Iberdrola unveiled its plans for Scottish Power last week, including more wind power ... and improving the utility's rank as supplier of the UK's most environmentally damaging electricity

LIKE MANY of its counterparts across the globe, the advent of electronic trading has emptied the floor of Madrid's stock exchange of traders and brokers. With nothing more exciting to see than a few flashing terminal screens, the number of tourists flocking to the Bolsa de Madrid, with its neo-classical façade, has dwindled over the past few years.

The security guards manning the entrance, therefore, had their work cut out last week as more than 100 reporters swarmed to the exchange for a lunch hosted by Iberdrola's chairman, Ignacio Galan, to present the company's strategic plan for the next three years and its quarterly results - the first following the acquisition of Scottish Power earlier in the year.

Following a lunch of butternut squash soup then beef, Galan took to the podium and dominated the room for more than an hour fleshing out his plans for maintaining Iberdrola's position as the world's number one renewable energy company. It was an impressive performance, especially considering he had held a three-hour conference call for analysts that morning.

For the five Scottish journalists present, however, the highlight was perhaps not Galan's presentation but instead the chance to grill his right-hand man, Jose Luis del Valle, who stepped into the role of chief executive of Scottish Power at the takeover.

Iberdrola's results underlined just how important the purchase of Scottish Power has been to the company - especially as it has operated in a difficult environment on its home turf. In the past year, the wholesale electricity price has tumbled 33% in Spain, cutting profits.

Overall, Iberdrola's operating profits climbed to 3.8 billion (£2.7bn), up 30% on a year ago, with Scottish Power contributing 818.5 million (£574m), or 21%. The energy division in Spain contributed 2bn (£1.4bn) but that figure was down 8.8% down on a year ago.

"Markets outside Spain are making up for a worse showing at home," said one Madrid-based analyst.

The strategic plan, however, took some analysts by surprise. It centres on an investment of 17.8bn (£12.5bn) over the next three years - a figure Galan said makes him "dizzy" - and focuses on promoting the group's consolidation, integration and organic growth. Analysts have come to expect something more aggressive from Iberdrola after its rampant acquisition spree and expansion over the past few years.

But Andrew Moulder, senior European utilities analyst at Credit Sights said that while there were "no fireworks" in the proposals, this was "clearly the right thing to do after acquiring a company the size of Scottish Power".

The target is for net profit to reach 3.5bn (£2.5bn) by 2010 - double of that achieved in 2006.

When you break the numbers down, 3bn (£2.1bn) of the investment money will be spent in the UK. The bulk of this - 2.1bn (£1.5bn) - will be invested in the regulated business, that is to say the wires, pylons and networks that allow energy to be distributed.

Investment in their regulated businesses is something power companies are required to do by the government. The remaining 900m (£631m) will be invested in power generation facilities.

Part of this seeks to boost Scottish Power's wind capacity from about 400MW to 1200MW by 2010, which del Valle described as a "very good speed".

Prior to the takeover, however, Scottish Power had planned to boost its wind power capabilities to 1000MW. Iberdrola is therefore only pledging 200MW more energy than Scottish Power had planned.

Del Valle admits that this is true. But in his view, Iberdrola is more likely to deliver on its pledges than Scottish Power was likely to have as an independent player.

If Scottish Power had gone to the markets to raise the cash for such investment, it very likely would have struggled, del Valle says. He points to the difficulties Scottish Power got itself into with PacifiCorp in the US.

The Scottish company bought PacifiCorp in 1999 for $10bn (£4.9bn) and sold it six years later for $9.6bn (£4.7bn) after it failed to meet earnings targets. The fact that it was forced to sell an investment at a loss just six years on would have done untold damage to the board's credibility with investors.

As del Valle adds, such difficulties would have then been compounded by the global credit crunch. "This world is a very different place than it was six months ago or 12 months ago," he says, expressing a view shared by analysts.

Tim Wolfden, product strategy manager at Uswitch, says: "Scottish Power could have been in the position of over-promising but under-delivering. With Iberdrola behind it there is going to be a bit more shrewdness."

Iberdrola is also in the favourable position of having a strategic investment in Gamesa, a maker of wind turbines.

During his presentation, Galan noted that because the interest in renewable energy has taken off, demand for turbines is outstripping supply. He said that the link with Gamesa will help ensure Iberdrola has access to the turbines it needs and wants. Gamesa represents 63% of the supply contracts Iberdrola has.

Del Valle, meanwhile, conceded that the slow planning permission process was a frustration in the UK but said that Scottish Power now had a "good model in place".

Apart from wind power, Iberdrola's investment into power generation in the UK is seen by some analysts as quite limited. The investment going into traditional power generation is mainly concerned with making it more environmentally friendly, as opposed to actually expanding capacity by building more plants.

This focus on the environment is not surprising when you consider that Iberdrola, as the world's largest wind power producer, prides itself on its green credentials but has seen its UK reputation somewhat tarnished by Scottish Power.

According to energyWatch, in the year to March 31, of 13 UK energy suppliers, the electricity Scottish Power supplied to its customers was the most environmentally damaging. It produced 0.63kg of carbon per kilowatt hour compared with an average of 0.47kg.

It is this sort of thing that Iberdrola is addressing. The firm has launched a £1.5bn scheme to convert Longannet power station in Fife to so-called clean coal technologies by replacing existing boilers and turbines with what are known as super-critical boilers.

The plan is six months into an 18-month feasibility study but del Valle says he is "very optimistic" about getting the go-ahead.

However, investment to expand traditional power generation capabilities is much similar to that Scottish Power announced before the takeover.

Rival RWE, which does not have a network to maintain, announced last week that it was ploughing millions of euros into boosting its power generation capabilities.

Andrew Moulder, senior European utilities analyst at Credit Sights said: "RWE is investing 600m £421m into generation. Iberdrola didn't say that."

But he added that the investment plans that Iberdrola announced were over a relatively short timescale and that after the consolidation period to 2010 they may launch a new investment plan that focuses more on generation.

At Wednesday's lunch, both Galan and del Valle stressed how smooth the integration of Scottish Power into Iberdrola had been and praised the employees at Scottish Power for their adaptability, their ability to adopt work practices identified as beneficial and their strong technical capabilities as engineers.

Del Valle pointed out that the six-man integration team comprising both Spanish and UK representatives had "shut shop" this month, satisfied that its job was done. Cost savings were also 50% higher than previously expected, rising to 266m (187m) by 2010.

The search is also on for a new chief executive to replace del Valle. From the outset, Iberdrola has stressed that del Valle's appointment in the UK was a temporary one. He retained his job in Madrid as Iberdrola's head of strategy and was central in identifying Energy East in the States as a potential takeover target. Given that Iberdrola expects the 6.4bn (£4.5bn) acquisition of Energy East to be finialised by June, it is more that likely that del Valle's next move will be to the US.

That said, del Valle has done better than his predecessor at embracing life in Scotland. Since May, the Spaniard has lived in the middle of Glasgow's city centre on West George Street. During his tenure as chief executive, Philip Bowman always stayed in a hotel in Glasgow.

Del Valle said that candidates from both within and external to the company are being assessed. While stressing that Iberdrola prefers recruiting native staff to manage local operations, he stopped short of saying a Scot would be hired.

"It's about capability, not passports," he said.

Despite the apparent smoothness of the Iberdrola takeover of Scottish Power, there are nevertheless some analysts that predict that there may yet be teething problems.

Moulder at CreditSights said that his concern is that "senior management at Iberdrola do not understand the regulatory regime in the UK. There are certainly managers within the UK who will be experts on regulation, but we get the impression that Spanish managers believe they can lobby politicians to change regulation in other countries (rather like they do in Spain) and if they try this in the US or in the UK they will be in for a shock."

Wolfden at Uswitch also has reservations and said the integration between the two companies is still very much "ongoing".He questioned whether the Spaniards have "fully understood the UK market or appreciate quite how competitive it is". He also said that consumers will increasingly demand more services and better service for their money.

Delivery of service, however, is an area in which Iberdrola plans to invest a lot of cash in its systems. It is particularly keen to introduce a standard payments system for all its customers across the globe.

The Spanish are incredulous that customers in the UK can, if they wish, pay their electricity bills by cash or cheque. In Spain, customers are billed quarterly and their payments are taken from their accounts monthly by direct debit. For the customer, this has the advantage of spreading their payments more evenly through the year. For providers, it helps to prevents customers falling behind in payments and racking up debt.

In view of these plans to improve Scottish Power's service, the management must be taking heart from a new customer service league table launched by energywatch.

Although ranking as the company with the third-most complaints made about it to energywatch out of six companies, Scottish Power was praised for making the biggest improvement in its service.

Commenting specifically on the three big energy companies in Scotland - Scottish Power, Scottish Hydro and Scottish Gas - Graham Kerr of energywatch said: "Scottish Power has shown significant improvement over the last two years and must now look to match the performance of its northern rivals."

As a way of being able to improve customer service, del Valle is also a strong supporter of so-called smart meters, devices that allow both the provider and the customer to measure exactly how much energy they are using in real-time.

This issue is rising quickly up the political agenda. The chief executive of the Energy Retail Association, which counts Scottish Power among its members, was in Scotland on Friday lobbying MSPs to back plans for a nationwide roll-out of smart meters over the next decade.

Del Valle favours such a roll-out but is keen to ensure that meters are standardised.

As the lunch in Madrid drew to a close, del Valle picked up his two Blackberries - one for his Scottish Power-related messages in English, the other for his Iberdrola-related messages in Spanish - and prepared to head back to Glasgow. Time did not permit a stay long enough to watch his team, Real Madrid, play in Bernabeu Stadium. No doubt he was delighted to find out they won 4-2.