It is really a transaction transforms CarlsbergFriday despite the statements made by George wIt is likely that other ads are implementedFocus on cognac in Charente is not uselessPoint of gas gas competition the game remains sluggishIt is time to enter the era of pragmatismThe lowest rate in seventyfive years saidSuch a movement could quickly become uncontrollableMore reason to freedom in the negotiation85 over the last twelve months as the whole sectorHis visionary policy has been the world leader in wind power, its acquisitions for more than 20 billion euros last year transformed it into an international actor, opened its capital and buyout rumors surround regularly, the last on EDF... Iberdrola had everything to entice investors. The second Spanish electrician experienced a stock market climb impressive, began after the arrival in his head, mid-2001, of Ignacio Sánchez Galán, who succeeded in imposing a bold strategy.
In six years, since January 2002, the Spanish group flew 150 on the stock market, when the European electricity and gas companies sector grew by 90, 56 Spanish stock exchange and the general European DJ Euro Stoxx 50 index remained flat. In December, the rating of its subsidiary wind, Iberdrola Renovables, was one of the stock market events of the year, involving once again featured the group led by Ignacio Sánchez Galán.
Will the current stock market consolidation stop Iberdrola momentum It is likely in any case to cause the development of the sector. With the outbreak of the energy and interest rates lower, electricians have not ceased to be assessed on the stock market since 2003 and the sector has become expensive, without mention of the actors in renewable energy. Deutsche Bank estimates, the value of business (market capitalization and debt) of the European utilities now represents 9.7 times their operating income estimated for 2008, a historically high multiple knowing that since a decade, it oscillates between 7 and 9.
Defensive sector
The sector therefore hardly offers hopes of gains in the eyes of analysts... unless the "subprime" crisis lasts, in which case it could take advantage of its defensive image. "Given the economic uncertainty, our strategists have passed"underperformance"sector to"neutral"", and indicates the Deutsche Bank. The beginning of the year does not yet valid this reasoning of "shelter sector" since the utilities fell by 13.5, in line with the Euro Stoxx 50.
The market continues to follow with attention Iberdrola: 30 analysts surveyed by Bloomberg place consensus, only five recommended the sale of the title and any decline is seen as an opportunity to purchase. Goldman Sachs who, like many, still felt fully valued action in December, the registered January 17 on its list of values to buy (with a goal of courses in a year of 12 euros) after the decline of the course, passed below 10 euros.
However, this interest in Iberdrola has a condition: the Spanish group hold growth targets it has set for itself. Last year, to guard against a takeover bid, he has completed the acquisition of the UK Scottish Power electrician in April for 12.2 billion, then announced, two months later, an agreement for the purchase of American Energy East for $ 4.5 billion. The strategic plan presented late October now focuses on strong internal growth. On 2008-2010, the group plans to invest 24 billion euros, of which 18 billion in internal growth in the international and the wind (which alone accounts for 48 of the envelope). A key, a diversification of risk, since "the traditional Spanish activities should represent 33 of Ebitda in 2010, compared to 62 in 2006", said Deutsche Bank.
With these investments, the Group table on an annual growth rate to double-digit operating income, an increase of 11 per year of net income and dividend per share, and a double profit in four years, to spend $ 1.7 billion in 2006 to more than 3.5 billion by 2010.
Increasing risks
Renewable energy, in full explosion, must provide the bulk of the growth through Iberdrola Renovables ("Iberenova"), the publicly traded subsidiary since December but still owned 80. The risk of execution, in the future, will be therefore essentially at the level of this subsidiary features (read below), which must also support the course of the group through its stock valuation multiple much higher than those of traditional electricians. Other side of the coin: in January, the bursting of the valuations in renewable energy has lowered the course of its parent.
And observers weigh the risk attached to Iberdrola. On 12 December, Moody's lowered a notch the note of the group, putting forward a "risk of execution and integration". For the Agency, "the company has developed new markets on which it has less experience, and in addition it has ambitious growth targets, which may be affected if the environment becomes more difficult".
The latter figure would not save its traditional activities of electricity production, in particular if the Spanish electricity prices recover not their decline in form of 2007. A rebound is expected in 2008 (Goldman Sachs provided, end of November, they would reach 57 euros the megawatt-hour in 2008 for the production of base against 40 euros last year) and Iberdrola table 60 euros in 2010, a price deemed to reflect the CO2 emission permits. But these optimistic projections do not unanimously: Lehman thus anticipates rather 54 euros for 2010 award because it expects a market price of CO2 of EUR 25 per tonne against 30 euros for Iberdrola and therefore calculates a net result of the lower group of 8 to the objectives. Dexia, for its part, fears an overproduction in Spain 2010, in the light of the ongoing investment in the production of electricity.
Less polluting
Despite these risks, the traditional activities of Iberdrola retain assets. Its electric assets include more nuclear and of power than the average, the group issues therefore less CO2. A size advantage, given the financial burden that may represent the purchase of emission of CO2 on specialized scholarships for other electricians. As a comparison, RWE, the largest polluter in Europe because it burns much coal, believes that its purchases of permit CO2 should represent more than 1 billion euros per year in the future. A risk of rising costs which do not threaten his Spanish rival. This asset has been considerably strengthened the week last by the announcement of the disappearance of quotas CO2 in Europe in 2013. Industry will need to buy emission permits full.
Some analysts also point to another attraction of "conventional" of Iberdrola in electricity production: it has been eclipsed by Iberdrola Renovables, to the point of today offer an interesting haircut. "Défalquée once the value of renewable energy, the value of business from the rest of the activities of Iberdrola represents only 7.7 times the operational result estimated for 2008 and 7.4 times that of 2009, a significant discount to the multiple of the sector, 9.2 and 8.4 respectively", calculates Goldman Sachs.
Finally, for the acolytes of the value, Iberdrola could benefit from a speculative premium, large OPA manoeuvres on the Group of Ignacio Sánchez Galán being likely to re-emerge after the Spanish elections in March.
