By Pietro Lombardi
MADRID (Reuters) -Europe’s largest utility Iberdrola launched a five billion euro ($5.87 billion) capital increase on Wednesday to help pay for a big increase in investments in power grids in Britain and the United States.
The company plans to increase its annual investments to around 15 billion euros from around 12 billion euros, building on its shift towards upgrading and expanding power grids in countries where returns are steady and healthy, such as the U.S. and Britain.
In the next six years, it will invest some 55 billion euros in power grids, more than 80% in these two countries as they offer “an unprecedented investment opportunity,” Executive Chairman Ignacio Sanchez Galan said in a call with analysts.
The planned investment represents a 75% increase over the previous six years.
As a result, the value of its grid assets, whose returns are regulated and guaranteed, will top 90 billion euros by 2031 – 75% of which will be in Britain and the U.S. – from 55 billion euros this year and just 30 billion euros at the beginning of the decade.
The weight of its Spanish home market in the network business is set to decline significantly, as a share of both investments and regulated assets.
Spanish utilities have recently warned that the country risked losing critical investments in grids to other countries as the remuneration on grid assets proposed by regulators was set below what they expect.
“The draft proposal, in my opinion, is providing a clear negative signal to the market,” Galan said.
The cash raised by Iberdrola’s capital increase, along with debt, operating cash flow, asset sales and partnerships will help fund the new strategy to be set out in September. No further equity raises are expected until at least the end of the decade, Galan said.
The shares offered through a process of accelerated book-building were set to be priced at 15.10 euros and investor interest covered the entire amount, one of the bookrunners said. Iberdrola’s share price closed at 15.895 euros on Tuesday.
Spain’s stock market regulator suspended trading of Iberdrola’s shares on Wednesday morning.
The issue, though unexpected, was of a scale expected to be digested by the market, Citi analysts said in a note.
Iberdrola also said first-half net profit declined 14% from a year earlier to 3.56 billion euros, when results were boosted by the inclusion of the sale of gas assets in Mexico.
($1 = 0.8523 euros)
(Reporting by Pietro Lombardi, editing by Inti Landauro, Louise Heavens and Elaine Hardcastle)
