1
EDP Renováveis Presentation
September, 2013 www.edpr.com
EDP Renovveis Presentation September, 2013 www.edpr.com 1 - - PowerPoint PPT Presentation
EDP Renovveis Presentation September, 2013 www.edpr.com 1 Disclaimer This presentation has been prepared by EDP Renovveis, S.A. (the "Company") solely for use at the presentation to be made on September, 2013. By attending the
1
September, 2013 www.edpr.com
2
This presentation has been prepared by EDP Renováveis, S.A. (the "Company") solely for use at the presentation to be made on September, 2013. By attending the meeting where this presentation is made, or by reading the presentation slides, you acknowledge and agree to be bound by the following limitations and restrictions. Therefore, this presentation 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 express consent 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 or implied, 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 the Company 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 this presentation 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 the Company 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, nor the 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 to the 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 construed as 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 so registered 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 and applicable 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. The words “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 future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; developments of the Company’s markets; the impact of regulatory initiatives; 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 other data available from third parties. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known 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 materially from 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 notice unless 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 reflect any change in events, conditions or circumstances.
US Brazil Canada Poland Romania Italy Portugal France Spain Belgium UK
1,010 MW 2,310 MW
Building the first wind farm 30 MW
3,637 MW 84 MW 314 MW 57 MW
Offshore under dev. up to 2.4 GW
320 MW 378 MW 40 MW
Notes: 1H13 Figures; Portugal installed capacity includes 391 MW from ENEOP (Equity Consolidated) 4
5
An outstanding growth rate over the last 5 years
7.8 10.9 14.4 16.8 18.4 2008 2009 2010 2011 2012
Electricity Production Evolution (TWh)
CAGR
+24%
Source: Companies‘ Reports
31.0 25.8 18.4 16.8 15.2 Iberdrola Nextera EDPR Longyuan Acciona
Top Wind Players (TWh, 2012) #3 worldwide wind energy producer
6
Electricity Output Ongoing growth Selling Price Low risk portfolio Load Factor Quality assets
1H13 Operating Metrics 1H13 Financial Metrics
EBITDA Solid returns Free Cash-Flow Self funding strategy Net Profit Increased profitability …delivering stronger profitability and robust cash-flow generation
10.7 TWh
+8% YoY
33%
+0.7bps YoY
€64.3/MWh
+5% YoY
€560m
+11% YoY
€129m
+29% YoY
€298m
7
Selective and profitable growth Self-funding business model Quality assets delivering increased profitability
Ongoing premium performance on key operating metrics: Load Factor, Availability and Cost Control Better visibility in the US: +250 MW PPA signed in the 1H13 for operating capacity Targeting 0.5 GW of capacity additions for 2013: +163 MW YTD & remaining under or to start construction Increased visibility on growth: +0.4 GW of PPA structured for new capacity to be installed in 2014/15 in US €368m cashed-in through asset rotation in the 1H13: 1st transaction with CTG concluded (Portugal) Self-funded growth to be enabled by additional transactions under negotiations with financial investors and CTG
9
Assets’ Average Age and Residual Useful Life (Years; weighted average)
EDPR Assets Age
4.4 2.4 4.1 0.5 1.4 1.4 4.3 4.1 4.8 5.8
5 10 15 20 25
EDPR Brazil US Italy Romania Poland Belgium France Portugal Spain
Asset Base (MW)
2,310 1,011 8,150 314 57 320 378 40 3,637
Invested Capital (€ million)
Property, Plant and Equipment (-) PP&E, assets under construction (-) Cash grants received in the US (=) Invested Capital in Existing Assets 11,528 (gross) EDPR has €11.5bn invested in a very young asset base with 21 years of useful life 10,371 (net)
Notes: 1H13 Figures; Portugal installed capacity includes 391 MW from ENEOP (Equity Consolidated)
84
10
Energy Assessment & Engineering
Wind assessment is knowledge-based and difficult to replicate Key value drivers to maximize load factors and revenues Provides site selection criteria Optimises layout for superior performance Supports turbine selection Strong in-house wind energy assessment knowledge delivering a structural competitive advantage Spanish Load Factor: EDPR vs. Market Average 28% 25% 26% 27% 25% 27% 2007 2008 2009 2010 2011 2012
Spanish Market
Load Factor: LT view on Current Assets 27% 27% 32% 27% 24% 24% 23% 24% 32%
US Spot 11% US PPA 41% Brazil 1% Spain 29% Rest of Europe 9% Portugal 8%
11
Electricity Output Breakdown
Balanced generation portfolio with increased output in Eastern Europe and lower merchant exposure in US
1H13 Electricity Output Breakdown (GWh; %)
(GWh, %)
16% 14% 37% 40% 30% 28% 10% 8% 6% 9% 2010 2011 2012
US Spot RoE Portugal Spain US PPA Brazil
12
Capacity under Long-Term Remuneration Frameworks (MW; 1H13)
12% 7% 44% 44% 49% 45% >2025 Jun-13 FiT
Spot
Maturity <2020 2020-25 Green Certificates (floors/caps) PPA/ LT Hedges 88% of PPA/Regulated Frameworks with a long-term maturity beyond 2020 Portfolio exposed to a diversified set of economic regimes
Notes: PPA/LT Hedges: US, Brazil, Specific Polish projects, Belgium
13
1H13 average selling price of 64.3€ per MWh, meaning +5% YoY 2010 2011 2012 1H13 YoY% €88 €79 €83 €85
R$286 R$254 R$278 R$309 +11% $54
PPA/ Hedge
$52 $51 $52 +1% $31 $31
Spot
$30 $31 +24% €102 €94 €99 €108 +1%
Breakdown of Average Selling Price per MWh EDPR Average Selling Price (€/MWh)
58 58 63 64 2010 2011 2012 1H13 €107 €94 €96 €111 +4%
RoE
+5% YoY
14
Proactive supervision through quality assurance and control inspections to identify serial/infancy defects
Closely manage the initial warranty contracts
with O&M contractors
Model (M3), keeping high value-added activities in-house
Post initial warranty O&M contract End of warranty
Exhaustive end of warranty inspections before launching competitive tenders
Data from over 2 million sensors in >5,000 WTG, monitored and controlled in real time Proprietary management systems to analyse WTG performance
Remote control system and performance management Innovative product enhancements
Power-enhancing retrofits pioneered by EDPR to boost annual production
Systematic review of underperformance, root cause analysis and implementing improvement initiatives to maximize availability, efficiency and reduce costs
Continuous improvement
Dec-12
15
Breakdown by O&M Contracts (GW; 2012)
M3 Full scope contracts Initial warranty 8.0 GW 6% 10% 16% 68% Contracts Expiration Date
2013 2014 2015 >2015
84% of O&M costs predictable/fixed for the medium/long-term
Latest O&M Service Tenders (€k per MW)
Initial Warranty Cost Full Scope Contracts Cost M3 Estimated Cost
Combination of O&M strategic options, competitive tenders and market context yielding lower O&M costs
Adequate for wind farms with very stable track-record
16
Operating costs have been mostly penalised by the introduction of new levies (e.g. 7% tax in Spain)… …while on controllable costs EDPR has been demonstrating higher efficiency
Operating costs breakdown(1) (€ million, %)
48.8 47.3 2010 2012
Opex/MW Evolution (€k)
90% 87% 86% 79% 10% 13% 14% 21% 2010 2011 2012 1H13 Opex Levies
Notes: (1) Excludes write-offs.
O&M represent 40% of opex (2010-1H13)
17
Selective growth towards most attractive markets and reduction of merchant exposure enabling increased returns
EBITDA per Average Installed Capacity (€k)
129 120 131 2010 2011 2012 1H13
electricity price depressing EBITDA
prices in Eastern Europe
exposure to spot market, accretive to EBITDA 2011 2012… +5% YoY
19
Spain Structurally changes remuneration for regulatory life
with key details still pending to be published
Romania Rights preserved and limited impact on profitability
profiles the projects’ cash-flows.
and 3GC for solar PV
Poland New Law to potentially solve current price environment
Green Certificate market prices and new long-term contracts negotiations
US New growth opportunities on the short-term
triggering new RfP for PPAs (2013 YTD EDPR secured a total of 380 MW PPA for operating projects)
Long-term visibility for new projects
(EDPR securing 60 MW with a 20-year PPA)
Italy, Brazil, France Portugal Win-win solution and improved visibility
reached between the wind sector and the government to extend the remuneration framework
0% - 30%
20
2014-15 Growth Breakdown (MW)
…enabling EDPR to capture opportunities in the most attractive countries PPA based growth to provide very high visibility on future returns Strong interest from institutional investors on US PPA assets to enhance asset rotation program Original Strategy Growth Shift US to be at the core of EDPR growth EDPR global growth not to exceed 500 MW/year
New Markets & Techs New Markets & Techs
0.8 1.6 2.3
1H12 2H12 1H13
RFPs by Utilities for new PPA (GW)
21
PTC extension Increasing demand Regulatory Clarity Market Opportunity Top Notch Projects
before YE2013 (no time limit for COD)
i) Demonstrate physical works
ii) 5% capex spending “safe harbour” 2013YTD EDPR New PPAs
250 MW
Operating projects
Wind competiti- veness RPS based
280 MW
2014 COD
100 MW
2015 COD
630 MW EDPR competitive projects
20yr 20yr 20yr
22
2013: PPAs for new projects in US
EDPR continues to execute a flexible business, adding high quality projects to the portfolio
117 c180
New PPAs 2014 80 California Yes Headwaters 2014 2015 200 100 Indiana Oklahoma Yes No Arbuckle Rising Tree MW State RPS COD PPA Duration
Load Factor 1st year PPA Price Price Escalator
New PPA vs. EDPR PPA US Installed Capacity (1H13)
+50%
PPA duration
EDPR US installed capacity
(including merchant)
EBITDA per MW - Portfolio vs New PPAs ($k)
24
Operating Cash-Flow to clearly cover Capex needs
Operating Cash-Flow as % CAPEX (2012-15E)
Asset Rotation target
Proceeds from Asset Rotation (2012-15E)
EDPR to keep debt levels and cost of debt under control in a growth environment
Balance sheet discipline
Sources of funds to both cover capex levels and allow for a reduction of Net Debt/EBITDA ratio Asset rotation program as key to support different capex scenarios
25
Development Construction Operation Cost of Capital throughout the life cycle of a wind farm (WACC; %) High Risk Risk Reduction Low Risk Accelerate value growth through asset rotation:
1. Crystallise existing projects’ NPV (capture value created) 2. Re-invest in new value accretive projects
Operating Assets
Cumulative value creation
As an option to expand to
Co-Development Assets to target
26
November 2012:
Borealis acquires a 49% interest in US wind farms in Oregon, Minnesota, Texas and Illinois Transaction Scope: Total consideration: Implied Transaction Value (EV/MW): Average asset age:
599 MW $230m $1.3m 4.5y
Transaction Scope: Total consideration: Implied Transaction Value (EV/MW): Average asset age:
615 MW €359m €1.6m 6y
December 2012:
CTG acquires a 49% equity shareholding and 25% of the outstanding shareholder loans of wind farms in Portugal
China Three Gorges Corporation
Notes: (1) including all cash-flows generated by the projects since inception
€2.4m(1) $2.4m(1)
China Three Gorges Institutional Investors
27
Further news on asset rotation deals expected to be announced throughout 2013
cash flows
wind farms and for a co-capex program through 2015
mainly through PPA/LT Hedges schemes
the US, but also in European FiT asset type
asset rotation strategy
29
Royal-Decree Law
Details of new regulation expected to be published in the 4Q13 Only after the publication of key parameters and standards the economic impact can be assessed
Royal-Decree Ministerial Order Spanish Energy Reform consists of several events with impact on Renewable Energy
RDL 9/2013 Project of Electricity Sector Law
framework for Renewable Energy Sector
defined as Spanish 10Y Bond Yield + 300 bps for the regulatory life
Approved Draft Published Pending
Government to announce remuneration components
months after the RD approval to develop a Ministerial Order
determine renewable energy remuneration for each segment of assets Draft of RD sent to the Energy Regulator (CNE)
methodology: based on past and future (Revenues-Costs)
receive above-average returns
30
How to compute the 7.5% return for a standard asset?
Define the standard asset 1 Define future key parameters 2
company”?
MW basis) for a standard asset to obtain a 7.5% return?
Regular regulatory revision 3
update of the Net Asset Value of the standard asset.
deviations from the expected pool price. standard capex
A
1
Capitalised at 10Year Bond + 300bps capacity complement per MW
Net Asset Value
D C +
Discounted at 10Year Bond + 300bps
D COD Today
2
Today End of Regulation
(MW x average load factor x regulated price)
(MW x standard load factor x pool price(1) with cap & floor)
B
Net Asset Value
B A - C
Notes: (1) Forecasted.
31
EDPR continuously delivering better load factors Installed Capacity in Spain (%, MW)
Higher load factor represents premium annual electricity sales (+c10% per MW) EDPR has younger assets, with 19 years of remaining useful life Spanish Load Factor: EDPR vs. Market Average 27% 27% 29% 29% 27% 28% 25% 26% 27% 25% 27% 2002 2004 2006 2008 2010 2012
Spanish Market
Average annual premium of 230bps Installed Capacity: EDPR vs. Market Average 2002 2004 2006 2008 2010 2012
Spanish Market
EDPR: 5.8 years; Market: 7.2 years
%
50% 100%
33
Strong financial growth Cash generation capabilities Premium assets and diversified portfolio
execution of asset rotation strategy
101% 110% 105% 96%
34
1H12 1H13 38% 36% 27% 31% 33% 25% 27%
97.6% 97.7%
1H3 vs. average Assets delivering leading operating metrics
Load Factor and Technical Availability
EDPR Technical Availability
32%
Electricity Production (TWh)
9.9 +0.6 +0.2 10.7 1H12 Capacity Growth Load Factor Performance 1H13 +8%
35
61.4 64.3 1H12 1H13 +5%
Mix impact: +€2.4/MWh Forex impact:
Higher output in Europe and stronger prices in the US driving the +5% YoY avg. selling price EU €94
Higher prices in RoE hampered by the end of the Transitory Regime (SP)
US $48 +5%
Benefiting from higher PPA prices and output
BR R$309 +11%
Inflation + working hours adjustment
1H13 % YoY
EDPR Price Evolution (€/MWh)
36
...driving a continuous improvement in the portfolio’s metrics Quality assets: +648 MW YoY Top-notch load factor: 33% High availability: 97.7% Solid electricity output: +8% YoY EU +19%; US +0.2%; BR +5% Stronger average selling prices: +5% YoY EU -0.4%; US +5%; BR +11%
Revenues (€ million) Main drivers for Revenues performance
673 756 1H12 1H13 +12%
37
Opex (excluding Other Operating Income) (€ million)
Other Operating Income (1)
14 25 +€11m Ongoing focus on efficiency and control over Opex
Notes: (1) 1H13 impacted by $18m (€14m) from the restructuring of the off-taking volumes of a long-term PPA in the US (200 MW).
202 19 184 221 1H12 1H13 +20% +10% 1H12 1H13 +13% Opex/MW (€k) 1H12 1H13 +1% Opex/MW (ex-7% Tax in Spain & write-offs) (€k)
7% Tax in Spain
129 327 560 21 56 121 233
38
EBITDA to Net Profit (€ million)
D&A EBIT Taxes Minorities Financial Results D% YoY EBITDA New capacity, impairments and grants amort. +5% Performance benefiting from operational leverage +16% Lower interest costs (-4%) due to lower net debt
Tax Rate of 27.3% (vs. 31.1% in 1H12) +18% Borealis transaction and performance in Iberia +282% Strong top-line growth and costs under control +11% Net Profit Net Profit benefits from top-line performance +29%
Free Cash-Flow €298m
39
1H13: Source and Use of Funds (€ million)
472 92 368 93 104 337 100 35 263 Operating Cash-Flow Other Payments Net Debt decreased €263m YTD (€464m QoQ) CTG-EDPR Portugal transaction concluded in 1H13 as expected (€368m)
Source of Funds Use of Funds
Cash Grant PP&E suppliers Capex Net Interest Costs(1) Asset Rotation (CTG)
Notes: (1) Net Interest cost (post capitalisation).
Debt Reduction +31% Dividends
40
1H13 Debt Breakdown (%)
Net Debt €3,042m 60% Loans with EDP 77% >=2018 81% Cash 36% Bank Loans 23% <2018 19% 4% Debt Currency Type Maturity €3,042m
Net Financial Debt Net Interest Costs €101m
Cost of Debt 5.2%
1H13 Operating Metrics
43
…with impact in EDPR from 2014 onwards IFRS 11 rules…
Proportional consolidation will only be allowed when the partner has control over the assets and obligation for the liabilities, as defined in the agreement between the partners Joint ventures previously consolidated using proportional method will be consolidated by equity method
277 MW
Capacity included in reported EBITDA MW from 50/50 partnerships Estimated impact in 2014E Net Income from IFRS11 implementation none Estimated impact in 2014E EBITDA from IFRS11 implementation
c€30m
EDPR his currently consolidating proportionally assets in the US and in Spain from 50/50 partnerships Implementation of IFRS in EDPR will happen in 2014
Compulsory for all the assets under the special regime
45
RD 2/2013
Feed-in Tariff
any impact of tax changes, minus “x” (50 bps).
Inflation Adjustments
RD 2/2013 to lose its effect once full framework enters into force (reference date Jul-2013)
RD 9/2013
300bps (currently 7.5%)
Return
Visibility yet limited Further details expected in the 4Q13 7% General Tax over electricity sales generated in Spain was introduced in January, 2013
Applicable to wind farms licensed until February, 2006.
46
inflation
cap/floor system (€74/MWh - €98/MWh)
correlated with load factor.
Feed-in Tariff
Applicable to ENEOP’s wind farms
for following years.
market electricity price and Green Certificate, if a GC market exists.
Feed-in Tariff All the capacity contributing to EDPR’s EBITDA is under the “old” regime ENEOP’s capacity is remunerated under the “new” regime
Before DL 33A/2005 After DL 33A/2005
and tradable on established market.
Wallonia (€65-110) Flanders (€80-125)
47
inflation-type adjusted.
correlated with historical load factor: €82/MWh for an average 27% Load Factor €28/MWh for an average 41% Load Factor
France Belgium
Feed-in Tariff Market Price + Green Certificates
48
years.
0.78*(€180/MWh – “P-1”), where “P-1” is the previous year average market price.
Premium scheme with premium defined as 0.78*(€180/MWh – “P-1”), where “P-1” is the previous year average market price.
COD before 2013 COD equal to 2013 or later
Market Price + Green Certificates / Feed-in Premium PPA through competitive auctions
Number of Green Certificates per technology Quota of GCs for energy suppliers
49
distributor at regulated price (PLN201.4/MWh in 2013)
market.
compliance with GC obligation. In 2013, the substitution fee was set at PLN297. Substitution fee is updated with inflation..
Framework for Existing Assets Draft for New Assets
Market Price + Green Certificates Market Price + Green Certificates
until completing 15 years receive 1GC/MWh. 1 out of the 2 GC earned until Dec-2017 can only be sold from Jan- 2018
6 GC earned until Mar-2017 can only be sold after Apr- 2017.
(cap €58.8 / floor €28.9)
50
0.75 GC from 2018 onwards until completing 15 years.
PV for 15 years.
Framework for Existing Assets Draft for New Assets
Market Price + Green Certificates Market Price + Green Certificates
51
Framework for Existing Assets Draft for New Assets
prices.
subject to each state regulation
Market Price + Green Certificates
Credits (10-year period starting from COD) or Investment Tax Credit (in the amount of 30%, which – dependind on COD – could be monetised through the Cash Grant
depreciate wind farms (95%) over the first 5 years
Tax Incentives
prices, with region being a determinant
subject to each state regulation
Market Price + Green Certificates
2013 are ilegible for a 10-year PTC / 30% ITC.
depreciate wind farms (around 95%) over the first 5 years
Tax Incentives
52
Framework for Existing Assets New Assets
updated according with inflation-type adjustment.
renewable energy
PPA PPA through competitive auctions
IR Contacts
Rui Antunes, Head of IR Francisco Beirão Maria Fontes Emanuel Sousa E-mail: ir@edpr.com Phone: +34 914 238 402 Fax: +34 914 238 429 Serrano Galvache 56, Edificio Olmo, 7th Floor 28033, Madrid - Spain
EDP Renováveis online
Site: www.edpr.com Link Results & Presentations: www.edpr.com/investors
Next Events
September 10th – Roadshow London September 11th – BBVA Conference (London) September 12th – Morgan Stanley Conference (London) September 13th – BPI Conference (Oporto) September 19th & 20th – Boston & NYC Roadshow September 19th – ESN Conference (Frankfurt) September 27th – Paris Roadshow