Iberdrola Prioritizes Networks for Stable Utility Returns
Operators in regulated utilities should model capital expenditure against authorized tariff returns to secure margins.
Updated on Oct. 26, 2026 in Utilities
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Iberdrola reported higher profitability within its networks business, outperforming generation and supply by €1 billion during the first nine months of 2026. This shift underscores a broader strategic focus on regulated utility infrastructure as the company executes a €37 billion network investment plan through 2028.
Why it matters
Operators in the utilities sector face increasing pressure to balance aggressive capital expenditure against the realities of regulatory frameworks and supply chain constraints. Iberdrola’s performance highlights the stabilizing role of pre-defined, regulated remuneration tariffs in securing capital returns amid global market volatility.
Iberdrola generated €1 billion more in adjusted Ebitda from networks than from generation and supply in the first nine months of 2026, while investing €5 billion in network assets during that same period. The company now expects a 9.5% average return on its €37 billion network investment budget.
The players
Iberdrola
A multinational utility company operating extensive generation and distribution networks across Europe, the US, and Brazil.
ScottishPower Transmission
A UK-based utility subsidiary responsible for the management and development of high-voltage electrical infrastructure.
Avangrid
The US subsidiary of Iberdrola that maintains a significant regulated asset base and coordinates infrastructure investment.
Ofgem
The UK's independent energy regulator responsible for setting price controls and determining utility spending allowances.
The details
Iberdrola prioritizes capital allocation to regions with closed or negotiated regulatory frameworks, which helps insulate profit margins from merchant energy price risks. The company secures its supply chain through long-term framework agreements, a mechanism it utilizes to manage project timelines and costs. However, despite these protections, the company noted that trade tariffs and broader inflationary pressures on construction could still threaten the execution of its planned grid expansion.
Timeline
April 2026 marks the start of ScottishPower Transmission's five-year settlement period.
2026-2031 is the window for Spain's authorized 6.58% pre-tax return on asset base.
2025-2028 covers the duration of the current network investment plan.
2027-2030 is the designated period for Spain's additional €10 billion distribution investment.
Market Landscape
Iberdrola’s operational approach follows the pattern set by Ofgem's RIIO-T3 settlement, which dictates specific infrastructure spending allowances for utilities. This regulatory model provides the predictability necessary to attract the scale of investment required for major grid modernization.
Operators should monitor how regulatory settlements in their jurisdictions define return-on-equity benchmarks to adjust their own capital planning. With Iberdrola targeting a 9.5% average return, firms should evaluate whether their current contract structures offer similar protection against inflationary pressure.
The takeaway
Reliable returns in the utility space currently rely on navigating distinct regulatory frameworks rather than merchant market success. Operators should track the specific return-on-asset metrics set by their local regulators to align their mid-term capital expenditure with authorized spending caps.
Further reading
For broader trends in infrastructure capital allocation, monitor the latest updates in Utilities.
Source note: This article includes information reported by Rechargenews.
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