Good morning, ladies and gentlemen. Thank you for being with us today in the conference call for EDP's 2019 results. We'll begin with a brief introduction by our CEO, António Mexia. Our CFO, Miguel Stilwell d'Andrade, will provide us an overview of results and the main developments of the period. We'll come back to our CEO for a more detailed analysis of the status of our strategic execution. We'll move to a Q&A session, in which we will be taking your questions both by phone and via our webpage. We expect this call to last no more than between 60 and 75 minutes. I'll give now the floor to our CEO, António Mexia.
Thank you, Miguel. Thank you. Good morning, everybody. Thanks for being here, attending our conference call on the results of 2019. On your slide number four, I would like to start providing an overview of our performance. First and foremost, I believe it's important to mention that we have achieved a sound performance in the first quarter, so since the last time we met, that supported the delivery of 2019 financial targets. In fact, during the first quarter, hydro volumes were 56% above our historical average, which allowed not only to increase hydro generation, but also to recover storage levels in our reservoirs. The high volatility of the Energy markets in the quarter also led to good results on our Energy management in Iberia.
In Brazil, we booked in this quarter the asset rotation gain from the sale of Babilônia Wind Farm and continue registering a robust growth in Networks. Another important remark worth mentioning is that interest costs started a downward trend and are expected to continue this path in the following periods. All in all, our EBITDA increased by 12% to EUR 3.7 billion, with strong growth across all our three business platforms. A number that is clearly above the EUR 3.6 billion that we reported and we are expected back in September. In line with our operational performance, our recurrent net profit increased by 7% to EUR 854 million. I would also like to stress that our net debt to EBITDA was reduced from 4.0- 3.6 as of December 19, still not as much as expected in line with our de-leverage commitment.
Regarding dividends, the executive Board of Directors will propose at the annual shareholders meeting next April the distribution of a dividend for the year of 2019 in the amount of EUR 0.19 per share, which represents a payout of 81% on net recurrent income. Clearly, the floor is respected. The commitment is there, and in the middle of the bracket that was proposed. I will pass to Miguel Stilwell for a more detailed analysis of our results, and then come back to talk about strategy execution. Thank you.
Good morning, everyone, thank you, António. I'll start off on slide five, talking about the hydro and the wind performance, which obviously impact our business throughout the year. In hydro, we had basically two periods. We had the first nine months, which were particularly dry, as you know, and with weak hydro resources. That was a drag, I think, for most of the year, in particular the first quarter. We had the last quarter, where in particular December, we had very strong hydro resources. Overall for the last quarter we were 56% above the historical average. This basically allowed a recovery of the storage level in our reservoirs, to above 0.4 TWh above the historical average, which meant that we got a good start to the year also for 2020.
Regarding wind resources, they were 3% below the long-term average in 2019, but still better than last year. Overall, the load factor from the wind farms improved from 30% in 2018 to 32% in 2019. Moving on to slide six, talk about EBITDA. EBITDA, as António mentioned, was up 12% to EUR 3.7 billion, all three platforms contributing to this growth, as you can see here on the right-hand side. Renewables rose by EUR 89 million, mostly driven by the results from the wind and the solar, which more than compensated the decline in the hydro in Iberia and Brazil. EBITDA from Networks went up by EUR 160 million, which is pretty similar value also to the increase in EBITDA from Client Solutions & Energy Management. The year-on-year boost from Networks was mostly from Brazil. The Client Solutions & Energy Management was mostly in Iberia, that increase.
Moving on, I'll give a little bit more detail after that on the detail of the EBITDA from the different activities. Moving on to slide seven, and talking about the wind and solar EBITDA. It increases by 27%, an improvement of 6% in generation, together with a 2% increase also in the average selling price. We also accelerated the execution of our asset rotation strategies. We had total gains for the year of EUR 330 million, basically from two deals. One in Europe, which we'd already announced in the first semester results, EUR 226 million. Another now in this fourth quarter in Brazil, EUR 87 million. This compares with gains of EUR 109 million in 2018 relating to the sale of a wind portfolio in North America. Basically, we outperformed what we set out in our strategic plan regarding the capital gains on this asset rotation.
Moving on to next slide, EBITDA from Hydro. Here, the EBITDA from Hydro reduced 29% year-on-year. Had both in Iberia and Brazil. In Iberia, the EBITDA went down 25%. It is relating to two things. Basically, 27% decline in volumes, but also a 14% reduction in the hydro realized prices as a result of lower pool prices. However, this was mitigated by our hedging strategy, and so the net impact was substantially mitigated versus what it would have been if we had not implemented this hedging strategy. In Brazil, the decline in EBITDA from Hydro is in great part relating to the sale of the small hydro plants in the fourth quarter of 2018, where we booked a gain of EUR 82 million, which obviously is not there in 2019. Moving on to the next slide, talking about regulated networks.
Here, the EBITDA from network increased 19% year-on-year, mainly driven by strong growth in Brazil. Here, the EBITDA increased 75%, basically driven by, firstly, the growth in the transmission activities. We're finally beginning to see this coming through in terms of the EBITDA, and it's a big part of our growth in Networks in Brazil. A second piece that explains this growth is the revision of the regulated asset base of both of our distribution concessions. This is something we'd also talked about in the third quarter results. Finally, in the fourth quarter, there was also a change in the medical plan in the Espírito Santo, which resulted in a gain also in the Networks business.
In Iberia, we had a reduction on the return on RAB in Portugal, which reflects obviously lower yields on the Portuguese Republic debt. It was to be expected. We also had a one-off cost relating to previous periods, basically sharing of capital gains relating to the sale of real estate, which that, plus some adjustments, added up to approximately EUR 28 million. This was partly compensated by a 4% OpEx reduction, so good performance there on efficiency in Iberia Networks. Moving on to slide 10, Client Solutions & Energy Management. Here, very strong increase, 52% year-on-year. Strong growth in Iberia. Here, the results from the hedging strategy more than compensated the fall in the pool prices and the significant decrease in generation from our coal plants.
In supply, we had an increase of EUR 93 million in EBITDA, mostly due to normalization of supply margins since 2018 was a particularly adverse year, as you know, in supply in Portugal. We'd already flagged that, I think, up front, that's why we're quite optimistic about in the strategic update regarding our supply business. Also, we had increased sales of services, the digitalization of processes, which brought the cost down, and just overall, better quality of service. All of this justifying the increase in supply margins. In Brazil, the decline in results from thermal is explained basically by a gain in 2018 due to the downwards revision of availability level of our coal plant, Pecém. I think we've also talked about on previous calls.
Regarding supply and Energy management in Brazil, the reduction in our results is due to lower supply volumes, which is also in turn relating to lower liquidity in the free market, and also some lower results from Energy management year-on-year due to the improved energy context, so more rain. Let's move on to financial leverage or deleverage in this case. Our net debt EBITDA is down to 3.6, which I believe is a historic, for at least over the last decade. This basically is a result mostly of the organic cash flow, which is up 20% year-on-year, supported by the strong EBITDA. We are increasing the pace of expansion investments amounting to EUR 2.1 billion, 70% of this is in Renewables and roughly 30% Networks. The EUR 1.2 billion of net expansion also reflects the EUR 1 billion of proceeds from the asset rotation.
Half of the recurring organic cash flow goes to dividends, very comfortable coverage. On top of that, the net debt is also impacted positively by 50% equity content of the EUR 1 billion hybrid bonds issued at the beginning of last year, as you know. This was compensated or nulled by other effects, namely regulatory receivables and an extraordinary pension fund contribution in 2019. Net-net, we end up at 13.8, as I say, at a net debt EBITDA ratio, historic low. Just to remind you, if you didn't notice that, the proceeds from the sale in Brazil were not received at the end of last year. They were received at the beginning of this year, they'll be reflected in the first quarter. Obviously, if we were to include that, they would be closer.
That plus regulatory receivables would be basically flat year-on-year. Moving on to slide 12, interest-related costs. They increased 2% to EUR 685 million. The fourth quarter already shows a downward trend. The year-on-year rise is basically a 10-basis point increase in the average cost of debt to 3.9%. Which is impacted then by the issuance of EUR 1 billion of hybrid bond in 2019. One of the things which impacts quite a lot is the mix of debt in our portfolio. As we are investing more in the U.S. and in Brazil, obviously the cost of debt in this currency is higher than the cost of debt in euros. There's this shift in terms of the mix. Overall, we expect to see, though, the cost of debt coming down. Finally, moving on to net profit.
The reported net profit was penalized, as you know, and we'd flagged that in December when we talked about the impairments, mainly in coal in Iberia. Our reported net profit in 2019 ended up at EUR 512 million. It's also impacted by the Fri-El provision, which we'd also flagged in our third quarter results. In Portugal, in particular, we had a net loss of EUR 98 million. It's the second year in a row of net loss in Portugal. However, obviously this is impacted by the very low hydro conditions and a lot of these one-offs that I've talked about, the coal impairments and Fri-El. Finally, recurring net profits. Excluding some of these one-off items, our recurring net profit was up 7% to EUR 854 million. EDP Renováveis and EDP Brasil had record results this year.
In Portugal, recurring net profits went down EUR 160 million. That's, as I mentioned, mostly impacted by lower hydro production. Obviously continues to be impacted also by the high levies and taxes, which were partially mitigated by the turnaround of results from the supply activities. I think overall, a solid set of results. I'll pass the word back to António to give you an update on our strategic plan. Thanks.
Thank you, Miguel. I think it's a good moment to, because we have presented the plan last year in March, I think it's a good moment to basically focus on what we have delivered and of what is basically, I think, the strong credibility of the past that we have established and strategy that we have established between 2019 and 2022. As I mentioned, we presented our strategic plan. That was based in five pillars. The accelerated and focused growth, the continuous portfolio optimization, efficient and digital enabled, solid balance sheet and low risk profile, and attractive shareholder remuneration. This is shared with you again in slide 16. Having an idea that we wanted to lead clear value creation in the energy transition due to the fact also that we were a kind of first mover in this trend.
Let's start with the first pillar on slide 17. One of the key questions was, of course, is the company able to deliver what it committed for this plan? I think the answer is clearly yes. In March, we presented a four-year target of 7 GW to be secured in the period through PPAs and other long-term contracts. During 2019, we agreed 3 GW of long-term contracts for our planned renewables additions up to 2022, reaching, as we speak, a total of 5.4 GW secured, representing 76% of our target. I believe that we can consider last year as a very intensive year with an unprecedented execution. Close to half of our 3 GW of project secured were in the U.S., a market that we like and in which we have a strong position, and we have all the conditions to strive.
It's also worth noting that we won important auctions in Poland, in Italy, and we have increased market positioning in Brazil to number four in the market while entering into new geographies like Colombia and Greece. On next slide, another, for me, a very important issue. Even if we believe that this growth is rather astonishing, and yet another proof of several that we already gave to the market of our strong track record on securing projects, it's also important to mention that we did it while preserving our strict investment criteria. The key question is, are these people able to grow profitably and keeping what are those criteria that we present to the market?
In this slide, we show that we have analyzed EUR 9 billion of opportunities at top decision-making level, after all tight scrutiny at business units level, and only 2/3 were approved and successful. The context was challenged, but we maintain our criteria selective in average terms, and we maintain our investment criteria both at return and risk level. As you see on the right part, those four ratios that are critical and the visibility, I think it's strong in terms of the quality of delivery. Moving on to slide 19. It means looking into the medium term.
The future brings us several opportunities, not only for the development of new assets and new technologies like offshore wind or green hydrogen, but also for enhancing the value of the existing one through hybrid project storage, and as the time goes by, wind repowering. All the opportunities supported by a decline in the cost of the several renewables technologies. Public support on renewables has been increasing, namely in the recent good news from the extension of PTCs in the U.S., one additional year, or the Green Deal of the EUR 1 trillion launched by the European Commission with even more aggressive decarbonization targets. For EDP, clearly this context is an opportunity, and we are ready for it, not only in the markets in which we are already present, but also in new markets. Moving to an important element, wind offshore.
As you all know, we established a 50/50% JV with ENGIE, creating a top global player in offshore wind, a technology that is new and is capital intensive. The JV current portfolio of 5.2 GW is progressing with 1.5 GW under construction. We expect to increase the size of the portfolio between two and three times until 2025. In late 2019, we were awarded more than 800 MW PPA in Massachusetts. We installed in Portugal the world's largest wind turbine in a floating platform. Going into Brazil. Let's start with Networks. I think it's worth to highlight the recent regulatory views at EDP Espírito Santo and EDP São Paulo, which had a very positive outcome.
A net RAB growth of 36%, the maintenance of the return on RAB at 8.1%, and I believe an astonishing outcome on investments ARCAT of less than 0.5%, the lowest in the industry and the lowest ever. The best ever verified in Brazilian history. These regulatory views provide full visibility of returns up to 2022 and 2023. Going into the other parts of Brazil, regarding transmission. We have already executed 59% of our total investment of BRL 3.9 billion in six transmission lines. One line was already operating during the whole year of 2019, and the second one is partly in operation since beginning of January 2020. We expect this strong growth pace to continue, and that by 2022, transmission represents more than 50% of EDP Brasil's EBITDA.
It's clear that we are delivering our growth in transmission with execution ahead of schedule and that better than expected funding condition, clearly enhancing the equity returns of the project. Moving into clients. The number of clients in Iberia, slide 23, remained broadly stable in a period in which some of our peers have been experiencing a decrease in their market shares. This is possible due and of evolve to our quality of service. About this point, I would like to stress that 23% decrease in the number of complaints per 1,000 contracts that we had in Iberia, which clearly shows our full commitment to our clients. We are by far the number one in terms of quality in our market. On top of that, we increased services penetration, digitalization, and new Client Solutions. All in all, 2019, we are already above 2020 targets of more than EUR 60 million.
Looking forward, this is a sustainable trend and we still see room for moderate improvement in 2020. Well ahead of what we have foreseen in 2019, March. Second pillar. How do you see after-growth? How do we fund it? We also, as you know, the second question was continuous portfolio optimization. This is critical for us. No taboos, crystallizing value, de-risking the portfolio. It's a critical element for us. We had a target of more than EUR 4 billion, and so far we have already concluded two deals with proceeds more than EUR 1.1 billion at very attractive multiples. An EV megawatt of EUR 1.6 million for the European assets rotation deal and EUR 2.2 million for the deal in Brazil.
For the three years ahead of us, we see a positive outlook given the low interest rate context, which was not anticipated at the time of the plan last year, and an increasing appetite from investor for infrastructure and renewables assets. We keep, of course, we are very focused in looking for new opportunities, mainly in U.S. and in Europe, that we can expect for this year. Moving to slide 25. We had a target of more than EUR 2 billion of asset disposals. As you know, we have agreed by year-end a EUR 2.2 billion disposal of 1 point for further steps in our de-risking goal with a decrease in market price exposure and concentration of other risk in a particular region of Portugal.
This was a sizable value crystallization of an important asset class of our portfolio that was until now clearly undervalued by the market. The read across, I think it was an interesting element. I would like to highlight that the financial closing is expected in the second half and everything is going according to plans. As we have stated last March, and we have also reaffirmed over the last quarters, we have continued to look in parallel to four alternatives of complementary options to the largest size at our disposal. These options may still be considered, namely regarding other Iberia assets or asset reshuffling opportunities in Brazil. Moving into the third pillar in slide 26, efficient and digital. If we see OpEx, we continue to see a strong performance on operating costs.
OpEx on a like-for-like basis shows 1% nominal decline, supported by all our platforms. In Iberia, 2% reduction in adjusted OpEx. In Brazil, OpEx in local currency increased 3% below average inflation, so in normal terms. At EDPR, adjusted core OpEx per megawatt, which excludes Forex impact and one-offs effect, was flat year-on-year. Summing up, OpEx year-on-year evolution puts us on track to achieve our OpEx reduction targets of EUR 50 million in 2020. As you remember, EUR 100 million in 2022 after EUR 50 million in 2020, with an overall effect accumulated of EUR 300 million over the period. Well on track to this. Moving to slide 27 and pillar number four, solid balance sheet and low risk profile. It's clear that we are delivering our commitment in terms of business risk and financial risk.
On the business risk side, our contracted exposure was 79% in 2019, an increase of 4% compared to 2018. I think it's a clear sign of our commitment and a very good signal to our portfolio. On financial risk, the leveraging continues to be a priority, and we are moving forward to fulfill this target. Net debt over EBITDA decreased during 2019, as I mentioned, to 3.6x . I would like to highlight that it was the lowest since 2007. We are on track to be below 3.2x in 2020, aiming to reach a solid investment rate. Moving to slide 28. In terms of refunding, the decline of marginal cost of funding, both in U.S. dollar and euros, has allowed us to issue debt at lower rates than the debt that is maturing. This will allow us to sustainably reduce our average cost of debt going forward.
In fact, our 3.9% average cost of debt in 2019 is even below our 4% assumption presented in the strategic update. Moving to slide 29. Recurring organic cash flow has been increasing significantly, supported by EBITDA improvement, lower working capital needs, and maintenance CapEx. We continue to see a moderate upside over the current basis for 2020. Taking into account 2019 results and our most updated view on 2020, in these two years, we expect to deliver more than 50% of sources of cash and net investment assumed in the plan and 100% of our debt reduction commitment. I think it's clearly being ahead of the curve. Moving to slide 30. Fifth pillar, attractive shareholder remuneration. I think that it's obvious that green is the spotlight nowadays. That we have been, as you know, focused in being a green company, even when green was not the trend.
Decarbonization played and continues to play a crucial role for us. During 2019, we managed to give a good performance, both in terms of renewable generation and specific emissions, despite weaker hydro resources in Portugal. I would like to highlight that we were one among 87 global corporations that pledged to reduce emissions and ensures global warming does not exceed 1.5 degrees centigrade up to 2050, assuming as well a commitment with net zero emissions by no later than 2050. We said we want to become coal-free before the end of the decade, and we are clearly moving in that target faster than expected, not only because of our willingness to do that, but also due to market conditions. As it's public that the Portuguese government intends to shut down Sines plant until end of 2023, subject to some conditions.
Probably beside the operation for this period, we will be conditioned on achieving positive margins. I would like to highlight here on this slide that the coal production in Iberia decreased by 49% and represents less than 1% of our EBITDA of the total of the group. Less than 1% of the total of the group. Slide 31. Distinctive green positioning. I think that we have been very consistent. We have a distinctive story that is not only about decarbonization. We have years of experience in ESG, and we have consistently been recognized by the main ESG rankings. Last year brought us, again, the knowledge of our sound, sustainable performance, with several important achievements, namely being ranked as number one integrated utility for Dow Jones Sustainability Index in the world.
In fact, 10 out of 11 years, we have been ranked number one or number two in this index from RobecoSAM. We achieved other important recognitions this year and on past years among our peers, as you know, and you can see on this slide. Reinforcing both our achievements and continuous commitments to our ESG positioning. Moving to slides. 32, our last slide. Overall, 2019, we had several positive developments which have contributed to improve the visibility of our strategic plan execution. I think it's critical to highlight this. I can share with you that we are now even more confident that one year ago, that we will deliver all the key targets which we have committed in our 2019-2022 strategic plan, both for 2020, 2021, and 2022. Thank you. Now we can move for the Q&A.
Ladies and gentlemen, if you'd like to ask a question at this time, please press star one on your telephone keypad. To cancel your question, please press star two. Once again, that's star one to register a question and star two to cancel. We will now take our first question from Stefano Bezzato from Credit Suisse. Please go ahead.
Yes. Hi, good afternoon. Three questions from me. The first one on your sell down plans. Can you remind us what's the assumption in terms of capital gains that you have for the EUR 3.7 billion of EBITDA target this year? The second question is on your Brazilian strategy. Looking at recent statements from the local management about a possible disposal of hydro assets. Do you envisage a process similar to the one that you launched in Portugal last year? The third question, if you can just remind us what is the current situation for a possible reduction in the energy tax, in Portugal this year. Thank you.
Thank you, Stefano. Sell down plans. As you know, in 2019, the results were better than we expected, with a figure that is above EUR 300 million. In what concerns this year in terms of farming down in renewables, the figures will be clearly above what also was foreseen of EUR 200 million. I think that we will have a good delivery in what concerns this outcome. Second, Brazil. Miguel Setas, we have been working on this, of course, mentioning the asset reshuffling in Brazil. I think that it gives you also the feeling that in any geography, wherever we are asset reshuffling and crystallizing value and moving to parts of the value chain that we consider more adjusted to our strategy, we have no problems in doing this.
It's clear that we have, in the recent past, we have been focused more in distribution and clearly very first mover in transmission with a fantastic result. We don't exclude the kind of asset reshuffling in Brazil basis. We will be looking to do this in 2020. In terms of a reduction of energy tax, as you know, the commitment was twofold. First, that 2/3 of the energy tax would be applied in the reduction of the tariff deficit, and mainly that the tax, the 0.85 that applies to the asset base to all the sector, not only for EDP, will be reduced according to the reduction of the tariff deficit. We expect what? As the tariff deficit reduces 15%, we expect these taxes to be reduced by 15%. Going 15% below the 0.85.
This was included in the budget law that was approved in the parliament.
We can go to the next setting, please.
Our next question comes from the line of Harry Wyburd from Bank of America. Please go ahead.
Hi, everyone. Thanks for taking my questions. Three from me, please. Just the first one's on earnings. If you look at what you just went through in the presentation, there's a lot of areas where things have clearly improved since March. You mentioned cost of debt is looking much better, rates are much lower. You've got certainty on the hydro sale, and you got a very good multiple on that. You've got lower ongoing coal depreciation. You've had good regulatory reviews in Brazil, and of course, you've got a good base year now, in 2019. Would it be fair to assume that you're more comfortable? I guess you just reiterated the past guidance. Would it be fair to say you're much more comfortable about that guidance now?
Is there something that's gone the other way, a negative that we haven't seen that's leading you to not to raise your targets? Second question's on EDPR. I guess a lot has changed since you last launched an offer for the EDPR minorities. The earnings outlook, as you just mentioned, seems to be pretty good now, which maybe means you could perhaps stomach a bit of dilution if you made an all-share offer there. What's your thinking at the moment on the EDPR minority and the future of that in your strategy? Just final one, just very high level. I guess everybody's now looking at what could be a much more substantial outlook for Renewables CapEx globally. You're one of the biggest global developers.
If we're to think about a big leveling up in Renewables CapEx in the business, what are the funding sources you could tap for that, and what would be your order of preference? I guess you've done some conventional asset sales already in the form of the hydro, but would you look at potentially rotating some other conventional assets, in Iberia? Would you look to perhaps expanding JVs so you can bring in outside capital, or is there a more radical, source of funding you could turn to perhaps just to level up Renewables CapEx if you suddenly see a much bigger opportunity in that area?
Okay, thank you for interesting questions. First, guidance. I like to be clear that the performance just reinforces our guidance for 2020, as I mentioned. hydro disposal, we assume the closing in the second half. We still assume, it depending if EUR 80 million in terms of EBITDA in the first half, or if it's higher, the full year will be around EUR 150. We expect the 2020 asset rotation to be in the second half.
We have good visibility on the hydro. As in January, we have 1.03 load factor, so I think it's good. Regulatory uncertainties have been much more limited, so consensus was at 3.6. I think that in terms of EBITDA, we feel now comfortable with 3.7, basically on Networks in Brazil, regulatory views, the gross in transmission, and better outlook for the CMEC in Iberia. In terms of earnings, our guidance is aligned with the consensus.
Note that EDP's recurring net profit guidance consider the energy tax as a one-off. It also excludes the cost liability management of our IRET. We have been doing liability management. This is a one-off, of course, that does not impact our guidance in terms of recurring, but just to remind you this. We expect to have a higher average net debt in the first half. This is a seasonal effect just because of dividend and because of dispose around the second half. Just to remind you also that IFRS 16 was positive at EBITDA and slightly negative, around EUR 10 million, in net profit. Overall, we feel comfortable with the guidance in recurring net profit, and we have improved our guidance in terms of EBITDA. In terms of EDPR minorities, as you know, we will not be integrating anything in cash. It's not a priority.
Of course, we continuously evaluate any option to the extent it's aligned with our equity story. We evaluate any solution that must make sense in all terms for EDP shareholders. We reiterate that we are not giving this a priority. We don't mind to have partners. We have been dealing well with those partners, so it's really not the focus. At this moment, we are focused on delivering the pipeline. In terms of funding new projects, as you know, we are already tripling the development on an yearly basis of EDP Renováveis. We went from 700 MW a year to more than 2 GW. It shows that we have already accelerated. It doesn't mean that we cannot slightly move higher, but typically, we have proven what?
Asset association is a critical element because it makes all the sense in terms of keeping the fleet young and crystallizing value and de-risking the portfolio. It does not mean that we will not be able to move other asset reshuffling, but we will be focused on also keeping EDP as a balanced company with energy transition means renewables, means grids, means Client Solutions. Of course, I think that as we speak, particularly, we have been doing this with profitable returns everywhere, including the very challenging renewables market. I think that we want to keep this balance because it makes all the sense. It's a quite unique portfolio that we believe gives more value to our shareholders.
We can go to the next question, please.
Thank you. Our next question comes from the line of Alberto Gandolfi. Oh, my apologies, from Javier Garrido from JP Morgan. Please go ahead.
Yeah, good afternoon. I think there's only one of my questions pending, which is, you can elaborate on the earnings profile of Energy management. You had a very strong Q4. I assume that part of it is because of your ability to benefit from the collapse in spot prices. To which extent do you see that sustainable into 2020? Actually connected to this, you can elaborate on your views on gas prices and power prices in Iberia? Given the profile of decline in LNG prices that we have seen of late, what is your view about power prices? Are you making any change in your hedging policy associated to this? Thank you.
Okay. Thank you, Javier. As you know, stress is a good result. For 2020, we have edged spreads for nearly all of our expected production. Hydro and nuclear output forward are contracted at 55 MWh . Thermal spreads for contracted at mid-single- digits. I think that, just to stress, our prices and spreads are based on baseload with no ancillary services or taxes included. It means that typically, I stress again, we always compare more to the full price and not what is typically other utilities present as the final price to the client. I think that it's a good result. For 2021, we have already contracted forward 5 TWh at baseload prices of slightly above 50.
Also in 2021, we expect to have a 3.4 TWh reduction in our merchant electricity production in Iberia, following the disposal of our hydro portfolio with last December. I would also highlight that the 13 TWh of energy sold to residential supply clients in Iberia in 2019, most of it is in Portugal with very low churn rates, so a very stable client base, much less volatile than the wholesale energy market. Over 2019, we closed more contracts with SMEs clients for longer periods than the traditional 12 months. I think it's good, and I think it answers to your question.
Thank you. We can go to the next question, please.
Our next question comes from Alberto Gandolfi from Goldman Sachs. Please go ahead.
Hi, good morning. Very soprano today. Thanks for taking my three questions as well. The first one is, apologies to go back again to EDPR integration. I was wondering, I understand negotiations here and expectations, but I would guess, would you agree that timing is not on your side? The renewable top-down industry is accelerating. Any CapEx upgrade you would announce would benefit more EDPR than EDP, it seems that it's almost like a reverse option here. Why wait? Why not a higher priority here? Anything I'm missing in this logic? The second question is, if maybe you can also be a little bit more specific about what power price you are assuming in your 2022 guidance.
Still the same as in the plan, or have you already baked in lower power prices, but improvements you were talking about, for instance, I don't know, Brazilian transmission as an example, and cost savings. Is that similar to before but for different reasons, or maybe we need to still have some sort of concerns on the power prices on the back end of the guidance? The last one is, you've been very successful at delivering your 1.4x IRR versus WACC in onshore and solar. Offshore, as we have seen in several instances, carries much higher capital intensity and execution risks. I was wondering, what is your IRR over WACC target in offshore? What is the IRR over WACC you already believe you have locked in what has already been awarded so far?
Can you maybe give us a little bit of granularity on how you think about it? Thank you.
Thank you, Alberto. In terms of integration, we are open, as you have already seen by our statements, to do a deal that makes sense for EDP. We are not ready to buy it in cash. Alternatives could be studied, but of course, we don't want to compromise, we don't want to not deliver the deleveraging targets that we have at EDP level. It's really, especially in the current market context, it's clearly not an option to spend cash doing this. I also tend to address the following. Of course, we capture always 83% of whatever you introduce in this pipeline.
Frankly, I believe that the evolution of the market in terms of energy transition gives an additional value for not just developing renewable, that, of course, is our core business, but also as we are at the overall group, very much focused on also everything that relates to grids and that relates to final clients. I think that keeping this balance of the different pillars of the energy transition, it makes sense, and we don't just want to focus in only one of those pillars. Frankly, especially not spending money on that front. Cash. Power prices. The critical thing that I have also shared with Javier is that we have already been edging well to 2020. Very well in 2021 also. You are asking me about 2022. Okay, let's see. It can be different, yes.
I think that we have a lot of things, other elements that would compensate if it's the case. Probably when discussing about those pool prices, what I would like to highlight is, against what is the case of other players, we have been, as you've seen, including in renewables and including even in solar, we have been focusing just not in piling up megawatts or buying megawatts, but clearly only doing this when we feel that the value is there. Sometimes I even question, why don't you do more tons of solar in Spain? It's because I share the idea that we need to be protected. I don't like merchants on that side.
I think that not only looking into our hedging policy, but in what concerns our allocation and investment policy, I think that we have probably been the more balanced utility in approaching the Iberian market. It's what I have to share with you as global consideration. In what concerns in offshore, I wanted to tell you that we want a minimum of 1.5. We have been reaching more than 1.5 IRR on equity investment. Of course, as you know, it's very capital intensive, it's more risky. It's the reason, by the way, we have been doing a JV. We have been also doing asset rotation. We stated since the beginning, we want to be in more projects and to de-risk as soon as we can with other partners, and we have been very consistent with this.
Very consistent on demanding well above 1.5 equity returns on those projects.
Thank you.
We can go to the next question, please.
Our next question comes from Jorge Guimarães from JB Capital Markets. Please go ahead.
Hi, good morning. Thank you very much for taking my questions. I have three. Can you go back to the assets re shuffling in Brazil, or possible assets re shuffling. Would the idea be to sell some hydro plants to reinvest in other hydro plants? Or the idea would be to relocate capital from hydro, into transmission or distribution projects? In which case, my question would be, isn't that a bit against the trend of the importance of renewables on EDP and the importance of that investors attribute to renewables on EDP? That would be the first one. Related to this, what are your plans for Celesc, and if you can elaborate on that. Finally, a question related to Portugal. What is EDP's view about the outlook for the generation clawback in Portugal?
Namely, what is the rate incorporated in the guidance that now is being provided, for the clawback generation in Portugal? Thank you very much.
Thank you, Jorge. In what concerns the assets reshuffling in EDP Brasil, as you know, we act in Brazil through two companies. You have EDP Brasil, and then you have also EDP Renováveis acting in Brazil. When we talk about moving from hydro at EDP Brasil, we are talking, of course, moving from hydro into more transmission or distribution. It doesn't go against what is renewables, because, as you know, we have a target already very strong in what concerns the renewables, the new renewables, wind and solar for Brazil, reaching of 1.5 by 2022. Brazil is consistently been and will be important for the renewable strategy of EDP Group. Why hydro? Hydro is, of course, the old renewables. The question of hydro is that we believe that is an area interesting, but where we will not be growing in the future because there are no growth opportunities.
It's basically mature assets that we are now running. I think if we can deploy more value, if we are able to reshuffle capital from those hydros into areas we have been clearly being very good at the distribution and transmission. Your second question about Celesc is exactly the move that we like to do, is we have entered into Celesc. We are making that as a minority shareholder, helping Celesc to be a better company and creating an option if it's going to be privatized. I think it makes a lot of sense. In what concerns your first question, EDP outlook for clawback. As you know, clawback now is again being considered as a netting mechanism as it should always been. You need to include both CES and social tariff in the calculation.
The calculation will be made by us, but of course, we are now in a normal situation where we don't have a double taxation.
We can go to the next question, please.
As a reminder, it is star one to ask a question. Our next question comes from the line of Arthur Sitbon from Morgan Stanley. Please go ahead.
Hello. Thank you for taking my questions. I have two. The first one is, I wanted to know if you consider the recent extension in PTC in the U.S. as representing potential upside to your ambitions in U.S. renewables, even maybe beyond your current plan, beyond 2022. The second question is, what do you think are the prospects for potential increases in CapEx in electricity distribution in Portugal? Thank you.
Thank you, Arthur. First, PTC is basically we were back to 60% in everything that will be built until 2024, with the safe harbors until 2020. It means that wind will have basically one additional year. We don't expect it to have more than this, it was already a bonus that was not included in our business plan. We moved part of the safe harbor from 2019 to 2020. The PTC is moved from 40- 60, it will basically allow to include projects until 2024. Our first estimate is that it can give us an additional between 200 MW and 300 MW of wind in the U.S. to be developed in this period, based on our pipeline. I think it's interesting, but, it's a plus that was not included.
In what concerns in EDP distribution in Portugal, the question is, we will be basically investing slightly more than EUR 300 million that is typically foreseen in the business plan with no change. The only thing is you have a movement from a certain nature of investment into a smarter grid evolution. I don't see any major change in EDP distribution investment in Portugal.
Thank you.
At this time there are no more questions.
Okay. We don't have any more questions on the phone. We have just one pending question on the web, which is from Bloomberg Intelligence, Mamadou. It's the question regarding the exposure to Brazilian real, if that is a concern for us for 2020.
I'll take this question. Brazil accounts for slightly below 20% of our EBITDA at the moment and even significantly less than that at the net profit level. As you know, we have a ring-fence policy, we raise local financing in reais, the assets and liabilities are typically matched. Most of our revenues are inflation linked, obviously that translates into higher growth that you see in Brazil. Obviously Brazilian FX has its volatility, but it's something that the way that the Brazilian operations are being set up offsets a big part of that.
I'll pass now to our CEO for just a final remark.
Thank you everybody to be present. Thank you very much for the questions. Hopefully, the presentation and also the sharing of those questions and answers gave you really the feeling that we are very focused on delivering our strategic plan. 2019, I think it was outstanding in delivering in all fronts. I think that 2019 and 2020 are showing that our strategy, in terms of being an early mover in energy transition is the right one. We have been very pragmatic in terms of, okay, let's prove the market that we deliver the pipeline. Yes. Let's show that we are able to finance it through assets rotation. Yes, let's show that we are not emotionally attached to any assets, but clearly towards a balanced portfolio and the evidence shows this.
Yes, that we are focused in a balanced approach in all the items of energy transition, and that we extend this pragmatism to different geographies and new markets that was always highlighting the fact that we want to protect the returns, and that we have been able to really accelerate our growth, but always respecting the returns. I think it's really, we stick as a board, to this pair. Growing, but growing profitably, always. I think it's indispensable. Thank you very much, and hope to see you soon.