Galán forecasts ?sharp earnings growth? at Iberdrola Renovables in 2010

Overwhelming shareholder support for resolutions at the General Shareholders’ Meeting held in Valencia with a quorum of 88.73%. The Chairman of Iberdrola Renovables believes the Spanish Government is “on the right track” with its deficit contention measures, although structural reforms are needed.

Galán calls for a freeze on growth in solar power technology to prevent pushing electricity prices higher and going over the legal limit on the tariff deficit. The company’s shareholders ratify the appointment of four new independent directors designated by co-option.  Shareholders also approve a €0.25 gross dividend against 2009 earnings to leave payout at 27% despite the adverse economic backdrop.

Iberdrola Renovables Chairman Ignacio Galán, said he saw “sharp earnings growth this year in the order of 20%” which will cement the company’s leadership position in the global wind power industry.

In an address to the company’s General Shareholders’ Meeting, held today at Teatre Martin i Soler, Palau de les Arts Reina Sofía, Valencia, Galán alluded to “earnings stability, thanks to locking in prices on 90% of output under forward contracts, coupled with efficiency gains, enable us to maintain our earnings guidance for 2010”.

He said “the first-quarter earnings performance, combined with high visibility in core business drivers, leave us optimistic on the company’s earnings outlook this year, despite significant economic uncertainty, especially in Europe”. Capacity rose by 17.4% and output by 26.2% in the first quarter, driving net profit growth of 37.3% to €156 million.

Galán also highlighted the company’s healthy performance throughout 2009, a year in which, against an adverse economic backdrop, it reaffirmed its global leadership in wind energy, “thanks to a business strategy founded on sustained growth, operating efficiency and financial strength”.

Spain, the US and the UK

Referring to the economy, Ignacio Galán said the measures being taken by the Spanish Government to scale back public spending were “on the right track, even though they may undermine growth prospects”. He added that in order “to reconcile public spending cuts with economic recovery, the country needs to structurally reform the current economic model, facilitate job creation and improve productivity on a sustainable basis, while eliminating speculation and returning to the real economy”.

In his opinion “it is vital to boost human capital with more and better training at all levels of education while simultaneously rendering the job market more flexible in response to the new economic paradigm”. He also called for stimulating innovation and taking measures to support international corporate expansion and the existence of major national industrial groups that are “capable of competing on the international stage, exerting a driving force on the productive landscape”.

“In an ever more global economy, if we do not have international groups that serve as the engine for the rest of the business scene, we will gradually slide in the global economic ranks and will be unable to create the jobs that our economy so desperately needs”.

In terms of regulation, the Chairman of Iberdrola Renovables said the purpose of the review of the regulatory framework governing the sector should be to temper the growth of the various renewable power sources in accordance with their level of technological development and contribution to the system. He recalled that development of the various technologies has been very uneven and has not adequately factored in the contribution to the power supply or their impact on system costs.

In his opinion, whereas wind power development has been sustainable, and in line with the targets set in the 2005-2010 Renewable Energy Plan, growth in solar power (photovoltaic and solar thermal) has been exponential, considerably exceeding the initial targets set.

Galán said he believed that the various technologies have very diverse annual economic impacts for every additional 1,000 MW installed: while solar thermal and photovoltaic power increase system costs by €900 million and €600 million, respectively, wind energy adds only €70 million.

Delay growth in solar power

Galán stressed that “if we are to avoid substantial increases in electricity prices or overstepping the legal limit on the tariff deficit, adding to a debt that will be inherited by future generations, we need to delay growth in solar power technology until technological advances make them more competitive”.

In other countries, Galán praised the regulatory framework in place in the US which he termed an “unprecedented success, with almost 10,000 MW installed in just one year”. In the UK he highlighted the nation’s “strong” strategic commitment to the development of offshore wind power over the coming years, “harnessing the huge potential for this technology there”.

On another front, Ignacio Galán praised the new British Government for expressing its commitment to cutting emissions and its full backing for renewable energy sources, leaving the door open to raising the initial targets for contribution to output and the introduction of a premium system in addition to the existing green certificates scheme.

Dividend approved

The shareholders expressed overwhelming support for the resolutions submitted to them in general meeting by the Board of Directors. The General Shareholders’ Meeting quorum was over 88.73%.

Specifically, Iberdrola Renovables´ shareholders ratified the appointment of independent directors Emilio Ontiveros Baeza, Manuel Amigo Mateos, Gustavo Buesa Ibáñez and Juan Manuel González Serna, designated by the Board by co-option since the last General Meeting.

The shareholders also voted in favour of the payment of a single per share gross dividend of €0.25 against 2009 earning, payable on 15 July. The company has thereby maintained the dividend year-on-year, leaving the payout at 27%, despite the complex economic situation, fulfilling its commitments to shareholders.

Resolutions were also passed to amend articles 9, 43 and 53 of the By-Laws in order to adapt them to the changes made to the Spanish Companies Act following the enactment of the Companies Structural Modifications Act, to reduce director mandates to four years and to adapt their drafting. Shareholders also approved a new text of the AGM bylaws, completing and clarifying the regulation of various items.