Good afternoon or good morning, everybody, depending on where you're connecting from, and welcome to Verdola's webinar on Offshore Wind Energy. My name is Diego Moron, Investor Relations of the Verdola Group, and I will be your host today. First of all, we sincerely hope you are keeping in good health and coping with the lockdown measures the best way possible. In today's session, we would like to share the view of our company on the offshore industry, the future of technology, the prospect for the sector and our plans and business opportunities that will lead to Refinery Verdrola as one of the leaders in the field. For that purpose, I'm delighted to be joined today by three of the people that are heading our efforts in this area: Mr.
Xavier Viteri, Group's CEO of the Renewable Energy business Mr. Pedro Sagra, our Chief Development Officer and Mr. Jonathan Cole, Managing Director of Iberdrola Renewables Offshore Wind Division. After the presentation, we will give you the opportunity to ask questions to our panel of experts. As a reminder, you can only ask questions through the phone and not through the webcast.
Also, and in order to give as many people as possible the opportunity to participate, we would kindly request that you ask a maximum of two questions. Lastly, I would like to remind you that the reply of this webinar will be available at our webpage, www.hiberdola.es in a few days. And now without further ado, I will leave the virtual floor to my colleagues. Please Javier, the floor is now yours.
Thank you very much, Diego. And as you said, good evening or morning. Thanks for attending this webinar and hope that it will be interesting for you. We are fully involved, as you know, in the energy transition for the decarbonization of the economy. And there is no doubt that renewables based electrification is the most effective and efficient way to achieve it and reach a more sustainable industry and society.
So why are we talking about offshore today? Very simple. To underline the key role of offshore wind in this electrification process, I will remark Iberdrola's outstanding position to be the industry leader. Wind associations, whether we talk about Europe, Asia or The US, everyone predicts massive new offshore wind capacity needs to comply with the policy targets. Our internal assumptions based on different outlooks shows offshore capacity in year 2030 multiplying by '6 the capacity available in 2020 or by '30 when looking to 02/1950.
This meaning huge investment, a lot of job creations and, obviously, big COT emission savings. There is room enough for all the offshore players, from which Iberdrola, as a global integrated utility, is uniquely positioned based on its renewable driven strategic focus since more than twenty years ago and the key track record that we have. Let me elaborate a little bit on this unique position. Isargolo is one of the largest vertically integrated utilities in the world with assets worth €122,000,000,000 having been anticipating and leading the energy transition for the last twenty years, investing in cleaner and more reliable power systems, optimizing its portfolio, maximizing efficiency and pushing for innovation. Iberdrola's sustainable business model, with innovative, flexible and efficient driven execution in the three businesses renewables, networks and retail, has proven to work, moving from the traditional local utility in 2000 to a global diversified group.
For next decades, and based on our new energy context and the climate actions momentum growing all around the world, Iberdrola plants more renewables, more grids, more storage and more energy solution for customers, with €75,000,000,000 investment in the twenty twenty-twenty five period, out of which €34,000,000,000 in renewals and more than €90,000,000,000 investment in the twenty twenty six-two thousand and thirty period, more than €40,000,000,000 in renewals. As part of this wider group, our offshore business can benefit from the experience in networks from the huge client base and markets understanding as well as the access to capital as we will describe later. Iberdrola's renewables footprint today shows a wide geographical and technological diversified renewable operation asset based of 35 gigawatts and a pipeline of 75 gigawatts for future growth. Traditionally, present in hydro, since more than twenty years ago, the business has been step by step incorporating new renewable technologies: onshore wind, bottom fixed offshore wind, large scale PV, stand alone and co located batteries being now a global leader in renewable operation and asset management, with operating assets in 13 countries, more than 4,300 employees, 11,400 wind turbines and four control centers in U. S, Spain, UK and Brazil.
In addition, cross advantages such as hybrid projects of onshore wind solar PV and or storage are specific to Iberdrola and other integrated players and difficult to replicate for the rest. Offshore has been playing a growing role in our last ten years, resulting in a key growth vector as I will explain to you in the next slides, complementing the expected onshore and wind PV growth.
Our strategic plan presented in the Capital Markets Day back in November 2020 targets to double the existing capacity and EBITDA by 2025 and triple by 2,030.
Offshore wind plays a key role in this plan, increasing its contribution to 25% of the target EBITDA in 2025, approximately CHF1.2 billion and thirty percent to 35% of the target EBITDA in 02/1930, more than €2,000,000,000 thanks to the new offshore capacity to be installed and the higher EBITDA per megawatt contribution of this technology, which is three times higher than onshore wind and five times higher than solar PV as an average. All of our offshore projects in the plan until 2025 are already defined and under construction, with returns complying with our investment standard 200 basis point spread and secure route to market. And the second decade period growth is supported by our pipeline as described in the next slide. Iberdrola renewables pipeline, as I said before, amounts to 75 gigawatts for future growth, of which 22 gigawatts, one third, is offshore wind based in attractive markets with established support mechanism where the seabed leases and costs are at reasonable levels. Over the last months, Iberdrola has enlarged its offshore wind pipeline, entering into a number of new markets.
As you can see in the slide, half of the pipeline projects are in Iberdrola's traditional markets, where we can leverage on our local and global experience to achieve efficiencies for operations and the development of future projects. But we are also taking earlier stage position in new growing markets at a low cost that will give us future growth opportunities and flexibilities. And all this through a winning strategy, based in creating hubs, first mover in The U. S, now looking forward a huge hub in the Baltic Sea, also into a Japanese market in earlier stage, which has, by the way, high floating offshore wind potential and, without forgetting, more traditional areas such as North Sea of IEC. Let me underline, first, the high value of the pipeline in terms of capacity by all stages of development and second, Iberdrola's different strategies to market for renewables that include tariff through auctions, PPAs and the ability to match demand profiles against existing retail customers' portfolios.
Jonathan Cole will enter later into more details about the project status. And finally, try to mention that to take advantage of the huge growth opportunities that the offshore markets offer and be able to succeed, unique experience, capabilities and innovations are constantly required. First driver, improvement of projects' competitiveness, driving permanently the LCOEs down because this is key. Main drivers for this are: in house construction using our experience to always select state of the art equipment using our global sourcing capabilities to achieve economies of scale in purchasing equipments, either across Iberdrola, across multiple offshore projects or within super scale projects, using also our significant in house projects delivery team to optimize the contract strategy and manage risk within the project execution phase and finally, using our knowledge, experience, tools and data systems as the largest owner operator of wind turbines globally to optimize the assets management and achieve best in class operational efficiency. A second success factor is the capability to properly understand and manage the market's challenges market design, access to grid, spatial planning and industrialization.
We take advantage of our in house global energy management capability to optimise offtake arrangements, working with our networks business in deregulated markets to optimise the design, build, finance and operation of the offshore transmission assets. Assets. In third place, leadership and investment in technological innovation, bigger, more efficient turbines and with higher capacity factors. Increased focus on innovation beyond the turbines technology, logistics, installation, digitalization, operational maintenance, vessels and finally, floating, area of opportunity set to reach commercialization by 2030 or earlier. And last but not least, the access to the capital.
Due to the huge investment levels and the cash profile of these projects, Guerrero Dola is the leader in green financing. All these projects will be further delivered by my colleagues, who will describe much more in detail the main ideas that I have tried to convey to you. Thank you. And now it's your turn, Diego.
Thank you very much for your presentation, Javier. Now let's move on to the next chapter of the agenda. Please, Jonathan, the floor is now yours. Thank you.
Thank you very much, Diego, and thank you, Xavier. And hello, everyone, and thank you for joining us in this webinar today. I'm gonna follow the comments from Zabia and elaborate a bit more on our pipeline, and then talk about some of the challenges and the key features of success for our offshore business going forward. And then finally, make some comments on the prospects for floating offshore wind. So starting first with our pipeline.
On the slide, what you can see is that we are already working with a very large and very well diversified global pipeline of projects. In fact, if you add together all of the projects we currently have in our pipeline, including partner shares, we're working on a portfolio of projects now, which is almost at 40 gigawatts across the world offshore wind. So our pipeline size is enormous. The other thing that you will see is that our pipeline is very concentrated on what we would call core markets, core markets for the offshore wind sector generally and also core markets for the Iberdrola group. And all of these areas where we are pursuing offshore projects are areas with excellent growth potential.
The other thing you may have noticed if you've been following our progress is that over the past twelve to eighteen months, we have also been very busily adding to this pipeline, anticipating the fact that the market was becoming a very attractive one and more and more players were becoming very hungry to enter the market. What we've done is we've spent the past twelve to eighteen months adding to our pipeline, taking early positions in what we see being key markets for growth. And so what you've seen over the past year or so is pipeline coming up in Brazil, in Sweden, in Poland, in Ireland and in Japan. So it is a very large and a diversified pipeline. But I think it's fair to say it's also quite a carefully planned pipeline, and each of these markets have been quite well chosen.
And the process that we usually go through to decide on a market is one where we look And And
then
then big So
the
market market
in
in going
stable regulatory mechanisms to develop and then take to market renewable energy. We also consider what our own strength is in that market. And as you can see in our pipeline, we've tended to concentrate a lot on markets where we already have a very strong position within the Iberdrola group. And then we look at things like the industrial capability, the supply chain capability in the market, and of course, whether we can secure projects in that market at reasonable cost. And that's basically the methodology that we have employed in order to arrive at this quite significant pipeline of opportunities.
Once we have identified a location as being one in which we want to participate, really the next thing that we are trying to do is achieve scale. And, you know, probably, you know from the Iberdrola group that when we go into a market, we don't go in, you know, playing in in millions of euros and megawatts. We go in with billions and gigawatts, and that's exactly the approach that we're taking with this offshore wind pipeline. Because what we see is scale is vitally important to driving up industrialization and driving down cost, and also vitally important to moving forward the technology and indeed moving forward the regulatory landscape to keep the market on track. So with that in mind, we have developed what we call a hub concept in our global strategy.
We have the Southern North Sea hub, where we have the East Anglia projects, nearly four gigawatts of projects. In the Baltic Region, we have a hub there which started with a one gigawatt hub of German projects, which at that time, many years ago, seemed like a large hub. Now it seems rather small, but of course, what we've done in the past year is added more than 10 gigawatts into that hub with projects in Sweden and in Poland and looking at other projects as well in that region. And we've taken steps into The US, again, a market where we already have a very strong capability within the Iberdrola group, and that's one of the reasons why we chose to become one of the early movers in that market. And we've got two large hubs there, a hub of nearly five gigawatts off the coast of Massachusetts and 2.5 gigawatts off the coast of North Carolina.
And then we're also now moving into Asia, and our first step in Asia is in Japan, which is a very attractive market with a 45 gigawatt offshore wind target. It's the largest single country target in the global offshore wind space. And again, we've went in there at scale, and we've already got a hub of more than three gigawatts of potential projects to be working on there. So know, the really, the key feature of our pipeline here is that we've got large scale in very attractive markets that we've managed to secure at an early stage at a reasonable cost, and that's very important for setting the right foundations for our growth in future. Now sometimes when you talk about a pipeline of 40 gigawatts, it can be quite difficult to digest and really understand how that gets put into practical implementation.
So what we're showing here on this slide is a more simple timeline, which shows you the projects that we see being the most promising projects over the course of this decade. Okay? Now the years that you see on this slide are the years in which FID, so the final investment decision, is envisaged for each of these projects. And what you can see here is quite a credible, progressive plan where we have, you know, a succession of projects coming through in relatively stable, continuous fashion. So starting this year with the Vineyard project in The US, we're expecting the permit to be issued in the next month or so and the FID to come this summer.
So that will be the first large scale US project, and it will be done by us and our partner. And we're also then working on the East Anglia hub project, which is a 3,000 megawatt project opportunity in The UK, and that we will be taking to the next auction process in The UK that should open later this year, and then taking the FID next year. We have another large US project, another 800 megawatts in Park City, which already has secured the PPA, and it's going through the permitting process, so we expect to have that permitted into FID by 2023. And then we have a German project called Vindanker, which will go through a process this year in Germany, and what's relevant there is that we actually have a last call rate on that project. Whatever the outcome of the auction is, we will be given the opportunity to take that project forward.
We're then, beyond that, working on a series of other projects in The U. S. With our Kitty Hawk projects in North Carolina and more of our Massachusetts projects being brought forward as and when they secure their route to market and their permits. And I mentioned our Japanese portfolio, so we've got projects. They are eligible to go into auctions in 2022, 2023 and 2024.
So, you know, we're expecting the first of those projects to succeed and get through FID by 2025. We're also looking to get our first Irish project through an auction process by the middle of the decade and built by the end of the decade. And then what we expect to see towards the end of the decade is more projects from our Japanese credible, but quite significant buildup of projects there in that timeline. If you added all of that together, that's around 18 gigawatts of projects being worked on between now and the end of the decade. So that gives us a lot of flexibility and opportunities for growth and acceleration.
The other thing that's worth noting is that around 80% of the projects shown on this time line are in markets where there's some kind of price stabilization or price support mechanism being issued. So these the vast majority of these projects have very limited market risk or merchant risk. Now it's also quite well known in the offshore wind sector that over the next year or two, there's going to be a lot of options, tenders, processes coming up around the world. And I think the good thing to point out here is that our pipeline and our capability correlates very nicely with those processes. So within our own pipeline, we have more than three gigawatts of projects eligible to go and compete in processes that will be run-in The U.
S, in Rhode Island, Massachusetts and New York. We also, as I mentioned, have projects in The UK ready for the next auction there, in Germany for the next auction there and for the next three auctions in Japan. We're also looking at bidding into processes for new pipelines. We'll be participating this year in the Polish processes to try and secure pipeline there. We're planning to participate in the French processes, are running to build upon the existing projects that we've got in construction in France, and as we've announced, we're in a partnership with Total to bid into the Danish process as well.
And then on top of that, there are other processes that are quite well reported, like the process in The Netherlands and Taiwan, and we are eligible to participate in those if we wish to do so, and a decision on that is pending. So what you can see is that we as well as that very strong pipeline we've got having the opportunity to go and secure its position, we've also got the opportunity to gather even more projects in other markets on top of that as well. So giving us a very strong growth opportunity across our global pipeline. Now if I move on then just to talk about some of the things that Xavier touched on around the key success factors that will be necessary to deliver a pipeline like that in a successful way. And I think probably, you know, when you think about these success factors, it probably reminds you why this is a market that has quite a high barrier to entry because there are certain key attributes you really have to have that are not easy to obtain.
So one of the most important is this ongoing need to drive down the levelized cost of energy. I think sometimes we take for granted the phenomenal progress we've made in offshore wind already, driving about 75% out of the cost of offshore wind over the past ten years, but that's something that we need to keep pushing forward with, and we see a number of key factors to that. And one of those key factors is scale and technology. And I've already mentioned this when we're talking about the reason why we go for these super hubs, but also the reason why our projects themselves tend to be large scale projects, so aiming to be around the gigawatt mark or more, and in case of things like East Anglia hub, three gigawatts, because the economies of scale that you can get from that, the operational synergies you can get, the industrial step change that you can stimulate, the technology change that you can stimulate is really important for continuing to drive down the cost. So by having these large scale projects and by having a portfolio of projects being done in tandem, allowing you to get scale across the portfolio, and of course, being company like Iberdrola, which is one of the largest procurers of electrical equipment across the world, we are able to drive scale across our entire value chain and also make sure we're always staying at the cutting edge of technology.
And that's something which is vitally important, and that's how we will continue to drive the CapEx down, drive the operating costs down and drive the efficiency up. It's also very important in a market like this that you have a global presence on the supply chain. And as I said, Iberdrol is one of the largest purchasers of electric equipment. We're probably the most significant and sophisticated buyer of wind turbines in the global market, but we've procured around 12,000 wind turbines in our history, so no one knows more about doing that than we do. And we have very good long term relationships with key suppliers.
And what that allows us to do is stay at the cutting edge of technology. Like, each time we have chosen a turbine for each of the offshore projects that we're building, That turbine either didn't exist or only existed in prototype at the time we chose it, but that was a very well managed process using our expertise to allow us to make those decisions in a very sound, rational way. And so by working very closely with the key technology suppliers, we're able to stay at the cutting edge of technology, we're able to help them stay at the cutting edge of technology and make sure we are developing projects that are fully taking account of technological advancements of the future. So that's a very important factor. The other thing which is very important is your ability to execute mega projects.
And across Iberdrola, not just in our offshore business but in our hydro business, in our networks business, you know, that's something we've been living and breathing for decades. We have a very strong track record in our offshore business of delivering big projects on time, on budget, with a good health and safety record. That's what we've done with our Western Dudden Sands, Wickinger and East Anglia 1 projects to date. And of course, you know, with the systems and processes and people we've got in place, we see that being a recurring feature of our business going forward. What's important is we have 600 full time professional staff working within our offshore business every day, living and breathing offshore wind projects and delivering offshore wind projects.
So we have a huge amount of knowledge and expertise in house. We're not relying on external parties, we're not relying on partners, we can do this ourselves, and that's really important as the market grows exponentially that you have that control in house of those key resources. And then the final thing on driving down cost, and in some ways, this is the next big frontier of cost reduction in offshore wind, and it's probably an area that hasn't been fully exploited today, and that's an area of asset management, where there's an awful lot of opportunity for improvement. You know, one of the things that we are, you know, I think quite proud of is our track record in asset management. This is not something that's easy to obtain.
So new entrants to this market cannot just acquire this kind of knowledge and expertise. It takes a long time to build up the kind of capability you need to be best in class in this area. But we think that we have that. Using our hub concept, we're able to develop huge operational synergies, big operational centers that drive a lot of efficiency, but also we're able to tap into the global expertise of our global renewables business. And as I mentioned earlier, you know, the fact that we we we are operating over 12,000 wind turbines across the world.
No one is gathering more data about turbines than we are, and we're able to, you know, take that know how, take that data, and put it to good use in developing best in class systems and processes for operating our wind farms. And then, of course, we are investing in technology, digitalization, AI, robotics, etcetera, in order to really move to the next stage. You know, a stage where we're moving away from time based maintenance models to condition based maintenance models, where you're using data to diagnose issues long before they happen so that you're actually hardly needing any reactive maintenance, you're doing your maintenance in a planned way, which is about two and a half times cheaper than doing it in a reactive way. So these are all the types of things that we are working on in order to continue driving the efficiency of our business up and the cost of offshore wind down. The other things, as Abhi mentioned, are market related issues that will affect offshore wind in every market.
Now probably not not any need to go into these in much detail, but just to to touch on those, every market in the world that wants to have a large scale offshore wind sector has to deal more or less with these four issues. What is the market going to look like in the future? In a in a market driven by renewable energy, what is the price setting methodology? What is the route to market? And that's an area that, you know, that that needs to be addressed.
How do you integrate this power into the transmission system? How do you design a strategically planned, resilient, interconnected transmission system? These are issues that need to be addressed. We have a lot of expertise in that area, of course, because of the size of our networks business with the Nibor Drola. As the sector gets bigger, how are we dealing with spatial planning issues and working with other users of the sea, in particular, fishermen and the maritime sector?
Again, that's something that we're already very engaged in. And then this concept of the just transition. Not everyone will benefit from the energy transition initially, because a lot of people learnt the livelihoods from the fossil based industries, and what we need is a sensitive way to try to make sure that industrialization is happening in the right place. And really, the key thing here is that you have to be out taking a very long term view. You you can't just be in this market to do a project, you have to be here to support the industry.
And we are a very long term asset owner operator working with governments to help solve these problems in the long term, and that's what's making our pipeline all the more sustainable and all the more deliverable. Final thing to say then is on technology of the future. I think, you know, when we talked earlier on about the size of offshore wind, as Javier mentioned, you know, 1,000 gigawatts of potential capacity by 02/1950. Think I it's fair to say that if that's gonna be the reality, a substantial amount of that has to be floating. About 70% of the resource out there is floating offshore wind.
And so floating has to be taken seriously if we're going to achieve the potential of offshore wind. It's true to say that right now, today, floating is more expensive than fixed, but it's also true to say that a floating structure, whilst the first of the kind is very expensive, is much more prone to standardization and therefore to industrialization and economies of scale. And so, you know, when you take that into account and you consider that floating projects can be easier to install, when you consider that they can be installed in areas that capture more wind, what you can see is if you can get to a sufficient level of scale in the floating market, you can really drive down the cost. Now we've been quite quietly active in floating for about ten years now working on various demonstration projects. Right now we're most publicly active in the flagship project, which is a European Union part funded project being installed in Norway quite soon.
And so we're working on the demonstration side, just getting the technology ready. But what we really want to do is get to commercial projects as quickly as possible because that's where you get scale and that's where you get cost out. So in our pipeline already, in Japan and in Ireland, we have floating projects. We're going to be looking to get floating projects in Scotland and in France, and the process is being run over the next year or so. We're also actively trying to get floating projects running in Spain as well because that's how we see the market being developed.
And our aim, if we can get that scale, if we can get some of these projects up and running, is by the end of this decade to have floating offshore wind capable of competing with fixed offshore wind. Okay. So final thing, just to quickly recap then on what Zabi and I have been saying. So Labrador has been a pioneer in the energy transition for more than twenty years. We've been living and breathing the energy transition, and in particular, growing a leadership role in the renewable sector.
We've grown a big pipeline in offshore wind with good opportunities in the short, medium and long term. It's a pipeline in good markets that we've managed to obtain a reasonable cost. And because of our strong capabilities in the Iberdrola Group and in this offshore business, we're able to deliver best in class in terms of project delivery, asset management, etcetera. So we're also using that expertise to pioneer new technologies to grow the market. So I think that however you look at it, market is going to be a big one, and we feel with what we're showing you today that we are very well positioned to play a significant role in that market.
So thank you very much. Diego, I'll pass back to you.
Thank you very much, Jonathan, for your presentation. And now Pedro Sara will cover the third and last part of our agenda. Please, Pedro, now the floor is yours. Thank you.
Okay. So thank you, Diego, and thank you, Jonathan and Xavier and everybody. I think the presentation I'm going to be making today, I want to kick off with a little bit of an introduction, which is why we are here and how we managed to get here. And I like always to say and complement different parts of my company. So all of you that you are listening to this presentation and today and in general or you're listening to us on a daily basis, I think you understand that this is not we happen to be here.
I think the first thing is we have the leadership and the vision and the strategy of the Chairman and CEO. And I think that's something that is clear there for twenty years. We have been doing a lot of things ahead of a lot of people. And when suddenly something becomes the hot topic for today, we've been there for many years. And not only the vision and the leadership and the strategy that he has, but also the day to day of focusing the business twenty four hours a day.
Then you have the financing and the investor relations angle. We've been there communicating at the right time in the right way for many, many years. And then finally, you have the operations that I think is definitely where we have to deliver in order to run these assets appropriately. So within that framework, I think the first page I'm going to be presenting to you is a little bit the history. There are many times that we work as a machine.
We are very well prepared, each of us, to contribute. I think when you look at the what I call the 2010s until the 2020, as you can see, each of these potential assets has a history, which did not start in an auction paying a lot for something, did not start in a negotiation the day before yesterday, did not start with a huge premium being paid. I think we're back to almost 2,003. We were starting with a JV ahead of a lot of people in terms of moving into this potential dynamic called offshore. As you know, in Wickenburg, that was acquired in 2010.
If you remember, Istofanglia, we closed around 2010 also a joint venture with Battenfall. In the case of the joint venture with Battenfall, it's very interesting because then we moved into a demerger. You take care of something, we take care of something. Very interesting where we are and where other people are. And I think after that, as you see, we already have one asset in operation, more to come.
We even sold a stake to crystallize the value. St. Briuk, we did a joint venture a long time ago. Then there was a moment, I think, one of our partners was really not there for the long term. For whatever reasons, we took them out.
I think Baltic Eagle acquired them at the right time in the right place. Vintjard, I think if you compare that with other transactions going in The U. S, I think it's definitely 2017, the right moment with the right partner to acquire the right assets. So from that point of view, if you look at the 2010s, we did probably around 1,400 megawatts of offshore, either real or potential, which is now, and you can see, and Jonathan presented that very well, a reality. And I can tell you, the acquisition per megawatt is quite small.
If you're referring to the fixed payments that all of these cost to us, and we're excluding the acquisition of the stake in San Brioche that we did from our partners, I think we're talking probably well below the €30,000 per megawatt. I think where you're speaking about the total cost of all these 1,400 megawatts, including the potential earn outs, variable payments in all these assets, I think we're probably below 50,000 per megawatt. I think those are numbers that show how comfortable we are as a good machinery. Some of us need to bring some of these projects and acquire them and these companies at the right time, and then we have the right teams to deliver them and bring them to the finish line. So think I this is probably the first example.
I think now you are we are in a different moment, okay? So we go to the 2020s. And where are we? Same thing. I think suddenly, the middle of the virus, in the middle of different things going on globally, we did not stop.
We thought it was the right moment to give another push, okay? It's a push that is going to be there for the next ten years. I think we focused in Japan in two transactions, one, as you know, with Macquarie, another one with Cosmos. I think we focus in Sweden, we focus in Poland and we focus in Ireland. Again, when I'm thinking about how many how much we are in excess of 10,000 megawatts And when you're thinking about the cost per megawatt, I think we're talking speaking probably below EUR 5,000 per megawatt of fixed payments in all these assets.
And then you're speaking probably around below 40,000 megawatts, including any other potential variable payments. Those amounts for more than 10,000 megawatts, as you can see, is we're doing things and developing and buying at the right time, at the right place to prepare ourselves again for what's to come next that, as you know, is the next ten years ahead of us. I think one probably and I'm moving more into the valuation, potential impact in the Iberdrola, some of the parts and other value considerations, we usually do with all of you, following Ignacio Cuenca, Pepe Saenz and Diego's guidance, is very simple. We have right now in the EBITDA of the company probably in excess of 75%, more or less, of EBITDA coming from A, AA or AAA rated countries, okay? I think that's something that when you look at the offshore development, I don't think we're going backwards.
I think if you see most of the countries where we are, as you can see, they are all A or above. So from that point of view, or A minus and above. But most of them, AAA, AA, as you can see. I mean when you think about our discount rate, when you think about the risk of our businesses, I think the country risk, the impact that they may have in the discount rate potentially to be used for valuation purposes, I think we're very comfortable we're doing on a material basis, putting the X in the right place. The next page, and I'm using a research by Global Investment Bank on the 03/05/2021.
I think we've tried to show here two things. I think there are many companies right now going on and potentially doing IPOs. If we were to split Iberdrola in 23 different small renewable companies, we probably are worth EUR 300,000,000,000 or something like that, okay? Just comparing that with those small companies going public. So I tried to compare here.
We tried to show to all of you a little bit things that other people explained very well, but I think we don't have anything to hide. I think right now, using the research, you have Iberdrola with almost 19 gigawatt of potential pipeline right now. And then you have probably 1.7, 2x, 4x, 5x more than most of the other people who are involved in this business. I think when you look at the presentation that we have just seen and some more details I'll give now, I think there is an additional 19 gigawatt available right now for us of additional pipeline. If you see the numbers, compare with our main competitors, it starts to be three times to 10x more than those competitors of pipeline.
So I think in terms of what we want to do ahead of us, I think it's a clear picture that this is absolutely something we feel very comfortable with. One comment here that I'd like to do. I think when you think about probably one of our major U. S. Competitors, one of our major European competitors, and we think about the strategy and the future, of these people have said, I don't want to be in offshore.
Well, when you already have €05,000,000,000 EBITDA in offshore, what you see ahead of us, this beautiful pipeline of projects and value creation ahead of us, I think to have, by 02/1930, zero in assets in offshore, zero in EBITDA seems to us something that is probably not adding a lot of value for the future of a company, some of the parts and potential value creation. So I think it's very clear for us that we believe we are in the right place, not today, or we started paying a huge premium yesterday to buy 50% of something. As you can see, we've been there for twenty years. I think in the next page, it's very interesting that the sum of the parts right now, and we just focus on, say, analyst one, analyst two, analyst three. More or less, right now, they are assuming that 8% of our enterprise value is coming from offshore.
And that's more or less around EUR 10,000,000,000 of enterprise value allocated to that business. And I just want to use this number because I think we're going to be comparing that. As I said, many companies going public, small companies, many companies doing transactions paying some numbers. I think we're going to see potential gaps of value that we see. And we have there we've been with this business for a long time.
It's probably the right time to make use of those benchmarks that other people are using for themselves also for us. When we see at Orsted, one of the leading companies in the sector right now in offshore, and that's where they focus, as you very well know, I mean we just use seven analysts. We try to do an average of them. And they do very it's a very consistent sum of the parts. They do some operational assets.
They have over four gigawatts of existing assets, and they apply a multiple, more or less, of EUR 6,000,000 enterprise value into megawatts that they have. When they refer to advanced construction, also very consistent, probably around 2.7 gigawatts being in advanced construction. And as you know, looking at the numbers being showed in this, some of the parts evaluation by analysts, I think you're getting to a conclusion around EUR 5,000,000, more or less, enterprise value per megawatt. When you look at the pipeline announced until 02/1930, I think it's also around 20,000 gigawatts sorry, 20 gigawatts. And usually, same thing for the rest of the pilot beyond 02/1930, which is around 25 gigawatts.
I think we're referring probably a little bit less than 500,000.0 per megawatt, okay, in terms of enterprise value. So that's a very simple way of explaining the sum of the parts of Orsted. I think when you go into us, and I think we're going to see here some very simple numbers, when we look at the operational assets and we just apply those values, I think it's very simple. We get to almost in excess of EUR 7,000,000,000 enterprise value. When you think about what we call the advanced construction, and as you
can see,
COD 2023, we have around half a gigawatt there available. We're talking about €2,500,000,000 more or less. When you think about the pipeline below 2030 or until 02/1930, again, we have 17 gigawatts. That's another €7,000,000,000 of value. And when we think about the additional 6.7 gigawatts that we have ahead of 02/1930, I think we're going to EUR 2,700,000,000.0 of value.
I think something very interesting. We are already in this presentation referring to our additional pipeline of 13 gigawatts, which is not even considered in these numbers we are showing. So I think when you look at that, you get very comfortably to a EUR 19,000,000,000 enterprise value based on these peers in some of the parts multiples. And I think, as you can see, there is probably EUR 9,000,000,000 of gap in value that I think is being allocated to some of our competitors. And in our case, we're missing that.
I think if we go to see, well, let's look at EBITDA numbers, okay? Because, again, some of our competitors seem not to have and will not have EBITDA in this business. That's okay. I think more for us, we're happy with that. But I think some of these people that are already with that business, they are right now trading, as you know, at certain EBITDA multiples right now, probably in the case of Horsted twenty twenty, around 25x.
Well, if you apply that to our €500,000,000 almost €600,000,000 of EBITDA, think I that's giving you a €15,000,000,000 value for the business. Again, that's around €5,000,000,000 above the average of the sum of the parts allocation of value given to our offshore business. Then let's go into transactions. We've been analyzing more than 100 transactions. We've been there, as you've seen, right now for eighteen years in this business and definitely for the last twelve years ahead of many people.
And well, when you look at the transactions and we just go country by country looking at different transactions at the same stages of construction, development, pipeline, etcetera, well, we happen to get again to around €19,000,000,000 of value for this business, which compares with the €10,000,000,000 we mentioned before. So again, more or less, an additional EUR 9,000,000,000 of value versus the average of the sum of the parts that we have right now at Sivartrola. I think the next page is probably something that we're asked many times, why are not doing this? Not Why doing that? What you have done, other people do.
I think we always try to follow what we think we should be doing. And as you can see, I think there is something right now going on here, something you're not doing networks. Well, we have been buying networks since 1998. I think everybody was focusing on renewables. We were buying networks.
I think everybody is focusing offshore. As you can see, we have been in offshore for many, many, many years and doing the right acquisitions at the right time and having the right team from an operational point of view to take those assets now into the finish line. So I think when you look at some value creations, let's look at three examples. I think East Of Anje, we monetize at that time with the highest multiple with hours, availability, CFD numbers, etcetera, multiple in a transaction, I mean, that implies probably around EUR 1,600,000,000.0 of value creation, okay? I think when you look at The U.
S. Pipeline, I mean, you know very well the little millions, and we're speaking about units of probably no more than in excess of EUR 10,000,000 in euros, what basically allowed us to go into having fifty percent and fifty plus one share when the assets are in operation in our joint venture in The U. S. I think when you look at recent transactions, very similar transactions. If you apply that just to what we have in The U.
S, I think there's probably a 3,000,000,000 value gap there. When you look at East Of Anglia hub, the current lease auction, the last one that has happened, and you think about the gigawatts that we have there, again, in excess of €1,500,000,000 of value creation. So very easily, you get to potential €6,300,000,000 value creation, which is something that also, from a value point of view, when you compare to the sum of the parts of other people, potentially we're missing there. So just as a summary, if you look at the analyst peers, some of the parts, probably EUR 9,000,000,000, same thing for present transactions. If you think about the trading multiples that other people are having right now for this business, probably at least EUR 5,000,000,000 of gap.
And again, with two or three transactions, you very still reach €6,000,000,000 of value creation being there. So just to finish, not to make this presentation very long, what we want is to show to you is we believe we have been in the as a very well coordinated team, in Iberdrola, bringing the right transactions for many of these assets you see now as a reality at the right time in a very cheaply way, as you heard from me, is very low tens of thousands. I think that allows the business people, now the operational guys, to take that into reality. Then second, very good rating in most of the countries where we do businesses in this arena. I think that also confirms no pressure in the discount rate.
And finally, I think there is a significant gap valuation. Not potential if you were to do something, just taking a look at some of the parts that other people have right now. Different methodologies take you there. So I think we are very comfortable on this type of review to show you that we did the right things at the right time, and we always try to anticipate. We don't care if people follow us.
We just try to do the best thing that we can for all of you at the right time. And that's all, Diego. So thank you very much.
Well, thank you very, very much, Pedro, for your presentation. And now I think that we can jump directly into the Q and A session. Please, operator, we are now open to questions. Thank you.
Thank you. The first question comes from Alberto Gandolfi from Goldman Sachs. Please go ahead.
Thank you. Hi, Alberto. Thanks for taking the time for shedding light on this portion of your business. And I stick to the two question rule. The first one, I'm afraid is not an offshore, but please bear with me, because it's a big debate out there.
So you have a slide early on. I can pick up the number in the second of the slide, but I'll first give you the concept and the question I'm asking, which is you are showing an EBITDA for the combined renewable business, I'm talking about Slide seven, going from EUR 2,400,000,000.0 in 2020 to more than EUR 7,000,000,000 in 02/1930. And you are talking about in, I think, couple of slides prior to that, if I'm not mistaken, yes, Slide five, you talk about €75,000,000,000 investments and clearly many more in the second half. So I was trying to ask you, there's about €4,500,000,000 of increase in EBITDA over the period? And can you tell us how much capital employed you are using?
And can you maybe give us a bit more detail about the €4,500,000,000 increase? Because the $4,500,000,000 is a net increase. You're going to have a gross increase much greater. I don't know if it's 7,000,000,008 or $10,000,000,000 Then there's clearly incentives that expire. I don't know what power price assumption you have, but probably lower than the current levels.
So, I think I was trying to understand incentives and power prices as a way to try and and get to understanding how to calibrate basically the actually offshore, sorry, 2,500,000,000 to €7,000,000,000 EBITDA versus the installed base. So just to be clear, yes, sorry, this is offshore, misread the slide. But is the return on capital employed? What are the underlying assumptions on that? Trying to assess, basically gauge the IRR.
The second question is on Page 25. Again, very interesting slide here. I mean, 19 gigawatt pipeline, 18.6 additional. Can you maybe bring this together with the Slide 13? How can you have a reasonable confidence that you're going to translate those 19 gigawatts in that timeframe?
And what's the proper difference? I'm not sure I quite understood between the 19 and the 18.6, the incremental pipeline over there. That would be great. Thank you so much.
Okay. Thank you, Alberto. I think that on the first one, that was quite complex and long. I think if you can streamline to a couple of because it's like capital employed and several things on the first one. So I think that on that one, probably, we had several things to be addressed.
And I don't know if they remain all of them clear. So if you can clarify on your first one what specifically your doubts are, okay?
The is that I was wrong myself because I thought you were putting a slide about bigger portion of the business, but it's only offshore. So my point is, you have an offshore there. There's an EBITDA going from 2,400,000,000 to €7,000,000,000 I would like to know please what's the capital employed for those ten years and what adjustments should we do to the EBITDA? Because I suspect that there are some incentives that are expiring and maybe you have a different power price assumptions. If you can give me the elements, can estimate the or you can just tell us, look, we estimate that over the next ten years, the return on capital employed before taxes on this project is 8%, 9%, whatever.
So it's basically a question on the ROCE on your conversion of the offshore pipeline that I'm asking. Thank you.
Okay. So the first one will be on return on capital employed, basically. And the second one will be translation of the pipeline basically into actual projects and megawatts. Thank
you. Yes.
I don't know if on the one on the return of on capital, I don't know, Javier, probably you can address it. And on the one related to the pipeline, I don't know if Pedro probably can can address the the second one. Okay? Yeah.
Well, I I I could give you some information, but not just now. Right? I mean, I need some time to to give you this this detailed information about what is the the the the capital employee in this growth and what is the impact. But the only thing that I can say is that, obviously, when you look the figures in different years of 2025, 2020, 2025, '2 and 2030, there are some investment that actually has not been producing during the whole during the whole year during the last four years. So, I mean, I I I I think that I mean, we can we can we can provide you with this information in detail, but not right now.
Okay. No, If I may follow-up, maybe is it is there any idea on project IRR you can provide? What do you think the evolution of the returns of this? Whatever metric you want to use can be IRR, can be EBITDA per megawatt hour, whatever you think is relevant, know, the way you look at it would be very helpful to see how much value you can actually extract from those investments. Thank you so much.
No. I mean, I mean, the the the value that we are extracting, as I mentioned in my is fulfilling our, say, investment standards, and this is a spread of around 200 basis points. Okay? And then depends on what is how much is the the the the the the the our our cost of capital in the in this moment. So I actually understand that we are getting this 200 basis points.
So we are around this moment in all in all of these projects and depends on them figures that could be from 6% onwards. Right? But it will depends on what is the evolution of this capital cost of capital.
Thank you.
Thank you. Nevertheless, I mean, I am very happy to to provide you with the detailed information, but just some time in the chart, right?
Can I Alberto? It's Jonathan. Just one thing to clarify, though. The slide you're referring to, it's not suggesting €7,000,000,000 EBITDA from offshore. It's suggesting $7,000,000,000 EBITDA for the renewables business, of which 30% to 35% is offshore to around 2.3% to 2.5%.
To be clear, so you're misunderstanding what you're saying.
That's why, because I was trying to understand what was the total capital and Flori referred to that, but there's lots of bits and pieces moving. Happy to take offline and apologies, I tangled myself at the beginning of the question. Thank you.
And on the second one, Pedro, maybe on the translation of the pipeline?
I think on that one, just to help you on the numbers. When you think of the operational Watts, Biecinger and Histofangla one, that's in excess of 1,200. I think San Briuk, as you know, is 500 megawatts. So that's the installed capacity plus under construction. I think before 02/1930, you have Germany, which is Baltic and Bindanker.
That's almost 800,000,000 Then you have Eastern Lehab that is in excess of €3,000 Then you have Sweden, which is in excess of €2,000 Then you have The U. S, where you have Vineyard, Park City, Cityhawk, an additional Vineyard pipeline. That's probably in excess of 7,500. And then you have Japan with Aomori and the Akashia wheel firms, which is in excess of 3,000 megawatts. So that gets you more or less to that pipeline before 2030 of approximately 18,000.
I'm trying to compare that with that research that was mentioned. Then when you think about pipeline after 02/1930, I think you are speaking about Poland. We thought about 1,000 megawatts. I think you're thinking about Sweden, an additional probably 2,500 or in sense of that. And you're thinking about Ireland, let's say, around 3,000.
I think that's going to take you to an additional 6,500, more or less. I think that's going to take those numbers to the 25,000, more or less, that you were referring that we were referring. And now we have an additional potential upside. We're thinking about Sweden, an additional 4,000 megawatts, and we're thinking about Brazil, an additional 9,000 megawatts. I think those numbers are the ones that take you to an additional 13,000 megawatts potential pipeline.
If you add that to what I said about the 6,500 megawatts in excess of that, that gives you the additional 1,900 megawatts.
Thank you very much, Alberto. We can in any case, we can follow-up at any time if you want. Next question please, operator.
Thank you. The next question comes from Harry Wyburt from Bank of America. Please go ahead.
Hi, everyone. Thanks for taking my question. So a couple of them, but they're actually totally unrelated. So the first one is just, I guess, seabed prices are a super hot topic at the moment. I just wondered if you could give us your view on where you think seabed prices are going to go globally.
Obviously, there's been a specific UK case, but do you think this is there's going to be a sort of contagion risk here and what's gonna happen is that all governments globally are gonna try and sort of use this as a as a to extract, money from from the development process? And how how would that scenario sort of impact your your returns outlook? And then the second one is really a technical one. And again, sorry to come back to really a follow-up in many ways to Alberto's question on Slide 25 on the pipeline. And one of the things that we sort of struggle with is what is the definition of pipeline?
And I guess in the oil industry, there's sort of an element of standardization for reserves. Certainly, my perception is that there's no real objective definition of pipeline for obviously, legitimate big companies like you, you have a quite strict set of criteria. If you look around the industry, really, some stuff can get classified as pipeline even maybe when there's not maybe that much sort of real basis for it. So how do you tackle that when you look at your peers? And how do you actually compare apples for apples with pipeline?
And is there can it or should there be an industry standard here as to what really is pipeline and what's not? Thank you.
Thank you, Harry. Jonathan, maybe you can address on the trends for the Seabed. And I think that given the fact that of '25 slide, I think, is on the side of Pedro, okay? So you will address that, Okay? Okay.
Perfect. Thank you.
Okay. Hi, Harry. Thanks for the questions. Right. So the the, you know, the the topic of how much money is being paid for seabed rates is obviously a hot topic just now.
And what we've seen recently in The UK is some parties very hungry to acquire seabed rates and therefore very willing to pay high prices. I think there's a couple of things you have to keep in mind there. Firstly, that was the first competitive process in The UK for more than ten years. So it's a market which has been undersupplied with seabed. So it's not really an appropriate market test because the market's somehow been distorted by the lack of supply for such a long period of time.
So I think that what we should see happening over the course of this decade is more regular processes for giving out seabeds, which should then hopefully drive more rational and more market appropriate pricing. The other thing I would point out to you though, just in terms of our own position, if you might, what happened in The UK, you know, was noteworthy. But what's also noteworthy is we've already got 3,000 megawatts of projects still to be built in The UK. So our pipeline was already there, and and we were somehow not affected by, you know, the by that process. Similarly, the next big option might be in The US, but we've already got 7,000 megawatts of pipeline secured there.
So even if over the next few years, there's still quite a frenzied approach to bidding, we have built up such a strong pipeline in these core markets already that that's not going to have any significant impact as in the short term. And in the long term, as I say, I think the market will start to stabilize as you see a more regular process for getting out seabed being developed in each market.
Okay. In the second question, I think when you look at the pipeline, and you correctly say, I think we struggled many times about these small companies and others that they are priced on a pipeline that you don't even know what it is. I think the first comment I would make is where you are seeing what we are doing right now comes from three years ago, four years ago, five years ago. So it's not something we are doing something right now for the first time or paying for something. So I think the results are there, and that comes from many years ago.
I think when you look at the pipeline, and probably I'm going to focus on that one between now and 02/1930, I think we're referring to operational assets. That's okay. Under Construction St. Brook, that's okay. But then when we review Germany, it's Baltic and Bindanker.
I think in Jonathan's presentation, you can see very clear when that's expected to kick off. When you look at the East Of Ambra hub, you know the new rounds, and it's going to be there. And I think we are in a very unique position to take care of that. When you think about The U. S, I think we have names: Vineyard, Park City, Githy Hawk an additional Vineyard pipeline.
And just giving the example, New York, we may not have won the first one, but I think these guys want to go ahead either by the end of the year or next year with another one. So since sorry, in Japan, we mentioned specific names. And as also Jonathan mentioned, and when we announced the transaction, we made it very clear that allows us to be in the second round and later in the third and fourth. I mean that's early next year and then two, three years from now. So within 02/1930, I think we're speaking out of that, probably around 14,000, 15,000 megawatts.
I think we have added an additional 2,300 megawatts in Sweden because we're already there. I think we have in the right place because long term, as you know, the country need to substitute certain energy for new energy. And therefore, in the nine years ahead of us, seems quite realistic that, that's something also potentially that should be there. Is this enough? No.
Maybe there are more things to come. I think we have heard different places like Brazil. We have heard Oregon, okay? But in this case, I think it's probably something that allows you already to know very specific, around 15,000 megawatts, where we expect them to happen.
Thank
you very much, Pedro. Please, operator, next question.
Your next question comes from Rob Pourreign from Morgan Stanley. Please go ahead.
Hi. Thank you. So a couple of questions also from myself. So firstly, you mentioned cost reductions in the development offshore wind so far. And I think this is an area of significant misunderstanding as we look ahead over the economics for the next ten years of investments.
And so to the point of the journey so far and how much further we have to go, what innings are we in? What minute of the game? What percentage of further cost reduction or LCOE reduction would you be willing to venture we shall see over this decade in offshore wind? And the second question is, you spent a lot of time making a compelling case that the valuation of the stock does not discount your offshore wind business. And so the logical question is, if the market continues to not assign the value that you think is due to this business, would you look to crystallize it in other ways, for example, a minority listing or a structural partner or some other options?
Thank you very much.
Okay. Thank you, Rob. I don't know the first one. You know, Tan or Xavier, you can you can discuss on
I I can ask to that. I mean, we're talking about what what are the figures that we see in terms of LCOE reduction in this decade. I think that probably for the figures that we have now, projects with FID this year to the point is that we can expect to have the FID close to the end of the decade. I I understand we are going to see an additional reduction of around 40%. Due to reduction in CapEx, due to reduction in OpEx, which actually, as Jota has mentioned, is going to be even more dramatic and and very likely also due to the increase the increase in the output in the capacity factors of the of of, let's say, the two, right, of the of the project.
So it means, I mean, the figure if around the 40%, even a little bit more than the 40% close to a 40% reduction in the coming years.
Okay. In relation with the question of evaluation, I think the first the answer I want to give you is very simple. I don't think we are saying we are not reflecting the net value. We are trying to show that if you look at other people valuation right now, we're missing that. So from that point of view, I think our first duty is what we are doing right now, which is explain it, show that we have assets when many people don't have assets, and we have pipeline where many people claim to have pipeline and they don't have so much pipeline.
But I think we are always trying to show things are certain. So I think what we are doing right now is the first step of many other roadshows, one on ones and conversations we want to have with all of you just to make sure you understand that if we compare ourselves with other people, I think there is room for value in our company right now as we have explained. So I think let us perhaps spend some time on the educational side because I think there are reasons for that.
Thank you very much. And if I may, just a quick follow-up on that second point is, I think you're right to try and educate the market. But just hypothetically, if we have the same conversation in twelve months' time and that market treating Iberdrola as the diversified integrated utility it is, which has lots of things going on and lots of exciting stories, still has not, shall we say, closed this gap that you portray on the slide pack today. At what point do you believe it would be in shareholders' interest to crystallize this valuation through corporate action?
I think my answer will be, let's just speak, in twelve months from now. But I think in the meantime, markets go up, go down, valuation of our competitors, suddenly they lose 20% of their value. I think we're very comfortable we have room there. So let us explain to people what potentially we're missing right now compared to others, and I think let's see what happens.
Fair enough. Thank you very much. I'll hand it over.
Thank you, Rob. Next question please, operator.
Thank you. The next question comes from Jose Ruiz from Barclays. Please go ahead.
Yes, good afternoon, everybody. The first question is a follow-up on the previous question. You were talking about LCOE coming down 40%. Could you is the same drop in terms of CapEx per megawatt that you are expecting? And the second question is basically is a clarification, excuse me for this, but what did you acquire in all these pipelines in Poland, Japan and so on last year?
Did you acquire leases? Did you acquire early stages of the project?
Thank you.
JOSE First one for Xavier, I think, okay. And the second one probably for Jonathan, okay, or Pedro. What would you prefer? Xavier, I think you can address
the first one. I mean, was mentioning that the reduction in the LCOE, the figure was obtained by a decrease in the CapEx, decrease over 30% in the CapEx. OpEx also have another decrease basically over 20%, more than 20%, clearly close to figures around 30. And then the capacity factor increase for the figures that we can see now over, say, 5%. Altogether, could bring you to this possibility of achieving 40%.
Thank you, Savias. Jonathan, on the second one?
Yes. So just for clarification then. So on the pipeline that we've shown on global map, every project that's shown there is a project where we have already obtained some degree of development rights or leases to develop the projects, okay? So we've already got some kind of position there to be developing the project. In the case of what we've acquired in Japan, what we've acquired is a portfolio of projects, two of which are in quite an advanced stage and are almost about to be entered into an auction process, so quite advanced development rates.
And another two or three projects are a bit less advanced and will take longer to develop. So that's what we've acquired initially in Japan, and then only a week or so ago, we announced another acquisition, which again is a project with quite advanced development rates just about to go into an auction. In the case of Poland, what we've done is we've entered into a development partnership with a partner who has been working on Polish projects for some time, but because of the changes in the regulations in Poland, what's happening is effectively that there will be processes to allocate the seabed, and what we will do is with our partner and using all the information that they've obtained over the years, we will go and bid into and seek to win. And that's incidentally why you don't see the Polish projects yet appearing on that global pipeline chart, because at this stage, it's not a secured rate, and so we don't, you know, include it. At this stage, it's simply an opportunity that we're talking about for.
Thank Thank you, Jose. Next question, please, operator.
Thank you. The next question comes from Marc Fershny from Credit Suisse. Please go ahead.
Hello, good afternoon. Thank you very much for your presentation, and thank you for allowing me to take some or ask some questions, should I say. Firstly, on the Vattenfall projects in The UK, which are adjacent to your own ones. I mean it was a big shock when the courts removed the planning permission for Vanguard, which is a massive project, and it looks less likely Boreas can get planning permission, which is a big problem for the industry, the government and Battenfall. What are your thoughts on there?
And have we hit a brick wall in The U. K. Where it's very difficult to get planning permission? And just that's my first question. And just secondly, on the returns that your colleagues in oil and gas are taking.
I mean, on my modeling, given the big upfront lease payments, I think the Crown Estates, some of your competitors are taking 3% to 4% IRRs on development projects with development risk. What is your modeling showing for those projects? Thank you.
So maybe, Jonathan, been an expert on UK, even more an expert on The UK. Can address And the first the second one, I don't know if in between Xavier or Jonathan as well, whatever you prefer. I mean, all of us are wanting to answer. So we have a lot of experts wanting to willing to answer. Okay?
So I mean, Joko, whoever whoever wants to take the second one. Jonathan?
Right. Okay. So thanks for the questions, Mark. And Ray, so starting with the the position with permitting and the recent judicial review in relation to the Vanguard project. First thing to say is that that's a very specific set of circumstances, very specific to that project and because of the way in which that project and an adjacent project were being permitted in two separate processes running six months apart, and and and there was questions about the extent to which they should have been considered cumulatively or separately.
In relation to other projects, for example, our East Anglia projects, that's not a relevant issue because we are running those permitting processes as one conjoined process. So I think that's quite a specific thing that's not going to read across to other big projects. And I think it's true to say that spatial planning and development is becoming increasingly a hot topic in certain parts of the country because of the the the the upscaling deployment of offshore wind. But I think what you're seeing is, you know, government policy and and other measures being taken to try to address that in the longer term and prevent that from from holding back the industry. So reforms in the planning system, reforms in the grid planning system to try to take some of the heat out of of of those issues.
In relation to the second question, Javier, do you want to answer, or do want me to? So, I mean, I think that the the I I you know, I can't tell you what the oil and gas companies' returns might be. I mean, what what I can say is in relation to that recent UK process, in in really, you know, some of those projects, depending on how long you expect them to be paying the option fees for, but let's just say it's quite a a bullish assessment of around four years, are going to have to somehow deal with a payment of around a billion pounds. Okay?
And if you add a billion pounds onto the cost of an offshore wind project, you have to deal with that in one of three ways. Either you lower your returns, you increase your prices, or you squeeze your supply chain and make the project more efficient. And that's the challenge that those project developers are now going to have to deal with, how do they reconcile that in a very competitive market where pricing is set by a competitive process and in a market where the supply chain is already being squeezed quite heavily. So for us, that's not an issue because we are not carrying those types of costs in any of our projects, as Pedro has already mentioned.
Okay. Maybe, Xavier, can make
a clarification.
Yeah. You don't know me. I mean, Jonathan, in relation with with the last question, I think that maybe this payment, cannot talk about returns in this case, but we can talk in terms of LCOE. And in terms of LCOE, we are talking figures that could be important figures. I mean, somehow, I mean, if you you add your table.
So I'm talking the figures of two digits, probably. Yeah? It will depends on how much you're paying. It's in the very low two digits or a little bit higher, but this is these are important these are important figures. I mean, I'm talking in terms of returns.
When I mentioned to to Gandolfi before, I mean, that that that we were talking about over 6% upwards. Obviously, I was thinking in the projects having looking forward in by by the end of the decade. Alright? Okay? The ones that are going to enter into a more, let's say, competitive and more, let's say, important moments of of where it's going to be going to be a higher competition.
Right? Because obviously, the returns that we're obtaining for the existing portfolio, as it can be achieved clearly for the figures that Pedro has been showing and the ones that we are running nowadays, I mean, are much, much higher figures.
And Pedro, maybe you want to make a final comment as well?
Yes. On the oil and gas companies, I think probably the first thing to congratulate is, as you know, for many, many years, many companies in that sector and many networks, they were opposing a lot of green development in many countries, etcetera. So to see those guys now supporting finally a green development in the economies and in many places is very welcome because I think the countries and the world needs that. I think at the same time, that's a sector that has different metrics to be analyzed and valued. It has also different analysts, different investors.
They look for different things that you have in our utility sector. And I think from that point of view, probably once they have to disclose better the type of moves, investments, acquisitions, returns they are doing, so they may have some issues with perhaps different margins in their upstream business, different margins in the offshore business, different margins in renewable business. I think probably they're going to have to explain how different the business is going to be and what they're doing next and not why. But I think, in general, I think great that finally these people they're also on board from a world point of view supporting the green development.
Thank you, Perrigo.
Thank very much, gentlemen.
Thank you, Marc. Thank you as well. Thank you. Operator, please, I think we have just a couple of more questions or people wanted to ask. Thank you.
Thank you. The next question comes from Jorge Alonso from Societe Generale. Please go ahead.
Hi, good afternoon to everybody. My first question is regarding what made you think that you are very good position for the next tenders? In the sense that in The UK, could it be because you have not paid for the seabed and there is you think you have better reserves? It could be because you have the hub and then you think the real the CapEx per megawatt will be much lower than the peers or in The U. S.
Because of all the different reasons. So just to try to understand from a quality perspective, what makes you think in the three main different areas, The UK, US and the North Sea that you will be winning the tenders in order to put the pipeline into becoming into operating assets? And the second one would be related to the I know that you do not provide a CapEx figure, on average, what could be the average for the CapEx in The U. S, UK and the North Sea? And if you think you can materially beat that average in each of the regions or you'll be more close to the average CapEx in one particular region?
Thank you very much.
Okay. So for the first one, I don't know who wants to make kind of like a summary of the present okay. Jonathan will make a brief summary of the presentation to try to make a summary of it. And for the first question, and maybe, Xavier, you can take the you want to take the second one on CapEx. Is that right?
Okay. Perfect. Jonathan?
Okay. Right. So guys, Jorge, so the reason why we think we would be competitive in each of these processes is a number of factors. I mean, one is that in each case, we are building in an area where we've already established an industrial footprint and we've already established projects. So we're getting a lot of industrial and operational synergies on top of that.
Second is the projects that we're developing are at the right end of scale. So they have, you know, large scale, which again improves efficiency in in procurement and also in in construction and operations. You know, the third thing is that these projects have been developed with an eye on the future and and and, you know, new cutting edge technologies. And again, because of the size of the projects, we're able to engage in in, you know, conversations about being at the cutting edge of technology with our suppliers. And then on top of that, you know, we deploy our our our credentials in terms of project execution, asset management, the ability to finance in the most optimal way.
And you put all those factors together, yeah, I mean, we believe we would be as competitive as anyone else could be in this market at this time for those projects.
Yeah. Yeah. But but I'm sorry to to to interrupt, but is there a particular reason because one particular project has or you think you are in a much better area because of the wind reserves and that that gives you because, I mean, in The US, the last one, I I thought you have all these kind of skills and, I mean, where all the projects are awarded and not not not yours. Just just in order to understand if there is really specific issue that you just think that you give gives you an advantage.
Well, Tim, I mean, in the in The UK scenario, the projects we've got, East Anglia hub, we're talking about massive scale projects in an area which is quite close to shore, excellent wind, good seabed, so as good as you'll find anywhere else. So, I mean, all all the boxes are ticked there. In relation to The US, I mean, I think if you're referring to New York, what we were doing there was taking a project from New England down to New York, and what eventually happened was the project local to New York was was the one that won it. And the next few options coming up, they're coming up in New England, in Rhode Island, in Massachusetts. There'll be one in Connecticut as well.
So, again, I think that, you you you know, the the the the competitive capability is you know, differs from option to option. But in the options coming up, we see that we've got, you know, all the right capabilities, and we've got the right projects in the right locations to be able to bid in and win in those processes.
Yeah. In relation to the to the CapEx, I mean, the difference the CapEx needs of the areas, I think it depends basically of two of two things. One is what how far the the the industry the the offshore industry has been developed in the area. Right? So nowadays, it's clear that Europe is some steps forward in comparison, for example, with The US.
Right? And the second the second thing that makes difference for what's equal over clearly is what are the local content that are required into the province. So this could, in some cases, make some projects more expensive or less expensive depending of how broad the different opportunities of development of acquired appreciation we can have. Nevertheless, for us, I mean, we we treat all our projects from the global basics, from our global design perspective and also for our grow global procurement teams. So in some in that ways, I think we feel as competitive as anyone else in any of the areas where we are actually developing projects.
Thank you, Sabir. I think that we have time for a last question coming from Elcin, if I'm not wrong. Please, operator.
Thank you. The next question comes from Elcin Mamato from Bloomberg Intelligence. Please go ahead.
Thanks for taking my questions. I have two. The first one is on LCOE. You had a nice chart on LCOE reduction on Page 15. Does that account for the fact that we could potentially see higher debt costs with the rising bond yields, higher leasing costs and permitting issues potentially increasing the overall cost of the project?
So that's on LCOE. And the second one is on Scott Wind. My understanding that if it's all a plan to participate in it, what do you think? Will it be dominated by floating or fixed foundation project? I'm not expert on Scottish seabed and their debts.
So if you could help figure it out, that would be great.
Thank you, Elton. So Jonathan, do you want to take on the first one on the LCOE factors that are considered? And maybe, Xavier, you want to touch on the second one on the Scott Wind. Is that correct?
Okay. Yes. Okay, Rich. So on the LCOE, yes, mean, our LCOE projections are mostly driven by technical factors, so driven by a reduction in CapEx, brought about by scale of projects and size of turbines, brought about by a reduction in OpEx, brought about by technology, scale of projects, size of turbines and operating efficiency, and then brought about by increase in capacity factor, which is again driven mostly by technology and asset management practices. So those are the three main ingredients in us driving down cost of energy.
There is, of course, a sensitivity in the levelized cost to cost of capital, but the assumption that we are making is that through, you know, the the course of these projects that we're talking about developing in this decade that we can, you know, maintain a steady cost of capital with room to optimize if we need to.
In relation with the Scott win, I will say the first yeah. The first sentence, and I will leave Jonathan to finish because as a Scott's man, he he probably can tell those a little bit more, the the CEO of that area. Obviously, I think both fixed and floating, but very likely floating is going to to be ahead of the fixed possibilities. But, Jonathan, please correct if I am wrong or just make a be more precise in the
in the answer. Well, yeah, you're absolutely right. I think one of the key drivers for the Scottish process is to to catalyze a a floating offshore wind industry in Scotland, and that's one of the reasons why there was a positive announcement about the auction going ahead more or less in the same format as previously described yesterday in Scotland because they're keen to get the process going and and get these projects going. So I would expect it will be a combination, but there will be more floating projects in Scotland by the end of this process than you see probably in any other market.
Well, thanks a lot.
You very much. I think that Pedro has a final remark to be done before we say goodbye. Pedro?
Yes. Diego, no, I think as a general comment, I think, based on some of the questions, I think we wanted to make sure that everybody knows that the Chairman, Pepe Ignacio, Diego, all of us, we're always focused on value creation for shareholders, okay? There should be no doubt about that. That's our main purpose all the time. And I think this is another effort to be transparent, trying to put on the table information that we in a more detailed way.
And I think we have a long track record of crystallizing value. We have a track record of experience with partners, with sales, anticipating to be in the right place at the right time. And as you guys have seen, doing very, very many transactions many years ago that allow us to be at the right place ten years later. So from that point of view, I think, count on us always on being available to be transparent, and the focus is 100% always on value creation.
Thank you, Pedro. Well, this is I think that this was the last question I want to thank before leaving Xavier, Yonatan and Pedro. Believe it or not, we've looked very coordinated, but Xavier is in Bilbao, Yonatan is in The U. K, Pedro is here with me in Madrid. So apologies if there has been some kind of, whatever, technical mismatch, but I think that it's been really, really great to hear you.
Thank you very much, the three of you, and we'll do the rest. With this, we finished the session. We hope you found it useful and informative. I would like to thank you for your time. Please stay safe, and we really hope to see
you soon. Bye now.
JOSE Bye bye. Thank you.