EDP, S.A. (ELI:EDP)
Portugal · Delayed Price · Currency is EUR 4.543
-0.077 (-1.67%)
Apr 29, 2026, 4:35 PM WET
← View all transcripts
Earnings Call: H2 2018
Mar 12, 2019
Good morning, and gentlemen. Thanks for being here with us today for the strategic update presentation of EDP twenty nineteen-twenty twenty two. Just going through the agendas. First, we'll start with the 2018 results presentation, which was already released to the market before market opening today. The first part of Main Allied will be presented by our CEO, Antonio Mexia and then more detailed parts by our CFO, Miguel Stiouel.
Then we'll have a short Q and A session, and we'll move to the strategic presentation, which in the meanwhile will be also made available in the CMVM. We'll also made available to the people in the room, pen drives with the presentation, so we'll not have hard copies given our sustainable policy. And the strategic presentation, the first part will be presented by with the strategic part by our CEO, followed by the presentation of the platforms and financial part by our CFO. Afterwards, we'll have a Q and A focused on the strategic presentation, and we'll invite everybody to a light lunch afterwards. So we'll start then with the twenty eighteen results by our CEO, Antonio Mshia.
So thank you, Miguel. Thank you, everybody. Good morning. We will have basically two parts, one thinking about, talking about 2018 and one talking about bright future. Just the notes, the question of not having the small book that everybody loves loves to take notes is because of of saving the planet, but also being digital.
So it's it's mandatory now. So but thank you again, and I would like to today to to start with the results. And let me see. Okay. So I'm just showing in the screen.
Can we move this to the screen to the left? So we have seen on this first slide that with starting with the recurrent EBITDA, it decreased by 3% to around 3,300,000,000.0 This includes, of course, the positive contribution from the increase of 2% of our installed capacity, 100% of it through the renewables addition. On the negative side, and we need to talk about this, our results were penalized by a very weak wind resource, the year, namely in the second half. We fell short 6% of the long term average, and we were at a six year low. While regarding the hydro resources, despite the full year of 2018, in line with the annual average, The first quarter alone was marked by a very weak hydro conditions.
Our performance in 2018 continued strongly penalized by heavy taxes and levies and adverse regulatory decisions in Portugal. They were already anticipated. They were basically introduced in 2017, but of course the impact, the full fledged was in 'eighteen. We will see these in detail because I think it's important that you analyze 2018 regarding these figures. We also had a strong performance regarding OpEx, posting a 3% decline in Iberia and 1% improvement in real terms in Brazil.
I think that you'll see now, but also looking to the future, now we all need to talk about efficiency. Have been talking about efficiency for a long time, and clearly, we have been delivering. Our recurring net profit rose three percent to €797,000,000 positively impacted by the 12% decline on interest costs, following the decline on cost of debt by 30 basis points to 3.8%, down from 4.1%. Note that the reported year on year profit, slightly above 50, is strongly impacted by nonrecurrent items, namely, a negative one off provision of €285,000,000 related to the decision, as you know, of retroactive cuts on the Cmax revenue, which EDP is currently challenging in courts. And also, the second item was, 600 positive sales, very sizable gain on the sale of Natrogas in '17.
But this one off, we are we are going to challenge him, and we are sure pretty sure that we will be successful. Not tomorrow. It takes time, but anyway, we fully provisioned the €287,000,000 Our net debt was down from 13,900,000.0 to 13,500,000.0 comparing December to December, reflecting a 50% growth in our recurring organic cash flow. I think that's an important item that we want to share with you. So we grew for a little bit more than EUR600 million to EUR1.2 billion.
So and also this due to a good news is we have also a EUR600 million decrease year on year in regulatory receivables. Receivables. Regarding dividend distribution, the management is proposing the maintenance of a dividend per share of zero one nine euros which corresponds to our floor. We are committed to this floor. Of course, subject to the approval of our Annual Shareholders' Meeting that will take place on the April 24.
And we expect that this dividend will pay fully be fully paid in May. Moving to Slide three, highlights from focused growth, optimization and efficiency. What we see is that we were rather busy in terms of our business plan execution despite all the challenges that we have shared with you. We have continued our growth strategy based on renewables and also in Brazil. Regarding wind onshore and solar, in 2018, we have built over 800 megawatts of capacity and secured PPAs of 1.3 gigas, of which 0.4 gigas reference two big solar projects, one in U.
S. And another one in Brazil. Regarding offshore, we also had a busy year. On Moray East project in U. K, starting construction following the closing of the final investment decision and the project finance in December.
In France, we finally got full visibility after a long work, on the long term tariff regime, and our projects were granted the environmental permits. Finally, in The US, we were awarded a lease area in Massachusetts, as you know, which could accommodate up to 1.6 giga and which we will now start to develop in partnership. Moving to Brazil. Clearly, the key word in terms of growth is networks. We have commissioned our first transmission line last December, twenty months ahead of the initial schedule.
And I think it's important. Basically, we have been repeating here what we did also in the generation project, well ahead of and clear a difference to to the other players in the market. Furthermore, we have built a 2355% stake in CELSH, which we anticipate management involvement in the company and, of course, optionality for the future. We were also very active on portfolio optimization with the execution of the first sale of majority stake in a portfolio of wind farms, 500 megawatts in U. S.
And Canada, which allowed us to recycle capital with upfront value crystallization. So in order to maintain a low risk profile for our investors, we have also reduced our stakes in wind offshore projects from 77 to 33.3, stake in Moray East, and from 42% to 43% to 29.5% in our two French projects. Lastly, we have disposed several non core assets during 2018, namely mini hydro assets in Portugal and Brazil and biomass operations in Portugal with, more than two eighty million euros cash effect. Think it's a step. There are steps in a clear direction that shows exactly what we want to do.
In terms of efficiency, we have kept a steady performance of our targets, reaching €200,000,000 savings in 2018, anticipating our OpEx target by two years. In terms of financing, we have sold €1.3 of tariff deficit, as I mentioned, and we have been pioneers in green bonds issuing in Portugal with a seven years €600,000,000 bond in October with a yield of 1.95. And more recently, already in January, we issued a €1,000,000,000 green hybrid priced at a yield of 4.5. So I think these are two important instruments. Moving to slide four and understanding, Iberia.
Clearly, we were heavily penalized by adversarial issue. So the largest negative regulatory item was the decision of the alleged inventory cost of CMEX, representing what, as I mentioned, the €285,000,000 provision and the lower than contracted final adjustment of the CMEC as decided by the government, which together represented $3.00 €3,000,000 one off cost in 2018. Since EDP considered such decisions violate contracted terms, it has taken the necessary steps to protect its interests and rights. Notwithstanding this, EDP prudently provisioned these issues. The energy tax says, corresponding, as you know, to point 85% on assets kept in place despite its supposed extraordinary nature and represented a negative impact of €65,000,000 earnings, euros 40,000,000 in generation and 25,000,000 in distribution.
Worse is to note that something that people have talked a lot in the the past, the Portuguese electricity system debt decreased by €800,000,000 to an overall debt of €3,800,000,000 proving the system's steady deleveraging path which will enhance the progressive phasing out of the energy taxes envisaged in the public accounts. Accounts. So clearly, we are on the phasing out, and this gives rooms and credibility to that idea of the sales vanishing. So in terms of generation tax, in 2018, this amounted to €56,000,000 reflecting the changes introduced in the 2017 until the suspension of ClobX since October 2018. In any case, contrary to the European Commission recommendations, the cost of social tariff in Portugal continued to be supported by conventional power plants, representing an 84% extra cost to EDP.
Finally, the start of the new regulatory period for electricity distribution in Portugal had also an adverse impact on regulated revenues, which showed a €164,000,000 year on year decrease last year. All in all, our results in 2018 encompassed a €672,000,000 negative impact from sector taxes and revised retroactive cuts on CMEX and year on year cuts on regulated revenues. So some of course a lot of them are one offs, but the figure is big. Slide number five. We control what we can control.
Of course, we can work, then we challenge what we cannot control. But talking about another thing that we cannot control, But, we see that, 2018 was marked by the normalization of other resources in Portugal, although very weak, as I mentioned in the last quarter, and abnormally low wind resources in our main markets. So we have a gradual improvement significant gradual improvement of hydro resources, but six years low for wind. Hydro production was 5% above historical average despite a dry last quarter. This compares to a very dry period last year, which justifies the 85% year on year increase on our hydro production NAVIO.
On the other hand, wind resources, as I mentioned, was at this record low. On Slide number six, talking about recurrent EBITDA. It increases 2% ex for ex because of this hydro improvement and growth in Brazil, offsetting weaker wind resources and regulatory cuts in Portugal. So recurrent EBITDA is penalized by a 5% negative impact from ForEx, which was significant last year, resulting from the depreciation of Brazilian real and U. S.
Dollar versus the euro. So excluding ForEx, recurring EBITDA would have grown 2% versus last year. Firstly, in Brazil, EBITDA grew 1414% in local currency, propelled by a decrease in energy losses, in distribution and higher demand coupled with our low risk hedging strategy on hydro volumes and energy prices. Secondly, in Iberia, an increase of 1%, minus 2% in Portugal and plus 12% in Spain, due to the increase of hydro production, partially mitigated by regulatory measures in Portugal. Finally, in Renewables, EBITDA, excluding ForEx impact, went down 2% year on year, reflecting not only the wind resource, as I mentioned, 6% below long term average, but also the decline in average revenue per megawatt, as you know, expected with the extension of some of the PTCs after ten years in U.
S. This trend, as explained in previous conference calls, is associated to the increased competitiveness of renewables and, of course, with this change of The U. S. Market. In slide seven, the strong performance.
Let's go to what really you control. Strong performance on operating costs. We continue to see a strong performance. Excluding ForEx, operating costs showed a 1% nominal growth in a period in which our average generation capacity grew more than 1% and the number of customers connected with growth by 1%. In Iberia, OpEx fell by 3% in nominal terms and almost 4% in real terms, in line with the 4% reduction in average headcount in Iberia.
We had less two seventy five people. In the last three years, we are talking about less five sixty people. In Brazil, OpEx in local currency increased 3% or almost minus 1% in real terms considering the inflation of close to 4% in the period of the expansion, activity with 2% increase in the number of customers connected in distribution. So recovery clear in Brazil. At EDPR, core OpEx per megawatt, excluding ForEx and one offs, rose 3%, Reflecting the development of our O and M self performing strategy, we are sure that it will allow us to achieve significant efficiency improvements in the near future.
Moving to Slide eight, let's talk about recurring net profit. Overall, our recurring net profit rose 3% to EUR797 million, benefiting from lower financial costs, hydro recovery from weak levels in 2017 and underlying growth in Brazil, which more than compensated the effects from adverse regulatory changes in Portugal and weak the non offs and weak wind resources in 2018. Recurrent net profit in Portugal decreased by 16% as the hydro recovery and OpEx nominal reduction was offset by those regulatory changes. In Spain, recurring net profit rose by 8%. And note that in Portugal, the company showed a reported net loss of 18,000,000 for the first time since the first privatization stage of the company in 1997.
The contribution of Brazil to our consolidated net profit rose 29% or €25,000,000 following the 108% increase of EDP's Brazil reported net profit in local currency. EDPR's contribution also increased by 21%, propelled by a 14% increase of EDPR's net profit and our ADP stake, 82.6% since August 2017. So and once again, I would stress the organic cash flow growing and being enough to not only to support the dividend proposal that we have presented and we will be voted by shareholders, but also the expansion CapEx. Having said this, I will pass to Miguel. So thank you.
Thank you, Antonio. Good morning, everyone. So moving on to some of the more detailed results analysis, if we see here on slide 11, you can basically see that the focus continues clearly to be in the growth in renewables. And so now renewables by capacity already represents around 75% of the total capacity. This is including also hydro and wind and solar.
In terms of electricity production, also representing two thirds of the total production, so an increase in 22% in the year of 2018, mostly driven by obviously the increase in hydro production versus the previous year. Moving forward to look at the different business units. If you look at EDPR EBITDA, obviously this decreases 5% year on year to approximately 1,300,000,000. This includes a negative ForEx impact of roughly around 3%. On one hand EDPR's average installed capacity rises by 6% to 10.8 gigawatts.
However, some of these benefits were offset by the weaker wind resources, which Santana just mentioned, which were 6% below the long term average in 2018. The EBITDA was also impacted by a 7% decrease in the average selling price excluding ForEx. This was a consequence most of the lower prices in Poland, Romania and The U. S. And also by the termination of some of the ten year PTCs, which led to a 15% decrease or a 14% decrease in PTC revenues.
Again, this was already anticipated when we were looking at 2018. Moving forward to look at generation supply in Iberia. So here there's an increase in recurring EBITDA of roughly 40%, mainly driven by the hydro resources, which increased overall to roughly €800,000,000 This has got to do with obviously the normalization of the annual hydro resources despite the weak hydro resources in the fourth quarter. Overall, we have roughly 13.7 terawatt hours of production in 2018, which accounted for 39% of EDP's own production, prompting a 14% decrease in the average sourcing cost to roughly EUR29 per megawatt hour, which you can see here, so a 14% decrease. The end of the COMEX of the old regime, which ended in June 2017, also had an impact of roughly 103,000,000 year on year in terms of EBITDA.
The 5,000,000 leftover is just a correction from previous years. Looking at EDP Brasil in local currency, we see that there's an increase of 12% in EBITDA to roughly BRL2.5 billion. So in terms of efficiency, the trajectory is very good, so decreasing the non technical losses over the last quarters, which we've been seeing in the discos. So you see here both for Spiritsa and Sao Paulo a decrease of zero point eight and one point one percentage points. The same coal plant also had a very strong performance in 2018 and we're able to maintain the availability levels well above the contractual benchmarks.
So this translated into an availability premium of BRL135 million compared to the penalty we'd had in the previous year. This was partially offset by the program maintenance that have occurred in the 2018. Finally, and I think it's worth noting the good results on the hedging strategy, which reached a total amount of BRL151 million, so January greater than the previous year. Looking at regulated networks in Iberia, so this decreased 19%. This is already excluding the gas distribution networks which had been sold in 2017.
So this decrease reflects mainly the networks in Portugal, which represent obviously 77% of the EBITDA in the segment. The OpEx had a good performance, so it improved 3% year on year despite the 3% growth in volumes distributed. However, this was not enough to compensate the impact from the regulatory review in Portugal, which mostly justified the 13% decrease in regulated revenues. Additionally, in terms of EBITDA from our distribution network in Spain, it's amounted to €145,000,000 and reflects a relatively prudent accounting approach, to some possible negative regulatory changes which we've called the les vividad. Now let's look at net debt.
So net debt decreases to €13,500,000,000 as of December 2018. This reflects, as Antonio mentioned earlier, 1,200,000,000.0 of recurring organic cash flow. It reflects the dividend payments to our shareholders of €700,000,000 and also around €400,000,000 of net expansion investments in the period, mostly allocated to wind onshore in The U. S. But also the regulated networks in Brazil.
Additionally, the net debt was also positively impacted by the €600,000,000 reduction in the regulatory receivables, which we sold over 2018. This is relating to tariff deficit and also the good performance of the electricity system debt, which as was mentioned, reduced roughly CHF 800,000,000 over the period of 2018. So as a result, the stock of debt in the electricity system is now roughly €3,800,000,000 in 2018 benefiting from the demand growth in Portugal and also the past cost cuts. Overall, the net debt to recurring EBITDA stood at roughly four times. Now talking about financial liquidity, we have €7,600,000,000 of liquidity, including the €1,900,000,000 of cash and equivalents.
We also have €5,700,000,000 of available credit lines. Part of these were recently extended as of March 2018 for another five years plus extendable for another two years. So this covers our refinancing needs beyond 2021, so a very comfortable position. It's also worth highlighting the €750,000,000 bond issued in June with a yield of 1.67%, the securitization of €900,000,000 of tariff deficit in Portugal, and then as has already been mentioned, the first ever green bond of €600,000,000 which we issued in October with a seven year maturity. 2018, we continue down this green path and we're now reinforcing the balance sheet as of January with a €1,000,000,000 subordinated green note of the 4.5% mentioned.
Looking at financial costs. The net financial costs decreased 32% year on year. Firstly, this is related partly to the net interest costs which reduced by 12% or €77,000,000 year on year. This is supported by 30 basis points decline in the average cost of debt to 3.8% overall, 11 an percent year on year decrease in the average debt, obviously relating to 2017 when we sold Naturgas. Secondly, there's a positive impact of €30,000,000 from Forex and derivatives that are essentially tied to the evolution of the U.
S. Dollar against the euro and thirdly, euros 87,000,000 gain on the reduction of our equity stakes in wind offshore, mostly in The UK and France, just part of our recurring asset rotation strategy. Finally, CHF 46,000,000, which is relating to other items, mostly the bad will associated with the acquisition of our stake in CELESK, some higher financial guarantees revenues in Brazil of around CHF 14,000,000 and also lower costs with our tax equity investors of around CHF 8,000,000. And finally, in terms of last slide, so reported net profit amounts to CHF519 million in 2018 with obviously significant year on year decline, which is very impacted by one off results. In particular, when comparing with 2017, the $558,000,000 gain from the sale of the gas distribution in Spain, which is booked in the 2017, and also the $285,000,000 one off provision relating to the Chemex, which Antonio mentioned.
There's also an issue that the higher share of results in EDP Brazil and EDP Renewables as they had better results, there's also a more significant percentage of minorities coming out on that line. So excluding some of these extraordinary items and one off impacts, the net profit in 2018 increased to 3% to €797,000,000 which benefits, as has been mentioned in this presentation, from the strong improvement in financial results in associates, which increased by €238,000,000 and also the very strong net profit growth in EDPR and EDP Brasil. So overall, this positive evolution of financial results together with the underlying growth in Brazil and hydro recovery more than compensates the decline in the EBITDA prompted by the regulatory changes in Portugal, the weaker wind resources and ForEx. And so that basically would conclude the presentation. I think the idea now would be to turn over to Q and A.
Thank you, Thanks.
Thank you, So we'll go for a short Q and A session on the results before moving to we have there from UBS. The micro, please, just that the people in the in the webcast could could listen in the third row there. There.
Good morning, everyone. I have a few questions, but I'm going to keep this one I'm just going to start with one specifically on the 2018 results. Is about the other cash flow line. Just very quickly, just to confirm if the €300,000,000 of other cash flow includes sales that you haven't paid since 2017? And also if you I mean, you mentioned that you have extraordinary pension contributions on that line, but last year, you also had extraordinary pension contributions.
So the question is when should we expect to see these extraordinary contributions to stop? Thank you.
So in relation to the first question, yes, the sales payment was done in 2018 and so it's included there in that cash flow item. In relation to the extraordinary pension, so this we are contributing to the pension plan in relation to medical acts and death, if you want. That's sort of the technical term. Those are particularly strong contributions over the last two, three years. It will now settle into a more recurrent lower level of contributions to the pension plan along a more foreseeable line.
So contribution should reduce quite significantly going forward versus what they were in the previous years.
Next question. I don't know if someone else has some more questions on the results. Well, if there is no more questions, we'll move for a short video introduction of the strategic update, and then our CEO, Antonio Chia, will start with the strategic part of the presentation.
So hope you like the movie. It's a pleasure to be here. And I would like to start remembering the first time when I arrived, the industry coming from the oil side. It was in 02/2006, and we were presenting in London, our vision to the for the sector and what we believe that would be the evolution. And I remember at that time that CDP was considered eventually, not very interesting because we were not enough exposed to energy prices in the market.
Finally then, we have seen that some of those contracts were challenged, but anyway, we were not there. But clearly, I would like to stress is at that moment, in 02/2006, we have decided that we wanted to be, driven by renewables, in a world that should be, different and also having the idea of the disclaimer. It takes just one hour. So and so when we we have decided in 02/2006, this is what we are going to do. We are going to see two people on stage, our context, our vision, our platforms, our financials, and our final remarks.
But clearly, when we started in 02/2006, we we we needed to create a vision that, I believe at that time was really different. Different in the sense that renewables were considered now it looks absurd that they were considered by a lot of them as pet projects. Too small, not enough centralized, not big enough. So it was against what was the philosophy of of the sector. I would say that eventually we're not the first mover, but we we we have a first mover advantage even if we're eventually the number two.
But clearly, we moved into an exciting journey that I believe, we need now to to retell the story. Why? Because I think that we have basically anticipated the energy transition. Not on its full fledge, namely including all that now is today digital and the client focus that is clearly stronger than anybody expected, but clearly, the scaling up of renewables and also the needs to go global. So in this period, we have multiplied by more than three renewables.
And you will see today that we define renewables as water, wind, and solar. That's an important element. So I think that we created a distinctive story because we have more than tripled our c o two generation, and we have more than doubled our international presence. So we went abroad, and we went greener. I think it's about the size of moment.
And so the idea is we have anticipated the idea that I want to share is we have, in a certain way, anticipated, and this is important because the price and the potential of getting in and getting in first is better and cheaper than coming in last. So that idea of anticipation, I think, is important. Also, of course, we have also eventually underestimated, not anticipated, issues related with with the regulation or legal structure in Portugal, inherited from those words that we have been hearing like the CMEC for a while, that basically replaced the old contracts. And clearly, this had an effect as we have seen in 2018 mainly. So what we have today is a story that I believe is very compelling, that is a little bit blurred, blurred by these the last, I would say, eighteen months in terms of regulatory issues in Portugal.
We call regulatory, but a lot of them is basically also legal. But regular regulatory, legal in terms of pen having a pen, and also to the fact that we have been we are now under an offer by our biggest shareholder, CTG. So for one reason, we have spent a lot of time on our one on ones talking about Portuguese situation. Everything else disappeared. So it was difficult to explain what we have been doing.
People were typically, we focus on on the what is the issue, what is the hot topic, what is the problem. And, the second is, of course, when you are on an offer, you need to be consistent with that situation. You need to to to say you can say what you can say. We have done our report. You know what is our position.
So we have been doing what is expected to do, in this kind of situation. But, clearly, we have a plan. We have a vision. We have a vision that is shared by a team. By the way, today, besides Miguel Stioule, I have here Massonetto with us, Joe Massonetto, CEO of Renewables, and also, Miguel Sertes, CEO of Brazil.
So we we are a team that believes really on this, on this vision, that we are going to explain today and all the key targets that we want to share with you up to 02/2022. So we felt the need that was more or less obvious to reconnect with the market and to tell us about this story and especially how this vision shared by all of us in the team, shared by 12,000 people that have been very focused on delivering this value. Sometimes it's easy to pass in the current situation those news, but we are very focused. We have anticipated. We have that vision.
We believe on this, and we need to share it with you. And by the way, the last I mentioned 02/2006, my first visit to London to share our vision. But the last one the last time we were here was in May 16, so it was already a long time. So we since '16, a lot of things happen. A lot of things blurring our story came over.
And now we want to say to say that, okay. Clouds. Look through the clouds and look into what we really believe is a good vision and good fundamentals. That's a critical thing and having that long term perspective up to 02/2022. So starting by what eventually we have been missing, people have been missing is what we have done because of that focus on on the issue of Portugal.
You see, basically, I would like to stress four things. The sustainable growth, the strong value creation, the improved, efficiency, and also the stronger balance sheet that we have reached between 2016 and 2018. So since last time we met in, Investors Day, today we are just doing a strategic update, lighter, no deep dive, but clear giving due to the circumstances, but we will be sharing our key, targets. And the key idea that I want to share is that all platforms overdelivered. We have overdelivered in everything that we committed in '16.
But, of course, we were impacted by these relevant cuts in Portugal. But I want to stress really what we have delivered since 2016, what we have been doing basically in the last almost three years. So first, sustained growth. What we see is we have deployed more than two gigas and secured one point gigas of wind and solar for this period. We have, as we will see, strong visibility even post 02/2020.
So, clearly, this is an element that I need to stress is we know exactly where, when, how, everything has the big chunk of these has names, dates, so clearly earmarked. And also, we have anticipated, and I think that's very relevant as you'll see and the figure shows that it's very relevant. We have anticipated the interest of going into this transmission market in Brazil. And we opened a new vector of growth with an investment that will present more or less €800,000,000 and as I mentioned already, delivered with more than twenty months in advance the first line. So we have been creating this optionality in a very visible way.
But at the same time, we have been also strongly crystallizing value with the shareholders. I I believe that the change, and we will see towards the future, the change of the nature of the business, mainly in renewables, calls for this. This makes sense because it crystallizes values, it derisks, and it helps financing a sharper growth, diversifying your risk. So we have done in this period €1,600,000,000 of cash of this minority sales, what we call asset rotation. We have executed at the end of last year the first majority, so the the bigger the first farm down for 500 megawatts with a huge impact, and we will see you have a slide for this.
Miguel will show this. It's a way of of really using less capital, having a huge impact upfront and a very important return in terms of, our shareholders. So you will see this in detail. And of course, we have disposed a significant amount of non core assets in Iberia. So it's a process that is not starting today.
It has already started. We sold 3,200,000,000.0 of assets in Iberia, As you've seen, both in Spain and in Portugal, of course, the biggest being Naturgas. But relevant, we have done this with €700,000,000 gains. It's relevant. So we have rebalanced our portfolio, and we have done this in a way that has immediately created capture the value for our shareholders.
So as an example, so we have the $70,000,000 net equity cash in The U. S. It's a good figure. And we had multiples like in natural gas. You remember it was 16x EBITDA.
So here, we have been above, as I mentioned, we have been above the commitments of 02/2016. So the idea of over delivering in what you control, it's important. So we promised, we committed, and we have done more in terms of giving visibility. We have done more in what concerns creating new areas. We have done more in terms of crystallizing value and derisking.
But also, we have done more than we have committed in terms of OpEx savings. Eventually, 2015, 2016, people were not very interested in cost, but now a lot of people talks about cost. I think it's important. We also always thought that it was relevant. We are already in what we call the OPEC's five.
So as you know, it's like those movies with several, five, six, seven, eight. So we have reached the 2020 targets with three years in advance. The figures that we have shared with you that would be reached by 2020 will reach them by 2018. We have an OpEx reduction of 4% nominal in Iberia and clearly also real in real terms in Brazil. And we have an improvement, management of renewable assets with 3% reduction on COR OPEX per megawatt, in our platform.
So I think this is important. And we have basically also an issue that, of course, a lot of you always ask us, but we reduced our net debt by 4,000,000,000, supported by free cash flow, by disposals and by declining regulatory receivables. Here, minus EUR 2,200,000,000.0. And of course also the improvement of our financing costs going almost 1% down, to be more exact, 90 basis points. So I think that we are going in that circle of growth, value, efficiency and stronger balance sheet.
I think the 18 sixteen, eighteen, it's good. And we have done this having behind us also a track record of sustainability. Sustainability, let's talk about this briefly. But sustainability is what? Is do we have inside the company and in our behaviors and in our culture, the mentality, the needs, the competitive advantage for the future.
And we have been clearly clearly recognized by more than, those critical indexes for more than ten years. In the Dow Jones Sustainability Index, we have been, in the last years, of the integrated utilities, either number one or number two. In 'eighteen, we are number two. In 'seventeen, we are number one. I think in '16, we are number two.
So we are moving from one to two. And we have been clearly, in all of these indexes, performing well. So, in FTSE4Good, on MCI, on Euronext, on stock, on green awards. So and what I like to share with you is the idea that we are considered leader, so best ranking number one of those utilities in risk management, in growing capital allocation, climate change issues, human rights, biodiversity, talent attraction. So these are elements that are important.
And here, it's not my data. It's people that score companies and try to understand if you have it or not. And the idea is we have it. And I think that we are basically talking about the triple the triple bottom line, so people, planet, and profit, and I think it's, it makes a lot of sense. We have this structure in a in a in a good way, and it also talks about what's go what's going on in our people.
Basically, companies are better or worse also considering if we have the right people in the right place. Looking forward, we can spend here a lot of time. Now everybody in any presentation will share with you a lot of data about how the future will be. There are enormous amount of figures, billions and trillions, and so it it it looks very big. But what I would like typically to share with you is something that I've been stressing for a while is that the the future will be electric.
That's clear. And so and we want to deliver this on a clean, affordable, reliable. And you have all of these figures that everybody knows that are important. So what does it mean? There is a lot of opportunities.
So if you see this as an opportunity and we see this as an opportunity, if you if this is consistent with what we have been doing previously, it makes sense that you can grab that opportunity. So clean, affordable, and really reliable. And of course, at the core of this, renewables growth will be supported by some fundamentals. So we'll have an enormous amount of capacity additions. So this will be very strong.
So we are we will be going to more than 42 gigas a year between 1922. And the key issue is that we go in a system with sound economics. Wind, onshore, and solar already highly competitive at market prices. And, of course, as we have seen learning curve, if anything, everybody was surprised by the movement on that learning curve. And all these three technologies will become more and more efficient, so lower cost.
So there is no doubt, that the future will be electric and will be greener. And also because we have a solid support now to reach long term renewables and climate targets, both in Europe and The US. And also why? Because technology has helped also to commit to this target. Because you don't have you don't have any longer that perception that eventually if you target too nicely, too strongly, you could have problems.
So typically, this square something that makes sense is, of course, renewables supported by sound fundamentals. And so besides decarbonization, you have another two d's. So decarbonization, digitalization, decentralization. And this, of course, will accelerate new client solutions and smarter networks. Clients are at the center of the energy transition, pushing for new solutions.
Energy efficiency, decentralized generation and storage, new business models, EVs, and so and also smarter, and grease needs to be smarter. So this looks very intelligent. And as as green also in the green part. So probably it's difficult to meet somebody that will be in this stage talking about different topics. So the topics are the same, but the question is, how do you address those topics?
Where do you put the money? How do you put the money with which criteria? And, of course, already anticipating the new economics associated with these trends because that's a critical issue. Of course, everybody knows that it will be greener, and everybody knows that we'll be client focused. So the question is, how do you do it?
The devil is in the force d on the details. So decarbonization, digitalization, decentralization, but, of course, the details is the issue. And, clearly, we will I think that we have been proving that we know how to choose those details where that make the difference and how to translate transform this into targets and execution capabilities. So what is our vision? Clearly, probably, it it doesn't look very different from we started in 02/2006.
Of course, the word energy transition was not still there for anybody, but was clearly going into a sector that was changing, should be greener, with less CO two, but leading the energy transition to create superior value. It's what basically we have been doing. And the question, we want to lead, and we want to lead leading is not a question of scale. It's a question of creating value and doing differently. And we have been we will be showing exactly how do we think that we are different.
So what everybody tries to do is why we we, do it better. So clearly, we will do through five pillars and anchored on very three consistent platforms. There are strategy of five pillars, the accelerate and focused growth, continuous portfolio optimization, solid balance sheet and low risk profile, efficient and digital enabled, and attractive shareholder remuneration. Is it a total transformation from what we have been doing? No.
But it's again a transformation. It's again a transformation. It's again a new phase of the company. If you pick the words, of course, and we as we have been showing, we have been this optimization will be probably enhanced clearly. We have more of this rotation.
It makes a lot of sense. It's not because you need, it's because it makes sense. You'll see, of course, more probably of new enablers in the market, but clearly, it's consistent with what we have been doing. But but it's again a transformation of the company. And, even the how we organize ourselves and the the relation between these platforms is also a signal clear of how we intend to transform.
So let's start by focusing on our vision of leading the energy transition to create superior value. So where do we start from? Believe that we are in a very privileged position to capitalize on the energy transition. Why? Because we are an early mover in renewables.
We have a total installed capacity of 21 gigas. We are top five in wind in the world with 12 gigas installed. And we have more than nine gigas of hydro. We have invested more than €20,000,000,000 over the twelve years, 75% of which in wind onshore and 40% of this in The U. S.
Market. We are in a privileged position because the weight of renewables in energy production increased from 20%, in 2005 to 66% in 02/2018. It will be clearly above 70 in 02/2022. Of course, this includes, let's recall always, we are talking about water, wind, and solar. So wind onshore and offshore.
And we will be clearly well above 90%, in 2030 where we see, of course, still a presence of gas as a backup. So excluding gas that we all present clearly less than 10%, we will be basically a green generating company. And we are already leading. The world green is, is the word, the keyword. But if you look into a green, we have already distinctive positioning.
Why? We are already leading that green utility. We have 65% of our EBITDA from renewables, 40 from wind and solar, and 25% from hydro. It means that we have 2.5 times more renewables, than our average integrated players. So we are more comparable to renewables player on the other side.
So we have only one to the left. Basically also, the high quality and the young fleet. Age matters. We have more than twenty five years of residual life, twenty two for wind and solar, and thirty three for hydro. So we are greener and we tend to be younger.
Younger in the sense of the, the visibility of the years that we have in front of us. We start from a leading position. So our vision is what? Those three Ds plus the details that we are going to share is decarbonization, renewables to present more than 90%, coal free by 02/1930, lead the coal free movement of the sector. We want to be in that line.
Reduce we are in that line. Reduce 90% specific CO2 emissions by 2030 versus 02/2005. That's the rule. Second, digitalization and decentralization. Helping our clients to embark on our mission of decarbonization.
We have installed more than 4,000,000 decentralized solar panels, They have 1,000,000 with e mobility charging solutions clients, and they have 100% of smart reads in Iberia due to digital, enablers. So typically, we see ourselves moving from generation into the client relation into this total sustainable, green world. Let's go and have a dive on those strategies before I pass to Miguel to talk about the platforms. Accelerate and focus growth. Our first pillar, we will accelerate investment with a 60% increase in the annual CapEx to 2,900,000,000 with the previous plan.
So between 2016 and 2020, the targets were 1.8. We will be investing 2.9. And we will continue to focus more renewables, 75% will be renewables, 20% relates to networks, we have networks and the smart part, and 5% in clients and energy solutions. So we will be investing €12,000,000,000 in the period with an increase of 60% on an annual basis. And of course, more international growth, basically 40% in North America and 35% in Europe.
And we have clear visibility. This is an element that really is very important. Throwing figures on the paper, it's easy. But you need to trust those figures. And clearly, the element that I want to share with you is the high visibility on the €12,000,000,000 CapEx between twenty nineteen and 2022.
We have 75% of CapEx secured or under active negotiation. And the remaining 25%, as you'll see, refers to an existing pipeline of renewables of more than 16 gigas. So typically, the figures are important. And if we look closer to twenty nineteentwenty twenty period, we have 100% of that CapEx is secured or under active negotiations, so full visibility for 2019 and 2020. And for 2021, 2022, the figure is slightly above 60%.
So key figures for you to retain. 2.9 gigas already secured. Two gigas under active negotiations, so it means close to the end, and two visible pipeline, two gigas to find in a in a pipeline of 16. I think that's interesting enough to to see what is coming in front of us. So we are really increasing the pace.
We are increasing the pace with full visibility, but we are doing this with a very disciplined framework. As always, I think that we are used to it. So, basically, as you know, we have certain thresholds, and I think this is figures that we like to share. Not a lot of people shares with the investors and other stakeholders, but clearly, we have a minimum threshold of IRR overwork of 1.4, 25% of NPV relating to the CapEx, so returns, and also contracted period above fifteen years and contracted NPV should be a percentage above 60%. And we have been checking this.
We have been checking this. And the last big 60 projects, so we are talking about 60 projects, we have been achieving the recent past 1.5, 35%, twenty years, and more than around 70%. So it shows that whenever you invest, you need to respect criteria. It's not piling megawatts. It's basically creating value, respecting those attractive returns, having the idea of time to cash, having the idea of low risk.
So everything matters in whenever you take a decision, in whenever country, in whenever technology, whenever even when you are talking green. And we have a track record of delivery, not only these figures, but also in terms of PPA origination. We have been top three PPA secured and number two in C and I segment in 02/2018. I think it's important. So these figures are important because it shows that we are doing it.
So, typically, you repeat what we have been doing well. And with a selective approach, we have answer more of around 200 in RFP, and we have won 5%. So we have been on top, but we have been also doing this, with visibility on the profitability that we want. And also, another example is the Brazilian transmission auction. We have 40% above peers' remuneration based on public and comparable information from the auctions.
If you see the auctions, as you know, we have reference prices and costs. If you compare this, so this is public data, our returns in the auctions that we won, the returns are 40% above what was attained by our peers. So I think this is an interesting figure because it shows discipline. Green must be wild in the sense that you are in the nature, but it needs to be disciplined also. Besides this, I would also like that we are going to use our proven asset rotation model to create value and to accelerate renewables growth.
And here again, we have a good track record since 02/2012. So it allows the development to crystallize in value upfront. We had 3.1 proceeds between 2012 and '18. So it shows what? It shows recurrency.
It shows capability. We have a growing appetite for majority stakes, so full upfront value crystallization now flowing through p and l. When we saw when you sell minorities, it goes only to your balance sheet. But clearly, you are going to have going through the p and l. And that first deal closed in December with a significant value creation of around 109 $129,000,000.
What is our commitment for twenty nineteen-twenty twenty two? €4,000,000,000 of proceeds assumed in the plan on sales of majority stakes. And it allows to retain industrial value, O and M contracts, and then it allows you to speed up your development plan. So clear visibility on 2019 execution and then more prudent assumption post 2020. But this is clearly it shows, in our opinion, we are first mover in the assets rotation.
I think that other people are doing this, especially in the offshore, but we understand that this clearly makes sense because it allows you to derisk, to crystallize value, to go faster, to do more that we could do, and, of course, to create value for the your your shareholder. And we are doing this basically also with a huge track record. And the secondary market exists. So if you have any question, the the doubt is not here. What I try to explain is on the other side.
Are we ready to do the 7 the the 8,000,000,000 investment on renewables? Yes. Does the market exist for this? That's the easy part. So so we will generate basically 6,000,000,000 of asset of sale proceeds to reinvest in renewables and to strengthen our balance sheet.
So keywords keywords is, of course, creating value and deleveraging. So we continuously assess continuously assess portfolio optimization strategy that create long term shareholder value. So we have a €12,000,000,000 investment plan combined with a €6,000,000,000 capital reallocation plan, 4 plus billion of asset rotation with the merits that I have already shown, and 2 plus billion disposal in the next twelve to eighteen months, mainly in Iberia. And the criteria typically is we want to deleverage, so it means it needs to be significant. And we want to reduce the merchant exposure and, of course, starting with the thermal position.
So improved risk profile and free capital to strengthen the balance sheet is critical. So I've shown you we are going to invest 12,000,000,000. We are going to asset rotation more than four, disposals more than two, focus in Iberia and focus on reducing. And it also shows that we have been doing we have already sold 3,200,000,000.0 in Iberia, so it shows that we want to rebalance each time our portfolio and being more, focused, of course, in renewables and improving this risk profile. So we want really to have visibility on those items before the year end.
We want really on disposal to have visibility by the year end. So we will keep adjusting our portfolio to better align. It's the reason why it's a transformation. The pillars are the same. The strategy is driven towards the same vision, driven by the same ideas, but it's again a transformation.
So our diversified portfolio, we need the key issue is it's going to be further optimized. If we pick the keywords here, you have what? Renewables and networks, 90%. We want to reduce merchants. We want basically to reduce thermal, so decrease exposure while managing for value.
This is the key items. If you have a title, you know exactly what we want to do. And growth geographies, North America and rest of Europe. And clearly, America is the key engine, but also the rest of Europe. And in what concerns Brazil, Latin America, maintain exposure, but also having this idea of growth optionality.
So we need to understand exactly, what is the characteristic of those markets and and behave accordingly. And, of course, decreasing the exposure to Iberia. We have started being basically only a Portuguese company. We will we are a company in more than 16 countries, and this rebalance is clearly moving. So, we want to keep delivering where we control and exit everything that we don't like or we don't control.
Basically, you should focus where you are better. So we have also a solid balance sheet and low risk profile. We are targeting a solid investment grade, BBB. We will deleverage in the short term. And here, I would like to to say the following.
When we met last time, the the the three times that you see this here in 02/2022, you saw it in 02/2020. And now we are below 3.2. Postponing. It's not postponing. We have a clear target.
The net debt that decreased, as you know, by 4,000,000,000 in the recent past. We are going to decrease it by two in the to 02/2020. And, clearly, the figures in 2020 would be reached, and the figures of 2018 will be already reached, the ones that we have talked in 2016, if it was not for the surprises in regulation that I've mentioned previously. So strong cash flow generation, we have seen this already in 2018, disposable and €2,000,000,000 net debt reduction. So and of course, reinforcing this low risk profile with more than 75% contracted exposure and 80% Europe and U.
S. To be maintained. Targeting BBB flat, so this $111,500,000,000.0 debt between 2022 and the FFO over net debt above 20% in 02/2022. And also a word in terms of low risk profile and solid balance sheet. We have a better regulatory visibility, and we can approach this in Portugal, in Spain, in US, and in Brazil, key markets.
But we have seen the trends in what people the full support of this energy transition that's today clear in Portugal. So Portugal needs 23,000,000,000 investment until 02/1930. We will have auctions, for solar, the wind over equipment. So things moved are moving in what concerns general transition. As I mentioned, a very steady decline.
We have we in our balance sheet, we had a peak of more than 5,000,000,000 tariff deficit in our balance sheet, and we ended up 2,000, 18 with slightly more than 200,000,000. So from 5 more than 5,000,000,000, 200,000,000, the overall system is clearly going down. It's now north of 3,000,000,000, but clearly, this evolution of the the system is good news for everybody, for the sector, for the clients. So and, of course, it leads to the expectation of the sales, as it was stated by the government, progressive reduction. And, of course, everything that relates to the special taxes that we have seen recently, reduction or elimination, the important climate targets in Spain, of course, additional visibility of returns to up to 2,025.
We have elections, I know, but as we speak, renewables portfolio standards in US in 29 states covering 56% of US electricity sales, environment restriction, the clear visibility on on PTCs and ITC. So a lot of elements that were uncertain, in US market with the political changes. Now we have full visibility. And of course, also in Brazil, Danel returned distribution at 1.5 1.1%, until 02/2223 in what concerns our now our business. And, of course, a government that is today totally focused on attracting foreign investment.
So we have an environment today that is better than it was, before. Moving now to efficiency. We will keep driving efficiency across organization. The clear commitment, we have the strong once again, can we trust the future? Let's talk if you have walked the talk in the past.
So 4% normal reduction in Iberia, 4% real terms in Brazil. So we will not stop. We are targeting 100,000,000 like for like annual savings until 02/2022. The effort will be steady, 50,000,000 already expected by 2020. Maintain the generational replacement, embedding new skills in the organization, and, of course, delivers operational excellence.
Zero base. We have been doing zero basing budgets everywhere. Natural account reduction. We have now a ratio for any two people that leave, retire. Have only one getting in with different skills and digital enablement.
So typically, this is an important commitment going back to figures that we like, leading the industry with 27%, of, OpEx, net OpEx of gross margin. So that's I think the figures are quite relevant. And cumulative, we are talking about €300,000,000 cumulative between 2019 and 2022. So, 100,000,000 a year and 300,000,000 cumulative in the period. Here, just to mention what.
A lot of people spend a lot of time talking about this, but I think it's relevant, but let's be focused. Euros 800,000,000 in digital CapEx, including the platforms. It will deliver efficient revenue gains across organization. We are not obsessed of piling digital, but it relates with the IT, digital, smart meter, so everything that relates to that intelligent part. We will have three more than 300 digital MVPs initiatives.
So I think it's important for the client relations for the assets and operation, including a very interesting domain for us, predictive maintenance. And the process, 95% digitalized. So everybody is going trying to do a smart organization, not a smarter greed, not a smarter relation with the clients, but also a much smarter, organization. I think that we are doing it committed to do this. And this, of course, is very, very, enhanced by open innovation.
We have partnership with more than 50 trusted partners. The biggest partners are web summits. We have capital in in venture capital in in small and small companies. So, basically, we are we really believe on this open innovation and changing the skills that we have leading to what I call everything will be electric and everything needs to be intelligent power. So, basically and we will foster a more flexible and global organization.
People, people, people. It's not very easy, but I think that one of the things that probably you already recognize about EDP's team is that typically we have good teams and we have top teams in the industry. So we have more than 500 agile experts as part of embracing people on digital and agile mindset. So we have more flexible, more collaborative ways of working. On those indexes, people recognize that we do better on this front.
We want to be, multiplied by four top performance to critical position ratio, so signal competition to critical positions. And we are diverse in digital skills and upskill current workforce by up to 85% new coverages needed. So everybody is trying to do the same. We have been doing this in a rather good way in terms of changing the culture of the company. You just if you visit our office and you see people working there, you see immediately that everybody feels smart and digital.
Attractive shareholder remuneration.
We
have clearly a distinctive green position. 65 share of EBITDA in renewables. It's top two among European utilities. More than twenty five years average life of renewables renewables assets. So I think that is relevant.
We want, of course, to deliver strong earning growth. Our commitment, once again, is to grow by 7% on average per year. We will be around €900,000,000 in 2020 and clearly above the €1,000,000,000 cap in 2022. And attractive shareholder remuneration as dividend per shares. Why?
We have a solid floor. This floor has resisted to everything. We have always we have we have never seen I think it's quite unique. We have never changed our commitment in terms of a solid floor of €0.19 per share. We are targeting now a different range, a target payout of €75 to 85 And the sustainable EPS growth, if achieved to be delivered as a EPS increase.
So sustainable EPS growth to delivered EPS increase. So we keep the floor. We change the target payout and we will share growth with the shareholders. And that's a clear commitment. So what I've tried to do is we are transforming again the company.
We are transforming again the company. Very focused growth, very ambitious optimization program, totally committed. It's a commitment. A much stronger balance sheet, a very flexible, focused, disciplined and efficient organization, and a clear commitment to share this with the shareholders. So the commitments are clear.
And also, how we are going to deliver this through platforms. And this positioning in renewables, networks, client solutions, and energy management shows that we structure ourselves and we take decisions. And, the competition for those decisions in terms of capital allocation and who goes who who goes where and where people move inside the company, we need to understand exactly how to structure our business in a way that allows us to deliver those commitments. So the commitments are clear and our platforms. Now I'll pass the word to Miguel to explain about this platform, and I will come back to the remarks.
Thank you. Miguel, So the floor is
once again, good morning, everyone. So I will go into the detail now of the fourth D that Antonio talked about in terms of the platforms and some of the concrete numbers. I think the first point to make is that we will be reporting now on a new segmentation, which is basically these three platforms. This is clearly aligned with the energy transition, and it's also clearly aligned with how we see ourselves evolving from a structured organizational point of view. Renewables including wind, solar and hydro, as Antonio mentioned, 65% of it of our EBITDA is already in this platform.
25% in networks, which includes distribution in Portugal, Spain and in Brazil. It also includes the transmission, which is being built out in Brazil. And then roughly, well, less than 10% around client solutions and energy management, which includes both the client, the trading and the residual thermal we still have in our portfolio. So clearly, much more simple and focused structure, how we see the company aligned with the energy transition and clearly also enables us to share best practices and efficiency across the organization. So where would we be investing?
So we talked about the €12,000,000,000 of CapEx investment over this period, 2019 to 2022, 75% on a gross basis going into renewables and 20% into networks. We will be doing over €4,000,000,000 of asset rotations to get to roughly £7,000,000,000 of net investments and then £2,500,000,000 of maintenance and you get £5,000,000,000 of net expansion investments, 83% of which will go into renewables. Most of this, as has been mentioned, will go into either North America, Europe and also some into Latin America, mainly in renewables and also the build out of the transmission networks in Brazil, which is included here in this 30%. So we clearly see value in having this diversified renewables platform. As you see, it's a platform which is basically fifty-fifty in terms of hydro and in wind and solar.
Although the wind and solar will continue to grow over the next couple of years, and I'll show that in more detail further on. Clearly, we believe we have distinctive development and operational capabilities, that's been shown in the track record over the past decade in terms of build out, and we see it as a key growth platform for the future. In terms of hydro in the geographies where we're present, we see an enormous flexibility value from the pumping storage, which we have a lot of. Very strong cash flow generation. It's efficient, and it's got a very long term value.
So we're talking about long term concessions in all of the geographies where we're in. So overall, it's a technologically and geographically diversified portfolio with a very unique green profile. So specifically, let's talk about growth. What we're seeing is from a build out of roughly 700 megawatts per year from the 2016 to 2018, we will double that for the period 2019, 2020. As was mentioned, we have extremely high visibility on this, so all of this with PPA is already locked in, and we will triple it for the period 2021 to 2022.
So for this period, 40% already secured, 2030% under active negotiations, And we have a pipeline, as was mentioned, of over 16 gigawatts in the various geographies where we're in from which we will be able to source additional megawatts for the remaining period of twenty nineteen-twenty twenty two. So how do we see these four technologies evolving in terms of net additions? Clearly, wind onshore will be growing from the roughly 11.5 gigawatts, adding an additional five, five point five gigawatts, so 70% of the net additions. It's a mature technology. There's definitely a lot of market appetite out there for this technology.
We are already a top five global player with a distinctive track record. So we are very comfortable with achieving these growth rates. Solar PV, we haven't been as present in the past, but it is definitely increasing the relevance. We have strong visibility already with 400 megawatts secured and another 400 megawatts under negotiation. We see it as a sizable opportunity, high market competitiveness.
We are targeting 1.5 to two gigawatts mostly in the 2021, 2022 period. But as I say, already with pretty good visibility on 800 megawatts of that. Wind offshore, again, a very interesting high growth area, so we see a lot of growth potential there. What we've looked at doing is building the projects, diversifying the risk by selling down and partnering up with other companies, and we've shown that track record over the last couple of years. We've got 4.4 gigawatts gross under development in these joint ventures.
Most of it will come after '22, so beyond the scope of this business plan. However, by 2025, we would expect over two gigawatts of gross capacity to come online basically around these projects. And finally, hydro, here a relatively mature technology. We have a nice portfolio both in Portugal, Spain and in Brazil and basically managing this portfolio for efficiency. A residual addition over this period, but a very nice business to have.
So definitely, is a platform which will be driven by this development, the PPA generation, O and M and the hedging capabilities that we've shown over the last couple of years. So maybe just a deep dive on solar and wind offshore is probably less familiar to you. So in solar PV, it's already cost competitive in most of our geographies. And I think what we like about this renewables platform is we should be in the technologies that are most competitive wherever we are. So if solar is competitive, we'll be there.
If wind is competitive, we will be there. If hydro is competitive, we will be there. It is cost competitive. It will increase the competitiveness in The US post 2020. As you know, the PTCs phase out and the ITCs will still remain for a while longer, so solar will become more competitive in 2021, 2022 period.
And we will leverage on the client base in Iberia and Brazil also to lock in corporate PPAs to make this project viable. We already have secured 400 megawatts, as I mentioned, so a fifteen year PPA in Brazil, COD beginning of twenty twenty two, Riverstart in The U. S, which will come online in the 2021, 2022 periods, again, with a twenty year PPA. Additional initiatives we have in the pipeline. As we know, we have upcoming auctions in Portugal of around 1.5 gigawatts, so we will be participating in those auctions.
And we're also exploring hybrid wind solar solutions, which quite frankly we think is quite interesting because this is a good way of reducing the costs associated with the new solar. You basically use existing infrastructure to connect to the network and you become more efficient and competitive in those projects. In relation to wind offshore, again, a technology which is becoming increasingly cost competitive and we've seen that. One project we were present in The UK, in Scotland, where we've got a fifteen year CFD, nine fifty megawatts. As you know, we sold part of that down now in 2018.
We are definitely developing these partnerships to derisk. These are big projects. We like developing them. We also like to share the burden with some of our partners. And we are building our capabilities, so both in France with a twenty year feed in tariff for 2023, 2024.
We recently won a lease in The US, and we will also be looking at the PPAs that will come online over the next couple of years in The US for that. And looking also at an extension of Moray, so Moray West, again, preparing for an auction, which may come this year or the following year. So that's by technology. Let's look at in terms of geographies. So North America, as I mentioned, a very liquid market, good visibility on the PTCs and ITCs.
We've got a very diversified geo geographical footprint. So we work in many states that allows us to take advantage of, for example, in the Midwest where there's a lot of wind resource, very low costs, very competitive, including with coal and gas. And then you've also got the coastlines with higher costs, but also a very big predisposition to contract renewable projects. So we work the full geographic scope. Approximately four to 4.5 gigawatts of additions over this period.
In Europe, around 1.8 to 2.2 gigawatts. Again, Europe, very strong targets in terms of renewable build out, so we'll definitely take advantage of that. And then in Latin America, mostly Brazil, also strong fundamentals. We've been present there. We are one of the top three wind developers in Brazil in terms of megawatts, and we will continue to develop that over the next couple of periods.
We will look at new markets, but clearly some key criteria, so strong market size, strong fundamentals, low risk and contracted profile. As Antonio mentioned, we will go into projects when we have clear visibility on the returns and that we can lock in part of that risk and revenue and obviously stable market and regulatory context. Let's talk about asset rotation because this is a very big part of our plan and a very relevant one. I talked about the added additions that we're going to have coming online to approximately over two gigawatts in the twenty twenty one, twenty twenty two period. Roughly 50% will be to keep and manage.
And the other 50%, we will be selling down, rotating that, just leveraging on the market appetite and liquidity. And there is a huge market appetite and liquidity for these assets once they have been derisked, and we've shown that over the last couple of years. This allows us to crystallize the NPV upfront, makes it less capital intensive. So unlike a lot of utilities, we have a lot more opportunities than we have capital, which is a fantastic thing. It means that we can develop those options, crystallize them and redeploy that capital back into the business.
So recycle capital in the renewable space. It allows us in some of the structures to retain the industrial value added because we continue to manage those projects and we continue to manage those wind farms even after they're built and once we've sold the majority stake. We've been showing that, as I mentioned, since 2012, 15 over 15 transactions already done in terms of asset rotation with over €3,000,000,000 of proceeds and historically a 2% to 3% margin or 2% to 4% margin between the rate of return when we start building it. Once we've derisked it and we sell it, we get a much the buyers are accepting a much lower rate of return. So basically that's the value crystallization you get from doing this asset rotation.
So really it allows us to accelerate this plan and not be limited by our capital our capital base. So it's a good way to to create more value for shareholders. Let me give you a specific example, and this is just a case study on The U. S. Transaction we did at the end of the year in which we worked on over the second half.
So this was a 500 megawatt case study, included two wind farms in The US and one in Canada. One of The US wind farms had a COD at the 2018. The Canadian one will only be at the 2019. Because people believe in EDP, they believe in our track record, they believe in the quality of the assets that we build out, we've done a 200,000,000,000 equity investment and we basically sold already 80% before we have even completed two of the wind farms. So people believe that we can deliver and that we can deliver on time and on budget.
We cashed in €270,000,000 That meant we got a €70,000,000 net equity cash in, 100 megawatts for free because basically you got not only got paid all of your capital put in, but you kept the 20% corresponding to 100 megawatts. Capital gain of $120,000,000 roughly $260,000 per megawatt. So basically, we sold before the projects were even completed and had a fast turnaround of less than one year in terms of this build out. So this is a good case study and this is the type of transaction we will want to keep doing within the context of that asset rotation strategy. So just to wrap up this section on renewables, just three sort of key numbers.
So over GBP 8,000,000,000 of investment plan in renewables over this period with over GBP 4,000,000,000 of asset rotations and roughly GBP 4,000,000,000 of net investments. We expect installed capacity to increase to roughly 25 gigawatts and under management 28 gigawatts because we will keep some of the managing some of the projects that we sell down. And in terms of EBITDA to grow by 17% to €2,500,000,000 this already includes the disposals that Antonio talked about. This is very important. So this already factors in the sale of some assets.
So it's not if you want to exclude that, you wouldn't have to add that to these numbers. So this includes already those disposal numbers. And then roughly €100,000,000 of additional equity coming in from the projects that we sold down. Let's talk about networks. So we have a low risk portfolio stabilized with growth potential.
It's a nice, solid, stable, long term cash flow generation. It helps fund growth also in other areas of the business. It's got a low risk profile, which is important for the balance sheet and and rating agencies like it and and they should. It's got a sizable capital deployment, recurrent. Every year, you're reinvesting in getting a rate of return on that.
And it allows us basically to align the networks with the energy transition. So the investments we're doing are typically modernization and and maintenance of the of those networks. In relation to Iberia, clearly maximizing the value by modernizing the grid and getting maximum efficiency, obviously keep monitoring the regulatory settings, and we will analyze partial value crystallization leveraging our market appetite. So this is something we are analyzing and we will look at going forward to make sure we are maximizing the value and extracting maximum value for shareholders. In Brazil, we are aiming for superior execution of existing projects, mainly in the transmission, as you know, an ambitious plan there that we have been delivering not on time and on budget, but before time and below budget.
And also continue to improve the operations and then be open to value to consolidation and value accretive growth opportunities that may come up. We've shown that we go to the auctions when they make sense. And if we get the right returns, we also go to the auctions. If we don't get the right returns, that's no problem. We walk away.
So we will not do anything below what we think are fair returns that we like. So overall, I think the networks are well positioned for the energy transition. They're clearly a key pillar here as part of the strategy and underpinned by an improving regulatory environment. So now just two slides, one on Iberia and one on Brazil. So just to recap, most of you probably know this.
So in Portugal, we have roughly €3,000,000,000 of RAV with different rates of return on the high voltage and medium voltage and also on the low voltage. And in Spain, we've got roughly $100,000,000,950,000,000 euros actually at 6.5% rate of return. So here typically we go and doing the investment in modernization and the depreciation and amortization is in line with that CapEx, so you have a stable RAV. The focus has been very much on efficiency. So we've got a historical efficiency gain of 3.6%.
We're increasing the smart meter penetration, so over 70% smart meter penetration by 2022. In Spain, it's already 100%. It's a legal requirement. In Portugal, we are building that out at roughly 500, 600,000 smart meters per year and in general continue to modernize the grids as I mentioned. The current regulatory cycle in Portugal is in place until 2020, so it's stable.
As we saw in the results 2018, we had a decrease in the regulated revenue from 2017 to 2018. It's now stable for this three year period. The low voltage tender process in Portugal, there's ongoing analysis. So the regulator came out with their sort of a plan or a study, which foresee a couple of regions. The government has said they would prefer to have one region.
The framework is not yet defined. Quite frankly, we don't expect any visibility on this really this year. So there will be ongoing analysis. And in 2020, we'll probably then get better visibility on that going forward. But our base case is that that will be there in our business plan numbers.
As you know, in a worst case scenario, you get robbed back, so if that was to disappear. There's additional visibility on the returns in Spain, and many of you know that also from the Spanish regulator and and government. Obviously, there's now elections. Let's see. But in general, think we're fairly comfortable with the with the rate of returns we're assuming here.
In general, I think grids have a a role to play in the energy transition. And so what there needs to be is a good solid regulatory framework to support this. In Brazil and distribution, so clearly unlike Iberia where you've basically got CapEx and depreciation and amortization in line, in Brazil there is a strong build out or a strong CapEx program. It's a good return on RAB, RAB overall increasing roughly 900,000,000. Strong track record over the last three years in terms of reducing the grid losses, reducing the grid interruption time and also in terms of OpEx per client reduction.
So a very good business that has all the right tendencies in terms of operational improvements. In transmission, over R3 billion dollars of investment, 12% to 14% implicit return on equity. And we've been talking about this, but I just want to highlight. So we went into the auctions with certain investment thresholds, which was the 12% to 14. We have actually managed to anticipate construction well ahead of what we had planned and also get much cheaper funding than we had also planned.
So we've doubled the NPV that we're expecting to get from these projects, which is obviously a very nice thing to happen for shareholders. So we'll keep assessing future growth and are open to value crystallization opportunities. I mean, this is how we look at rotating capital, including in also Brazil. We've been doing that and you saw also some of the sell downs of the mini hydros in Brazil this year. So that is definitely a part of our business.
So rotate capital, deploy it into businesses or new projects that add value. When you can crystallize it at good value, you then recycle that back into the business and keep generating NPV. So just to wrap up this section on networks, so GBP 2,400,000,000.0 of total CapEx over this period, roughly GBP 600,000,000 per year, GBP 1,100,000,000.0 in Iberia and the rest in Brazil in distribution and transmission, So the 0.7 is in transmission. The regulated asset base to increase 16% mostly in Brazil. As you can see, Iberia is expected to stay roughly flat.
And then the EBITDA to grow driven by the investments in Brazil, again, mostly in transmission projects as they get built out. So now talking about Client Solutions and Energy Management. Here, we've put clients in the middle. And this basically because it relates energy management also the client solutions that we're developing. In energy management, this is increasingly relevant, particularly when you have a big renewable portfolio.
So not only do you need to to sell the energy and to manage the the renewables intermittency, But the thermal capacity backup, especially gas going forward, is a useful complement to that renewable intermittency. In terms of sourcing, it's definitely very important to be able to originate corporate PPAs and to do hedging in the various geographies. In The U. S, typically we do that through corporate PPAs or with regulated utilities. In Iberia, increasingly, we were the first company to sign up a corporate PPA in Spain in relation to Milks Pasquale, which was one of the clients we had there.
We manage the spot on the forward energy market both in electricity, gas, coal, CO2, and we also provide ancillary services typically through our thermal plants. So that's also a very important part of this energy management. In clients, definitely supplying electricity and gas with good quality of service, be cost efficient, and then this is an area which is relevant, which is things like e mobility and just more generally distributed generation, which we think can have a very attractive opportunity to grow in the future. We are being very active in Portugal. Spain until recently in distributed generation from a regulatory point of view, it wasn't possible to do.
If that market opens up, we will definitely look at it as a complement to the client portfolio. Talking now specifically on energy management and the value we see there. So this allows us really to optimize the energy we're and trading. And in the case of Iberia, you see clearly we have a balanced portfolio between renewables and nonrenewables and also our B2C and B2B customers. So this allows for a certain natural hedge with the customers and the hydro pumping also allows us for some flexibility.
So we do see value in this integration in Iberia. In Brazil, this is really for 2016 or 2017, 2018, But you see the losses we would have had if we hadn't had an active energy management strategy. Basically, with the the cycle was the lack of of water, we would have had a $7,600,000,000 Riyaj loss as a result of less water in the PLV costs. Because of the active hedging strategy, we actually had a positive result at the end of the day. So this shows the value of being proactive energy management.
On clients, a 10,000,000 client base, basically with improved operations. Here, the focus is on quality, increasing the service contracts, penetration, digitalization to really reduce costs, that's obviously a huge trend if you want to be competitive in this market. And also the fostering the new solutions, namely services, solar, e mobility. So we do see an opportunity there. For example, we've given a study here in terms of decentralized solar we have in Brazil building out over the next couple of years.
Overall, we do expect this to expand the margins significantly. So this is the average of 1618. We have been higher than that. 2020, we're expecting roughly 60,000,000 and 100,000,000. This looks like a big increase, but in terms of EBITDA margin, we're talking still about 1.7% EBITDA margin.
So basically wrapping up this section, we see a strong increase of energy under management to 81 terawatt hours, mostly driven by the increase in the renewables. Growth driven from services, you see here we're not focused on growth for growth's sake. Here we're focused on growing the services, which adds a nice margin to our client business. And we do see significant EBITDA growth driven mostly from Iberia. So overall, putting this all together and some of the key numbers, in renewables, the installed capacity growing to 25 gigawatts and €2,500,000,000 of EBITDA.
The networks, the RAB increasing to €6,000,000,000 so 15% increase. The EBITDA growing to €1,100,000,000 of EBITDA and Client Solutions Energy Management mostly growing as the services contract and the margin and increasing to roughly €05,000,000,000 of EBITDA. What does this plan translate to overall? And I think these are five key numbers really to to look at. EBITDA growing to over 4,000,000,000 over this period, mostly driven by renewables and networks.
Net income growing to over €1,000,000,000 Investments roughly the €2,900,000,000 per year. The net debt decreasing to 11,500,000,000.0 that's a €2,000,000,000 decrease. And the net debt to EBITDA basically around 3,200,000,000.0 or below 3,200,000,000.0 in 2020 and below 3% in 2022. And these are commitments to the market. From a financial policy perspective, and this is one slide, but it's really in line with what we've been doing in the past.
We have a prudent financial policy. We typically have a strong liquidity position. I think you saw that in the 2018 results presentation. We do liability management to improve the cost of debt. We did that at the end of last year.
We've done that also in 2017. Typically, we have liquidity for twelve to twenty four months of refinancing ahead, and that's obviously critical for rating agencies and for ourselves to to feel comfortable going forward. Funding. We do that at a centralized level with one exception, which is Brazil, is ring fenced, and that's done at the local level. So 80% of that is done at the centralized level.
Rating, we will be targeting a BBB rating over this period driven by this decrease in debt. Our funding sources, typically we get them from the debt capital markets, but we also have significant liquidity resources from revolving credit facilities. And finally, how do we manage our risks, both interest and foreign exchange? We typically invest in the same currency where we'll be getting our revenue from. We also typically have prudent interest rate.
We are assuming here 55% fixed rate debt. That's been increasing over time. We've been benefiting also obviously from the low interest rate environment we've had over the last couple of years. We will continue to manage this proactively. So finally, just in terms of the overall sources of cash and uses of cash.
So where are we getting the cash from and where are we using it? Where are we investing in? We're getting over €8,000,000,000 of organic cash flow, so this is before maintenance CapEx. We're assuming over €2,000,000,000 of disposals and we are assuming roughly €2,000,000,000 from tax equity investments or from the green hybrid. So actually part of that is already done.
That was done in January. So that adds up to a total of 12,000,000,000 or over 12,000,000,000 sources of cash. We will be paying out roughly 3,000,000,000 of dividends. We will be deleveraging roughly 2,000,000,000, and we will be investing over 7,000,000,000 in both expansion CapEx and in maintenance. So the expansion, as we saw, is roughly five and the maintenance roughly two and a half.
So we are committing our funds to deleverage, to pay dividends and to invest in the business. And I think that's the cycle of generating the cash and reinvesting that and sharing that with the shareholders and paying down debt. Now I'll pass it over to Antonio to closing remarks. Thank you.
Thank you, Miguel. Leading, So the energy transition, could it be here or in other presentation? Eventually, but not in the same way. The question is, really, I would like to after this morning, that people understand exactly why we are distinctive equity story that has been blurred by at least those recent events. And, then I will try to understand how we have we are not just talking about one thing or another.
We are basically finding a a a good balance of all the critical details to reach, this leadership position. So we have been, we have been continuously engaging with all the stakeholders. We have a focused company. We have exposure to renewals and networks. We have been clearly sponsoring liberalization and client services everywhere we are.
Of course, Portugal, but it's clear again the case in Brazil and Spain. So we have it's it's in our DNA. Investment grade, shareholder remuneration, everything. And by the way, we are here today after supervisory board yesterday approving approving this vision to 2022 where you have key shareholders, but, as you know, a majority of of of independents. So but the idea is we are ready.
We have been we have been ready for the future. Forget about the clouds, those clouds that appeared for a while. So and we have been ready also because we have we have all always embraced the sustainability model, this triple bottom line of of business in a consistent way. I'm not putting this because it's politically correct or because everybody does this today. We have been doing this for a long time where nobody give a damn about showing those charts of sustainability or indexes.
And clearly, this relates with the with the gender equality because it makes a smarter organization, employees that are engaged with society, investing in access to energy. As you remember, the first refugee camp in the world in Kenya where we don't have either investors, as I know, or clients, the safety standards, the social investment, the, the question of leading by example on several items, so like fleets. And so, typically, we have been clearly focused on, on eight of the sustainable development goal, but I think that we have been consistent. I will not spend we can talk for hours, but I think it's clear.
As
Miguel showed and wrapping up all these, the five pillars that I've mentioned, the figures are clear. They are ambitious. They are they are mainly credible. So this acceleration of our vision, I think it's very, very clear. Right?
Because it leverage on what we do well, and it just we just go faster. So the track record is important. So, the question is the the growth, the 12,000,000,000 investment. The asset rotation, we explained why clearly it makes sense and how we can do it. The very focused more than 2,000,000,000 disposals, consistent to what we have been doing already, the solid balance sheet in what concerns the key key the targets, the efficiency, the attractive shareholder return.
Everything those these figures that were already shown, so I would not repeat them not to have an overdose of the same figure. But I would like to enhance this, the credibility issue. You can say you can't tell people whatever you want, but people, every institution, every company is about the story. A story that people need to like, They are supposed. If not, we will not be telling those stories.
But they're they're credible, that at the end, everybody will be happy. The the nice stories that and, clearly, but they need to have that vision, that idea of future, something that you mix better than others, something that is, I would say, attractive, but at the same time credible. Those even when you and credible. Why? Because the story that we have been telling previously, it's already good.
Clearly, we have been delivering. So this company, I think, has been, for more than clear, decade, a good storyteller. Why? Because the story was true. And clearly, we committed.
We delivered. We were surprised by things that we were didn't anticipate. Yes. But we mainly anticipated the key the key items. And credibility.
Seven gigas growth in renewables. 70% already secured or being negotiated after 02/2022, and everything secured for '19 and '20. I think it's good news. It's visibility. It's okay.
Let's take the cloud out and see exactly what we have. Assets rotation. We have 3 point one proceeds 3,100,000,000.0 proceeds since 02/2012. I think it's a good figure. Strong visibility for 19 and prudent approach for 2022.
This asset rotation where we were one of the the first to to understand the value of this strategy. Disposals. Not only we have a good quality asset base because when you so you can you have several alternatives, by the way. So you have several alternatives. That's important.
But clearly, we have a track record of 3,200,000,000.0 in the last three years. So it's not starting. Okay? Strong efficient capture. We have always, since we met always, either with one year or two years in advance.
So you say, okay. They should promise more. No. But we promised them, of course, it's not the end of promise for over delivery, but the targets have been tough, clear, and delivered. So a 4% reduction between sixteen and eighteen in Iberia, I think it's interesting.
And real terms in Brazil also in that country, you need to do it. And if you see those if you compare in Brazil the net OpEx of a gross margin, you are probably the number the reference now in the sector, clearly. Attractive share on remuneration, billion dividend since 02/2005, keeping it secure and growing floor. So we started from 10¢, and we grew up to 19. So clearly, we can and we will deliver the commitments.
So just as a final slide, we have anticipated from 20% to 70% more than, renewables generation in 02/2022. We have delivered superior value. If you compare total shareholder return, your stock utility in the same period, we delivered 150 compared to 65. I think it's better than the reverse. And we are really in a good position.
Why? Because everybody is green, but we are greener. And so but, basically, also, we have we have people that are now need to talk only about structure and costs. We have been talking about this for a while. You have people that are buying growth platform because they were not exposed.
All of this is organic. We are not buying. And we are not moving from a nonorganic to organic. We are already organic growth. With the exception of the first move where we bought the platform in The US, we have been basically organic.
So we don't buy growth. We grow. And I think it's it's it's interesting this. So, Of course, do we need focus companies of our size? Of course, compared to what eventually was five or six years ago needed need what?
More focus. Yes. Today, companies of our scale and even bigger, we are no longer expected to be good in everything everywhere and be the setting the example. It's the reason why I believe that this plan, this strategic update, shows a transformation based on the same the same pillars. But it's a transformation in a world where you need to explain exactly what you do better than the others.
Why? Because then it's the only reason or the best reason for people to understand why you are an option to be better exposed to this anesthesia. Why we feel that we are a better option to, for people to be exposed to the energy exposed and invested in the energy transition. We did we don't need to criticize our old structure, our old team, our old asset portfolio. I'm just mentioning this.
I don't know why. But, we don't need to be talking about, how things are going now to be so fine. They have been fine. We have been really doing of course, there are other people that do this. Don't ask me names.
But there are other peoples. But there are other people that don't do this. Don't ask me names, though it will be longer in any way. So the question is, we also recognize that we are we we need to focus and but this focus recognizing what we do best and also this adjustment is made through capabilities and through means that we have already used and done. It's not changing with no track record.
It's track record in what we grow, but it's also track record in what we don't won't grow anymore and eventually even reduce. So I think that's the key issue. It's about I've started the presentation talking about 02/2006. It was a long time ago. When I see the pictures, taken at that time, I see that I'm eventually different.
We are all different. But, typically, one thing is is the same is that the vision is we believed exactly what was our goal, our destiny, and I think that we delivered rather good. What do I don't like? What I don't like is clear. Something that blurs and makes people out of focus of what we should be focused.
Because we are focused, clearly, what's this reconnect reconnection with the market in the current current circumstances as, of course, because we need. We have not been talking, and we need to talk. Not only what we have been done in the last six to ten months, I think it's a huge, in the current context. But clearly, to have this, give visibility, and hopefully, were able to say that we know we are going and that we are clearly a distinctive value proposition that, by the way, sometimes is discounted by those clouds that when it's going out, some clouds are, I would say, whiter. The sky is bluer, much more blue today.
So, typically, even if it was not a deep dive, I believe that the commitments are very clear, very strong, and very detailed in what concerns how we are going to reach those. So thank you. And now let's Q and A. Miguel, if you want to join me. Joao and Rui, they are going to join us too.
Miguel, I will see there. So
We'll have also some, some questions from from the web, so we can have, take some questions maybe, from here and just to to highlight for, the people that are following us on the webcast. And I think we have more more than 500 people following us on the webcast, so, you can also, make make your questions. I think we we can start with the with the the questions in the room. I have here in the left here, maybe for the microphone so that everybody can hear. Carolina Borscht from Morgan Stanley.
I have two. First, on the €2,000,000,000 of disposals that you mentioned, Antonio, most of it seemed to be on the new division, the Energy Management, where the thermal is. But still, that the EBITDA guidance for that division, it's going up a lot. So I guess my question is how is the dilution of these disposals that you are baking into the plan? Second one, on the slide where that's probably for Miguel, that you go through the sources of cash.
There's EUR 2,000,000,000 of sources that it's basically hybrid tax equity and changes in regulatory receivables. I was wondering if you could give us the breakdown. Are you just doing more tax equity? Or this is also a function of more hybrids and lower stock of disposals?
Thank you, Caroline. So about the €2,000,000,000 deleverage and where they are. It's true. Clearly, first of all, deleverage is a top priority. And in this context, clearly, we because also it makes sense in terms of business structure, we envisage to reduce Iberia.
At the divestment of an hybrid generation portfolio can make sense to consider. So probably, of course, we want the key priorities at all this. It needs to be meaningful. It needs preferably to reduce our merchant exposure. But we are aware that probably we need an hybrid generation portfolio.
And of course, this will have thermal but eventually also non thermal assets. We cannot, of course, at this moment, tell you exactly the portfolios. We have been working on those, by the way. So we have not we will not start today. We have been working on this.
Of course, the final decisions will depend upon interest founds, values, of course, and the impact on our portfolio. But clearly, are talking about Iberia. And on the other side, what we see today on that so on the sales side and the €2,000,000,000 disposal, it's a clear commitment. It also concerns your question why that part clients energy management grows up. As we have Miguel has stressed this already and showing not only what we have been doing in Brazil, but also what have been doing in the margins, the evolutions that we expect to have in Portugal and in Spain and in the markets that we have, where we are.
And clearly, we see ourselves have the evolution in the last four years make it totally credible to more than triple the results and I think the figures were presented more than triple the margins that we make with the clients through services, through energy management, through energy solutions. So we are really confident. And the last three or four years shows this increase. So even with the sales, we let's say, what we can call the service parts to our clients and energy management will assure that growth. So let's be clear about the disposal.
Let's be clear also what we expect about that energy management part. But Miguel?
So on the cash flow part, what we're assuming in those €2,000,000,000 is roughly the €500,000,000 of the hybrid, which is already done and locked in as of January. We're also assuming tax equity, roughly 1,200,000,000 and the rest is regulatory receivables. Essentially, that's sort of the three key components of that, those EUR 2,000,000,000.
We can go for our next question here, Jose Luis from Macquarie. Second row here.
Jose Ruiz from Macquarie. Just two questions on dividend. The first of all, I would like to test your commitment to the 3,000,000,000 dividends in this period because your dividend policy is based on dividend payout. If we see other clouds, would you reduce that commitment? And the second question is regarding you mentioned potential other potential disposals.
You talk about crystallization of networks, which I understand is a minority stake. I would like to understand why would you do that, considering that you, with the existing plan, you are deleveraging and you're delivering on dividend? And just on that question, would you consider returning cash to shareholders if that was the case?
Thank you.
So, Frederic, thank you. Dividends. The advantage of being you you have been bearing us and me, particularly for a long time is that, you can test exactly what we have been doing in the past. And, if we have told the truth, we have never changed dividend policy even when the clouds were tough, even when part everybody was talking that Portugal would leave the euro and everybody was asking me how I would pay the debt in Iskudar. You don't remember those times, but And of course, with the recent cloud regulatory, we we we have not changed and we will not change.
So, the best thing is clouds bigger than the ones that we have lived, impossible. Impossible. I'm I'm old enough to say that it's impossible. So and clear. So the clouds are gone of that scale, clearly, and we will not change the dividend policy.
Then shareholders can vote otherwise. They can can vote less if they want. Sometimes, it will be curious, but, they can vote less. Networks, minority stakes. Of course, the question is we want to be very clear in what concerns the two plus disposals.
We have been clear and sometimes people have not noticed because it was mini hydros here, mini hydros there, then biomass. But all this was more than 200. And people eventually not even noticed. But clearly, in terms of cash proceeds, more than in terms of value. The question is, why?
Because, typically, we don't have taboos. And, and, of course, the only taboo is to fulfill the commitment. I need to fulfill we need to fulfill the the two plus. We try as we showed, we will go. Our preferred path is reducing merchant, in Iberia, but we also need to show people that if it's by any chance impossible for any reason that I don't see, But clearly, we have we are setting alternatives.
The question is we have we always need to have alternatives and but also always in the scale that makes sense. It's the reason why. And clearly, as we speak today, even the current situation of the decisions of the low voltage in Portugal probably being postponed to 2020, would advise not to take any decision that we'll leave money on the table before time. Clearly, we are moving in the right direction, smaller number of region, eventually only one. Let's see.
But clearly, uncertainty is not the best thing. So let's try whether it makes sense. And the other is clearly just optionality because the commitment is there. The 2,000,000,000 commitment is there.
We have a question there from Suisse, from Stefano Gazzato.
Yes. Hi. Stefano from Credit Suisse. Thank you for taking my questions. I have three.
The first one on renewables and on EDPR minorities. It looks like renewables is your core engine of growth in this plan. Given also the valuation of EDPR today, would it make sense for you to reconsider taking over EDPR minorities? The second question is on the sell downs. If you can share with us what's the level of capital gains that is embedded in your current forecast?
And finally, the third question on the energy tax in Portugal, what's your best guess on the timing for this tax to be reduced or removed? Thank you.
Thank you, Stefano. EDP Renewables. We are comfortable with the current situation. We are not at all in a hurry. When clear, think we will not spend cash buying minorities.
We are we have a have a huge amount of organic organic organic organic, opportunities that we want to implement now. We have visibility and on that pipeline that we need to find besides those that we have clear visibility. We need additional two on the 16. So I'm I'm our focus is on that part of the story and not buying minorities. We consider EDPR to be integrated within the EDP Group.
We are convinced is the reason why we shared with these moods to have a solid plan that will benefit all the shareholders, EDP and EDPR. Our portfolio optimization plan will allow firepower to boost investment in renewables. Even the question of when we talk about the platform, cash providing hydro, so we the constraints of balance sheet in that part reduces. So we are centered on this, but we are not really in a hurry to change anything. The renewables pipeline will be supported by the generation cash that we have proven here.
So we are considering, of course, we have disintegrated in the group, but we are not considering any transaction at this stage, to be very clear. Second, energy tax. The energy tax, as you know, the energy the the government was clear in the budget, the last budget, to prove that the energy tax would be reduced progressively with the reduction of the tariff deficit. The tariff deficit evolution has been really strong. Last year, we had a reduction of €800,000,000 on the system.
And so everything is credible. And in our assumptions, we believe that in 2022, the tax will be around
In 2020, 40%.
40%. So we'll have a progressive, probably towards the end. But clearly, our assumption believes that the tax will still be around with 40% in 2022. The capital gain embedded. So
in terms of the capital gains that embedded, as we mentioned, it's we've taken a relatively prudent approach where we show the case study on The U. S. And I wouldn't want to get into specific numbers, but you can assume it's quite a bit lower than that, that what we've incorporated in our numbers just to be prudent and on a descending basis. So that's what's in those numbers.
Next question we have here, Gonzalo from La Caixa BP.
Hi. Good morning. Gonzalo Santiago Bordona from Caixa Bambi. I found a couple of questions on my side. On the 2,000,000,000 disposals program, would you consider going above that level if the right opportunities arise?
Or you're just limiting yourselves to the €2,000,000,000 I'm just assuming you might find more opportunities on renewables for that or even you reduce the sale of majority stakes. If that's the case, I would like to get a view on that. And then second question on the on I've seen, I think it was this week in the Portuguese press that the European Commission has been looking again into the hydro concessions renewal in in Portugal. So I was wondering if you could provide an update on is that going and what next steps do you expect. I think it's been a process that's taken many years already.
I just wonder if you could update us on that. Thank you.
Thank you. So going above the €2,000,000,000 We have put two plus, so above €2,000,000,000 At this stage, I think that we have clear balance between what is asset rotation, the farm downs with €4,000,000,000 and the €2,000,000,000 disposals of other assets. I think it makes sense. But of course, it can be adjusted by what, euros 2,500,000,000.0. The only thing that I wanted to be we wanted to be very clear here is that we have a figure, a minimum figure that we want to reach.
It's a figure that we want to show that has full credibility still in 2019. It could be implemented in the twelve to eighteen months but with visibility. So we have tried in every detail not to overdo it in the sense, oh, but then it's too big, you cannot do it. So I think that's but, of course, if the opportunity is there, we could do more than the 2,000,000,000. European Commission.
As you know, it's an old question that basically is related not only with Portugal but a lot of countries where part of the European Commission, because there are different parts of the European Commission, always consider the idea of the obligation today, of course, of doing auctions for the eidos. But as you know, the decision in 2007 was totally based on legislation that existed, applying what was the legal structure at that time, by the way. And the European Commission has already considered two things that, by the way, that the auction the result of the extension was fair according to market conditions. So that was a really important part. And they understood that, by the way, doing a competition at that moment would would look strange because there were assets that were not available in that moment those moments, so people nobody would be bidding.
So typically, but it's true that whenever there are other countries that would like to keep their idols for look for the locals, they always go back to this. If anything this, the only thing is it supports the vision of eventually an hybrid hybrid, not the hybrid that Miguel was mentioning, but the hybrid generation mix that, we consider to sell. So if anything, it enhances what everybody loves it. More competition even if I remind people, the Iberian market is a fully integrated market, very competitive and where EDP has 14% of generation market share. So just for us to understand exactly what we are talking about.
We have one more question there from Fernando Garcia from Royal Bank of Canada.
Fernando Garcia, Royal Bank of Canada. I have a couple of questions. No. First one is on the 2019 tariffs. Borderless regulators achieved a reduction of tariffs stands to two eighty five million euros commented in the presentation of SEMIC clawback.
So my question here is in absence of any regulatory cut for 2020, what is your estimated tariff increase necessary to achieve the reduction in direct deficit that is forecasted by the regulator? Second question is regarding taxes. So you have reached very low taxes in the last year, so I wanted to know what is your forecast. And if, let's say, you continue maintaining this very low tax rate, could you provide for the reasons? And last third one on a clarification is you mentioned 5,000,000 customers in Portugal.
You have 4,000,000 in liberalized. So I wonder if the figure is liberalized and regulated customers. Thank you.
So Fernando, thank you for the taxes. I will pass to the taxpayer when we pay taxes. So tariffs. As you know, we totally disagree with the 295. We were very clear.
It cannot be considered an innovation because, by the way, the regulator, the different, governments for ten years approved everything that had to do with this, item. So we challenge this whatever. We we will challenge this. But of the 02/1985 that we have totally provisioned this year, only around 90 was you were used to reduce the tariffs in 02/2019. So it means that they still have a margin of the 295 to be used in in any reduction that people would like to see on the tariffs.
But I I wanted to be clear in one thing is that the system evolution is going exactly as foreseen, and we have been very clear for years. And it was three, four, five years ago, it was much more difficult to believe that the tariff deficit would peak. And then we have surpluses that clearly are consistent, with tariff, evolution that is acceptable, whatever. We can say what is acceptable. So I I believe that the dynamics today in the market are clearly in the sense that the credibility of debt going down makes no need for any measure or or any new invention about creation, innovative measures to cope with the tariff evolution.
The the system is totally sustainable, and the the tariff deficit is clearly vanishing well before, for example, our neighbor. And so clearly, if it's 2021 or 2022, it's more or less irrelevant, the difference in the final year, but the evolution is clearly positive according to what was estimated five or six years ago. Taxes.
So on taxes, we're assuming that the tax rate converges to a normal tax rate in the mid-20s, sort of around twenty four percent twenty up to '22. And so this current low tax rate will not be maintained going forward. So that's what's in the assumptions.
So just to your last question was about liberalized clients. I'm sorry. Fernando, can you repeat? I I lost a little bit of Oh, it's the 5,000,000 clients. Yes.
It includes the regulated.
Yes. It includes the regulated clients.
And then I think see. Also part of the question, if I understood, was the evolution of the distribution tariffs. Is that it? Or the sort of overall tariff rate?
Want to be sure that we capture your last question.
It's answered, think.
Okay. Thank you, Fernando. Sorry.
Question from the room. Have one.
Pablo Arios from Saigon Capital. Yeah. My question is regarding the asset sales that you have. Are you considering also as a part of those potential asset sales Energias to Brazil either entirely or some part of it like the distribution or the transmission or the generation business?
One question. Actually, I lose the third question. So Brazil plays today a relevant role in our business as we see And there's been value accretive for ADP. It has an exposure fully aligned with our strategy, basically renewables and networks, so regulated, highly accretive, providing significant growth. As you see, net income is growing at a solid double digit.
It's a growth with significant visibility, so it's a de risk growth, namely transmission. So we have not been we we we never went crazy there. So so clearly, let's be let's be clear that we have been always in a moment where everybody was excited. I remember moments when Europe was in a bad situation that everybody on the one one one one one say, why don't you sell everything you have in Europe and buy more in Brazil? Two days later two years later say, why don't you sell everything you have in Brazil and Dubai only Europe?
So I've seen all of everything in all these thirteen years that I've been doing roadshows with NADP. But going back, we have a long term track to analyze the total shareholder return, so above 14% since the IPO a year. Brazil provides growth optionality to our equity story with the level of exposure that we are comfortable. As we have seen, we were clear in the sectors that we want to grow, the regions where we want to grow. And here we talked about maintaining an optionality.
But of course, having this in consideration, we always consider any value creation opportunities that reinforce our strategy and enhance our value. So typically, once again, we will not be buying minorities. Just to repeat the answer that I was asked about renewables, we will not be spending money. So we will not be buying. It's serious because three months ago the question is if we would be buying Brazil.
We will not be buying the minorities in Brazil. Brazil is consistent with our strategy, but once again we consider anything that enhances value for that asset in a platform that can be very interesting.
There are Rui Dias from UBS.
Thank you, Miguel. Just one last question. On net debt to EBITDA, the question is do you really have to go below 3x by 2022? In case you have much more in case you are successful in crystallizing much more of your current project pipeline in renewables, wouldn't you be comfortable with a higher level? And what will be that level?
Thank you.
The question about the three times is eventually the one that I sometimes I feel, I'm not saying embarrassed. It's not I'm never embarrassed. But I'm sometimes worried that do people believe because we have been postponing that three times. Okay? And I've explained exactly why.
The question is going into that direction. The firm commitment is about the level of debt to show that after 2020 to 2022, we will reduce from 3,200,000,000.0 or below 3,200,000,000.0 in that direction through fewer growth of EBITDA. But of course, we have also a strong commitment with the rating agencies and we will be looking not only for that ratio. It's the reason why we explained and we are focused also on the FFO over net debt because we have a clear rating committee. So once again, the three times is because it's a figure that we have been keeping with us for a long time.
We have been consistent with the targets of deleveraging and of course, but we can leave depending upon the FFO over net debt, we can leave eventually with a slightly different figure. But I agree with you.
So maybe we can put now some questions from the web. We have from Oddo from Philippe of Patience. Regarding the net debt to EBITDA target for 2022, what is our assumption in terms of regulatory receivables if how much do we assume in 2022 in terms of this amount?
Philippe, thank you for your question. I think it will. It's totally residual. We have at the 2018, I think it's slightly more than 200,000,000 And I think at that time, if I'm not mistaken, we are talking about slightly above €100,000,000 So it's a very small
amount. From Javier Garido, a question regarding the payout ratio, the 75% to 85% payout ratio. And a question regarding the gains on the target disposals, so under €2,000,000,000 if these gains will impact or not the dividend regarding the payout of 75% to 85%.
It depends very much on what will be the capital gain on those sales. So it depends I cannot answer you today. It depends on what you are going to sell. As you have mentioned, we are setting different alternatives. We have also been clear about the criteria, meaningful reducing merchant are key priorities.
So depending upon what we move, we will also act accordingly. But we tend to stick to our if we can prove people that you can accelerate growth or you are doing the right stuff with shareholders' money, I don't see any reason to have bumps on the dividend policy, on dividend amounts. As we have been talking in the future, since we arrived, have increased from point one zero to zero one nine, so we have almost doubled the dividend. I think dividends should avoid bad erodes because it's we have been behaving like an utility should be, low risk visibility on the cash flows, asset allocation anticipating the energy trends. So I think that let's not talk about something that I really don't know exactly what will be the item that we are going to sell.
Well, we are already almost three hours of the session. I think we get the opportunity to continue making some questions in the light lunch afterwards. I will pass now to the CEO for just some final remarks.
I don't know what is the lunch menu, I must confess. I just wanted to share what is the menu that we have in front of us. I think it's a very interesting menu with with we like proteins. We don't like, we excluded the fat. So it's a very healthy menu, for our shareholders.
I think that we know exactly what, we need to do. And, but throughout the lunch, I can share with you any individual or collective question that you want to raise to our team, from me or to the team. Thank you very much. Thank you.