Press office

Press office

25.02.2015
Investments totalled €957.6 million

Ordinary profit of the Red Eléctrica Group rose 5.4% in 2014, after stripping out one-off events

  • The dividend for 2014 that will be proposed to the General Shareholders’ Meeting is of €3 per share, a year-on-year increase of 18%.
  • The Company also presented today its Strategic Plan for the period 2014-2019, with planned investment exceeding €4.5 billion

The Red Eléctrica de España Group has made an ordinary profit of €717.8 million during fiscal year 2014, up 5.4% on the previous year’s figure, after having stripped out the one-off events occurred in 2014. The company today reported the consolidated results for 2014, period in which investments made amounted to €957.6 million, a year-on-year increase of 60.7%.

The Board of Directors has resolved to propose to the General Shareholders' Meeting a dividend for 2014 of €3 per share, a year-on-year increase of 18%. The Board also approved the Company’s Strategic Plan, which will represent investments in excess of €4.5 billion in the period 2014-2019 and that will be distributed in transmission grid development, fibre optics, energy storage (in the Canary Islands) and international projects.

Investments of the Group in 2014 amounted to €957.6 million; of which €492.6 million correspond to the development of the Spanish transmission grid and €433.7 million correspond to the agreement entered into with ADIF in November 2014.

In this regard, noteworthy is the significant progress made by Red Eléctrica in international interconnections, completing the work of the electrical interconnection with France through the eastern Pyrenees which will double the power exchange capacity between Spain and France bringing it to 2,800 megawatts (MW), and also the new 400 kilovolt (kV) interconnection between Puebla de Guzmán (Spain) and Tavira (Portugal), brought into service in mid-2014.

Additionally, in June 2014, Peru’s 220 kV Tintaya-Socabaya line was put into commercial operation, meeting the deadlines agreed with the Peruvian State and the Regulator

Results for 2014 were influenced by certain one-off events such as the agreement reached with the Plurinational State of Bolivia regarding compensation for Transportadora de Electricidad (TDE), the acquisition of rights to use and manage ADIF's dark fibre optic network, and the impact of the tax reform (Law 27/2014). Therefore, the increase in profit for 2014 reached 35.7%, although after stripping out the impact of the aforementioned one-off events, net profit grew 5.4 %, mainly due to new assets commissioned and improvements in financial and operational efficiency, therefore exceeding the 5% target set for 2014.

Revenue for 2014 amounted to €1,846.7 million, registering a growth of 5.0%. This increase is due to revenue associated with the commissioning of new transmission facilities during 2013, and the increase in income from the provision of System Operation services.

Gross operating result (EBITDA) registered a 6.4% year-on-year increase reaching €1,385.4 million. This growth was also driven by the favourable evolution in operating costs.

Of note is that the net financial result was €95.7 million and includes compensation of €52.3 million for the disposal of TDE. Finance costs totalled €160.2 million, reflecting a year-on-year improvement of €23.4 million. This improvement is mainly due to the lower average cost of debt (interest rate), which stood at 3.49% in 2014 compared to 3.84% in the previous year. Likewise, the average gross debt balance reached €5,047 million, down €127 million from the average debt balance in 2013.

Profit before taxes rose to €853.5 million, reflecting a 16.4% year-on-year growth, and including the aforementioned effect of TDE. Eliminating this effect would have brought profit before tax to €801.2 million, 9.3% higher than the previous year.

Net financial debt of the Red Eléctrica Group increased by €884.9 million in 2014 with regard to the previous year, reaching €5,408.5 million as at 31 December 2014. Deducting the effect of the investment in ADIF's dark fibre optic network and VAT on transactions, would bring the debt to €4,883.7 million.

 

   

PRO FORMA

stripping out one-off events in 2014

 

January-December

January-December

(in thousands of euros)

2014

2013

D %

2014

2013

D %

Net revenue

1.846.714

1.758.266

5,0

1.839,3

1.758,3

4,6

Gross operating result (EBITDA)

1.385.393

1.301.877

6,4

1.379,9

1.301,9

6,0

Profit before tax

853.496

733.013

16,4

801,2

733,0

9,3

Profit for the year

717.821

529.139

35,7

557,9

529,1

5,4

 

Corporate Governance

The Board of Directors, at its meeting on February 24, resolved to continue with the remuneration freeze of its directors for the eighth consecutive year, except for 2012 which recorded a 5% cut. As has been standard practice for years, Red Eléctrica will submit the annual remuneration and the remuneration policy of the Board, overall and individualized per director, for approval at the Annual General Shareholders’ Meeting. The Remuneration Report and the Remuneration Policy of the Board as well as the Annual Corporate Governance Report, which the company has sent today to the National Securities Market Commission (CNMV), meet all the international recommendations on good governance, applying the principles of information transparency, sustainability and quality.

Strategic Plan 2014-2019: On the road towards Red21. A sustainable energy model

Red Eléctrica has also presented the Company’s Strategic Plan for the period 2014-2019, recently approved by the Board of Directors.

The reality of Red Eléctrica is part of a European context faced with many current and future challenges. The electricity system is in a transition phase to a new model characterized by the preponderance of renewable energy (which needs to be managed differently than conventional energy), the reduction of dependence on fossil fuels and the boom in demand agents as active consumers.

Integration of grids and energy storage will be key tools to help develop an electricity system with low CO2 emissions and achieve an internal energy market properly connected and fully operational.

Red Eléctrica’s mission will be oriented towards sustainable development, which entails the promotion of a more efficient electricity system, undertaking commitments regarding the medium and long-term economic sustainability of the Company, and fostering relationships based on social responsibility criteria with the value chain, with special attention to shareholders, clients and suppliers. Carrying out this task by adopting best practices in corporate governance that strengthen confidence in the management, and promoting at all times a company culture focused on the values and commitments set out in Red Eléctrica’s Code of Ethics.

Furthermore, a plan has been drafted that is focused on people and talent development in order to promote stable and quality employment in a safe and healthy environment.

The Strategic Plan, which has been presented by the Chairman of the Board, is focused on the Company’s core business: grid management. The 2014-2019 strategy is aimed at achieving solid growth in the Company's consolidated activities: electricity transmission and system operation, and management of fibre optic networks.

Thus, more than €3.5 billion will be invested in these activities, of which €3.1 billion is earmarked for investment in the power transmission grid in Spain and €475 million for the management of fibre optic networks, including in this amount the assignment agreement regarding ADIF’s dark fibre optic network.

Moreover, that growth will be boosted with new activities such as energy storage in the Canary Islands and international investment in the electricity transmission activity. Around €1.0 billion will be invested in these new activities.

Investments in the peninsular transmission grid will enable progress to be made towards achieving the minimum level recommended by the European Union regarding the commercial exchange capacity with the European system. In addition, investments are aimed at reducing system costs, allowing the evacuation of more efficient energy generation.

In addition, investments in the two archipelagos seek to improve grid meshing – whereby boosting competition in the generation market of the Islands - the safe integration of renewable energy, the progressive substitution of fossil fuels by renewables and the reduction of system costs.

This integration of renewables will be achieved through energy storage as a tool of the system operator. The role of the system operator will be key in all the activities necessary to achieve a sustainable energy model.

The role that telecommunications will play will also be decisive and Red Eléctrica is the neutral operator of fibre optic networks in Spain. It is expected that, once the agreement of assignment of rights to use ADIF’s dark fibre optic network is formalised, the contribution of the telecommunications business to the Group’s revenue and EBITDA will be around 4% at the end of 2019.

In addition, the Company will analyse those investment opportunities in electricity transmission grid that may arise in stable markets and that offer adequate potential profitability, with the clear goal of strengthening shareholder remuneration.

Overall Objectives 2014-2019:

  • Improved EBITDA margin at the end of the period equal to or slightly above 200 basis points.
  • Achieve an average net debt to EBITDA ratio of 3.5 times over the period.
  • A range of growth in earnings per share over the 2013 figures, between 5 and 6% in cumulative rate.

Shareholder remuneration policy

At its meeting held on 24 February, the Board of Directors resolved to propose to the shareholders at their General Shareholders' Meeting a dividend pay-out for 2014 of €3 per share, €0.8323 of which was paid out as an interim dividend on 2 January. This dividend represents a year-on-year increase of 18% with respect to the dividend in cash out of profits from fiscal year 2013.

On this basis, Red Eléctrica considers a dividend per share growth of 7% cumulative annual compound rate for the period 2014-2019.

 

 

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