By Pietro Lombardi
MADRID (Reuters) -Europe’s largest utility Iberdrola raised 5 billion euros ($5.87 billion) through a capital increase on Wednesday to help pay for a big rise in investments in power grids in Britain and the United States.
The move represents the biggest accelerated bookbuild in Spain since banking group Santander raised 7.5 billion euros in 2015.
Iberdrola plans to step up annual investments to around 15 billion euros from around 12 billion euros, building on its shift towards upgrading and expanding power grids in countries where returns are steady and healthy, such as the U.S. and Britain.
In the next six years, it will invest some 55 billion euros in power grids, more than 80% in these two countries as they offer “an unprecedented investment opportunity”, Executive Chairman Ignacio Sanchez Galan said in a call with analysts.
The roughly 331 million new shares offered through a process of accelerated bookbuilding were priced at 15.15 euros and the order book was 3.8 times oversubscribed by existing shareholders and new investors, Iberdrola said.
The price was a 4.7% discount versus the 15.895 euros that Iberdrola’s shares closed at on Tuesday.
Iberdrola shares closed 4.7% down on Wednesday, making it the day’s worst performer on the blue-chip index. Earlier, the Spanish stock market regulator had lifted a suspension imposed before trading opened.
The planned uplift in investment represents a 75% increase over the previous six years.
As a result, the value of Iberdrola’s grid assets, whose returns are regulated and guaranteed, will top 90 billion euros by 2031 – 75% of which will be in Britain and the U.S. – from 55 billion euros this year and just 30 billion euros at the beginning of the decade.
The weight of its Spanish home market in the network business is set to decline significantly, as a share of both investments and regulated assets.
Spanish utilities last week warned that the country risked losing critical investments in grids to other countries as the remuneration on grid assets proposed by regulators was set below what they expected.
“The draft proposal, in my opinion, is providing a clear negative signal to the market,” Galan said.
The cash raised by Iberdrola’s capital increase, along with debt, operating cash flow, asset sales and partnerships, will help fund a new strategy to be set out in September. No further equity raises are expected until at least the end of the decade, Galan said.
Iberdrola also said first-half net profit declined 14% from a year earlier to 3.56 billion euros, when results were boosted by the inclusion of the sale of gas assets in Mexico.
($1 = 0.8523 euros)
(Reporting by Pietro Lombardi; Additional reporting by David Latona and Jesús Aguado; Editing by Inti Landauro, Louise Heavens, Elaine Hardcastle and Alison Williams)
