Iberdrola SA (IBE), Spain’s largest utility, may sell as much as 5 billion euros ($6.5 billion) in assets as part of a strategic plan that aims to reduce debt and maintain profitability.
The company plans to sell 2 billion euros of the assets by the end of 2014 as it makes a priority of reducing its leverage and investment in regulated businesses, Chairman Ignacio Galan said in a presentation to analysts. It targets 26 billion euros in debt by 2014, compared with 31 billion euros now.
“Iberdrola will slow down its investment and rely on the disposal of non-strategic assets,” Galan said in London today. “Even in a stressed scenario we have identified a number of divestment opportunities ready to be executed.” They’ll have “minimal impact on profit and loss accounts,” he said.
The Bilbao-based company is presenting a new strategic plan for 2012-2014 after reporting profits for the first nine months rose on the strength of earnings from its overseas businesses, which offset a drop in income from its home market. Net income climbed 12 percent to 2.4 billion euros, in line with analyst estimates, driven by growth in its renewable energy and network businesses. About 75 percent of profit was generated abroad.
Iberdrola, whose three main units are power generation, clean energy and networks, plans to maintain profitability at 2011 levels during the next two years and positive cash flows in the three areas. It will also maintain its dividend of 0.30 euros a share, Galan said.
Shares closed 1.6 percent higher in Madrid trading at 3.94 euros. The stock has dropped 18.6 percent this year.
The company, which is the world’s largest wind-farm operator, cut investment 67 percent in the first nine months of the year to 2.1 billion euros and aims to invest 12.3 billion euros by the end of 2014, or 37 percent less than between 2010 and 2012. It has already eliminated 1,000 jobs this year and plans to pare another 200 jobs by 2014.
Iberdrola will also sell assets that aren’t central to its strategy and outside the main geographies where it works, which Galan identified as the U.S., the U.K., Spain, Mexico and Brazil. All renewable energy assets outside these countries are “potentially” for sale, he told reporters in London.
“Iberdrola focused efforts during the period to maintaining a strong balance sheet, closing the period with liquidity of more than 11 billion euros, enough to meet financial needs for the next 36 months,” the company said in today’s statement.
In the next two years, the company will invest about 60 percent of the total in electricity networks and 25 percent, or about 2.6 billion euros, in renewable energy. By areas, about 42 percent of total investment will be in the U.K. and 23 percent in Latin America.
Earnings before interest, tax, depreciation and amortization were 5.78 billion euros, in line with analyst estimates. Profit from the utility’s international business advanced 52 percent, while dropping 36 percent in Spain.
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