Good afternoon. We welcome you to the EDP Renewables Full Year 2023 Results Presentation Conference Call. During the presentation, all participants will be on a listen-only mode. There will be an opportunity to ask questions after the presentation. If you wish to ask a question during the Q&A session, you may do so by pressing the star key followed by five on your telephone keypad. If you're experiencing any difficulty in listening to the conference at any time, please make sure you have your headset fully plugged in, or alternatively, please try calling from a different device. And now, hand the conference over to Mr. Miguel Viana, IR & ESG. Please go ahead, sir.
Good afternoon, everyone. Thank you for attending EDPR 2023 results conference call. We have here with us our CEO, Miguel Stilwell d'Andrade, and our CFO, Rui Teixeira. We'll run you through the key highlights on the update of the execution of our strategic plan and the financial performance of the year. We'll then move to Q&A, in which we'll be taking your questions both by phone and the written questions that you can insert from now onwards in your conference web page. This call is expected to last close to 60 minutes. I'll give now the floor to our CEO, Miguel Stilwell d'Andrade.
Thank you, Miguel. Good afternoon to everyone, and I think it's good that we can talk and update you on what's been happening in 2023 and also the company's update and, and outlook for the year. I start off by saying that 2023 was a challenging year for the renewable sector in general, but, also, EDPR in particular. I don't think there's any sugar coating it, and I won't try to. I'll give you a balanced and realistic view of where I think the sector is and, and where EDPR is. As you know, we've been regularly briefing you on the year, and the fourth quarter didn't go particularly well either.
There were several issues that negatively impacted us and that we've been working through and are continuing to work through, and I'll go through that in detail in the presentation. There are also some positives that I will highlight. So, I would start off just by going, well, just before going to the bulk of the presentation, to slide four, just saying 2023, as I said, definitely challenging. So moving forward to slide four, first, I think if you look at the capacity additions, we had a strong fourth quarter in 2023. We added 1.7 GW of renewables, which is quite an impressive volume for a single quarter.
And so we ended up the year with a total of 2.5 GW of annual capacity additions. So this is what we'd previously anticipated at the nine-month results release. Going forward for 2024, we have very good visibility on the execution of our 4 GW target. We already have 85% of this capacity currently under construction. The last couple of months, we've seen also the normalization of the solar panel supply chain in the U.S. So, you know, we had a pretty adverse environment over most of 2023, and it seems to have normalized now.
Regarding balance sheets, as you know, in 2023, we reinforced our capital structure with the EUR 1 billion equity raise, and we've also successfully implemented a new scrip dividend policy, which, so it would be the second year. We just came out with the news release for that this week. On asset rotation, I think it was a particularly strong year, great execution by the teams and, reflecting, I think, the value of the assets. And I remember this time last year when we were getting a lot of questions on the demand for asset rotation, if you could still keep it up. Yes, I mean, the answer was clearly in 2023, we had three great transactions contributing to the total of EUR 1.7 billion of proceeds, EUR 460 million of gains, and an average gain of 60% on invested capital.
So again, a year on, I think we can look back and say it was a great year for asset rotation. And it's clearly above the 20%-25% target return for asset rotations that we'd assumed in the strategic plan. We continue to see strong interest from investors. And in the beginning of 2024, we already announced the closing of one transaction. We've signed another one. We expect them to close in the first quarter of 2024, totaling a total of around $1.1 billion in terms of enterprise value. But 2023 was also marked by quite a few material headwinds, and, you know, we've shared them over the last couple of quarters, and now we're actually showing the numbers' impact.
We had a well below average wind resource with a negative impact of around EUR 200 million in the 2023 EBITDA, mostly penalized by the El Niño effect on the U.S. wind resource. I think we flagged that already, I think, in the first quarter numbers of last year, that that was beginning to happen. We had a cost associated with the delay on the transmission line permitting in the wind project in Colombia. We had the bottlenecks on the solar panel supply chain in the U.S., and we had the countercyclical clawback taxes in Europe. So altogether, these headwinds represent about a EUR 400 million negative impact on our 2023 EBITDA, and they seriously distort our underlying P&L.
Finally, in late December, we announced an agreement for a transaction that comes. I think it'll allow us to simplify the corporate structure. It's definitely earnings accretive from day one. So we bought back 49% of a 1 GW portfolio of wind farms that we operate in Europe, around EUR 570 million. The implicit enterprise value per MW multiple was around 1.2x, and we expect the transaction to be closed in the second quarter of this year. So now I'll go deeper into these topics, and I'd start off just by taking a step back and, you know, just looking at the big picture.
First, we had some positive news coming out of the COP in December, essentially talking about tripling the renewables capacity between 2022 and 2030 to reach the 1.5-degree target. And so that commitment was, let's say, signed by more than 130 national governments. We had the European Union, coming together and also agreeing to, to triple that. So I think that broad tailwind continues to be there, and we continue to see it, you know, pushing the sector forward. Solar PV and wind is expected to account for 95% of global renewable expansion, and that's where we are placed.
So we're well placed, take advantage of that. You know, and in general, the, the generation costs continue to be below both fossil and, and non-fossil fuel alternatives. There's also been upward revisions of the 2023-2027 targets for renewables in countries like Brazil, Germany, the U.S., so large economies where we're present. In the offshore, we also expect the upward price revision, auction coming up, in round six. You know, the price cap increased by 66%. And in the U.S., we're also seeing a significant increase in the pricing, including inflation updates over the construction stage.
So we are seeing conditions improve materially for auctions, both onshore and offshore. We saw in 2023 also the approval by the FERC, so the Federal Energy Regulatory Commission, for a rule to speed up the interconnection processes. As you know, that's one of the issues which is holding up a lot of projects for the sector. And that's the first major change to the interconnection requirements in two decades. So, you know, work is being done by the different regulators to, to try and get, you know, streamlined the permitting and the licensing issues.
And in Europe, I think, you know, the European Commission has also come out with a, a goal recommending a 90% greenhouse gas emissions reduction compared to 1990 of around 90% so 90% reduction for 2040 compared to 1990. So things seem to be going in the right direction. The broad macro winds are there. Now it's really about execution. So if we go on to the next slide, I think if we look back, we are continuing to scale up significantly versus what our growth rate was in the past. You know, as I say, over the decade 2010 to 2020, we were growing around 700 MW a year.
We're now, you know, we just did 2.5 GW. You know, that's still a significant increase versus what our historical growth is. And as I say, we are very confident on the 4 GW for 2024. I mentioned to you 85% is on the construction. 15% is expected to start over the next few months. It's got a big weight of solar DG projects that normally have an average construction time of around six months. I think it's important to say also that most of the solar panels have already been delivered to the projects in the U.S., and so that gives us quite a high degree of confidence there.
I move forward to the next slides on asset rotation. So here, as I mentioned, you know, very strong gains, around 60%, gains on invested capital. Three transactions: Spain, Poland, Brazil. I won't go through in a lot of detail because I think we've already given information over the course of last year, so this is not news for most of you. I would just highlight that in the beginning of 2024, we've already closed two additional transactions, so around 500 MW, EUR 1.1 billion enterprise value. As I say, the other transactions for 2024 have already been launched, and we expect to get the gains and the proceeds to be at least in line with the strategic plan target.
If we move over to slide 8, just to give you a highlight on the buyback of the 49%. I think it was a good opportunity that we had to take back 100% control. It gives us quite a bit of additional flexibility, simplifies the ownership structure. It's cash flow and earnings accretive day one, and it gives us more flexibility for hybridization, repowering, and even on the energy management side. So we're expecting this for the second quarter, but, as you can see, pretty healthy numbers, you know, double-digit cash yield and around EUR 40 million expected contribution to net income.
If we move over to supply chain. So supply chain, definitely a much stronger position, I think, than we were maybe nine months ago. We had to reconfigure the supply chain in the U.S. As you know, we had a large dependency on Chinese panels, as a result of significant delays in the import of those panels. We went back and we reconfigured it, so now we have nine different suppliers for the 2024 deliveries between the U.S. and Europe. They're all aligned with ESG audit requirements and traceability on the manufacturing origin.
So I think that's really something that's important is to make sure that, you know, we don't get caught up in any issues around UFLPA, so the Uyghur Forced Labor Prevention Act, or, or tariffs in the U.S.. So some of these are tariff some of these modules are already, produced in the U.S.. We've diversified the polysilicon, including the origins from the U.S., Germany, and Malaysia. So I think overall, we're in a better place or a more resilient place now in relation to the supply chain.
And as I say, if you see here on slide 9 at the bottom, you've got the 70% of the solar panels already delivered, which, this is what I mentioned on the so in relation to the previous slide. So that, I think, positions us well. I think if you look at costs on the right-hand side, it's also important to see that the costs have been coming down for solar, the panel prices significantly. We've recently closed framework agreements on about or 1 GW of solar panel volume for late 2024, early 2025 deliveries, mostly in Europe.
I think it's record low prices, so I think that also places us well for the growth there. If we move to slide 10, talking about risk and hedging and long-term contracted. So as you know, we normally have a policy of being quite contracted and hedged going forward. That sometimes has a downside if prices spike and we don't capture all of that upside. But it also has an advantage, which is when prices fall, we also don't get as much impacted. So we've kept a high weight of long-term contracted and hedged electricity sales.
You know, normally we target long-term contracts of at least 15 years maturity, and, and we try to lock in at least 60% of the, of the cash flows for, for the investment, let's say, of the NPV, with this contracted profile. Specifically in relation to 2024, so 90% of the expected generation is already contracted or, or hedged, and in 2025, 85%. Only 50% is related to European electricity markets, which is mainly Spain. The rest of the merchant exposure is mostly U.S. and Brazil, where electricity prices have, you know, the volatility is being less significant.
I think it's also important to note that this residual exposure to the spot electricity prices is associated with the low-risk volume management of renewables generation intermittency, so that, you know, obviously there can be it can blow more or less, but, in the case it blows less, you want to make sure you're not overhedged. And so, you know, that is typically where we want to be. Regarding prices, they were above EUR 80 per MWh for 2024, above EUR 70 per MWh in 2025, so significantly above the current forward prices.
So that is part of the downside, but it's part of, let's say, it's in relation to a smaller volume. The average maturity portfolio of the long-term contracts is around 13 years, so I think that provides quite a lot of stability to the revenues. Since 2022, for renewable projects to be delivered going forward for 2024, 2025, and beyond, we are investing in what we think are better conditions, higher PPA prices, assuming already a higher cost of capital, and so, obviously having also higher absolute returns. So I think these will end up being pretty good projects.
So 61% of the projects, let's say, have the secured capacity. The decisions were taken since 2022. So, as I say, taking advantage of these assumptions. These projects were approved at an average of, you know, over 1.4x WACC. They will be entering operations from late 2024 onwards. And so I think we might benefit from a slight improvement of market conditions if there's an easing of supply chain pressure or lower interest rates versus the 2023 peak levels. Overall, we continue to see attractive returns based on our investment criteria, not just within the portfolio of secured projects, but also projects under development and that we haven't yet secured for commissioning in 2025 and beyond.
If we go to slide 12. So this is a point which I think is important. Obviously, in a market where, you know, energy prices are reducing, at least on the merchant side, you know, and where there have been delays, it's really important to be focused on efficiency and making sure that we are mitigating the impacts of the delays and the projects. So on one hand, we've been making sure that we are focusing the growth, so around more than 90% of secured capacity for 2024 to 2026, we're expecting to come from 10 core markets and just 60% from three core markets, which is basically the U.S., Spain, and Brazil.
So leveraging there on the critical mass that we have in those markets. In terms of organization, we are leveraging on the EDP and EDPR synergies, so particularly in terms of back office and some global functions to make sure that we're not duplicating teams or functions. So I think that's allowing us to streamline, let's say, the operations and the overheads and really make sure we are the leanest, most efficient company possible.
In terms of cost efficiency, we are implementing a series of cost efficiency savings, including delaying of headcounts, that, you know, given a slower growth. And so we are estimating savings of more than EUR 30 million already in 2024 and growing. And on O&M, we're also seeing increased availability and also a leaner cost structure there. That's more on the efficiency and on the organizational front. On the technologies, hybrids, we continue to see quite a lot of potential for hybrids.
So we've now reached 107 MW of operational wind and solar hybrid projects in Poland, Portugal, and Spain. We're the first ones to actually have hybrid projects in Portugal and in Spain. And we continue to work to materialize our 1 GW of hybridization pipeline. So those are, let's say, quick wins that will have quite a lot of value, just because of the sharing of the infrastructure in terms of the interconnections and, and the access roads and so forth. In terms of storage, we've already installed 60 MW in the U.S.
We have around 200 MW under construction also in the U.S., and we're working also on the pipeline in the U.K. And then in terms of solar DG, the generation installed capacity, both in APAC and in the U.S., has increased over 50% year-over-year. So we do have leverages or we do have synergies in, in this business line, together with EDP to establish a global platform. And in terms of contracts, I mean, this in many cases, these are relatively large contracts. So in 2023, we closed the largest U.S. corporate sponsorship of a distributed PV with Google. I think that was quite a highly publicized contract of around 500 MW, and that's something that we're working on to make real over the next couple of years.
Finally, in this section, just another word on OW. So we currently have 2 GW of wind offshore projects under construction in Europe and around 1.7 GW of projects in advanced development stage in both Poland and in the U.S. . T he under construction, we have three projects in France. I mean, they're progressing as planned. The COD capacity increase of around 100 MW, which means that we have a project which could reach almost 500 MW in total. And finally, on SouthCoast Wind, used to be called Mayflower Project. That's the project in the U.S. off Massachusetts. It's an advanced stage of permitting and interconnection.
The revenues are not secured. As you know, we canceled the PPA last year, and that's part of the numbers last year. We are analyzing the potential bid into the first multi-state PPA auction in the U.S. So it's in Rhode Island, Connecticut, and Massachusetts. That bid is expected or that, let's say, that PPA auction is expected around the end of March. So like both onshore but also for offshore, we do follow the strict investment criteria, namely in terms of target risks and returns.
And we're also, obviously, aim to minimize the timing between PPA contracting and FID. So it's obviously very important. I think we've seen that very clearly in the sector over the last year, the importance of trying to line up both revenues and costs, to mitigate that potential disconnect in case there's a market disruption. So I'll stop there for now, I'll pass it over to Rui to go through the 2023 numbers, and then I'll come back for closing remarks. Thank you.
Thank you, Miguel, and good afternoon to you all. I would like to take you through the 2023 results now. Maybe if we move just to slide 15. As we already anticipated in the previous presentations, 2023 operational performance has been heavily impacted by the El Niño weather event in North America. It impacted the. Obviously, these low wind volumes had a negative impact, a substantial one, close to EUR 0.2 billion of EBITDA. There are two important messages I would like to convey with the chart on the right-hand side of this slide.
The first one is that El Niño is cyclical. It's a cyclical phenomenon. We, we are aware of it, and we already incorporate these sort of events in our long-term forecasts in our net operating hours. So it is captured in our P50 and PV estimations when we go for a financial investment decision for our projects. The second one is that our historical data shows that the slope of wind resource deviation is zero. So there's no evidence that our portfolio is exposed to a declining wind speed, and that obviously we do have the short-term financial impacts, by the volatility, the normal volatility of wind, and particularly impacted by this type of phenomenon, weather phenomenon as the El Niño.
But it doesn't mean that we have a downward trend of our portfolio profitability. For 2024, we do expect a gradual recovery towards more normalized levels of wind resource. If we now move to slide 16, along with other, with lower wind resources, EDPR performance in 2023 was also impacted by other headwinds that we have talked about several. The first one, the U.S. solar project delays caused by the supply chain issues, that Miguel already discussed, impacted our EBITDA by about EUR 50 million, EUR 51 million this year.
For 2024, we do not expect additional costs from COD delays, as around 70% of the equipment has already been delivered for the year's installations. The construction schedule foresees a gradual ramp-up of the U.S. solar capacity, and generation volumes over 2024. Clawbacks in Europe have had an impact of EUR 106 million at an atypical level in 2023, effectively lower than what we initially expected in the beginning of the year. You may recall that we were estimating a potential EUR 300 million of impact, and this was on the back of lower prices throughout 2023.
For 2024, Poland's clawback has ended, so it will not be active in 2024. Romania will continue to have an impact. It's a non-cash impact, as after we unwind the hedges. So, there will be an impact, but again, it will not be a cash one. The clawback pure impact, what we call the, you know, the effective application of a clawback, will not be material at all given where we are in terms of price conditions for 2024 or price forward curves for 2024. Spain, as you know, reintroduced the 7% tax on generation revenues, and this will imply around EUR 15 million impact in 2024.
But all in all, the big number, the EUR 106 million that we have, at typical level, is going to reduce materially as we move into 2024. Lastly, we have incurred costs with delays in Colombia. This amounts to about EUR 53 million, in 2023 P&L. This is related to the short position that we have, given that we have the delivery commitment, the energy delivery commitment, but we don't have the operating wind farm. We are in an advanced stage of negotiation with the majority of the uptakers aiming to reduce that short position.
In parallel, we have been hedging an important. Driven by the project delays, and we've, of course, we consider this as a non-recurring impact, and I'm sure we can provide you some more details if you ask so. Also, as Miguel already said, we expect to get transmission line environmental permit in the second half of 2024 and continue with construction, to have these projects fully operational, I would say, by late 2025. On slide 17, recurring EBITDA was about EUR 1.8 billion. That's a 14% drop year-on-year.
This has a positive impact from the asset rotation gains, EUR 460 million, which are, you know, very much above the target that we set for our business plan. And also the EBITDA growth or the, sorry, evolution was driven by an increase in terms of 12% year-on-year installed capacity. But of course, we have that negative impact from lower renewable resources, also lower average selling price, about -6% year-on-year, with Europe coming down from the abnormal peak prices in 2022.
This was partly compensated by the 8% increase in realized prices in the U.S., mainly coming from the new additions at higher prices. Also, some temporary headwind in Europe and the, the Americas that we already, that I already explained. Also, to highlight the reduction of share profits from associates, this is driven by the reduction of the wholesale electricity prices in the U.K. versus, again, a very extraordinary level in 2022, and the PPA cancellation penalty that we booked back in, in Q2.
So all in all, the, the this justifies the drop in EBITDA to EUR 1.8 billion. On slide 18, the net expansion investments of EUR 2.9 billion. I think it's an important number too, however, it shows really that we carry on with the growth, even though we have these headwinds. By the end of the year, net debt was at EUR 5.8 billion. That's an increase of around EUR 0.9 billion versus December 2022, mainly driven by the growth effort, with this, overall, EUR 4.2 billion of expansion CapEx on a gross basis, partially offset by the asset rotation and also the tax equity proceeds.
Maybe here, I think it's important to highlight that 2024 started with a strong balance sheet position, obviously with the EUR 1 billion additional asset rotation already executed and signed for the year, that I believe is basically reducing the January debt to about the, you know, to the levels of the 2022 year-end. We will have more proceeds from this asset rotation transaction through the year, along with a strong contribution from tax equity proceeds, as the U.S. projects get to COD, and I expect here more than EUR 1 billion contribution. If we now move to slide 19, financial results amounted to EUR 313 million in 2023, decreasing 30% versus 2022.
There are some impacts here. Currency, as we have been rebalancing, you know, the, as you know, the, on the net hedge investment, the, U.S. dollar exposure, also some reversion of the negative impact from, of forex and derivatives back in 2022, as well as higher capitalized financial expenses, in line with the current project timings. Average cost of debt increased to 4.8%, driven by a higher gross debt of around EUR 1 billion year-on-year. EDPR debt has 82% of the stock at fixed rate. It's important to mention that our financial liquidity, and that includes cash and committed credit lines, continues to cover refinancing needs beyond 2026, and that more than 70% of our debt matures post-2026.
So if we now move to net profit, net profit totaled EUR 513 million versus EUR 671 million back in 2022, impacted by the top-line headwinds, partially compensated by the strong execution on the asset rotation side, as well as the improved financials. Non-recurrent accounted events at net profit were mainly the PPA cancellation in Massachusetts, from Q2, and this is at typical level, the impairment in Colombia this quarter, and the Romanian provision, at the depreciation and amortization, and this is related to the tax clawback in Romania.
Lastly, as announced yesterday to the market, the board of directors will propose in the 2024 General Shareholders' Meeting to continue with the scrip dividend program that we introduced last year, for the results corresponding to the year 2023, providing, I would say, once again, with a flexible remuneration system for our shareholders that can opt between cash or shares. And with this, Miguel, I would hand back to you for closing remarks. Thank you.
Okay, thank you, Rui. So in relation to 2024 guidance, first, I'd say that we reiterate the 4 GW installations for 2024. As I said, 85% is already under construction, 100% secured with long-term revenues and, you know, and the DG part is also beginning to progress. The second is to say that we start off with a strong balance sheet position. I mean, we have a capital increase. We've got EUR 2.4 billion of asset rotation proceeds executed and signed as of today. We've had another half a billion of tax equity proceeds also cashed in.
And we will continue to execute significant volumes of asset rotation proceeds and tax equity during 2024. So I think that's a positive message and something that we continue to see in the market. Despite the 2024 strong expected installations, we do have a lower cumulative capacity added versus the business plan. So that leads us to estimate a lower volume of renewable generation in the year to around 40-42 TWh range, even though that's a year-on-year growth of around 15% or more than 15%.
And despite the high weight of the long-term contracted and hedged in generation in our portfolio, there has been a material decline, and I'm sure you've all seen that in the market over the last couple of months of electricity prices in Europe. As I mentioned earlier in the presentation, so Brazil and the U.S., there wasn't such a high increase. There isn't such a decrease. That leads us to estimate the average selling price for the global renewables generation portfolio as a whole from EUR 53-55 per MWh.
So we don't normally provide guidance at this point in terms of EBITDA or net income, but let's say this is some sort of help to try and get a view on how we're seeing 2024 as of today. So as Rui mentioned, we do see some headwinds continue to maintain in 2024, although obviously it's a lower size in 2023. We've been working through a lot of these issues, but we will continue to have some PPA costs in Colombia. We have non, but don't forget that we also have some of the hedges in Colombia, so this is not, let's say it's not such a straightforward calculation there.
We have non-cash costs with hedges due to clawbacks in Romania, and also some residual El Niño effects in early 2024. We're assuming an El Niño of, let's say, just one year, and so that would come off, sort of over the next two quarters. So in relation to guidance for 2024, our recurring EBITDA is showing a moderate year-on-year growth with a higher underlying contribution excluding capital gains. So we had a lower underlying in 2023 and higher capital gains in 2023, as you know. And in 2024, we expect that the capital gains would be, let's say, in line with what we had in the business plan.
And obviously, that means that the higher there will be a higher underlying contribution from the business to give us a moderate year-on-year growth for 2024. So I'm not trying to sell you a big story. I'm just saying that I think we, you know, 2023 is, is definitely was definitely a bad year in terms of the underlying. Obviously, we had then a good contribution from the asset rotation. 2024, we're seeing the underlying improve versus 2023. Going forward, we will continue to grow. We will continue to invest, based on the investment criteria. I think we've always been very clear about that. I think we've been disciplined about that.
We take relatively conservative projections in terms of energy prices for the future, you know, and we will be focusing on projects that give us those returns, so when prioritizing returns over volumes. That's something that I also wanted to leave that message, that we are here to create value and we are to, to grow, but, you know, making sure we're getting the returns that, that we want. And I'd stop there. We can turn it over to Q&A and go in depth, wherever you want. Thank you.
Okay, so, yes, I think the first question comes from Manuel Palomo from BNP. Manuel, please go ahead.
Hello. Good afternoon. Miguel, Rui, and Miguel, thank you for giving my questions. I will ask three questions, if I may. First one is on the average selling price. You expect a decline from EUR 61 per MWh to somewhere between EUR 53-55 per MWh in 2024. My question is, what are the drivers for the decline? I understand that partly it should be the merchant exposure, but I wonder whether you still see some pressure on PPA prices. That's the first question.
Second is just a clarification on the asset rotation for year 2024 after your recent statements, Miguel, about the asset rotations. You say, also in the slides that asset rotation of 2024 will be in line with business plan. Does it mean that it will be closer to the 300 rather than the above 400 that we saw in 2022 and 2023?
And lastly, wanted to ask you about your views on the returns for the assets because one of the big concerns that the market could have is that, well, there's some merchant exposure, but also there's some exposure to forward curves beyond termination of PPAs. I wonder whether you could shed some light on this and whether you are now assuming lower overall returns for your fleet. Thank you very much.
Thank you, Manuel. So let me see. I'm not quite sure I got the last question. So you were talking about the deals, the returns on the asset rotations and whether there's exposure to merchant post-PPAs or something. I didn't quite catch it. [crosstalk] .
No, I'm sorry. No, I was. I meant to ask about the returns of your asset fleet, not the asset rotations, but the existing fleet in general terms.
Okay. Okay. So on the first point around pricing, the reasons for decline, it's essentially on the merchant component. So obviously, the PPAs are what they are, and, you know, and the hedges are what they are. So although we have limited merchant exposure, you know, the prices were obviously much higher, previously, and now they've come down. And so it's a small volume, let's say, but it's a big delta.
That then impacts, obviously, the average selling price, in particular, if I'm not mistaken, off the top of my head, but it's around 4 terawatt-hours in total. 50% of that is in Europe and sort of 50% of that in Spain. If you look at the deltas of price movement over the last couple of months, that basically is what is driving the change in the average selling price. So roughly, that's sort of the explanation. On the second point, so yeah, just to clarify, that's exactly what I was saying. So, you know, we've had great asset rotation deals last year. We had them also in 2022, you know, clearly above EUR 400 million.
You know, like we do, we never count on extraordinary gains or anything like that. I mean, if it comes, it comes. That's great. That's upside for us. But you know, in terms of guidance, we definitely don't want to create any expectations. So what we're saying is the asset rotations for 2024, let's say, in this guidance that's here, which is the moderate EBITDA growth, we are assuming doing it around the EUR 300 million mark that we had in the business plan. So, you know, we're not taking a more aggressive approach there. So what it means, if you back that out, is that you have a slightly better underlying performance, obviously.
So you have a decrease in the asset rotation gains, but you have an increase in the underlying. On the third point, so I think, basically on the returns and if I understood I still didn't quite understand the question, but if from what I understood, it's the exposure to merchant post-PPAs and how that impacts the returns of the projects, right? So I think there the comment I would make is that, you know, 60% around 60% of our NPV is contracted, which means that there's 40 you know, either with the PPA well, typically with the PPA, which means that there's 40%. Project's 30 years.
You lock in the PPA for 15 years, which will typically cover around 60% of your NPV. The remaining 15 years represent 40% of the NPV, which is exposed to merchant. I mean, I can tell you, you know, our prices are well aligned with market, you know, with other markets, independent consultants and other things like that, sometimes even below that. So it already factors in, you know, the penetration of renewables, you know, an aggressive penetration of renewables in the future, things like what we call the solar adjustment factor, wind adjustment factor.
So, you know, when assuming that there's a lot of renewables, that's going to pressure the lower prices. That's all factored into the numbers when we run the models. And so just to be very clear on that. In terms of the absolute returns, I think one of the interesting things is to look at the PPA prices we've been locking in over the last couple of months, you know, even in this declining wholesale prices.
So in Spain, you know, recently, prices for wind around EUR 55 and solar EUR 42, Germany 70s, UK EUR 70, Italy EUR 78, France EUR 85, Singapore there's a couple of projects, but between EUR 58 and EUR 62 and giving us, you know, high single-digit IRRs. In the case of the UK, it was actually double-digit IRRs. So, you know, good IRR minus WACC spreads clearly above the 200 basis points and also with a high NPV contracted. So, you know, well, sort of in many cases, even above the 60% NPV contracted. So this is just to give you sort of a sense of what we're seeing in the market at the moment. Does that help?
Yeah. Thank you very much, thank you .
Yep.
Can go to the next question. I believe the next question comes from Javier Garrido from JP Morgan. Javier, please go ahead.
Yeah. Good afternoon. In Europe, which is where we are seeing the collapse in prices, can you give any indication of what is the, the price that you are using as a reference for your guidance in for merchant in Spain? What is the, wholesale price or the capture price that you are assuming for, for the Spanish market in, in 2024?
The second question, has to do with the also with the guidance, that range of terawatt-hour versus prices. Is it fair is it fair to assume that if the output comes towards the lower end of the range, we should expect achieve prices coming closer to the higher end of the range? Because in the end, it, it's reasonable to assume that you would have, less merchant, output in the mix. And then the third question is about, below the EBITDA line.
I understand you are not willing to provide guidance, but if you can provide some indication of the moves, because in financial results, there's quite a lot of action that you have taken to manage that line. So you can give some indication of where we should see net financial costs in 2024 and also about minorities, given the CTG deal. It makes sense to see a reduction in minorities. If you can cast any light on the lines below EBITDA, that would be very helpful. Thank you.
Okay. Thank you, Javier. So, as to the first two, and then I'll ask Rui to comment on the below EBITDA. So on the first one, I mean, we're using basically updated forward prices. So it's, we're not making any specific assumptions or modeling. We're just taking what we're seeing in the market at the moment, for the year, both in Spain and in the other markets. On the second point, so yes, I understand your rationale. So lower volumes overall.
I would just say, though, that the relative percentages so it depends where the lower volume happens. But if there was a lower volume, then it's not clear that you would have the higher achieved prices because, as I say, it depends whether it's coming in or where we have more contracted or where we have more merchant. If we had lower volumes in the geographies where we have more merchant, then yes, then at least the delta wouldn't be as large. And below the EBITDA, Rui, if you want to comment.
Hi, Javier. I would say there are roughly EUR 0.1 billion less depreciation, EUR 0.1 billion less minorities, and EUR 0.1 billion lower taxes and financial costs. No wrong, wrong figures.
That's very clear. Thank you.
Okay. I think we can go for the next question. Next question comes from Alberto Gandolfi from Goldman. Alberto, please go ahead.
Hi. Good afternoon. And thank you for taking my questions. I also have three P's. First, going back again to the 2024 guidance, just to be very clear, you're talking about moderate growth year-on-year. Just to be 100% right, you're using the recurring EUR 1.0 billion roughly EUR 1.85 billion EBITDA. And I was going to ask you I really like your slide 16. You know, it really details all the headwinds, temporary headwinds you had in 2023. Would it be possible to say, for you to tell us what similar headwinds have you assumed in the 2024 guidance?
So do we have EUR 200 million, EUR 300 million, EUR 400 million of temporary effects on 2024 profits? I'm asking this because the original guidance you gave about a year ago for 2024 was EUR 2.5 billion, EUR 2.5 billion. Secondly, going to 2026 now, I know this is not subject of the call to revisit guidance, but can you remind us what power prices you were using for 2026 and what level of hedges and visibility we have right now? Because I remember that I think the baseload price was above EUR 80 MWh. And again, in Spain, we're below 50 for 2026.
So I was trying to understand if we need to take 5- 6- 7 terawatt hours of merchant exposure and trying to see on a mark-to-market basis where we might end up. So if you help us with the building blocks, would be great. And the last question is, I can't help noticing that the divergence of performance between EDP and EDPR is even more pronounced. Is there a psychological threshold beyond which you would just be more inclined to perhaps combine the two companies in a single entity? And what would be the rationale? Thank you.
Thank you, Albert. On the first one, so yes, the base is the 1.85 that you mentioned. In terms of, let's say, the deltas that we still expect for 2024, so we're expecting roughly half the impact of 2023. I mean, as I mentioned, some of the El Niño we're still expecting to carry on through 2024. That's clear.
We're not expecting any, so just going through these you know, we're not expecting any additional costs with the PPAs, or sort of or additional delays. Poland I mean, we have this highlighted here. Mainly, what we are expecting sort of will continue, let's say, for 2024. Colombia will continue to be a drag in 2024. So, I mean, look what we hear there. What other sort of key issues there? But I think those are sort of the maybe the key ones.
Yep. I would say so. Miguel, if you want, Albert, just to give a sort of round numbers, you know, Colombia is likely to keep the EUR 50 million ballpark. The Romanian non-cash is going to be around the Slovakia non-cash is about EUR 50 million. As I mentioned there, you have the 7% tax in Spain that will be about EUR 15.5 million. So all, all in all, I would say EUR 0.1 ballpark.
Thank you. Plus U.S. load factors, right? That's already for Q1 for about, what, EUR 50-100 million as well?
I'm sorry. Can you repeat, Alberto?
Sorry. The U.S. load factors on top of, of these, right? So it's about EUR 100 million plus U.S. load factors. So we're talking about EUR 200-250 million is probably embedded as a temporary effect in your 2024 guidance as a negative.
So I would say not that, that high. But yes, in Q1, we should have some impact in January, in February from low wind speeds in the U.S.
Thank you.
Great.
Okay. Alberto, on the second one, so I think you're roughly right. I mean, we're looking at the same prices, I guess, that you are in terms of the forwards for 2025 and 2026. So, you know, we don't have a better estimate or guess than you would have. I would perhaps the only nuance I would make that we sometimes look at is what is the implied market price based on the gas forwards? Because the gas is a much more liquid commodity rather than the merchant that you see in sort of the Spanish wholesale price.
So the gas might give you just a slightly higher price than the wholesale electricity price. Like, the implied electricity price from the gas would give you slightly higher than the wholesale electricity price that you'll see. But yes. But that's basically, you know, we're assuming the same values that you're seeing. In relation to the third question, oh, sorry. But just in relation to the second question. But I think the point there that I made on the slide on the long-term contracted hedging is that, you know, a big part of our revenues are long-term contracted and hedged.
And so yes, there is that merchant component. The delta is what it is. So, I mean, run the numbers on that. But, we're not providing additional guidance or methodology versus what you said. On the EDP versus EDPR, I think here the question is really, you know, we've talked a lot about this, quite often. I mean, it. So we obviously look at that option constantly. It's, it's a regular thing. I think it would always be important to, to understand what would be the value behind it. I think, you know, we've always said we've been comfortable, and we are comfortable with the, the current structure.
You know, we are working on and I mentioned that in the call on trying to extract as many synergies as possible under the current structure. So integrating the back offices and, you know, and some of the, the global functions that, so to get the synergies. You know, obviously, I'm not going to provide, like, any specific levels or anything like that where it would make sense. But, I mean, in the past, in 2017, I think it was a different market, different circumstances. When we tried to buy the minorities of EDPR, at this point, we've said we are comfortable with the structure.
And I, I keep saying that. That's not something that's, that I see changing. It depends, you know to be honest, to buy for cash would not make sense. We don't have the balance sheet for that. And, and it would be, you know and for shares, it really depends on the relative, ratio. And, and the truth is, EDP is also relatively depressed. And so I think it, it would depend very much on the, the ratios. So I just leave it at that. It's an option. We analyze it, but it doesn't seem like it makes a lot of sense at this moment.
Okay. The next question comes from Arthur Sitbon from Morgan Stanley. Arthur, please go ahead.
Hello. Thank you very much for taking my questions. I have two. The first one is on, well, in one of your slides, you talk about current PPA prices that are still resilient to the downward trend on wholesale prices. I guess that's a comment that is applicable to contracts that have been signed so far. I was wondering if you could comment on ongoing negotiations. Are they going according to plan, despite the foreign prices?
And generally speaking, I think we've seen difficulties to sign good PPAs at good prices in a market like Brazil, for example, where power prices were depressed for quite some time. I think we're not there yet, in Europe. But I would be interested in getting your view on what, if anything, may prevent European renewables market to turn like the Brazilian one if ever power prices were to drop further. That's the first question.
The second one, just on the, on the guidance on average selling price so you're talking at the midpoint of EUR 54 per MWh. That's down 12% year-on-year. But you indicate that only 10% of your revenues are merchant. So I'm struggling a bit to reconcile how the price could come down 12% if only 10% of revenues are exposed. I guess it may be related to the hedges. But, but yeah, any more detail on that would be quite helpful. Thank you very much.
Okay. Thank you, Arthur. So the, the negotiations, as I mentioned so we've been managing to close PPAs at, at relatively good prices. I mean, the Brazilian example that you give, it's, I mean, it's true. You're having a very high hydro conditions in Brazil, which is depressing the, the prices. I think that well, which is in itself, I think, also maybe a function of the El Niño. But that's expected to turn around. So this will be, you know, cyclical, over time. And we've seen Brazil with, like, maximum level sort of at the cap, relatively recently.
So I think in Brazil, in particular, we think that that's a short-term issue. And once that sort of the hydro normalizes, then you'll have the PLD, which is very sensitive to the hydro conditions, reestablished. In any case, one of the reasons that we did also that take private of Brazil and we mentioned that at the time is that we do have a very good trading and commercial arm in Brazil. And I think that's one of the things where we or one of the areas where we're seeing quite a lot of value by being able to articulate that with EDPR so that we have, let's say, renewable projects in Brazil and being able to place that energy with retail customers or sort of B2B customers in Brazil, which the EDP Brazil have those competencies.
EDPR did not. And I think that take private, we can do that. We can manage that better. You like Brazil? Listen, the EU had low prices. I mean, we've just come through a peak of energy prices. But you know, the EU was growing quite rapidly also in renewables with prices also in the around EUR 40-50 per MWh in terms of wholesale prices. So I think the driver for Europe is it's not just the wholesale prices. I think it's the decarbonization metrics. It's making sure that the companies or, you know, the actual company commitments to go on decarbonizing.
That's driving a lot of the demand for the PPA. So it's a different situation from Brazil where they don't have such a strong focus on that decarbonization, let's say, objective. So the EU, sorry. I talked about Brazil. But and on the EU, I think it's very much demand-driven by, by the, the EU emissions objectives. On this, hopefully, that answers the question. On the second question so it's really just a function of yes, it's not a lot of merchant exposure. But the delta is quite large. So it's a small volume times a big delta. I think that's the, the point.
Thank you very much.
Yep.
Thank you, Arthur. So the next question comes from Jorge Guimaraes from JB Capital. Jorge, please go ahead.
Good afternoon. Thank you for taking my questions. I have three. The first two are related to Colombia. The third one is a more conceptual one. On Colombia, is it possible to tell us if there is any capital invested beyond what has been impaired? And to clarify the situation, you seem to suggest that the negotiations continue. But yet, at the same time, you impair the project. So, I would like to understand if you really expect the project to go ahead, what will happen to the capital that was impaired now? And if not, what capital has been left to impair?
And the third one is, there seems to be some type of of disconnection between what financial markets are pricing for renewables and what European Union authorities want for green transition. I don't know if you share this view. But if so, what do you believe that European authorities can do to to prevent the low power prices from stalling the the growth in renewables? Thank you very much.
Okay. Thank you. So on on Colombia, just to to clarify I mean, we did the impairment based on the best information that we have. But we are in an advanced stage of negotiation of, a let's say, pushing forward the PPAs to to 2027. So I think we have pretty good visibility there. Now, the amount of capital let's say, the book value that we have is around EUR 500 million. Part of that is impaired.
The rest, we think you know, there's a path to, to having a viable project. And that's what we're working with together with the Colombian government. And I think the, what's on the critical path at the moment is the environmental. Well, so it's the, the PPA renegotiations that's ongoing. And hopefully, you know, the information I have is progressing well. And then getting the environmental license, you know, as quickly as possible and locking in the agreements with the, indigenous communities. So once that's done, then we'd be in a better position to, to progress with the project. Rui, do you want to comment anything else on Colombia?
Maybe just highlight that, you know, the sort of assumptions that we use because yes, it's important that we have these renegotiations so that we reduce that, short position. So that was one important input into the, impairment test also. I mean, we use a low double-digit return rate to discount the cash flows, so that we are also conservative. But at the end of the day, given where we are, you know, we would still even continue with the project forward, we it was prudent to book at this point these, roughly speaking, EUR 180 million.
On the second question, I mean, it's a great question. I think yes. I mean, obviously, the financial markets are not rewarding renewables at the moment. So I think that's pretty clear from just looking at the share price. In the EU objectives, I think things continue to progress. I mean, you know, if we take ourselves back two years and, you know, I think I've said this a couple of times.
So we tend to overestimate how much impact certain things will have in the short term and underestimate how much they have in the medium-long term. I think this is one of the cases where Europe is taking pretty, you know, aggressive steps in terms of changing and improving and simplifying the licensing and permitting regimes. You know, the different member states are doing that. They've come out with a new market design at the end of last year, which, for the first time, incentivizes and recognizes PPAs and CFDs as being an integral, like, an intrinsic part of the market design.
That's something which didn't exist in the past. There's been a lot of push to have governments come out with more structured, you know, predictable auctions over time to continue to drive the demand for renewables. And so, you know, when we go from quarter to quarter, it can feel like things sometimes are not going as well as expected. But I think when we look back, or certainly, say, in this case, when we look back, Europe is actually taking quite a lot of big steps. And I think they continue to do that. And looking forward, I think those will have an impact.
I mean, if we look at the bottom, the installations of renewables globally, but even in Europe, there was a material increase in 2023. I think the expectation is that some of these measures go on feeding through into the, let's call it, the real economy, to the companies, and to the different member states, etc., that, you know, the project will continue to progress and accelerate, and that they will be financially sustainable and profitable. So I think the EU continues to have that objective, as I've said a couple of times.
You know, I don't think it's just the environmental issue anymore. I think it's definitely also driven by national security issues. I was in Berlin recently. You know, definitely, it's very palpable, the need to continue to drive the renewables growth there and introducing that concept of overriding public interest. You know, and they were giving examples, like a German official talking about the fact that in the past, when you wanted to build a project, you would sometimes get it stuck in courts.
And you were basically the judge had to decide between two conflicting private views, you know, the local community, which didn't want the project built, and maybe the promoter who wanted the project built. Now, you've introduced this concept of a public interest. And so the judge can decide between the local community or the public interest. And in many cases, that allows him to unblock the situation and move forward with the project [audio distortion] .
Okay. Are we back online? Okay. So I apologize for apparently the connection was broken. Obviously, it's a signal for us to move on. Hopefully, that was clear, my, my answer. Maybe we can move on to the next question.
Hi. So, we, we have now the next question from Enrico. We, we have still three questions. If you can just make one question in order to sort it here a little bit and a gig opportunity for everybody to make questions. Please go ahead. Enrico? Maybe you can go to the next question, which is from Fernando Garcia, Royal Bank of Canada.
Yes. Thank you for taking my questions. I have several from, about Colombia, no? So I wanted to know there, what is the situation of the turbines for this project? So now you say that you are expecting to get all permitting in the second half of the year. So can you be more specific on that? And then can you tell us, from getting all permitting, what are your expectations in order to build that project? How long can that take?
So you say that as well that in terms of the PPAs, that you are advancing negotiation to push the PPAs to 2027. Then from that 2027, how many years will cover that PPA after? And it will be with the same prices that you have before? And finally, on the arbitration process, can you provide some information such as timing, what you expect in this arbitration, and what are you asking in this arbitration? Thank you.
Thank you, Fernando. So let me take a couple of these, and Jorge can complement. So on the turbines, I mean, the turbines have been locked in. They were locked in before with Vestas. And we actually have them physically already in Colombia. So that's to say that that's a given. In terms of the permitting, we're expecting the environmental license to be obtained by around October. In terms of the PPAs, the advanced negotiation, yes, it's so it's pushing them to 2027.
I think the question was, how many years? I think they're 15-year PPAs. In terms of the timing of the arbitration, so what we would expect is to get or to renegotiate or to get an arbitration to decide that the remaining PPAs that haven't renegotiated with us, that their conditions should be changed to be aligned with the ones that we have renegotiated. So at least, at least that. In general, on the PPAs also, I think your question was around prices and how long.
But so in general, maintaining prices, but just extending it a bit further and providing some additional volume because the PPA didn't cover the full expected volumes of the project. I think hopefully that answered your questions.
Yeah. Thank you.
Yeah. Thanks.
Thank you, Fernando. So we have last question from Gonzalo, from UBS. Gonzalo, please go ahead.
Hi. Thank you for taking my question.
Did you say, Miguel, there was the last question?
So I was gonna stick to one. But maybe I have two.
No, that's fine. You can do two. No problem.
Okay. Perfect. So first one is on the deal you did with CTG. I'm assuming that now, with you know, longer-term power prices probably lower than it was just a few weeks or months ago, you might find that, you know, rebuying some of the minorities might be a bit cheaper. And if that is the case, you know, what kind of timing, volumes involved we would be looking at. That is the first one.
Second one is related with a very interesting data you brought on the on slide 15 on the evolution throughout the years of the portfolio in a El Niño phenomenon. I'm guessing your guidance for 2024 is based on the recovery that you expect based on this chart. But I was looking at, for instance, the period 2014, 2015, where you see a more steep or deeper fall from the previous high level to the following low level.
So I was wondering if you have some alternative scenario in which, you know, it takes a bit longer to recover, based on meteorological, meteorological models or anything like that. And if that is the case, you know, what is kind of a secondary scenario? If things don't go under your base case assumptions for 2024, what kind of impact or volatility we could expect on the on the numbers for 2024? Thank you.
Yeah. Thank you, Gonzalo. So, I'll take the questions. And if we can complement, I think, on the only but on, on the CTG, let's say, in terms of other deals, yes. So I think this was, you know, a good deal, as I mentioned. I think it was fair and with good multiples. If we find other alternatives or other options that are like this, yes. You know, it's creative day one.
It's, you know, cash flow positive day one. It seems too well; it ticks all the boxes. So it's definitely contributing to the bottom line. So we would be open to doing additional deals, I mean, of this type, if it makes sense, and if we get the right conditions for it. But we don't say. I'm not disclosing anything specific at the moment or on the El Niño. So listen, predicting meteorology and climate is an impossible science or a very difficult science.
But the expectation, let's say, the typical correlations looking at what's happened in the past is that there would be, you know, the Q1 and Q2 would still be impacted by the El Niño. But then it would start shifting to La Niña, so the opposite effect, by Q3 and Q4. So that would potentially lead to above-average volumes in the U.S.
But listen, that's- I wouldn't place any guidance on that just because I think, you know, we like to predict based on P50s, which is, you know, the average. In this case, we are in an El Niño. So I think we can say that, obviously, the El Niño will continue at least for another one or two quarters. But exactly what it will do after that will be, you know, we might have some small correlations. But it's not something I would say make a big bet on. In any case, Rui, if you want to comment.
Hi, Gonzalo? No, I think, you know, basically, I mean, there's no statistical evidence right now that suggests that the El Niño would be prolonged, if any- a nd Miguel said it's the La Niña. So for the forecast or sort of the guidance that we are providing here, we're basically taking the view that for the rest of the year, so let's say, somewhere around Q2 and then definitely Q3, Q4, we should go back to sort of P50 scenarios.
Okay. Very clear. Thank you.
So I think you can move to closing remarks, Miguel.
Okay. Listen, thank you. I'm sorry we went on a little bit longer maybe than what we expected. But just to say, listen, we know 2023 was challenging. We continue to have some of those same challenges in 2024. That's clear. We are working through a lot of these issues. We, I think, set out very clearly what those headwinds are. And we will go on solving them. Total focus is on execution, making sure we are able to deliver.
You know, I think we do have the 4 GWs that we're working on very hard to deliver this year. We had a great year in 2023 in terms of asset rotation. So I think that shows a just a general structural demand and, you know, an appetite for these type of assets. You know, but I think we keep our eye on the ball and focused on the medium-long-term goals. And so riding out some of these challenges and the economic cycle.
And so that's very much what the team is all focused on. And certainly, that's what myself and Jorge are very focused on. And we'll keep you up to date, I guess, now at the first quarter numbers. I mean, we're not expecting anything great for the first quarter because of these challenges that I talked about. Hopefully, we will see some recovery over the rest of the year. We'll keep you updated, as soon as we know any more information. Thank you.