Acciona Energia’s 2022 Growth Exceeds Expectations

We are currently maintaining our fair value estimate of EUR 35 for no-moat Acciona Energia ANE as we roll our model to incorporate full fiscal 2022 results. EBIT jumped 76% in 2022, as increased volume demand and achieved power prices in Spain compounded with a Spanish regulatory banding mechanism regarding the company’s standard regulatory facilities (excluding biomass generation) being reversed. The reversal had a positive effect of EUR 10.2/MWh to the average achieved power price in Spain, pushing it to EUR 167.6/MWh and raising EBT higher than our expectations. The company will pay a dividend of EUR 0.70 per share on 2022 results, implying a 1.9% dividend yield. We view shares as fairly valued.

Spain’s EBITDA grew 136% year over year to EUR 1,255 million, reflecting increased capacity, higher average pool prices, and the regulatory banding mechanism reversal, while the international business’ EBITDA declined 28% to EUR 398 million. International’s EBITDA was affected by low average achieved prices in Chile (EUR 25/MWh), tough comparables due to the 2021 storm in Texas, and the Russia-Ukraine war’s impact on generation capabilities. Net income for the year was a bit below our forecast for 2022 at EUR 759 million.

Total installed capacity rose by 5% to 11,826 MW at the end of 2022, while consolidated capacity grew 8%. Despite capacity’s increase, total and consolidated production decreased 3% and 2% respectively due in part to reduced resource availability. Hydro production decreased almost 12% in Spain due to the end of a concession and drought.

Continued capital expenditures are going to be necessary to maintain and grow capacity, particularly in the international business. Guidance for fiscal 2023 reflects this, with net investment cashflows anticipated to be between EUR 1.8 and 1.9 billion, slightly below our forecasts. EBITDA is anticipated to be between EUR 1.5 and 1.6 billion for fiscal 2023, in line with our model.