Iberdrola's raised profit target set by grid construction, not power prices
By Amelia Baillie, Hamza Aldroubi, Jaime Cortés Vilaplana, Milica Jeftic · Energy & Utilities desk
What happened
Iberdrola (BME: IBE) released its nine-month results on 21 October 2026, showing that it now expects adjusted net profit to grow by more than 10% in 2026, after the first nine months saw a 9% rise to €5,141m [1]. Networks drove the result, with adjusted EBITDA up 15% to €6,430m, aided by the UK’s RIIO-T3 transmission framework from April, the NECEC power line in the US from January, and a new regulatory framework in Spain [1]. Its Power & Customers business, which is in charge of electricity generation and sales, saw EBITDA fall 2% to €5,359m, as sales made at 2025 prices met higher 2026 costs, alongside regulated gas rates and an increase in ancillary services [1].
What people are missing
The evidence suggests Iberdrola’s earnings growth is set less by what electricity sells for than by how much regulated grid equipment it builds, because a regulator, such as the CNMC in Spain, Ofgem in the UK or FERC in the US, sets a return on the net value of the assets a network needs to provide a public service, known as the regulated asset base (RAB) [2]. That return is set by the regulatory framework itself rather than by the market, and Iberdrola’s plan expects an average return on equity of 9.5% on its €37bn of network investment to 2028 [3], so earnings rise when the asset base does: RAB grew 14% to €56bn while networks EBITDA grew 15% [1]. The growth is physical, because every line, cable and substation must be built and energised before it contributes, as the NECEC line did when it entered service on 16 January [1][4], and as Brazil’s completed transmission lines now do with over €250m of annual EBITDA on a €4.3bn RAB [1]. On our calculation from the company’s rounded percentages, networks added about €0.8bn to EBITDA, roughly all of the group’s €827m rise, while Power & Customers lost about €0.1bn [1].
Why it matters
Iberdrola’s growth now depends mainly on how quickly it can build and connect power lines and substations, and on regulators continuing to let it earn an agreed return on them, which is the direction its plan sets, with 75% of its operating earnings targeted to be independent of energy prices by 2028 [3]. That makes it less exposed to swings in power prices, as it was in the first nine months of 2026 where Iberdrola attributes its Power & Customers losses partly to higher 2026 power costs [1]. Winning back every euro of the power shortfall would add only about 1% to operating earnings on our calculation, but it means delays to construction would cost far more than a weak year for power. Growth also has to be paid for, as its net debt rose €4.4bn since the end of 2025 to €54.6bn, which the company links to higher capital spending and currency moves [1].
What we are watching next
We are watching whether Iberdrola’s regulated asset base reaches the roughly €58bn, up 15%, that it forecasts for the end of 2026 [1], and what the company adds at its Capital Markets Day in March 2027 [1]. Reaching €58bn would support our reading that construction pace sets Iberdrola’s earnings, while a shortfall would suggest growth is arriving more slowly than planned, which a recovery in power would not make up.
Sources
Meridian62 notes explain what is happening and why. They are not investment advice and do not recommend buying or selling anything. Read the disclaimer.