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TheStreet Open House

Iberdrola Chairman To Shareholders: Spain Is Beginning To Recover From Economic Crisis

ROCHESTER, N.Y., March 22, 2013 /PRNewswire/ -- Iberdrola (IBDRY:US) chairman Ignacio Galan told shareholders today that despite a difficult economic environment, Iberdrola again generated solid results in 2012, driven by 35% net earnings growth in its international operations. The Company was one of the few European utilities to have maintained profit and dividends to shareholders since the economic crisis began in 2008.

Addressing the Annual General Meeting in Bilbao, Spain, Galan said strong fiscal measures taken by the Spanish government in 2012 are beginning to bear fruit: "The efforts of the Spanish government are being recognized by the international community and financial markets," he said, adding that this year will be one of transition for the Spanish economy, with positive growth rates in the fourth quarter.

"The reforms carried out and others to be introduced in the near future will boost sustainable growth in the long term and we expect them to have a positive impact on jobs from the second half of 2014 and increasing in the following years," he said.

Galan stressed that Iberdrola has remained an engine of growth in countries where it operates. In 2012, the group hired more than 2,000 employees and 800 interns/trainees, invested €3.26 billion ( $4.18 billion USD) to upgrade technology and infrastructure, purchased goods and services totaling €5 billion ( $6.4 billion USD), and provided direct and indirect employment for 150,000 people around the world. 

The Chairman also reiterated highlights from the Group's 2012 financial results which were released last month:

  • Group revenues rose 8.1% to €34.2 billion ( $43.95 billion USD), while gross margin increased 4.6% to €12.58 billion ( $16.16 billion USD), and operating cash flow rose 2.5% to €6.19 billion ( $7.96 billion USD).
  • EBITDA increased 1% to €7.73 billion ( $9.93 billion USD).
  • Net earnings rose 1.3% to €2.84 billion ( $3.65 billion USD), driven by a 35% international earnings growth

Galan also highlighted the importance of its geographically diversified portfolio, citing that 70% of the Group's profit was produced outside Spain. In 2012, Iberdrola revenue makeup was: 30% Euro, 30% British Pound, 30% US Dollar and 10% Brazilian Real. Company investments were also diversified, with nearly half (48%) of Iberdrola's total investment spent in the US and UK, mostly in the regulated and renewables business units which offer stable and largely predictable revenues.

Galan emphasized that Iberdrola's efforts to strengthen its balance sheet are working well. In 2012, the Company:

  • sold €850 million ( $1.12 billion USD) of the €2 billion ( $2.6 billion USD) planned of non-strategic assets,
  • reduced its debt by nearly €1.38 billion ( $1.82 billion USD) to €30.32 billion ( $40.0 billion USD),
  • increased operating cash flow 2.5%, and 
  • grew liquidity to more than €12 billion ( $15.89 billion USD) – enough to meet its needs for more than three years.

US Subsidiary Operations Also addressing the AGM, Iberdrola Chief Operating Officer José Luis San Pedro commented on the US networks business operated by Iberdrola USA. San Pedro paid special attention to the new transmission system being built in Maine by Central Maine Power (CMP). He described the $1.4 billion Maine Power Reliability Program as "an important contribution to improving network reliability for customers." Construction on the project, which now employs nearly 3,500 workers, has passed the halfway point and continues on time and on budget. The five-year program is the largest energy infrastructure project ever undertaken in Maine. It includes the construction of six new substations, upgrades to more than 40 existing substations, and the installation or rebuilding of nearly 440 miles of transmission line in 75 communities.

San Pedro also mentioned the successful completion of CMP's advanced meter initiative (AMI) in Maine where the company installed 620,000 'smart' meters and the associated mesh network. CMP now gets 98% of its monthly billing data electronically from smart meters, has eliminated nearly 2 million meter-reading vehicle miles per year, and provides customers with detailed online reports about their energy use. This was the largest single smart-grid project ever completed by Iberdrola, and the group intends to share the learning from it throughout its worldwide network.

The three US subsidiaries – CMP in Maine and RG&E and NYSEG in New York, were also faced with unprecedented recovery work in the wake of Superstorm Sandy, one of the largest and most powerful to have hit the country in recent times. The three companies deployed more than 6,000 people to manage a cumulative total of nearly 500,000 electricity service interruptions. Once their own customers had been restored, they released nearly 1,800 line, bucket, pole-setting, digger, tree, gas and supervisory employees and contract workers to assist other utilities. For these efforts, each subsidiary won both the Edison Electric Institute 2012 Emergency Recovery Award and the Emergency Assistance Award.

Iberdrola USA Financial PerformanceIberdrola USA had its best collective performance since becoming part of the Iberdrola Group. Galan noted that the positive US performance was underpinned by GDP growth of 2.3% in 2012, which the IMF projects will grow 3% in 2014. He said performance of Iberdrola's networks businesses in New York and Maine was supported by stable regulatory frameworks in both areas. As reported, Iberdrola USA 2012 gross margin was up 10% to €1.42 billion ( $1.83 billion USD), driven by scheduled rate increases and a favorable currency exchange rate. EBITDA increased more than 20% from 2011 to €660 million ( $848 million USD).

As a result of continued strong financial performance, Standard & Poor's upgraded Rochester Gas & Electric Corp's senior unsecured credit rating from "BBB" to "BBB+" and Moody's upgraded NYSEG senior unsecured credit rating from "Baa2" to "Baa1".

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