Scottish arm proves to be power behind Iberdrola's growth

Published on Thursday 24 July 2008 21:32

SCOTTISHPOWER has been credited as a "one of the principal engines" of growth at Spanish parent company Iberdrola.

Iberdrola revealed yesterday that their Scottish division's performance was "better than expected" while output and profits at the group's renewable energy arm – which includes windfarms in Scotland – grew significantly.

Profits in the groups renewables division grew 325 per cent to 195 million, figures out yesterday showed. Iberdrola said 39 per cent of its output is produced by renewable sources.

Last year the Spanish company bought out ScottishPower in an 11.6 billion deal creating one of the largest energy companies in the world.

The energy group posted record first-half results yesterday with profits up 78 per cent to 1.9bn on the same period in 2007.

According to the group, their ScottishPower division had performed "better than expected" as energy production increased 8 per cent in the first half of the year while energy distribution was up 3 per cent.

At the same time, costs were reduced significantly by 21 per cent, including a 10 per cent drop in staff levels, although it claimed that job losses were "minimal".

A spokesman said job losses, for "ex-PLC functions" – those administrative jobs duplicated in Scotland and Spain – were all voluntary.

Some jobs were also allocated within the group from ScottishPower to the renewables group, while other jobs in ScottishPower's US division were transferred to other companies.

Iberdrola said ScottishPower's operations contributed more than 27 per cent of the larger group's EBITDA (earnings before interest, taxes, depreciation and amortisation), and most of its growth.

Iberdrola has used EBITDA to compare this half's figures with last year to allow for various accounting adjustments required following the acquisition, and also to reflect the transition to euros from sterling.

The net profit figure for ScottishPower for the first half of 2008, was 585.3m.

Jorge Marin, an Iberdrola finance officer, hailed the group's international expansion, noting nearly half of their energy is now produced overseas.

"Seven or eight years ago, Iberdrola was almost 100 per cent located in Spain. For the first time in Iberdrola's history, the group has produced more than half its energy outside of Spain."

The group said despite operating in the credit crunch environment, its financial strength was sustained. The company has reduced its level of debt keeping debt costs stable, while liquidity was raised with reserves of ready cash and borrowings increasing to 11.4bn

"Our position is very strong, we are not suffering this credit crunch," said Marin. "Even our debt cost is getting lower or stable. We don't see any big problems in the future."

Nevertheless the group doesn't rule out the possibility of increasing prices to retail customers.