Iberdrola in £3.3bn US gas deal for UK customers

SCOTTISH POWER’s parent firm Iberdrola has struck a major deal which will see customers in the UK supplied with gas from Texas.

Ángel Chiarri, Director of Global Energy Management. Picture: Contributed
Ángel Chiarri, Director of Global Energy Management. Picture: Contributed

Under the 20-year, €4.1 billion (£3.3bn) agreement Iberdola will buy a billion cubic metres of liquefied natural gas (LNG) a year beginning in 2019 from US firm Cheniere Energy.

A new plant will be built by Cheniere near Corpus Christi, Texas, to process the gas ready for shipment to Europe.

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Iberdrola said the agreement, enough to supply around 750,000 homes a year, will enable it to meet its long-term needs in the UK and Spain.

The imported LNG will fuel gas-fired plants, be sold to retail customers and also to meet previously agreed long-term sales to the wholesale gas market. Gas destined for the UK will come in via Isle of Grain in Kent.

Iberdrola already has long-term natural gas supply agreements with companies including Sonatrach, Nigeria LNG, ENI of Italy and Statoil of Norway.

It said yesterday’s announcement had consolidated its role as one a leading energy companies, with operations in around 30 countries, 45,000 megawatts of installed generation capacity, 32 million customers and more than 28,000 employees. At the end of March, Iberdola had 3.6 million customers for gas: 2.2 million in the UK; 800,000 in Spain; and 600,000 in the US.

Yesterday’s agreement was signed at Iberdola’s offices in Madrid by global energy management director Angel Chiarri and Cheniere’s Meg Gentle, pictured. Earlier this year Iberdrola unveiled plans to invest more than €4bn in the UK over the next three years as it posted annual profits hit by a doubling of regulatory levies in its Spanish home market.

The UK won the lion’s share of its global investment 2014-16 despite ScottishPower’s underlying earnings in generation and supply falling to €320.5m in 2013.

That was down 11 per cent on the €360.6m booked in 2012mainly due to the closure of the coal-fired Cockenzie power station in East Lothian in March 2013.

ScottishPower’s revenues were flat at some €8.7bn, although customer numbers rose 100,000 to 5.79 million. More than 40 per cent of Iberdrola’s forward investment programme will be in the UK. Of that, 60 per cent will go on upgrading local and longer distance power networks, with 40 per cent on developing renewables.

Last month, the group said renewable output from ScottishPower rose 38.7 per cent to 1,089 gigawatt hours during the first quarter, helped by windier conditions and an increase in generation capacity.

Overall earnings in the UK business – including hydro and gas-fired plants – rose 7.7 per cent to €197.7m.

Iberdrola’s wider renewables business saw earnings fall by more than a quarter in the first three months of the year as profits in Spain were hit by a cut in government subsidies.