Iberdrola Sa · BME:IBE
Iberdrola Sa — Investor Presentation (February 2019)
72 slides from Iberdrola Sa's investor presentation, Feb 26, 2019
Slide 1: Outlook 2018 - 2022 Update
Outlook 2018 - 2022 Update London Pl 26 february / 2019 Ignacio Galan Chairman & CEO IBERDROLA
Slide 2: a IBERDROLA Outlook 2018 - 2022 Update / London / February 2
a IBERDROLA Outlook 2018 - 2022 Update / London / 26 February 2
Slide 3: Legal Notice
Legal Notice DISCLAIMER This document has been prepared by Iberdrola, S.A. exclusively for use during the This document and the information presented herein was prepared by Iberdrola, S.A. presentation “Outlook 2018-2022 Update”. As a consequence thereof, this solely with respect to the presentation
Slide 4: Legal Notice: Forward Looking Statements
Legal Notice FORWARD LOOKING STATEMENTS This communication contains forward-looking information and statements about Iberdrola, S.A., including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operati
Slide 5: Strategic Overview
Agenda Strategic Overview a IBERDROLA Outlook 2018 - 2022 Update / London / 26 February 5
Slide 6: A new energy context
A new energy context #1 Industry Trends #2 Energy Transition #3 Iberdrola’s Approach #Business Units #Strategic Pillars #Value Creation 6
Slide 7: Industry Trends: the need for a new and sustainable model
#1 Industry Trends The World faces the need for... 1 …Decarbonisation 2 …More Energy Climate change and air pollution Population growth, increased lead to severe impacts on urbanisation and extension of power ecosystems, infrastructure and supply social systems +30% emissions to 2040 under current p
Slide 8: Energy Transition: A clean, reliable and smart model
#2 Energy Transition A clean, reliable and smart model 1 Decarbonisation More Energy 2 Green Electrification Driver ENERGY TRANSITION Technological Customer Progress and Innovation Empowerment Key enabler Essential enhancer 3 Optimised Processes A New Customer Approach 4 8
Slide 9: Green electrification to support global electricity demand growth
#2 Energy Transition Increased GREEN ELECTRIFICATION based on… …more and better ENERGY POLICIES …enhanced PRIVATE INITIATIVES Green Electrification …sophisticated GREEN FINANCING tools (i.e. TFCD) Driver …stronger PUBLIC AWARENESS …improved AUDITING & TRACEABILITY mechanisms World electrification1 E
Slide 10: Technological progress and innovation
#2 Energy Transition TECHNOLOGICAL PROGRESS & INNOVATION allow… …a continuous COST REDUCTION in green technologies Technological …developing enhanced CAPABILITIES Progress and Innovation …reaching improved ACCESIBILITY Key enabler Wind turbine size Global cumulative capacity forecasts (installed GW)
Slide 11: Customer empowerment
#2 Energy Transition CUSTOMER EMPOWERMENT focused on… …new PRODUCTS & SERVICES Customer …evolved RESPONSIBLE CONSUMPTION habits Empowerment …increased CUSTOMISED energy demand Essential enhancer …a growing PROSUMER approach Smart Meters growth Electric Vehicle growth Global Stock, M1 655 Global stoc
Slide 12: The Energy Transition is an opportunity Iberdrola is ready to seize
#3 Iberdrola’s Approach The Energy Transition is an opportunity Iberdrola is ready to continue seizing in all its businesses More and smarter clean generation Cleaner supply More and smarter storage A more reliable More and smarter system networks More and smarter Smarter customer solutions applianc
Slide 13: Strategic pillars with digitisation and innovation
#3 Iberdrola’s Approach Our strategic pillars, combined with digitisation and innovation... More and smarter clean generation Digitisation & Innovation More and smarter storage Value Customer creation centricity More and smarter networks Capital Optimisation More and smarter customer solutions …will
Slide 14: Outlook 2018-2022 Update
Agenda Outlook 2018- 2022 Update 14
Slide 15: 2018 Delivery
2018 Delivery Accelerating the delivery of the 2018-2022 plan: ahead of the initial schedule 7.5% Growth in Net Profit to EUR 3,014 M ✓ EUR 9,349 M EBITDA (+27.7%) ✓ EFFICIENCY improvement (>10%) ✓ EUR 5,320 M INVESTMENTS ✓ 7.7% growth in shareholder remuneration1 ✓ 1 Subject to approval at Annual G
Slide 16: Context update: new opportunities and challenges
Context update New opportunities and challenges arise in the current context United Kingdom United States Brexit process Offshore wind State objectives Offshore wind momentum Networks resiliency plans and rate plans Onshore opportunities Defined frameworks for transmission up to Corporate appetite f
Slide 17: Investments 2018-2022
Investments 2018 – 2022 Profitable Growth Accelerating investments to reach EUR 34 Bn, with EUR 30 Bn already executed or under construction 34 32 EUR Bn 4 30 Executed or under construction 2018-2022 Plan Updated Plan (Feb 2018) (Feb 2019) 17
Slide 18: Investments by business
Investments 2018 – 2022: investments by business Increasing the investments in regulated or long-term contracted Profitable Growth activities, up to 86%... Initial EUR 32 Bn Plan Updated EUR 34 Bn Plan Generation and Supply Generation and Supply EUR 4.2 Bn EUR 3.8 Bn Renewables 13% EUR 11.5 Bn 11% 3
Slide 19: Investments by currency
Investments 2018 – 2022: investments by currency Profitable Growth Maintaining currency diversification… Initial EUR 32 Bn Plan Updated EUR 34 Bn Plan GBP GBP EUR 6 Bn EUR 6 Bn USD 19% USD 17% EUR 12 Bn EUR 12 Bn 38% 36% Initial Updated EUR 32 Bn EUR 34 Bn 25% 29% EUR EUR 10 Bn EUR 18% EUR 8 Bn 18%
Slide 20: Investments: Networks assets
Investments 2018 – 2022: Networks assets 98% of EUR 16 Bn investments in networks in progress, based on Profitable Growth existing regulatory schemes, increasing networks assets by 34%... Networks investments driven by regulatory schemes Total Regulated Networks Assets (EUR Bn) • Distribution – New
Slide 21: Investments: Renewable capacity
Investments 2018 – 2022: Renewable capacity EUR 13.3 Bn of renewable investments: 70% executed or under Profitable Growth construction to add +6.6 GW of capacity and +20 GWh of energy storage... Renewable capacity (GW) Energy storage (GWh) +9.91 +20 +35% 38.4 +28.6% 35.1 29.2 operational 90 28.52 or
Slide 22: Investments: Contracted generation capacity
Investments 2018 – 2022: Contracted generation capacity Also in contracted generation, 100% of the EUR 3.8 Bn investments Profitable Growth in progress… Contracted generation capacity (GW) +3.5 +60% 9.3 6.8 secured 5.8 2017 2018 2022 …representing +3.5 GW by 2022 22
Slide 23: Investments: Generation capacity
Investments 2018 – 2022: Generation capacity As a result, over 13 GW in progress will raise installed capacity by Profitable Growth 39% during the plan… Commissioning date Capacity in progress New capacity Additional (MW) 2018 - 2019 2020 2021 2022 2018 - 2022 Projects 490 224 Offshore 400 400 1,514
Slide 24: Capital Optimisation
Capital Optimisation Capital Optimisation EUR 3.5 Bn of capital optimisation through asset rotation Capital Optimisation UK Conventional Generation: EUR 0.7 Bn 2018 ✓ EUR 1.2 Bn Other non-core Spain: EUR 0.3 Bn US Gas Business: EUR 0.2 Bn 2019 - 2022 EUR 2.3 Bn 24
Slide 25: Operational Excellence
Operational Excellence Measures executed and in progress will lead to an improvement Operational Excellence of the initial target to over EUR 1,200 M… 2018-2022 plan efficiencies (accumulated EUR M) +20% vs Synergies initial target >1,200 Digitisation Best practices Assets and processes optimisation
Slide 26: Growth: 2022 Results
Growth: 2022 Results Updated plan results exceed the upper limits of the previous plan... Initial Plan (February 2018) Updated Plan (February 2019) Investments EUR 32 Bn EUR 34 Bn EBITDA EUR 11.5 - 12 Bn EUR >12 Bn Net Profit EUR 3.5 - 3.7 Bn EUR 3.7 - 3.9 Bn Dividend EUR 0.4/share Floor EUR 0.4/sha
Slide 27: Growth: 2022 EBITDA by business
Growth: 2022 Results Improved estimated results by 2022 with EBITDA over EUR 12 Bn in the EUR 34 Bn investments scenario EBITDA by business: EBITDA by business: Initial EUR 32 Bn Plan Updated EUR 34 Bn Plan Contracted Contracted Generation & Generation & Renewables Retail Renewables Retail 23% 22% 2
Slide 28: EBITDA by currency
Growth: 2022 Results By currency, EBITDA distribution remains balanced EBITDA by currency: EBITDA by currency: Initial EUR 32 Bn Plan Updated EUR 34 Bn Plan GBP GBP USD 20% USD 19% 29% 27% EUR 11.5 - 12 Bn EUR >12 Bn 16% 35% 16% 37% BRL BRL EUR EUR 28
Slide 29: Net Profit by 2022
Growth: 2022 Results Net Profit by 2022 between EUR 3.7 - 3.9 Bn Upper part of the range becomes the lower part of the new range… Net Profit: Net Profit: Initial EUR 32 Bn Plan Updated EUR 34 Bn Plan 3.9 3.7 3.7 3.5 3.0 3.0 2018 2022 2018 2022 …with a Net Profit increase of up to 30% vs 2018 29
Slide 30: Sustainable shareholder remuneration
Sustainable shareholder remuneration Growing dividend in line with results… Dividend FLOOR per Share (EUR) +23% (Floor) 2017-2022 0.40 0.351* 0.385 0.37 0.36 0.326 2017 2018 2019 2020 2021 2022 …with a growing floor, maintaining the shareholder remuneration policy: Pay-out between 65% and 75%… …main
Slide 31: Sustainable growth
Sustainable growth Our social dividend, based on the SDGs, will create value for our stakeholders Contributing to all SDGs • Health and Safety Social • Innovation, digitisation and quality for our customers Value • Contribution to the well-being of our communities • Good governance, transparency and
Slide 32: Additional growth opportunities: post 2022
Additional growth opportunities: post 2022 Accelerating growth during the plan and beyond United States United Kingdom In Offshore wind, Distribution and Transmission In Onshore and Offshore wind, Distribution and Transmission Mexico In Renewables and Contracted Generation Continental Europe France
Slide 33: Additional growth opportunities in Spain
Additional growth opportunities in Spain In the context of the National Integrated Energy and Climate Plan 2021–30… Plan aligned with EU energy and climate policies 74% renewable generation share by 2030: adding 64 GW of renewable capacity (Solar: 37 GW, Wind: 27 GW) and 6 GW of storage Retirement o
Slide 34: Spain: solar PV and onshore wind
Additional growth opportunities in Spain: solar PV and onshore wind Iberdrola to continue leading the energy transition… …maintaining our …replacing coal and nuclear …generating enough energy leadership in renewables... with renewable output… to supply our customers Iberdrola, best positioned with k
Slide 35: Offshore wind in Europe and the US
Additional growth opportunities: offshore wind in Europe and the US Increasing our current installed capacity in the UK and Germany to reach >2GW by 2022, with additional +1 GW secured post 2022… Pending Total Iberdrola Iberdrola Additional Targets Capacity by 2022 Capacity post 2022 Pipeline United
Slide 36: Conclusions
Conclusions Accelerating growth, transforming initial caps in updated floors… Initial Plan (February 2018) Updated Plan (February 2019) Investments EUR 32 Bn EUR 34 Bn 2022 EBITDA EUR 11.5 - 12 Bn 2022 EBITDA EUR >12 Bn Results 2022 Net Profit EUR 3.5 - 3.7 Bn 2022 Net Profit EUR 3.7 - 3.9 Bn (c. +3
Slide 37: José Sáinz Armada
José Sáinz Armada Chief Financial & Resources Officer
Slide 38: Financial Management
Agenda Financial Management 38
Slide 39: Agenda
Agenda Plan Hypothesis 2018 Financial performance Financial strategy 2019-2022 39
Slide 40: Plan Hypothesis
Agenda Plan Hypothesis a IBERDROLA Outlook 2018 - 2022 Update / London /26February 40
Slide 41: Outlook 2022 update: Demand
Outlook 2022 update: Demand Flat demand in Spain, UK and USA and more growth in Mexico and Brazil Spain UK 0,9% -0,1% Electricity demand growth CAGR 2017-22 USA Mexico Brazil 3,8% 2,8% -0,8% 41
Slide 42: Outlook 2022: Prices hypothesis
Outlook 2022 : Prices hypothesis Price increase derived from a higher CO2 cost Oil, $/bbl Coal, $/t CO2, €/t 94 89 24 75 72 Commodity 83 16 10 76 6 Prices 54 56 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 February 2018 February 2019 Spain, €/MWh UK, £/MW
Slide 43: Macro hypothesis for 2019-2022: interest rates
Macro hypothesis for 2019-2022 Modest increase in interest rates in US and Brazil, and higher in the Eurozone and UK as monetary policies normalize New forecast slightly lower than last years’ in the long part of the curve and similar in the short part Forecasts based on market consensus Interest ra
Slide 44: Macro hypothesis for 2019-2022: FX
Macro hypothesis for 2019-2022 Plan update assumes no change in average FX rates, appreciation of $ and £ compensates BRL depreciation FX estimates up to 2022 assumes 2019 forward levels versus EUR Average FX rates vs. Euro R M 10% 1% depreciation appreciation 3% 0.4% appreciation appreciation 1.21
Slide 45: Impact of new accounting standard for leases
Impact of new accounting standard for leases Iberdrola criteria for IFRS16 in line with current accounting standard definition New IFRS 16 standard from 2019 • Main differences with respect to previous standards are: – Leases net present value considered as debt – Leases costs removed from External
Slide 46: Impact of IFRS16
Impact of new accounting standard for leases Main impact of new accounting criteria for IFRS16 IFRS 16 impacts 2019 onwards Balance Sheet P&L Cash Flow Net Debt: +EUR 0.4 Bn EBITDA: +EUR 68 M FFO: +EUR 50 M Net Profit: ~ 0 RCF: +EUR 50 M Net Debt / EBITDA FFO / Net Debt RCF / Net Debt Impact ~ + 0.0
Slide 47: 2018 Financial performance
Agenda 2018 Financial performance 47
Slide 48: 2018 Interest rate risk management
2018 Interest rate risk management Increase in fixed-rate structure in 2018 to 78% to take advantage of low interest rates and reduce volatility in financial expenses As December Including forwards 2018 swaps Floating Floating 35% • IRS Fw start already signed: 22% 1,250 M in 2019 900 M in 2020 1,30
Slide 49: 2018 Financing activity
2018 Financing activity EUR 6.8 Bn of new financing and EUR 7.4 Bn credit lines renegotiated, diversifying markets at very competitive levels, continuing with green/sustainable strategy (65%) Total financing Green / Sustainable financing EUR M Amounts (M) Details Hybrid Second issuance, after 2017
Slide 50: Debt maturity profile and liquidity
2018 Financial activity A comfortable debt maturity profile and sufficient liquidity to fulfill Rating Agencies requirements Debt Maturity Profile (EUR M) Liquidity Base scenario 24 months > EUR 13.0 Bn Stress scenario 18 months 2018 Financial needs coverage 50
Slide 51: 2018 net debt financial cost
2018 Financial activity 2018 net debt financial cost 15 b.p. better than Plan Financial cost 15 b.p. Competitive financing conditions achieved during the year ✓ 3.55% 3.40% Excluding IFRS9 change of criteria, 2018 cost of debt would have been 10 b.p. lower ✓ Feb’18 Plan 2018 Target Total 51
Slide 52: EUR 1.2 Bn of divestments achieved in 2018
2018 Financial activity EUR 1.2 Bn of divestments already achieved in 2018 2018 Divestments: EUR 1.2 Bn Other non core Spain EUR 0.3 Bn US Gas Business EUR 0.2 Bn Reducing 2018 Net Debt ✓ Positive impact on ratios due to UK Conventional Generation EUR 0.7 Bn their low / negative earnings contributio
Slide 53: Neoenergia financial profile
Neoenergía During 2018, we have improved significantly the financial profile of NEO ✓ Net Debt / EBITDA ratio improves from 3.9x prior to 2017 equity injection to 3.49x at 2018 year-end Increased liquidity from 7 months to 20 months ✓ Average life of Debt improved from 3.0 to 3.9 years ✓ Prefunded B
Slide 54: Financial strategy for the 2019-2022 period
Agenda Financial strategy for the 2019-2022 period 54
Slide 55: Financial Management Strategy for 2019-2022
Financial Management Strategy for 2019-2022 Main financial guidelines for 2019-2022 period … permitting …maintaining a growing Financing a strong and growth Capex … financial sustainable position … dividend policy 55
Slide 56: Sources and uses of funds
Sources and uses of funds EUR 51 Bn of funds, 82% coming from FFO, allows an increasing and sustainable dividend policy up to EUR 12.5 Bn remuneration on top of EUR 34 Bn of investments Sources Uses 2018 – 2022 EUR 51 Bn EUR 51 Bn 7% Asset Rotation 8% Capitalized costs 11% Additional Debt 25% Divide
Slide 57: Outlook: FFO, Capex and Net Debt
Outlook: FFO, Capex and Net Debt Average investments will increase 5%, to an average of EUR 6.8 Bn vs. 2018 Plan FFO grows 29% vs. 2018 to EUR 9.4 Bn while Net Debt increases 9% to over 37 Bn Investments vs. FFO (EUR Bn) Net Debt (EUR Bn) FFO CAGR 9.4 +29% Capex per year 6.5% 7.3 37.4 +9% 6.6 Averag
Slide 58: Solvency ratios
Solvency ratios Financial ratios will improve throughout the Plan … Net Debt / EBITDA FFO / Net Debt RCF / Net Debt >21.0% >24.0% 3.7 21.5% 20.2% < 3.1 2018 2022 2018 2022 2018 2022 … allowing for further organic investment growth in 2021 and 2022 as they exceed our 22% FFO / Net Debt target 58
Slide 59: Interest rate risk management
Interest rate risk management High fixed rate structure anticipating possible rate hikes in the future Debt structure W/out forward W forward swaps swaps Estimated Floating Floating Floating 35% 22% 38% In line with our Fixed Fixed * income Fixed 65% 78% structure 62% 2018 2022 * Forward swaps: EUR
Slide 60: Debt structure by currency
Interest rate risk management Debt structure by currency % fixed Debt % fixed estimated weighting* current** range • Duration of regulatory cycles: 46% 69% 65-75% on average ~5.5 years 24% 85% 80-90% • Average debt maturity of 6 years guarantees re- 16% 66% 55-70% pricing of debt to regulatory chang
Slide 61: Cost of Debt
Cost of Debt Average cost of net debt will remain below 4% despite larger investments in BRL and US$ Gross debt financial cost by currencies Net financial cost * 2018 2022 Feb’18 4.2 Plan 1.7% 1.5% 4.1 3.8 3.9 3.7 3.9 3.9 Feb’19 4.0% 4.3% 3.8 Update 3.6 3.6 3.3% 3.5% * 2018-on data include forward p
Slide 62: Structural subordination
Structural subordination Financial model designed to follow current structural subordination guidance (ex Neo) Current situation Subordination during the plan Mexico Average Target 1% Other 4% 21% USA 17% 6% UK To be kept 6% ~30% threshold 1% Corporate Other 2% 72% Our model gives us flexibility to
Slide 63: Debt structure per markets
Debt structure per markets Strong diversification in sources of finance, with low bank risk Access to many markets Maintaining leadership in sustainable / green markets Current debt structure by market During the plan Bank loans 17% Consolidating green financing (including TEI strategy: green loan
Slide 64: Liquidity
Liquidity Active liquidity management, keeping ~ EUR 12-14 Bn, with ability to increase if required Target Liquidity management criteria S&P: 12 Months Sources / Uses > 1.2 Rating agencies’ Moodys: 18 Months in risk scenario requirements Fitch: (Liquidity + FCF post dividend and Capex ) / 12 m
Slide 65: Financing Policy
Financing Policy Moderate financial needs over the period … Financial needs (EUR Bn) 2018 financing higher than required due to pre funding of 2019 NEO financing needs Moderate financial needs thanks to a comfortable debt maturity profile 6.8 and strong generation of funds 4.9 5.4 5.2 4.1 In 2
Slide 66: Divestments
Divestments … considering EUR 3.5 Bn of divestments over 2018-2022 Asset rotation 2018-2022 (EUR Bn) To be achieved Minority stakes & non core assets Low strategic fit assets 2.3 Low EBITDA / FFO 1.2 contribution assets 2018 2019 - 2022 Flexible approach depending on investment opportunities 6
Slide 67: FX risk management: structural
FX risk management: structural Structural FX hedge is taken by having the debt in the same currency and similar % as the funds from operations Minimize FFO / Net Debt ratio volatility Debt range R 13.5% 10-16% 2.0% 1-3% M 20.5% 17-23% 25.0% 22-28% 39.0% 30-50% FFO 2019–2022 Average Debt 67
Slide 68: FX risk management: P&L hedging
FX risk management: yearly FX risk in the Profit & Loss account is minimized through derivatives Hedging Net Income FX exposure in currencies against the Euro Net Income by currency 1% 2% 6% 8% 10% 24% 25% 25% MXN BRL 27% GBP 27% 24% USD EUR 43% 39% 39% 2018 2020 2022 Almost 100% of the 2019 risk po
Slide 69: Business risk 2019-2022
Business risk- Average 2019-2022 80% of average annual EBITDA comes from Renewables & Networks Businesses with ~4.3% EBITDA at risk in an adverse scenario Total correlated Business risks is ~6% Average annual Risk as % of Risk as % of EBITDA share 19-22 annual EBITDA 19-22 annual EBITDA 19-22 (non c
Slide 70: Brexit
Brexit Hard Brexit would have no direct immediate material impact on 19-22 Plan update, except for currency translation, hedged for 2019 Increases in FX will impact in future translation of results, although 2019 already hedged Interest rate and CPI increases naturally hedged through different regul
Slide 71: Cybersecurity
Cybersecurity Ensuring the protection of assets, systems and information across the entire Group Global Comprehensive Cybersecurity Program based on risk management approach with standard rules deployed in all countries and businesses Reinforced security measures for critical infrastructures and per
Slide 72: Investor Relations app
Investor Relations app Download now the Iberdrola Investor Relations app www.iberdrola.com 72