Iberdrola, a leading Spanish renewable energy company, announced its ambitious investment plan of 41 billion euros ($44.83 billion) for the upcoming three years, focusing on enhancing and expanding power grids in the United States.
This initiative aligns with the strategic shift the company embraced in 2022, aiming for a more discerning approach to renewable energy projects, mirroring a similar strategy by Italy’s Enel.
Both utilities are drawn to the reliable returns of power grids amidst challenges in the renewable sector such as high interest rates and supply chain disruptions.
The transition from conventional fossil fuel plants to renewable sources necessitates significant investments in grid infrastructure, with the European Commission estimating a need for 584 billion euros in Europe alone this decade.
Iberdrola, positioned to capitalize on this demand, plans to direct funds towards ongoing renewable projects, with 36 billion euros in net investments, supplemented by approximately 5 billion euros from renewable partners.
A notable aspect of the plan is the proposed $2.5 billion acquisition of the remaining shares in its U.S. subsidiary Avangrid.
Iberdrola’s commitment to the U.S. market persists despite the potential election of Donald Trump, who may oppose the current green policies.
The U.S. is set to receive the largest share of the global net investments, amounting to 35%.
Iberdrola’s strategy heavily emphasizes network investments, allocating around 21.5 billion euros or 60% of its net investments to this area, expected to increase its network assets’ value to 54 billion euros by 2026.
The renewable sector, particularly offshore wind projects in the U.S., Britain, France, and Germany, will receive about 15.5 billion euros.
This investment strategy is anticipated to drive shareholder returns, with dividends projected to grow in tandem with net profit, aiming for a dividend per share growth of up to 20% by the end of the plan.
The company projects a net profit increase to between 5.6 billion euros and 5.8 billion euros by 2026, with core earnings estimated at between 16.5 billion euros and 17 billion euros.
Following the announcement, Iberdrola’s shares experienced a 0.9% increase, outperforming the Ibex-35 index, which saw a 1.1% rise.
This investment underscores Iberdrola’s commitment to leading the transition towards renewable energy, marking a significant contribution of around 41 billion euros in investments since the beginning of the decade.