Good afternoon, everyone. My name is Juan Gaitán, Director of Investor Relations at Cellnex, and I would like to thank you all for joining us today for our Q1 2022 results conference call. As always, I'm joined by our CEO, Tobias Martínez, our CFO, José Manuel Aisa, and our Deputy CEO, Alex Mestre, who will lead today's session. Throughout our prepared remarks, we will refer to the presentation that we have just published, and then we will open the line for your questions. Without further ado, over to you, Tobias.
Well, thank you, Juan Gaitán. Good afternoon, everyone, and thank you so much for your time. Let me please start with the main highlights of the period, which has been marked by a consistent execution in a challenging macro environment, thanks to our resilient business model. Our organic growth generation continues to be strong and sustainable with new PoPs on existing sites and our build-to-suit programs generating a 6.5% growth. The main driver behind this strong organic growth has been again the significant contribution from our build-to-suit programs with around 900 new sites deployed in the quarter and with no issues observed in our supply chain, which allowed us to meet our clients' network needs on time. We continue to make progress on our efficiencies plan, and we are reiterating our 2025 saving target.
We are presenting again a solid set of results with revenues increasing 64% compared to last year. Our adjusted EBITDA 66% and our Recurring Levered Free Cash Flow 67%. In the current macro environment, I invite you to think of Cellnex as a place to be in an inflationary cost context, with the majority of our contracts linked to CPI. Controlled impact from rising energy prices due to our pass-through mechanism, hedged build-to-suit CapEx, and a solid capital structure and long-term trends support our fundamentals. On M&A, we are ready to execute on our targeted pipeline as the opportunities are there and our firepower is fully funded. 86% of our debt is fixed. The remaining 40% is linked to Euribor, which is at historical lows.
We have an available liquidity fully funded and of around EUR 8 billion, and our debt has no covenant, hedge, or warranty. Again, on the organic front, we have renewed a first batch of sites acquired from Telefónica in Spain at existing terms. We are executing bolt-on agreements with existing clients, and we have the commitment from Digi in Portugal to extensively use our towers for the network rollout. Finally, we are reiterating our 2022 guidance as we are maintaining our assumptions in terms of closing of deals and impact from remedies. We are also reiterating our 2025 guidance. If we go to slide number three, we are showing here, for illustrative purposes, the profile of our adjusted EBITDA and cash flow in 2022, how they will be generating during the year.
As you can see, these magnitudes will increase every quarter as we generate organic growth, make progress on our build-to-suit programs and efficiencies plan, and see the contribution from the Hutch U.K. deal when it is closed. Our 2022 guidance implies an expected EBITDA and recurring levered free cash flow growth of around 40% compared to 2021. Moving to the following slide, I would like to highlight that we have successfully completed 25 integration processes in 12 countries since 2015. 15 integrations in only 2021. The rest of our ongoing integrations are progressing as planned, with a particular emphasis in the U.K., where we need to finalize the remedies process before we can close the Hutchison deal. If we go to slide number 5, just a quick review of our current footprint and medium-term financial targets.
When all of our deals are closed and our build-to-suit programs complete, Cellnex will further strengthen its position in Europe as the main independent telecom infrastructure operator, managing a portfolio of almost 140,000 sites, with presence in 12 markets, boosting our financials and becoming the industrial partner of choice for our clients. Please note that these figures do not consider the execution of remedies, processes on which we are intensively working today. A quick reminder of our medium-term guidance, which we are reiterating. It implies an annual growth of more than 20% in all of our key financial metrics since 2020. With a targeted EBITDA in 2025 of between EUR 3.3 billion and EUR 3.5 billion, including the impact from remedies and without the additional contribution from the projects in our pipeline.
With this, I will now hand over to our CFO, José Manuel Aisa, who will provide more details on the period.
Thank you, Tobias. If we move to slide seven, let me please provide a few more details on the period. Our revenues have increased 64% to EUR 828 million. Our recurring levered free cash flow has increased 67% to EUR 300 million. Total PoPs have increased 50% if we include the contribution from organic and inorganic growth. If we think about organic growth only, our PoP have increased 6.5% compared to last year, as a result of colocation and the strong contribution from our build-to-suit programs. Moving now to slide eight. The performance of our main metrics on top of the few we just discussed. You can see our adjusted EBITDA has increased 66% compared to last year, with a solid margin expansion as a result of our operating leverage and change of perimeter.
This EBITDA growth is mainly explained by the contribution from telecom infrastructure services, organic growth build-to-suit recent acquisitions, and by the best-in-class management of our OpEx rates. The following slide, number nine, explains our Recurring Levered Free Cash Flow generation in the period. You can see here the contribution to organic growth from our different growth drivers, colocation, associated services, build-to-suit escalators, and efficiencies. These elements combined generated EUR 46 million in the first quarter of 2022, a 25% growth compared to the same quarter last year. If we also include the additional contribution from M&A and the rest of cash items below adjusted EBITDA, Cellnex has generated again a strong Recurring Levered Free Cash Flow growth of 67% compared to Q1 2021. Moving to slide 10. Just a quick update of our lease efficiency plan.
The proactive management of our ground lease contracts has always played a key role in our operations, and we keep demonstrating a solid execution, crystallizing efficiencies even in a high inflation environment. In the first months of 2022, we have negotiated more than 850 ground lease contracts, generating EUR 20 million of efficiencies in 2021, and we are reiterating our 2025 targets. Moving to our balance sheet. Movements compared to December 2021 are explained by our M&A and capital allocation activity in Q1 2022. Mainly acquisition of minority stakes and own shares, making the most of current market conditions and reaching today a level above 1% of our share capital. Finally, a summary of the main characteristic of our solid capital structure.
We have recently refinanced a bond maturing in 2022 with associated 3% coupon by issuing a new one at much lower cost, thus reducing the average cost of our debt. No significant refinancing is required before 2024. We have close to EUR 8 billion of available liquidity, so we do not need additional debt to fund the growth opportunities in our pipeline. 86% of our debt is fixed. We have no exposure to the U.S. dollar, and our corporate debt has no covenant, no pledge, no guarantee, so we have full flexibility to make further financing and funding decisions. With this, please open the line for your questions.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. The first question comes from Andrew Lee from Goldman Sachs. Please go ahead.
Yeah. Good evening, guys. Your results are pretty in line and you answered the question that investors come in on leases, and the concentration in Q1 really clearly. I had two questions, slightly different to that. Firstly, apologies on Deutsche Telekom. Know you're probably limited in what you can say on that. Wondered if you could just talk about how you think about the conceptual funding of a deal for Deutsche Telekom. Historically, you've said you don't want to do another equity raise. Wondered how you're thinking about that balance between using your own equity, the use of your existing balance sheet capacity and how much you think that is, as well as the potential use of other financial partners. That would be really helpful.
Just secondly, in terms of the organic growth outlook, obviously organic growth is strong now. The balance between build-to-suit and colocation is similar to last quarter. We understand that densification is at the heart the driver of that growth. But how should we think about the balance between build-to-suit and colocation going forward? You know, you said that you're confident that your headline organic growth is sustainable. Tobias said that early on. Does that mean that if build-to-suit slows colocation would likely be accelerating? You know, how do you give us confidence in the sustainability of the overall growth? Thanks very much.
Hi, Andrew. Tobias is speaking. I will take the first question about Deutsche Telekom. Well, you know that it's public information that we are in the process, of course. Obviously, it's our duty, and obviously we have to assess properly if this is our opportunity in order to be there. Obviously, as you can imagine, we cannot elaborate more than that. I'm very sorry, because I do not want to convey the wrong message that we do not want to enter into discussion, but difficult to say. Difficult to go further, but obviously Germany, it's a very attractive market, and obviously Deutsche Telekom is also a very attractive potential customer as well. We are in the process, and obviously we have restrictions, legal restrictions in order to disclose additional information.
Happy to talk about your second and third question that I think also the second one is linked with this project. Maybe José Manuel can elaborate.
Of course. No, I think that you are going in the very right direction when you raise the question, Andrew. Yes, I think that Cellnex should be focused on what we have seen before working with partners. Obviously, when we work with partners, project financing is a must. Also we have been clear that no rights issue. I mean, we are not going to ask for money from our current investors. These are part of the deals, you know that, we cannot disclose forever. Please bear in mind that, we have been able to also co-invest with our other clients in France now I'm recalling, no? This could be also somehow copy-pasting the transaction.
Other things that we have done in the past has been with Hutchison, in which we deliver a little bit of shares of new Cellnex shares. There must be a combination of these elements, you know, in the order that we were saying before. But again, what it matters is the money, is the money discipline, is the industrial discipline, and what it most matter is the contract. The contract is everything. We are talking about a long-term investment. We need to have comfort about all the clauses, and this give us value and capacity to fund any transaction as we have always showed to you.
Maybe the third question, maybe Alex.
Sure. Yeah. In relation to the organic growth, Andrew, I think the point you are raising is correct. There is a combination between build-to-suit and new collocations. Let's not forget, though, that we still have 23,000 build-to-suits yet to be deployed on the coming years. That amount is also a fluid element. Let's recall that we have announced at the end of February an additional 5,000 build-to-suits. This is also part of this pipeline of organic pipeline of new build-to-suits that we are normally also incrementing. It's not something that we believe all of a sudden build-to-suits will just vanish. We'll be also continuously incrementing alongside with the colocation.
On our view, the mix that we are today having between the two elements will be there for a long time. Because the combination of new colocation required for densification and new upgrades for 5G, and again, build-to-suit for both, for densification and coverage in rural areas or undercovered areas, which is also part of the build-to-suits that we're having.
Okay, thanks very much for all the color.
Thank you. The next question comes from Akhil Dattani, JP Morgan. Please go ahead.
Yeah. Hi, thanks very much. Thanks for taking the questions. Maybe if I could stick on the topic of M&A first. Tobías, you mentioned in your answer to the previous question that Germany is a very attractive market. I guess without wanting to get into the specifics of any deal, I was just interested in your comment around that. There's often a lot of debate around Germany and whether it really is an attractive market. I guess I just wanted to understand why you think it is. I guess the two specific things people ask a lot about is firstly, the fact that there's already existing tower cos, so there seems to be less future potential in market bolt-on M&A potential than in other markets you operate in. Secondly, there's a lot of rooftops.
I just wondered if that concept, you can give us a bit of color on why you think it's an attractive market conceptually without getting into valuation or anything else. The second thing was, hypothetically, if you were to choose not to go for the DT deal or you were not to get it, I was hoping to get a bit of color from you around other M&A opportunities because you said in your introductory comments that there's still interesting options ahead. I guess any sort of broad high-level color around alternative M&A opportunities. Also, you know, you've had a really aggressive M&A story over the last few years. You've been extremely successful. Is it fair to say post-DT, the future M&A options do start to become a bit more limited? And if they do, how do we think about balance sheet priorities?
I guess obviously, you've talked about the buyback that you've been tactical around recently, but, you know, could shareholder returns start to become a bigger theme for Cellnex going forward? Those are my two questions. Thanks so much.
No, thank you for the question. I will take the first part of your questions about the activity of Germany. First of all, when you assess the market, you have currently three, let me say, very well-established telecom operators, but you have to take into consideration that we have a new player in Germany, which is 1&1. This is a fact. The second point is the quality of the assets. The nationwide coverage of Deutsche Funkturm is the best one. No doubts about that. The quality, the footprint, the densification, it's best in class. The third one, if you look at 5G. 5G is about additional kind of assets around the pure, let me say, towers. It means fiber to the tower, densification.
It means not just small cells. It's about a new build to suit program in Germany, but also data centers. The fourth, which is very important for me, is we are not acquiring, we are not dealing just about a portfolio of towers. You are partnering with a strong and the largest telecom operator in Europe, which is, let me say, strategic-wise, very important because there are some opportunities, maybe beyond Germany. Why not? All in all, is because makes sense, this transformational deal for us. But obviously we have to assess properly. We have to understand the fit with us. The industrial fit is there, the strategic fit is there, and we are working on it.
It's not just about there are American Towers or Vantage Towers, and therefore it's in fact that there is no room for improvement. There are a lot of room for improvement, a lot of opportunities on the industrial and the verticals and the fourth telecom operators will boost the demand. We can tackle the question about what happens if we are not executing Deutsche Telekom. Maybe, Alex, you can
Sure, yeah. There is plenty of opportunities yet there, and those opportunities we believe are ideal for Cellnex to seize them. Why is that? Because our industrial capacity, and I would make two buckets out of that. One is a smaller, this is true in comparison with the deal that you are mentioning, core business transactions towers. When I say smaller, means more complex and means that you need to take into consideration that there are maybe legacy rent-sharing agreements on the country. I'm just thinking, for instance, around the Nordics, and someone being able to understand those legacy agreements, those complexities, understanding that there are things that have to be previously unwind as we did, for instance, in Portugal with NOS, no?
That we have just recently completed the second transaction on NOS, which was related to previous rent-sharing agreements. All that complexity makes these type of deals, I think, perfect for Cellnex, because we are able to speak the same language and understand the intrinsic complexity of those deals. That would be point number one. Point number two is in relation to growing alongside with our clients, and this is a little bit on those adjacencies that we have already started to work around in, for instance, in Poland with Polkomtel, in Bouygues. We will see that more and more our clients will be open and inclined to consider these type of transactions with an industrial partner, which is already an important partner from the original transaction coming out from the towers.
Really, we believe that there is going to be a very important area of potential incremental capacity on our side to deploy the firepower. That's the two angles where we really see that there is yet this growth is still there.
José Manuel Aisa, do you want to comment on the possibility of buybacks?
Of course, you know, the buyback program is we were not, you know, in a worst-case scenario, we were not to deploy the firepower that we have committed to the market. It's of course a possibility. In fact, during these first three months, we have already acquired 1% of the company, 1% plus. Also take into account that we can buy shares when we have no restriction from another perspective. Not every day we can do it according to the Spanish and European legislation. I think we have been active as much as we have been able to do it. At the same time being commensurate with our firepower.
Yes, this is an instrument that, it is there, it does exist, and we are happy to make it work at the right moment.
Great. Thanks so much.
Thank you. The next question comes from Simon Coles from Barclays. Please go ahead.
Hi, guys. Thanks for taking the questions. I guess one on sort of leverage is sort of linked to some of the previous questions. You had a good track record of sort of increasing leverage. I think when you initially IPO'd back in the day, you were sort of much lower than you are now, and now we're sort of heading towards 7x. If there is a big deal coming up, do you think there's scope to maybe increase leverage slightly higher, maybe temporarily, just because of sort of the visibility you have on your free cash flows, but also the deleveraging potential that you've demonstrated in the past? Secondly, just on BTS CapEx, it's at a similar level to last year, which was quite a material step-up on the year before.
It feels like BTS is going very well. I think when you initially announced a lot of these BTS transactions, you'd always said that it should be sort of back-end loaded or at least steady progression. Feels like they're a little bit more front-end loaded than we might have thought. Is it fair to assume that we should see another very strong year on the BTS side this year? Thank you.
Thank you, Simon. Again, I can maybe start with you with the second one. The certain series he says there is something at a trend that we anticipated last year. As you saw, 2021 was extremely strong in terms of build to suit. What we have seen in 2022 is what we anticipated, no? A strong execution on the build to suit front. Also, linking this to Alex's previous comment, no? In the coming years at least, 2022 and for sure 2023, the pattern that you will be seeing is quite consistent with our delivery in 2021. Yes. José Manuel, you want to comment on? Of course.
No, in terms of, you know perfectly well, Simon, that during, as you are saying, during the first years since inception until now, we have been able to step by step to increase our net debt to EBITDA and do not deteriorate our credit quality. Why? Because of the business risk profile, because of the backlog, our capacity to deliver quicker than before. There are many elements, no? That have helped us a lot in order to increase our thresholds. You are suggesting a further step. I agree with you. I tend to agree fully. In fact, if you look at our last reports by Standard & Poor's and Fitch, you can see that both of them are giving us a little bit more headroom with the same corporate rating.
This is just an example of our financial policy, which is step by step increasing the business risk profile and therefore increasing the level of debt. Regarding next transaction, which is also your question, no? What happens for the transaction? Exactly the same. We will repeat the modus operandi. If we were to do a transformational deal, I'm pretty sure that our net debt to EBITDA could improve. Or who knows, become investment grade, no longer a crossover. This is something that is important. It's something important. Many times we tend to see M&A just a pure IRR element. That's one key element, but it's not the full picture. It's about the contract, it's about the backlog, it's about the credit quality. It's many things that can transform Cellnex.
How to estimate this into an IRR. This is the big question we have. I think that as always, if we go ahead with a different firepower, the firepower we have is because we will create value for you significantly.
That's great. Thanks, guys.
Thank you. The next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.
Great. Evening, everyone. Thank you for the questions. I've got two, please, based around inflation. You've been very clear on the contracts you got, the top line. Is it possible to get a sense of the CPI assumption you are making over the medium term to hit your guidance by 2025? I see, you know, you've assumed a couple% blended inflation in 2022 over 2021, but what about the medium term? Moving to the leases. Now, you've been very clear and very targeted in your optimization and efficiency programs. Can you tell us the CPI mechanism or the inflation mechanism of the leases which haven't been negotiated? Are they purely linked to CPI or potential CPI? Are there any caps on those ground leases which haven't been negotiated yet? Thank you.
Let me take the first one then. Listen, this is when we gave to you 2025 revenues and EBITDA, we gave to you a range. This range, we ran the Cellnex model with different scenarios in terms of PoPs, in terms of inflation, in terms of efficiencies, in terms of many elements. When we come back to you with a range, is because we do think that scenarios of inflation, current inflation can be within that range, obviously in the higher part of the range, if this were to be sustained in the following years. For us, as you know, we are not changing. It is true that inflation is super high.
Let's put it this way, we should land in the highest part of this range. If inflation were to be very low, we should land maybe in the average or low point of this range. This is one KPI. There are other KPIs that are moving the needle of Cellnex, no? For instance, you can see our EBITDA growth. Our EBITDA growth of this quarter is being driven not only by inflation, but also by the good behavior of OpEx, which is fully under control. It's like for like OpEx flat. Operating leverage does work also, has an impact. In our view, as an infrastructure company, we must take care of inflation impact on our revenues, but especially to maintain a very good and excellent operating leverage. Okay?
This is within our range or the range that we gave to you last year in 2021 for 2025.
Maybe, you know, just to complement José Manuel's answer, let's see what happens in 2023. In the current situation must be prudent, no? Let's see the evolution. Maybe the second question.
Yeah.
About the CPI link with o n leases.
Typically, the mechanic is, well, you need to bear in mind that there is a small portion of our lease contracts which are simply flat. They have no escalator embedded. Even without pre-negotiation, we are not seeing an increase linked to these contracts. In some other cases, it is not extremely difficult for us to avoid the CPI link included in the contract, because, you know that, we have much more bargaining power vis-a-vis the landlord. This, I would say that this negotiation is not included in our side actions. Okay? Because, again, we have been building this strength, this positioning in Europe.
What we are seeing is that it is not too difficult for us to avoid this CPI increase. In some other cases where this negotiation is not successful, simply what you should be expecting is that annuity being increasing every year with inflation in that market.
Well, yes. To complement your answer, Juan. You have to bear in mind that we launched a very, let me say, aggressive plan of acquisitions and also cash advance program. We launched this project three years ago, roughly speaking. When the inflation was very low. Currently, we are benefiting from this, let me say, efficiency plan in terms of ground lease contracts. We keep going. We are benefiting, on average speaking, from lower inflation impact on the ground lease because it's a mix, it's a sort of different actions.
Great. That's helpful. Thank you.
Thank you. The next question comes from Abhilash Mohapatra from Berenberg. Please go ahead.
Yes. Good afternoon, and thanks for taking my question. I've got one around your sort of the way that you think about your cost of capital please. Obviously, we've seen yields going up materially and continue to go up. How does that sort of factor into your thinking about cost of capital? And linked to that, how does it then impact your thinking around the IRR that you need to generate from future M&A? And then second one is just a quick follow-up to an earlier answer. Was I right in understanding that you've ruled out issuing any new equity as part of any potential deal with Deutsche Telekom? Thank you.
Well, regarding both questions are the basics of valuation and corporate finance. We are a long-term investor. As a long-term investor, we should be consistent what we have done in the past. Risk and reward. As a long-term investor, we must be coherent between risk and reward. We cannot break this rule. When regarding IRRs, when regarding all the business plan, we have to present to you something that makes sense. Makes sense because the contract is well written, the backlog makes sense, the counterparty has a level of risk, the capacity of the growth of the business is whatever, no? All these elements, as a long-term investor, cannot be subject to the evolution of the interest rates. Okay? This is important.
We have to keep an eye on interest rates to understand the evolution of the cost of equity. Of course, we have to. At the same time, we cannot forget that maybe what it matters are the next 30 years, 40 years, 50 years, and we have to be consistent with the risk and reward of those cash flows that are being projected. Yes, we will try to be coherent, but with all the elements, not only with one. The second, as we were saying before, I mean that we have it clear that Cellnex should work with partners. Cellnex should work with partners and therefore this means project financing.
Therefore this means maximizing this way of acquiring, gaining optionality in the future to do staggered acquisitions. We have to present to you different formulas that are coherent with current equity market. We do not see a rights issue right now, to be honest. We do have a plan now. The market, the equity market is not there. We have to do deployment of our last rights issue, and this is where we have to be focused. I think that we will repeat all the schemes that we have done before. Nothing new, but rights issue this time is not on the agenda.
That's great. Thank you.
Thank you. The next question comes from Ottavio Adorisio from Société Générale. Please go ahead.
Hi, good afternoon. I have a question on my side. It's related to you, but from a different tack. You provided useful information about the fact that you refinanced the bond with a lower cost. But that bond was issued 2016. That was just around your IPO, and sovereign rates was even higher than today. So as a benchmark, could you just tell us how the cost of the refinancing compared to the average maturity of your debt and the average cost of debt you currently have? The second question is related to the BTS and to an information you provide in slide 16. You basically say that only one-third of the cost that related to BTS are construction cost.
Could you give us a bit of color, what about the other two-thirds of the cost you have? Also related to that, what's the ratio of the BTS towers that have been built by the anchor tenants? The third one, talking about partners. Last year, you partnered especially with Deutsche Telekom. You created investment fund, and I believe you already contribute EUR 200 million. At that stage, you were referring to enlarging the fund, to open the fund to private equity, to infrastructure funds, and so on and so forth. The idea was effective to use this fund to make deals.
It's been more than a year, and I was wondering if you give us an update, and if you plan to use this fund at some stage or if you actually all the M&A you're talking or the one that Alex was referring will be done directly with through your balance sheet. Thank you.
I will try to answer and please the compliance team. Average cost. This bond, it has a coupon of 2.25%, and what we have done is to get half of this bond and to do it, to float it in Euribor plus 0.1% spread. All in, we have hedged this in a way that all in the current cost of this bond is no longer 2.25%, but all in is 1.7%, which is commensurate, it's very similarly in line with our current capital structure. Okay. We have used hedge instruments.
We did have worked out this flexibility beforehand issuing this bond, and I think we have taken advantage of different elements, and we have done something which is very interesting. In line with our current financial structure. This is about the average cost, you know. Your second question was about the build-to-suit. You know, Ottavio, perfectly well that we have always used our build-to-suit programs to reduce the upfront M&A proceeds. Build-to-suits for us is a combination of three elements. First is to securitize the organic growth of the future, to securitize the densification of our current clients. Second is a way to fund M&A transactions because we defer the payment of them to the build-to-suit.
Third, and very importantly, is to have a tax shield. Because as you know, the acquisition of shares is not tax deductible in Europe, but the acquisition of assets is fully tax deductible. It makes sense for us to use build-to-suit for three different reasons that create a lot of value for our shareholders. You had another question in this point, which is the percentage of build-to-suit that are carried out by our partners very high. I will say to you that the vast majority, yeah, of them. That's very simple to answer. Not all of them, because it's impossible, but 90% easily it has this characteristic. Finally, you were talking about our long-term relationship with Deutsche Telekom Group. You are right. We co-invested in Swiss Towers.
We co-invested in Cellnex Netherlands. We have co-invested in Digital Infrastructure Vehicle last year. I think we have several instruments to face new opportunities with them. How to put all of them together? Give us a little bit of time. You know that, since the very beginning, Ottavio, that you have followed the company, we have taken advantage of every single instrument to be creative and to extract value for our shareholders, and we will keep on doing so.
That's perfect. Thank you.
Thank you. The next question comes from Stefano Gamberini from Equita SIM. Please go ahead.
Good afternoon, everybody, and thanks for taking my question. Just a quick clarification about the change of net debt during the period, which is around EUR 1.7 billion. Excluding the current free cash flow, the expansion CapEx, BTS and M&A, there remains around, in my estimate, in my calculation, around EUR 0.4 billion-EUR 0.5 billion from issue of equity accounting, the accrued interest and the other cash out. Could you give us an idea what are the main issues that impact this further around EUR 450 million? I'm referring to the debt structure in the annex. Mainly related to the treasury acquisitions or are there some other elements? Many thanks.
It's the acquisitions.
Thank you.
That is correct. This is the amount corresponding to the acquisition of On Tower Portugal.
Yes.
Yeah. Roughly speaking, it's about 1%.
A little bit more. The reason why it's a little bit more than EUR 300 million that.
Okay.
That he's signaling. He's very right.
Thanks a lot.
Thank you. The next question comes from David Guarino from Green Street. Please go ahead.
Hey, thanks. Question on the energy cost. Could you remind us what percentage of your OpEx is related to energy costs? And I wonder if you could provide some more color on your energy hedging program, specifically what the remaining duration of your forward hedge contracts are. My second question on an unrelated note, on the Telefónica contract automatic renewal, I believe this is the first contract renewal you've had since coming public. Could you just remind us, is it common for MNOs to take the renewal option, and why wouldn't they just opt to renegotiate a longer-term contract now that the lease is over? Thanks.
Thank you. Thank you, David. Let me, coming back to your first question. In Q1 2022, we have a total utilities cost, which is the vast majority of our corresponding to energy of EUR 64 million. That corresponds to a total OpEx excluding leases of close to EUR 200 million. That gives you a, I would say that proportion of the total OpEx, which is corresponding to electricity. Also to remind you that the vast majority of this electricity cost is treated as a pass-through. This is a slide that we are also presenting today. This is the same content that we prepared a few quarters ago.
It is important to highlight that even if you see increases in the context of the current environment, where we are able to pass through this cost, the majority of that to our clients. In terms of efficiency, we have a number of measures in place. We are trying basically to do the same with less consumption. We are also working on a number of initiatives which could be free cooling, so maybe less air conditioning and more making the most of environmental conditions around the site. Sort of free cooling system using the air around the site without the need to use air conditioning to maintain the temperature at site level.
Also something that at least we were quite active last year, was to sign long-term contracts with electricity companies. We have secured the cost for a number of years. In the short term, I would say that all in all, with our efficiency measures and our contracts in place, we are comfortable with the current situation. There was a last question linked to Telefónica renewal. Yeah.
Yeah. I'm happy to take that one. It is true that at certain point there were concerns raised by you on in relation to those renewals, and we always try to be quite clear. We were confident on this to happen in a smooth way. There is a clear win-win relationship already being established and willingness to continue working together, even though in the case of Telefónica, they have been, let's say, selling towers to someone else recently, you know.
The relationship already being established and the uniqueness of the sites that we acquired from them a few years ago was giving, let's say the opportunity for both parties to continue with our relationship without any major disruption or thinking that they could be building sites in opposition to ours or anything like that. This is where we've been quite, let's say convinced that that was the way that would be resolved. This is just the first batch. It's 1,000 towers. It was the project we named Babel. And those were naturally renewed at the same terms and conditions. There are coming in the coming years other batches from Telefónica and from other anchors.
We believe we have that element well, let's say linked and discussed with our partners and should not be any potential surprise around that topic, as we have just demonstrated with Telefónica.
Okay, thanks. That's helpful. Then just to confirm on that first question on the hedge cost. So it sounds like your hedges extend out pretty far into the future, and that the higher energy prices across Europe don't have any impact on your 25 guidance. Is that correct to understand that?
That is correct, yes.
Great. Thank you.
Thank you. The next question comes from Sam McHugh from BNP Paribas. Please go ahead.
Yeah, hi guys. Two questions. Just on the interest side, for your variable debt, can you just give us a bit of color about whether that's linked to the 12-month Euribor, have a floor of zero? And then what is assumed in the guidance for this year in terms of step up on interest costs, if anything, on that variable interest? Any color would be helpful. The second more broad question on lease optimization, I don't know how you think about the macro environment, impacting your ability to negotiate with landlords or perhaps landlords' willingness to engage with you. Do you think there'll be more opportunities? Are you seeing any change in behavior from landlords as inflation bites? You know, are they more willing to negotiate with you?
Any color on the changes you're seeing there would be helpful as well. Thanks very much.
The first one is regarding the variable. If you know that 87% of our debt is fixed, as of April, also some very minor that we have. In our Excel's, we are providing results as of March, but in our presentation, a bit more updated information. As of April, 86% of our debt is fixed and 14% is variable. Okay. This 14% variable, it is open to Euribor. This Euribor tends to be six months or one year. Okay? And then on top of that, we have the spreads that tend to be all of them a little bit, circa 100 basis points. That's all . We are trying to keep this 85% fixed, 15% open.
We really think that somehow the Euribor is going to grow, but even with this, we do not think that can increase the average cost of our debt in the next few quarters. Okay? We feel comfortable in this regard. In other terms, regarding a BTS and landlords' leases we are at full steam. No, look, we are at full steam. In that sense, if you look at the results we are providing to you on page 10 of the presentation, this quarter, we did 857 negotiations, which is 15% more than the first quarter last year. We end up 2021 with 3,125 leases negotiated, let's say, in any kind of the different mechanisms we have.
The machinery now is accelerating. We do not foresee, let's say, any impact on the intended 20,000 actions that we are expecting for 2025 with this EUR 90 million-EUR 100 million improvement on our record level free cash flow. In fact, also we are presenting as a guidance for 2022 estimation that we will be around EUR 35 million of efficiencies, which is again, much more than the 20,000 that we have completed last year. We are very confident on that.
Okay. Thanks very much.
Thank you. The next question comes from Jerry Dellis from Jefferies. Please go ahead.
Yes. Good evening. Thank you for taking my questions. First question has to do with ground lease contracts and where you have contracts where there is some sort of inflation escalator. Does the inflation escalation come progressively through the year? In other words, is the point of escalation different depending on the particular sort of contract in question? Are they more focused towards the beginning of the year, or should this sort of issue continue to sort of build up as we go through the year?
Secondly, in relation to an aspect of the potential structuring of a deal with Deutsche Telekom, it was reported in the German press that one possibility was the insertion of legacy Cellnex assets into the perimeter as a way of paying for an equity stake. I just wondered on your sort of thoughts on that and whether it's possible in theory to structure that in a tax-efficient way. Thank you.
No, maybe I take the last question, I'm Tobias. We are not considering to contribute any kind of current assets on the potential DT transaction in Germany. Obviously, there is overlapping in Austria, which makes sense for us. Obviously, we are already there. We are not structuring a transaction in which we are incorporating any existing asset from Cellnex.
Then the lease. Yeah. On the first one, Gerry, thank you for the question. Bear in mind that, I mean, typically in our case, one contract is one individual. So as of today, we have thousands of contracts and each of them with different terms. What happens is that escalators, inflations, they happen.
It's basically gradual over the year. Also please let me highlight that this is under a do nothing scenario. Okay? If we didn't manage proactively this contract, what you should be expecting is that these leases gradually throughout the year, they will work. What we have demonstrated in the past, and also what we are actively doing today is to avoid these CPI increases by negotiating with the landlord. Okay? This is something that again it's a matter of communication. It's a matter of implementing best practices in the past. It's also, I would say, a structural characteristic of the sector extremely fragmented. Also with an extending contract, we have a number of tools in place.
Again, under a do-nothing scenario, this is what you should be expecting, a gradual increase over the year. We have been able to avoid that in the past. We do, as Alex mentioned, we do believe in our ability to maintain this trend in the future.
Understood. Thank you.
Thank you. Ladies and gentlemen, there are no further questions. I will now give back the floor to our company. Thank you.
Thank you so much for your time and for your questions. Looking forward to see you soon. Bye-bye.
Ladies and gentlemen, thank you for joining. We have reached the end of the conference call. You may now disconnect your lines.