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WRAPUP 2-Iberdrola, IP seek growth in emerging markets
March 2, 2011 / 9:13 AM / 7 years ago

WRAPUP 2-Iberdrola, IP seek growth in emerging markets

* Iberdrola to expand in Brazil, U.S., Britain

* International Power to grow in Latin America, Middle East

* Expansion won’t make up for drop in Europe profit-analysts

* Verbund forecasts 2011 earnings to remain flat

* Companies’ shares fall

By Adveith Nair and Jonathan Gleave

LONDON/MADRID, March 2 (Reuters) - European utilities International Power IPR.L and Iberdrola (IBE.MC) face an uphill struggle to counter the sharpest slump in the energy sector in at least 20 years by expanding in emerging markets.

Energy demand in Europe is not expected to recover to pre- financial crisis levels before 2015, reflecting sluggish economic growth. Weak power prices and a glut in the supply of natural gas are also weighing on the earnings of European utilities.

International Power, 70 percent owned by French utility GDF Suez GSZ.PA, and Iberdrola, Spain’s largest power company, are seeking earnings growth in emerging markets, including Brazil where Iberdrola recently bought electricity distributor Elektro for 1.8 billion euros ($2.49 billion).

“High-growth developing economies - Latin America, the Middle East, North Africa, Turkey and South East Asia are prime targets for us,” Philip Cox, chief executive officer of International Power said on Wednesday.

But even that strategy, also being pursued by Italian competitor Enel (ENEI.MI) and German peer E.ON (EONGn.DE), will not deliver enough profit to make up for the drop in earnings in Europe, some analysts say.

“We do not anticipate earnings per share will reach 2009 levels until after 2013,” said Evolution Securities analyst Lakis Athanasiou, referring to International Power.

International Power shares dropped 2.1 percent to 326 pence and Iberdrola slid 1.2 percent to 6.16 euros, more than the Stoxx 600 Europe utilities index .SX6P, which fell 0.6 percent at 1106 GMT.

Iberdrola is also focusing growth to 2012 on developing power networks in the United States as well as the United Kingdom and Spain.

Austrian utility Verbund disappointed investors on Wednesday with its expectations for 2011 operating earnings to remain flat and shares dropped 5.4 percent to 26.33 euros.

“The outlook makes it worse,” said Kepler Equities analyst Ingo Becker.

Profit at International Power, a first glimpse at the earnings of parent GDF Suez which reports on Thursday, dropped less than forecast in 2010 helped by growth in Asia and the Middle East. [IP:nLDE71R0X9]

GDF Suez completed its takeover of the firm in February to create the world’s largest independent power producer.

Verbund reported a 21 percent drop in earnings before interest and taxes of 829 million euros, beating the 794 million-euro average of estimates from 11 analysts in a Reuters poll. [ID:nLDE71K1VA]

Iberdrola (IBE.MC) reiterated forecasts for growth and investment to 2012 on Wednesday as it said it was cutting organic investment to pay for the recent acquisition in Brazil. [ID:nLDE7210GG]

With additional reporting by Andres Gonzalez in Madrid and Peter Dinkloh in Frankfurt; Writing by Peter Dinkloh in Frankfurt; Editing by Erica Billingham

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