Iberdrola will invest €32 billion between 2018 and 2022, building the foundations for sustainable growth in the next decade
Iberdrola will invest €32,000 million during 2018-2022 to lay the foundation for the group's sustainable growth in the coming decade. In this regard, the group has updated its 2016-2020 Strategic Outlooks, including the investment plan for the Brazilian subsidiary Neoenergia. The company will accelerate its creation of value built upon five strategic pillars:
- Earnings growth: investments will target a portfolio of projects that include opportunities to create long-term value and short-term returns.
- Operating excellence: With operating expenses are already 23% lower than the average for its European competitors, Iberdrola will continue enhancing its efficiency levels. In this regard, Iberdrola will implement a €1,000 million savings plan executed through synergies, digitisation and the implementation of best practices in areas such as purchasing, operation and control.
- Customers at the focal point of the strategy: the grid will be adapted to the needs of consumers, and thus the entire grid (100%) will be smart by 2030 and electric vehicles will be incorporated. Tailored renewable generation contracts will be implemented, new technology solutions will be promoted to best adapt to the habits of our customers, and energy sales contracts to companies will be shored up.
- Capital optimisation: the group will continue buttressing its balance to maintain a solid rating. To do so, it will implement an asset rotation plan of €3,000 million. The company will also continue actively managing its debt.
- Digitisation and Innovation: Iberdrola expects digitisation to contribute an additional €600 million to its EBITDA for 2022. This growing contribution will be possible thanks to operational improvements, the transformation of processes and new products and services to implement new technologies.
Over 90% of the €32,000 million invested will be allocated to regulated activities or long-term contracts according to the group's strategy to focus on businesses with stable and foreseeable returns. These areas will also contribute to over 80% of the EBITDA in 2022, between €11,500 and €12,000 million. In particular, 50% of these €32,000 million will go to Grids, 37% to Renewables and 9% Contracted Generation in Mexico. The remaining 4% will correspond to Generation and Customers. Under the plan, by 2022, the group will increase its renewable installed capacity by 24% to 36,000 MW.
According to group forecasts, the net earnings in 2022 will stand between €3,500 and €3,700 million. The Operating Cash Flow (FFO) will reach €42,000 million, exceeding the investments made across all the businesses. Additionally, at the end of the period the company will have new investments in progress worth €9,000 million, which will continue generating results beyond 2022.
This performance will enable Iberdrola to maintain its shareholder remuneration policy, growing in line with its earnings at a payout rate between 65% and 75% of the net consolidated profit while maintaining the current number of shares at 6,240 million, which, according to our estimates, should reach a dividend of approximately 0.4 euro per share by 2022.