The controversy of Spain’s Iberdrola speaking English

First rank of international journalists, analysts and investors attended on Wednesday in London Iberdrola’s presentation of their 2013 results as well as the strategy for period 2014-2016.

Basically, last year’ results agree with anaysts’ expectations and reflect te consequences of the sector regulatory reform. Iberdrola’s Ebitda reduced by 7% to €7,200 million after tax charges in Spain doubled to€1,000 million and the contribution of Brazil, one of the company’s main markets, decreased due to currency effects.

Iberdrola has its business divided into three different blocks: Networks, Generation and Supply and Renowables. The first fell 2% in Ebitda to €3,700 million for Brazil currency devaluation and tariffs. As regards Generation and Supply t registered good results in gross margin, although its Ebitda reduced by 14% to €2,000 million mainly because of taxes and the weakness of pound sterling against euro. Finally, Renowables division dropped by 3% at an Ebitda level to €1,600 miilion  since the increase of electricity generation and taxes in UK, US and the rest of the world could not compensate changes in Spain’s laws as well as currency effects.

The heart of the question comes with the company’s strategy plan for next two. Iberdrola announced investments amounting €9,600 million (of which €4,400 million are assigned to growth operation) will be adressed to countrys having an stable and attractive legal Framework, mainly to bussiness of networks and renowables, and specially to UK, US, Brazil and Mexico. And here it is when those words from president about the company’ s “nationality” came out. Mexico will receive 23% of Iberdrola’s investments, US about 17% and UK no more and no less than 41% of overall figures. Only around €1,500 millions will arrive to Spain, just 15% of total amount. This means a decrease of 24% against €2,000 million of previous  years plan.According to Sánchez Galán, they will be destined to maintenance “ so that consumers can have the best services.”

Analysts in Madrid has read the results presentation in very technical terms and seemgly agree that the company bets for a conservative strategy with no relevant changes and forecast new drops in 2014’ results for the impact of the energy refor. They prices Iberdrola’s shares between 4,15 to 5 €, very near its fair value, after results’ presentation.

The announcing of Iberdrola’s investment shift of destination has been interpreted obviously as a response to the energy reform having place in Spain. The country’s energy industry says that problems of Spain’s electricity system and of energy high prices underlie on regulated assets,not on energy costs or the working of wholesale market that the government wants to reform.

Spanish Minister of Industry José Manuel Soria of course has denied on Thursday that Iberdrola’s decision to cut investments in Spain has nothing to do with government energy reform, since the company has been reducing “thousand of millions  euros” since year 2009, and not only in Spain but also in the UK and US.

Sánchez Galán also assured he felt very “proud” to be Spanish and his relation with the Spanish government is “kind”, although he is most concerned with those of countries where the company has presence such as UK, US or Mexico.

About the Author

Julia Pastor
Julia Pastor has broad experience in business writing for Consejeros Media Group at Consejeros, Consenso del Mercado and The Corner. Previously, she worked for the financial news agency GBA and contributed to El País Business. She holds a Master's in Financial Journalism and a degree in English from the Complutense University in Madrid.

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