Morning, ladies and gentlemen. Thank you all for standing by. Welcome to today's EDP Conference Call 9M 2018 Results. I would now like to hand over the call to your speaker today, António Mexia. Please go ahead.
Good morning, ladies and gentlemen. First of all, thanks for being with us today in this conference call for the presentation of EDP's nine months' results for 2018. We will begin with a presentation providing an overview of the results and the main developments of the first nine months of the year, and then we will move to Q&A section. Our CEO, António Mexia, and our CFO, Miguel Stilwell, will be available to answer your questions. We would like to highlight that we are taking questions submitted via the web, so please ask your question only through our webpage, www.edp.com. We expect this call will last no more than 60 minutes. Now I will give the floor to our CEO, António Mexia, who will give us an update on the main highlights of the period.
Thank you, Miguel. Good morning, everybody. Thank you very much for participating in this results conference call. Over these first nine months of 2019, EDP has basically continued to execute its strategy of growth in renewables in Brazil. Also, implementation of efficiency improvement measures and preserving the low-risk profile of our business. Due to a lot of extraordinary results, I will start with the recurrence. Our recurrent EBITDA for the first nine months decreased by 6% year-on-year to EUR 2.42 million. This includes a 6% negative impact for Forex, due to year-on-year depreciation of Brazilian real and U.S. dollars versus the euro. Does it mean that excluding Forex, recurrent EBITDA would be flat year-on-year? Why?
In Portugal, our performance was penalized by regulatory changes announced in the past year, known by everybody, which had a negative impact of EUR 169 million in our EBITDA. On the positive side, we continued to perform well on OPEX, which showed a 1% nominal increase excluding Forex, in a period of significant expansion of activity, including nominal OPEX decline of 2% in Iberia and 1% in Brazil, as you will see. In terms of renewable resources, hydro production, we will be detailed in this, showed a significant recovery. On the other hand, the relevant wind resource for our wind farms stood at a six -year record low in the third quarter. We continue to see a decline in revenues per megawatt as expected in renewables. Until now, good water and bad wind in the sense that the wind was not blowing.
Our operations in Brazil showed a strong performance, benefited from significant operational improvements both in distribution and generation, and, I stress this, from the successful low -risk integrated approach of our hedging strategy in energy markets. All in all, our recurrent net profit rose 2% to EUR 570 million, positively impacted by the 14% decline of interest costs, following the decline on cost of debt by 40 basis points to 3.7. Note at this level that the reported net profit is significantly penalized in this period by the EUR 285 one-off provision that we have decided to do now due to an alleged past overcompensation in the contractual CMEC revenues at some of our generation assets in Portugal. On this subject, as we have already stated, EDP finds itself impaired by this administrative decision and is, therefore, taking necessary measures to protect its rights and interests, including all legal means.
This material negative one-off in third quarter and the sizable positive one-offs in the third quarter of last year from the gain of the sale of Naturgas justify the sharp year-on-year decline on the reported net profit. Our net debt stood at EUR 14.5 billion in September 2018, 4% lower than September last year, reflecting the 7% growth of our recurrent organic free cash flow to EUR 1 billion, the payment of EUR 700 million annual dividend to shareholders in last May, and the acceleration of the net expansion CapEx to EUR 1 billion, from which more than 90% was allocated to renewables with long-term contracts. In more detail, on the slide three, in terms of the renewables, what do we see? We saw a gradual improvement of hydro resource in Iberia since the beginning of the year.
After two very dry months of January and February, hydro production for the first nine months managed to improve to 20% above historical average. This compares to a very dry period last year, which justifies 87% increase year-on-year of the hydro production. On the other end, as I've mentioned, over the first nine months. This year, wind resources evolved in the opposite direction, reaching a bottom in the third quarter over six -year record low, with wind resources being 11% below long-term average. Moving to Brazil. In Brazil, EBITDA in local currency grew 19%, propelled by our low -risk hedging strategy on higher volume and energy prices; good results from our program from reduction of commercial losses, always important in Brazilian distribution; and the maintenance of high availability levels in generation, which is particularly important in the current high power price environment.
There's more value to be there when you are needed. In renewables, EBITDA excluding ForEx impact, went down 9% year-on-year, reflecting not only wind resources 4% below long-term average in accumulated period of the first nine months but also the decline in the average revenue per megawatt hour. A trend that, as you know, associated to the increasing competitiveness of renewables project, more recently commissioned and also the exploration of PTCs for wind farms in U.S. that have reached the end of the 10 years period, and as was already totally expected and shared with you. Recurring EBITDA in Iberia fell by 1% as the positive impact from the 83% increase of hydro production was fully offset by the EUR 53 million increase of taxes in generation, also known, and the EUR 116 million decline of regulated revenues in distribution, also already known.
Strong performance on operating costs on the slide five. I like to stress this. Moving here, what we see. Our operating costs, excluding Forex impact, show the 1% nominal growth in a period in which our generation capacity grew by 3% and the number of customers connected to our distribution grids rose by 1%. Region by region in Iberia, OpEx fell by 2% in nominal terms and almost 3% in real terms, particularly remarkable considering the 1% increase both in the average installed capacity and the number of energy supply customers. In Brazil, OpEx in local currency decreased by 1% in nominal terms or almost 5% in real terms, considering the local inflation of 3.5% in the period of expansion in activity with a 2% increase in the number of customers connected to distribution.
In renewables, core OpEx per megawatt, including Forex and one-offs, rose 3% year-on-year, reflecting essentially the buildup of our O&M internalization strategy and ongoing investment that you see as strategic and that we are sure that will allow us to achieve very significant efficiency improvements in the near future. We have explaining the self-performance strategy and the important medium term of this choice. On slide six. Overall, our recurrent net profit rose 2% to, as I mentioned, to EUR 570 million, benefiting from lower financial costs and the natural dilution of at bottom levels of Forex impact, given our low-risk approach of funding operations in local currency. Recurrent net profit increased by 4% in Iberia as the hydro recovery and OpEx nominal reduction was not totally offset by the adverse regulatory change already mentioned in Portugal.
Note that the weight of Portuguese operations on reported net profit went down from 19% last year, same period, to 6% in the first nine months of 2018, showing the impact of these regulatory measures are having on the profitability of our operations in Portugal. The contribution of Brazil, our consolidated net profit, rose almost 50% or EUR 29 million, following the 80% increase of EDP Brazil's net profit in local currency. The growth of Brazil contribution compensated this time the EDP Africa contribution, reinforcing, as we are also always stressing, our view of the value of diversified portfolio of EDP. Moving to the guidance on slide seven. We maintain our guidance for EBITDA in the region of EUR 3.4 billion, which reflects what?
First, the seasonal improvement of renewable resources in the first quarter of the year, the recent recovery of the Brazilian real, and also the positive impact from some sell-downs of stakes at some of our renewable assets. In line with the capital optimization and value crystallization strategy that in recent years has become a recurrent part of our renewables activity. Regarding net profits, we maintain the previous guidance of a reported net profit between EUR 500 million and EUR 600 million. That reflects the one-off CMEC provision, which has a EUR 200 million net impact in net of taxes. We also maintain our guidance for recurrent net profit in the region of EUR 800 million, fully in line with what we said in the conference call of the first half results. I would like to talk about each of the businesses, basically. On slide eight, what we see.
A strong improvement of fundamentals in Iberia. I would like to highlight three key issues. The first one is energy prices. Over the last 12 months, we saw strong and steady recovery, also because of CO₂, while we have more than double in this period. This together with the recovery of thermal costs, such as gas and coal, has contributed to an increase of electricity price in Iberia for 2019, by more than EUR 14 megawatt hour. We are talking about a 30% increase. This is obviously positive news for the long-term performance of our renewable portfolio, also in Iberia, where we have a combined annual production of hydro and wind above 20 terawatt hours. Second, we have also seen positive developments regarding the demand recovery. With accumulated electricity consumption growing by almost 5% in Iberia over the last four years.
Note that in the first nine months of 2018, growth demand in Portugal was above 3% year-on-year. On top of that, the recent announcement of Spanish government regarding reduction of marginal taxes in generation is a positive signal to reduce the fiscal burden in the system with positive impacts for companies and consumers. Finally, I would like to highlight the recent improvement of visibility regarding the next regulatory period in Spain for the allowed returns to electricity networks and renewable energy, as recently published by CNMC. Brazil. Regarding the execution of our long-term strategy of low risk and profitable growth, let me update on the evolution of our operations in Brazil.
First, we have implemented an integrated hedging in energy market through the utilization of several instruments such as the GSF insurance option, by keeping uncontracted some residual generation volumes, by closing financial positions in forward energy markets, and last but not least, by the optimization of the positions in energy markets by our generation assets and by our supply division. This strategy allows us to keep a low exposure to volatility in idle volumes, GSF and the energy prices, PLD, and even to bid significantly these adverse factors through the optimization of our integrated market position, as it was the case in the first nine months. Second, regarding new investments. Our expansion CapEx in Brazil is now focused on the delivery of five new transmission lines.
A total expected investments of BRL 3.1 billion, of which 95% to occur between 2019 and 2021, and with expected commissioning dates at the end of that year. At the moment of awarding of 2016 and 2017 transmission auctions, we were assuming that this project would provide us return on equity rates in the 12%-14% range. Since then, we have managed to improve the profitability in a significant way of this project, which we now see at the top end of this range. Why? Because profitability improvements came from both anticipation of construction schedule and from the funding conditions more competitive than in our assumptions, improving significantly the expected NPV shareholders versus our initial assumption. Cutting on execution time and improving funding does clearly give good signs.
Proves the Experiência line, the most advanced one, has now achieved close to 80% of the completion and is 17 months ahead in terms of construction schedule. Our second most advanced line, located in Santa Catarina, has recently secured a competitive funding of BRL 1.2 billion for 10 years, which covers 99% of expected CapEx. I think it's a striking figure. Moving to renewables. We continue to be focused on the execution of our organic growth, securing long-term contracts. EDP Renováveis has currently secured 3.4 gigas of PPAs and feed-in tariffs for new wind and solar capacity to be commissioned over the next years. This year, we expect to install a total of 0.9 gigas, of which 0.2 gigas were commissioned in the first nine months of the year, and we have currently 900 megawatts under construction, of which 700 to be commissioned in the last quarter.
200 to start operations at the beginning of 2019. For 2019 and 2020, we have secured long-term contracts for 1.7 gigas of new capacity, of which almost 60% in U.S., taking advantage of the last couple of years in which the new wind farms in U.S. will be entitled to 100% of the PTC incentives for the next 10 years. Moreover, we have already secured long-term contracts for 1 giga of renewal capacity to be commissioned post -2020.
Being relevant, and I would like to stress this, that solar projects represent already 40% of these contracts of new capacity, reflecting our strategy positioning in the increasing competitive renewables technology. Regarding offshore wind, the Moray East project in U.K., in which EDPR has almost a 57% stake, will be equipped with 109.5 megawatt Vestas turbines and is now reaching the final investment decision stage, in line with the schedule to reach full commissioning in 2022. In France, the development of our two projects, Noirmoutier and Dieppe-Le Tréport, with a total capacity of 992 megawatts, in which EDPR has a 43% stake, is advancing well with the granting of several required permits, and we continue on track to reach a final investment decision by 2020, with field commissioning expected to occur between 2023 and 2024. A final word before I pass to Miguel about the current context.
As you know, we are still in a period of strong regulatory restriction regarding what we can comment with the market on everything that is somehow related to the preliminary offer announced by China Three Gorges the past 11th of May. Still, an update of the process, we can comment on the following. First, there are clear signals that CTG is doing the work in the context of the offer. The competition authority in Brazil, the CADE, has recently considered approval. Also, as stated by the European Commission this week, a pre-notification to the European Union merger control was filed as well. The process is progressing. There are several necessary regulatory approvals in different jurisdictions where EDP operates, which the offer is conditioned, and the process is ongoing.
Second point, the opinion of EDP Executive Board of Directors continues to be the one stated in our report after the offer, which was released to the market on the 9th of June. Third, this is very important to stress, management and everybody in the company: we continue to totally focus on shareholders' value creation while keeping sound financials. As we have seen before, we have secured low-risk projects in excess of our targets to 2020 and securing growth post -2020. We maintain dialogue with CTG and expect to update the market in the first quarter 2019, following further clarity on the offer. Let's be clear, we are doing what is expected from us. Thank you. Now I will pass the word to Miguel.
Morning, everyone. Now move back to the nine months 2018 results. Just walk you through some of the additional slides. If we move to slide 13, what we can see is that our focus on renewable energies has continued in this period, with the renewables installed capacity increasing by 3%. Means that the renewable energy, in total now, weighs 74% of EDP's installed capacity and two-thirds of the generation mix. Already very skewed to renewable energy. In line with this, the renewable production increased 25% in the nine months of 2018, also benefiting from the strong recovery of hydro resources in Iberia over the last year. Again, reinforcing this idea of very much a CO₂-free portfolio. If we move to the next slide, talking about EDP Renováveis.
The average capacity has increased 6%, and the EBITDA of EDP Renováveis decreased 12% to EUR 869 million, including a negative Forex impact of 3%. Excluding the Forex, EDPR EBITDA would have decreased by 9% year-on-year as a result of several different variables, which I'll just talk about. On one hand, as I mentioned, the installed capacity rose 6%. However, this increase of the portfolio was offset by much weaker wind resources in the period, as António mentioned just a little earlier. It's 4% below the P50 scenario, and it hit the six-year low, as was mentioned. EBITDA was also impacted by the 8% decrease in the average selling price, excluding Forex.
This was mostly due to lower prices in Spain, Poland, Romania, and the U.S., and also the termination, as mentioned, of the 10-year-old PTCs in the U.S., led to a decrease in 11% of these revenues. Moving on to slide 15. Here, talking about generation supply in Iberia. Excluding the 2017 share of lower CMEC final adjustment, EBITDA increased by 24% to EUR 640 million, boosted by the strong recovery of the hydro resources since March 2018. As a result, the hydro production has increased by 87% to 11.1 terawatt-hours in these first nine months and accounted for 42% of EDP's own production. This prompted a 20% decrease in the average sourcing cost to EUR 26 per megawatt-hour, which can also be seen here. Overall, the performance of generation supply ended up being limited by the increase of regulatory costs, which was also up 29%.
This is as a result of changes in Portugal announced already last year, but which had impact, obviously, over the course of this year, and also by the end of the CMEC deviation revenues, which were still in place in the first half of 2017. We talked about this in a previous call. Slide 16. EDP Brazil EBITDA, in local currency, reached BRL 1,952 million. That is a 19% increase, mostly fueled by the efficiency improvements, but also the successful hedging strategy in energy markets. In terms of efficiency, the trajectory of decreasing non-technical losses in this most recent quarters was in our DisCos. Our % coal plants also had a very strong performance in these nine months, as we were able to manage availability levels well above the contractual benchmarks, and that translated into an availability premium of BRL 98 million in the period.
This compared to a penalty of BRL 13 million in the nine months of 2017. Finally, worth noting that these good results came mostly from the integrated energy management strategy, which reached a net amount of BRL 186 million in the nine months and represented an increase of BRL 135 million. Moving on to slide 17, talking about regulated networks. Excluding the gas distribution networks, which were sold last year, the EBITDA from the regulated networks in Iberia fell 19% year-on-year to EUR 477 million. This decrease reflects mainly the performance in Portugal. That represents 77% of the EBITDA in this segment. The OPEX in Portugal had a very good performance. It basically dropped by 4% year-on-year, despite the 4% growth in volumes distributed. I think here, a very strong focus on cost reduction, OPEX efficiency, and that is definitely something we will maintain going forward.
However, this still was not enough to compensate for the impact of the regulatory review in Portugal, which mostly justified a 12% decrease in regulated revenues. In relation to Spain, to electricity distribution in Spain, here the EBITDA was EUR 108 million, reflecting essentially relatively stable, but just also reflecting this prudent accounting approach to a possible regulatory change in the asset base, what we have called the DBAD. Moving on to page 18 and talking about net debt, and I think there are also some questions on that. Net debt, EUR 14.5 billion as of September, reflecting approximately EUR 1 billion of recurring organic cash flow. The dividend coming out of this, EUR 700 million, was paid in the first half. Obviously, though, then we have our net expansion activity in this period, which has resulted in this increase versus end-of-year net debt.
Regarding this expansion activity, just note that it is mostly dedicated to construction of new wind capacity and transmission and also transmission in Brazil. It also includes investment in CELESC. The sale of 20% stake of the Moray Offshore Windfarm in Scotland and also the sale of Costa Rica, which is a small hydroplant in Brazil. The net debt was also positively impacted by the reduction in regulatory receivables during this period of approximately EUR 200 million, prompted by the sale of the tariff deficits and also just the general good performance of the electricity system debt. It had approximately EUR 500 million surplus in the period. As a result, the stock of debt in the electricity system reached EUR 4.2 billion in September 2018, benefiting from this increase in demand in Portugal and also past cost cuts. Moving on to liquidity on slide 19.
Liquidity and debt maturity profile. Essentially the key issues are the total available liquidity is around EUR 6.3 billion as of September, including EUR 1 billion of cash and equivalents and EUR 5.3 billion of available credit lines. This covers our refinancing needs beyond 2020, so relatively prudent. I would like to highlight that on top of the EUR 750 million bond issue that we did back in June had a yield of 1.67%. We also did the securitization of the EUR 300 million of electricity tariff deficits in Portugal. Then, I guess the news from this quarter is really that EDP issued its first-ever green bond, EUR 600 million, seven-year maturity, and a yield of 1.96%, and which I think was very well received by the market. Moving on to financial costs.
The net financial cost decreased 25% year-on-year, essentially as a result of, first, 14% decline in the net interest cost of around EUR 71 million, resulting from a 40 basis points lower cost of debt and also an 11% year-on-year decrease on average debt. Secondly, a positive impact of EUR 52 million from result of Forex and derivatives that were essentially tied to the evolution of the U.S. dollar against the euro. Finally, also included in these financial results is a EUR 50 million gain on the sale of a 20% stake in the U.K. Wind offshore project, which is part of our recurring sell-down strategy. We also had the positive sign of EUR 15 million from bad will related with the acquisition of CELESC. Moving on just onto the final slide. Slide 21.
Reported net profits amounted to EUR 297 million in the nine months of 2018. Obviously, the significant year-on-year decline was very influenced by the one-off impact, and António mentioned that earlier in the call. Essentially, we had EUR 558 million from the sale of the gas distribution in Spain last year, which was booked in the third quarter, which obviously was a one-off. This quarter, we decided to take a EUR 285 million provision against the alleged past overcompensation on the contractual connect revenues of some of our generation plants in Portugal. Excluding the gas distribution in Iberia in the nine months of 2017 and these one-off impacts, net profits in the nine months of 2018 increased 2% to EUR 570 million.
As we've seen over the course of this presentation, it essentially benefited from the strong improvement in financial results in associates, which increased by a total of EUR 156 million in the nine months. Overall, the positive evolution of financial results, together with the underlying growth in Brazil and hydro recovery, more than compensated the decline in EBITDA prompted by the regulatory changes in Portugal, weaker wind resources in Forex. I think this is a summary, essentially, of our presentation and will now turn it over to Q&A. Thank you.
Ladies and gentlemen, we will now begin the question and answer session. To submit a question to the presenter, please type your question into the Q&A or chat panel at the bottom right hand of the corner of your screen.
Thank you. I will start. Let's try to pull the questions. Disposal of small hydro, a question by Carolina Dores from Morgan Stanley, asking about the strategy, depending if we are going to keep this on. Manuel Palomo asking us to explain the rationale and why they are not considered core. Rui Dias talking about multiples of the transactions and asking if there is anything that makes these assets so attractive. First of all, I would like to comment that the agreed sale is not yet closed but cashed. Not yet closed or cashed. We are talking about EUR 300 million. We are talking about the mini hydros in Portugal. As you see, EV EUR 164 for 103 MW. Brazil, talking about the price of BRL 591 million, 132 MW. And the 50% of the electric, EUR 65 million. What does it show?
We are trying to reduce everything that is either subscale or, as is in the case of Brazil, very far away from the rest of our business. In the case of Portugal, the rationale is, of course, in these subscale elements crystallizing value. Reduce also our exposure to a market where, if anything, we are basically too big. Also having more money to invest where we make the difference. I think it's more or less obvious. It goes also in the same direction as you have seen; we have sold Portgás in Portugal. It makes, I believe, if you add all this, it shows clearly a strategy of focus. In terms of the multiples. Let's be clear, it was a very dry year. The multiple, let's be fair, on an average year with a typical hydro will be more towards eight and not 13 times.
Okay? As you remember, last year was very dry. If you pick a normal year, it will be a multiple of a little bit more than eight. Second question from regulation in Spain, market reform from Stefano Bezzato. The question of windfall profits.
Based on our discussion with the Spanish government, what should we expect from the upcoming reform of the energy market, and particularly, how do you expect the remuneration of hydro and nuclear can be changed? Spain for us is not very material, as you can imagine. I would like to start by reinforcing some of the things that were said by other companies. Looking at this and then talking easily about windfall profits is basically wrong, not to say more than wrong. Typically, assets are not fully amortized. They can be old, but they are not amortized. They are not young from the last week, but they are not. They need to be amortized according to the useful life. By the way, a lot of those operators, including ourselves, they did a lot of investment to replace equipment.
None of these, the first thing that I would like to stress is this talk doesn't make any sense. Going back to Portugal, as in Spain, is not a critical issue for us. We have a net asset book of hydro plants of EUR 4.8 billion. It shows that clearly they are not amortized. The number of years that we still have of hydro concessions on average, weighted by megawatt, is up to 2056. Third element, our hydro plants already paid extra revised, to be more exact, EUR 328 million. The clawback, the social tariff, the sales already paid, all this together represents EUR 328 million. A detail that is very relevant is the CapEx in the new hydro in the last 10 years was close to EUR 3 billion. Clearly not amortized.
Finally, in Portugal, the concessions were bought, paid by the operators, including, of course, EDP, and in Spain, it was not the case. If anything is-- By the way, it does make sense to talk about windfall profits and even less in Portugal. Just to be clear about this question. Moving to the third one. Javier Garrido, J.P. Morgan. Regulation. When do you expect us to update the calculation of clawback in Portugal? How do you think this calculation can change following the change in generation taxes recently approved in Spain? Of course, the clawback was there because of the tax in Spain. Once the tax in Spain goes, it's obvious that the clawback must go.
By the way, we cannot expect that the clawback could be, again, because there is a distortion that already existed when social tariffs and sales were not considered part of the mechanism. Clearly, our expectation is Portugal follows Spain because clawback existed to eliminate distortion between the two markets. Typically, as period review of the clawback could adjust as part of the rule. We look forward to know in detail the 2019 tariffs. Clearly what we expect is the clear alignment to the Spanish situation. We should know this very quickly. The signals that we have is of normality. It's what I want to share with you, Javier. First question also from you, from Javier. We have seen recently a significant increase in clean , dark, and spark spreads in Iberia. Do you think these higher spreads will persist in 2019?
When would you benefit from the increase in light of your hedging policy? Hedging policy. We have 17 terawatt-hours forward contracted with clients for 2019 at EUR 58 per megawatt-hour, average price more EUR 3 versus 2018. This does not include index volumes of two terawatt-hours. Already secured average thermal spread at high single digits per megawatt for around 40% of expected coal production. Thermal spreads for 2019 are tighter than 2018. But clearly, when we talk, once again, this 58, as you know the difference between us and the others, when we talked about 58, this 58, when you compare this to excludes realized price, profiling, supply margin, ancillary services, and grid losses, which altogether can add between 10 and 15 to our final average selling price for the next year. Let's compare apples with apples, just to remind you also, Javier, about this. Fifth question.
CTG offer, Carolina Dores from Morgan Stanley. First, besides Brazil, has the CTG transaction received any other regulatory approval? The question is, yes. I don't want to talk because it's not from us to talk about this, but clearly, in a lot of countries, as you know, I believe there were 14, so a lot of them. As I mentioned, they had already did the pre-filing in Europe, because the most important is, of course, Europe. Everything that is competition and in Berlin and the U.S. This is what I've conveyed is, we see that they are doing what is expected from them in those filings. The rest, of course, the smaller ones, are already behind us. Typically, they are focusing in what they need to focus. Let me see if I managed all the questions. No. Miguel, you can.
Okay. Some questions here on down sheet and from Rui Dias and Manuel Palomo, and also Carolina Dores. Essentially around the targets and evolution of debt. Clearly, there has been a drag on the results from regulatory changes. I think that's clear. We have also managed to balance growth with the dividend policy and deleverage. One of the questions here is relating to how we would address the issue of the leverage. I think what we've managed to show is that we have attractive growth opportunities. We continue to pay down debt. We continue to invest. We have been doing asset rotations where we are selling assets when we think we can crystallize value and reinvesting that capital back into the business, into new opportunities that can create growth and value.
The question here from Palomo specifically talks about the free cash flow in the nine months is EUR 1 billion, the CapEx net is EUR 1 billion; hence, the dividend continues to be paid through debt. How do you expect to achieve your guidance? I would think a little bit about this slightly differently. I think about it as the free cash flow pays the dividends and part of the expansion CapEx, and the rest of the CapEx is financed through debt, but it's because you're financing projects, you're financing growth, you're financing future cash flows. Essentially, if we're doing this in a profitable and value-creating way, then it makes sense. Overall, we expect our net debt, EBITDA ratio to keep coming down over time, and trending towards our guidance. That is something which is being done, obviously, over time.
We manage this balance between deleverage, growth, and dividends. I think that will do what creates most value for the company and for the shareholders. Carolina, specifically, given EDPR's accelerating investment above the level of the strategy plan, what level of net debt do you expect for 2018, 2019? We finished the third quarter with EUR 14.5 billion. We expect this to come down in the fourth quarter to EUR 14 billion or even possibly below. That's the trend, and that's how we're managing the business going forward. Just a comment on the mini hydros, which was also mentioned.
I would just like to answer one of the questions which came up, or a specific one, which is, the mini -hydro in Portugal have a relatively short residual average concession of around 14 years and quite a high tariff. That also explains the multiple which is being put forward. As I say, it depends very much on the hydrology, and António's talked about that, but also bear in mind the shorter residual average concession life and the higher tariff. Okay. I'll pass back to António.
Thank you, Miguel. Going back to a question by Carolina Dores. Does EDPR EBITDA in first quarter include capital gains from disposal? If so, can you clarify? Carolina, note that our sell-down strategy in renewables is considered as a recurring part of our business. I would say a second business line of our renewables since several years ago. Some gains from sell-downs will occur in first quarter. This is reflected in our guidance. It's day-to-day business now. It makes a lot of sense because you crystallize value, you can de-risk, you fund new growth, and you have always a gain between the moment where you invest at X% and then you place at a lower remuneration. Clearly at a lower yield. It's included in the guidance.
I have a question from Juan Reque from Argus Media. What is EDP view on the Portuguese energy regulator as proposed changes to increase efficiency in the local electricity market, especially opening up the purchase of PRE of special regime output to third-party companies and ending EDP universal SU, so last resort exclusivity, and transferring the task of putting together the daily schedule generation from this special regime from EDP to REN? This, if it's the case, both, it would be good news. Because, of course, the first, it's associated with the creation of tariff deviations, and the second is, of course, the responsibility of calculating right tomorrow's resources. If it's the case, it's basically good news, and it should be like this, by the way. Also from Mafalda Pombeiro from GP Capital.
Regarding a strategic update plan, are you thinking about presenting it in the near future? As I already told you, Mafalda and everybody, we maintain a continuous dialogue with, of course, CTG. You know our report. You know what is expected from us. We have stated what we are working on and expect to update the market, including because of these regulatory issues that were mentioned prior, and the implications of this, at the beginning of next year, following further clarity. Clear we will be talking about the future in the first quarter.
Just another two questions here on more around the balance sheet and ratings. One question from Erica from Zurich. Given the significant increase in debt, are you still committed to investment-grade ratings? The answer is yes, definitely. That is a strong commitment by management to the investment grade. Another question from Carolina, specifically on the level of regulatory receivables that we expect to have in 2018/2019. This is stable to decreasing. To be honest, there's quite a lot of appetite in the market for this. We can sell these regulatory receivables when we want to. It depends on market conditions, on price, and we will go on doing that as we see the opportunity to do it. It's clearly something which we've been managing, and you've seen the conditions in which we've been able to do it over the last couple of months.
We expect to continue doing that, going forward.
Thank you, Miguel. As final remarks, I would like to say that, of course, we are in a period where we are under an offer, but we are doing what we need to do and what we committed, with everybody in the market. Visibility on the growth. I think it's important. We have been able to, everywhere we have committed in renewables in Brazil, we have been committed clearly to give visibility almost with the earmarked projects and, of course, goals and trying to anticipate everything. We did anticipate our targets, and we will anticipate the targets for renewables. We are anticipating the targets for Brazil. Visibility on growth is something that I think that we have been performing rather well. Efficiency. It's true.
We have been, once again, always doing more than we have, at least slightly more than we have committed, and we are very focused on this. I think the figures already show this. Focus and asset reshuffling. You have very sometimes smaller, sometimes bigger, but you see everywhere that we are moving in the directions that you should expect from us. Selling subscale business. Sometimes these deals take a lot of time, but they are meaningful because they prove what we really want, that we don't have any constraints in what concerns looking at the assets and there is no emotion. There is what we do, what we need to do.
The biomass, the mini hydros in Portugal, in Brazil, and also what we are doing in terms of farm downs, asset reshuffling in EDP Renováveis shows that we are very focused on this, and this clearly is part of the business. The asset reshuffling in a changing world is clearly part of the business and will be each time more part of the business because the sector is changing so fast that you need to work on this. We keep also very focused on the market and the importance of clients for the hedging, for the question of the supply and how you treat not only retail but also your industrial clients, providing solutions.
All the digital revolution that we don't show it a lot, but I think it's clearly one of the things that we have been presenting results, and this appears not only in our market shares in the markets where we are obvious. What we have been doing in decentralized solar and solutions for clients in Iberia. In Portugal, we have a market share that is really, really proof of this. Also in Brazil, also in other European countries where we already started with our strategy of integrating supply with the renewables part. It shows that we are anticipating what we need to anticipate and we are doing. I'm sure that you would like me to give more details on the offer, but it's what it is.
We are restrained, but we are not absolutely zero restraints in what concerns manage the company, giving visibility about its future. We will be meeting soon. Thank you again, and have a nice weekend. Bye-bye.
Thank you.
That does conclude our conference for today. Thank you all for participating. You may all disconnect.