Green Power Giant Iberdrola Plans $88 Billion Investment to Capitalize on Energy Transition
November 05 2020 - 10:11AM
Dow Jones News
By Sarah McFarlane
LONDON -- Spain's Iberdrola SA said it would spend EUR75 billion
($88 billion) over the next five years to double its renewable
power capacity and capitalize on the shift to green energy,
highlighting how some of Europe's lesser-known utility companies
have become major players in the global energy industry.
Iberdrola is already the world's second-largest renewable energy
producer by capacity -- behind another European utility, Italy's
Enel SpA -- having been an early mover in both wind and solar
power. That has giving it an edge amid increasing demand for
low-carbon energy, and boosted its appeal to investors, with its
market cap now exceeding that of oil major BP PLC.
Global electricity use is expected to rise because of
innovations like electric vehicles, with the International Energy
Agency expecting renewables to provide 80% of the growth in demand
through to 2030.
Iberdrola said Thursday the planned investment would allow it to
grow its renewable capacity to 60 gigawatts by 2025, up from 32
gigawatts in 2019. That growth will mostly come from solar and wind
power projects.
About a third of its renewables budget is earmarked for the
U.S., with the company also planning to spend big in Spain and the
U.K.
The investment pledge comes as Iberdrola is rapidly expanding,
partly through acquisitions. In October, it agreed to pay $4.3
billion to purchase New Mexico-based electricity company PNM
Resources Inc., its eighth deal this year. The PNM acquisition
supports the company's international efforts: Over 60% of its
earnings are generated overseas, having shifted from being almost
exclusively Spain-focused 20 years ago.
This year has seen the rise of clean power companies --
including Iberdrola, Enel and, in the U.S., NextEra Energy Inc. --
into the upper echelons of the world's most valuable energy
companies. That has come as traditional oil majors grapple with the
fallout from the coronavirus pandemic, which has decimated demand
for crude and tanked prices. There is also broader support from
companies, investors and governments for low-carbon energy.
The pandemic could accelerate the shift away from fossil fuels
toward renewables and other low-carbon energy as governments
include support for those types of initiatives as part of economic
rescue packages. The European Union has committed to spending
around a third of its EUR750 billion recovery fund on addressing
climate concerns.
Places where Iberdrola operates are showing a clear commitment
to the energy transition, including the European Union, the U.K.
and the U.S., said Chief Executive Ignacio Galán.
"Only those who have already been working for years ahead of
this moment will be ready to take this opportunity. In our case, in
just two years we have increased by 75% our renewable pipeline,"
said Mr. Galán, adding that the pipeline was now 70 gigawatts
world-wide.
Amid these moves, some oil majors plan to reduce their
dependence on crude, while increasing investments in renewables.
For example, BP plans to reduce its oil and gas production by 40%
over the coming decade, while increasing its renewable energy
capacity to 50 gigawatts, from 2.5 gigawatts in 2019.
Iberdrola also plans to build more network infrastructure -- the
largest part of its business -- to support the growth in renewables
and electricity generation.
The company expects its planned investments to boost net profit
to EUR5 billion by 2025, from a record EUR3.4 billion last year. In
funding its spending drive, Iberdrola's net debt is forecast to
rise to EUR56 billion by 2025, from EUR38 billion last year.
"After 20 years of anticipating the energy transition, our
business model positions us as a key agent in the transformation of
the industrial fabric," said Mr. Galán.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
November 05, 2020 09:56 ET (14:56 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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