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EDP Renováveis1H15 Results
July 29th, 201515:00 CET | 14:00 UK/Lisbon
www.edpr.com
Disclaimer
This presentation has been prepared by EDP Renováveis, S.A. (the "Company") solely for use at the presentation to be made on July 29th, 2015. By attending the meeting wherethis presentation is made, or by reading the presentation slides, you acknowledge and agree to be bound by the following limitations and restrictions. Therefore, thispresentation may not be distributed to the press or any other person, and may not be reproduced in any form, in whole or in part for any other purpose without the expressconsent in writing of the Company.
The information contained in this presentation has not been independently verified by any of the Company's advisors. No representation, warranty or undertaking, express orimplied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. Neither theCompany nor any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of thispresentation or its contents or otherwise arising in connection with this presentation.
This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of theCompany or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, northe fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.
Neither this presentation nor any copy of it, nor the information contained herein, in whole or in part, may be taken or transmitted into, or distributed, directly or indirectly tothe United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. This presentation does not constitute and should not be construedas an offer to sell or the solicitation of an offer to buy securities in the United States. No securities of the Company have been registered under U.S. securities laws, and unless soregistered may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of U.S. securities laws andapplicable state securities laws.
Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements other than in respect of historical facts. Thewords “believe”, “expect”, “anticipate”, “intends”, “estimate”, “will”, “may”, "continue”, “should” and similar expressions usually identify forward-looking statements. Forward-looking statements include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for futuregrowth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; developments of the Company’s markets; the impact of regulatoryinitiatives; and the strength of the Company’s competitors. The forward-looking statements in this presentation are based upon various assumptions, many of which are based,in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and otherdata available from third parties. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significantknown and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. Such risks,uncertainties, contingencies and other important factors could cause the actual results, performance or achievements of the Company or industry results to differ materiallyfrom those results expressed or implied in this presentation by such forward-looking statements.
The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation, and are subject to change without noticeunless required by applicable law. The Company and its respective agents, employees or advisors do not intend to, and expressly disclaim any duty, undertaking or obligation to,make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this presentation to reflectany change in events, conditions or circumstances.
2
Agenda
Highlights of the periodI
1H15 ResultsII
Outlook and ConclusionsIII
3
Executing a solid strategic agenda
Quality assets
• Output of 11 TWh on the back of strong operational excellence with 97.4% availability levels; 1H15 registered a weaker load factor YoY and was 3% below the P50 scenario
• Avg. selling price improved 11% YoY due to increase in Spain, US and FX translation and stable pricing on the back of PPA/FiT and effective hedging strategies
• O&M strategy continues to deliver higher efficiency (Adj. Opex/MW ex-FX -7% YoY)
Selective and profitable growth
• EBITDA of €548m (+11% YoY) reflecting higher prices and efficiency and Net Profit of €69m (-14% YoY) impacted by wind conditions in 1H15 vs. 1H14 and one-offs
• Capacity under execution in 2015 totals 661 MW (105 MW added in 1H15 and 556 MW under construction) and is ahead of target additions (~0.6 GW)
• 0.9 GW for ST growth (2016-17) with PPA/FiT contracts in US, EU and Brazil/Mexico
Self-funding business model
• €404m of OCF from a portfolio mostly exposed to PPA/FIT regimes and with an expected remaining lifespan of at least 20 years
• Ongoing execution of Asset Rotation ($378m received in 1H15) and studying the development of a complementary Asset Rotation program (YieldCo)
• Net Debt increased to €3.5bn (+€0.2bn vs. Dec-14) due to FX translation (+€0.2bn)
4
1H15 Results
9.1 GWSpain26%
Portugal13%
Rest of Europe
15%
North America
45%Brazil
1%
EDPR has today a portfolio of 9.1 GW of first-class assets with average 5.6 years old
Installed Capacity1
(EBITDA MW + Equity Consolidated)
661 MW under execution in 20152015 execution above expectations: 105 MW added in 1H15 and 556 MW currently under construction
Notes: 1) Installed capacity includes EDPR’s Equity consolidated: 533 MW of EDPR’s interest in ENEOP, and equity stakes of 174 MW in Spain and 179 MW in the US.Includes 82 MW of Solar PV. 2) Refers only to EBITDA MW
UnderConstruction
+300 MW+99 MW
+136 MW+6 MW
+120 MW-
1H15Additions
+556 MW+105 MWAverage Installed Capacity2 increased +6.8% YoY
6
EDPR Technical
Availability
Recurrent premium load factor reflecting distinctive core competences
1H15
33%
29%
26%
97.4%
31%
-1.5pp
-3.9pp
-2.4pp
-2.6pp
∆% YoY
0.0pp
1H14 vs. average
103%
110%
107%
101%
Although the 1H15 had a wind resource below the expected scenario (P50),EDPR continues to achieve load factors above market
1H15 vs. average
90%
104%
97%
92%
+5% +5%
-4%
+2%
+12%
+0%
-7%
-3%-3% -3%
1Q 2Q 3Q 4Q
2014 2015
Load Factor and Technical Availability
2013
EDPR Quarterly Load Factor vs. Quarters’ Average(%)
7
Evolution of electricity output impacted by outstanding wind resource in 1H14
Electricity Production(TWh)
Electricity Output breakdown: 51% in Europe, 49% in US and 1% in Brazil
11.0 +0.3 -0.7 10.8
1H14 CapacityGrowth
LoadFactor
1H15
-1%
Outstanding load factor in 1H14
-0.4%
-2%
-8%
TWh% YoY
Stable in Europe YoY with strong output growth in RoE +24% YoYmitigated by the lower wind resource in Iberia
Low wind resource in Central and Western regions, which offset the effect from capacity additions
Lower load factor YoY
8
EDPR Price Evolution(€/MWh)
€57.7 €64.2
1H14 1H15
Selling price increased +11% YoY, with the active hedging strategy offsetting impact of lower output
+11%
Selling price recovered from depressed levels in Spain and in US (1H14) and boosted by FX conversion
€82.2 +3% +15% YoY higher price in Spain;1.2 TWh sold under hedges
$52.1 +3%Higher PPA prices (+0.4% YoY);Non-PPA: $46/MWh (+22% YoY) REC sales & effective hedgings
R$369 +7% Inflation adjustment
1H15 % YoY
+4% ex-FX
9
693773
1H14 1H15
Revenues totalled €773m (+11% YoY) on the back of better prices and dollar strength
Better pricing in Spain and US driving the increase in Revenues
Quality assets: +492 MW (EBITDA) YoYLoad factor: 31%
High availability: 97.4%
Lower Electricity output: -1% YoY
EU -0.4%; NA -2%; BR -8%
Higher average selling price: +11% YoY
EU +3%; NA +3%; BR +7%
Revenues (1)
(€ million)Main drivers for Revenues performance
+11%
(1) Do not include gains with hedges accounted in financial results. 10
21.2 22.1
1H14 1H15
214241
1H14 1H15
O&M strategy and cost control continue to deliver sound results
Opex (excludes Other Operating Income) (€ million)
Operating costs per average MW ex-FX decreased 7% YoY
+11%
+13%Adj. Opex/MW (ex-Levies & Write-Offs) (€k)
Adj. Opex(1)
Levies &Write-Offs
Notes: (1) Opex excluding levies and write-offs.
+4%
+16%
+4% ex-FX
-7% ex-FX
-4% ex-FX
11
€548m
EBITDA increased +11% YoY, with price recovery more than compensating the lower output YoY
EBITDA(€ million)
EDPR operation in North America contributed with 43% of 1H15 EBITDA
495548
1H14 1H15
+11%
EBITDA per Region(%)
Spain23%
Portugal13%
Rest of Europe
20%
North America
43%Brazil1%
12
Comparison of financial metrics in 1H15 vs. 1H14, impacted by significantly different wind resource
Impact in EBITDA from weaker wind resource also impacts the bottom linegiven the fixed cost structure below EBITDA
1H14: 7% above P50
1H15: 3% below P50
Different production mix and
different performance vs. P50
1H15 production
was 1% below 1H14
Wind
resource
YoY
Analysis
EU & US
Analysis
EBITDA impacted by deviations on wind resource vs. P50
+40
-11
1H14vs. P50
1H15vs. P50
€ million
€51m YoY variance on load factor performance
13
69
292
548
43
37
143
255
Net profit in the period totalled €69m
1H15 EBITDA to Net Profit(€ million)
D&A
EBIT
Taxes
Minorities
FinancialResults
% YoY
EBITDA
New capacity YoY (+492 MW) and FX+15%
In line with EBITDA performance+7%
Interests cost -14% YoY (ex-FX); Financial results+0.2% YoY (ex-FX & one-offs); Associates -46% YoY+34%
Effective Tax Rate of 24.5%-23%
Strategic partnership and Asset Rotation program +14%
In line with top-line and ongoing efficiency+11%
Net Profit Net Profit totalled €69m-14%
(1)
Notes: (1) Includes Share of profit of associates. 14
EDPR started to apply IFRIC 21 in the 1H15
IFRIC 21 changes the timing of recognition of liabilities from levies(now recognized in the moment that triggers the recognition of liability; previously rateably over the fiscal year)
1H15 Result
Pre-IFRIC 21 IFRIC 21 Reported
Revenues
EBITDA
EBIT
EBT
Net Profit
1H14 Results
Reported IFRIC 21 Restated
-693 693
-11.9506 495
-11.9284 273
-11.9178 166
-6.787 81
-773 773
-15.6563 548
-15.6308 292
-15.6165 149
-8.077 69
15
Diversified source of funds aligned with EDPR self-funding strategy
1H15: Cash Flow(€ million)
OperatingCash-Flow
Div. &Cap. Dist.
Asset Rotation and alternative funding sources as enablers of value added growth program
AssetRotation
InterestCosts2
TaxEquity
TaxEquity
Increasein Net Debt
Forex &Other
CTG &EDPR BR
404
(190)
316
54139
(669)
(103)(87)
(91)
(153)
Investments1
Notes: (1) Capex, PP&E suppliers and other investment activities; (2) Net interest costs (post capitalisation)
• €56m to minorities (dividends and capital distributions)
• €35m to EDPR shareholders (dividends)
16
Outlook and Conclusions
EDPR with visible drivers to deliver strong performance in 2015, even with weaker wind…
Average Selling Price(€/MWh)
EBITDA(€m)
Electricity Output(GWh)
1H15 generation decreased -1% YoYdue to strong 1H14 and 3% below
expected load factor in 1H15
Average Selling price improved+11% YoY on the back of
Spanish and US price recovery and active hedging strategy
EBITDA is +11% YoYwith a stable 71% EBITDA margin
Electricity output expected growth of +10-13% YoY on the back of 2014
new MW and ENEOP consolidation(pending regulatory approvals for asset
splitting)
Average Selling price with positive evolution expected based on
hedges in Spain and in US
EBITDA to grow at solid double digit benefiting from high efficiency levels
and USD strength
1H15 OperationalPerformance…
…in line with YE15 Outlook(presented in YE14 results)
18
…and the re-negotiation of debt facilities to show tangible results ahead
Favourable debt market conditions also allows EDPR to extend the average debt maturity
Corporate Loans€1.2bn
Project Finance€0.2bn
EDPR is being able to secure better financing conditions
Two re-negotiations of debt with EDP already executed (Mar’15 and Jul’15)
Longer average maturity and lower interest cost
Spain
Romania
• Re-negotiation of a Project Finance agreement executed in 2012
• 125 MW installed between 2009 and 2012
• Restructuring of financing for 57 MW
• Replacing PF (executed in 2012) with Corporate loans
Positive impact in P&L c.€3m (pre-tax) on a FY basis2Q15 impacted by €8m (write-down of deferred costs on BS)
Positive impact in P&L c.€26m (pre-tax) on a FY basis(prorated in 2015)
19
On the other levers of self-funding strategy, EDPR is also committed to maximize shareholder value…
Increased competition from Institutional Investors is driving down targeted yields
Ongoing appetite from investors for new structures of wind energy assets to benefit EDPR shareholders
New Investors (including from new business sectors) driving down targeted yields for new transactions
EDPR to continue to tap the market to capture improved shareholder value
Tax Equity
Asset Rotation
$378m: settlement of transaction with Fiera Axium and agreement with DIF III (wind and solar assets in US)
$117m: institutional equity financing in relation to a new 99 MW wind farm in California, US
20
…and is studying the development of acomplementary Asset Rotation program…
…allowing to monetize quality European assets and re-invest in the development of new accretive projects
“(…) EDPR to evaluate alternatives to efficiently monetise and rotate its assets, focusing on the particular possibility of establishing a YieldCo composed by European wind generation assets to be listed on the Spanish stock exchange “
Notification to the Stock Market Exchange Regulator, June 22nd 2015
Monetize Quality Assets Re-invest in accretive projects
Low cost of capital in Europe
Strong appetite from investors forassets with stable cash-flows
EDPR is a leading worldwide renewable player with quality assets and a solid track record
Quality options in the short-term(US and selective EU markets)
Stronger growth on the medium-term(EU targets and US Clean Power Plan)
High competitiveness from renewable technologies (wind and solar) to further enhance growth in EDPR markets
21
Conclusions
On track to deliver 2015 new projects with105 MW added in 1H15 and 556 MW under construction
Premium assets and high efficiency levels continue to deliversound metrics even in periods with lower than expected load factor
Improved pricing environment on the back oflow risk assets with PPA/FiT contracts complemented with an effective hedging strategy
Debt-renegotiation with EDP and 3rd parties, taking advantage of favourable debt market conditions, to positively impact P&L while extending maturities
Sound executing of the 2017 strategic agenda while analysing the opportunity of acomplementary Asset Rotation program to enhance the growth profile
22
IR Contacts
Rui Antunes, Head of Planning & Control and IRFrancisco BeirãoMaria FontesPaloma Bastos-MendesFilipe Lopes
E-mail: [email protected]: +34 914 238 402Fax: +34 914 238 429
Serrano Galvache 56, Edificio Olmo, 7th Floor28033, Madrid - Spain
EDP Renováveis online
Site: www.edpr.com
Link Results & Presentations:www.edpr.com/investors
Next Events
9M15 Results: October 28th