Good afternoon. This is the chorus call conference operator. Welcome, and thank you for joining the ERG second quarter 2024 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo Merli, CEO of ERG. Please go ahead, sir.
Good afternoon, everyone, and welcome to our second quarter and first half results presentation. Here with me, as usual, is our CFO, Michele Pedemonte, who will run you through our business performance over the period, say in more detail later on. So let's get started with the overview of results over the period. I'm on page number four, and now I focus on first half results, then Michele will elaborate more on second quarter figures. EBITDA closed at EUR 281 million, up 4% year-on-year, mainly driven by the larger installed capacity, which included the full consolidation of the U.S. portfolio as of April 1. The higher production, for about 0.7 GWh over the first six months of the year, more than offset a much weaker price scenario, which, it must be said, was particularly strong in the first half of last year.
We experienced, basically two different trends in Italy and abroad. In fact, in Italy, EBITDA was up 20% year-on-year, thanks to the larger installed capacity and, progressively into operation as of, second half of last year, coupled with a positive effect stemming from the value of the incentive that was nil last year. Being inversely correlated to the merchant price, it helped mitigating the weaker price scenario. On the opposite, outside Italy, EBITDA was down 16% year-on-year, as the consolidation of new assets in France, Spain, and U.S. were more than offset by a particularly tough comparison in terms of price scenario.
Basically, in all the European countries where we operate, but in particular in Germany, where, as you know, we sell electricity through one-way CFD, and in Spain, whose electricity market suffers the so-called duck curve phenomenon, or say, very low prices in the daytime hours. Overall, new assets contributed EUR 28 million in the first half on a year-on-year basis. We still invested significantly over the period, EUR 444 million, significantly up year-on-year. Say, more or less two-thirds of the CapEx were related to M&A in France and U.S., while roughly one-third in the organic CapEx, mainly associated to assets under construction, both repowering and greenfield projects. Adjusted net profit was EUR 106 million, down 7% year-on-year, notwithstanding the higher EBITDA.
This is, as a result, say, of higher depreciation, financial charges due to the consolidation of new assets, and a higher tax rate following the cancellation of some fiscal benefits in Italy, known as such. Net financial position at June 30 was EUR 1.9 billion, higher versus the end of 2023, mainly reflecting investments, buyback, and dividends. It also included a EUR 35 million item paid as a substitute tax to free up goodwill associated to some recent acquisitions, thus offering tax savings over the next five years. Let's move on. Page number five, commenting on recent achievements, saying the period, we continue, we continued our journey forward in line with our business plan in repowering, which remains a key pillar of our strategy.
We completed another project in Sicily, Mineo-Militello-Vizzini, for 101 MW capacity that is now fully up and running. As far as the U.S., we finalized the acquisition of a wind and solar portfolio. We are continuing to work on our co-development agreement to look for further opportunity in the U.S.. We have chosen our team, who will go overseas to work together with our partner. In France, we completed the construction of a solar and a wind plant. In the country, we are carrying forward our under construction projects, which accounts now for roughly further 50 MW. As far as financing, we continue to have a very sound financial structure. As Fitch confirmed our investment grade rating on our debt as we... We successfully issued our fourth green bond for EUR 500 million. But Michele will tell you more about that.
In 2023, MSCI confirmed a AAA rating on ERG. We are also very proud to have just obtained yesterday. On a quick look at delivery on our strategy, on page 6, we are well on track to reach the target for the year at 3.9 GW of installed capacity. As a matter of fact, as of today, we have added about 500 MW to our asset base, made up of a good mix of wind and solar, M&A, and organic. About 100 MW are now in the very final phase of construction. So in a year, we will be adding 600 MW of new capacity, +18% versus the end of 2023. So well spread over different geographies. Those assets are going to fully contribute to our results as of 2025. So I would say quite significant growth.
Here, a quick snapshot of assets currently under construction, on page seven, about 200 MW wind, solar, and our first installation in battery storage. As you can see from the chart, those assets, again, are in Italy, France, U.K., Germany, as geographical diversification remains central to our strategy. We can also rely on a pipeline of projects for almost 500 MW that are already fully authorized, spread in Italy, France, Germany, U.K., but still waiting for our final investment decision, as we first need to define the route to market, either through CFD awarded in auctions or PPA, say consistently with our value over volume strategy. As you know, for instance, we are still waiting for the FER X decree in Italy, necessary to define the business case for all our repowering projects.
Having said that, relying on a well-advanced pipeline of projects, we remain confident about our business plan targets. And now over to Michele for his review on results.
Thank you, Paolo. In Q2, power market prices have been significantly lower than previous year in all markets. This trend has partially influenced our all-in unitary revenues, which are, in any case, mainly dependent on incentive feeding schemes, long-term PPAs, and short-term matching. Italy is a clear example of this. Wind all-in unitary revenues increased from EUR 117/MWh- EUR 121/MWh, mainly influenced by the value of the green incentive, which is EUR 42/MWh in 2024, and null in 2023. In part, offset by the lower market price captured in Q2 2024, compared to last year.
In France, the unitary revenues decreased because the lower market scenario impacts on assets which do not benefit anymore of the two-way tariff mechanism or by PPAs, and on our newly acquired plant awaiting to enter in the tariff scheme. In Germany, captured price in thousand... In the second quarter of 2024, are strongly lower than last year, because previous, previous year was influenced by short-term matching at high prices, while in 2024, they are aligned to one-way CFD flow. East Europe, unitary revenues decreased in the second quarter, mainly due to decrease in energy prices in Poland and Bulgaria. Also in Romania, starting from second quarter 2024, the government set the global cap price at RON 400/MWh, roughly EUR 80/MWh, lower therefore than RON 450/MWh last year.
In the U.K., captured price is around EUR 55/MWh, not including balancing services revenues, lower than second quarter 2023, which still benefited from 1 plant at merchant price. As regards the solar all-in unitary revenues, there is an increase of value in second quarter in Italy, thanks to a higher hedging price year-on-year. In Spain, the captured price suffers the current market scenario and compared with the second quarter 2023, which benefited from higher hedging prices. In France, the all-in unitary revenues is influenced by the newly acquired asset, that have a tariff at lower prices than other plants. ERG plants in the United States have a unitary revenues that reflects the PPA prices and the production tax credit for our wind asset. And now a focus on production on page 10.
As regards the second quarter, we have in Italy, 641 GWh, 14%++ year-on-year, thanks to new asset contribution related to repowering and a new greenfield plant entering operation at the beginning of 2024. In France, 262 GWh, up 3%, thanks to new new asset acquired in January 2024, partially offset by lower wind condition compared to a particularly windy second quarter, 2023. In Germany, 113 GWh, + 10%, thanks to better wind condition. In Eastern Europe, -5%, volume is slightly lower than the second quarter last year, mainly driven by Romania.... In U.K. and Nordics, 137 GWh, 60% up compared to last year, when our assets were still in commissioning.
Production in U.K. are also influenced by remunerated balancing service market in Scotland, and grid containment, not remunerated in Northern Ireland. In Spain, 167 GWh , more than double, year-on-year, thanks to the production of the newly acquired plants that entered in operation between July and December 2022. The contribution related to the new plants in the USA is equal to 263 gigawatt hour in the second quarter, out of which 213 comes from wind and 50 from solar. As regard the first half, the production reached 3.7 TWh , +22% year-on-year, mainly driven by the perimeter effect.
In the second quarter of the year, we have an overall EBITDA equal to EUR 116 million, EUR 9 million higher than the second quarter of 2023, thanks to the new asset contribution, partially offset by lower market share. In Italy, EBITDA is EUR 81 million, higher than last year by EUR 12 million, thanks to the new asset contribution, coupled with a better price effect driven by the green incentive, as already commented. In France, the EBITDA is EUR 8 million, lower than previous year, due to lower market scenario, coupled up with the worse wind conditions compared to a particularly windy second quarter, 2023. In Germany, EBITDA is EUR 7 million, lower than the previous year, which was influenced by short-term hedging at higher prices, while the actual results reflect the CfD flow.
In Eastern Europe, EBITDA is EUR 8 million, lower than previous year, which benefited from higher capture price and higher production. U.K. and Nordics, EBITDA is slightly lower than second quarter, mainly due to lower capture price, partial offset by higher production in the period. In Spain, EBITDA is EUR 4 million, lower than last year, because of lower capture price, partially offset by perimeter effect, coming from the capacity entering operation in 2023. The contribution coming from USA is EUR 12 million, and include production tax credit calculated on actual production, equal to EUR 6 million in the second quarter. As regard the first half, the EBITDA is EUR 281 million, EUR 10 million higher than first half, 2023, mainly due to perimeter effect and better wind condition in Italy, U.K., and Nordics, partially offset by lower market share.
Let's comment now on investment in the period. In the first half, we invested EUR 444 million, an amount which is higher than the one invested in the first half, 2023, mainly due to the acquisition of wind and solar plants in the U.S. and EUR 135 million in France, while the first half of 2023 included M&A in Spain. In addition, we made about EUR 118 million of organic CapEx, out of which EUR 60 million in Italy, for repowering and greenfield wind asset, and the remaining part in France and U.K.. Let's now move on to the financials, commenting on the other items for the profit and loss. In the second quarter, amortization and depreciation at EUR 68 million, higher than last year, mainly due to new assets acquired and entering operation.
Net financial charges at EUR 7 million, versus EUR 3 million in second quarter 2023. The increase is mainly influenced by the accounting mechanism of the tax equity partnership of the U.S. portfolio, so not, not a cash item. In addition, please note that the second quarter, EUR 2.6 million, are figurative lease interest expenses according to IFRS 16. The sum of these two accounting items is five point five million euros, out of overall EUR 7 million euros of net financial charges. Tax rate in the quarter is 30%, higher than 24% of second quarter last year, due to the cancellation of the ACE benefit in it. As a result of all of this, the adjusted net profit of the quarter amount to EUR 28 million, lower than last year, EUR 36 million.
The adjusted net profit for the first half amounts to EUR 106 million, versus EUR 114 million in the first half, 2023. Finally, let's take a look at the cash flow statement and the net financial position for the first half. The net financial debt closed at EUR 1.9 billion, EUR 0.5 billion higher than the end of 2023, mainly driven by a solid cash generation from EBITDA, netted by the already commenting investment in the period, the dividend distribution for EUR 184 million, the last part of the buyback operation for EUR 37 million, and EUR 53 million of tax cash out.
A part of this tax cash out, EUR 35 million, is related to one-off taxes on goodwill release, to attribute tax relevance to the goodwill, to the goodwill arising from the mergers of the Siena and Montero projects. This payment allows future tax benefit to the tax amortization of the value of the goodwill, of the goodwill, starting from fiscal year 2025. Finally, a brief overview of our last green bond issue, the fourth. First of all, please note that the settlement happened on the third of July, so the net financial position at the end of the quarter is not affected by the issue. It was really well received by the international debt capital market, with the demand peaking 5 times the bond size.
It allows us to extend the average debt duration to over 5 years and to show a business plan period without any further refinancing need. The green bond benefits by a EUR 250 million pre-hedge at 0.4%, that leads the bond cost at 3% per year. After this last issue, we can confirm a very competitive cost of gross debt in current interest rate environment, in the range of 1.5%-1.7%. The success of our fourth bond demonstrates the benefit of an investment grade rating financial policy, that allows the group to access the debt capital market at very attractive terms, delivering a financially sustainable net profit also in the long term. Thank you for your attention, and now I hand over to Paolo for his comments on the guidance.
Thanks, Michele, now let's see our 2024 guidance. I keep it short. We are confirming all our guidance. Full year EBITDA is expected within a range of EUR 520 million-EUR 580 million, which includes the consolidation of the U.S. portfolio as of April 1, 2024, and the progressive contribution of the assets under construction. CapEx within a range of EUR 550 million-EUR 600 million, including the cash out for the acquisition in USA and France, as well as the CapEx associated to assets under construction. Net financial position at year-end is expected in the range of EUR 1.75 billion-EUR 1.85 billion. This guidance has remained unchanged, despite a cash out of EUR 35 million, not estimated at the time of the original guidance.
As we just recently decided to invest that amount to pay the substitute tax at 16%, to free up the goodwill associated to some assets, in order to benefit from cash tax savings to the order of EUR 13 million per year over the next five years. In a nutshell, I'd say, so far, so good. More or less everything is in line with our budget. Now, we are ready to take your questions.
Thank you. This is the Chorus call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as callers join the queue. The first question is from Enrico Bartoli, Mediobanca. Please go ahead.
Hi, good afternoon, everybody. A few questions from my side. First of all, a question regarding your slide 7, when you highlight this 500 MW of project fully authorized. I was wondering, what are the conditions that would trigger a final investment decision on those projects, and particularly, if you can provide some details on the repowering, and if the price that had been anticipated regarding the FER X of around 85 EUR per MWh would be consistent with your expectations in terms of returns for those projects? Second question is related to 25.
I know it's early for a guidance, but if you can provide some qualitative indications of what a reasonable evolution can be, particularly considering that green certificate maybe will be in Italy, higher in terms of price than this year. There will be the contribution from the additional capacity, and the forward curves indicate higher prices in for next year compared to this year. In particular, if you can update us on the level of hedging and the price there. And I see that the consensus is around EUR 490 million or below EUR 600 million, if you think that this is could be a reasonable number.
The last one, just the details on results, if you can provide the breakdown on EBITDA for Italy and France between wind and solar. Thank you.
Okay, Enrico, thanks for your question. But I say the first one, yes, it's the first time we are providing this kind of figure, 500 MW, which are the assets already fully authorized. Consider that out of this amount, more, the 300 MW are Italian project, Italian repowering projects. So that's why we haven't yet taken the final investment decision, because here we are waiting for the FER X issuance. Honestly, we have been waiting for it for almost two years. Now, the conditions seems are closed for the issuance. We hope by the end of the year to have more clarity on this, because for sure the easiest path forward is to participate to the auction and get a 20-year CfD.
That's the base of the structure of for the new tariff in Italy, and this is already defined as a draft. Decree has been circulating, say, in the sector, but we are still waiting for the officiality of the price. The range in the draft is between EUR 70 and EUR 95 , with a full link and indexation to the CPI. So this is very positive. But yet, we need to wait for the official decree, and above all, the first auction in order to participate. So our process would entail, first, to participate in the auction, and once getting a CFD, then we will take our final investment decision, and not vice versa.
In other countries, such as in France, or in Germany, where we have other projects, fully authorized, we are, in these days, trying to participate in the next auctions. I can't disclose the price at which we want to participate, but, in case, they will go through, for sure, we will take, accordingly, the, the final investment decision. But let me say, the key message here is, we are, based on the amount of the pipeline fully authorized, we are quite confident, that, we are, we are going to meet, say, our, our objectives, for, say, in the business plan. Let me elaborate a little bit more on one specific project, because, something that, touch me.
We have these very great projects of repowering, which is one of the best in our pipeline in Sardinia. And as you know, there has been a regional law that is preventing, say, from constructing new assets in the island until the region will define over the next 18 months, that's the deadline they said in the law, the go, no-go areas. But we are quite confident about this project, because being a repowering, we think this is a go area by law. But just to say and elaborate a little bit more about your questions, sometimes you have fully authorized assets, but you can't go on, because there are constraints like this in Sardinia.
But anyway, we have a constructive dialogue with the region, and we are, let me say, confident that we will go through this project. The second question was about 2025. Yes, still early to say a guidance for 2025, but you are right. So we should expect the full contribution from the assets that progressively enter in the scope of consolidation. Last but not least, in the U.S., that's gonna contribute for the full year next, in 2025, while just nine months in 2024. But all...
On top of this, all the other assets that have already entered into operation during the first part of 2024, and the ones that are going to enter in the second part of the year, and please consider that even the assets that were started up in the first half, they are not fully up and running since the zero time. They need time to reach, say, the full potential. 2025 we have covered roughly 1 TWh production at a price above EUR 100/ MWh. So I think quite a good pricing.
As you said, the value of the green is expected to be higher, because, as you know, is worked out from a mathematical formula that consider the actual price in 2024. So according to the estimate, the best estimates, the calendar for the full year, we should expect this green to be, I don't know, EUR 60 instead of EUR 40-EUR 42 this year. So maybe the last question is the split between wind and solar on EBITDA. So in Italy, it was EUR 50 million wind and EUR 30 million solar. In France, EUR 6 million wind and EUR 2 million solar.
Thank you. Just sorry, a comment on your, your first question. If I understand that, if you get the right, conditions for taking the final investment decision for the project in the pipeline, you, you are lightly authorized, actually, those projects would likely contribute, starting 2026. So on, on 2025, most of the capacity additions is the one, that is currently under, under construction. I take it right?
Yes, sir, it's absolutely right. For sure, the project I mentioned in the pipeline, even though already authorized, even in case of a final investment decision by year-end, considering the construction time, for sure is gonna be beyond 2025. In 2025, we expect the contribution of the assets already entered into operation, plus the three parks wind farms that are gonna enter in the second half of the year. And as you know, we have a preferential right agreement or kind of co-development agreement in U.S.
We are working on some projects in the area, but yet we don't know if we can, you know, if we can find an agreement, but in case, yes, we could expect also a contribution from these projects, consistently with our business plan that entails significant development in the U.S.. But it's still too early to say if there should be further assets in 2025 on top of the one you already, you already know.
Perfect. Thank you very much.
The next question is from [Alexandre Rancier], Bank of America. Please go ahead.
Hi, good afternoon, and thanks for taking my question. I'll just like to... I've got three, please. I'll just like to follow up on the previous question and some of your remarks about FER X. And I know, you know, there's been a draft circulating, and you've commented on that as well. But I think, you know, in the past and with other, you know, stakeholders, there was always some issues regarding no specific pricing, depending on the technology. I think, you know, you've been quite vocal about the need to increase you know the prices for wind compared to solar. Have you had any more discussion about that?
Has there been, as well, any more discussion or comments about the discount for repowered assets, as well as on zonal pricing, specifically? The second question is about batteries. And you just, you know, commented about U.S. and the preferential right to buy assets there. And we've seen, obviously, the market moving more and more in storage. You've had a first move, and or you are the first move, actually, in storage in Italy for 2025. Would you be actually considering, as well with your partnership with Apex, storage assets in the States? And then last question, if I may, which is more about the numbers for the French and the U.S. assets.
I can see from the disclosure that you've consolidated the full quarter EBITDA for both, despite the closing kind of mid-quarter for each Q1 and Q2. Should we assume also a full quarter cash contribution for those assets, or is there some kind of working capital, you know, movements there, i.e., we'd get the full EBITDA, but the cash impact will actually just be pro forma from the date of closing? Thank you.
Okay. Thank you for your questions, Alexandre. So I say the first one about the FER X, I try to elaborate a little bit more. Yes, we think the final decision, and the draft is in this direction, there will be separated and independent option between the different technologies, wind and solar. The range of prices are more or less the same, between EUR 70 and EUR 95, and we think the competitive option for the PV, the solar, will end up with a price not probably at the cap, while when talking about wind, we would expect the price awarded should be more near the top of the range, because as you are aware, wind industry is got a higher capital intensity.
And I think the OEM results, at least so far, are demonstrating that the value chain in the wind is a little bit more under pressure. But say, yes, we think if the flexibility is there, and then we can get the higher part of the range, at least some investment should be appealing, and then we expect to go on. You mentioned another point, which is very important for us, and is distinguished from the FER X, the discount at which the repowering projects are asked to bid, but basically, it's not... It's a penalization more than a discount, in the sense that the SPV, the company that own the asset that is going to be repowered, didn't participate, or didn't adhere to the Spalma Incentivi plan.
It was a, you know, a plan to smooth the value of incentives, extended the duration of them, that was submitted to operators in 2013, so many, many years ago. But the law at that time implied that the decision was free for operators, so was on a voluntary basis. But if you-- if the operator wouldn't apply, then this... They were not allowed to participate to any kind of public system, public mechanism. And then this prohibition was converted into this 5% discount, which doesn't make any sense. It's against the development of repowering, as which, as you know, has got some additional costs compared to a greenfield, because we have to dismantle the assets.
So we are working with the ministry in order to abolish, say, this this norm, which is totally nonsense, and we hope to to have, even though it's not all on our—under our management, but we hope to have this situation solved by the first auction of of of FER X, which is expected to be probably in January 2025. So at least we are working in this direction. About battery storage, I think the awareness around the world, not just in Europe, not just in Italy, but around the world, is the battery storage, the flexibility is becoming more and more important given the phenomenon of negative prices zero hour, Duck Curve, whatever.
So, operators should become smarter from this point of view, and we are working in this direction. We set a technical and performance committee within the company in order to kind of addressing all this kind of situation. But definitely, the Vicari project is the first one, but we have—we've been analyzing a larger, much larger pipeline of battery storage projects, and in particular, in some specific European countries where the value of battery is even more important.
I can easily mention Spain, where the volatility between peak and low prices during the daily hours is very big and massive, or even in Northern Ireland, where we are suffering a strong curtailments, because the infrastructure there are not as they should be to sustain the penetration of renewable. So say, with a cherry-picking approach, we are trying to target some specific projects in order to enhance the value of our portfolio. Also, in a defensive manner. In the U.S., for sure, where the market is more mature and they are more used to dealing with this kind of volatility, for the time being, we still, we haven't had the chance, opportunity to study, but of course, we are open to discuss with Apex any potential opportunity in this direction. About...
If I got well on the third question, about the contribution of the new assets, I need to take my management report, as we discussed today in the board. And let's say in the second quarter, we had a contribution from new assets of EUR 12 million EBITDA. No, sorry, I may I picked the wrong, the wrong, page. Sorry, EUR 22 million. This is the contribution of new assets in the second quarter of 2024, so quite big one, and is well spread all over the new assets. We have a contribution from Italy, they did the first repowering projects, from the acquisition in France, from the new assets in Spain, and the U.S.
I prefer not to give the breakdown because, sorry, but all in all, the new assets contributed EUR 22 million during the quarter, and almost EUR 30 million over the first half of the year. Against the backdrop of merchant prices well below the value of last year. Consider this.
Paul, if I may add, regarding the U.S. assets, the closing was in the first few days of April, and so we consolidate from the beginning of the month.
... and the same for the French asset, where the closing was in the first days of January, and so we consolidated by the beginning of the first quarter. So, but in particular, for the U.S., it was an acquisition with a Lock Box Date, where we are entitled to the cash flow of the asset. Starting from the Lock Box Date, it was, in reality, mid-2023. So, the consolidation is a partial reflection of the real cash generated by this asset for the benefit of the group.
Great. Super clear. Thank you for the answers.
The next question is from Roberto Ranieri, Stifel. Please go ahead. Mr. Ranieri, we cannot hear you. Maybe your line is on mute.
Yes, thank you. Sorry for that. Thank you very much for taking my question. I have two questions, please, about the perimeter effect and also expectations in the future. The first one is on USA. If you can remind us, basically the contribution to the EBITDA on full year basis, probably I missed this figure. And as a specific on the company, on the asset that you bought in the U.S., just to understand what I'm asking, what the contractual scheme is related to this plant. I suppose it should be a PPA.
If you can give us some more details on the duration of the PPA, that would be useful. On USA, as well, you mentioned during the conference about other opportunities in U.S.. If you can give us some granularity on which the megawatt are you targeting in this country, would be also helpful. And my last question is on the power prices in Spain, which has suffered some very high volatility in the recent past. So I'm wondering what your expectations are for the remaining of the year.
Some competitors are saying that the power prices in Spain should go up even significantly, materially versus the average prices that we have seen in the first and second quarters of this year. So if you can share some of your expectations on this pricing in Spain, would be very helpful as well. Thank you very much.
I'll try to answer your question. The number Michele presented before said that in the U.S., or in the second quarter, we recorded an EBITDA of EUR 12 million. Let's say, if you take on average something in the region of 40 for the full year is a sound number. I can't say more than that. Of course, it depends on the wind, on the solar irradiation, on the prices. The prices just say the basis, which means the differential between the base load, but I don't want to enter in this complexity, because all the production is covered by a long-term purchase price agreement. But more or less, the magnitude of the EBITDA is in the region of EUR 40 million.
But please, to be honest, consider that, when we announce the transaction, EUR 200.
The $70 million for the portfolio is about 75%, and we are consolidating 100%. So $40 million is the full consolidation of the asset, of the portfolio. 25% is not owned by us, and then will be revert in the minority line of the P&L, just to be straightforward and transparent. Yes, in the U.S., that was part of the original agreement. We have this kind of co-development agreement, which is very structured. So, it's about 5 projects, wind and solar, for an aggregated amount of 1 GW. We are not expected to buy all of them, but the objective, just to answer your question in detail, is to double, more or less, the current installed capacity that we have in the U.S..
Right now, 320 MW, more or less. We are targeting roughly double this amount, and we are working hard, with, together with Apex, to reach this target. It's not given. There is not an obligation for them to sell, but there are a kind of framework we have to move in, in between, and we hope to find the, an agreement on some of the, those projects that are very valuable. So far, so good. The chemistry, let's say, because we have we set up the organization, our team, that is going to fly overseas, and to join Apex, to work together on this, on this pipeline of projects. The third one was about Spain. Difficult to say.
So yes, we have noticed quite huge volatility, in particular in April, May, and the first part of June, with many hours with negative... Not negative, but near to zero prices. In fact, we are performing an hourly analysis with our management controller, and that are showing—those analysis are showing that roughly 50%, 50% of the hours during the second quarter were near to zero or even negative. This is not a very good market in this moment in those months. In fact, when decision maker here in Italy are saying, "Ah, Spain is an example," I shouldn't say that. But let me say, in a positive way, that this phenomenon is now over.
Today, the price in Spain is EUR 94 per MWh, and if I see the hourly price, even in the central hours of the day, the price are above EUR 100 in some hours. So in the very early morning or late evening, when sun is still, the solar plants are still running, and in the very central hours of the day, the prices today, but today, just to give an example, are in the region of EUR 70/ MWh. So very positive. So the market is a little bit, you know, crazy, moving from 0 MWh- 70 MWh in just a few weeks.
Because now, with the hot season, the demand is getting stronger and stronger, so we are carrying some inventory, and also the deployment of renewables is a little bit slowing down. So I believe in the market, and the market will adjust this weird price situation that we have lived, say, in the first part of the year. So we remain... We are not getting too excited when the prices are very high, like today, and we weren't depressed when we saw this phenomenon in April, because we have a medium long-term view, and we expect this market to be a quite solid market.
Also, because, as you can see from newspaper, major, technology companies like Google, et cetera, et cetera, are going to massively invest in Spain, because, on the opposite of Italy, they are deploying large-scale industrial solar plants, and not, you know, rooftop, that are more expensive and not, so efficient. So there, the energy costs less and is attracting, demand and attracting, data center, data lakes, data warehouse, and blah, blah, which should be the trigger for, the pickup in demand, going forward. So Roberto, I hope to have, added some value on, on this point.
Yes, thank you.
The next question is from Nash Kuo, from Barclays. Please go ahead.
Hey, good afternoon, everyone. Thanks for taking my questions. Three, please, if that's okay. So the first question, I just want to get a bit of help on your full year guidance. I remember last time you said the guidance that only include 6 months of the U.S., but then we are having... Sorry, six, 2 quarters of the U.S., but now we are having 3 quarters. And I think, Paolo, you mentioned earlier, we have EUR 40 million on a full year basis. That means we are now including average EUR 10 million more in the EBITDA, but you are not changing the guidance. But that mean the 2H outlook is becoming more negative. What has changed? Just wonder. And my second question is around wind CapEx. We heard a few different stories around wind industry in the last few weeks.
Just wonder if you can tell us what's your expectation for wind CapEx evolution for rest of the year or 2025 or beyond? And then my third question is, now you have the U.S. portfolio, and what are the positive and negative surprises over there? Thank you.
... Thank you for your questions. Well, say, the first one about the guidance, yes, you're right. To be very, very precise, I'm talking to analysts, so I want to be very precise. In our budget, the U.S. was consolidated as of June 1st. Maybe we, for telling reason, we said in the second part of the year, but so there are just a couple of months difference between what was included in the first guidance. We prefer considering that six months have already passed to consider to maintain the same guidance, EUR 520 million-EUR 580 million, because honestly, May and June and July was not that different. The wind conditions across Europe were not as good as expected in our budget.
But notwithstanding that, let me say, over the last couple of years, we have noticed that the wind tends to be stronger than expected in the fourth quarter. Last year, we, you know, and all the audience knows, that we changed the guidance in the second quarter to be surprised, because all the lower production registered in the second quarter were more than offset in the fourth quarter. And as you know, the fourth quarter for us is the game changer for our PNL. So we think, and we are still confident, that the fourth quarter should be good.
Say, the midpoint of the guidance is based, even for the second half of the year, in line, with the budget, so we are not expecting any recovery, compared to the lower wind production in these months, I mean, May and June. But if the second part of the year is going to be as windy as last year, we should finish, in the top end, of the range. So depends on wind, I can't control it, but I think I provided you with a comprehensive, answer. Maybe the last one, because you said, of course, our pro forma results, including the contribution of U.S. in the first quarter, would have been, EUR 10 million more than the guidance, the current guidance.
I always said that those EUR 10 million are in our cash flow, because the contract we signed was based on our Lock Box Date. So all the cash we got in the second half of 2023, because the Lock Box Date was on June 30, and in the first quarter of Q1 2024, is ours. In fact, in the end, the acquisition cost was lower than EUR 270 million, because at the closing day, we found the cash in the vehicle we bought. I hope, Nash, to have answered this question. The second one is our view about CapEx intensity in the wind industry.
You know that, I've always been cautious in this respect, because when I was-- I'm a former analyst like you, so I know that when companies are suffering in their P&L, reporting losses, sometimes at operational level, they have to recover this marginality, and then it's difficult to expect them to lower their prices, their selling prices. But we have already factored this CapEx trend in our business plan, and I can confirm that more or less we are basically in line. And now, the cost of installing a new megawatt in wind is in the range between EUR 1.5 million-EUR 1.8 million per megawatt. But I missed probably the third, the third?
The positive and negative of U.S.
That said. So far, so good. We are happy, because the numbers we have seen so far, and particularly in the first half of the year, are bang in line with our analysis, with our budget, and with the numbers at the basis of the acquisition. So this is not, let's say, granting also the future, but we started in the right way. Let me spend a couple of words about Apex. The feeling with them is super positive. We recognize their excellence in what they are doing and their work in their core business. So we are also very happy about the joint venture, the partnership, and more than before, we are confident...
That the way we identified to enter in the U.S. through this partnership was by far the best way possible, because we are learning while growing, exactly as announced and stated during the business plan.
Perfect. Thanks, Paolo. Can I ask a very quick follow-up question, if that's okay? Just very curious, if ERG is going to consider Siemens Gamesa or some Chinese wind turbine suppliers, will you just exclude them, or will you put them in your supplier list?
I'd say, honestly, we have one project in Sweden that is equipped with the new platform of Siemens Gamesa. We are suffering a little bit because but it's common knowledge this that this platform has something to be fixed. We are working well with them in order to fix the all the issues. We have a punch list to be solved, and it's a little bit painstaking work because it's lasting more than we could have expected maybe six months ago. But step by step, bit by bit, I think we are in the right direction to solve the issues and to bring, say, the plant at its full potential. Of course, and to bring, say, the plant at its full potential.
Of course, your question, I know, was a little bit different. Looking at the future, we want to be sure that all the technological issues we encountered with this technology is solved definitely before buying other, other wind turbines.
Understand. Thanks, Paolo.
The next question is from Stefano Gamberini, Equita. Please go ahead.
Good afternoon, everybody, and thanks a lot for taking my questions. I have three of them. The first, still regarding your pipeline. You have 500 MW of fully authorized projects. Could you elaborate a little bit about the different phases that you have for the other, the other projects that you have in your, your pipeline, which are clearly more close to the final authorization, and in which countries are this project? The second, regarding your financial flexibility. So in the case that you find the right regulations that match your IRR requirements or an acquisition with the same characteristics, what is the financial flexibility you have on top of your targets to 2026 business plan targets, clearly? The third, regarding the hedging.
You said that you already hedged 1 TWh north of EUR 100/ MWh on 2025. Could you give us the same figure for 2024? And what is the remaining production merchant, both on 2024 and 2025, just to do some math of the changes 2024 and 2025 on this metric.
So I'm gonna answer the first two, and I leave Michele to provide you the details about hedging. Say, the 500 MW of pipeline already fully authorized is they spread over, say, three or four countries, including Italy. And all the pipeline, I already said, that 300 MW , a little bit more than that, are is made of repowering projects, all wind. Then we have other projects, always wind, in France, roughly 60 MW, something like that. Then we have more or less the same amount in Germany, which is a premium market, and so we are quite happy to have this fully authorized projects in Germany.
We have also some projects in the U.K., on top of the one that we are already constructing. For instance, in the U.K., we have a new park that is currently under construction, Corlacky, that is not included in the target for 2024, but the COD, the commercial operation date, is expected to be late 2025. And most of the pipeline is wind. We have some pipeline quite important in solar PV in Italy, in France especially and in Spain, but it's not at the same level, at the same stage of those wind farms, so it's not yet fully authorized. And on top of that, you know that in Italy-...
The Decreto Agricoltura, I don't know how to say, Agricultural Decree, has been just issued a couple of months ago, and is not, to say the least, very supporting for the development of solar PV in Italy. But let's see. Honestly, the last amendment before the issuance of the decree said that the projects that are already under permitting, have already started the permitting process are not affected by this decree. And in fact, according to our understanding, most of our pipeline in the solar PV shouldn't be affected by this. But this is on top of the explanation, to answer your question about the breakdown of the pipeline. The hedging?
Yeah, maybe, is it the question also of financial flexibility? I don't know if you want to address that. But in any case, I can answer on the hedging. This is the portion of merchant exposure in 2024, so not covered and still open for the remaining part of the year, is roughly 1 TWh. And these figures, regarding 2025, is roughly 2 TWh, a bit more than 2 TWh. So, consider that 2025 is a full year still open, so we are building up our short-term hedging during the second part. So benefiting of some increase of the forward curve in these last months.
This is the figures regarding our merchant exposure for 2024 and 2025. So roughly, also in 2025, we have 1 TWh of short-term hedging already closed, at price close to the price mentioned before by Paolo for 2024.
Sorry, I didn't catch you exactly. So 2 TWh still, we can say, open on 25, and 1 TWh already hedged, north of EUR 100
Yeah.
megawatt hour. As we got 24, I lost-
1, 1 still, 1, after 1 TWh merchant for the second part of the year.
And the already hedged in 2024, at what price, more or less?
It's another 1 terawatt hour. At the price is higher than EUR 100/MWh .
Thank you. Just as we got the leverage, if you have the answer.
Yeah, leverage, you know, that our financial policy is linked to the main pillar, maintenance of the investment grade rating, that is translated into a maximum leverage in the region of 4, in terms of net debt to EBITDA. This is our capital. We still have room to grow in this, maintaining this financial, maintaining our current rating, and so we still have room in this aspect. In addition, as already mentioned during the business plan presentation, we have the full ownership of all our assets, and so we still have the flexibility through our asset rotation program to exploit further growth opportunities, leveraging on existing asset base.
So, an asset transition would be an opportunistic way to find financial means to grow, because we are one of the few player with the full ownership of the portfolio of the assets.
Great. See you, mate. Thanks.
The next question is from Davide Candela, Intesa Sanpaolo. Please go ahead.
Hi, good afternoon, gentlemen. Thank you for taking my question and for the presentation. I have two. The first one is on the back to Spain. I was wondering if you can go back to the second quarter dynamics that we observed in 2024. I was wondering if this could be more or less a structural dynamic also for the next year, and which were the reasons for that trend in the second quarter? The idea is that I was wondering if there will be too much production of renewables that more than offset the demand and the pressure on demand that could have in the quarter. So just your view on that.
My second question is on the PPA market. If you can provide us some color on the evolution, and now what is the stage of the market? And maybe considering if there is competition and some pressure on the prices that went down compared to last year, if large scale utilities could come available as clients, because they have the tools for hedging themselves internally, or if the companies, the corporates, still are the major customer for you. Thank you.
Say, okay, thank you for your questions. But say, about Spain, I can tell you that the selling price at which we valorize our productions over the second quarter was more or less in the region of EUR 35/MWh-EUR 40/MWh , which is EUR 40/MWh , let's say, which is not the price we imagined in our budget, so is below. But it's anyway protected by some PPA, because on the larger asset we have a PPA with Google that provides a floor. So even when the prices on average are below the threshold, the floor, we are getting this amount. But I repeat, I think this phenomenon was not temporary, because could happen again, but now is over.
So it just happened in the second quarter, in particular in April, May, and the first part of June. As I said, but I repeat, close to zero, 200+ hours with negative price. So which means if you sum the two, more than 1,000 hours in a quarter with very low price. This is a 50% of the entire hours in a quarter. That's are a little bit 2002 hours in a quarter. So, but this, we are not expecting this to remain, because the market, you know, react to this. It should react with battery storage, flexibility. Even ourself, we are trying to understand the opportunity to invest in flexibility tools, like battery storage. So...
The demand is expected to pick up, following the investment, the huge investment the country is having. So we are, and remain, I repeat, confident about the future of the country. In fact, we are happy with our investment because they are, from a technical point of view, performing very, very well. I think a couple of months, I know the market, the financial markets are a little bit hysterical sometimes, but we are not, because we are valuing investments over a 30, 40-year horizon. So we are absolutely confident that those investments are very valuable. PPA, of course, the volatility in the price is not helping, you know, the negotiation of PPA, and in particular, the first part of the year suffered low prices.
So we are negotiating some contracts, some long-term contracts, but the match, say, between demand and offer is not there, because we have different expectation. But now the prices are reversing on the upside. They are moving up. And this has been, you know, not overnight, but was a very quick process. So in the blink of a month, 30 days, the future and the forward prices are moving up quite significantly. The TTF gas price moved from the low of the year of EUR 20, now it's EUR 36, so almost doubled. So we expect this should be reflected in the energy prices in a medium, in the medium long term.
Thank you.
All right.
The next question is from [Paul Rouaud-Chavron], Kempen. Please go ahead.
Yes, thank you for taking my question. I have only one, which is a follow-up on previous comment that you had on CapEx. On wind CapEx, you mentioned that currently you are expecting a price moving forward of EUR 1.5-EUR 1.8. I think in the business plan, May, you had mentioned EUR 1.6 in average in Italy. So this is a 60% increase over the price, over the CapEx, say, in 2020. But during the same time, the price of turbines only increased, let's say, 25%-30%. So I'm trying to reconcile this gap between, let's say, the increase in CapEx of around 60% over the past four years, and the 25%-30% increase in wind turbines over the past four years during the same period.
Yeah, so if you could, help me, let's say, piece those two together, that would be extremely helpful. Thank you.
I try to give you more factors in order to make the calculation on a like-for-like basis. Yes, it's true, we moved from EUR 1- EUR 1.6, but don't forget the EUR 1 million we had in our original business plan, the repowering and for other assets was based on a framework agreement we signed, we negotiated and signed with Vestas and Enercon in 2018, 2019, in a completely different business environment. And this framework agreement, I remember exactly, but I think we signed in 2020, lasted three years, so up to the end of 2023, up to the end of last year. That's why we managed to have some projects with overall spending in EUR 1.1 million/MW .
That was an outstanding achievement of the group, because we found the right moment to negotiate this framework agreement. But in these three years, was not the reference, our CapEx per megawatt, because the CapEx per megawatt moved progressively from EUR 1 million/MW-EUR 1.2 million/MW, then EUR 1.3 million/MW, EUR 1.4 million/MW in 2023. So that's why we had this jump from EUR 1 million/MW-EUR 1.5 million/MW and EUR 1.6 million/MW, which is, by the way, in line with the current dynamic of the market. And now we are more in the region of EUR 1.6 million/MW, EUR 1.7 million/MW. I invite you to look at the other operators, and to just simply divide the CapEx for megawatts. This is the market value.
So it's not. It's a 60% increase, but compared to a super favorable framework agreement we signed in a time where market was completely different. I hope this could help your understanding.
Yeah, it does. It's helpful, but I think the underlying question for me is also trying to just get the bridge between the total CapEx and the price of turbines. I think Vestas and Nordex are reporting average selling price at EUR 1 million or a bit less than EUR 1 million. And it's true that most operators will build wind capacity for more than that, much more than that, but it's usually, say, 20%-30% more, including all the construction cost. So, I'm sometimes a bit struggling to understand... I mean, it seems to me that ERG is, let's say,
Yeah, I got-
Yeah.
Sorry, I got the question. I was very clear, even from the beginning. I just give you a picture of the entire price. The cost of turbine, in our case, which is, of which the 1 and 1.5 was 0.6. When the cost of the entire megawatt was EUR 1 million, of which 0.6, the turbine. But now, if you take, an investor relation presentation of, of, Vestas or... They are listed companies, they are saying the selling price for a wind turbine is EUR 1.1 million per megawatt. At which, you have to add the balance of plant CapEx, that have increased quite significantly over the last few years.
Because electrical, civil, and mechanical works are now cost much more, the cost associated is much more than it used to be just three years ago. All in all, that was the increase, but I... No, now I know I understand you wanted to reconcile the cost of turbine with the entire cost of the installing a megawatt, but this is the trend. The wind turbine moved from 0.6 in our case, to now EUR 1.1 million/MW . But even the BOP that costed roughly 0.2, 0.3, 0.3, something like that, in 2018, 2019, now it's gonna cost 0.6, then 0.5, 0.6/MW .
Then, putting together these two figures, you got to the number I mentioned.
Yeah, very clear. Thank you very much.
You're welcome.
The last question is from Francesco Sada, Banca Akros. Please go ahead.
Yes, good afternoon, thank you, and thank you for taking my question. I was just wondering about the tax scheme of the U.S. assets in general, and more in particular, if in Q2 or going forward, there's gonna be a tax component above the EBITDA level that we should consider. Thank you.
Yeah.
Yeah. You go.
Yeah, in particular, one of the two assets, the Pinnacle portfolio. One of the two assets of the Pinnacle portfolio, the wind assets in particular, benefit of the so-called production tax credit. This kind of, this kind of production tax credit are, account roughly half of our EBITDA in the, in the second quarter of this year. So this is the tax component, that is recorded in our EBITDA for the second half of the year.
Thank you.
Mr. Merli, there are. That was the last question. I turn the conference back to you for any closing remarks.
Thank you. I just thank you, the audience and all the analysts attending the, the meeting today, and I hope you a very nice summer, and see you soon in October or September for whatever it is. Thank you very much, and have a nice holiday.