Good day, and thank you for standing by. Welcome to REN's 2022 first half results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to our speaker today, Madalena Garrido, Head of IR. Please go ahead.
Thank you very much. Thank you all. We would like to thank you for making the time for joining us today for our first half 2022 results conference call. As usual, we have here our executive team, Rodrigo Costa, our Chief Executive Officer , João Conceição, the Chief Operating Officer, and Gonçalo Morais Soares, our Chief Financial Officer. Rodrigo will start with his opening remarks, and then João and Gonçalo will guide you through the main operational and financial highlights. We will then move to our Q&A session, in which we will be taking your questions. I will now pass the floor to our Chief Executive Officer , Rodrigo.
Thank you, Madalena. Good afternoon and welcome to our call. During this first quarter, we had a series of unexpected events that took us by surprise. Now, after the close of the second quarter, we are much more conscious of the challenges ahead. We all know these challenges. They are global and they are endless. The war, the inflation, interest rising, industrial disruption, air transport prices, social unrest. I think that we all know very well what is going on. The key question is not if we can deal with all these situations, by the way, I'm sure we will. We are worried, as we should, but we are confident that we can manage, you know, our future well. The key question is how all these events will affect us.
Today, we remain positive and we have a tremendous amount of work to develop. I'll just go through a couple of our key priorities that I think it's worth mentioning. We have the natural gas conundrum with the on and off supply disruptions and the search for alternatives, including the increase of LNG transshipment in Sines and the port operations. We have the question about the hydrogen future and our role supporting the development of new infrastructures, including the new Sines projects on the generation side, the data center, the hydrogen transportation, and the multiple industrial plants that are supposed to be developed. The grid planning and licensing process to accommodate a massive increase of new renewable generation, solar, onshore and offshore wind, also are putting a lot of pressure.
At the same time, of course, it means that in the years ahead we will have plenty of projects to develop. The upgrade and new construction of substations and major lines to connect the new generation projects, both hydro, as the one we, Alto Tâmega, inaugurated last week and solar, plus the development of new interconnections with Spain are projects that we are building at the moment at full speed. Gonçalo will go through the details of our numbers, including Chile, and we expect that to provide a better visibility on the overall situation. As Madalena Garrido said, at the end, we will address any questions you may have.
Thank you, Rodrigo. Good afternoon to you all. I think that we are presenting here a strong set of results in a challenging energy context. I think they are strong, both domestically, internationally, and I think they are strong also from a financial point of view. As you see, EBITDA increased 4.6% year-on-year to EUR 238.4 million. This is basically on the back domestically of the evolution of the rates of return and some other impacts. Secondly, domestically, it also has been evolving quite well, so it increased from almost EUR 4 million year-on-year.
In terms of net profit, the increase is bigger, but it's also because, as you know, in the first quarter we account for net profit grew 40%-45.9%, which is around 16% versus last year. This is also not only EBITDA but also a little bit better financial result. In terms of CapEx, what you see is a number close to EUR 80 million. It is decreasing, but in reality, it is not a trend that we expect towards the end of the year because we do expect a strong year in terms of CapEx this year. Finally, renewables, you see that they are coming down. I will let João, our Chief Operating Officer, comment on the main operational highlight. João.
Well, thanks, Gonçalo. Good afternoon to you all. In slide five, you have the overview of what's going on. Apart from what Rodrigo and Gonçalo have already mentioned, we have quite a turmoil in the sector. We are trying, as much as we can, to respond positively. So far, I think we have been succeeding. Specifically, in terms of a quick overview on the hydrogen world, we are on track on what is our commitment to start a new hydrogen infrastructure and as well as accommodating the blending of hydrogen within our natural gas infrastructure.
Regarding that, we are on track with all the adequacy studies that we are supposed to do before starting to do the necessary upgrading in the NG infrastructure to accommodate up to 5% and then 10% blending with hydrogen. On the other hand, we have been giving go-ahead for the next phase, and actually we're going to start the conversations with the Portuguese authorities in May for this hydrogen backbone in Sines, where we are foreseeing to make some investment on a specific hydrogen infrastructure to connect new sources of hydrogen generations and new hydrogen consumers in the industrial sites of Sines.
In terms of investments, this first half year, we have the Portuguese regulator submitting to public consultation the investment plan for the distribution activities, where it is included the Portgás, our distribution network, in the north of the country. We have to wait now for the final opinion of the regulator for the process to go on and the final decision on the government. If we move to slide seven, you have the overall highlights on the SLAs for the electricity, natural gas, and gas transmission business. As you can see, in terms of consumption, we are increasing slightly the consumption versus last year, about 3%, and that's actually approximately our forecast for the full year of 2022.
On the other hand, we're going through a very dry year, so our hydro capacity reduced to the historical minimum levels. We are actually having only 11% of the electricity generated in Portugal coming from the hydro generation, which is on the low end of the normal share of this type of technology. This has an impact on the share of renewables, which has decreased significantly versus what we had last year. The cause is precisely the reduction of the hydro capacity. In the meantime, solar is coming in. It already represents 5% of the total generation of electricity consumed in Portugal. In terms of the quality of service indicators, we are well.
I mean, there is a slight fluctuation in terms of average interruption time or combined availability rate, but they are above the requirement levels set by the regulators for specifically for the PDIRT, IMDP, sorry, incentive mechanism. If that we stay at these levels, we are on track for complying with these specific targets. On the natural gas side, what you see is a slight decrease in terms of natural gas consumption. This slight decrease derives from the combination of two opposite effects. A significant re-increase, almost to 50%, 50%, versus 2021 in terms of the usage of natural gas for electricity generation.
Whereas the conventional, what we call the conventional consumption, which is in Portugal, mainly industry consumption, it has decreased 21.8% versus the first half of 2021. Combining these two factors, we have this 1.2% decrease in terms of consumption. Availability rate on the natural gas infrastructure for transmission are very of maximum levels, 100%. We didn't have any occurrences first half of 2022. In the distribution, gas distribution, we managed to increase our capacity or our response time for emergency situations. With that, Gonçalo, give back to you.
Thank you, João. We're going to slide number eight, just the main highlights. You know, you see EBITDA growing 4.6%. We do expect now a growth for the full year in net profit, that is growing 16%. Just to mention on the net debt, that is close to EUR 2.1 billion. That this is also driven, this value, by the evolution of the various variations. This is still, although slowing down, moving in the same direction. We expect this to kind of go back slightly or a bit towards the end of the year, but we now have a positive balance in our favor of almost EUR 433 million, which are bringing down the value of the net debt. Okay?
In slide nine, we see the consolidated view in terms of EBITDA. You see assets and OPEX remuneration going up. This is basically the new regulation, the RoR, pushing up remuneration. You see OPEX basically being pushed down by electricity costs in the terminal. We'll talk about that. It's very similar to the first quarter. International segment, good performance by both companies. We can see that the international segment is going up from 2.5, almost 4% in terms of weight. Gas distribution is also increasing a little bit. Electricity is basically flat, and you see gas transmission coming down in weight a couple of percentage points. Slide 10.
In looking at the evolution of rates, there has been some correction, but they are still much higher than they were at the start of the year, they kind of came down a little bit, but there is still a material impact in terms of rates of return. You see that electricity 20 basis points above and gas, both transmission, distribution is 50 basis points above. That has a material impact in terms of EBITDA. Looking at CapEx, what you see, and you always know that at this stage it's very early to comment and to say anything, but you see this decrease, but it's mainly because also in 2020 we had some construction that was still delayed from 2020, and so from the pandemic, and so we have more than usual CapEx in the beginning of the year.
We are expecting a strong year in terms of CapEx. We expect that full year should be at least as strong as last year, if not a little bit more. We are still seeing this strong impulse for CapEx driven by the decarbonization in electricity mainly. In gas, as João said, there are several initiatives going on in hydrogen. We actually will probably do a little bit more of CapEx between this and next year than we were expecting with these initiatives. We are also expanding the Sines terminal to increase transshipment capacity, and then João can also explain a little bit more about that in the Q&A, which is initiatives to support a natural gas supply in terms of Europe, not only for us, but João can explain that.
All of those contribute with a little bit more of CapEx. As I said, this comes mainly and mostly from electricity. Okay? Slide 12 is just the evolution of several businesses. You could see an increase of RAV in electricity, an increase in gas distribution and a decrease in gas transmission. You do see a healthy growth of average RAV of around 2.5%, between the first half of last year and the first half of this year. Looking at slide 13 and looking at the businesses, they are all positive, so they are all being pushed up by the positive impact in terms of RAV evolution.
You also see that, as I said before, both electricity and gas distribution are also seeing the remuneration going up because of the positive impact of RAV evolution. Asset base is also growing, which is, I think, very healthy, specifically at this stage where you have rates going up. Moving to slide 14, in looking at costs, see this increase of 4%. Personnel costs are increasing very little, they are basically flat. The rest in the core external cost, it's basically an increase of electricity in our terminal, in the Sines terminal. This is something that we are looking into right now. It should not have such a big impact, but it does because price of electricity is going up quite a lot.
This is basically what explains the evolution of costs now being a little bit compensated by some decreases and optimizations in terms of O&M in other areas. Okay. I'd say that in terms of forecasts, you'll still see at the end of the year some kind of increase in terms of costs, basically driven by this trend in electricity. Although we do expect that year-on-year, this should reduce a little bit the growth as the year goes on. With also last year, we already had some electricity costs going up in the last quarter. I think that then you'll see this year-on-year evolution kind of trending down slightly. Going to slide 15, international business. I'd say that everything is going okay.
Chile as a country is still undergoing its constitutional revision process. It's, I'd say that it's not fully stable in that respect. In terms of the electricity businesses we are in, they are in good shape. Electrogas, the gas pipeline, it has an increase in volume with new contracts, has an increase in tariff. We are seeing that EBITDA is evolving quite well. Transemel the same, not so much by the same reasons, but because of the growth, new projects that came and were concluded last year and this year are contributing to the increase in EBITDA. There are also some tax recoveries that can push the contribution that these businesses have at their net income level. We do see this strong contribution remaining for the full year.
Perhaps not as strong in terms of year-on-year, but we do see that they may increase EUR 3 million or something versus last year when we look at the EBITDA contribution for the businesses. On slide 16, putting everything and looking at net profit, and then I'll go down. You see the positive evolution of EBITDA. Net depreciation is normal, and then you have, I'd say taxes and financial results. You have this positive impact on financial results, both as savings but also higher dividends received, and I'll go a little bit into that detail in the following slide. Slide 17, you see the evolution of net debt. You do see that net debt is, as you see below, lower than usual because of tariff deviations.
The tariff deviations have impacted the evolution in these first two quarters, but you also see that even without the tariff deviations, we would have come down almost EUR 100 million in terms of net debt. If you exclude that impact in this first half of the year, there was still a very strong cash flow generation. I think that's one of the reasons and the way that we manage our balance sheet is one of the reasons why Moody's, as you might have seen, upgraded us yesterday. They upgraded us from Baa3 positive to Baa2 stable. Basically we are now with all of the three agencies at the BBB level, which I think is also positive on the credit side, but it's a good sign on how rating agencies are looking at REN.
In terms of funding, we have been refinancing many loans and anticipating this increase in rates. We have locked in some lower costs. We continue that effort. We have very strong liquidity, almost EUR 1.5 billion. True that part of that is the tariff deviations, but even without that, we are still abiding with the more than two-year liquidity that we have. We will see when we have to come to market. It doesn't look likely that we have to do it this year, so we'll probably do it early next year if need be. We will continue to try and refinance and get more attractive loans along the way. In terms of slide 18, looking at the other, the rest below EBITDA. Financial results part has to do with this evolution of debt.
Debt also has an impact. As you can see, the average cost of debt is very slightly higher and from 158-166. It's almost the same, but it's slightly higher. It also benefited not only from this, but because we received higher dividends, mainly from Mozambique, CTRG, and that we have an increase of dividend of EUR 1.3 million versus last year. It's a financial asset that we have there, but it has been providing very healthy dividends over the years. In terms of taxes, no news. I'd say everything more or less in line, which is also bad because we are still reserved there. We do believe that there are no news. Just before you ask, there are no news regarding this. There's no update.
There's nothing new from the court. The only thing that we can see is that the tariff deficit of the electricity sector, which was one of the main reasons for creating this levy, is coming down. Actually, the government has always put in the state budget that they could, if the tariff deficit came down, could revise this. They haven't done so, but the reality is that the tariff deficit continues to go down. Let's keep the hope, but there are no updates whatsoever regarding the special levy. In slide 19, just looking at the evolution of price, a little bit more, I'd say, choppy in the last couple of months, and mainly due to rates announcements and other things.
We still have a very strong TSR for the first half of the year compared with the sector and the market and other peers. Moving to talking a little bit about ESG and moving to slide 21, you have there the commitment that we have made recently. We are pushing ahead with a very ambitious plan in many areas. I can give you and then João can also add in the Q&A an example. We are in several of our technical facilities installing or starting to plan to install self-generation in terms of solar. We have those in gas RMS. We have those in electricity substations. We have those in close to one of our data centers. We are pushing with our own electricity generation. As you know, we can only produce for our own production.
We are pushing for that, so that we can reduce our footprint and improve our emission. It's a strong investment also, but it's something that we take very seriously and review as strategic. That has been reflected in terms of how we are, as the agencies are looking at us, namely, I point out the MSCI, that we improved our rating. This is something we don't work for the ratings, but we are happy when the work that we are doing is being reflected. It's a sign that outside of the company, people view that we are on the good direction.
We're concluding remarks. Strong set of results, good growth both of EBITDA net profit. There should be some growth at the end of the year, good rating in terms of Moody's. We anticipate still strong CapEx at the end of the year. I think that this is very in line, but I think we are actually beating a little bit what our own expectations were for this year. With this, I close the presentation, and I'll open up to any questions that you may have for the three of us. Thank you.
As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question comes from the line of Enrico Bartoli of Mediobanca. Please go ahead. Your line is open.
We are not hearing any questions.
Enrico Bartoli of Mediobanca, your line is open. You may ask your question. Okay, please stand by for the next question. The next question comes from Ignacio Domenech from JB Capital. Your line is open.
Yes, good afternoon, and thank you for taking my questions. I have two actually. The first one is on interconnections. It would be great if you could quantify the investment needs on interconnections with Spain, in between Spain and Portugal, both for electricity and gas transportation. My second question is related to the tariff deviation from REN Trading. Since the last quarters, I would like to know if you could please quantify what is the total amount that as of today needs to be reverted over the next quarters. Thank you very much.
Actually. Sorry. We'll start by the first question on the interconnections. As you know, we have basically two projects on the table. The first one is the interconnection with Minho-Galicia in electricity. The second one is the natural gas interconnection, the so-called third interconnection. With this last one, we have to assess in terms of the environmental authorities what will be specifically the right of way that we will be used. Therefore, it's a little bit early to set a number because it will depend on that.
What I can tell you is to mention the figure that was foreseen in the past, which was something between EUR 150 million and EUR 200 million of investment. In terms of the electricity interconnection with Minho interconnection, we are speaking about EUR 20 million, rough figure.
Relative to the tariff deviations, it's hard to say quarter by quarter exactly what we are giving. I can tell you that at REN Trading since the beginning of the year, we gave back around EUR 70 million just at REN Trading. The other thing that I would add to you is that the regulator determined there to be an acceleration in the way that we should give this back to them. They actually said that there should be an additional EUR 100 million that from July until the end of the year, should be anticipated from the ones already generated this year. We are expecting that the stock that we have overall of EUR 430 million should come down.
It's a little bit difficult to tell if this will come down to EUR 300, EUR 250, EUR 200. We don't know. It depends on the evolution, also on the electricity and how they are generated. As I've told you, this for us is very neutral, and it's also, it's almost a nuisance in terms of financial management. It's something that you can. It does not have a financial cost in the sense that we are depositing the money, but it's not something that we like. As we would prefer that this could also reduce a little bit faster, but it's as it is. Okay.
Thank you.
Very useful. Thank you.
As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile a Q&A roster. Okay, there are no further questions. Speakers, please continue.
Thank you very much. If there are no further questions at this stage, we of course remain available to answer any other questions offline, or by email. I'll pass it on maybe to Rodrigo to close up. Thank you very much for coming by.
Well, thank you, Madalena. Thank you all. I think, you know, our presentation as usual is quite detailed. We always provide a lot of, you know, visibility on what's going on. I think being on a regulated market also, you know, most of the people understand well what we have in front of us. As I said in the beginning, you know, it's very challenging times, but at the same time we, you know, have, you know, opportunities to develop new projects. I think, the energy transition, it is, you know, something that it's going to change the way the world operates.
At the moment, I would say the thing that it's more worrying is the time we you know have opportunities to develop new projects. I think the energy transition it is you know something that it's going to change the way the world operates. At the moment, I would say the thing that is more worrying is the war and the effect that that can have, especially on energy pricing. We are affected as a energy buyer, but we are not an energy trader, then we do not have any kind of upside or downside. We just have to deal with much more complexity that deals with all the you know the consumers being industrial or residential.
This is of course, you know, this is complex to do, but I think we have a great team.
This conference call. Thank you for your
Be very well. Well, to the ones who go in holidays now, just have a good break. Safe travels. You know, traveling these days is also very complex, and we all need to be lucky. Thank you.
Thank you very much, all.
Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.