Business: Spanish giant in profit slump - Overseas growth limits damage

The world's biggest wind operator, Spain's Iberdrola Renovables, says decreasing electricity prices in Spain for the six months to end June are behind a fall in its consolidated net profits for the nine months to end-September 2009.

Profits came in at EUR167.6 million, down 27.4% on the same period a year earlier. But with domestic electricity prices recovering in the third quarter - averaging 5% up on those for the first six months of the year - combined with a 12% fall in wind plant operational costs year-on-year and the company's increased focus on booming markets outside Spain. In the US and UK, where electricity prices are higher, the company's earnings before interest, taxes, depreciation and amortisation (Ebitda) were up 6% on the same period in 2008 to EUR813.7 million. Cash flow over the nine months was also up 9% to EUR623 million.

Close to 10 GW

The company connected 1.7 GW over the nine months, bringing its cumulative operational capacity to 9.8 GW, nearly all from wind. Additionally, 633 MW is undergoing tests and 807 MW is being built. Iberdrola president Ignacio Galan expects its cumulative installed capacity to reach 12.5 GW by end 2010, up from a forecast 10.75 GW for end 2009.

He also expects Ebitda growth next year to approach 20%. Even though its new capacity additions were considerably down on the 2.7 GW installed during the first nine months of 2008, the company says its performance during the recession is a sign of solidity.

Galan adds that a $547 million grant from the US stimulus package, supporting eight projects already online, was the most significant development in the last quarter year. The amount represents 52% of total grants awarded to the sector so far in US. Galan expects a further $30 million this year and approximately $430 million throughout 2010. The vast majority of over 40 financial analysts consulted made a buy or hold recommendation on Iberdrola Renovables stock following the results.

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