Capital Markets Day Transcript - EDRVY 2026-05-06

Speaker 9

Hello and welcome everyone. Thank you for joining EDPR's first quarter 2026 results conference call. We are pleased to have with us today our CEO, Miguel Estudio Andrade, and our CFO, Rita Echeira. They walk us through the key financial highlights of the period and share insights into our strategy. After the presentation, we will open the floor for questions. You are welcome to submit them via the conference chat or ask them directly over the phone. The session is scheduled to last approximately 60 minutes. With that, I will now hand over to Miguel Suárez Andrade to begin the presentation.

Miguel Sudo Andrade, CEO

Miguel Suárez Andrade Thank you, Miguel. Good afternoon, everyone, and thank you very much for attending EDPR's first quarter of the 2026 results call. So, I'll kick off with some key operational and financial highlights for the first three And so if we move straight into slide four, I'd say that EDPR's first quarter was a good solid start to the year. We're absolutely focused on executing everything that's under our control and making sure that this is then reflected in the underlying performance. I think we are well set up for having a constructive base for the rest of the year. On the key financials, recurring EBITDA reached 489 million euros. it's up 2% year-on-year, or 10% if you exclude in FX. Recurring net profit is at 71 million euros. It's increasing 9% year-on-year, or 21% excluding FX. And this strong financial performance, it was basically underpinned by some key operational drivers. We had two gigawatts more of gross capacity additions over the last 12 months. We also have already 90% of 2026 target editions already installed or under construction. So it's also a good start. Generation up 0.4 terawatt hours to 11.3 terawatt hours. However, we had lower prices in Europe. We had an average selling price that was down 9% to 52 euros per megawatt hour versus last year, which had substantially higher prices. It also had a strong impact of the US dollar devaluation versus the first quarter of last year. On the current macro context, I think it's important to recall that over 80% of our generation is long-term contracted or hedged. On the efficiency side, I think it's very important to note that we have continued our focus on operational efficiency. We had an 11% year-on-year decrease in the recurring core OPEX and a very good improvement on the productivity metrics OPEX per megawatt or OPEX over gross profit. So overall, I think very proud of the work that the team has done over the last few years. It's consistent in terms of extracting efficiencies and making sure we can leverage the economies of scale within the company. Finally, over 90% of the recurring EBITDAs in A-rated countries reflecting the low-risk earnings profile. So I just wanted to reiterate that also in terms of the quality of the earnings. If we move to slide five, we'll talk a little bit about the U.S. market. I think here, key to note that independent consultants are projecting, like Wood Mackenzie and others, are projecting that between the electrification trends, industrial reshoring, and the rapid growth of data centers, they are driving sustained increase in the electricity demand of around 2% to 3% a year between 2025 and 2035. I think it's also increasingly clear that renewables generation will play a pivotal role in supporting this, and it's expected to have an 8% CAGR between 2025 and 2030, while non-renewables declined by 4%, given that many thermal plants are being retired. So obviously some are being installed, others retired, the older ones retired, net decline. So renewables is really outperforming the more conventional thermal. The bulk of the capacity additions by technology are mostly solar and storage and still some wind. And if we look at the graph on the right-hand side, we can see that in 2025, roughly 60 gigawatts of new generation capacity was added in the U.S., with around 92 percent coming from wind, solar, and storage. Solar alone accounted for more than half of the total additions in this trend is expected to strengthen even further. So overall, a structural shift in the U.S. energy mix and underpinning EDPR's long-term growth opportunities, given our focus on renewals. I also wanted to give you just two important data points. In the month of March, renewals, including hydro, generated over one-third of US electricity generation, overtaking gas for the first time ever. And also that additions in the US are expected to reach a record high of 86 gigawatts this year. So I think just two important data points that really highlight what I just mentioned. If we move to slide six, so obviously this demand is then translating into a favorable price environment. I mean, the graph you can see on the left-hand side shows the evolution of the market PPA prices. They've risen steadily across the different technologies, and this has been reflected in very robust contracting activities. So we have corporate PPA volumes reaching around 24 gigawatts in 2025. EDPR has secured already 1.4 gigawatts in the U.S. over the last nine months since the OBBB was signed, and we expect to continue with the momentum over the next few months and still sign in an additional couple of PPAs, which are currently under active negotiation. We're benefiting from growing demand for co-located generation between solar and batteries and co-located demand solutions with data sensors. We have around 2 gigawatts of powered land, and so we continue to work on those opportunities. Also on the wind side, there are some attractive wind life extension and repowering opportunities. We have around 0.6 gigawatts in marketing stage. However, this optionality is not included in our 2026-28 business plan. And so it would be an upside if it materialized either in this period or post-2028. I think this is relevant in the context of some of the recent news that has come out about the licensing of wind. So if we move to slide seven, I'm talking a little bit about Europe. So here the message is also very clear. I mean, on our side, we are very focused on value creation and just discipline on the investments. But this is clearly a market where renewals are structurally supported by reinforced electrification and energy independence efforts. And, you know, you've seen a lot of statements by President van der Leyen of the European Commission. You've seen them by Dan Jurgis and the European Commissioner of Energy, sort of the focus on really making sure we are more, Europe is more energy independent and immune to some of this volatility. So, you know, you can see this also just by the fact that as renewable penetration continues to rise in certain markets like Iberia, we see a clear structural decoupling between the electricity prices and fossil fuel price volatility. in general it has lower and more stable wholesale power prices and i think this reinforces the role of clean and generation not just in the decarbonization but also in terms of system resilience and affordability so idea i think is a good case study for the rest of europe and i know that you know a lot of the european political leaders have been looking at this precisely for that reason this transition is also being supported by regulatory and policy environments i mean in 2025, close to 95% of all new capacity additions in Europe came from either wind, solar, and And for the first time ever, renewables overtook fossil fuels and total electricity generation. So again, we are well positioned to capture value here. We have close to 15 gigawatts of pipeline in the European core markets, and we benefit from these fundamentals and increasing system needs. Finally, around 55% of our European EBITDA comes from Iberia. And here, I think regulatory risk, price volatility remains low, and generation taxes have also recently been reduced in Portugal and Spain. I know there's been some very recent speculation about extraordinary taxes on energy. I think that if we look back, in the case of Portugal, certainly to the 2022 crisis, the electricity sector was not included. So we only know, obviously, what's publicly available, but I'd say that given that they're using as a precedent the 2022 basis, that the electricity sector would be excluded from that, but that's certainly our strong expectation. So overall, in Europe, supportive market context, strong pipeline visibility, disciplined capital allocation. I think we see Europe as a good, stable, and attractive platform for EDPR continue growing. We move to slide eight and talking about additions and the investment plan for 2026. So at around one and a half gigawatts of target additions, we already have 90%, as I mentioned earlier, already installed or under construction to be delivered mainly over the second half of 2026, a lot of this will be very much backloaded towards the end of the year. We still have some remaining projects that aren't with the other 10%, which are basically solar DG, which have an average of six months construction time. So we're still perfectly on time to have them built by the end of the year. And overall, US and Europe should represent around 95% of total expected additions for the year. In terms of technology, around 50% solar, 25% storage, and 25% wind onshore and offshore. As I said earlier, the 2026 plan really shows this focus on core low-risk markets, U.S. and Europe representing 90% of total investment, 95% coming from a racist country. If we move forward to slide nine, I'm talking about business plan execution. So 2026, as I mentioned, is secured. 80% of 2027 is already secured. And we have good visibility of line of sight of additional megawatts coming out of the U.S. over the next couple of months that we expect will be signed. So overall, we have around 60% of the 5 gigawatts editions already secured at this time, of which 3.2 gigawatts is coming from North America and Europe already. I wanted to stress again, because I really think that's an important part of our value proposition. These are value-creative, low-risk growth with an expected return or spread of IRR minus WAC for around 285 basis points. To capture the benefits of this development activity, we are well-positioned with the pipeline and commercial momentum, as I mentioned, in U.S., Europe, and also some low-risk APAC markets. We have around 1 gigawatts of PPAs under commercial discussions, 20 gigawatts of pipeline overall. 50% of this is in MyZone PGM. Some of you who are more familiar with the US might know these are some of the most attractive demand pockets of projects in the US. And this has been supported by competitive domestic content procurement. As you know, We reconfigured our procurement supply chain a couple of years ago, so it's all domestic content, and we also have the tax credit safe harbor. In Europe, we have around 0.8 gigawatts of PPAs on the commercial discussions and the 15 gigawatts pipeline in the core European growth markets. Again, deliberately low risk, execution-driven, focusing on core markets, leveraging CFD auction routes to market. In APAC, we are focused very much on countries like Australia, Singapore, and Japan, A-rated countries with also good growth prospects. So takeaway very simply is delivery of the 26-28 business plan is being de-risked at attractive returns with long-term contracting. To move to slide 10, just so far I pass over to Vui. So an important point is the focus on portfolio optimization. And we aim to maximize returns and to reduce risk also through our asset rotation program and the disposals in non-core markets and segments. In 2026, you know, and I think I say this every year, we continue to see strong demand in private markets willing to buy high quality assets at competitive multiples. And this has been consistent over the last couple of years. Given the favorable market environment, given the visibility that, you know, that we already have, we are able to advance with an upward revision on the expected 2026 asset rotation gains from around 0.2 to a range of 0.2 to 0.3 billion interval. I think this is just an additional proof of our strong execution track record and on a part which is critical for our strategy. This is not done with additional volumes. In fact, if anything, we will probably be doing less volumes than expected, but with higher gains per megawatt, which I think is exactly the right message and the signal. And if you want, I think, an additional proof of the quality of the vintage of projects that are coming through this year. Additionally, our disposals in non-core markets is also ongoing, and we will be reinforcing the high weight of A-rated countries in our portfolio.

Rui Teixeira, CFO

So as I say, US and Europe and certain select impact countries.

Miguel Sudo Andrade, CEO

Finally, just on offshore, I just wanted to highlight the recent settlement between Ocean Winds and the U.S. Department of Interior that came out just a couple of days ago. This will enable Ocean Winds to recover the leases in the value of around $0.2 billion. This is in line with the current book value of these projects, so we don't expect gains or losses on these projects. But obviously, it will be a positive cash impact on the balance sheet that we expect to have over the next couple of months. This will reduce CDPR's current exposure to the US offshore to a book value of 0.2 billion dollars. So we're roughly recovering already half of the value.

Rui Teixeira, CFO

And if you want, we can then talk a little bit later about south coast wind.

Miguel Sudo Andrade, CEO

But I'll stop here and I'll pass it over to Hui and come back later for final remarks. Thanks.

Rui Teixeira, CFO

Thank you, Miguel. Good afternoon to you all. So let's move now to the first quarter 2036 results. We are delivering a solid start of the year. Averaging salt capacity increasing 9% year on year. We reached 20.5 gigawatts by the end of a quarter. Obviously driven by north america and europe as the regions with main additions at the same time we also continue to actively reshape the portfolio with the different expectations that were closed throughout last year some final closing also in the first quarter this year um so that was about 0.9 gigawatt sold in line with what was forecasted in the business plan as a result electricity generation increased 3% year-on-year to 11.3 terawatt hours. This is obviously supported by average higher installed capacity in operation, partially offset by the perimeter change, as I just mentioned, given the asset rotation. Overall, generation levels are fully in line with our full-year expectations. So if we move now to revenues on slide 13, Electricity sales decreased 5% year-on-year to $591 million, and this reflects both the lower prices in Europe, sort of a normalization of the prices in Europe, and the depreciation of the U.S. dollar. I think it's important when we exclude FX, revenues were broadly stable and the higher volumes of setting the price normalization. The average selling price declined to 52.3 EUR per megawatt hour, that led to the European case. That was a drop of about 14% year-on-year. But North America, if you look at it from a U.S. dollar perspective, actually remained stable year-on-year. Europe was impacted by this normalization, obviously, despite of the higher generation, particularly in Iberia, given the extreme weather events that we had in this first part of the year. North America declined 24 million euros year-on-year, but actually increased in the US dollar, again, supported by the volumes. South America and AIPAC showed positive contributions from higher volumes as well. So overall, I think that the key takeaway is that volumes are growing. Pricing reflects normalization. And then we have these specific original events, and particularly the effects impact on the US dollar side. If we now move to slide 14, I think it's important to focus on the efficiency, because it is really a key part of how we create value. So in the first quarter, our recurring core OPEX decreased by 11% year-on-year, and even when accounting for FX and depreciation and inflation adjustments, it actually decreased 9% year-on-year. So it's a very important decrease in terms of the recurring core OPEX. This reflects a continued execution in what we define as the efficiency strategy. On a per-megawatt basis, core OPEX is increasing by 11% over the last two years to €41,000 per average megawatt, and OPEX per gross profit ratio improves to 24%. These results reflect obviously the focus on more efficient, flexible O&M strategy, continued cost discipline, organization streamlining with a lean workforce model, but also scaling digital and AI across EDPR that is contributing to productivity improvements across the different regions. So all of this in a context of growth, bearing in mind that EDPR delivers its growth targets and is able to reduce the core opex. So I think it's notable, it's a remarkable achievement by Dara and company. As we also recently shared, this is part of a wider value-driven asset management. Namely, we look at how we maximize the asset's life. We can think about life extension. We can think about repowering, co-location, something that we highlighted a few weeks back, which is the value, the existing value of the operating fleet that goes well beyond what is the sort of defined standard useful life for the assets, particularly on the wind side. So now, if we move to slide 15 on EBITDA, recurring EBITDA reached 480 million euros, up 2% versus last year, or actually increasing by 10% if we exclude the FX impact. Looking at the main drivers, electricity sales were low, as discussed. Tax equity revenues increased by 13 million, supported by the solar additions that benefit from the ITC that offset the gradual phase-out of the mean PTCs. Core OPEX decreased by $20 million, just mentioned before reflecting these efficiency gains and the cost discipline. Other costs improved, including initial asset rotation gains of about $5 million in Q1, so from the final closing from a past transaction in Greece. As also Miguel stated, we should observe the cost situation of this year's asset rotation gains in these coming quarters. From a regional perspective, growth was mainly driven by North America, while Europe was In fact, it's by the pricing normalization. And just finally, the portfolio expansion and the efficiency gains definitely more than offsetting this pricing effect that I just referred to. On financial results, Q1 saw an improvement of 13 million year-on-year with total financial costs reaching 113 million euros. This is driven by 0.4 billion lower average NAPEP, also by a reduction of the average cost of debt from 4.8% to 4.5%. We also observed a lower impact from FX in derivatives, and these were partly offset by higher capitalized financial expenses. The financial profile remains strong. 74% of the debt is fixed. We are well diversified across different currencies, 42% euro, 39% U.S. dollar, 9% in Brazilian reals, and 11% in other currencies. We maintain the long maturity profile with 60% of our debt during beyond 2028. So all this reinforces the discipline and low-risk financial policy that we have. So we now move to slide 17 and looking to the cash flow evolution in the first quarter of 26. Organic cash flow reached 142 million, 1% up versus last year, Reflecting the strength from the operating portfolio, during the quarter, we invested $0.4 billion in expansion capex, partially funded by operating cash flow. And as a result, net debt increased to $8.4 billion. That's up $0.3 billion since December. On the net profit, recurring net profit, this is on slide 18, reached 71 million euros, increasing 9% year-on-year, or 21% when excluding Forex. It showcases how EDPR's good financial operational performance was in this first period of the year. The main drivers, in addition to the portfolio expansion, the good operational performance that delivered higher EBITDA, also the improved financial results. Depreciation slightly increased, obviously given the capacity additions. tax remained broadly stable when compared to the first quarter of last year, as there are no materialized rotation deals that were closed in this period in both of the years, and also higher minorities following the completion in Q4 last year of the sale of a 49% stake in our pioneer portfolio in the US. Regarding the one-off impact at the net profit level, there's one million recognized this year, mainly coming from accelerated depreciation of middle age four. As you may remember, this is a repowering wind farm project in the US. We also have some small impacts from some restructuring, internal restructuring, HR restructuring. Before ending, just a quick note on script dividends, following the approval in our last month's shareholders meeting and the launch of the process on May 4th, the admission to trading of the new shares will start on June 3rd. Just finally, before I head over to Miguel, let me just, on slide 19, let me just recall the sensitivity of EDPR's net profit to wholesale markets, and obviously considering the current context, the geopolitical context, current market context, and the wholesale markets. So first of all, the portfolio is highly resilient, low risk profile. 85% of the generation is either long-term contracted or hedged. Around 70% is secured through long-term contracts with an average remaining life of approximately 11 years. Therefore, we have very strong visibility on the cash flows well beyond the current business plan. The remaining exposure is actively managed through rolling hedges, while merchant exposure remains limited, and they're always a very strict management. So as a result, the average selling price are, I would say, very well protected. at around 51, 53 euros per megawatt hour in 2026, and then increasing to 52 to 55 euros per megawatt hour by 2028. Again, importantly, it's a very limited merchant exposure and also well diversified geographically, which then benefits from this diversification effect. So in Europe, foreign prices for 28 are currently slightly below our business plan assumptions. This is mostly driven by Iberia with a modest negative impact of around 2% on any income. But on the other hand, this is largely offset by more favorable dynamics in the U.S., particularly in our exposure to PJM in nicer markets, but also Brazil, where forward prices are above the plan assumptions, and therefore they contribute positively to the earnings. So overall, as I was mentioning, there's a diversification effect that works also as a hedging across the different regions. So, taking all this into consideration, net income sensitivity to forward power prices as of now is less than 1% for 2028. So, again, I think it reinforces the message that our earnings are predictable to the extent of the exposure to wholesale prices, and therefore also the cash generation. So with this, I would hand over to Miguel for closing remarks.

Miguel Sudo Andrade, CEO

Thanks, Ray. Right. So just before going to closing remarks, just a quick update on how we see the 2026 EBITDA guidance. So we had a good first quarter operational financial execution. And so we feel comfortable about upgrading our 2026 EBITDA guidance by 5% to around $2.2 billion, essentially on the back of three levers. The first one is an improved outlook on the asset rotation gain. So, as I say, going from around 0.2 to a range of 0.2 to 0.3, and benefiting from the strong private markets and investors willing to buy these high-quality assets. As I say, I think this is a signal of a new vintage of projects coming through that we'll see over the coming years, months and years. The second lever was really a strong focus on the underlying performance. and this commitment to driving efficiency consistently over time across the business. And you saw the numbers that both I and Huy talked about in terms of bringing the OPEX down and bringing the OPEX per megawatt down. And I think that's something that, again, this is something we're going to continue to drive over time. And I think it's really showing through also in the numbers. Finally, a third point in third lever, it's really just the improved macro context. So power prices, some tailwinds on the regulatory and political landscapes, like the Generations Act in Spain, which is also positive. So all of this put together, I think, just shows EDPR is in a good place, strong execution capabilities, both financially and operationally, together with a good environment. And I think that we can really get the company to unlock its full potential over the coming years. With that, going on to just the final slide. So, just the key data points, execution on the business plan, progressing well, visibility continued to improve, 60% of the 5 gigawatts already secured at attractive risk-return metrics, commercial momentum remains strong, over 2 gigawatts under active discussions in the US and also 0.8 gigawatts in Europe, 80% of our electricity generation long-term contracted. I think we've already spoken at length about that and how that keeps us protected from some of the volatility. Post-2028, I think the visibility is also strengthening. And so maybe at some point we'll be able to also talk about that. Demand growth in both Iberia and the U.S., structurally driven by these long-term electrification trends, data centers, electrical vehicles, industrial reshoring. I think this is really important because more demand means you need more supply. And so we're definitely locked into that. In the US, higher PPA prices, meaningful re-contracting upside, moving local supply chains, safe harbor framework for tax credits locked in. I think all positive. Europe, increasing demand for hybrid solutions, regulated CFD schemes, reinforcing this role of renewables. So I think Europe also a lot of positive signals. So overall, I think we are in a good place. Continued investments in digital and artificial intelligence, I think that's what we're also continuing to focus on, to just push this operational efficiency and the asset performance. And so all in all, taken together, good long-term demand fundamentals, good medium-term visibility, disciplined execution means we are confident on EDPR's ability to grow and have resilient value creation, not just over the course of this business plan, but also beyond. Thanks.

Speaker 4

And Miguel, I'll pass it back to you.

Speaker 9

Well, I think we can start here with some questions from the web. And the first question comes, essentially, we have from Beatriz from Mediabanca and other analysts around the EBTA in the guidance for 2026, if we can elaborate on 2026 guidance upgrade from 2.1 billion to 2.2 billion, namely providing detail on the breakdown of contribution between asset rotation and underlying, and also regarding how we see the evolution for the next partners.

Miguel Sudo Andrade, CEO

Okay, so essentially the upgrade is based on two things, on underlying performance and also on higher visibility on the asset rotation. In terms of the underlying performance, so already 90% of our 2026 is long-term contracted or hedged, so no reason for big deviations here. But excluding the dollar headwind, I mean, the underlying effects would obviously be But even independently of that, we have and are still expecting high single-digit growth of the electricity generation, so around 44 terawatt hours in 26, and then an average selling price range to stay in the 51 to 53 years per megawatt hour. Also expecting some slightly better contributions from pricing in Poland, Romania, Brazil, better than expected OPEX, lower taxes and levies in Niberia, U.S. partially offsetting U.S. depreciation. so that's on the underlying performance on the asset rotation as i i said i think in the presentation we are expecting to sell the same or i would say slightly lower perimeter of assets almost certainly but at better margins than initially assumed and so higher visibility on asset rotation also so the combination of this i think is what's giving us confidence on the on the upgrade.

Speaker 9

Thank you, Miguel. The next question comes also from Marta Sittman from Morgan Sons and the names. If we can provide some visibility in terms of guidance for net profit for 2026, we didn't provide in the presentation.

Miguel Sudo Andrade, CEO

Yeah. So normally we don't give a lot of, or we don't give guidance, specific guidance on net profit for EDPR. I think what I can say here that we're comfortable with the recurring net profit consensus for 2026, which, depending on the sources, could be between 400 and 450 million euro range. And as I said, this is due to what I mentioned. And what I said about the EBITDAs obviously then flows down to the net profit. We are also working on EDPR's portfolio optimization. and so the exit of some non-core markets and business segments and we expect that to also positively impact edpr's underlying financials you know the net profit trajectory for the next couple of years um but in relation to 2026 essentially some of the comments on the that are slowing down to the bottom line let's say consensus for 26 that range we're comfortable and we have a question also on the net depth uh by the year end how do we see the net depth evolution until December 2026?

Rui Teixeira, CFO

Thank you, Miguel. So we do expect net depth below December 25. Just remember, it was $8.1 billion. And we should be deleveraging and trend down as projected in the business plan, 26-28. Again, just a reminder, we're expecting 28 to be below 25 by $1.5 billion. This obviously depends on the timing of the execution and the cash-in on the asset rotation and tax equity proceeds, as well as on the disposal, sparkle optimization, which are on track.

Speaker 9

Then we have a question on the recent news that came out this weekend on the Trump administration blocking wind power licenses that came in Financial Times. If we have any comment on this.

Miguel Sudo Andrade, CEO

So, yeah, I mean, there was news, I think we all saw that, on the U.S. administration blocking wind power licenses. I think it's a broader concern for all wind powering projects that require federal permits primarily. And it's obviously something that we're monitoring very closely together with the industry associations, ACP and others that are acting on the ground. I think this is I just wanted to reinforce this because I mentioned it also way back in November at the capital market. And I've repeated it several times. We don't expect this to have any impact on the 26-28 business plan because we already projected this to be relatively prudent in that respect. So we're only including one repowering project in the U.S. for this period. That's already under construction. So any additional repowering that we did in this business plan period would be a potential upside. So this news is not obviously positive, but it doesn't have an impact on our projections. For the period immediately post-2028, and we highlighted this also in a recent presentation we did in Madrid for some of you that were able to attend, the wind value levers, we have around 0.6 gigawatts of repowering projects currently in the marketing stage. But as I say, we are being deliberately low risk in terms of permitting and in PPA commitments, and only projects that meet these criteria are considered secure. So we're not taking undue risks on this. And as I say, any news that you get on the repairing, in particular, would be upside for us.

Speaker 9

Still on the U.S., also in terms of clarification of the ocean winds, the U.S. offshore settlement agreement and namely related with the reinvestments, financial impacts for EDPR, and also how do we see the standing of the South Coast wind that is still in the portfolio of what I will.

Rui Teixeira, CFO

Thank you, Miguel. So just first to clarify, the reinvestment, so maybe just a step back. As you may remember, these two projects, one in New York and one in California, those are projects where Oceanwinds partners with two other investors, as GIP in New York and CEPIV in California. What is agreed is that these investments will be carried out by our partners in those two projects, and therefore there will be no direct involvement of Ocean Wind or ADPR in those investments. I would say that the most relevant impact that we are seeing for ADPR is an expected reduction of 2026 net debt in the same amount of the reimbursement, obviously in what is EDPR's share. Just also highlighting about three quarters of this reimbursement, the $0.2 billion, is blue point, so the New York, and about one quarter is the Golden State Twin, which is the California. So that's not evenly splitted between the two projects. From 2027 onwards, we see sort of a single digit impact in terms of millionaires. associated with the earnings, given that we are saving those interests. Regarding south coast wind, I mean, that's probably the most advanced project, offshore projects, right now in that part of the country, in Massachusetts. It's very advanced in terms of the permitting interconnection milestones, so all options are being explored. For the moment, the project continues to be carbonated. As you may remember, also, we assume that as we took that view back in the end of 2024, when we also booked an impairment for a year delay in the project. But as I said, I mean, all options are being explored as of now.

Speaker 9

Regarding data centers, just a question around the strategy of EDPR and how it's evolving our pipeline in US and Europe.

Miguel Sudo Andrade, CEO

So this is an interesting area, but what I'd say is we're working on both sides of the Atlantic in Europe, mostly here in Iberia, and also in the US. on several opportunities for co-location, powered land, securing electricity consumption, grid connection rights. We have some more advanced stages of powered land in the US and Spain, and we'll let you know, obviously, when we reach a concrete deal. So I don't want to elaborate too much on this. And at this point, I would say, you know, once we have something concrete, we'll obviously communicate it. The only thing perhaps to mention here, and this is something that you've also mentioned in presentations. We have around 2 gigawatts of powered land pipeline, of which 0.8 gigawatts is an advanced permitting. And so we are continuing to explore different ways of monetizing this and extracting value of this. Maybe just as a side note, but obviously relevant to us, just recently in Iberia's Start Campus, which was one of the big data centers here in Portugal, which which has been built just recently announced the second phase with NVIDIA and N-Scale. And that's obviously a key milestone. So they're already moving through into the second phase, and I think they'll be well-positioned to also then start marketing the third phase. And this already represents or begins to represent a significant amount of additional demand here in Portugal, which will come through sort of 2027 and beyond. But I think it's one specific example, just because it's come out very recently that I wanted to flag. I mean, there are many more that we could probably talk about.

Speaker 9

Regarding the upgrades of 2026 guidance, the question is if this guidance upgrade has any implication on EDPR 2026-2028 targets of the business plan.

Miguel Sudo Andrade, CEO

Well, I'd say that it's still early, so I'm not going to comment too much. we're focused on delivering the plan and also gain further visibility on the post 2028 period so that hopefully at some point not too distant future we can come back and talk about that what i'd say is that the portfolio optimization is evolving positively you know underlying net profit in 27 28 when we look at sort of prices and we're still assuming after rotation gains contributing around 0.2 billion euros sort of in line with the business plan assumptions that we had. We're also seeing good commercial activity in the U.S. and in Europe for 27 and 28 and beyond. We're also seeing that optionality that I talked about, the data centers and some other levers for either collocation or repairing.

Speaker 9

So there are some potential upsides that we're working on but for now I wouldn't I'd say let's just assume the the current estimates for for 2028 and as I say if we get there's no visibility on 28 and beyond then we would come back to the marketing and talk about that we have a left written question before moving to to the questions on phone from our to see point from Morgan Stanley we have seen multiple companies in sector using equity in recent weeks to prepare future growth opportunities, are there scenarios in which GDPR could consider resorting to the same type of measure?

Augustin, Analyst — Goldman Sachs

Yeah.

Miguel Sudo Andrade, CEO

So I think what I'd say here is that we are very comfortable with our current plan in terms of balance sheet. We obviously use asset rotation as a way of optimizing our balance sheet. our plan does not assume any equity raise and we don't need to raise any equity and I think we are just very focused on creating the maximum amount of value possible so delivering on the megawatts securing additional megawatts, delivering on those megawatts rotating those megawatts with significant gains and keeping the balance sheets within the ratios that we want and that are compatible with the triple B rating for UDP. So that's what I said. We don't have any plans for equity raising.

Augustin, Analyst — Goldman Sachs

Thank you.

Speaker 9

So we go now to the questions on the phone. First question comes from the line of Pedro Alts from CaixaBank. Pedro, please go ahead.

Pedro Alves, Analyst — CaixaBank

Good afternoon. Thank you for taking my question. Two, if I may, the first one. And sorry to come again to the 2028 targets. You have more than 60% of all divisions secured for the plan. and apparently with better returns, encouraging origination activity. You mentioned the optionality from repowering in the U.S. in the marketing stage, and also that visibility on asset rotation has improved with healthy private markets for M&A. Can you at least acknowledge that your 2028 targets now seem to be on the conservative side, at least in terms of underlying EBITDA. And the second question is just additional color on the PPA pricing in the US and the cost inflation. PPA prices continue to go up quarter after quarter, and I think this is already reflected in better IRR over walk spread compared to your original plan assumptions. So I just wanted to ask you if your latest commercial discussions with offtakers in this environment give you confidence on keeping this expansion of IRR spreads for the whole five gigawatts of the plan. Or if eventually higher EPC interconnection or equipment costs could be absorbing most of these PPA upside into the returns. Thank you.

Miguel Sudo Andrade, CEO

Thanks. No, listen, we're only six months into the plan. So we announced this in November, just May. and I think what we look for is to go on executing over the course of this year and then as I said towards the beginning of next year or something once we have good visibility in 26 we can maybe come back and talk a bit more about 28 and beyond but what I'd say is that there are positives and negatives on the 28 numbers in general I think we feel very confident about 2028 But you were trying to get me to characterize it as conservative, and I don't think I'd go there. I would use that at this point. So we're six months into the three-year plan. Let's take it to give it a little bit more time before we talk about changes to 2028. PPA pricing. I mean, yes, we feel very comfortable on the spreads. I think the structural underlying demand growth, and both in Europe and in the U.S., means that we feel you know confident that new generation needs to be well remunerated and we will you know we're not going for volume we're going for risk adjusted returns and we want to make sure that we keep you know this uh criteria um you know not very disciplined on that so um i think we are comfortable on those spreads as as you know we have let's say um the number of megawatts that we're expecting for the next couple of years, which seems quite doable. And so we're going to make sure we're focused on getting the best projects possible precisely to keep those spreads and that low risk profile, which I think is extremely important. On the supply chain and all that, I mean, we're constantly updating. You know, one of the things I think we've gotten much better over time is our operational management on the supply chain, just making sure we're always building in better estimates about capex costs, building in more contingencies, buffers, making sure we're much closer in terms of when we take investment decisions and when we actually also lock in the capex. So that's what I mean when I also talk about low risk, just making sure we are not exposing ourselves to inflation or to any type of cost overruns.

Speaker 4

Thank you.

Augustin, Analyst — Goldman Sachs

Thank you, Pedro.

Speaker 9

Next question comes from the line of Javier Herrido from GPMorgan. Javier, please go ahead.

Javier Herrido, Analyst — JPMorgan

Yeah, thanks, Miguel. All my questions have been answered, but I would like to ask again on the last topic, you could elaborate a bit more on the potential risk or the way you manage the risk from inflationary pressures given what's going on in the Middle East and the likely inflationary pressures as we should see in the value chain, it would be helpful if you can elaborate a little more on how protected you are, whether your protection comes from risk sharing with the PPA of takers or because it's more about fixing the price. Basically, what is different from 21-22?

Miguel Sudo Andrade, CEO

Yeah, Javier, so I think that's, you know, happy to go into more detail on that. I think the big, so the way that, this works in terms of development of these projects, as you know, is you go on doing some of the development, and at the same time, you are trying to find an off-taker, a PPA, and trying to price the project, and running in parallel sort of an estimate for the CAPEX for the project. It's not always easy to line these up, and I think one of the things that the sector did in general, not just ourselves, but would be to make sure that we were able to lock in a PPA with certain CAPEX estimate, and then go in and try to lock the CAPEX once you have the PPA closed. That meant that you were exposed for a certain amount of time between when you locked in the PPA with certain estimates and when you actually locked in the CAPEX. I think what we've been very focused on doing is reducing to the maximum possible any time between when you lock in the PPA and when you lock in the CapEx and making sure that you're not taking on exposure, let's say inflation exposure or CapEx exposure between these two dates, when you take FID and close the PPA and when you lock in the CapEx. So that's one point. I think the second point is just to say that we're also building in much more buffers and contingencies for delays, for, you know, unexpected contingencies that might come along. And so we're being more prudent also in terms of the CAPEX numbers that we use in our own modeling. So when we talk about some of these spreads, they already have built in not just what we're seeing in the market, but we're adding in an extra buffer just to be on the safe side.

Augustin, Analyst — Goldman Sachs

So that's why I think we feel quite comfortable about, or much more comfortable about managing I think the supply chain, just based on everything we've done internally to adjust, to reduce that's very helpful thank you thank you so the next question comes from line of August and office from Goldman Sachs thank you and thank you good afternoon I have the following question the first one is I think just wanted to go back to slide nine can you please tell us again what is the IRR over work spread and if you can the absolute IRR you have been signing let's say over the past six to nine months and how much is the uncontracted capex 28 because i'm just trying to figure out the upside from the plan you presented which appears at this stage fairly conservative um the second question is could you be a bit more explicit on um any potential data center strategy you may have, there are companies now that are actually developing data centers themselves. There are companies that are selling sites, companies providing energy like yourselves. Are you tempted to also explore the other two routes? Are you working on that, like size and or direct development? And the last question is, I understand you just said you're comfortable with the current capital structure. But can I ask you, when can you upgrade the current level of net capacity additions without having to raise any equity? Is it, you know, given the returns, is it later in 28, is it 29, 2030? So can you tell us when can we expect you to grow a little bit more? Because on a net basis, you're not adding that match given the size of the company right now. Thank you.

Miguel Sudo Andrade, CEO

So quite a lot to unpack there. So just see if I can get all of your questions. On the first one in terms of spread obviously it depends on the geography because it's really spread to the underlying WAC. So I won't give you very specific IRRs but let's say in the US it could be around 10% thereabouts. I think we've seen projects sort of high nines, that's the sort of range. But the overall spread then in Europe, it will be slightly lower IRRs because the cost of capital is also slightly lower. In terms of the contracted 2028 CapEx, I mean, we still have around 40%, given that we only have 3.2 gigawatts secured of the five. So just doing the math, the 1.8 gigawatts still unsecured is basically mostly 2028. little bit of 2027. So hopefully that answers the first question. On the second question, on the data center strategy. So we will not do direct development of data centers. I don't think we have the competencies or the balance sheets to get into that. And I don't think we're the best player for that. I think I believe very much in sticking to what we know how to do and, stick to the basics if you want. And what we know how to do is to develop renewable projects, run networks. Well, in the case of VDPR, just projects, whether it's wind, solar, batteries. We know how to develop sites. We know how to develop interconnections. We have some good sites that we can monetize, as I say, either by helping co-locate data centers, for example, close to existing sites that we might have. That's one way. We can obviously co-develop with other people as well, new sites and, or come up with sites that we think are attractive for some of these data centers. So that's also something that we can, can do. And then obviously the plain vanilla selling energy to, to these big tech or some of these offtakers. And that's, you know, that's our bread and butter. That's what we do on the day-to-day. That's what we've been, I think, very successful. And, you know, PR, I think, is a leader in doing that. And so that's going to be the bulk of, you know, of our projects going forward. So direct development, no selling directly power to these sites, you know, and these PPAs and doing these projects. Yes, that's our bread and butter. Additional sort of monetization of existing sites and or development of some new sites. We will also look at that and are looking at that. If we have concrete transactions, we'll let you know. On the third question, capital structure. I mean, we've been around us a while. I think what I say is that the two things go in parallel. As you know, for 2028, we still have some space on the balance sheets. We are expecting that we could potentially upsize there just without having to sell additional megawatts. But in any case, we can all manage these two. Since the market for asset rotation is so healthy, we believe that we would be able to continue to upsize and continue to monetize some of these projects. And so, you know, it wouldn't require equity. So I think that's, you know, we've managed to find this balance certainly over the last couple of years, and that's what's built into our business plan, so that we could still keep the asset rotation.

Augustin, Analyst — Goldman Sachs

Thank you.

Miguel Sudo Andrade, CEO

Thank you.

Speaker 9

Thank you, Alberto. And our last question today comes from the line of Manuel Palomo from BNP. Manuel, please go ahead.

Speaker 1

Hello. Good afternoon, everyone. Two big ones. One maybe insisted a little bit in the last question, following up on it. If I look at your first slides in the presentation, it seems to be crystal clear the good momentum for renewables. So my question is, what prevents you from accelerating the installation's pace? Permitting, balance sheet, lack of pipeline in certain markets? so that that is my question what is preventing you from that and the second one is is a more detailed uh question on the on the spanish generation tax could you please quantify the impact positive i understand uh from the removal of these spanish generation tax uh in 2026 numbers thank you okay thanks manel so on the first one what prevents us from accelerating um i don't think anything is preventing us from accelerating.

Miguel Sudo Andrade, CEO

I think what we're making sure, well, two parts to this. One, making sure we really get the best project risk return. And so obviously we can do more megawatts, but then you start perhaps sacrificing either returns or taking on more risk. And so I think we continue to try to find the right balance in terms of volume, but also risk return. As I say, it's very easy to build megawatts if you accept very low returns because you'll just start gaining market share. But we're not in the business of building megawatts for the sake of it, in the business of making money. And so very focused on getting that balance right. The second thing, though, is that there are obviously also restrictions on permitting and licensing. I mean, that does slow down in certain markets. So for example, some of the European markets in particular um whether it's italy or france places like that that there are restrictions in terms of building more megawatts and in the u.s in some cases particularly on the wind side i wouldn't say so much on the solar and battery side but on the wind side i mean we just talked about some of the restrictions on the repowering or sort of upsiding some of the projects so yes there there is a restriction it's not just a question of risk returns it's a question of licensing and what you can actually get there so within those restrictions it's then choosing the best project to take forth on the second point on the impact of the generation tax I think we're assuming around 16 million euros at the EBITDA level in terms of positive impact okay we have no more questions of this I'll hand over to Miguel, Joe, to final remarks. Just to thank you all for being on the call, we're off to a good start to the year. I think generally positive outlook, that's why we feel comfortable in coming back to you with an upgrade and the guidance. But I would say the long-term fundamentals are feeling very good, whether it's on the demand side, which is obviously then going to drive on the generation side. But I think on Manel's final question, what is keeping us from accelerating? Obviously, there are still issues on the permitting and licensing, which can be frustrating to a certain extent. But then within that, it's really just a question of making sure we're choosing the best projects. And I think that's showing through. The reason we are upgrading, for example, on the asset rotation side, the gains, even though we'll probably be doing less volume, is precisely because I think we are getting a good vintage of projects coming through. And we've talked about this in the past, that it was less good vintage. Now we're getting a good vintage, and I think that will show up. And it's just a testament, I think, to the value of the project that we're building. Not just the ones that we're selling, but the ones that we're also keeping on the balance sheet going forward. So off to a good start, looking good for the next couple of years, and we'll come back to the next couple of months with some additional news. Thanks.