Iberdrola sees 2021 hedged price unchanged at over Eur70/MWh

Barcelona — Spain's Iberdrola said Wednesday that it has not seen any decline in its Spanish forward sale power prices despite the drop in wholesale exchange prices, with 77% of its 2021 generating volume placed at a retail price of more than Eur70/MWh.

The prices for 2020 and 2021 are similar to before the coronavirus pandemic when they were seen in line with 2019 prices, Business CEO of Iberdrola Francisco Martinez Corcoles said, without providing more precise figures. The company's 2020 generation is already 100% hedged, Iberdrola said.

Cal 21 is currently quoted at Eur41.50/MWh on the Iberian OMIP platform, having recovered from a low of Eur38.40/MWh on March 23, but still below the Eur50.95/MWh price at the end of April last year.

The company has been buffered from the effects of the coronavirus pandemic by a strategy of forward selling and being short in generation, CEO Ignacio Sanchez Galan told analysts on a conference call.

Its strong hydro position has also given it more flexibility in the face of volatile prices, he said.

Indeed, the company has seized the opportunity of weak demand and low prices in Spain to boost its hydro pumping levels and build up stocks.

According to data from grid operator Red Electrica, Spanish hydro pumping since heavy rainfall in December has been at its highest level since Q1 2016.

As a result, Iberdrola, which has an installed hydro capacity of 9.7 GW, said it has built stocks of 8 TWh of hydro, equivalent to 70% full, up 50% from the same point last year and also up 9 points from the end of March.

Hydro output in Q1 was 3.9 TWh, its highest since Q2 2018, while thermal and wind output declined amid an overall slump in national demand at the end of the quarter as coronavirus-related restrictions were implemented.

Green recovery

The company's plan to roll out new renewable capacity has not been affected, however, Sanchez Galan said; on the contrary, the company accelerated its Q1 capital expenditure by 24% year on year and is on track to boost capex by 25% in the full year to Eur10 billion ($10.8 billion) with all its renewable projects still on track.

The company said it has received orders for more than Eur3.8 billion in the last few weeks and noted it has installed the last wind turbine at its 714 MW East Anglia One wind farm in the UK, which it expects to be at full capacity before June.

And more capacity is due online in the coming period, with 8.5 GW currently in construction, allowing the company to remain firm on its 2020 guidance.

This acceleration is supported by a move in public policy towards the green economy to get out of the current situation, Sanchez Galan said.

"All of the input we are receiving [from governments in countries where it operates] is that the recovery is going to be green," he said, adding that this is a sector where Iberdrola can operate without requiring funding from state budgets.

In Spain, the risk of demand destruction and weak prices on renewable power sales is mitigated by the company's large consumer base, which means only 30% of its renewable energy sold is market driven, while output from its other renewables is seen as no different to its other generating businesses.