Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our twenty twenty nine months results presentation. Secondly, we hope that you, your family, friends and colleagues are all safe and well during this global pandemic we are suffering. Now on to the reason why we are here. Our nine month results presentation, which in the current occasion will be structured in a different way due to The U.
S. Deal that we have just announced today. Firstly, we will begin with an overview of the results and the main developments during the period given by the senior executive team that we usually have with us: our Chairman and CEO, Mr. Ignacio Galan Mr. Francisco Martinez Corcoles, Business CEO and finally, the CFO, Mr.
Jose Saenz. Once we finish the review of the results, we will continue with the presentation where Mr. Pedro Asagra, our M and A Director, will inform you about the details of the acquisition of PNM Resources, and then it will be followed by a Q and A session where we will try to give answer to the question you may have about both items presented today, nine months results and the mentioned tax action. I would also like to highlight that we are only going to take questions submitted via the web. On our part, we will divide your queries between the ones corresponding to the results in the one hand and those relating to the deal on the other.
So feel free to ask all kind of questions you might have, but please only through www.iberdrola.com. Hoping that both presentations will be useful and informative for all of you. Now without further ado, I would like to give the floor to our Chairman and CEO, Mr. Ignacio Galan. Thank you very much again.
Please, Mr. Galan. Good
morning, everyone, and thank you very much for joining today's conference call. As Ignacio mentioned, after our usual result presentation this morning, we will use some details of the announced yesterday evening deal between AvantGrid and PENN Resources. It's a deal which fits our strategy and improves similarly our position and growth potential in United States, as you know, one of our key geographies. Just focusing in results. Over the last months, we have seen an ongoing recovery of market condition after the strong heat of COVID-nineteen during the second quarter.
In any case, Iberdrola will remain fully aware of our responsibility to our employees, customers and society. We continue to make safety of our top priority, doing everything at our disposal to mitigate the impact of the virus, especially as the second wave appears. Thank to the professionalism and responsibility of all the women and men who work for the company and our supply chains and the comprehensive set of measures implemented by the company, the infection rate at Iberdrola continues to be much lower than the countries where we operate. Our thoughts continue to be with everyone affected by this disease. We have also maintained the quality of service to our customers, and we have continued accelerating our investment to contribute to the recovery of economic activity and create jobs.
Jobs. We believe this is not only our duty, but also our moral obligation. Visually, Iberdrola will stand up to the challenge as we have always done, showing that it is possible to deliver our social dividend and increase result at the same time. Over the first nine months, adjusted net profit grew 8.8%, more than one point above the evolution shown in June. Reported net profit rate thousand 381,000,000, including the divestment of Siben Gomesa and the impact of the decision of the U.
K. Government to maintain corporate tax rate at 90%. Gross investment have continued to register new record figures despite the restrictions offered. As of September, Iberdrola invested 6,638 million euros 23% more than previous year. Thanks to the ramp up of activity registered in the third quarter when investment increased by 60% year on year to 3,000,000,000.
A remarkable figure that confirms the new investment selection period we are entering. Next November 5, I will share with you our outlook for the coming years, but let me advance today that we see a great investment opportunity in all our traditional markets, as well in other geographies like Japan, where one month ago, we reached a deal to acquire 3.3 gigawatts of short wind portfolio. Capturing this potential growth will be possible, thanks to our strong cash flow generation even in the current circumstances. In the first nine months, adjusted EBITDA, which exclude COVID impact, exceeds €7,500,000,000 with 3.2% increase year on year. Including COVID effect, reported EBITDA reaches 7,003 and €45,000,000 The set of results we are presenting allow maintain our commitment to shareholder remuneration.
Yesterday, the Board of Directors approved the interim shareholder dividend of €0.168 per share. Let me now give you some highlights about the transaction closed yesterday by the EU subsidiary, Van Grit, with PayNM Resources. This merger fits with Iberdrola's group strategy based on growing regulated networks and renewables in countries with high growth potential and strong ratings, with accretive impact on our earnings and preserving our financial strength. The deal created a stronger and more diversified growth platform for the group in one of the key markets, The United States. P and M Resources, a fully regulated group with transmission and distribution activities serving 800,000 customers in New Mexico and Texas.
And it has more than 2,000 megawatt of regulated generation asset with an increased share of wind power. Its regulated asset base reached $4,100,000,000 And in 2019, the company registered almost $600,000,000 in EBITDA and close to $100,000,000 in net profit. Penang Resources is based into a state we know well. In Texas, where it starts growing areas close to Houston and Dallas, Avangrid has 1,300 megawatts of wind generation and the group is starting new retail activities. In New Mexico, where PNM is the largest utility and distribute electricity in all major cities, we already have 600 megawatt of wind capacity in operation construction.
For the last fifteen years, we have funded the King Felipe VI Chair in Advanced Computing Science in the University of New Mexico. So they are people which are close to us for a long time. The transaction consideration will be 100% cash, valuing P and M Resources equity in $4,300,000,000 and Avangrid will assume 4,000,000,000 in debt. Iberdrola has provided a funds commitment letter to Avangrid, guaranteed the financing of the deal. After the transaction, our used subsidiary will reach pro form a EBITDA of close to $2,500,000,000 and net profit close to €900,000,000 on 2019 data.
For Iberdrola, this measure adds around €500,000,000 to our EBITDA on a pro form a basis and more than €120,000,000 of net profit. These numbers represent at least 3% accretion of earning per share level for both companies. This deal is a new step in our successful strategy adding to the other resin transaction, like Infigen in Australia, Ultrapower in France or the acquisition of offshore wind portfolios in Sweden and Japan. Pedro Assagola, our MMA response, will give you more details about this transaction later on. Going back to nine months result in the last three months, we have seen a confirmation of the trends identified in the second quarter, which pointed to a progressive normalization operating conditions.
Power demand evolution has continued improving week after week, moving from decreases of more than 15% in the worst moment of the lockdown to just minus 2% in September, both in U. K. And Spain. Similar in 2021, forward prices have recovered, reaching higher levels than before the crisis in both countries. In addition, the group has continued accelerating its expansion in gross investment of EUR 3,000,000,000 in the last three months.
Thanks to the huge effort made by our employees and also by the 400,000 people who work for us in our supplies and contractors. Iberdrola has recorded the highest amount ever invested in a quarter even in the circumstances created by COVID-nineteen, leading to a 23% increase year to date, up just 2% in June. More than half of this 6,730 million euros invested were allocated to renewables, who registered 51.8% increase, consolidated its position at the largest investment destination of the group. Net growth investment increased by 5.5%, contributing 40% of the total investment, mainly United States and Spain, but also in transmission and distribution in Brazil and UK. Investment in generation and supply, which as you know, consists mostly on capitalization of the customer acquisition expenses, fell 21%, driven by the slowdown of commercial activity.
We expect this to recover in the coming months as confinement measures decrease. As a consequence, we remain confident about reaching €10,000,000,000 in 2020. All in all, in the last twelve months, we have installed more than 4,600 megawatts, reaching 54,000 megawatts in total capacity. And we have 7,600 under construction. Close to 1,000 correspond of offshore wind projects like Sandbrick and France of AltiGigal, that together represent more than EUR 4,000,000,000 investment.
Onshore wind represent 2,200 megawatts split over all our geographies. Solar photovoltaic adds up more than 2,700 with approximately two third located in Spain as we continue ramping up investment in the country. Battery and hydro storage represent a further twelve fifty megawatts as we continue progressing construction of the Tamika Pappe hydro power plant, a hybrid project combining renewables and batteries. Focusing now on our group operating performance. Adjusted EBITDA increased by 3.2% to 7,561 million euros thanks to the positive evolution of renewables in generation and supply.
Renewables EBITDA was up more than 5% due to the contribution of new facilities like the East Anglia 1 offshore wind farm. The better performance in United States driven by new wind capacity, higher availability and the increase of hydro production in Spain and Brazil, with Spain's hydro reserves are 50% above previous year levels. Generation and supply EBITDA already reflect the normalization of production and sales benefiting also from the lower procurement costs, thanks to the price hedge. In particular, U. K, results are starting to return to normal levels despite the market situation.
It's still challenging to the tariff caps. In the coming months, result will also include the recent acquisition of 2,050 new contracts for an independent retailer, driven Scotty's power to customer portfolio over 5,000,000 customers. Finally, Networks, results were negotiated negatively impacted by the transition to the new regulatory period in Spain, the temporary adjustment in United States due to the deviation on demand energy costs and major storm such as Isaias. As you know, all these amounts are fully recognized as regulatory asset and therefore, be recovered in the future with a positive impact in next year consolidated result. In Brazil, the impact of COVID-nineteen on distribution was more than offset by the new transmission project awarded in the last years, together with higher efficiencies.
Globally, COVID has had a total impact of €260,000,000 at the group EBITDA level. NetMode results were also impacted by the adverse movement of exchange rate, mainly due to the Brazilian real. Excluding this effect, adjusted EBITDA rise by 6.4%. This improvement in operating profit was also the result of our cost reduction, which have been strengthened by the more in the current scenario. Net operating expenses improved by €57,000,000 to 3,101 million euros versus 2019.
Even after €43,000,000 of one off expenditure mainly related to donations of medical equipment related to COVID-nineteen. Operating cash flow grows 2.3, improving our FFO to adjusted net debt ratio to 21.9, 20 basis points higher than one year ago. The company maintains full access to capital market at extremely competitive condition despite the overall contraction. Pepe Seid will give you more details of this subject later on. A strong financial structure is particularly relevant in the current situation, which combines macro uncertainty with an unprecedented investment selected in the industry.
Let me just mention some recent milestones that give clear signal of this investment acceleration in all our geographies. In Europe, the commission proposed an increase in the emission reduction target for 2030 from previous 40% to 55%. This level of ambition, fully consistent with reaching climate neutrality by 02/1950, will require increasing the share of renewables in electricity mix 10 points to 65%. According to our estimate, this will give a further increase in investment of 30% for renewables and 15% for power networks in continent. Green hydrogen has also emerged as a significant investment opportunity with the European Commission targeting 40 gigawatt of hydrogen electrolysis power by renewables in 02/1930.
All European countries are setting national target on this line. Spain recently published its national hydrogen strategy aiming at four gigawatts of renewable electrolysis by 2030 with €9,000,000,000 in investment. In this context, Iberdrola recently announced the creation of a new unit specifically dedicated to green hydrogen. And we have signed a deal with Fertibaria, the first producer of fertilizer in Spain to the below 20 megawatt of green hydrogen plant in Porto Llano, Spain that will be the largest of this kind in Europe when it becomes operational next year. We will give you more details on further developments of this partnership very soon.
Green hydrogen is one of the building blocks of the recovery plan being approved all around Europe. The government of Spain had recently announced that onethree coronavirus recovery funds for a total of EUR 140,000,000,000 will be allocated to energy climate change. These funds open massive opportunity to transform the Spanish economy and Iberdrola is already collaborating with all public administration to make sure that the money is allocated to initiative, the key jobs and accelerate the industrialization and the modernization of the industry of the country's production model in a more sustainable manner. In The U. K, just weeks ago, the government announced an increase of the offshore wind target from 30 to 40 gigawatt for 02/1940, with the aim of powering every home in the country with offshore wind.
The Prime Minister also signaled hydrogen as part of the government strategy for reaching net zero by 02/1950. Similarly, United States, offshore wind continues gaining momentum. New York and New Jersey have announced the auction to be held in twenty twenty, twenty twenty one for 4,900 megawatts. And the government of Virginia ratified last July the Clean Economy Act, setting 5.2 gigawatt of offshore wind target as well. Iberdrola is once again showing anticipation in this global scenario, expanding our geographical footprint to the new growth platform.
On top of the transaction, we already explained to Jas in July, in Swedish and France, we have reached an agreement to account an offshore wind portfolio in Japan, consisting in two offshore wind farms under development, which had combined capacity up to 1.2 gigawatt strut, strategically located to access the actions announced by Japanese government to be held from 2023 and for additional project with a total capacity to 2.1 gigawatt for the second half of the decade. These developments allow us to diversify even more our mix of business and geographies, while strengthening our current pipeline with 14,000 new megawatts to boost future growth, where around 90% are offshore wind. All in all, our pipeline reaches 70,000 megawatts of capacity. At the same time, we keep reinforcing our position in the good current market with a new transaction, as one announced yesterday in The United States, a country where we also have massive organic growth opportunities. Just yesterday, Avangrit submitted bids to the upcoming offshore wind auction in New York that will allocate up what, 2,500 megawatts of new capacity.
In this state, the regulatory body is also expected to approve the rate case for our Benelux subsidiaries before the year end with tariff retracted from April. And it has already allocated to this company $150,000,000 until 2025 for the deployment of charging point for electric mobility. And regarding Main, following the court ruling considered unconstitutional referendum about our interconnection line with Canada, the project continues ahead and is expected to start construction in the next weeks. In The U. K, the process for new regulatory framework for transmission, RIIO T2, continues ahead.
As you know, the CMA has recently published its provisional funding on the remuneration of water distribution companies, increasing the investment and the rate of return initial load by the regulatory body of WAT. This has been recognized by many agents as a signal for the regulation of power transmission. As we have expressed in many occasion to the U. K. Government and the OGEN, investor need coherence between energy policy, which is clearly asking for additional investment to reach net zero by 2050 and regulatory frameworks.
We still need to wait for the outcome, but we would expect higher return on power transmission than on water as the risk and technological complexity associated to the business are higher. An investment in the power sector is essential to promote decarbonization and industrialization in The UK. Iberdrola and Scottish Power remain totally open to collaborate with Ojen and the U. K. Government in this process.
Also in The U. K, England, Wales and Scotland have announced the leasing of new offshore wind areas with potential up to 18 gigawatt bids are due in early twenty twenty one. In Brazil, the regulatory procedures linked to COVID-nineteen continue progressing. Net energy has already received BRL $1,660,000,000 corresponding to the off balance sheet loan to recover extra costs. And the study net tariff review for distribution companies continue progressing.
I will now hand over to Pepe Saif to present the group financial stand in more detail. Thank you.
I will thank you, Chairman. Good morning. I will start updating the two main COVID impacts considered in our accounts, totaling million at EBIT level, million above the EUR228 million of the first half. In the third quarter, COVID impact is decreasing with demand recovering our main countries and bad debt growing less than in the first half, as you can see as you will see in the next slide. Euros $260,000,000 out of this $3.00 €8,000,000 are related to demand decrease, euros 59,000,000 additional to the €157,000,000 of the first half, mainly affecting to network business more than to generation and supply.
92,000,000 of bad debt accounted for as provisions reducing our EBIT, 21,000,000 more than in the first half, being, in this case, generation and supply more affected than networks. There are several measures underway in order to offset COVID impacts. In networks, we are still expecting the recovery of the impacts through regulatory measures. In The UK and in The U. S.
In 2021 and 2022, and it is being negotiated in Brazil, as the Chairman has commented. In generation and supply, bad debt will be managed for commercial activity and there has been submitted a proposal to Ofgem for recognition in the SVT tariff of bad debt cost starting in April 2021. As mentioned, net profit COVID impact amounted to 136,000,000 in Q2 and in Q3 fell to EUR 50,000,000. Hopefully, in the fourth quarter, this trend will continue. Our reported net profit was 4.7%, up to 2,681 million euros as the FX negative impacts at the EBITDA level have been hedged.
The real has depreciated 22%, while the dollar and the pound were flat versus last year. Our adjusted results exclude the most relevant nonrecurring items, both in 'nineteen and 'twenty nine months, but does not consider any FX impact. As you can see in the slide, twenty twenty nine months adjusted EBITDA is 7,561 million euros excluding €216,000,000 COVID demand effect. Euros nine months 'nineteen adjusted EBITDA was 7,329 million euros instead of the 7,499 million euros reported and excludes €170,000,000 nonrecurring, 89,000,000 from LNG sales, 49,000,000 transfer of the fiber optic contracts in Q3 twenty nineteen and €33,000,000 from settlements in Spanish networks. As a consequence, adjusted EBITDA grew 3.2% instead of the 2% reported.
If added the FX impact, our adjusted EBITDA would have grown 6.4%. Nine months adjusted net profit was 2,553 million euros instead of the 2,681 million euros reported and excludes all COVID net impact in our accounts, EUR $2.00 3,000,000. The EUR $485,000,000 of the GAMESSA gain, another EUR 154,000,000 of nonrecurring negative tax impact mainly due to The UK. As a result, adjusted net profit grew 8.8% instead of the 4.7% growth reported. Revenues decreased 8.4% to €24,000,000,000 impacted by COVID FX and weather related lower demand.
And procurement fell 13.7%, reaching €12,400,000,000 As a consequence, gross margin was down 2% to €11,800,000,000 affected by the €343,000,000 of negative FX impact. Without this FX hit, gross margin would have grown by 0.8%. Net operating expenses improved by 1.8% to €3,100,000,000 driven by cost containment due to COVID and efficiency plans. Euros 108,000,000 positive FX impact more than compensates the €43,000,000 of donation and other expenses related to COVID. Levis fell by 2.4% to $1,395,000,000 euros with lower prices in Spain being a key factor.
As you can see in the slide, Spanish taxes on generation improved €36,000,000 Analyzing the result of the different business and starting by Networks, its EBITDA fell by 10.7% to €3,500,000,000 considering €122,000,000 negative COVID impact on demand and €181,000,000 of timing and storm effects in The U. S. As you can see in the slide, Spain contributed 34%, The U. S. 24%, Brazil reached 31% and The UK contributed another 21%.
In Spain, EBITDA fell 7.2% to €1,200,000,000 due to the €49,000,000 negative impact of transferring the fiber optic contracts that was accounted as a positive result in the third quarter of last year. In addition, remuneration for 2020 brings down revenues by €44,000,000 and there is an impact of €33,000,000 of positive settlements also accounted for in the 2019. Net operating expenses and taxes improved compensating partially this fall. In The U. S, IFRS EBITDA was 20% down to $935,000,000 driven by $190,000,000 negative temporary adjustments consequence of difference in volumes and energy costs, together with the impact of storms, especially the Isaias storm in the Q3.
These negative impacts will start to be recovered during the 2020 and following years. U. S. GAAP EBITDA is EUR 102,000,000 higher than the IFRS EBITDA and fell just 1.1%. In addition to all these negative impacts, as the Chairman has commented, there is a delay in the New York rate case due to the COVID that has been postponed to December versus April year, whose impact is €66,000,000 in our accounts, although it will be recovered.
In Brazil, EBITDA grew 8.6% to BRL 4,200,000,000.0. Tariff revision in Coelba and Concern from April and Electro and in Electro from August, increasing contribution for higher investments in transmission and cost contention due to efficiency plans, been partially compensated by a minus €167,000,000 COVID impact on demand. Finally, in The UK, EBITDA was 3.3%, up to £647,000,000 with higher revenues both in transmission and distribution as a consequence of the growing asset base due to investments, partially offset by £21,000,000 less revenues due to COVID linked to lower demand to be recovered in 2022. Renewables EBITDA grew 5.6% to €1,800,000,000 driven by growth in The UK and in The U. S.
And despite weak conditions and prices in Spain. Our average operating capacity increased to 29,175 megawatts and our total installed capacity reached almost 34,000 megawatts. In The U. K, EBITDA was 47%, up to £443,000,000 with higher contribution both in onshore and offshore as a result of the East Anglia production, as its seven forty megawatts are fully operational since mid July. It is worth noting that the offshore wind business contributed already 40% to the total gross margin in the business, paying back the strong investments needed.
In The U. Increased 9% to $511,000,000 caused by a 14.5% higher output following the six ninety five megawatts increase in operating capacity in last year and a higher wind resource. In Spain, EBITDA was €445,000,000 14% below last year due to a 36% lower prices in sales to other supply business despite a 23% higher output driven by a 54% higher hydro production as well as higher PV capacity. In the international business, mainly in Europe, EBITDA fell 5.5% to €234,000,000 due to lower wind conditions and higher development costs as a one off in the quarter as business expands. Alto Power is consolidated from the July 1 and Infigen from the August 5.
In April in Brazil, EBITDA grew 0.7% to BRL449 million as output is increasing 5.8% with higher hydro output compensating the falling wind as Baixehuacu is fully operational. Finally, in Mexico, EBITDA decreased 1.8% to $62,000,000 improving versus the 13.7% fall at June due to the new installed capacity. Pierre is already in operation. Nevertheless, this is still decreasing slightly due to the lower load factor both in wind and photovoltaic generation. Generation and supply EBITDA was up 10.3% to €2,000,000,000 including €94,000,000 negative COVID impact on demand.
In Spain, the EBITDA was up by 4.7% to €1,200,000,000 despite lower output due to 11% higher purchases at lower prices versus last year. We continue active management of our customer portfolio of Energy and Smart Solutions. There are €89,000,000 negative nonrecurring from LNG sale accounted for in the 2019. In Mexico, EBITDA grew 0.4 to $643,000,000 thanks to higher sales as a consequence of a production increase, partially compensated by temporary lower availability of one CCGT plant and lower prices. In The UK, the EBITDA grew 266% to £137,000,000 more than doubling the 130% growth of June as a consequence of improved margins versus 2019 despite the falling sales.
Brazil added BRL273 million to the EBITDA in a context of business normalization after the one off negative effect that lowered results in 2019. And in the international business, EBITDA was €2,900,000 negative, improving versus last year, but still affected by initial development costs of our supply business in Europe. We have reached one seven forty thousand contracts, 36% higher than one year ago. EBITDA fell 11.2 to €4,100,000,000 as provisions grew 42% after including €92,000,000 of bad debt COVID provisions, euros 40,000,000 in networks, mostly in Brazil that is being negotiated to be recovered through regulatory mechanism and €52,000,000 in generation and supply to be managed through our commercial activity. As I mentioned, there is a consultation by Ofgem to receive part of the bad debt costs in The U.
K. Are included in the SVT tariff from April 21. In addition, amortizations increased 8.7% due to increase of the asset base and activity. Net financial expenses improved €250,000,000 to €641,000,000 driven by €180,000,000 in hedges mostly linked to FX. Another €118,000,000 positive impact due to the lower cost of debt that improved 42 basis points to 3.15% and a EUR 49,000,000 negative result due to the EUR 1,800,000,000.0 higher average debt.
Our reported credit metrics remained strong and in comfortable levels for our rating requirements in spite of the €1,400,000,000 adjusted debt increase due to investments and the Infigen and Alto Power deals that have increased our debt in €1,000,000,000 FFO adjusted net debt improved 0.2 percentage points to 21.9%. Adjusted net debt to EBITDA increased slightly to 3.8 times from 3.6 Retained cash flow adjusted net debt remained around the 20% level and adjusted leverage ratio increased 40.5%. As of today, we maintain ample liquidity of around €13,800,000,000 maintaining thirteen months of coverage of financial needs in our basis scenario and twenty one months in the stress one. Our sources financing continue to be highly diversified. Currently, the bond market is 62% of sources.
Current weight of the bank financing is 12%, giving us the opportunity to increase this kind of funding if required. Reported net profit grew 4.7% to €2,700,000,000 and adjusted net profit grew 8.8%, as explained in previous slides. Another Chairman will end the presentation.
Thank you, Pepe. To conclude, over the last nine months, in one of the most challenging scenarios indicates, Iberdrola has delivered strong results, thanks to the resilient bank business model. Reported net profit reached 2,781 million euros 4.7 up, versus the figure registered last year. And adjusted net profit, which exclude COVID impact for more than €200,000,000 rose 9%. At the same time, we have continued executing our steady plan and creating new growth platforms for the coming decade.
Up to September, gross investment increased 23% up to 6,006 and €38,000,000 installing more than 4,600 megawatts in the last twelve months and reached total capacity of 54,000. And we combined this growth with an improvement financial position as shown by our solvency ratios and our liquidity with the existing €13,800,000,000 up to date. For the rest of the year, we expect then the positive trends we started in defined July following the progress softening of COVID-nineteen results will consolidate the acceleration of investment on top of the €9,600,000,000 already spent in the last twelve months will allow us to continue adding generation capacity. Results also reflect the impact of new rates and higher revenues in transmission, mainly in Brazil and United States. And in U.
K, we expect the normalization of our retail business to continue. Isangara Guan offshore wind farm will keep its contribution in the fourth quarter. On top of this, efficiency measures will also continue. We expect all this offset the impact from COVID-nineteen on demand and prices, which in any case, we see decreasing in the last quarter. As a consequence, we expect earnings to continue increasing quarter on quarter after the strong impact of coronavirus in June result, with the fourth quarter showing a positive net profit growth versus last year, allowing us to maintain our net profit guidance and mid high single digit growth and to maintain our dividend policy base in our payout ratio between 6575%.
Following this policy, as I mentioned, the Board of Directors has approved an interim dividend of €1.68 per share payable in February 2021, proving our commitment to shareholder remuneration. You can be sure that the women and men working at Iberdrola will continue delivering the essential service we provide and accelerating investment to make the energy transition a reality and create jobs and wealth to the benefit of our customers the society we serve. Now Pedro Asagra will explain in detail the transaction between Avangrit and BM Resources. Pedro? PEDRO
Good morning, Chairman. I'm going to kick off with the presentation. As the Chairman explained, the transaction in between Havant Grid and PNM reflects the strategy that the Chairman and the group has had for many, many years, allows growth in regulated businesses and renewables, continuous investments in AAA or very good rated countries mostly. It's accretive in earnings from the first year and intends to maintain the balance sheet strength that we have at present. In relation to PNM, which is the utility in the states of New Mexico and Texas in The U.
S, First of all, it's a regulated utility. So therefore, it is 100% almost regulated, both distribution and networks and also generation in a small piece. In The U. S, largest country, as you know, by GDP in the world, and very good rating. This company operates in a stage where we are ready, and that's important.
In the case of New Mexico, we have right now over 600 megawatts of installed capacity or assets under construction. This company, PNM, is the transmission operator of those assets, some of those assets that take energy from New Mexico into California. We've been working with them in that part, in that piece of the business for some time now. In the case of Texas, through AVANGRID, we already have the state with more presence in renewable assets with almost 1,300 megawatts. And we also have three Iberdrola retail business operations right now kicking off in Texas.
In both states, AVANGRID today has over 1,400 megawatts of pipeline in renewables. This company, P and M, is almost 100% regulated. As the Chairman explained, it has, in 2019, over $4,000,000,000 of rate base and approximately 2.8 gigawatts of regulated generation. In the case of the service territory, it owns two utilities, one of them in New Mexico. It serves the most important cities in New Mexico, especially Albuquerque and Santa Fe.
And then in the case of Texas, it also covers the surroundings of the two main cities in the state, both Dallas and Houston, among others, Lewisville and League City. I think just to give some operational city for PNM. It has almost 800 ratepayers. It has a population of almost 2,000,000 people served. The EBITDA for 2019 approaching $600,000,000 and net income approaching $180,000,000 in that period.
When we look at the combined company between Avangrit and PNM, we're going to be approaching a very important data in The U. S. We will hold, through Avangrit, 10 regulated utilities. The company the combined company will presence in more than 24 states when you include the renewable operations. Installed capacity, including the regulated generation, it will almost reach 11,000 megawatts.
And it will have more than 16,800 kilometers of T and D lines. Data from a financial operational point of view for the combined company, Avangrit plus PNM, ratepayers, over 4,000,000 population served, approaching 9,000,000 people installed capacity, approaching 11,000 gigawatts and very important, our renewal pipeline of around 19,000 gigawatts. In terms of some financial data for the combined entity, EBITDA in 2019 pro form a figures, almost 2,500,000,000 and net income, almost $850,000,000 Very important, the new company, and this is important for the profile of Hub and Grid and also for the group, we're adding a 100% almost regulated utility with two utilities. Therefore, the EBITDA of Avangrit after this Potentes transaction, if it's closed, it will reach more than 80% of its activities coming from regulated. For the Iberdrola Group, the strategy laid out by the Chairman continues to apply.
Growth in regulated businesses, T and D and renewables, good countries from a rating point of view, EPS accretive more than 3%, both at the Avangrit and Iberdrola level from year one. Very important to keep in mind, year one means 2022 because it will take almost a year to get it approved. So the first year of full consolidation will be 2022. And ESG leadership, we will explain the acceleration of the only asset they own and operate of coal. Pro form a figures for Iberdrola, just to give some feeling, we're adding more or less to the Iberdrola Group EUR 500,000,000 from an EBITDA point of view in 2019 and also around EUR $100,120,000,000, EUR 19,000,000 figures for net income.
The transaction, simple. Avangrid has agreed to buy to merge with PNM and paying 100% in cash with a total equity value of $4,300,000,000 I think the transaction, as expected, will be intends to be closed a year from now approximately. This offer represents more or less a 10% premium of the price recent price of the company and more or less 19% premium over the thirty day volume average. Just some highlights from our standpoint point of view. As we said, it's more than 3% accretive from year one, which is 22%.
In the case of the funding of Avangrid, in order to be able that Avangrid can commit to pay to the target to its shareholders, Iberdrola has sent a letter to AVANGRID where it commits funds enough funds to pay for the equity of this company. I think, as you know, Iberdrola has right now more around €14,000,000,000 of credit lines available. So therefore, more than enough to target this transaction. And I think very important, on November 5, Iberdrola Group and Avangrid will be providing, as you know, new guidance, both on target for different lines of the business group, also for Avangrid. And also there, we will be explaining in detail the financing and the different alternatives for UP and GRID and also for Iberdrola.
We believe it's important to mention that we are already in both states. I think from an economic point of view, the state of New Mexico and Texas, on a compound growth basis, they've been growing 3.44.9% in the last twenty years. I think the population, very important also, between zero point seven percent and one point seven growth in that period. As it has been mentioned, we already have over 600 megawatts of renewables installed capacity under construction in New Mexico and almost 1,300 megawatts of renewable business renewable assets in Texas plus the retail business being done through the parent company. In the case of the pipeline, we have right now in Avangrit in excess of 1,400 megawatts of pipeline.
And in the case of PNM, very important, we have also more than 600 megawatts of identified projects in order to be developed. I think just to get a feeling of our presence, we also have a chair in the University of Ukeke, the King Felipe VI Chair. And we have been there for more than fifteen years. In this case, regulatory approvals. You know we're very familiar with the further approvals because of the energy, UIL, sale of the gas distribution, etcetera, transactions.
We've been there quite often. Only one additional mention, because of our financial stake, PNM has it is a nuclear facility. We also need, in this case, Nuclear Regulatory Commission approval. And the two states that have to approve the transaction are New Mexico and Texas. I think in both states, there has been recent transactions.
In the case of New Mexico, Tico bought from P and M some businesses in a very few years ago, and Emera bought Tico, as you know, recently. Also in the case of Texas, we have the Oncor transaction being bought by Sempra, and we also have their recent transaction, JPMorgan by El Paso last year. So from that point of view, very comfortable on those jurisdictions in terms of merger approval. That's why we believe the expectation should be around twelve months in order to get it approved. I think we're going to spend now a little bit of time on two things.
First, the regulatory environment in both states. I think if we start by Texas, many utilities, very known regulatory environment. Most of the things they propose, they get approved, over 9.6% return on equity approved authorized ROE in the case of debt equity ratio of 55%. And usually, they have semiannual approaches to rates in transmission, annually distribution. And now and then, they also do general rate cases.
In the case of New Mexico, very important to highlight several things so then we have a clear explanation about this regulatory environment. First of all, as many other companies in The U. S, they targeted with the regulator to get recovery, especially in the coal facilities and nuclear facilities of the different costs associated with them. I think in the case of the coal facilities, we'll explain it later, but they have been achieving usually around 50%, 60% of the request from a rate base they have requested. It's a one year forward.
So basically, they get things approved in advance. Otherwise, they will not invest in them. Just to get some feeling, they got the most recent filing and the Renewable Act approved. They also have been exceeding the authorized ROE, and therefore, the actual has been exceeding the authorized of 9.5. They have led a coalition of the other utilities in requesting from the public commission unauthorized regulatory asset for the COVID item.
They have also got it approved, the abandonment of the only power plant they own in coal, and we'll explain that later. They also got approval to acquire the Western Spring Inno line. In 2019, they got approved application to continue using a fuel and purchasing power close mechanism. I just want to give this feeling to get the feeling that, yes, there were some issues on the recovery of the coal facilities. Finally, Supreme Court got it approved.
We'll explain that now in detail. So therefore, I think we believe there is a good environment in both cases. And we believe Iberdrola has experience to actually put on the table their strategic angle on renewables and T and D and make sure we work together with the commissioners, with the governor and the rest of the constituencies. Finally, we're going to explain a little bit about the cold matter just to make sure you know that there is no misunderstanding on this topic. PNM owns and operates just one facility.
They own 66.3 interest in a coal facility, which basically means five sixty two megawatts. Just to have dates very precise, so there is no confusion on this item. Again, a very, very small portion of the company, and by the way, regulated. But in July, basically, PNM filed to exit the San Juan Power Plant. Plant.
In January 2020, the New Mexico Supreme Court ruling basically applies the new and recently approved Energy Transition Act by the governor and approves the exit plan. Therefore, on April 2020, which is, as you can see very recently, and that's part of the reasons why in our negotiations, it was important for us, the public commission order approved the abandonment and the securitization of the pending asset value. Therefore, by 2022, this power plant will be shut down. In the case of our Corners, which is another coal facility, is not controlled by PNM. We only have financial stake.
This is equivalent to 200 megawatts, but it's just a financial stake. Just also to be very specific in dates, in June 2020, there was a public announcement by PNM with intention to exit the Four Corners stake. By the 2020, they expect to have a final agreement with the exit. And also by December 2024, they will expect the same procedure in terms of new public commission approval and securitization of the pending asset. Just to be very specific also in relation with both power plants.
In the case of the San Juan power plant, the $361,000,000 still pending asset value and some other cost will be securitized in 2022. It has been already approved. And in the case of our Corners, they expect to do the portion which is related to their financial stake also by 2024. I think in the case of what is called in The U. S, the completion remediation and what is actually called the reclamation liability, just to make very simple, in relation with the mine related to these assets and as in most of the utilities that own coal assets in The U.
S. In this case, for both assets, there is a liability, which is audited, reviewed and updated. And by the way, very updated as in the case of the nuclear very recently, with around $140,000,000 Out of that, dollars 19,000,000 have been already approved sorry, expensed, and the remaining 40,000,000 included in the projections of the company that we have assumed. Very important, these are figures only for the above service reclamation liability. Below service, 100% will go through rates.
So I think with that, we wanted to give a very simple explanation about this. Also in relation with the stake in the nuclear facility, I think two comments here. They own a stake, 7.3% stake. They also have 114 megawatts of leases. Those leases, they have announced they are selling them, and they will proceed to sell as well.
I think the financial stake, there will be no issue with that. We expect in the regulatory agency, federal one, the Nuclear Regulatory Commission, the NRC. And also on the decommissioning cost, the Supreme Court has also told the public commission that's something that has to be taken care of by rates. And the decommissioning fund, which was updated because of El Paso transaction by JPMorgan infrastructure, there is actually excess in funds in the decommissioning fund. And I think with this, we just wanted to do a summary of the different things, which we believe are important with for this transaction in relation with Avangrid and Iberdrola.
So thank you, Chairman. And please, Ignacio, I leave it to you.
Thank you, Pedro, our Corporate Development Director, by the way, who many of you already well known. Now as we told you previously, we are going to now to deliver the set of questions regarding the result. And afterwards, we will go directly to the PNM deal. First question comes from Jorge Alonso, Societe Generale and James Brand, Deutsche Bank. Could you give an update on the extraordinary tariff review in Brazil?
What are the main measures do you expect to be introduced?
So well, I think in Brazil, the certain measure has been introduced. I think they already pay already, in our case, $1,360,000,000 of what they call CONTACovid, which is off balance, which I think is already in our balance sheet in this moment. Also, we are in this moment negotiating an extraordinary review of the tariffs for compensating mainly the bad debt incur as consequences of the confinement. So I think there are already talks are going in a good line. And I think what we are expecting is what has been done already in the past in the many years ago when we have already the situation of drug in which they make already a regulatory asset, which we recognize in our accounts and nothing is paid across the years in tariff.
That is what we are talking. I think in our case, think this the amount what we are looking, I don't know precisely, but I think it's in line of few million of million, BRL200 million, BRL300 million. So I think it's not a huge amount, but I think it's an important amount for FERNANDEZ:] NeoNegea.
Second question comes from Javier Suarez, Mediobanca and Rob Pullen, Morgan Stanley, and is regarding the hydrogen, which is the role that Iberdrola intends to play through the hydrogen value chains. Does management believe green hydrogen could accelerate the development of corporate PPAs in Europe as a new off take route for renewables energies?
IGNACIO Well, I think hydrogen is just something which can be used for those areas which cannot be electrified. I think they are around 16% of the total industrial processes or transport, which is very difficult to electrify. I think that represent roughly 60% and represent roughly 18%, 20% of the emission. So for those sectors is where the hydrogen has already a clear use. And that's why I think the two main use in this moment, I think, is for gasoline, for refining gasoline, which is already in the refineries and fertilizers as well there are other processes.
But it's going to come another one, which I think we can be used in the future. So that's why our approach was to go and strike for those areas and today is the largest industrial consumer, which is fertilizers, the presence of ammonia. In our target and objective is that the full ammonia production in Spain within the next few years will be full clean, full green. I think for that, I think the first installation is using solar photovoltaic in Porto Llano in the center of Spain, close to our solar plant inside of the factory of Fortiberia for making already this electrolyzer for transforming the use of natural gas, what they are already using today for generation of hydrogen and polytene emitting CO2 with this electrolyte one. In the next few days, we will present much ambitious plans, I think, probably at the end of this week or beginning this together with Etihabria.
But the second area is another uses, which can be already been applied, is already heavy transport, which is already certain industrial processes still another one, but we are working on that one. But I think our initial approach is just to go where is today the uses and afterwards to transform another uses and hydrogen instead of using fossil fuels. That is the plan we have and we are already a busy plan. But I insist that represent roughly 60% of the processes, which is very difficult to electrify. I think our ambition continue electrifying as much as we can and hydrogen is a complement for that one.
JOSE Next question comes from Jorge Alonso, Societe Generale. It's regarding The U. K. Networks. Do you expect proposal to improve on the back of the outcome for water companies?
What improvements is Hibbertola proposing?
JOSE Well, I think I mentioned in my speech, we find CMA comments positive. I think it's no sense that for one side, the government is already saying that they would like to reach next zero. Then they would like to electrify more the economy to make more ambitious plan in terms of electric vehicles, in terms of transforming industrial process in more electrified. And for another side, the regulator diminished the investment we are allowed to make for achieving the government targets and putting already a remuneration, we may not attract it to invest one single penny. So I think that what we are seeing from CMA is precisely in the two direction.
I think it's needed more investment, if we would like to read the objective. And second, it's needed to give already a much attractive returns because if not, the money is going to flow. And that is what you are expecting. I think we have already conversation ongoing either with the government, either with the regulator. And we expect, as always, in Britain, the rationality will come again.
So I think something which is a contradiction, we will already this contradiction, probably is misunderstanding, but I'm sure that we will at the end through the discussion and negotiation, we reach a reasonable thing, we can already fix both things. For one side, the interest of the energy policy of the government and for another side, something which is reasonable either for consumers. I think the point then they are the Objen is proposing to represent GBP 1 per customer per annum is peanuts. So but I think the interest of that one with the industrial interest of the country and the policy, energy policy of the government.
James Ram from Deutsche Bank and Fernando Garcia, Royal Bank of Canada are asking about Mexico developments. Have recent regulatory changes made you less keen to invest heavily in Mexico in the coming years?
So I think it's as I used to say, we are not making the energy policy. The energy policy is being made by government. If a government is welcoming investment in certain areas, I think we go. If government is not welcoming the investment, we we are going to invest. And I think we are in this moment in Mexico, yes, completing the investment we started a few months ago, a few years ago, and we are not starting a new one unless the government decide that the policy will be clarified the policy.
So if the policy of the government is that they don't like, then the foreign investor invest in the country, we are going to invest. If the government will like and we invest, they make a necessary reasonable framework as we had already hit up to now, we will go. But I think, in any case, think it represents very little in our total contribution, in our total balance sheet. So the transaction we are already announcing today is almost the same size than our investment already in Mexico. So I think roughly in Mexico, we have €10,000,000,000 and this transaction is €8,000,000,000 or €9,000,000,000 so which is very similar.
From Deutsche Bank, James Brand, this is Aske again. You have entered new markets with the acquisition of Infigen in Australia and offshore pipelines in Japan and Sweden. In the past, you have been very focused with a concentrated position in handful of countries. Do you see the renewable growth opportunity as requiring a more James global approach? If so, why?
So I think we have already the company quite well diversified. I think one thing is that we are focusing in the five or six main countries, but another one is that we are present in other ones. I think we are present in France, we are present in Germany, we are present in Greece, we are present in Hungary, we are present in many countries. So I think Australia looks to us a country with a huge potential and I think that's why we went there. So I think we are in the front of energy revolution.
So and I think we have been pioneers in this energy revolution for twenty years. When nobody believes then the electricity can be produced with clean sources and everybody was thinking then coal will remain for centuries and the oil and gas are absolutely needed for that one. We were already the only one with use the flag saying that we can already generate and produce electricity with clean sources and we can already and we have started our energy transition twenty years ago. So, and I think in this moment, that is already happening in most geographies and we would like benefit of our experience in countries, as has been mentioned before in the transaction we made, with a stable, clear and defined regulatory framework with good ratings and for using our expertise and our knowledge. That is the case of Japan.
I think we have an expertise in offshore. Why not to use our expertise in offshore in a country which is not starting still making any one? Same thing we did in The United States. In The United States, we are the first mover in offshore. I think our Binger Wind is going to be the first largest offshore wind farm in the state.
And we're delighted to lead the same thing as well in Japan of Sweden. So because we've been for the last twenty years always ahead of the of competitors in moving in countries, geographies and technologies.
IGNACIO Next question comes from Stefano Beccato, Credit Suisse. Can you give an idea of the scope of our increase in network investment in the context of the European Union Recovery Fund?
JOSE I think I mentioned before, I think, is the European Commission was standing that the reduction of the emission from 40% to 55%. That represents something like increases of renewables up to 60%, 65% of the total mix. And for making that one, we'll need something like 15% extra investment in networks. I think those were the numbers I was I have in my memory. So I think certain this ambition needs more ambition this ambition increased ambition in emission reduction means more ambition in terms of renewable target.
And for if there are more renewables, I think it's needed more networks. And I think the number I have in mind with the European Commission is already announcing is on the range of 15% extra investment. And I think here, in the case of Spain, we are already our association of network operator has already write letters to the government, I think, in this line that we will need to remove the cap we have in this moment of investment for being able to make the necessary investment required for making that happen.
Next question comes from Rolf Poulain, Morgan Stanley. Does the FX and political events of 2020 drive a change in future capital allocation between emerging markets and developed ones?
IGNACIO Well, give me some possibilities of explaining the thing on the November 5. I've been certain that we are going to modify things, but on the November 5, we will provide you details where is our investment in which to go in the next few years.
Next question from Stefano Beccato, Credit Suisse. Can you anticipate a deterioration of the COVID impact in light of the tightening of measures we are currently experiencing in Europe? We are always very prudent. And I think in our outlook for the year end, we've already introduced certain provisions that in our account thinking that it does happen. So our how that is going to affect to our P and L.
And I think the provision, if
I have not my memory doesn't fail, Pepe let me if my memory fail, is that is something in between the damage we have already suffered in the second quarter was something like 150,000,000 and the damage we suffered in the third quarter was in the range of EUR 50,000,000. So something in between has been already put in our account. So I think we are already making this provision already because the things can already happen. So what we are seeing is that the situation being already not very positive in terms of confinement is not as hard as it was already in the second quarter. So I think our estimate looks for the time being reasonable.
JOSE Next question comes from Javier Garredo, JPMorgan, as probably is related to Pepe answer. Could your FFO over net debt ratio change if you use the methodology of the rating agencies? How much? What is the minimum level to keep your rating?
Well, yes. Normally, the different rating agencies adjust the ratio that we provide according to other, let's say, possible liabilities, which is not debt, for example. Yes, they typically rating agencies, they don't use the same methodology, but they make some adjustment for future liabilities, which are not debt, as for example, pensions. So typically, the impact of that from what we have to what they normally get is between two and three percentage points. Obviously, we monitor the ratings or the levels that the rating agencies use and we maintain more or less according to the ratings, the ratios that are enough to maintain our credit rating.
So today, the 21.9%, for example, that we are publishing is around 19% according to the S and P methodology and slightly less with Moody's. To maintain a BBB plus rating in S and P and the Baa for Moody's, you need to have an around 18% ratio of FA over net debt. So right now, we are above that ratio. But as I say, we monitor not only the ratios that we provide, but also the adjustments that rating agencies do to the ratios.
IGNACIO Next question comes from Jorge Alonso, Societe Generale. What would be the rationale for the government to make renewable auctions if many players are developing them directly and looking at the pipelines to the PEMIEC targets will easily be achieved?
Well, I think I agree with you. I'm not seeing very many rationale. I was explaining to everybody if they are not already anybody which is able to deliver what is already expected in the plan and the government has to take the necessary action for that one. But being so much people ready to invest, I'm not seeing what is the need of this action. But I think that is, as I mentioned before, the energy policy is made by government and good respect the policy that the government is making.
But I'm not seeing the needs of making those things. I think there are many people ready to put their money and I think the question is negotiating with the customers as we did another day with Heineken. Then we reached an agreement with them for providing the electricity generated in one of our plant we inaugurated a couple of weeks ago. So but I think it's energy policy, energy policy made by politician, the government, in good respect, what they are making. I don't see that it's needed
at all. Jorge Guimaraes, JV Capital Markets, is asking about the impact of the temporary suspension of a plant in Mexico mentioned in the presentation. Is it already back online?
Well, I think we have not any suspension as far as I know, no? I think he's referring to the fifth unit of Monterrey that had a problem and has been shut down for several months. Now it's back online and was a robbing problem in the mechanical assembly of GE, of General Electric, and now it's back online since several months and the effect could be around a few dozens of U. S. Dollars.
The last three questions. The first one is coming from Fernando Garcia, Royal Bank Canada. Is it possible to detail The U. K. Client acquisitions mentioned in the call by the CEO, namely client number and costs?
I think the numbers, if I don't remember about this, in the range of 250,000 customers. In terms of as far as I know, the acquisition cost is lower than the average acquisition cost we have for the standard one, so which I think is something which is as reasonable in terms of how what is the cost of our acquisition that seems what I understood is lower than the average of our acquisition cost and the number is 250,000 customers.
Javier Garido, JPMorgan, is asking about Avangrit's results and his test is Avangrit has missed again expectation under U. S. GAAP and has lowered materially the 2020 guidance. What action is the new management taking to address this underperformance?
Well, I think they will explain those things as well. But I think what we've been reported another day in the Board, the first thing is the new CEO is already stand only for two point five months. I think he's landed. But I think there are certain things which is already affecting is affecting the storms, where they have already been suffering. The delay of this rate case even is going to be retracted, but I think they cannot account yet.
The availability the availability the good results in certain area has not been as good as they were expecting. Certain delays on the construction of the wind farms. And but I think that he's already working hard, I have to say. He's working hard to improve the rate cases, has already succeed in short time already for the starting the construction of this transmission line with Canada. The availability of the wind fleet is already going well.
Tonight, last night, was presented the offer for the new offshore wind farm for New York and we hope that it will happen. So I think it's working and I think there are certain external things, but he will comment more in detail in his presentation of result. But I think what I can tell you as far as ourselves as investors concerned is that he is already taking the drive of the company for making already a much predictable and avoiding this situation as much as we can because I think if they are in the storm, it's in the storm and the storm is the storm and that's already an impact, then it's recovered afterwards. But I think in the short term, it's already been affected.
JOSE Last question coming or regarding the results is coming from Stefano Beccato, Credit Suisse Assamari, UBS. Given the scope SOLANO for increasing investment and the step up in M and A, do you see the need to raise cash via capital increase in order to keep your commitment of maintaining financial strength?
Well, we will comment all those things to you on the Investor Day, but I think what we were mentioning, the level of investment we are making today, we are more than able to finance with our cash flow and with the level of liquidity we have in the company. Also, I think we are rising some hybrids. I think today, Pepe can already mention, we are already launching a new hybrid for funding already the company. So we will comment to you, but it's not in our mind to make an increase in share capital for the time being at all.
Okay. Now we are moving towards the deal questions. And the first one comes from Alberto Gandolfi, Goldman Royal Bank of Canada Pierre Marie Guillairez, Eleva Capital and Jose Javier Rui de Barclays. How do you plan to finance the acquisition of P and M? If preferred option is with net debt, can you elaborate on your net debt to EBITDA position at the group level?
Could a capital increase be considered diluted our position perhaps?
I think it's Pedro, you can already reply to that one, but I think it was explained. Our plan is that we will already propose an increase in share capital of Avangrit for Militad one if Verdola is ready to subscribe at least this, our 81%. And I think that is the most in. But I think you would like to complete anything, Pedro, you can say. But I think it's an increase in share capital of our grid for funding that one, then Iberdrola we will subscribe.
I think you have explained that very well. I think, first of all, relation with the transaction, when you announce a deal, you need to prove to the in this case, to PNM that you have the money at Avangrit. The way we have done to avoid bridge financing costs, things like that, it has been Iberdrola sending a funds commitment letter to up and grid. So they are fine. I think when the time comes, as the Chairman has said, I think for the purposes of the case, some additional debt may be raised in up and grid, but also definitely, they will have to do a capital increase in due course.
And as the Chairman said, I think our intention is to keep the 81.5%. In the case of Iberdrola, I think we have, as it was mentioned, 14,000,000,000 line credits. As the Chairman mentioned, we are considering hybrids and other potential financings as well in debt, etcetera. So from that point of view, I think it's well taken care of.
JOSE Next question comes from Javier Garredio, JPMorgan. It's related to the model, Pedro. How do you calculate the 3% accretion to EPS from the P and M deal? Pedro, do you use $20.19 figures? Which is the cost of financing you use?
Okay. So I think for the accretion dilution, we are using 22 and 23 figures. I think because of Avangrit and Iberdrola in November releasing new guidance, I think we're not providing right now those numbers, underlying numbers under which we're calculating them. But really, it doesn't matter more to us from a transaction point of view. Even if we use the existing plan that as of today we have or if we use the new plan that I it will be explained by the Chairman on November 5, I think in both scenarios, it is accretive.
And it's very simple. For EBITDA purposes, very simple to account for that. For net income basis, I think we are assuming right now in the base case that AvantGrid is issuing EUR 700,000,000 of debt at the same cost, average cost that the company is holding right now. And the rest will be done through a capital increase. That's how we do get to the accretion dilution.
In the case of adjustments, I think we're assuming some enhancement in the PTC treatment and NOLs, very conservative. So probably, we're speaking about around EUR 20,000,000 related to that of enhancement in those earnings, and that's it. I think in the case of Iberdrola, to be very conservative in the accretion dilution as well, we could have used the 100% debt finance at Iberdrola level. We're not. I think the best case we're doing for the contribution of, let's say, for example, 3,600,000,000.0 capital increase in Avangrit required.
The 81,500,000,000.0 we have done for the purposes of the 3% at more than 3% accretion, 100% hybrid. If you were to use debt, it will be much more accretive, of course.
Javier Regardado is asking why using cash for the tax action when you have a listed currency in a bank rate?
So Pedro, you can already comment
I as think we agree. I think the Chairman knows very well this. We like to do share transactions. I think we also do cash deals. We did energies in cash, and we very quickly did a capital increase.
We did electric and gas, but we did also shares in Scottish Power, and we did shares recently as well with UIL. I think in this case, there has been already for some time material potential leaks of the deal we were working on. I think because of we needed to move into announcing a deal right now. We couldn't give shares today under the existing guidance that we have of earnings and then on November 5, changing those earnings. So from that point of view, much simpler and quicker.
If we wanted to accommodate to the timetable we needed, it was to do an all cash deal. This is not such a material transaction for the group. So that's the reason.
So but I think it's a good question. I think it's almost was everything prepared for making with shares and cash. And I think we decided in the last minute to make for the reason Pedro is announcing to pass to all cash for avoiding leakage and for already avoiding whatever question can be passed, already taken our Investor Day as close as it's going to be. So but I think our policy is not changed on that one. I think we are ready to make deals with the shares because I think it's true that we have already a unique currency for making this sort of transaction.
Transaction. That is not very large, and I think it's made, but I think certainly in the future, make anything larger, we will use our shares as currency. So the policy has not changed.
We have now a question from Javier Suarez, Mediobanca and Jorge Guimaraes, JV Capital Markets, related to something that you have already explained. And if you can detail again, it's worth it for them. It's regarding the installed capacity of P and M in gas, coal and nuclear. What do you plan to do with field conventional generation? Can you elaborate on the commissioning plans and progressive substitution?
Why acquiring thermal generation in The S. Instead of using those funds in renewable organic growth? So something regarding the installed capacity of P
and L. So very quickly. First of all, let's remind everybody that it's regulated generation. So we're not buying merchant generation in The U. S.
This is regulated generation. So rate base, out of the 2,800 megawatts, 2,087 are in rate base, so therefore, regulated as T and D. So you get return on equity on that and you get that. I think out of that, we have solar, 157 in rate base. And then we have the stake in nuclear.
And then we have the coal facilities. I think the coal facility, as we explained, to be shut down in 'twenty two. Let's not forget that 'twenty two will be the first year of full consolidation. So therefore, by the end of that year, we will have no control of any coal asset. I think gas generation, as you know, generation in The U.
S, I cannot think of almost any utility that doesn't have gas generation. But in this case, it's 800 megawatts of regulated gas generation and 158 megawatts of PPAs. In the case of the wind, the three fifty six megawatts is what basically they call a contracted output included in rates. And therefore, they do not own the asset. The same thing for 15 megawatts coming out of the geothermal.
In the case of solar, there is another 130 megawatts. They have contracted the output also through rates. But in that case, 50% of that is owned. So that's the reason why we don't see this as moving at all into the commercial generation. And in the case of generation, I think we have explained very clearly that by 2022, the only asset control will be shut down.
I think also I think the fact that we merger, we offer the guarantee, then that coal will be shut down. So I think we cannot guarantee that it will be shut down by '20 REPRESENTATIVE:] '22 as soon as we land and attend the company.
This question comes from Alberto Gandolfi, Goldman Sachs and Fernando Garcia, Royal Bank of Canada. Can you talk about CapEx and growth outlook for in P and M? Bloomberg consensus has more than $20,000,000 net income for twenty twenty one and seven hundred million euros EBITDA. Can growth be so strong versus 2019?
Pedro? Yes. Thank you, Chairman. In relation with the CapEx, I think our estimates right now, and we are working 21,000,000 to 24,000,000 I'm going to focus on 22,000,000 to €24,000,000 I think we're speaking roughly about around €700,000,000 of CapEx per year. Just to get a feeling, I would say, in terms of the New Mexico and Texas numbers out of that is almost 90%.
So 90% of that figure is going to be T and D. We have not put in the projections for that period anything at all about additional renewable opportunity. However, the governor in New Mexico has been named this year the greenest governor in the country. You have heard we're already there in green energy doing assets. They are our system transmission operator for the energy being transferred from Mexico to California in one of our assets.
And therefore, those in excess of 600 megawatts that we know they have identified already, I think they are very clear in the messages. They don't have money, and they don't have the skills to develop, operate, build those assets. So it seems to us that's an additional pipeline that we have there that I'm sure working with the governor and the public commission will be able to give it a push in the upcoming years.
Next question Mediobanca Jorge Guimaraes, JV Capital Markets Ron Kulem, Morgan Stanley, Samari, UBS and has a double component. One is which are the operational synergies between Avangrit and PNM? And the second one is more strategic. Why does the company feels they need to go into a corporate deal with opportunities for organic growth already look like very significant?
So think it's we our strategy remains. I think the organic opportunities in distribution is none. I think we are the organic the only one is on the distribution companies we hold. And I think we are increasing our investment in New York, in Maine, in Connecticut, but I think that's far for our ambition. So I think they have the opportunity of jumping with a regulated asset base of EUR 4,000,000,000.
So I think a unique opportunity in a base of something which is already been accretive from the day one, which already offer opportunities of growth as well, not only in the area of regulated area, which I think as Pedro was mentioning, that the plans of investment on this company, but as well in non regulated areas. I think I mentioned that we have altogether between what we have in pipeline plus what they have in pipeline, I think we have already close to 2,000 megawatt that can much easily been already transformed in a real power plant that we are already not physically present in the area. So, I think our ambition is growing and I think growing healthy. And I think that is a transaction offering. I think it's we are regulated, is accretive.
We can already finance easily and offer growth opportunities either in the line of regulated and in networks and transmission and distribution or in the area of renewables. And that is the deal. So as well in the states which are well known for us, we are not discovering in a state we've never been. I think we have presence in Texas, in New Mexico in many years. I was mentioning then among others, myself personally, I worked fifteen years ago, eighteen years ago with Prince Philip for inauguration of the Chair of the New Mexico University about advanced computing.
We've been already sharing students, Americans and Spanish students to the Auquique University for these fifty years. We have already had for many years, I think, with Palo Verde Paco, you've been already involved with that one nuclear power plant, which we've been already we have already with them as well. I think it's in the state which is well known. I think we have already a lot of links with them. And I think that we go to a state where we know with people where we know with even P and N is our, as Pedro mentioned, is our supplier of transmission for our some of our wind farm in Mexico where we are exporting the electricity to Texas, this will take us to California.
So I think that fits absolutely and is absolutely current with our strategy for twenty years, growing in regulated business, growing in renewables, accretive and I think it's already maintaining our financial solidity. In geographical areas, what has growth and are well known. So that fits all.
IGNACIO Next question comes from Andre Mulder, Credit Suisse. P and M is an EUR 8,500,000,000.0 enterprise value transaction. Do you expect to have to take any mitigating measures to maintain your current rating levels?
I think on that one, Chairman, and the reason to credit, two things. We have been analyzing again with the approach, as we mentioned, of a base case financing for Avangrid. And what we have heard from the rating is the ratios are not materially impacted at all because of the transaction. I put aside the strategic plan that we will comment it on November 5. And I think it's also clear that the profile of the new company is better than before because of the increase of regulated activities.
From that point of view, I think that's the feedback we have achieved.
Next question comes from Michael Charlton, Santander. Moody has indicated that the Avangrit PNM Resources transaction would increase the structural subordination at the Iberdrola Holco level. How will this issue be addressed to avoid the risk of a downgrade of the Holco bonds?
IGNACIO As far as I know, we are going to make already an increase in share capital. So I think if we increase in share capital, it's not at all No.
He has mentioned to the Iberdrola. But I could say that, that is true, Michael, that the structural subordination increased with this deal. But in the November 5, we will come with measures to reduce structurally the situation and to avoid that the plan will include this increase that I mentioned in this moment, the rating agencies. But on November 5, Pepe will come with this situation. Next question regarding Samari, UBS.
Are the incremental growth opportunities after this merger? Are there, sorry, incremental growth opportunities after this merger? I think we have already replied. I think it's certain. It's increased opportunities in the
area of transmission and distribution, the new states. As in the new cases, we will participate as well in these state objectives of the carbonization and electrification. So I think that will require more investment in that was in transmission. And second, will accelerate of the pipeline we have already in both states. So which I think that in both cases has been as positive in terms of growth.
DIDIER Next question and the last one comes from Jorge Guimaraes, JB Capital Markets and Jose Javier Reed, Barclays. Should we assume that this acquisition means that there will be no acquisition in The U. K?
I think as far as I know, we are already not taking a decision related to U. K. But I think it's we, for the time being, we are more than concentrated in what we have today. I think we have the Investor Day on the fifth and we will explain to you what is our organic expectation, including this one, because we will consider just organic, one is already been done. And I think that will be our plan.
Our ambition in organic is so huge that we don't require already further investment in that one. But I think you will see all those things in our Investor Day. But certainly, we are not already in this moment very fun to do anything in Britain more than those things that we are making in this moment in an organic manner.
Okay. After one point hours with this event, it's time to end with it. And please let me now give the floor to Mr. Galan to conclude with the day.
So thank you very much for taking part of this conference call. As always, Ignacio and his team of Investor Relations will provide you with you requiring further information. Well, we hope to meet you again in November 5 on our Capital Market Day. In the meantime, probably in the next few days, we will announce something as well related to hydrogen that we will make public our plans with Fertibaria. So thank you very much and see you on the November 5.
Thank you.