Companies with a strong balance sheet that create wealth and profit are essential to thriving regional and national economies.

By offering long-term employment prospects, contributing tax revenues to the UK Treasury and their significant purchasing of goods and services, they contribute to the financial wellbeing of society.

Although the IBERDROLA group is not listed on the London Stock Exchange, many leading UK pension funds hold our shares, so hundreds of thousands of Britons benefit from our strong financial performance through their pension funds.

During the last year, newspaper headlines have been dominated by the credit crunch and increasing energy prices. Commentators and consumer groups have attacked energy companies’ profits as “excessive”, at a time when the number of UK households suffering from fuel poverty continues to grow.

While we believe that our industry has a role to play in working with government, housing providers and the voluntary sector to combat fuel poverty, profit in the energy sector has never been more important.

A report published recently by Ernst & Young, updating its “Securing the UK’s Energy Future – Meeting the Financing Challenge”, forecasts that the UK’s energy supply industry will need to invest £234 billion in new infrastructure by 2025, to ensure security of supply and meet the Government’s climate change and renewable energy targets.

In order to achieve investment on this scale, energy companies must be able to access debt and equity finance and have the financial status necessary to convince lenders that the debt will be repaid and persuade shareholders that their investment will provide sustainable and market competitive returns.

Investment on this scale across the UK industry is required to upgrade the ageing electricity grid and replace much of the base load generation fleet with power stations that produce much lower levels of emissions.

This massive investment, which will double the value of the UK energy supply industry’s asset base, includes the cost of developing renewable energy on a large scale, additional gas storage and investment in environmental technologies, such as carbon capture and storage.

Another Ernst & Young Report “Costing the Earth”, published in June 2008, predicts further price rises in energy bills of at least 20% by 2020, purely to cover the costs of the low carbon agenda – independent of any commodity price rise for energy.

The additional costs include the provision of low carbon electricity generation – including nuclear – and customer energy efficiency measures, through the statutory Carbon Emissions Reduction Target (CERT) programme.

In future, educating customers about energy efficiency measures will play an even more important role in helping to mitigate the rising energy prices that will be brought about by funding the move to a low carbon economy and investing in the future security of the UK’s energy supplies.

Ramón Fernández Olmedo, Impact Leader