EDP Renewables, S.A. (EDPR) Earnings Call Transcript & Summary

Hello and welcome to the 9 months '21 EDPR Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] And I will now hand you over to your host, Andre Fernandes, Head of Investor Relations, Planning and Control and Sustainability, to begin today's conference. Thank you.

Good afternoon, everyone. Thank you very much for attending EDPR's Third Quarter 2021 Results Conference Call. We have here with us our CEO, Miguel Stilwell de Andrade; and our CFO, Rui Teixeira, who will run you through the key highlights and -- of the business plan execution and of the 9 months results. We will then move into Q&A in which we will be taking your questions. This call is expected to last around 1 hour. And I will now give the floor to our CEO, Miguel Stilwell de Andrade.

Thank you, Andre. Good afternoon, everyone. I hope you are all doing well. And it's also a pleasure to be on these calls and be able to not only present what we've been doing but also take your questions afterwards. So anyway, today, we have a lot to talk about, so I'll get straight into the presentation. We move to Slide 5 and just giving you a broad overview of the business plan execution, first of all, in the key pillars of growth. We are ramping up and we have around 2.5 gigawatts added year-on-year, so this is good progress towards the 3 gigawatt-plus which we were aiming for in the 2021 to 2023 growth targets. So this is actually the largest number of megawatts ever built by EDP Renewables in 12 months, and I'd really like to highlight that this shows that there is a successful ramp-up of the growth rate. And it should give us confidence on the execution of the growth plan. Also, today, we just announced the acquisition of Sunseap. You will have seen that news, I'm sure, this morning. I think it establishes a great platform in Asia Pacific. This is a region -- and I'll talk a little bit about this later on, but it's a huge growth potential in the region, so that's something I think that's worth also highlighting, obviously. On secured capacity, we now have 8.1 gigawatts secured, out of which 7.9 gigawatts in 2021 to 2023. So that's around 75% of our 2021 to '23 target. I think good progress there. And we also have visibility on additional 4.1 gigawatts of PPAs in our key markets in which we are either shortlisted or currently under negotiation, so we will, hopefully, be giving good visibility on the rollout of those PPAs also in the next couple of months. So overall solid ramp-up of growth, a good platform for growth in Asia Pacific and also strong execution with short-term visibility on the additional PPAs. On the asset rotation program, so the pillar here in the middle, we continue to see strong market appetite and attractive valuations both for wind and solar. We have the EUR 2.3 billion of asset rotation proceeds. Multiples continue to be very attractive, on average EUR 1.6 million per megawatt, EUR 1.7 million for wind and EUR 1.2 million for solar. So I'll go there in a little bit more detail in a minute. As of September, we have EUR 550 million of asset rotation proceeds, overall capital gains of EUR 151 million following the Mayflower earnout of EUR 30 million. So overall we're on track to deliver capital gains above the EUR 300 million of guidance we've given for this year. And we have a couple of transactions which we've already announced but which we are hoping to close over the next couple of weeks or months but, hopefully, at least 1 or 2 by the end of the year. On excellence, which is the third pillar. So for the 9 months to date, EDP Renewables has achieved 28% load factor. This is down 0.6% year-on-year, but it still reflects 95% of the expected gross capacity factor. We have had a bad year in terms of wind. I mean low resource, particularly in the U.S. and Spain. And I think that's something that we've talked about in previous quarters, and the third quarter was no exception. Regarding operations, we continue with a strong performance with core OpEx per megawatt decreasing 3% year-on-year. And on the technical side, we continue to deliver a good availability of 97%, so slightly above year-on-year. So in terms of operations, I think good performance there. On ESG, execution is well on track for the business plan targets. We have already -- most of the initiatives are already in progress under the "changing tomorrow now" program. And finally, I mean, just -- I mean note is not here on the slide, but we have an EBITDA of EUR 917 million; net income of around EUR 150 million, EUR 148 million. This is mostly impacted by the lower capital gains year-on-year, the first quarter one-off ERCOT event and lower generation or lower winds in the U.S. and Spain. I think that's something we have to recognize. So it hasn't been a great year from a wind resource perspective. And overall, the high pool prices in the third quarter have also introduced some pressure on the hedges. In Spain in particular, the EBITDA is EUR 40 million to EUR 45 million below expectation in the 9 months, EUR 30 million of which is from low wind, especially in the second and third quarter which is below the P50. And then you have around EUR 10 million to EUR 15 million from financial hedges in the third quarter given the high prices combined with low generation. So I'll go this -- go through this in more details, and Rui will also elaborate more on this. Anyway, let's move forward to Slide 6. So here on the growth platform for Asia Pacific that we -- and the Sunseap transaction we announced today. So as you know, we had 20 gigawatts of additions until 2025 set out in the strategic plan, 1.4 gigawatts we'd outlined or highlighted will come from new markets. These new geographies do bring us optionality. They bring diversification to our portfolio. And so the expansion into Asia Pacific was something we've been working on now for a while, so I think today's news is certainly good news. If we move to Slide 7, just talking a little bit about the overall Asia Pacific market. It's one of the largest renewables markets globally. It has strong growth expectations, especially in solar. We're talking about 120 gigawatts per year in terms of growth, so it's a massive market. And at EDP Renewables, we really felt it was important to tap this opportunity and have a foothold in [Technical Difficulty]

Please stand by whilst we reestablish the connection with our speakers. Thank you for your patience. Speakers, please continue.

Okay. So sorry for the technical difficulties. I mean I think this is the first. I'm told that we somehow got disconnected around Slide 7, so I'll resume on Slide 7. Hopefully, you haven't heard that before. So I'll just go back to Slide 7 and talk about Asia Pacific. So this is really one of the largest markets globally. It's got huge growth expectations, especially in solar, and some key numbers which I think are worth highlighting: a 120 gigawatts per year market, so it's really a massive market; 55% of the global growth in renewables. And solar represents 65% of this growth in Asia Pacific. Also something which I'm sure everyone will be familiar with, which is, I mean, this is a highly populated, densely populated region. So it's over 4 billion people and over 50% of the global power demand. And finally, just to say that, countries like China, Japan, South Korea, they've all committed to net zero emissions by 2050 or 2060. And so there does seem to also be a general trend towards decarbonization in the region and promoting renewables. And so just a final message on this slide. If we are serious about reaching net zero by 2050, and there is a broad consensus around this, then all regions and all countries will need to contribute to this target. And so we want to make sure that EDP Renewables is positioned in the long run to take advantage of this opportunity. So I think I'd just like to highlight this in relation to this region, which is obviously, I think, key to making us global. And that's exactly the topic of the next slide. So Slide 8. With this platform, we now become truly global. So we already had a very strong platform in the U.S., a very strong platform in Europe. We have a good platform in Latin America with Brazil, Chile, Colombia. And now we set up this platform also in Asia Pacific, yes. So we think that Sunseap's team is very complementary to EDPR both geographically and technologically. Their footprint, solar pipeline, together with our scale and our capabilities, the fact that we have, for example, wind that we can also bring to the table, that means that we believe we will be able to build out the platform and accelerate the growth in the region. So now having -- once we complete the acquisition, we will be present in 25 markets, representing 75% of global growth over the next decade. So that's we'll have a very strong representation in all of the key markets. Moving to Slide 9 and a specific comment on Sunseap. So it is a solar-focused platform. It is based out of Singapore; present in 9 markets; 550 megawatts of operating and under-construction assets, most of these in Singapore, with a very low-risk profile. As you know, Singapore is with AAA rating. Sunseap is also present in Vietnam, where EDPR is also present, so we will be able to integrate our positions there. Very young assets, below 2 years; 20-year contracted revenues, so 76% of that PPAs, and 24% is regulated, at an average price of EUR 75 per megawatt hour. So low risk, stable, long-term cash flows, completely aligned with the EDPR strategy. Also they bring very strong client relationships and a track record. The offtakers include some of the EDPR clients in Europe and in the U.S., so companies like Amazon, Facebook, Microsoft, Apple. So solar distributed generation represents around 70% of the operating and under-construction portfolio. And it's a key technology obviously to grow in Asia Pacific. Going forward, utility scale will also play a key and increasingly relevant role. So Sunseap brings a strong footprint in Asia Pacific, a great track record, over 10 years of successfully developing the business there. It's got a fantastic management team with a lot of local knowledge, over 400 employees and growing given the growth of the market. So that will facilitate the local culture know-how and also the long-term, yes, buildup of relationships. So I think they have a great reputation in the region, and I think that gives us a lot of confidence to leverage on that and accelerate growth. Also very importantly, and moving to Slide 10, Sunseap has a great pipeline. So overall the portfolio is around 5.5 gigawatts. So on top of the 550 megawatts of operating and under construction, there are 130 megawatts of contracted capacity, so almost 700 megawatts of secured capacity. And we have a pipeline of almost 5 gigawatts in different stages of development. So around 2 gigawatts of advanced stage and 2.8 gigawatts of early stage. Future growth will have obviously more geographic diversification and also higher exposure to solar utility scale going forward. Moving on to Slide 11 and talking just a little bit about valuations and then -- and stakes. So we are leveraging our capabilities to really accelerate the growth and the value creation in Asia Pacific through Sunseap. The way we see it, it's putting the business on steroids and really leveraging it up. We will have a 87% stake. This may actually increase to around 91%. Sunseap has, as I mentioned, a great management team. So the founders will stay invested with around 6.5% and with their incentives fully aligned with the growth and the profitability of the business. I think this is the key point to make sure that we have a smooth transition and we really bring the local experience and the new culture to EDPR with -- obviously they have great knowledge of the markets and the developments in the Asia Pacific markets, and so we want to make sure that we are able to merge the companies well and really leverage on Sunseap to take it even further and make it grow even faster. Together with the founders and the management, we will have around 94%. That may actually increase to 98%. In terms of valuation. So the implied price we are paying is around EUR 870 million. Breaking this down, I'd say that there's 1 block which is CapEx, so implicit in the 550 megawatts. Since it's mostly solar and -- distributed generation, it has an average CapEx per megawatt AC. The -- so this is important to stress. This is AC, not DC -- of around EUR 1 million. We have the value creation associated with the operating and under-construction assets together with the secured capacity, so a total of 700 megawatts. And I'm sure you can come up with an NPV per megawatt reference for this bucket. I just reemphasize that these assets are very young. They have 20-year contracted revenues at an average price of EUR 75 per megawatt hour. And finally, there's a pipeline and a platform. And we believe we'll be creating significant value from the existing pipeline and we'll be able to leverage the Sunseap model. So with strong development capabilities in this footprint [ in ] 9 markets to really deliver the growth going forward. Overall, for EDPR it really opens up a new region of the world where we didn't have a significant presence. And we think that this together in terms of solar, together with what we can bring in wind will really mean that we can ramp up this platform, as I say, in the Asia Pacific region. Okay, so that's Sunseap. I'd just like to now talk you through some of the other key metrics for the business. If we move to Slide 12. We have around 8 gigawatts secured, 8.1 gigawatts secured, yes, so it's up 2.7 gigawatts year-to-date. And I think that shows the origination capabilities and also the competitive projects that we are able to bring. If we zoom in just on 2021 to '23, as I mentioned earlier, we'll have around 7.9 gigawatts secured already until '23. So that's around 75%. We continue to have a disciplined investment approach. And so I think attractive returns, low-risk profile, contracted NPV of around 60%. So we continue to see those metrics, yes, across the different projects that we are investing in. And so overall strong visibility on the 2021 to '23 time frame and also a solid risk-return profile. We move to Slide 13. And this is something we've talked about previously but just to give you an update on this. So we continue to be protected from CapEx cost inflation, as we've discussed on previous calls. And we have limited exposure on 10% of our secured capacity. For new projects, we are seeing the PPA market and the auctions adjusting to the sector-wide increase in CapEx, so from that perspective, it's not hindering our competitiveness when bidding for new projects and the return thresholds are being preserved. So just to give you a specific example: [ If you happen to ] look at the Spanish auction now in October, you will have seen that the average price of the auction went up. That has to do, we believe, with the adjustment also to the new CapEx expectations. We are also seeing that, when we are doing bilateral, let's say, discussions on PPAs, we are seeing those prices feeding through into new PPA prices, revised PPA prices under discussion, and being accepted by clients. In relation to the supply chain, we have a strong position. We have a privileged relationship, I'd say, with the suppliers. And so we continue to monitor and to manage any disruptions that might happen to the supply chain. In relation to wind, we feel comfortable. There doesn't seem to be any material issue with our projects in the short and the medium term. In solar it's something we're monitoring more closely, obviously, to make sure that, yes, any disruptions are dealt with quickly and that we can manage that in the context of our development and construction. If we move to Slide 14, and in terms of pipeline. We continue to ramp up, yes. We have good short-term visibility on growth. I wanted to highlight that 60% of the current secured capacity has been secured through PPAs. So that's a market where we continue to be very active and we actually expect it to increase even more over the coming years. So as I mentioned earlier, 4.1 gigawatts of PPAs under negotiation and shortlisted, yes, which we hope will provide short-term visibility on additional capacity. Slide 15, on offshore. Ocean Winds continues to grow. So operating capacity is now 1.5 gigawatts in 2022, expected to reach 3.4 gigawatts by 2025. Moray East finalized construction. And I had the pleasure of being up in Scotland a couple of weeks ago to, yes, just turn over the O&M center in Fraserburgh. We're moving ahead also with some other projects in Scotland, so the Moray West, yes. We also expect to give visibility on that soon. We have several other projects that we are continuing to develop in Poland, U.S., South Korea. We are participating in the RFP in Massachusetts for Mayflower. Hopefully, we will have visibility on that soon. And also, in relation to ScotWind, we'll also have visibility on that soon. So we have a good, strong presence in Scotland, so let's wait and see what comes out of that auction. Slide 16, just a quick comment here on asset rotation. You will have seen most of these numbers, so just very quickly: EUR 2.3 billion of proceeds, 30% of the EUR 8 billion target. [ That's a full ] 5-year plan. We're overall very happy with the multiples achieved and the execution. Within the third quarter, we upsized the U.S. transaction to 80%. And we also signed the Polish transaction, so clearly we are on track to deliver capital gains north of EUR 300 million in 2021. The actual value will depend on the timing of the regulatory approvals and the closing of each transaction. So all in all, execution on the asset rotation going well. We continue to see strong appetite from investors. And so now our efforts are totally on the regulatory approval side to make sure that we can get at least some of these over the line here by the end of 2021. Slide 17, a quick note on ESG. So circular economy and biodiversity, we have been promoting a lot the waste recovery in the operational phase for a while, so extending our best practices now to the rest of the value chain. Repowering, although it's still not very material, EDPR is focused on tackling the repowering wave that we expect post 2025, especially in Spain, Portugal and the U.S. So far, we've done -- we've repowered 2 wind farms in Spain, and we are repowering another 1 in the U.S. In the 2 sites that we repowered in Spain, more -- most of the -- let's say, the waste generated was recovered. So almost 95%. In this respect, we are participating also in some blade recycling projects in Spain, the U.S. and also in Portugal. And 100% of the area impacted during the repowering processes in Spain were fully restored. In relation to communities, we are obviously -- want to make sure that we work with the local communities so that we are able to keep the alignment with our core business and make sure that we are able to develop our projects in harmony with the local communities. In terms of people, we are aiming to achieve the 36% female employees. Currently we're at 32%, but 37% of our new hires are all women, which I think contributes well to achieving our goal. So definitely looking out for equality of opportunities there. And lastly, just in relation to the sustainable suppliers goal, what we've been asking our core business suppliers is basically in terms of health and safety, environmental, ethical criteria to be totally aligned with us. So it's not just a question of EDPR having certain goals and targets. It's also making sure that, that extends to our suppliers, at least our key suppliers. And with this business plan, as you know, we have the idea of going one step further by making sure that we have these ESG goals totally aligned with the suppliers'. So I'll stop here. And now I'll turn it over to Rui to walk you through the 9 months results and then come back at the end for closing remarks. Thank you.

Thank you, Miguel. Good afternoon to you all. So let's move on to the 9 months results. So on Slide 19. Our financial performance year-on-year has been, as you know, mostly impacted by, on one hand, lower capital gains; and the one-off ERCOT event in Q1; and also the lower generations that we have been observing in U.S. and Spain. So we achieved EUR 917 million EBITDA and EUR 148 million net profit in the first 9 months. That's on the back of the generating 21-point (sic) [ 21.5 ] terawatt hours of clean energy. That's a 5% [indiscernible]. So that's EUR 122 million at the net profit. So on top of the EUR 100 million gain on the U.S. asset rotation, we have also some positive price adjustments from 2020 transactions in offshore and in this Rosewater build-and-transfer project along with EUR 30 million earnout from Mayflower. Below EBITDA, we continued to improve our average cost of debt, 3.4% versus 3.5%. So that's a reduction of about 0.2 percentage points year-on-year. In U.S., our top line is impacted by the Q1 one-off ERCOT event, and we extensively discussed this in the first quarter, but also by the fact that we are below the average resource. For the period, we also have a weak wind resource in Spain as well. And let me just highlight here some impacts that we have in Spain and that, of course, are hitting us in the 9 months results. So overall, Spain is about EUR 40 million to EUR 45 million below our expectation for the 9 months 2021. Out of these are around EUR 30 million are from low wind, and that's particularly in the Q2 and Q3 where we have -- we are below the 90% of our P50; and about EUR 10 million to EUR 15 million from financial hedges in Q2 -- Q3 given the high prices and the low generation. Just to give you an expected full year result from this impact with the P50 in terms of wind for the fourth quarter is around EUR 25 million. So I think it's also worth highlighting that, given pool only went above the EUR 60 per megawatt hour in July, the regulatory adjustment that is booked in the Q3 concentrates the regulatory adjustment for the full 9 months 2021. So there is a concentration -- it's a technicality, but there is a concentration here in the Q3. So just a snapshot in the balance sheet. Net debt decreased year-to-date to EUR 3.32 billion. This is, of course, on the back of the EUR 1.5 billion capital increase; around EUR 140 million asset rotation, so the equity proceeds from that; and around EUR 0.6 billion of a tax equity which is already booked for the U.S. projects. And of course, it impacts the net debt reduction. I think it's important now that -- if we move to the operational side. So if we move to Slide 20, highlighting that we added 2.5 gigas of wind and solar capacity year-on-year. This is the highest capacity ever installed by EDPR in 12 months period. I think it is demonstrating how we are ramping up the business and the growth rate. In addition to that, we have 2.7 gigas which are under construction. So I think these are numbers that speak from themselves in terms of the ramping up of the growth profile at EDPR. Year-on-year, we successfully completed 1 gigawatt net of asset rotation deals. That's in Spain and U.S. So we ended the period with a 13-giga portfolio by the end of September 2021 and a really balanced mix across the main platform: so North America 55%, Europe around 40% and the rest of world -- Brazil 5% and just still a minority position in the rest of the world here just considering Vietnam. So not yet incorporating the acquisition that Miguel referred to, Sunseap, in APAC. Our load factor achieved 28% in these 9 months. It is a recovery in Iberia and Brazil. Naturally this is offset by the one-off ERCOT event and, across this period, the low resource in the U.S. Technical availability, at good levels, 97%. That's slightly above this number for the -- for last year. Electricity output increased 5% year-on-year. So this, of course, benefits from the capacity additions. Naturally this is offset by the lower resource. So we generate 21.5 terawatt hours of clean energy, so we can say that we have avoided 13 million tons of CO2 emissions. Operations in North America, Europe and Brazil generated, respectively, around 58%, 37% and 6% of the total input. On Page 21, looking into the revenues. We have a reduction vis-a-vis last year. So there's a 5% reduction. Of course, this is due to sell-downs, so if you were to see this on a like-for-like basis, we would be plus 2% versus 9 months 2020; but also driven by the lower average price around EUR 51 per megawatt hour and some unfavorable FX and which as I said before is also partly offset by some new capacity. In Europe, the average price decreased 10% to EUR 74. That's, of course, driven to Spain, the asset mix -- not only the asset mix from the 2020 asset rotation deal but also the impact of the regulatory and financial hedges in the context of very high pool prices. In Portugal, the tariff extension and the new additions. In the rest of Europe, we actually observed an 11% increase in terms of the average revenue price -- or price increase. That, of course, offsets these reductions in Spain and Portugal. In North America, the average price increased by 1% with higher merchant prices that's offset by -- that were offset by [indiscernible] in Q1. In Brazil, average price was up by 9%, BRL 239, yes; and this, of course, back on the fact that we have -- we are exposed to higher merchant prices and also the evolution in terms of capacity. Revenues totaled EUR 1.3 billion with the impact from the sell-downs. So that's a reduction of EUR 92 million year-on-year. Lower average prices. So that's minus EUR 27 million year-on-year if we exclude sell-down. And some ForEx translation, as I mentioned in the beginning, and others that account for about EUR 54 million reduction versus last year, which of course they are not offset by the capacity additions that contribute to around EUR 118 million year-on-year. So like-for-like, as said before, if you are to adjust by the -- for the sell-downs, you would have an increased revenues in EDPR by 2% year-on-year. On the OpEx, moving to the next slide. Naturally we keep very focused in terms of excellence of the operations. So core OpEx per average megawatt is up only by 1% year-on-year. So actually this is a minus 3% if adjusted, on the back of our O&M strategy. And of course, as you know, we have been front-loading the company in terms of resources to meet the business plan growth. Overall this leads us to have an EBITDA of EUR 917 million. And of course, this is driven not only by the top line performance -- [ indeed ] lower capital gains year-on-year. And in terms of the geographical mix, pretty much a 50-50 contribution from North America and Europe to EDPR results as -- on a consolidated basis. On the net profit, we ended up the period with EUR 148 million, again on the back of the top line performance. The financials have improved. On the financials, as I said in the beginning, we have improved our cost of debt to 3.4%. So that's a reduction, 0.2 percentage points, versus last year. Again I would like to emphasize that, on the P&L, tax has a negative impact year-on-year, but the bulk of this is noncash. And cash taxes are neutral when you compare to the 9 months results 2020. So on the next slide, in terms of debt. Net debt and tax equity increased EUR 191 million. Of course, the asset rotation proceeds and capital increase, they are -- they have offset it or funded the growth acceleration. So we -- by September, we actually have debt approximately EUR 100 million lower versus the 31st of December at last year. And almost 90% of the EUR 3.3 billion net debt is at a fixed interest rate, yes. So as you know, it's part of our risk profile. Tax equity increased to EUR 1.4 billion, naturally following the EUR 0.6 billion of tax equity proceeds that we announced recently but also offset by the deconsolidation of the tax equity associated with the U.S. asset rotation deal in June. And just also to finalize, focusing on the period ESG on this Slide 25. So starting by the environmental performance: As I said before, we avoided 13 million tons of CO2 emissions, so we are effectively contributing to this global challenge of reaching a net zero. The company's emissions represent only about 0.2% of the avoided ones. In terms of circularity, we are maintaining our recovery ratios in line with previous years, continuously working naturally to improve on those. In biodiversity, no significant spills, no significant fires. We had 56 near misses. And the year-on-year, I mean the variation, is pretty much aligned with the company growth. Social dimension. As Miguel said, we have surpassed the 2,000 employees. So that's a 23% increase year-on-year and actually moving towards our diversity goal with the percentage of female employees increasing to 32%. Regarding health and safety, there was an average of 1.7 work-related accidents per million worked hours; 64 lost workdays per million worked hours, which is in line year-on-year. Unfortunately, we have some severe accidents, [ 2 ] severe accidents, that are impacting naturally the business. And we can -- we have been dedicating a significant amount of time to improve the safety -- health and safety across the different operations and the construction sites. So learning from these lessons, unfortunately. And just a final note, regarding communities. EDPR maintained its EUR 5 million cumulative investment in Access to Energy. We reached EUR 1.1 million in social investment. So that's slightly lower year-on-year naturally given the COVID-19 response plan that we implemented last year within our local communities. And with this, I will hand back to Miguel for his closing remarks. Thank you.

Okay, thank you, Rui. So just to finalize the presentation, just a couple of words on the overall environment and also on the outlook for renewables. All right. And if we move to Slide 27. We continue to see an environment -- a policy environment which is highly supportive of the energy transition. We have the recent news flow from COP26, which I'm sure you're following, now taking place in Glasgow. And I think it just comes to show sort of the need to really elevate the global commitments and also different measures that the various different countries and political leaders and companies are taking to fight climate change. So clearly this fight for climate change requires strong fundamentals. You will have an unprecedented growth in renewables, which -- I think it's an interesting document, I'm sure you've read, highlighted by the International Energy Agency's World Energy Outlook which was just recently released now in mid-October. It states that, to limit global warming to 1.5 degrees, it would require an -- annual global clean energy investments of $4 trillion by 2030, so 4x as much as the $1 trillion which was invested in 2020. I mean these are absolutely staggering values. And I mean even a fraction of this will be a significant increase versus what we are seeing today. And I believe there is obviously a political move by a lot of different countries to move in that direction. In Europe in particular, which has been a champion of climate change, the European Commission's toolbox to tackle the increase in energy costs, which has been obviously a big issue on the agenda recently, is very much to reinforce the need to deploy renewables. Clearly we need to also have energy efficiency solutions. We need to continue to build our grids across the continent. And there will be the need to deploy EUR 750 billion from the European next-generation funds, so -- and that's a process we expect will now be moving to the stage of application of projects at the national level. And hopefully, we'll have more visibility during 2022, but I mean bottom line is the European Commission has been very aggressive and, I think, very consistent in its fight for climate change, in supporting the need for deploying renewables and electrifying the economy and so forth. In relation to the U.S. I mean clearly I'm sure we've all been watching closely the Build Back Better framework package which has been in discussion. So as you know, there's already one package which have been approved, the infrastructure bill, which was, let's say, they were tying it to the second package as well. It's currently estimated at around $1.8 trillion, that Build Back Better bill. It includes the long-term visibility of the fiscal incentives for clean energy investments, so the PTCs and the ITCs, potentially extending those. And it gives a tax credit to total amount of $320 billion to support the renewables in the medium term. So clearly, the U.S., it seems to be taking some good steps. Hopefully, in the very, very short term, as in next couple of days, [ as in, I mean, hopefully ], no more than a couple of weeks, there will be visibility on closing that. And as you know, it's been something which has been around for a while, but it seems that people are quite optimistic about this. In terms of key takeaways, so Slide 28, and then just before moving on to Q&A. So first, we really are going global now. I mean we're already a global company but now present in 25 markets, which exposes the company to 75% of worldwide growth in renewables until 2030. So I think this is a very significant step that we are taking. This growth platform in Asia Pacific, basically we'll leverage on Sunseap. So as I say, an established platform fully consistent with our portfolio. It's got a low-risk long-term contracted profile which is very similar to or something that we like very much. EDP Renewables ramping up the growth, 2.5 gigawatts added year-on-year; 2.7 gigawatts under construction, so getting closer to the 3 gigawatts sort of target per year. And we now have over 8 gigawatts secured with good returns and risk profile. And so that's a 75% of the target until 2023. Asset rotation, I've talked about, very solid and good. Financials have been impacted in the third quarter or the 9 months to date by the lower capital gains year-on-year, lower generation in U.S. and Spain, but we believe that the attractive asset rotation deals that we've done will allow us to close the gap over the next couple of months. So I think there is a need to look through the short-term pressure and really think about, let's say, the underlying potential and growth of EDP Renewables which is absolutely fantastic. So the growth outlook continues to be very strong. We see it very strongly. EDP Renewables is extremely well positioned to capture it globally now in all the different platforms. And so I'd just really like to reiterate, I mean, on behalf of the team, clearly very enthusiastic about the growth prospects for the business in the different regions and now looking forward to also tackle the growth opportunity in Asia Pacific. So clearly a focus on the U.S. and Europe, Latin America and now this additional region. So focused on the plan, focused on delivering the megawatts and the numbers. And now happy to turn it over to Q&A. So Andre?

Thank you, Miguel. So we can move now to Q&A.

[Operator Instructions] And our first question comes in from the line of Alberto Gandolfi calling from Goldman Sachs.

The first one is to go back a little bit on Slide 13. You basically said that you're insulated from any cost inflation, so I just wanted to confirm. Can you maybe again specify from -- on a time horizon basis? Do you think you are protected from cost inflation until the beginning of 2023, Q1, Q2, end of '22? If you can give us some ideas. And any disruption from the supply chain you're seeing, shipping, freight; any delays that might derive from that? On -- second question is on the M&A transaction you announced today. May I just ask in terms of financing? You believe that the balance sheet is okay. You believe that just asset rotations would be sufficient. Or any other ways of financing we should be thinking about here? And the last question, a bit provocative, so apologies in advance if it doesn't come out properly, right, but you could argue that there isn't much net income that the company is generating for the first 9 months of the year, so can I ask you how you explain that? Is it because you really -- besides the load factors that were well below average -- but you can argue that the capital gains you booked offsets losses from Texas. So point will be is it just because you think you are ramping up capacity you are putting so much upfront costs and then revenues will gradually keep growing with inflation in most jurisdictions. Is it an increase in devex because you're accelerating construction? Or how should we think about that; and the evolution of net income in the next 3, 4, 5 years?

So good questions. In relation to the first question, so the cost inflation, yes. I mean we are insulated, in fact, for the projects that we have in the short term. We not only have the -- in many cases, the actual turbines and the solar panels delivered and were -- sort of the ones that are under construction, we have a high degree of confidence and, let's say, visibility on that. In relation to things which are further out, and I believe you mentioned sort of 2023, I mean, in those cases, what we're doing, to the extent that we haven't yet closed those projects, we will be feeding that through into the PPAs, so as I mentioned, in terms of the cost inflation. In terms of wind turbines, we also have good visibility. We have no indication to the country that would -- we would not be able to get access to the turbines that have been contracted. And so that's something which even recently we're talking to the teams. I think we have privileged relationships with the different suppliers. And so that's something again that we don't expect any -- certainly not any material, nothing that would be sort of out of usual delays or disruptions there. I think, in relation to solar, it is maybe a slightly different story. So in the short term, again we have the visibility. In many cases, we already have the panels actually in our possession. And so it's there's no issue there. In the medium term, we are obviously monitoring the supply chain carefully and talking to the suppliers almost on a daily basis to really understand if there are any issues. So far, I mean, the issues that have been highlighted have been delays which could be, let's say, a month. That sort of the type of time frame which is really not material in the context, so even if it slipped [ a quarter, a month ] to the other in terms of profitability, we don't see that as an issue, but there is a degree of uncertainty in the market at the moment. And so we are working very closely with the suppliers to make sure that we have -- that we are able to close that, let's say, timings so that we have better visibility on that, but again I'd say on wind certainly there's no issue there. In terms of solar, it's just a lack of visibility which we are working through, but so far, we have not had any material, let's say, indication that we would be out of -- not able to comply with the targets. M&A transaction definitely will be done on balance sheet, yes. I think we have space for that. I mean this is a transaction which brings also some operational megawatts with good profitability and also a good pipeline, so we would be deploying CapEx in any case in the region. And so in that extent, we are not expecting to do anything different from what we would normally do. So it would fit within the normal, let's say, [ structure or ] balance sheet that we would be assuming for the next couple of years. And if he wants, Rui can also comment a bit in more detail on that. In relation to net income. I mean, this year, obviously there have been -- as I mentioned earlier, there have been some issues which have impacted us, so it's not a -- it's not been a great year. We have had much lower wind generation, so that is certainly something which has impacted the year. We've had some one-offs like ERCOT, which again obviously not -- impacted us earlier this year; and also in terms of some of the hedges in terms of Spain. I think we addressed that as well, although that's, let's say, more residual. So really the key thing has been the wind generation. I mean obviously we are ramping up growth. And so ramping up growth means that we ramp up devex. We ramp up some of the growth costs, but I think that's, let's say, built into the numbers over the -- certainly over the medium term. So that's, let's say, the guidance I could probably give you on that, but then we can come back to that again if you want any more detail on that.

The next question comes in from the line of Manuel Palomo calling from Exane BNP Paribas.

I've got a follow-up on the transaction. I understand that today's announced transaction is not just a simple acquisition of assets, but could you please give us some additional information and color about the transaction in terms of operational data? I mean in terms of the expected EBITDA, net profit maybe for the year 2022; and also if you could give us a bit of the detail on those 540 megawatts in operation and under construction. How much is in operation? How much is under construction? And my second question is -- relates -- so to Spain. I've seen that there has been a significant decline in the average selling price in the country from EUR 80.3 to EUR 58.5, so I would ask for a bit of color on the granularity on the different components for this decline in the price given the high wholesale prices that we are seeing. And also wanted to ask you a bit about your hedging policy for the coming year or years in Spain. One question would be if you have contracted volumes in Spain that could -- would you address in case that the resource continues to be weak. And the other question is whether you could give us an expectation in terms of volumes that are already hedged and also prices at which you have hedged volumes.

Yes, thanks, Manuel. So in relation to the first question, I mean some additional color I can probably provide for 2022 is that the expected EBITDA contribution will be around EUR 50 million for '22. And we expect that to grow at around 25% CAGR over the next couple of years, so there will be north of EUR 100 million certainly by 2025. And hopefully -- well, I'd say that. So in terms of, let's say, financials, yes. And we don't go down to the net income level. In terms of megawatts then: So I'd say that, talking AC operating end of the year, you'd probably be expecting to have around 430 megawatts. The rest will be coming in early next year, so probably another 200-plus coming in, in '22, AC; and hopefully, more than that, but I'd say, let's say, on the conservative side that would be it. So that's probably some of the color I can give at this stage in terms of the transaction. In terms of timing of closing, it is subject to regulatory approval, so we will have to go through that still before we can actually step into the company. So what we've done is just signed obviously the SPAs. And we expect that would happen -- let's say the most optimistic scenario would still be this year but, given COVID, et cetera, maybe early next year. So in terms of actual closing of the transaction. In relation to questions two and three, Rui -- I can probably ask, pass it on to Rui...

Okay, thank you, Miguel. So regarding Spain. So maybe I think it's better if just split these in 3 building blocks. So let's start by the actual pre hedging, okay? So we have about 2.5 terawatt hours with generation which is under the regulated framework. And in that, on average we have a price of EUR 76.5 per megawatt hour, okay? Then we have about 1 terawatt hour. So that's merchants, those -- that capacity which is under a merchant -- on a merchant basis or outside of regulatory framework. And that was sold at an average price of EUR 67 per megawatt hour. I mean this includes the pool price; the WAF, so the wind adjustment factor; and so on and so forth. In -- if you build these 2 together, you get to an average price of around EUR 74 per megawatt hour. Again this is pre hedging, okay? Now the second part of this is that, as you know, we have a hedging strategy to mitigate volatility and making sure that we have a low-risk profile. So before the year started, we have already approximately -- or as the year was starting, we had approximately 2.2 terawatt hours of energy sold forward at EUR 53.5 per megawatt hour. So basically -- when you combine these 2, plus the fact that you have a lower wind resource this year in Spain, basically you get down to an average price of the EUR 58.5 that we were reporting and that you were referring to. Again the combination is -- or this is a result of the combination of, in one hand, the fact that we -- once we have the hedge in place, then -- I mean, if there is any delta towards the regulatory hedge, I mean, that is -- will be impacting the books and impacted the books. And secondly, because there is a part of this hedging that was -- that we had a shortfall in terms of volume, therefore, we were not able to generate the required power and basically had to buy it at higher market prices. So it's the combination of these 2 factors of what is the actual pre hedging plus the hedging that yielded this EUR 58.5 per megawatt hour. As we move forward to 2022, maybe here 2 comments. So we have approximately 70% of our capacity or generation hedged for 2022. That's an average price of EUR 50 per megawatt hour. As you know, I mean, there has been, there is now a discussion in terms of regulatory -- some potential regulatory change impacting the 2022 and which the government is discussing this with the different renewables associations. So this is something that we have to wait and see what is the outcome of that discussion and to what extent it could potentially impact the hedging strategy towards 2022. I mean, if nothing changes, as I said, I mean, we have about 70%. That's around 2.2 terawatt hours also hedged for '22 for the year.

The next question comes in from the line of Jenny Ping calling from Citi.

I have 2 questions, please. Just going back to the point around supply chain. We've just heard on the Ørsted call about solar panel delays in the U.S. And Vestas obviously reported today, and they highlighted some of the delays around onshore wind. 2 out of 3 orders are being pushed back. I understand you say that you've got very strong relationships, but I just wondered whether you can elaborate a little bit more around that. Do you have existing sort of contracts in place to effectively mitigate any or claw back any lost earnings on the back of any delays in some of these supply chain issues which may come through end of this year, next year? Just really trying to understand where the -- where -- your strong relationships, how that manifests itself. And then secondly, on Sunseap. Manuel has already asked quite a bit of the details. I just wondered whether you can give the debt number, the net debt number, that you will be taking on. And then very lastly, and apologies for a newbie question, but when I look at Equinor, when I look at Ørsted, all of these companies are now starting to report, at least give guidance around the EBITDA ex gains. I just wondered to hear what -- your latest thoughts on that, in terms of your views in including the gains in EBITDA.

Yes, thank you. So taking the first question, on the supply chain. I mean, first of all, we have contracts obviously for everything that is under construction and that we have secured. And so to that extent, those contracts typically have clauses, which in the case of delays or significant delays there are penalties associated with that. And that's -- I don't think in anyone's interest that there would be those delays. We have these long-term relationships. I mean we've been in this business now for almost 2 decades. We're not the #1 customer [ best as -- we are probably the close, dependent ] maybe on the year. So I think, in relation to that, we -- obviously we work with them and try to have the best terms possible, but we also have the contracts in place and we will obviously enforce those. And as I mentioned earlier, we have had no indication that there would be any delays on the projects that we already have under construction or that we are, let's say, developing over the next year or so. In relation to solar panels. I mean there it's not so much a question of, let's say, well -- I'm sorry, in relation to pricing as well. I mean obviously that's already built into the contract, so when we lock in the CapEx, we're also locking in the pricing and -- yes. And so to the extent that it's closed, it's closed. If, for example, we are still in the process of an RFP or a tender or something and there is an increase in the CapEx estimates, then we will see that through into the higher PPA prices or the auction prices. And so that's why I gave the example of Spain, where we saw an increase in the tender prices; and also in some of the PPAs that we are currently negotiating where we've gone back to the customers with higher PPA prices. And since it's a general sector-wide thing, that's been accepted so I'd say that that's the visibility that we have. In relation to solar, let's say again we have good, long-term relationships with suppliers like [ LONGi, Boviet ], yes, which are, let's say, some of the top suppliers globally. To the extent that there are issues on pricing, and there have been, we are also feeding that through into increased PPAs. In any case, when we talk about increases in PPAs, we're talking about maybe to $2, EUR 2 per megawatt hour. I mean that's the sort of size of the delta that we see in some cases. In terms of actual timing, as I say, there, there is some uncertainty. So we have had no indication that there will be any material delays, but in any case, it is something that we are following closely. So obviously we are -- we know that there have been issues in the supply chain further upstream. And so I mean we're continuing to monitor the situation, but I don't have any specific, let's say, guidance to give you on that. Apart from that, it seems to be manageable within the current context or within the current, let's say, estimates that we had given out to the market. In terms of net -- sorry. So hopefully, that answers the question. Or it's given you a little bit more color on the question.

No, that's perfect.

In -- yes. In terms of the net debt for Sunseap, so it's around EUR 200 million. So I think we've given enterprise value, EUR 870 million; equity value, around EUR 600-and-something million. And so I think that's the delta would be around EUR 200 million. What we have said, however, is since that they're -- some of these projects are under construction, yes, over the next couple of months or sort of by the end of the year, probably the enterprise value would be closer to EUR 1 billion because of the additional CapEx that will be in place. So let's say, breaking it down into very specific numbers, EV EUR 870 million as of date of signing, equity value EUR 690 million, net debt EUR 180 million. And as I said -- but the enterprise value will be closer to EUR 1 billion by the end of the year, which is probably when we will do the closing. In terms of guidance. I mean to us we consider and we have been considering now for a while that the asset rotation strategy is something which is, let's say, an intrinsic part of the business. I mean we build megawatts. Some of them are to keep. Some others are to sell, and we give visibility on those gains. And so when you talk about ex gains, I mean, what we've indicated to the markets, let's say, in the context of our business plan is that the capital gains implicit in the business plan are roughly EUR 300 million per year over the next couple of years. So if you look at the numbers that you have for EDPR, that's sort of the level of gains. And so one minus the other would give you, let's say, the guidance ex gains.

The next question comes in from the line of Mikel Zabala calling from Bank of America.

Miguel, Rui and Andre, 2 questions from me, please. So as you pointed out in your slides, the last draft of the U.S. [ reconciliation ] bill is proposing 10-year extension for subsidies. Would it be fair to say that there is upside to your long-term capacity targets from February? And could you give us an idea in terms of the incremental opportunity here versus your plan if those extensions become a reality? And the second question is we've seen permitting issues in most of the European markets. It's been a problem for new projects, so could you please discuss the visibility that you have right now where Sunseap's pipeline, given, is so big vis-a-vis the operational capacity? What can you tell us about the permitting situation in some of those Asian markets? Is it better than in Europe? And also conscious that, that is a bit of a different game for distributed solar, so is it fair to say that this is easier -- a technology easier to permit than utility-scaled solar?

All right, yes. So I mean, great questions. In relation to the first one, I mean, I think actually your first question is slightly related to your second question as well. So the 10-year extension is absolutely fantastic. I mean obviously it gives a big boost to the industry as a whole in the U.S. and just continues -- I mean, if renewables is already competitive even without the PTCs, I think this really gives an extra boost to continue the growth of renewables in the U.S., both wind and solar; and also even other technologies like storage and hydrogen, which will also -- and offshore which also get, let's say, that additional boost. I mean I wouldn't want to necessarily give a specific target because I don't have one of upsides to the long-term goals that we've given. What I would say is I would go back to one of the comments which I've made, which is if we want to reach the targets, the overall sort of, let's say, Paris Agreement targets, the 1.5 degrees, we would be investing $4 trillion per year globally, as opposed to the $1 trillion, so quadrupling. I mean obviously that's not the basis for our numbers. So our numbers are based on, let's say, more conservative growth plans, but I mean this is just a massive amount. So I don't think the -- I mean the sky is the limit in terms of number of megawatts. I think the big issue which is on the table in terms of how fast we can roll this out is making sure that each individual country has very specific targets. So they'd go from that more aspirational goals to very concrete yearly goals over the next 10 years. And they'd translate that, for example, into tenders. Or they'd translate that into sort of specific processes so that they continue to drive the demand sort of at the national and at the regional level. And then I think one of the things which we've also been highlighting both with the European Commission and also within associations like WindEurope or Eurelectric is around the permitting issues, but obviously some countries are easier than others. I think there is work that can be done there, and that's something that I know -- at the highest level in the European Commission. And I think in the -- also in the European Commission they are looking at permitting issues; how they can, let's say, look at the best practices of different countries, come up with a list, for example, of countries and how they rank in terms of time to be able to get the permits done and to get projects sort of approved. As you know, it can vary quite a lot between different countries. And so I think focusing now on some of those issues and making sure those are, let's say, more -- are facilitated, I think that will help certainly translate some of these more ambitious targets into very concrete numbers on the ground and accelerate even more what we're currently seeing. In relation to Sunseap in particular. I mean I think in Asia Pacific definitely the issues around permitting are relevant because, I mean, it is a densely populated region of the world, which is good and bad. I mean it's good because there's a lot of demand there. There's a lot of need to decarbonize the economy, but it does mean that land is expensive. And you need to really manage, yes, let's say, those permitting and to make sure it's compatible with the local communities. I think that's why things like floating solar or reclaiming land or offshore -- I mean all of those; or distributed generation, which is actually something which is really growing in a lot of these countries, are ways of reaching those objectives, let's say, in a way which is consistent also with the permitting issues and with the impact on the local communities. So I think Sunseap has been very successful in terms of what they've done over the last couple of years and the way they have positioned themselves for this. In terms of growth going forwards, I mean, we're talking about probably being able to grow at 200 to 300 megawatts, at least in the short term, per year AC; and sort of 300 to 400 DC. And I think, as I said, I'm probably upsizing that given the different markets and just given the overall size of the region. So hopefully, that's added a little bit of color to the questions.

Yes. [indiscernible].

The next question comes in from the line of Philippe Ourpatian calling from ODDO.

Yes. Just 3 follow-up question. The first one is concerning the 540 megawatts of Sunseap you mentioned at EUR 1 million per megawatt, which seems to be quite high. Could you just elaborate about this figure? That's my first question. You mentioned also 20-year PPA, which is a good news regarding the duration, but is the 670 megawatts which are in operation and [ securized ] are -- fully under PPA? Means 100% of the capacity is under PPA. That's the second question. And the last question is concerning the valuation. Could you just elaborate how you're -- valued the value creation you mentioned on the Slide 11? It means that could you just give us some parameter you use. Or more simply, I would say this -- on the bracket "margin generated versus the construction cost," which seems to be quite high somewhere around 50%, could you just elaborate concerning this valuation?

Okay, in relation to the first question, so the 540 -- million -- I mean it's high, but you have to think about it in terms of distributed generation. So we're talking about, let's say, smaller project sizes. Typically would be in the single-digit megawatts and obviously in locations which have higher costs in terms of deployments because of -- because they are more distributed generation. So in terms of the CapEx, given the way they were developed, I think it's normal or what would be expected. Also just to remind you: It is AC and not DC. And sometimes I think, when people are comparing the, let's say, CapEx numbers for solar, it is important to make that distinction because obviously it is AC. And DCs do have around a 20% difference. So I think, in relation to CapEx, I mean, obviously we think CapEx will then continue to come down over the next couple of years, but let's say that would be one first comment in relation to that. In relation to the second question, the 20-year PPAs. So yes, it is pretty much fully contracted for the PPAs or regulators. I think that's mentioned here on one of the slides. I don't have -- I can't find exactly the number of the slide, but that is fully contracted and at the around EUR 75 per megawatt hour. So I just also highlight the -- let's say, the price of the -- or the implied price of those PPA/regulated. In relation to the value creation, I'm glad you asked the question. I mean what I would say is we look -- when we look at these projects or when we look at these acquisitions for our platform, I mean, we are applying the same type of investment metrics that we do for other projects. So in this case, we would be looking at, let's say, above 2% spread over our cost of capital. And that's assuming, let's say, a relatively prudent growth plan over the next couple of years. So let's say we'd be basically taking the current, yes, operational projects and -- let's say, and the margin on that using that sort of spread; and then also looking at the future value creation that will be had with that growth. And overall it'd have to be in line with our investments criteria, so around the 1.4x or at least above the 2% spread. So that's sort of the way we would look at it from a valuation perspective. That's why, in terms of the slide, if you noticed, I mean the way we've brought it out, it's the CapEx and then the value creation and the pipeline. And those 3 bars actually sum up to more -- or at least visually they should sum up to more, look more than the implied enterprise value actually paid for it because we do believe we are, let's say, getting a good return for this investment assuming reasonable assumptions.

Just one additional. Is -- this means that for the pipeline of the 4.8 gigawatts you have taken the assumption that the utility-scale business are going to be bigger than the DG. And it means that your CapEx will go down toward the normal level of what we were seeing in some projects around the world somewhere between 0.5 or 0.6. That's correct to assume.

What we've looked at and probably the best way to think about it is we've looked at what would be a reasonable growth rate or -- relatively being relatively conservative. Obviously we don't want to be too aggressive here in terms of growth of megawatts over the next couple of years until 2025, thereabouts; and the implied value creation that we will be getting on that assuming our typical investment return, so around the 1.4x WACC or above 2% spread. And so just saying that, implied in that pipeline, we're assuming that we will develop at least part of it, not all of it but at least part of it, over the next couple of years; that we will be creating value from that pipeline. And that will give us a return which will be, let's say, quite a bit higher than the EUR 870 million that we are paying for the platform.

The next question comes in from the line of Jorge Alonso calling from Societe Generale.

Just a couple of questions left, please. Regarding the expansion into new markets, specifically in Asia, this is a solar platform, but do you think it could be a good idea for you to look for a similar transaction or a similar approach for developing wind in Asia? Or do you think your capabilities are good enough to go and do it directly? And the second one is if you can provide a little bit of color about work in progress do -- you expect to have at the end of this year? So which amount of money will be invested and reflected in the net debt but not contributing to EBITDA?

Thanks, Jorge. So in relation to the first comment, I think I mentioned in the presentation that we would look to leverage on this platform to bring our competencies in wind, yes. So we are not looking or not thinking about buying any additional platform, yes, in Asia for wind. We think that -- given the team and the quality of the people there plus our own expertise and the people we have internally, that we would be able to build on this platform to develop, let's say, the wind component to it. So it's not in our plans to go out and do another acquisition for a specific wind platform. In relation to the second question, on work in progress, I'm just looking here. I'm not sure we have a specific number. Perhaps we can follow that up later, but it's not something I have here off the top of my head.

The next question comes in from the line of Sara Piccinini calling from Mediobanca.

Just a clarification, if possible, about the deal of Sunseap. So how do you consider the distributed solar generation versus the utility-scale generation? Do you think it's a more risky business? Or they have similar characteristics. And when you indicate the EUR 75 per megawatt hour and -- I presume this is for the assets already secured, but do you expect this tariff to be applicable also for the future projects? And then also about the pipeline, I understood that large part of the pipeline is also related to floating PV. Can you please indicate a level of CapEx per megawatt for this technology? And then the second question is about the guidance. Could you please indicate, what is the level of EBITDA and net debt that you expect by year-end considering the EUR 300 million capital gains and also the acquisition of Sunseap?

Okay. So in relation to your questions. In relation to the first one, distributed generation versus utility scale, I mean I think one of the key things -- and we've obviously been doing a lot of work on Asia Pacific and seeing how we can take advantage of the growth opportunity there. It is quite densely populated. I mean I think that's something to bear in mind. So distributed generation there, which can be sort of 2 megawatt, that type of range. Or 1- to 10-megawatt type range can be quite an interesting solution because it can be deployed much closer to the industrial customers; or the customer that's -- let's say, that we are entering into PPAs with. And then growing that sort of at scale in the region. So it is relatively similar, I'd say, in the sense that you have also specific counterparts. I mean I mentioned some of them, whether it's an Amazon or a Microsoft. Those are the type of customers that you can also have in this case. That's true for some markets. In other markets, for example, in Vietnam, I mean, maybe you have a regulated tariff. And so in that case, it would also be -- let's say for the utility scale, yes, it would also be something that we would be considering. So from a technological point of view, it's not so different. From a regulatory point of view, I mean the key thing is also looking at -- let's say, at the regulation or at the counterparty. So I don't think they're very -- substantially very different businesses at the end of the day. And we're not talking B2C. We're talking -- we're not -- distributed generation. We're talking basically C&I and B2B customers, yes, so I don't see it as a materially very different business. In terms of the second question, the EUR 75 per megawatt hour. So these are for assets already secured. I mean obviously this will evolve over time, depending on the countries, depending on whether -- what are the CapEx assumptions that we will be using or sort of getting for the different projects. I will say that, over time, we would expect these numbers to probably start coming down as also the -- let's say, the economies of scale start kicking in, in some of these geographies, so -- but I would say they would still stay relatively high numbers certainly compared to perhaps some of the numbers we see in other parts of the world, for -- like in Iberia or some parts of the U.S. So the EUR 75 per megawatt hour is for what we have secured. I wouldn't expect it to deviate too much over the next couple of years. In terms of floating PV solar CapEx, I don't have a specific estimate for that, yes. We can get back to you on that. When we are looking at -- let's say, when we are looking at what is the pipeline, the value of a certain pipeline, the most important thing for us is do we think that we can get a positive value creation, a positive margin, yes, on the projects when we invest in them. And that's why, the metrics that we look for, whether it's the 2% minimum spread or the 1.4x WACC, that's really what's most relevant for us. Then it needs to be technologically feasible. We need to make sure we have a good counterpart and that the PPA is competitive. In terms of the specific CapEx estimates, maybe we can come back to you with that. In terms of EBITDA and net income, what I'd say is that we are still comfortable with consensus. And essentially it will depend very much on -- as I mentioned in the presentation, on closing some of the asset rotation transactions before the end of the year. So I think we're making good progress there. As you know, we have several transactions on track that we signed earlier this year. And so I'd say we will be above the EUR 300 million. That is our expectation by the end of the year. And so in line with the EBITDA and net income that's out in the market and which I think is being given out by [ IR ].

The next question comes in from the line of Olly Jeffery calling from Deutsche Bank.

Two questions from me, please. First is on just going back to the poor wind resource that we've seen this year and just giving -- asking the question again. Do you have any reason to believe that the P50 load factors that you're assuming in the future for wind should be lower? For example, are you having any -- are there any noises internally getting louder about [ having ] to look at this again? Or are you aware of any studies that are questioning P50 load factors as we look at them? And also are you looking into this? Are you carrying out an assessment into this area to see if you're still comfortable with where the P50s are? And then the second question I have is just specifically on the Portugal and Poland sales done at quite high EV per megawatt multiples, [ 2.4 ] megawatts. Can we expect, when you complete these, that the gains that you get on these assets on a per-megawatt basis are significantly higher than the [ 250 ] per megawatt we saw at the beginning of the year? Because if you assume a typical CapEx, you might expect that the gains here are going to be really quite chunky, in excess of 500,000 megawatt perhaps. Any comments on that would be much appreciated.

Okay, all right. So I think, in relation to the first question, that's I mean the question I certainly ask internally constantly. And so far, there is no reason to believe that this is changing. I mean that's the honest answer. When we look back over 20, 30, 40 years, I mean, and look at the long-term trend, and sort of we'd factor in the last couple of years or the last couple of quarters, I mean, there is volatility. There always has been volatility. It seems to be within the normal range and so the overall trend line does not seem to be deviating. So there will be good years. There will be bad years. I mean this is clearly not a good year, but the only voice, I think -- that is Rui and myself making sure internally that we are sufficiently comfortable to be able to tell you and the rest that we have no reason to believe that this is changing. And then -- and so that's a question we ask ourselves internally. And that's the assessments we've been looking at and sort of the statistics we have been looking at, and as I say, nothing has led us to believe that there is a change. In relation to the second question. I mean, yes, you are right. I would say, particularly in the case of Portugal, it would be a higher multiple per megawatt. In Poland, it'd probably be more in line with the values that you indicated. I mean we will provide specific numbers on that obviously when we close them. It is all subject to adjustments and to changes and depending on the contractual provisions that we have with the buyers. And so that's why we typically only give out the final numbers when we actually close the transaction. So hopefully, by year-end, we will have done that. And then we'll be able to provide additional information on that, but I would say yes. I mean your intuition is right in that the gains per megawatt will be higher than the [ 250 ].

The final question comes in from the line of Jorge Guimarães calling from JB Capital.

I just have 2 follow-up questions, if I may. And the first is a technical one related to your issues with regulatory hedging in Spain. I would like to understand exactly the mechanics of what happened in the quarter, yes. And if possible, if you can quantify what was the impact in the quarter of this regulatory hedge, as you might call it. And the second one is related to distributed generation. You are doing a massive push on distributed generation with this acquisition of Sunseap. Could we see -- and this is a theme that you mentioned in the past. Could we see EDPR buying more platforms of distributed generation in other geographies?

So in relation to the first one, I can pass it to Rui. And probably, more detail, we can also then take it offline just to walk you through the exact mechanics, but I'll pass it to Rui. Perhaps I'll just answer the second question, first, and then -- before I pass the ball. I mean, in relation to DG, I think DG -- well, first, we're talking about typically these platforms are more B2B or C&I; and so the line between DG and utility scale sometimes becomes more blurred, certainly in certain geographies. So I think our position has been that the same way that we look at wind, solar, offshore. Within these technologies, you then have slightly different segments, and sometimes these are blurred. So you can have, for example, utility scale in France which can be maybe 10 megawatts. And you can have what we would call distributed generation which might be also some single digits or close to 10 megawatts, depending -- just because it's [ behind the meter ]. So I think we do see synergies there. And we do see these as different ways of, let's say, attacking the market in different geographies and also depending on the particular regulatory environment. I wouldn't see ourselves buying a lot more platforms. Or at least we don't have a strategy for going out and buying more DG platforms. We have done that selectively where we think it adds value to us. So this is one case. I mean Sunseap does both because it's expected going forward to do about 50% each, 50% utility; 50% more, let's say, C&I DG. We have done that in the U.S., yes, with C2, so that's also a complement to our existing platform in the U.S. I think that also gives us a good insight into the dynamics of the -- let's say, the DG market in the U.S. So again, we will do it selectively. We do think it's a good way, particularly in some geographies, of getting access to more growth, particularly on the -- let's say, on the solar side, but it's not something that, let's say, we have an active strategy of specifically going out to buy more of those platforms, in relation to the first question. Then I'll pass the ball to Rui -- if you want to take that.

Yes. Thank you, Miguel. So I will -- definitely we can take it offline and go through in more detail, but just in a ballpark: So we have about EUR 15 million impact, that's to EUR 10 million to EUR 15 million impact, in Q3 from this financial hedging in Spain. Our full year estimate is around EUR 25 million on the basis of a P50 wind resource in the fourth quarter. So that's now the amount or, if -- the range that we are talking about. I mean the mechanics just in 1 minute is basically once -- if you're -- if you have regulatory -- so wind farms [ and ] the regulatory framework. And if you are hedged, as you know, and if the price goes above the regulatory cap, you'll have to get that additional revenue back to the system, but if you are hedged, because we decided to hedge some volumes within the collar so that we don't take that volatility, then you need to give back the delta to your hedging and not to the regulatory cap. So that's what -- it's impacting, but again if you want -- what I can do is we take it offline and go step by step so that you can get comfort on the numbers and the dynamics. [ Are we there ]...

Thank you. That was the final question in the queue.

Okay, thank you very much, everyone. Good afternoon.

Yes, thanks, everyone. Take care.

Take care. Bye-bye.

Thank you for joining today's call. You may now disconnect your handsets.