Spain's Iberdrola to add 9 GW of generating capacity in next two years

Spain's Iberdrola said Wednesday it intends to continue its renewable capacity surge over the next two years as it increases its capital expenditure to record levels following the successful sale of assets ahead of schedule.

The company plans to bring online 4 GW of new generating capacity in 2020 and 5 GW in 2021 towards a total of 13 GW by 2022, building on 5.5 GW installed in 2019. This compares with an average of 1 GW in recent years, CEO Ignacio Sanchez Galan said.

The company said it will hike investment to Eur10 billion ($10.9 billion) in 2020, up from Eur8.2 billion in 2019, and 40% higher than the average of the last three years, he said.

This followed the early raising of capital from asset sales, including the disposal of the company's 8% stake in wind turbine group Siemens Gamesa last month for Eur1.1 billion, which took overall disposals to Eur4.6 billion -- ahead of its target of Eur3.5 billion by 2022.

The company was also been successful with green financing last year, leading the world in the placement of private green bonds, with Eur4 billion issued in 2019.

The capex split for Iberdrola in 2020 will see 45% allocated to renewables, 35-40% to networks, which Sanchez Galan sees as "the backbone of the energy transition," and the remainder to generation and supply.

In its domestic Iberian market, Iberdrola expects to bring online 3 GW in the next two years.

The company said it already completed two onshore wind farms this quarter at Ballestas and Casetona (69 MW) in Burgos, and another at Padrillo, Zaragoza (23 MW) will be finished in Q1.

In the second quarter, it expects to bring the Cavar wind farm (111 MW) in Navarra online, while its giant photovoltaic project, the 500-MW Nunez de Balboa has been completed and will be started up as soon as all authorizations are received.

Additionally, work on the Puylobo wind farm (49 MW) in Zaragoza and the Andeevalo solar PV plant (50 MW) in Huelva started in Q1 while work is also starting on over 1 GW of solar PV and wind projects, primarily in Castile-La Mancha, Castile-Leon, Andalusia and Extremadura.

In Portugal, work continues on the Tamega hydroelectric complex, with Daivoes and Gouvaes slated for commissioning in 2021.

Concreting work for the main body of the Daivoes dam (118 MW) has been completed while at the Gouvaes site (880 MW), concreting work is more than 90% complete while electrical work is on track.

Excavation work for the generation plant and slope reinforcement at the Alto Tamega (160 MW) site is now 94% complete, Iberdrola said.

In the UK, Work continues on the Beinn an Tuirc 3 (50 MW) and Halsary (30 MW) onshore wind farms, both in Scotland, while several battery storage projects are also about to break ground.

The UK offshore business is focused largely on East Anglia projects in the North Sea, where East Anglia 1 is already generating electricity and recently complied with regulatory conditions to begin receiving payments under the Contracts for Difference scheme in the United Kingdom.

Over half the wind farm's turbines have now been erected (53 of 102 turbines to date) and the wind farm will be fully operational in 2020.

The 1.4-GW, East Anglia 3 project has been redesigned to be developed as a hub with East Anglia 1 North and East Anglia 2, with applications for consent having been submitted to the government for the EA2 (900 MW) and EA1N (800 MW) projects during October 2019 and expected to be granted in 2021.

Network visibility

In its other businesses, Iberdrola outlined regulatory visibility in both Spain (through to 2026) and the UK (RIIO-T2 from 2021 and RIIO-ED2 from 2023) which will help the company to meet a target of 4% growth in regulated asset base to Eur32 billion in 2020

In its generation business, the company should benefit from a recovery in Iberian hydro levels and the new installed renewable capacity. Renewable production jumped more than 26% in Q4 to 7.2 TWh, approaching 50% of Iberian generation of 15.0 TWh.

The company should be also be able to buffer any price shocks from weak power market prices, having already hedged 100% of 2020 and 70% of 2021 production at a similar level to 2019, Business CEO of Iberdrola Francisco Martinez Corcoles said, without providing figures.

Iberdrola also said it was happy to cover its natural gas obligations for short-, medium- and long-term in the spot market, given the current liquidity and weak prices.

Iberdrola sold its 5 Bcm a year long-term contracted positions to Pavilion Energy last year, a decision it sees as justified given the current conditions, noting that it was able to make a capital gain, something it sees as unlikely in today's market, and has been able to shed obligations to take gas from third parties.