Power Grid

22 Mar 2024

Europe’s Top Utility to Invest $45 Billion With Focus on US Grids

22 Mar 2024  by reuters   

A sign bearing the logotype of Spanish utility company Iberdrola stands alongside an electrical substation, Durango, Spain, January 17, 2024. REUTERS/Vincent West/file photo Purchase Licensing Rights
Spanish renewable energy giant Iberdrola (IBE.MC), opens new tab said on Thursday it plans to invest 41 billion euros ($44.83 billion) over the next three years, with a focus on upgrading and expanding power grids in the United States.

The new plan builds on the strategic shift Iberdrola announced in 2022, when it said it would be taking a more selective approach to renewable energy projects. Italy's Enel (ENEI.MI), opens new tab took a similar step late last year.

The region's two top utilities are attracted by the stable and predictable returns offered by grids, while the renewable sector has been hit by high interest rates, rising debt costs and supply chain issues.

Adapting decades-old grids from the traditional model of large, fossil fuel power plants to wind and solar power generation, as well as building new ones where needed, will require investment of 584 billion euros in Europe this decade, according to the European Commission, and companies like Iberdrola are well positioned to benefit from the grid drive.

Investment into renewables will be channelled into projects already under construction, it said.

Overall net investments for the company will stand at 36 billion euros, since around 5 billion euros will come from partners in renewables.

The plan includes the announced $2.5 billion offer to buy the 18.4% stake in its U.S. subsidiary Avangrid that it doesn't hold.

Europe's largest utility by market cap will continue its push to expand in the U.S., despite the potential for Donald Trump to be elected as president later this year, who could axe U.S. President Joe Biden's green agenda.

The U.S. will get 35% of global net investments, more than any other country.

About 80% of Iberdrola's business in the U.S. is linked to networks, which are regulated by the states instead of the federal government, Executive Chairman Ignacio Sanchez Galan told investors and analysts on Thursday.

Galan had previously said that the U.S. offered the best returns on grids investments.


Overall, Iberdrola will pour 21.5 billion euros into its network business, or around 60% of net investments.

This will help boost the value of its network assets to 54 billion euros by 2026, from the current 42 billion euros.

Renewables will get some 15.5 billion euros, going only to projects already under construction. Approximately 5 billion euros will come from partners.

Offshore wind projects in the U.S., Britain, France and Germany will absorb more than half of the planned renewable budget.

Shareholders will get 11 billion euros through 2026, as dividends will grow in line with net profit.

By the end of the plan, dividends should stand at between 0.61 euros and 0.66 euros per share, a growth of up to 20%, with a floor of 0.55 euros.

Iberdrola expects net profit to grow to between 5.6 billion euros and 5.8 billion euros in 2026, while core earnings - before interest, tax, depreciation and amortisation - are seen at between 16.5 billion euros and 17 billion euros.

Iberdrola shares were up 0.9% in early afternoon trading on Thursday, while the blue chip index Ibex-35 (.IBEX), opens new tab was up 1.1%.

Since the start of this decade, Iberdrola has invested around 41 billion euros.


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