Europe’s largest electricity company, Iberdrola, posted a net profit of 2,760 million euros in the first three months of 2024, almost double the 1,485 million recorded in the same period of the previous year. The results include two important extraordinary items: the sale of its combined cycle (gas) plants in Mexico, which has brought a capital gain of 1,165 million to its income statement. Without this operation, the jump in net profit would have been 27%.
The energy company foresees a net profit of more than 5,000 million at the end of the year, a new historical high, “thanks to the strong operating performance, the contribution of investments and the contribution of the new regulatory frameworks in the network business.” “The good evolution of our businesses in the first quarter, together with the growth of investments already underway, also allows us to improve our forecasts for the entire year 2024,” points out its president, Ignacio Sánchez Galán, in the note sent to the first time this Wednesday to the National Securities Market Commission (CNMV).
On a purely operational level, Iberdrola’s gross operating result (ebitda) – excluding the operation in Mexico – showed profits of 4,140 million euros in the first three months of the year, with two important vectors of growth: the improvement of the electrical networks, with a substantial contribution to the remuneration received in the United States, the United Kingdom and Brazil, and the “largest contribution” of renewable generation, with a maximum of production of a decade in the Iberian Peninsula – thanks, above all to hydroelectric power—and an equally notable jump in the United Kingdom, Germany, France and the United States.
More profits in Spain despite electricity at zero price
Despite the collapse of electricity as the quarter progressed, the electricity company’s ebitda in Spain grew almost 3% compared to the same period in 2023. Both the sales figure (revenue) and its gross margin were recorded, however , two falls of 27% and 8%. For two reasons: the worsening of the gas business—which a year ago was extraordinary and has now deflated—and the drastic drop in the price of electricity. As this newspaper revealed last Sunday, the company plans to close all of its combined cycle plants on the Peninsula before 2030.
Asked about the recent streak of minimum prices in Spain, the CEO, Armando Martínez, stated that “it was clear that something like this was going to happen.” Despite everything, the executive has limited this circumstance – negative values included in various sections of the day – to “very specific situations”, such as the very high non-manageable hydroelectric production. “When these phenomena disappear, prices will return to normal.”
Debt down, investment up
In addition to fattening its income statement, the sale last fall of its entire fossil business in Mexico has allowed Iberdrola to reduce its debt for the first time in several quarters. Net financial debt, a metric that several analysts had focused on in recent times, went from just over 47,800 million at the end of 2023 to just 45,000 million as of March 31, 2024. The operation also allowed a reduction in all its leverage ratios.
The Spanish electricity company’s investments grew by 36% in the first quarter, to a new record of almost 2.4 billion euros, with the networks – a much more stable business, with recurring regulated income – taking just over half of the total. For its part, Iberdrola allocated just over four out of every 10 euros to renewables, with offshore wind in its focus. By geography, just over a third of its investment went to the United States; 20%, to the United Kingdom and Spain, respectively; 15% to the Latin American markets in which it operates; and the remaining 10%, to continental Europe and Australia. Throughout 2024, the electricity company’s investment will be around 12 billion.
“Electrification is unstoppable,” said Sánchez Galán in the conference with analysts. “Starting in 2030 there will be a very strong boom: for transportation, for refrigeration and heating, for industry and for data centers. The panorama is going to change drastically,” he explained. Iberdrola’s stock closed practically flat in yesterday’s session, with a drop of 0.09% after rising around 1%.