Corporación Acciona Energías Renovables, S.A. (ANE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Acciona Group and Acciona Energias 2022 results presentation. Let me first tell you that we will -- I will make a short introduction, and then I will leave the floor to Rafael Mateo, CEO of Acciona Energias; and Arantza Ezpeleta, CFO of Acciona Energias. And then after them, we will continue with the presentation of Acciona Group results with Pepa Chapa, Investor Relations; and José Ángel Tejero, CFSO. After the presentations, we will go into the Q&A. I -- we will try to put the Energias questions first and then the rest of the group questions, although I'm not sure we will be able to administer the timing of each of the questions in that order. 2022, marked 25 years since 1997 when the ENTRECANALES Group merged with CUBIERTAS and went public under the Acciona brand. During these 25 years, we have generated more than 300 terawatt hours of clean energy, which is equivalent to the power of a country like Italy for a year and avoided carbon dioxide equivalent of planting 180 million trees or close to 170 million tons of CO2 avoided, which is 70% of -- equivalent to 70% of Spain's annual emissions. Also during the last 25 years, we have built close to 10 million square meters of houses, industrial or commercial or office buildings, which would be equivalent to the city of Bilbao; 6,000 kilometers of roads, which is Madrid to Warsaw and back; 600 major bridges; 3,000 kilometers of high-speed rail; 1,300 kilometers of metro or water infrastructure serving 76 million people. We were one of the first companies in the world to define sustainability as our main strategic guidelines and under this focus, we have developed a unique business which despite operating in different sectors, our CapEx in 2022 was 98% aligned with the European taxonomy of sustainable activities, which comes to prove that almost any business can be done sustainably. Today, we employ close to 50,000 people in 55 countries, and our robust balance sheet allows us to invest heavily in seizing the enormous opportunities derived from the need to decarbonize the economy while adapting it to the unavoidable impact of climate change, urbanization and evolving social needs. And for that, we continue to invest in innovation at an intensity 3x higher than that of our peers -- peers' average. All these factors plus a long-term focus and a stable shareholder base place us in a privileged position to provide the state-of-the-art sustainable solutions up-to-date, while exploring what will be the solutions of tomorrow. Green hydrogen, energy storage, urban electric mobility, carbon-free desalination or positive energy housing are excellent examples of what could be Acciona's unicorns of tomorrow. I will not run you through the financial figures of 2022 as Rafael, Arantza, José Ángel and Pepa will do it later. But let me make a few comments on this year. Despite difficulties in the supply chain, raising costs, logistical problems and interest rate hikes, the growth plans we projected at the IPO of Acciona Energias continue on track, and we are confident that inorganic growth opportunities will arise to recover any delays accumulated over the past 20 months. Bottom line, P&L and leverage wise, however, we are far better off than predicted at that time. Notwithstanding the important geopolitical and inflation risks, the fundamentals of the industry remain solid. It's 3 main variables: CapEx, interest rates and energy prices have increased significantly over the past months. CapEx by 15% to 25%. Cost of capital by 200 basis points approximately, but future energy prices by 20% to 60% depending on the market. Hence, our 200-plus basis points margin over WACC still holds. The invasion of Ukraine has proven how important it is to rely on foreign paths for our energy needs, more so when it's authoritarian autocracies. Finally, it is now clear that renewables are not only the solution to emissions, but also to energy independence with its immediate costs. And just to put it into context, between March and September last year, wind and solar generated 24% of the EU's electricity, avoiding 8 billion cubic meters of fossil fuels and saving EUR 11 billion, which also did not go to financed -- to finance the aggressor. Along these lines, only a 5% increase in new renewable capacity in Europe's repair EU plan, say from 40% to 45%, would mean a 50% reduction in our gas imports by 2030. That is savings of EUR 100 billion a year. Of course, while reactivating all the related industries and creating close to 2 million new jobs, nobrainer if you ask me. With this, government reaction must be consistent and avoid contradictory messages. Europe, on the one hand, has raised public commitment to renewables while on the other, lags on its investment in transmission networks, fails to simplify the permitting processes or opens a regulatory frenzy that put mindly has added new risks to potential investors. Needless to say, investment capital flows to the best risk return equation available. It is always wise to offer a predictable regulatory environment when willing to attract unprecedented amounts of private capital into a region or a sector, but it is paramount when the world's other major players are significantly improving their investment profile, in particular the U.S. with the IRA or the regulatory tailwinds in Australia as examples. This is particularly worrying for European wind turbine manufacturers who do not see a clear improvement in demand while operating at a loss caused by price hikes in the supply chain and logistics problems. European OEMs in the leadership -- the leadership in the world is at risk. It is, frankly, very frustrated to see how it's low went at all. We are protecting our industrial independence in a sector in which we are a global leader essential to our energy independence and key to decarbonization. But notwithstanding the regulatory uncertainty, inflation and financing cost hikes as the dangers of climate change and energy dependence become more apparent and urgent, investors, customers and regulators have raised their expectations. The momentum towards a net 0 is undeniable, 132 countries, nearly 90% of the emissions are now targeted for reduction and net 0 commitments. The scale required for the economic transformation would be unprecedented. A recent study from McKinsey shows a shift of spending from high to low emission assets that could create one of the largest relocations of capital in history, $275 trillion between '21 and 2050, 2021 and 2050. For this to happen, CapEx needs to rise from about $5.7 trillion today annually to an annual average of $9.2 trillion, that all the way to 2050. This is an annual increase of 61% or $3.5 trillion of additional investment annually. Indeed, energy infrastructures are an essential part of this investment, by no means the only one, a wide range of smart infrastructure. Smart we use as an acronym for sustainable, mitigating, adaptive, resilient and transformative, need to accompany the energy investment. And for the first time in decades, I believe demand for smart infrastructure is picking up at a speed that may shed some light at the end of the tunnel of decarbonization. Only exponential growth in global public awareness, government policies and corporate strategies may bring us back to the track of 1.5 degrees Celsius as a target. For the first time in decades, as we're saying, I see signs that the much-needed exponential growth may be starting to happen. Indeed, it's been our record year in new infrastructure contracts with EUR 30 billion in consolidated backlog, 85% international. Renewables pipeline growth of 8 gigawatts from 30 to 38 gigawatts and new transformative technologies where Acciona has significant competitive advantages, quickly getting closer to market readiness. 2022 has brought us a good example of what we can do. The largest construction contract in Acciona's history, the Western Harbour Tunnel in Sydney, a $2.8 billion alliance contract, one that greatly diminishes our risk for a virtually invisible infrastructure that will reclaim access to -- of natural areas and will emit 60% less CO2 in its contribution than the originally designed project or the 1 gigawatt MacIntyre wind farm in Australia, one of the largest renewable energy facilities in the world, of which construction is underway. Two of the most important property developments we have promoted this year, one of them, which will be our new headquarters, which have obtained the highest sustainability ratings ever obtained in the world or the development of the Silence S04 or extractable battery urban EV, which will be in the market, hopefully, this summer or starting the project, which will solve the secular water supply cuts in one of the largest cities in Northern Mexico and one of the most water-stressed regions in the world or the recently recurrent floods in cargo -- in Fargo in North Dakota. I could go on with more iconic projects that show why Acciona is the most comprehensive global sustainable infrastructure solutions provider in the market. But although the increase in activity has been remarkable, we have managed to start decoupling our CO2 emissions from growth. We have reduced our Scope 1 and 2 emissions by 3.3% and our intensity from 21 to 15 tons of CO2 per EUR 1 million of revenue. We have also employed 10% more full-time workers worldwide and strengthened social conditions, both on communities with very specific action plans and human rights compliance in the supply chain. Finally, in 2022, our social cash flow, the funds we create and distribute was EUR 12.2 billion, which is 22% more than the previous year. Of that, EUR 12.2 billion, EUR 7.4 billion went to suppliers, EUR 1.9 billion went to CapEx, EUR 1.3 billion to employees' compensation, which is 18% more than the year before and EUR 1.5 billion was paid in the different taxes, which is a 14% increase over the previous year. EUR 225 million comparatively went to dividends. Let me underscore that dividends are by far the smallest chapter in our social cash flow and particularly a seventh of what we contribute in taxes. As for this year, we will propose a dividend of EUR 4.5 per share, which is a 10% increase. Ladies and gentlemen, if my perception is correct, we may be at a historic moment in the recent history of mankind by starting to turn around the unsustainably destructive path on which humanity has set itself a couple of hundred years ago. Time will tell whether it is unfunded optimist or really the start of something big. But true or not, all we can do is continue trying. At Acciona, we will remain committed to their purpose to continue creating economic value while providing society with sustainable infrastructure and decarbonize the economy. Thank you very much. Rafael?

Thank you, Jose Manuel, and good morning to everyone. I wanted to start with a review of the key highlights of the year. 2022 has been a very good year from a financial perspective, the strong results responds to the high energy price environment in which we have operated during 2022 in the majority of our markets, and also in adequate commercial policy and energy risk management in this volatile situation. In Spain, in particular, it positioned us to capture the high prices through our spot sales and the gradual rollover of our hedge position, and we took the advantage of the circumstances to recontract energy maturing from the regulated system turning into 10 years PPAs. These very good results put us in a strong position to address the accelerated investment needed to enable the energy transition and to reduce the Europe's dependence on imported gas and other energy commodities. In fact, we have closed the year 2022 with flat net debt as the operating cash flow generated was sufficient to cover a growing CapEx bill and the payment of the dividend. Our credit ratios are even lower than the year before. We believe we have one of the strongest credit profiles in the sector and a very distinct financial policy centered on corporate debt and access to the debt capital markets. We live in a world of higher interest rates and tougher financial markets, renewable development and energy management are adding more complex, requiring flexibility in our balance sheet and funding model represent in our view and a strong competitive advantage. Our liquidity is high, and we have pre-arranged the bulk of our financial needs for 2023. In terms of capacity additions, we have added more than 700 megawatts in the year, and we have 2.2 gigawatts under construction. These are real projects that are in progress and should take us closer to the 2 gigawatts capacity additions in 2023, which is a mirror step change in our rate of capacity growth towards the -- at least 2 gigawatts per year cruise speed that we are targeting. The supply chain is normalizing gradually, and we have resecured our equipment needs for 2023. Our focus for the successful delivery of our 2023 targets is on the PV module deliveries and the pace of civil works, foundations, towers and turbine erection at the MacIntyre wind farm. We are not only working on 2023, but also beyond to maintain high growth rates in profitable new project additions. We have an excellent visibility and optionality for 2024, as I will show you in a moment. With respect to 2025 target, it's obvious that the world has become more complex, and we are somewhat behind the schedule due to the difficulties in 2022. Having said that, this target remains a key role driving the entire organization, and it is not just for the market. It is for us. I will elaborate in a minute. The company does not need to tell you that with overall capacity just to grow or to meet the targets given to the market, but to add value. We are strongly committed to preserve our balance sheet strength and optionality in our investment-grade credit ratings. Before I turn to the next slide, I also wanted to talk briefly about our commercial policy. We believe our commercial policies is smart, is flexible, is prudent. We are at the top of the list of the green PPAs in 2022 with 2.5 terawatt hour nearly signed during the year -- with major contract signed with the Spanish industry that gives them the stability, the affordability and the green energy access that they need. And also, we signed another large asset to a key client in the U.S. market. In Spain, we believe we are managing well the faster than expected regulated to merchant transition resulting from the higher power product environment. We were prepared for this, and we have already recontracted 2.5 terawatt hour under mostly 10 years contact so far, increasing the contracted duration of these volumes out of the regulation. I want to mention also that we have renegotiated prices in certain existing PPAs to better reflect the new cost environment. Turning into the Slide #9. We provide you an update of the capacity we added in 2021 and 2022 in the pipeline. Since the IPO, our total pipeline has increased by around 8 gigawatts and that is after having installed 1 gigawatt in the meantime. The more traditional win and PV pipeline has grown by 2.5 gigawatts approximately and the pipeline related to new technologies, such as batteries, offshore and green hydrogen has increased by around 5.5 gigawatts. I would reiterate nevertheless, that the role is not to have a massive pipeline, but actually to have sufficient pipeline as maintaining a pipeline is expensive. Our goal is to have a level of pipeline that is efficient cost, effectively giving us the headroom to achieve our goals and flexible to adapt to the changing market situations. In Slide #10, I want to elaborate a bit more about our 2025 capacity target. As I said before, we are approximately less than 1 year behind our initial plans and it's a fact that environment for making investment decisions is more volatile today, higher volatile CapEx and financial cost, higher uncertainties on permitting speeds in cruise access or residual supply chain fears. Our 2025 target is more challenging today, but at the same time, the policy trends that we are seeing, for example, in Europe or in the U.S. are very supportive, and our pipeline is growing significantly in size and scope. While CapEx costs have increased around 15% to 25% in the last couple of years, and WACC are up by around 200 basis points. Energy prices in some of our key markets have increased between 30% and 60% in the period, whether we are looking at PPA prices or average long-term wholesale prices. I'd like to say again that our capacity target is not just a target for the investment community. It's a critical driver for internal performance and achievement across the entire organization. We are confident in crystallizing a major increase in the rate of capacity additions during 2023, around 1.8 gigawatts, and our focus is on being able to maintain an increase, if possible, a cruise speed of at least 2 gigawatts per year. The main markets that we contribute to this whole are Australia, the U.S., Spain and Brazil. Brazil, in particular, could be in the future, a significant swing factor. Again, financial discipline is extremely important, and we will grow as long as returns are attractive and the balance sheet strength is protected. We are maintaining our investment policy, and we currently see reasonable good prospects in terms of returns across some of the key markets where we operate. We are confident that we can generate significant volumes of good projects in markets like Spain, Europe, the U.S. and Australia. In other parts of the world, we will be ready for the PPA price investment cost equation to be better aligned of our policy to turn around. This is why it's important for us to have a long-term strategy and a very good geographical diversification in terms of operations and in terms of pipelines that allows us to shift from one region to another. In Slide 11, I want to refer to the details of the 2023 construction plan and the visibility that we are building for 2024 and beyond. In 2023, our plan is to add 1.8 gigawatts of new capacity with 650 megawatts of MacIntyre with around 830 megawatts of our U.S. PV assets currently under construction as well as new capacity in Spain and in Peru. Here, the critical points are the PV module delivery, which we are confident it will be according with the schedule as well as the pace of installation at MacIntyre. With respect to 2024, we have 1.2 gigawatts already identified that are including the tail end MacIntyre in Australia and the completion of retail halt in the U.S. roughly 250 megawatts in Australia that are part of the new PV project called Aldoga with a total capacity of 445 megawatts plus 72 megawatts in Croatia plus new assets in Spain, which recently received, awarded environmental approval. We expect to close around 300 megawatts added in 2024 in Spain, including 50 megawatts biomass plant. Additionally, we have a mature pipeline and a lot of development optionality to support additional growth in 2024 and 2025. I will highlight that we are in advance talks in several processes to acquire U.S. PV pipeline in very advanced stage of the development amounting to more than 2 gigawatts in aggregate. I would also to like to mention that the Spanish hybridization pipeline with 2.3 gigawatts of project in total, out of which around 50% has already applied for environmental approval, in which we think will provide a steady source of new megawatts for us in the next few years, although we need to be watchful of the evolution of volumes and prices. In Brazil, we continue developing our 1.1 gigawatts of pipeline and the focus today is in getting these projects ready to build and be ready for the alignment of the power price with CapEx and financial costs. We are confident in this country in the future as a significant source of growth for the company. All in all, you can see that we have 3.5 gigawatts of secure and under construction projects as well as many opportunities in which we are making progress in order to maintain an excellent crisis speed of profitable megawatt additions. We have included in the Annex a good level of details of all the projects under construction with the cures and the progress of the key projects that we are building today. To conclude this section, we have included an overview of where -- that we are doing with respect with the new businesses and new technologies. I'm particularly pleased with the acquisition of what is now our first operating utility scale battery project in the U.S., 190 megawatts, 380 megawatts hour, 2 hours of storage plus a large pipeline of additional projects all in ERCOT, Texas, U.S., which is one of the most advanced markets for batteries and storage in the world. This is to jump from our R&D demonstration projects that we were operating for a decade to only operating and dispatching the largest battery in Texas grid. This is a great milestone for us in a new business line. We are also very excited with the entry into the Southeast Asian market partnering with Pioneer -- with our partners, the Pioneer developer, The Blue Circle. Asia is one of the most populated and energy-hungry regions in the world and developing market for green energy, and we want to play an important role there. On green hydrogen, I like to mention the progress that we are making in the development of our 25 megawatt electrolyzer project that is being developed under our joint venture with Plug Power and that will be constructed on the site of our biomass plant in Navarra. In Offshore, we continue to work on the development of floating solutions, pursuing opportunities in several markets. And now let me hand over to our Chief Financial and Sustainability Officer, Arantza Ezpeleta for the review of the key financial and sustainability aspects of the results. Arantza? Thank you.

Thank you, Rafael. Good morning. Let me start with a quick overview of the key financial and operating headlines. Revenues have increased to EUR 4,351 million, thanks to the higher volume and prices in the supply chain activity in Spain and higher regeneration revenues. EBITDA is up to EUR 1,653 million with generation volumes slightly down, but with average achieved prices growing strongly. Attributable net profit has increased to EUR 759 million. I would note the impact of the reversal of the regulatory banding mechanism in the P&L with EUR 94 million net contribution to pretax profit and the impact of the mark-to-market of certain energy supply contracts of EUR 64 million. Net investment cash flow grew from EUR 819 million of net investment in 2021 to close to EUR 1.3 billion in 2022. Net debt is basically flat at EUR 2 billion, and the credit ratios improved with net debt-to-EBITDA falling from 1.83x to 1.22x. In terms of operating data, shown in the right-hand table, let me mention some of the key data. Total capacity grew by 5% and consolidated capacity by 8% at 11.8 gigawatts and 9.9 gigawatts, respectively. Consolidated output is down 2% to 19.7 terawatt hours. Our supply volumes in Spain and Portugal exceeded 9 terawatt hours, growing by 26%. Our load factors were weaker than expected, as Rafael mentioned, at 27%. The average achieved price has increased to EUR 114 per megawatt hour. Moving to Slide 15 on our ESG performance. On the social side, we have increased the percentage of women in managerial positions to 26% and we have also increased significantly the number of projects with social impact management deployment and it's scope increased to encompass the product development phase as well. We have improved further our accident frequency index to 0.39, which is something we are very proud of as safety is one of our top priorities at Acciona Energias. With respect to the environmental indicators, we have almost 100% alignment of CapEx with the European Union taxonomy and we have reduced our Scope 1 and 2 emissions by almost 40% and by increasing further the procurement on green energy for our own operations. We have also rolled out initiatives such as electrify and our own fleet for the O&M vehicles and our emissions are well below the SBTI target for Scope 1 and 2. We have also increased -- reduced significantly the waste and landfill volumes and increased recovered waste to 98%. In Slide 16, you can find details on investment during the year. Gross CapEx amounted to over EUR 1.6 billion with net CapEx deferral at EUR 362 million. As a result, the total cash outflow from investment reached almost EUR 1.3 billion. The investment is mainly concentrated in new capacity in the U.S., Australia and Spain. In this slide, we show the evolution of the net debt in the year and the key cash flow items. I would highlight that operating cash flow was very strong at EUR 1.3 billion and compares against net debt before IFRS 16 of EUR 1.6 billion at the start of the year. This cash flow generation almost fully covered net investment of EUR 1.3 billion and the payment of the dividend. In Slide 18, you can find details on the makeup and the key metrics of our debt. Our gross debt stood at the end of December at EUR 2.4 billion with close to EUR 1.9 billion of corporate debt, representing 77% of gross debt and EUR 551 million of project debt. Cash and cash equivalents at year-end amounted to more than EUR 800 million and the IFRS 16 liability at just over EUR 400 million. Our average cost of debt during the year was 3.26%, with the cost of corporate debt at 1.6%. The cost of debt has been increasing gradually as the year progressed due to the steep increase in the base rates. As of year-end, fixed debt represented 64% of the total gross debt. The average maturity of our debt is more than 5 years, increasing significantly relatively to 2021, primarily due to the issue of long-term bonds. We have included, as usual, some statistic on the Spanish power market. I would highlight the 50% increase in the average power price to EUR 168 per megawatt hour, and how monthly averages were below 2021 levels for most of the second half of 2022, mostly due to the Spanish gas exception intervention. Demand fell by almost 3% and with the ordinary line demand falling by close to 4% with a steep fall in the industrial demand in the context of the very high power prices. In absolute terms, it is the lowest electricity demand since 2 years and 3. CCGT production was the first technology in Spain in the year, followed by wind and emissions increased. Hydro production fell by 43%, although at year-end reserves have recovered significantly and stood broadly in line with 5-year averages and at 43%. Here in Slide 20, you can see the key drivers for the Spanish generation revenues. Consolidated output fell by 3% to 9.3 terawatt hours. Regulated output represented 35% of production and hedge energy and other 52%, so that total contracted stood at 87%. Average achieved prices in Spain increased by 100% to EUR 168 per megawatt hour, hedge volumes through financial derivatives and contracts achieved a price of close to EUR 134 per megawatt hours, while the merchant volumes captured a net price of EUR 168 per megawatt hour. The regulated volumes achieved a price of EUR 219 per megawatt hour. Given the high power prices in the market, the regulator income received and the impact of the reversal of the regulatory banding mechanism accounting in line with the criteria of the securities authority CNMB as most of our regulated assets are unlikely to obtain any regulatory income in the future and will consume the regulatory capital ahead of the end of their regulated useful life. All in all, generation revenues increased to EUR 1,555 million. Total Spanish revenues in Slide 21, reached EUR 3.2 billion with a strong supply and generation revenues. Generation EBITDA reached EUR 1,272 million and the total EBITDA was EUR 1,255 million, which is a very good result. Let me jump directly to Slide 23. In this slide, you can find the key drivers for the international generation revenues. Production was slightly down with consolidated output at 10.4 terawatt hours and achieved prices fell to EUR 66 megawatt hour. Prices increased in most markets, except for Chile and the U.S., where we capture exceptionally high prices in 2021 due to the Texas storm. Revenues fell to EUR 685 million with lower revenues in Chile and the U.S. and higher in the rest of the market. EBITDA in the international business fell to EUR 398 million, with lower contribution in Chile and the U.S. generation fleet, a negative contribution for the -- from the equity accounted assets due to the impairment in our Portuguese PV plant because of the end of the feed-in tariff period. To conclude the presentation, I would like to share with you our outlook for 2023. Starting with EBITDA, we expect another excellent year in 2023. We expect EBITDA in a range of EUR 1.5 billion to EUR 1.6 billion. And of course, depending on the evolution of the power prices, which will be a key driver for this. As we have said in many occasions, we now live in a world where power price expectations for the year move by tens of euros per megawatt hour. In terms of net investment, we expect it to increase relatively to 2022 within the range of EUR 1.8 billion to EUR 1.9 billion. Net debt-to-EBITDA should close the year at 2x or below, a very low year-end ratio. And in terms of dividends, the Board has proposed a distribution on a dividend per share of EUR 0.8, which implies a payout of 30%. Thank you for your attention.

The questions that we have received relating to Acciona Energías, which will be addressed by Arantza and Rafael and the key management team who's currently present in this room. So let's start with a question from CaixaBank, Flora Trindade, in which she is asking about the current interest rate environment and competition for new projects, if we can -- within that environment, if we can comment on the IRRs of most recent projects. I reiterate my comments in the -- in my introduction, we have not seen a significant change in the financial structure of our investments in energy because as prices costs have risen in the -- in CapEx and financial costs have also increased by about 200 basis points. They have been offset by the increase in energy prices. So our returns going forward, and the curves that we use as a reference, which is a mixture of all the public curves plus our own future projections and our own curves all those elements put together, throw out IRRs that remain in the ranges that we were using before in -- when we announced -- when we came public and made our assumptions in the IPO. So no, the answer is no. It has not changed substantially in any way. Obviously, there's variations in regions, but no, the change is not substantial in that front. I don't know if there's anything you want to add, Rafael or Arantza?

No, maybe on top of the prices, also the RIN certificates are increasing the price. So the addition -- energy plus RIN certifications are compensating and offsetting the increase in CapEx.

Okay. Second question is about M&A. M&A and the possibility of M&A helping reach the 2025 target. Indeed, that's something that we've always kept in our -- as a possibility. And in fact, we have done a couple of M&A -- smaller M&A projects, a few M&A projects in the past 18 months, one of which has added capacity in the battery space, and we expect to continue to have opportunities of that nature. On -- that was a question from Fernando -- sorry, from CaixaBank, Flora Trindade again and Deutsche Bank, Olly Jeffery. The third question is from Fernando Garcia, Royal Bank of Canada, which goes on regulatory banding will be neutral in the future, will achieve prices evolve with just market prices and hedge prices in Spain? So Arantza or Rafael?

Yes. Thank you. So you're right that the reversion of the banding is a one-off accounting item in 2022, but we are doing just the same of the rest of the utilities in the sector in Spain. Most of our regulated assets will not have regulatory income going forward. We're estimating only between EUR 2 million to EUR 3 million in the coming years and will consume any residual net asset value before the end of their useful life. Going forward in Spain, you're also right that the regulatory driver is going to be very marginal, it will be only -- it will all be about how we sold the electricity through long-term contracts, financial hedges and also the portion of merchant. And I will suggest that you have a look at the slide in the appendix, where you can find some detail on how the mix of volumes may evolve in Spain in the future.

Thank you, Arantza. Then there's another question from Fernando Garcia at RBC. What is the output subject to gas clawback in Spain in 2023?

Yes. Thank you. We are estimating that at P50, that would be around 2 terawatt hours of consolidated Spanish output. And this is taking into account the hedges we put in place before April 2022, and the long-term contracted energy that is below the price of EUR 67 per megawatt hour.

Okay. Question number 5 comes from a number of attendees to the conference -- comes from Fernando Garcia at RBC, Oscar Nájar Ríos from Santander, Jorge Alonso from SocGen, Paul Chabran from Kempen and Olly Jeffery from Deutsche. The question is, based on your guided capacity installations, would you need approximately 4 gigawatt additions in 2025 to reach your 20 gigawatt guidance for 2025? I guess he means 24 gigawatts in 2024 and '25, anyway, it says 4 gigawatts in 2025. Do you maintain the guidance, which I guess is the key part of the question? So Rafael.

Yes. We are going to build 1.8 gigawatts in 2023. And for the next couple of years, '24 and '25, we need to do at least 2 gigawatts per year and we are reaching this target. We have some opportunities in the market. As I mentioned before, we are in today talking with some developers in the U.S. markets with opportunities in PV totalizing 2 gigawatts. And with some of these opportunities, we are comfortable with filling them up to reach the target.

Okay. Question number 6 from Arthur Sitbon at Morgan Stanley. Would you mind providing the underlying commodity and government intervention assumptions for both your low point EUR 1.5 billion and your high point, EUR 1.6 billion EBITDA guidance, 2023? Rafael, go ahead, please.

We are not expecting more interventions in the year, more than the clawback extension until the end of the year in order to do the guidance and EUR 1.5 billion, EUR 1.6 billion, we are considering prices around -- for prices for the year, EUR 130 to EUR 150 per watt hour.

Yes. So our expectation is that there will be no significant changes in the model regulatory-wise in the next year, in the present in the current year. And the impact, as Rafael says will be mostly on what happens with prices. On Question number 7, also from Oscar Nájar of, Santander, Ranieri from Stifel and also from SocGen, Garrido from JPMorgan, Chabran from Kempen and Tar from Berenberg is, in PPAs lately, you have signed several PPAs. Could you please give us some feedback about types, prices and length. I think it's worth giving the floor to Javier who's sitting there, Javier Montes, who's the expert on the topic, and he will give some color on details.

Acciona Energias signed in 2022, 34 PPAs, representing 2.53 terawatt hours of corporate PPAs and another 300 in some feed-in tariff contracts in Croatia and the Dominican Republic. Of this, more than 95% are 10 to 15 years in length, only some 250 gigawatt hours are on 5-year contracts in Spain, which represent interest from some retail clients. Around 40% of the electricity contracted corresponds to baseload contracts in Spain and are supported by assets from our operational fleet, which were coming out of the regulated environment. The rest are pay as produced and almost all for new assets. Prices have increased around the world with healthy trends, even though the pace might be slowing somewhat in -- as we expect in 2023, but the increase is very substantial compared to 2021. Those increases range from 20% to 60% and are more strongly felt in Europe and the U.S. compared to other jurisdictions.

Thank you, Javier. Then question number 8 comes from Jorge Guimarães, JB Capital. When do you expect CapEx cost pressure in the U.S. to abate? I will pass on to this [indiscernible], Head of Construction, CapEx.

Thanks, Jose Manuel. Yes, we are, in fact, already seeing this reduction in cost in PV in the U.S., mainly due to the module polysilicon and logistic decreases. So we are already taking advantage in our current projects under construction and this CapEx reduction. For the rest of the BOP and future projects, the trend is also going down, not so heavily as it's happening for polysilicon and logistics.

Okay. Question number 9 from Jorge Alonso at SocGen, Javier Garrido, JP and Swabey at HSBC, is when do you expect to bring into operation the pipeline of battery capacity and that you acquired in the U.S.A. and whether there are any expected additions of batteries in '23 and '24?

Well, in the U.S., we acquired a pipeline with projects of batteries, something around 1 gigawatts. The projects are secured in land, not yet the interconnection, they are pending on the interconnection and we expect to finish the development in 2025. We are seeing other opportunities of storage in other markets as in Australia.

Let me add to that, that there is a line of analysis and research and opportunity around the second life batteries of mobility -- of vehicles, and we're working hard on that. It's still probably not for the next few years, but it will have an impact in the storage capacity of the electrical system. Okay. Question number 10, what is -- Ranieri from Stifel and Javier Garrido at JPMorgan, what is your expectation on the pool prices in Spain for 2023? Arantza?

Yes. Thank you. So our current expectation is for the Spanish pool prices to be in the range of the EUR 130 to EUR 150 megawatt hour, but this will also very much influence and depend on how the second half of the year evolves in terms of temperature gas, storage and prices, LNG market and so on.

Very good. Question number 11. U.S.A. inflation reduction act policy and how does from Charles Swabey at HSBC, whether it's possible -- whether it's positive in the 2024, '25 capacity addition? Or is this more of a 2025 beyond story? Is the potential acquisition of the mature USBV pipeline related to IRA to the Inflation Reduction Act policy. I think this question, Rafael Esteban, head of development can deal with it.

Yes, sure. Thank you, Jose Manuel. I mean, the IRA really helps us in terms of more visibility of the market to attend 10, 12 years of visibility. So it really helps to build up and to continue making the pipeline. In the cases of the portfolio that we are looking -- the pipeline of projects that we are looking doesn't relate specifically to it. Of course, it helps. But what we are looking is capacity addition. So from that pipeline that -- some of them could go on '24, '25 and other ones could go beyond that time.

Thank you, Rafael. And this is a question that we can share between Rafael Esteban, Rafael Mateo, because it's quite generic. It's on the Brazilian market. Could you give us a color on the Brazilian market? And what are the key factors for growth? And what's driving PPAs in Brazil? So...

Yes. As I said before, we are developing today in Brazil, 1.1 gigawatts in 3 wind farms -- in 3 wind projects with a very high load factor. The idea is today to finish the development to reach the ready-to-build situation and to wait for the best moment to look for an offtaker to sign a PPA. Brazil is very dependent on the hydrology. Today, they are living in a window of very low prices. So we need to wait after reaching the ready-to-build the best moment to sign the PPA. We are permanently talking with potential offtakers in order to close the best moment.

Okay. Well, thank you very much. That does away with the questions on energy, and we will then -- we will now address the questions on infrastructure in general. I will start with question #1, which is, can you please explain the drivers behind the strong construction EBITDA.