14th november 2017 - iberdrola... hybrid bond presentation, november 2017 / 4 - strategic overview...

Hybrid presentation 14th November 2017

2 Hybrid Bond presentation, November 2017 www.iberdrola.com

DISCLAIMER

This document has been prepared by Iberdrola, S.A. exclusively for use in connection with the offering by Iberdrola International B.V. of Undated Deeply

Subordinated Reset Rate Guaranteed Securities unconditionally and irrevocably guaranteed on a subordinated basis by Iberdrola, S.A. (the “Offering”).

As a consequence thereof, this document may not be disclosed or published, nor used by any other person or entity, for any other reason without the express and

prior written consent of Iberdrola, S.A.

Iberdrola, S.A. does not assume liability for this document if it is used with a purpose other than the above.

The information and any opinions or statements made in this document have not been verified by independent third parties; therefore, no express or implied warranty

is made as to the impartiality, accuracy, completeness or correctness of the information or the opinions or statements expressed herein.

Neither Iberdrola, S.A. nor its subsidiaries or other companies of the Iberdrola Group or its affiliates assume liability of any kind, whether for negligence or any other

reason, for any damage or loss arising from any use of this document or its contents.

Neither this document nor any part of it constitutes a contract, nor may it be used for incorporation into or construction of any contract or agreement.

Information in this document about the price at which securities issued by Iberdrola, S.A. have been bought or sold in the past or about the yield on securities issued

by Iberdrola, S.A. cannot be relied upon as a guide to future performance.

IMPORTANT INFORMATION

This document does not constitute an offer or invitation to purchase or subscribe shares, in accordance with the provisions of (i) the restated text of the Securities

Market Law approved by Royal Legislative Decree 4/2015, of 23 October; (ii) Royal Decree-Law 5/2005, of 11 March; (iii) Royal Decree 1310/2005, of 4 November;

(iv) and their implementing regulations.

In addition, this document does not constitute an offer of purchase, sale or exchange, nor a request for an offer of purchase, sale or exchange of securities, nor a

request for any vote or approval in any other jurisdiction.

For information regarding the Offering, please refer to the Offering Circular dated November [], 2017.

The shares of Iberdrola, S.A. may not be offered or sold in the United States of America except pursuant to an effective registration statement under the Securities

Act of 1933 or pursuant to a valid exemption from registration. The shares of Iberdrola, S.A. may not be offered or sold in Brazil except under the registration of

Iberdrola, S.A. as a foreign issuer of listed securities, and a registration of a public offering of depositary receipts of its shares, pursuant to the Capital Markets Act of

1976 (Federal Law No. 6,385 of December 7, 1976, as further amended), or pursuant to a valid exemption from registration of the offering.

This document and the information presented herein was prepared by Iberdrola, S.A. solely with respect to the consolidated financial results of Iberdrola, S.A. and

was prepared and is presented in accordance with the International Financial Reporting Standards (“IFRS”). This document does not contain, and the information

presented herein does not constitute, an earnings release or statement of earnings of Avangrid, Inc. (“Avangrid”) or Avangrid's financial results. Neither Avangrid nor

its subsidiaries assume responsibility for the information presented herein, which was not prepared and is not presented in accordance with United States Generally

Accepted Accounting Principles (“U.S. GAAP”), which differs from IFRS in a number of significant respects. IFRS financial results are not indicative of U.S. GAAP

financial results and should not be used as an alternative to, or a basis for anticipating or estimating, Avangrid's financial results. For information regarding

Avangrid’s financial results for the nine-month period ended on September 30, 2017, please see the press release that Avangrid issued on the October 24, 2017,

which is available on its investor relations website at www.avangrid.com and the Securities and Exchange Commission (“SEC”) website at www.sec.gov.

This document does not contain, and the information presented herein does not constitute, an earnings release or statement of earnings of Neoenergia S.A.

(“Neoenergia”) or Neoenergia's financial results. Neither Neoenergia nor its subsidiaries assume responsibility for the information presented herein. For information

regarding Neoenergia’s financial results for the nine-month period ended on September 30, 2017, please see the press release that Neoenergia issued on November

5, 2017, which is available on its investor relations website at www.ri.neoenergia.com and the Brazilian Comissão de Valores Mobiliários (“CVM”) website at

www.cvm.gov.br.

Legal Notice

https://www.iberdrola.es/

http://www.avangrid.com/

http://www.sec.gov/

http://www.cvm.gov.br/


Legal Notice

FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking information and statements about Iberdrola, S.A., including financial projections and

estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future

operations, capital expenditures, synergies, products and services, and statements regarding future performance. Forward-looking

statements are statements that are not historical facts and are generally identified by the words “expects,” “anticipates,” “believes,”

“intends,” “estimates” and similar expressions.

Although Iberdrola, S.A. believes that the expectations reflected in such forward-looking statements are reasonable, investors and

holders of Iberdrola, S.A. shares are cautioned that forward-looking information and statements are subject to various risks and

uncertainties, many of which are difficult to predict and generally beyond the control of Iberdrola, S.A., that could cause actual results

and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and

statements. These risks and uncertainties include those discussed or identified in the documents sent by Iberdrola, S.A. to the Spanish

Comisión Nacional del Mercado de Valores, which are accessible to the public.

Forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Iberdrola, S.A.

You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. All

subsequent oral or written forward-looking statements attributable to Iberdrola, S.A. or any of its members, directors, officers,

employees or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward-

looking statements included herein are based on information available to Iberdrola, S.A. on the date hereof. Except as required by

applicable law, Iberdrola, S.A. does not undertake any obligation to publicly update or revise any forward-looking statements, whether

as a result of new information, future events or otherwise.


www.iberdrola.com / 4 Hybrid Bond presentation, November 2017

- Strategic overview page 05

- Business drivers page 13

- Outlook 2016-2020 update page 17

- Liquidity and Solvency page 23

- Green bond background page 28

- Hybrid Transaction page 34

- Final Remarks page 38

- Annex: Results presentation 9M 2017 page 40

Agenda



Strategic

overview

Agenda



Global energy scenario

More electrification of the economy

Increasing energy demand Need to reduce emissions

• More low carbon sources will be needed: Utility scale / distributed

• Storage capacity required

• Digitized Grids will be crucial to manage a more complex energy system

• Active customer management



The utility of the future

More renewables

More storage

More and smarter networks

The utility of the future…

…is Iberdrola today

More and smarter customer solutions



More RENEWABLES


Iberdrola has anticipated the global energy transition

Almost 60% Renewable capacity (2015) in

operation: 27.4GW1

+ 7GW in construction (1.65GW to be

commissioned after 2020)

World leader in onshore wind and strongly

investing in offshore

West of Duddon Sands, Irish Sea, UK

1 Managed capacity including hydro and 100% Neoenergia



More STORAGE



4.5GW Hydro pumped storage in

operation and construction

Cortes la Muela, Spain

Equivalent to ~5M domestic

batteries of 13.5kWh





More and SMARTER NETWORKS

HV & MV

Smart Grid

100% digitalized Spain, UK and Brazil

US automation plan (2016-2021)

LV Smart Grid

&

Smart Meters

Digitalized

generation

operations

Spain: 200,000 km of smart grids and 9M smart meters

UK: beating 2016 regulatory objectives on smart meters

US: 100% smart meters Maine, 63% Connecticut and NY AMI Plan

100% Renewables (CORE), Hydro, Nuclear, CCGT and Cogeneration

Further improvement of operations and efficiency



Smart Customer Solutions



Development of new solutions through Big Data:

Tailored tariffs

Remote heating control

Distributed generation and storage

Added Value / Personalization / Energy efficiency

to increase customer satisfaction and loyalty

Multichannel

Energy management

Energy bank

…



United

States

$

Continental

Europe

€

United

Kingdom

£

Mexico

$

Brazil

R$

geographies

currencies

businesses

Iberdrola business model

A model that combines geographic diversification

with focus on energy transition businesses…

…providing attractive shareholder remuneration today

with future growth visibility mainly in countries with A rating



Business

drivers

Agenda



Investments 2016 – 2020 update

29%

20% 3%

48%

Investment by business Investment by currency

Around 90% of investment:

regulated or long-term contracted activities

Currency diversification

71% allocated to countries with A rating

Generation

and Retail

Networks

Renewables1 Regulated

generation USD GBP

Euro2

Real 1Including hydro

2Including German offshore windfarm: Wikinger

Eur 25Bn 42%

42%

7% 9%

Eur 25Bn



Growth drivers 2016-2020

Regulated business

Generation & customers

Renewables

between 5% & 7%

between 2% & 4%

between 8.5% & 10.5%

RD 1048/2013 Capex € 1.8 bn

RIIO T1 / ED1 Capex £ 2.3 bn

Rates cases Capex $ 5.8 bn

Tariff periods Capex R$ 1.7 bn

Business as usual Capex £ 1.0 bn

+3,600 MW Capex $ 2.0 bn

+30 MW Capex € 0.3 bn

+1,540 MW Capex £ 3.7 bn

+2,000 MW Capex $ 4.1 bn

+700 MW Capex $ 0.9 bn

+330 MW Capex R$ 1.0 bn

Customers growth Capex € 1.8 bn

* Corporation and other business not included

CAGR

EBITDA*


https://commons.wikimedia.org/wiki/File:Flag_of_Portugal.svg


The Utility of the Future

Execution of our 2016-2020 Plan well on track

and ensuring growth post 2020

2016-2020

Growth investment plan

Execution well on track

Post-2020

Ensuring further growth

Seizing opportunities beyond

2020 in…

networks

low carbon sources

storage

Eur 22 Bn completed or in

construction (90% of Plan)



Outlook 2016-2020

update (as presented in February 2017)

Agenda



Financial Strategy for 2017-2020

Main financial guidelines for 2017 – 2020 period:

Financial structure

Liquidity Optimizing liquidity management , covering 18 months in

stressed scenario

FX risk management

Structural & annual coverage

Solvency ratios Maintaining solid levels to preserve credit quality. Asset rotation

& hybrids to be used if needed to maintain financial strength.

Financing Strong diversification in sources of finance provides access to

many markets, banks and supranational lenders

Protecting the company from interest rate increases:

increasing fixed rate debt >60%



Sources and uses of funds

91% of the plan needs are funded by operating cash flow,

which will grow as the plan investments pay -off

With current investment plan, we expect 2017 & 2018 to have solvency ratios

in line with 2016, and to strengthen in 2019 & 2020

Sources Uses 2017 – 2020

FFO

New Debt

91%

8%

Investments

Dividends 25%

65%

Capitalized costs

Divestments 1%

10%



2020

Eur

~3.5Bn

~10Bn >6%

2015 – 2020

CAGR

~7.5%

Evolution of results 2016 – 2020 update

Increasing annual average net profit growth…

… and keeping growth expectations post-2020

due to contribution from new investments

Update

EBITDA

Net profit XX%

2015 2020

Net Profit/EBITDA Ratio

~35%

33%



Return on investments

XX %

XX%

2015 2020

ROCE Group

>6%

ROE Group

2015 2020

Maintaining financial strength and

improving return on investments

>8.5%

6.7%

5.2%



Shareholder remuneration

Shareholder remuneration growing in line with results

Maintaining scrip dividend

Share buy-back to avoid dilution

Scrip Dividend &

Share buy-back

Maintaining current number of shares at 6,240 million Number of shares

• Growing in line with results (pay-out between

65% and 75%)

driving 2020 DPS between 0.37-0.40 Eur

• Establishing a floor of Eur 0.31/share during the

period

Shareholder

remuneration

DPS Eur

2014 2016 2020

Floor

0,31

0.27

0.31

0.37 – 0.40

15%

20/30%



Liquidity and solvency

Agenda



Net Debt / Group

Eur M

Net Debt

FY 2016

FFO Net Debt

9M 2017

-4,626

3,997

Net

Investments

29,230

33,698

FX

-1,290

Dividends

and Treasury

Stock

repurchase

1,715

2,965

NEO

contribution

to Group’s

Debt as of

30/09/2017 (*) Eur 400 M before taxes

Hydro contributes Eur 300 M* less than

previous year

Q3 2017 Net Debt closed almost Eur 4.5 bn higher than Dec’16,

mostly due to NEO´s integration. Investments +31.5% vs 9M 2016

Eur 1,707 M of “Other” include Eur 674 M of capitalised costs and subsidies

and Eur 577 M of working capital

Other

1,707



FFO / Group

FFO proforma increases 5.4% to Eur 6,652.5 M, but NEO contribution

is offset by the impact of extremely low hydro conditions in Spain

FFO

FY 2016

6,310.8

NEO

482.3

FFO proforma

September 2017*

6,652.5

Gen. &

Supply

Spain

159.4

Rest of

Group

-300.0

Excluding adverse hydro conditions, that impact Gen&Supply in Spain,

FFO would have been Eur 300 M higher, reaching Eur 6,952.5 M

Eur M

(*) Last 12 months



Credit metrics / Group

FFO/Net Debt

FY 2016

21.5%

Almost 75% of the impact on FFO/Net Debt (-1.4 p.p.)

is driven by the temporary effect of the situation of Spanish hydro in 2017

NEO

effect

-0.4 p.p

FFO/Net Debt

Q3 2017

19.7%

Other credit metrics also impacted

FFO / Net Debt Credit Metrics

Net Debt/EBITDA

RCF/Net Debt

Leverage

4.1x

17.0%

44.2%

Proforma: NEO 1 year

4.1x

17.1%

43.8%

Ex. NEO

Hydro

effects

-1.4 p.p 20.1%

FFO/Net Debt

Q3 2017

EX. NEO

FFO/Net Debt 19.7% 20.1%



Financing / Liquidity and Debt Maturity

Strong liquidity position covering

20 months of financing needs in a stressed scenario

Total adjusted

Liquidity

Average Debt

maturity

Eur 7,389 M

6.1 years

Liquidity and Average Maturity Debt maturity profile

2019 includes Eur 500 M with an extension option of 6 months

2020 includes Eur 975 M with an extension option of 1 year

Not taking into account NEO, which finances itself on a standalone basis

564

3,004 2,784

4,293

2,350

18,471

2017 2018 2019 2020 2021 2022+



Green Bond

Background



Green Bond Background

The business model and strategy of the Group is aimed at “the supply of

reliable, high-quality and environmentally-friendly energy”, through

sustainable, long-term industrial enterprise

In line with its

CSR and

Sustainability

policies and

this context…

Iberdrola issued its first public Green Bond in 2014, 3 more Green

Bonds in 2016, 2 in 2017 + contracted a Green Loan

in total representing EUR 5.7bn

To support its long term strategy, Iberdrola will apply

its’ existing Green Bond Framework to the new issuance,

and has appointed Vigeo Eiris to provide a Second Party Opinion

The green bond and loan proceeds have and will be used to

(re)finance renewable energy and transmission projects, contributing

to climate change mitigation and energy management.

Iberdrola has updated its Green Bond Framework, aligned with the

2017 ICMA Green Bond Principles



Use of Proceeds

In compliance with ESG criteria evaluated by Vigeo Eiris, Eligible Green Projects are Renewable Energy projects which aim to:

The net proceeds of the 2017 Green Hybrid Bond will be used to (re)finance, in whole or in part, Renewable Energy Projects:

• Producing Electricity from renewable sources

• Improving the Energy Mix of Iberdrola

• Reducing the necessity and load factor of the

Fossil Fuel Generation in the countries where it

operates

• The projects include investments in development,

construction, installation and maintenance of

renewable energy production units

• The energy is produced from renewable non-fossil

sources, more specifically from wind power

(onshore and offshore)

• The available projects are existing and on-going

projects located in the United Kingdom and

Germany and managed by Iberdrola subsidiaries.



Eligible Projects and Management of Proceeds

• Compliance with the Use of Proceeds: all projects will be verified for compliance with

the Eligibility Criteria and with the CSR and Sustainability policies by Iberdrola’s

Business, Sustainability, CSR and Legal teams

• Iberdrola will check the absence of any material ESG controversies (application of the

exclusion criteria)

• The list of selected Eligible Projects is determined by Iberdrola’s Business, Legal, CSR

and Environmental teams, based on internal expertise, and submitted to the Finance

Department for validation and selection

Evaluation and Selection Eligible Projects

• Responsible management of each project is monitored at corporate level and at project

level through the relevant performance indicators

Management of Proceeds

• Iberdrola will track the allocation to Eligible Projects to avoid double counting with other

green bond or loan proceeds. This tracking is integrated into the company’s annual

financial reporting process.

• The allocation of funds will be reviewed annually by an external auditor.

• In case of asset divestment, Iberdrola commits to use the net proceeds to (re)finance

other Eligible Projects which are compliant with the current framework



Reporting

• Environmental benefits: annual estimates of climate benefits (outputs and/or

impacts) of each Eligible Projects’ share (re)financed by the Bond, then

aggregated at Bond level

Reporting

• Use of proceeds: list of (re)financed projects, with related description, fund

allocation and compliance of selected projects with the Green Bond framework.

The Issuer commits to report annually and transparently on the Green Hybrid

Bond, in its Annual Sustainability Report, on:

Use of Proceeds Reporting

At project level:

• List of financed projects with related description (type, location, operation date, size)

• Iberdrola’s share (in %)

Environmental

Benefits

Output Reporting indicators:

• Installed (attributable to the bond) renewable energy capacity of the wind farms (in MW)

• Annual renewable energy produced (attributable to the bond) by the wind farms (in

MWh)

Impact Reporting indicators:

• Annual GHG emissions avoided (in tCO2e)

Re

po

rtin

g In

dic

ato

rs



Q & A

• If the call option is not exercised, allocation towards green projects and reporting will continue

for perpetuity

• As per the commitments in our Green Bond Framework, if the underlying assets are sold or have

reached the end of their lifetime, the proceeds will be reallocated to new green projects.

What is Iberdrola’s commitment to allocation to green projects and reporting on environmental

benefits?

In the case that the call option is exercised, what will happen to the allocated projects and reporting?

• After the call option is exercised, there is no longer a commitment to allocate hybrid bond

proceeds to green projects or report on their environmental benefits.

What will happen if the call option is not exercised?

• Iberdrola is committed to allocate green projects and report on environmental benefits while the

hybrid bond is outstanding

• The proceeds will be allocated towards green projects until the call date; reporting will also

continue for that duration of time.

• After the call option is exercised, live allocated projects can be re-allocated to other issuances



Hybrid

Transaction



Transaction Rationale

• Supporting solid solvency ratios to maintain financial strength

• Diversifying sources of finance keeping on the balance sheet the hybrid

instruments as part of the capital structure ahead of the potential

upcoming redemption of its outstanding hybrid at the first call date

• Capitalising on the attractive overall cost of the instrument

Why issue hybrid capital?



Summary Terms of the New Hybrid

Issuer Iberdrola International B.V.

Guarantor Iberdrola S.A.

Currency / Size EUR benchmark

Senior Rating (M / S / F) Baa1 (positive) / BBB+ (stable) / BBB+ (stable)

Expected Issue Rating (M / S /

F) Baa3 / BBB- / BBB-

Maturity / Call Perpetual NC-5.5 with 3-month par call prior First Reset Date in Year 5.5

Subsequent Calls Every Interest Payment Date thereafter

Initial Coupon [ ● ]%, annual fixed until First Reset Date in year 5.5, then reset at 5-year mid-swaps plus initial margin plus

any step-ups (see below) every 5 years

First Step-Up 25bps in year 10.5

Second Step-Up Further 75bps in year 25.5

Replacement Language Intention based, with customary carve-outs

Optional Deferral Cumulative and compounding at the Issuer’s option; Compulsory repayment upon payment of cash dividends on

ordinary shares, parity obligations and certain other payments or repurchases, subject to customary exceptions.

Early Redemption Withholding Tax Event, Substantial Purchase Event (75% repurchased) - at par

Accounting Event, Capital Event, Tax Event – 101% prior to First Call Date, par thereafter

Change of Control 500bps step-up upon the occurrence of a Change of Control Event if the Notes are not called at par

Ranking of the Securities Deeply subordinated, senior to Ordinary Shares and preference shares

Ranking of the Guarantee Deeply subordinated, senior to Ordinary Shares and other shares

Equity Credit (M / S / F) 50% / 50% (until first call date) / 50% expected

Listing / Governing Law Luxembourg / English Law, except securities subordination governed by Dutch Law and guarantee subordination

governed by Spanish Law

Denomination EUR100k + 100k

Use of Proceeds (Re)finance Renewable Energy Projects



Structural Comparison to Recent Hybrid Deals

Issuer Iberdrola International B.V. Ferrovial Nethrrlands B.V. Danone TenneT Holding B.V.

Issue Date [November 2017] 7 November 2017 23 October 2017 10 April 2017

Currency / Size EUR benchmark EUR500m EUR1,250m EUR1,000m

Senior Rating (M/S/F) Baa1 (positive) / BBB+ (stable) /

BBB+ (stable) - / BBB (stable) / BBB (stable) Baa1 (stable) / BBB+ (neg) / - A3 (stable) / A- (stable) / -

Issue Rating (M/S/F) Baa3 / BBB- / BBB- expected - / BB+ / BB+ Baa3 / BBB- / - Baa3 / BB+ / -

Maturity Perpetual NC-5.5 with 3-month par

call prior First Call Date

Perpetual NC-5.5 with 3-month par

call

Perpetual NC-5.6 with 3-month par

call Perpetual NC-7.1

Subsequent Calls Every Interest Payment Date

thereafter

Every Interest Payment Date

thereafter

Every Interest Payment Date

thereafter Every Interest Payment Date

thereafter

Initial Coupon [ ● ]% 2.124% 1.750% 2.995%

First Step-Up Date / Margin 25bps in year 10.5 25 bps in year 5.5 25 bps in year 10.6 25 bps in year 12.1

Second Step-Up Date / Margin Further 75bps in year 25.5 Further 75 bps in year 25.5 Further 75 bps in year 25.6 Further 75 bps in year 27.1

Replacement Language Intention based, with customary

carve-outs

Intention based, with customary

carve-outs


carve-outs


carve-outs

Optional Deferral

Cumulative and compounding at

the Issuer’s option, subject to

compulsory repayment upon

payment of cash dividends and

certain other payments









payment of dividends and certain

other payments






Early Redemption

Withholding Tax Event, Substantial

Purchase Event (75)% - at par

Accounting Event, Capital Event,

Tax Event - 101% prior to First Call

Date, par thereafter


Purchase Event (80)% - at par

Accounting Event, Capital Event,

Tax Event - 101% prior to first call

date, par thereafter


Purchase Event (80)%, Change of

Control - at par

Accounting Event, Rating Event,




Purchase Event (80)%, Change of

Control - at par

Accounting Event, Rating Event,



Change of Control 500bps step-up and call N/A 500bps step-up and call 500bps step-up and call

Ranking of the Securities Deeply subordinated, senior to

preference and ordinary shares

Deeply subordinated, senior to






Ranking of the Guarantee Deeply subordinated, senior to

ordinary shares and other shares

Deeply subordinated, pari passu

with preference shares, senior to

ordinary shares

N/A N/A

Listing / Gov. Law Luxembourg / English law except

subordination

Dublin / English Law except

subordination Paris / French Law Amsterdam / Dutch Law

Denomination EUR100k + 100k EUR100k + 1k EUR100k + 100k EUR100k + 1k

Explicit Green Project Use of

Proceeds Yes No No Yes



Final remarks



Final remarks

The company has positioned itself as leader in clean energy: Iberdrola is the top renewable

energy producer in Europe and a global leader in terms of installed onshore wind power,

and thus has become one of the biggest Green Bond issuer

Iberdrola’s resilient model and diversification in businesses and countries, allows it to

offset the negative effects from challenging operating conditions in 2017

Shareholder remuneration track record: confident on the long term performance and

structural resilience of the Group, 2017 interim shareholder remuneration has increased by

3.7%; dividend pay-outs act as “payment pusher” for the hybrid

Iberdrola is developing a growth plan, supported by a strong investment drive between

2016 and 2020, predominately in regulated businesses or long-term contracted,

which will further strengthen its business model

Iberdrola is one of the largest electric utilities in the world producing and supplying

electricity to around 100 million people in the countries in which it operates

Committed with solid solvency ratios maintaining financial strength



9M 2017

Results

presentation

Click the link below to access 9M 2017 Results presentation


IBE PRESENT HYBRID NOV 2017.pptx



14th november 2017 - iberdrola... hybrid bond presentation, november 2017 / 4 - strategic overview...

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