Earnings Call: Q1 2018

May 11, 2018

Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter Results twenty eighteen. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question over the phone today, please press star then one on your telephone keypad. Alternatively, you may submit a question on the web by typing it in the ask a question box and clicking submit. I must advise you the call is being recorded today, Friday, 05/11/2018. I would now like to hand the conference over to your first speaker today, Miguel Diana. 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 twenty eighteen first quarter results. As usual, we'll begin with a presentation providing an overview of the results and the main developments of the first quarter of the year, and then we'll move to the Q and A session. Our CEO, Antonio Mexia and our CFO, Miguel Stiouw, will be fully available to answer your questions, as usual, through the Q and A platform on our website, www.edp.com, and also this time through the phone. Now I will give the floor to our CEO, Antonio Mexia, who will give us an update on the main highlights of the period. Thank you, Miguel. First of all, thank you for being here participating in this conference call. As Miguel Viana already mentioned, we will be going through also at the end of Q and As through the platform, but also live questions over the phone. So hopefully, this will answer some of the demands that some of you raised in the past. Personally, I prefer. So starting in Slide number one, I believe that our operating performance is clearly marked by specific events. On one hand, by a healthy underlying growth both in renewables and in Brazil, which was obviously partially hidden by the negative ForEx impact on one hand, so positives underlying growth and on the other hand by the negative year on year impact from regulatory changes in Brazil, most of them implemented during the 2017 and so well known by all of you by all of us at this stage. This combination justifies the 4% year on year decline of the recurring EBITDA to EUR $911,000,000. In terms of growth, our average generation capacity increased 4%, fully driven by new renewables capacity, namely 600 megawatts additional wind and solar capacity, which increased our rate of renewables to 74% of our generation mix. I think it's a quite distinctive ratio. We continue also showing the positive developments on efficiency with a 1% rise in operating costs excluding ForEx impact falling short of 4% growth on generation capacity and 1% increase in the number of customers. Our net debt went down by to 13,800,000,000.0, with the average net debt decreasing 15% year on year, leading to an adjusted net debt to EBITDA of EUR 3.8 And it's clear that interest cost improved 16%, driven by a 50 basis point decline in average cost of debt to 3.8%. The net profit declined 12% on a pro form a base, excluding the disposed gas network, while recurring net profits fell 5%, excluding extraordinary energy tax in both years, so like for like, and in first quarter, the revision of the CMEC final adjustments related to 2017. This bottom line performance results from the combination of one hand, as I mentioned, the strong earnings growth at our subsidiaries EDPR and Brazil second, improved operation conditions in Iberia free market third, better efficiency, which on the other hand was more than offset by the fourth element, the previously referred regulatory changes of last year in Portugal. Finally, and as fully expected, on April 5, EDP shareholders meeting approved the annual dividend of €0.19 per share, which was already fully paid in cash on May 2, representing a dividend yield of €6.4 reflecting once again the delivery of our strong commitment with shareholder return. So let's move to recurring EBITDA, 4% down as the 8% underlying growth, mostly driven by renewables in Brazil was eroded by ForEx and regulation in Portugal. So we see as I mentioned, I would like to stress this underlying growth driven by renewables in Brazil, but also the recovery of Iberian free market conditions versus an extremely difficult year in 2017 and the previously referred benefits from efficiency improvement. This strong underlying performance was eroded by the 6% negative ForEx impact due to the devaluation of U. S. Dollars and Brazilian real versus the euro and the €66,000,000 negative year on year impact from the regulatory changes in Portugal, but I would like to stress 90% of which resulted from regulatory measures taken during the 2017 and that are currently fully reflected on our guidance for 2018. Going to Slide number three, we see that the recurring EBITDA ex ForEx rose 1%, normalized even with the regulation in Portugal. If we focus on the breakdown of this underlying recurring EBITDA, we can see that 1% consolidated growth ex ForEx results from a very distinct performance by geography and segments. Renewables business, this represents 42% of our EBITDA in this first quarter, show the sound EBITDA growth of 8% excluding ForEx or 2% in euros following the 7% increase of average installed capacity mostly in U. S. And Brazil. The EBITDA from our generation supply electricity operations in Portugal was the only negative contributor in terms of underlying EBITDA falling by 29% even considering the demand growth and the increased hydro production. So a decline fully justifies by the adverse regulatory change. In generation, we face not only already known the end of the CMEC annual adjustments since twenty seventeen July, but also the more recent decision that affected that in a way while the CMEC final adjustment that had an impact of negative impact of EUR 6,000,000 and this final revision is still under our analysis. Still in generation, we were also penalized by the increase of the clawback tax since like August as you know, and the new coal consumption Levi in place since last January, totaling a negative million impact. That basically is the first element. The second is rather small. In Distribution, the 14% cut on regulated revenues decided on December 2017 and in force since the 2018 implied the already known €43,000,000 reduction on EBITDA. Even considering the 4% year on year growth on electricity consumption in the period. This is good news. EDP Brazil showed 18% growth of EBITDA in local currency on good results from integrated hedging strategy in energy markets and efficiency improvements, namely the lower losses in distribution and higher availability in generation with the best ever in our power plants, namely in the coal power plants. Finally, EBITDA from generation and supply and distribution in Spain showed 24% increase highlighting the debtor operation conditions in the Iberia free market vessel last year. Going to Slide four, what do you see? Strong recovery of hydro resources allowed year on year improvement in production and recovery of the reservoir slightly above historical average. As you can see, we have a strong improvement in rainfall, particularly since March, allowed a one terawatt hour improvement in our hydro production and the recovery of our hydro reservoirs, which moved from extremely low levels in late February to above average by the end of the quarter. Nevertheless, produced were still two terawatt hours less than in a normalized period. Of course, reservoirs brings us good expectations for the rest of the years as we will see. Slide five, sound performance on operating costs across all divisions. In Iberia, OpEx fell by 1%, particularly outstanding as regard the over 3% increase in average capacity installed and in large portfolio of customers and 0.8% inflation. At EDPR, adjusted core OpEx per megawatt improved by 1% on the back of control over costs and the one time strategy in place. Finally, in Brazil, OpEx decreased 3% in local currency, while inflation stood at almost 3%, an impressive performance backed by several cost cutting initiatives, namely the third year in a row of zero budget based budgets. Note that after highly successful execution of our last OpEx program, we are currently working on the new OpEx plan that we expect to present to the market after the summer. Slide six, steady decline on interest cost backed by what 50 basis points reduction in average interest rates and lower average net debt. So we have steady improvement, 50% decline on our cost of debt to 3.8%, 15% decline on average net debt. And also, I would like to highlight 70 basis points year on year decline in the marginal cost of debt. This reinforces the positive outlook for our cost of debt. Moving to net profit. Basically the drivers are the same, but even reinforced. Growth from renewables, Brazil and Iberia free market was eroded by regulatory changes in Portugal. Renewables added 48% gross to earnings, combining the impact from the increase in our equity stake to almost 83% and the EPR net profit rose to 39%. Note, I think it's important that EDPR has represented close to 50% of our net profit in the first quarter. The contribution of Brazil to EDP net profit increased by 31% in euro terms following EDP Brazil, 59% increase in net profit in local currency. Performance in free market also improved in Spain, but all of this was overshadowed by the 65% year on year decline in Portugal prompted by regulatory changes that you already knew last year. What you see, if you add up EDP Renewables, with EDP Brasil and EDP Spain, have 90% of the net profit coming from these three business units. All in all, this performance makes very clear why it makes sense to diversify our portfolio and how to grow our growth strategy outside Iberia while keeping focus on reinforcing visibility and it's a critical element of our growth platform at attractive returns as shown in the next few slides. Let's talk about this visibility. So on Slide number eight, in renewables, in the first quarter, we reinforced visibility on growth preserving attractive returns. I repeat this because I think it's important. We started the construction of new point two gigawatts in U. S, reaching one gig of assets under construction by the end of the quarter. 80% of these will be commissioned in 2018. Moreover, following the recovery of the PPAs markets in U. S. Plus the tax reform clarification, we have signed five PPAs for additional 600 megawatts, reaching 1.4 gigas of secured PPAs or fit in tariff for renewables project. And I would like to stress that returns of 10% is familiar figure to us. So equally important to stress is that the lower long term contracted prices reflect wind increasing competitiveness and improves efficiency, so attractive returns are being preserved, an element that I really want to stress. Regarding our 1,900,000,000 of wind offshore in UK and France, would like to mention the following. In UK, we are on track to reach a final investment decision during the second half of this year. And we have recently concluded a 20% sale down in Moray East, anticipating a value creation in early stage project. In France, we are confident on a reasonable outcome from the expected government decision, which should assure the feasibility of the projects. Brazil, we have been delivering growth through the execution of value accretive deals and delivering projects ahead of time and under a strict capital discipline. We delivered San Manuel ahead of schedule, four months ahead of schedule for the first turbine and the revision of contracted volumes improves economics and reduce the GSF risk. As you know, we have five greenfield transmission lines representing a total investment of BRL3.1 billion to build until 2022. The expected returns on equity ranges from 12% to 14%, but there's room to improve on back of better funding conditions, reinforced value creation. And I really want to highlight that the first transmission line is currently seventeen months ahead of schedule. And I think it's important in terms of increasing the returns and having more money ahead of time. More recently, we have completed the acquisition of 19.6% stake in the electricity distribution company, Salask, for a total investment of BRL300 million. With an implicit EVRAB of 0.8, we are creating new optionalities in Brazil, paving the way for a significant involvement in management decision and capturing the value for potential efficiency improvements with expected net savings of more than BRL130 million over the next four, five years backed by the ongoing namely HR restructuring plan. To conclude, regarding solar PV, distributed generation and this is part of a new growth agenda in the supply business. We consider solar important and taking advantage of the exceptional solar conditions that we have in Brazil, we currently have 11 megawatts peak under development representing an investment over slightly over BRL100 million. Overall, these value enhancing investments should allow us to almost double our earnings in Brazil over the next four years. Slide 10, and I think it's important to stress this. Overall comparing to our previous call, we had some positive developments in what concerns of the year on year recovery of the hydro volumes and electricity demand and we assume hydro normalization for the rest of the year. The regulatory framework is known, namely the impact on distribution and generation in Portugal for the rest of the year and we expect to continue to deliver on efficiency gains and operating cost control. At EDPR, we expect we have full visibility to add this year the 800 megawatts of new capacity, mostly in U. S. And Brazil, which EDP Brazil should continue to show solid growth in local currency. We continue to assume a negative ForEx impact for the rest of the year, but much smaller on near base, namely following the recent rebound of the dollar relating to the euro. On net interest costs, we should continue to benefit from the declining average cost of debt and lower average net debt. Overall, EBITDA €3,400,000,000 net profit €800,000,000 so the maintenance of our guidance. Regarding medium term outlook, we expect to update our financial targets. In our Capital Markets Day twenty eighteen to be held after the summer in which we keep with our strong focus on value creation and shareholder return. So my key message in this last slide is with what we know since we met last time and the evolution clearly, we keep our guidance for 2018. Now I would pass Miguel Stivas, the CFO for a more detailed analysis of the first quarter, and then we will move to typical Q and A with now phone. So Miguel, please. Good morning, everyone. Pleasure to be on the call. I will walk you through the next couple of slides. If we turn to Slide 13, basically talking about the EP generation portfolio. And here, what's quite clear is that the strong focus on renewable energy represents more than 70%. We see that in the first quarter, EDP continued investing in this area and installed capacity grew 3% year on year. So we basically added approximately 600 megawatts of wind and solar capacity and 200 megawatts of hydro. So with this, the renewable energy altogether reaches a weight of more than 70%, both in installed capacity and in overall production. If we move to the following slides, we then start doing deep dive in each of the business units, starting with EDP Renewables, which currently represents over 40% of our EBITDA. So EDP Renewables end up being the main contributor in absolute terms. Its EBITDA increased 2% to EUR381 million. However, if we exclude the negative impact from ForEx, basically, it would have increased by 8%, so showing the strong underlying performance that Antonio mentioned just a little while ago. So this growth is mainly supported by new capacity additions in The U. S. And Brazil, but also by a higher load factor, approximately 2% higher, reflecting better than average wind resources in Iberia, essentially 5% higher than historical average. This was all partially offset by a 5% decrease in the average selling price, excluding ForEx, and also by the termination of some ten year old PTCs in The U. S, which basically is expected by definition when they get to the end of those ten years fall away. If we move forward to the next slide, Slide 15, talking about generation supply in Iberia, which represents approximately 20 cities of our EBITDA, we see that excluding the lower CMEK adjustment, the recurring EBITDA increased 1% to $2.00 €4,000,000 As mentioned before, the regulatory changes in Portugal impacted the positive impact from improved market conditions. So this was mostly the increase in the clawback tax, which, as mentioned, is the second half twenty seventeen effect and so already incorporated and also the end of the annual adjustment of the KMECs, which ended in June 2017 as well. So those negative impacts partially offset the positives, which were a 2% increase in the average selling price to customers and a 17% decrease in the average fuel costs. Once again, it's worth noting that the hydro production was higher year on year, clearly, and we also built up our reservoirs. However, the production, at least in the first quarter, was still below the historical average of by about two terawatt hours, hence the guidance. Moving on to Slide 16, talking about GDP Brazil representing 18% of our EBITDA. So this showed a very positive performance in the first quarter, particularly in local currency increasing by 18%. This was mostly to do with the integrated energy management, so how we managed our contracted and uncontracted volumes as well as just general overall operational performance. And we really see this coming through in the high availability of Passaic, our coal power plant, which increases 4% availability to 98%, which is we think is a pretty good number and also by the reduction of distribution grid losses in both the distribution networks in Xpiritucentu and in Sao Paulo area. Moving on to Slide 17, so talking about regulated energy networks in Iberia, so 17% of our EBITDA. So here, we're excluding the gas distribution, obviously, which was there in 2017 that we sold. So the EBITDA excluding that falls by 23%, reflecting mostly the EUR44 million cut in regulated revenue in Portugal, EUR4 million as of December. This was partially offset by 7% OpEx decrease and a 4% growth in volumes distributed, which I think, once again, in terms of the underlying performance of the OpEx and the volumes, I think is positive. In Spain, we also had a relatively prudent approach to the possible regulatory changes of the les vivibades, and so we have a decrease of EUR 6,000,000 there in our regulated revenues. Moving on to net debt. So here we have a decrease of 1% year to date to €13,800,000,000 The organic cash flow was approximately EUR 300,000,000 in the first quarter. It is impacted partially by working capital since most of the rain came towards the end of the quarter around March. Part of that revenue was only received later in April. So as of the end of the first quarter, there's a cash part missing there, but which will be recognized later on. Obviously, there's lower hydro in the first two months. We do have don't have the gas business, so that's also a part. So that explains generally the difference in organic cash flow. In terms of expansion investments, also around EUR 300,000,000. So we have the new wind capacity. We have the investments in Soesque, the distributor in Brazil and also the sale of the 20% stake in the Moray offshore wind project up in Scotland. Then also some ForEx fluctuations, which mean that the overall impact was a decrease in net debt of EUR0.1 billion. So the adjusted net debt to recurring EBITDA ratio stays at around 3.8, I guess, mostly impacted on the EBITDA side by the hydro. So moving on to the financial liquidity and debt maturity profile. So in the first quarter, I think we did some important things. We extended our average debt maturity and flexibility. We so essentially by replacing a revolving credit facility, which was maturing in 2020, the one that matures in 2023 with an extension of up to another two years, so figure out as far as 2025. Important to note, two things. First, it can be drawn down either in euros or in U. S. Dollars, which is an improvement over the previous revolving credit facility. Since we do a lot of our investments in dollars, this was an added flexibility. Also, it's done on more competitive terms, so with lower costs than the previous revolving credit facility. So we're pretty satisfied with that. As of March, we had €6,300,000,000 of available liquidity, which basically covers our refinancing needs out until 2020, beyond 2020. We also went to the market with EUR $250,000,000 of tariff deficits and possibly expect to go out with some further securitization of tariff deficit. Going on to the financial costs. So they're down by 36% year on year and they're essentially due to the following: first, the decrease in our net interest cost of 16%, so continue to show the clear downward trend on a quarterly basis. So as mentioned by Antonio, this is supported by a GBP 2,400,000,000.0 decrease in the average net debt as well as a decline in the average cost of debt. Secondly is the positive impact from the net results with foreign exchange and energy derivatives, which improved by CHF29 million this quarter. These energy derivatives are essentially tied to the energy contracts, but for accounting reasons, they come below the EBITDA line. The revenues from regulatory receivables and capitalized interest worsens by around 15,000,000 Nevertheless, this should now be flat at the current level, given the stable volumes and the rates in the regulatory receivables and the conclusion of the hydro construction in Portugal. The capital gains increase reflects the sale of the 20% stake in The U. K. Offshore wind project, which is already known, which is part of our sell down recurrent strategy. So as you know, this is something we do on an ongoing basis. Finally, the unwinding registered positive impact due to the dollar devaluation on tax equity investments in The U. S. Finally, on the last slide, net profits. So net profit at EUR166 million in the first quarter, 12% lower year on year excluding the gas operations in Iberia mostly impacted obviously by the decrease in the EBITDA. Excluding the gas distribution in Iberia, we would see the depreciation and amortizations increased by €7,000,000 mainly reflecting the new capacity additions in the last twelve months. The financial results and associates registered a positive evolution due to the lower interest costs and the income taxes were €17,000,000 higher, basically due to an increase in the effective tax rates from 15% to 18%, so still below the 20% guidance given in the previous conference calls. So summing it up, the net profit decline in the first quarter was essentially justified, as mentioned earlier, by the decline in EBITDA, which had good underlying performance in Renewables, EDP Brasil, the operations in Iberia then eroded by the regulation in Portugal. So I think these are the key issues on the section on the numbers. With this, we'll conclude the presentation and take just a quick break before moving on to the Q and A. Thank you very much. Thank you. We'll start with one question from Danette from Harry Arlbuch from Bank of America Merrill Lynch. The question is regarding the improvement of hydro and the significant improvement in recent weeks. Why the fiscal year final year guidance only appear to improve from $770,000,000 to €800,000,000 so to justify. Thank you, Harry. I would like to start. So April 2018, hydro production 0.5 terawatts above average. Accumulated first four months production is still 1.5 below historical average. Period January to February typically normally represents 50% of annual production. Looking into next month, hydro reservoir is now at 83%, so above historical average of 73. Typically, May to September are normally five dry months that historically represents 20% of the annual hydro generation. So having this into account, plus the downwards revision on the assumption of the final CMEC adjustment, that means for the 2018 EBITDA, something probably between 10,000,000 and EUR 15,000,000. We see at this stage no reason to change our previous guidance of items for the generation supply. It's in line with what is said in was said in early March. I think that we have we are comfortable with this. But of course, you have again a key uncertainty in the future is the 2018 level of RAIN. But all in all, I think that the last two months give us a good mood, but no reason to change the agenda for now. Thank you. We can go now to the questions on the telephone. Thank you. The first question we have today comes from Rui Diaz from UBS. Just to clarify, so do you now assume 2018 as a normalized year in terms of hydro? This is just one of the questions that I have, just to clarify. Okay. Ruiz, thank you. From now on, yes, but basically as you know, for a normalized year, would see a figure of EUR900 million and now we are seeing a figure for this year as an EUR800 million. So it's normalized until the end of the year, but with a figure of €800 okay? Okay, okay, clear. All right. So my very first question is more on energy policy in Portugal, basically because last weekend, as you've seen, the Portuguese Secretary of State for Energy said in an interview to the press that his main goal is to see electricity prices in line with the European average until the next elections. And I think the next elections will take place in October 2019, if I'm not wrong. So basically, the government would like to see electricity tariffs to drop by roughly 10% within the next year and a half. So I think we are talking about a total cut in the revenues of the system of around 600,000,700 million euros And please correct me if I'm wrong, but it's quite a significant cut. So the question is how could this be achieved without a negative impact on EDP? So this is the first question. The second and I'll make it the last. Could you just give us some more detail on what is happening to your supply business? I mean, apart from regulatory risks or regulatory issues, why is it so weak? I mean, the margins that you achieved were quite low during Q1 despite the improvements market conditions? And also, is the reason behind the rough 1015% drop in electricity volumes sold in the business segments during the quarter? Thank you very much. I will start with the question of the target of 10% reduction. So I would like to say that without any further regulatory measures, so that's because it could be behind the question could be behind. Such a tough decline naturally comes up when system debt gets to zero by early twenty twenty. In any case, this is even more clear following last year's cost cuts and this year's demand evolution. So we have seen something that, as you know, the reduction of going down in the curve of the tariff deficits is clearly also driven by demand and demand has been currently being very, very positive. So and as you know, we have been we are now seeing a super average of the system of more than EUR 700,000,000. So I don't see any reason why the system could not cope with the reductions without with through its own dynamics. And by the way, as you know, only 10% of the consumption is under the tariff system because the rest is in the free market. And as you have seen the movement even with the possibility of the clients going back to the regulated market, the movement was basically zero. By the way, it's negative. The free market has been growing in Portugal. So I believe that this idea is totally compatible with the dynamics the actual dynamics of the system. The system debt is no longer an issue. The main issue there is that EDP finances debt system debt was down year to date 2020 from 4.6 to 4.5. System delivering is backed by our consumption. Consumption is in April 2018 was up 6.6%. So I think that the dynamics clear are there to support an evolution without any additional risk. So on the supply, Miguel was responsive until recently. It's good to see him. Yes. So going to one of your questions on the volumes. We are generally long only long in clients. And so our opportunity cost is basically buying energy in the pool and selling it to customers. We have a very strong policy of not selling below costs, people would agree with, in terms of discipline on margins. We had some large B2B customers, some mainly in Spain, which we had in the previous year and which we didn't have in this year. And so that explains basically the decrease in the volumes. So basically, this focus on margin discipline will be as aggressive as possible, but it comes to a point when it doesn't justify keeping volume just for volume sake. In relation to the supply and to the evolution of margins, there is partially a seasonal effect. So in the first quarter, higher acquisition costs, which then smooth out over the year. So the energy is bought, but and locked in, got a fixed price to the customer. And then over the year, there will be a certain smoothing out of this margin effect, negative margin effect and will end up positive on the year. The next question today comes from the line of Javier Guerrero from JPMorgan. Please go ahead. Good morning. Thanks very much for taking questions on the line. My first question would be on your statement about doubling profits in Brazil in four years. Which profit line are you thinking of EBITDA or EBIT? And then also in Brazil, you have stated that you are seventeen months ahead in the works on the first transmission line. How sustainable do you think this anticipated delivery can be? Is it feasible to deliver these spreads with strategic anticipation or should we expect something more in line with what you achieved with Saw Manor? And the second question would be on the regulatory situation in Portugal. You were very clear about the levers for the government to lower prices without having an impact on EDP. But I would like to know if we have come to an end on the debate on the CEMEX on the adjustments to CEMEX with the decision to allocate €154,000,000 as a final adjustment or whether the government could open up the file again at some later point and come back with some adjustment? And I'm particularly thinking on the original debate about the EUR 500,000,000 of additional potential cuts that have highlighted that seem to not to have been adopted by the government, but is the government able to come back with some additional cuts? Thank you. Thank you, Javier. Relating to Brazil, clearly, are talking about the bottom line. So really the last line, we expect this to double. I think a lot of this, of course, relates to the new transmission line. They have a huge impact. And as you know, they will have an impact even before being concluded. And the fact that they have been concluded and we expect clearly to be closer to the seventeen months anticipation than to the four months of Sao Manuel. As you know, we have a good team on that front. We were cautious in the first approach. So clearly, this coupled with interest rates going down plus everything that is efficiency wise, risk management approach integrated, I believe that Brazil has proven very strongly the value of having distribution both in generation and even if you don't have the self dealing, you have an hedging even with the hydro situations in Brazil and the pool prices. So clearly, I believe that this doubling is a very sound target. And we will be of course more detailed in the capital markets, but I feel comfortable as we speak. On the regulatory in Portugal, what I would like to share is that we believe that first, as I mentioned, more than 90% was already known. I think that we have reached, I would say, the bottom of what could be considered a recurrent basis. As you know, we are disputing some of those issues. But in our figures, we have what we have now. We are disputing, of course, some of those because they are clearly some of those make any doesn't make any sense like double taxation. In what concerns the final revision of the CMEK, as you know, you have seen a small impact, a provision of EUR 18,000,000 that by the way also was also questioned by Panal Palomo. Clearly, the EUR 18,000,000 is a non recurrent. It was due to the 2017. The figure was higher than when you see on an annual basis from now on because it was hydro and CNIZ. Now full year in 2018, you have only what I mentioned between 2010 and 2015 and relates only to hydro. But let's be clear, we whereas the final CMEC is a final CMEC. And we in what concerns any consideration for other items that people would like to reanalyze, We feel totally comfortable in those concerns just doing exactly what was mandatory by whatever law at that moment. By the way, everything was approved on a yearly basis by the authorities and the regulators. So on that front, we are very comfortable no matter what. And of course, we will make this our key message all over. What concerns the 500,000,000 let's be very clear and sometimes people make this confusion. They eventually mentioning our 500,000,000 was, as you remember, mentioning by the regulator in the two lines comments in when they provide the final revision of the CMEC. We have already had access to all the comments of the regulator between 02/2007 2016, including even the comments before 02/2007, as you know, when they started being enforced. And clearly, and that's very obvious, the approvals were there. And any change would be would imply that the law of 2004 would need to be changed. So we feel very comfortable. It's I don't want to be very long on this. The more information we have about this, namely these annual documentations of the regulator, the more comfortable we feel of a totally in existence of any excessive rent based on the Decree Law thousand and four two forty of 02/2004. So let's be clear, let's discuss net slot make soup of these elements. Final comeback is the final CMEK. We can go to the next question on the phone, please. Thank you very much. The next question today comes from the line of Jorge Guimaraes from Haitong. Please go ahead. Hi, good morning everyone and thank you for taking my questions. Still sorry to go back to final MEC adjustment. When the taking the Javier's question about the features or the innovative features. Are you also comfortable with the past environmental CapEx in the Finnish plant? Isn't that the risk that it could be taken out of the final MEC adjustment? Secondly, I'm still on the regulatory issues in Portugal. When should we expect a decision about the final clawback rate? And where do you see it ending remaining at the current €4.75 per megawatt hour or below that value? And finally, regarding the low voltage concessions in Portugal which are to be renewed in 2020, you always seem to downplay a bit the profitability of these concessions. So could you see a scenario where one another Portuguese company takes one of those concessions or a Spanish company? Thank you very much. I've seen that we are spending a lot of time about only 10% of our net profit. So I really would love to talk about the 90%. But let's see and I thank you for questions, Riccard, we want to be precise. As concerns the investment was on Esox and Dinox. All the investments were in line with contracts. All were approved by relevant authorities. They were mandatory. So by the way, all the other players have been recognized as investment because they were mandatory. And if it was not for these investments, Cynes would not be not have been able to operate under environment rules. And so we would not be able to fully contract the availability level. So we were demanded to be available. We were demanded to supply and we could only supply under those legal binding laws. So and everything was approved. So we were not really innovative. We are just complying with the law. In what concerns the clawback, as you know, I'm going putting this together with also question on Manoppolo. Just to be clear, when we see the difference between previous year and this year of regulatory impacts, have EUR 150,000,000 on distribution, it was known, 60,000,000 on clawback, it was known and I will go back EUR 7,000,000 on coal. And the only thing that is new is the final Quebec provision that will affect on a yearly basis recurrence between EUR 10,000,000 and 15,000,000, typically a small figure. In what concerns the clawback, as you see, we put here the full figure, but we expect that, of course, a normalized situation where you don't create a distortion that makes power stations in Portugal, either EDP or anybody else with an unfair competition could be clarified down the roads. But for now, our guidance includes the clawback for the full year. Okay. We can go now to the Low voltage, sorry, sorry. Low voltage, I think it's too early. The issue is, of course, we don't know what will be the rules of the game that will clearly I think that the key restriction of the system is that whatever happens, it should minimize the synergies in the system and should imply the best solution for the final customer. So the only thing is clearly, we will be there if and when it makes sense. And our job at this stage is to help as anybody else should be doing on making something that makes sense for the system. By the way, in any case, we will always receive the full rev if we will not if we don't want or if whatever happens in the so that's clear. So that's clear. So let's wait. It's too early. Can now go to some questions on the web. The first one comes from Monaco Lomo from Exane BNP. Given your increased focus on renewable energies, the question is what are our thoughts regarding the full ownership of EDPR? And maybe I'll put together also the question from Antonella Vientetti from Citi regarding the targets disposals for 2018. If you can elaborate on this and our the progress and or what are our plans? Very well. In renewables, as I mentioned, I'm going to repeat myself. Down the road, a lot of things can make sense. There is no sense of urgency or whatever. So we will not, in the current environment, ask people to be waiting for something standing up. So clearly, no surprises. So in what concerns disposals, as you know, many others in Portugal and in Brazil are classified as assets held for sale. In what concerns asset rotation or farm downs, it's the new normal and the focus will be in The U. S. So typically, there is nothing new on the table compared to what we stated three months ago. More questions from Dwev. One is regarding electricity distribution in Spain. If we can elaborate on the detail on the decline on the EBITDA and what is our expectation for the full year and also regarding tax rate guidance for 2018. So I'll take those questions from Antonella. In terms of the tax rate, pardon me, the second question. So we maintain our guidance of less than 20% for the full year. Obviously, this depends on several variables, but that's our guidance and we're fairly comfortable with that. In terms of the distribution in Spain, so as you know, the regulatory terms are set till the 2019 and any changes before that do not make sense. However, formally, was a process called in Spain, which was declared at the April, targeting changes to the useful life of assets. So it doesn't change the rules, but it just paves the way for possible courts and the Supreme Court's challenge. So we just took a prudent approach. We're optimistic about the outcome, but in this case, we have just provisioned for we are adjusting for that amount. In any case, a final decision would probably happen sometime over the next year. And so we'll have visibility on that. Can we have still the I think everything. We can go to the next question on the phone. Thank you. The next question comes from the line of Carolina Dordes from Morgan Stanley. Please go ahead. Hello. Good morning, everyone. Thanks for taking my questions. I have three. One, it's very quick one. What the timeframe that you expect to communicate on the business plan? Is it 2020, 2022 or do you know 2021? Second, Brazil, the operations are going very well. Do you expect to make more investments or is the idea just to focus on delivering the transmission lines at this point? And third, you mentioned about the tax or the levy on coal and the clawback. And I understand that especially on coal, the economics would this tax increases over time. So what is the plan? Do you expect some negotiations with the government or would be the plan to potentially shut down CNES? Thank you very much. Thank you, Carolina. We will be presenting after summer twenty twenty two. So it's also a very quick answer to your simple question. So 2018, 2022 and it will be probably October. So we will set the dates where we'll hopefully be meeting all of us. Brazil, new investments. We have not been involved in the last interesting and exciting auction for a distribution company there. I like the idea of having creating optionalities with Selesque with 0.8 rad that, of course, gives us a lot of room in what concerns whenever this company will be in the next stage of our life going into the market. Think it makes sense. Meanwhile, we are helping the current shareholders to make more efficient company. So I like this idea of optionality. I like the idea of also going into so you will not see ourselves, you will not see us on those big bids to point something rev acquisitions. So let's be clear on what concerns also static opportunities, adjusting even percentage of our portfolio. As you know, we have assets where we have 60%, the others where always 30%. We will try to move around as we have seen selling mini items shows that we are keen in crystallizing value and capturing as it was the case in previous assets to buy additional stakes if it makes sense to optimize our value on that assets. And I'm talking about, for example, existing guide projects that we have already. But we see clearly transmission. But now we were one of the first now everybody looks into transmission. We will be looking into transmission whenever it makes sense at the prices that make sense with clearly double digit returns. On but basically optionality and balanced approach. Tax on coal, of course, I believe that any tax on coal that by the way, I think it was introduced the concept when the CO2 price was very low. And now as you see the market is clearly finally picking up, So creating individual piecemeal and the country alone doing whatever they want, it makes like less sense, especially in an integrated market. So we see ourselves, Zynes as a very competitive, one of the most competitive and the cleanest pulp plants in Iberia. And of course, it would not make sense import wise balance, payment, employment, imports of energy to have much worse power plants in Spain, occupying the place of a much better and more recent coal fired plant in Portugal. Of course, having in mind that up to 02/1930, they will be all gone, but the transition phase should make sense and I believe that we will be working and everybody should be working on this front. What concerns the clawback, I just wanted to repeat myself is we need to approach once again, the concept is people should have the same playing field, whatever side of the border in integrated market they are. So we expect this to be taken into consideration because if not, we would make Portuguese located power plants or whatever in a disadvantage compared to the location in Spain. So we but once again, for the full year, this year, we expect we have in our guidance of the figure that we have, again, confirmed, we put the delta of the EUR 60,000,000 compared to the previous year. Just for the sake of time, as we are reaching the this call is reaching sixty minutes, which is our timing targets, we'll go for a last question on the phone, and then we'll follow-up at IR level the remaining questions. Thank you very much. The next question today comes from the line of Jose Martins from JB Capital Markets. Please go ahead. I hope everyone is well. I have two questions. One is about sales. Recently in the in their Investor Day, Rand disclosed that that they expect news in matter of months instead in a matter of years. I was wondering if you could share that view or if you have anything that you could guide us through that. Say, well, something related to that, you you provisions for the payment of sales already. Do you have an actually it's not a cash outflow. I just wanted to clarify that. And then the second question is, well, you seem to find growth options, whether it's renewables, whether it's Brazil. I think probably we should approach it in a different way. You want to maintain optionality and you want to a balanced approach. But if you ever consider if you have more capital, would you grow faster? You seem to have had historically a wise investment process, but if you had more capital, would you deploy it? And would you consider tapping the capital markets to do that? You have two listed subsidiaries rather than removing the minorities. We could probably use them to invest at a higher pace. Those are my questions. Thank you. So thank you. Inouas concerned, SAS, I will be probably repeating what was said at Ren. As you know, we have challenged SAS as well as the other two companies, so Galp and WRAM. It's true and answering to your second question, have provision, but we have not cashed out in the sense that we consider that not only the repetition, but especially the fact that the cash of the sales was not going as it was foreseen into the sector made this decision of giving a warranty and not a cash makes it's the fair one. So the sooner the better we have a decision. So hopefully, what was said in many terms of timing happens because I think that all these issues should be clarified as soon as possible. And in that case, it will be good news. In what concerns growth, let's be clear. We have been doing we will not have any rights issue, especially not EDP, we will not have EDPR. As you know EDPR decision is taken. The equity story of the group is where it is for now. It's clear. We clearly prefer to do what we have been doing as we did with Airgas. We have cashed 2.5 times, 16 times EBITDA and we have redeployed money also to invest in Brazil to have more or less 90 of the same EBITDA at the beginning of next decade with one third of the investment. We have, as you know, recently because I think it makes all the sense in terms of derisking and in terms of crystallizing value updated our strategy in terms of asset rotation including pump downs. So we can grow faster and we can be also developer. I think that the nature of the business in renewables has changed at least in what concerns our vision and our key strengths. So I don't I really don't see any need to do we can I feel totally comfortable with the muscle that we have and the strategy that we have in terms of building the optionalities? And by the way, we've talked a lot of time about what represents today the smallest a very small part of our unfortunately, of our profit. But I think that and eventually, fact that we have no question was raised there is that high PPAs in the last months, full visibility of 800 megawatts for this year, it shows what that we know exactly earmarked what we are doing. And whenever people hesitate because they feel a weakness in a specific market, namely in U. S, but now it will be more difficult, the PTCs market with the phasing down and then the tax equity market will be difficult. As you'll see, as we have seen, we have been delivering always. And if anything, we could be, as you mentioned, being doing more. And of course, the timing down assets rotation strategy will do will allow us to develop more, crystallize more. And the cash positioning of EDP at the level of EDPR is totally comfortable. And so liquidity or having capital is not the issue. So thank you for all the questions. Very clear. Thank And Miguel will follow with some Miguel will follow some of details and then maybe some of the gas and some questions. But once again, I would like to highlight that probably are looking into a company that has bottomed part of its problems in what concerns the framework of regulation in Portugal and legal and framework legal and regulatory framework. And clearly, we wanted to share with you this possibility that we have all the possibilities that we've been creating that both in renewables, especially in U. S, but also in Brazil, giving a sound basis for what will be presented just after summer. So I think that we will have a good moment. So thank you for your presence and see you soon. Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect.