said.
Iberdrola currently has 40 GW of renewables capacity, new chief executive Armando Martinez told the company’s capital markets day in London.
The company plans to deliver 52 GW of newly installed renewables capacity by 2025, he added. Over half of the new capacity is already secured and around 95% of the production in 2025 is contracted.
The target has been reduced from 60 GW previously and its 2030 renewables capacity target has been reduced to around 80 GW from 95 GW previously, analysts at Jefferies investment bank said.
Iberdrola’s Martinez said there were still constraints from permitting processes for renewables and the company is taking a selective approach to developing the best quality projects.
Net profit should increase to 5.2-5.4 billion euros by 2025 from an expected 4-4.2 billion euros in 2022, Iberdrola said.
It also aims for earnings before interest, taxes depreciation, and amortization (EBITDA) of 16.5 billion-17 billion euros by 2025, up from 13 billion euros in 2022 and above the analyst consensus of 12.6 billion euros.
Shareholders are expected to receive between 0.55 and 0.58 euros per share by 2025 after Iberdrola set a payout ratio of between 65% and 75% of earnings.
Iberdrola’s share price rose by around 1% to 10.16 euros by 1000 GMT.