Iberdrola, S.A. (IBE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, shareholders. After 2 years of holding these AGMs only telematically, we want to go back to institutional normality by using Brazilian formulas that favor a maximum participation of our shareholders at the AGM. And in order to do so, the company has implemented the necessary mechanisms to fulfill the rights of information, intervention, assistance and delegation of vote. And we've also set up new participation channels in addition to telematic channels. And we've extended the forms of crediting shareholders and their representatives. We've decided to hold this meeting in person at Torre Iberdrola, and this coincides with the 10th anniversary since it was opened, with seats bookings, which guarantees health requirements are met. And thanks to everybody's efforts, and thanks to the incentives that we have given people to participate that I'll describe later, I am pleased to tell you that we've reached the necessary quorum to constitute and hold the AGM. So therefore, we can begin. I'm now going to give the floor to the Secretary.

Thank you very much, Chairman. Good morning, ladies and gentlemen. As the Chairman has pointed out, this meeting is being held at the company headquarters with face-to-face and remote presence of the shareholders and their representatives, and the company has opened up various channels in order to delegate and to vote in advance. In order to facilitate the rights of the shareholders, the interventions that those that attend remotely wish to make will be received as indicated in the call for the meeting up to the beginning of this meeting. I would like to report that the Chairman and Secretary of the shareholders' meeting are held by the same people that hold the positions of Chair and Secretary in the company. Mr. Ramón Múgica Alcorta is present in the room, the notary that will draft the minutes of the meeting. The announcement of the call, the proposals made by the Board, the reports and documents approved by the Board, the modifications or improvements included in the Governance and Sustainability system, and the remaining information required by the company bylaws have been available on the corporate website. An external review has been made of the various procedures, delegation, remote voting and counting of the votes as well as reserving seats in the whole. So pending final checks, the compliance with the governance and sustainability system as ruled is confirmed. And according to the current rules, all questions will be answered during this meeting or in writing within 7 days of the meeting, and that they will be delivered to the notary to be literally transcribed in the minute when the shareholders have stated that they wish their questions to be included.

Now that 7 months have come by since its publication, all of you know the annual accounts and the management report and the nonfinancial information statement corresponding to the year 2021. This was formulated by the Board of Directors on February 22 and was made available to you on the website of the CNMV and of our company, where you can consult this information together with the respective auditing and verification reports. So this is why, in order to speed up this AGM, I will only underscore some of the data of a record year for Iberdrola, in which the acceleration of our investments that have reached EUR 9.9 billion have allowed us to grow more than expected initially. And this confirms the success of our sustainable model that is aimed at consolidating an economy that is free of emissions and which is much more self-sufficient from the energy perspective. And as a result of this, our sales have reached a figure of EUR 39.11 billion with an increase of 18% compared to the year 2020. And the group's EBITDA reached EUR 12 billion, which is 90% higher than the previous fiscal year. And profits reached EUR 3,855 million, with a growth of 8%. So once the AGM finishes, we will show a documentary that explains how our company has evolved, as well as the most relevant events of 2021, the contribution that Iberdrola has made toward all the interest groups, and our prospects for the future. So these are excellent results that have been achieved thanks to the efforts, dedication, and a wonderful work of all the professionals that form part of our group. Those that have allowed us to see that our company is nowadays 1 of the 2 largest and most important companies on the Spanish Stock Exchange in terms of capitalization, and the biggest European utility and one of the leaders in the world and one of the most outstanding companies on the IBEX 35 with nearly 15%. And these results have also made the Board of Directors propose a supplementary dividend of EUR 0.27 per share, which together with the EUR 0.17 that were paid in February as an interim dividend, represent retribution or remuneration to the shareholder of EUR 0.44 per share, which is 5% higher than the figure of the previous year. Well, as regards to the main new developments that we are to present here for your approval, I would like to underscore the reform of the company's bylaws and the regulation applicable to the AGM to consolidate Iberdrola's commitment in terms of its purpose and values and its social dividend, as well as the introduction of what we call the involvement dividend. Because at Iberdrola, we are fully aware of the importance of involving all of the groups of interest in our social life, and in particular, we are aware of how relevant it is for shareholders to participate at the AGM. So that's why we are still looking for instruments to even foster it further. So what we are proposing for your approval is an involvement dividend, which consists of paying EUR 1 for every 200 shares to the shareholders with the right to attend this AGM for having exceeded the quorum of participation of 70% of the share capital. Finally, and as regards to the composition of the Board, I would now like to underscore the proposals that are relative to the reelection of Anthony Gardner, and the ratification and reelection of María Ángeles Alcalá Díaz and Isabel García Tejerina as independent directors. These proposals show how committed the society is in terms of independence and diversity. And after the appointment, 71% of the directors will be independent and 43% of them will be women. But now I would like to give the floor to the secretary, so that he can give the information on the recommendations of the code of good governance.

According to what has been stated by the Chairman, I would like to report that the company complies with all the recommendations established in the listed companies code of good governance that are applicable, except number one, since Article 29.2 of our By-Laws approved by you limits to 10% the maximum number of votes that can be cast by a partner. This measure is to defend shareholders in companies with an owner structure which is dispersed such as Iberdrola's. And #64, that refers to payments for termination of relations with executive administrators due to the existence of contracts previous to the publication of this recommendation.

I'm going to give the floor to the secretary so that he can inform on the constitution quorum of this AGM.

The share capital today amounts to EUR 4,828,172,000 and is represented by 6,437,563,000 ordinary shares, all of them with a nominal value of EUR 0.75 each and belonging to a single class and series. A total of 71,411 shareholders holding 4,643,719,000 shares, representing 62.5% of the company are attending this meeting. And of these shareholders, a total of 18,234 holding 124,894,893 shares are considered to be present or attending, representing 16.8% of the share capital; and a total of 53,163 shareholders holding 63,859,653 shares, representing 49.95% of the share capital are represented or have delegated their vote. The treasury stake, which amounts to 198,321,883 shares and represents 3.081% of the share capital have been included in order to calculate the necessary percentages for the constitution and adoption of resolutions, albeit according to the law, the right to vote related to these shares is suspended.

So therefore, we hereby confirm the ballot constitution of this AGM in its second call to deal with all the issues that appear in the agenda. I'm now going to give the floor to the notary.

In compliance with Article 101.1 of the business register regulations, I state that I have been requested to attend this shareholders meeting and draft the minutes of the meeting. I have judged the capacity of the request and have verified that the meeting has been summoned according to the legal and by-law requirements and have accepted the request. I also state that after examining the request for information and clarifications made by writing through the channels provided by the company, no shareholder has expressed, neither themselves or through their representatives, any reservation or protest regarding the summons to the general meeting, the provisions adopted to facilitate the rights of the shareholders, or the celebration of the meeting itself. Finally, in compliance with Article 101.3 of the mentioned business registered regulations, I have to ask this assembly the following question. Are there any reservations or protests regarding the statements made by the secretary regarding the number of shareholders attending and the capital present and represented? There are none. The minutes will reflect that no reservations or protests have been made by any of the attendees either in their own name or in the representation they hold.

We're now going to move on to the Q&A session. I'm going to give the floor to the secretary.

The shareholders that have given sufficient notice to speak are the following: Mr. Joaquin [indiscernible] Diegos, Ms. Yolanda Gomez, Mr. Pedro [indiscernible], Mr. Jose Fernandez, Mr. [indiscernible] Sanchez, Ms. Maria Carmen Alvarez, Mr. Jose [indiscernible], Mr. [indiscernible]; Ms. Angela Sanchez [indiscernible], and Mr. Roberto Gonzalez. The questions will be answered by the Chairman. The first is a valuation of the decarbonation efforts by Spanish and European authorities.

After '20, we've been putting our stakes on economy that is low in emissions. It's wonderful to see that there's a consensus in favor of decarbonization. But we also want to become much more self-sufficient from the energy perspective. And today, 75% of the energy that is consumed comes from oil, gas and coal, and less than 25% comes from electricity. So this is why we want to decarbonize and want to be more self-sufficient. If we want to do this, we have to increase our electricity share in the energy mix. And even in the case of electricity, we have to increase the percentage of renewables because nowadays, more than half of this is produced with fossil energy. So therefore, this is an enormous opportunity to develop renewables. That also for the electric grid and for the storage facilities that are required to integrate all of these things, but also for other energy vectors such as green hydrogen, for instance. The European energy policy is promoted through the Fit for 55 agreement or the new REPowerEU package that has been recently approved that I call fit for self-sufficiency. And in this new environment, Iberdrola, I think that we have some very clear-cut advantages because we have more than 20 years of experience in developing and executing renewable projects. We have young and well-trained human team from 79 different nationalities. We have access to green funding because nowadays we are the biggest issuers of green funding in the world. And we are present in stable and attractive markets like the United States, the U.K., or Australia, apart from the traditional markets in Europe and Latin America. And thanks to which we can say that we've multiplied by 7 our size in the last 20 years. And now we've become, as I said previously, one of the most outstanding companies on the Spanish IBEX and the first European utility, one of the biggest in the world. And I'm sure that in the future, we would invest more, and we will grow even further in this regard.

There's a second question, Chairman, on the impact on Iberdrola of the Ukraine war.

Well, firstly, I would like to start off by saying on my behalf and on behalf of all the people that form part of the Board of Directors and all of its workers, I would like to send a message of solidarity to the people of Ukraine. We hope that the invasion will finish as soon as possible, and we hope that freedom and peace can be reestablished in that country. But as regards to your question, the impact for us is minimal, because we are neither present in Russia and we're not present in Ukraine, nor do we import gas from those countries. But apart from that, this war is proving that we have to be more self-sufficient from the energy perspective, I said so before, and I would like to stress that. And that means that we need to make more investment, so that we can electrify the economy, and we have to invest more money in networks, in renewables, and also in storage facilities for electricity. And that is our strategy, and it has been our strategy for the last 20 years.

There are 2 questions that refer to the macroeconomic situation and the current price situation and how this could affect the Iberdrola dividend.

I think that our activity is less sensitive to cycles because of the stability of electrical consumption and also because we expect that demand will grow thanks to a higher degree of electrification. But in addition to that, in our particular case, we are very diversified from a geographic perspective. And our income, our revenues come from countries with different currencies. We have 1/3 in euros, another 1/3 in dollars, 20% in pounds, at a point in time when these currencies are well revaluing vis-a-vis the euro. But we've also sold; in the case of Spain, we sold all of our energy production for the year 2022. And as I've already mentioned on previous occasions, we've sold it at fixed prices before we establish the current prices. And well, in view of the drought that is affecting Spain and the lack of wind, we have been forced to buy more power, more energy than what we would require normally at higher prices, and we have not applied this increase to our customers, which has brought about a slight decline in the results of Iberdrola, Spain, that have been compensated thanks to the growth we have in other countries. But we also have sold more than 80% of our energy in the year 2023 and lots of energy for the following years, too. Our supplies of equipment for 2022 are now fully committed with prices that have already been established. And as regards to possible increases in interest rates, we have 80% of our debt at a fixed rate with long-term maturities of more than 6 years on average. So this is why we are proposing to this AGM a dividend of EUR 0.44 per share, which is 5% more. And in view of how the fiscal year is evolving, especially in our businesses in the United States and Brazil, we can also ratify our perspective as regards, well, we've said this previously, as regards to reaching a net profit between EUR 4 billion and EUR 4.2 billion and increase the dividend in the same proportion, too. And the major investments we're making, there are enormous investments, as everybody knows, throughout the world, are also going to allow us to carry on growing in the next few years, and we expect that growth will also be in terms of results and dividends.

There's a question on the growth of the offshore wind business.

Well, this is not new offshore. Wind power is not new, because we already mentioned this 15 years ago. In the U.K., once again, our company was a pioneer in this technology. And this applied to onshore, but now it also applies to offshore. But this is a reality. At our company, we have 2 wind farms in operation in the U.K. and one of them in Germany that are already delivering more than EUR 600 million to our EBITDA every year. And we are also building another 2 wind farms in Germany, 3 in the United States, and 1 in France. And we have a team that is made up of more than 800 professionals of 20 nationalities with lots of experience, because they are now at 2 centers, 1 in London and the other 1 in Boston, apart from other venues that we have in Spain, Germany, France, or Japan, to develop these things. And over the next 3 or 4 years approximately, well, I would like to remind you that we're going to invest something like EUR 10 billion in this sector, fundamentally in the United States, Germany, France or the U.K., where in the case of the U.K., we've just submitted, I think it was on the 15th, we've just submitted our proposal to an auction for the East Anglia THREE project of 1,400 megawatts with investments in excess of EUR 4 billion. But as regards to the future, we are also growing and reaching out to other countries, like Japan or Taiwan or South Korea, where we already have several developments underway and we have people working in those countries. And in the case of Japan, I trust and hope that if the next few months there's another round of auctions, it will be possible for us to participate with some of the projects we have in our pipeline.

A shareholder asked about the green hydrogen business and its potential development and profitability.

Well, I think that the first step that we have to take to decarbonize the economy, first, we have to make progress in terms of electrification with renewables, and this is something that at Iberdrola we've been doing for the last 20 years. Although there are sectors that more or less represent 20% of the energy and where it's difficult to implement electrification, and in those sectors in which it's difficult to electrify, there is a solution, which is based on using green hydrogen that is produced by means of electrolysis with renewable electricity. So as we are fully convinced of this opportunity that cropped up 2 years ago, we put our stakes on this technology, and we now have several real life projects. Recently, for instance, we have the honor of being visited by His Majesty, The King, to open our green hydrogen plant in Puertollano, which is the largest of Europe for industrial applications. We have another one in Barcelona to supply green hydrogen to the buses that are used in the city. And we have a pipeline of more than 60 projects that if they ever materialize, they could represent an investment in excess of EUR 3 billion, both in Europe and America, and which I hope will happen in the next few years. But in addition to that, the European Commission has clearly focused on the production of hydrogen in Europe, and it's established a target of more than 10 million tonnes for 2030. And I'm sure, as I've said on previous occasions, that it will provide the necessary support mechanisms in order to achieve this goal.

Regarding diversity and inclusion, there's a question about what else Iberdrola is going to do in this field.

Well, we've been a pioneer company in terms of the quality at Iberdrola, and we've done this in a sector that traditionally, in the past, where women have hardly been present or there's been a minority of women in technical positions and in management positions, too. And in our case, women now occupy more than 1/3 of these positions of responsibility, when a short time ago, if I'm not mistaken, nearly represented just over something like 20% of the workforce. And on our Board, and this is something that everybody knows, at this point in time, we have the same number of men and women on the board. So we don't have a wage gap in Iberdrola, as you've also been able to see in our report on diversity and inclusion. We have more than 100 work-life balance measures and flexibility measures, so that men and women can carry on with family lives without any kind of interference. And we want more women to join technical studies, both at universities as well as vocational training centers with ad hoc scholarships, which is what we are giving. And I feel very proud of these initiatives. We have, for instance, schools for women electricians that we have in Brazil up and running right now. And everybody knows that we are supporting female sports, because in Spain we have 600,000 women in 32 federations we are supporting. And I think that right now 2 out of every 3 women that form part of a federation in Spain of any sport are receiving Iberdrola support. And not only in Spain, but also in Brazil. We are also supporting the National Football Championship of Women as well as the national team -- national side. So I feel very proud. And in fact, Forbes has recognized us as 1 of the 10 best companies of the world based on the integration of women and because we are present in the most outstanding indices of the world like the Bloomberg Gender Equality Index, although diversity and inclusion are much more than gender equality, of course. So this is why, by following the policy approved by the Board, we are also working very hard to eliminate any kind of a barrier against people with different skills. And we are open to all kinds of cultures and ethnicities, because as I said before, we have workers from 79 nationalities, from 5 continents. But in any case, we are fully aware of the fact that there is still much more work to be done, although we are completely sure that equality and the respect for diversity and that inclusion are absolutely unstoppable now.

There's a question, Chairman, on Iberdrola's investments in the United States and the reasons why the P&M operation wasn't carried out, the New Mexico and Texas utility.

Well, as you know, we've been operating in the United States for 15 years, and we are the European utility and the Spanish company of all sectors with the biggest investments in this country. As regards to renewables, we have wind farms and solar farms in 25 states. We are building the first major offshore wind farm in the country off the coast of Massachusetts, as I said before, and there are going to be another 2 coming along also off the coast of Massachusetts and the investments will total several billion dollars. And in the case of grids, we are in the states of New York, Connecticut, Maine and Massachusetts, and we are delivering our services to more than 7 million Americans. And in the case of PNM, as you know, this is the utility in New Mexico and Texas. We also expect to be able to get this done in the future. But in this particular case, and as regard to the issue of the merger with PNM with the utility in New Mexico, we have all the federal and the state permits except for one of them, and an appeal has been filed at the Court of Justice. And I'm sure that the outcome of this appeal is going to be positive. And I know that over the next few months, we will have the operation carried out in full because I believe that it's very, very beneficial both for the shareholders of both companies, as well as for the citizens of these states.

A shareholder from Bilbao asked Iberdrola to continue to promote the image of Bilbao and the Basque Country and asked about investments in renewables in the Basque Country.

Well, this is something that I've repeated many times. We are very proud of our Basque roots because we were born here and we've been here for the last 120 years. I mean this is where we want to continue in the future. And this is why whenever we can, we try to showcase to the rest of the world this dynamic and very important Basque Country. And we've been able to do so this year by bringing [indiscernible] outstanding events. On the one hand, the annual meeting of the ERT with the 60 largest industrial companies of Europe that employ more than 5 million people and have a turnover of more than EUR 2 trillion. And this event was wonderful because we had His Majesty, the King; the Vice President of European Commission; the Basque President; and the Vice President of the Government of Spain; as well as the Deputy General of Biscay and Bilbao, and that meant that the event was a total success. So that's why I plan to thank them very much. Indeed, I would like to thank the Mayor. I met up with him this morning. And I would like to thank them for all of their support and their dedication. For me, it was a great satisfaction to see that after this business summit, the Financial Times published an extensive article praising this significant transformation of the Basque Country and the opportunities that are offered here for overseas investments. Something similar happened a few months later with WindEurope that is the major Wind Power Trade Fair Exhibition of Europe, which we expect to bring back to Bilbao in future years. But talking about investments. Nowadays, our investments and our purchases with Basque companies generate 12,000 jobs. We are the biggest taxpayer. And together with the Bizkaia Provincial Council, we've set up a Center of Excellence and Innovation for smart grids in [indiscernible] that has 120 innovation projects in which 80 companies are involved, and practically all of them are based in the Basque Country. And as regards to specific investments in renewables, we have several wind farms in operation in the 3 Basque provinces, one in [indiscernible] in Bizkaia with 270 megawatts. But now we have a joint venture with EVE, and we are promoting another 4 wind farms as well as a TV station, which will be the largest of its kind in the Basque Country, and this is being done together with EVE and the Grupo Mondragon. And all of these investments on the whole could actually exceed EUR 300 million over the next few years.

Finally, a shareholder wishes to acknowledge the Board and its Chairman for their work in defending the Iberdrola business project and asks that we continue along these lines.

Well, before anything else, I would like to thank you for your kind words on my behalf and on behalf of the Board, too. But in any case, without a doubt, we have defended and will defend as much as we possibly can. This project has transformed Iberdrola into Europe's biggest utility and also one of the biggest companies in the world. It's a company model that is based on collaborating with all of our interest groups in all of the countries in which we are present in the 5 continents. And it's a model that always defends, rest assured, it defends your interests shareholders, as you can see by making this proposal for increasing the dividend that is here to be approved by you. And we are fully convinced that it's also compatible with our social dividend commitment that, by the way, can be seen in our by-laws that you approved several years ago, because a business project is only sustainable if it does generate value for society as a whole, not only through the service that it renders, but also through the jobs it produces, its contribution towards the public treasury, how it takes care of the environment, how it fosters innovation, and of course, how it defends and pays its shareholders in a sustainable manner, and that's what we're doing at Iberdrola. Because last year we hired more than 5,000 people, and we've given more than 15 hours of training per person. We've maintained 400,000 jobs of our suppliers through our purchases exceeding EUR 12 billion a year. And we have emissions of only 60 grams per kilowatt in Europe, which is the fourth of what our European competitors have. And we contributed with nearly EUR 8 billion in the case of the IRS services. And this is something you can see in our tax transparency report. And we've spent EUR 350 million on innovation. And of course, we are paying this dividend of EUR 0.44 per share, which is 5% more compared to the previous fiscal year. And this is why you can be absolutely sure that we are going to continue along the same path. In other words, we're going to be creating value for everybody.

And now we will vote on the proposed resolutions. Regarding the provisional results of the vote, I must point out that the votes issued remotely as well as the proxies received through all the channels have been processed. And after checking the count of the votes and pending final checks, the procedures applied meet the provisions of the governance and sustainability system and its rules. The votes related to the shares present and represented will be considered to be according to the rules of the shareholders. Regarding point 14, 15, 16 and 17 regarding the remunerations and ratification and reelection of directors, the members of the Board that are conflicted will abstain from exercising the right to vote of the shares they represent. These rights will be exercised unless the opposite is stated by the Secretary of the Board of Directors, and if he were conflicted by the Vice Secretaries, we have all expressly accepted the nomination. As we can see on the agenda, the subjects are grouped by blocks, and we will announce the votes obtained. The first group where we put your approval, the annual accounts, the management report, the nonfinancial information, the company management and the reelection of KPMG as auditor of accounts for 2 years. And the second block, the modification of the preamble and Article 7 and 16 of the bylaws and Article 7 of the shareholders Meeting regulations. The third block requests your authorization for the payout of the new engagement dividend and the final dividend and 2 capital increases within the Iberdrola flexible remuneration system. And to compensate dilution effect of the capital increases, we propose reducing it by a maximum of 3.069%. And there will also be a consultative vote on the annual report on directors' remuneration. Fourthly, the reelection of Mr. Anthony Gardner as Independent Director and the ratification and reelection of Ms. María Ángeles Alcalá Díaz and Ms. Isabel García Tejerina as independent directors. They have all expressed their intention to accept the position that will be formalized after the meeting. We also request your approval to determine the number of members of the Board of Directors. Fifth, we request your authorization to acquire treasury stock. And we also request the delegation of powers to formalize and publish the resolutions. In view of the preview of the results, I'm pleased to report that excluding the votes that have not yet been counted of the shareholders that are attending face-to-face or remotely, there is sufficient majority under each item of the agenda to approve all the proposed resolutions put to the shareholders' meetings. The final data on the votes will be published on the company's website.

Well, according to the information that the panel has and that will be detailed in the minutes of this AGM, all of the proposals that have been formulated by the Board have been approved. So on behalf of the Board, I would like to thank you all for your participation and for your support. And I would like to remind you that now we're going to show the documentary that I mentioned previously on the most relevant landmarks of last year. So we here conclude the AGM. Thank you very much, and the session is adjourned. [Statements in English on this transcript were spoken by an interpreter present on the live call.]