Reuters: Hot Stocks: UPDATE 1-Iberdrola warns of lower dividend after regulatory hit

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UPDATE 1-Iberdrola warns of lower dividend after regulatory hit Oct 23rd 2013, 09:52 Share this Email Print Reprints Wed Oct 23, 2013 5:52am EDT * Regulatory changes wipe 1.01 billion euros from results * Nine-month core profit 5.54 bln euros vs f'cast 5.59 bln * Net profit fells 3 percent to 2.27 billion euros * Shares fall 2.2 percent, backtrack from near 2-yr high (Adds details on new dividend policy, writes through) By Tracy Rucinski MADRID, Oct 23 (Reuters) - Spanish power firm Iberdrola has warned that the costs of regulatory changes were impacting its earnings and forcing it to reduce its shareholder remuneration. The company, a world leader in wind turbines and power grids, said on Wednesday regulatory changes in Spain, Britain and Brazil had wiped 1.01 billion euros ($1.4 billion) from its core profit in the first nine months of the year. Iberdrola's shares, which have gained 17 percent so far this year and had spiked to a near two-year high in recent sessions, were down 2.2 percent by 0925 GMT, underperforming a 0.7 percent fall in the European utility index. Facing further earnings declines this year and next, Iberdrola said it would have to raise the portion of profit it pays in dividends to between 65 percent and 75 percent to keep up shareholder rewards. It previously targeted a level of 60 percent over the medium term. The statement throws into doubt the group's previous commitment to an average 0.30 euro per share dividend until 2014, since even if it increases the proportion of profits it doles out, this may not be enough to maintain the payout. Iberdrola's annual net profit is expected to fall next year due to further regulatory hits to its domestic wind power business and less favourable currency exchange rates. "Based on our estimates, (distributing) that dividend implies a payout ratio of 79 percent in 2013, 73 percent in 2014 and 82.5 percent in 2015," Espirito Santo analysts said in a note to clients. Iberdrola also said it would continue to give shareholders the option of taking a scrip dividend rather than cash, but would cut the buy-back price by 10 percent to 0.125 euros. It also kept the door open to cancelling treasury stock to offset dilution from the scrip dividend. More clarity on the dividend issue could come when the company holds its investors' day in February, said the group's Executive Chairman Ignacio Galan. Iberdrola said the 1.01 billion euro impact on underlying profits was offset by a 770 million euro gain from higher production, cost savings and contributions from new assets. Those factors translated into a 4.1 percent fall in earnings before interest, taxes, depreciation and amortisation (EBITDA) to 5.54 billion euros in the nine months through September, in line with a Reuters poll. In Spain, Iberdrola has been hurt by measures that cap profits on its generation business and is facing further hits to its renewable energy earnings as part of an energy reform aimed to reduce high regulated costs in the power system. Iberdrola, which also owns Scottish Power and Energy East in the United States, said net profit fell 3 percent to 2.27 billion euros. ($1 = 0.7260 euros) (Editing by Fiona Ortiz and David Holmes) Link this Share this Digg this Email Reprints

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