New capacity brought on stream in the nine months totalled 1,254 MW, with another 1,405 MW under construction, supporting annual objectives.
Strong cash flow generation (20% increase to €741 million) and increased efficiency following a 3.8% cut in operating cost per megawatt and cost control. – End 2010 capacity projected at 12,500 MW, with up to 1,500 MW installed in 2011 of which around half will be in the U.S.
Future growth will be focused on Brazil, Mexico, Eastern Europe, the UK and Germany, as well as the U.S. Balance sheet strength reinforced with a gearing of only 27.9% and total assets of nearly €24 billion at the close of the third quarter.
Iberdola Renewables recorded net earnings of €179.4 million in the first nine months of 2010, a rise of 7.1% that was affected by declining performance in the gas business. Ebitda rose 19.4% to €972 million, gross margin by 18.6% to €1,411.6 million, of which half came from international business, while revenues rose 17.7% to €1,597.8 million and cash flow by 20% to €741 million.
This growth was built on geographic and business diversification, increased production and capacity, and improved efficiency, compensating for a declining performance in the gas business which was affected by narrowing spreads. Ebitda for the renewables business rose 25.3% to €1,005 million and net earnings by 25.2% to €217 million.
Operating performance in the period consolidated Iberdola Renewables’ world leadership both in capacity and production. Electricitty generation rose 20.2% to 18,091 million kilowatt hours (kWh) due to increases in the U.S. (29.6%), Spain (18.2%) and the rest of the world (21.9%). Wind energy, the most mature and competitive renewables technology, continued to be the pillar of the company’s business accounting for 96% of production.
Installed capacity came to 12,006 megawatts (MW) while operating capacity rose 16.1% to 11,434 MW with 52.8% of the increase coming from the U.S. The company put 1,254 MW into operation in the period and more than half total capacity is now outside Spain as a result of the strategy of diversifyng assets in markets with higher growth potential.
Iberdola Renewables again improved efficiency levels, with a 3.8% decline in cost per average operational megawatt. The company’s sound financial foundations were consolidated with total assets of €24 billion and a grearing of 24.7%, one of the lowest in the sector.
Key aspects of the period
1. United States: increased production and capacity
The U.S. business was among the key factors in performance during the period with 855 MW coming on stream in the past 12 months, making up 52.8% of the increased capacity of the Group during the period and accounting for the fastest growth in the U.S. sector.
Installed wind farm capacity in the U.S. came to 4,314 MW divided among 47 wind farms in 23 states, with another 717 MW currently under construction. Electricity production rose 29.6% to 7,430 kWh, 41% of total company output.
The company has to date received €1 billion in U.S. stimulus grants, guaranteeing growth projects in the country until 2012. It has signed Power Purchase Agreements (PPA) so far this year for around 600 MW at an average price in excess of previous years, ensuring returns on energy installations in the country. In addition, the company has a project pipeline for photovoltaic energy of more than 400 MW which will be developed following criteria of sustainability and return.
Among significant events in the third quarter was the startup of the Renewables Control Center (CORE) at Portland, the most advanced installation of its type in the U.S. controlling 800,000 messages from the company’s 2,500 wind turbines across the country.
2. United Kingdom: major offshore wind farm projects
Through its ScottishPower Renewables subsidiary, the group is the leading developer and generator of land-based wind energy in the country with 910 MW installed, an increase of 108 MW in the period. The company recently announced an extension of 217 MW at the Whitelee wind farm, the largest in Europe, to a total of 539 MW, coming on stream in 2012.
The main development during the period was the decision of Iberdola Renewables to lead future development of marine technology in Europe, considered to be the second revolution in renewables.
The Company created an offshore business division in Scotland at the beginning of 2010 to manage the development of the substantial wind assets awarded to the company, amounting to around 10,000 MW worldwide and which will be incorporated progressively in the company’s project pipeline.
Specifically, Iberdola Renewables has been awarded rights in the UK to build one of the largest offshore wind farms in the world – 7,200 MW – capable of supplying five million households.
The company also has 2,300 MW under development in the UK, among which is the 400 MW West of Duddon Sands wind farm (jointly developed with Dong) for which construction will start in 2012.
3. Spain: increased production
In Spain, the company’s business was supported by increased wind resources during the nine months, permitting a 18.2% rise in production to 7,500 million kWh.
Installed capacity stands at 5,593 MW, of which 5,199 MW are wind, 342 MW mini-hydro, 50 MW solar thermal and 2 MW forest biomass. By regions, Castilla-La Mancha has the largest capacity with 1,981 MW, followed by Castilla-Leon (1,222 MW), Andalucia (803 MW), Galicia (627 MW), Aragon (278 MW), La Rioja (248 MW), Basque Country (153 MW), Murcia (146 MW), Valencia (57 MW), Navarre (44 MW), Cantabria (28 MW), Extremadura (5 MW) and Madrid (1 MW).
Growth projections
For Iberdola Renewables, this year offers broad visibility in its key business aspects, as a result of which the projected 1,750 MW of additional capacity to 12,500 MW is maintained. The company currently has 1,405 MW under construction worldwide, guaranteeing fulfilment of objectives set. It foresees a sustained double digit increase in production and gross operating income for the current year.
In 2011, the company expects to increase installed capacity by 1,400-1,500 MW (+12%), of which between 600-700 MW will be in the United States, 250 MW in the UK, 220 MW in Spain and 320 MW in the rest of the world.
This expansion will be made possible by the company’s project pipeline, the largest in the world, which rose 4,600 MW over September last year to 62,000 MW(2)(2) See explanation , driven by new offshore wind development in the UK. Significant also is the 27% rise to 2,700 MW in the segment of projects designated as certain, offering support for two years growth.
The diversification of this pipeline (41% of projects are in the U.S., 24% in Spain, 12% in the UK and 23% in the rest of the world) and of operating assets gives the company the flexibility to develop in markets with better growth and regulatory prospects, where it will focus future investments following criteria of prudence, profitability and low risk.
In addition to focusing investments in the U.S., the company has growth options in new markets such as the United Kingdom, where it plans to double land-based wind capacity between 2009-2012 and develop offshore wind technology, as well as Mexico, Brazil and Eastern Europe.
Specifically, the company was recently awarded nine wind farm projects in Brazil, in consortium with Neoenergia, for a total capacity of 258 MW, while in Mexico it has 80 MW in operation and 103 MW under construction. In Eastern Europe it has 161 MW installed and 1,000 in pipeline in Poland, is building 80 MW in Romania with more than 1,000 MW in the development phase, while in Germany it has a pipeline totalling 500 MW in offshore wind.
Iberdola Renewables, among the leading IBEX 35 companies by market capitalization, is present in more than 20 countries and is the largest investor in its sector worldwide.
