Good afternoon, everyone. Thank you for attending EDPR's First Quarter 2023 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 first quarter 2023 execution and financial results. We'll move to Q&A, in which we'll be taking your questions, both by phone and the written questions that you can insert from now onwards in our conference webpage. This call should last no more than one hour. I'll give now the floor to our CEO, Miguel Stilwell d'Andrade.
Thank you, Miguel. Good afternoon, everyone. I hope you're all doing well. It's always a pleasure to speak to you. Just diving straight into the presentation and talking a bit about EDP Renewables' performance in the first quarter. Let's start off by saying that if we move to slide four, we had a sound top-line performance driven by capacity growth and pricing updates. In being more specific, our revenues, they reached EUR 706 million, that's a 24% increase year-on-year. It reflects sustainable top-line growth supported by operational performance with an installed capacity 5% higher year-on-year, and an increase in generation of 11% year-on-year. We also saw a significant improvement in the average selling price of around 8% year-on-year.
This was mainly supported by new PPAs, hedging rollover, and inflation updates. EBITDA, it increased to around EUR 450 million, 14% year-on-year. The four regional hubs contributing to year-on-year growth, that was positive on all the different geographies. Net profit flat year-on-year at EUR 65 million. You had the good top-line performance, it was penalized by higher financial costs, which are impacted by volatile Forex mark-to-markets. Gross investments supported the company growth, around EUR 1 billion in the first quarter of 2023, with more than 80% of invested CapEx in Europe and North America. We reached a record of 5 GW under construction by March. That's diversified by geographies and technologies.
This is truly a major development and construction effort that we're having throughout the company, and it shows how we've been ramping up the organization to be able to grow sustainably over the long run. Since the Capital Markets Day, so just two months ago, almost to the day, our secured capacity has increased by 1.5 GWs. This is being fueled by strong renewable demand from both corporates and public support, both in Europe and in the USA. Finally, regarding our 2022 scrip dividend program, it was launched yesterday, and shareholders will be able to opt between receiving 1 bonus share of EDPR for every 75, well, or incorporation rights, or an alternative to receive a EUR 26.5 cent cash amount per share to be paid on May 26th.
If we move now into slide five and start going through the different items. The average selling price, of the 8% up, as I mentioned, on the PPAs inflation and hedges rolling over. I'd say that the average selling price is now at almost EUR 58 per MWh in the first within first quarter 2022 versus the EUR 62.5 this quarter. 8% increase. It's supported, as I mentioned, by the, let's say, the PPAs inflation and the hedging rollover. In terms of geographies, the price was supported mainly in Europe, up 22%, and in the U.S., up 3%.
Despite the prices remaining high versus pre-pandemic levels, since the beginning of 2023, the electricity prices in Europe have been easing, this implies lower costs with clawback taxes in Poland and Romania. All in all, EDPR maintains its low risk profile. The majority of its portfolio under long-term contracted revenues are close to 90% for 2023 and around 80% for 2024. That's going to support the performance in the upcoming years. That's the graph you can see there on the right of the slide. If we move to slide six, I think it's worth mentioning we have active PPA markets. You know, we've seen EDPR securing 1.5 GWs since the CMD. Very strong increase in the capacity to 8.5 GWs overall.
That's around 50% of the overall 2023- 2026 target, which is 17 GWs, as you know. It's also around 75% of the target additions for 2023- 2024. Impressive execution from our teams that will support the upcoming growth. Overall, I can also say that we're seeing great appetite from corporates for PPAs. Matter of fact, 78% of our PPAs have been closed with commercial and industrial companies with an average duration of 15 years at really attractive prices. There's also an active market here, and companies see EDPR as a key counterparty that's being selected for having best ESG practices linked to our projects. We support the local communities, habitat restoration, and being net zero-driven projects. I think we have a lot of people reaching out to us to close PPAs, which I think is positive.
As an example, we just closed an agreement with Google to develop 500 MWs of distributed solar energy in the USA. This marks the largest US corporate sponsorship in distributed photovoltaic. The deal, it will promote environmental justice and will be an initiative that provides benefits to nearly 25,000 low to moderate- income families. This value is not included in the 8.5 GWs , but will accrue as we go on closing projects over the coming months. We currently have around 2 GWs of PPAs under negotiation between our different platforms, and that will continue supporting our strategy of securing PPAs for this period, 23- 26. If we move now to slide seven. Talking about capacity under construction and just generally how we're placed over the next couple of years.
Out of the 8.5 GWs of secure capacity, as I mentioned, we have around 5 GWs under construction. We're expecting to deliver now around 3 GWs in 2023, of which close to 1.1 GWs will be installed in the U.S. I think it's worth noting that we have around 0.9 GWs of solar PV installations in the U.S. that we're moving from 2023 to 2024, essentially related with the delay of solar modules from LONGi. It's a specific issue with a specific supplier. Unfortunately, it's taking more time than expected to fulfill the Customs and Border Protection documentation requests related to the Uyghur Forced Labor Prevention Act. We keep going, and we're learning from market dynamics and quickly adapting our strategy for the best delivery in terms of execution.
We've been reinforcing the diversification of our solar supply chain. The solar installations in the U.S. in 2024 are going to be sourced from five different solar manufacturers. As you know, 'cause we recently announced it, that we've contracted 1.5 GW capacity with First Solar for projects post 2024, once again, reinforcing this diversification path. We also see a strong growth ahead of U.S.-based solar modules manufacturing. According to the SEIA, there's a total of 48 GWs of factories under construction or that have been announced. This number represents more than 5x the current capacity in the market. Moreover, we have one gigawatt of capacity under construction with delivery planned for post 2023, a significant part related to offshore projects in the U.K. and France.
The remaining 2.7 GWs are in the process of starting construction with very good prospects. That's basically a summary there of slide six and the graph there on the left-hand side. If we move forward to the next slide and talking about offshore wind and Ocean Winds. We had recent developments in France with our big projects, Normandy and Dieppe-Le Tréport, which means final investment decision and starting construction. In the U.K., Moray West has also got another milestone and reached its financial closing. Our projects have sound economics supported by inflation-linked revenues with clear visibility on CapEx and supply chain. They comply with our strict investment policy, and we're looking forward to having them in operation soon.
As of now, around 20% of our wind offshore portfolio is already installed or under construction, and all the projects framed in the business plan timetable are already under construction. There are substantial growth opportunities that we're currently analyzing with upcoming tenders where Ocean Winds is participating or will participate over the coming months. If we move on to slide nine, we talk about the macro environment. The current macro environment has got high yields. Obviously, it's challenging for growth companies like EDPR. I think it's worth noting that we have 76% of our financial debt at fixed rates. In variable debt, it's mainly coming from Brazil, where revenues are linked to inflation.
We've already pre-hedged EUR 1 billion at 1.8%, EUR 1 billion to 1.8%, and $1 billion for a 5-year period that will bring us even more stability. As you know, during this quarter, we also successfully raised EUR 1 billion through a capital increase. That totally supports the business plan, and it improves the EDPR position in the capital markets. Finally, our 2023 asset rotation strategy has already been launched this quarter. I can say that based on the processes that are going on and the preliminary feedback, we continue to see high market appetite for renewable portfolios, strongly driven by the ESG angle and the growth prospect. This is despite the current high-yield environment.
The demand is there and the value is there, confirming our belief that even in this environment, it's possible to do successful and profitable asset rotations. Finally, just before I turn over to Rui, moving on to slide 10 on ESG topics and specifically our environmental performance and strategy. We'd like to announce that we submitted our commitment letter to the SBTi to set near-term reduction targets by 2030 and net- zero targets by 2040. Even though our business inherently reduces CO2 emissions, we want to boost our decarbonization role by aligning ourselves with initiatives that actively contribute to the global challenge of net zero. This is something that was highlighted by some of our investors, and we've taken their comments and suggestions and are moving forward with this.
Although EDPR is, you know, a 100% renewable player, we thought it was important, and that was in the discussion with investors, to actually have a concrete plan and target, for 2030 and also for 2040. In this context, we're keeping 99.5% of our eligible turnover and CapEx fully aligned with the EU taxonomy. As you know, our core business is totally focused on renewables, so that makes sense. We avoided the emission of 6 million tons of CO2 during the first quarter of the year, benefiting from the increase in the energy production. On the social side, we're happy to have been recognized by several institutions on our efforts and commitments to a healthy and inclusive work experience to combine with our practices and policies that place our people at the center of our strategy.
This reflects our commitment to diversity and inclusion. Our team has now reached more than 3,000 employees, a 10% year-on-year increase. We hired 200 employees during the first quarter of the year, of which 36% are women. This is very much aligned with our commitment to diversity. Our business plan target of having 36% of women employees by 2026, it's currently at 33%, we're moving clearly in that direction of getting to 36%. In addition, 29% of our employees in leadership positions are women. It's one percentage point increase year on year, contributing to our overall target. With that, I'll stop there and turn over to Rui, and I'll come back again for closing remarks. Thank you.
Thank you, Miguel, good afternoon to you all. I'd like to take you through the first quarter 2023 results. If you move to slide 12, highlighting that EDPR really begins the year delivering strong operational performance. We installed 1.7 GW s over the last 12 months. The asset rotation amounted to 0.9 GWs, that led to a portfolio of 14.8 GWs by the end of the first quarter of the year. With a very balanced mix across North America, 49%, Europe, 38%, South America, 8%, APAC, 5%. By the end of the quarter, the capacity under construction, as Miguel already referred to, reached 5 GW. That's 1 GW more versus what we had during the quarter, throughout the first quarter of 2023.
This is really supporting the additions for 2023 and beyond 2023. Our renewable resource was slightly lower than last year at 34%. That's - 1 percentile point year-over-year, reflecting a renewables index only 2% below than the expected long-term average gross capacity or gross capacity factor. A better-than-expected good first quarter in last year in terms of renewable resource. Effectively, last year, as you may remember, we had a better than expected, so year-over-year translates into this - 1 percentile point. All in all, electricity output increased 11% year-over-year, benefiting from capacity additions and a good renewable resource. As a result, we generated more than 10 TWhs of clean energy, and also, just as Miguel said, avoiding the 6 million tons of CO2 emissions.
Really good strong operational performance, solid resource, solid new additions, and therefore higher electricity production. If we move now to EBITDA, that's an increase of 14% year-on-year, backed by an outstanding top-line performance, also, you know, a little offset by regulatory callbacks and lower associates contribution, that is the Ocean Winds contribution. EBITDA was positively driven by strong top-line evolution. That's a 24% increase in revenues in line with higher production and with higher selling prices that went up 8% year-on-year. It was, however, penalized by regulatory callbacks in Poland and Romania and lower associates contribution versus 2022, and due to the power price in U.K. that impacted Ocean Winds performance.
EBITDA increased to EUR 448 million, representing a strong performance with a 14% growth year-on-year and basically growing in all the regional hubs. Evolution in Europe increased by 21%, North America by 14%, South America, 62%, and APAC with a substantial increase of 5.1x due to the impact of the Sunseap integration from the beginning of 2022. On slide 14, the net debt evolution, mainly driven by EUR 1 billion of net expansion investment, which of course is compensated by the EUR 1 billion capital increase and the organic cash flow. As of end of March 2023, net debt was EUR 4.8 billion.
That's EUR 100 million less versus December 2022, driven by EDPR's organic cash flow that is mainly allocated to fund the growth of the business. The asset rotation proceeds from the deal closed in Brazil, and the EUR 1 billion of capital increase that offset the EUR 1 billion of net expansion investment, that including CapEx and financial investments. In the first quarter, our working capital differences were mainly driven by non-cash regulatory adjustments related to the Spanish remuneration assets. Despite this evolution in net debt versus last year, the last 12 months, net debt over EBITDA ratio remains very strong at 2.3x by the end of the first quarter this year.
The average gross debt in the period increased year-on-year from EUR 5.1 billion in the first quarter of 2022- EUR 6 billion this quarter, fully aligned with our cash management strategy. All in all, this level of net debt is supporting EDPR growth in line with the strong target additions. If we now move to the financial results. Financial results are penalized by non-cash financial items related to mark-to-market forward points, along with the higher average cost of debt year-on-year. With the financial results, by the end of the first quarter, reached EUR 126 million. That compares with EUR 74 million in the first quarter last year.
As I mentioned, this evolution was mostly driven by the non-cash financial items related to MTM of EUR-USD currency hedging, and basically is the impact of the difference in forward points on FX and derivatives. This is, you know, expected to happen under volatile markets, but is, you know, the reflection of a conservative net investment policy. Excluding this volatile non-cash trench on our financials, the cost of debt amounted to EUR 91 million in 1 Q this year. It compares with EUR 66 million in first quarter 2022, this is driven by the higher average gross debt year-on-year that supports the CapEx and the future growth. Also, the average cost of debt that went up by one percentage point year-on-year.
This is mainly impacted by the fact that we have the weight of the U.S . dollar-denominated debt and of course, the higher cost of US dollar debt. On the net profit on the following page, we reached the first quarter with EUR 65 million in a pretty flat year- on- year. This is driven by a strong top-line evolution and of course, offset by the clawbacks and a high financial cost that I just described. We totaled EUR 65 million compared to EUR 66 million in the first quarter of 2022.
The financial costs were up by EUR 52 million, but as I mentioned, mainly due to the MTM of the mark- to- market on the Forex and derivatives, that representing 37% of the total financials in the first quarter this year. As a result of the market volatility and our conservative net investment policy. On taxes, we have an effective tax rate of 17%. That's slightly below last year, - 3 percentage points. Minorities of EUR 52 million, decreasing EUR 10 million year-on-year on the back of the lower prices in the rest of Europe, where we have most of our assets with minorities. Just a final note on the scrip dividend program that was launched as we described in our CMD.
This is providing optionality to the existing shareholders. The payment is on May 26, with EUR 0.265 per share. This is really the first edition of EDPR Scrip Dividend Program. It was launched yesterday after being approved at the AGM on April 4th, and yesterday after the board approved the final terms and conditions. For each share of EDPR acquired until the last trading date, shareholders will receive one incorporation right. With that incorporation right, they will have different options. If the shareholder decides to opt for shares, it will receive one bonus share for each 75 incorporation rights. The shareholder can sell the incorporation rights to EDPR at a fixed price of EUR 0.265 during the payment acceptance period.
They can actually sell the incorporation rights in the Euronext market and trading at the trading price during the rights trading period. As we stated, EDP will opt to receive shares, prioritizing cash flow reinvestment in accretive growth to the company. With this, I would conclude the financials on the first quarter, and I would hand back to Miguel for closing remarks. Thank you.
Okay. Thank you, Rui. To finalize the presentation, just to reiterate a couple of key messages in relation to EDPR performance, and also a few words on the overall environment and outlook for renewables. I'd say the first thing is that strong top-line performance in the first quarter, that's driven, as I mentioned earlier, by the increase in generation and also the increase in the average price, resulting in EBITDA of around EUR 450 million, around 14% up year-on-year. This is despite the clawback and the lower contribution from Ocean Winds. Net income at EUR 65 million flat year-on-year. As I say, the higher top line offset by the non-cash financial cost items.
Second point is just to say that EDPR average selling price is benefiting from the new PPAs, inflation updates, and gradual hedges rolling over. Now, obviously, the decline of electricity prices in the rest of Europe reduces the clawback impact and the financing hedging cost expectations for the year-end. Third point is just to mention the positive development on execution. 5 GWs under construction, a record, and around 3 GWs to be installed in 2023, with around 0.9 GWs pushed into 2024 due to the modules delay in the U.S. Around 50% of the capacity targets for 2023-2026 already secured. Good geographical and technological diversification, and also good short-term perspectives, with 75% of the capacity secured for 2023 and 2024.
OW achieved FID on the French project. The 2023 asset rotations have launched and are on track clearly to reach expectations. EDPR is also stepping up to the challenge of decarbonization. We're publicly stating our commitment to set near-term targets by 2030 and net- zero targets by 2040, in line with the Science-Based Targets initiative criteria and recommendations. Finally, as Rui just mentioned a little while ago, the scrip dividend has now been launched. That provides optionality to the EDPR shareholders. We think that's a net positive for everyone. Once again, thank you for attending this first- quarter results call. I think we can now move to Q&A. Thank you. Rui.
We can go for the Q&A through the phone first. You can go directly for the Q&A. I think the first question comes from Javier Garrido from JP Morgan. Javier, please go ahead.
Yeah. Good afternoon, and thanks for taking my questions. I have three. The first one is on capacity additions. Now you have lowered your target for 2023. It's the addition, but it's now a few years when for one reason or the other, you are not hitting the original capacity addition target. How comfortable are you about doing 4.6 GW in 2024, which is what you need to deliver the 2023, 2024 target, and yet again, another big increase versus what you are now actually hoping to deliver in 2023? What could go wrong and how are you planning to address those potential threats? That is the first question. Second question is, generic question on the industry.
There seem to be quite a few headwinds, obstacles on the implementation of the US IRA. Which developments in this implementation process could be more relevant for you? Which are the aspects of the US IRA where you think implementation is more urgent or you would look for more rapid in delivery?
The third question is, as adaptations, you have announced that you have launched all the processes, but if you look at your operating results, you qualify them as strong. If you look at your CapEx, with the delays, you probably need less money for 2023. Is there a possibility that you decide to postpone some of those asset rotations, or do you still think the delivery around EUR 300 million of asset rotation gains is a core target for you this year? Thank you.
Good. Thank you, Javier. A couple of comments on your questions. In relation to the first one, basically the capacity additions. You know, we've gone through a very detailed exercise of looking at all of the different projects that are, you know, projected for 2023 and 2024. As I mentioned, we've already got 75% of those, you know, secured, and already CapEx committed to that. I'd say the 2023 movement of 0.9 to next year is a very specific issue which is relating to the LONGi panels, as I mentioned. The projects are there. They're being constructed. It's a question of getting access to the panels. Unfortunately, because of the specific supplier, that is taking longer than expected.
We're managing that Well, managing expectations that it will be coming in into 2024. There is a possibility that part of that might still come in 2023, but let's say that's we don't want to promise that just yet. We're managing expectations in terms of the round three for this year and the rest coming in 2024. I'd say 75% already secured for the combined period. I'd say that it's more a question of execution. I think this, disregarding this specific issue, which is very well identified, the rest, as I mentioned, we have a more diversified supplier mix already for, not just for the rest of 23, but for 24 in particular. I think we should be more okay there. I'd say we're on track.
I mean, what particular issues there, it's just a question of execution, of, you know, access to the panels, access to the turbines, access to the BOP. As I say, we've got 5 GWs already under construction, and so I think that makes us very comfortable with the combined 23/24 number. As I say, we've, you know, we've just gone through a very detailed, almost project- by- project, on each one of these. On the second question, the industry, if I understood it correctly, so is on the headwinds in relation to the US IRA. I mean, just to take a step back. I mean, there was some speculation at some point about whether Joe Manchin thought that he was regretting the IRA. Honestly, we don't see any of that. We're seeing the IRA being implemented.
In particular, we're seeing the guidelines for the IRA coming out. The most relevant ones for us are the ones that relate, for example, to things like what are considered underprivileged or low communities relating to the decarbonization or to the transition. That, for example, you get a bonus or an adder in terms of tax credits if you are building a project near a coal plant which is being shut down, et cetera. That's something which is actually playing in our favor. Just talking to the U.S. team yesterday, they're actually seeing that as a positive for our pipeline going forward.
I'd say, you know, we always managed and mentioned that I don't think the US IRA is going to have any implication on 2023, 2024 in terms of number of MWs. It's having probably a positive impact in terms of the profitability of some of those MWs. What it is going to have more of an impact sort of towards the back end of the business plan, because it allows us to ramp up with more certainty on the tax credits coming through. I don't know if there's any specific headwinds that you were thinking of when you were talking about this US IRA, but if you want, then I'll come back to that. On the third one.
No, I think That was the-- yeah. Thank you.
Yeah. No, I'd say we're very comfortable with the US IRA. The guidelines continue to come out. As I mentioned, you know, the important ones I think for us are becoming clearer. On the asset rotation. You know, we continue to move forward with the processes of the asset rotation. You know, we expect, and as I mentioned on the call, you know, to be in line with the expectations of the round of EUR 300 million for the year. That's still moving forward. The CapEx-- I mean, one thing is the CapEx, the other thing is the COD. As I mentioned, we have the 5 GWs under construction. The CapEx program is definitely, you know, strongly underway.
We're also keeping the asset rotation, let's say, in place, as projected.
Thank you.
Thank you, Javier. We can go now to the next question from Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead.
Miguel, thank you for taking my question. The first one is more about the value creation of those projects. You know, because most investors tend to believe that every EUR you invest generates basically no incremental value. I was wondering what effort, incremental effort can be done by you or the industry to disclose, to provide better disclosure to returns. I mean, can you tell us which type of long-term power price you assume when you said that a lot of what you have under construction or, you know, originally installed is 200-300 basis points over WACC? Can you tell us what is the IRR of the overall portfolio?
You know, if those 5 GWs under construction were to be the end of, you know, EDPR, let's say you developed no more than those 5 GWs, what would be the IRR of your portfolio right now, or the IRR over WACC? If you can give some disclosure to the assumptions underlying that, I think it would put to bed quite a lot of these very unhealthy debate or unhelpful, I should say, debate. It's very healthy, actually. I think it's unhelpful for the shares right now. The second one, again, is to go over the additions. Can you tell us maybe a little bit about the timing and the risks to the 3 GWs this year? To see nearly 5 GWs, 4.8 in 2024, when do you need to start construction of all these assets?
Let's say, I don't know, if by September, we don't have another 6 GWs under construction, maybe we're not gonna see 4.8 next year. I was just trying to understand the timing of addition for 2023 to forecast earnings and the feasibility for further acceleration for next year. The last question is that, what specific opportunities do you see, not threats, opportunities from US IRA, and any potential European response? Do you see an opportunity in repowering onshore wind? Do you see an opportunity in accelerating further solar developments, maybe investing more in energy storage? Could you just give us the broad guidelines of where you see the opportunities lie? Thank you so much.
Thank you, Albert. In relation to the first one, I think. Listen, we've managed to show, I think, year- upon- year- upon year, the value creation of the projects. You know, that's reflected very well in the asset rotations that we've been doing. I think, you know, when we talk about value creation, the capital gains that we're generating on that and where we've systematically, I think, outperformed on that is I think a very good, let's say, indicator of the value creation of what we're doing. In terms of actual IRRs and, let's say, cash yields and, those type of metrics, we've been also very clear.
I mean, we keep the 1.4x , you know, IRR over WACC, and sort of, you know, above 200 basis points spread. We've been seeing higher PPA prices, you know, that's something we also indicated in the Capital Markets Day, and we're continuing to see that. You know, even today, we're talking about PPA prices in the 60s, 70s, dollars or euros versus, you know, where we were just 2 years ago, where we were sort of in the 20s or low 30s. I think that's a clear indication also of the market reacting in terms of pricing. You know, we can talk specific IRRs.
I mean, normally we don't give breakdown per projects, but I can tell you that most of the IRRs we're talking about, you know, are in, particularly in the U.S., sort of high- single- digits. That's what the sort of investment decisions that we're taking at the moment. In Europe, sort of depending on the country, but also in that type of range, sort of 7%, 8%, that's what we're seeing. Listen, I think we will continue to show the value creation of these projects, you know, and we continue to surprise the market on the upside, and that's our goal. On the additions, the second question. As you say, very rightly, we have 5 GWs under construction between 2023 projects and 2024 projects.
We are continuing to move forward with the BOPs, you know, in closing the CapEx and securing projects for what is left for 2024. I'd say that, let's say, certainly before the end of the year, we should have relatively good visibility on the full construction profile, not just of the ones that have been done in 2023, obviously, but also for 2024. I would also just add one additional thing, which is to separate perhaps what we see for utility- scale projects from what is more, let's say, DG- type projects. Utility style projects typically have a longer lead time, you know, maybe 12, 18 months. As you know, most of the CODs have come in toward the end of the year.
We should be taking this, those part of the construction for a 24 project, let's say, over the second half of this year. DG projects, which is already, you know, also an important part of the overall target, that can actually be done within the actual year because these are faster projects to permit, they're faster projects to build, you know, we can deploy that capital and those projects on a faster basis. We're talking about 200 MWs there as well, so that we can actually see perhaps throughout the year of 2024. On the third comment, specific opportunities. Listen, I think, certainly in terms of the US IRA, it's just giving that predictability.
I can tell you know, sort of, just talking about the teams and, you know, we're discussing that even at the board yesterday, EDPR board. There's the short-term impact, which is, let's say we have a project, and this has happened to a couple of projects, where we're actually basing them, for example, in communities which are close to, you know, decommissioning coal plants, et cetera, and we're getting the adder and the bonus of the tax credits on that. There's things like being able to switch solar from ITCs to PTCs, which for projects that have high solar capacity or NCFs, that actually results also in an uptick in terms of the profitability on that. Those are specific improvements in terms of profitability of the IRA, the US IRA. I'd also talk about storage.
Storage previously was not financially viable, so not on a standalone basis. It's now become much more viable, and so that's also, you know, a big part of what we're looking at. The final point I talk about is hydrogen, particularly in the, let's say, certainly in the U.S., it really seems to be taking off as a possibility. I'd say that's more medium long-term, but that's definitely something that is very much on, let's say, the agenda of the sector, I think, in the U.S. In Europe, you know, there's certainly a lot more movement going on in terms of simplifying the permitting rules and just making things move faster.
In Spain, for example, just to give you a specific example of the last couple of weeks, post CMD, we're moving forward with an additional 500 MW of projects which got permitted faster by the Spanish government. I think you're beginning to see what was decided at the European, or was, let's say, the guidelines at the European level of doing faster permitting and accelerating the projects, moving down to the member states and the member states themselves taking, let's say, more assertive action to move the projects forward. Listen, I mean, I could go on, but to be honest, it's almost a full session in itself, perhaps I'll stop there. If there's anything more specific, I am happy to get back to you.
No, this is great. Thank you so much. Thank you, Miguel.
Thank you, Alberto. The next question comes from Jorge Guimarães from JB Capital. Jorge, please go ahead.
Hi, good afternoon. I have three questions. One is a follow-up from the questions from Alberto. If you can give us some idea about the price range where PPAs in Europe are being signed? This would be the first one. The second one is related to the Eastern Europe clawbacks , where we are now on that question, namely if Poland has already agreed to change its laws? The third one, it's a more conceptual one. If you believe the recent or ignited concerns about solar PV capture prices in Spain could lead to projects being dumped, and if you could buy solar PV projects in Spain that developers need to sell? Thank you very much.
Okay. Thank you, Jorge. In terms of price ranges in Europe, again, I think we're seeing sort of in the area of EUR 60-70 per MWh . North of that in some cases, I think that depends also on whether it's wind or solar, and also whether it's more Northern Europe or Southern Europe. Rui, I don't know if you want to make a comment on this point.
Maybe just to add color. Jorge, if you look in the south of Europe, you're now getting to prices around the EUR 40s. Northern Europe, as Miguel said, around the EUR 60s, EUR 70s. Wind with a premium versus the solar. There's a sort of a relevant price delta between the south and north.
In Eastern Europe on the clawbacks , there hasn't been any change since we last spoke. What we did is, you know, was just to put a stop loss on that. I think that, that effect has been basically captured in the guidance that we gave earlier. For the overall value of that at around the EUR 0.1 billion resulting from that, let's say, unjust component of the clawbacks . No other change in law, neither in Poland nor in Romania. In relation to the solar capture prices, if I understood your question, that would be, first, is that a concern? Secondly, would that induce opportunities for us to buy in Spain? Did I understand you correctly?
Yes. Apparently the, as you know, this theme is recurrent and now it's again in the focus of investors.
Yeah.
If you see projects being put up for sale, if you could look at them.
Yeah. The first thing I'd say is I mean, we've been talking about the solar adjustment factor, I think now for quite a while, because I think this was something that was quite predictable as we saw the solar scale up in these different geographies. We've been modeling that in our projects certainly for a long time now. You know, over the long run, that's incorporated in the power prices. It's not a surprise for us that we're beginning to see sort of the, let's say, the solar adjustment factor coming into play over time. Would we look at projects in Spain? Listen, I think we have a pretty good organic portfolio at the moment.
As I said, you know, just taking an investment decision to move forward with more than 500 MW s in Spain. You know, We're not actively looking at M&A. It would have to be the very, let's say, good price for us to look at that. I'd say it's not on our agenda at the moment. We're certainly not actively looking at that at the moment.
Okay, perfect. Many thanks.
The next question comes from Enrico Bartoli from Mediobanca. Enrico, please go ahead.
Hi, good afternoon and thanks for taking my question. The first one is related to offshore. Ocean Winds announced the FIDs for these two large projects in France recently. If you can elaborate, give some flavor on the returns that you expect from those projects, considering that in the industry there is, in other markets, quite a lot of discussions on, let's say, the profitability offshore projects in the current market conditions. Also you commented that you will consider whether to attend to the next auctions. If you can also give some color on, let's say, the criteria on which your decision could be based.
Second question is related again, on your indication on PPAs that actually you had this strong new signing of PPAs in the past few months. If you can comment a bit on the situation of the PPA market in the U.S. in terms of demand and in terms of the pricing evolution that you've been experiencing. The last one is related to your agreement with Google on the distributed generation capacity. If you can provide some color on the returns so that you expect from these kind of projects in the US, and considering the size of this project, if we can assume that there will be an acceleration in this kind of project in the U.S. market. Thank you.
Thank you, Enrico. What I'd say, in relation to the first one, the returns are actually very healthy. I can say that a couple of comments. Obviously, these projects are quite old in the sense that they've been, we've been working on them for many, many years now. The tariff is inflation- linked. Obviously, CapEx has also increased, the overall CapEx is quite high, the tariff more than makes up for that. If we actually look at the, let's say, the returns that, you know, they are well within our parameters. Actually, I would feel personally very comfortable with the, you know, the returns of these projects. I think these are good projects.
They've taken a long time to get to FID, but we're finally there, and I think that's a positive to be able to move forward with that. In terms of future auction criteria, I mean, typically what we've guided towards is being around 1.5x our cost of equity because we don't consolidate these. We look at it more on the cost of equity side. You know, and that's what we've done. Risk adjusted for the different geographies, but let's say the criteria that Ocean Winds has is 1.5x cost of equity, and that's what we would bid with.
On the second one, the PPAs, the signing of PPAs in the U.S. market, we continue to see good demand there, and I think, you know, a testament to that is the fact that we've been able to close PPAs even over the last couple of months. Obviously, some of the large corporates or large tech companies continue to be strong buyers of these, but not just that. I mean, we've also been signing, for example, with some of the local or regional utilities, actually quite attractive prices and conditions there. The mix between corporates and regional utilities, I'd say, we continue to see good demand.
In terms of pricing, I know the last PPA that's that I was discussing was in the high $60s per MWh , and that's before you add on the PTCs and you add on sort of the, all the different bonuses, et cetera. I think, you know, we're quite comfortable there in terms of, let's say, of developing the pipeline or the returns and the profitability there. On the third point, we're not giving out specific guidance on the Google 500 MWs. I'd say it's relatively high- single- digits, but the project economics will be analyzed individually, you know, on a, let's say, on a per project basis. That's why we're not including the 500 MWs within the 8.5 that we've talked about in the presentation. This is what they--
This is a framework agreement, and as we go on locking in the projects, there's certain economic criteria. We're, let's say, benefiting from having locked in also certain prices for the RECs with Google, and that should give us a good return on these projects. As I say, we will be locking these in project by project, so the 500 is a framework agreement that we'll be having over the next couple of years. I think the positive is that it's, you know, it's a step forward, certainly from Google and for ourselves in terms of really accelerating the distributed generation there in the U.S. I think it's providing that framework with this social dimension, which I think is important as well.
We're very enthusiastic about that, I think it's giving us good visibility on that growth in that area. Perhaps I'll stop there.
Thank you very much.
Thanks.
Thanks, Enrico. Moving to the next question from Jenny Ping from Citi. Jenny, please go ahead.
Hi. Thank you very much. Three questions from me as well, please. Firstly, just back on slide nine. I just wanna clarify your point around the variable debt and the 1 billion or 2 billion, EUR 1 billion, $1 billion of pre-hedged debt. I presume these are related to the variable component of it. Effectively, if that's the case, then you know, why do we actually see the step-up in terms of the interest rate coming through? That's question number one. Secondly, if you can give us a bit more disclosure around how much debt there is attached to the Ocean Winds JV, which is currently your share, but not on balance sheet, that would be helpful.
Lastly, just a big picture question back to the U.S., and looking at the U.S. debt ceiling and the prospect or potential for some of the you know, the IRA to be repealed. What are you hearing on the ground from your colleagues in the U.S. in terms of the elements that could be repealed, that's a part of the IRA? Is it ITC- related? Is it domestic content related? Just a bit of more color around that would be great. Thank you.
Okay. Hi, Jenny. It's Rui here. Let me clarify on the first question. First of all, the amount of variable debt that we have is effectively in Brazilian reals, again, also to match the asset on the asset side, the reflection of the inflation that we have on the tariffs of some of the projects that we have there. Basically, this is matching assets and liability. The pre-hedging that we did has nothing to do with that, so to be absolutely clear. What we have is, starting by the U.S. dollar. We have approximately at EDPR level, we'll have approximately $1 billion refinancing over the next three years, 2023, 2024, and 2025.
What I wanted to do was to, back in summer 2022, we hedged, or in this case, we pre-hedged at the 2.6% the yield, so the mid-swap at which we would then refinance this debt over this period. For example, if you take today's, you know, 10-year yields for the U.S., which should be close to 3.5%. If today we are issuing new U.S. dollars, that would be issued at EDP, of course, and then to refinance this position at EDPR, the cost of debt, let's say that mid-swap would be 2.6 and not the 3.5.
That's a substantial, you know, cost control, if you want, measure. Basically, we locked in the mid-swap rates at which we'll be refinancing the U.S. dollar, and the same for euro terms. Basically, the exposure that we have is the spread at which we'll be issuing that new debt when the time comes. The base, so the mid-swap, is already locked in 2.8% for $1 billion, 1.6% for the-- sorry, 2.6% for the U.S. dollars, 1.8% for the euros. A second comment related to the financing costs. If you look to the U.S. dollar- denominated debt is predominant right now in our balance sheet.
Of course, this is on the back that as we, over time, as we were raising capital in EUR and also some of the asset rotation was in EUR, the net debt in EUR terms has not evolved the same, at the same pace as the U.S. dollar. If you look to the page in our presentation where we are showing the split in terms of currencies, you'll see that your EUR- denominated is only 11%, while the USD is 77% of our net debt. And that's why you have this higher interest or cost of debt. It's just all on the how the arithmetics or the math works on the cost of USD versus EUR. Towards your second--
I hope you clarified, but if not, we're definitely happy to follow up offline. On the JV, on Ocean Winds. The strategy is as we get, you know, the project, as the project evolves and particularly as it starts construction, we also raise project finance at the project level. Effectively, as we raise the project finance, then that becomes off- balance sheet, and only the equity contributions are balance sheet. For all the development work and for the projects that are under construction for which we have not yet closed the project finance, we may raise some equity bridges.
Either it's corporate debt, and therefore you would see it in the net debt, or it could be some equity bridge loans backed by EDPR. That would also, you can see that in our report because ultimately is impacting the rating. That is already, you know, being communicated and quite transparently in our reports. Highlighting only that, you know, for the Moray West project that we currently are constructing, financial closing was already achieved. That effectively, as I said, will become more of an off-balance sheet, exception made for the equity contributions.
Jenny, sorry, in relation to the third comment, in relation to the IRA, and if it has any implication on the discussion around the debt ceiling. I mean, listen, the IRA is probably I'd say the biggest flag that President Biden had and, you know, and the Democrats in the last couple of years. I think if this was to be repealed, I think they would have a major political issue in terms of altering Biden in terms of his reelection and, you know, just the way he presents himself to the public.
We haven't heard anything on the ground in terms of there being any credibility or there being any, let's say, probability of this actually happening. You know, everything we're hearing is, you know, there's no way that this will be a trade-off for something like the debt ceiling. I think they're on a different plane.
Brilliant. Thank you very much.
Thanks.
Thank you, Jenny. Moving to next question from . Pedro, please go ahead.
Hi, all. Thank you for taking my questions. The first one, regarding your pipeline of offshore projects, and looking at the upcoming tenders and your expectations, that this will pose growth opportunities for you. What are your expectations for the upcoming 5th auction round in U.K.? If I remember correctly, the previous rounds in competitive for offshore projects, at least based on the strike prices. Also in Portugal, expectations for 10 GWs of floating offshore to be launched. Spain also important auction around the corner. Given the 1.5 cost of equity investment fact-criteria that you just mentioned and the competition out there, do you think you can play an important role in these auctions and increase shortly your offshore pipeline portfolio?
The second question, we are seeing this acceleration of your diversification strategy in solar supply chain, which makes sense considering the specific issues that you are seeing. But I was just wondering whether this implies, this acceleration implies a higher CapEx per MW, or is this included in your expectations in your business plan? Thank you very much.
Thank you, Pedro. In relation to the first question, I mean, we'll be privileging to a couple of comments here. We'll be privileging typically, processes where there's less of an upfront auction for seabed leases and more where there's sort of a beauty contest or some of the other criteria that are not just price related to the seabed. I think that would be our preference in terms of our strategy. The second is that, you know, when you look at the U.K., for example, when we took the investment decision on Moray West, we actually had several corporate PPAs, we just had a small portion, which was actually part of the CFTs, the government-run CFT. You know, we may do it, but let's say on a more--
For the CFTs, we'll use it, but as a , on a parcel basis, not necessarily on a full basis for the full project. In terms of the different projects, I mean, I can tell you, Ocean Wind has been very successful over the last 1 year, 2 years in terms of securing projects. I think we've, you know, outperformed and exceeded the targets that have been set out , when we first did the JV with ENGIE. There are several processes that are going on, ranging from Australia, you know, Norway, Lithuania, additional ones in France. We've got the Portuguese one over the next probably a year or so, Ireland. There are several different processes that we'll be participating in. Now, we will be disciplined in terms of the returns.
I can tell you that because I think we're here to make money and to guarantee that, you know, these projects are profitable. You know, that's going to be the key, let's say, when we look at these different processes. On the second one, so accelerating the diversification of supply chain, if it has a higher, it has an impact on the CapEx per megawatt. This is built in, honestly. It's not something that's, you know, we needed to close CapEx and equipment for the next couple of years and for the projects that we're securing. That's been done with different suppliers. You know, the market is competitive, so we're getting market price.
I mean, we're not seeing any, you know, certainly we're getting within what we expected and what was built into the business plan. It's not any deviation from what we had assumed previously. Rui, I don't know if you want to comment on the first one, just add any color or.
Maybe just highlighting that we today, we believe that Ocean Winds holds a competitive hedge on the floating. As you know, we are the only ones, at least in continental Europe, that has an operating industrial scale wind farm in the north of Portugal. There's another one going under construction. The technology is from PPI, that is then, it's owned by nowadays Ocean Winds with our partners.
As we think about the Portuguese tenders or even the Spanish tenders, definitely, I mean, the teams will be working on these processes and, you know, looking at ways of being competitive, making sure that we meet the returns. Also, we have extensive experience developing these projects in South Korea, starting as well in Scotland and the U.S. Just, you know, give this comment that on the floating side, we see it as a very attractive, potentially attractive and, you know, definitely a substantial growth opportunity there, but always being very disciplined on the returns.
Thank you very much.
Thank you. Thank you, Pedro. Just moving to the last question on the phone, which comes from Olly from Deutsche Bank. Olly, please go ahead.
Hey, thank you very much, Miguel. The first question I have, please, is just on the capital gains guidance. I know you said that you're still targeting EUR 300 million. On the pricing and your kind of impression of pricing, if we think back to the EUR million or EUR thousands per MW that you guided at the CMD, I think broadly that was, you know, EUR 250,000-EUR 300,000 a MW.
Are you more optimistic on the pricing you might be able to achieve now, such that we might see pricing materially above that despite keeping the EUR 300 million as the overall annual target? The second question I had is, on the supplier issue you mentioned this year, the 0.9 GW being moved into 2024, does that same supplier have additional modules respecting in 2024? Could this be an issue that basically repeats again in 2024, or not, because you have this diversification of other module providers?
I wonder, because of this capacity slipping into 2024, how much of an EBITDA impact do you think that is versus plan in 2023 and 2024? Then final question, please, is on the financial cost, and I know a large amount of the financial cost in Q1 are non-cash. Are you able to kind of give your current view for as things stand, FX-wise, what the full year estimate for financial costs, what would be a good estimate for that for the full year? That'd be very helpful. Thanks very much.
Okay. Olly, it's Rui Teixeira here. Let me address the, you know, the three questions. On the first one, first one, yes, I mean, we are still targeting the EUR 300 million. I mean, we just started the processes, you know, going through the, you know, the normal typical process getting on bindings. At least what I can say so far is that, I think, you know, we see a good market there. As I mentioned before, what we saw was already last year, and we're still seeing this year, more of industrial strategic players as opposed to the financials. They still, you know, have, you know, their own strong views about the development of these assets.
Let's see how the process evolve, but, you know, I think that we are on track to deliver the at least EUR 300 million of capital gains. On the--j ust one final note there, we may be having more of European Latam closing, deals closing this year, maybe less of U.S. just because of timing. We are just launching the U.S. transactions a bit later, so we might see just more closing this year on the European Latam side.
On the LONGi specific risk, you know, the strategy to diversify the supplier base towards 2024 and 2025 and onwards, is effectively to make sure that we are, in particularly the case in the U.S., and this is a very particular case in the U.S., I think, you know, we understood it was important to have this diversification as we are getting, you know, as we still are not getting absolutely clear about how this U.S. UFLPA process will unfold. We know that the process to show that the manufacturers are compliant with this Act is not straightforward. Of course, we respect that. It's just that we do see that we'll need to have diversification.
Ultimately, what we are expecting, and we have been in close contact with LONGi, is that as, you know, time passes and they provide this additional comfort about the traceability, the problem will get solved. Therefore, we would be able to get the panels released for our 2023 projects that will be commissioned in 2024, and also starting to get new panels into the 2024 projects. In any case, if by any chance there was some delay, again, we have additional four other suppliers that would compensate for this shortfall. Impact of delays on 2023 EBITDA, I would say low double-digit region at the EBITDA level. That's, you know, sort of the impact.
Into the financial costs, on the last question, I would say that should be pretty much in line with 2022, let's say within the EUR 400 million-EUR 450 million. We do, you know, depending on the volatility on the FX, I would expect, of course, this MTM to normalize. Also, you know, as I said, at some point, we will be refinancing some of the maturing euro and U.S . dollar, but the mid swaps are already, you know, the cost of the mid swap is already locked in through that pre-hedge. Yes, I would expect within the range of the EUR 400 million-EUR 450 million, impact, or if you want, financial cost overall for EDPR.
Thank you, Arthur.
Great. Sorry, Rui.
Thank you, Olly. Now going now to the question from Arthur, which is the last question that we have here from the web. We are just a little bit tight on time, so go for this last one. From Arthur Sitbon from Morgan Stanley. The question is, was there any negative one-off books in associates? If not, how can we explain the strong decline in contribution from Ocean Winds despite the CFD of Moray East not having started yet?
Yeah. Arthur, it's Rui here. Last year we had this project. Our Moray West project was exposed to merchant prices, and the U.K. merchant prices were quite strong in Q1 last year as compared to this year. I would say that Q1 was, to some extent, an extraordinary year for this project. Sorry, Moray East. I think I mentioned Moray West. Moray East, the operational one. Now prices are getting normalized, so the contribution that you see in that line is basically that net of the OW cost. There is no one-off event there.
Okay. I'll move now to our CFO and give the floor for final remarks.
Yeah, CEO.
Thanks, Miguel. Listen, just a final remark. I think definitely the first quarter, we had a good performance on the top line. I think, as Rui's already mentioned, that in terms of the financial performance or the financial costs, they were higher, and that ended up impacting our bottom line. Globally, we are very comfortable with the construction program that we have in place. I mean, we're talking about an absolute record of 5 GWs. I think Olivier asked a good question, that we should see this ramp up over the next couple of months, to an even higher number. This is a massive construction program. We are very comfortable with the returns.
Obviously we are in a higher cost of capital environment, but we have also seen the higher energy prices coming in. I think, you know, as we go on doing asset rotations, we'll be seeing the value of that. That's something that we'll, you know, we'll be very happy to share with you over the rest of the year as we go on closing those transactions. Globally, I think we've also, I think, highlighting the 1.5 GWs that we secured just in the last 2 months. I think also that's a very impressive number. You know, globally, very positive, ramping up construction, ramping up secured MWs, looking forward to delivering on the guidance and delivering on the results for the next couple of years. Thanks very much.
Talk to you soon, and obviously feel free to reach out to the IR team for any additional questions. Thank you. Take care.