Iberdrola’s Steady Ascent: Sustaining Growth Amid Regulatory and Supply Chain Challenges

Iberdrola, the Spanish energy giant, has reaffirmed its 2025 net profit guidance for mid- to high-single-digit growth, excluding the positive impact of prior cost recognition adjustments in its U.S. operations. This confidence underscores the company’s ability to navigate a complex landscape of regulatory changes, supply chain volatility, and geopolitical risks while maintaining its position as a leader in renewable energy and regulated utilities.

The Guidance: A Test of Resilience

Iberdrola first outlined its 2025 targets in its 2024 half-year results, emphasizing growth driven by regulated network assets and renewable projects. Despite excluding the one-time benefits of past U.S. cost recognition adjustments—including non-cash items and supply chain optimizations—the company remains confident in its trajectory. This resilience is rooted in strategic moves that insulate its financials from external shocks.

The U.S. Market: Navigating Costs and Regulation

The U.S., a critical growth market for Iberdrola, poses unique challenges. Rising tariffs, supply chain disruptions, and regulatory uncertainty could have derailed its cost management efforts. Yet the company has implemented robust strategies to mitigate these risks:

1. Supply Chain Mastery:
   Iberdrola secured €18 billion in 2024 purchases, with €14 billion earmarked for projects beyond 2024. Crucially, 82% of U.S. purchases now rely on domestic suppliers, reducing exposure to tariffs. This localization not only stabilizes costs but also aligns with U.S. regulatory preferences for local content in infrastructure projects.

2. Regulatory Tailwinds:
   U.S. regulators have approved tariff adjustments in key regions like New York, boosting asset bases and EBITDA. For instance, investments in New York’s distribution networks contributed €1.5 billion to regulated assets, ensuring steady returns. The NCC interconnection project in the U.S., now nearing completion, further solidifies this growth.

3. Project-Specific Stability:
   Offshore wind projects like Vineyard Wind Farm—scheduled for 2025 completion—and solar/wind ventures with locked-in tax credits and PPAs with tech giants (Meta, Microsoft, Amazon) provide predictable revenue streams. These long-term agreements, averaging 15–20 years, shield Iberdrola from commodity price swings and demand volatility.

The Numbers Behind the Narrative

The company’s financial discipline is evident in its numbers:
- Renewable investments in the U.S. grew 37% in 2024 compared to 2023, with €2 billion allocated to offshore wind alone.
- The non-cash adjustment of €1.1 billion in 2024—largely tied to customer-related activities—was a one-time hit, with no recurring impact on future earnings.
- Dividend policy remains a pillar of shareholder confidence: Iberdrola’s €0.635 per share dividend (up 15% from 2023) marks the ninth consecutive annual increase, extending its 45-year streak of uninterrupted payouts.

Conclusion: A Calculated Bet on Renewables and Regulation

Iberdrola’s reaffirmed guidance is more than a financial forecast—it’s a testament to its strategic foresight. By locking in supply chains, leveraging regulatory frameworks in key markets like the U.S., and capitalizing on long-term PPAs, the company has built a moat against cost volatility.

With €95 billion in projects secured through 2030 and a dividend policy that rewards investors while retaining capital for growth, Iberdrola’s path to mid- to high-single-digit net profit growth seems achievable. The exclusion of U.S. cost recognition benefits highlights its conservative approach, suggesting even stronger results if those factors were included.

For investors, Iberdrola offers a rare combination: a proven track record in regulated utilities, a dominant position in renewables, and a disciplined capital allocation strategy. In an era of energy transition and geopolitical turbulence, this Spanish giant appears poised to capitalize on both the opportunities and the headwinds.

Data as of 2024. All figures in EUR unless stated.