Edp Renewables Sa U/Adr

Hello and welcome, everyone. Thank you for joining EDPR's 2035 Results Conference Call. We are pleased to have with us today our CEO, Miguel Sueldo Andrade, and our CFO, Rui Teixeira. They will walk us through the key financial highlights of the period and share insights into our strategy. After the presentation, we'll open the floor for questions, and you are welcome to submit via the conference chat or ask them directly over the phone. The session is scheduled to last no more than 60 minutes. With that, I will now hand it over to Miguel Suadandrade to begin the presentation.

Miguel Suadandrade Thank you, Miguel. Good afternoon, everyone, and thank you very much for attending our 2025 results conference call. Just before we move into EDPR's results, I just wanted to take a brief moment to acknowledge the severe storms that recently affected Portugal, in particular Storm Christine at the end of January. Some of you may be aware, but maybe others haven't been following. This was a really exceptional weather event, significant impact on the communities, on the electricity networks operated by EDP in Portugal. So first and foremost, our thoughts are with the people in the communities affected. And having personally witnessed up close the devastation on the ground over the past couple of weeks, I think clearly a lot of work to rebuild the area, and we're also contributing to that at the social level. I'd also like to take a moment to recognize and extend a sincere word of appreciation for the absolutely extraordinary efforts of all the teams, both internal and external, involved in the response and in the recovery in extremely adverse conditions. And I just wanted to highlight also the fantastic collaboration and coordination with the national and the local authorities that allow the networks business to recover 100% of the customers with only still a few specific situations outstanding and that we believe will be resolved very, very shortly. So the teams have been working flat out, nonstop, weekends and holidays to get the energy back to everyone as quickly as possible. From EDPR perspective, the direct operational and financial impact was limited. Our renewable assets proved resilient and the event does not change our fundamentals, the strategy, or the outlook. That said, at EDP's results call tomorrow, we'll give more detail but as part of the EDP group, we just thought it was important to acknowledge the broader context in which we're operating, particularly when an extraordinary event impacts the system as a whole. And with that, okay, let's go to the first slide. So talk about EDPR's results and performance for 2025. And I'd start by saying that 2025 was really a very solid recovery versus 2024. Execution was the key word, absolute focus on executing everything under our control, We delivered on our targets. We kept a disciplined financial profile, and we set up a constructive base for 2026. On financial performance, recurring EBITDA reached around 2 billion, so it's up 17% year-on-year. It's above our latest guidance level. The underlying EBITDA was at around 1.9 billion, so up 23%, confirming that the improvement is fundamentally operational. Recurring net profit recovered to around 0.3 billion, up 50% year-on-year. And importantly, we delivered these results while keeping financial discipline. So net debt closed at 8.1 billion, slightly down versus 2024, consistent with our guidance. And the ratio net debt to recurring EBITDA improved from 4.9 in 2024 to 4.1 in 2025. So a very strong improvement in our leverage position. In terms of key operational drivers, we delivered the two gigawatts of gross capacity additions. Generation was up 11%. to 40.6 terawatt hours. And we navigated also a normalization in prices in Europe with the average selling price down 10% to 53 euros per megawatt hour. Despite that, which was expected, the combination of top line performance with efficiency initiatives supported the recovery in earnings. And so that leads me to the point on efficiency. Core OPEX per average megawatt decreased 12% versus last year. I mean, this really shows a huge improvement in efficiency and quite honestly, very proud of this achievement. There was tremendous effort done by the teams on the efficiency front, on leveraging economies of scale. And so we actually ended up better than expected. And as I mentioned, that supported the recovery also in earnings. Asset rotation gains in the P&L were around 119 million euros, so below 2024, but fully in line with the guidance, especially considering we were also very successful in rotating 49% of a large US portfolio. But as you know, in that case, the capital gain doesn't flow to the bottom line. So overall, strong execution, improving profitability, and financial discipline, supporting a positive outlook going into 2026. Okay, so moving now into a little bit more detail on some of the key operational issues. On slide five, two gigawatts long-term contracted additions, around 90% in North American Europe. It's a good mix, led by solar, 48%, wind on shore, 28%, and the growing weight of batteries, around 17%. Offshore, a small project in France, 6%. And then in terms of concrete execution milestones, this includes around half a gig of solar in the US and 0.3 gigawatts in Europe, including our first solar projects in Germany, around 0.3 gigawatts of batteries in the US, and also our first standalone battery in the UK. Also around 0.2 gigawatts of wind onshore in the US, and around 0.2 gigawatts in core European markets, including the start of operations, as I mentioned, at one of ocean wins offshore projects in France. So we deliver the planned capacity on time, on budget, and in line with guidance with a contractor profile and the concentration in our core markets that supports the resilience and visibility going forward. If we move forward to slide six, talking about asset rotation in 2025. So we had strong investor demand for high-quality assets. The gains were mostly concentrated in Europe. As I mentioned, the U.S. transactions were minority-stake sales. During the year, we rotated around 0.8 gigawatts from five transactions in Europe, delivering 119 million euros of gains, around 15% gains to invested capital, 20% if we excluded Spain, along with two deals at 49% stake in the US with proceeds reaching 1.5 billion, given the attractive valuations. Just note that the Greece transaction closed in January of 2026, so the 0.2 billion of proceeds will only be accounted for in the first quarter of 2026. If we move on to talk about additions. So for 2026, we secured already the one and a half gigawatts of capacity additions. Around 80% of that is already under construction. The remaining projects are expected to come online in the next couple of months or start construction as scheduled, including also some of the solar DG that has an average six month construction time. And so still fully confident on the delivery of the one and a half gigawatts of capacity for this year. Most importantly, this is a very value-creative growth. So the portfolio is expected to return an average spread of around 275 basis points. And we included just a couple of examples to illustrate the quality of the portfolio across the different technologies. So we have our SunRISA project. So it's solar and batteries in California. It's a 200 megawatt solar, 184 megawatt batteries. It's backed by 20-year bus bar PDA. It's a strong off-taker. Meadowlake for repowering in Indiana, so that's around 100 megawatts, had a 50% uplift in production and also captured an additional 10 years of PTC benefits. So the material increase in profitability from this repowering. We also had a good hybrid solar in Poland, a 20-year CFD wind project in Italy at 77.6 euros per megawatt hour. So the takeaway is quite simple. The delivery of 2026 is de-risk. and as attractive returns and with long-term contracting. And this will also feed into our asset rotation that's expected for the year. We move to slide eight on contracting a new project. So the contracting momentum is strengthened, including after the business plan, the CMD presentation. So just over the last six months alone, we've secured 1.3 gigawatts at attractive returns, PPAs with utilities, global tech, We've done building transfer agreements in the US. So it's exactly the kind of de-risk growth that we wanted. For 26-28 period, we now have 2.8 gigawatts secured. So as I said, 2026 fully covered. Around 65% of 2027 already covered. And we expect to be covering the rest of the next couple of months. And 10% of 2028. So total around 55% secured over the period 26-28. This contracting progress is reducing the risk, increasing the cash flow visibility, and it's supporting also this disciplined execution into 2026 and beyond. So let's talk a little bit about the U.S. I think, you know, I've been consistent about this in many of the previous interactions, both in these calls and also in some of the investor presentations. I mean, the message on the U.S. remains very positive. The demand is structurally rising, and that's If the fundamentals aren't there, then it doesn't work. In this case, the fundamentals are there. I mean, the IEA projects 2% yearly annual electricity demand growth between 2026 and 2030. It's largely driven by data centers, and it's going to be supporting a strong runway for renewables, which is the fastest and most efficient and cheapest technology to be deployed. So we've discussed this in the past, but these are projects that can be supplied today to deliver power today, and that will help with issues around affordability and just the delivery of power in general in the U.S. On the supply side, for the U.S., and you can see that on the graph on the left-hand side, I mean, you're expecting or it's expected to have around 8% renewables CAGR over the period 25 to 2030, while the non-renewables rose much more modestly. Obviously, there's some thermal coal, for example, coming offline. You have some gas coming online. but non-renewables, much more modest growth compared to, for example, the renewables. Wood Mackenzie, independent consultant, estimates an average of around 25 gigawatts of solar, 9 gigawatts of wind additions per year for the period 2027 to 2030. So we're well positioned to capture that growth. We have strong visibility across the portfolio. We have 1 gigawatt of PPAs under commercial discussions and a more than 20 gigawatt pipeline with around 50% located in the MiZone PJM regions, which are two of the most attractive demand pockets. So we have the policy and execution resilience also built in. We have around six gigawatts of safe harbor for wind and solar projects for CODs up till 2030. We have flexibility between the annual additions, and this is excluding batteries, which, as you know, has a much longer timeframe in terms of tax credit visibility. We're also capturing data center optionality directly. We've got around two gigawatts of powered land, including 8 gigawatts already in advanced permitting, mainly ERCOT and PJM. And then our approach continues to be disciplined. So one of the issues we had a couple of years ago and that we've successfully, I think, adjusted is making sure we have a domestic content procurement strategy, including the first solar frame agreement and also other U.S.-made equipment like trackers, rackings, inverters. And so we see potential upside from repowering and also flexible repricing, but Essentially, on the procurement side, we feel very confident about the supply chain. But then we also have these additional upsides towards the back end of the decade. So overall, bottom line, US market fundamentals are strong. EDPR has the pipeline. It's got the contracting momentum. And it's got the optionality to keep delivering the growth up to 2028 and beyond. Turning to Europe, the message is also similar and clear. So we're strengthening value creation. been extremely focused. We've got a leadership in the hybrid market where renewables remain structurally supported. On the demand side, the outlook is also positive. I mean, electricity demand in the European Union is still projected to grow at around 2% per year. And on the supply side, renewables is also expected to grow at around 8% CAGR up to 2030, while non-renewables sources are expected to actually decline by around 4%. So again, well positioned to capture this. We have a tangible pipeline. We have a commercial momentum, over 14 gigawatts of pipeline in core European growth markets, over 8 or 0.8 gigawatts of PPAs under advanced discussion, and around half a gigawatt ready to bid in upcoming auctions. So we are being very much execution driven, deliberately low risk, and we're focusing on core markets like Italy and France. where we can leverage some of the CFD options to market. We're also creating extra pathways to address other fast-growing demand from demand centers. So we have around 0.8 gigawatts of powered land opportunities in Europe, namely in Germany and Poland, and we have some additional opportunities in Spain that will help us serve demand-centered demand as it emerges. On hybrids, it's a key differentiator, I think, for us. We're leveraging our existing wind base to add solar and also to co-locate solar with batteries. And that's helping us improve the resilience and the value capture as the volatility and flexibility increases. So overall, bottom line for Europe, disciplined growth story, focused markets, lower risk on the commercial side, and reliable execution using also hybrid solutions to enhance returns and competitiveness. And just a final slide on this first section before I pass it over to Hui. talking about efficiency, because I think this is also one of the key drivers for the earnings growth. And it's independent of market conditions. Our adjusted core OPEX per average megawatt decreased by 12%. At the same time, we streamlined the organization. Headcount is down around 9%, so we're becoming leaner, more focused, but staying execution driven. And this has to do with three key levers. So operational streamline and cost discipline, leaner workforce model, and also scaling digital and AI to improve availability. Overall, I think very proud of the effort that's being done here at all levels and all the different geographies and platforms. And then, as I say, really seeing sort of the benefits of the economies of scale coming through. So this is, I think, one of the best in class in terms of efficiencies. And with that, I'll pause there and pass it over to Hui, and then I'll come back for closing remarks. Thanks. Thank you, Miguel, and good afternoon to you all. So let's move to the 2025 numbers, starting on slide 13. And I would like to start with a strong increase in generation. So it went up by 11% to 40.6 terawatt hours. This was supported by capacity additions, lower losses, even though we had a renewable resource weaker than the long-term average. So on the left-hand side, you can see that the renewables resource index was 95% in 2025 versus 98% in 2024. This was driven by lower wind conditions. Europe saw its lowest wind levels in 45 years. North America had its weakest September in the third quarter since 1989. Again, this was region-wide, not portfolio specific. On the right-hand side, EDPR You can see generated an additional four terawatt hours year-on-year from higher average megawatt in operation, improved losses, supported also the year-on-year increase. And again, this is, as I said, partially offset by the resource, also some impact from the asset rotation perimeter. Please also note that solar generation increased by 77%, and this is obviously reflecting the growing portfolio. If we now move to slide 14, Electricity sales increased by 1% year-on-year to 2.15 million or billion euros, with higher volumes offsetting lower prices. The average selling price declined from 58.9 euros per megawatt hour to 53, and this is reflecting the normalization impact in Europe that was already expected. Regionally, the mix is also clear. You can see that on the left-hand side. North America contributed to an additional 145 million year-on-year, supported by both higher volumes, in total 23.3 terawatt-hours, so that's a 16% increase year-on-year, and also higher prices, with the average selling price at 4% to $47.4 per megawatt-hour. Europe was down 137 million year-on-year, with volumes broadly flat at 11.5 terawatt-hours, But as I said, pricing normalizing and decreasing 13% to an average price of 80.1 euros per megawatt hour. South America improved by 6 million, supported by higher volumes, 4.2 terawatt hours. This is a 22% increase, while the ever-selling price was slightly lower on a Brazilian real, 180.8 per megawatt hour. So that's approximately minus 2%. APAC was broadly stable. So if we move now to EBITDA, on slide 15, the underlying recurring EBITDA grew 23% year-on-year, increasing by $159 million in this period, again, excluding asset rotation gains. So starting from the left of the bridge, electricity sales were up 1% year-on-year to $2.15 billion. Tax equity revenues were up by 118%. uh to 421 million mainly driven by the solar additions that benefit from the itcs and this is offsetting the gradual phase out of wind ptcs as a rotations contributed 119 million euros in line with our guidance um on the cost side and as miguel said you know it's you know very good efficiency and very good results Core OPEX was $766 million. So on an adjusted basis, adjusted core OPEX per megawatt, per average megawatt, improved 12%. And this reflects all the efforts that Miguel already alluded to. Finally, other costs on the net basis was $48 million. This line also reflects a cleaner underlying profile. So 2024, you may remember it was impacted by losses in Colombia and Romania, while 2025 includes about 26 million of provision in Vietnam. All in all, recurring EBITDA was 1.97 billion, with the underlying business mix continuing to shift toward our core markets, with North America at 59% of the underlying EBITDA, and Europe at 34%. If we now go to financial results, in 2025, increased by $109 million year-on-year, reached $482 million. This increase is primarily due to a $1.5 billion rise in average net debt and the lower capitalization of financial expenses, following a $1 billion decrease of DP&E, working in progress, but also partially offset by effects and derivatives. Looking ahead, we expect this line to improve from 2026 onwards and keep declining across the business plan, mostly on the back of lower debt and lower tax equity and mining costs. Also highlighting that from a risk and liquidity standpoint, our profiles remain conservative. Seventy-four percent of the debt is fixed, 30 percent variable. We are well diversified by currency, 44 percent in euro, 37 percent in U.S. dollar, 30 percent in other currencies. and we maintain a solid maturity profile, with over 60% of our debt incurring beyond 2028, therefore reinforcing long-term financial stability. I would like now to move to slide 17, net debt closed the year at 8.1 billion. That's a reduction of 0.2 billion versus December 31st of 2024. Gross investments total 2.4 billion, of which 2.2 was CAPEX, and approximately 0.2 billion financial investments. 55% in North America, 25% in Europe. 50% of this was invested in solar, 31% in wind onshore, and 12% in battery storage, with about 7% related to equity investments, including ocean winds and some capitalized expenses. Also in addition, we have a 0.5 billion working capital outflow linked to fixed asset suppliers. In total, these investments were fully funded through 1.5 billion of asset rotation, 0.8 billion of tax equity proceeds, and very importantly, 0.6 billion of operating cash flow. So considering some effects and other impacts, net debt reduced by 0.2 to a total of 8.1, also an improved net debt EBITDA from 4.9 times to 4.1 times, And also, just reminding what Miguel mentioned in the beginning, this does not include yet the proceeds from the Greek transaction that only closed in January, about 0.2 billion. So on the net profit, recurring net profit reached 330 million, effectively increasing fourfold year on year if we exclude capital gains. As mentioned earlier, our recurring EBITDA increased 17% year on year, so reflecting solid operational performance. Depreciation increased. driven by the new capacity additions, also a one-off impact from accelerated depreciation in repowering farm in the U.S., which is ongoing. Taxes were higher this year on the back of lower asset rotation and some one-off costs that are not tax-deductible. We expect this to go down in the following years. Minorities contributed positively year-on-year following the completion of the buyback of the 49% wind portfolio in late 2024. Again, note that this line will be impacted in the coming year with the 49% stake that we sold in the asset rotation in the U.S. this year. So just to bear in mind that, please. Regarding the one-off impacts at net profit level, there are about 114 million recognized this year, and these are mainly coming from impairments in Europe, some including non-core countries, also ocean winds U.S. platform. as well as accelerate the appreciation of this repowering wind farm in the U.S., the Middle Lake 4 Wind Farm. Also to note that the board of directors will propose in the 2026 general shareholders meeting to continue the script dividend program with a payout of 40% and implying a maximum amount of 13 cents per share. And finally, just before I hand over to Miguel, let me just touch briefly on the sensitivity of EDPR's net profit to the wholesale power markets. The updated 2028 net income sensitivity remains unchanged versus our CMD. So if you consider a five euros per megawatt hour movement in global electricity prices, it results or should result in a sort of 25 million euros impact on a net income level, the reference for 2028. And currently what we are seeing in the regional Trends are Europe that holds about 60% of the exposure, 2028 reference prices up around 64 US per megawatt hour. The trend is currently downwards, and this is mainly driven by Spain, Poland, and Romania. US that has about 25% of the exposure that has a reference price of $43. Here the exposure is mostly on PJM and NYSO, and we are seeing an upward trend. Also, Brazil, that holds about 15% exposure with a reference price of 170 Brazilian reals per megawatt-hour, also showing an upward trend on foreign prices. So, again, to highlight that we have broadly a stable sensitivity due to portfolio and original diversification. And now, Miguel, back to you for closing remarks. Thank you.

Okay.