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

Good morning, and thank you all for joining us at EDP Strategic Update 2021-2025. We are thrilled to be here today to present you our strategy. We start by kicking off with our CEO, Miguel Stilwell de Andrade, with an overview of what the world needs from us and how we are stepping up to the challenge with our vision and commitments. Our CFO, Rui Teixeira, will deep dive on our global business platforms and financials. Finally, our CEO will do a wrap-up of our positioning for the future. We expect this presentation to last around 1 hour, followed by the usual Q&A. [Operator Instructions] Note that the whole session should take no more than 2 hours. And without further ado, Miguel, please take the floor.

Thank you, Miguel. Good morning, everyone, and welcome to the EDP Capital Markets Day. It's a pleasure to have you with us today, and I hope you're all doing well. I'd like to start off by talking about one of the major challenges facing the world. We have an increase in population. We have an increase in energy consumption over the next decade and an expected temperature rise approximating 4 degrees by the end of the century. We believe this will cause a huge amount of issues with the world. We're going to have an increase in sea level rise, additional migrants, environmental migrants, approximately 1 billion and an impact in terms of the world's GDP. So this is something which is really going to have a major impact on the world, and it's something that society is coming together, politicians and also people at large in terms of facing this. So we really believe that the world needs to be transformed. And this is a fundamental thesis that we at EDP believe needs to be tackled. We need a new decarbonized and electrified world. We need an energy sector, which allows the world to not go above the 1.5 degrees increase, which has been foreseen by the Paris Agreement. So we need a clean, affordable, reliable energy sector, where renewables is the vast majority of the production, where we have 0 carbon being emitted. And that's the commitment that we think the world needs at this moment. This is really the big challenge that society has to face globally. One of the good things is that there's a potential amount or a huge amount of opportunity in terms of renewables. We see that the costs are coming down. This is really becoming something that is competitive globally. Whether it's Solar PV, whether it's onshore wind or offshore wind, this is now becoming a mature technology, which is able to compete and is even below the wholesale electricity prices. So clearly, renewables are cost competitive, and they are able to face up to this challenge. And if we look at the graph on the left-hand side, I think this is really impressive. The past growth has been around 40 gigawatts per year of installed capacity. Today's forecasts are expected to grow or expect us to grow to around 80 gigawatts over the next couple of years. To meet the 1.5 degrees challenge, so it doesn't go above that, we need approximately 250 gigawatts to 300 gigawatts per year of renewables over the next decade. So this is a huge amount of opportunity. It means that we expect this to grow the most conservative estimate, doubling, but at a more realistic, probably multiplying by 6 or 7 in terms of the renewables capacity that needs to be actually deployed if we are to meet this challenge in terms of the world. And so I think this is definitely one of the key issues that we have to face. And fortunately, I think the good news is that the renewals are there and they are able to meet this challenge. Let's also talk about networks because in terms of networks, there's also a huge and unprecedented amount of investment which needs to be done. Again, by some of the estimates, this is going to increase by around EUR 100 billion to EUR 200 billion per year. And this is going to be so that you can incorporate the renewables into the networks so that you can replace aging infrastructure, so you can increase the generation, which is linked to the distribution, increase also the resilience of the networks, in particular, to face some of the extreme climate issues that we face. I mean we've seen wildfires in California. We've seen the polar vortex in Texas. We've seen similar things the world over. So really, this network needs to be much more resilient. It needs to be capable of withstanding the challenges over the next couple of decades. Let's talk about client solutions. Again, one of the downstreams, the closer connection to the customer, where the issue is not so much the pure commodity, which has is being sold to the customers, it's really the issue around decentralized solar where again the projections in terms of growth are absolutely massive. There's also a massive amount of growth coming through in electric mobility, in flexibility, managing to the intermittency of the renewables. So this is also a huge area of growth and hydrogen. Again, one of the energy factors, which is expected to really grow over the next couple of years. So again, in all of these different areas of the client solutions space, a huge amount of opportunity going forward. So we really believe that the energy sector is going to explode over the next decade and over the next multiple decades. We believe this is a secular trend, and we, EDP are well placed to take advantage of this. And fortunately, the world is joining forces in this effort. We had the Paris Agreement. We've had the U.S. coming back into The Paris Agreement now. So we have China, Europe, the U.S., representing more than 95 -- total number of countries representing more than 95% of the world's GDP. So there is a very broad alignment in terms of facing this challenge. If we look specifically at Europe or the U.S., we have the Green Deal in Europe with already underway. New regulation already been put in place. We have the Biden Plan, the stimulus plan, which is being discussed around $1.9 trillion, and there's also talk about the infrastructure plan that's coming along. So all of this driving this idea of more infrastructure in the energy space. And finally, even on the private and social side, we have commitments by companies over $15 trillion already, committing to go 100% green, and we have 90% of the younger people believing they can make a difference on climate change. So all of these, once again, a massive secular push to combat and to rise up to the challenge of the climate. And we at EDP are not stopped. We are stepping up to this challenge. We are leading this energy transition, and we believe we can create superior value by being at the forefront of this move. We are committing to invest EUR 24 billion in CapEx over the next 5 years until 2025. We will be doubling our approximated renewables deployment to 4 gigawatts per year. We will be doubling our solar and wind installed capacity, and we will be coal-free by 2025. By 2030, we expect to have added, and this is obviously more inspirational, we expect to have added 50 gigawatts of renewables additions. We will be 100% renewables generation we will be carbon neutral by 2030. Again, one of our commitments for this next decade. So these commitments, what do they boil down to? They boil down to 3 key commitments: One, we will be accelerating our growth, and it will be a sustainable growth. We will be stepping up in terms of the green growth. We will be building out this distinctive resilient portfolio, which can rise up and meet these challenges of climate change. And we will have a solid balance sheet. So when I talk about sustainable growth, I mean, we'll be able to also do it sustainably, not only investing in sustainable assets, but having a sustainable balance sheet that will allow us to get this growth. Let's talk about ESG excellence. EDP has been a reference for many years in ESG excellence, and we've also been delivering the returns. So we will continue. We will strive to continue in ESG reference we will have a green leadership position. Like we've had in the past, we will continue to develop this further, and we will make sure we have a strong return visibility, making sure that we are delivering value for our various stakeholders. And how are we going to do this? By making sure we also have a future-proof organization. We're not just talking about today's organization. We're talking about making sure that we have the DNA to take this company forward for the next decade and the next multiple decades. And to do that, we need to be global, we need to be agile. We need to be efficient. We need to make sure we have the most talented people working for the company and that they are empowered. They're empowered to give -- to rise up to this challenge and to really keep the company going forward. Finally, we'll be investing significantly in innovation, and we will be driving also the digital agenda within the company. So these are our commitments, and this is also what I'm going to talk to you about. Let's go straight into the accelerated and sustainable growth pillar, and I'll give you a little bit more information on this. So first, in terms of investment acceleration, we are growing it from around EUR 3 billion per year to approximately EUR 5 billion per year. So cumulative of total EUR 24 billion over the -- this period, 80% of which will be in renewables, 15% in networks and 5% in client solutions. Where are we going to invest? 40% in Europe, 40% in North America, so evenly split, and the remaining between Latin America and the rest of the world which includes some parts of Asia. So this is where the growth of our CapEx is going. We'll have clear visibility on execution of this plan. So as I said, we already have 60% secured or expected to be secured in the short term. What does this mean? Secured means either the distribution CapEx, which is already foreseen or PPAs that we already have secured to build out and that we've talked about in the previous results presentation. And secured to be in the short term is expected to be over the next 12 months. That leaves us 40% to be secured. And as you know from our track record, we have been very successful in securing pipeline, securing new projects over the course of time, and we expect to do that again in this case. So we are very confident that we will be able to deliver on this CapEx plan. But investment is not just about deploying megawatts. It's not just about deploying euros. It's about making sure that we're getting the return on that investment for our shareholders. We will keep the disciplined capital approach that we've had. So 1.4x our WACC will be our threshold. We will be looking to have more than a 2% spread in terms of IRR versus the cost of capital. We will want to create significant value on our CapEx, so approximately 30%. And then in terms of risk, which is also extremely important, we want to make sure that we have a significant amount of contracted NPV whenever we take an investment decision. Fortunately, we have a big portfolio to draw form, multi-technology, multi-geographies, multiproduct, and that's where we're drawing basically the projects that we will develop over this period. Just to give you an example, 2018, we had -- we looked at approximately 40 projects over the year. In 2020, last year, we looked at double the number of projects, and we are continuing to increase the pipeline so that we can be really selective in terms of the growth. We will be accelerating this renewables growth. As I mentioned, we're taking it up to 20 gigawatts over this period, so basically doubling from around 2 gigawatts to 4 gigawatts, but we will be keeping more of these megawatts on balance sheet. We will be continue -- or we will continue to do asset rotations, not at the same percentage as we were doing in the past. So we were doing approximately 50-50. We will be doing now more 1/3, 2/3 in terms of asset rotations. So we continue to believe in the asset rotation strategy as definitely a key pillar in terms of our growth. We like it because it allows us to crystallize value upfront. It allows us to recycle the capital back into the business, and we are permanently testing the quality of these assets in the market. So I think it's definitely a great strategy, and we will continue to do it. We will be doing approximately 1/3 of the new build that we do. And obviously, for the megawatts that we keep on the balance sheet, we believe they have long-term strategic value, and it will allow us to have more scale and synergies associated with that growing fleet. In terms of overall portfolio, I talked to you about the distinctive portfolio, the resilience portfolio. What does this mean over time? First, we will be reducing the amount of thermal we have in our portfolio. So getting rid of coal by 2025. And by 2030, as I said, we hope to be carbon neutral. In terms of energy transition EBITDA, this will be more than 95% over this period. And in terms of investments, most of it will be in Europe and in North America. As I mentioned, we will be decreasing our exposure to Iberia, and we will keep Brazil below the 20% that has been historically our cap. So we will keep it well below that. We will be doing approximately EUR 1 billion of disposals which we expect to come from Brazil mostly. So this is -- the entirety of this EUR 1 billion will be located in Brazil associated with our strategy, which I'll talk about for Brazil. So let's talk about listed subsidiaries, renewables. EDP Renewables is a core part of our business, and I'll stress this again. It is a core part of our business, irrespective of it being listed or not listed. The fact that is one of the few listed pure-play renewables with scale we believe is a net positive. And so we are aiming to reinforce liquidity in the stock, and we believe EDPR can be a potential funding vehicle, while EDP also keeping at least 70% control of it. So we have a large CapEx plan. As I mentioned, approximately EUR 19 billion just in renewables with 20 gigawatts that I mentioned. So to partially finance this CapEx plan, EDPR is considering the issuance of equity, between EUR 1.5 billion to EUR 2 billion, to be placed with institutional investors at an appropriate time. And we believe that this equity issuance will meaningfully increase the free float and liquidity of the EDPR shares. We will also obviously consider additional asset rotation and other funding alternatives. So we are evaluating all possibilities including this equity issuance. In relation to Brazil, as I mentioned, we will be rebalancing the portfolio, refocusing more on networks, more on new downstream, selling some of the hydro. That's something we've talked about in the past, and that's something we're also committing to in this business plan. We will ensure we keep a majority control while optimizing our equity exposure. So the exact percentage may vary over time, but we will keep a majority control. Finally, I talked to you about sustainable growth. We are fully committed to BBB, and I will reiterate that. That's been a strong commitment by EDP to get to the BBB. We are -- we believe we will get there in the short term. As you will have seen from our results presentation, we are at the lowest level of absolute debt and also the lowest level in terms of the ratio net debt to EBITDA. So we will -- we believe we are well placed to get there. And we also have the flexibility to continue to reinforce the balance sheet, whether through hybrids or asset rotations, portfolio optimizations. As you know, we did recently a hybrid of EUR 750 million. We are able to do more. We will make sure that we get to the BBB, and that we have an FFO to net debt, which is typically the metric that rating agencies look at, of around 20%. So this is also one of the hard commitments that we have in relation to the EDP. Let's talk about organization and talk about some of the challenges there. Now this is a pillar which typically companies don't talk so much about. I mean it's not a particularly hard pillar, sometimes a little bit softer, but I think it's something that we believe passionately about at EDP. We believe we are human-centered and that we need to keep our people empowered to really develop the best projects and the best business as possible, and we need to make sure that the company is prepared for the future. I think one of the really good things about EDP is that we have a lot of talent internally. We have been considered a top employer for many years in a number of different geographies both in Iberia and in the U.S. and various other European geographies. And so I think people like working at EDP, and we can attract talent and we can retain talent. And that's absolutely critical when you're growing a business, and it's a very competitive business. So we will make sure that we continue to have the best conditions possible that we have a lot of diversity in the company that we have a lot of inclusion not just for the stake of statistics, but simply because we truly believe that it triggers more innovation, and it allows us to be a better company. And so that's something that we are definitely working on, and we'll continue to do that over the future. In terms of our organization, we're also pivoting in terms of workforce. So we have, obviously, our businesses, our core businesses, things like networks, in some of the conventional generation. We will continue to streamline that and make that increasingly more efficient. That will mean a slight reduction in the number of people that work there, simply as a function of increased automation and increased digitalization. And we will be growing, obviously, our newer businesses, things like solar and wind and obviously, new growth avenues, new business units, which we've also talked about. So there will be this pivot and this re-shift, and that is part of simply growing the company. We believe we have a really strong world-class wind and solar team. And by 2025, we expect to have a large number of people in the operation and maintenance. So we are best-in-class. We'll continue to have a lot of development people, obviously, because that's critical to develop the portfolio. But also in the new growth avenues, we're also going to have approximately 700 people developing the businesses in this area. So this is something, making sure we are attracting this talent and that we are getting them to build out this business, I think, is absolutely fundamental. All this, but we will be driving efficiency as well. And as I mentioned, in relation to some of the core businesses and some of our more mature businesses, we want to make sure that we are still delivering on the targets that we set ourselves. So we set ourselves EUR 100 million by 2022. We are keeping that, and we're taking it a step further. So by 2025, we will continue to bring the cost, the nominal costs, down over the entirety of the business on a like-for-like basis. So again, efficiency is definitely a key factor that we will continue to drive. In terms of innovation, again, we're expecting to double the number of people in innovation, investing more, investing approximately EUR 1 billion in total cost between CapEx and OpEx in innovation. And basically, we structure innovation around 4 key pillars. Cleaner energy, which includes not only improving our renewables portfolio, but also things like hydrogen, smarter grids, how to make our grids much more resilient, more efficient, more automated. And also in terms of storage, flexibility, how we manage that intermittency on the network; and client solutions, how we are able to have newer business models including many of the new technologies that I've already talked about. So these are the 4 pillars that we typically talk about when we talk about innovation. And we are making sure that we have a strong focus on this, and we've also done some recent changes to make this more evident within the group. In terms of digital, it's impossible not to talk about digital. It's just such a major part of our strategy. We are going to be investing approximately EUR 1 billion over these 5 years, approximately EUR 200 million per year in digital. One of the key things is making sure we think about digital from the bottom up. So it's not a, by the way. It means we actually think digital first in the way we organize ourselves and in the way we set up our processes. Another thing which I'm very passionate about, which is the data-centric decision making. We have billions of data points every day we're producing data points, whether it's in the network with all of our customers, whether it's in the renewables with all the different turbines that we have throughout the world and all the signals that they're sending us, whether it's in conventional generation, whether it's in distributed generation. There's just a massive amount of data. So making sure that we are using the analytics and taking decisions based on hard data, that's definitely one of the key for us, and we want to make sure that's transversal across the organization. In terms of efficiency in the operations. Again, we can use that data to become more efficient and more automated. And then in terms of our actual digital culture, making sure that everyone within the organization, no matter how old you are, young or old. No matter what business you work in, making sure you have the minimum competencies in terms of digital that you're able to use all the tools that are at our disposal. And finally, and this is a critical point for us, making sure we have zero trust security, which means having our cybersecurity at a top standard, advanced level. We manage critical infrastructure. We need to be absolutely comfortable that we are managing our infrastructure carefully and that it is not subject to any external threats. And so that is obviously a key part of our digital strategy, and we have fully dedicated teams to that. So that was the pillar on organization. Let me talk to you now about ESG excellence and attractive returns. I think one of the key things here I'd like to talk about is our ESG reference. We have been, and we will continue to be a reference in ESG. For over 10 years now, we've been either the #1 or #2 in the Dow Jones Sustainability Index. And we have multiple other awards as well. I mean we've been top in the ethics committee -- ethics companies. We've been in Sustainalytics. We have multiple awards the sustainable area in terms of ESG, and we will continue to be committed to being top in these various indices going forward. And that means also being a part of the UN Sustainable Development Goals. And on the various dimensions, typically, we focus more on 9 of them, but these 9 are absolutely critical for us. And obviously, we can go into more detail after this in the Q&A on this issue. And we will be accelerating our efforts on ESG dimension. I think now it is -- it's not a nice-to-have. It's an absolutely must-have on the Environmental dimension, as I mentioned, we are going to carbon neutral by 2030. We are continuing to transition our portfolio to 100% energy transition EBITDA. In terms of social, we continue to focus on making sure we have more diversity within the organization, whether it's gender or different geographies. In terms of social investments, over EUR 100 million of social investment over this period. And in terms of governance, making sure that everyone is aligned and is linked to the different stakeholders that we have, making sure that our compensation at all levels is linked also with the ESG standards, and that we have reinforced risk management and that we are taking this seriously at all levels. So we want to make sure that we guarantee best ethical and compliance principles. And we're doing this how? We're doing this also by making sure that we are ahead of the curve in terms of taking the company to another level on the environmental side. So we are committing ourselves to being carbon neutral by 2030. As I mentioned already, we will be coal free by 2025, and we want to go down to 0 specific emissions by 2030. And so this is one of the commitments that we set out in this business plan that we will work towards over this next decade. And finally, we will continue to deliver superior value to our shareholders. We want to go all green by 2030. We want to double the installed capacity, as I mentioned, we will be investing EUR 24 billion to get there. And we will be also having this ESG leadership as one of the key pillars of the company. All this will translate into hard numbers. And obviously, Rui will also talk to you more about that, but we are seeing basically an 8% growth in net income over the next couple of years to reach EUR 1.2 billion by 2025, and we will be keeping our attractive dividend policy. So approximately EUR 0.19 per share. That's not a hard floor. As you know, this has been something we've been committing to for many years. We will keep the 75% to 85% target payout and we expect to be able to see some dividend increase over this business plan period as the EPS continues to grow. So this is also one of the commitments that we are keeping in relation to the company and in relation to the shareholders. Finally, who's going to deliver this? We are, the management team. This is a renewed team. The 5 of us, as you know, we've made it a smaller, more agile team. We have a global ownership of the business. And obviously, we have specific ownerships then for different platforms, but we have a unified and integrated view of all of this. Many familiar faces that you will know because they've transitioned from the previous team. Also, in the case of Ana Paula Marques, a newer face, but with a very seasoned and experienced executive also from a listed company here in Portugal. So you will continue to see this team dedicated and accountable to delivering these results that I've been talking about. And now I'd pause here. I'd pass over now to Rui Teixeira to deep dive into the different platforms and into the numbers. Thank you, and I'll be back then for closing remarks. Thank you.

Thank you very much, Miguel. Good morning to you all. I'm happy to be with you, even at a distance. I hope you are all safe. I would like now to go through what are -- how we look into the group and how we manage the group through 3 different platforms. So basically, we look at the first platform, the renewables, which we, of course, consider to be the clean energy growth engine. The second platform, which is the networks, where what we call the energy transition enabler. And the third platform, client solutions and energy management, of course, to manage all of our client base and our energy management portfolio. And of course, the way we will be looking into the 3 different platforms is naturally on a business level but very integrated in how we manage, understanding that they, of course, through that, we have an ability to capture different investment cycles. And of course, we will be leveraging on the 3 of them to capture synergies. So now I would like to go through the first platform, the renewables platform. So we start this period, '21 to '25 with 20 gigs of installed capacity, the majority of which in wind, but also a significant component in hydro. Of course, plenty of experience in both of these technologies. As you know, we have built competitive advantages through our capabilities, not only in hydro, but very much in wind. So we're very comfortable to keep delivering value in -- for the future to come. And I would like to talk a little bit about this short-term future, let's say the '21 and the '22. What we are showing in this chart is the capacity which is already secured in terms of offtaking arrangements, so PPAs or CfDs or tariffs that have been awarded through EDPR projects into EDP renewables platform through the different auctions. And effectively, when we look to this, we see that we've delivered 1.6 giga in 2020, but we will already be ramping up, up to 3 gigas by 2022. And of course, we see this. We are very comfortable that we will be meeting this. And it shows already that we are stepping up growth with the secured projects. So that's why when we look to what we are committing to do next is effectively to step up this growth. So we are committing ourselves to deliver 4 gigas on average per annum in terms of renewable capacity, renewable additions. Of course, it will be ramping up. The period '21 to '23, 3-point gigas, and the period '24 to '25, 4.6 gigas of new additions per annum. And the reason why we are very comfortable that we can do this is because for the entire 20 gigas that we are committing to build within these 5 years, 45% of that is already secured or will be secured in the short term, we expect over the next 12 months. And around 55% will be built throughout the remaining period of this business plan. But for which we have around 36 giga of pipelines, so we have pipeline development from which we can select the most competitive and beneficiate from our geographical diversification. So truly committed and very comfortable that we will be achieving this ambitious growth target of the 4 gigas per annum on average until 2025. But also, I would like to highlight that where we are going to do that is effectively pretty much using the same geographies where we have been developing our efforts so far. So right now, looking at the '21-'25 period, 80% of our new additions will be in geographies which we know extremely well, both in the U.S. and -- or North America and then Europe, of course with some presence in Brazil and Latin America. But also exploring to a limited extent, some opportunities elsewhere in the world, creating and opening new different markets. Now I think it's important also to highlight that from a technology perspective, more than 50% of our new additions will be in wind, which is where, of course, we believe we have differentiating capabilities. We really see ourselves as someone that has a competitive edge vis-Ã-vis the rest of the market. And of course, that is built on all the different knowledge that -- and different relationship with suppliers and the entire supply chain that we have built over time in a very credible way. Naturally, we will also be investing in significantly in solar, not only at utility-scale level, but as well as on the decentralized basis. And we will also be tapping storage, what we call the stand-alone storage with some PPA, so making sure that we keep our low-risk profile. But all in all, more than 50% of our capacity in terms of new additions will be in wind. And I'll address later a little bit the remaining technologies, of course, that we will be tapping in or be managing our portfolio, namely the hydro and some potential opportunities in the future for hydrogen. But I think it's also fair to share that when we look to the different technologies, again, we see the same profile and the same pattern that I mentioned before. Around 70% of the wind capacity will be installed in both Europe and the United States. So our core geographies, low-risk geographies. If you look to solar, the same, 85% of that new capacity will be installed in Europe and United States, here, more into the North American platform, again, with a smaller exposure from Latin America and the new geographies. When we talk about offshore, which, as you know, is developed and executed through our JV Ocean Winds JV with Engie, that is much more project-by-project related. But what I would like to highlight is that we do have already secured PPAs or off-taking arrangements for most of the projects or for the projects that are due to become, to be online by 2025 or '26. So very comfortable that the team not only will be developing new growth opportunities but effectively deploying this capital and delivering on these offshore projects in the different geographies, which again include Europe, the United States and some Asian markets, but also with low-risk profile. And here, I would just pause for a second on the hydro because I would like really to highlight the tremendous value that we have from these assets, the ability to generate strong cash flows from this renewable technology, but also the 2.4 gigas of pumping capacity that we have in the Peninsula Iberia through which we, of course, can manage very well the flexibility of these assets. We can manage how we will link these to the load profiles, to solar penetration, arbitraging, peak and off-peak, so it's important to understand that there is significant value coming from these assets. And of course, in Brazil, I mean, managing for value, the projects or the assets that we have there with PPAs. Now storage and hydrogen. Definitely 2 new technologies. Storage is something that we are seeing evolving quite rapidly in the United States. And again, it's a business model where we do see that it could meet the low-risk profile that we are looking always for our portfolio. So basically, taking investment decisions supported by PPAs or by long-term contracting. And of course, there will be some storage also coupled with some solar installations as a request, just answering to requests from clients. But on a stand-alone basis, we would -- we see that we can invest or can grow up to 400 megawatts within this period, namely in the United States. Also a word to hydrogen. As you know, hydrogen is acknowledged today as -- or there is a consensus, a wide consensus, that it's a technology that will take us to that last mile of decarbonization. Europe has set very ambitious strategic targets for growth in hydrogen. And actually, we see ourselves as having a role, a key role within this sector and, of course, capturing the value from these potential growth opportunities. So as of today, we have created a unit, we've created a unit for storage, and we have created a business unit for hydrogen through which we'll be developing different projects in different partnerships. Today, we have more than 50 projects in our pipeline, ongoing discussions with the potential off-takers. So depending on how the technology ramp up we could see ourselves installing somewhere in the range of 250 megawatts of electrolyzers by 2025. That would represent 500 megawatts, 1 giga of renewable capacity. So this is something that we will be following and dedicating teams specifically to develop this business model. I've talked about growth. But definitely, I'd like to talk about also asset rotation because, as you know, they go hand in hand. And while in the past, we were looking at selling around 50% of our gross additions through asset rotation transactions, for the remain -- for this period, for the '21 to '25, where we expect to sell about 1.4 gigawatts, 1.5 gigawatts of capacity. This -- in terms of the relative weight to the gross additions, will be decreasing. So that 50% that we had in the previous business plan will go down to 30% by 2025. So actually, a less weight of that asset rotation vis-a-vis the gross additions. And I think two important messages that I always like to convey is, a, I mean, we have a credible execution track record. Executing these deals since 2012, EUR 12 billion in enterprise value. And also, we do see that -- I mean, to some extent, we are a bit conservative in the financials because we are considering that the capital gains from the asset rotations will decrease vis-a-vis the last 2 years, where we estimated around EUR 300 million, EUR 400 million per annum, and we are estimating for this period around EUR 300 million per annum. So this will keep an important role but decreasing in relative terms over time. Now main highlights of this platform. Naturally, it's a platform where we'll be deploying the majority of the capital. So it's a EUR 19 billion capital allocation to renewables platform. Of course, with an important impact in terms of EBITDA growth, our EBITDA should grow from EUR 2.2 billion in 2020 to EUR 2.9 billion in 2025. So that's a very important growth. It's a 5% per annum in terms of -- and following very much what is the installed capacity. Now on networks. As I said before, this is the enabler. And why? I mean it's important for the energy transition, as you know. But in what concerns our portfolio, it's a strong cash flow profile generator, low-risk profile. So effectively, this is something that we look very carefully to hold into the portfolio, but also acknowledging that we will have to differentiate how is -- what is the strategy for distribution and what is the strategy for transmission? Because both the 2 class -- asset classes, they -- we treat them differently. And how we are going to do that. In what concerns the distribution, basically, the -- I think one of the main figures is that we are increasing significantly our regulated asset base. It jumps from EUR 4.5 billion to EUR 6.1 billion. Of course, this is very much driven by the acquisition of Viesgo. And within this new business or within this platform or the distribution within the networks platform of course, we will be deploying capital on a recurrent basis. So that's a EUR 3.2 billion CapEx to be deployed over this period. And actually, we are doing so because we have very good visibility about the regulatory frameworks in each of the different geographies where we have our operations, namely in Spain, in Portugal and as well in Brazil. So that visibility supports that investment decision in terms of organic CapEx for the networks. In Iberia, of course, we become a leading player. With the acquisition of Viesgo, we become the third largest DSO in Iberian Peninsula. With a more balanced EBITDA contribution from both networks, Portugal accounting for 60% and Spain accounting for 40%. And of course, we are absolutely committed to deliver the savings and capturing the synergies, the operational synergies that we have committed to when in December of 2020, we acquired Viesgo. So we are fully committed to deliver this EUR 200 million of savings from the integration of Viesgo and E-Redes our business in Spain. When we look, of course, to overall how we'll be deploying also capital into the distribution business. Naturally, we'll be investing significantly in modernization, in digitalization, in how we deal with the network which will be more complex, but also has to be more resilient. That means that we will naturally be targeting how we can improve the quality of service, how can we improve the losses in the grids? Because as you know, in the regulation, this is actually a lever to capture additional value, but also very focused in terms of improving efficiencies with a strong reduction in terms of our OpEx per connection point. So that is how we'll be creating value in our distribution business across the different geographies. And now on the transmission asset class, of course, is different. It starts with the ability that -- I mean it starts actually with the anticipation that we had about the growth potential of this market in Brazil, where we participated in the first auctions, where we were able to be at return on equities around 12% to 14%. But it's very important now that we have to execute, and the team in Brazil has been executing extremely well, actually ahead of time, below budget, which is a source of value creation for this CapEx or this capital allocation. So all in all, we are right now expecting a higher return from these assets than we have in the bid. And of course, I mean, we'll be looking for potential consolidation as well as the value crystallization through these type of assets. Naturally, the highlights of this second platform, the networks is, of course, still a significant amount of capital being allocated, about EUR 3.4 billion in total. The regulated asset base increasing significantly. So for the 3 geographies, going from EUR 5.1 billion to EUR 7.1 billion. And of course, a very important EBITDA increased contribution going from EUR 0.9 billion, so slightly below EUR 1 billion, to approximately EUR 1.3 billion in 2025. So a very important growth from the networks platform. And the third platform within the EDP Group is the client solutions and energy management. And of course, here, the first thing that we acknowledge is that we have a large customer client base of 8 million. And of course, what we have to do is make sure that we are creating value based on this, of course, with different strategies related to the segment. But very importantly, also looking at what are -- what is innovation in terms of new products and new services to this client base. But also on the energy management side, which is absolutely key to make sure that we keep managing the portfolio, implementing hedging strategies and also being successful in the PPA origination, which is critical for -- to support the growth in the -- particularly in the renewables. So how are we looking to the client solutions? Of course, increasing the margin on the client base. How we are going to do that? We'll be doing that for -- applying different services, but very much based on a growth that we expect to have on the decentralized generation, actually increasing tenfold, also in mobility services. And of course, also understanding that we need to be more efficient reducing the cost to serve, becoming more digital, having a much better engagement with our client base and really improving that digital connection. On the energy management side, I would basically highlight 3 blocks. I mean there is one which has to do with understanding really well what are the risk profile of the different decisions that we have to make, either on the understanding rules, wind, hedges, profile shapes. We really need to have a good understanding about that risk profile, and we have built that internally within our teams. And second one, which has to do with how we are originating and structuring PPAs. And again, this is very important because this gives credibility to that earlier slide and to that ambition of growing 4 gigas per annum with a low-risk profile. And what I'd like to share is that we have been extremely successful, top 6, top 5 player in the U.S. and Europe, in terms of adding new PPAs to our portfolio. But of course, also understanding that we will not win all, we don't want to feel a winner's curse. And in fact, we will be very selective in how we structure and how we ultimately agree upon the PPAs, making sure they are profitable and with the appropriate risk profile. And last but not least, naturally, all the way that we are monetizing the flexibility that we have embedded into our portfolio, the combination of hydro, pumping, renewables, combined gas cycles and the option value allocated to that, so effectively managing this portfolio, as we have been doing so far with great expertise and great excellence. So the key highlights for this, for this platform is on a CapEx basis of course it's a more capital light, capital-light platform, around EUR 1 billion investment within this business plan. But very importantly, this potential -- this growth that we estimate that we will deliver in terms of DG, decentralized generation. And of course, an important contribution in terms of EBITDA from this platform from EUR 0.4 billion to EUR 0.5 billion within this period. So again, looking at EDP Group as a whole, 3 platforms, working on the business lines, but combined to make sure that we capture that portfolio value, but also that there are the synergies of managing this in a very agilent way. Renewables, the growth engine. So what we call this clean energy growth engine, EBITDA going from EUR 2.2 billion to EUR 2.9 billion. So that will represent 60% of our EBITDA and 80% of our CapEx for this period. Networks. The energy transition enabler. Our EBITDA growing from EUR 0.9 billion to EUR 1.3 billion by 2025. That's a 30% of our EBITDA by 2025, and there allocating around 30% of the -- 15% of the CapEx to the networks. And finally, the client and energy -- client solutions and energy management, where we will be allocating 5% of the CapEx and will be contributing with 10% of our EBITDA by 2025 with approximately EUR 500 million by the end of this period. So now just going through the financials of this business plan. What this represent in terms of aggregate numbers and consolidated numbers? So the first, I think, is to highlight the ambition in terms of capital allocation. We will be investing in this period, starting EUR 3.7 billion in 2020, reaching EUR 4.6 billion of investment in 2025. So if you compare the 2 years, is a EUR 1 billion growth in terms of investment from 1 year to the last year of this plan. EBITDA, growing at a 6% CAGR between '20 and '25 so reaching the EUR 4.7 consolidated. EBITDA, EUR 4.7 billion, EBITDA by the end of 2025. Net income. Of course, reflecting the accretive nature of this investment program with an 8% CAGR between 2020 and 2025, reaching EUR 1.2 billion by the end of this period. And of course, very, very strongly committed to achieving a solid investment grade, BBB rating. So our FFO to net debt going from around 19% to 21% within this business plan. And actually, I would like to address a little bit this, how we strategically look at the financing. Again, very committed, strongly committed with the BBB rating and reaching this 21% FFO to net debt by 2025. Green financing will be the way that we will keep on issuing new bonds, new hybrid, new instruments. This will -- from now, we have started doing that in the past, and we'll keep on doing that for the future. Of course, that we will keep a very active management in our debt position, particularly the liquidity position, ensuring that we have visibility for the next 12 to 24 months in terms of liquidity. So again, a prudent financial policy. We will keep centralized debt management. Of course, Brazil, as you know, is ring-fenced. But otherwise than that, that will be managed mostly at the corporate level, at the holding level. Of course, we keep a very active management in terms of FX and interest rates and making sure that we are matching our assets and liabilities both in terms of duration, but also in terms of FX exposure. And finally, also considering a reduction in terms of cost of debt of around 40 basis points by 2025. But I would like to end my part now with how -- from where will we -- taking the cash that we need for this ambitious plan. So as you see, we will be -- in terms of cash uses, we will use around 28% of EUR 28 billion of cash. Most of that, of course, is for the CapEx. There's EUR 4 billion for dividends, as Miguel said previously. We are keeping the same dividend policy as exists as of today. How we are going to fund this EUR 28 billion cash needs? The most -- the majority of it will be project related. So EUR 22 billion will be either from -- will actually be cumulative of cash from operations from the different -- from the entire portfolio; EUR 8 billion of asset rotation, something that we are definitely committed to; and EUR 2 billion from tax equity, which, as you know, is creating value through the monetization of the investment and production tax credits we have in the U.S. Then EUR 2 billion, additional EUR 2 billion debt. EUR 2 billion of some portfolio optimization alternatives such as new hybrids, of course some regulatory receivables. And also EUR 2 billion from what we call this flexible funding sources, as Miguel also mentioned before. EDPR capital increase and our additional hybrids, disposals, asset rotations and all these are being evaluated. And with this, I would like to thank you for your attention, and I will now hand over to Miguel. Thank you very much.

Thank you, Rui. Okay. So some final remarks, and I would like to share with you. I think we've seen obviously a lot of numbers, but I would just like to take a step back and talk to you about what we've already done in the past. Because I think it's this track record, it's this history, which allows us to be confident about delivering the future. We have consistently delivered on target. And if we look at the business plan that we presented to the market in March of 2019, we have delivered on the key targets. We had the 7 gigawatts of secured capacity. We've delivered already by the end of 2020, 7.7 gigawatts. And we had around EUR 1 billion of proceeds per year. We've already delivered EUR 2.3 billion over the last 2 years, with premiums 50% above target. If you remember, that was one of the issues, and many of you challenged us or at least wanted to know more about that, and this is something that we've delivered consistently above the expectations. In terms of our portfolio, again, we've delivered in terms of having a low-risk regulated portfolio. This has been enhanced obviously by the Viesgo acquisition which we did last year, which brought in more regulated long-term assets into the portfolio. The disposals. We talked about the EUR 2 billion of disposals in Iberia. We've done well over EUR 2 billion. We've done EUR 2.7 billion, swapping out some of the hydros in Portugal, some of the B2C in Spain and the thermal, the CCGTs and trading that out for Viesgo regulated assets with a very attractive multiple. And I think that was clearly recognized also by the market and investors. In terms of balance sheet, we've delivered again. And obviously, we've talked about that also in the 2020 results, but we are at the lowest level in terms of net debt and the lowest level in terms of net debt to EBITDA of the last 13 years. And so I think clearly taking a big step forward in terms of balance sheet. And finally, obviously, this has translated into good, strong total shareholder returns over this period, 65%, clearly above the rest of the index, the utilities. So I think by taking a step back, looking at what we've done, and it's essentially the same core team, that we are confident about also delivering on our ambitions going forward. And that's why we believe and we are confident with this ambitious plan. The accelerating sustainable growth as both myself and Rui have talked already about that, a big step-up of growth in renewables, accelerating the ownership of the assets that we keep, but also keeping the asset rotation strategy, EUR 24 billion in CapEx over this period, 20 gigawatts of gross additions, EUR 8 billion of asset rotation. So I think these are some of the key numbers. Obviously, there are a lot of numbers in this presentation, but I think these are really some of the key numbers to bear in mind. Continue to focus the investments on renewables and networks both in Europe and in the U.S., so around 80% of the investments that we're going to be doing, and targeting the BBB, keeping that in the short term. So we definitely want to keep a sustainable leverage going forward. EUR 4.7 billion of EBITDA. Rui has already talked to you about that, and keeping roughly 20% FFO net debt in the short term, as I said, to get to that BBB. So these are the key targets that we are committing to over this period. I've also talked to you about organization. And again, this is something which we believe very strongly about. It's making sure that we are continuing to attract the talent, that we are global, agile, efficient, that we are seen as a top employer, and that is seen as a competitive advantage to take this company forward. We are continuing to focus and we'll reinforce the investment in innovation, and we will also continue to press forward with the digital agenda. So clearly here also some big numbers. We've talked about the EUR 100 million in OpEx savings and also the EUR 2 billion including both digital and innovation. So again, a strong focus here on this idea of keeping the company future-proof. Finally, ESG excellence. This is something that, again, we've been very strong about not only in the recent past, but also going forward. We will definitely keep up the strong green leadership positioning. We will be referencing ESG. We want to be coal free by 2025. We want to be carbon neutral by 2030. And we want to then deliver good returns, great returns for our shareholders, reaching the EUR 1.2 billion net income by 2025 and keeping, obviously, the minimum EUR 0.19 floor for this period with the potential for an increase. Finally, but not the least, we are really stepping up our commitments. And I just want to go back to the beginning of the presentation. We're talking about a major secular trend. This is something which is impacting the globe. It's impacting all the different economies. This is transversal to all of society. And everyone is stepping up. And so one of the key numbers, I think, which really stands out certainly for me is when we talk about having more than 95% of the global GDP committed to the Paris Agreement. So this is not something which is a niche play. This is a major secular trend. And so we are firmly committed. We are well positioned to take advantage of this opportunity. We are committing to 2030 where we have this aspiration of the 50 gigawatts; the 100% energy transition EBITDA, making sure that we are fully aligned with that secular trend, and that we are carbon neutral also by 2030. So stepping up growth in scale, going all green by 2030 and creating superior value for stakeholders. So these are some of the commitments that we are taking as a team, team that you know well. It's not just the 12,000 people that work at EDP every day and that have been delivering over the many years; it's also obviously the team that you have in front of you and that you know also from other areas. And this is what is going to allow us to take EDP forward over this next decade and continue to deliver value, superior value for all stakeholders. So we definitely want to catch up with you over the -- not only in the Q&A, which we'll have following the session, but also in many future iterations that we'll have in terms of the results to keep you up to speed. We are saying, and I think this is really, we believe passionately as a team about this. This is an unprecedented challenge globally. It requires ambitious commitments. And at EDP, we are passionately committed to delivering on this plan and making a difference in the world. And so I'd stop there. And obviously, we'll then open it up for Q&A. So thanks very much for taking the time.

[Operator Instructions] Before we go to Q&A, we will have a few words by Mr. Miguel Viana, Head of IR. [Presentation]

[Operator Instructions] Before we go to Q&A, I will give the floor to Mr. Miguel Viana, head of IR.

So thank you, everybody. So we'll start now with our Q&A session. We'll start with the questions by the phone, and then we'll move to the questions that we got from the web. We'll start with a question from Harry from Bank of America Merrill Lynch.

So I've got three. So firstly, just on the earnings guidance. You've given us very clear guidance for 2023 and '25. But I was wondering, could you just comment a little bit on what you expect for this year? I believe your company compiled consensus for 2021 at statutory net income, which is the new headline figure, as about EUR 900 million. So it would be very useful if you could let us know whether you're comfortable with that value? Secondly, I wanted to ask on the Brazilian disposals that you mentioned and whether you could give any kind of sense of timing there and what assets you might be looking at selling. Maybe comment a little bit about perhaps valuation relative to what you think the market has in some of the parts of those assets. And then importantly, how would you actually use that cash? Because obviously, it's got to follow quite a complicated path to get to the end reinvestment objective. You've got to take it out of the Brazilian entity, upstream it to Portugal, and then I guess, downstream it back to EDPR if you want to spend it on renewables. So be useful to sort of get a bit of color there. And then just sort of final one on the EDPR capital raise. So just from an EDP perspective, you mentioned that you'd keep your stake above 70%. So can I just understand a bit about how that might work. So is that suggesting that you may not fully subscribe pro rata to any capital raise? And are we effectively saying that you are planning to reduce your stake to 70% and have more of a sort of primary focus raise? So be great to get some more color on that, too.

So can I go? Okay. So Harry, thanks for the questions. And I hope you're well. Listen, in relation to the earnings guidance, typically, as you know, at the beginning of the year, we don't provide that much guidance for the year. Obviously, as you know, we're still very dependent on the hydro, typically, for the first 3, 4 months. So we will be probably providing more concrete guidance at the first quarter results. In any case, we are expecting some growth versus 2020 at the net income and the EBITDA level. And so as I say, we'll come back to that probably in the first quarter, but we would expect some growth versus 2020. In relation to the second question, Brazilian disposals. So I wouldn't like to necessarily comment on value. But in terms of time frame, we are moving ahead with the transactions or with the processes. So it's something that we would expect would happen or that we would try to front-load it, certainly, in the first part of this time frame of the business plan. And we will obviously provide visibility whenever is appropriate and is possible. But it is -- it's not backloaded. It's front-loaded. In terms of what we do with it, again, great question. I mean, first, Brazil, as you know, has implemented a dividend policy and also a buyback policy. So that's certainly one way of using it. Another way is to reinvest it back into transmission projects, new transmission projects, or in the downstream, for example, they're developing more of their solar platform there. So that's obviously also a certain part can be reinvested. So a part reinvest in Brazil. As we've always mentioned, we would like to keep the Brazilian exposure below 20%, and that's sort of the number where we keep looking at. So we'll keep it below that level. We'll reinvest part of it back in Brazil, and the rest will either be dividends or buybacks. In relation to the EDPR capital raise. So that is one of the possibilities that we are looking at, and we have obviously flagged it in the presentation. We would do it at the appropriate time and in conditions where we would place it essentially with institutional investors only. And obviously, the idea there is because we are -- we would be raising fresh capital in that situation. So if we subscribed, obviously that would not -- that would partially defeat the purpose, given we have such a large percentage. We don't go -- expect to go down to the 70%. We expect to stay above that. I think we just simply highlighted what was, let's say, the lower bound of what we thought was appropriate in terms of our stake in EDPR, but we would expect to stay above that in any scenario. So hopefully, that answered your questions. Perhaps we can go on to the next one.

Okay. We have now a question from Alberto Gandolfi from Goldman Sachs.

Miguel, thank you, and good morning, and welcome conversation for becoming -- on the path of becoming a green energy super major if you really execute. So that's the first question really. Can you please talk about the main challenges to do something like 4-gigawatt growth, and what seems to be 6-gigawatt growth per year in the second half of the decade? And maybe can you tell us what type of main bottlenecks do you monitor in terms of the no cables availability, equipment availability, personnel? What are you assuming in terms of policy? Like what do you think Biden is going to do given that a big chunk of your investment, if I'm not mistaken, 45% are in the U.S.? The second question is about a little bit -- apologies, a bit boring here, but the net income you presented last night and the net income goals you're presenting today, the EUR 1 billion target and the EUR 1.2 billion target, can you -- you now change the definition of recurring, which I think is way clearer. Is the EUR 1.2 billion excluding any capital gains, let's say, on the EUR 1 billion as well from rotation or from whatever? And maybe tagging along of that, you just replied to Harry saying, you expect EBITDA growth. I guess you're assuming EBITDA before capital gains, the EUR 3.5 billion. Would you also expect underlying growth in net income for '21? And no, that's it. The third question was on the capital increase but you've already replied to that.

Hi, Alberto. So thanks for the question. So we definitely see ourselves when we believe we already are one of the majors, one of the green energy majors, and that's for sure. I think our track record, the installed capacity, we already have the scale we have, the global footprint, I think certainly places us up on the podium, and we intend to stay there. We are aiming for the 4 gigawatts per year over this period. One of -- and I think you were actually on the call yesterday with EDPR, and we pointed to the graph where we already have secured around 3 gigawatts in 2022. And I think you saw that ramp up. So we are, I think, well placed to get there. And that means that we would sort of be more towards the 5 gigawatts in 2025, around 4.6, if I'm not mistaken, in that last period. And we think we can take it from there. And I really want to take a step back and go back to one of the messages I mentioned at the beginning of the call, which is the incredible amount of growth that we expect over the next 10 years, and we hope will come in the next 10 years, next 10, 20 years, associated with the build-out to achieve the Paris Agreement and the 1.5 degrees. And I pointed to one of the graphs, which is we had approximately 40 gigawatts per year being installed over the last year or so or the last years per annum. And going forward, that would need to multiply by 6, 7x, if you wanted to reach the 1.5 degrees. So we really do think there's a huge amount of upside. Obviously, we're not necessarily projecting for that. We're projecting for something which is used by independent analysts, et cetera, but I do think there is possibility to even ramp that up further. So it is a big market, and it's definitely growing very fast and we are going to be a part of that. In terms of the challenges, I mean, quite frankly, I think we're in a good phase now. So we are seeing a lot of regulatory and political support, both in the EU, also in the U.S. And I think there's been a lot of positive signals in that sense, but also elsewhere in the world. And so I've pointed that out, we've seen places like Brazil, Colombia, where we already have 500 megawatts. We've seen places in Asia. All of those -- and take the example of Brazil and Colombia, which typically were hydro countries, and you see them also opening up very strongly to renewables and wind and solar. And that's true of a lot of other geographies because essentially, renewables is now more competitive than the more conventional technologies. And so I think that's what gives us this comfort that this is really something that will continue to grow over the next couple of years. But obviously there are challenges, I won't deny that. One of them is to make sure that we have the best team possible, that I think we have definitely a good solid core team, and we need to continue to build that out. We need to make sure that the supply chain is all in place, and it keeps moving forward. But that's part of this ramp-up. And I think there will also be some issues to solve, some problems. Otherwise, life would be too easy. But I think that's just simply part of this macro trend of growth, and I'm sure we'll all be able to solve for that. In terms of the net income, so I'll just -- I think I'll be answering your question. So the recurring EUR 1.2 billion includes asset rotation gains as we've been doing. So that is part of our -- the way we are looking at the numbers. It doesn't include, obviously, capital gains associated with disposals, for example. So that's something that we treat as extraordinaries. But the asset rotation gains we are assuming, and we will continue to have that as a recurring feature over the next couple of years, and that's also in the EBITDA. So it's -- we'll continue to present the numbers as we have until now. So the asset rotation gains within the recurring, any disposals that we do would be, let's say, an extraordinary. Does that answer your question?

Yes, it does. Thank you. I guess you're not going to say now, Miguel how much broadly you include that.

We're expecting, well, I can answer broadly. So in the previous plan, we had around EUR 0.2 billion. We're now expecting around EUR 0.3 billion in line with what we've seen 2019, 2020, we're actually above that. We are at sort of around EUR 0.4 billion but we're assuming on average about EUR 0.3 billion over this period.

Okay. We can go to the next question.

Sorry. And it was EUR 0.3 billion. So in terms of the per megawatt number, you can then do the math, but obviously, it's lower over time.

Okay. We can go to the next question from Stefano Bezzato, Credit Suisse.

Three questions for me. First one on renewables growth. And in particular, yesterday, during the 2020 results call, you pointed out that the peculiar challenges of the offshore wind business. And in particular, the rising competition from oil companies. Do you think this kind of challenge could extend eventually also to onshore wind and solar? And if not, why not? The second question is on the -- on your 20 gigawatt of renewable growth by 2025. Can you give us an indication of how that is split between merchant projects, government auctions and corporate PPAs? And finally, the third question, going back on the net income, EUR 1.2 billion target for 2025. Can you give us a flavor of the evolution of minorities that is embedded in that target?

So good morning, Stefano. So in terms of the first one, the renewables growth and the offshore, the oil and gas that I talked about. So clearly, we saw prices which we didn't -- which we thought were extremely aggressive in that round 4. And I think that's already been commented on. I also did comment on the onshore and the solar. I think we are talking about slightly different business models. It's much more granular, much, much smaller projects. You have to have had a long period of development to actually bring these projects online, typically 4, 5, 6 years depending on the geography, to be able to implement it. And so we continue to see, and we have seen good returns on those projects that we are developing. And so one of the slides that we pointed to was what we saw, for example, in 2020. And I would just like to remind, it's projects that we took an investment decision in 2020, but that relates to projects that will be deployed in '21, '22 and '23. And so we're already talking about future returns that we've already been locking in for that period. And so as I said, we do see -- we continue to see that, and it's much more, as I say, granular, you need to be on the ground, you need to have development teams, and you need to have spent the time and the resources to develop that pipeline. I would also just reiterate one of the comments that I made to Alberto, which is this is a huge market. And so I do believe that there is going to be rationality in terms of the returns. And there is so much capital that needs to be deployed, that it would make sense to achieve that, that as we've seen, for example, even in the recent Spanish solar auction, I think the result was -- made sense. I mean it made sense, I think, for the various different players there. You had numbers that were sort of in the mid-EUR 20s per megawatt hour for solar, which I think gave a reasonable return to the people that were participating. So I would expect that in general for the -- certainly for the onshore and solar going forward. And even in the offshore, I think you have a lot of different models. So I certainly wouldn't want to extrapolate from the round 4. We see, for example, the Mayflower project. We have a lot of other pipeline that's been developed in countries like Poland or Northern Europe or even in Asia, where -- and obviously, apart from the U.S., where I think that it's not just a price-driven. There's also a certain amount of beauty contests in some cases. And so I think that -- well, it will make sense and it has to make sense in terms of returns for the sector. In terms of the renewables growth. So we don't invest on a merchant basis. We certainly wouldn't take an investment decision based on that. And you know that from our history, we -- that's not what we do. So all of it would either be government or sort of system PPAs or corporate PPAs. The exact percentage, I don't know, Rui, if -- we haven't given out...

No, we are not giving out that sort of percentage. But again, what we can highlight is I mean we are not running -- we are not doing enough the growth on a merchant basis. In U.S., most of it is PPA. And of course, we work very much with unit contingents thus far, although, of course, also working in some more complex structures as long as we feel comfortable with the risk profile. And in Europe, as you know, is mostly through government-led auctions, such as in Italy, now in Spain again, Poland. But we are already working very actively in the corporate PPAs. And there, again, it's a combination of -- it's pay as produced, in some other case we can have some, a bit more complex structure. But then again, always within the control risk profile.

Okay. And in relation to the third question, good question in terms of the minorities. So what I would say here is that we've built in already into these numbers, sort of all the different estimates including the asset rotation sales and any other financing instruments that we might use to underpin the financing of this business plan. So that's already built into the estimates that we've already provided. But I don't think we're giving out specific numbers.

So I think we can go to the next question. I think it's from Javier Garrido from JPMorgan.

Thank you, Miguel. I have a few questions about the equity issuance at the EDPR. And it seems to be your clear view or your central case scenario, though you mentioned you still consider other options. What is the rationale for going for one option like equity versus additional asset rotations or why not hybrid at the EDPR level? So what is the rationale behind making equity issuance at EDPR, the first option. Secondly, coming back to the returns in renewables. Apologies if you specifically mentioned that, but do you believe 1.4x WACC is sustainable in this marketplace? And is this -- would it still that mean, I guess, a lower IRR as your WACC has decreased materially since 2018. Is that the way you look at it? And the final question, a very small one is what are you assuming for financial costs in this projection for net income of EUR 1.2 billion in '25? What is your assumption for your cost of financing?

So thanks, Javier, and good morning. So the rationale. First, this is an ambitious growth plan. And so there's a lot of investment that we're projecting to do over the next 5 years. We have stressed that we want to keep a solid balance sheet. And so the BBB is definitely something that we want to make sure we are targeting and achieving. And we are considering the various options that you mentioned. So we have also considered hybrids. In fact, we recently launched -- or placed a EUR 750 million hybrid. We could consider doing more. We've -- we will also continue to do the asset rotation. So you'll also have seen that, and we are also considering the equity. So we look at all the instruments, depending on which one is the most efficient at any particular time and to make sure that we also keep the solid balance sheet, but we're also able to finance the plan. And that's essentially because we think that this plan is value-accretive to the shareholders. And so we think it makes sense to make sure that we complete the plan and that we can finance it adequately and build out those projects with those returns and using the various instruments that we have to finance that. So we will use the most efficient one at any particular time, making sure that we keep that solid balance sheet. In terms of the returns. In the renewables, I mean the answer is yes. And our track record over many years is that we have managed to keep those returns. And obviously, as I say, this is -- this has been -- this is a market which is growing, and it's growing very fast, and I would just keep reiterating that. Obviously, the cost of capital has come down, as you rightly point out. And so the returns, in absolute terms, also come down. But that spread, that sort of IRR minus the WACC spread, continues to be very attractive, and that's reflected in the capital gains that we're getting when we do the asset rotation. So I think that's one of the market tests that we use to make sure that we're continuing to create value when we build these projects and take these investment decisions. And I think that's one of the best indicators that I can give you for that. For example, the recent portfolio. We have another portfolio that we expect to come, that we'll be able to communicate or expect to sign in the short term. And again, I think you'll see, again, interesting returns, and these are for projects that are being built as of now. So we continue to see that coming through. And I think at the end of the day, why? Because -- and I will reiterate this again -- you need a lot of capital to be deployed and people are rational. At the end of the day, they need to be accountable also to their shareholders. We certainly are, and we will continue to stay disciplined and make sure we get those returns. Then obviously, we have an additional scale. We have a footprint which allows us to be in the different markets, and so make sure that we're optimizing that portfolio. The scale allows us to be, let's say, get better returns than the others and still win the projects because we have better access to the turbine manufacturers or we have better locations in terms of land or the interconnection. And so that edge, I think, gives us that additional delta of return. In relation to the third question, I'll probably pass it over to Rui.

Thank you, Miguel. So effectively looking to this plan, we are estimating a cost of debt at around 2.9% by 2025. Of course, over the next 2 years, we'll have some refinancing ongoing of debt that we currently have with higher cost. So then there will be -- although we are foreseeing some increase in terms of the interest rates within this period, given that we will be refinancing. And again, I stress, we will do that through green instruments. But again, through this refinancing, we expect cost of debt to go down by 2025, just below 3%, 2.9%.

So we can have a next question from Jose Ruiz from Barclays.

Congratulations for the presentation. I just have three quick questions. The first one is to confirm or deny. In the previous -- in the recent history of the company, you kept the independency -- financial independency of affiliates. Is this principle going to be maintained? I'm asking this because I was not very sure about the, any raise of capital at the EDPR level, if it's going to be subscribed partially by the parent company. Related to this, second question is basically related to the role of the parent company. I mean you're growing massively on renewables. And the Iberian presence, for example, is going to be diluted within the company. How are you going to prevent in the future seeing again the parent company business trading at a discount? And thirdly, a clarification. On the asset sell-down, are you still maintaining the same criteria as before, which is selling majority stakes?

Okay. Thank you, Ruiz. Perhaps the first one, Rui, if you want to talk about the financing?

Yes. Of course. So to be absolutely clear, we will keep the same approach in terms of financing policies within the group as we have done so far. So primarily, this is controlled on a centralized basis at the group level, at the corporate level. So it's from the corporate that we will be managing the debt and managing all the new issuances of the different debt instruments. And of course, at the Brazilian level, as you know, it is ring-fenced. And therefore, the Brazilian business unit will keep addressing the market and raising fundings in the Brazilian real as needed. And thirdly, at EDPR level, at the renewables entity, of course, we will still be using some project finance where it makes sense, typically very limited in what compares to the remaining balance sheet. But of course, taking advantage of some local characteristics of the different markets, raising debt in local currency, which may not be so strong currency. So it is appropriate to use project finance or in some special cases, taking advantage of low interest rates sponsored by national development banks, for example, the case in Brazil. So it's -- we are maintaining the same policy, fully centralized at the corporate level and then with these smaller exceptions.

Okay. So in relation to the second one, it's also a great question. First, I think the group, the EDP Group creates additional value by being more than just a simple sum of the parts. And the fact that EDP continues to invest in networks, continues to invest in downstream. We are seeing a lot of growth also there, obviously. It's more in the distributed generation in our supply business, but we also have a very strong presence in the networks. And all of that, I think, gives us a lot of optionality and a lot of additional value, very much aligned with this idea of the energy transition story. So we clearly believe that there is this trend which is going on and which is reshaping the sector, and we are part of that, and the EDP Group as a whole benefits. It has a very strong growth pillar through EDPR. But EDPR also benefits by being integrated in EDP Group by also having that balance sheet and having that access to other optionalities. So that's certainly one piece. EDP is also converging in a way, to be a much more renewables. We are going 100% green by 2030. So I think that's obviously an important part. And EDPR is an integral part of EDP. So that's something that we stress. The fact that we now have the same CEO and CFO means that we will keep a very aligned strategy in relation to that group structure. So certainly, I don't see any reason for a discount. On the contrary, I would see sort of value-added by having this integrated view of the energy transition. In relation to the third question, the asset rotation. We are definitely keeping the majority stakes -- sorry, we're continuing the same strategy of selling majority stakes, typically 100% in Europe and probably 80% in the U.S., which also relating partially to the fact that we do some tax equity over in the U.S. but definitely selling the majority stakes is what we've built into the business plan, and it's what's underlying the numbers that you're seeing.

Okay. We have now a question from Meike Becker from Bernstein.

Two questions from my side. Could you put, if possible, in dollar or euro per megawatt hour terms, the competitive advantage using a large player with scale would have compared to a smaller local player in onshore wind and solar, if that's possible? And I believe, if I heard correct, you said you're expecting a 200 basis point spread over the WACC, between IRR and WACC? Could you just elaborate again, apologies for that question, what makes you so confident that you sort of can maintain that for the next 10 years? And the second question is on the coal phase out. And your net income assumptions and guidance for 2025. So should we assume that, that has been included, for example, stepping out of Brazil and your coal plant there. And what do you actually consider to be the exit strategy? So is that going to be a sale most likely?

Thanks. So in relation to the first question, I'm not sure I can pin a particular dollar-euro number. But I would certainly say for local players or smaller players, many times they may not even have access to financing or access to turbine manufacturers at competitive costs. And so what we've typically seen is that we can actually partner up with many of them, with some of these, let's say, smaller local developers to actually take the projects forward. So they will, let's say, do some of the initial work in terms of development and the permitting, and we will then take it on into the next phase, bringing it to the auction and ensuring that we have, let's say, the all the infrastructure in terms of the BOP, the financing and the turbines, et cetera, to actually make it a reality. And then there's -- sometimes we work on a success fee basis or we'll actually have -- incorporate that local player. So I can't pick a specific number, but I would say some of those local players might not even be -- they just simply wouldn't even be able to get that project done without us stepping in. And then also, just to be precise. So what we've indicated is a 200 basis point spread. That's typically what we would aim for, or the 1.4x our cost of capital, which is also one of the metrics we've typically used in the past. So -- and as I say, and you've got that in the presentation, the numbers that you've seen, we have been above that, certainly over the last couple of years. In relation to the coal phase out, so we are assuming Sines and Soto are already not in the numbers. Going forward, we will be left with Abono and Pecem, which will then phase out by the end of this period. And so that's expected. I don't know, Rui, if you have any specific numbers. I don't think we've given that out.

So just expecting that the coal will be phased out by the end of 2025, but it will still be there for a while.

Okay. So we can go to next question from Sara Piccinini from Mediobanca.

I have three. The first one on the dividend policies. You say that there could be a possible increase in the DPS following the delivery on the EPS growth. So my question would be, should we see this increase in DPS eventually to follow the payout rule, so you will pay the dividend based strictly to the payout or just related to the EPS growth? So this is the first question. If you can provide some details on this eventual DPS growth. The second question is on the evolution of CapEx per megawatt for wind and solar. How do you see the trend in the future if you have a figure of CapEx per megawatt? And also, what is your view on the trend in power prices with more renewables into the system. Do you see power prices to significantly suffer a downward pressure? And how this would affect your portfolio both in terms of the merchant plans that you have and also on your ability to sign PPAs? And the last question is on networks. If you are considering any regulatory impact given that we will have in Portugal the regulatory review this year? Or any impact on the networks in Brazil also following some recent statements by the President.

Thanks. So in relation to the dividend, what -- our strong commitment, and it has been, is to the floor. And we will consider the DPS growth also as a function of a sustainable EPS growth going forward. So we're not going to give out specific numbers. We've given out a payout ratio but the -- let's say, it's a hard floor, and we will then consider potential growth going forward. In terms of CapEx per megawatt in wind and solar. Again, we don't give specific numbers. What I can comment on that, though, is so winds has -- essentially the CapEx per megawatt has been relatively stable, but what has been improving has been the cost per megawatt hour. Because at the end of the day, it's not just the per megawatt, it's what you're actually producing in terms of energy. And so what you're seeing is you're having turbines which are becoming more efficient and managing to produce more, but they are bigger turbines and so you're managing to get more megawatt hours out of the same megawatt installed, and that's one of the things which then lowers the price per megawatt hour. So actually I think one of the more relevant metrics is actually looking at the per megawatt hour, and that continues to trend downwards. And the prices that we are seeing in the markets, obviously, in the, let's say, in the auctions, we're seeing is obviously reflecting that. So when you see solar, let's say, bidding in Spain in the mid-20s, obviously that's reflecting this downward trend that we're seeing in the cost per megawatt hour for these technologies. And it's also why I mentioned at the beginning of the presentation. This is already more competitive. It's already lower than the wholesale prices, and it's what is driving, let's say, this big increase in growth globally. In terms of power prices, just a comment -- a couple of comments here. So we -- first, in terms of what we're assuming for the short term. We're assuming below EUR 50 per megawatt hour. But more importantly, if we look in the medium to long term, we continue to see the marginal price being set mostly by thermal. Even when you get a high penetration of renewables, let's say you get 100% powered in, let's say, 20, 40 or whatever, have solar working and producing all of the energy for a couple of hours during the day. We still expect thermal to be setting it for the remaining number of hours. So I've given this example a couple of times. If you have 24 hours and you have maybe solar at, even if it was at 0 for 4 hours, and you have the remaining 20 hours being set let's say, at 60, 70, 80 euros, whatever number you want to take in terms of gas prices, the average price will still be quite high. So there, it's important just to take into consideration what are the solar adjustment factors or the discount or the realized prices that each different technology will be getting. And we are obviously factoring in those discounts when we do the analysis and when we do the -- when we have the -- sort of look at the returns that we're expecting for the projects going forward. In terms of networks, regulatory impact in Portugal. So we're not expecting any regulatory impact. I mean I think it's well known that 2/3 of the RAB has a long-term concession until 2044. 1/3 or around EUR 1.2 billion is the low voltage concessions which are up for tender. I believe the government is still preparing the framework to exactly see on what terms that tender would be done. In the meantime, we will obviously continue to manage it on an ongoing sort of business-as-usual basis. And what happens there is if, for some reason, there's a tender and we don't win, we get RAB back, which we can redeploy elsewhere. Or if we win, we would obviously continue to manage it on whatever conditions are defined at the time. In Spain, as you know, it's a perpetual license. And in Brazil, we don't expect any regulatory impact. I discussed this also yesterday. I think Brazil has been a very stable and sophisticated framework for many, many years. We've been invested in Brazil now for over 20 years. And I actually think it's extremely predictable. Obviously, Brazil then has FX risk, it has political risk, it has macro risk. All those are well known. But from the actual electricity sector point of view, it's actually very sophisticated and well, it has worked very well in the past. And so I wouldn't expect that to change. I don't know if you want to comment on power prices.