* Iberdrola sees 2010-2012 annual profit growth below 5 pct
* Centrica promises improved earnings growth in 2012
* Downstream business hurt by weak power demand for both
* Spain’s Gamesa also cuts 2012 targets
* Iberdrola, Gamesa shares down; Centrica up
By Tracy Rucinski and Adveith Nair
MADRID/LONDON, Feb 23 (Reuters) - - Spain’s Iberdrola and Britain’s Centrica posted 2011 results marred by pressure on their downstream energy businesses, as consumer demand remained weak in both countries’ fragile economies.
Spain’s largest power utility cut 2012 targets after a disappointing set of full-year numbers showed its expansion into regulated markets and renewables had failed to offset distress in its liberalised distribution business.
Yet Centrica, which owns Britain’s biggest household energy supplier, British Gas, said it expected to deliver improved growth this year, helped by higher profits from its upstream oil and gas business.
European utilities have been scrambling to shield themselves from declines in their traditional downstream business, which has had to reconcile falling demand as consumers’ spending power is pinched by rising prices and unemployment and government budget cuts.
Some, like Iberdrola, have tried to tap into faster-growing emerging markets such as Brazil, with a firm eye on wind power expansion. Centrica, meanwhile, said it would focus on growing its upstream business through acquisition and organic development.
Iberdrola, plagued by a tough environment at home as the Spanish economy threatens to slip into recession for the second time in four years, posted a slight decline in 2011 net profit and was forced to cut growth forecasts for this year.
Though it is a world leader in wind power, its renewables business suffered weaker gross margins in Spain and the United States, and the outlook for its business remains uncertain as the Spanish government draws up plans to eliminate utilities’ 24 billion euro tariff deficit.
The new centre-right government has already declared a moratorium on subsidising renewable energy.
By 1200 GMT its shares, which have fallen 3.6 percent this year, were down 3.15 percent at 4.519 euros.
Spanish peer Gamesa, which makes wind turbines and competes with Denmark’s Vestas, cut its expectations for wind turbine sales in a measure it said was necessary to keep debt in check, sending its shares down 9 percent.
Its growth in emerging markets like China, India and Brazil has come at the expense of increasing debt more than investors are comfortable with.
The outlook for Centrica was more promising thanks to its plans to raise upstream UK gas and oil production by more than a quarter this year. Analysts said the upstream business would be key to delivering a company target to improve year-on-year earnings growth for 2012.
Shares in the company, which have dropped more than 10 percent in the past year, were up 1.2 percent at 297 pence at 1200 GMT.