Iberdrola expects 8-10% net profit rise before windfall tax

By David Latona

MADRID (Reuters) -Spain's biggest utility Iberdrola expects its net profit to increase by 8% to 10% this year from 2022, it said on Wednesday, discounting the country's windfall tax that would cut the growth rate to the mid-single-digit.

Following Russia's invasion of Ukraine a year ago, energy markets in Europe hit record highs, adding to economic pain in countries reeling from the impact of the COVID-19 pandemic.

Iberdrola, which is Europe's largest utility by market capitalisation, but not by revenue, posted a net profit of 4.34 billion euros ($4.63 billion) in 2022, an increase of 11.7%.

The results, driven by a strong international performance, were in line with Iberdrola's guidance issued in February 2022 and slightly above the average forecast of 4.17 billion euros in a Refinitiv poll of analysts.

Shares were down 0.9% at 0835 GMT amid a general drop in the blue-chip index.

Executive Chairman Jose Ignacio Sanchez Galan attributed last year's "stable growth" to geographical diversification, as the impact of Europe's energy crisis was offset by other markets, mainly Brazil and the United States.

Last July, Spain's ruling left-wing coalition introduced a bill to impose a 1.2% tax on utilities' sales. Spanish electricity utilities association AELEC, of which Iberdrola is a member, lodged an appeal against the tax before the High Court last week.

Energy markets have fallen significantly from last year's peaks and utilities say in any case they also had higher costs when fuel was expensive, whereas oil and gas production companies reaped more of the gains.

Iberdrola says it is investing for the future.

The company invested a record 10.73 billion euros, 13% more than in 2021, with 90% allocated to renewables and smart grids.

"This is the company's main focus in the face of the new regulations imposed by the EU," IG analyst Diego Morin told Reuters.

The European Union is seeking to wean itself off fossil fuel, especially that imported from Russia, and has a target of zero net greenhouse emissions by 2050.

Iberdrola ended last year with a market capitalisation of around 70 billion euros after climbing 6% on the stock market, making it the largest utility in Europe.

It aims to divest assets to finance a three-year plan to invest up to 47 billion euros, keep its credit ratings and maintain a dividend pay-out of up to 75% of its earnings per share.

Those assets include a gas, wind and solar in Spain which could raise more than $700 million, three sources with knowledge of the plans told Reuters last week.

Last month, Norway's $1.3 trillion sovereign wealth fund agreed to buy a 49% stake in Iberdrola's 1.3 gigawatt (GW) portfolio of Spanish solar plants and onshore wind farms for 600 million euros.

($1 = 0.9383 euros)

(Reporting by David Latona in Madrid; Additional reporting by Matteo Allievi in Gdansk; Editing by Inti Landauro and Barbara Lewis)