Best Liquidity Management Solution Winner: Iberdrola SA

Published: Aug 2018


Photo of Fabio Monico, Bank of America Merrill Lynch, Vanessa Edesa Verde and Javier Urquidi, Iberdrola SA.


Iberdrola’s unique solution gives it centralised liquidity and a genuinely global view of the company’s cash through one global platform. This has resulted in the more efficient management of currency flows and mitigated the number of intercompany loans it has to make, both of which have led to cost savings.

Vanessa Edesa Verde

Treasury Manager

Bilbao, Spain

Iberdrola, the utility of the future. With a history of over 170 years, today Iberdrola is an international leader committed to low-emission energies: it produces and supplies electricity to more than 100m people in the countries in which it operates. The group has undergone a major transformation over the last 15 years, staying clearly ahead of the energy transition in order to tackle the challenges posed by climate change and the need for clean electricity. As a result of its commitment to the environment and its pledge to the decarbonisation of the economy, Iberdrola stands out as the leading renewable energy company and has managed to reduce emissions in Europe by 75% since 2000, reaching levels that are 70% below the average figures of the European companies in the sector.

in partnership with

Expanded global visibility in multi-currency notional pooling structure

The challenge

Iberdrola was already one of the world’s largest energy companies when it acquired US company UIL Holdings for US$3bn to create a new listed US company, Avangrid. With that acquisition came a new set of challenges; Iberdrola’s previous European banking provider was conscious of the uncertain and changing regulatory landscape and the implication of capital costs and gross reporting associated with notional pooling.

At the same time, this regulatory landscape uncertainty coupled with the increased emphasis on US markets and the acquisition of a new US listed entity for the pool structure, led to a preference within Iberdrola’s finance team for a new multi-currency notional pool (MCNP) provider subject to US GAAP over IFRS reporting.

These considerations and concerns prompted the company’s treasury team to search for a new banking provider that would offer and commit to a sustainable MCNP solution. The new provider would need the balance sheet to cope with a company of Iberdrola’s scale, as well as the experience to navigate the changing regulatory landscape. The brief to that provider was to put in place a new liquidity structure that could offer centralised liquidity and a genuinely global view of the company’s cash.

The solution

The new MCNP solution from Bank of America Merrill Lynch (BofAML) resulted from detailed due diligence and a collaborative understanding with Iberdrola of the requirements in all applicable jurisdictions where the company entities are domiciled, including a key US entity (Avangrid). Once implemented, Iberdrola gained additional global visibility, control and utilisation of their liquidity, thereby enhancing efficiency and flexibility.

The solution also supported a broad currency offering, including Iberdrola’s core currencies (eg USD, EUR, GBP, CAD), as well as non-core currencies (eg RON and HUF). Based in London, the MCNP is funded by semi-automatic transfers from up to 11 group entities and is designed to create a net notional position in a single currency without the need to perform traditional FX and/or swaps. Balances of the participating accounts are notionally converted using transparent Reuters mid-market rate.

It is a great pleasure for our treasury team and Iberdrola to be recognised for such a well renowned award. Winning this award means that we are on the right track and that we have deployed the best practices available in treasury management in line with the current market environment and our business objectives.

– Vanessa Edesa Verde, Treasury Manager, Iberdrola SA

Best practice and innovation

The Iberdrola MCNP is remarkable in that it has provided them with a robust structure, supported by clean legal and tax opinions, delivered in expedited timescales. It is the best possible example of how a treasury team can take on the multiple challenges of:

  • A changing regulatory environment (Basel III Liquidity requirements).
  • Global expansion, visibility, and exposure to multiple jurisdictions (IFRS vs GAAP).
  • Rapid corporate expansion through acquisition (three months to implement).
  • Operational synergies and efficiencies.
  • Globally managing working capital requirements of the Iberdrola Group subsidiaries through their holding companies from seven different geographies in four different time zones.

All these challenges were met through one solution, developed through close collaboration between the treasury team and its banking provider. This is an excellent example of a rapid response to a problem increasingly faced by the largest corporations: keeping control and visibility of cash in a fast-growth organisation.

Key benefits

  • Complete visibility of cash positions through one platform.
  • Mitigates intercompany loans and acts as a flexible working capital funding source.
  • Remove the need to perform traditional FX and/or swaps.
  • Efficient management of currency flows.
  • Cost reductions.
  • Efficiency gains.

Key learning points

A close collaboration and open dialogue with our banking provider has resulted in us establishing an efficient solution that provides us with opportunities for greater operational synergies, whilst allowing for future scale and growth.

Leveraging and utilising what our banking partner offered us in terms of guidance, their available advisory and best practice knowledge was a key component in our ability to complete our project within our given timescales using the resources we had available.

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