Iberdrola

Iberdrola logo^[1]

Introduction

Iberdrola is the largest Spanish power company by installed capacity. It had a total installed capacity of 27,791 MW at the end of 2005 ^[2], of which 24,502 MW are located in Spain.^[3] The Company leads the Spanish industry in the construction of combined cycle gas plants, participating in projects with capacity of 6,400 MW and managing, at the end of last year, combined cycle plant with capacity of 4,800 MW. South America is one of Iberdrola's main areas of growth, with a presence in Brazil, Bolivia, Chile, Mexico and Guatemala. ^[4] The Company also owned, in Spain, at the end of 2005, 3,810 MW of renewable energy; 8,819MW of hydroelectricity and 3,344 MW of nuclear capacity.

A Nuclear Utility

Iberdrola owns a share of 7 nuclear reactors in Spain: Sta. Maria de Garona (50% - 466MW); Trillo I (49%- 1067MW); Asco II (15% - 1027MW); Vandellos II (28% - 1087MW); Cofrentes (100% - 1092MW); Almaraz (52.69% - 1092MW). ^[5] It is a member of the World Nuclear Association. The Company is also a member of the Spanish Nuclear Industry Forum, as well as the American Nuclear Energy Institute, by virtue of its membership of the Spanish Electricity Industry Association (UNESA).

In theory the Spanish Government is committed to phasing out nuclear power, but only "if circumstances permit," according to Prime Minister Jose Luis Zapatero speaking to the Spanish parliament in May 2006. There is no specific timetable, nor is there likely to be one before the next General Election in March 2008. Industry Minister, Jose Montilla, has even said the government will consider lifetime extensions for existing reactors. The nuclear industry in Spain has been campaigning hard for the phase-out policy to be dropped. ^[6]

Nuclear Mexico

In recent years Iberdrola may have been trying to downplay its connections with the nuclear industry, by referring to itself as the largest operator of renewable energy in the world, but it has recently been a member of a consortium, which won the contract to expand and modernize Mexico’s only nuclear plant at Laguna Verde. The consortium was made up of Iberdrola and France's Alstom. The upgrade is aimed at increasing Laguna Verde's capacity to 1,634 megawatts from 1,365 MW at present. ^[7]

Once Bitten …?

On the other hand, the Spanish nuclear phase-out dates back to 1984. This left three Spanish utilities - Iberdrola, Sevillana and Union Fenosa – with a total debt of US$2,6 billion for unfinished nuclear power projects. Five nuclear power stations were in various stages of construction when the moratorium was declared: Lemoniz I and II (Iberdrola) Valdecaballeros I and II (Sevillana) and Trillo II (Union Fenosa). Although this debt was assumed by Spanish banks in 1995, Iberdrola may be wary of investing in further risky nuclear projects. ^[8]

Renewable Expansion

Iberdrola claims to be the world´s leading wind energy company and one of its largest operators in renewable energies. ^[9] It says it plans to invest 3.25 billion euros in renewable projects between now and 2009. The Company’s aim is to reach 7,000 MW of renewable energy during 2009, of which 1,450 MW will be located outside Spain, and 10,000MW by 2011. The Company is in the process of building its sixth wind farm in France, a wind energy project in Mexico and a solar photovoltaic facility in Spanish Province of Soria.

At least part of Iberdrola’s expansion into renewables has been done by buying other companies. Iberdrola bought Community Energy Inc, in the US during 2006, to give it a platform to enter the US wind market quickly. Iberdrola were said to be: “uniquely poised to accelerate CEI’s delivery of wind energy generation to its utility partners and customers.” ^[10]

Scottish Power

The Company’s claim to be the largest owner and operator of renewable energy facilities in the world, and its clear interest in wind energy could be the reason it has been trying to buy the Scottish Utility, Scottish Power. Scottish Power, too, says its vision is to be a world leader in renewables. It is the biggest generator of onshore wind energy in the UK and is developing biomass and wave generation. ^[11]

Scottish Power has not demonstrated any great enthusiasm for new nuclear reactors in Scotland. It has been reported to have no interest in nuclear generation. ^[12] In its response to the Department of Trade and Industry's energy review consultation, the Company cautioned against the government becoming too pro- nuclear just because it might be wary of being too dependent on imported gas for electricity generation. It said it did not believe there needs to be any major programme of nuclear construction announced as a result of the Energy Review. The Company goes on to say that in 2015, if the economics are right and progress on other low carbon technologies demand it, then new reactors could be considered. ^[13]

It would be unfortunate if Iberdrola’s purchase of Scottish Power meant the utility joined other UK utilities in lobbying for a nuclear renaissance.

Takeover Approved

The European Commission cleared the proposed acquisition of ScottishPower by Iberdrola in the middle of February 2007. ^[14] Investors are due to receive some Iberdrola shares plus 400p cash for each SP share. Scottish Power chairman, Charles Miller Smith, is expected to give his views on the future of the combined operation soon, now that the EC has given its verdict, in time for a meeting of shareholders to approve the takeover in early March. ^[15]

After a meeting between the Iberdrola management and Scotland’s First Minister, it became clear that the Spanish Company is committed to the existing investment programme of Scottish Power at Longannet coal-fired station (to meet the requirements of the Large Combustion Plant Directive which imposes strict limits on sulphur dioxide and nitrogen oxide emissions) and in renewables. The First Minister said: “…most importantly for the longer term they have opened up the opportunity for us in Scotland to bid for and to secure further investment in Scotland in the energy industry”. ^[16] There has even been some discussion of Iberdrola cleaning up emissions from the Cockenzie coal-fired power station, which Scottish Power has slated for closure in 2015, rather than attempting to meet the Large Combustion Plant Directive. ^[17]

A Merger Made on the Wind?

Forbes Magazine says Scottish Power will fit well with Iberdrola. Scottish Power has 14 wind farms throughout Britain and Ireland. Its U.S. business, PPM Energy, operates cogeneration power plants and wind farms. Iberdrola already acquired two wind farms in Britain in 2006, and it has signed a tentative agreement to build a 1,000 megawatt wind farm in northern China. ^[18] It has also agreed to invest over $1 billion on wind farms in Turkey. ^[19] Wind farm builder ACS is reported to be trying to increase its stake in Iberdrola from 10% to 25% in order to gain a decisive stake in the combined business, which would be the world's biggest renewable energy company. ^[20] ACS had increased its share to over 14% by 23rd January 2007. ^[21]

In 2004, WWF ranked global power companies according to the amount of renewable energy and gas-fired CHP installed and planned. In Europe Iberdrola and Scottish Power came out top. ^[22]

References

1. ^ Photograph from AEM Iberdrola, logo, accessed 16 April 2007.
2. ^Iberdrola website (viewed 22.01.07)
3. ^Iberdrola website (viewed 22.01.07)
4. ^ Google Finance Website Iberdrola SA. (viewed 22.01.07)
5. ^Iberdrola Website (viewed 22.01.07) See Map
6. ^ Spain says “Adios” to Nuclear Power, Greenpeace Press Release, May 31, 2006. See also Nuclear Monitor, July 14, 2006
7. ^Mexico has Three Bids to Upgrade Nuclear Plant, Reuters, January 19, 2007. Also: Alsom, Iberdrola poised to win Mexico Nuclear Power Plant Contract Forbes, January 22, 2007. Platts Nuclear News Flashes, March 2, 2007.
8. ^ Spanish Banks to Assume Nuclear Debt, Wise News Communique, July 21, 1995
9. ^Iberdrola website (viewed 22.01.07) See also Alt energy Investor Website (Viewed 23.01.07)
10. ^ IBERDROLA, World Leader in Renewable Energy, Enters the U.S. Market with the Forthcoming Acquisition of Community Energy, Inc, Community Energy Inc. Press Release, May 2, 2006.
11. ^ Scottish Power Website, (viewed 23.01.07)
12. ^Ian McConnell, Scottish Power warns on nuclear Government should not commit to major build, Herald, April 14, 2007.
13. ^ Our Energy Challenge – Scottish Power Response Scottish Power, April 2006.
14. ^ Nick Bevens, EU gives Scottish Power takeover the green light Scotsman February 16, 2007
15. ^ John Phelps, Scottish Power investors hope for more than romance this Valentine’s Day, Sunday Herald, January 21, 2007.
16. ^ Executive Meets with Iberdrola, Scottish Executive Press Release, December 5, 2006.
17. ^ Douglas Friedli Iberdrola to Spend £1.5bn on Greener Scottish Power, Scotland on Sunday, December 17, 2006
18. ^ Spanish Scottish Match in Thin Air Forbes, November 8, 2006.
19. ^ Spanish Iberdrola plans to build Wind Farms in Turkey, Turkish Weekly, November 6, 2006
20. ^ Douglas Friedli ACS targets 25% of Iberdrola Scotland on Sunday, December 3, 2006
21. ^ ACS takes Additional 2.3 pct of Iberdrola via Equity Swap Contract Forbes, January 23, 2007
22. ^ Ranking Power: Scorecards for Electricity Companies WWF Powerswitch Campaign, November 2004.