Spanish electric utility Iberdrola SA (IBE.MC) Wednesday said it sees a solid growth in profits over the next three years as it deepens its bet on renewable energy and networks.

The company in a presentation for an investor day said it expects its earnings before interest, taxes, depreciation and appreciation, or Ebitda, as well as its recurring net profit, to grow by an annual 5% to 9% in the 2010 to 2012 period.

Energy investments in general will be driven more by climate change issues and the need to decrease greenhouse gas emissions than demand this decade and beyond, Iberdrola Chairman Ignacio Galan said. Worldwide investments required in the electricity sector could reach $14 trillion up to 2030, he added.

Just in the 2010 to 2012 period, Iberdrola expects to add one gigawatt of renewable energy generation capacity per year in the U.S. , currently the world's largest market for wind power. The company also expects a moderate increase in renewables and prices in the more mature Spanish market, but sees its renewable capacity doubling in the U.K. and the rest of the world.

"It's a good strategy. Iberdrola already now has an advantage versus its peers due to its energy mix with a high content of nuclear, hydro and wind power," said Pablo Pena-Rich, analyst at BPI in Madrid . High government aid for renewables in Spain and the U.S. , where Iberdrola has its core assets, guarantee very good returns, he added. The company said its renewables unit Iberdrola Renovables SA (IBR.MC) in 2010 expects to receive another $430 million in renewable grants in the U.S. after getting $577 million last year.

The U.S. give the grants in an effort to move to a more low carbon electricity generation and meet its commitment to reduce its greenhouse gas emissions by 17% from 2005 levels by 2020. The European Union and Japan have even stricter emission cut targets.

Galan said Iberdrola through 2030 sees global generation capacity additions by the entire industry of some 400 GW in onshore and offshore wind power, 50 GW in hydroelectric energy, and 70 GW in nuclear power. The company expects another 125 GW from sources applying carbon capture and storage technologies.

The company gave its outlook after reporting its fourth quarter net profit rose to EUR795.3 million, from EUR379.3 million a year earlier, on the consolidation of its U.S. unit Energy East, and rising renewable energy output.

But lower income from Spain and the U.K. , due respectively to weaker electricity prices and the pound's weakness, dented profits somewhat.

The company in a release said it expects its results to improve in 2010 amid a stabilization of demand and an increase in its electricity generation capacity.

Through 2012, Iberdrola next to renewables also sees growth being driven by expansion in electricity transmission networks in the U.K. and the U.S. , improvements in the U.S. due to regulatory reviews, and a stable evolution in its Latin American business.

Chairman Galan also said the company expects annual costs savings of more than EUR300 million by 2012, in part due to economies of scale as renewable energy is gaining in size, and a further integration of corporate activities.

The company also said it expects net investments of some EUR16 billion from 2010 to 2012, half of that in renewable power.

Iberdrola also said it expects to sell up to EUR2.5 billion worth in non-core assets through 2012, but didn't specify what they are. The company has sold a 2.7% stake in Energias de Portugal SA (EDP.LB), or EDP, for EUR298 million, but said that in the short term, it will keep its remaining 6.8% stake.

Iberdrola's fourth quarter net revenue fell 36% to EUR4.77 billion, from EUR7.39 billion a year earlier, while Ebitda rose 25% to EUR1.86 billion from EUR1.49 billion.

Income from U.S. unit Energy East, which was consolidated into company results in October 2008, offset declining profit elsewhere. The unit, now called Iberdrola USA , made up 7% of the company's EUR6.82 billion Ebitda for the full year of 2009. Iberdrola didn't provide quarterly figures for each business section.

The company also said its 2009 net profit fell 1.3% to EUR2.82 billion from EUR2.86 billion in 2008.

Iberdrola shares fell 0.9% to EUR5.84 at 1522 GMT Wednesday, and are down 12.4% this year so far amid a fall in electricity demand due to the economic downturn and worries over Spain 's sovereign risk.

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