Good morning, ladies and gentlemen. Thank you for standing by, welcome to today's EDP Conference Call Q1 2019 results. At this time, all participants are on a listen-only mode. There will be a presentation followed by a question-and-answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today, Friday the 17th of May, 2019. Now I will hand the conference over to your first speaker today, Miguel Viana. Please go ahead, sir.
Hi. Good morning, ladies and gentlemen. We are here for the presentation of the first quarter 2019 results of EDP. Here with me today, our CEO, António Mexia, and our CFO, Miguel Stilwell de Andrade. We will go through the presentation, then we will have a Q&A session at the end, with live questions and also the possibility of making questions through the web. Our call should take somewhere between 45 minutes and maximum of an hour. I will pass the floor to our CEO, António Mexia, for the start of the presentation.
Thank you, Miguel. Good morning, everybody. Thank you very much for attending this results conference call. I am going to share with you the slides. In slide two with the key highlights. I really would like to start by highlighting that this quarter we are reporting for the first time under the new business segmentation, which we have recently presented to the market in our strategic update. These business segments are fully aligned with the challenges and the opportunities that we envisage with the ongoing energy transition, and of course, giving visibility about our goals in this leadership energy transition. In the first quarter 2019, our recurring EBITDA increased by 1% to EUR 921 million. This EBITDA was particularly penalized by very low hydro volumes in Iberia, 48% below historical average, and also low wind volumes across key geographies, which stood 7% short of the long-term average. Unusual figure.
On the positive side, our installed capacity increased by 2%, exclusively through renewables addition, and in parallel, the renewables average selling price went up by 5%, partially compensating the lower renewables volumes in the period. Additionally, our networks operations showed sound growth, namely in Brazil, through the commissioning of our first transmission line in December last year, and increased demand in distribution, while in Iberia, we had a positive contribution from OpEx reduction by 3% year-on-year. The year-on-year comparison of net profit is also penalized by financial costs, mostly due to significant positive impact from mark-to-market of financial hedges last year.
The average cost of debt stood at 4%, in line with the guidance in our strategic plan, which is 30% basis above first quarter last year, naturally following the increasing rates of our debt in U.S. dollars and in Brazilian real, in line with our significant expansion CapEx, mainly in the U.S. and of course, Brazilian markets. Effective tax rate, which is more volatile on the quarterly basis, was 27% in first quarter, significantly above what we have shown over the last couple of years, and well above our expectations for the full year 2019. I would also like to highlight that in the first quarter, we paid the full annual amount of CES, the extraordinary energy tax in Portugal, which reduces our reported net profit results by EUR 67 million-EUR 100 million, with a net loss of EUR 23 million in Portugal.
We see that outside, we were at the profit of well above EUR 100 million, and that it was penalized by this negative result in Portugal. Thus, all in all, our recurring net profit stood at EUR 167 million. Our net debt fell by 1% year-on-year to EUR 13.7 billion. When comparing to December, net debt increased 2%, essentially due to a slight EUR 200 million increase of regulatory receivables in first quarter, which in second quarter should be more than offset by a significant reduction of those receivables in our balance sheet, following the EUR 600 million tariff deficit sale that we have just announced this week. Clearly on track to do what we have committed.
Our recurrent organic cash flow showed a significant 66% increase to EUR 465 million in the first quarter, supporting by EBITDA growth and positive impact from working capital, while net expansion invested more than double what versus last year to EUR 858 million, following an acceleration of payments to fixed asset suppliers, still reflecting the sizable wind capacity commissioned by the year-end last quarter of last year, especially, of course, in the U.S. Note also that IFRS 16 adoption implied an increase of EUR 800 million of both other assets and other liabilities at our balance sheets, having also some minor impact on P&L without any expected impact on our key credit rating metrics, as Miguel Stilwell will explain to you in detail later.
Finally, I would highlight that last Wednesday we paid to our shareholders a EUR 0.19 dividend per share, referring to 2018, fully aligned with our dividend policy on the plan of 2022, and representing a dividend yield of something above 6% at current price levels. Going to slide three. As I mentioned already, the first quarter was very dry in Iberia, with hydro resources almost half the historical average in Portugal, or close to 3 terawatt-hour lower than this historical figure. As we have seen recently, hydro production in Iberia has a significant volatility on a quarterly basis, as it can be observed by 2018 performance, a year that showed rain flows just 5% above the historical average for the full year, but resulting from a combination of extremely wet second and third quarters, and a close normalized first quarter, and a significantly dry fourth quarter.
Note also that in April, I think it's important, there was already a significant normalization of other resources, which are much more in line with average. Regarding our global wind portfolio, wind resources stood 7%, as I mentioned, below long-term average, which compares to a windy first quarter in 2018, where resources were 5% above long-term average. Overall, wind generation fell by 4%, as weak wind resources were partially mitigated by the 6% capacity increase. As mentioned in EDPR's first quarter call, we have conducted a study on wind resource availability in our portfolio. The conclusions are that there is no trend, that there is low volatility of wind. Furthermore, there is little correlation in wind availability across our geographies. I think this is important. Moving to slide four.
As announced in our strategic update in March, our new segments are renewables, which includes wind, solar, and hydropower production operations. Second, electricity networks, comprising activities in Iberia and Brazil. Finally, Client Solutions & Energy Management, which cover activities of supply, thermal generation, and energy trading. Recurring EBITDA increased by 1% year-on-year, or 2% if excluded impact from ForEx. Going into details. Let's see. First, renewables. EBITDA down by 6%, propelled by lower hydro and wind resources in our key geographies as mentioned, which together reduced our results by about EUR 150 million year-on-year. About half of this impact was offset by higher selling price, both as in hydro and in wind. Additionally, the increase in renewables capacity and the suspension of generation clawback in Iberia also mitigated the low load factor effect.
In networks, EBITDA increased by 11%, mainly driven by sound performance in Brazil, with the beginning of operations in our first transmission line, and a 5% increase on electricity demand in our distribution areas. Finally, in Client Solutions & Energy Management, EBITDA was 17% up, pushed by the turnaround of the supply operations in Portugal, supported by the normalization of the regulatory context after the adverse conditions that we faced in 2018, a solid increase in revenues from services to our clients in Iberia, which more than doubled, although still naturally from a small basis, and a 5% increase in thermal generation in Iberia following the adverse hydro condition that I already mentioned. Moving to slide five and OpEx. We continued to see a strong performance on operating costs.
Excluding ForEx, operating costs show a 1% nominal growth in a period in which the number of customers connected to our distribution grids rose by 1%, and our average installed capacity grew by 2%. If this growth effect was excluded, OpEx was down by 2% in nominal terms. In Iberia, OpEx fell by 3% in nominal and almost 4% in real terms, in line with a 4% reduction in average head count. In Brazil, OpEx in local currency increased 2% or almost -2% in real terms, considering the local inflation of 4% in the period of expansion of activity. At EDPR, adjusted core OpEx per megawatt, excluding ForEx and one-offs, rose 1%. Again, below weighted average inflation in the countries where we operate. OpEx growth was below inflation in all our key geographies, leading to reduction in real terms. Moving to slide six.
Our reported net profit declined 39% year-on-year to EUR 100 million, with, as I mentioned, Portugal posting a net loss of EUR 23 million, heavily penalized by taxes and regulatory costs, in particular, the energy tax that represent in 2019, a EUR 67 million annual cost, fully booked in the first quarter, in line with what happened in last year. 67, sorry. The scarce hydro resources also impacted significantly our performance in Portugal, since it's where we have most of our portfolio, while in Spain, reported net profit remained stable year-on-year. EDP Renova net profit declined 35% year-on-year, mainly impacted by the previously referred lower wind resources across all our geographies. Reported net profit in Brazil increased 28% year-on-year, propelled by the commissioning of the first transmission line and strong operational performance in distribution. Moving to slide 7.
Following the strategic update, we are now fully focused on the delivery of our 2019-2022 business plan, which is based on the deployment of 7 gigas of renewables capacity and significant growth in our networks business, mainly in Brazil, through greenfield transmission projects. In renewables, we have currently 3.1 gigas of capacity secured, more than 40% of our 7 gigas target for the period, and slightly above the 2.9 that we have communicated at the strategic update, following a recent addition of 200 megawatts of wind in the U.S. to be commissioned in 2020. Regarding development efforts of new renewables project, we are now focused on contracting wind capacity in U.S.
to enter into production before 2020 year-end, still entitled with 100% of PTCs, as well as contracting of corporate PPAs mainly in Brazil, and also the preparation of our participation in some renewables auction in several European markets during 2019. Regarding new capacity to be installed this year, we are on track to install 1.1 gigas of wind onshore capacity, of which 0.9 in U.S. and Canada and 0.2 gigas in Europe. Regarding the employment of our five greenfield transmission lines in Brazil, we have already stated the first one fully operational. Commission, I also like to highlight once again, 20 months ahead of the schedule, and we are now at construction stage in two other lines in Maranhão and Santa Catarina. The remaining two lines are still on licensing phases, and one of those is expected to start construction in the second half of this year.
All these lines are now expected to be commissioned between second half of 2020 and first half of 2021, also ahead of the regulatory schedule. Going to slide 8. Regarding our strategy of crystallizing value up front and leverage on strong market appetite for renewables assets, we are well on track to deliver the EUR 4 billion assets rotation target announced for the period 2019-2022. Last month, we announced the sale of a majority stake in a 997 megawatts wind farm portfolio in Spain, Portugal, France, and Belgium, representing EUR 0.8 billion of proceeds and an expected capital gain of EUR 2 billion. We will keep providing O&M services in these projects, reinforcing the recurring profile of our assets rotation strategy.
Looking forward, we continue to see strong demand from financial investors on these kind of assets, which support the ongoing analysis of some additional asset rotation deals for the next 12 months. Regarding the execution of the EUR 2 billion disposal plan, also announced on our recent strategic update in London, the target is fully on track to be executed within the announced time frame of 12-18 months. I want to be very clear. Advisors are engaged, and we are working on the analysis and preparation of the different potential transaction, with keeping our plan of reducing exposure to Iberia and merchant thermal assets. Moving to slide 9. Overall, despite this quarter's adverse weather conditions, we gave significant step ahead regarding the delivery of our strategy.
We have increased our wind and solar capacity by 6%, and in parallel, we have announced a feasible, as I've just mentioned, EUR 800 million asset rotation deal with the material value crystallization component. Furthermore, we have reinforced our capital structure with an issue of EUR 1 billion hybrid green bond, and we continue to deliver efficiency improvement with the reduction of OpEx by 2%. On a like-for-like basis. Clearly below inflation, as I mentioned. Finally, we have shared growth, as usual, with the EUR 0.19 per share dividend, which corresponds to the floor of the policy that we have announced in the strategic update. Overall, we are performing well on what depends on us, controlling costs, crystallizing value, delivering new expansion investment at attractive returns, and managing our portfolio in an efficient way.
I would also like to finalize mentioning that we are comfortable with our EBITDA in 2019 consensus of around EUR 3.5. This view includes the adverse impact from low hydro and wind volumes in first quarter, and our current expectations on the impact from asset rotations in renewables. As you know already, EUR 200 million gained from the recent deals, and includes the impact from IFRS of around EUR 70 million in 2019. In net profits, with the information that we have today, we clearly believe that the consensus of net profit of around EUR 800 million is achievable, depending, of course, on the hydro and wind conditions and asset rotation execution for the rest of the year. This last part, we are very comfortable. Of course, rain depends, of course, not on us, namely in the last quarter.
Typically, we are focused on delivering the targets of the strategic update, and we are comfortable with the year 2019. I will now pass to Miguel Stilwell for more detailed analysis, and I will come back to the Q&A session. Thank you very much. Miguel?
Thank you, António. Moving on to the more detailed analysis of the different segments. Let's start by moving to slide 11. Here we can see that the focus continues to be on renewable energy, with a 2% increase in renewable installed capacity. I would like to highlight that there was a 6% increase in wind and solar capacity, as António already mentioned. With this, renewable energy reaches a weight of 74% of EDP's installed capacity and 69% of its generation mix, despite the very dry quarter in Iberia and weak wind resources in our key journal. The renewables production was 18% lower than in the first quarter of 2018 due to the renewable resource scarcity I just mentioned. Moving on to slide 12.
You can see that the EBITDA from wind and solar increased 1% year-on-year to EUR 285 million, mainly negatively impacted by the 10% year-on-year decline in load factor, since wind and solar resources were 7% below long-term average and 5% above average in the first quarter 2018. There's this delta swing between the first quarter 2018 and first quarter 2019. Also note the termination of some PTCs in some wind farms that are 10 years old in the U.S., which means that there was a 10% decrease in the PTC revenue. However, these effects on results were mitigated by the 6% expansion of wind and solar installed capacity, as well as the 3% increase in the average selling price, mainly due to price increases in North America and Eastern Europe. Moving on to slide 13.
Talking about hydro, EBITDA decreased 16% year-on-year to EUR 271 million, again, strongly impacted by the very dry quarter in Iberia, in particular Portugal. In Portugal, the hydro coefficient was 48% below the long-term average, and as a result, the hydro generation overall in Iberia declined 35% to 2.6 terawatt-hours. On the other hand, as I mentioned, average selling price of hydro generation in Iberia increased 20%, prompted by the higher fuel price and also higher realized prices from hydro plants due to increased opportunity costs. In Brazil, EBITDA from hydro was flat in local currency but declined 6% in EUR due to the Brazilian real depreciation.
Note that our hedging strategy in Brazil allowed us to smooth our exposure to the GSF volatility, which increased from 113% in the first quarter 2018 to 149% first quarter 2019, reflecting the average seasonal weighting curve of the system's physical guarantee, which allocates energy more to the second half of the year. Moving on to slide 14, regulated networks. Here, EBITDA increased 11% to EUR 243 million, mainly due to the contribution from Brazil. In Brazil, the EBITDA from networks increased 30% or 39% in local currency. This was the first quarter with a significant EBITDA contribution from the transmission activity, which stood at EUR 10 million as our first line became operational in December 2018.
In distribution, the improvement in results was mainly driven by the 5% demand growth in our concession areas on higher temperatures and better economic context, as well as due to the reduction of distribution losses. In Iberia, EBITDA from networks advanced 4% year-on-year, mostly driven by the 3% cost reduction. Moving to slide 15. Slide 15 is about Client Solutions & Energy Management, which, as we mentioned, as you know, activities of supply, energy management, and thermal generation. EBITDA globally from these operations increased 35% year-on-year to EUR 160 million. Operations in Iberia improved as a result of the normalization of supply margins in Iberia, as well as due to higher thermal generation, which in turn was driven by the dry quarter. I'd like to highlight that there was lower regulatory costs due to the suspension of the generation taxes in Spain and Portugal in this first quarter.
In Brazil, EBITDA from these activities declined mainly due to lower volumes in the liberalized supply market. In Pecém, as you know, the coal plant, the slight decline in results was mostly due to the extraordinary effect in the first quarter of 2018 as a result of the downward revision of the reference availability level. Moving on to slide 16, net debt. Net debt increased to EUR 13.7 billion in March 2019, it's a 2% rise versus December 2018. If you exclude regulatory receivables, net debt was flat. In detail, the regulatory receivables increased by EUR 200 million, despite the overall electricity system debt decreasing by EUR 62 million in this quarter. As you know, this week we sold EUR 600 million of tariff deficits, which we announced. The regulatory receivables in our balance sheet will reduce significantly in the second quarter.
Net debt was impacted by roughly EUR 900 million for net expansion investments in the period, with a significant part of that amount dedicated to payments to suppliers of expansion investments, with proceeds from asset rotation expected to flow in the coming quarters. This quarter reflects the EUR 1 billion from the hybrid green bond issued last January, which has a 50% equity content. There's also some recurring organic cash flow of around EUR 500 million, which has also contributed significantly to reducing the debt. Moving on to slide 17. Here are some of the key things to highlight. The cash and equivalents, EUR 1.7 billion. We have EUR 5.9 billion of available credit lines. This covers our financing need beyond 2021. Note also in terms of three key issues here in 2019.
First, the EUR 1 billion subordinated green bond, which we issued at 4.5%, the second green bond after the EUR 600 million we issued back in October. S&P reaffirmed our rating of BBB-. This was already in April. As I mentioned before, the EUR 600 million sale of the tariff deficit, which we did on May 13. Moving on to slide 18. Here, I think a little more detailed explanation to understand some of the movements here. The net financial costs stood at EUR 186 million in the first quarter of 2019, which increased significantly relative to the first quarter of 2018. This is explained basically by, first, the adoption of the IFRS 16, which increased the account of financial costs by EUR 10 million.
Secondly, there's a negative impact year-on-year of EUR 31 million due to mark-to-market of financial non-cash hedges, of which EUR 21 million is due to the relative evolution of the US dollar versus the euro interest rates, as I mentioned, non-cash. EUR 10 million from mark-to-market of some hedging positions in energy markets, which were booked in the first quarter of 2018 and not this year. Thirdly and finally, last year's gain booked on the sale of the 20% stake in our U.K. offshore project, Moray East, was EUR 15 million. If you adjust the financial costs for these effects, the figure would have been EUR 183 million. The interest-related costs went up by EUR 3 million, which was basically impacted by the higher average cost of debt, which increased from 3.7% to 4%.
This 4% is mostly impacted by the higher weight of the US dollar and the Brazilian real in our total net debt, which, as you can see here on the right-hand side, together with the dollar appreciation against the euro. Obviously, this also takes into consideration the issuance of the EUR 1 billion hybrid bond in January, and also lower level of short-term debt in the first quarter, which, as you know, commercial paper typically has a negative rate. Since we took in a lot of cash right at the end of last year, we had lower levels of commercial paper. Going forward, I think this is a question which would come up, we are still comfortable with the 4% rate, going forward.
I think in relation to 2019, bear in mind that we have several much more expensive financings that are terminating this year and that we expect to refinance on more attractive terms than they are currently. That will contribute to keeping the financing costs at around 4%, as we mentioned in our strategic update. Moving forward to the final slide 19. Here, reported net profit, as I mentioned, EUR 100 million in the first quarter, 39% below the first quarter of last year, obviously impacted by the financial costs, which I just mentioned, and the income taxes. A word on income tax. It went up by EUR 25 million year-on-year, following a higher effective tax rate this quarter. As you know, tax is typically quite lumpy on a quarterly basis.
We expect this to be normalized over the rest of the year and to be at a level below 20% on a 12-month basis. Moving forward, this is something that we've also talked about in the strategic update, obviously, we expect the tax rates to evolve towards the mid-teens, but for 2019, clearly below 20%.
To highlight that in this 1st quarter, it is penalized for booking the full amount of extraordinary energy tax, so the EUR 67 million. If you exclude that, on a recurring basis, the net profit would have declined by 32% year-on-year, impacted by these various aspects that I have just described. With that, we close the presentation and move to Q&A. Thank you very much.
Thank you, ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, that is star and one for any audio questions. Thank you. Your 1st question comes from the line of Stefano Bezzato from Credit Suisse. Please ask your question.
Yes. Hi, good morning. Three questions from me, please. The 1st one is on the sell downs of renewable capacity. You announced 1 gigawatt in April. That is already roughly 25% of your target for the four years. How quickly do you expect to achieve the EUR 4 billion target that you have announced in March? The 2nd question is still related to the sell downs. You mentioned you are comfortable with the guidance with the current consensus for net profit in 2019 of around EUR 800 million. How much capital gain would you include in that guidance? Third question on the recent report on the excessive rents from the Portuguese parliament, can you help us understand what can be the practical consequences for EDP? Do you expect any legal or government-driven intervention to implement the recommendations of the commission? Thank you.
Thank you, Stefano. The sell down of EDP renewables when? Clearly, we have basically reached more, I would say 90% of the target for the year. We still expect to do something until the end of the year. Eventually we will be less. As you know, we have presented in London that the figure will increase with time, but it means that probably we will be doing a little bit more than expected this year because the market is there. If anything, slightly quicker than expected. Of course not one year in advance, just making the curve flatter than it was, flat in the sense that 2019 will be a bigger contribution. In terms of guidance, and the impact of this, we would expect to be above the EUR 200 million, of course, that we have already presented.
It depends very much on the next deals, clearly, slightly above this figure. In terms of your questions of the parliamentary commission. First, I would like to highlight that the commission, the report, was approved only by the left-wing parties, including socialists and everything that is left, that it was voted against on the social democrats and to the right. Typically, it shows that it was a political exercise more than anything else. I really would like to highlight three main issues raised in the report, and to clarify our vision about these potential recommendations. First, regarding the past results from tariff deficit sales, which as you know, result, and everybody knows, results from EDP taking the risk of mark-to-market interest rates evolution.
The government has already stated that any retroactive measure on this would not make any sense, and that for the future, they would not be ready to take these interest rate risks because if they want to take the risks and the benefits, we are ready to give them the tariff deficit. The question is, they are not ready to take this risk. I think that we are clear on that front. Second, on the issue of double subsidies alleged received by renewables projects in the 1990s, EDP's and everybody else, it was also already recognized by the government representatives. There is a total lack of legal support to implement this measure, which was initially approved more than two years ago, but never really enforced. The figures and reality is that this does not exist.
Finally, regarding Sines, the report recognizes, and I think it's very important, that Sines has been operating according to the law. Regarding the future, it's very simple. We would like to point out that Sines plant will generate electricity if market and regulatory conditions are there. Imposing taxes and double taxes on it would of course, and not on others, would remove its competitiveness. If there is no profitability, we will shut down. You will have a huge problem in terms of security of supply. Any anticipation of the closure of Sines will represent the problems for the system. It's not my statement. It's already recognized by everybody.
Of course, we agree, we are totally focused on decarbonization, of course, decarbonization should be played through the market of CO2, and we have been very clear on this. It's clear examples about what we believe that are the measures that eventually would be coming out of the recommendations.
We can go to the next question on the phone.
Thank you. Next question comes to the line of Jorge Guimarães from JB Capital Markets. Please ask your question.
Hi, good afternoon, everyone. I have three questions. Firstly, can you clarify something on the guidance view? Maybe this is just detail, I understood that you are comfortable with the EUR 3.5 billion EBITDA guidance. On the net income guidance, you said we could reach the EUR 800 million, depending on wind and rain. Should I assume that you need higher than EUR 3.5 billion EBITDA to reach the EUR 800 million net income? This is the first one. Second, what is your view about full year 2019 cost of debt? Finally, one on the Portuguese regulation. What is your view about the generation clawback from Q2 onwards? Because generation tax is now in place again in Spain, the reason why there was no clawback in Q1 is not there anymore. What is your view about clawback for Q2, Q3, and Q4? Thank you very much.
Jorge, I will talk about guidance and clawback, I will pass to Miguel. Should always be the CFO that talks about that. To see that we are aligned. The guidance, it's a pair. Let's be clear. The EUR 3.5 and EUR 800 million. The question is, of course, the hydro of the last quarter, it's an important element just to be clear on that EUR 800 million, we don't see any mismatch between these two figures. We feel they are connected, of course, we need first to anticipate some, as I mentioned with the previous question, exactly what will be the gain above the EUR 200 million in what concerns the asset rotation.
In what concerns the clawback, the answer is very simple, is that if the tax disappears in Spain, the problem is automatically solved as it was the case in the first quarter. If the tax stays in Spain, there is a provision in the budget law in Portugal, so approved by the parliament, that the mechanism of clawback should be revised to be fair. Because everybody knows that, and recognize that the system that was implemented was basically double taxation in the Portuguese system. Clearly, if it stays, we expect the system to be revising according to the law. Miguel, in what concerns debt?
In relation to debt, just to reaffirm what I said a little while ago, we're comfortable with around 4% cost of debt. As I mentioned, the first quarter was more penalized than what we expect the rest of the year because of the high cash position, given the proceeds received at the end of last year. Also bear in mind that over the rest of this year, we expect to go on refinancing some more expensive debt that we have and which will come in then at a lower rate. There will be cheaper debt coming in to do that refinancing. Overall, still comfortable with the target that we gave in the strategic update.
We can go to the next question on the phone, please.
Thank you. Next question comes line of Jose Ruiz from Macquarie. Please ask your question.
Good afternoon. Just two questions on my side. The first one is how much tariff deficit are you planning to save in 2019, and what is the tax impact attached to that? Second question is a clarification. You said, sorry, talking about the EUR 65 per megawatt achieved in hydro. You talked about opportunity cost. What do you mean by that?
Okay. I'll take that question both. On the tariff deficit sale, as I mentioned, we've done EUR 600 million already. We have approximately EUR 1 billion, or expect to have EUR 1 billion, roughly, balance sheet. We still expect to do some more transactions this year, either through securitization or bilaterals. Clearly, we would expect to sell the rest of the tariff deficit that we have on our balance sheets throughout the year. On the EUR 65 per megawatt.
Basically, when you have less water, as it was the case, we basically manage selling the capacity when the difference between the base price and that peak price is higher. Basically, we just sold. Whenever you have lower volume, you sell at the best moments. It's the reason why that differential is bigger.
Thank you very much.
Thank you. Thank you, Jose.
We can go to the next question on the phone, please.
Thank you. Next question comes to the line of Alberto Gandolfi from Goldman Sachs. To ask your question.
Yeah. Good morning, and thanks for taking my question. The first one is on portfolio restructuring. Would you be willing to push your strategy with, I might call it shrink to grow? Would you be happy, for instance, to focus more on Iberia and renewables and perhaps swap out some of the assets to gain a bit more of strategic independence? Any thoughts on that would be really appreciated. The second is, again, a little bit on strategy. How important do you think is scale to develop renewables? There's a very long tail of new entrants, but there's only a really handful of players, and you are one of them, an elite that basically can add a couple of gigawatts a year. Can you maybe talk about scale? What are your advantages?
If so, would you be open to perhaps integrate yourself with another of the big guys to create a sort of the Avengers of renewables or like a super renewable developer if you're not into Marvel? The last question is a little bit more boring on the numbers. You talked about EUR 150 million negative swing year-on-year from hydro and wind, but last year you were above average. Versus average, is it correct you were about EUR 70 million-EUR 75 million below average? If so, if next year we add EUR 75 million to the renewable division and you have an extra, I guess, EUR 2-3 per megawatt hour on the hedged price, would that be a fair approach to calculate your renewable division for next year over and above any capacity addition? Thank you.
Alberto, it's a pleasure to have you back on the conference.
Likewise. Thank you.
Portfolio restructuring and renewables. I believe that your two questions, the first questions are related. We are very clear. I think that we are top player in renewable. Let's start. Our restructuring portfolio is based on the fact that we want to reduce exposure to Iberia, we want to reduce exposure to merchants, we want to reduce, if possible, the exposure to terminals. That's the key element. The recent past proved that we should be smaller in Iberia, especially in Portugal. It's clear that we have been very clear in what we want, where we want to start working on those sales. It's the reason I've mentioned that we have already designed the potential portfolio alternatives. We are working on it as we speak.
In what concerns, basically diversifying renewables, of course important, but also we recognize that renewables will be a very different end game in the future. I think that it's important to recognize this. It's one of the reasons why we like to crystallize value also on that farm down strategy included on the asset rotation. Why? Because it gives you more value crystallization, optionality, lower risk, and flexibility to adjust your path along the way. Scale is important, of course. Of course, in terms of what? Having the right people, but also attracting and keeping the right people. Working with the key suppliers. This is, of course, also very important in offshore, where you have a limited number of suppliers. Solar is slightly different, where I would say that barriers to entry are much smaller.
The scale of the project can be much smaller, it's available for a totally different number of players, much higher than in wind, of course much higher than in offshore. In that front, in any case, we have just proven that we have been able last year to go fast in this. We have assured last year 400 megawatts and the key targets, especially for the U.S., with a specific pipeline, especially at the moment where wind goes down and solar goes up because of the PTC going out and the ITC being kept. We have proven that we have both the team, the capabilities, and the pipeline. I think that we are fully equipped. We don't want to integrate ourselves. Why? Because it's an element. EDP is basically a renewables company.
We are only open to things that makes us growing faster, but us at the driving seat. Because why? Because we are a key player. In what concerns your last question?
Yes. Alberto, hi. In relation to your last question, The first quarter of 2018 was also not fantastic. The second and third quarter in 2018 were significantly above average, the fourth quarter was also bad. As a year, it ended up being more or less average, but there were definitely swings between the different quarters. Versus a normalized year, I'd say this quarter was around EUR 150 million to EUR 200 million below normalized, depending on the price issue. Prices going forward for 2020, typically, we go on closing these positions over the year. If you take the current forward price, I think it's at around EUR 56. It will be thereabout. Depends obviously on the evolution. That's how I would look at it.
I would like to A lot of people mention, of course, this climate change and whatever. It's the reason why in the introduction, Alberto, I've mentioned a study on wind resource availability in our portfolio and the conclusions that there is no trend and that there is low volatility on wind. We have been monitoring this, and the results are clear. In terms of hydro, we don't see a structural change in hydro volumes in terms of long-term average. We expect, however, more volatility. By the way, related to what Miguel just mentioned. Typically, we don't see a change in the volumes. We see a change in volatility in hydro, but no impact on the wind.
So we-
Very clear. Thank you.
Thank you.
Sorry, we have no more questions. for to conclude.
Thank you, everybody, for being present. I think that we have been keeping our strategy. One of the best definitions in life that I've heard about strategy is, strategy is like rain dancing. You should always dance, not because you make it rain, but because you learn how to dance better. Typically, what we have been doing is clearly doing everything that depends on us, being rather sooner than later on those targets, cost cuttings, development of pipelines, asset rotation. I think that we are basically dancing better. Thank you, and see you soon.
Thank you. That does conclude our conference for today. Thank you for participating, and we'll now disconnect.