“More renewable and faster”. This was one of the phrases with which the chairman of Iberdrola, Ignacio Sánchez Galán, "put investors in the pocket" a few weeks ago during his speech at the Aurora forum at the University of Oxford, according to several investors attending the event. . “Despite all the macroeconomic problems, the rate hikes, the inflation... the world is flooded with fresh money in search of convincing and green projects. The electric ones are at the same time that they are a defensive value in the face of uncertainty”, concludes an investor.
If, in addition, these investments offer reasonable returns in not very long terms and with contained risk, the attractiveness increases. Galán knows this, and the design of his strategy at Iberdrola runs under those premises. This is stated in the strategic plan that he presented in November. “Although perhaps it is now when the lines of work are being exhibited with more verve”, point out those who regularly listen to him.
It's not by chance. This strategy has allowed Iberdrola to scale up to become the second electric company in the world in terms of capitalization, to around 75,000 million euros. In addition, in the last year he has shed some of the heaviest ballasts of his career. The Spanish National Court definitively closed in October and November 2022 the cases that linked the company and its managers, including Sánchez Galán, in the Villarejo case.
The sale of 80% of its assets in Mexico, last week, also allowed it to shelve the most onerous litigation in that country and has put an end, at least for the moment, to the harsh confrontation with the Mexican president, Andrés Manuel López Obrador. . Galán drags the bad relationship with the Spanish president, Pedro Sánchez, but the tension between the two, at least in public, has decreased, and its possible negative impact on the business is less, according to a Goldman Sachs report. "The cap on prices in Spain limits the risk that the country may adopt new reforms that affect the sector," says the report.
The Mexican operation reported 5,500 million euros and has also allowed it to step on the accelerator of its 2023-2025 strategic plan that it presented in November. “It is closing operations that will allow it to grow without stressing the balance sheet and keeping the debt under control. The planned disinvestments have almost been completed," says Virginia Romero, an analyst at Banc Sabadell.
"If everything went to reduce debt, it would drop 10%," says the Goldman Sach report. It will not. The goal is to continue investing. A total of 47,000 million until 2025. “It has simplified its business and is concentrating on growing in countries with higher ratings, such as the United States and Europe, where it will also be able to take advantage, especially in the US. the aid plans of the Inflation Reduction Act, and also the RePower EU in Europe”, explains Aránzazu Bueno, Bankinter analyst.
Simpler business in safer countries, although Brazil remains strategic. But above all, focus on areas where you can add more value. Of the 47,000 million euros of investment foreseen in the strategic plan, 27,000 million are allocated to networks. “While in renewables there is more competition in grids or in offshore wind, you have to have more financial power and more expertise to do it well. Iberdrola has them, and that has an impact on the stock market value”, affirms Virginia Romero.
Another of the highly valued strategies is “co-investment”, as they describe it at Goldman Sachs. “It is about making way for financial investors, as has been the case with the Norwegian fund Norges Bank and Mapfre in Spain, at a time when the risk of awarding and construction has already passed and there is good visibility of future income. For the financial investor it means reducing the risk, and for Iberdrola, maintaining control of the assets while obtaining income to continue investing in new projects”, explains Bueno.
With this balance, Galán is submitted to re-election at the meeting on April 28. He comes with the duties formally done, also the appointment of a CEO, Armando Martínez, as they have been demanding for years. Although as president he keeps all the powers of his.
