Ladies and gentlemen, thank you for standing by and welcome to the EDP's January to September 2019 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. If you should require assistance at any during the call, please press star zero. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Mr. Miguel Viana. Please go ahead, sir.
Hi. Good morning, ladies and gentlemen. Thanks for being with us today for the conference call on EDP's 2019 third quarter results. As usual, we'll begin with the presentation by our CEO, António Mexia, and our CFO, Miguel Stilwell de Andrade, which will provide us an overview of the results and the main developments of the period. We'll move to a Q&A session in which we'll be taking your questions both by phone and via our web page, www.edp.com. Expect this call to last no more than 60 minutes. I'll give now the floor to our CEO, António Mexia.
Good morning, everybody. Thanks as usual for those that are attending in this results conference call. The first slide that I want to share with you, the slide three, basically we have the key highlights. The key highlights give us an overview of our performance over the first nine months. At EBITDA level, we see an increase by 10% to EUR 2.66 billion with a strong growth across all our three business platforms. That's important. In renewables, over the last 12 months, we have commissioned 0.9 gigawatts of new wind capacity. At the same time, we have been delivering our assets rotation strategy. We closed in the beginning of August, an important deal involving an attributable capacity of 500 megawatts of wind farms in Europe.
In late July, we have announced an additional asset rotation deal in Brazil, which is expected to be closed before the end of this year. In networks, we showed also a very sound growth, mainly in Brazil. In distribution, the recent regulatory review implied a significant growth of our Regulated Asset Base, providing good visibility on returns over the next three years. In transmission, we have four lines under construction and one additional under development, in which we are managing to anticipate, again, schedule and optimize funding conditions. That will be added to our first line that is already operational since last December. On the other hand, our performance this year is strongly affected by the weak hydro resources in Portugal, which were 39% below long-term average in the first nine months of the year. Today is raining.
Our recurrent net profit increased by 7% to EUR 585 million, reflecting operational performance, but also temporary increase in financial costs, partially related to the EUR 1 billion hybrid bond, important for our structure, issued last January, and higher rate of US dollars and Brazilian reais. Why? Because it's where we are growing. That justified the 4% average cost of debt in the period. Note that this average cost of debt does not yet reflect the recent significant decline of our refinancing costs, as it was shown by our seven-year bonds issued in September at the record low yield of 40 basis points. We have a strong potential from benefiting from this low interest rate environment with EUR 4 billion of bonds maturing until 2022 that have coupons in the region of 4%-5%.
Our reported net profits stood at EUR 460 million, negatively impacted by an EUR 87 million provision related to Fridão. This provision, booked for prudential reasons, refers mainly to invest amounts since 2008, in addition to the EUR 280 million down payment following deployment and awarding of this hydro project concession to EDP. After the 2016 government's decision to suspend the project for a three years period, the Portuguese government decided not to move forward with the process. We now expect that the exact terms of a financial settlement should be now defined by an arbitral process that, as you know, is the quicker system to have a result.
Our net debt fell by 5% year on year to EUR 13.8 billion in September 2019, with expansion CapEx of around EUR 900 million, partially compensated by asset rotation proceeds of EUR 800 million, and benefiting as well from a good performance on organic free cash flow, which rose significantly to EUR 1 billion. Now going into details. Slide four. As you can see, our hydro production in Iberia fell, as I mentioned, by 47% year on year, with low hydro resources, which were 39% below or more than 4 terawatts hour below the average, historical average, which compares to 20% above average in the first nine months of 2019. Clearly different years. As expected, due to seasonality, the third quarter had no material impact on these accumulated figures.
Regarding wind resources, they were 4% below long-term average in the nine months, which is exactly the same figure of the same period in the last year. Our wind production increased by 6% due to increased installed capacity and higher load factors in new wind farms. Moving to slide five. EBITDA increased by 10% year-on-year. Going into detail, we now spread by business units. Firstly, from renewables. We have an increase by 7%, with a major contribution from wind and solar, where EBITDA boosted by 40% with asset rotation transaction in Europe generating a EUR 226 million gain. That's important, even excluding these gains and exchange rate effect, EBITDA from wind and solar increased by 11% year-on-year, backed on our installed capacity and higher average selling price. For negative side, we have the hydro.
The low volumes in Iberia imply the negative impact around EUR 250 million on EBITDA, partially compensated by higher average prices. Moving to networks. EBITDA increased by 18%, mainly supported by robust growth in Brazil. We entered into a new regulatory period for both of our distribution concession in this country, with higher EBITDA coming from the recognition of a higher RAB. While the return on RAB is maintained at 8.1% until 2022, and until 2000 in Espírito Santo, and 2023 in São Paulo. Good visibility until the end of our business plan. Additionally, EBITDA was also backed on a 3% increase in electricity demand and the positive impact from tariff updates. In transmission, we benefited from the rollout of the lines that we have under construction. In Iberia, EBITDA increased backed by sound cost performance, evolution with adjusted CapEx down by 4%.
Lastly, in Client Solutions and Energy Management, EBITDA was 19% up, supported by operations in Iberia following the normalization of the operating margins in the supply business after the adverse conditions that we faced in 2018, as well as the good results from energy management and hedging through forward sales, and the 84% increase in gas generation, which more than compensated the strong decline in coal load factors, especially in the third quarter. On the other hand, EBITDA from these activities in Brazil declined by EUR 51 million, penalized by lower supply volumes and one-off impact in our coal plant in 2018 from the revision of contracted availability level. Moving to slide six, OpEx. We continued to see a strong performance on operating costs. OpEx on a like-for-like basis showed a 1% nominal decline. In Iberia, OpEx was flat, but with 4% reduction in adjusted OpEx from networks in Portugal.
In Brazil, OpEx in local currency increased 3% in nominal terms or almost minus 1% in real terms in a period of significant expansion of activity. At renewables, at EDPR, adjusted core OpEx per megawatt, which excludes ForEx impact and one-offs effect, was flat year-on-year. Summing up, basically, OpEx year-on-year evolution was slightly below inflation in all our key geographies, translating into savings in real terms despite increasing activities. Moving to slide seven and net profits. Our recurring net profit increased 7% year-on-year to €585 million, strongly supported by EBITDA improvement, mostly on renewables, as we have seen, and networks, but as I mentioned before, partially penalized by higher financial costs and income taxes.
Regarding our reported net profit, it increased by 55% year-on-year to EUR 460 million, following a year-on-year reduction of negative non-recurring items in Portugal, namely in the third quarter of 2018, the provision on the CMEC inventory costs, and in the third quarter of 2019, the provision on some costs related to Fridão, as already referred. EDPR net profit increased 197% year-on-year, significantly impacted by gains from the assets rotation. In Brazil, net profit increased by 12% year-on-year in local currency, propelled by strong growth in network, partially offset by lower results in energy management. In Spain, the lower net profit reflects the deterioration of gross margin from our coal plants, as well as a positive fiscal impact in last year's results.
Finally, operations in Portugal posted a net loss of EUR 33 million. Finalized by the low idle resources, by the provision of Fridão of other project, and the maintenance of heavy levels of taxes and regulatory costs. We will talk about this later. Slide nine. We are delivering our growth targets. In terms of update of our strategic plan, I would like to highlight that we have reached 70% of long-term contracts agreed for our planned renewables addition up to 2022. I remember in March, we were at 40% when we talked in our strategic update. We almost doubled since March our long term, with a total of 4.9 gigawatts secured out of the seven gigas of our target.
Since December 2018, we secured 2.4 GW, of which 1.6 GW in North America, both in wind and solar, 0.6 GW in LATAM, including 500 MW of wind in Colombia, and 0.3 GW in Europe. The last three months, last quarter have been very intensive in adding 1.8 GW of new contracts, with visibility on delivering and prices. Overall, in the presentation of the first half results, we had 46% of our 7 GW target, and now three months later, we have 70%. This clearly shows our strong focus on execution of our strategic plan, and I believe gives visibility on our top first commitment in terms of the business plan. Still regarding wind offshore, we were informed yesterday that our Mayflower Wind offshore project in U.S. was awarded by Massachusetts State with a 800 MW PPA for 2025, a 20 years PPA.
We are waiting for the Connecticut results, which will be announced soon. The establishment of the JV with Engie Wind Offshore is moving forward as expected. Of course, the recent evolution is good news. Moving to slide 10. On networks in Brazil, it's worth to highlight the very relevant outcome from the recent regulatory reviews of EDP Espírito Santo and EDP São Paulo. As I mentioned, providing visibility of returns, 8.1 return on RAB, the same as the previous regulatory period until August 2022 and October 2023. Additionally, our RAB was enhanced through high regulated asset base, which increased by 28% in Espírito Santo and 45% in São Paulo with respect to the first year of the previous regulatory period, which was 2016 for Espírito Santo and 2015 for São Paulo. Clearly here, 99 plus of the investment was recognized.
I remember that a decade ago, the level was at 85%, 86%, and we are now passing glass in Brazil by far. Finally, we continue executing our growth in transmission, which represents now a total investment of EUR 3.9 billion in six projects. The first line is already operational, four projects under construction, and the most recent line in our portfolio in permitting stage. All conditions are met for the execution of transmission once again and repeatedly ahead of schedule. Furthermore, better than expected funding conditions have also revealed as a clear driver of value enhancement. This driver are expected to double our expected NPV from this project. Slide 11. Regarding the execution of asset rotation strategy, we have agreed on two relevant transactions this year.
The sale of our 51% stake in 997 megawatts in Europe, which was closed in July, with EUR 2.8 billion proceeds, and the sale of 137 MW in Brazil, which is expected to be closed in the first quarter of this year. The implicit valuation of these deals were higher than initially assumed in our plan, reflecting the strong buyers' appetite for this kind of assets, providing the low interest rate context and current sustainable investment trend. These two deals represent EUR 1.1 billion of proceeds or more than 25% of our target of EUR 4 billion asset rotation proceeds between 2019 and 2022. Regarding asset disposal, we are working on the execution of our more than EUR 2 billion proceeds target. We have a potential portfolio of about 1.7 GW of merchant generation assets in Portugal, on which there is an ongoing due diligence process by a selected group of interest parties.
Potential bidding offers are to be submitted by year-end, while full execution and closing is expected in 2020. We are exactly on track with what we committed in March and we repeated just before summer. Moreover, in line with what we defined in our strategic plan, we continue to develop other options regarding disposal of assets, which can be complementary or as alternative to the ongoing process that I've just mentioned. Slide 12. Last month, EDP was ranked as global leader within integrated utilities by the Dow Jones Sustainability Index, which is a clear recognition of our commitment to pursue a transparent strategy aligned with the energy transition. To highlight that we have achieved the highest score, one under in another, in 9 categories, namely climate strategy, water-related risks, and stakeholder engagement. I think basically it shows that we are competitive.
Also in September, within the scope of the UN, we were one of the 87 global corporations that pledged to reduce emissions and ensure global warming does not exceed 1.5 after 2050, assuming as well a commitment with net zero emission by no later than 2050. We have already concrete targets to contribute to this achievement, such as a reduction of specific CO2 emissions by 90% by 2030 versus 2005, and more than 90% share of renewable generation in our portfolio as we announced in the strategic update. Overall, we affirm our strong engagement with decarbonization by pursuing the best practice, aligning our strategy with energy transition, and with transparent disclosure of ESG metrics. We are well-positioned for leading the energy transition, creating superior value for all our stakeholders. Moving to slide 13. Now I have already mentioned that the main highlights of the last quarter.
I would like to share with you our current expectation for 2019 full year, a period that will be obviously marked by the low hydro volumes in Iberia, as we have seen in previous slides. We expect to reach 2019 EBITDA close to €3.6 billion, slightly above what we shared with you at the first half results conference call, mostly due to the referred positive regulatory developments in Brazil and assuming renewables production close to historical average in the last two months of the year. Regarding net profit, we expect to reach a figure close to €5.8 billion, excluding non-recurrent items in line with our previous expectations. Finally, I would like to stress that over these first nine months, we have gained very important steps, to execute the full delivery of the strategic plan.
I think that one of the key highlights of today is that we have been focusing on delivering what we have committed in terms of sustainable growth and balanced business plan. Regarding accelerated and focused growth pillar, we have reached 4.9 gigas of long-term contracts for renewables capacity additions, which represents 70%, as I mentioned. I think that we have been clearly performing very well in a moment where a lot of you and everybody asks, "Can you be competitive in a market where everybody now wants the same and is targeting the same areas?" We have been proving that we are clearly, if anything, ahead of the curve. Very well. In Networks Brazil, we have now full visibility on regulatory returns for the period of our plan following the recent 36% average increase on RAV.
We continue to focus on delivering the new line ahead of schedule and of course below costs. Regarding our strategy of continuous portfolio optimization, we have our asset rotation program as a clear driver of value through the monetization of fully valued renewables projects to reinvest in new projects in development stage. This has become a recurrent piece of our renewables business and an important part of our strategy. I think that it allows to grow faster, it de-risks, it gives you optionality. I think it's clearly the best strategy. For this year, we have already crystallized EUR 1.1 billion of value at valuations, as I mentioned, better than assumed in our plan and representing one quarter of our targets up to 2022.
Furthermore, regarding the assets disposal program, as I just mentioned, and I want to stress this again, we are fully on track to deliver the target proceeds of more than EUR 2 billion before the end of 2020, with visibility until the end of this year. Regarding cost of debt, we are penalized in the period by the increasing rates of hybrid bonds and USD and Brazilian reais, the fact that they are bigger now than they were before. Our most recent refinancing, 7-year green bond that we issued in September at a record low, as I mentioned, is a good example of what are the current prospects regarding the refinancing of the EUR 4 billion bond maturity that we have until 2022. Most of them are paying interest well above the 4%. On efficiency and digitalization front, we have achieved a 1% reduction of OpEx.
As a result of several initiatives under development in order to continue always to improve our efficiency. I believe that the last quarter really shows, in terms of growth, visibility of regulatory assets, in terms of efficiency, in terms of optionality, shows that we are clearly delivering all our commitments. Now, I will pass to Miguel for a detailed analysis, and then we can go back to the Q&A. Thank you.
Well, thank you, António. Let's move on to slide 15. Here on slide 15, you can see that during the last 12 months, we've built over 900 MW of wind farm. About two-thirds of these additions coming through in North America. On the other hand, though, we've sold 1.4 GW of wind capacity, of which 400 MW in North America, related to the deal we announced in December 2018, and 1 GW in Europe, of which we have 51%. Just 0.5 GW net of minorities. The deal that António's already mentioned. Additionally, we also sold around 0.2 GW of small hydro plants in the fourth quarter of 2018 in Portugal and Brazil. Obviously, that explains this movement that you can see here on the graph on the left-hand side.
Altogether, September 2019, we had 26.3 gigawatts of installed capacity, of which 73% related to renewable source. Concerning generation mix, on the right-hand side. The main highlight goes to the six terawatt-hour reduction year-on-year on hydro generation, mostly due to the weak hydro resources in Portugal, which we've talked about, and which were 39% below the long-term average. On the other hand, our generation from wind and solar increased one terawatt hour, backed by the 3% increase in average capacity and the higher load factors from new additions. It's also important to highlight that in this period, thermal generation declined one terawatt hour, with gas generation almost doubling year-on-year from a low base, and finally replacing coal generation, given that significant increase in CO2 prices and lower gas prices.
Altogether, in the first nine months of 2019, we had 48 terawatt hours of electricity, with 64% from renewable sources, which is a figure which is very penalized by hydro scarcity in Portugal and doesn't reflect the ongoing base. Moving on to slide 16. Here, wind and solar EBITDA increases 40% year-on-year to EUR 1.2 billion, significantly impacted by the EUR 226 million asset rotation gain in Europe, as you can see here. Even excluding this impact, EBITDA would have grown by 14%. I think it's important to highlight. It would've grown excluding this impact, driven by the increase in average installed capacity of 3%, mainly in the U.S. and Brazil, and also the higher average selling price, by 6%, mainly in Brazil, but also benefiting from a 6% appreciation of the U.S. dollar versus the euro.
Also benefiting from a 6% increase in electricity production, despite stable deviation of wind resources versus the historical average on a year-on-year basis. The new wind farms have higher load factors than existing portfolios. That explains basically the deviation or the movements on the EBITDA in wind and solar. Moving on to slide 17 on the EBITDA from hydro. Here you can see it's decreased to 34% year-on-year to EUR 443 million, mostly explained by the weak hydro resources in Portugal. As I mentioned, the hydro coefficient 39% below historical average. As a result, the hydro generation in Iberia this year was almost half of the previous year at 5.9 terawatt hours. This impact was slightly mitigated by a 3% increase in the average selling price, reflecting the hydro increase opportunity cost, as well as due to our forward sales hedging strategy.
Furthermore, pumping volume also rose 10% year-on-year, optimizing production from the low reserves with stable pumping margins in the region of EUR 15 per megawatt hour. In Brazil, EBITDA from hydro declined 14% year-on-year due to several factors. First, 8% decline of installed capacity due to the disposal of the mini hydro plants by the end of 2018. Secondly, lower average selling price. Third, our hedging strategy, which allocated a higher percentage of our annual energy contracts to the second half of the year. Moving on to slide 18 and regulated networks. Regarding our network activities, EBITDA increased 18% to EUR 749 million. In Brazil, EBITDA increased 59%, propelled by both distribution, transmission, operations, and we already discussed that, both António mentioned that.
In distribution, the start of this new regulatory period implied a significant revision of the Regulated Asset Base recognized by ANEEL, implying a EUR 59 million increase on the update of the present value of our distribution concession, residual asset value. The results of the distribution operations also benefited from the annual tariff updates and the 3% increase year-on-year on electricity demand, mostly in distributed central states. In transmission, 2019 is the first year of material EBITDA contribution, following the entrance into operation of our first line in December 2018, as well as progressing construction work in the other four lines. In Iberia, in network, EBITDA performance was mainly supported by a 4% decline in OpEx, which EBITDA was also impacted by Portugal's declining rate of return, which is obviously connected to the evolution of Portugal's 10-year bond yield. Moving on to slide 19.
Client solutions and energy management. This includes the supply, energy management, and thermal generation. The EBITDA from these operations increased 19% year-on-year to EUR 284 million. In relation to supply in Iberia, EBITDA improvement resulted from the normalization of operating margins, starting from a particularly difficult 2018. This is something we talked about already in the strategic update back in March, also increasing penetration of new services. We had an increase of overall EUR 64 million. Regarding thermal and energy management in Iberia, we have better results from energy management support for hedging operations. We've more than offset the duration of the coal load factors, which can go from 80% in the third quarter of 2018, to 22% in the third quarter of 2019. In Brazil, EBITDA from these activities declined, mainly due to lower volumes in supply and weaker results from the hedging strategy.
From thermal, last year's results were positively impacted by a EUR 25 million gain due to the downward revision of the contracted availability level. Excluding this effect, thermal EBITDA was stable year-on-year. Going on to slide 20, talking about the Portuguese electricity system debt. I think the keynote here is that the regulator released a proposal for the electricity tariff in Portugal for 2020, back on the 15th of October. The final proposal will be out on the 15th of December. It's clear from this proposal that the Portuguese electricity system is following a sustainable path downwards, with a continuous reduction in electricity system debt, which is forecasted to reduce by EUR 0.6 billion to EUR 2.9 billion by 2020. You can see this has come a long way since the peak a couple of years ago.
It's expected that the tariff debt will continue to be gradually reducing until being paid fully down by before 2025. That's in line with the tariff expectations. In parallel, the regulator defined tariffs for the last resort consumers, so proposing a decline of 0.4%. Again, demonstrating the financial sustainability of the electricity system in Portugal. For our distribution operations, the rate of return on RAB is expected to be the same as in 2019, so at 5.16%, will be then adjusted afterwards according to the Portuguese 10-year bond yields. Regarding the CESE, the extraordinary energy tax. The amounts referring to 2020 should be defined by the annual state budget. The first government proposal should be presented to the parliament by December 15th. Typically, this is done on the 15th of October, however, given we had elections, now at the beginning of October, it's deferred by two months.
To conclude on this section, I'd just like to remind that the results of the recent Portuguese solar auction also, with 1.3 gigawatts awarded, at an average tariff of EUR 21 per megawatt hour, I think is also a sign of the potential gains to the electricity system from the new renewable additions. Earlier we were talking about a sustainable system, I think some of the concerns we had a few years ago are fairly over. Slide 21, net debt. Net debt at EUR 13.8 billion in September 2019, 2% rise versus September 2018, it's a 1% decline year-on-year. The main impacts on net debt are, first, recurring organic cash flow, which is almost EUR 1 billion, which is a 1% increase year-on-year. Despite the weak results from hydro, they're offset by gains from the asset rotation.
Secondly, the net expansion investments amount to EUR 2.9 billion, is a combination of net expansion investments, with a significant weight devoted to renewables and transmission. Also on the other side is EUR 1 billion proceeds from asset rotation deals. Obviously, there's also the payment in May of the annual dividend, amounting to around EUR 700 million. There's also the positive EUR 500 million from the 50% equity component of the hybrid bonds issued in January. There's some other effects relating to exchange rates and regulatory receivables. Overall, adjusted net debt to recurring EBITDA reduced to 3.8 times, down from 4. Slide 22, in talking about financial results. Here, net financial costs stood at EUR 545 million in the nine months of 2019. This is an increase of 23% in relation to the same period of last year.
This figure is highly impacted by some particular volatile items not relating to interest costs. Just to remind, in the nine months of 2018, last year, the one-offs were, there's a IFRS 16 adjustment of EUR 25 million. There's a Celesc bad will impact of EUR 15 million. There's a capital gains of EUR 19 million, mostly related to the Moray East project that we sold down last year. Also in both 2018 and 2019, there are the results of net ForEx and derivatives mark-to-markets, which total a negative year-over-year impact of EUR 24 million. Stripping that out as a result of the interest-related costs rose by 4%, EUR 17 million. Basically justified on one hand by a 20 basis point increase on the average cost of debt to 4%.
There's also a difference in the mix because there's a higher weight of US dollars and Brazilian reais in our overall consolidated net debt, which is where we're doing most of our investments. There's also an impact of the US dollar appreciation. If we look also at slide 23, we've included the slide just to show that, EDP five-year yields in EUR are near zero territory. They've fallen 115 basis points since last September. Our US dollar and Brazilian yields have also fallen by close to 200 and 300 basis points respectively. This significant decline in our medium and long-term yields improves expectations regarding refinancing in the following years. Note that we have EUR 4 billion of bonds, both EUR and US, maturing until 2022, namely several bonds with coupon rates in the region of 4% and 5%, as you can see here on slide 63.
This number does not include the EUR 750 million hybrid, with the 5.375% coupon rate, the first call option in September 2021. We also have almost EUR 1 billion of debt in Brazilian reais, which will mature by 2022 and which will also bring a significant opportunity for interest cost savings, given where the financing cost in reais has gone in the last couple of months. We expect to get some material savings in the near future due to the slow interest rate environment, which means that our overall 4% rate that you see in our business plan now means we think we can beat that, going forward.
To conclude, just like to mention that we still have around EUR 7.7 billion in liquidity, of which EUR 5.9 relating to available credit lines, covers our refinancing need beyond 2022, protecting us from any volatility in the credit markets and also enabling us to manage basically the refinancing and some of the transactions that we expect over the next 12 months. Slide 24, last slide. Here you can see sort of the breakdown of the net profits, the waterfall. Our EBIT rose by 36%, following the 10% rise in EBITDA. There's a reduction in the amount of provisions, given that last year we had the EUR 285 million of extraordinary provision, relating to the alleged CMEC overcompensation.
Financial results and associates went down by EUR 97 million due to the previously referred adverse year-on-year comparison of non-interest related items, and also 20 basis points increase in the average cost of debt. Income tax expense increases by EUR 95 million year-on-year, with an effective tax rate of 15% on the nine months of 2019. It's still a fairly low effective tax rate. Regarding non-controlling interest, this includes EUR 158 million relating to EDP Renewables and EUR 114 million relating to EDP Brazil. The total amount increases by EUR 35 million, which mostly reflects the increase of the net profit in the public's profit carrier. Overall, net profit grows 7% to EUR 460 million, while our recurring net profits grew 55%, EUR 585 million. That concludes my section of the presentation. Now I'll turn it over to Miguel Viana to lead the Q&A. Thanks.
Thank you, Miguel. We'll start here with some questions from the web, and then we'll pass to the phone. The first question that we have from the web is from Andrew Mulder, from CreditSights, essentially on the wake effect that was discussed in the last couple of days on the calls of Ørsted and Iberdrola, and how do we see that in terms of our investment decisions?
Thank you, Miguel. Clearly, I believe that we have presented our load factor expectations to investors based on 25 years of wind resource and predictive models between 2018 and since 1994. The conclusion is that EDP has been experienced stable wind resources with very low volatility, and this was again explained yesterday by EDP Renewables. Finally, I believe that our internalization activity brings more value into the equation. It means that, we have know-how, the example of calibrating models, but overall, what I would like to say is that we have been advanced well in the learning curve. We have suffered some of these problems, of course, but it was in 2007, 2008, so at the beginning our development. We have learned a lot of things in the last decade.
We are now very sure, very confident about what we have been showing and commitment that, by the way, proved by the recent figures.
Still in renewables, we have questions from Jorge Alonso, from SocGen, and also from Kerstin Mammadov, from Bloomberg, regarding the Mayflower Wind that we have won yesterday. If we get some more details on the next steps?
clearly, this is very good news. As you know, we were leaders in onshore in U.S. We have been successful in Europe in offshore, namely U.K. and France. clearly, we wanted to do our footprint, and we did it in a process that we have now consolidated our leadership positioning and with returns that are respecting everything that has been shared with you. We are talking about 1.5 times return equity returns with double digits even before any strategic sell-down. These 20-year PPAs, first, now in Massachusetts, we have 1,000 megawatts, and now we expect to even enhance this with the connected results show that we have been doing a very good job in the last year to be prepared to win this with very interesting returns. In a state where the commitments about doing more offshore winds and the investment in ports has been very significant.
The potential in that area is big, and it shows that when last December we auctioned for the site, we did it well, and then the team is of course to be congratulated with a fantastic job that is very important for EDP.
In wind offshore, but now on floating, we have this question also from Kerstin Mammadov in terms of South Korean partnership and how we see this evolution of floating technology.
First of all, Korea. This Wind Power Korea, Aker Solutions, and EDPR, this consortium, we have the ambition to develop an initial 500 MW floating. Why it's important? First, because the South Korean government calls for 13 GW of offshore wind installed by 2030. The potential is huge. We believe that we are adding value by combining established industry leaders in renewables and offshore project development, alongside with the local market, and basically the industry expertise provided by the Wind Power Korea. I would like to highlight that the WindFloat that we are developing, the WindFloat technology that we have been developing throughout the last, I would say, mainly five years, with the new project in Portugal, with 525 MW, with turbines of 8.5, the biggest in this technology, with the floating technology.
The learning curve on our side has been very relevant, and we'll show that we are in the forefront of this new opportunity in floating offshore. Of course, this plus the rest that we have just mentioned in U.S., it means that now we are clearly already in the top five in the world of offshore, and we want to go up in that ranking.
A question also from Jorge Alonso regarding special energy tax in Portugal, if we have some expectation here, some developments.
Thank you. That question is relevant. As you know, probably only in the 2020 public budget we will have visibility over this. It's very relevant to mention that the system debt deleveraging is progressing and clearly indicates room for reduction already in 2020. This is important. As you know, budget proposal will be released before Christmas. Two relevant commitments were assumed last year, and it was already included in the budget last year: to reduce the energy tax as the system deleveraged, and it's the case, and to allocate two-thirds of the revenues from energy and tax to the electricity system. I believe that we have everything to expect that reduction because those criteria are supposed to be met. Just mentioning the system debt. The system debt declined in the first nine months by EUR 160 million since December 2018 to EUR 3.7 billion.
Clearly accelerating in the first quarter. I remember that EDP's share is 10%, only 10% of the total system at the end of September. For the full year, it will decline typically by EUR 3.3 billion, with a negative impact from weaker demand, partially due to mild temperature. It means that EDP regulatory receivables are expected to be rather stable. It's important to mention the 2020 debt proposal signals a decline again of EUR 0.6 billion in the debt. It means that we will be well below the 2012 level then. All the conditions for the sales changing are there.
We have now a question from Arthur Sitbon from Morgan Stanley. The guidance on 2019 EBITDA is increased. Regarding that profit outlook remains in line with what had been mentioned in the first half results conference call. Could you walk us through the moving parts below EBITDA level in the P&L, if any of these items is more negative than expected?
This is clearly the fact that what is growing in our company, areas where we have minorities. Renewables, Brazil. Whenever you go from up there to down there, you have the impact of this, where the growth is. As you know, typically the negative impact is in Iberia. It was the hydro and regulatory issues in Portugal. The first below average, the second already included in our vision. Of course, below the line, you have financial cost in 2019, the hybrid, the fact that we have increased the share of dollars and reais. I would like to stress this. We will see the benefits of lower rates because of the fact that we have a big refinancing program relatively to the others. By the way, the average maturity was considered eventually a problem one or two years ago. Now it's an opportunity.
It's always like this in life. We have an opportunity to have, throughout the period 2022, the impact of lower financial costs.
A question also from Jorge Alonso, SocGen, regarding net debt guidance for the end of the year.
I don't know, Miguel, if you want to share the same?
I think for net debt end of the year, we'll be looking roughly in line with close of last year. This year's leverage pace was slightly slower than expected just because there was also much weaker than average hydro conditions. We should be close to EUR 13.5 billion. That's what we're aiming for. I think there was also part of this question, which was the tax impact for the Fridão provision. This will be tax-deductible, the bottom line impact of the EUR 87 million is around EUR 50 million.
Philippe Oddo from Oddo BHF and Ekin Mammadov from Bloomberg, they ask for an update in terms of the proposal plan in Iberia.
The process, as I mentioned, and now I'd like to stress again, because I know that it's relevant after growth, after asset rotation in renewables. Of course, the disposable is probably one of the top three issues that we want to give full visibility. The process is progressing with no changes from what we stated before. As we speak, either assets in Iberia is the most likely option. We have alternative complementary disposals in Iberia are also being considered. If it's the case, it's always important to have plan B. It means that we will keep the necessary flexibility, eyeing on a reduction of exposure to the market. We will make sure that the process results in a clear benefit for business plan execution and shareholders' value.
Finally, we remain confident of full execution before 2020 year-end, and we expect to give visibility until the end of this year or maximum beginning of early 2020. As you know, the fundamentals are there. We have a very high market share in generation in Portugal, so it makes sense to everybody being aligned on this process. It gives diversity to generation players in Portugal, and the process is going as everything that relates to Portuguese government and anything that relates to Brussels is going as normal. We expect this process to be, as we announced in March, exactly keeping the pace.
We have a question also from Mammadov from Bloomberg. Load factors of coal-fired power plants in Iberia have deteriorated sharply. Do you plan to book coal asset impairments anytime soon?
As you know, every year we revisit the issue, typically at the year end. By then, we always incorporate expectations for commodity prices as well as the remaining life of assets, as is normal, in order to assess potential impairments. We know coal plants have been working much fewer hours this year, which will certainly be factored in. We have the expectation for future role in the daily and ancillary markets. High CO2 prices and lower gas prices have reduced coal plants headroom. Clearly, we have been already doing some moves in the recent years, and we will repeat the exercise every year to give transparency to our expectations in what concerns these coal assets. As you know, we are leaders in commitment of decarbonization. Of course, it means a transition, and we need to evaluate exactly what does it mean in terms of the impact.
In any case, non-cash, we will be having the exercise as usual.
We have a final question on the web before we move to a couple of questions on the phone. It's regarding hydro EBITDA in terms of the positive impact from hedging in these first nine months of the year. What we have here essentially is that our average selling price shows an increase of 3%, as we show in our results release. This compared to the 10% decline of power prices. There is here a positive impact from hedging, which we estimate in the region of EUR 70 million. You have other impacts, namely the increase of realized premium versus base loads, given that the load factors of hydro were lower than average. Finalizing here the answer of questions through the web. We'll move now to the phone, where we have a couple of questions.
Ladies and gentlemen, if you would 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 Alberto Gandolfi from Goldman Sachs. Please go ahead.
Thank you, and good afternoon, everyone. The first question, please, I have is on the hydro disposals. As we are getting close to hopefully the conclusion of this, I was wondering if you're still sticking to your idea of effectively dedicating all of the proceeds to paying down debt, or if you see room sometime towards the end of the plan, perhaps, to accelerate investments in maybe, I don't know, domestic renewables, given the trends we are seeing in merchant solar, or to grow dividends, perhaps. The second question is, and if you can't answer this, I'm happy to take it offline, but is there an easy way to think about the non-cash items included in the EBITDA? With all the new IFRS changes, I'm trying to figure out the cash conversion of EBITDA, and if not, happy to take it offline. The third one is on European consolidation.
Recently, the CFO of a company that is in the industry, a similar market cap to yours, says that he expects lots of M&A in the next few years in utilities, as companies try to reposition for the next 10, 20, 30 years. You seem to own lots of assets that people would want for the next 10, 20, 30 years. I'm wondering if proactively you think there could be value for shareholders from consolidation. If you were to merge with someone else, what would be the advantages? Why would that be the case? What's the value of scale, I guess, in developing renewables is the question. Thank you.
Thank you, Alberto. Typically, the second question will probably need to be a live answer, then it should not be over the phone. Because it's, of course, very interesting, but of course, not obvious at all. Let's start with the first, and then let's move to the second. Proceeds. As you know, we have tried very clearly in this call to highlight that before, okay, you can have more rain, a little bit less rain. You can have some hurdles in terms of no cash provision, but we wanted clearly to give the visibility about commitment, delivering the key pillars of the business plan. Visibility on growth, I think that better than anybody could expect in huge impact of new PPA signed in a very competitive market, and entering new markets that are exciting and with very attractive returns. I'm talking about U.S., I'm talking about Colombia.
The second pillar is about the asset rotation at better prices than we expected, taking advantage, of course, of the market condition. Finally, the idea of proceeds and reducing exposure to Iberia market was always focused on the deleveraging and keeping that balance. If anything, the first commitment is put the balance sheets in the place where we have committed. Of course, this allow us to have additional flexibility, if it's the case, to do some more. We have not missed any opportunity because of lack of financial strength. We have been delivering everything that we need. We have always been able to find business structure, business models, and financial structures that will deliver that growth and sharing that growth with our shareholders.
I think that even the asset rotation, I think that we are a good bet in what concerns the different valuations between public and private markets and EDP. I think it's bridging very well, the difference between both markets. Let's do what we have been doing, that I think it's clearly value enhancing for the shareholders and adjust the speed of growth. It will be, of course, just doing more as we have been doing until now. European consolidation. I remember, again, when we started long ago in this industry, that I was told by a lot of people that we would only have four utilities. It was 2006 or 2007, that we would only have four utilities in Europe. It was written by somebody that I will not. It's not you.
No, the question is, do I see room for people trying to improve their positioning in energy transition? Clearly, yes. What I would like also to answer is we have defined a strategy that allows ourselves to control our destiny. It means that we know what we want. We have anticipated the trends. Typically, we have done the partnerships that we need. We are building the partnerships that we need in offshore. We have been clearly being able to prove that we are able to grow now soundly in solar. I think that we control our destiny, and frankly, a lot of people probably need more out what we have, and I need less what they have. Frankly, I'm not overexcited about that story.
We are reaching just the one hour of the call, I will just move to the final remarks by the CEO, and we'll follow up any more technical questions through the IR team.
After this, my last comment that shows that, of course, the industry is an exciting industry. Over the Alberto question, it's going to be an exciting world because everything has been changing. As you know, business models, economics, marginal cost of the adding technologies, the importance of the client. I think that as a final remark, I know that we have sometimes in EDP, relative to our size, we have a lot of moving parts of small items, provisions below the lines, whatever, some details, especially in Iberia, not to mention Portugal. I think that the big picture is we know exactly what we want to do. We have been able, clearly, to deliver in very competitive markets with very, either in solar, either now recently in offshore and new markets, and also regulatory basis challenging like in Brazil.
We have been clearly best in class in what drives our growth, and we have been humble enough know that we need to keep our sound balance sheet and not going out of tune just because we have a specific macro situation. I think that we feel responsible on that balanced approach and keeping control of our story as leading the energy transition. Thank you for your time, and see you soon.
This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.