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

Once again, we're holding this shareholders' meeting at our corporate headquarters. Thanks to everybody's hard work. I'm pleased to report that after setting up all the possible channels for participation and accreditation, we have reached the necessary quorum to be able to constitute and hold this shareholders' meeting. Consequently, we can begin. The Secretary, Santiago Martínez Garrido, has the floor.

Thank you, Mr. President. Good morning, ladies and gentlemen, dear shareholders. This meeting is held at the corporate headquarters with the attendance of the shareholders and their representatives besides other by proxy and remote votes received through the different channels that have made possible to have a share capital participation of over 74%. And already 98% have voted, as you can see on screen, which once again shows the trust vested upon the Board of Directors. In this sense, I would like to inform you that since the previous meeting, we have kept in touch with all of you through the different transparency and engagement measures that have been implemented, which show the clear will to be in constant touch with all our shareholders. That has meant that we have received over 388,000 through our website, and hundreds of meetings with both national and international shareholders as well as with voting advisers, and we have been in constant though the OLA Club of the shareholder channel. And besides, for the call of this General Shareholders Meeting, one more year, we have organized the Shareholder Month digital immersive space that has had an all-time high participation of over 23,000 visits. And we have held several meetings to get to know the company better, such as the Shareholder Day in the corporate headquarters. We have also implemented the mechanism necessary, so all shareholders can exercise, in the easiest possible way, their right to information, intervention and vote. We have also allowed interventions to be done on the subjects of the agenda to be received as mentioned in the call, automating till the meeting starts. I'd like to inform you that the President and Secretary of the meeting, those persons who are President and Secretary in the Board of Directors. We have requested the presence of notary public, Mr. Ramón Múgica Alcorta, who will draw up the minutes of the meeting. The call of the meeting, the proposals made by the Board, or the reports and documents approved by the Board, all the modification or amendments included in the sustainability and governance system, and all the other information required by law, bylaws or such system have been available in the corporate website. We have also carried out an external assessment, amongst other procedures, the by proxy, remote voting, quorum calculation, and seat reservation systems. Pending final legal review, we can say that we have met all the legal and regulation measures as well as for the governance system. Since they were published several weeks ago, you have been able to review the annual accounts of the management report and the nonfinancial information for the year 2023, which were made available to you on the website of the National Stock Exchange Commission and the company, where you have been able to see them together with the audit and verification report, and have so far received tens of thousands of visits, which have been covered at the various meetings held with national and international shareholders and with the voting advisers. Therefore, the report from the Board of Directors as last year consists of an audiovisual section explaining the main milestones for the year, and I will later elaborate on some additional aspects related to this information as well as our future outlook, both economically and socially. [Presentation]

Ladies and gentlemen, our shareholders, as you would have seen during the past financial year, we have continued to pursue our strategy of profitable growth with which we generate value for our employees, our customers, our suppliers, for all the companies that we provide services to, and of course, for you, our shareholders. Thanks to the EUR 11,400 million invested in electricity grids, renewables and storage infrastructures, in 2023, we have further promoted energy autonomy, protection of the environment, competitiveness, and employment worldwide. We have positioned ourselves as the leading Spanish company in all sectors in terms of investment volume with more than double the next highest. This unprecedented effort has led us to exceed EUR 150,000 million in assets, and to also beat our record profits with a net profit of EUR 4,803 million, allowing us to propose to this shareholders meeting to allocate a total of EUR 3,500 million to remunerate all of your shareholders with a 10.8% increase. This means EUR 0.55 per share, the highest dividend ever paid by the company. Ladies and gentlemen, 2023 has meant a real turning point in the world on the path towards an energy matrix less dependent on fossil fuels. The social and political consensus reached last year on the need to accelerate this transition outlined a new scenario and ratifies the success of the strategy we put in place more than 2 decades ago. The last Climate Summit in Dubai, marked by a global context of geopolitical and macroeconomic uncertainty, resulted in the commitment signed by nearly 200 countries to undertake a progressive abandonment of fossil fuels and triple renewable generation capacity in the next 6 years. This is a historic milestone that comes barely a decade after the Paris Agreement and whose origin has been, as it was then, the mobilization of civil society to stop environmental pollution and reduce greenhouse gas emissions. Driven by this climate, governments around the world are approving energy policies and regulatory frameworks that will bring huge investment opportunities. These include the electricity market reform and the net zero industry law in Europe, various regulations implementing the inflation reduction law in the United States, the new renewable targets recently adopted in the United Kingdom, or the electrification plan and reduction of emissions started up in Australia. And we are proud to be able to say from here, from our headquarters in Bilbao, that thanks to our pioneering commitment, Iberdrola is going to face all these opportunities, firmly establish as a world leader in the sector, the largest electricity company in Europe and 1 of the 2 largest in the world by market capitalization, a position from which we want to continue to be a driver of social, economic and industrial progress in partnership with thousands of suppliers, large companies, financial institutions, and investment funds that share our vision. In this regard, I would like to sincerely thank His Excellency, Saud Muhammed Al Thani, representing the Qatar Investment Authority, one of the largest sovereign wealth funds in the world, for his providence, which, as you know, has more than 9% of the Iberdrola share capital, which means over 9 million shares. Ladies and gentlemen, technological progress, coupled with choosing electricity as the preferred mode to cover more and more energy uses by millions of consumers from around the world make electrification an unstoppable process. According to the International Energy Agency, electric consumption in industry will increase by close to 60% by 2040. In road transport, demand will increase four-fold by 2030, and almost 20-fold by 2050. And in the air condition of buildings, electricity will gradually replace oil, coal and gas to account, in just 15 years, for more than 60% of this energy consumption in both Europe and the United States. This increase in demand is accelerating even more with the new electricity requirements for data processing and the management of cloud-based applications in the so-called data centers. According to various estimates, the electricity consumption of the 4 major technology companies in the world in 2022 was already similar to that of more than 40 million people. And the development of tools linked to artificial intelligence will cause the demand by the data centers to double by 2026 to 800 terawatt hours to give an equivalent figure to the total consumption of Spain, the United Kingdom, and Italy combined in the process of exponential growth that will continue in the following years. Clearly, to serve all this demand will require large investments and proper network planning by regulators and system operators. As you have just heard, ladies and gentlemen, thanks to our vision, the right strategy and excellent execution over decades of work, the wind is now blowing in our direction. We are in the best position to continue to set in motion a virtuous circle of growth, financial strength, and value creation for all. We have just presented, just a couple of months ago, the largest investment plan in our history with EUR 41,000 million to 2026, clearly beating the record of the last 3 years, which were EUR 32,000 million. The United States will be the top destination with 35% of the total, followed by the United Kingdom with 24%, the Iberian Peninsula with 15%, Mexico and Brazil with another 15%, and Australia and other EU countries with the remaining 11%, thus increasing the weight on our balance sheet of markets with great financial solvency and high credit ratings. By businesses, almost 2/3 of the investments will go to expansion, increasing capacity and the digitalization of our electricity grids. As a result, in just 3 years, our regulated assets with assured remuneration will exceed EUR 54,000 million with an increase of 38%. Almost 1/3 of this amount will correspond to very high transmission grid and the rest to medium- and low-voltage distribution grids, further extending the 1.3 million kilometers of lines we currently have. In renewables, we plan to invest EUR 15,000 million, of which more than half will go to offshore wind in projects that we already have under construction. We're not talking about dreams. These are projects that are already being built; projects like Saint-Brieuc in France, Baltic Eagle and Windanker in Germany, Vineyard Wind in the United States, and East Anglia THREE in the United Kingdom. Together with those we already have in operation in the United Kingdom and Germany, these wind firms will bring our total accumulated investment in offshore wind to more than EUR 17,000 million with an annual production of more than 20,000 million kilowatt hours energy that we have already sold for the next 15 years through long-term contracts on very attractive terms. In addition, with our sight set on the end of this decade or the beginning of the next, we are currently bidding in new auctions for wind farms in the United Kingdom and the United States, and we have been recently awarded a new project in Japan and seafloor to build another one in the future in Australia. All of this will reinforce our leadership position in technology with an immense future and in which we have technological capacity, global presence and access to supply chains in different markets. In addition to this increase in investments in grids and in renewables, we are firmly committed to energy storage in order to optimize the use of renewable energies. To this end, in the coming years, we will add a storage capacity of 20 million-kilowatt hours in 3 projects already underway on the Tajo, Duero, and Sil rivers in addition to the 100 million kilowatt hours we already have at present. Thanks to this plan, and I'm speaking now in economic terms, we expect to reach, in 2026, a gross operating profit or EBITDA of between EUR 16,500 million and EUR 17,000 million, and a net profit of between EUR 5,600 million and EUR 5,800 million, with a growth of around 20% in just 3 years, and improving, at the same time, our financial strength and increasing the dividend in line with these profits to between EUR 0.61 and EUR 0.66 per share in 2026. That is 20% more than at present, which will result in a dividend totaling EUR 11,000 million over the period. These positive economic forecasts will be accompanied by a further boost to our social commitment over these 3 years by adding 10,000 new hires around the world, with purchases of goods and services for close to EUR 40,000 million from suppliers who employ more than 0.5 million people, with the contribution of EUR 25,000 million to the public coffers, helping in this way to support the social services in all countries in which we are present. And of course, by further promoting care for the environment, which will lead us to invest EUR 9 out of every EUR 10 in activities classified as sustainable by the authorities in the European Union. As a result, we will further reduce our emissions, which today stand at just 60 grams or somewhat less per kilowatt hour, 80% less than our European competitors, until we achieve climate neutrality in our generation plants by 2030. That same year, by 2030, we will also achieve a net positive impact on biodiversity with initiatives such as planting 20 million trees during this period. In gender equality, we have continued to make great strides inside and outside our company with a 40% increase in women hired so far this year, and strengthening our support for women's sports, which now reaches more than 800,000 women in 35 different federations. And we continue to make progress in the diversity of backgrounds, races and ethnicities in our workforce. Moreover, as a company of people working for people, we continue to be committed to the great social work of our foundations. And of course, to our thousands of volunteers, who dedicate their free time to improving the living conditions of hundreds of thousands of men and women around the world. This social commitment has led us to receive, once again in 2023, various international recognitions such as being among the 100 most sustainable companies in the world according to the ranking published last year during the Davos forum, winning the award for leadership in sustainability awarded to us by the Foreign Policy Association of the United States, or being the only Spanish company amongst the most ethical on the planet according to the U.S. Ethisphere Institute. And we have been selected for yet another year to form part of the most prestigious environmental and social indices worldwide, such as Bloomberg Gender Equality, FTSE4Good, or Dow Jones Sustainability. Our governance system has also been consolidated as an international benchmark and we continue to incorporate the most advanced practices in terms of the involvement of all of you, ladies and gentlemen, our shareholders. Thanks to the effort and dedication of a great team of 43,000 men and women of more than 90 nationalities, who combine youth and experience, Iberdrola is a larger group every day, not only in size, but also in its commitment to people. For this reason, I would like to thank each and every one of our employees for their invaluable contribution and their involvement with this project, and I would like to ask for a round of applause for them. I would also like to thank all the members of the Board of Directors for their constant commitment and support and for the great work they do, both on the Board and its committees. The will to continue with this magnificent work led us to submit today to the approval of this general shareholders' meeting, the reelection of 3 directors, Nicola Brewer, Regina Nunes and Iñigo Víctor de Oriol. Ladies and gentlemen, it is with great pride that I stand before all of you today to give you an account of Iberdrola's performance in 2023. Once again, a record year in which we have continued on the unprecedented path of growth and creation of value over the last 2 decades, built from here, from our headquarters in Bilbao, which was our birthplace over 120 years ago. Our vision, our strategy, and the execution carried out throughout these years allow us to present to all of you today an Iberdrola that is more solid, more sustainable and more committed than ever, and also better prepared to take advantage of the best growth perspectives in our sector in its entire history. We thus face an enormously promising future with a record investment plan of EUR 41,000 million in just 3 years, which will put us in the best position to continue growing in size and in results, contributing even more to all the energy transformations demanded by our citizens, generating more quality employment and more industrial and technological development, improving the environment. And we will do this based on the ethical values, the dedication and the commitment that characterize all of us who work in this company. And to conclude, I would like once again to convey to you, ladies and gentlemen, on my own behalf and on behalf of the Board of Directors, my most sincere thanks for your trust, your encouragement and your involvement in enabling us to carry out this task. In response to your support, I would like to reaffirm today my personal commitment to reach new heights of solidity, size and profitability every day. Building from this, which is your company, a fairer, more fraternal, supportive and, of course, sustainable world, with people always at the center of our activity. Many thanks. I now hand the floor over to the Secretary. I'd like to inform you that once necessary decisions were taken and implemented in 2024 to meet recommendation #64 of the corporate governance of public companies, the company now meets all the recommendations applicable to it, except recommendation #1, for which an alternative is included in Article 29.2 of its bylaws pursuant to Capital Corporate Act. Again, I hand the floor over to the Secretary to explain the quorum.

The share capital amounts to EUR 4,817,474,250 and is represented by 6,423,000,299 ordinary stocks or shares, all of power value of EUR 0.75 and belonging to a single class and series. A total of 99 [ items ] in the meeting with 4,151,100,316 shares that represent 75.52% of the share capital. And out of those shareholders, in person 220 shareholders with 571,146,329 shares that represent 8.90% of the share capital are also present given that they have voted. Remotely, we have 23,278 shareholders with 1,602,413,848 shares that represent 24.95% of the share capital. And by proxy, 75,528 shareholders with 2,676,740,139 shares that represent 41.67% of the share capital. Notwithstanding the changes required after processing the by proxy and votes still to be counted, I'm happy to convey that as I'm informed, given the by proxy and casted votes up to now, all the blocks of the proposals have received support of between 95% and 99%. The treasury stock, which is 162,522,833 shares that represent 2.53% of the share capital I believe needed in the calculations of the percentages needed to constitute and adopt resolutions, although in accordance with the provisions of the law, the voting rights of those shares are suspended.

The valid constitution of this meeting is therefore confirmed first of all to discuss all the items comprised on the agenda. The notary has the floor.

Pursuant to Article 101.1 of the registry regulations, I'd like to express that I have been requested to attend this meeting, to elaborate the minutes of such meeting. I have judged the capacity of the required and I can assure that the meeting meets all the legal requirements and have accepted this required. And pursuant to Article 101.3 of the aforementioned regulation, I'm happy to express that in case there are any reservations or protests by shareholders attending in person or remotely on the number of shareholders attending or the present or represent share count, you may express them at this table or do so following the website directions to make sure I can note these reservations and they will be included in the minutes of the session.

We will now open the floor for questions, and I'll hand over to the secretary to organize the interventions.

To ensure that this meeting runs smoothly and to make sure that all those who want to who want to participate are able to do so, I'd like to mention that you should limit your interventions to the subjects included in the meeting's agenda and not exceed the time required to ensure the exercise of your right of information following the regulations of the shareholders' meeting. I would like to mention that according to applicable legislation, all the questions made will be answered verbally during the meeting or will be answered in writing in the 7 days pursuant the celebration of this meeting, and they will be provided to the notary public, so the interventions of those shareholders that have requested can be included in the minutes. Six shareholders have requested to participate. I'll give the floor, first of all, to [ Ms. Susana Vera ] representing 544,768 shares.

Good morning. I just wanted to comment that in other shareholder meetings, you normally talk about -- well, you talk a lot about the past and less about the commitments of the future, but I can see that in this case, we keep on talking about plans and how these plans are being met. Maybe that's why I see the financial analysts still recommend to buy and keep their shares, and they even mention that we are such an example. And I believe that in an environment such as the one we're going through today, this is not easy task. And that's why I would like to congratulate you and the Board. You recently showed the strategic plan for the period 2024 to 2026, and I wanted to go a bit beyond. So you can tell us which are your focus beyond the company and beyond the term included in the strategic plan. Thank you.

I'll now give the floor to Mr. Franco Castanalez owning 2,008 shares.

I'd like to start my intervention by congratulating the President and the Board of Directors for the financial and investment results and for the forecast of the company. As shareholder concerned by the profitability of our shares, I can only express my satisfaction, and that's why I would like to start by thanking you, Mr. Sanchez Galan, and all the directors. But besides the profitability of the company, Mr. President, I'm also interested in the territory, how it looks and how the actions and the management of the company impacts the territories in which it operates. I come from a territory that many of us believe as to be a hard walking land, Extremadura, where Iberdrola has many of its assets. Around 2,000 hydroelectric megawatts, 3,000 PV, and a nuclear plant with almost also 2,000 megawatts, although that ownership is shared with other companies. But you're about to lose or could lose 2 wind farms because 2 [indiscernible] organizations have forecasted. And now another wind farm in [indiscernible] with 550 megawatts that's been deemed illegal after a sentence by the court in Extremadura. Another PV farm of over 550 megawatts in Qatar has also been deemed illegal by the court of Extremadura as well. 1,100 megawatts of the nuclear plant in Almaraz that will have an expiry date. They will have to close in 2027 for Reactor 1 and 2028 for Reactor 2. So adding all up -- and we've also got another 1,100 megawatts that I will mention at the end of my intervention that have been declared not to be compatible and so illegal, because they are in the Monfragüe National Park and they have been declared incompatible. 3,100 megawatts lost or being sued and several others are in path to be lost given the lack of empathy of a company that nobody feels as their own in Extremadura despite all the investment made in the region and [indiscernible] that has been kept since 1956, and with all due respect, I'd like to bring your attention to. 54% of the assets in Extremadura are or have been threatened for their future existence. And we should think about it and the Board of Directors should probably reflect upon it. I believe that there are many things that are in the hands of the decisions of the government and the decisions of regional governments as well. But there are many other things that are in the hands of the management of the company. You have power enough to have executives or managers or people close to the President that can take care of the territories in which you operate. Because unless you're nice, if indigenous people of the territories feel marginalized, and in many cases, expelled from the territories, you have an enemy -- you'll create an enemy that will end up winning the battle, no matter how present you are and no matter how close you are to the governments. Civil society is important. In many cases, they are tired of politics, they are tired of politicians who win and lose the elections. According to what has been belief of them, some civil society platforms are created to defend some rights in some territories. In the [ EMEA ] region, there are many such associations and many are linked to energy policies and Iberdrola is the main company operating in Extremadura. I'm not here to say anything bad about the management or the Board of Directors or the executive team. I'm here just to call your attention, so you can feel closer and increase your [ sensory ] towards the problems created in the territory, because in many cases, unless you are part of it, very hard to understand. It is true that you can probably answer to me that you are not paid or the company does not pay you to be nice. I'm sure you could say that. But given that I won't have another turn, I'll rather provide my answer, but we are not paying you not to be nice and to be arrogant in those territories. Please make an effort to get on well with the territory and these people. And I will finish by talking about sustainability. Iberdrola has started a very tough fight against wind-washing, the greenwashing of other companies who have their headquarters nearby. And I do completely share, I fully share that battle, that actions from the company, but at the same time, I would like to call your attention on ourselves about Iberdrola. It is true that a huge effort is being made to be more sustainable and for the energy transition. Well, with the standards our society is asking us for, but there are small details in the global context, or even in the general context of the company and the shareholders that are beyond the watchful eye of our society and shareholders themselves, but not for those of us who live in the territory. Iberdrola has 1,100 megawatts, well, it's not a very precise figure, that are impacting the Monfragüe National Park. The National Park Act does not allow these plants to be created. They gave a date to finish this, which ended 4 years ago in December 2020. Not only have you gotten rid of it, the company should have done, it's also in the hands of the government to comply with the law, but at some point, you have carried out hazardous activities that have turned the National Park into a waste field. I'd like to invite you, all the members of the Board and other shareholders or those who represent the shareholders who want to come with me to the National Park for you to see if the heart of the most important natural space of Mediterranean forests can have what it has in it. More so, even the law is against it very clearly, and the dates to solve the situation are over. So this cannot be solved with having politicians from different parties in the Board of the company. That's something that I would like to talk about, but will leave this for other shareholders, because I guess you are not going to give me the floor again. You cannot hide it with huge amounts of money invested in the media, in advertisement or non-advertisement. I would also like to know how much Iberdrola is investing in the media, in advertisement and non-advertisement campaigns globally. You can silence the media. You can -- so to speak, and with all due respect, I'm not trying to offend anyone, but you can probably tame the government and public administrations, but people see, people suffer, and people are more and more outreach. That's why we have more and more civil society platforms that are able to close PV plant wind farms with the tools of justice and quite probably, with the help of the European Union and the court of Extremadura. Thank you very much.

Thank you. I will now give the floor to [indiscernible], the owner of 17,502 shares.