Earnings Call: Q1 2021

May 13, 2021

Ladies and gentlemen, welcome to the EDP First Quarter twenty twenty one Results Call. My name is Bethany, and I'll be coordinating your call for you today. I will now hand the call over to your host, Miguel Vienna, Head of Investor Relations, to begin. Miguel, over to you when you're ready. Good afternoon, ladies and gentlemen. Thank you for attending EDP's first quarter results conference call. We are today here with us with our CEO, Miguel Stroud Andrade and our CFO, Ruipei Scheira, which will present you the main highlights of first quarter twenty twenty one financial performance and also an update on the strategy execution. We'll then move to the Q and A session, in which we'll be taking your questions both by phone or written questions that you can insert from now onwards at our webpage. This call should last no more than sixty minutes. I'll give now the floor to our CEO, Miguel Stroldenhardt. Thank you, Miguel. Good afternoon, everyone. So I hope you're all doing well. Perhaps just before diving into the results of the first quarter results, I think it's just important to take a step back, recognize that over the last couple of months, particularly since the presentation of our strategic plan in late February, it's been marked by several important milestones. And just to mention a few, I think one of them is certainly the reinforcement of our balance sheet. I mean the outcome is being recognized by both S and P and Fitch, which upgraded EDP's long term rating outlook to BBB stable and Moody's as well to positive outlook. So I think this is definitely a major milestone for the EDP Group. And obviously, this is also impacted by the execution of EDPR's capital increase of €1,500,000,000 which we did shortly after the strategic update. And this allowed us to significantly derisk the funding of the business plan. So obviously, I think that was also a major milestone over the last couple of months. Perhaps just another one I'd mentioned before, as I say, going into the results. But clearly, since the strategic update, if anything, the long term and medium term political and regulatory outlook has even improved versus what we thought or presented back in the strategic update. And I think that's just given the statements and the draft proposals that we've seen discussed in Europe and in The U. S. Over the last couple of weeks and months. So I think that's also very positive and constructive undertone to the whole sector, in particular, what they call the electric decade of the next couple of years. So anyway, now let's turn to the first quarter results. In spite of some headwinds, which I think we've recognized, particularly on the EBITDAR side, recurring EBITDA ex ForEx was flat, reaching €844,000,000 This was penalized obviously by the Texas weather event, which we talked about in the EDPR call. And just generally, weak wind resource, particularly in The U. S. I mean, in Europe and Brazil, it was actually very much in line or even slightly above. So that's one point. It's also a tough comparison year on year versus last year, particularly on the Energy Management side. You know, in the first quarter of last year was exceptionally strong and really quite extraordinary. So obviously, that year on year comparison makes it a slightly tougher comparison. Another point to note, I think, on the first quarter numbers is that the diversified portfolio allowed us to partially mitigate this impact of the weaker wind resource. The very positive hydro performance in Iberia and also a strong growth in networks, particularly in Spain with integration of Viejo, but also in Brazil, where we had a good recovery of demand and also an inflation update of our regulated revenues, which more than compensated the 26% or partially compensated the 26% devaluation of the Brazilian real against the euro. So overall, net profit increased 6% to around €160,000,000 benefiting from the improved financial results and lower effective tax rate. Net debt increased this quarter to €13,100,000,000 mostly explained by a proactive increase of working capital. Essentially, what we did was take advantage of the increased liquidity that we're expecting from the capital increase and also to reduce cost of having cash on the balance sheet. So we manage the working capital by anticipating some funds to suppliers. And so obviously, that ended up, let's say, reducing working capital and increasing debt. But overall, it has a positive financial impact because of lower cost of having cash. So taking into consideration the €1,500,000,000 capital increase at EDPR, which we concluded in April, so already post the closing of the first quarter, the adjusted net debt to EBITDA ratio would have decreased to 3.4 times. Now if we move on to Slide four, just three highlights. As I mentioned, we had some headwinds in the first quarter on the overall, particularly on the weak wins in The U. S. But the global platform and the diversified portfolio helped offset the main challenges that we had from the first quarter. So in particular, as I mentioned already, the strong performance in Hydro ibeer, which is 28% above the historic average. On the regulated and contracted revenue in Brazil, I mean, that's indexed to inflation. So that helps offset the negative impact of the euro versus the real depreciation. And finally, another point I'd like to mention, which is the risk management strategy in renewables, which is quite prudent. And as you know, we typically have long term contracted or feed in tariffs or CFDs. So 94% of EDPR revenues come from this type of contract or schemes. So obviously, this helped hedge against short term adverse market events like the Texas freeze. And so we ended up having some impact, but relatively limited, at least compared to perhaps what others have seen. So again, I think this just shows that we have a pretty resilient business model and a low risk approach. And I think that pays off in when you have these type of extreme weather events. So move forward to Slide five. And again, just talk a little bit about the big picture and what we've seen coming out of both The U. S. And in Europe. Since we last spoke, as I mentioned, when we spoke at the strategic update, the outlook was a very, very robust. And as I mentioned, the last couple of months have only reiterated this positive growth expected for the overall sector. There is very strong continued political support towards decarbonization, which we very much believe in and think is going to be a very long term trend. So in The U. S, the Biden administration announced in March that The U. S. Will raise its offshore wind power targets to 30 gigawatts by 02/1930. In relation to the Americans' job plan, it also raised expectations on a significant upgrade of public support for renewables growth and that acceleration of renewables growth. It's still dependent on the final outcome of the discussion on the legislative package. I'd just like to remind you that The U. S. Represents around 40% of our €24,000,000,000 investment plan until 2025. In Europe, the next generation EU funds, so turning over to Europe, it's a critical mechanism to revitalize the EU economy. And as you know, the €750,000,000,000 envelope that's going to be applied between 2021 and 2026 represents a pretty unique opportunity to leverage the energy transition and to stimulate the European economy. Overall, in relation to these funds, we'll be focusing on six key areas across nine European countries. Key areas of focus are going to be renewables, green hydrogen, intelligent networks, sustainable mobility, decarbonization, energy efficiency and digitalization and fare transition. And these are obviously the ones which are more related to our core business, and that's what we'll be focusing on. And we expect a significant amount of projects that we'll be able to submit for this. If we move on to Slide six, so talking a little bit about strategy execution. So we've already achieved the 6.4 gigawatts of secured capacity additions until 2025. That's more than 30% of our 20 gigawatt target for the period. We've added 1.2 gigawatts of wind and solar net capacity over the last twelve months and 0.3 gigawatts in the first quarter. And we have 2.9 gigawatts of capacity under construction, which represents a massive increase in the build out of the capacity. So this is a significant effort, obviously, for the teams, but it just shows this ramp up of growth that we're experiencing and which is obviously positive for the company. In the last couple of months, we've also signed an additional 0.5 gigawatts in PPAs, and we have another 2.5 gigawatts of PPAs under negotiation and shortlisted. So that gives us also comfort for going forward in terms of additional PPAs we'll be able to have. On the right hand side, in terms of asset rotation, so all combined, we've already signed €1,100,000,000 asset rotation deals with expected closing in 2021, close to €200,000,000 of asset rotation gains already secured for the year. We have good visibility on additional deals in Europe, which we're working on, and we expect to close still this year, which means we would see asset rotation gains north of GBP 300,000,000 in 2021. Perhaps if we move forward, just a quick note on the EDPR capital increase, which I think many of you already know well. So we think it was well received by the market. It allowed us to execute quickly on something we'd announced strategic update. We derisked the funding of our business plan upfront. We raised the CHF1.5 billion through an ABB. It was one of the largest of the year in Europe, at least so far. And EDP ended up with a stake of 75%, and this ended up increasing the free float of EDPR by 60%. So a significant increase in free float and liquidity. And general, that ends up being quite positive, not only for the balance sheet, which as I mentioned, was recognized, I think, also by the credit rating agencies and the upgrades, but also in terms of presence in some of the key indexes and sort of the available liquidity for investors in EDPR. Let's move on to Slide eight. So Slide eight is not a particularly numbers slide, but I do think it is an important slide because companies don't just survive on operational and financial data. So we've moved fast on the management side to drive organizational change and fast track execution. We implemented a simplification of the structure to align the organization with our overall business global business platforms and to make sure that we can continue to be a global, agile and efficient organization. So I think this helps streamline some of the operations. The management team, as you know, is much leaner. It's now got global responsibilities per platform. And I believe that certainly enables increased knowledge sharing and efficiencies and better governance practices across the board. Finally, we've also launched an internal program, so Changing Tomorrow Now. At the moment, it's got 14 different initiatives to really fast track execution and to make sure that we have a clear road map in place to deliver the next growth cycle. So along with the numbers, we have a purpose, which is very clear for us. We have a plan and we have a team. So I think the good news is we are on track to deliver and to execute. On Slide nine, and this, I think, is also an interesting slide, again, very much showing how the renewables is increasing its weight in our generation mix to 85. And so as you know, have the target of being carbon neutral by 2000 and thirty and one hundred percent renewables production. So again, this keeps stepping up. Obviously, we had a good hydro quarter. But in any case, I think step by step, we are getting there. Revenues from coal fell 37% year on year. Obviously, as you know, we shut down Zynich last December. In 2021, we expect to shut down two additional coal plants in Spain, so Sodusri and Nabonyo-one, which will allow us to become coal free in Iberia in the very relatively short term and overall globally by 2025. Specific CO2 emissions continue to decline, so 9% reduction year on year. So that's already 69% below 2015 levels. And as I mentioned before, we are committed to being carbon neutral. So again, all positive indications in that sense. I think this reinforces that we have a really distinctive green position, and this is something we stressed over the years, but in particular, more recently. We are of the European integrated electric utilities, we are moving very quickly to becoming a pure energy transition player. And I think that's been recognized by the market. Last April, EDP, the overall group was included in the S and P Global Clean Energy Index. EDPR was already there, but EDP as well has also been included there, which I think is a testament to how we've positioned ourselves. Finally, on this section, just before I turn over to Rui to discuss the results in more detail, I just also wanted to give a note on governance, which which is also very much aligned with our commitment to delivering ESG excellence. So now we have a new renewed or newly appointed Supervisory Board, who's elected now in April at the Shareholders' Meeting, has a leaner structure. It's gone from 21 down 16 members. It has a reinforced majority of independent members and also improved gender diversity. If we take a step back and we look at the overall Board changes at EDPR and EDP, that's number of non executive and executive Board members of EDP and EDPR decreased by 27% from 45 to 33 members. So I think this is also a good step in terms of corporate governance best practices. And finally, also relating to this, the shareholders meeting also approved almost unanimously with at least 99% approval, the new remuneration policy for the Executive Board of Directors, also in line with best practices, which includes long term incentive settled in shares with the deferred payment of a three year period for the assessment of the long term performance over that period, and ESG linked compensation amongst others. So again, I think a positive step in terms of making sure we are top and second to none in terms of our ESG commitments. All of this clearly reinforces our commitment to delivering the business plan. It also shows that we are implementing best practices on all dimensions of the SG, so that we can continue to be a reference in the sector. And that's something that, as you know, we take very seriously. And we are working on all dimensions, operational, financial, environmental, social, governance. So on all of these dimensions, we keep moving and keep raising the bar. I'll pass over now to Rui for a more detailed analysis and then come back for closing remarks. Thank you. Thank you very much, Miguel. Good afternoon to you all. So I'd like to move on to Page 12, just to show the good results in our view given the context at the EBITA level. So it was flat year on year. If we exclude ForEx, recurrent EBITDA, first quarter twenty twenty two, 2021, including ForEx, was an eight percent reduction. This was primarily driven by in the Renewables segment, we have a reduction of CHF 47,000,000 at EBITDA level. Most of this is coming from the ERCOT and Polar Vortex. So as you know, this is a very unique event. Back in February. It impacted our EBITDA at around €35,000,000 Also driven by the Polar Vortex in itself, I mean, we experienced a lower wind resource in U. S. That's around 7% below the long term average. So these two elements with a significant impact at EBITDA level. But on the other hand, compensated by a very positive hydro quarter, So we have a positive impact of around CHF 24,000,000 coming from the both Iberian and the Brazilian hydro, naturally given the good hydro resources that we have in Portugal, that's 28% above the long term average. On the networks, a very sound increase at EBITDA, that's plus €74,000,000 for the segment, mostly driven, of course, by the incorporation of ESCO. So that's an additional €47,000,000 On the other hand, as you know, there is an update on the already foreseen in the regulation. And so all in all, the net impact was €39,000,000 at EBITDA level. This is in Spain, but also in Portugal with improvement particularly on the OpEx with a €15,000,000 positive. In Brazil, the distribution, we had a very positive impact both from tariffs and demand and also at the transmission level, an important contribution from CapEx execution at the transmission lines. So, a CHF 7,000,000 positive impact in the segment. In Client Solutions and Energy Management, I would say that this is a normalization of Energy Management. As you know, we have an extraordinary a very extraordinary first quarter twenty twenty. So definitely now we see a quarter more normalized. Also in 2020, we had CNES coal plants still contributing with the €27,000,000 at EBITDA level, but also important growth in terms of service penetration rate from the supply business. So all in all, $844,000,000 EBITDA recurring on the first quarter twenty twenty. So if you move to Page 13 and getting a bit more detailed view on the wind and solar part of the renewables platform. In The U. S, I mean, the reduction is fundamentally driven by these two factors that I mentioned before, the ERCOT event in itself and this exposure the small exposure that we have to this event in the ERCOT market, but also broadly speaking, wind resource in U. S. That was impacted by this weather event, polar vortex. On the other side, I mean, with a very positive contribution, 5% above the 2020 on the back of a recovery of the load factors, more in line with our long term average. So indeed, a good recovery from the European side. So all in all, $269,000,000 of EBITDA from wind and solar on the 2021. And then Page 14, also positive impact from the hydro capacity, both in Iberia as well as in Brazil, euros 177,000,000 of EBITDA. That's a 16% increase year on year. Excluding ForEx, particularly the Brazilian real depreciation, we would have a 25% growth. Naturally, this is on the back of the hydro resources. So this quarter, we had 28% above the what is the long term average, so a significant recovery vis a vis the 2020. But also on the Brazilian side, with a normalization of results from our strategy of quarterly allocation of sales and a weak 2020. So all in all, CHF177 million from our hydro portfolio, a very sound contribution to the group's EBITDA. In Page 15, looking to the networks business, the networks platform, so €310,000,000 that's a 31% year on year increase. It would be 45% excluding ForEx. Of course, here, the VSGRO contribution is very much relevant, as I mentioned in the beginning. Also, in terms of the OpEx, and this can be seen in the OpEx per supply point in Iberia with an improvement of 9% year on year and a very important impact in the Portuguese business. But also in the Brazilian case, a good recovery on the distribution EBITDA, 61% increase versus the 2020. This is a reflection of the positive inflation updates on the annual tariff revisions, but also from the increased demand. So you see that there was a 4.4% increase on electricity distributed. As well as at transmission level, million, so that's a significant increase vis a vis last year. And construction is going according to plan or actually ahead of plan. So we will have six lines fully operational during 2021. And the last segment on Page 16, Client Solutions and Energy Management, what I call in the beginning a more normalized quarter. So as you know, in the first quarter twenty twenty, we had an exceptional strong performance. And that at the time, that accounted for 60% of the 2020 full year EBITDA for this business. So I would say no more into a normalized number. Also on the Client Solutions side, very important penetration of new services, 29% versus 25% in the 2020. Also moving forward on the distribution distributed solar installations, we've been adding already 36 megawatt peak year to date. And also on the Brazilian side here, of course, our strong impact from the Brazilian real depreciation. As I said in the beginning, in the first quarter twenty twenty, we also had around €27,000,000 of EBITDA contribution from the CNES plant. It's closed. And therefore, I mean, this contribution is no longer within the group's EBITDA. But also working on efficiency on Page 17, on a looking at the OpEx cash recurring, it's a 3% on a like for like basis, a 3% reduction vis a vis the first quarter twenty twenty. Of course, at the Renewables business, we are increasing headcount, but making sure that we keep a leaner organization. If we look to the OpEx per average megawatt, that's a 3% reduction vis a vis last year, and that's fundamentally driven by the O and M strategy and of course, overall cost control. But also in Networks, if we were to exclude growth, that would be an 8% reduction year on year. We have been investing in digitalization, of course, making sure that we keep reducing headcount. So very focused on efficiency. We have already launched internally a new efficiency program. Already two fifty initiatives have been identified. With these initiatives, we are covering already 60% of the OpEx targets that we communicated at the Capital Markets Day until 2025. So really on track to meet these efficiency numbers that we committed to in our business plan. On Page 18, I would like to highlight that on a comparable basis, so if you were to exclude the cost in the first quarter for repurchasing some bonds and the ForEx gains, so that's the first quarter twenty twenty and some ForEx gains in the first quarter twenty twenty one. On a like for like basis, net financial cost is around €141,000,000 That's a 2% reduction versus the first quarter twenty twenty. Again, just to remind you that back in January, we issued a hybrid bond, 1.95 yield, below definitely below the existing bond portfolio for different maturities. So on track also to work on reducing the financial costs at the group level. And on Page 19, the net debt, this increase is mostly explained by the fact that knowing that were cashing in during April the proceeds from the capital increase at EDPR, the €1,500,000,000 Of course, we had we were very active in terms of treasury management throughout this first quarter. So we actually anticipated some payments to suppliers that had an impact in terms of the working capital on fixed asset the fixed asset suppliers. So that's why the net debt raised to €13,100,000,000 If we were to include the €1,500,000,000 from the EDPR capital increase, net debt would be at €11,600,000,000 That's a 3.4 times net debt to EBITDA. And also with a very important contribution on FFO to net debt, So including this capital increase, adjusting for the capital increase, FFO over net debt would be at around 21%. Again, just reminding how important it is for EDPR to keep a very strong balance sheet and the fact that this has been recognized by S and P and Fitch with an upgrade to BBB and Moody's placing us as a positive outlook to be revised of the next months. Just to finalize before I hand over back to Miguel, net profit up by 6%. So we ended the period with €159,000,000 If we were to exclude ForEx, actually, this would be a 15% increase, so very good results given the context that I mentioned in the beginning. I'd like to highlight that on at the income tax level, we have a 17% tax rate that's on the back of some tax credits related to research and development in U. S. And also here, the contribution from the known controlling interest is the decrease is this is driven by the decrease in net profit from EDPR. So all in all, 159,000,000 net profit on a recurring basis, very good improvement from last year. Just to finalize the difference to reporting this year is driven by the capital gain from the sale of our 50% at CHC, that supply business that we have in Spain, without a shareholder, Cide. So we sold them our 50% that contributed to a with a 21% sorry, with a €21,000,000 capital gain. Looking at the non recurring items back in 2020, of course, we have we are correcting for the asset sale that we have in Portugal and Spain and also the bond we purchased. So with that, the reported net income at the €180,000,000 that's a 23% increase year on year. So that I would say very strong net profit, good with the important growth vis a vis 2020. And with this, I would hand over to Miguel. Thank you. Thank you, Rui. So as you know, we are deeply committed to delivering superior value for our shareholders and all stakeholders. And I think some of these numbers or some of the highlights are worth mentioning. I'd just like to reiterate them. First of all, on the investment side, we presented an ambitious investment plan until 2025 back at the strategic update. It had a strong focus on growth in renewables, but also networks. And we started growing started working on its delivery, I mean, since the first day. In fact, I'd even say even before that, we're already just working just to make sure we would be able to deliver that. In this first quarter, the investments increased 50% to around EUR0.7 billion, more than 90% of which is allocated to renewables or electricity networks. And we have a total of 3.2 gigawatts of renewables under construction already deployed over this first quarter. And that's in line with the targets defined for this year. So on the investment side, I think we are beginning to see that very big ramp up in growth. In terms of PPAs and future growth, again, here, since the strategic update, we've already contracted more than 0.5 gigawatts of renewable PPAs. So we've reached 6.4 gigawatts of capacity for delivery until 2025. That's more almost onethree of the 20 gigawatt target in our plan. So again, on the growth side and future PPAs, it's also going very well. On asset rotation, we've already secured for this year deals in The U. S. Amounting to 1,100,000,000 and we have other deals in advanced stage in Europe. So we have good visibility for asset rotation gains above well above €300,000,000 in 2021. On the balance sheet and funding for growth, the successful execution of the €1,500,000,000 capital increase of EDPR just after our strategic update and given the volatility in the equity markets, I think that was a significant step. As I've said, this allowed us to really strengthen our balance sheet and get the BBB rating from S and P and Moody's or the S and P and Fitch and the upgrade from Moody's. And it's also significantly allowed us to derisk the business plan. I So think that's something that really protects our company's growth plan from any future volatility in the financial markets because we've managed to get that funding in place. And so we can concentrate on executing and finding those attractive PPAs that you know us for. So now we can focus on execution, and that's what we've also been working on. So once again, we've simplified the structure. We're working on the organizational alignment. We're working on efficiency and very much focused on delivering strategic targets. And finally, but not least, we continue giving major steps towards ESG excellence. So corporate governance model talked about that. We've updated the best practices. We're very much aligned now with the energy transition. So in this first quarter, our total production was already 85% renewables. So clearly, EDP is a clean energy player, and it's got the ambition to become all green by 02/1930. And so we are working actively on that. And so I just take the opportunity to reiterate what I've said before in earlier calls. So in 2021, we expect to show some growth on our recurring net profit versus the 2020 figure of the €780,000,000 That excludes the 2020 contribution from disposals, namely Hydro Portugal and the CCGTs and supply in Spain. And finally, and I think this is just to wrap it up before turning it over for Q and A. Mean, Rui, myself and the full team, we're really enthusiastic about the prospects for the business development on the various fronts that we're working on. This is a really exciting time to be in the sector. As I've said, this is the electric decade, and EDP is very well positioned for that. We have strong public support for the energy transition in general and renewables in particular. We see continued strong demand for the renewables PPAs. We see strong demand for asset rotation deals and good pricing. And we're very comfortable with the recent reinforcement of our balance sheet. So I think all of these are very important factors, which allow us to continue to create value for our shareholders, and that's something that we are very much focused on. And it also allows us to continue delivering the financial targets that we presented less than three months ago at the Capital Markets Day. So all in all, from a strategic perspective and an operational and financial perspective, we are on track to continue to deliver. So once again, thank you for attending this quarter results call. And I suggest we now move to the Q and A session. Miguel? We can start now with the questions via the phone, and then we'll move to the questions via the web. The first question on the phone comes from Harry Wyburd of Bank of America. I've got three. So firstly, would you mind just updating us if there's any news on your plans for selling assets in Brazil and whether you could give any kind of guidance on the time frame you expect for the potential asset sales there? And the second one is on your exposure to power prices. Could you remind us and obviously, you've got the hydro in Iberia, but could you remind us what the all in exposure you have to outright power generation in Iberia is in terawatt hours? And then how hedged you are on that for 2022 and also 2023, if you're hedged at all? Just to try and get a sense to your potential exposure to the increases in power prices that we've seen. And then the third one is on net income for this year. You sort of briefly mentioned earlier you expected some growth. So I wondered if it would be possible to be a bit more specific. I believe the consensus you sent around earlier was about $880,000,000 of net income for the year. Obviously, that would require you to do certainly significantly better in the next three quarters than you did in the first quarter. But obviously, that's a pattern that has happened in the past. So I just wondered if you could give us any kind of sense for how you feel versus that consensus of $880,000,000 for this year. Harry, thanks very much for the questions. I'll do the first and the third, and I'll pass to Rui to talk about the second one. In relation to Brazil, so we talked about this. We are looking into potential implementation of an asset rotation model in Brazil in the transmission That would allow us to crystallize value and then rotate capital into new greenfield projects. So we are advancing progressing well. I would expect that to be probably a 2021 transaction. In relation to hydro, we are also looking to reduce some of our hydro risk in Brazil, like we did in Iberia in 2020. So we currently have three hydro plants, Zari, Quezua De Calderon and Somanuel, which are equity consolidated, partly because we have them in partnership with CTG, which we have shared control. And so we would look also to do that, and that might also be a 'twenty one transaction. And then we have a target, but this is more medium term for as you know, to be coal free by 2025. So Pathejn has a current PPA, which lasts until 2027, but the concession contract actually goes till 02/1943. So that's something we're also analyzing and trying to identify when would be the best timing. That's not a 2021 transaction, but the other two would be. Perhaps I'll just take your net income question and then pass it over to Rui. So and I'll take the net income, but I'll also talk just taking a step back, I'll also talk about the EBITDA. So on EBITDA, on consensus, we are comfortable with the 3.7. I mean, obviously, we have the Texas slight impact. On the other hand, we probably expect slightly better capital gains. Viesco synergies will probably be mostly or will be coming in more in 2022. Capacity in 'twenty one will also come more towards the year end. And so that's just some comments I would make probably on the EBITDA, but we can go into more detail if someone then has more questions on that. On the net income in particular, I'd just like to say the following. I don't want to comment specifically on the consensus because I think I believe there's still a significant number of analysts, by our estimates, around half of them, that are updating their forecasts with the impact on the 2021 net profit from the capital increase in EDPR. So as you know, the minorities increased from 17% to 25%. I mean, this will end up then being compensated by the new investments generating earnings, but mostly from 'twenty two onwards. So I won't give you a specific guideline on that. What I did say in the presentation was that we would expect some growth versus the recurring net profit of the €780,000,000 which was in 2020 and which excluded the hydro in Portugal and the CCGTs and supply in Spain. And so I think I'd probably leave it at there for now. Rui, if you want to power prices? Sure. Thank you very much. Hi, Henrik. So on the hedging, so as you know, we are pretty much fully hedged for 2021. So no material impact there. But there is some upside for 2022 and 2023, namely for the nine terawatt hours of base loads capacity that we have with the hydro capacity in Iberia. So for 2022, we have around 30% of this production still unhedged that, of course, would benefit from increased prices. The remaining is hedged at around €50 per megawatt hour. And this is actually above the what we used as an assumption for the business plan. And for 2023, we have around 25%, 30% hedged at pretty much the same €50 per megawatt Okay. That's very just a quick follow-up. So just to check if I heard correctly. So 70% hedged, 30% unhedged for 'twenty two and then sort of 70% unhedged and 30% hedged for 2023. Have I heard that right? That's right. Okay. And then the nine terawatt hours of hydro in Iberia, is there any is any of your wind or solar in Iberia merchant at all? Or should we just assume that zero of that merchant? No. So for renewables, we have around 80% hedged for 'twenty two and around 30% hedged for 'twenty three. Okay. And that would apply to all of your wind and solar in Iberia, is that right? In Iberia. That's right. Well, in Spain. As you know, the Portuguese has farmstead on so that's applicable only to the Spanish fleet. The next question comes from Sarah Pinithney from Mediobanca. Please, the question on the guidance regarding net debt. What is the level of net debt that you expect by year end? And considering the €1,000,000,000 impact of working capital for this quarter, do you expect this to be reabsorbed by the year end? And therefore, if you can give an indication of net debt to EBITDA or level of debt that you expect for 2021? And then the other question was on the synergies on BSCO, but I guess if you have any additional comment, otherwise, is fine. Sara, this is Rui. So, debt to the year end, we expect around €11,000,000,000 I mean, the decline is on the back of, of course, the €1,500,000,000 capital increase that we cashed in April, executing the business plan in terms of the growth. So, the CapEx plan on a gross basis is around €4,500,000,000 throughout the year. And of course, we are also expecting proceeds from the asset rotation and as well closing the tax equity structures in U. S, although this is expected to be more towards the second half of the year. And as regarding I mean, Viejo integration synergy, it's going according to plan. As you know, we don't disclose the synergies, but they are not far from the consensus that we see in the market for the synergies to be captured. Many thanks. We can go to the next question, please. The next question comes from Javier Garido of JPMorgan. Javier, your line is open. Thanks. Good evening. I think I only got one question left, which is if you can explain a little bit about your realized price in hydro because you have delivered, if I am correct, a realized price of €52 per megawatt hour in Q1 when your hedge price for this year is €45 And last year, when your hedge price was €55 you delivered an average realized price in hydro in the 40s. So it would be very much appreciated if you can give us an indication of these deltas, what happens in addition to the margins in Pampa Storage, what drives these discrepancies between the hedge price and the realized price or higher? Okay. You, Javier. It's Rui. So the hedges are at the base load. And of course, the realized price is just taking advantage of modulation of the production. So in the reservoir dams, of course, we will select the best towers to operate. And of course, the lower the towers will lower prices, and then we'll also use it for the pumping. But really, when you look at the realized price, the difference versus the hedge is that the hedge is base load and the realized price is just how we modulated the production throughout the quarter. But maybe if you want then some more details, we can take it offline. Yes, please. Thank you. Thank you. Next question, please. The next question comes from Alberto Gandolfi of Goldman Sachs. Alberto, please go ahead. Hi. Good afternoon, and thanks for taking the question. I guess I just wanted first like a comment. Thank you for clarifying earlier on the EDPR call that you have absolutely no exposure to cost inflation, so you fixed your procurement costs. Just to be on the same page on that one. I guess the questions are, you have nearly three gigawatt under construction of renewables and nearly 6.5 in total already secured. Now given the skepticism on returns out there, can you tell us if on those secured and under construction, you are on track to deliver your 200 basis points of a WACC if you are above, if you are below, if there's a region or a technology that surprised you on the upside or downside, just really to put to rest an argument with facts instead of speculation? I guess the second question is I couldn't help noticing maybe the transfer price, but there's like your EBITDA from Brazilian network is up nearly 70% in local currency. Your supply in Iberia is up nearly 200%, and your Energy Management is down 90%, just to name three big changes. So can I ask you if there's any division for which the first quarter is not representative of the true underlying earnings power? So anything that we should consider on any of these? I'm talking local currency here. And that's about it. You have already replied all my other questions. Alberto, always good to hear from you. So on the first point, I mean, yes, we clarified on the EPR call, so no risk of cost inflation on the projects that we've already secured or have taken investment decision on under construction. And obviously, that means that the returns are also completely locked in for those projects. And also in relation to the 6.4 gigawatts that we have secured, that means that we've also not only locked in the PPAs, but have also typically locked in a big part of that CapEx. So we are very comfortable with the more than 200 basis points WACC. And as you know, historically, our 200 basis points above WACC spreads. And so historically, we've actually been far better than that. And so that's we're very comfortable with that. And typically, as you know, over time, this any inflationary pressure would be passed through on to new PPAs that are done going forward. And people are looking for similar returns. And so they just incorporate the best estimates on whether it's interest prices or cost prices into the models and into their management or the sort of the financial calculations that they're doing. So we're very continue to be very comfortable with the level of competition and the fact that we can continue to find profitable projects. In terms of the different businesses that you mentioned, so I think things are going pretty much in line and well for the different businesses, and we'd expect that to also continue on for the year. Energy Management, we'd actually expect to go up. As you know, Energy Management in the first quarter was below the normalized level that we typically see for the year. And so we would expect a positive increase on the Energy Management for the remaining quarters. The rest supply is relatively stable. And in Brazil, I mean, obviously, apart from FX, but it does I mean, the business is doing well in Brazil. And as you know, had better much better year. At one point, there was some concern maybe a year ago about Brazil in the middle of COVID, etcetera, but it actually turned out to be turn out very well for and actually had fantastic results last year, and we expect it to continue to do quite well going forward. So hopefully, answered your questions. You can go to you. Albert, have you finished? Do you want add something else? No. I was just pointing out sorry, I was just pointing out that, again, you are doing more than 200 basis point over WACC on your extremely visible renewable projects. Thank you So so much for pointing Thank even above 300,000,000 on average for the portfolio. Obviously, the 200,000,000 is, let's say, what we typically have as a floor. But for the portfolio, we're currently above 300 Right. Including everything installed, you mean? The projects that we have under construction and locked in. So what's coming is above 300. Yes. Yes, that's right. You. You, Alberto. So we can now go to the last question on the phone, and then we can go to the couple of questions that we have also on the web. The final question comes from George Guimaraes from JB Capital. I have three. The first one is your view about the recent comments from Endesa's CEO, where he mentioned there is a significant increase in competition of the Plymouth Spine. And do you see any cross read of that to Portugal? That would be the first one. The second one is actually a follow-up and just a clarification on your answer to Alberto. Now when you say under construction and locked in, you mentioned the 6.4 gig of EDPR. Is this correct? So this would be the second one. And the third one would be, if you can provide us with an update on regulatory situation in Portugal regarding sales and clawback because I see that sales significantly down in the quarter I mean significantly to €50,000,000 So if it's possible to give us an update on where things stand now in terms of sales and in terms of also of the generation clawback? Okay, Josh. So in relation to supply, in well, as you know, we sold the supply business last year to Total in Spain. So the B2C, in any case, in the B2B, we continue to be there. So we no longer have necessarily an opinion on the B2C competition in Spain. In Portugal, in any case, you'll have seen that the supply margin actually went up this quarter. So I would say the answer in terms of the competition is, yes, there's competition in Portugal. There has been Portugal has actually been liberalized since 2006 and more intensively since 2012. We have more than €5,000,000 of the six already in the liberalized market in Portugal. And so there is competition, but we don't see any change in the level of competition in terms of aggressiveness. I think it's been relatively stable over this period. And in fact, as I mentioned, the supply margins are also reflecting partially that. The second question, if I understood correctly, the under construction and locked in. So yes, it's the 2,900,000,000.0 and the €6,400,000,000 that we have at EDPR. And in relation to the regulatory situation in Portugal. So the sales, there is a decrease, but don't forget that we've sold the hydro last year. So there's less assets and the sales is applicable as well as a percentage, point 85% of the assets that we have. So if we have less assets, we pay less sales. Obviously, in this case, ENGIE will be paying that delta in the sales of those dams. Going forward, we maintain the expectation that since this is an extraordinary tax that it will evolve in line with the system debt, and it will come down. And our expectation is that by 2025, it would be down to in line with the system debt, down to zero. On the clawback, so last year, we had around close to €30,000,000 or thereabouts of 20,000,000 to €30,000,000 of clawback. It's calculated on a yearly basis by the regulator. I don't think that number has come out yet, but I would assume that it would be ballpark that type of number. So we'll have to see when it comes out, but we're not expecting major variations in that. Okay. Thank you, George. We have a final question, final one, maybe we can accept. Okay. The final question comes from Manuel Palomo from Exane. Manuel, your line is open. I've got sort of a follow-up question on the renewal returns. I mean it's, for me, very, very clear. You've demonstrated that for those assets in which you have done asset rotations, you have made clearly more than two hundred three hundred or 400 basis points spread. But I'm a bit curious, I mean, that there's a big gap or a gap at least between the useful life of the asset and the lifetime of the associated PPA. I would love if you could tell us how you build your assumptions in terms of prices for that period after termination of the PPA? Okay. So let me just give a first go at that, and then if Rui wants to complement. But so clearly, when we're valuing the renewable project or anyone is valuing that renewable project, they'll be looking at the PPA price, which is very easy number to calculate, and be discounting that at the appropriate cost of capital. Let's say it's a fifteen year PPA. And then we'll be looking at the post PPA period, so merchants and assuming what are the merchant curves post that period. I mean, we have a view that prices will continue to be indexed to gas price or the merchant prices will continue to be indexed to gas prices post PPA period and for the foreseeable future while there's sort of while the current marginal system is in place. And so what you'll have is perhaps a differentiation in terms of realized prices between the different technologies, but let's say, the baseload price will continue to be set by that. Wind, in particular, has a relatively low adjustment factor. So the realized price is typically only a small discount to the base load because it's pretty irregular throughout the day, so it's not so defined. Solar maybe has a higher solar adjustment factor. And so you'd be discounting or incorporating that into the power prices post the PPA period to get your estimate. So that's how we would look and that's how we would value a renewable project and that's how we see the market valuing it. I don't know, Rui, if you want to complement. Thank you very much. Maybe I'll just complement to two different aspects. One is, I mean, of course, we have our own internal estimates that are based on looking at the fundamentals in terms of commodities and supply demand to come up with these long term projections. But naturally, we also use third party curves to make sure that we compare the numbers. But I think the second aspect, which is very important, according and it's something that we shared also at the Capital Markets Day, It's not only about meeting this profitability, the spread of our WACC, but also that in terms of risk profile, we'll typically have at least 60% of the NPV under contracted revenue. And we have been achieving actually much more than that. So not only about meeting the returns, but also making sure that we keep a low risk profile for the long term for these projects. Thank you very much. Very clear. Okay. We'll go now to two last questions by email. We have one question by Jorge from SocGen. Could you provide a view about the proceeds expected on the asset rotation in renewables in 2021 and providing the €300,000,000 that you referred in terms of capital gains? There, the only thing I'd be able to say is a little bit reiterate what was in the presentation. So we're very close to three deals or some of them coming from the past in The U. S, which have a €200,000,000 asset rotation gain. We have some advanced or some deals in advanced stage in Europe, where we would also be expecting to obviously add on to that number, the additional capital gains. So it would be above the €300,000,000 that I talked about. Okay. We have another question from Arthur Sippon on with clean spot spreads coming down, could you consider anticipating the exit of the Gas five Power Generation business? Is there a risk to see transaction multiple for these assets dropping in the next few years considering you'd wait 2030 for the sale of the plants? Yes. I mean, what we said is that we would be carbon neutral by 02/1930. And so we would manage these plants or the remaining gas plants over this period and see sort of what is the most appropriate what is the most appropriate destination for them in this period. Currently, the gas plants are obviously very important for just general market stability and equilibrium and security of supply. So they do have an optionality value independently of sometimes having small or negligible spreads, but then they are important as a backup. So we will be very much focused on going all green by 02/1930, but it doesn't mean that we'll wait until 2030 to execute this ambition. So we will monitor the market and do whatever makes most sense in terms of value for EDP and for the shareholders. Final question from Jorge from SocGen. How the draw in Brazil is affecting your generation and supply unit there? Would that prevent you from considering the disposal of the stakes in the idle plants where you have CTG as a partner? So as you know, we've talked about repeatedly, we have very much a prudent approach to risk management in terms of portfolio. We have hedging strategy in place to mitigate the GSF and the PLD, sort of the local energy price risk so that we can reduce the volatility of earnings. So in general, in Brazil, it's not so much an unbundled system like it is in Europe. Typically, the supply and generation activities are managed in a much more integrated way even also with the distribution. So there's some optimization of the portfolio as a whole, and that mitigates part of this hydro risk. Having said that, I did say that we would like to reduce our presence in hydro in Brazil, like we've done also in Iberia in 2020. So that's something that we're working on. And we would consider that the disposals, the stakes where we have CTG as a partner, and that's something that's, as I mentioned, I think Harry asked or mentioned that. So we would look to do it probably over the next twelve months. We have no more questions, so I'll pass the word to our CEO for final remarks. Last remark I would make is the following. I mean, we are just a couple of months after the business plan, but we've already managed to execute a significant number of milestones that were important for us. Since the business plan, as I mentioned, we've been upgraded by S and Ps and Fitch. That means we have now a much more solid balance sheet, which gives us the ability to continue to grow without any question about our ability to deploy the investments in the capital and to take advantage of the opportunities that come up. We have a great pipeline. We have a great set of projects under construction, which we're working on with good returns. And we continue to see very attractive opportunities in the market and the various different markets that we're in. So as I mentioned, this is electric decade, I have no doubt that GDP is very well positioned to continue to take advantage of that, be it in renewables, be it in distribution networks in the various different geographies, or even on the Client Solutions side, where as you saw, we had good supply margins, we have good sales services to our customers, We have a good increase in deployment of distributed generation also in a couple of different geographies. So quite frankly, we see across the value chain, a significant amount of good opportunities, and we're well placed to take advantage of them. Thanks very much, and we'll see each other or talk to each other again in the short term, maybe some of you earlier, but otherwise in July. Thanks. Take care. Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect your lines.