General Shareholders’ Meeting
Red Eléctrica plans to make investments of around 4.7 billion euros in the period 2014-2019
  • In 2014, investment totalled 957.6 million euros, of which 433.7 corresponded to the agreement signed with ADIF and 492.6 million to the transmission grid.
  • The Board submits to the Meeting for approval an annual dividend of 3 euros per share.
  • The total remuneration of the Board is frozen for the eighth consecutive year, except for 2012, when it was reduced 5%.

Red Eléctrica plans to make investments of around 4.7 billion euros in the period 2014-2019, as set out in the Company’s Strategic Plan, according to the Chairman of the Company, José Folgado, in an informative session prior to the General Shareholders’ Meeting to be held tomorrow in Madrid.

The Company, which posted a net profit of 718 million euros in 2014, last year invested 492.6 million euros in the transmission grid, which led to the commissioning of 600 km of new line and 95 substation bays, increasing transformer capacity by 3,250 MVA. At the General Meeting, the Board of Directors of the Company will propose, among other items, a board member remuneration policy for a period of three years, and the freezing of the total remuneration of the Board, for the eighth year running, except for 2012, when it was reduced by 5%. In addition, an annual dividend of 3 euros per share and the ratification of José Luis Feito and Santiago Lanzuela as independent directors are to be submitted to the Meeting for approval.

José Folgado presented the Company’s results for 2014, as well as the key strategic lines and financial targets set out in its 2014-2019 Strategic Plan, in addition to explaining the progress made regarding corporate responsibility and good governance, and analysing the main future challenges of the Company. The Chairman has linked the situation of the Company to the economic context in which it carries out its activities, as well as the new direction taken by the European energy policy and the in-depth regulatory reform undertaken by the Government concerning the energy sector.

Solid economic results in 2014

With respect to the results for the year, Mr. Folgado indicated they had reached 718 million, 35.7% higher than in 2013, and explained that this increase is mainly due to two exceptional events: the payment received for 52 million euros as per the agreement reached with the Government of Bolivia in relation to Transportadora de Electricidad (TDE) and the tax reform, which had a positive impact of 106 million euros. Stripping out these effects, and the impact of the ADIF transaction, the growth achieved by the Company’s standard business was 5.4%.

The net revenue of the Company reached 1,847 million euros, of which 93% comes from electricity transmission. The Gross operating result (EBITDA) in like-for-like terms amounted to 1,385 million euros, representing an increase of 6.4% over the previous year. Net operating profit (EBIT) showed an increase of 5.6%.

From the point of view of the evolution of the Company’s balance sheet, the Chairman highlighted that Red Eléctrica has a well-diversified debt structure, with 79% at fixed rates and a strong position of liquidity, with high availability terms. The average cost of debt stands at 3.49%, in comparison to 3.84% the previous year.

The Chairman described the evolution of the share price and market capitalisation of the Company as spectacular, as the share price rose 51% in 2014 and market capitalisation increased from 5 billion euros to more than 10 billion in the last three years. This is mainly due to the end of the regulatory uncertainty, the improvement in the economic situation of Spain and the effective management by the Company.

Electricity reform

Mr. Folgado highlighted 2014 as the first year in which almost the whole of the new regulatory framework of the electricity sector was applied, following the approval of Royal Decree 413/2014, and which completes the revision of the remuneration models of the regulated activities in order to adapt them to the general principles established in the Law 24/2013. Furthermore he noted that, although the cost of settlements in 2014 are not yet definitive, it is expected that the imbalance between revenues and regulated sector costs in the year will be minimal, leaving behind tariff deficits in excess of 3.0 billion euros recorded since 2006.

Among the regulations passed last year, he highlighted Order IET / 728/2014, of 28 April, that established the transfer of the project for the 200 MW Chira-Soria reversible pumping hydroelectric power station in Gran Canaria to the system operator.

International interconnections

In 2014, the European Union has given a strong impetus to international interconnections in order to achieve full integration of the internal electricity market. In this regard, the Chairman highlighted the Madrid Declaration, resulting from the Summit regarding energy interconnections held on 4 March in Madrid, between the Heads of State and Governments of Spain, France and Portugal, with the participation of the European Commission and the European Investment Bank. This declaration embodies the commitment to address, in addition to the submarine interconnection with France through the Bay of Biscay, two new projects that would allow the level of electricity interconnection between Spain and France to be increased to approximately 8,000 MW. A first project will be undertaken between Cantegrit and Navarra or the Basque Country, and the other between Marsillon and Aragon.

To accelerate these projects, whose exact routes are currently being studied, ENTSOE and the European Commission are working together to group three projects into one generic one called the France-Spain Western Interconnection, which would allow them to be included in the relevant planning instruments to ensure that they are recognised as Projects of Common Interest.

Mr Folgado has also highlighted the significant progress made in 2014 by the inauguration of the interconnection between Spain and France via the eastern Pyrenees; a direct current interconnection, 64.5 kilometres in length, linking the towns of Baixas, in Roussillon (France), and Santa Llogaia, in the Alt Empordà area (Spain). The amount invested in this great project over the past four years totalled 700 million euros, 50% coming from RTE and 50% from Red Eléctrica. With this installation, the exchange capacity between the two countries will be doubled from 1,400 MW to 2,800 MW.

Similarly, the Chairman has made mention of the interconnection between Puebla de Guzmán (Spain) and Tavira (Portugal), which represents an increase in the exchange capacity, going from 2,300 MW to 2,700 MW. This interconnection links up with the Almaraz-Guillena line through the Guillena-Puebla de Guzmán axis, thus ensuring the quality of supply in Extremadura and Andalusia, and providing a more robust connection to Portugal.

Inter-island links

With respect to investments in the islands, Mr. Folgado noted the commencement of the Majorca-Ibiza submarine interconnection that will link the two existing electricity subsystems in the Balearic Islands: Majorca-Menorca and Ibiza-Formentera. This new link will strengthen the process of electrical integration of the Balearic Islands to the peninsular system and will be essential in ensuring the reliability of the electricity supply in the archipelago, as well as a cost saving for the system and promoting competition in electricity generation in the islands.

The Chairman also highlighted the investment plan, around 800 million euros, that Red Eléctrica is planning to implement in the coming years in the Canary Islands to promote the progressive change in the energy model based on the integration of renewables and the development of interconnections between the islands. The agreement signed with Endesa for the transfer of the proposed Chira-Soria hydroelectric power station in Gran Canaria also contributes to this goal. This project signifies an investment of approximately 300 million euros and will constitute a powerful tool for the system operator for the stability and security of the electricity supply.

Integration of renewables

The Control Centre of Renewable Energies (CECRE) a facility of international reference was visited by 672 people during the past year, of which 235 were part of foreign delegations from 19 countries. In 2014, the work carried out by the CECRE enabled 43% of demand in the peninsular electricity system to be covered by renewable energy production. Specifically, to facilitate the integration of renewables and increase system efficiency, work has been undertaken on the development of 66 technological innovation projects, which represent a lever for growth and efficiency.

International investment

In terms of international investment, the Chairman stressed the commissioning in Peru of the Tintaya-Socabaya 220 kV line, fulfilling the deadlines agreed with the Peruvian State and regulator. Transmisora Eléctrica de Sur commences the operation phase of the concession for a period of 30 years.

Furthermore, in February 2015, Red Eléctrica Internacional, in consortium with the Peruvian investment fund manager AC Capital, was awarded the concession of the 220 kV Azángaro-Juliaca-Puno line in Peru, in an international tender. The project, with a planned investment of 70 million dollars and a construction period of 33 months, includes the design, financing, construction, operation and maintenance of this line of 115 km in length and its associated substations for a period of 30 years.

Corporate responsibility and good governance

With regard to corporate responsibility, the Chairman spoke about the Corporate Responsibility Plan 2014-2016, approved by the Corporate Responsibility and Governance Committee, which is divided into five management areas: corporate governance and ethics; sustainable energy model; commitment to employees; commitment to society and commitment to the environment. In this sense, he highlighted that in 2015, for the first time, the management of corporate social responsibility and excellence criteria will be incorporated within the EFQM model as managerial objectives.

The Chairman highlighted that the two Committees of the Board have increased the independent board members, reaching 75%, as well as the female participation on the Board, which has made Red Eléctrica the first company in the IBEX 35 with 50% of external board members being women. He also explained that efforts made in recent years, and that have served to position the Company as a benchmark reference in the field of good governance, have resulted in the formalisation of a corporate governance policy and a new Compliance Programme that will be launched in 2015 as well as the development of a guide to enhance transparency.

Regarding Red Eléctrica’s workforce, year after year, the Company renews its commitment to stable and quality employment; to equality, increasing the number of women on the workforce, highlighting the fact that there has been a 43.8% increase of women in management positions during the past five years, and thru the promotion and protection of the health, safety and well-being of people.

Regarding Red Eléctrica’s commitment to the environment, the Chairman highlighted the protection and conservation of biodiversity, working in consensus with all concerned agents for the siting of facilities and definition of routes for lines so as to produce minimal effects on the territory and the fight against climate change. Among the environmental actions, Mr. Folgado highlighted the "Red Eléctrica Forest" ​​and the "Birds and Power Lines: Mapping of bird flight paths" project for which the Company won the European Environment Award 2014, in the special category ‘Business and Biodiversity’

Finally, he stressed that the Company maintains the 500+ seal, granted by the Club de Excelencia en Gestión, continues to be part of the FTSE4Good index and has been included in the MSCI indexes and the Euronext-Vigeo family of indexes, as recognition for its high level of performance in corporate responsibility and sustainability.

Strategic Plan

Mr. Folgado explained the main courses of action of the Company’s 2014-2019 Strategic Plan, which is based on the development of a better interconnected transmission grid that is more meshed and robust, and on the contribution of the Company to help achieve the challenge of sustainable development through the integration of renewable energy and the promotion of projects aimed at energy efficiency and innovation. The Plan assumes a greater range of other businesses linked to already consolidated activities, such as is the case of the management of the optical fibre network and the expansion of the business base coming from energy storage and international investment.

The Chairman stressed that the development of the Strategic Plan will enable the Company to maintain an annual growth in earnings per share, taking 2013 as a reference, of between 5% and 6% until 2019. With regard to the shareholder remuneration policy, based on a dividend of 3 euros per share in 2014, an increase of 7% will be maintained in cumulative annual growth rate through 2019.

The Strategic Plan includes an investment of 3.1 billion euros in the development of the Spanish electricity transmission grid, highlighting the electrical interconnections of the islands due to their importance from the point of view of security of supply. Added to this, are 100 million euros in projects and developments related to the operation of the system. An additional investment of around 1.5 billion euros is also considered, which will be used to develop the telecommunications business, the construction of energy storage facilities in the Canary Islands and the execution of new investments in the international arena.


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