Hello, and welcome to the EDPR 2021 results presentation. My name is Judy, and I'll be your coordinator for today's event. Please note that today's call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad at any time. If you require technical assistance at any point, please press star zero and you will be connected to an operator. I would now like to hand you over to your host, Mr. André Fernandes, Head of Investor Relations at EDPR, to begin today's conference. Thank you.
Thank you. Good afternoon, everyone. Thank you for attending EDPR's 2021 full year results conference call. We have here with us our CEO, Miguel Stilwell de Andrade, and our CFO, Rui Teixeira, who will run you through the key highlights of the business plan execution and 2021 results. We'll then move to Q&A, and we'll be taking your questions. This call is expected to last approximately 1 hour, and I'll give now the floor to our CEO, Miguel Stilwell de Andrade.
Thank you, André. Good afternoon, everyone. I hope you're all doing well, and it's always great to speak to you. Let's talk about the 2021 performance and results. If we move to the first page, I mean, it's got a good highlight of really what were some of the key achievements over this year. On growth, we achieved record additions of 2.6 GW in 2021. We are clearly ramping up the growth towards the 2021-2025 target of 20 GW. Just an order of magnitude, I mean, we built in 2021 more than in the previous two years combined, and the sum of 2020 and 2021 is more than the previous six years combined. Really a very strong growth from EDPR in terms of the megawatts.
We also have 8.4 GW already secured, keeping a very disciplined investment approach. With, as you know, our metric of IRR over WACC of over 1.4x. Ocean Winds also had a great year. I mean, it increased its portfolio to 9.3 GW, and it had awards in the U.S., U.K., Poland, and South Korea. Overall, solid ramp up of growth and attractive returns across all regions and technologies. On value, we completed four asset rotations in 2021, so we had strong gains. We had EUR 520 million, which is significantly above the business plan target. We start 2022 already with three transactions signed for completion this year.
We signed them last year and just we expect to conclude them in 2022. We also did the 1.5 capital increase back in April, which, as you know, was an important milestone to fund the growth plan until 2025. We have the funding in place. We have strong value creation with the gains well above the EUR 300 million targets, as we've been anticipating in previous quarters. On excellence, we continue to be recognized as best-in-class in ESG. Several achievements throughout 2021. We're top 10 in the S&P Global Clean Energy Index. Once again included in the Bloomberg Gender-Equality Index. Again, recognized as top employer in Europe and top workplace in the U.S., included in the FTSE4Good Index, Ethibel, among others. Really a strong performance also on the ESG front.
If we move forward to slide six. Here we ramped up, as I mentioned, in 2021, coming from under 1 GW over the last decade to 1.6 GW, and in 2020 and now 2.6 GW in 2021. It's been a challenging environment. I think no one can deny that. COVID, permitting and interconnection, slowing down development. Clearly, it's key that the authorities work to streamline and speed up permitting and the networks accelerate investments in the grid upgrades and expansion. I mean, in the context of the current energy crisis, more renewables is definitely part of the solution and not part of the problem. Also, U.S. policies and supply chain introduce some uncertainties on timing. We'll be talking about that later in the call, especially for solar projects.
Moving forward, we expect to continue to ramp up the growth and reach the average targets for 2021 to 2025 that we had committed to in the business plan. If we move on to slide seven. Here, we can go deeper on the supply chain. We don't think this will impact the 20 GW growth plan until 2025, although it has had some short-term impacts. As we mentioned in previous calls, around 90% of our secured capacity is fully contracted for the major equipment at a fixed price. It already has the higher CapEx incorporated into the investment decisions. From a cost and returns perspective, the impact is not material, and we continue with a healthy spread over WACC.
For the PPAs that were under negotiation and for new PPAs, we've been able to revise prices by $2-$5 or EUR 2-5 per MWh, and we pass through that CapEx increase, so keeping our returns. I think that's an important point to highlight, and I just wanted to stress this. This increase in future prices has been reflected in the PPA prices. It has not impacted our competitiveness because the overall CapEx increase is, you know, general to the sector.
From an off-taker perspective, I mean, these PPA prices continue to be well below other alternatives, especially in the current context of the high gas and power prices. However, there were negotiations of the PPAs in the context of the supply chain disruption and the market turbulence have delayed the signing of new PPAs, which we expect to then recover in the coming months. I mean, we literally had over 1 GW ready to sign, but we prefer to go back and adjust for the changes in costs and ensure the profitability we wanted for this project. It would probably been easier to show more megawatts, but in that case, it would have been with worse economics. In relation to timings, we are on track for the wind projects.
On solar, we could have delays of a few months, potentially moving some projects between quarters, including from Q4 2022 to Q1 2023. In a nutshell, I mean, we see the supply chain having a short-term impact, moving some capacity from 2022 to 2023, but overall, we don't see it impacting the EDPR growth plan of the 20 GW until 2025. Move to slide eight, just to touch on another point, which I think, many of you have reached out on, and which concerns the sector, which is inflation and interest rates. We are well protected against inflation and increasing interest rate environments, and a couple of comments on this side. On the revenues, 30% of our revenue is inflation-linked, and so it has a natural hedge to inflation.
This is mostly the case in Portugal, France, Brazil, Canada, the PTCs in the U.S. Also, not included in this number, but we have 1.5 GW of operational offshore projects, which are also inflation-linked, WindFloat, SeaMade, Moray East. That's a big chunk of our revenues. 15% of our revenues also have escalators, typically with annual escalation of 2%-2.5%. This is the case for many of the PPAs in the U.S. 25% of our revenues are merchant, which are currently hedged with the potential upside, especially from 2023 onwards as the hedges roll over. We currently have 50% of our merchant exposure hedged in 2023, 35% in 2024, 30% in 2025.
On the debt side, here we have 85% of our debt at fixed rates, so not impacted by the increasing interest rates, and over 55% of our debt is maturing post-2025. Overall, we only have 30% of flat revenues, and our debt is mostly fixed rate with a long-term maturity. Move forward to slide nine. Just a comment about our global footprint. I mean, as you know, with the Sunseap acquisition, we're now in all the key growth regions and across the core renewable technologies, onshore wind, solar, offshore, in total 26 markets globally. Sunseap transaction will reach completion this month, probably next week. As you know, we're also present offshore globally through the Ocean Winds JV.
As we scale up and work with an expanded global footprint, it's really important to have the right organization and team in mind. We did a reinforcement of the management team. Apart from myself and Rui, as you know, we also have Duarte Bello, who's been in the management team since 2017, covering Europe and Latam. Sandhya Ganapathy takes over as CEO for North America. She's been in EDPR for 10 years now, driving our investments and growth in the U.S. Pedro Vasconcelos taking the role of COO for Asia Pacific. Pedro Vasconcelos has been in the EDP group for the last 15 years, most recently in business development. Bautista, longtime at EDPR since inception, covering mostly offshore and the technical side of the business, as CTO.
I think here the key message is we have a really deep bench of talent, and I'm really pleased to be able to work alongside this great team, so very experienced, many years in the company and in the sector. I know they're highly motivated to really continue to drive the growth in the various regions. In terms of operating model, just to say that, we really have been ensuring we leverage our scale, our expertise, and the global presence. In things like procurement, origination, engineering, asset operations, investment. I think this is one of the things which distinguishes us from many other companies, is making sure that we are, let's say, global.
We have some global functions which mean that we can leverage our scale across the different platforms, but we are also very local in terms of the business development, in terms of sourcing the different opportunities. Clearly giving power to the regions to focus on growth and project development while not losing the scale advantage. We move to slide 10. We now have the 8.4 GW secured, 3 GW secured last year. As I mentioned, we have a significant amount of PPAs with the execution, which was delayed given the adjustments for the increase in CapEx. Many of these should be announced in the next couple of weeks or months. We continue to have a disciplined investment approach with the returns above 1.4x and the 300 basis points spread.
We move forward to slide 11. In terms of pipeline. We continue to grow our pipeline, obviously, to feed the construction pipeline. We continue to be very active in the PPA market. Roughly 60% of our capacity comes from PPAs with corporates, 40% from centralized auctions. This shift over time from centralized auctions to PPAs is something we see. I mean, clearly as part of the U.S. reality, it's increasing in Europe as well. The backlog continues to increase, backlog in terms of additional PPAs, and they're driven by building up PPAs that have this CapEx adjustment accounting for the recent inflation. As I say, that will be announced in the next couple of months.
In parallel, auctions are also expected to increase to around 40 GW in markets where we are present in 2022. I mean, this gives you an order of magnitude of the size of the auctions taking place in the EDPR markets. Just a quick comment on offshore. I mentioned it was a great year for Ocean Winds. Moray East is fully installed, increased the operating capacity now to 1.5 GW. The OW operating capacity is 1.5 GW. We have been successful in recent tenders, so we have the 400 MW PPA in Massachusetts for the Mayflower Wind project, in addition to the 1.2 we already had, the 800 we already had. We've also been awarded the Caledonia 1 GW seabed lease in the Scotland tender.
We were recently given the electricity business license for 870 MW in the KF Wind project in South Korea. The model is slightly different, but basically this award is a sort of seabed lease. We're also preparing to participate in next week's New York Bight seabed tender. We have a total portfolio now of 9.3 GW, and really becoming a reference in the offshore business. I think, you know, the partnership with ENGIE in relation to Ocean Winds, I think is showing good signs of development. On slide 13, and obviously this is an important part of the value creation of the company, the asset rotations. Here we achieved the target proceeds of EUR 1.5 billion, rotating less megawatts. This is something we've discussed on previous calls.
We rotated 1 GW versus the 1.4 GW we had in the business plan, but we essentially achieved the same proceeds as we were expecting. Obviously, by definition, mathematically, it means we had higher gains per megawatt and we had higher gains in absolute terms. We had roughly EUR 500 million versus the EUR 300 we had in our business plan. And also, I think this is important, we start already 2022 with almost EUR 1 billion of asset rotation proceeds signed in Poland, Spain, and the U.S. We are preparing and kicking off additional transactions to complete the asset rotation program for 2022. All in all, asset rotation execution's been really strong.
We continue to see good appetite from investors, and really the effort now is completing the transactions that are already signed and moving forward with the additional 2022 transactions. On slide 14, just a word, important word on ESG, particularly on circular economy and biodiversity. This is something again, that we've been stressing. We've been very focused now on promoting waste recovery in the operational phase, and we're extending this best practice also to the rest of the value chain. Repowering isn't yet very material. You know, we are focusing on solutions to tackle the wind repowering wave that we expect will be post 2025, especially in Spain and Portugal and to a certain extent in the U.S.
You know, as the wind farms start getting to a certain age, but we expect that to be more to the second half of the decade. So far, EDP Renewables has repowered already three wind farms, two in Spain and one more recently in the U.S., Blue Canyon II. For the sites repowered in 2021, which is Cormon and Blue Canyon II, we achieved a recovery rate of 100%. I think a great achievement to keep going forward. On communities, here we're on track with EUR 7 million of investments and adapting our investments to the new markets and also the local communities. It's really important that we make sure we are a good citizen, that we involve the local people, so that the projects can proceed smoothly and that we have a good buy-in from the local communities.
Obviously, you know, developing renewables can't be done against local opposition, and so it's something that we are, you know, very conscious of and that we spend a lot of time thinking about how to manage. On people and diversity, 35% of our new hires are women, so we'll be moving towards the 36% female employees target that we had for 2025, and we're also increasing female employees in senior leadership. We also even recently launched a campaign for universities and even pre-university to try and get more female participation in STEM degrees. On suppliers, we've been requesting critical suppliers in incorporating more demanding gender, decarbonization, circular economy, transparency, health and safety criteria in the overall procurement process.
Making sure that it's not just EDPR that needs to be ESG compliant, but also all of our suppliers need to get in line and step up as well. Overall, on track and continue to be recognized as the best-in-class in ESG. I'll turn it over to Rui to walk you through the 2021 results, and I'll come back at the end for closing remarks. Thank you.
Thank you, Miguel. Good afternoon to you all. Now let's move into the 2021 full year results. As we can see on page 16, strong results benefited, of course, by higher capital gains from the asset rotation deals and stronger performance in Europe and Brazil. At the end, it translated to a net profit of EUR 655 million. That's 100 million growth versus 2020. We achieved a EUR 1.76 billion EBITDA and EUR 655 million net profit. That's a growth, as I mentioned, on a year-on-year basis. That represents about 6% and 18% at the EBITDA net profit level respectively. We generated 13.3 terawatt hours of clean energy, a 6% growth year-on-year.
That's mainly due to the new capacity in operation. In total, we have EUR 523 million of capital gains at EBITDA level. That's about EUR 471 million at net profit. As a result of our very solid asset rotation strategy program with deals in the U.S. and Europe that were concluded in 2021, as well as some offshore contingent price reviews. We had a very strong business performance in Europe and Brazil, and also good improvement in terms of the financial results year-on-year. On the downside, as you know, we have the U.S. top line that was impacted by the first quarter one-off ERCOT event.
The wind resource, which was below our P50, settled at about 96% of our P50, and that is driven primarily by the U.S. In Spain, that was impacted by the regulatory and financial hedges, given the higher pool prices, although recovered in Q4 because mainly of the NCF. On the balance sheet, net debt decreased to EUR 2.93 billion, so that's a reduction of about EUR 500 million year-over-year. Tax equity increased to EUR 1.54 billion. That's about EUR 0.4 billion growth year-over-year. On the funding, we had a very successful year with EUR 1.5 billion capital increase, as you know, in the beginning of the year. Also proceeds from the tax equity transactions of EUR 0.8 billion, and the asset rotation proceeds of EUR 1.5 billion.
Regarding dividends, we will be proposing a dividend of EUR 0.09 per share, naturally subject to the shareholders' approval, at the GSM. That's partly sharing the growth with the shareholders, while of course prioritizing the cash flow that we want to reinvest, and that we'll need to reinvest in accretive growth. If we move on to slide 17, EDPR added 2.6 GW of wind and solar capacity in 2021. That's the highest capacity ever installed by EDPR in a 12-month period, and this clearly demonstrates the ramp-up of the company's growth rate. Also, as of December 2021, EDPR has 1.8 GW of capacity under construction. An additional capacity will start construction in Q1 and Q2, especially solar capacity.
Just to be clear, these numbers do not include the 0.6 GW of installed and under construction capacity related to Sunseap, that you know, this capacity relates to December 31. This does not include these numbers. Year-on-year, we have successfully completed 1 net GW of asset rotation deals. It results at the end in a 13.6 GW portfolio. This is at the end of December 2021, with a very balanced mix across North America. That's around 52%, Europe 42%, and Brazil with 6%. In 2021, we achieved a 29.4% load factor with the recovery in Iberia and Brazil, offset by the one-off outage event in the U.S. and broadly, you know, the low resource that we saw in the U.S. throughout the year.
Technical availability was very flat year-on-year at 97%, so very good and high level of technical availability of our fleet. Electricity output increased 6% year-on-year on the back of the capacity additions. These are partly offset by slightly lower resource, as I mentioned before. EDPR generated 30.3 TWh of clean energy in 2021. We have avoided 18 million tons of CO2 emissions. It was also quite, you know, balanced, although a bit skewed towards North America given the NCF profile. The operations in North America, Europe, and Brazil generated, respectively, 56%, 37%, and 6% of the total output.
If you move now to the revenues on slide 18, revenues increased 2% year-on-year, driven by new capacity in operation and higher average price due to some partial merchant upside in Rest of Europe and Brazil that were enough to offset the sell-down impacts as well as some unfavorable Forex. In Europe, the average price has slightly increased 0.5% year-on-year, despite some of the regulatory and financial hedges impact in Spain that we saw already in the nine months, but also Rest of Europe and Brazil that captured higher pool prices. North America average price was flat year-on-year with higher merchant prices offset by the one-off events in ERCOT in the first quarter. In Brazil, the average price was 13% higher year-on-year.
It was at BRL 246 on average. This is on the back of the higher merchant prices, that slightly offset by new capacity. Revenues total EUR 1.7 billion. That's a 2% growth year-on-year, 10% if excluding sell-down, with the impact from the megawatts addition, so that's around EUR 198 million year-on-year. Average higher price, EUR 33 million year-on-year, excluding sell-down. This, of course, surpasses the effects from the sell-down itself, which is a minus EUR 132 million year-on-year. Lower resource, EUR 12 million reduction, and Forex and others, which is about EUR 60 million reduction year-on-year. If you move now to costs, and as you know, we take good care of maintaining a very efficient operation.
The core OPEX per average megawatt was flat year-on-year as a result of the O&M strategy that we have been implementing. Despite the fact that we are up-fronting the scale-up that we need to cope with the business plan growth and the commitment that we have to install 20 GW by 2025. Overall, EBITDA total EUR 1.76 billion. That's a 6% growth versus 1.65. Naturally driven by the top line performance, as I mentioned before, with this good contribution from Europe and Brazil, and a higher capital gains, naturally within this period. In terms of the geographical mix, in North America and Europe represents roughly 50/50 of the EBITDA contribution. On the net profits on the slide 20, total EUR 655 million.
That's 18% growth year-on-year, an additional EUR 100 million. This of course is on the back of the higher gains, improved financials, mainly from lower tax equity costs, and some positive Forex contribution. This of course despite the negative impacts from higher depreciation and amortization, of course taxes and minorities, and of course, these are driven by the top line performance. Just a final note on the financials, on the net debt and tax equity on slide 21, this decreased EUR 114 million, with the asset rotation proceeds and the capital increase offsetting the impact from the acceleration in growth.
As of December 2021, net debt amounted to EUR 2.9 billion, so that's a EUR 0.5 billion reduction year-over-year. Almost 90% at fixed interest rate. Of course, considering the equity proceeds from the asset rotation, cash in January 2022, our net debt pro forma would be EUR 2.6 billion. Tax equity increased to EUR 1.5 billion, following the proceeds that we secured in this year of EUR 0.8 billion. Just a final remark on slide 22 regarding the ESG. I think it does reflect the acceleration of growth. Starting by the environmental performance.
As I mentioned before, EDPR avoided over 18 million tons of CO2 emissions, so we are actively contributing to the global challenge of net zero. In addition, the company's emissions represent only 0.2% of the avoided ones. Naturally with a very small footprint. Regarding circularity, we have improved our recovery ratios to 80%. On biodiversity, there was a fire in Mexico that was classified as significant because it affects some protective species according to local protection laws. This incident is under analysis, and naturally we'll be implementing any corrective and preventive measures that we may conclude from this analysis. On the social dimension, EDPR team reached 2,150 employees worldwide, that's a 24% growth year-on-year.
In relation to diversity goal, the percentage of female employees increased to 32%. That's a two percentage points increase year-on-year. Regarding health and safety, there was an average 2.1 work-related accidents per million work hours, and 84 lost work days per million work hours, which reflects naturally the acceleration of growth in construction activities, and of course, the increasing size of the portfolio. There is a very complete and holistic program on the way to make sure that we keep on improving on health and safety. Regarding communities, EDPR maintained its EUR 5 million cumulative investment in access to energy and reached almost EUR 2 million in social investment. That's a lower year-on-year also given the COVID-19 response plan that we implemented along the lines and across the local communities back in 2020.
With this, I would now hand back to Miguel for the closing remarks. Thank you.
Yeah. Thank you, Rui. Just a couple of comments sort of as key takeaways, and then also just some comments on how we see the overall sector context and outlook. In terms of key takeaways, first, as you saw in the presentation and the numbers really was a record year in terms of growth for EDPR, and so clearly ramping up towards the 2025 target of the 20 GW. I mentioned already earlier significant increase versus 2020 and almost more than tripling versus 2019. The second comment is on the supply chain. Obviously there has been disruption. I think that's everyone's aware of that. We don't see that impacting the overall business plan, and we do see that we are well protected from inflationary and interest rate pressure.
On the 8.4 GW secured, you know, good returns and good risk profile. It's already a very significant percentage of the 23 target, so around 75%. As I mentioned, we already have 6 GW shortlisted and under negotiation, taking a bit more time, mostly due to the fact that we were renegotiating the PPAs to take into account increases in the CapEx, so to ensure that we kept the returns. On Ocean Winds, you know, growing its operating capacities 1.5 GW in a total portfolio pipeline of 9.3 GW, so continuing to develop very well. On asset rotations, EUR 1.5 billion proceeds with the EUR 500 million gain booked in 2021, and we already have around EUR 900 million proceeds signed with attractive multiples for 2022 completion.
In terms of financials, overall, EBITDA of around EUR 1.8 billion, net profit of EUR 650 million, so EUR 100 million more year-over-year. Finally, I mean, just generally, the growth outlook continues very strong. We're very well positioned to capture it now globally, including all of the major key growth regions. I think just as a couple of general comments, I mean, we do see the policy environment still supportive of the energy transition.
I mean, naturally there's an energy crisis going on with the gas prices and the power prices, but we had COP26 held in Glasgow just a couple of months ago, and as I mentioned earlier, we definitely see renewables as being part of the solution and not part of the problem. If anything, you know, the European Commission and the various different governments are aware of that, and they know that they need to facilitate and accelerate the pace of renewables build out, facilitating also things like licensing and permitting the build-out of the infrastructure to make sure that that happens. The IEA World Energy Outlook was released last October. I think that was also an important milestone last year.
You know, if you just go back to that, to what it said, I mean, essentially it said, the overall investment that is required for the global clean energy until 2030 is around $4 trillion. That's a very significant investment over this period and obviously a very significant growth versus what it was or what it's been. In Europe, I mentioned already the European Commission does have a very strong incentive to deploy more renewables. As well as renewables, also just energy storage solutions, energy efficiency, building out grids, all this is going to be supported by the deployment of the NextGenerationEU. That's something that's also moving forward, and we expect to have more visibility during 2022.
There's obviously a lot of applications of projects at national levels, including the Just Transition Fund, to help transition, for example, carbon coal plants to, let's say, to renewable projects with hydrogen. There's going to be a lot of activity in some of the geographies we're present in on that. In the U.S., demand from the corporates continues very strong. The renewable targets continue to be upgraded at the state level. I mean, unfortunately, as we all know, the Build Back Better bill was not approved, yet at least.
Anyway, I think without wanting to have any expectations, the truth is we've seen, you know, we've been present in the U.S. since 2007, and despite all the different administrations and all the different, let's say, federal perspectives, the truth is that a lot of this is driven at the state level. We continue to believe that the sector will continue to grow, and obviously that there will be some benefit from potential short-term extension of the PTCs and the ITCs as we've had in the previous administration. Just on a final note, just saying that, you know, we do continue to see this strong demand.
As I said, the energy crisis that's going on just highlights the importance of really accelerating the energy transition and making sure that, you know, we have more renewable sources, more endogenous sources. That's. It's a question of energy independence and not just a question of environment. I think that's something that people are very aware of and they're very focused on as well. I'd probably stop there and turn it over to Q&A and talk to you soon.
Thank you so much. As a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. You'll then be advised when you can ask your question. Again, it is star one on your telephone keypad to register for a question. The first question is coming from the line of Alberto Gandolfi from Goldman Sachs. Alberto, you're unmuted and now go ahead.
Thank you. Good afternoon, and thank you for taking my questions. There will be a lot to talk about. I'm clearly going to stick to there here. The first one is on returns. Pretty much every metric you've been showing on slide 10 exceeds the expectations you provided on the business plan. I wanted to ask you if you can elaborate with a few numbers here, were you pricing in a contraction in IRR over WACC, which has not happened, or has actually IRR over WACC expanded? I'm trying to gauge if there's an industry-wide improvement in returns or maybe EDPR specific, you were just better at that. I'm just trying to understand what's really going on on returns versus your expectations just over a year ago.
Second question is, I think you've been super clear in telling us, you know, 90% of equipment is secured, you know, 75% of the project. May I ask you, if you were to look at your previous business plan and you look at the current one, if you were to freeze the world, you know, current expectations for, let's say, end of 2022 inflation, slight normalization, but, you know, not going back to what we had a couple of years ago, how would your plan look like? You know, what would be your leverage? What would be your EBITDA by 2025? I think you had a EUR 2.3 billion EBITDA target with EUR 300 million gains in it, so it's kind of like EUR 2 billion underlying.
Are we now going to have something like probably a bit higher EBITDA because of power prices and inflation hedge, but higher leverage as well because CapEx? Can you help us understand a little bit almost on a mark-to-market basis? Last, not least, you continue to achieve higher than expected exit multiples on your asset rotations. Can you maybe tell us versus the 20 GW that you were originally planning to add, how much more are you going to retain versus your original expectations? You know, same value creation you keep or you divest or similarly, I suspect. Can you tell us, are you going to retain more megawatts, perhaps, than what you were thinking last year?
Does it mean that the underlying EBITDA 25 should be even greater in that case, or maybe I'm just totally off? Thank you.
Hi, Alberto. All's good to talk. In terms of the three questions, in terms of returns and looking at slide 10, I mean, we have had, I think, a good performance. This is the stock of the different projects that we already have secured. We continue to see, I mean, obviously this depends on the technologies, depends on the markets, but globally, the portfolio continues to have an average return above the 1.4x. I wouldn't say it's expanded. I mean, in some places it will go up and then come down. I mean, it has its own market dynamics depending on the competitiveness, which varies from time to time. What we've done, I think, is just a good capital allocation.
You know, we really are quite pickier or disciplined about the project, and if we see that the returns are going down too much, we won't invest there and we'll go and invest somewhere else, and try to keep that high overall return expectation. That's I guess one point. That's one of the reasons why, you know, with the recent CapEx increases, we obviously had a lot of PPAs that were under negotiation, and in many cases, we had to go back and, you know, ask for the additional $2-$5 or EUR 2-EUR 5, depending on the geography, to ensure we got that.
As I say, that was a conscious decision, so we wanted to make sure we just didn't lock in the PPAs for the sake of the PPAs, but that we actually got the returns we wanted. We've managed to keep that. I mean, the WACC obviously has varied over time, but the returns on, you know, the current cost of capital basis, we continue to look for the same spreads and multiples that we have in the past. On the second question, I'm not sure I got it 100%, but if you want me to comment on 2025 versus previous business plan, is that it?
That's correct. Correct.
Maybe it's done. Yeah. First, we are investing more, and we are growing faster than in the previous business plan. What we had in the previous business plan, as in 2019-2022, we had an average of 2 GW sort of growth expected. You know, just last year, we built 2.6. Clearly we are looking to continue to ramp up, you know, despite obviously the challenges that I talked about, but continue to ramp up the pace of growth. On that side, I would say that we are, you know, going to have more megawatts being built, which means more CapEx as well. In terms of other, let's say, dynamics that we see in the market, clearly the power prices are much higher now and expected to be in the next couple of years.
I mean, even looking out till just 2023, you know, we're seeing OTC, you know, pool prices in Iberia, for example, above EUR 100 per MWh. I mean, that was absolutely unthinkable, sort of any time over the last decades. That naturally translates or we think will translate into higher, say, revenues from the components that aren't fully hedged at the moment. We do think that over the next couple of years, and depending on how prices go, but just looking at where they are now, expected for 2023-2025, there could and should be some upside there. In terms of the third question, which was the exit multiples.
Again, what we look at is the balance sheet, and what we want is to ensure that we have a solid balance sheet so that, you know, to ride out the different economic cycles and make sure we can continue to grow without any problems there. What we'll do is we'll back out what are the megawatts that we need to rotate in order to achieve that, you know, the proceeds to keep that balance sheet at the BBB. In this case, we're getting much higher proceeds per megawatt than expected and, you know, better capital gains as well. As I say, we'll probably be able to achieve the overall proceeds with fewer megawatts.
You know, I think we've discussed on previous calls that the question will be, and that's not a decision we've taken, as to whether we then continue to grow even more or whether we just retain more, you know, rotate more and try and grow more or retain more. In any case, I think the bottom line is that we are clearly exceeding the capital gains and the proceeds per megawatt basis, which just shows there's a lot of demand for these type of assets. I think that, you know, we are able to create value in this process. You know, we're kicking off a bunch of different transactions also for 2022.
Then, you know, we'll also see how it goes this year, but we have no reason to believe that it, you know, we won't continue to see very attractive returns and value creation there. So hopefully that answers your question as well there.
It does. Very clear, and thank you for disclosing so much more on returns. I think it's very helpful to the industry. Thank you so much, and congratulations.
Thank you, Alberto, for your questions. The next question is coming from the line of Pablo Cuadrado from JB Capital. You're now unmuted, and now go ahead.
Hi, good afternoon. Thank you for taking my questions. I have four, if I might. The first one is still related to the asset rotation program. I would like to have your view on whether the current inversion of the interest rate cycle already had some impact on the demand for assets in terms of prices paid, but mostly in terms of volumes. That would be my first question.
The second one, it's also related to inflation, but here on the CapEx side, is whether you had to cancel any project due to CapEx inflation that you were not able to pass on to PPAs or to tariffs. The third one is if you can clarify what is currently being discussed in the U.S. regarding PTCs and ITC, because there is a lot of things going on. What is the current point of situation? What is pending? The final one, it's a bit more conceptual. You have been doing some arbitrage between the prices paid in public and private markets by doing the assets rotation program. My question is if you could go a bit further and do some type of buyback or something like that.
Thank you very much.
Thank you, Jorge. On the first one, on the asset rotation, we're not seeing, let's say any change in demand from investors based on sort of the interest rate cycle inversion. In terms of prices, I mean, the last transactions that we closed still didn't incorporate any sort of material adjustment. I mean, obviously I think people will as we go throughout the year, I don't expect there to be an issue of demand. I think there's always demand for these assets and we've seen that throughout the many years that we've been doing this. In terms of prices, obviously people will incorporate the latest information in terms of cost of debt and cost of equity at any particular moment in time.
I mean, I expect that will be priced in. On inflation and CapEx, did we cancel any project? The answer is no. What we did, I think we've been quite successful in going back to the clients. As I mentioned, you know, when you're closing a PPA at EUR 30 and you're revising up to EUR 34 or EUR 35 as an example, I mean, it's still a hell of a lot cheaper than what the current pool prices are and what, you know, the power prices are for the next couple of years. What we found is, let's say, the ability for our customers to incorporate these deltas in price and continue with the project.
We haven't had any cancellation, and we've managed to find a solution for the projects that we had in you know that we are already sort of in advanced negotiations on the PPAs. On the U.S. PTCs and ITCs. Listen, I'm not building in any expectation on the you know Build Back Better. I think that's done. I don't have any indication that it will be resuscitated or certainly I don't you know even if there's talk about it, I'm not betting on it.
What I am betting on, which I think is, you know, the base case and it was the base case also, even when we presented the business plan, is that the U.S. will continue to have very strong demand at the state level, and that the PTCs and the ITCs in some form or other will continue to be present. I think, you know, if we go a little bit more specific, you know, Joe Manchin, who is a senator from West Virginia, who has blocked the Build Back Better, I mean, he's had public statements saying that he's supportive of the renewables part or the clean energy part of the Build Back Better. He just wasn't supportive of the social part of it. I think there's clearly space there.
I mean, in the past we've seen it sort of over the many years of, you know, being able to extend the PTCs and the ITCs, and so I think our base case is that that will continue to happen, not with as much predictability as would've happened under the Build Back Better, but it will happen in any case. Other things that were present in the bill, things like direct pay and stuff like that. I mean, to be honest, that wasn't going to be like a major issue for us, positive or negative. It would've facilitated perhaps that for other companies, but we've always had access at very competitive rates to tax equity, and so we've always been able to monetize PTCs and ITCs, and we've been doing that for many years, so it's business as usual for us.
In that sense, not having direct pay is not an issue. If anything, it could be even a potential barrier to entry for smaller players. On the fourth one, no, I mean, we don't have any plan for buybacks, to be honest. You know, we've been just focused on, you know, we do this asset rotation because we think it's a good way of, you know, releasing value and being able to reinvest it back into the business. We don't have any current plans to do any buybacks.
Many thanks for your answers.
Thank you for your question. The next question is coming from the line of Javier Garrido from JP Morgan. You're now unmuted, and now go ahead.
Thank you, and good afternoon. I have three questions, if I may. The first one is, if you can comment on the difference between gross and net capacity factors. Is there a widening gap due to curtailment in any of your markets? The second question would be on your hedging strategy in Spain. Have you managed to change it, now to start to exclude the output from the regulated capacity? The third question is on your comment on the 25% of revenues that should be merchant in 2023.
Particularly, it would be very useful if you could cast some light on the allocation of those revenues on a per country basis, you know, to get a better feeling of what could be the benefit of having that merchant exposure. Thank you.
Javier. I'll take the first one and then pass it to Rui, who can talk about the second and third one. In relation to gross versus the net, I mean, we had one situation clearly in the West on quite heavy curtailment, which was during the time of the polar vortex and sort of around that time. That was relatively strong curtailment. In Spain, we've had some in some specific situations, some curtailment. I'd say those two situations, which are quite specific, are what explain a big part of the delta between the gross and the net capacity factor. Not thinking of anything else which has sort of materially impacted that delta. In terms of hedging Spain, Rui, if you want to comment.
Hi, Javier. In, I mean, we did some optimization mainly between the Q4 2021 and the Q4 2022, just, you know, taking into consideration a specific detail on the regulation. As you know, I mean, it was pretty much locked in. What you would see here is, of course, I mean, in the fourth quarter, we have a good impact from the NCFs because there were 104% of P50, so that had a positive impact. Just the fact that in the previous quarter, we had in that the regulatory adjustment, basically we were concentrating into one single quarter, you know, the impact from the nine months.
From a hedging, you know, perspective in Spain, I mean, there was some adjustments, but again, some shifts between Q4 2021 and Q4 2022. Then the final question, I mean, on the split per country, I think we can follow up on that. I don't have that in front of me. But I mean, there will be a substantial part which is Spain and the U.S. Then we will have smaller percentages coming from Poland that was, you know, likely be on top of this because it's more on the REC side. So it would be fundamentally Spain and U.S. You know, roughly speaking, I would say maybe half U.S., a third Spain, but we can follow up with more precise data.
Okay. Thank you. Thank you very much.
Thank you for your question. The next question is coming from the line of Sara Piccinini from Mediobanca. You're now unmuted, and now go ahead.
Hi, good afternoon, and thanks for taking my questions. I have three. The first one is on this situation of commodity prices that is obviously under the spotlight. You say that 90% of the capacity is contracted. Are you referring to the 8.4 GW correct? If so, when will you start to contract to negotiate for the contracting of the new capacity? If you see higher prices, which is the technology where you see higher risks of higher prices and so that could delay investments? This is the first question. The second question, if I understood correctly, you saw a slowdown in the negotiations of PPAs or maybe there are some PPAs that are still on hold.
The question is, isn't this counterintuitive in the sense that in this delicate situation of high energy prices in Europe, shouldn't we see an acceleration of PPAs with government pushing for contracted power with the renewable players? Just if you can give your view on this. Final question is, if you have any indication on the guidance for capital gains from asset rotations that you expect for 2022, and maybe a guidance for 2022 in general. Many thanks.
Thanks, Sarah. Thanks for the questions. I think in relation to the first one, I mean, just first in terms of the technologies where we're seeing sort of just generally we saw the highest increase in prices, that was mostly solar for projects that we were negotiating. I mean, the 90% contracted, as you say, is in relation to the 8.4 GW, but it already includes, let's say, that includes already the MW that were closed with no changes in CapEx or CapEx that had already renegotiated the PPAs. For future PPAs, we are incorporating that higher CapEx numbers. As I say, that's going to be mostly solar, and we hope to be announcing those shortly.
In relation to your second question, which is, I guess, a follow-on from what I just said, the slowdown in PPA negotiation just means you need to go back to the customers and, you know, tell them they need to revise their numbers. I mean, it does take time. I mean, in one case, I can tell you, which is quite a large order, we're probably talking about a gigawatt of projects, it's taking about two months to go back. There is an administrative procedure which ends up being slow. I mean, we're talking about 15-year contracts, so, I mean, people are seeing the higher prices. I don't think that necessarily means that they can rush through the administrative processes that they need to go through just because of that.
Let's say that's one part of it. In general, I do agree, though, with your comment that we are seeing a lot of corporates in Europe, which in the past we didn't see as much. As you know, in the U.S., you all had a lot of corporates doing PPAs. In Europe, not so much. It wasn't really that, you know, such a strong market for corporate PPAs. We are seeing a significant pickup in that, in clients wanting to discuss that. In the past, customers would look for, you know, your traditional corporate in Europe would look for an 18-24 month contract with a retailer. Now they're looking at, you know, five years plus energy contract and considering doing PPAs.
I think there is a reaction from the market. Because the market is not extremely mature, it also takes some time for people to feel comfortable with what it means to negotiate a PPA, you know, with everything that goes along with it. I mean, it's obviously a much more complex contract than simply, you know, going to your local retailer and buying energy for the next 12 months. I think there is a lot of education going on at the moment in the sector regarding longer term PPAs in Europe. In relation to your third question, we don't give full guidance for 2022. What I can say in relation to the asset rotation gains is that we expect, again, you know, comfortably above EUR 300 million this year.
What we had in the business plan was EUR 300 million. I think what we've seen, you know, I mentioned that and also in the answer to Alberto Gandolfi, is that we've been finding that we are getting better multiples than probably what we were expecting or incorporating into the business plan. I'd say, you know, above EUR 300 million for 2022.
Okay, thanks.
Wynn, thanks. Thank you for your question. The next question is coming from the line of Gonzalo Sánchez-Andrada from UBS. Your line is now unmuted. Now go ahead.
Yes. Hi, good afternoon, and thank you for taking my questions. I have a couple of clarifications, if I may, just to see that I got the message right. On if I understood correctly, you are not seeing any sort of changes in the market environment for asset rotation transactions with regards to the yields required by buyers or potential buyers. So effectively, just wanted to confirm that if you are assuming that you will get higher than expected capital gains on next deals, that you're not probably seeing that. But I would appreciate any clarification on that point, given the environment of pricing yields and potentially rates. And the second one would be on the capacity that you have already secured.
I mean, we've seen a significant slowdown in the last part of the year in terms of new capacity being secured. I would assume that this is pretty much related with the fact that you have been renegotiating some of the PPAs that you have already kind of closed or so on. But I was wondering if there is something more out of the ordinary that has basically meant that you are seeing less interesting projects or projects that are maybe yielding a lower return and therefore not that appealing to you, or if this was just a matter of calendar by the end of the year, beginning of the year, or something like that. Thank you.
Yeah. Hi, Gonzalo. Just to be clear, in terms of the asset rotation, what I said is that we continue to see a lot of demand for these type of assets. You know, whenever we go out to the market, we see them, you know, we see a lot of investors that still have appetite to take on these type of assets. You know, long-term contracted, good cash yields, green. I think that demand is there. In terms of the actual yields that they're looking for, I mean, what I mentioned is that they will typically price, you know, market conditions. They'll take into account whatever the cost of debt at the time and any cost of equity that they're assuming.
You know, if there is an increase in cost of debt, then I would assume that that's going to be reflected. In the projects that we've already signed, I mean, it's signed, it's done. In relation to additional transactions in 2022, I mean, we'll have to see, but I assume it will reflect the market conditions at the time. We'll have to see what the central banks do over the next couple of months. Sorry. On the second question, capacity. No, listen. As I mentioned, we did have to renegotiate the PPAs, so that did slow us down in the fourth quarter and the beginning of this year. Just globally, we continue to see very strong demand, I mean, from corporates, from centralized auctions. You know, we do need to.
You know, we are disciplined about the returns we look for, so, you know, we, in some cases, we will not step into certain markets if we think that it's too, you know, too competitive or we're not getting the returns. I think globally, we're continuing to see very strong demand. You know, I mentioned, for example, one of the around 40 GW of auctions expected to happen in 2022, in markets that we're present in. You know, that gives you an indication. Should it accelerate even more, I mean, you know, that's. We certainly believe that it should. That's something that, you know, we think that both in the European Commission, you know, given this energy crisis, is just something that they're going to be also quite focused on.
How they can facilitate the permitting and the licensing. I mean, without giving away any confidential information, but I can tell you that, you know, at the highest level at the European Commission, it's they are looking at sort of how to, how they can help accelerate the rollout of renewables at the sort of local level, looking at things like the, you know, faster interconnection points, a single point of contact for the permitting and licensing, very clear milestones. That's something which I think is, you know, Portugal and Spain are already pretty good at that and pretty fast. I'd say that some other European geographies or countries could be more agile in doing that.
That's very useful. Thank you very much.
Okay. The next question is coming from the line of Manuel Palomo from Bank of America. Your line is now unmuted, and now go ahead.
Hi. Good afternoon. Thanks for taking my question. Two from me. First of all, on the offshore JV, it's very likely that we'll start to consume more CapEx in 2022 and 2023. Is it the plan here to sell down stakes in some of these projects under construction? Or would you rather say that that's gonna happen only when construction is completed? Then the second one is on supply chain cost increases. Would it be fair to say that the worst is now behind us, or are you still seeing component price increases as of lately? Thank you.
Okay. I'll take the second one, and we can also talk about a little bit about the offshore. In terms of cost increases, I would say the worst is behind us. You know, we had the particular moment, I think, of stress to the sector as a whole in the last quarter of last year, where clearly there was a lot of uncertainty going on, both on the wind and on the solar side. The solar in particular with production stoppages in Southeast Asia or Asia. Issues around where commodity prices were going to go. It was a very turbulent market. I think things have calmed down now. Doesn't mean the prices have come back to where they were before, but at least there's a bit more stability.
You know, at one point, you know, we had less visibility on when deliveries were going to take place and on the overall costs. I think as of today, you know, as I'm speaking to you, we have that under control. It's, you know, it's pretty clear that what are going to be the timing of deliveries and what is the cost that we can count on. That's what we've also been sort of pushing back onto the customers. On the offshore, José, you want to take that one?
Yeah, sure, Manuel. Thank you for the question. I mean, the strategy is that of course we will be selling down our Ocean Winds. We will be selling down some stakes at those projects. I mean, there is a good, you know, entry point, which is at a final investment decision, so that's prior to the construction start. But it's also likely that Ocean Winds will still retain, you know, significant shareholding position and therefore it could also sell down again, as it enters into operation. So I think, you know, it will be a combination of both, so pre-construction, and then, as it goes into operation as well.
Okay. Excellent. Thank you.
Thank you so much. The next question in the queue is coming from the line of Arthur Sitbon from Morgan Stanley. You're now unmuted, and now go ahead.
Hello. Thank you for taking my questions. The first one is on the strong performance of equity income of associates in Q4. I was wondering if you could walk us through the main reasons of that strong performance and tell us how sustainable that can be in the future. The second question I have would be on the slide where you provide the returns of your project and the IRR to WACC spread. I was wondering if you had changed your assumption in terms of long-term power prices with the recent commodity moves we've seen.
Basically, if you could help us understand a bit what are your long-term power price assumption in your main geographies, that would be very helpful. The last question is on your asset rotation gains. Just trying to understand a bit the situation for this year, for 2022. My understanding is that with what has already been announced, you could be around EUR 250 million-EUR 300 million of capital gains. I just wanted to check if this is right. Thank you very much.
Okay. On the third one, I'd say that on what's already been announced, the capital gain would be slightly lower than that. We haven't provided any specific guidance on that number. Overall, for the year, we do expect to be, you know, as I mentioned, above 300. On the second one, just to say we haven't changed assumptions on power prices. You know, at the time when we take investment decision, which some of these projects come from the past, and so, you know, the power prices at the time were what they were, and that's what was being assumed in the IRR calculation. In any case, as we look forward, we see. Obviously, you know, we use the OTCs or the current wholesale prices for the next couple of years.
That's for new, let's say that's how we would assume the power prices. Since we normally contract PPAs for it's not so relevant in the next 10, 15 years, the actual power price. It's only relevant post the PPA period. We'd be talking about sort of late 2030s decade. There we haven't made any material change. I mean, if anything, even goes on adjusting down as a question, as a function of assuming more renewables coming into the energy mix. I wouldn't say that has had any material impact on the returns that we assume. On the other income, I don't know if, Jorge, you want to give some specifics.
Yeah.
I mean, it is related to the performance in Europe. Europe, we have 104% of the P50. Basically it's also from some contribution from Ocean Winds. We can follow up in more detail, but that's fundamentally where it's coming from.
Thank you.
Okay, thank you for your questions. The next question in the queue is coming from the line of Olly Jeffery from Deutsche Bank. Ollie, you're unmuted, and now go ahead.
Thanks very much. Good afternoon. So a few questions, please. The first one, just going back to the unhedged merchant position that you have, could you please confirm when you talk about that, how many terawatt hours do you have on an unhedged basis, roughly annually? And can you please just confirm how much you have hedged for 2022? I heard your figures earlier in the call for 2023, 2024, 2025. The next question is on supply chain. You mentioned the supply chain is leading to some issues of delays by a couple of quarters. Are you seeing a quarter potentially? Are you seeing any potential for that to get larger than that? Or should we not be concerned about material delays beyond the quarter coming into effect?
Lastly, I know you're not giving guidance for this year, but I wonder if you could comment on the consensus. Consensus currently on Bloomberg is EUR 1.78 billion EBITDA. So potentially EUR 1.5 billion EBITDA underlying, assuming EUR 300 million gains and EUR 600 million net income. Are you comfortable with the absolute figures and the underlying current mean consensus for 2022? Thank you very much.
Hi, Ollie. With regards to the first question, I mean, starting by 2022, we have about 75% hedged. That's 7.7 TWh of power, so let's say 2.5 unhedged. 2023, 35% unhedged should be roughly speaking 4 TWh -4.5 TWh . It's about 6 TWh -7 TWh for the following years, for 2024 and 2025. Give or take, I mean, I would say these are pretty much the numbers.
In terms of the others, Ollie, supply chain delays, do we expect larger than that? Not for now, we have no indication that there will be any, you know, more than what we talked about sort of on the solar side, maybe 1-3 months, that type of range. You know, as I mentioned at the end of last year, last quarter, there was a moment when we didn't have that much visibility because the suppliers themselves didn't have visibility on how the logistics and everything was going to work out. At the moment, we have confirmation that for those projects, you know, they will be delivering. As I say, it could mean projects slipping from 2022 to Q1 2023, things like that, but not materially more than that.
On the guidance, we don't, I mean, we don't give overall guidance. So if I commented on the consensus, I would be giving implicitly a guidance. So I prefer not to comment. Thanks.
Okay. Thank you.
Thank you so much. The final question in the queue is coming from the line of José Ruiz from Barclays. Your line is now unmuted, and you can go ahead.
Yeah, good afternoon, everyone. Just two questions. Number one, how do you see 2022 in terms of wind resource? We had two bad years, particularly 2021. How do you see that year compared to those two previous years in terms of wind resource? The second question is, in the current environment of increasing interest rates, particularly in the U.S., how do you see the evolution of cost of tax equity partnerships? Thank you very much.
Okay. On the first one, even recently, I think it was about three weeks ago, we got our technical teams together, and we went back and looked at this. We have absolutely no indication that there is any pattern or any indication that there was any decrease in wind. The volatility we've seen is perfectly within normal years or with the normal, let's say, taking sort of a couple of decades of wind resource data. There's absolutely no indication that there is a change there. Two bad years, it happens. I mean, obviously we need to follow it. I mean, if we start getting more than maybe a pattern does start to emerge, but as of the moment, as of now, there's zero data that supports that.
On the contrary, I mean, it's very consistent with other periods that we've had in the past. Obviously, people are much more sensitive to it now because there's an industry now which depends on it, and so we become more sensitive. On the tax equity and the interest rates, I mean, on the way down it didn't have so much, but Rui, do you want to comment more specifically? Yeah, I can. So I mean, tax equity in U.S. is a market, as you know, two banks, they pretty much, you know, account for about 50% of the market share in tax equity. So I would say that, you know, it stays relatively stable.
You know, while we saw U.S. dollar yields going down, I mean, the tax equity, I would say was around the 5%-6%. Nowadays, I would say it would be more than around the 6%. They never go down tremendously. They neither go up, you know, certainly. I would expect that for 2022, you know, should be around the 6% or 6%+. Thank you.
Okay, thank you everyone for your questions today. There are no further questions in the queue, so I would like to hand it over to your host to conclude today's call.
Thank you very much, everyone. Thank you for attending the 2021 results call. I'll just pass further final remarks for Miguel too.
Okay. Listen, thanks for being on the call. Hopefully it was useful. You know, I think we did have a great year last year. I mean, despite the difficult conditions and obviously, you know, a lot of challenges, a lot of issues, but if this was easy then we wouldn't be here doing anything. I think, you know, we are very positive on the outlook, and I do think that we've managed to get over some of the bumpier road, parts of the road, certainly in terms of supply chain and in terms of, you know, the visibility we had on some of the projects.
We continue to work hard on making sure that we continue to deliver the business plan. Just a final note, just before we sign off. This is André Fernandes' last IR presentation here. As you know, he's been doing the IR for the last year. Going forward, Miguel Viana will be managing both IR teams, both in Lisbon and Madrid. He'll be the key contact person going forward as well for that. Thank you, André, for the great work and I'm sure everyone appreciate that very much.
Thank you, Miguel.
Thank you, everyone, and talk to you soon. Talk to you on Friday.
Thank you everyone for joining us on today's call. You may now disconnect your handsets. Hosts, please stay connected.