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 Capital Markets Day in which we have the pleasure of sharing with you our plans for the period to the 2025 and even some of our plans beyond that. Secondly, we hope that you, your families, friends and colleagues are all safe and keeping good health during this global pandemic. Today's agenda has already been shared with all of you. But to recap, firstly, we will begin with an overview of the energy context and a detailed description of our operational and financial targets afterwards, the business positioning and finally, the financial details and the closing remarks 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, our CFO, Peter Saif. Following these three presentations and after a five minutes break, we will move on to the Q and A session. I would also like to highlight that we are only going to take questions submitted via the web. So please ask your questions only through our webpage, www.iberdrola.com.
Additionally, it is a pleasure for me to introduce you to a small selection of our younger, multinational, committed and experienced management team that we have with us today from various locations across the group, some of them physically near to us and others virtually as a consequence of the travel restrictions and compulsory social distancing that we must adhere to in these difficult times. Anyway, that is enough from me. I hope that you find the presentation to be useful and informative. 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, and thank you very much for attending this Capital Market Day. We would have liked to meet you in London as usually to maximize personal interaction. But this is not possible in the current circumstances. We have organized this event virtually, trying to maintain the same level of transparency and to give you the opportunity to ask as many questions as you like. Today, we present Iberdrola's current position and prospect in the short, medium and long term, updating our target for 2022, giving you detailed information about our outlook over 2025 and sharing our vision for the next decade up to 02/1930.
As Ignacio Bunkas said, we have structured this Capital Market Day in three different presentation. Firstly, I give you an overview of the energy context and describe our operation and financial target, in other words, what we are going to do. Then Paco Martinez Korkhalis will explain our operational capabilities to reach those targets, that is how we will do it. And finally, Pepe Sein will provide all the financial details of the plan to maintain our strong balance sheet, in other words, how we will finance it. After my closing remarks, we will move to the usual Q and A session.
We have also with us connected already, as Ignacio mentioned, to answer any question, the three Global Business Directors, the Head of Control, the CEOs of our main subsidiaries and other members of our management teams as is usual in our Capital Market Day. The industry is reaching a real turning point. The concession of the urgency to fight climate change is already almost unanimous. And all the analysts show that transforming the energy industry to electrify energy uses is most efficient way to decarbonize economies. This will lead to a dramatic increase in investment in clean electrification to change the way we produce and consume energy.
And it will also constitute a unique opportunity to accelerate economy recovery and job creation after the pandemic. In this context, we need Energy Group with the commitment, the skill, the technology and the financial strength to lead this process. Iberdrola's track record over the last two decades proves that we are one of those companies. Back in 02/2001, we identified the building blocks for our model, a strong belief in social market economy and a proactive contribution to sustainable development following the same principle that ten years later defined United Nations Sustainable Development Goals. Today, these goals are fully integrated in Iberdrola's strategy in our corporate governance system.
Following this principle for the last twenty years, Hiverrola has been anticipating and shaping the energy transition, investing strongly in cleaner and more reliable power systems based on renewable networks and storage, closing polluting generation plants and concentrating our asset portfolio in our core businesses to produce, distribute and sell electricity and related services also maintaining a constant commitment to efficiency in our operation and increasing our agility in decision making and execution and taking an innovative approach to technology, customer relation and energy policy to capture the acceleration of change in the industry. Over time, following this business model, we have had the courage to implement different energy solutions often against general trends, but always looking for the effectiveness and efficiency. In renewables, for example, we firstly beat on hydro onshore wind and hydropower storage and then invested as well in other technologies like solar, offshore wind and batteries as they become competitive energy solutions. In terms of geographies, starting as a company fully concentrated in Spain, we implemented a deep internalization strategy in areas with attractive rating and ambitious climate policies like UK and United States and then expanding the new geographies in Europe and other continents, always with quick and successful integration process thanks to our friendly approach to mergers.
In terms of financing, Iberdrola growth history has been based on conservative policies preserving financial strength through cash flow generation and efficient proto liability management, ensuring open access to different markets and structures and leading development of financial products such as green bonds. DALCOM for these twenty years is a larger and stronger group that has created sustainable value for stakeholders. As shown by our environmental, social and governance metrics like investment in renewable energy, reduction of emission, measures to promote diversity and equality, the increase in training hours for our employees or job creation either in the company or in our supply chains, always with fluent relation with trade unions. And we have demonstrated that transforming Iberdrola into a greener and more sustainable company was also the best way to create shareholders' value, multiplying our size by six times and our result almost by five times, delivering a total shareholder return of 650% since 02/2001. And becoming one of the three largest utilities worldwide, a global DIVASEFE group based on regulated and renewable business with 80% are in A rating countries.
But as I said, Iberdrola twenty year journey has also placed us in unique position to accelerate growth in the current next scenario. Today, the need for decarbonization is more pressing than ever. Only in the last month, we have suffered extreme weather event in fires like in California, massive floods in Southeast Of Spain or heavy snow in Scotland. Policymakers all over the world are taking several action to face this challenge also in response to the increasing social pressure. At present, countries that consume more than 50% of world energy have already set net zero emission goals for 02/1950.
This increase in ambition is in line with the improvement in efficiency and competitiveness of clean technologies like wind, solar or batteries that have reduced cost by 80% in the last ten years and with the demands of customers who are clearly expressing their preference for clean, sustainable, affordable and smart energy solution. These factors will drive a very relevant transformation of the energy landscape in the coming decades. According to all reset bodies like the International Energy Agency, the only way to supply all the world's energy requirement and reach emission reduction targets is a very significant increase in the share of electricity as a percentage of total energy. In fact, electricity demand is expected to double by 2,050, contributing to close 40% on a demand by this year. Higher energy efficiency resulting from the substitution of fossil fuels with renewables will make this huge increase in electricity use compatible with a 10% decrease in final energy consumption and with a 70% fall of CO2 emission by 02/1950.
In this new context, we'll require an unprecedented acceleration of investment reaching $2,700,000,000,000 per annum in 02/1930. This means that in just the years, we will need to multiply by three times the current annual investment in electricity generation, storage, transmission and distribution. It will want to supply the new demand for all the sectors. In transport, electric vehicles will continue increasing market share as battery costs keep declining a new charging infrastructure in this bill, multiplying power consumption in this sector by 15 times in 02/1950. In building, the electrification of cooling and heating will boost electricity demand, partly offset by new energy efficiency measures.
All in all, demand in building is expected to increase by more than 50% by 02/1950. Finally, industrial consumption will also go through a deep transformation mainly to electrify processes that currently use fossil fuels. In addition, other processes will be decarbonized through new technical solution like green hydrogen. Covering all this demand will require to multiply renewable capacity by 2.5x in just ten years to reach 7,000 gigawatts. Out of the 4,000 new gigawatts needed, 2,000 gigawatts will be 62 thermal and nuclear plants that will close over the decade.
This amount, to give you a number, is equivalent to the current total capacity of The United States and the European Union combined. On top of this, 2,200 gigawatts will be needed to cover the electrification of new users. This trend will continue in following decades with renewable capacity increasing by around 4,000 gigawatts even ten years, reaching 50,000 gigawatts by 02/1950. By technologies, solar and wind will contribute 90% of the new capacity addition by 02/1930. Offshore wind will show the strongest growth rates with installed capacity multiplied by 7x.
Solar PV will multiply by 4x and onshore wind by three. This acceleration of renewable investment will be common across all geographies and very special in all these in which Iberdrola is present. For instance, offshore wind capacity is expected to rise by 50 gigawatt in the next ten years in U. K, Continental Europe and United States. All in all, the potential growth opportunity for Eberdrol is enormous, just if we aim to maintain our current share in each of these markets, which is today from 5% to 15% approximately.
Bringing all these renewable energy of consumption centers will increase very heavily the current investment levels in distribution and transmission networks as well. Average global investment will be need to increase by 60% to $430,000,000,000 per annum in the next decade and will multiply by three times to more than $800,000,000,000 per year from 2030 to 02/1940. This will be experienced across all geographies due to a combination of new demand, the need to integrate renewable capacity, new interconnection, network reinforcement and smart grid and storage. Finally, electrification, together with new products and services linked to this process, will increase the value of access to industrial and residential customers, creating also opportunities in energy uses for which direct electrification is not technically feasible, such as certain industrial processes and heavy duty transport, which together represent 16% of final European energy demand. Over the last month, we have seen several administration taking a specific action to support their transition from grid to green hydrogen, like in European Union, which published a new hydrogen strategy targeting 40 gigawatt of electrolyzer by 2030 or in Spain, where the government approved hydrogen roadmap targeting four gigawatts by 02/1930.
The production of green hydrogen will also be a very large source of new demand for renewable energy. Producing all the hydrogen currently required for industrial processes through electrolysis will mean an additional renewable energy demand of 3,000 terawatt hours per annum, equivalent to today's total electricity consumption in Europe. Finally, decarbonization through renewables will multiply the requirement of efficient storage capacity, both hydro pump and storage and batteries, in order to increase system flexibility and security of supply. Only in Europe, more than 40,000 megawatts will be added in the next ten to fifteen years. The new contest I have just described makes the Verdola business model even more suitable for the years to come.
After having invested €120,000,000,000 in two decades, today Verdola is in the best position to face this new stage of investment acceleration across the whole electricity value chain. As we have seen, we are taking about we are talking about multiplying renewable capacity towards electrification and decarbonization, investing more in transmission and distribution networks to increase resiliency, connect new renewables and integrate more complex system building more storage capacity to accommodate supply and demand and optimize energy resources and providing more energy solutions to customers who will push this revolution looking for competitiveness, efficiency and sustainability. Becoming a winner in this scenario will only be possible for companies focused on countries that combine a clear commitment to their carbonization with a credibility and the strong credit rating needed to attract investment in very competitive environment. Companies that have already made the energy transition a key element of their purpose and values beyond opportunistic approaches and have their capacity to make incremental investment and maintain efficiency in operation. And we are also talking about companies with experienced and well prepared teams with a track record of execution and delivery on time and budget and sufficient management flexibility to constantly review and optimize their portfolios preserving a strategic focus and finance sustainability and that innovative every day with new solutions to anticipate customers' needs and improve competitiveness.
Hyperdola has been getting ready for this opportunity over the last two decades. We are fully prepared to take part of this energy paradigm with a not new that is not new for us, accelerating investment and maintaining our financial strength, to deliver growth and sustainable dividends to our shareholders and to act as an engine for recovery promoting industrialization, creating economic activity, boosting productivity, generating new jobs and delivering sustainable value for our stakeholders. We have the team, the know how and proven expertise of execution. All the geographies in which we are present are showing the day after day a clear commitment to this energy transition to give you just a few examples. In European Union, it has increased ambitions of the Green Deal through the mobilization of 37% of the total €750,000,000,000 from the next generation EU funds to put in place the most powerful decarbonization agenda even seen targeting a 55% reduction in emission by 2030 and carbon neutrality by 02/1950.
The UK has reaffirmed its net zero goal by 02/1950, taking steps to become the world leading in offshore wind. And more and more United States continue to upgrade their renewable energy target for the coming years. Energy policy is already there. Now it's time for execution. And only those who have been able and been already working for years ahead of this moment will be ready to take this opportunity.
In our case, in just two years, we have increased by 75% our renewable pipeline to reach 70,000 megawatts worldwide. In particular, our offshore wind pipeline has multiplied by almost two, up to 20 gigawatt in United States, U. K, Germany, France, Japan or Sweden as well the vessel portfolio of projects that will be maturing over the next ten years, starting with our American, French and German project and then adding other geographies. This will allow us to maximize investment opportunities and accommodate a rational use of technological human and financial resources. We also have more than 15,000 megawatt of onshore wind pipeline and over 30,000 megawatt of solar photovoltaic located in most system of geographies in terms of any resources and policy support mechanism.
We are talking about a specific project, not just DREAMS or pieces of paper. 7,000 megawatts of this capacity are already under construction and we expect to continue maturing new projects in a similar pace in the future. And over the last year, our track record shows our ability to commission 5,000 megawatts per annum. Our plan considered that less than 50% of our current pipeline will start operation in 2025, a pipeline that for sure will also continue growing in the coming years. In Networks, our footprint combines markets with a strong growth in demand like Brazil with others with significant investment requirement to enhance transmission capacity and reliability like United States or to reinforce and digitalize the grid like United States The UK or Spain.
All of them also present big opportunities linked to new electricity uses in cooling and heating or electric mobility. In terms of customer base, several years ago, we anticipated the value of access to customers to sell new product and services, hedge energy position and find new roads to market. On top of this, electrification is adding a new value source to Iberdrola HSE customer base on more than 40,000,000 contracts at present. In our consolidated markets of Spain and U. K.
As well as the fast growing areas as Portugal, Italy or France, where we have built a significant footprint in the recent years, and new markets like Germany, Brazil or United States. For each of them, we are building different channels, including powerful digital platforms in a wide of competitive product portfolio admitting of our customer energy need from pure energy to value added services like mobility or smart solar or essential customers. Other energy solution for industrial and commercial customer like on-site solar energy efficiency or more recently, green hydrogen in sectors for which solution based on electricity are not technically feasible, like steel, glass, ammonia based fertilizers or heavy transport. Given the ambition energy policy targets and the increased environmental awareness of industrial customer, we are working in different initiatives on top of the addition of new renewable capacity for electrolysis. We had contracts in advanced state to support the creation and development of numerous factors of electrolysis to avoid bottlenecks in the supply chains with the same rationale as with Gamesa two decades ago.
We expect to give you more details shortly. And we are signing industrial alliance to accelerate the use of hydrogen in different manufacturing process like we recently announced with Vertivaria. Based on this energy landscape and building on the strength of our business model, today we are presenting you an ambitious but realistic outlook for the coming years. We have updated our financial projection with macro and energy assumption, then take into account the economic impact of the COVID-nineteen, especially in the short and medium term. In particular, our energy assumption reflect lower demand and commodity prices with the exception of the carbon emissions.
This impact power prices mainly between 2020 and 2022, which with a most stable evolution from 2023 to 2025. In terms of currencies, we are now projecting lower exchange rates of dollar, pound and real against euro. And we are also forecast lower interest rate we will remain at current levels to 2022 and then increase slightly. Again, in this scenario, we are implementing several management measures to avoid negative impact in our results. As you already know, we have accelerated our investment, increasing them by around 10% in organic terms to 2022 or by 35% including corporate transaction P and M resources in United States for €7,000,000,000 and the smaller deal announced in Australia, France, Japan and Sweden.
All in all, investment will reach €50,000,000,000 from 2018 to 2022. In terms of operating efficiency, as we have reported over the last quarters, the company is making a net strive for in all activities. This is allowing us to increase our saving target by 33%, reaching EUR 1,600,000,000.0 in the just five years. Looking at the impact of this scenario on group net profit for 2022, we are forecasting that exchange rate, new market condition and lower return to regulated networks driven by lower interest rate will have a combined negative impact of EUR 100,000,000. We will be more than offset by the positive effect of interest rate on our financial expenses as well as the management mentioned implemented, high investment in cost control for a total net positive impact of around €150,000,000 Once we add the net profit from P and L Resources transaction, we are increasing our 2022 net profit guidance to between EUR 4,000,000,000 and EUR 4,200,000,000.0 from EUR 3,700,000,000.0 to EUR 3,900,000,000.0 that was the previous one, which allow us to maintain our shareholder remuneration policy with our dividend payout ratio between 65%, 75 and floor of €0.4 per share until 2022.
Focusing now on the outlook for the period 2020 to 2025, we will continue accelerating our investment to reach €75,000,000,000 over the next six years. Within an upward trend, they will lead us to almost double the average EUR 7,000,000,000 invested between 2017 and 2019 to reach EUR 13,000,000,000 per annum in the last three years of the plan. 75% of this investment will be allocated to growth activities, maximizing the opportunity from the investment cycle we are entering. And these figures are based on projects already identified. Out of the €68,000,000,000 that will be dedicated to organic investment, 70% is secured.
With this percentage rising 90% in the case of Networks, thanks to regulatory frameworks already in place, which reflect higher investment need to support the electrification of the economy. And in Renewables, 60% of investment are already secured too. These are specific projects of the 30 gigawatt of the plant put in service seven are already under construction, as I mentioned before. And the remaining 23 represent one third of our total pipeline. As I mentioned, we expect to commission five gigawatt per annum in line with the last year.
By business, renewable will contribute 51% of the total organic investment more than Europe and United States, consolidating the position of this business as a group first investment destination. Network investment will also increase in the geographies, mainly United States and Brazil, reaching 40% of the total. By geography, let me highlight the very significant increase in the contribution of United States and continued Europe led Iberdrola Energia International. By 2025, we expect to allocate to this new growth platform as much investment as in UK. As a result of the total share of investment in A rating countries, we'll continue to increase reaching 83% over the period.
The plan will lead us to double our renewable capacity in CZR up to 60 gigawatt by 2025. And to show you that our sustainable growth will continue beyond this period, we have already identified project for 11,000 megawatts that will be under construction by 2025. On top of renewable, as you know, we have 20 gigawatt of another generation technologies for a total installed capacity of more than 80,000 megawatts. In the coming five years, we will split our renewable investment almost evenly among onshore wind, offshore wind and solar PV. As you know, offshore wind require higher investment per megawatt installed, but this technology also delivers five times the EBITDA per megawatt of solar and three times the EBITDA per megawatt of onshore wind.
Over the period, we will add new offshore wind facilities in France and Brick, which is in construction United States Vintage Wind and Par City Wind Germany, Vaticigel and on top of East Anglia one in U. K, we began operation already in 2020 for a total of three gigawatt of capacity. Biographies, the largest contributor to this growth will be Spain and United States. And Iberdrola and Energia International will multiply its capacity by eight times contributing to 7,000 new megawatt for of 25% of the total group capacities additions and become the third largest area by installed power in the group. Again, the group projection for this new growth platform are based in specific projects.
In solar, more in Portugal, Australia and Italy In offshore wind, mainly Australia and France. In the case of offshore wind, France and Germany, is now in construction. Regarding Netherlands, our regulated asset will increase by 50%, reaching €47,000,000,000 by 2025, within three main growth drivers: organic investment in all our markets the regulated assets based on P and L results in United States and additional transmission investment outside our franchise areas, which are growing quickly in countries like Brazil, United States, which will reach EUR 4,000,000,000 by 2025. Thanks to the integration of P and L Resources, the new interconnection line with Canada and other investment in transmission and distribution, United States will become the guru's largest geography with around 40% of total assets or regulated assets by 2025, followed by Spain with 2383% of the total regulated assets will be in A rated countries by 2025. Our portfolio of contracts will also increase by 40% to EUR 60,000,000 driven mainly by growth in European countries and the addition of new product and energy solutions will double to €24,000,000 This will place Iberdrola in the best position in the context of increasing electrification and more customer productivity.
Biographies, Iberdrola and ETI International will reach a similar number of contract to The UK, where we also expect to increase our energy services. The rest of geographies will grow more moderately, losing relative weight to the growth due to the growth of Iberdrola and Energia International. As mentioned a few days ago, we announced an alliance with one of the largest producer fertilizer in Europe, Fertibaria, which will be our first investment in green hydrogen, resulting 600 megawatt of electrolysis in production with a production of 15,000 tons of green hydrogen by 2025. This plan will require financial reporting scheme that, in our view, are more than justified at this project because this project will accelerate the competitiveness of green hydrogen, develop new industrial activities across the hydrogen value chains and create thousands of qualified jobs in Europe. Following our twenty years model, these ambitious growth plans are combined with an extra effort in efficiency and cost saving as Paco Martinez Corquel will explain in detail later on.
We expect cumulating saving of €1,500,000,000 from 2020 to 2025 as a result of the ongoing improvements in our net operating expenses gross margin ratio will fall below 25% by 2025. Out of this total, we expect €1,000,000,000 to materialize between 2023 and 2025. Combining all these factors, EBITDA will increase by EUR 5,000,000,000 to reach around EUR 15,000,000,000 in 2025, which is 6% to 7% annual growth rate from 2019. 80% of the operating result will continue to come from Networks and Renewables by 2025. Investment in green energy will increase the contribution of Renewables by more than five points over the period to exceed 30%.
Generation and Supply is expected to maintain a contribution of above 20%, mainly thanks to the new retail activities in Europe. By currency, the contribution of euro and dollar to total EBITDA will increase with more than 80% of EBITDA coming from A rating countries. Net profit will reach around EUR 5,000,000,000 in 2025, increasing by EUR 1,500,000,000.0 for a 6% to 7% annual increase as well. Maintaining our commitment with financial solidity and strong rating levels as Pepe Sahid will detail later on. In terms of dividend, we reaffirm our target to increase shareholder remuneration in line with results, which allow us to maintain our shareholder remuneration policy with a dividend payout ratio between 6575%.
According to our result estimate, this will lead to a dividend per share of approximately €0.53 €0.56 by 2025. In addition, we'll have an increasing floor of €0.4 per share up to 2022 and then €0.44 per share afterwards. We will also preserve the optionality for our shareholders through the Iberdrola Ratuille of Receivables program, including share buyback. I started this presentation defining social market economy and the United Nations 2030 agenda as the building block of our model. The expected impact of our outlook for 2025 in all our stakeholders show that our commitment to social dividend is not just limited to a nice work.
So far, today, I have been describing what this plan will mean for our shareholders, but we always take our decision thinking in our foremost triangle, looking for a balanced outcome that benefits employees and society as well. For this reason, we have developed an environmental, social and governance plan with a specific and modified target in a wide range of indicators. Today, we reaffirm our determination to become an active player in the transformation of the current social economic model and leave a better world to future generation. In environmental terms, apart from our emission reduction goal, we will explain later by 2025, we'll contribute for reforestation by planting 1,000,000 trees with ambition to reach 20,000,000 by 02/1930. We'll also maintain or increase our current training hours per employee, which today is four times above the European average, increase the number of jobs we support globally from 400,000 to 500,000 in just this year think our investment and purchases, contribute further to gender equality, increasing the share of women in leadership position and having no gender pay gap in achievement we already reached in 2019.
Of expanding the number of beneficiaries of our electricity for all program from 14,000,000 people to 25. We also determined we have at least 75% of suppliers with sustainable policies. This plan also reinforced our leadership in terms of decarbonization. Our carbon emission per kilowatt hour, which are already two thirds below European average, will continue decreasing to reach zero emission in Europe already by 02/1930, becoming a key actor for the success of Europe's climate ambition from 2030 to 02/1950. Let me repeat it, this plan lead us to zero emission in Europe by 02/1930.
Globally, we expect to reach less than 50 grams per kilowatt hour from our current 110 grams. This is significantly below the targets of our main competitor for 02/1930. Finally, after the measures taken in the last year, Iberdrola positioned at the forefront of corporate governance and compliance, it recognized by prestigious bodies. But this does not lead us to complacency. Instead, I increase our commitment to remain as smart as this in this field as well.
Now I will pass the floor to Paco Martinez Corcules, the business CEO, to explain more in detail how we are going to make it. Thank you.
Thank you, Chairman. Good morning. During my presentation, I'm going to detail our view about the technological evolution impacting the electricity system, the competitive advantages of the company, and our key actions to benefit from the growth opportunities we have ahead. In terms of technology, the evolution will be driven by the decarbonization as the main challenge we have in the system. All renewable technologies will significantly increase their presence in the electricity sector requiring a large amount of investments on networks to integrate their energy and on storage to absorb their output variations.
Thanks to this expansion of renewables, the electricity becomes the most cost effective energy carrier to remove the emission from the majority of the demand, postponing the decarbonization of the most difficult sectors to the availability of other solutions different from electricity. Renewables technologies are already competitive, but a further reduction of cost is expected during the decade driven by the huge growth they will register. This massive growth will impact the electricity system in which renewables will be the main source of energy with an increasing need for demand sign response and storage for flexibility purposes. Regarding photovoltaic, the technology evolution will be driven by the improvement of efficiency in the modules, a further reduction of material needs and a performance increase in the production lines. As a result, we expect an efficiency improvement of 25% and an increase of installed capacity of 4x.
In terms of onshore wind, we expect improvements derived from the larger size and the weight reduction of the turbines as well as the progression of modular components and digitization. This evolution will allow an efficiency improvement of 14% and an increase of installed capacity of three times. In offshore wind, the technology evolution will be driven by the economies of scale, together with an increase of standard and modular components as well as innovation construction and operation. As a result, we expect an efficiency improvement of 9% and an increase of installed capacity of seven times. The increase in renewables technologies and in the electrification of the economy will imply a strong increase in networks as well, given their unique role as integrators of the generation and supply sides.
We also expect a more active role of the demand in the system as its flexibility needs will increase a long time. More storage will also be needed to integrate the increasing amount of renewable energy. In this regard, we expect a large technology evolution of the batteries driven by the strong increase of electric vehicles that will imply a cost reduction above 50% by 02/1950. Given their size and modularity, the batteries will increase their role in the electricity system. However, the efficiency and capacity to store large amount of energy makes the pumped hydro the most cost efficient solution for providing flexibility, and we expect this will be the preferred alternative where possible.
The expected cost reduction of green hydrogen will enable its storage role in the electricity system, but our view is that this will be an eligible solution in most of the markets as its small efficiency will hinder to be a competitive alternative. Given its ability to integrate renewables, the electricity is and will be the most cost effective way of decarbonizing the economy. As European Commission has stated in its in its strategy, the principle of energy efficiency first should guide the decarbonization. In this regard, the electric the electric appliances, as the electric vehicle and the electric heat pump, have a clear competitive advantage against other alternatives given their much their much larger performance. Therefore, we expect an increasing role of electricity for decarbonizing light transport and residential heat, which could also be spread to heavy duty transport and some processes of the industry in the medium term.
There are some niche areas in which electricity is not decarbonizing alternative or competitive. For this consumption, which only accounts for 16% of the demand, the green hydrogen is expected to be the main solution for reducing emissions. Based on three drivers, reduction of electricity costs, lower CapEx and larger electrolyzer performance, we expect the cost of green hydrogen will be reduced by 2,030. As a way of improving technology and reducing costs, the carbonization of the hydrogen used as feedstock in the industry should be the priority. Now moving on to Iberdrola's competitive advantages, I'm going to detail them around three main topics: diversification, experience and size and customers.
Regarding diversification, Iberdrola accounts on a diversified model in all the scopes: business, geography, technology and route to market. In terms of business, the company has always tried to adapt its progress to the new needs and trends of the industry, which have resulted in a potential growth opportunities in several aspects of the three businesses, giving us a broader flexibility to select the most profitable ways of growth and a more diversified source of results. As of geography, Iberdrola counts on a diversified position across the three businesses at country level to increase stability and to maximize flexibility and synergies. Regarding technology, the company has always bet for exploring the new needs of industry, which has resulted in a healthy position in terms of renewables with a balanced mix of the different technologies and customer services being able to offer a broad range of products. As a consequence, Iberdrola is able to propose an integrated and sustainable model.
For instance, we benefit from the complementarity of wind and solar production, offering renewables PPAs to customers with base load needs. Lastly, the route to market approach, which is essential to sustain the growth. As shown in the graph, Iberdrola has multiple ways of developing projects and making them feasible. This allows us to find the most profitable way for growing in power plants, but also a flexible model to keep investing when a certain solution is no longer valid. For instance, it is typical to see huge competition in renewable auctions even from non incumbent players and a more reduced and selected playing field for PPA's contracts.
In terms of experience, Iberdrola has developed a strong management and execution capacity, which is essential to control the delivery in periods of sustained growth. There are three levers we have developed in this regard: the identification of core activities in each business to preserve know how and outsource low value services, an effective combination of global model with local capabilities, a permanent focus on customer and ESG. Regarding renewables, we have identified the core activities we want to preserve in order to secure the delivery of the growth, especially in terms of development control, technical know how and construction supervision. As of networks, the technology know how is a key element of the value chain as well as the consistency and control of the operations. We have implemented global processes, systems and tools that are adapted to local characteristics and updated with any best practice the different teams find and share.
In retail, Libertola takes care of the complete customer experience focusing on their product design and sales. Let me highlight our commitment to ESG in this area with particular measure to vulnerable customers and special effort on social collaborations. Another aspect in which the experience has a great impact on is the efficiency. Hiberdola's best in class in this regard has been developed along the years based on the early implementation of digital solution and the best practices exchange, which have a large effect on the central control dispatch operation and maintenance of the assets. The third competitive advantage is our customer base.
We believe that our customers are an essential element of the business and we keep them at the center of our decisions. They provide a natural hedge for our generation, mitigating the risk from price variations. This is one of the reasons why Verdola continue growing in renewables position. This fact is also beneficial for the customers as many of them do not want to be exposed to electricity price changes and are willing to have fixed price contracts. For residential customers, Iberdrola's Iberdrola approach is to be the unique provider of their energy needs, offering customized products for heating and cooling, mobility, self consumption or efficiency.
This give us the opportunity of fostering our customers' loyalty and getting more value from them. For industrial customers, Iberdrola offers an integrated model, which is composed of all the services needed. We can be the interface of the customer with the market, provide a renewable base load PPA, thanks to our mix of renewable technologies, or help the customer to decarbonize their energy consumption and processes by electrifying heat or producing green hydrogen. This is the case of the Portoiano project, our pioneer bid for decarbonizing the use of hydrogen as feedstock in the industrial process to obtain ammonia. Now moving on to our key actions for this strategic plan, we have identified four.
Growth, as the world requires a massive increase in the electricity sector that will benefit our stakeholder, creating employment, local providers, training, acceleration to increase momentum and grow in line with the decarbonization progress, investment efficiency and operating efficiency, both devoted to gain competitiveness to secure growth and results. Starting by growth in renewables, Iberdrola plans to invest €34,000,000,000 in the period in all technologies and countries to increase our diversification and take advantage of the best opportunities. 90% of the investment is devoted to growth and 60% of the total is already secured. Let me highlight the strong bet of the company for offshore wind and for Iberdrola Energia International, where our position in Australia, France, Germany, Italy, Portugal, Ireland and Greece has significant significantly increased with the integration of Alto Power and Iffigen, giving us two additional platforms of growth. These investments will enable the installation of almost 28 gigawatt of renewable capacity, half of it solar photovoltaic.
In terms of geographies, Spain and international will be the main destinies of the new assets followed by The United Kingdom. As a result, Iberdrola will almost account for 60 gigawatt of renewables by 2025, almost doubling our capacity in only six years with a healthy mix in terms of technology and origin. Onshore will be the leading source with a weight over 40% followed by hydro and solar. Spain will have more than 24 gigawatts installed, thanks to our strong presence in hydro followed by USA and international. In order to secure this growth, Iberdrola accounts with one of the largest pipeline in the industry over 70 gigawatt of projects in different stages.
Let me remark its high quality given the solid diversification in terms of technology and countries as well as maturity. The company has seven gigawatt already under construction, as the Chairman mentioned, 25% of the total new capacity and over 15 gigawatt of projects in different phases of permitting process, adding around 10 gigawatts to the pipeline every year. You can see the complete detail by technology and country where solar and offshore have the main contribution as well as USA and international. Now regarding Iberdrola Energia International, our plan considers an increase of capacity of almost seven gigawatt, focused on Australia and Europe. Regarding our growth in solar photovoltaic, Iberdrola will install almost 14 gigawatt up to twenty twenty five.
Close to six will be put into service in the first three years, having already 2.7 under construction. Spain will be the main destiny of the growth followed by international. The company will install almost seven gigawatt of onshore wind having close to five already secured and more than two under construction. The mix by geography is well balanced, being international, the region with largest growth. In terms of offshore wind, Iberdrola will add 2.6 gigawatt of new capacity up to 2,025, reaching almost four gigawatt installed at the end of the plan.
Two projects are already under construction, St. Louis and Baltic Eagle, and the other two are awarded and with secured PPA, Vinyar and Par City. Moving on to net worth. Iberdrola will invest €27,000,000,000 during the period. 60% of the investment will be devoted to grow our asset base, whereas 90% of the total investment is secured under current regulatory frameworks.
USA will be the main destiny of the investments having the other three countries a similar weight. Most of the effort will be devoted to regulated transmission and distribution, but we also plan to invest on competitive transmission to enlarge our opportunities of growth. This strong investment will allow 55% increase of our asset base, which will exceed €47,000,000,000 by 2025. The mix of the asset base is in line with the investment being The U. S.
The 40%. As shown in the graph, the evolution of the asset base will be mainly driven by the investments in regulated distribution and transmission, in competitive transmission and in PNM, partially offset by the regulatory amortization of assets during the period. Let me highlight the stable regulatory frameworks that Iberdrola accounts on with almost 80% of them secured up to 2022, especially in Spain, Brazil and U. K. In competitive transmission, we expect growth opportunities in different countries.
We are already developing an effect in The U. S. And several projects from Brazilian auctions. We will analyze further auctions to see excuse me, in these two countries and in new geographies where the company is present. Moving on to the generation and retail business, Iberdrola will invest €6,000,000,000 during the plan, especially in the retail activities to increase our customer base.
Spain will be the main destiny of the investments followed by U. K, including the smart meters deployment and international. 60% of the investment will be devoted to growth. During the period, the company will significantly increase the service to customers reaching 40,000,000 by 2025, 60% more than today. As I have already mentioned, Iberdrola is devoted to the growth of smart solution as they increase the loyalty of the customer, fulfill their needs and allow us to benefit from the rise of electricity consumption.
We expect an increase of smart solutions of €11,000,000 up to 2025 with a balanced mix between Spain, UK and the rest of the countries. Iberdrola is building strategic alliances with manufacturers and customers to reinforce our positioning and ensure our growth. Mobility has had a more active role in this regard given the more advanced stage of the industry, but we have also developed relevant projects in areas like solar or green hydrogen. Let me move now into the second key action, acceleration. We have enlarged the speed of our growth to benefit from the early movement and to gain momentum for the decarbonization progress.
That is why Iberdrola's investments are increasing during the years, going from an average amount of €7,000,000,000 per year in 2017 to 2019 to around €13,000,000,000 per year in 2023, 2025. In terms of renewables, therefore, has increased our installed capacity per year, growing over 3x during the plan. Instead of an average installation of 1.6 gigawatt per year up to 2019, Iberdrola will put into service over five gigawatt per year from 2023 onwards. In terms of our regulated asset base and considering different effects, we expect a larger growth rhythm in line with the investment required for the decarbonization. Regarding services to customers, we also expect a steady increase of our sales in smart solutions, especially on the ones concerning mobility and heating and cooling.
I will comment now our key actions designed to increase our competitiveness. In investment efficiency, Verdola will continue improving the business process, especially the ones concerning development and construction. The larger use of standard designs, equipment and procedures will enable the capture of synergies along the life cycle, whereas economies of scale and technology evolution will also play a significant role to optimize investments. In terms of operating efficiency, we will maintain our effort on the early implementation of digital solutions to increase our remote activities and improve process. We also expect gains derived from economies of scale and asset optimization, thanks to the improvements on logistics, availability and standards.
Let me conclude. Iberdrola is perfectly positioned to keep growing. Our pioneer bet for renewables, smart networks and solutions for our customers allows us to be in the right place at the right time. In renewables, we have a high quality pipeline of 70 gigawatts and investments of €34,000,000,000 to increase our installed capacity by almost 30 gigawatt by 2025. Of that, close to half is secured and seven gigawatt are already under construction.
In networks, we have stable regulatory framework and investments of €27,000,000,000 up to 2025, which will enable an increase of our regulatory asset base of €17,000,000,000 In retail, we will get 15,000,000 services more in the period together with 600 megawatt of green hydrogen. This growth will result in a strong benefit for the society creating wealth, high quality employment and development of local industry and providers. Iberdrola counts on a strong competitive advantages that will allow us to optimize the growth opportunities. We are well diversified in all scopes, business, geography, technology and route to market. This give us more stable results and a broader pipeline of opportunities to grow in all the businesses.
Our experienced and extended assets have developed a compelling management, execution and efficiency capacities that allow the company to be a reference in competitiveness and know how as our track record of delivery shows. Iberdrola's customer base is key to growing the electricity system as it is a natural price hedge for our increasing renewable production, which will balance our short position in generation, a source of results given the rise of consumption and the perfect platform to sell more added value products. Thank you very much for your attention.
Thank you, Paco, for providing us details how we'll do this plan. And now Pepe will provide the financial details of plan. In other words, how we will finance it. Pepe?
Good morning to everybody. I hope everybody is doing fine and keeping healthy in this difficult situation. Following the Chairman and the CEO presentations about the future prospects of Iberdrola in this era of energy transition and great opportunities for the group. I will now explain how we are going to finance this plan, maintaining a strong financial profile and creating value for our shareholders, adding the F of financial performance to the concept of sustainability. So for the 2025 period, we will continue our sustainable financial strategy as we have proven in the last years with a sustainable growth path combined with a maintenance of a strong financial position along the plan with the credit ratios in the BBB plus Baa1 levels and with green and sustainable financing where we are leaders and will be at the core of our financing strategy and at the same time, enabling a sustainable growing dividend policy, growing in line with the earnings per share with a 65%, 75% payout ratio with €0.4 per share floor up to €22 and €0.44 per shares up to 25 And as the Chairman has explained, given our earnings estimate, reaching a EPS range of €0.53 to €0.56 by 2025.
Green financing is the way that suits best in our sustainable strategy. Our green financing framework is considered a best practice, aligned with the International Capital Markets Association green bond principles and only including assets and activities eligible under the European Union taxonomy. Use of proceeds, reporting external verification and strict standards for the eligibility of activities together with a full alignment of the company's strategy are highly valued by ESG investors. Investors find in the use of proceeds approach the best way to measure the sustainable impact of their investments. Comprehensive reporting, second party opinion and external reporting guarantee assurance and transparency.
Our current asset base and investment plan focused in the energy transition allow the group to continue taking advantage of the green bond market. This allow us to increase the investor base and as a consequence to reduce the cost of our debt. We estimate that green sustainable financing can save up to 15 basis points according to Citi reports, etcetera, and other investment banking reports. We estimate that 75% of our total investment plan will be considered as sustainable green under the EU taxonomy criteria. This percentage could potentially increase up to 81% considering two more U.
S. States, which will be in the trajectory to decarbonization by 2025. As of today, sustainable and green financing already in Iberdrola is up to 22,000,000,000 €40,000,000,000 of green financing mainly through bonds and another €8,000,000,000 of sustainable credit lines. Our proven financial track record supports the credibility of our commitment towards sustainable financial strength. Our FFO over net debt ratio has been maintained above the credit rating agencies' 18 threshold, guaranteeing a BBB plus rating since the end of the financial crisis.
Our asset rotation plan of €3,500,000,000 for the period twenty eighteen to 2022 has been exceeded, reaching €4,600,000,000 Regarding green financing, as I have explained, we are the world leading private group in green bonds issued. In 2014, Iberdrola issued its first green bond where funds proceeds were used to finance green projects. We were the first Spanish issuer of a green bond as the world Spanish the first Spanish issuer of a green hybrid bond. Since then, Iberdrola has consolidated green financing following the group investment strategy. Our commitment with green financing goes beyond the holding level and thus our subsidiaries in The U.
S. And Brazil have already been tapping this market. This has led the Iberdrola Group to become the world's biggest corporate issuer of green bonds. Our FX risk management strategy both structurally and on a yearly coverage has been proven effective protecting our solvency ratios and the group's yearly net income. A highly diversified source of funds allow us to continue reducing spreads and increase our average debt maturity.
In 2020, we signed new financing for more than €5,000,000,000 through the lockdown and recently we have added another €3,000,000,000 through an additional hybrid issue. And finally, we have maintained through the past years excellent liquidity levels more than fulfilling rating agencies' requirements of eighteen months coverage of financial needs in stress scenarios. During the 2025 period, we will have €94,000,000,000 as sources of funds to apply to CapEx and dividends. 67% of the plan needs will be covered by funds from operations, 19% will be additional debt, 88% hybrids and 1% tax equity structures and the remaining 5% will be covered through asset rotation. 80% of our sources will be dedicated to investments, including 6% capitalized cost and 10% of assets under construction at the end of the plan that will deliver further growth and cash flows post 2025.
The remaining 20% will be dedicated to dividends. Working capital will have a slight positive impact. This growing investment cycle will be funded while maintaining financial discipline with a strong solvency ratios throughout the plan. Our net debt to EBITDA will be around 3.6 times, 3.7 times. Our FFO over net debt will be between 21.5 times and 22.4 times and our retained cash flow over net debt will move around 20%.
Although our ratio calculations differ from those of the rating agencies, these ratios in our opinion are consistent with the 18% threshold that rating agencies require to maintain a BBB plus Baa1 ratio. As you can see in the slide, during the twenty nineteentwenty twenty five period, net debt increases 47% to €56,000,000,000 an average of 6.6% per year, driven by the significant investment effort that have been already explained. In the same period, FFO increases more than the debt, 51%, reaching an average increase of 7.1% or 0.5 percentage points more than debt, guaranteeing an adequate debt coverage. You will see that in 2021, we have a big growth peak in our investments plan and this is due to the consolidation of PNM. Our asset rotation plan has a flexible approach depending on investment opportunities and financial ratios.
We have already completed, as I mentioned, 4,600,000,000.0 divestments exceeding our €3,500,000,000 target for the period 2018 to 2022. And for the twenty twenty one-twenty twenty five period, we have introduced a new target of 3,200,000,000 equivalent to just 4% of the 75,000,000,000 total investment of the plan. We have in principle set the new asset rotation program in €3,200,000,000 but it will also depend on our investment opportunities to increase or decrease it. Divestments will as always comply with the requirements that we are asking, either low strategic fit, low contribution or minority stakes. We will maintain moderate financial needs throughout the plan, thanks to a diversified debt maturity profile without concentration of maturities in a particular period and our strength cash flow generation that helps.
In 2020, despite the COVID lockdown, as I mentioned, Iberdrola Group has raised close to €9,000,000,000 of funding in different markets, more than the needs as you can see for 2021, 2022, 2023 and 2024. Life of the regulatory cycles is around five years. An average life of debt of over six point five years guarantees the repricing of the company's debt taking into account the regulatory changes and adapting our cost of debt to new interest rate environment while taking advantage of the yield curve. Our financial needs will be financed mainly from the holding, although U. A.
And Brazil will also raise financing in their local markets. Our strong diversification of financial sources allows Iberdrola plenty of access to different lenders and markets. Currently, the bond market is 62% of our total sources, including 22 of green bonds that will continue to grow. Current weight of the bank market is 12% including 1% of green loans, giving us the opportunity to increase this kind of financing if required with our strong and diversified group of relationship banks. We keep a stable commercial paper exposure of around 8%.
Supernational lenders have another 12% share and structured finance represents 6%. Eurobond will still be our main source of financing, maintaining the target to have a complete secondary curve with two benchmark references each year. Local bond markets in The U. S. And Brazil will also be important.
Supranational lenders will continue supporting our investment plans with Iberdrola being one of their most important partners, especially with the European Investment Bank and several development banks, including those of Spain and Brazil. And the good news is that more and more development banks in different countries will be active in funding sustainable investments and we will collaborate with them to get the funding. Also, the hybrid market will have an important role given that our low outstanding balance allow us to increase its share along the plan. Let me stress that in our recent €3,000,000,000 hybrid visions, investor demand was more than €7,000,000,000 proving again the strong interest from fixed income investors in Iberdrola paper. We use green financing for investments in renewables and network investments for clean energy.
As you can see in the slide, currently 26 of our sources of financing is green and this percentage will increase to 45% in 2025 as most of our expected financing during this period will be green or sustainable. Our average cost of net debt will continue to decrease during the plan around 3% in 2025 despite the increasing weight of debt in Brazilian reales and U. S. Dollars. We're improving the financial cost close to 80 basis points versus our previous plan due to lower average forecasted interest rates.
Analyzing the gross cost of debt by currencies, our euro cost will fall to 1.5% by 2025. Our U. S. Dollar will maintain more or less its cost in the range of 3.5%, 3.6% compared to the 4.3% area in previous plan. In sterling, our cost, which is currently around 2.9%, will fall to levels of around 2.3% in 2022 and one point eight percent in 2025.
And in Brazilian reals, our cost was 6.9% in 2019. Cost expected for this year is around 4.7%. It will increase to levels of around 6.8% in 2025 due to higher interest rate and inflation rates in Brazil that we are expecting. We expect also to continue actively managing our liquidity requirements, keeping more than €50,000,000,000 of liquidity maintaining eighteen months coverage of financial needs under stress scenarios complying with the demanding requirements from rating agencies. We will optimize our liquidity position trying to reduce our cash balances, which are very expensive nowadays as you know and extending the maturity of our credit lines with a target of minimizing the overall liquidity cost.
AlandGrid liquidity that benefits from being part of the Iberdrola Group has a coverage of fifteen months. And Energia that has its own liquidity policy has covers twelve months of financing needs according to the rating agencies' requirements during the period. All new credit lines will be based on KPIs achieving 100% of our sustainable lines at the end of the plan. Our financial model is based on financing the group needs from the holding company when this is possible. This model is designed to optimize the funding of our needs and monitor structural subordination guidance.
Currently, debt is mainly at the holding level. Our external debt other than the holding will be mainly raised at the regulated operating companies in The U. S. As cost of debt is a pass through and where we have minority stakeholders like Neo that it has its own financing policy as the group does not provide support. The holding has direct access to cash flows from fully owned subsidiaries that account for 70% of group's EBITDA.
The high visibility of centralized cash flows and the centralized treasury reduces the impact of structural subordination. Over the plan, the ratio will steadily decrease after the P and M transactions to levels close to 30% threshold in line with our financing policy. Our expansion plan requires a conservative while active management of interest rate risk aligned with our earnings structure. As mentioned earlier, currently, we have a 65% fixed debt. I would like to state that we have a low refinancing risk in fixed debt as we have more than €2,000,000,000 in interest rate forward swaps.
We will progressively adapt our debt structure to the income structure in the different currencies and using forward stat swaps to anticipate changes in interest rates or monetary policy. Regarding our analysis of fixed and floating debt structure, we take a bottom up approach by currencies, looking to match it with our own revenue structure and regulatory requirements. We have almost fixed debt in our U. S. Business that is a perfect pass through on our regulated business and most of our renewable business is based on long term PPAs, less in dollars and less in euros, only due to the weight of the liberalized business.
In British pound, our income is fairly balanced at fixed floating and inflation index and the real is heavily inflation index as most of our revenues are linked to Brazilian inflation. Expected debt interest rate structure by currencies is very close to our income structure along the plan. Our FX strategy hedges our most important solvency ratio to win monize the solvency and protect the rating of the group from FX fluctuations. On average, more than 60% of our operating cash flow will be generated in currencies different from the euro in the period. Structurally, we minimize the FFO over net debt ratio, volatility adjusting the amount of debt in the different currencies to the funds generated in each currency.
In addition, this policy protects partially the income statement from currency depreciation. As you can see in this slide, we have around 30% of our FFO in dollars and we have a similar proportion of debt in dollars. The same happens with the pound and the real. On a yearly basis, the target of our policy is to reduce as much as possible the volatility of our net profit. We mitigate the FX P and L risk through derivatives.
Our net income risk is managed on a yearly basis as long term FX management is not possible as it would generate huge P and L volatility and will not protect the P and L in subsequent years. Our FX risk management protected the budget net income creating value for the company over the last ten years for around €235,000,000 or an average of €24,000,000 per annum. As you can see in the slide, this plan creates value for our shareholders. As you can see, our return on capital employed will improve to over 6% from 5.9 in 2019, thus allowing return on equity to grow from 9.2 to over 11% in 2025. As you can see, our average return on capital investment on the investments that we're going to be in the period what we're going to be doing in the period will be clearly above the cost of capital of Iberdrola that we estimate in around 4.5%.
Let me conclude, remarking that Iberdrola is able to finance this ambitious plan, maintaining a financial strength through the period, improving shareholder return and with flexibility through asset rotation, as I was mentioning, only 4% of our total investment and much less than our asset base, which is over €120,000,000,000 that can grow if needed and with margin also to replace debt with hybrids at a very attractive cost. In the annex that we are providing you, you will see the financial hypothesis on which the plan is based. Thank you very much.
Okay. Thank you, Pepe, for the clarity you have already provided us how to finance this plan. So to conclude, let me highlight the key features of the ambitious plan we are presenting today. The first one is the increased ambitious climate agenda and the unstable electrification of the economy are leading the power sector toward an investment phase never seen before. Achieving a net zero global carbon economy by 2050 is possible, but we need concrete action today.
Iberdrola commitment to this vision place us in a best position to accelerate our growth, reaching all time high levels. Gross investment will exceed EUR 75,000,000,000 up to 2025, almost doubling the annual amounts of our previous plan, for a 6% to 7% increase in result with EBITDA reaching around EUR 15,000,000,000 and net profit around EUR 5,000,000,000. And we will achieve this growth maintaining our commitment to strong credit rating and to shareholder remuneration, which will continue increasing in line with earnings per share. The deep transformation of the energy landscape that we are going through has led us to analyze the prospect of our company in the longer term looking beyond 2025. Up to 02/1930, the massive investment needs in renewables and networks confirm that our business model is the most appropriate way to continue delivering healthy growth.
According to the energy plans announced all around the world and analysts forecast global onshore wind and solar capacity will multiply by two in point five the next ten years and offshore wind will multiply close to five times. We are fully confident of our ability to capture reasonable share of this growth, the good range from 5% to 10% for solar and onshore wind in the geographies where we are present. In the case of offshore wind, our current leading position in the larger market will allow us to estimate share between 1525%. As I commented earlier, these figures are, in general, even lower than our current market shares. Based on this assumption, our ambition to reach renewable capacity of 95 megawatt in 02/1930, almost tripling our current installed power to double our current regulated asset base up to 60,000,000,000 to reach EUR 70,000,000,000 contract by 02/1930, up EUR 30,000,000 up from today's figures and decrease our green hydrogen production up to 85,000 tons.
The plans are presented today connects twenty years of growth with a prospect of an unprecedented transformation of the energy industry. We have proven that we have the skills, the team, the track record of delivery, the technology and the access to financial resources to continue leading this industry in the next decade. With attractive growth in result to 2025 and with ambition to multiply our key operating metrics between two and three times by 02/1930, maintaining our commitment to efficiency and financial strength. You all remember that in 02/2001, we forecasted to double the size of the company and we have done much more than that as you can see. It's up to each of you to fill now the empty boxes on the bottom of this slide and estimate the value generated by this plan.
However, you can be sure that Iberdrola, starting for myself and all the senior managers, will continue to deliver in our commitment to read those figures. And that the younger team behind us has even more knowledge and ambition than once we have taken the company where we is today. We have all the ingredients to succeed, a business model that made us pioneers in energy transition, A track record of twenty years delivering increasing result in dividends. A genuine commitment of to environmental, social and governance standards. And of course, the best team made up of 40,000 women and men then day after day demonstrate their full dedication and professionalism and their readiness to continue advancing along the path of the last twenty years to achieve our even to improve the vision of 2,030 we have just presented.
Thank you very much. And now we'll answer your question you may have. Thank you.
Okay. As I mentioned before, we are going to have now a break, five minutes only, in order to satisfy human needs. Thank you very much. Thank you. We are going to start telling you that we have organized and structured the Q and A session by blocks, so thematic blocks, and we are going to answer all your questions you may have.
Up to now, we have 36 questions and probably more to come, but it's just to let you know more or less which is the time that we are going to have regarding this Q and A session. We are on time according with the expected program. The first one is the block the first block is regarding renewables. And first question comes from Harry Wybur, Bank of America and James Brandt from Deutsche Bank. What proportion of your planned renewables addition in gigawatts do you plan to sell fixed subsidy or PPA versus floating wholesale market price or selling to regular supply customer or floating price contracts?
So as I already mentioned before, we have already around 60% of our renewables investment already secured with, I think, seven more than seven megawatts are already gigawatts are already under construction. So as I mentioned as well, we have a pipeline of 70 gigawatts with, I think, is that means the plan we have already in this moment is to transform half of this into new productive power plant. I think the first thing I would like to say is considering the renewable action we have taken part in 2019 and 2020, our heat rate was already 70%. So every 10 auctions, we got already seven in all sectors. So I think not only renewables, in everything.
In any case, we are not taking part in all auctions. We take only part in some depending because we have already different route alternatives. I think we have already the route of PPAs. We have already signed with many of the largest corporation of the world, which is, I guess, United States, companies like Google, Amazon, another one. Another one is we sell directly to our customers.
I think we have already customer base very, very large, and I think we are selling to them. So I think it's another point as well as part of those renewables is for replacing our conventional generation so and for fulfilling the new demands with the during the electrification process.
JACQUES Second question comes from Harry Whitewater as well, Bank of America. For your market share targets on page 142, what assumptions have you made regarding competition? Do you think these are achievable even with complexion from big oil competition, sorry, from big oil?
So our position has always will come in the competition. So I think will come in the new entrants. You have already seen the figures. I think we need a much higher electrification, so I think there are room for everybody. In any case, we are very sure of our skill and resources.
I think as Paco and Pepe has already mentioned and very well explained. I think we are ready in this sense to compete with the same way we've been already competing during our one hundred and twenty years history. In any case, I think maybe in the next year, so with the new entrants, we learn in electricity as much we have already learned during the last one hundred and twenty years. I imagine then they are already faster in learning. We took twelve hundred and twenty years to learn what they have already learned, and I think I wish then they maybe they will be able to learn as much as we have already learned during this one hundred and twenty years.
But I think competition is well gone, and there are room for everybody.
Harry makes another question. Harry from Bank of America. Is there a risk that new renewables lead to a structurally lower power price in Europe in five to ten years, which would impair profitability on your nuclear and hydro assets? Is this a scenario governments would probably respond to boosting subsidies to support new renewables project, but nuclear, hydro and all renewables rolling off subsidies could be stranded or low power price? How do you manage this risk?
Well, I think nuclear we have the plan of closing. I think the nuclear is we are in a loss. I think everybody knows that we are losing money with nuclear. So I think the only could happen is that I think we've been we agreed to close this one with the government from '28 to '33 or '34. So I think I thought if I not already send this incorrect, please correct to me, but I'm trying to to see that one.
In the case of hydro, I think hydro is already is mostly is in storage energy. It has already been is going to have even more value. So I think it's going to when the wind blows, it will be a lot of wind. When the sun is shining, will be a lot of energy. But when they are not wind and they are not sun, I think it's needed already something which is called storage.
And the storage is massive, it's pumping, what we are using. And I think we have already reconverted many of, almost half of all our installed hydroelectric in storage. And that one, which is not a storage massive energy, what we have already for for for weeks or for months. So I think just the opposite. I think our hydroelectric, which we have much more value, and that's why the pumping is already needed.
In the case of nuclear, the only thing can happen is that that that we will force to more rapid closing of that one. I I think the fact in nuclear in most countries is just precisely the opposite. I think it's needed for maintaining the service in the case of United States and they are already paying we are paying, I think, our distribution companies. We are paying an extra for keeping for maintaining open the the nuclear power plant of our energy vendors. So but I think it's nuclear, if we are in a loss, the only thing would happen is then they can already, if it's needed, they have to pay for maintaining those one open.
That is what we have already negotiated. And in the case of hydroelectric, my vision is that storage of energy is going to be crucial and having already our electric with large dams and with large storage. So I think that is going to provide much more value than what is up today, which when it was already for those, we have already the running waters model.
JOSE Next question comes from Jorge Guimaraes, JV Capital Markets. What are the average CapEx cost considering plan of offshore wind, onshore wind and solar PV?
Pepe, can you reply to this
one? You
can reply the question. It's regarding
the cost of construction that probably Taco.
The is the construction or the financial cost?
No. It's it's average cost. Capex cost.
Oh, CapEx. Okay. Paco. Sorry. Sorry.
Well, Jorge, you will you will understand that we are not that we do not feel comfortable telling the exact figures we invest in each technology or the cost we have in each production. So cost and CapEx is, let's say, a strategic value for the company. What I can say is that more than the CapEx invested, what is important is the levelized cost of energy in each of these technology, which is what really matters when you compare with the utility that the different customers have and for their needs. So within this levelized cost of energy, we are pretty sure and we assure and if we are not, we do not do the project that we are going to be competitive, that we are going to be very high in the merit order, in the merit order, in the classical merit order of cost. So that's for sure.
Everybody knows that more or less, onshore and photovoltaic are in a proportion of one, two point five and offshore is probably three, four times this. But the specific values, on one hand, I don't have here. And on the other hand, if if we if I would have it, I will not be willing to tell in public because it's part of our strategic knowledge.
Nevertheless, I think I would like to add with this thing that Pagos mentioned that we are already working in a manner to make already more competitive design. We are already working to have already more operation and maintenance, lower cost. And we are already, yes, with our critical mass of our purchase reducing heavily the cost of our vendors and suppliers. So altogether make us in a very, very competitive position. So in some cases, I think we are already hybridizing our existing fleet of power plants, which I think that already minimized our operation cost.
And in another cases, I think we are already making largest installation, which as well minimizing our CapEx, etcetera, etcetera. As Pepe, as Patko says, I think we are working very hard in order to minimize the CapEx and to minimize the OpEx in order to be ready to become much more competitive, but we are very much more competitive. We are not in it out. So after our one hundred and twenty years experience in making those things make us already a clear competitive advantage. That's why we are gaining seven every 10 options we are coming.
Okay. Next question comes from Andrew Moller, CreditSite, and it's regarding The U. S. Offshore business. He wrote, Orsted has reported permitting and authorization delays in The U.
S. Offshore wind industry. Is there a risk you cannot meet your timetable on Banger 1 and Park City?
So I think it's we are already in the process. We were already the first mover in the country. I think we won the first option from Vineyard, so which I think we are already just open opening the road to the rest of the investors. So I think the information we got up to now is that the marine permits will be in December. There are not any reason why that is going not to be is going to be postponed and delayed.
And I think the plan continues the same one. I think we are already in this moment, we have already awarded Impinjar de Sovereigntion, which we make already last year. The winter dry supply, we are already selected. The Buro, as I mentioned, the marring is already expecting the process in December. So I think we are not already seeing anything for Pinar.
In the Par City, we are still in the early stage, commence it. And the project, I think we present the project to the plant to the Buen as well to the marine authorities. I think we present correct to me, Dennis, if I'm not correct on that one. I see yourself somewhere else. I think it was presented in June.
We have already signed the PPA with Connecticut and the federal permit already progressing according with schedule. So I think we have not seen anything. In the case of Catty Hawk, we have already in North Carolina, I think the technical survey campaign is concluded. I think we are already geophysical already working on it. I think we are starting we completed as well in October.
We submit the grid connections, which I think we expect in for redefine what is the best play for the service station. And I think that one. And in the case of New York, I think the new auction we have already presented. I think we make already different offers for 1.2 to 1.3 gigawatts. And we already expect that the result will be already beginning of next year.
So I think we are already all are in line. Dennis, if you have anything to add, please. Don't hesitate to say anything you would like to say to add on this point.
The only thing that I would say regarding Vineyard is that we did adjust our schedule previously, and it reflects, what's currently on the BOEM, website. So, you know, we won't comment obviously on Orsted. But, at this point in time, we have no reason
believe that the schedule that we put forward for Vineyard is the right one.
Thank you.
Next question comes from Alejandro Vigil, Signos Capital. Opinion on new auction in Spain.
So, well, I think I used to say that we are not making the energy policy. The energy policy is already made by governments. I think that the government decide to make auctions, so I think this is their duty to their responsibility to make. Our our point is if we will go, we'll not go to this one. And I think that is something that we will decide depending on the terms of the auction.
So I I think it's we we feel that, when there are enough people ready to make investment, I don't know why the government is gonna have to take already commitment, but I think it's their policy. So I think I have nothing to argue against the government policy. The government policy is that they take the energy policy, they have to take the decision, and it's in our hands to decide to go or not to go.
Question number seven comes from Probably, we will go. Right?
So I think I would like to say.
Comes number seven comes from Jorge de Marais, JV Capital Markets. What is the EBITDA contribution of hydro in Spain in 2025 EBITDA objective?
Oh, god. I don't know. It's
small. It's not even €100,000,000 Okay. The contribution is very slow. Small.
Yeah. Yeah. Yeah. Okay. Eight of your 20 is coming from Alberto Gandolfi, Goldman Sachs.
Of your 2025 EBITDA, how much would come from renewables? And when do you believe the step up of renewables in the mix will begin to negatively impact the power prices? Number eight. So the question is regarding the when we
When do you think renewables will account for the prices? When will it impact prices and will account for a big baseload of energy?
Well, it's not going to be a a cliff edge effect. It's going to be progressive. So we are seeing now that the prices, and you have seen in our presentations that the prices we are forecasting or foreseeing for the future are about, I don't know, 5 to €10 per megawatt hour less than they were in the previous emissions or additions of our information. So this is going to happen progressively and the level of around 45%, 45% to 50% or if you want 40% to 50% is going to be the trend and is what we are assuming and we are managing this. So it's the negative affection is already here if you want and is not going to be worse in the future going to well, I mean, in a stable way.
In a communal way, can happen what's happening in March or April that we have half of this on prices. But in a in a stable, in a steady state regime, we don't think that it will be so different of around this $40.40 something.
Alberto is asking as well. You now have 20 gigawatts offshore pipeline. There are likely to be 25 to 30 gigawatts auctions until the 2021? And how many will you be able to beat?
So perhaps Javier, you can already reply. So I think you have more in detail. That one, please. Yes, mister Sermon. I I think that we are going to, as you know, we have just recently, present our our bid in New York.
Next year, I think, also there is Massachusetts third possibility, Rhode Island second possibility. We are going to take part in both of them. And also what is the important one that is the the route four in UK. Alright? We're actually going to be It means that it doesn't mean that we are not obviously searching for other opportunities, maybe a little bit outside what is our current, let's say, areas of interest.
We are now passing to the block corresponding to generation and supply. And it's Jose Javier Ruiz from Barclays asks, why do you expect a growing power prices in Spain while the Spanish curve is in backwardation up to 2025? No. 11.
So think Paco was already explaining that one. Sorry, it's okay. In the mid long term, I think we expect already a stable wholesale price in nominal terms, which we put in our plan of €45 to €50 megatower. I think that we already the cost of certain technology will be offset by the increasing demand and inflation. I think they are ready as well, and Paco mentioned as well, they are period of instability.
I think it's think it's moments which are already deriving for the excess of gas or the excess of wind and so on. But I think those are punctual moment. I think we have to look the trend. And I think the trend we have seen is that those prices are already we see now that can already be maintained in the long term. So I think we are not that is our expectation and because that is there are not any reason why that is going to change very much on that one.
Punto Ali would happen, but the average will be already maintaining this level. That is our expectation.
Now we are going to start with the financial block. First one is coming from Javier Suarez, Mediobanca. Why the company has decided to remove the minimum and growing annual dividend commitment included in the previous previous plan? We don't understand it. So sorry?
I I don't
Probably some misunderstanding of Javier because we have not removed anything. So Good. Good. It's it's Remember
the dividend.
Why the company has decided to remove the minimum and growing annual dividend commitment?
Not at all. Not at all. I think we are maintaining our dividend policy. We are maintaining the same payout and we are already the opposite. We are increasing the flow in the period twenty three to twenty five from zero point four that was the previous plan to 0.44%.
So I think we are not already reducing, but I think we are increasing the flow and maintaining the policy.
Next question, comments as well from Javier Suarez. Why FFO is now at 22 by 2022 while previous business plan was at 24%? MICHAEL Why the company feels comfortable with net debt to EBITDA at 3.7 times versus three point zero times under the previous business
You'll reply, Jeffrey?
Yes. In the previous plan, we always said that we would never reach those levels, that basically we got to these levels because we didn't I mean, we were not we don't have specific investment plans, but that as investment plans would come, we would go to levels in which we are right now, which are consistent with a BBB plus rating in a world where there are lots of opportunities of investment. We are trying to maintain the solid credit rating while taking the opportunity to increase the investment. So we are comfortable with these levels of net debt EBITDA and FFO over net debt. Harry Wybur, Bank of America is asking for the €68,000,000,000
gross organic CapEx. What is the net figure? And is it the speed of the net figure for renewables? Net work level is the same as the speed of gross on the Slide 44. I would So you replied, Pepe.
I could We will provide through investor relations.
No,
but I think he can provide
organic The organic CapEx, we have around 6% of capitalized cost. So this means that net CapEx would be €64,000,000,000 of which around 52% will go to renewables and around 35% will go to networks.
IGNACIO Next question comes from Jorge Guimaraes, JV Capital Markets. What type of assets are you considering for the asset rotation, build and
sell of renewable assets? So we received the same question every plan. And so far, we always have delivered even some time in advance or even much more than was already expected. Today, we have announced a new target of €3,000,000,000 with from the period 2021 to 2025. As Pepe mentioned, that represents less than 4% of our investment and less than 3% of our total assets.
So I think we have plenty of things that can be sold on that one, as Pepe was mentioning, either in the nonstrategic asset, either minority stakes, either things that we can already discover, then they are not contributing enough to the company result. The same thing we have already done during the past. I think the amount is so slow compared with the size of our investment, with the size of our asset, then we feel they're more than achievable. Those numbers, as always, we have already done.
JOSE Next question are really three in side one. From Lawson Steel, Berenberg. Do you intend to raise 5% of your €94,000,000,000 funds from asset rotation and at the same time to increase your renewables capacity by three to 95 gigawatts by 02/1930. Is that 95 gigawatts a gross number or net holdings, excluding minority, please? Second, can you please talk about the current investor appetite for sell downs and how do you see that developing?
And if you could also give us more color around how do you see gigawatts ownership per se versus sell down opportunities that would also be very helpful. Thank you, Larsson.
So I think the first number, the 95%, I think, is our own. So I think those ones, we are making for our own. In those ones, what we are already consolidating. So to to sell or not to sell asset, I think I used to to say it always the same thing. I think we are not already company with our fundamentals is built to sell.
Saying that, if somebody is ready to pay a huge amount of money, we are always open to to sell a minority stake or to sell the whole the whole business. So I think it's we are not already in love with any particular piece of our balance sheet or our particular piece of our asset. But I think it's our ambition is not to to build for sale. It's to build for, operating and building for already, making business with it. So I think we have already sold last year a mistake of, Isangla because somebody was ready to pay a lot of money and we were ready sell Mineral State.
But I think our ambition is already to make the things for our own, to operate and to make already for our own. But if somebody is ready to offer a huge amount of money, I think we are always ready to listen.
Next question comes from Miguel Verina, KEC Capital. Can you comment on your views on Mexico? IGNACIO
So I think I said already in our last presentation on results. So we are very, very clear on that one. So I think we are not in Mexico. As most countries are repeat, we are not making the energy policy. So we are adapting every country our investment to the energy policy, whichever country is defining.
So I think in the case of Mexico, I think if they promote the foreign investment, we are ready to analyze those investment. But if they promote foreign investment, we are going not to to to to fight against the the energy policy of the of the of the of the country. So saying that, I think with the Mexican government, we are already we're very open dialogue, and I think we will continue in advance. So I think it's nothing nothing new. I don't know.
Enrique, you would like to add anything to this point?
You that we don't make the energy policy, and we have to adapt our investment plan to the decide of the Mexican government.
Okay. Thank you. Next question comes from Fernando Garcia, Royal Bank of Canada. What would be the 2025 net income assuming high rate interest cost is included in P and L?
Well, actually, it will be more or less the same amount because as a matter of fact, in our projections, we have slightly higher than €5,000,000,000 of net profit. So we were saying but for to give you a number more or less would be around for 2025, the impact of the hybrids will be around €170,000,000 But as I was saying, the number will be the €5,000,000,000 because in our projection, we have slightly higher than €5,000,000,000 This
question comes as well from Fernando Garcia. What would be the sensitivity if we assume 2025 forwards of €42 per megawatt hour instead of the €50 that we have already
JOSE Well, I think you can already add, Pepe. I think in prices, I think some numbers I got here is for each euro per megawatt hour variation, will represent already 0.3% of the average of the EBITDA.
That is correct. Around 0.5% in the net profit.
Next is from Stefano Vecchato, Credit Suisse. Can you
Sorry. Yes. If you allow me, Chairman, to add something. So this is the pure value of €1 per megawatt hour in repercussion on the EBITDA. But now the key question is not whether the forward change from 20 from 50 to 22 to 42, but the key question is whether we are able to keep our margin.
I mean, we are able to sell at the convenient price or not. If we really are not able to sell to that price and we keep this euro down in the margin, this will be the effect. But if we are able to keep that sales at the right prices, probably lower but with the same margins, this will not be a problem and the repercussion will not be 8x what the Chairman and Pepe has said. So that's very important because sometimes we think that the forward markets, the spot price or the wholesale spot price is, the price. No.
It's a reference. And we used to sell a quite a completely different price than the reference we are seeing. That's very important.
I think that is very important. I think our 10 or 12,000,000 customers in which we are selling electricity or more, I think. So I think the price is not already referred in most cases what is the spot prices or or or our prices. It's already price we agreed bilaterally independent of that one. And that is going to happen even more with the PPAs we are signing.
So I think not only with those one, the PPAs is relevant, what is the price? I think the price we agreed with Heineken another day what we have already signed just a PPA for making all their factories and their production in Spain absolutely using green sources. Is independent what is the price of the market. I think we have already agreed some terms for a long period. Same thing with The United States, with the PPS we have already signed for the next ten or fifty years or same thing in Mexico and another country.
So I think it's important, this point, Paco, because I think sometimes we are too obsessed with the spot prices, forward prices. That is a reference that Paco was mentioning, but that is not what is already affecting directly to our results.
Next comes from Stefano Beccato Credit Suisse. It's regarding against about hybrid. Can you explain how the hybrid accounting affects your SARAVIA:] new targets compared to the previous targets?
It's a little bit the same answer. As I was saying, kind of affecting around €170,000,000 for 2025 and slightly less than 150,000,000 for 2022.
James Brand from Deutsche Bank is asking about the dividend and said on the dividend, the €0.53 $0.05 6 DPS guidance in 2025 seems to imply a tighter payout than 65%, around the 70% midpoint. Should we view this as an indication that you might move closer to the 70% midpoint that is staying as covering at the top of the end of the range?
Well, policy is our policy and the policy is to increase the dividend in line with increase of EPS. And that makes that our range will be between 6535% payout. Another one is an example how that can be to give some numbers. I think if we provide if we don't provide number, the question will be why you're not providing numbers. If we provide numbers is so we would like to provide the number but I think in the indicative number.
So the dividend number should be a base in the policy, 65 to 75 and growing in line with the EPS in every moment.
Javier Gallardo is introducing a set of three questions. First one is what is the impact to your targets to 2025 if Spanish power price do not grow to EUR 50 megawatts hour as you project and stay at the current levels of EUR 44,000,000.
I insist again on the same point. So I think it's we are already quite a lot of PPAs in this moment signed with a certain price fixed. We have fixed or adjusted with something and we have already a customer base in which the prices is not already most of them are not related with the wholesale price or with the spot prices. So I think we are confident that the price we are selling, of course, to the market is much higher than this number and we feel that we can already protect this margin. So I think as Paco was mentioning before, we are looking for margin more than for prices.
So and I think the price is already we are comfortable with that one and we are not foreseeing then that is going to happen. But it happened and we said, Paco, Pepe was saying already what can be the effect, which is already minimal in terms of the global plan.
Second question from Javier is, can you explain how a 7% 6% to 7% EBITDA compound on CAGR to 2025 can result in a 6% to 7% net income CAGR in the same period, particularly when you expect a decline in cost of financing?
Well, there are two impacts. We have a decline in cost of financing, but the absolute number of financial expenses grow because the debt grows. And then you have to have another element, which is that due to a very large investment plan, our depreciation grows also a lot. So that explains that the EBITDA, the 6%, 7% growth in EBITDA drives a 6%, 7% growth in net profit, the increase in financial expenses and the increase in depreciation.
Finally, Javier is asking about I understand that your 2025 guidance includes the dilution from the planned disposal and does not include in net income targets the cost of hybrids. Is that correct?
Yes, that is correct.
Well, we are moving towards the hydrogen block. And the first question comes from Jorge Guimaraes, JV Capital Markets. What is the cost per megawatt hour of hydrogen electrolyzer considered? The price per kilowatt per kilograms of hydrogen in presentation includes any subsidy?
I feel I was already saying. I think today, cost of production of hydrogen with electrolysis is around €2 higher than the cost of production of of hydrogen already made with fossil fuels. So that's why I think that will require some subsidy. I think we are talking about amount which are not very large. I think we are talking of a few hundreds of million euros.
If we compare with the subsidies already applied when we have started already making in this country solar or wind. And so I think that's been us if we compare with that one. So but I think that is going to reduce on time. I think the size of electrolysis now are very small. So I think that makes the cost make us higher.
So I think the fact our first electrolysis which we already order with Norwegian company NEL, which is one of the largest never been built, I think it's 20 megawatt electrolyzer. I think the size of the existing electrolyzer is on the size of kilowatts, not megawatts. So I think that is going to be one of the largest. But we are sure in the moment that when we make the next ones, I think there's going to be much bigger and that is going to be reduced. That's why we will be to participate in the development of the largest electrolysis and that's why I announced that we are already in talks to try to make something in R and D for improving that one in the near future.
But I think it's not already this investment is the only investment we have in our plan, which is conditioned to receive the subsidy for making it happen. So I think we are not already receiving the amount with the European authorities are already promoting. If we are not receiving this subsidy, that's investment we will not make. I think we will need already to get some support for making already that competitive to work with this today's production with fossil fuel. If we are already quite convinced then that is going to be already included in the European plan of electrification of of the industrial processes and is going to be included in the in the in the green deal subsidies for precisely that has been done precisely for that one in the European hydrogen plan and the Spanish hydrogen plan as well.
Javier Suarez is asking two questions regarding hydrogen. First one is, can you clarify your positioning in the hydrogen value chain? And the second one, are you going to focus on renewable synergy that will feed the electrolyzer? Or do you intend to invest in the electrolysis as well?
No. I think I said, I think we are already energy producers and we seal that that is vectors for increasing the energy demand, the electricity demand. At the same time, we are already helping to the carbonization of the economy, which is one of our goals as well in terms of our commitment with the climatic change. So I think our position in the value chain is very clear. So we would like to make renewables as much electrolysis as needed for generating hydrogen, green hydrogen in a manner which can already provide already a competitive environment.
So saying that, I think we insist on that one. Today, the size of electrolysis is very small. The numbers of producers are very small. And I think we would like to contribute as we did twenty years ago with Gwyn to when we already transformed Gomesa from Gomesaeronautica in GAMESSA EOLICA to contribute already to push the industry to make already much larger electrolyzers and more efficient electrolyzers. So I think our ambition is not to be already electrolyzer manufactured, but our ambition is that the electrolysis will be as much competitive as possible to help already on the carbonization of certain industrial processes using already hydrogen instead of of fossil fuel or gas.
Stefano Beccato, Credit Suisse is asking the increased penetration of renewables is likely to lead to increased volatility in power prices. In light of this, do you expect governments to address this issue and adopt new power price model?
I don't know. So I don't know what is going to be the policy. So I think it's the volatility. We are suffering the volatility. I don't know how that can be organized.
Know any there. So I think we are working with the existing situation. I think it's moving to different situation. We will analyze those one. But in any case, I think whatever should be the model, if they minimize the volatility is welcome.
So which I think saying that any system we cannot reinforce the system reliability using already capacity payment or similar, that is positive for the system. So which is clear is nobody is going to produce something at the loss and nobody is going to keep already the power plant open and they are already losing money. So I think they are that's why the European authorities are already promoting this mechanism of capacity mechanism similar and that that is already something which is absolutely compatible with with option etcetera etcetera. Then we have to play two things. How we keep the lights on and how we can already make that one in a manner we will already enough attractive for the investment which is required.
And that is already with the political leaders are already defining in all countries. So we will play already the game in this environment, so which I think they have to define if it's needed to define more.
Stefano is asking as well, what is the contribution of green hydrogen of EBITDA and net income by 2025? How significant can this contribution become by the end of the decade?
Well, I think it's irrelevant. I think the amount of that one is very small. I don't know, Yatori, you can already say something, but the thing is in our total plan, the investment is very, very, very limited and returns is already very small. But I think you can add anything. Eitore?
Yes. I think that in 2025, the contribution to the EBITDA is around 40,000,050 million euros no more than this. And at the end of the decade, if we invest what we have considered that is going to depend on the suspension that can be attracted, could be several hundreds of million euros. But in 02/1930, God knows what is going to happen finally.
So I think it's a good opportunity, but in the short term, it's more already just a commitment to help in this direction than a business opportunity. Business opportunity will arrive afterwards as I told you he's mentioning. If we are first mover, I think the opportunities of capturing already value on that one can already measure in hundreds of million of euros. But I think for the period, it's already talking in decents of million, the contribution which can already be provided for this investment.
We have a question regarding hydrogen manufacturers from Martin Young in the stake that basically is, please, can you comment on the recent deal for a 20 megawatt PEM electrolyzer with NEL? I understand NEL is a leader in alkaline electrolyzer technology, but not in PEM. I wondered if why you choose NEL versus those who live in the PEM space.
So my feeling is just the opposite. I think the electrolyzer we are buying is PEM, I think, CoriGeMe, which is the top technology and because but I think it's probably in the future we are going to use as well alkaline because we would like to test both brands. But I think NEL, in our opinion, I think what we make already the choice is to use that one which is the pen technology, not the alkaline technology.
We are now once we have finished with the hydrogen, we are passing to the strategy more strategy question. The first one's come from Javier Garido, JPMorgan. You assume zero carbon emission in Europe by 02/1930. What is your vision for your Spanish CCG then CCGTs then?
Probably they are going to be used only as backup very few hours. That and that's why I think if we are using a few hours, that's why we are already just trying to compensate that one with the plantation of millions of trees. So which I think that compensate that one. So I think nevertheless, I think for 02/1930, most of those one, I think our initial combined cycle were built in the beginning of year 02/2001, 02/2002. So they will have already almost at the end of their life, so which I think is but our our feeling is that they are going to use just few hours.
And for these few hours, I think they will be already working few hours if they are already being paid with certain capacity payments because if not, they cannot be already in operation. You see the the way how they've been operating initially as almost base load, the model the way we are now, which are still working a certain number of certain number of of operating hours will be just already just used for peaks for a speaker in most cases. And for that one, I think those have to be already pay one man or the one to keep those one open. If not, they will be already being closed by this time, which I think, by the way, most of them, they will already complete their operational life for this period.
MARTIENNE Next question comes from Martin Young in Investec. Do you see a need for new nuclear in the global energy transition? Or do the levelized cost of energy reductions you set out for renewables mean that nuclear is expensive and yesterday's technology?
I think I know already quite a for in quite a I think we have the discussion of the day with MIT, and I I I precisely on this on this particular point. My my my point is that, my answer is very clear is no. And not for two reasons. First, because, the the the cost of renewables is declining very heavily and they could continue in certain manner.
The nuclear, I think, because of the security reasons, that is not so easy to be declined. But in any case, there are two things. Once nuclear required fuel, I think, then and requires some some materials, uranium for that one, which is is a costly material. And second, they they they are not still a clear solution what to do with nuclear waste. So I think both things has already caused a variable cost toward the the renewable.
We have no variable cost. I think Ecopes is higher than than renewables. And one has already a variable cost. Another one has no variable cost. And the OpEx as well in nuclear is much higher than the OpEx in renewables.
So I'm not seeing what
is the competitive advantage of nuclear to another one. Next question, we have two from Alberto Gandolfi, Goldman Sachs. First is, would you consider equity to fund the P and M acquisition or more in general to keep balance sheet flexibility? So
I think it's Pepe has already present very clear way how we're going to finance. I think I've not seen in the Pepe presentation any needs for further increase in equity. So I think he was telling that with the cash flow generated plus with a hybrid plus with the debt plus with the divestment, I think it's enough for funding and financing this this plan. So I think we are not already seeing the need of making any any injection of equity on the grant. So I think, Pepe, you were very clear on this.
I think I cannot add more than the financial director was already explaining very clearly.
IGNACIO Question from Alberto. What do you think is a sustainable net debt to EBITDA for the business over the medium term? EBITDA ratio?
Well, I think that this is a reasonable number for a BBB plus rating, Baa1. So I think that this is sustainable. I suppose rating agencies also think that this is a sustainable number. So this is more or less where we think we have the sweet spot in terms of financial leverage. So we are comfortable here.
Okay. We have finished with the first block of 36. If I'm not wrong question, we have another one of 18. But due to that, we are spending two hours and twenty minutes up to now. If you don't mind, I'm going to choose just question for those analysts and investors that has not already made questions.
So I will drive you speakers from Iberdrola, I will drive you through the papers which question in which block. The first one comes from Rob Pulleyn, Morgan Stanley, Amn, Makee Becker, Bernstein. May we ask the hurdle rate you require for renewables investment, either in IRR range or value creation over WACC?
So I think Pepe was already mentioning that the new investment we have foreseen a group average return of capital employed on the range of 6% and return on equity on the range of 11%. I think that makes roughly, and the numbers of Pepe correct to me, roughly one plus 200 basis points. But I think those are the numbers that we are already contemplating. Is it correct, Paolo? Yes.
I'm going to introduce a question for Fernando Malderca. He's saying that I think that this is could be quite interesting to explain that. He's asking about if you think number four question in renewables. If you think hydro and pump storage is so valuable, why did you sell your pump storage in The UK? Or has your view changed since 2018?
Could you sell further pumps storage as a part of your asset rotation?
Well, I think what we did in Britain was a great thing. So I think we we prepared already us a nice package to make it attractive. So I think it's to sell already power plant which are in a loss and we has no future. So, for the amount of money we have already sold, looks impossible. So and I think we have to put some nice cake beside.
And I think we put the cake together with the rest. And I think we sold all together and we make already a very good a very good deal. So I think saying that, I think our ambition is that I insist on that plan. If anybody else, we are making a huge pumping storage, new pumping storage system in Portugal in the in the Tamika River. And we are in this moment making a couple more reversible existing reversible power plant in Spain in the Tahoe River and the in the the no.
Sea River. No. In the close to the river. In Sea Valparais. In the river.
So if I think we would like to give those line, but I think if somebody is ready to pay a huge amount of money for those one, always you are open to to listen. And I think I'm sure that Pedro, you will be more than delighted to to already negotiate with them. But I think I insist on that one. We are not built for sale. We are building for us.
And I think we believe then the storage, and we saw that in long time. I think we have already reconverted many of our existing hydroelectric power plant in reversible for many years. I think we are the largest pumping storage in Spain and probably one of the largest in Europe because we transform our hydroelectric in reversible. And we continue feeling that that's the value. Why?
Because the cost of pumping storage is much cheaper than any other alternatives for storing energy. And as much renewable is built, as much need of storage is needed. And I think when when you compare the cost of an existing dam making reversible or a new dam already for the story compared with a battery for long period batteries, I think it's less than half. So I think that has a competitive advantage. I know compared with other ways of of storing like hydrogen.
Storing energy with hydrogen is nice, but I think it's too too expensive. So I think that's why we feel that's a value. But if somebody see that this is already variable for us and is ready to pay more than we consider that is going to generate to us Across the life, always we are open. Pedro is delighted to talk with whatever people is already making nice proposals.
Next question is number seven in the labor alliance block from Mickey Baker, Bernstein. What are your view on carbon prices in Europe by 2324?
So my feeling, and I said that when it was at five, then it's going to reach 20. Everybody was already laughing at me saying that I'm already absolutely wrong. When I was at 20, I was saying that he's going to reach 30. Everybody was saying to me, they're not crazy, they will reach 30. So I I would like to continue being crazy again.
Probably, it's going to overpass 30. So I don't like to say the number, but I'm probably it's going to be above 30.
Next question, number eight in networks from Sam Ari, UBS. Can you comment on The U. K. Markets as you currently see it? I think you have suggested in the past that you were not interested in the PPL assets that are currently in the sale process.
But can you speak a bit more about why and what you expect from of Gen's final price control in December?
I think, Keith, I see you in the shadow, but I think you are there. So I think that you are just can you can you already make comment about that one? You already talked with Objen. I think you have better information than myself because you are in the now I cannot go there because of the travel restriction, but I think you guys still you are able to to move inside of the country for the time being.
Yeah. Absolutely. Sorry, chairman. The the sun has decided to shine in Glasgow as always, so, I'm a little bit in the shadows.
It's Scotland is becoming a shiny country now.
Look. The we're we're obviously in the middle of the process of of renegotiating the price settlement with with Ofgem for t two. We've seen, the CMA's intervention with regards price settlement for water in terms of cost of equity, and we think that gives us a very strong case, for arguing a a better rate of return, than was originally, progressed, originally suggested by Ofgem in the market. There's still a lot of negotiation, a lot of discussions to have going forward. But we see, you know, a great opportunity for investment in the network in The UK.
We have a prime minister and the government who are talking about having every house powered by offshore wind by 2030, by hitting their commitment and accelerating their commit commitment for net zero carbon by 2050. And to deliver all of that will require a massive investment in the transmission system and the distribution system, which opens up a huge prospect for us, for a lot of investment driving connections for offshore wind, onshore wind, driving the investment needed for the future of the electrification of transport and starting to create the electric network to decarbonize the heat system. So lots of opportunity, we think, in the future for investment. And right now, we'll push to get a sensible realistic settlement from Ofgem for the final determination by the end of the year.
Next question is number 12 in the block of finance in Spain, and it's coming from Anto Vianquezi, Citi. You mentioned that the transition CapEx in the world will keep growing over time. Do you think that Iberdrola balance sheet in 2025 is fit to take the challenge? Also, if power price were to decline or customer base margin comes under pressure, which could be the favorite option to restore the financial ratios, quoting dividend, write issue, disposal?
Think it's a I would like to be a bit more optimistic. So I think it's have already I think it's we have already demonstrated. We have already during this twenty years, I think we have already passed through three crisis, I think. Yes. Three crisis.
One, we were already, yes, in the 02/2006, 02/2007. We were forced to stop our investment and to divest something. Afterwards, we have already the crisis of 02/2013, and, and now we have another crisis. And I think in all crisis, we have already take different solutions. And the solution in some cases was already divesting something, in other cases to the immediate investment, in other cases to to look for a zone expansion in some countries we can compensate those ones.
So we have already demonstrated. We are already some team which we are more prepared for already delivering what we committed even, in the middle of whatever situation. I think we are in the middle of a crisis and Jan's already announcing that far from diminishing our goals and target for 2022, we are already increasing our target for 2022. I think we are ready. When we present the plan in 2019, we are saying for 2022 to have already arranged between 3 point seven and three point nine net profit.
We are was announcing today between four and four point two. We were already announcing a flow of $40.0.44 euros by 2022, and we are paying that one since 2029 2019. So I think we will analyze the situation what could happen, and we take the necessary decision in all means. I think we have already used all kind of of ways for making already fulfilling the commitment we are taking with the market. We are no newcomers on that one.
We are twenty years behind ourselves, and we systematically we are delivering what we promised. And that is that is going to be the way. If anything already changed and happened, we will adapt the necessary measures. In all means, we have in hand for making already that we deliver what we are already just committed.
UNIDENTIFIED Next question comes from number 16, Elkema Madouf from Bloomberg. Can you please talk about your M and A strategy? Are privatization in Brazil of interest to Iberdrola? How about PPL's U. K.
Grid? Are you considering acquiring more smaller developers with a large pipeline in Europe or outside of it?
Well, I think the plan is not contemplated any M and A transaction. So I think the first thing. And I think one of the reason I asked to Pedro to accelerate the negotiation with PNM is precisely because I was sure that this question is going to happen. And because this question, I think now is replied. We have already done M and A is already done with PNM and in the plan is no one contemplated in this moment.
Next question, number 17, from Ralph Pulleyn, Morgan Stanley. What risk we see windfall taxes of hydro and nuclear earnings if hydrocarbon prices push forward upwards in near to medium term?
So I think we are already in a sector in which, I think anything can happen, but I don't know what is the more taxes of hydro nuclear when we are in a loss in nuclear. So I think it's That no. I I think it's fine. So I think it's we give the key. So you for you the key.
That's it. So and and and in hydro, I think they are taking almost 50% of the total revenue. So which I think is is more than that one. So but I I I know I know that is not I I think that was already in my opinion, and I would like to say, I said several times, it was a mistake was made by the previous government with taxing precisely those things which were the cleanest. And I think trying to promote coal when everybody was moving in the opposite direction, that was a mistake for the previous government.
We fortunately, this government has already corrected and is trying to go in the right direction, trying to promote the future with clean energies, with incentivating that one, and maintaining already just as much as as possible the legal security to avoid what has already happened hundreds of already legal actions and arbitrage for all the investors worldwide. So I have my opinion and my feeling and that is going not to happen again and that is already trying to define already very clear and defined a sustainable framework for that one.
JOSE Next question is number 18 from Sam Ady, UBS. And sorry for that, but this has a slightly long introduction. I'm sorry for my English. Your outlook suggests something in the order of 15 terawatts of renewables globally by 02/1950. In one way, that's a very big number and it shows that very good growth potential for your renewable business.
But in another way, that number is so way too low, way too low for a net zero scenario, especially for a scenario including hydrogen. So your slides imply that the world will miss net zero by a wide margin and this is turn implies that warning will rise to more than 1.5 degrees, perhaps more than two or 2.5 degrees. So my question is, what could a two or 2.5 degrees warming mean for your business? Have you studied this already internally? And how much can you say today about how your business could be affected?
My god, I think this question I need already to sit down with Agustin Delgado and the group of experts in climatic change and and all those want to make all these analysis. But I think my commitment is very simple. I don't know what is going to happen in the world. I think there are too many people talking. There are many people saying nice words, and there are not very many people already making things already happen.
And we are taking commitment very clear. First, we are the company in Europe with our emission is one third of the emission of our peers. One third. So two thirds, they are already two third more than ourselves. Second, we are taking a commitment in Europe to make zero emission by 2030.
I think that is our contribution. So if everybody follows our track, which I'm very glad in this moment that many of our strategy for twenty years have been copied by our our colleagues, fellows, and competitors. I'm very glad that that is happening. I think if everybody made that one, if all the European industry take the commitment to make zero emission by 2030, I'm sure that that is going to help to the diminishing the the the the the the the the increase of temperature in the planet. So but if everybody continues saying nice work about twenty fifty, but nobody doing nothing in 2020, in that case, the the the the system will be not the the target will be not achieved.
I think it's time I used I used to say in my in my intervention in United Nation this year and in previous year, the kind of work is over. It's kind of fast. We need already people. We do things not to to say not words. Now it's time for say doing things.
And they doing things means what is today's, not percentage grams of c o two emitted. Not we are going to reduce 50% of what? 1,000. So that means 500. So if we continue polluting with 500 per kilowatt hour, in that case, all the the the world will be absolutely destroyed.
And I think now it's time that everybody measure insane numbers, not percentage of reduction. What is your number? What is your contribution in terms not in percentage, in numbers? Zero for fifty fifty. Everybody has agreed with fifty fifty.
But what about 2021? What about 2022? What about 2025? What about 02/1930? Numbers, not percentage.
Numbers. And if everybody moves in this direction, in that case, your question will not already they were very easy answer. But if everybody continues using that words, percentage depending on the year, I take a year of the '95, '97, 2000 whatever is seventy, fifty or 80 whatever of a number, that doesn't work. Numbers, grams per kilowatt hour in all sectors, in all industries, in all energy energy producers. If not, this is going to be, we will be in trouble.
Jorge Alonso, Societe Generale, number 15One-five, which are your main concern regarding the plan economically and politically, main risks or concern?
So I think we were already trying to explain, Paco, Pepe and myself, what is our ambition. That is what we were already planning to do. And I think Paco was very clear saying what is our competitive advantage, what is already our capabilities, what is our track record, how we've been delivering those things, how realistic is what we already foreseen. Pepe was explaining what is our financial resources, which are our financial capabilities, how we are raising money, what is the cost of this money. So I think we present a plan which is realistic.
What is the risk? I think it's all the risk which we are already in all those things. What can really happen politically? We can affect to our effects. What can really happen in terms of technological changes, which can already happen on that one, but there are only things which are already given opportunities.
I think how fast we can go in the electrification, what is can be the measures which can be taken. I I heard this morning that the mayor of Madrid is announcing by 2025, all the buses will be electric. And by 2027, all the the the all the boilers, we foresee fuel will have to be closed. So that is good news. Perhaps that is going that is going to accelerate that one.
What is going to happen with our initiative of the of the of the hydrogen with fertilizers? I think I'm sure that is more going to mobilize the fertilizers industry in Europe as well to make something light. So all those things are negative things, but positive effect, we can already accelerate this plan. So altogether, I think we feel more than comfortable to achieve what we are already presenting today. So there are risk is, but there are opportunities.
And I think the word is moving so fast. The direction was been of our ambition for twenty years that we are much more comfortable than I was in 2021 when we present our plan to doubling the size of the company. And I think you see we multiply by six times. So I'm more comfortable now than I was in 2021 when we announced those things.
And last question, after one hour and forty minute two hours and forty minutes. And it's in Spanish. Sorry. I don't know who is the writer. Basically, it's Los Lato of Macroeconomicos
Macroeconomic data that we that we're getting shows that the crisis health in Ontario also leads to a major economic crisis in our countries. What is your solution to this crisis, to come out of this crisis?
Well, unfortunately, we are facing an unprecedented crisis in the world. And we've gone through other crisis, but this is a completely different story. But my experience, as I said before, after having, seen lots of crises during my professional life and as different economic cycles, is that you can always, overcome a crisis by investing more and by creating more jobs and by being more efficient and also by investing more in, r and d, in new technologies, and by increasing the training for the staff so that they can adapt to the new times, and in short, by doing whatever is required so that we can, leave a much better world to future generations. We're going to leave an unprecedented debt, we have the moral obligation of leaving them with a much better world. Having said that, we must also think that in the crisis, there are people in situations that I've had some very harsh situations, for instance, in the Basque country when they reconverted the industrial sector and the shipbuilding sector.
And, there are sectors that have to be helped so that, nobody is, thrown out of the system and measures had to be taken for that. So we need more investments, more jobs and, more investments in R and D, more efficiency and, more productivity too. And all of this is, what we intend to do through our plan because our plan is the most ambitious plan that this company has had in its one hundred and twenty years of existence. It is possibly the biggest investment plan that a Spanish company has ever made in such a short period of time. And we're doing so because, we are thinking about the €75,000,000,000, and we do not only want to contribute towards the sustainability of the planet, but we also want to leave behind this crisis we are being hit by.
With these investments, we can help our 18 or 20,000 suppliers to maintain their workforces. And, it's nearly 400 or 500,000 people working for us all over the world. And we also want to, hire another 10 or 20,000 people over the next few years. So this is our contribution, and this is why we want to do things because, you can emerge from crisis by investing, working hard, by creating jobs, and by assisting those people that in a difficult situation that so that they can receive enough support from the rest of society to overcome the situation. And Iberdrola, at Iberdrola, we, well, we are making our balance sheet available to the societies where we are operating so that we can help, overcome this crisis through our investments and through the jobs that our investments are going to create in our environment.
MARTIN Presidente Poise concluded.
MARTIN When you're ready, Chairman, you can close this act.
For this your attendance of this Capital Market Day, so you know always our the question has not properly replied or properly or not enough clarified, don't hesitate to call our Investor Relations team where they are already always ready to make already further information that you may require. So take care. Stay safe. Thank you very much. And I hope next session will be already with the opportunity to meet ourselves personally instead of through any screen.
Thank you very much to everybody. Thank