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UPDATE 2-Renovables upbeat on Q4 but 2009 profits to fall

Published 10/20/2009, 03:58 PM
Updated 10/20/2009, 04:03 PM
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* 2009 net profit seen lower but core profit to grow

* Q4 power prices in US and Europe seen flat to better

* 2010 EBITDA growth may reach 20 percent.

* Net profit, core earnings narrowly missed forecasts (Adds forecasts for 2009, 2010, quotes from chairman, CEO during conference call)

MADRID, Oct 20 (Reuters) - Spain's Iberdrola Renovables is cautiously optimistic over fourth-quarter power prices in its markets but warned this will not be enough to reverse the sharp fall in nine-months net profit reported on Tuesday.

"(We expect) stability or improvement in prices for all our markets this quarter ...," Renovables CEO Xabier Viteri said on a conference call after the world's leading renewable energy group reported a 27.4 percent fall in nine-months earnings.

Renovables reiterated its forecast for core profit to grow in double digits in 2009, after it rose 6 percent to September, but turned negative on its net profit forecast for 2009 after saying in July it would be the same or slightly higher.

"In 2009 we'll see double digit growth in EBITDA (Earnings before interest, taxes, depreciation and amortisation) but net profit will be slightly lower than in 2008," Viteri said to analysts.

Renovables' forecast growth in 2010 EBITDA may even match the 20 percent expected rise in power generation, driven by more wind farms in its core U.S. growth market and helped by about $430 million in state aid, Chairman Ignacio Sanchez Galan said.

A DOUBLE-EDGED SWORD

Renovables' rapid capacity expansion in the United States and the UK, which has boosted EBITDA and output, is set to continue after the company reiterated plans to install about 2 gigawatts more of power plants and wind farms by the end of 2010.

This rapid capacity expansion has been a double-edged sword for the company, reinforcing its position in key markets and boosting production, but increasing debt and depreciation costs, particularly during 2009's weak power prices.

The company's sharp fall in nine-months net profit to 167.6 million euros ($251 million) missed estimates for 173 million from a survey of six analysts, and reflected the cost of serving an 18.7 percent increase in debt and 2 GW of extra capacity.

"Growth in EBITDA is bang in line with my estimates and reflects the capacity hike. Net profit came in lower, which seems to be due to higher depreciation charges and financial costs," Fortis analyst Antonio Lopez said.

Renovables parent company Iberdrola will report nine months results tomorrow morning ahead of the market opening.

(Reporting by Jonathan Gleave; Editing Bernard Orr,)

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