Iberdrola maintains forecasts despite the slump in profits in Spain

Iberdrola continues with its strategy of commitment to clean energy to accelerate the energy transition and the decarbonisation of the planet. To this end, the company has invested almost 10,000 million euros in the last 12 months. With more than 2.1 billion euros in the first quarter of the year, the group has dedicated more than 90% of this amount to the smart grid business and renewables.

Of this investment, 80% was earmarked for international markets, with 32% in the United States, 18% in Brazil, 15% in the United Kingdom and 14% in other international geographic areas.

Thanks to the investments and the international contribution, net profit grew to €1,058 million in the first quarter of 2022, an increase of 3% compared to the same period in 2021. The growth in international business - 33% in Avangrid and 20% in Neoenergía - offsets the adverse result of Iberdrola España, which recorded a 29% drop in net profit, to EUR 337 million, due to the high energy prices that it has not passed on to its customers to whom it has sold energy at previously agreed fixed prices. Spain already accounts for less than a third of the group's total profit. 80% of the energy sold to Iberdrola's free market customers is at prices that are between one half and one third lower than the regulated tariff prices.

Gross operating profit (Ebitda) rose 5% in the first quarter of 2022 to Euro 2,951 million thanks to the good performance of the United States, Brazil and the international area.

By business, the networks area grew by 20% in this period to 1,587 million euros, while the energy production and customers business fell by 6.8% to 1,360 million euros, mainly affected by high energy prices, low renewable production and the unscheduled shutdown of the Cofrentes nuclear plant - now resolved - which forced the purchase of almost 4.5 TWh of energy on the market.

Regarding the current context, the Chairman of Iberdrola, Ignacio Galán, said: "The current crisis in the energy market demonstrates the need to accelerate the energy transition to achieve energy autonomy in Europe and decarbonise our economy. This requires solutions based on the European framework and a continuous dialogue between stakeholders and administrations".

The company has earmarked more than €1,121 million of investments in renewables in the first quarter of 2022. This investment drive has enabled the group to install 3,500 new renewable megawatts (MW) in the last 12 months - 1,218 MW of photovoltaic, 1,136 MW of onshore wind, 998 MW of hydro and 111 MW of batteries - and to reach 38,300 MW of renewable capacity worldwide.

The company currently has 7,500 MW under construction and a project portfolio of 90,000 MW. By country, the company has accelerated development in regions with greater climate ambition and more stable regulatory frameworks, such as the United States - with more than 22,100 MW in the portfolio -, the United Kingdom - 15,400 MW - and other international geographical areas - with 24,800 MW - including countries such as Sweden, Germany, Australia, Poland and Japan.

One of the group's main growth platforms is in the development of offshore wind projects, where it already has 1,258 MW in operation. During the first quarter, the company achieved important milestones in offshore wind energy, such as the authorisation for the 2,900 MW East Anglia Hub in the United Kingdom and the power purchase agreements for the Commonwealth Wind farm in Massachusetts, United States, which will involve an investment of 4,000 million euros with 1,232 MW. Thanks to the new projects, the company will have 7,000 MW of offshore wind in operation by 2027, of which 2,600 MW are already under construction.

Within the grids business, the group has invested almost EUR 800 million, in line with the group's strategy to increase and reinforce a key infrastructure for the energy transition and the electrification of the economy. The United States and Brazil together contributed 64% of the investment, while Spain and the United Kingdom accounted for the remaining 36%. Among the most noteworthy projects this quarter was the provisional approval by the British electricity market regulator (Ofgem) for the construction of the electricity transmission line that will link Scotland to the north-east of England, with a capacity of 2 gigawatts (GW), which is expected to come into service in 2027.

As part of this investment effort, Iberdrola has made purchases from suppliers totalling 12,000 million in the last twelve months, providing employment for 400,000 people in its supply chain around the world. In addition, in the last year the company has made 5,500 new hires.

Iberdrola continued to improve its financial strength in the first quarter thanks to the generation of operating cash flow, which grew 32% to 3,005 million euros.

During the first part of the year, the group has once again reaffirmed its leadership in green finance, with 41,000 million euros available under green -17,900 million euros- or sustainable -23,400 million euros- formats. In fact, during the first quarter of 2022, Iberdrola reopened the Euromarket for fixed income with a green bond issue of 1,000 million euros and a 10-year maturity. This operation enabled it to reinforce its already comfortable liquidity position, anticipating a large part of the financing to be provided during 2022 at excellent conditions and reducing market risk due to the evolution of interest rates and credit spreads.

The Group's liquidity currently exceeds EUR 21,000 million, which covers its financing needs for 22 months. In an inflationary context, the company has 80% of its debt financed at a fixed rate.

During the presentation, the chairman insisted that Iberdrola has a resilient business model in the short and medium term: it is highly diversified - 70% of gross margin comes from the international area -, has a solid financial structure - 80% of debt is fixed-rate and long-term - and purchases with closed or assured prices for 2022, thus avoiding the current tensions in raw materials.

Despite the regulatory uncertainty in Spain, Galán reaffirmed the profit growth forecasts for 2022, thanks to five main factors: the more than 3,800 MW of additional installed capacity planned for this year and the EUR 4,000 million of investment in networks that will contribute to this year's result; the additional growth in the United States and Brazil due to investments; the positive impact of currencies and the improvement in the margins of the retail business in the United Kingdom. With these elements, Iberdrola expects to achieve a net profit of between 4,000 and 4,200 million euros, which will allow a dividend distribution for 2022 in line with the same, setting a floor of 0.44 euros per share.

In addition, the Board of Directors will propose at the General Shareholders' Meeting the approval of a final dividend distribution for 2021 of at least 0.27 euros per share, which will be added to the 0.17 euros per share paid as an interim dividend in February.

This communication does not constitute an offer to buy, sell or exchange or the solicitation of an offer to buy, sell or exchange securities in the United States of America or in any other jurisdiction. IBERDROLA, S.A. shares may not be offered or sold in the United States of America except pursuant to an effective notice statement under the Securities Act of 1933, or pursuant to a valid exemption from the duty of notice.  

This communication includes certain Alternative Performance Measures ("ARMs"), as defined in the Guidelines on Alternative Performance Measures published by the European Securities and Markets Authority on 5 October 2015 (ESMA/2015/1415en). ARMs are measures of financial performance prepared on the basis of the financial information of Iberdrola, S.A. and its group companies but which are not defined or detailed in the applicable financial reporting framework. These ARMs are used with the objective of contributing to a better understanding of the financial performance of Iberdrola, S.A., but should only be considered as additional information and in no case replace the financial information prepared in accordance with IFRS. Furthermore, the way in which Iberdrola, S.A. defines and calculates these ARMs may differ from that of other entities using similar measures and, therefore, they may not be comparable with each other. Finally, it should be noted that some of the ARMs used in this communication have not been audited. For further information on these issues, including their definition or the reconciliation between the corresponding management indicators and the consolidated financial information prepared in accordance with IFRS, see the information available on the corporate website (https://www.iberdrola.com).

This communication contains forward-looking information and statements about IBERDROLA, S.A. and AVANGRID, Inc. Such statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, investments, synergies, products and services, and statements regarding future results. Forward-looking statements are not historical facts and are generally identified by the use of terms such as "expects", "anticipates", "believes", "intends", "estimates" and similar expressions.

In this regard, although IBERDROLA, S.A. believes that the expectations contained in such statements are reasonable, investors and holders of IBERDROLA, S.A. and AVANGRID, Inc. shares are cautioned that forward-looking information and statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond the control of IBERDROLA, S.A. and AVANGRID, Inc, risks that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Such risks and uncertainties include those identified in public documents filed by IBERDROLA, S.A. with the Comisión Nacional del Mercado de Valores and by AVANGRID, Inc. with the Securities and Exchange Commission that are available to the public.

Forward-looking statements are not guarantees of future performance and have not been reviewed by the auditors of IBERDROLA, S.A. and AVANGRID, Inc. You should not rely on forward-looking statements that speak only as of the date on which they were made. All forward-looking statements or statements herein or issued by IBERDROLA, S.A., AVANGRID, Inc. or any of their directors, officers, employees or agents are expressly qualified by the cautionary statements above. The forward-looking statements included in this document are based on information available as of the date of this communication. Except to the extent required by applicable law, IBERDROLA, S.A. undertakes no obligation to publicly update any forward-looking statements or revise any forward-looking information, even if new information is made public or new events occur.