Hello, and welcome to the Q1 2021 ATPR Results Presentation. My name is Val, and I will be your coordinator for today's event. Please note this conference 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 presentation.
I will now hand you over to your host, Miguel Stilwell Andrade, CEO to begin today's conference. Thank you.
Good afternoon, everyone. Thank you all for attending EDPR's Q1 results conference call. I hope Val. You're all well and safe. It's always a pleasure to speak to all of you and especially those who follow the company more closely.
So I have here with me Huite Scheideld, CFO of EDPR and also Andre Fournenci, who's the new Head of Investor Relations, Planning, Bal. So welcome, Bre. Moving on to the presentation. So if we turn to Slide 5, And I'd like to go through the key three strategic pillars of the business plan that we highlighted for 2021 2025. On the first pillar on growth.
So EDPR continues to accelerate its growth with 1.9 gigawatts added year on year, which consolidates a very solid portfolio of 12.5 gigawatts of installed capacity as of March of this year. During the Q1 of the year, EDPR installed 0.3 gigawatts and it currently has under construction 2.9 gigawatts of capacity, Bal. EDPR now has 6.4 gigawatts secured and growth prospects remain solid with 2.5 gigawatts PPA is currently under negotiations along with more than 30 gigawatts of auctions expected in 2021 in EDPR's existing markets. So this provides us Really good strong short term visibility on the PPAs on potential PPAs. On value, on the value pillar.
So the asset rotation strategy continues to be a value acceleration engine for ADPR's business plan. And here, we continue to see strong demand and good appetite from the And that's across various different geographies. As of March, EDPR already has Val. 1,100,000,000 of transactions signed in the U. S.
With expected closings still this year. And in addition, besides the transactions already announced, We also have good visibility on additional deals that are ongoing in Europe. So all in all, we're confident that we'll be able to deliver the additional transactions until year end, Translating into gains north of the €300,000,000 guidance that we provided the strategic update. On the excellence pillar. So in the Q1 of 2021, EDPR achieved a 34% load factor, which is stable year on year.
This reflects 97% of the expected long term average growth capacity factor for the Q1. And obviously, this is very much impacted by the one off U. S. Weather event, the polar vortex. So as you know, EDPR has a fantastic team.
It has a great technical and operational And that's all been an obsession for us and this is also reflected in the high technical availability. And so that together with the efficient operations translates into a 3% reduction of core OpEx per megawatt and reflects also in our O and M strategy and cost control. We are front loading the growth in terms of incorporating people. So there is upfront scale to cope with the growth acceleration And to make sure we can continue to deliver on this ambitious growth plan. If we move on to Slide 6.
Now obviously, the financial performance this quarter was impacted by the one off air cut event, so in Texas And also the lower wind resource globally in the U. S, which then normalized in March, but clearly, February was very much hit. So in the Q1, financial results ended up being very much driven by strong performance in Europe and Brazil, which had EUR 22,000,000 Positive, so greater year on year EBITDA. There's also an improvement in the average cost of debt, which goes down by 0.5 Val. From 3.8% to 3.3 percent and reduced the financial expenses by €26,000,000 to €55,000,000 In general, below the EBITDA, there's lower depreciation, amortization, tax equity investments and also lower Val.
This is driven mostly by a €17,000,000 R and D tax credit in the U. S. As I mentioned, The one off cut event impacted EDPR's EBITDA by around €35,000,000 so €26,000,000 impact in the net income, so low 10s as we talked about. The top line, however, was also impacted by the lower wind resource in the U. S.
Given the polar vortex. As I mentioned before, this was then normalized in March. Finally, in this point, the euro U. S. Dollar depreciated year on year had a negative impact of €10,000,000 So as a consequence, as a result of all this, EBITDA totaled €269,000,000 So this is 21% The treasury optimization during the Q1, so in advance of the cash in April, that meant that we significantly improved our working capital position.
It also helps lower the financial Because you're not paying to have cash on balance sheet. Net debt ended up being at around €4,650,000,000 So, dollars 1,200,000,000 versus December 20, but this is temporary and will materially decrease in the Q2 following the capital increase cash in of 1,500,000,000. Institutional partnership liabilities, they totaled $911,000,000 to $233,000,000 below December 2020 And that reflected the benefits captured by the projects together, obviously, with the reclassification to assets held for sale of the 2 projects, Brightstock and Harvest Ridge, which resulted from the asset rotation transaction, which we had announced back in April of in April. Finally, EDPR paid a dividend of €0.08 Per share, this was approved at the shareholders meeting and it was paid on May 12. If we move on to the next slide, Slide 7, So talk a little bit about the capital increase.
Here, I think we're very proud to have closed this capital increase in April of the Bal. I think we brought in 100 new growth investors into EDPR shareholder base. It allowed EDPR to fund its business plan to start off really on a strong footing and have A stronger capital structure for long term growth. So make sure that there's absolutely no question about our ability to deliver on the growth plan. The transaction has also significantly improved EDPR's position in the capital markets and increased EDPR's free float by 50%.
To improve this position for indexation in a lot of the indexes like iShares, MSCI and others. So I think overall, this ended up being a very good transaction For the company and we believe also for investors in allowing EDPR to make sure it can continue to grow successfully going Just a final note in this section on governance. So as we talked about in the Capital Markets Day, this was then recently approved, so formally approved in this year's shareholder meeting. So EDPR implemented a leaner, more diverse, More independent corporate governance structure, this fosters efficiency, but also higher performance. And so just to highlight a couple of comments here.
First, the Board Went from 15 down to 12 members, 2 of which are executives, which is Ruitashe and myself. It's also led by an independent Chairman, which I think also provides A strong signal to the market. The composition of the Board is reinforced by a higher presence of independent directors. So this increased from 40% to 50%, and we also increased the presence of women on the board to 33%. Regarding the 2 board committees, 100 percent of the members are independent directors and the specialization on the corporate governance matters was attributed to the appointments, Remunerations and Corporate Governance Committee.
Finally, the management team, which leads the daily operations of the business, has its remuneration tied To operational, financial and ESG KPIs and so and it also has long term incentives. So there's a full alignment between the management team and the shareholders and the successful growth and value creation from EDPR. So I'll now turn over to Guite Scheide, who will walk you through the Q1 results in further detail, and I'll be back at the end. Thanks.
Thank you, Miguel. So now let me deep dive into the results of the Q1. On growth since March 2020, EDPR added a total of 1.9 gigas Val. Wind and solar capacity of which around 1.8 are fully consolidated and about 98 megawatts are equity consolidated. Specifically, about 793 Megawatts in Europe and Brazil, and this includes the acquisition of renewables business of Iesco in Spain, 10 25 Megawatts in North America and 55 or 53, sorry, Megawatts Net in Offshore Related to the Win plus in Portugal and the SIMEI Offshore Project in Belgium that entered in operation in March.
On asset rotation, EDPR successfully sold 639 Megawatt net. That's regarding the 2 37 Megawatt Portfolio in Spain that was sold to Pinerge, 102 Megawatt build and transfer wind farm in the U. S. To Nipsco And 80 percent of our 5 63 Megawatt portfolio in the U. S.
To CC and L. As you know, of which 200 megawatts will close post-two thousand the Q1 of 2021. This results in wind and solar capacity of 12.5 giga as of March 2021, a very balanced portfolio across North America with 56%, Europe with 41% And Brazil with 3% of the installed capacity. As of March 2020, we have 2.9 gigas of new capacity under construction. Those are 2.2 gigas of wind onshore, around 400 Megawatts of Solar and 269 Megawatts Net those referring to EDPR stake in Moray East Offshore Project in the U.
K. From a geographical perspective, We have 1.8 giga tonne of construction in Europe and Brazil and 832 Megawatt tonne of construction in North America. Val. That includes U. S.
And Canada. I would like now to talk a little bit about the load factor In the Q1. So we achieved a 34% load factor. That's 97% of the expected long term average Bal. And of course, I mean, we were impacted negatively by the one off weather event in the U.
S. So in Europe, EDPR reached a 32% load factor. This is a good recovery of 2% roll points year on year and in line with the P50. In North America, EDPR achieved a 36% load factor, and that's 1% roll point below last year. And in Brazil, 31% of load factor, That's a 9 percentile points above the 1st Q 2020 on the back of a very strong wind resource at around 110% of the P50.
Technical availability reached 96.8%, so very high, very much in line with the Q1 last year of 96.9%. Definitely good recovery happening in Europe and Brazil. Indeed that also offset the one off air cut event And the overall weather conditions in U. S, which during March were normalized. So in the Q1 2021, EDPR produced 8.1 terawatt hours of clean energy, that's 5% increase year on year, avoiding 5,000,000 tons of CO2 emissions.
And these evolutions, of course, they benefit from the capacity additions Val. Over the last 12 months, in the slightly higher wind resource naturally if we were to exclude the one off weather events in Texas. So in Europe, generation increased 15% year on year. That is mainly impacted by higher installed capacity and strong wind resource in Iberia. North America output decreased 3% year on year to 4.6 terawatt hours.
Of course, this reflects In one hand, the positive impact of the new capacity in operation, that's 9% increase, but there was that was offset By the one off aircraft event and the overall polar vortex impact in the U. S. In Brazil, production increased 39%, Driven by the higher installed capacity along with a higher wind resource. So all in all, in Q1 2021, operations in Europe, North America and Brazil generated 41 Val. Now looking into the economics and to price, The average selling price declined 8% year on year.
That is driven by the Spanish portfolio mix, naturally post the sell down transaction. And of course, on the U. S, we have a negative impact from the mark to market of ERCOT hedges. As you know, this is a one off event. Also, Bal.
We were impacted by unfavorable ForEx. So in detail, in Europe, average price decreased 7% To €74,000,000 around €74,400,000 per megawatt hour. And as I said, it's due to the asset mix in Spain and above standard Production in Spain, along with the new additions and tariff extension in Portugal, then again, partly offset by the rest of Europe, so 4% positive performance. In North America, the average price also decreased to $43.1 per megawatt hour. That's a 4% reduction year on year, mainly impacted by financial hedges and by Canada with average price decreasing by 17% I'm on the back of new capacity and operations related to Nationwide's Wind Farm.
In Mexico and as a consequence of the BPA escalator, average price increased by 2 Val. Brazil average price decreasing 9%, driven by the mix effect regarding the new capacity in operation. So the average price for EDPR, if you were to adjust by the sell down effect ForEx and of course the one off On a quarterly weather event in the U. S. Decreased 2%.
This reflects increasingly competitive portfolio The new additions are driving lower prices, but we're in a long term contract, it's a very robust risk profile. And of course, reflecting Lower CapEx per megawatt and higher NCFs, therefore, maintaining value creation, very much in line with our current track record. So the impact of this into the revenues is that the revenues decreased to €448,000,000 in the period, that's an 8% decrease Year on year, if we were to break this down, dollars 37,000,000 come from the sell down, around $16,000,000 By lower selling prices, I mean, this, of course, excluding the sell down. And ForEx translation and others around $18,000,000 impact, Negative impact. On the positive side, dollars 23,000,000 positive impact by capacity additions And the Wind Resource justifying $9,000,000 improvement vis a vis the Q1 2020.
On the OpEx side, and I think it's important to highlight the focus that we keep giving to efficiency. It's very much in line with the growth acceleration. OpEx increased year on year to €179,000,000 due to the current O and M strategy and cost control, Core OpEx per average megawatt decreased by 3% year on year to around €10,000 per megawatt. And I think this is showcasing the efficient growth and, of course, the benefits of having this large scale across the portfolio. And again, I would like to highlight how much we are obsessed with execution, operational excellence, making sure that we are maximizing technical availability And of course, keeping costs under control.
And that's only I mean, this is the reason why then we can deliver this good operational efficiency results. The impact at EBITDA level is €269,000,000 in the period. That's a 21% Reduction year on year, given of course the top line performance, but I mentioned before about the one off At the EBITDA level around $35,000,000 I'm sorry, and lower wind resource in U. S, which That has been normalized or was normalized during March. Europe has an increased contribution to EBITDA in this quarter, followed by North America, Val, Brazil represents only around 1%.
On the net profit, of course, we at the end, we have a net profit Of €38,000,000 that's a 39% reduction year on year, given what I've been explaining. At the EBIT level, we reached EUR126 1,000,000, that's a 35% reduction year on year. Of course, this is mostly driven by the top line performance, some negative impact in associated companies due to the offshore JV Requirements, first, given the need to cope with the projects under construction and impact from ForEx. Financial expenses decreased to $55,000,000 That's a reduction of 26% versus The Q1 2020, if we look at the average cost of debt in the period, we have 3.3% Versus 3.8% in the Q1 2020. Effective tax rate was very low in the Q1.
Of course, It comes from the lower taxable income, but also from a positive impact of around $70,000,000 from research and development tax Credits in U. S. That impacted positively the quarter the results this quarter. Non controlling interest in the period totaled €32,000,000 decreasing €10,000,000 year on year Resulting, of course, from the top line performance. And as I mentioned in the beginning, €38,000,000 net profit, Of course, very much impacted by the top line, although offset by some positive tax impacts, Bal.
Particularly in U. S. Net debt and tax equity increased €972,000,000 due to growth acceleration and treasury optimization on the back of the recent ABB, at EDPR level. So retained cash flow, which captures the cash generated by operations to reinvest in distributed dividends And repay that totaled $182,000,000 cash investments totaled $1,000,000,000 besides growth acceleration to fund the 2 Val. As I previously mentioned, EDPR implemented a treasure optimization throughout the Q1, As we know that we have the incoming €1,500,000,000 proceeds from the accelerated book building.
So it Val. It resulted in an improved working capital position as of March 21. And in the period, ForEx and others have a negative impact on the cash flow. So all in all, as of March 2021, EDPR's net debt and tax equity partnerships increased to or by €972,000,000 So total net debt was €4,600,000,000 That's €1,200,000,000 Above more than the by December 2020. This is, as I mentioned, reflected this treasure optimization during the Q1, Which following the capital increase cash in April will significantly reduce net debt for the Q2.
Institutional partnerships liabilities Total €911,000,000 so that's a reduction of €233,000,000 versus December 2020, and it's reflecting the benefits captured by the projects along With the reclassification of asset held for sale of buy stock and arbitrage asset rotation transaction That we announced in April 19. And then to finalize, a quick note on ESG performance improving significantly both on the environmental and social dimensions. At the environmental level, looking at 3 main pillars of climate change, Circular Economy and Biodiversity and Climate Change, we avoided emissions of 5,000,000 tons of CO2 during the Q1 And our emissions represent only 0.2% of the divided ones. On circularity, EDPR generated 30 kilos of waste Per gigawatt hour, improving the ratio significantly year on year, and we recovered 74% of the total waste generated. And biodiversity, there were no significant spills and fires, and there were 23 year misses, which Val.
And looking to the social dimension, our team increased By more than 20% year on year to more than 1800 employees, of which 31% are women. Health and safety records improved when compared to the Q1 last year with an average of one work related accident per 1,000,000 hours worked, 36 lost workdays of accidents in the Q1 2021 per 1,000,000 hours worth. And finally, EDPR maintained its €5,000,000 cumulative investment in access to energy and reached €200,000 in social investment, Which is year on year impacted, of course, by the COVID-nineteen pandemic. And now I would hand over it back to Miguel Siouo to walk you through the business Val. Thank you very much.
Thank you, Louis. So now moving on to the business plan update. I think the first thing to highlight And as we've mentioned before, but EDPR now has 6.4 gigawatts of capacity additions secured for the 2021 2025 period. This represents 32% of the total additions and 61% of the target for 2021, 2023. And Val.
As we go on moving, we'll go on closing more PPAs towards the back end of this period. But so I think the 61% of the target Val. 5 gigawatts, 5 100 megawatts were secured between Europe and the U. S. And we are confident that we'll secure the additional growth in the short term since we already have Around 2.5 gigawatts of PPA is under negotiation and shortlisted.
I think also an important point to note and you can see that on the slide here, we have around 30 gigawatts of renewable auctions in 2021 in most of our existing markets. And you've got some of the key highlights here, I mean, including The UK, I mean, we've got obviously in Spain, France, even Portugal, so Brazil. I mean, there's most of the key markets we're in Are expected to have some sort of auctions or processes running in 2021. And these are places where we have a competitive Val. And so we're well positioned to participate in the tenders.
And then there's also an additional 20 gigawatts of renewable auctions in other European markets that we're also looking at where we're Val. Perhaps not present in yet, but we can also consider. So I mean just a massive amount, 50 gigawatts in 2021 expected to be negotiated. So I think this gives us quite a lot Confidence in terms of continuing to close in the pipeline for the future with profitable projects. If we move forward on to the next slide, Slide 22, also just give you a little bit further visibility on the asset rotation deals.
So as we mentioned earlier, dollars 1,100,000,000 signed in the U. S. To be closed in 2021 and that just these in the U. S. Will bring the Expected capital gains of around €200,000,000 We'd announced to the market back in October of 2019, a 300 Megawatt Build and transfer agreement, which was signed with NIPSCO in the U.
S. So this is the Northern Indiana Public Service Company. And the agreement at the time, what it allowed us to do was basically develop And build the EDPR's Indiana Crossroads Wind Farm in the U. S. And then transfer it already to NIPSCO.
And this is expected to come online by 2021. And so that's on track and so we expect to have that capital gain coming from that rotation in this year. The second transaction worth mentioning is in September of last year 2020, we signed with CCL, so Connor Clark and London Infrastructure For the sale of an 80% equity shareholding in the wind and solar portfolio, which is located in the U. S, it's got 5 60 megawatts, so 4 50 megawatts Bal. And it comprises 4 wind farms in operation and 1 pre COD solar asset.
So this transaction was closed in 2020 for the wind assets, But the 200 megawatts which corresponded to Riverstart, the solar project in Indiana, will be closed in 2021 once it reaches COD. So that's a second project, which will Resulting in which will be closing this year. In April 21, so just a couple of weeks ago, We also signed an agreement with funds managed by Greenco Capital to sell 55% equity stake and this may be upsized to 80% In a wind portfolio located also in the U. S. And this had basically 2 wind projects in operation with a total of 405 Brightstock on one hand was 205 Megawatts located in Illinois and in operation since 2019 And Harvest Ridge with 200 megawatts located also in Illinois and in operation since 2020.
Another deal which is announced year, but has a closing expected in 2022 is a 200 megawatt, so AC Solar Indiana Crossroads, which is also a build and transfer agreement, which was signed and announced in March with NIPSCO in the U. S. So this is something additional that we've announced, but will also Only coming in 2022. So besides all of these various U. S.
Transactions that we've already announced, we also have asset rotation deals ongoing in Europe With a strong appetite, and I've talked about that we see strong investor appetite for these projects and these processes, and we're confident that we'll be able to deliver by year end The overall asset rotation gains north of the $300,000,000 guidance, we provided the strategic update. If we move forward to Slide 23, and I think this is also an important slide. It's not so much about the numbers on our or the operational side, Very much about the regulatory environment both in the U. S. And in Europe.
Now last time we spoke at the strategic update, I mean the outlook for growth Bal. And if anything, quite frankly, it's only improved since then. In the last couple of months, they continue to reiterate that the positive growth We'd anticipated for the overall sector in both the U. S. And Europe continue to show strong political support for decarbonization and this has been reinforced very much so in the U.
S. Only a couple of weeks ago, the Biden administration announced that the U. S. Will raise its And also the initial details of the $2,250,000,000,000 American Job Plan, it also provided some very Interesting indications of what we can expect for the sector going forward. We still need some more information on how this will play out.
But in any case, I think just to highlight a couple of the, let's say, the issues or the positive issues that come out from this. So the extension of the tax credits for wind and solar, and I think that reinforces the already favorable economics with these technologies. 2nd point is the Val. Expansion of the tax credits to storage and fuel cells. I mean, this is also extremely positive and hopefully will also accelerate the deployment of these new Potential growth avenues.
The direct pay of tax credits, this will definitely benefit the sector. I mean, it provides increased liquidity, provides Val. Increased monetization options, which will allow us to fund the renewables growth. So if this comes through, it will be a very positive development for the sector. And just generally, I mean, the incentives to the U.
S. Power infrastructure are a major enabler for the renewable development. So we expect that this will just be a positive Tailwind for EDP Renewables in EDP in the U. S. Cutting overall, cutting greenhouse Gas emissions targets on Earth Day was extremely positive for the renewable development in the U.
S. I mean, we have 45% of our 20 gigawatt investment plan here You're projected to be in the U. S. Until 2025. So overall, I think very positive news coming out of the U.
S. Over the Val. In Europe, we are on track or on a journey, I would say, to unlock The largest stimulus package ever to date. The next generation EU funds is critical to revitalize the European economy. The idea is that this will obviously allow to create a more prosperous and resilient society following the COVID-nineteen pandemic, so to take A major threat and turn it into an opportunity.
The $750,000,000,000 envelope, which is expected to be applied between 2021 2026, Quite frankly, seems to us to represent a unique opportunity to stimulate enterprises and leverage the green economy. And that's certainly something that It has been reinforced by politicians throughout Europe over the last couple of Val. EDPR will be focusing on 2 key areas, renewables, obviously, and also green hydrogen. I mean both these areas are natural extensions for ADPR's commitment to climate transition and also shows increasingly critical roles that electricity and Bal. Just general electrification will play in society going forward.
So positive news from both sides of the Atlantic. Moving on to the final slide and some key takeaways and very briefly before wrapping up for Q and A. First, the financial performance in Q1 was very much impacted by the one off tax event and the lower wind resource in the U. S. So it was not a good quarter for the U.
S. I mean, We recognize that. Going forward, we expect that the normalization of the U. S. Performance and it is a fantastic growth engine.
It's got all the positive tailwinds, which I just talked about. So we continue to expect solid results in Europe and Brazil and the U. S. Also to recover. Improvements in the cost of debt, this provides us with a positive outlook for the remainder of 2021.
3rd point, Successful capital increase of the $1,500,000,000 has allowed us to fund the business plan and improve GDPR's position in the capital markets. The 4th point is the 6.4 gigawatts that we have secured and the significant visibility on the additional capacity over the short term. So another, I think, Important point, which highlights the growth that we have ahead of us. Very high visibility on the 2021 asset rotation deals With the €1,100,000,000 already signed in the U. S.
And the other processes in Europe going on track. And so we're on Bal. As I said to deliver above the $300,000,000 capital gain. Overall, continued path towards decarbonization with very positive developments for the overall sector. Just on a final note, I really wanted to reiterate our commitment to the strategic target to present it to the market.
I mean, we have no doubt that Bal. Clean energy will be at the center of the post COVID recovery and this will help stimulate the economy. It's good for the economy and it's good for the energy transition. So there's The purpose in what we do and it's good business. We have no doubt that the future is net 0.
And I think EDPR's Bal. And long track record of the many years can only make us make the long term growth prospects even stronger. So I think all the positive news coming out, I think, continues to be very good for ADPR. So once again, thank you for this year's for this quarter's results. I'll pass the word back to Andre Fermantes to
Val. Our first question for today comes from the line of Alberto Gandolfi from Goldman Sachs. Please go ahead.
Yes, hi and good afternoon. Thanks for taking my questions. Having the privilege of being the first, I ask maybe One more than usual, but hopefully quite quick. The first one is not quick at all. It's about cost inflation.
Can you tell us How you procure the equipment on the 2.9 gigawatt under construction and whatever you have already FID on the 6.4 gigawatt. So Are you fully hedged? Do you buy at a fixed price? Is that a profit sharing? Is there a risk of an IRR squeeze?
Or are you insulated from any cost inflation we see out there? The second one, am I right in saying that all the Spanish Portfolio is exposed to power price volatility within the band. And so you're going to be capturing quite a decent uplift as soon as you hedge For 2022 on your portfolio, so maybe you can elaborate on the merchant exposure, please. Just questioning, considering you said you're going to exceed the €300,000,000 How much can you give us a guidance? Where do you see the underlying EBITDA before gains?
Just to give you an idea, consensus For Bloomberg, it's €1,600,000,000 Probably in there, there are €300,000,000 So if you don't answer first, can you maybe tell us at least if you're comfortable with that? And very last, should we expect the net debt for the year once you get the €1,500,000,000 in Pay a bit of a dividend and start accelerating CapEx perhaps in the neighborhood or maybe below €4,000,000,000 Thank you so much and apologies for overdoing it.
Hi, Alberto. Good to hear from you. In relation to the first question on the cost inflation, we don't expect it to have any Material impact, I mean completely residual, if not 0, on what we have already under construction. And the reason for that is We typically or typically know we also when we take investment decision, we're also locking in the procurement of the different components. When we take that investment decision, we are already very confident about the CapEx that we're going to have for that.
So We don't expect any IRR squeeze on the projects already under construction. And in relation to the rest, I mean, obviously, any change And prices is then reflected also in the models and in the pricing of the actual PPAs, etcetera. So once again, that's typically passed through. And finally, I'd just say that, at least depending on some of the commodities, whether you're talking about steel, for example, which I think is one of the things that people have talked about, I mean, 10% increase in steel has less than a 1% impact on the overall CapEx of the project. On that, I think we're quite comfortable and it's not something that we're losing a lot of sleep over.
As I say, going forward, it is important that all the different players incorporate that into their pricing assumptions and into their, let's say, whether it's in the tenders or in the PPAs. Perhaps just on the 300,000,000 to jump into that and then I'll pass the word also to Roy here on the debt and on the merchant exposure. The EUR 300,000,000, so I wouldn't go into that. I mean, we haven't provided that information. What I would say is, For what we have already closed, and what's which is the U.
S. Transactions, so that's already locked in around EUR 200,000,000 Point 2, we still have the European transactions, which are underway at the moment. So I wouldn't like to specifically comment on those. We do expect to get binding offers over the next couple of months and then be able to close them by the end of the year as we typically do. And that should get us over the €300,000,000 that was, let's say, what was in our business plan That we set out.
So I won't comment on the consensus, but we are comfortable quite comfortable very comfortable about the €300,000,000 And perhaps Louis on the net debt and the margin. Sure.
Thank you, Miguel. Hi, Alberto. So on the hedging, as you know, we Very strict with policy. So for 2021, we have already 98% hedged at around €49.9 per megawatt hour. For 2022, we have 78 percent edge
at around 46%, a bit more than
46%. DOTCs now are at 59, so there we would have some headroom or the potential upside. And also for your reference for 2023, we only have around 30% hedged. So we would see in OTCs around the 50s. So definitely some potential upside for 2023 as well.
And going back to your question about debt, so this quarter what you So in the net debt was the fact that as we understood, we would have the cash in from the capital raise. We anticipated some payments to suppliers. Now of course, we have already cashed in. We have received the capital from shareholders, €1,500,000,000 So towards the year end, we would expect a net debt below €3,000,000,000
Thank you so much.
Thank you. The next question comes from the line of Javier Garrido from JPMorgan. Please go ahead.
Good afternoon, everyone. Thanks for taking my questions. The first question would be back to the asset rotation strategy. You are optimistic about your asset rotation gains in 2021, More optimistic than you were in the CMD. Is it fair to say that this makes your asset rotation targets to 2025 look conservative or is there any one off specific reason That has affected positively 2021 gains.
And the second question is, if you can Make any comment on performance in the Q2? We are midway through the quarter. So if you can comment particularly On law factors, if there has been any special situation or if everything has been In line with normal P50, if possible. The third question is, You could sorry, I'm not sure I understood. You could repeat what was The level at which you are hedged in 2021 in Spain, I understood it was 98% hedged, But I didn't catch the price.
And final question, I noted that in the breakdown of your net financial costs in Q1, There was a very significant increase in institutional partnership costs. Can you explain why this was Bal.
Thank you. Okay. Thanks, Javier. And again, thanks for the questions as well. So in relation to the asset rotation gains, we are optimistic about the 2021.
Obviously, it's more difficult for me to comment about The next couple of years, what we do see is continued strong demand for these type of portfolios across the geographies, Whether it's the U. S, whether it's in Europe and that gives us a lot of comfort that this is a strategy which makes sense for the company that we are able to attract People who are interested in getting good quality, sustainable, green, predictable yield assets And that continues to be the case. No matter even now sort of we have last year with COVID, we've had in last couple of years systematic Demand this year, we continue to see that. So I think that gives us comfort going forward. In terms of the actual values, I mean, we set out the numbers in the strategic plan, 2021 Clearly, above, going forward, I mean, let's see, but it will obviously depend also on the mix between wind and solar.
That's also something that You need to take into consideration when thinking about the multiples and thinking about the capital gains. But I don't want to comment too much except Good demand. They're good assets. And so we expect that to continue. In relation to Just a couple of so the hedge level in 2021, so around €50 per megawatt hour, that's sort of the And as you say around 98%, so basically 100%, it's €50, I mean, simplified.
And going forward, hopefully, you got it, otherwise you can repeat it. On the performance of the Q2, listen, we clearly had a bad Q1 in the U. S. I mean, obviously, the Texas Was an extraordinary, but then it recovered in March and that was more normalized. And so I think that's something that we Yes, we're quite comfortable that the load factor will be more normalized going forward.
In relation to the increase in partnership costs, I think that's just a question of timing in terms of the actual payments. It's not anything particular there. So it's still early to say in relation to the load factors going forward. Obviously, Same way that hydro is always possible to predict, but in any case, there is we are confident that it should revert back And Roy, perhaps if you on the tax equity, yes, go on there.
Yes. On the
tax equity, so we have noticed that in the handout, so the financial results that are disclosed in the handout are correct, the full amount, But there is a mismatch between what is allocated to interest and to tax equity and we will be adjusting that and Correcting it in the version that will be uploaded in the website of EDPR. Okay.
Bal. If I may follow-up on the hedging in Iberia. Can you Explain why the 2022 hedging, 20% hedge at 46, Why is such a significant drop versus 2021 is simply because you did A lot of that hedging activity in 2020?
Hi, guys. It's Ray here. So just the way we implemented the hedging strategy is that we typically of course 1 year in advance, we start closing the positions and start hedging the positions, so that when we get close to the year end For year n plus 1, we will have very high percentage of hedging. So what do you see now for 2022, this 78% hedged at this 46.4%. I mean this is a result of implementing the hedging strategy.
So Throughout 2021 2020, we were already starting to close some positions for 2022, But we still have this 22% left unhedged, which right now we have been working with the OTC prices Much higher. But it's just a result of how we are implementing the strategy in a forward looking way.
Thank you.
Thank you. The next question comes from the line of Sara Piccinini from Mediobanca. Please go ahead.
Hi, good afternoon and thanks for taking my questions. I have 4. The first Juan, in the results report, you mentioned that there are some costs related to the joint venture in offshore wind. Can you explain what are these costs related? It's just development costs or other costs?
And also considering that for other competitors, we have Seeing some higher maintenance costs related to offshore wind, would you expect this to be something that affects your Assets as well. The second question is on net debt. Did I understood correctly that you expect Below EUR 3,000,000,000 by the year end. And related to this, apart from the improvement that we should With the cash in from the capital increase, obviously, the net debt is increasing a lot. And going forward, you will Continue to increase CapEx to accelerate your development.
So my question is, would you consider another Eventual capital increased to finance this growth and maintain the level of net debt to EBITDA Of ETPR in a stable position. Then the third one is Hopefully, quick on the build and sell agreement. When you signed this agreement, also in the past, Is it at that time that you decide the price and so you already decide you already know the capital gain that you will have Once the construction is closed or there are other elements that could modify the capital gain once The plant is completed. And finally, on the level of there are so many auctions coming this year. What is
Thank you, Sane. So taking your questions. In relation to the first one on the cost of the JV, So we don't expect any just in operational terms, we have not been affected by higher maintenance costs. And if you're I don't know if indirectly you're referring to, for example, the Doris debt statements, that's not something that impacts us Both in SeaMaid and in Maurice, which are the only ones that have the array, so Cables already installed. We're talking about 5 in over 100 pillars, which is absolutely residual for us.
And so that's not the issue. So specifically, I don't know if that's the other costs.
Sorry, it's Rui here just complementing Miguel's comment. So at the wind float Atlantic, There was just a technical issue with the interconnection cable. It's already solved. I mean, there is an insurance to that. But I mean, it was nothing resulting from the design.
It was just that there's some damage that Val. So one off. Yes, to start up a one off and there will be insurance coverage.
So on the second question, so we are not And we'll not consider an additional capital increase. I mean, we sized the capital increase that we did so that we would be comfortable with the level of That and so the leverage ratios for EDP renewals going forward for the course of the business plan. So independently of the acceleration of the CapEx that was already built into the numbers that we set out and when we decided on the sizing of the capital increase. So No, we will not that's not under consideration and we don't think we need to raise any additional capital that's already quite comfortable. In fact, I'll just reiterate that the EDP Group as a whole has just had an upgrade by both Fitch and a few weeks ago by S and P.
And so I think we have a much more solid balance sheet and we've also been had a positive outlook by Moody. So very comfortable now on the balance sheet. In terms of the third question, so when we sign an asset rotation deal divestments, I mean, we lock in the price and We typically have the CapEx already. This project is already done. I mean, it is the CapEx is what it is.
If there's any change in CapEx, which is typically doesn't happen, then that adjusts to the capital gain. But As you know, we build on time and on budget, and so that's not something that impacts us. So the capital gain is basically fixed from the moment that we signed the deal. In terms of competition, I mean, Clearly, there is competition in the market. There has been for a while now.
So I think the important thing to note is the size of the opportunity, the fact that there is so much going on, and I think there's space for everyone. So I think there we do see the typical players, some of the strategics, we see independent developers. I mean those are the ones that we typically come across In all the different geographies, in terms of level of competition, I think it continues to be a competitive market like it has been in the past. So I don't think there's any particular Change or reference that I would make in that respect. Okay.
Many thanks.
Thanks.
Thank you. The next question comes from the line of Manuel Palomo from Exane. Please go ahead.
Hello. Good afternoon, everyone. I just have a couple of questions, if I may. The first one is on the exceptional weather conditions in Texas. You mentioned that the impact It's €35,000,000 However, I mean, my understanding is that I guess that there were several impacts on those wind farms, Stopper just maybe a bit of purchasing in the market in order to fulfill committed volumes.
So I mean is this the overall impact explained from the polar vortex, the EUR 35,000,000? Or to put it on a different way, EBITDA was €90,000,000 in the U. S. With the €35,000,000 would make it 125,000,000 last year it was 160,000,000. So should we consider that the $125,130,000,000 is the normalized condition for our Q1 Or not?
And if so, what makes the difference versus last year? And the second one is on It's Nasrat, good morning. You've mentioned that you have already signed some deals. I wonder what you could tell us when you expect These bills to start being accounted whether we could start seeing something already in the Q2? And the last one also linked to asset rotations.
What is the plan with the stake in Moray Offshore Wind Fund? Is the plan to keep it
So, okay, in relation to Texas, the $35,000,000 is all in. So it includes all the specific impacts Relating to that particular event, the polar vortex. I mean, another thing is that there was low wind overall in the But not necessarily just in Texas, but that was just something that we had lower wind resource. But in the €35,000,000 everything that's relating to the specific to the polar vortex in Texas is already incorporated there. So I think if you add that back, I believe is where you get the 120 from.
I confess I didn't quite understand the other question. And maybe it's just because of the noise on the line, but you're talking about the Moray Offshore and when we would decide timing of the stake. Was that the question?
Hello, can
you hear me? Can you repeat? Yes, I can hear you now.
Okay. No, I was just asking you whether the already signed asset rotation deals in the U. S. Where it starts to be accounted in the Q2 or maybe in the second half of the year? And then Also regarding the asset rotation, basically what is the plan with the stake in Moray offshore wind farm?
Okay. The accounting, so for the U. S, it's going to be probably more towards the second half of the year And the European portfolios will also be towards the second half of the year, more towards the end of the year. So that's in terms of the accounting for the capital gains coming from the asset rotation. In terms of Mori, Again, I didn't quite catch what's the plan for the quarter.
Sorry, Miguel. I was asking whether there is any plan To them size, the stake that you have in this wind farm, in this offshore wind farm?
Yes. I mean, we will analyze potential further reduction, but there is no decision being taken yet on in relation You're talking about Moray West or
Moray West, right?
Yes, Moray West.
Moray West, yes. Yes. So we haven't taken a specific decision on that in terms of timing or process, but it is something we would analyze. As you know, we typically Do sell down our stakes as the project goes on maturing. So I think we'll just need to identify what is the best timing to do that, but it's It's Bal, not going to be a 2021 event.
Thank you.
Sorry about not hearing some other questions.
Thank you. The next question comes from the line of Arthur Cipon from Morgan Stanley. Please go ahead.
Thank you. Thanks for taking my question. Hello. I was wondering if you were seeing any pickup in interest For corporate PPAs at the moment, with carbon prices and electricity prices rising Across Europe and also if you were seeing maybe an improvement of the terms on that front, so in terms of Price and also length of the agreement. Thank you.
So it's Rick here. So I mean, yes, we have been seeing good demand on the And let me just highlight, not only in U. S. But also in Europe, there has been some additional demand For corporate PPAs, as you know, in Europe, there are also companies acting as consultants For the corporate entities to support in their PPA procurement process, We have been getting feedback that it's likely that very large RFQs will be coming into the market very shortly. Typically for projects with the COD for 2023 2024, so the answer is yes.
I think good appetite Right now for the corporate PPAs. In terms of pricing, I think what also the feedback that we have is that Corporates have been more now open to enter into a longer term agreement given this volatility in the spot market And particularly looking in the short term. So in that sense, they are more open to discuss longer term contracts. So I would say yes, I mean, it's I think we are seeing good demand there.
Thank you.
Thank you. There are currently no further questions in the queue. So I'll hand the call back to our speakers to conclude the call for today. Thank you.
Okay. So listen, thank you everyone for your questions. Just one comment which I wanted to highlight. We have a lot of capacity coming online going back I think it was to Manel's question on the U. S.
So So a lot of capacity coming online also particularly in the U. S. During 2021. So that's also something to bear in mind When thinking about the growth of the numbers in 2021. Apart from that sorry, is there another question?
So I think there's one more question from JV.
Yes. Thank you. We do have another question that just registered And that comes from the line of Ignacio Lomenek from JV Capital. Please go ahead. Ignacio, your line is unmuted.
Please go ahead.
Sorry, thank you. Thank you for taking my questions. So two questions regarding CapEx costs. My first question, In the business plan, applying the mentioned percentages to objectives of CapEx and capacity, I come out with €7,100,000,000 of solar CapEx, So 41% of total for 8 gigawatts of solar being targeted, this implies a CapEx of $0.97 per megawatt. So why is this apparently above the usual reference of the sector of €500,000 per megawatt?
And then my second and last question Would be what is your view about the recent rise in CapEx cost, mainly in steel and logistics? So are you feeling some pressure from vendors increased Selling prices and how would you view such pressure even if temporary? Do you see this CapEx cost inflation interrupting in 2021, Downward trend in LCOEs for the new capacity? Thank you.
Okay. Thank you, Ignacio. So I believe in relation to the first question, potentially it's the difference between megawatts AC or DC. And a lot of times the market has the reference the CapEx per megawatt DC and our numbers are AC. So I mean As you know, in solar, in particular, in wind, this doesn't happen.
But in solar, it's producing DC and then it's converted to AC when it injects Bal. Into the grid. And the difference is around 30% from the AC to DC. So perhaps that We'll explain the difference that you're seeing in those numbers. So I'd say that that's probably the primary difference.
There might be some other which has to do within the U. S. There's no import tax Bal. For the next couple of years, but I'd say that's probably the first one. In relation to the second question, I mean, in terms of logistics, I mean that translates typically more into issues on potential delays on the supply chain.
As I say, we have the CapEx costs Closed for projects that are under construction and under FID. And so and change Those changes typically don't flow through into the cost of the project. So and for projects that we don't yet have closed or haven't taken an FID decision, We would price in or we'd incorporate any differences in prices as we do normally. I mean prices are changing all the time over the years. It's not a recent thing.
So we incorporate the best estimates and the best sort of quotes that we have from all the different suppliers when we are taking the investment decisions and we Typically, log that in as soon as we have visibility on the project. So that would be my response to that. I Val. Okay. I think these are all the questions at least that I have here in front of me.
So thank you very much and probably see at least some of you in a short while. Thank you. Take care.
Thank you for joining today's call. You may now disconnect.