Red Eléctrica plans to increase its profit by between 4% and 5% in 2014, with annual investments in excess of 500 million euros, according to the Chairman of the Company, José Folgado, in an informative session prior to the General Shareholders’ Meeting to be held tomorrow in Madrid.
The Company, which posted a net profit of 529 million euros for 2013, with an inter-year increase of 7.5%, last year invested 564 million euros in the transmission grid, which led to the bringing into service of 776 km of new circuit of line and 162 new substation bays, increasing transformer capacity by 2,525 MVA. At the General Shareholders’ Meeting, the Board of Directors of the Company will submit, amongst other items, a new remuneration structure that removes the variable remuneration, as well as the freezing of the total remuneration for the board members with respect to that of 2013. Moreover, the appointment of Socorro Fernández Larrea and Antonio Gómez Ciria as independent directors shall be submitted to the Meeting. With these appointments, 50% of external directors are women.
José Folgado has presented the results of the Company for 2013, as well as the financial targets for 2014, in addition to explaining the progress made in corporate responsibility and good governance matters and analysing the main future challenges for the sector in Europe and in Spain, and in particular for Red Eléctrica. The Chairman has linked the situation of the Company to the economic context in which it carries out its activities and to the in-depth reform of the electricity sector regulation undertaken by the Government.
Mr. Folgado spoke of the importance of the electricity reform, "necessary to eliminate the structural imbalance between regulated revenues and costs of the system, commonly known as the tariff deficit, and to provide the sector with a new, and more transparent, stable and predictable regulatory framework for the development of the electricity activities". He referred primarily to Royal Decree-Law 9/2013 of 12 July, which adopted urgent measures to ensure the financial stability of the electricity system, and that establishes a transitory methodology for calculating the remuneration of the transmission activity for the second half of 2013 and for 2014, and to Royal Decree 1047/2013 which develops the methodology for the remuneration of the transmission activity.
The Chairman explained that the tariff allocated to REE in Ministerial Order published on 1 February, pursuant to that established in this regulation, fixes revenues for the transmission business at 1.622 billion euros in 2014.
Solid economic results in 2013
With respect to the results of the year, Mr. Folgado explained that even in a difficult economic and energy context, Red Eléctrica has been able to react, showing solid economic results, which is of special value when you consider that the Company has had to endure a reduction in income and postponement thereof worth 500 million euros in the last two years.
The net revenue of the Company reached 1.8226 billion euros in recurring terms and almost 95% of this comes from electricity transmission. The Gross operating result (EBITDA) in like-for-like terms amounted to 1.369 billion euros, representing an increase of 5.9% over the previous year. Net operating profit (EBIT), in like-for-like terms, increased by 7.5%, while profit for the year rose to 8.8% year on year.
The Chairman has clarified that the income statement was shaped by various one-off events during 2012 and 2013, consequently the accounting profit grew at a rate of 7.5%, reaching a figure of 529 million euros. With regard to the results of the first quarter of 2014, presented on April 30, he highlighted the 6% growth in net income.
From the point of view of the evolution of the Company’s balance sheet, the Chairman highlighted the strong generation of operating cash flow, as well as the very positive performance in working capital, which has improved both the closing balance of debt and its average cost, which stands at 3.8%.
With respect to the stock market performance, 2013 was positive. Red Eléctrica has again outperformed the IBEX for the fourth consecutive year with an increase in its share price of 30%. In the last quarter of the year, the price registered record highs, with 48.295 euros/share, following the publication of Royal Decree 1047/2013.
Interconnections and the Islands
In 2013, investments efforts continued to be focused on strengthening the transmission grid and the development of international interconnections, which improves the quality and security of supply, helps integrate renewable energies and provides efficient operation and competition in the electricity market.
The Chairman highlighted the bringing into service of a large part of the Almaraz-Guillena axis that ensures the quality of supply in the autonomous communities of Extremadura and Andalusia; the Guillena–Puebla de Guzmán axis, which, together with the aforementioned line, will allow for a more solid interconnection with Portugal and in the north, the Grado-Salas axis, which forms part of a larger project for closing the axis of the Cantabrian region and that will allow the evacuation of wind power energy from Galicia and Asturias to areas of high consumption and deficit, such as the Basque Country and Cantabria.
Moreover, Mr. Folgado announced that the bringing into service of the new interconnection with France via Catalonia is scheduled for late 2014. With a total investment of 700 million euros, 50% co-financed with France and with the support from the European Investment Bank, the interconnection will be the first interconnection with the European grid that will be brought into service for 30 years and will double the current exchange capacity up to 2,800 MW. Also, currently being studied for the 2020 horizon is a new submarine interconnection project with France from the Basque Country, through the Bay of Biscay, which in late 2013 was included in the list of Projects of Common Interest (PCI) published by the European Commission.
One of the most important projects is the Majorca-Ibiza submarine interconnection, linking the two existing electricity subsystems currently in the Balearic Islands: Majorca-Menorca and Ibiza-Formentera. This new link will strengthen the electricity integration process of the Balearic Islands with the peninsular system, which began with the Spanish peninsula-Majorca interconnection, whose bringing into service has meant a substantial improvement in the quality and security of the electricity supply on the islands of Majorca and Menorca. In 2013, the energy transferred from the Peninsula via this link covered 22% of the Balearic Islands’ demand, reaching peaks of 35% of hourly consumption. This has allowed a saving of 18% on the cost of coverage of the Balearic Islands’ system and has avoided the emission of 250,000 tonnes of CO2.
Integration of renewable energies
In 2013, the work carried out by the Control Centre of Renewable Energies (CECRE) enabled 42% of demand in the peninsular electricity system to be covered by renewable energy production, 10 points higher than in 2012, helped by a good year in hydroelectric generation and a unprecedented contribution from wind energy that reached new all-time records regarding demand coverage and instantaneous production, as well as hourly and daily energy. Generation from renewable energy sources contributed to covering 55% of the demand in the first quarter of this year, reaching a new record of daily energy on 25 March.
Corporate Responsibility and Good Governance
The Chairman highlighted the Red Eléctrica Forest initiative through which damaged areas of the Spanish territory have been reforested through the planting of 350,000 trees, an initiative which has involved an investment of over one million euros in these first five years. With this initiative, the Company has offset around 40% of its CO2 emissions.
As for the team of professionals that makes up Red Eléctrica, year after year, the Company renews its commitment towards the creation of stable and quality employment, as reflected in the percentage of permanent contracts which stands close to 100%; towards equality, also increasing the number of women, both in management positions and on the workforce, and to the promotion and protection of occupational health and safety and the well-being of the people.
In addition, last April, the Company and the unions signed the new collective bargaining agreement, which focuses on a new formula for salary revision that is not linked to the RPI and is based on internal productivity and real GDP evolution. The agreement, endorsed by 82.74% of the employees of the Company, develops and improves flexibility of the working timetable backing efficiency, supporting the work-life balance and the sustainability of the employment framework, and enabling a better self-management of working time.
The Chairman mentioned the advances in corporate governance, such as the updating of the Company’s corporate website adapting it to the highest international corporate governance standards; the new Code of Ethics; the measures to offset the powers and responsibilities of the executive director and chairman of the Board of Directors; the new remuneration structure of the Board of Directors, and the percentage of women on the Board of Directors that now stands at 50%, which consolidates Red Eléctrica as one of the leading companies in this field.
Finally, he stressed that the Company forms part, for yet another year, of the most prestigious international indexes such as the Dow Jones Sustainability Indexes and the FTSE4Good, and it has also become the Spanish company with the best score in the European Seal of Excellence 500+ recognition, according to the EFQM model.
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