Hello and welcome to the EDPR Q2 results presentation. My name is [Rhian], and I'll be your coordinator for today's event. Please note 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 to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. For now, I'll hand you over to your host, Miguel Viana, Head of Investor Relations and Sustainability, to begin today's conference. Thank you.
Good afternoon, everyone. Thank you for attending EDPR's first half of 2022 results conference call. We have here with us our CEO, Miguel Stilwell d'Andrade, and our CFO, Rui Teixeira, who will run you through the key highlights of our strategy, execution and the first half 2022 results. We'll then move to Q&A, in which we'll be taking your questions. We know today is a busy results day, so we'll try to do this call in no more than one hour. I'll give now the floor to our CEO, Miguel Stilwell d'Andrade.
Thank you, Miguel. Good afternoon, everyone. As Miguel said, I know it's a busy week, so I'll try and just talk you through the key highlights in the presentation and Rui as well, obviously, for the financial impact. I'd start off by going straight into the presentation on slide five and essentially say EDP Renewables had a strong performance in the first half of 2022. Quite frankly, as you know, sometimes we have bad quarters, good quarters. This quarter and this semester is definitely a strong one. Strong growth in EBITDA up almost 50% to EUR 980 million approximately. Very much supported by the expansion of the asset base. We had installed capacity increasing 10% year-on-year.
We had good, strong renewable resource, namely the stronger wind volumes, 2% above the long-term average for the portfolio. We also saw a significant improvement in the average selling price that increased 27% year-on-year, with essentially higher realized market prices in Europe in general, and a positive impact also from the update of the Spanish regulatory framework, and we'll maybe talk a bit about that later on. It was a win-win. Our net profit increased around 87% to EUR 265 million. Reflecting the strong EBITDA performance. Focusing on growth towards the business plan targets and specifically the capacity additions. Since 2021, we've achieved additions of 3.2 GW, and we have a record of capacity under construction of 3.2 GW by the end of June.
I think this is something worth highlighting, that we've really been ramping up the projects under construction over this period. We have an additional 2.2 GW of projects contracted and committed since the beginning of 2022, and we now have 10.6 GW of secured capacity for the 2021-2025 period. Overall, with these, let's say these highlights or these achievements, we are moving closer and closer to the 2021-2025 target of 20 GW of capacity additions. Overall solid ramp up of growth across all regions and technologies.
In terms of value, this quarter we completed two asset rotation transactions, one in Spain and another one in Poland, with a good average multiple of around 1.9 million EUR per megawatt and a total of around 100 million EUR of gain. We have another transaction signed that's expected to close by year-end, and there are other transactions under negotiation, which as we've indicated previously to the market, we expect would bring more than 300 million EUR of asset rotation gains in 2022. On excellence, we continue to be recognized as a clear enabler of the energy transition, best in class regarding the ESG performance, and we've had several distinctions if you want, throughout the first semester. I mean, they're highlighted here on the slide, and obviously happy to go into any of these if you want.
Moving forward to slide six. Let's talk a little bit about renewables growth. I think clearly one of the things that's been highlighted by all the, let me say, the market movements over the last couple of months, and particularly I think by the tragedy of the war in Ukraine, is that renewables is a strong answer, not just to decarbonization, but also to security of supply and affordability. I mean, the typical energy trilemma where normally more focused or renewables more focused on the decarbonization aspect. Clearly now it's supporting all three axes of the typical energy trilemma. We clearly think that it's something that needs to be supported globally, to ensure that we, you know, particularly in Europe, that they are able to get sort of this additional security of supply and affordability.
Europe is in fact taking the lead. Just to do a couple of highlights on the different regions, you have Europe, U.S., LATAM and APAC. In Europe, REPowerEU, presented in May. Ambitious targets, for example, increasing the weight of renewables in energy consumption to 45%, so increase versus the Fit for 55%. The increase in ambition also requires execution. It can't just be about setting targets for the long run. The member states now need to act to achieve these targets. There's also been some, let's say, support and push by the European Commission regarding things like licensing and permitting, which I'll talk a little bit later on. On the other hand, in the U.S., unfortunately, we see some lack of positive developments.
The Build Back Better, as you know, was back in December, didn't move forward. There was also some expectation that it might move forward now before the summer. That doesn't seem that it's going to happen. It's not moving forward at the Congress or Senate level. There's no visibility on the tax credit extensions for now, although this is something that typically comes later in the year. Well, on the positive side, some of the uncertainties around the import tariffs on solar panels have been reduced. This is something I'd mentioned on a previous call. The anti-circumvention investigation, there's now a two-year tariff waiver, which so we have at least visibility on that, which is important.
On the other hand, there's been some increase in the bureaucratic process of imports of solar PV equipment that may cause some delays to adapt to the new rules. Generally, as you know, we continue to believe a strong structural growth in the U.S., some short-term issues around the solar side. Moving on to LATAM. LATAM, as you know, in Brazil, typically the regulated auctions and the C&I market continues to support growth. We also had some recent auctions there that where we were successful in. In Mexico, just to mention, we only have 3% of our operational capacity there, but there is still some significant regulatory uncertainty for renewables, which is being addressed by the sector.
Last but not the least, in APAC, we are seeing governments have more and more commitments to the decarbonization targets. Again, not just because of the decarbonization, but also because of energy security and affordability. Many parts of Southeast Asia, including China, are net energy importers. Obviously this gas price and energy prices in general are also having an impact there. In Singapore, for example, two RFPs were launched recently for projects to import up to 4 GW of renewables up to 2035. In Vietnam, just give another example, you have the Power Development Plan 8, which increases the 2030 renewables capacity targets versus the previous plan, increases by around 40% for solar and almost triples for wind. If we move to slide seven, just going a little bit more in-depth on the repowering.
I think what I'd mention here is clearly Europe is leading the way. As I mentioned, the target increasing to 45% by 2030. Overall, renewables in the electricity sector expected to grow from 36% in 2020 to almost 70% by 2030. I think it's worth highlighting this last bullet here, which is very striking. The annual additions needed to ramp up for solar is around 3.5x to 48 GW per year, and around 2.5x for wind onshore to 36 GW per year. The total renewables installed capacity needs to increase by 2.5x by the end of the decade to reach more than 1.2 TW by 2030.
Clearly a lot of ambition, but there also needs to be execution, and we're convinced that more or less bumps in the road, but there is going to be this push to grow. We move on to slide eight. An ambitious plan, as I mentioned, but it needs to be executed. You know, just highlighting some key points that I think should be addressed and that we've been discussing at various levels, whether it's at the member state level or whether it's even at the European Commission level. There's definitely a need for faster permitting. This is something I think that we can all agree with. You know, can digitalize it, simplify it, standardize it. Clearly you need to also have more resources here.
The plan, REPowerEU, has mandated an average development time of two years, while currently it easily exceeds three years. Clearly there needs to be a push here. I can tell you that we have been getting a lot of dialogue with the different countries to see how to do this. I do see movement here, and I do see a willingness to accelerate the permitting. Second, easier grid connection. Hybridization, repowering, all this requires fast-track permitting, but also the long-term grid planning and investment. That needs to go hand in hand with the increase in the build-out of renewables. Europe overall, we expect it to need an additional 85 GW of interconnection capacity by 2030.
Finally, last but not the least, again, regulation, definitely important. Stable, adequate regulation to incentivize investment in the region. Reduction in the market intervention and giving visibility on auctions to promote, let's say the build-out of renewables. It's not just about setting the 2030 target, it's about setting almost annual targets over the next couple of years to make sure that we get to the 2030 target. Clearly strong measures, also sense of urgency driven by the macro context. Probably not we won't see a very short-term impact, but definitely mid-term outlook is positive, and we think EDP Renewables is very well positioned to capture this additional growth. We move on to slide nine, just to talk a little bit about where we are in terms of the capacity build-up.
We already have more than 50% of the 25 target committed, so we've increased it by around 4.6 GW. Now, this includes all capacity with long-term contracts or with CapEx committed. The 3.2 GW already operational, 3.2 GW that are under construction, and the rest that we've already secured, typically with PPAs. We continue to have good visibility on the execution of the plan. We currently have more than 3 GW of PPAs under negotiation. Obviously, we continue to follow our investment criteria, which we've talked about in terms of IRR over WACC and also spreads over WACC. What I'd say here is we are confident on the execution.
You know, even recently, we took a step back and looked at how things were progressing, and I can tell you that we are very confident on this. We continue to secure different growth opportunities, so it's diversified in terms of platforms and technology and growing across the different regions. On the technology side, I mean, we have a great track record on wind onshore. We are developing very quickly the wind offshore. I think the last six months have been very strong in wind offshore. For solar PV, we've been working on it for quite a few years. We also continue to see good growth here in the various different markets.
Also in distributed solar, quite frankly, both in North America and in Southeast Asia, where we see that is a technology which has a lot of scope to grow. Specifically on offshore Ocean Winds, as you know, our partnership with ENGIE 50-50. It is a major source of growth. We currently have 12 GW portfolio, so we've almost doubled the portfolio we had as of the Capital Markets Day back in February. I think it's important to highlight that development projects in France, the U.K., and Poland have inflation-updated revenue secured, so we are well protected against inflation risk. This is a question we get asked quite frequently. Moray West, one of our projects in Scotland, is under construction as of very recently, July. It's been awarded around the 200 MW and 300 MW CfD contract at 47 GBP/MWh as of, you know, 2022 prices.
We have complementary corporate PPAs, let's say for the full number of megawatts of Moray West. We also have a small merchant component of this. Another point which I think is worth mentioning, as you know, in ScotWind, we'd won approximately 1 GW, or the reference we gave to the market was 1 GW. It was actually confirmed this month that it's actually 2 GW capacity potential. Thanks to a U.K. grid reinforcement plan that was recently announced, we will be able to double the capacity coming out of the Caledonian project. As you know, Moray East, Moray West, and Caledonian are all contiguous up in the Moray Firth.
I think that gives us quite a lot of, again, visibility, let's say, of growth in Scotland. Also, I think it's interesting to note, we have a floating offshore development project in South Korea with grid access already secured since the beginning of 2022 for 1.3 GW of capacity. That's something that we'll be seeing, you know, the development of that over the next couple of years. Just to summarize, Ocean Winds, 1.5 GW installed capacities, 3.5 GW under development with long-term revenues contracted, and 7 GW under development projects with seabed or connection rights secured. Definitely a reference in the wind offshore sector. Moving on to slide 11. Asset rotations. It's definitely been interesting market dynamics, but I'd say positive.
You know, we were asked lots of questions about whether the increase in interest rates was going to have an impact on asset prices. What we're seeing is that this has been more than offset by higher energy prices in most of the markets. We continue to see very high appetite from investors. We continue to see strong asset values because as I say, and higher energy prices offsetting or more than offsetting interest rates increases. We clearly expect to be above the EUR 300 million capital gains. We've already closed two transactions this year. One was the 150 MW Polish portfolio, closed at around EUR 2 million per MW. The second transaction in June was a Spanish wind portfolio, 180 MW at a multiple of 1.8.
Gains from these total around EUR 100 million. We already have 2.6 GW, EUR 1 billion of asset rotation proceeds out of a total of eight. I think that really shows that we are able to recycle capital, to reinvest into accretive growth. We have other transactions under negotiations and hopefully we'll give visibility on that over the rest of the year. We are reconfirming the asset rotation gains in 2022, barring any sort of accidents or some sort of unexpected issue that might come up. On slide twelve, let's talk about average energy prices or selling prices. I think definitely this is something which we have benefited from in the first half, so an increase of around 27%. As I said, generally higher prices throughout Europe.
We expect this level of average selling price per megawatt hour to be maintained until the end of the year. Although we have a high level of long-term contracted revenues, so close to 94% for 2022, we will still have some positive impact from the current environment. Going forward, as the hedges gradually roll over, we will be able to gradually reprice our renewables generation more in line with the current market environment. The merchant exposure as a percentage of total revenues should be on average around 16% in the period 2023-2025. We'll clearly be reaching average selling prices above the assumptions in our strategic plan.
Also note that we've mentioned this on previous calls, but we are adjusting our hedging strategy to slightly increase exposure to the market on a more structural way and to avoid over-hedging situations in the case of low renewable resources and high merchant prices. I mean, just given the market context and what we expect over the next couple of years, it seems like the sensible thing to do. Overall, we expect a net positive short and medium-term impact from this gradual repricing on our renewable generation, even considering some negative short-term impacts from government intervention in the electricity markets, like in Romania and Italy. Last slide on my side, just before turning it over to Rui on ESG. A couple of quick comments here. First, obviously 100% of our CapEx still fully aligned with the EU taxonomy.
I mean, the core business of EDP Renewables is 100% focused on renewables. Regarding circularity, a waste recovery ratio of 77% in line with our commitments also of achieving the circular economy target in the business plan. On the social dimension and something which I'm particularly happy, the percentage of female employees has increased to 33%, so a 2% increase versus last year. I think that reinforces our commitment to diversity. Health and safety, not so positive, but an average of 68 working days lost due to work-related accidents per million worked hours. We want to do better on this. We have a specific program called Play It Safe, which is company-wide, where we are really focused on making sure that we have an impeccable track record on health and safety.
Also, proud of having subscribed to the United Nations Sustainable Ocean Principles. As you know, the conference was here in Lisbon, and we took part in that, and also the United Nations Women's Empowerment Principles, so clearly aligned with our growth in ESG strategy pillars. I'll turn it over now to Rui to walk you through the first half numbers, and then I'll come back at the end for some closing remarks. Thanks.
Okay. Thank you, Miguel. Good afternoon to you all. Let's move into page 15 for the first half results. I'd like to start with the main highlights. We achieved EUR 976 million EBITDA. This represents a 49% increase versus last year. Net profit reached EUR 265 million, so that's a EUR 123 million increase also versus the first semester last year. We generated 17.8 TWh of clean energy. It's an increase of 16% year-on-year. Revenues were also positively affected by the average price increase of around 27% year-on-year. This comes from higher prices in Europe, but also from the Spanish regulatory framework that was updated through the second quarter.
We also have closed two asset rotation transactions with approximately EUR 100 million, EUR 99 million to be precise, of capital gains included in the EBITDA. On the other hand, financial costs increased EUR 74 million, mainly due to higher interest rate, increase of debt, on the back of course of the strong investment plan, the growth CapEx plan, but also of course with the Sunseap acquisition and equity contributions to Ocean Winds. We also have a negative impact of taxes in higher non-controlling interest in net income. All in all, very strong results benefiting from a solid performance of the EDPR base portfolio, better resources and prices. If you move to slide 16. By the end of the first half, EDPR have recorded capacity under construction of 3.2 GW.
I mean, this is a record number of megawatts under construction for EDPR. This is 1.5 GW of wind onshore, and also essentially a very substantial high number of 1.3 GW of solar capacity. With a total portfolio of 13.8 GW, very balanced across the different platforms. North America 51%, Europe with 40%, Brazil 6%, and APAC representing already 3% of this pipeline. In the first half, we achieved a very sound operational performance with 33% load factor. That's a two percentage point increase versus last year, reflecting a renewables index 2% higher than the expected long-term average gross capacity factor. This also compares well with the first half of last year.
The electricity output increased 16%, and of course, this is on the back of the capacity additions, but also the higher renewable resource, which as I said, compares very favorable with last year. As a result, we generated 17.8 TWh of clean energy in the first half of this year and avoided 11 million tons of CO2 emissions. If we move now to the selling price, the average selling price in the period was 27% higher year-on-year at EUR 65 per MWh. In Europe, the average price increased by 36% to EUR 105 per MWh, and this is mainly due to the higher realized market prices in Poland, in Italy, and very importantly, the update of the Spanish regulatory framework.
In North America, the average price increased by 3% in local currency due to higher merchant prices, but again, not so high as in Europe. In Brazil, average price was down by 1% to 244 BRL, and this is on the back of the more competitive assets that have been added recently to the portfolio. All in all, revenues increased 45%, totaling EUR 1.2 billion, mainly on the back of additional installed capacity, higher average selling price, excluding the sell down that accounts for an additional EUR 69 million year-on-year, along with Forex translation and others, which is about EUR 100 million. That's year on year. On slide 18, looking to the net profit. Net profit totaled EUR 265 million.
That's an increase of 87% year-on-year. Of course, this is on the back of the top line performance that I just explained, partly offset by some higher financial costs and of course, controlling interest. The financial costs are up by EUR 74 million. This is mainly due to the increase in debt, the increase in average cost of debt year-on-year, negative impact of the Forex. Taxes, we have an effective tax rate of 15%. That's three percentage points below last year. And minorities of EUR 120 million, increasing EUR 56 million year-on-year, on the back of the positive top line performance in the portfolio where we have the minority partners. Just moving to slide 19 and just to finalize before I hand over to Miguel.
As of June, net debt was EUR 5.2 billion. That's an increase of EUR 2.3 billion versus December closing, reflecting on the one hand the investments in the period, like the acquisition of Sunseap, the equity investment at Ocean Winds, and of course, the impact also from some Forex and translation. On the other hand, asset cash flow generation, strong asset rotation strategy, where proceeds reached EUR 975 million in the first six months of the year on the back of the deals concluded in Europe, also generate, you know, showing a very strong cash flow generation. Tax equity in the U.S. remained mostly flat over this period at around EUR 1.5 billion.
Note that we do keep a very high weight of fixed rate debt, so at 85% of total debt. We fund our investment in local currency, so matching assets and liabilities. The U.S. dollar and euro-denominated debt, they represent more than 80% of our total debt. All in all, despite the increase in that debt, I think it's clear that this is in line with the strong target additions, the record, you know, CapEx or the record number of projects under construction. Of course, this is in line with what we are set forth for the period of 2021 until 2025. Miguel, I hand it back to you now for closing remarks.
Thanks, Rui. Just last sort of key takeaways, I'd say six points. The first, solid first half results. The increase in EBITDA, driven very much by the increase in generation, but also selling prices, and obviously resulting then in an increase in net profit. First point. Second, record capacity under construction, 3.2 GW. 1.8 GW of wind, 1.3 GW of solar. Part of that will be added in 2022. Some of it will still come in 2023 for reasons that we talked about earlier. Third, committed capacity already more than 50% of the 20 GW target set for 2025. 10.6 GW capacity with good returns and good risk profile. Fourth point, Ocean Winds.
Strong portfolio, almost doubling what we had in the capital markets day, so to around 12 GW. Continuing to show, you know, good growth in multiple different geographies, whether it's in Scotland or in France or in Poland or in the U.S. or in South Korea. I think it's showing good prospects. Fifth point, good asset rotation prospects for the year. As we saw in the last quarter, two transactions closed, another one signed, other deals under negotiation. On track there. As I said, interest rates increases being typically offset by energy prices expectations going forward. And a lot of demand just from investors in general. Six point, growth outlook, strong, very strong.
I mean, REPowerEU makes, you know, you're clearly taking the lead by setting the ambitious targets, but also focusing on trying to simplify things like the licensing and permitting the interconnection. I think that is an area that, the member states are working on, probably not having a short-term impact, but certainly medium-term. We think it'll continue to be, there will continue to be this public support, for renewables for all the reasons that I mentioned, decarbonization, but also energy security and affordability. Overall, we are working on creating good growth opportunities that are diversified both in terms of regions and technologies. That's, we'll continue to do that.
I think that's part of our, or the value added that we are bringing, using our scale to buy well, using our competencies to build well and to continue to develop. In that sense, very focused on executing the plan, very focused on delivering the targets that were set out last year. We'll be working over the next couple of months to even revise some of those targets. Once again, thanks for attending the call. We can now move to the Q&A.
If you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. Our first question comes from the line of Manuel Palomo from Exane BNP Paribas. You're now unmuted. Please go ahead.
Hello. Good afternoon. Thanks for taking my questions. I've got. Well, I will stick to three. First one is on interest rates. You already commented on the impact from the higher interest rates on asset rotations that you see, it's pretty limited. However, I wonder to what extent and in light of the significant increase in the debt.
In the period, this hike in interest rates could put at risk your future plans. That would be the first one. The second one is on potential M&A. In the last couple of years, we've seen a couple of sizable transactions, Viesgo and Sunseap. My question is whether you are considering or planning any additional sizable acquisition up to 2025, or do you believe that with what you have today in terms of FID and so on would be enough to achieve the targets? Lastly, I wanted to ask you about what you think in terms of offshore. Because you have commented repeatedly that y ou see very strong prospects in offshore.
However, offshore is very balance sheet demanding, if I may. Could you please update us on your views and plans for offshore? Will you continue to sell stakes in earlier stage as in the past, or are you willing to maybe modify that strategy given the strong prospects for that technology? Thank you very much.
Thank you, Manuel. In relation to the first question, interest rates, I mean, no, I don't think. Yes, we are seeing sort of interest rates obviously going up, but we are also seeing energy prices going up, and so the two offsetting each other, or more than offsetting in the case of some of the geographies. With good demand and good valuations for these assets. In terms of the increase in debt, I mean, it's something that we expect will normalize towards the end of the year. We can also give a little more detail on that. We don't see that the increase in interest rates would be, let's say, an obstacle or a bottleneck to continue to execute on the plan.
On the M&A, listen, I don't know what you mean by sizable acquisition. We don't have anything specific on the, let's say, order of anything close to the Viesgo type transaction or Sunseap. We always continue to look at opportunities. You ask me until 2025, I mean, quite honestly, I have no clue. We will look at opportunities. That's our job, to also look at opportunities. If they make sense in terms of portfolio, whether it's, you know, technologies or geographies, then we should do it. If we think it adds value to our portfolio, then definitely we think it makes sense to do it. We'll keep you updated on anything which we do.
There are certain areas where we think it could make sense, but we'll obviously keep you. Let you know if anything comes up. But again, nothing of that order of magnitude. In offshore, yes, strong prospects, the balance sheet demanding. I think that's a good way of putting it. It's true. We do have that strategy of selling down stakes progressively as the project goes on maturing. R anging from when it's, you know, we already have the 50-50 JV with ENGIE, so that's already a way of partially managing and de-risking, managing the balance sheet and de-risking. We typically find partners. For example, New York Bight, we own 50% Ocean Winds with GIP, so we're indirectly 25%. In the case of Mayflower, we went with Shell.
We typically find partners, and we will then go on selling down stakes over time as the project matures, so that we manage the overall impact on the balance sheet. I think that's. We prefer to be in multiple projects with, decent stakes than to have too much concentration of capital in a single project. Like that, I think we can find a good risk-return balance, let's say overall in terms of the growth in this portfolio. In any case, Rui Teixeira, do you want to comment as well?
Manuel, thank you for the question. Just related to the net debt, I mean, what we are expecting is that net debt will go down to between EUR 4 billion and EUR 5 billion by the year-end. Of course, in the first half, you know, we had the impact of the other Sunseap acquisition. Given that, you know, we showed we have more than 3 GW under construction, there was already some cash out for the period. As we move through the second half, basically we'll have, on one hand, you know, the cash-in from the asset rotation that we are still, working to sign and close, that we expect to happen before the year-end.
Also, you know, there is some seasonality in terms of the working capital with the suppliers. Basically, we expect the debt to reduce towards the year-end. As Miguel said, I mean, we are not expecting any material change in terms of our cost of debt. I mean, as of now, as you saw, it went up from 3.5% to 3.7%, so it was not material because most of the debt is fixed. Whatever interest rate environments we will live in, we will also know that we'll have that reflect into the power prices. You know, we are seeing that happening.
Thank you.
Our next question comes from the line of Alberto Gandolfi from Goldman Sachs. You're now unmuted. Please go ahead.
Hi. Afternoon, and thanks for taking my questions. I also have three. The first one is on REPowerEU. I think, Miguel, you explained very, very well the end game and that we are lacking details. To your best knowledge, could you maybe share with us what do you think pragmatically are going to be the next steps?
When are we going to see maybe legislation in all member states or in the big member states that is actually going to accelerate the conversion of the pipelines? When are we going to see actually those higher level of about, you know, potentially up to 100 GW or maybe later in the decade, even 150 GW a year of wind and solar auctions in a given year? Just trying to gauge when will we see your P&L benefiting from it? Is it 2025 at best? Can it be a beat in 2024, or is it really in the second half of the decade? The second question is maybe if you can give us a bit of an update on returns. You already said a lot.
I'm particularly interested in trying to understand where you see returns going in this current backdrop. Are you planning to change your strategy to be maybe a bit more exposed to merchant prices despite price caps, given that, you know, merchant prices provide, you know, much stronger returns. More to the point, you know, there's about 12 GW in the JV of offshore, and again, most of those are in the second half of the decade. Who knows what the returns may look like. Can you tell us if you still are targeting the same IRR minus WACC of about 200 basis points or 300 basis points perhaps on those projects? Should they be more or less profitable than the rest of the portfolio?
I'm specifically referring to offshore. Last question, it's basically a segue from question number two. You know, 6 GW on your share of. Well, let's say 2 GW for the JV and, you know, half of that for your share, it's quite a lot of money. If we start to put together , a net debt, including tax equity partnerships, leases, maybe in the neighborhood of EUR 7 billion at the end of the year, and then you need. You know, you're about to see an acceleration in projects in Europe, in offshore, how are you going to fund it? Are you open. Should we expect every three years an equity raise from you? Nothing wrong with that. I think that it's for a good reason, right? You have plenty of projects to pursue, so I think it's okay.
I'm just trying to think how you're thinking about it. Is it gonna be more drawdowns or would you actually prefer to retain a little bit more and then try to use some equity? Thank you.
Hi, Alberto. Okay, great questions. Let me take them one by one. REPowerEU. You. We are already seeing governments take concrete steps to, you know, to try and simplify. I can give a very local example, which is, in Portugal, the government came out actually, just this week with what's called the Simplex. A package of measures, which is now for public consultation until September, where they are essentially streamlining the process, finding ways of reducing the environmental constraints within reason. But, it's a dedicated package to simplifying and to accelerating the licensing and permitting of renewable projects. That's one example.
You know, we can go country by country, and some haven't made it public yet, but I would say that almost all of them are talking to the associations, to the companies, to trying to understand where are the bottlenecks, how can they help. That is work which is being done. It will take, months, let's say, to get the resources and the actual simplifications done into law and/or sort of take out some of the bottlenecks. I'd say, sort of 12 months, 18 months, you'd start seeing already, hopefully concrete impacts of projects beginning to be accelerated. Towards the, you know, 2024, 2025, you start seeing some higher growth already coming through from that. Let's say.
I don't think I'm being too optimistic, but let's say that would, for me, would seem to be the reasonable sort of timeline. E ven Germany's sort of really pushing forward in terms of inverting the onus of proof so that you basically need to prove renewables are considered strategic assets, and you now need to prove that building renewables will be harmful, as opposed to us having to prove that we won't do any harm. There are measures that are being taken, and I think governments are very focused on that. On the second one, offshore returns, or and in general, more exposure to merchants. You know, in the past. Well, we are in a different world, okay? I mean, the world has changed definitely over the last couple of months.
In the past, the difference between doing a long-term PPA or going merchant, in terms of risk-reward, clearly was in favor of doing the PPAs. Because the projection of energy prices versus doing a PPA, I mean, with the additional risk of being merchant, you might as well just lock in that price for the next 15 years. You know, 18 months ago, I don't think or 12 months ago, there was no doubt about what was, let's say, the best risk-return strategy. I think where energy prices are now, certainly for the next two or three years, that changes slightly. I don't think it swings all the way to the other side. I certainly wouldn't, or we wouldn't, you know, consider or advocate doing fully merchant, because it does have a lot of volatility and it.
You know, prices can go up, but they can go down as well. If you're counting on very high prices, you can get squeezed hard on that. Having said that, I think having long term PPAs, and then what they nowadays call either merchant nose or merchant tail or small component of merchant, so you can maybe get a, an extra kicker in returns. I think that is, let's say, appropriate given the current market context and what we expect over the next couple of years. Specifically, you were then asking about the JV sort of on the offshore. I mean, in offshore, we target 1.5x cost of equity, which again, will be country specific.
We normally look at it on a cost of equity approach because since we have minority interests there, so it's normally project financing and so the appropriate measure would be the cost of equity that we're getting on that. You know, we're talking about , double digits or very high single digits in most of the geographies where we're in. With a good spread on the cost of equity. In your third point, listen, it's a deep question. We are definitely comfortable with the current business plan in terms of the financing of that. As we mentioned, the debt, we are expecting it to sort of normalize more towards the end of the year.
I think I wouldn't read too much into the net debt level at the end of this semester. Having said that, we are obviously accelerating the CapEx. What I'd say to you is the following, probably beginning of next year, we would normally go to the market to update, let's say, just looking at where the market is, in terms of interest rates, in terms of energy prices, in terms of the prospects for growth, et cetera. We're going through that exercise, but of looking at what are the prospects of growth, I don't have a concrete answer except to say with the current business plan, with the current assumptions, we are comfortable the way we are.
We don't need to go beyond in terms of farm downs or capital raising. You know, there are those options. I think we're sticking to our plan, but obviously, if we think it's appropriate to go back and revise that, then we'll do that at an appropriate moment. For now, I'd say the plan is credible and it's fully financed. Yeah.
Alberto, it's Rui Teixeira here. Just again to highlight , bear in mind that when we look to the offshore, and of course, offshore is in a very, capital intensive. A t different stages of the project development, either at when we start participating in the auction or pre-COD, or sorry, pre-FID or, at COD, at some point, Ocean Winds will be selling down stakes. The point is exactly acknowledging that it's a very capital intensive, and throughout the process, we will be bringing in partners , different profiles, so that also supports the funding of the entire portfolio.
Thank you so much.
Our next question comes from Jorge Guimarães from JB Capital. You're now unmuted. Please go ahead.
Hi. Good afternoon. I have three questions, one of which is a follow-up from your answer to Alberto. The first one is can you elaborate on the current levels of CapEx, namely for solar PV, 'cause some players are speaking about EUR 0.6 million-EUR 0.7 million per megawatt for installations in 2022 and 2023 in Europe. I would appreciate your view on this. The second one is looking at the objectives here in Iberia, in Spain and Portugal, solar seems to be very much ahead of government objectives, but wind not so much. Would you consider to speed up installations in wind in Iberia, or is it just a matter that the market is not attractive enough? The final one, and the follow-up to.
You mentioned high single digit, is it for project returns that allow for that ROE equals 1.0x-1.5x cost of equity, or the high single digit refers to the project to the equity IRR? The high single digit is project IRR or equity IRR in the offshore? Thank you very much.
Okay. Jorge, hi. So in terms of current level of CapEx, I'd say that's right. I mean, it has gone up, so probably, you know, we're talking again a year ago, probably below—we'd be below 0.5. I remember projects coming out almost 0.4 or thereabout. So CapEx has increased both on the PV and the turbine side for the projects that aren't, let's say that didn't have already the contract locked in. In terms of the objectives for Portugal, solar is moving forward. Wind, could it speed up? In Iberia in general, yes, definitely. I think there , but it goes back to one of my comments that, I mean, wind in Iberia is also very competitive onshore, or onshore is when it is very competitive.
It would be good to get visibility on auctions or let's say that would be happening in Portugal and in Spain over the next couple of years. I think it would be good for you guys, it would be good for us just to be able to think about allocating resources and sort of what can be the expectation in terms of the build-out of both technologies. For corporate PPAs, it is possible to, you know, to do wind and obviously solar. I think it will probably speed up once they also get simplified the licensing and permitting project. It is not going as fast as solar, at least at the moment, and certainly not in Portugal and not in Spain either. On return on equity.
We would normally target, let's say double-digit return on equity. As I say, it depends on the geographies. High single-digit would be in a very low risk market. Normally, what we find is that when we do the asset rotations or the sell down of the stakes, then these returns go up into the probably high double-digits. In fact, I can tell you just looking more east, at the moment, for example, we're talking about very healthy return on equities that we're getting, so 20%. I think in that sense, well, hopefully I've answered your question.
That would be the returns we would be looking at, that would be a spread to the cost of equity of the country.
Okay. Thank you very much.
Our next question comes from the line of José Ruiz from Barclays. You're now unmuted. Please go ahead.
Yeah, good afternoon. Just two questions. The first one, if you could give us a little bit more color on what is going on in the U.S. You mentioned the legislation package not going ahead. I would add the Manchin position to direct payments of tax credits. If you can throw a little bit of a light, if this is just temporary or the future looks more positive. The second one on slide number 10, you mentioned Moray West. You are going to be combining two ways of protection. One is the CfDs, and you say you complement with the corporate PPAs, the remaining capacity. Can you mention why you are doing this?
You're getting higher prices in corporate PPAs, or it was just a limitation of how much CfDs you could get for Moray West? Thank you very much.
Okay. In relation to the U.S., so as I mentioned, I think in terms of the Build Back Better, definitely didn't. Well, it's not going forward. I think that was killed. That was quite public, sort of about a week ago, or the second potential version of the Build Back Better. I think we're in the base case scenario, which is, the structural demand in the U.S. is there, whether it's from the renewable portfolio standards, whether it's the corporates. You know, more than half, I mean, almost 60% of our PPAs and projects in the U.S. are corporates. We continue to see strong demand there. Renewables continues to be very competitive in the U.S., even with the current PTCs and ITCs for wind and solar.
I'd say that the base case is what we are looking at or what we're expecting going forward. If the Build Back Better had gone forward, it would have been an upside to that. It's not going to go forward. What's the base case is the PTCs and ITCs phasing out. That's what's been agreed, and that's what's built into the business plan. The only additional thing that could happen now probably is, like, the extension of the current level of the PTC, so improving versus the base case. That would typically happen at the end of the year. I mean, let's see. Again, we're not holding our breath for that, but that would be probably the next data point that we would get.
What I would mention, though, is in terms of the tariffs, as I said, the two years, that's President Biden has given that. We have two years in which you have visibility that there'll be zero tariffs. By then, the Department of Commerce will have concluded the investigation, so we'll have visibility on are there going to be any tariffs or not, and, you know, what would be the level in that case. I did mention bureaucracy because I think that's something that in the short term is impacting, actually bringing the panels into the U.S. It's not a structural issue, but it's, let's say it's a short term logistical issue.
Structurally, what I'd say is we're assuming the base case could be some upside now, at the end of the year, but let's see. We're not building that into the business plan. On Moray West. This is called revenue stacking. Actually did the other way around. We had a corporate. You know, we're not necessarily sitting around just waiting for the CfDs to come by. We have an active presence in the market looking for corporate PPAs. Yes , in this case, we had two corporate PPAs that we were well advanced in, that we'd locked in. We went for the CfD. This is the volume of CfD that we needed to basically complement, let's say, the project with what we needed. We already have the corporate PPAs.
We locked in now the CfD. It means now we're fully set. In fact, we took the decision to move forward with the construction of Moray West. I think we'll see more and more of this, which is revenue stacking. Not just having a single. I mean, you can also have just one contract for the full project if you want, but you can also do the bundling. The advantage of that is you get some additional flexibility in terms of price, even in terms of conditions, whether there's revenue sharing or not. In the CfD, it is what it is. I mean, it's set, you bid for it, you lock it in. With the corporate PPA, you obviously have some additional flexibility to discuss terms when you know, when it kicks in, when the CfD comes in, and all that.
If you can find them, they're also good contracts to have if the counterparty is credible. [Does that answer your question?]
Our next question comes to the line of Skye Landon from Jefferies. You're now unmuted. Please go ahead.
Hi. Thank you very much. I just wanted to ask about the under-construction capacity, which obviously 3.2 GW is a nice uptick from 1 gig. I'm just wondering if you could provide a timeline of the expected, the big moving parts there, specifically U.S. Solar, the Canadian Wind projects, and also the Brazilian and Colombian Wind projects. Thank you.
We don't have a specific breakdown of that, but say it's about, if I'm not mistaken, around 50/50 of wind and solar. I mean, most of our wind currently, or the big bulk of it is in Colombia and Brazil. That we're expecting Colombia to probably come in beginning of 2023. That slipped slightly from the end of fourth quarter of 2022 to 2023. Solar, I've already mentioned on the previous call in the U.S. Some of that's slipping into 2023. Overall for this year, we have an expectation of doing between 2 GW and 2.5 GW. The delta, let's say, will be coming in in 2023.
Great. Thank you very much.
Our next question comes from the line of Fernando Garcia from RBC Capital Markets. You're now unmuted. Please go ahead.
Hi. Good afternoon. I have a couple of questions. First one, I would like to know the impact in the situation from the change in regulation in Spain in the first half, and what you expect for the full year on this change of regulation. Then second question, you said, if I recall well in first quarter results that you saw PPA prices increasing by 10%-15%. I wonder if you can update that figure. Thank you.
Thanks, Fernando. Rui?
Yep, sure. Hi, Fernando. On Spain, let me just run through the numbers. We generate about 2.5 TWh in Spain. About 60% of this is under this regulated price that now became the reference price, became EUR 120. As you know, this is a retroactive that also is impacting the first quarter, when the price then was at around, I would say EUR 60s. Basically there is this first positive impact, then 40%. The rest of the 40%, the generation of 40% is merchant. We hedge it at around EUR 50 per MWh.
Effectively, what we see is that when there is an impact in the first half from this change in regulation, which is about EUR 60 million, full year should be around about EUR 150 million. I would like also to highlight that, you know, this is positive for the system. This is not only positive for EDPR, this is positive for the system. Because on the other hand, the incentive, so that premium that we should be getting into from the system goes down , year-over-year from EUR 58 million to EUR 22 million. There's a substantial decrease in that, and that is a positive impact that the system also is observing.
I mean, again, just the number for us is EUR 60 million in the first half, and around EUR 150 million after full year. Sorry. The second question related to the PPA pricing. I mean, yes, we have been observing a PPA price increase, and something that we have been, of course , discussing with the different off-takers. Depending on the tenure or the PPA, I know you will see different percentages. Again, if we're talking about typically the 15-year tenure PPA, that is much more driven by the CapEx increase. You know, that sort of range to 10%-15% PPA price, pretty much reflecting the CapEx increase.
If you're talking about, shorter tenures, let's say between 7 years and 10 years, then it's more related to the forward curves, and there you would see a higher PPA price just because of merchant prices across Europe, a little less in U.S., but as well in U.S., went up. So basically, if we look to the shorter term PPAs, you actually see, you know, higher increases than the 10%-15%.
Many thanks.
Thank you.
Our next question comes from the line of Arthur Sitbon from Morgan Stanley. You're now unmuted. Please go ahead.
Yes. Thank you for taking my questions. I have two. I know you were mentioning some potential delay in the U.S. with the bureaucratic procedures on solar panels. I was wondering if you stick to your target of adding 3 GW of capacity in growth terms p er year on average for 2020 to 2023. That's my first question. The second question is a bit more detailed. It's on the contribution of associates in H1 this year, it's up EUR 80 million versus last year. I was wondering which assets is the growth related to, if it's sustainable, and which level we can expect on associates for the full year. Thank you very much.
Hi, Arthur. In relation to your first question, I mean, yes. We maintain the target for 2022, 2023. Obviously, 2023 is going to be a busy year, but I think what I'd say is we are getting it well advanced. You know, we've got the 3.2 GW under construction, which means most of that will be coming in 2022, part of that in 2023, and we'll also be continuing to launch additional projects, let's say the building of additional projects for 2023. 2023 will be obviously an intense year, but I think the teams are all well. We've been ramping up also in terms of teams and internally to make sure that we can deliver that.
You'll have seen that also in terms of head count, and personnel. On the second question, it's mostly Ocean Winds, but not only, also some additional projects in the U.S. and in Europe, so Spain and the U.S. mostly, from where we have sort of interest in projects and those additional, let's say results are coming through the associates line. Is it sustainable? Yes. I mean, given the current market context, it's something which we expect will continue going forward.
Thank you very much.
Thank you for your question. The final question is coming from the line of Olly Jeffery from Deutsche Bank. Your line is now unmuted and you may go ahead.
Thanks very much. Good afternoon. I have one follow-up and then two other questions, please. The first one is to follow up on your response to Fernando regarding the impact and the change of regulation in Spain. As you mentioned this year, that's a net beneficiary of EUR 150 million EBITDA versus before that change in regulation. When we think about 2023, I understand that the fixed element will be lower, but perhaps , the power price assumption will be higher as well. How should we think about the net effect of that in 2023 versus before this change of regulation? That's the follow-up question. The second question is on just to come back to the return metrics.
At full year results, you said that for the 8.4 GW, you then had secured the NPV over CapEx of those projects was at 35%. Since then you've done an additional 2 GW and power prices have obviously moved up quite considerably. What's the NPV over CapEx for the 2 GW broadly that you secured additionally in the first half of this year? The last question is just on the gains, you know, the target you still have in place of looking to be more than EUR 300 million but less than last year's broadly EUR 500 million. I know you've done EUR 100 million so far. Last year you had one project, the Portuguese project, where you sold to Onex that generated over EUR 300 million in gains. It was a huge project for gains.
I just wonder of the U.S. project you have in line and other projects you're working on, is one of those similarly very largely sized and potential gains, or are the gains quite evenly mixed across them? Yeah, your views on all of that would be much appreciated.
Okay. Thanks, Olly. In relation to the first question, Rui, do you want to take that?
Yeah, sure. Absolutely. Hi, Olly Jeffery. Just to say it's gonna be higher than EUR 150 million. First, by November, we will have the 2023 price being defined based on, you know, it's a basket of different forward curves, but it's likely that at this point, we will see a higher price than the reference today. Secondly, I mean, as we also have some hedging that basically will increase, you know, because of the hedging for 2023 is higher, then overall, I mean, we'll have a higher impact in our EBITDA in Spain. I mean, on the one hand coming from the regulation, also coming from the hedges.
Okay. In relation to the second question, I confess I don't have the numbers with me, so we can maybe get back to that through the IR team if we have additional detail. On the third question in relation to the gains, so as you say, we've locked in EUR 100 million. I'd say the others would be fairly evenly split, so we're not expecting a single project sort of to have certainly nothing of the materiality that we had last year in one shot. It'll be more split between the remaining asset rotation portfolios. Okay.
That's great. Thanks a lot.
Okay. I think that concludes the questions. Hopefully it was useful. Thanks for taking the time. Again, once again, I know it's a busy week for everyone, but thanks for taking the time to talk to us. You know, I think it was a good quarter, good first half, good prospects going forward. Good prospects not just for the rest of the year, but I think for 2023 onwards. Above all, I think the feeling that there's a very structural tailwind in favor of renewables. T here'll be ups and downs, but I think the structural growth is there and that's what we're working on, just making sure we can continue to grow the company and continue to create value. Thanks very much and talk to you soon. Take care.
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