Iberdrola, S.A. (OTCPK:IBDSF) Q3 2023 Earnings Name Transcript October 26, 2023 3:30 AM ET
Firm Individuals
Ignacio Arambarri – Investor Relations
Jose Sanchez Galan – Govt Chairman
Pepe Sainz – Chief Monetary Officer
Gerardo Calatrava – Basic Secretary
Convention Name Individuals
Ignacio Arambarri
[Foreign Language] Good morning, girls and gents. Initially, we wish to provide a heat welcome to all of you who’ve joined us at the moment for our 2023 9 months outcomes presentation.
As typical, we’ll observe the normal format given in our occasions. We’re going to start with an outline of the outcomes and the primary developments throughout the interval, given by the highest govt crew that normally is with us: Mr. Ignacio Galan, Govt Chairman; Mr. Armando Martinez, CEO; and eventually, Mr. Pepe Sainz, CFO. Following this, we’ll transfer on to the Q&A session.
I might additionally like to focus on that we’re solely going to take questions submitted through the net. So, please ask your query solely via our net web page, www.iberdrola.com. Lastly, we anticipate that at the moment’s occasion won’t final greater than 1 hour and quarter-hour. Hoping that this presentation can be helpful and informative for all of you.
Now, with out additional ado, I wish to give the ground to Mr. Ignacio Galan. Thanks very a lot, once more. Please, Mr. Galan?
Jose Sanchez Galan
Thanks, Ignacio. Good morning, everybody, and thanks very a lot for becoming a member of this outcomes presentation. Within the first 9 months of 2023, internet revenue reached EUR3,637 million, up 17%, or 22% excluding noncash tax provision associated to the Mexico transaction, as Pepe will clarify in additional element afterward. EBITDA grew 13% to EUR10,783 million, pushed by our ongoing sturdy operation efficiency, reflecting the upper manufacturing in our core geographies, primarily in renewables, as a result of enchancment in load elements, decrease vitality purchases, and better operational effectivity.
As well as, we proceed accelerating the implementation of our strategic plan with funding of EUR10.8 billion within the final 12 months, because of our means to safe provide chains and safe initiatives. This has pushed 9% enhance in our Networks asset base to virtually EUR42 billion and the addition of three,100 megawatts of latest renewable capability to achieve a complete of 41,300 megawatts globally. On prime of that, we have now continued rising our monetary energy, because of our operational money stream of EUR11.1 billion, resulting in an FFO/adjusted internet debt of 23.2%, with 85% of our debt at mounted charges, excluding Brazil, as , the place regulation offers us a pure hedge to rates of interest, and a liquidity of EUR20.2 billion, sufficient to cowl our monetary wants for 21 months. This set of outcomes has allowed the Board of Administrators to approve an interim dividend of EUR0.2 per share, 11% greater than final 12 months.
As you’ll be able to see, we have now continued delivering sturdy development and profitability and decreasing threat profile, following the important thing pillars of the technique offered in our final Capital Day a 12 months in the past, monetary energy as key precedence, development concentrate on networks with selective funding in renewables, and an additional enhance in our presence in high-rating international locations.
EBITDA is up 13% to 10.7 10,783 million. In vitality manufacturing and prospects, renewable output and costs proceed to normalize in European Union. And we additionally recovered the money equivalent to the deficit gathered over earlier 12 months within the retail enterprise in U.Okay., the place enterprise circumstances are enhancing. In Networks, we had optimistic impression from an annual tariff enhance in U.S., U.Okay. and Brazil. In all these geographies, regulatory frameworks are additionally defending us from excessive inflation. And we have now continued enhancing our operational efficiency.
On this enterprise, our funding led to 9% enhance in our regulated asset base, as I discussed, to EUR41.3 billion with a balanced breakdown. The U.S. represents 31%; U.Okay., 25%; and Spain and Brazil, 22% every. We now have already closed the tariff framework for 96% of our asset base to 2025, securing future predictable and secure development throughout all geographies. Within the case of distribution, within the U.S., the New York regulator has authorized a brand new charge case till April 2026 for our distribution firms on this state would signify virtually 60% of our AVANGRID regulated asset base. Whole funding as much as 2026, together with 2022, has been acknowledged, reached $6.4 billion with a base return on fairness of 9.2% and an incomes share mechanism above this stage. This charge case additionally improved the restoration of bills associated to a storm and reconciliation of economic bills. As well as, it contains threat mitigation measures for uncollectibles and could have retroactive impact from Might 1. This can end in mixed optimistic one-off impression of $136 million after tax in native [GIP] (ph) that can be registered within the fourth quarter. AVANGRID additionally acquired approval for the brand new charge case till June 2025 in Maine, the place the corporate has 14% of its regulated asset base. A brand new tariff was additionally authorized in Connecticut till June 2024 for an extra 15% of its asset base. This charge case has been appealed by the corporate to enhance some circumstances. In Brazil, the method for renewal of distribution concession for 30 years is progressing, following the cheap proposal made by the Ministry of Mines and Power.
During the last month, we have now additionally moved ahead in a number of development alternatives in transmission, which might signify EUR5 billion within the second half of the last decade. In New York, the Local weather management in Neighborhood Safety Act will drive important extra funding till 2030. Development works within the NECEC interconnection line in Maine have been resumed in August, and AVANGRID expects to achieve business operation by 2025. And within the U.Okay., official resolution on the ultimate plan for the Jap Hyperlink 1 interconnection venture is predicted in November. Let me remind you that the regime already authorized by the regulator will permit income recognition for the reason that starting of the development.
In renewables, we have now continued rising via a technique of selective funding enhance in initiatives that enhance our era and provide stability. In onshore wind and photo voltaic, within the final three months, we have now doubled our quarterly set up piece, leading to 2,700 megawatts added within the final 12 months, to achieve an onshore capability of 40,000 megawatts contracted in high-rating international locations. As we add 4,400 megawatts at the moment below development, we’ll attain a complete of seven,100 megawatts, reaching 60% of our goal by 2025. In offshore wind, our efficiency over the past month reveals that this expertise can create important worth with our disciplined strategy to acquisition of seabed rights, [indiscernible] administration, path to market and development. We could have 1,100 new megawatts operational by 2025. 500 megawatts corresponds to Saint-Brieuc in France with greater than half already exporting vitality at the moment, 475 megawatts to bulk Baltic Eagle in Germany, and 800 megawatts Winery Wind One in U.S. We simply closed $1.2 billion [indiscernible], which is the primary one for an offshore wind farm and the biggest ever made for a single renewable facility within the nation. These three initiatives have secured revenues for 100% of their vitality for 15 to twenty years, including EUR800 million of EBITDA from 2025-2026, on the highest of the EUR700 million we obtained from our present offshore wind farms since 2022.
In 2026, we’ll put in operation in East Anglia THREE within the U.Okay. with 1,500 megawatts and [STFD] (ph) for 15 years, and Windanker in Germany with 300 megawatts of capability, and its income is totally secured for 15 years via company PPAs already signed, including one other EUR400 million of EBITDA every year from 2026-2027. The EBITDA contribution of all these new initiatives is according to the decrease funding per megawatt. We expect 40% lower in unitary CapEx in comparison with the initiatives in superior development that can be operative earlier than 2025. In solely three years, we’ll multiply our present put in capability by 4x, reaching shut to five,000 megawatts. They’ll contribute to virtually EUR2 billion every year of EBITDA when accomplished in 2026-2027. We additionally proceed rising our pipeline to safe optionality for additional selective development, focusing in initiatives with the potential to ship anticipated returns. We now have 3,600 megawatts already with consent, together with Commonwealth Wind and Park Metropolis Wind in U.S., East Anglia ONE North and East Anglia TWO within the U.Okay. And we have now secured seabed rights for different 8,000 megawatts in U.Okay. and United States. Lastly, we proceed to develop alternatives in international locations like Japan, Sweden and Norway.
The common growth and seabed prices for all this pipeline is round EUR60 per kilowatt, 10x lower than the EUR600 paid only for seabed within the final public sale in U.S. and Europe. We’ll proceed shifting forward on this venture below the identical pointers: concentrate on high-rating international locations, self-discipline in worth creation, minimizing expenditure within the ultimate funding resolution, a conservative strategy of provide chains, wonderful venture and development, and growth of hubs to scale back working and upkeep value.
As increasingly renewables enter the system to switch thermal era, storage could have a key position to modulate provide and demand in day by day cycles, absorbing vitality throughout the central hours of the day via the extreme photo voltaic PV manufacturing over demand and delivering it within the evenings when demand will increase and photo voltaic manufacturing stops. Every of those two intervals takes six to 11 hours per day. As well as, storage may also handle an occasional extra of wind vitality. Additionally in weekly cycles, the fixed stream of renewable vitality over the week and the deep change in demand between weekdays and weekends is creating a chance to retailer extra of vitality on Saturdays and Sundays and steadily launch it from Monday to Friday. One thing related occurs in longer seasonal summer time, winter cycles to the climate adjustments.
Pumped hydro is the one expertise that may present all these providers in optimum financial phrases, as it could retailer vitality for lengthy cycles in comparison with the 2 to 4 hours of batteries, though each applied sciences can present [indiscernible] to stability provide and demand on a real-time foundation. All this makes hydro pump and storage a key expertise for the vitality transition. And like in networks or offshore wind, this may indicate important funding and alternatives. Iberdrola face this situation from a singular place. A number of years in the past, greater than 20, we began reworking our hydro crops with reversible generators. And at the moment, we have now greater than 100 million kilowatt hours of pump and retailer capability in operation within the Iberian Peninsula, 20 million kilowatt hours below development, an extra pipeline of initiatives up — for as much as 150 million kilowatt hours in varied planning phases. We’re additionally increasing battery storage in different geographies like United Kingdom and Australia.
Concerning routes to market, as of September, we have now already bought 90% of vitality manufacturing as much as 2025, and we anticipate to shut the remaining 10% throughout the coming months. As well as, we have now greater than 300 terawatt hours linked to long-term contracts for the second half of the last decade, most of them multi-country agreements with giant world firms like Vodafone, Meta, Amazon Net Companies, and so on. This offers us secure and predictable revenues and visibility for the long run and maximizes returns for brand spanking new initiatives like our German offshore wind farms, that are totally contracted via long-term PPAs.
Transferring to provide chains, we have already secured 100% of our renewable funding to 2025. And our two new offshore wind initiatives will enter in operation in 2026. And in networks, 85% of our must 2025 are lined as effectively.
We now have additionally achieved our goal for asset rotation and partnership of EUR7.5 billion two years upfront, permitting us to scale back our monetary wants and enhance profitability, with companions like the biggest sovereign funds on the earth like QIA, Norges, GIC or Masdar, or monetary establishments like Credit score Agricole and Mapfre and vitality firms like BP. We anticipate to proceed closing offers with these companions within the close to future in transmission, onshore and offshore renewables, or electrical energy mobility. Our transaction with Mexico Infrastructure Companions is on monitor for a closing earlier than year-end, and we have now solely pending the allow from the competitors authority. The asset swap with Eletrobras in Brazil was closed a couple of weeks in the past, permitting to consolidate 100% of the Dardanelos hydro plant with a optimistic noncash impression of BRL1.5 billion. In Brazil, the alliance with GIC to co-invest in transmission was already materialized, together with a primary fee of BRL1.1 billion. Our settlement to co-invest EUR1.2 billion in renewable with Norges Financial institution can also be going effectively with the primary proceeds acquired, and we’re getting ready an enlargement of this partnership to incorporate new co-investment. As well as, the co-investment settlement associated to our German offshore wind farm, Baltic Eagle, has simply acquired the allow from nationwide authorities, and we’re working to increase this alliance to different geographies with Masdar.
Lastly, our three way partnership with BP for the deployment of charging infrastructure in Spain and Portugal for EUR1 billion has already obtained the overseas funding authorization and is shifting forward to safe the permits from EU competitors authorities. All in all, we anticipate to gather EUR6 billion of extra money from this transaction within the fourth quarter of this 12 months, which, along with money stream era, will permit us to shut the 12 months with a internet debt of solely EUR42 million to EUR43 million, according to final 12 months ranges.
We now have additionally preserved our monetary ratios with FFO to adjusted internet debt at 23.2%, and our liquidity exceeds EUR20 billion. Primarily based on this monetary place, final Tuesday, the Board of Administrators authorized an interim dividend of EUR0.2 per share, with a rise of 11% versus EUR0.18 paid final 12 months. This can — this could permit us to exceed once more in 2023, the dividend ground of EUR0.5 per share dedicated for 2025.
Now, let me analyze the current settlement reached by the European Council on electrical energy market reform. This [indiscernible] is according to the proposal from the European Fee and the European Parliament offered earlier than summer time and the suggestion from totally different trade associations like [indiscernible] Europe. The Council, the Fee and the Parliament acknowledged that sufficient functioning of the market over the past years and proposed some new measures to extend long-term contracting, diminishing volatility available in the market with an rising penetration of renewables and keep away from future market intervention. No caps to nuclear or renewable applied sciences are allowed, and controlled contracts at mounted costs are solely allowed on a voluntary foundation.
As , the dialogue of learn how to — the usage of potential proceeds from the distinction between the costs mounted and these contracts and market costs have been lastly solved, giving some flexibility to member states all the time below the supervision of European Fee to keep away from market distortion. The proposal from the three EU establishments additionally established clear and customary guidelines to outline an emergency disaster, together with sustained minimal market value of EUR180 per megawatt hour throughout no less than six months. The European Council has additionally included measures to advertise capability mechanism and adaptability and acknowledged the necessity for greater funding in networks, according to the Parliament’s proposal. All in all, the reform is shifting towards a system based mostly on market ideas and long-term contracting, as we all the time defend it. We anticipate dialogues to maneuver forward within the coming weeks.
As well as, simply a few days in the past, the Fee launched its wind energy motion plan and a particular communication on offshore renewables. We’re analyzing its content material intimately, however we welcome the hassle to advertise the expertise through which Europe has been a pacesetter for many years. We expect it covers optimistic elements like enhancing allowing and provide chains. It additionally talked about the relevance of networks. Lastly, we additionally welcome the rise in offshore wind goal capability.
So, I’ll now hand over to the CFO, Pepe Sainz, who will current the group financials [indiscernible] additional element.
Pepe Sainz
Thanks, Chairman, and good morning to all people. Because the Chairman has defined, EBITDA was 13.2% as much as EUR10.8 billion, and reported internet revenue grew 17.2% to EUR3.6 billion, 22% up for those who exclude the EUR160 million one-off tax impression of the Mexico transaction that can be reversed as soon as we shut the deal. FX evolution had a adverse impact on our EBITDA outcomes. The pound and the greenback depreciated in opposition to the euro by a median of two.9% and 1.7%, whereas the true barely appreciated. However, the FX impression is greater than lined on the internet revenue stage as a consequence of our FX derivatives.
Revenues elevated — revenues, sorry, decreased 1.9% to EUR37.2 billion, primarily as a consequence of vitality manufacturing and shoppers in Spain. Procurements fell extra, 14%, to EUR20 billion. And final 12 months, we had to purchase electrical energy at very excessive costs as a consequence of renewables and nuclear shortfall in Spain. This 12 months, the state of affairs has been reverted as a consequence of a normalized manufacturing. As a consequence, gross margin rose by 17% to EUR17.2 billion.
Reported internet working bills elevated 14.5% to EUR4.3 billion. However excluding EUR83 million U.S. pension one-offs that had a optimistic impact final 12 months, EUR90 million linked to reconciliation results within the U.S. which might be acknowledged at gross margin stage and different one-off adverse impacts of EUR78 million within the U.S. and U.Okay., internet working bills elevated 6.5%. Reported internet personnel bills grew 11.9%. However excluding the U.S. pension optimistic one-off in 2022 and different minor objects, it grew 5.2%. Reported exterior providers elevated 11.4%, and 9.4% excluding the above-mentioned reconciliation impacts and the adverse extraordinaries within the U.S. and the U.Okay.
Analyzing the outcomes of the totally different companies and beginning by Networks, its EBITDA reached EUR4.4 billion, affected by a number of nonrecurring objects, as we’ll clarify. In Spain, EBITDA elevated 20% to EUR1,247 million, affected by a EUR203 million adverse one-off in 2022 associated to a authorized case that was reversed on the finish of 2022. Lately, the Spanish Supreme Courtroom has dominated in our favor on this case. So we expect to gather round EUR230 million. Excluding the authorized case, EBITDA would have been barely optimistic. Within the U.Okay., EBITDA was up 13.3% to GBP 767 million, because of the ED2 relevant from April onwards and better asset base, particularly in transmission, and regardless of a adverse GBP 36 million that we have now accounted on this quarter, and this can be a one-off.
In Brazil, EBITDA fell 3.7% to BRL7,553 million as a consequence of decrease contribution from the transmission enterprise that in Q3 included a one-off of round BRL1.2 billion, principally pushed by a transmission line, Vale do Itajai, that we’re going to declare to [Enel] (ph) as the additional prices that we’re accounting are associated to some delays within the authorizations linked to COVID-19. So the — we had delays within the authorizations coming from the Brazilian administration, and we’re claiming that to Enel, and we expect to recuperate a part of this adverse one-off. It is usually affected by the consolidation of transmission belongings included within the GIC deal. And it’s partially compensated by the rise within the distribution tariffs in Brazil that gave us one other BRL700 million optimistic.
Lastly, within the U.S., IFRS EBITDA was 41% all the way down to USD 953 million as a consequence of a adverse impression of $550 million optimistic one-off booked in 2022 linked to the popularity within the P&L of — in IFRS of regulatory belongings and $87 million from pension provisions, each accounted in IFRS however not in U.S. GAAP. Because the Chairman has mentioned, within the fourth quarter, we anticipate to recuperate $150 million in IFRS and $195 million in U.S. GAAP on the EBITDA stage from the New York charge case approval as its results are acknowledged from Might 1 of this 12 months.
Power manufacturing and buyer enterprise EBITDA grew 34% to EUR6,374 million. In Spain, the EBITDA was EUR3,155 million, 37% up, with greater manufacturing, particularly in hydro and in nuclear, and decrease vitality purchases at a lot decrease costs than we needed to pay final 12 months, and better gross sales within the free market as a result of achieve in market share from 25% to greater than 27% in 12 months. EBITDA features a 1.2% tax in revenues that we account within the levies merchandise and the quantity is EUR213 million. Within the U.Okay., EBITDA greater than doubled to GBP 1,354 million, because of the complete assortment of GBP 321 million of 2022 tariff deficit and higher margins in our retail enterprise. Larger offshore wind manufacturing partially compensated decrease onshore wind output.
Within the U.S., EBITDA elevated 5.1% to $562 million, pushed by a 4.1% greater output as a consequence of new put in capability and higher margins, however negatively affected by the cancellation value of Park Metropolis and Commonwealth offshore initiatives for $40 million. With these funds, all the prices for the cancellations of those initiatives have been already accounted. In Mexico, EBITDA fell 8.9% to $645 million as a consequence of decrease contribution from renewable belongings and contracted crops, partially compensated by the brand new capability in operation since Might 2022. In Brazil, EBITDA fell 16% to BRL1,345 million as contribution from new renewable capability in operation is offset by decrease contribution from thermal enterprise that final 12 months was exceptionally sturdy. Lastly, in the remainder of the world, EBITDA fell 5% to EUR302 million as a consequence of decrease costs, partially compensated by the next manufacturing as a consequence of excessive — to bigger put in capability.
EBITDA was up 20% to EUR6.8 billion. D&A plus provisions grew 2.7% to EUR4 billion, primarily as a result of greater asset base and exercise and unhealthy debt evolution as a consequence of elevated buyer billing. Internet monetary bills rose EUR287 million to EUR1,666 million. Debt-related prices grew EUR374 million, EUR158 million as a result of greater common internet debt and EUR229 million as a result of greater value of debt, 75 foundation factors to 4.98% that however is under the 5.05% that we had at June. Excluding Brazil, the price of debt was 3.71%. Value of debt in Brazil is beginning to fall as it’s linked to inflation. Value of debt ex-NEO is under the three.8% that we introduced to be anticipated this 12 months in our Capital Markets Day in 2022, because of our mounted charge coverage and the PNM delay. The upper monetary bills have been partially offset by EUR87 million optimistic non-debt-related outcomes, primarily linked to FX hedges.
Our reported credit score metrics remained strong. 12 months FFO elevated 3% to EUR11.1 billion, or 11% if we exclude hydro canon restoration in 2022. Adjusted internet debt grew to EUR47.9 billion. In Q3, internet debt is impacted by dividend, tax funds and FX. As a consequence, FFO/adjusted internet debt stands at 23.2%. Adjusted internet debt to EBITDA is 3.3x. And our adjusted leverage ratio was 44%. Ratios can be greater by year-end as we anticipate debt to finish the 12 months between EUR42 million and EUR43 billion.
2023 and 2024 maturities can be totally lined, because of already signed financing and anticipated proceeds coming from asset rotation and courtroom rulings that can permit Iberdrola to recuperate EUR6 billion. Let me level out to the 2 current sentences that we have now acquired, the primary one of many European courts relating to goodwill. And the second, beforehand talked about, in Networks in Spain will permit Iberdrola to recuperate EUR1 billion within the subsequent 12 months.
Publicity to new fixed-rate financing in 2024, if we exclude the PNM transaction can be restricted to round EUR1 billion as a result of ahead begin swaps already signed again in earlier years at decrease value than at the moment. Upcoming asset rotation and partnerships and selective development present extra flexibility to fund the investments. Our liquidity place of over EUR20 billion, because the Chairman has talked about, covers 21 months, and the common debt life is of six years. Our diversified portfolio offers flexibility to focus on totally different markets, reaching very favorable circumstances. Our 2023 financing of EUR6 billion is coming from seven totally different markets or sources of funds. Through the 9 months of 2023, Iberdrola did EUR5.3 billion of inexperienced financing, reaching EUR53 billion of ESG financing. Iberdrola continues to be the main personal group in inexperienced bonds.
Internet revenue grew 17% to EUR3,637 million. Fairness strategies outcome elevated 24%, because of the Brazil hydro plant asset swap with Eletrobras that the Chairman has talked about in his presentation. That is accounted in Q3, however I’ve to — I wish to point out and to emphasize that this offsets the Brazilian transmission one-off on the EBITDA stage of over EUR200 million. So, one optimistic offsets the one-off adverse that we have now accounted within the EBITDA for the transmission traces. Earnings tax can also be affected by the optimistic one-off accounted in 2022 in Brazil and by the adverse one-off in Mexico to be reversed hopefully on the finish of this 12 months, or we anticipate to reverse it on the finish of this 12 months. Excluding the Mexico one-off, internet revenue grew 22%.
I’ll end my a part of the presentation remarking that structurally, Iberdrola enterprise is protected against inflation and rate of interest rises. As you’ll be able to see on the slide, three out of our 4 community companies are completely or partially adjusted to inflation, and our vitality manufacturing and buyer enterprise is partially protected in inflationary environments instantly and not directly. As well as, our financing to be near 100% mounted by the year-end, excluding Brazil, clearly, reduces the financing value enhance. To conclude, Iberdrola is effectively positioned for the upper for longer rate of interest atmosphere.
Thanks. And now, the Chairman will conclude the presentation.
Jose Sanchez Galan
Thanks very a lot, Pepe, on your readability and your presentation. In November 2022, you keep in mind, we offered in London a technique prioritizing monetary energy. In an effort to shield ourselves from macro instability to have, on the identical time, the chance to proceed rising. One 12 months later, the figures we have now offered at the moment affirm that our evaluation was proper, and we’re executing our plan forward of estimates. Because of this, at the moment, we’re rising as soon as once more our 2023 internet revenue development outlook to double digit, excluding capital features from asset rotation. It’s excluding capital achieve for asset rotation.
Within the subsequent three months, we anticipate to proceed enhancing our efficiency, based mostly on ongoing funding in Networks with impression of the New York charge case and tariff will increase in U.S., Brazil and U.Okay., as effectively the rise in manufacturing, pushed by new capability that can proceed [indiscernible] to scale back vitality buy, and the continuing enchancment of retail situation, primarily United Kingdom, and in addition anticipate to keep up internet debt at EUR42 billion, EUR43 billion as a result of money stream in operation, asset rotation and partnerships. All that is based mostly on the supply of the important thing pillars offered in our Capital Market Day of final November.
We’re delivering development in Networks, rising our regulated asset base by 9% to EUR41.3 billion near 2025 goal. We’re additionally delivering selective development in renewables to optimize our supply-demand stability with our 2025 put in capability goal effectively superior, particularly in offshore wind. We proceed rising our concentrate on high-rate international locations with greater than 80% of our EBITDA coming from Continental Europe, the U.Okay. and U.S. and Australia. And we’re optimizing much more our monetary energy, as Pepe talked about, because of working money stream and the money proceeds from asset rotation anticipated by December, which can be ample to cowl all our 2024 debt maturities. All these permit us to reaffirm at the moment our 2025 targets and our dedication to proceed rising our dividends according to outcomes. We’ll replace you on all our outlook for the approaching years within the subsequent Capital Market Day, can be held in March 2024.
Thanks very a lot, and now we’ll reply any questions you’ll have. Thanks.
Query-and-Reply Session
A – Ignacio Arambarri
Completely different monetary professionals have requested the query that I’ll now put to the senior managers which might be attending this occasion. Gonzalo Sanchez-Bordona from UBS; Peter Bisztyga, Financial institution of America; Jose Ruiz, Barclays; Meike Becker,HSBC; Manuel Palomo, Exane BNP; Pedro Alves, CaixaBank; Rob Pulleyn and Arthur Sitbon from Morgan Stanley; Javier Garrido, JPMorgan; Fernando Lafuente, Alantra; Alberto Gandolfi, Goldman Sachs; James Model, Deutsche Financial institution; Fernando Garcia, Royal Financial institution of Canada; Ahmed Farman, Jefferies; Jorge Alonso, Societe Generale; Jorge Guimaraes, JB; Javier Suarez, Mediobanca; and eventually, Marc Ip Tat Kuen from Berenberg.
First query is expounded to the steerage 2023. Are you able to assist us perceive the drivers of the steerage improve? Are you able to give us a sign of EBITDA for the complete 12 months?
Jose Sanchez Galan
So I feel I attempted to clarify throughout my presentation. So I feel simply to attempt to summarize, once more, I feel they’re a brand new investments in Networks. Asset base has already grown by 9% year-on-year, reaching EUR41.3 billion RAB. In Brazil, there are new charge circumstances in Brazil, which offer greater EBITDA in second half towards the primary one everywhere, Coelba, Cosern in April; Elektro in August; and [indiscernible] Brasilia I feel from August as effectively, or one thing else. In U.S., as I discussed, the brand new charge case of New York, that are already affecting positively, being retroactive from Might 1. I feel it is producing an impact of $150 million, $190 million, which Pepe talked about. Maine, as effectively is from July. U.Okay., we have now extra revenues for an funding in RIIO-T2 and RIIO-ED2. I feel in manufacturing and prospects, I feel normalization of wind issue — we have now already had very, very low wind think about most international locations within the first half of the 12 months. Additionally now, we have now already seen lastly rain in Spain.
We now have already higher hydro circumstances as a part of the pumping and storage. We now have been making now — we have now already as effectively, so extra rain. And hydro reserves are in line and even greater than the common of historic we had already. We now have already put in serves, I discussed, 3,100 megawatts extra capability of renewables, and we’ll put some extra in service throughout the coming months. We proceed recovering the tariff deficits of U.Okay., which — noticed an adjustment as effectively on the value cap. And as Pepe talked about, it is the optimization of the monetary profile, I feel, which helps the; the asset rotation and partnership, that are making then our wants financially diminished. And people are the primary issues — the consequence is then the 2023 internet revenue steerage to double-digit development, and that’s what makes already this consideration.
Ignacio Arambarri
Associated to the identical subject, which one-off must be excluded from the brand new 2023 internet revenue steerage?
Jose Sanchez Galan
What must be excluded? I feel the asset rotation, sure. I feel that is clear. So I feel that, as I discussed earlier than, in these outcomes are by no means included any particular capital, extraordinary capital features. So I feel that’s simply excluding the whole lot we are able to have already for capital features for an additional provision that we are able to make for an additional half. But it surely’s primarily capital features — asset rotation capital features.
Ignacio Arambarri
Subsequent query is expounded to internet debt steerage. What’s your internet debt expectation for 2023, as we talked about within the presentation? And will you please assist us to construct a bridge to the EUR42 billion, EUR43 billion steerage internet debt from present EUR48 billion?
Jose Sanchez Galan
Pepe, are you able to reply that?
Pepe Sainz
Mainly, what we expect is that the online debt from — within the earlier presentation, we have been speaking about EUR42 billion. Now, we have now had some impression from FX because the greenback is barely stronger than what we had anticipated. So, that was the change from EUR42 billion to EUR42 billion, EUR43 billion. Mainly, what we expect is to gather round EUR6 billion coming from our Mexican deal earlier than the tip of the 12 months. So, that can drive the autumn in internet debt from these ranges to the EUR42 million, EUR43 billion that we’re mentioning.
Ignacio Arambarri
Please clarify the nonrecurring impacts of Brazil in 9 months that you simply talked about in your speech.
Jose Sanchez Galan
I feel, Pepe, you’ll be able to actually clarify that.
Pepe Sainz
We now have two impacts of an identical quantity. One is a adverse one which has to do with some additional prices that we’re accounting in our transmission enterprise, principally pushed by one transmission line. And an vital a part of these prices are coming from the truth that throughout COVID, the Brazilian administration was closed. So we had an vital delay on the authorization, particularly environmental authorizations, and that delay clearly impacted our prices. And clearly, that has — the delay within the authorization that we had not anticipated as a result of COVID is a vital cause of an vital a part of this delay. However by way of numbers, 200 — over EUR200 million should do with additional prices that we’re accounting on this quarter in transmission line, and we’re accounting this on the EBITDA stage. And an identical quantity we’re accounting on the fairness line and principally has to do with a revenue that we’re accounting as a result of trade in our hydro crops. We now have truly, because the Chairman has mentioned, obtained management of Dardanelos. And we’re giving to Eletrobras — it was — and Teles Pires, okay? And that’s — which might be the 2 impacts.
Ignacio Arambarri
Subsequent query is expounded to AVANGRID. Are you happy with the efficiency of AVANGRID within the first 9 months of the 12 months?
Jose Sanchez Galan
Nicely, as we talked about, I feel the outcome has been impacted by the delay in New York charge case, which lastly has been authorized, which is already retroactive from Might, as Pepe talked about already. However I feel Peter, you wish to add something. I feel we expect EUR190 million additional, which can be accounted within the fourth quarter of this 12 months, so — which I feel that makes already the outcomes much like these we expect.
Ignacio Arambarri
Subsequent, how does the rise in rates of interest have an effect on the profitability of belongings and initiatives below implementation and the way does it have an effect on the price of debt?
Jose Sanchez Galan
So I feel it was already talked about. Round 85% of our debt is already at mounted charge, excluding Brazil. And I feel as soon as we money the operation of Mexico, I feel, it is round 100%. Pepe, right to me the numbers, if I am not right.
Pepe Sainz
Sure, that is proper. And within the venture suite, after we begin a venture, we are likely to have our debt already mounted. And we’re not anticipating a rise within the monetary value this 12 months from the degrees that we’re proper now. So we had a complete value of $498 million, and we expect to finish the 12 months in an identical time period.
Ignacio Arambarri
Just a little bit extra element on the EUR1 billion money influx you anticipate for courtroom rulings.
Jose Sanchez Galan
So I feel that may be a optimistic information. I feel we have been investing in accordance with the Spanish legislation, as most Spanish firms. The worldwide enlargement has been already with sure tax allowances. And I feel that we already noticed a choice on the European Fee, who warns in opposition to this factor. However lastly, the courtroom — the European courtroom — the European Supreme Courtroom was already saying that we did the issues correctly. And I feel we have been pressured to repay already the quantity we had already been pressured to pay upfront. So I feel that represents one thing like EUR600 million to EUR700 million plus taxes, and which I feel we expect to money within the subsequent months. I do not know, Gerardo, you wish to add something on that one.
Gerardo Calatrava
Sure, it’s right, Chairman. And the European Supreme Courtroom has determined that there was acknowledged, however we had authorized confidence. And we must be paid these EUR700 million, even within the case that Europe Fee decides to approve — to attraction, sorry, the choice of the courtroom.
Jose Sanchez Galan
You can’t already…
Gerardo Calatrava
And the opposite case is the case that has been resolved by Supreme Courtroom of Spain concerning the remuneration of the distribution firms, and the administration considers that we have now been over — paid or remunerated. However the Supreme Courtroom has determined that we have now been remunerated accurately over the past 9 or 10 years. And the monetary results are that we have now to recuperate EUR230 million in money. That no-negative impression can be produced in P&L. And we’ll keep away from a lower of EUR500 million in our asset base.
Ignacio Arambarri
Subsequent query is expounded to Spanish politics. Are you able to please touch upon the most recent settlement between PSOE and Sumar to increase the vitality tax? What’s your understanding on the proposal included to set a minimal tax charge of 15% for firms?
Jose Sanchez Galan
Nicely, first, we’ll anticipate — when the federal government can be fashioned, we’ll see what’s the ultimate program of the federal government. Now, it is already — the dialogue between totally different companions — potential companions of the federal government. And so they nonetheless are pending on one other one. And after we will see the entire program, we’ll make the feedback about that one.
Ignacio Arambarri
Subsequent is the market reform, European market reform. May you please share your views on the lately agreed market reform?
Jose Sanchez Galan
Nicely, I feel I used to be attempting to be very clear on that one. I feel the European Council settlement, I feel, is according to the proposal of the Fee and the Parliament, which I feel that is optimistic, is constant — in our opinion, that’s constant, balanced and centered, I feel, and defending PPAs as key mechanism to supply secure costs for the long run. We now have defended that for a lot of, a few years. It is defending intervention, no caps. — have to please present market pricing about stations, which I feel that is optimistic, has a typical and clear goal to outline what’s a disaster state of affairs, which I feel not everybody can actually outline what’s vitality disaster. I feel it is a nationwide intervention mechanism. I feel one is, a typical disaster state of affairs can be outlined by European Fee. CFDs or public sale cannot be reworked. CFD continues to be voluntary. I feel it is together with sure — a couple of specs for sure member states, particularly France, on present and new capability and learn how to redistribute the variations between the surplus of CFD towards the value agreed to keep away from market distortion.
And there are optimistic elements as effectively just like the promotion of capability mechanism and assist already flexibility measures. And one thing which is essential, which I feel once more I feel within the final communication of the European Fee is insisting, has been our flag for a few years, the necessity of investing extra in networks. So I feel European Fee is defining extra funding in networks. Our worldwide company is defining to take a position extra in networks. And I used to be already utilizing, in my earlier outcome presentation, the phrases of the previous Vice President of Europe Fee that with out networks, there can be not renewable as a result of renewable won’t be already within the transition. So community is a key pillar of the brand new transition. Now it is totally outlined, and that’s included as effectively on this presentation.
So I feel the evaluation, for my part, is optimistic. It is defending market mechanism, no intervention and extra readability for no matter issues associated, how the European market has to carry out and learn how to incentivize the funding in renewables, in networks and introducing capability mechanism to make already to maintain the lights on.
Ignacio Arambarri
We now have now a number of questions associated to the P&M deal. What’s the newest on P&M acquisition? Which is the anticipated timing for conclusion? Would Iberdrola might contemplate to revisit the provide if present processes should not profitable? And will you additionally share the plan B if P&M shouldn’t be profitable?
Jose Sanchez Galan
Pepe or Gerardo?
Gerardo Calatrava
So, as , proper now, we expect for the Supreme Courtroom of New Mexico to resolve. As soon as the Supreme Courtroom decides, whether it is profitable for our curiosity, then it should go it to the Fee of New Mexico that has to approve it. We expect that to occur in all probability throughout the first half of subsequent 12 months. And relating to the case, the plan B is principally to inform that at this second, we have now a number of alternatives proper now within the U.S. We now have EUR6 billion to take a position with the New York charge case. We’re additionally, as , restarting NECEC, the transmission line. We now have an enormous alternative of repowering in our renewable belongings. And with the most recent information on the offshore auctions that we have now seen, we have now nonetheless plenty of prospects of creating offshore within the U.S. So I feel that there’s a lot. We have by no means seen so many alternatives within the U.S. as we have now proper now.
Ignacio Arambarri
Now it is a query associated to U.S. offshore. Have your views in U.S. offshore wind modified? Do you see troubles on different builders as a chance for Iberdrola? Will you take part within the accelerated New York actions?
Jose Sanchez Galan
Nicely, as I discussed throughout my presentation, we have now a optimistic view on the way forward for offshore wind. We now have already, as I discussed, the initiatives that are in development. All of them has PPA signed for 2026, 2027. That’s going to generate EUR1.2 million, EUR1.3 million additional extra EBITDA to make a complete contribution of our offshore enterprise by — at the moment, EUR700 million or EUR2 billion or near EUR2 billion EBITDA by 2026-2027. As , we have now extra websites secured with permits with very diminished seabed value, very aggressive, as I discussed, is on the vary of EUR60 per kilowatt to our EUR600, even in some circumstances, much more than that, as I am speaking a couple of quantity vary. I feel sure folks already pay over EUR1 billion per megawatt, so — which I feel in our case, could be very low cost or very aggressive. Additionally, I feel, the current auctions in New York are already making extra life like costs. So — and as effectively, has launched one thing which we have been claiming, which is revision method within the second the FID is made, so which I feel, sure, you’ll be able to modify the value in accordance with the value of the totally different elements of the CapEx within the second you begin the development. So I really feel and proceed to really feel optimistic. And that is why I feel we’re persevering with this one. However I feel what’s vital is to transmit all our offshore wind farm, that are below development, 100% CapEx secured. 100% of the export value is already mounted the phrases and the circumstances. And I feel that that is why I feel we have now no threat in these ones for already making that this venture can be totally profitable. And for the remaining we have now are the event, we have now a terrific alternative, seeing strategy of New York.
Others, I feel, it is — Eire lately as effectively made change as effectively to the way in which the public sale is made. And we hope that Britain, within the subsequent choice as effectively, goes to vary the phrases for making already some form of revision method for making already one thing extra life like as an alternative to go to a set value as we have been already prior to now.
Ignacio Arambarri
The following query is expounded to the identical subject that you’ve got already talked about about Park Metropolis Wind and Commonwealth Wind. What’s the forecast replace for Commonwealth for each offshore energy crops within the U.S.?
Jose Sanchez Galan
Nicely, I feel — each I feel, we’re free for going to the following public sale. And so actually the following actions are already in phrases — enticing phrases. We’ll be in situation to take part if we see the circumstances are actually enticing. However I feel we’re completely two initiatives, that are already very low value and really low CapEx expended to these [indiscernible] 10 occasions lower than most of our colleagues and rivals. And they’re completely free to go to the public sale if the phrases of the public sale are already sufficient enticing, which I anticipate they are going to be.
Ignacio Arambarri
Subsequent is expounded to the provision chains relating to offshore. Of the venture anticipated to be in operation by 2026, out of this, what’s the proportion with the CapEx and the financing secured?
Jose Sanchez Galan
So, I insist once more, I feel the CapEx is totally secured, closed, signed and agreed. So I feel there’s not any threat on that one. I feel 100% of the provision chains is granted and 100% of the phrases of the export of vitality is totally agreed. So I feel we’re — for example, a lot of these, the generators are below set up on this second. I feel within the case of Winery Wind, the primary turbine has been put in. Within the case of Saint-Brieuc, I’m going personally visiting the set up, and they’re a part of the wind farm it’s supporting electrical energy already now. Within the case of Baltic Eagle as effectively, I feel they’re — already virtually all the inspiration are accomplished. The substation is there. So which I feel is — the issues are already going in accordance with schedule and in accordance with value. So I feel that’s what I can already say. I feel we’re very assured and the issues are going effectively as a result of we have been very energetic in signing all phrases, both in financing, both in buying tools, both in set up tools to make already the issues in accordance with the phrases of the public sale or with the schedule. I might say, as an example, within the case of Winery Wind, I feel we simply signed lately already the ITC, the biggest ITC ever been signed — the tax fairness, sorry, the biggest tax fairness ever been signed for a venture in United States. So it is $1.2 billion we have now signed for this one, which I feel that give — already gave us the consolation that not solely technically, the issues have been clearly outlined and ready, however as effectively the finance is already secured.
Ignacio Arambarri
Subsequent is asset rotation. The presentation talks about additional asset rotation. Is there a euro goal you take note of?
Jose Sanchez Galan
Asset rotation, so effectively, I feel we make already simply — after we offered in our Investor Day final 12 months, the EUR7.5 billion of the funding in asset rotation, sure of, for example, of you, who’re skeptic concerning the numbers, so as soon as once more, we demonstrated after we’re committing one thing, we make already {that a} actuality. So that’s already accomplished on this second. However I feel we proceed already seeing the probabilities and alternatives below the identical profile. The profile is, how we are able to speed up the — we have now loads of initiatives, as Pepe talked about already. And I feel we wish to optimize the monetary profile utilizing partnership on this one, which may be good for our companions and good for us as effectively. So I feel we’re in talks with for different ones as effectively.
And I feel by way of the asset rotation, all the time, we’re open to see. There are alternatives that someone can be able to pay for a few of our belongings, greater than these, then we are able to already anticipate to [indiscernible]. However I feel it isn’t — there should not any new targets on that one. A goal is a goal. However I feel there are alternatives. We’re open to search for these alternatives. However within the case of partnership, I discussed, I feel we’re already very proud to have already a tier 1 of companions through which, with these ones, we have already signed an alliance for already extending and increasing our present joint ventures for broader and bigger initiatives collectively, so — which I feel in all probability within the subsequent few months, we’ll announce one other new venture that we are able to already make — lengthen the present aliens with our present companions.
Ignacio Arambarri
Query 15. Are you continue to planning to promote a minority stake in AVANGRID’s onshore renewables? Can we anticipate one thing till year-end?
Gerardo Calatrava
We’re analyzing alternatives. And effectively, that is one which we have now analyzed and we’re ready to see the potential provides and — however we’re not anticipating to see something earlier than year-end.
Ignacio Arambarri
Concerning the Mexican deal, there have been press studies that Iberdrola will reinvest the sale proceeds in Mexican renewables. May you please clarify whether or not there’s any particular dedication to reinvest proceeds from the sale of Mexico within the nation?
Jose Sanchez Galan
Nicely, there should not any obligations of settlement to reinvest in Mexico. Saying that, I feel that Mexico has been, for years, a strategic just for us. It continues to be a strategic nation for us. I feel we’ll be greater than delighted to have the chance to proceed increasing our footprint within the nation. The very fact we’re protecting virtually 50% of our — after the transaction, 50% of our belongings within the nation, principally in renewables. We now have a number of initiatives in renewables. Sure of these initiatives in renewable, I feel, this settlement has been put in service just like the [indiscernible] wind farm, which is Santiago, which is 140 megawatt, 130 megawatt, now’s in operation. And I feel we have now one other venture. We’re already asking for permits for an additional one. We can be greater than delighted to proceed making issues there. However I feel there should not any obligation, however we’ll be greater than delighted to proceed investing in Mexico as we did within the final 20 years.
Ignacio Arambarri
One other one in concrete relating to East Anglia THREE. Are you able to touch upon the opportunity of promoting the minority stake in East Anglia THREE as per press rumors?
Jose Sanchez Galan
Nicely, as I already talked about, I feel we’re very proud to have already this bench of tier 1 of companions. I feel it is — every of the initiatives I feel which we have now already on this second in development can already — we are able to already doubtlessly attain settlement on that one. Within the case of East Anglia THREE, we’re speaking with a few of these to see the opportunity of already making some partnership. However I feel nothing nonetheless is concluded. However I feel no matter of our present initiatives are already capable of make some form of partnership with sure of these what we have now already this strategic alliance. On this specific case, that a type of can already develop into one in every of our companions as effectively.
Ignacio Arambarri
Subsequent query associated to capital allocation. May you present an replace by way of your capital allocation following current disposals? Has one thing modified versus November 2022 Capital Markets Day?
Jose Sanchez Galan
Pepe?
Pepe Sainz
Nicely, we’re not altering the capital allocation technique principally to proceed investing in networks and in renewables with a selective strategy as we talked about. So nothing has modified, and we proceed with the identical technique.
Ignacio Arambarri
Subsequent is expounded to PPAs effectively tax charge. What’s the anticipated tax charge for full 12 months 2023? And likewise, what might be anticipated for 2024?
Pepe Sainz
Nicely, we’re all the time someplace between 23% and 24%. So that’s principally what we expect.
Ignacio Arambarri
And eventually, the final query is about renewables enlargement. There was a number of dialogue lately a couple of potential slowdown in renewables enlargement in energy era. Is there any change in your willingness to spend money on renewable?
Jose Sanchez Galan
No. Nicely, I feel it is — I wish to insist what was our technique after we outlined final 12 months. And I wish to insist our precedence is to maintain and to keep up our monetary solidity. The second was to develop in Networks to be — as a precedence and to be selective in renewables. And third one is to — already to look already to take a position principally in international locations with excessive ranking. And that’s our technique. We proceed on the identical foundation. First precedence, monetary solidity. Pepe has already insisted throughout the entire presentation about what we’re doing for protecting our monetary solidity. So we’re protecting already — we try that by the year-end, our debt will stay on the identical stage of earlier 12 months, even when we’re paying — rising our dividend, even we’re investing on the vary of EUR11 billion, EUR12 billion throughout the interval, because of asset rotation and due to the money stream generated. Second, our precedence is funding in networks.
Why Networks? First as a result of it is already a secure, predictable and since we have now a service obligation, and I each issues, service obligation and worthwhile, secure and predictable makes ourselves prioritize that one. And that is why we’re rising our asset base over the past 12 month by 9% on this one. In renewables, we’re investing. We put already in service 1,300 megawatts. We now have 7,100 megawatts in development. We now have already virtually all our — we have now all our offshore wind farms who’re within the plant already now within the late stage of development, which I feel they’ll begin producing money stream by 2024 and they’ll attain virtually EUR2 billion by 2026-2027. However we’re extra selective. And I feel that was the technique, selective within the sense of on the lookout for these that are extra worthwhile and on the lookout for companions so as to not cease the development however already to proceed within the phrases which won’t have an effect on our monetary solidity and our profitability.
Ignacio Arambarri
Okay. Thanks, Mr. Chairman. Now please let me now give the ground once more to Mr. Galan to conclude this occasion.
Jose Sanchez Galan
So, thanks very a lot on your consideration. And I feel, as all the time, our Investor Relations crew can be obtainable if we’re — we’ll not be sufficient clear in a few of our questions. I hope that we tried to be very clear. However you probably have any out, I feel the Investor Relations crew can be able to reply to all of you. So thanks very a lot. And I feel put into your agendas, March subsequent 12 months is our Investor Day already can be held in London. Thanks. Thanks very a lot.
