Credit Focus: Iberdrola’s CMD 2024-2026: a new super-cycle of investments on grids brings higher profitability ahead matched with Capex cuts

As summarised by IBESM’s bold opening remark: “Electrification is unstoppable”. The new plan accelerates its electrification efforts, with ‘Networks’ -and in particular ‘US Networks’- becoming IBESM’s main near-term investment focus. The upcoming US election in Nov24 will not impact regulation on domestic renewables as it is not a federal decision, confirming IBESM’s confidence on this market as the main home of its investments (35% of total capex in 2024-2026). Some of the main strategic pillars for 2024-2026 included:

•  IBESM’s capex reduction plan from previous EUR47bn to new EUR36bn, where 2/3 will be dedicated to networks (EUR21.5bn) and 1/3 will be dedicated to renewables. RAB will grow from current EUR42bn to EUR54bn by 2026.
• Renewable will still be a large component of future growth, the company foresees EUR15.5bn investments with a large tilt towards Offshore wind, where they have “secured 76% of supply chain and prices”; remaining 28% onshore wind and 18% in Solar PV. The use of strategic partnerships and alliances will be key as it has been for Iberdrola for the last few quarters. Storage has become a new key segment of growth with EUR1.5bn investment to provide additional growth and stable margins, while reducing investment in traditional generation. 
• The funding will come from a combination of strong cash flow generation, fixed rate financing, greater diversification of financing resources, and investing through partnerships and asset rotation, with no capital increases. Company highlighted its commitment to hybrids and maintaining by 2026 the current stack of EUR8.2bn, calling and replacing in due time (something we interpret positively for its existing bonds).
• Balance sheet and leverage containment as 3.2x ND/EBITDA YE26e target vs previous 3.4x and FFO/ND at 24% vs previous 22% target. Overall, a credit positive strategic update and targets