EDP Renovaveis SA

ELI:EDPR

Earnings Call Transcript 2022-Q1

[Operator]

Hello, and welcome to the EDPR First Quarter 202 Results Call. My name is Ryan, and I'll be your coordinator for today's event. [Operator Instructions]

For now, I'll hand you over to your host, Miguel Viana to begin today's conference. Thank you.

[Miguel Viana, executive]

Thank you for attending EDPR's First Quarter 2020 Results Conference Call. We have here with us our CEO, Miguel Stilwell de Andrade; and our CFO, Rui Teixeira. We'll run you through the key highlights of the business plan execution and first quarter 2022 results. We'll then move to Q&A in which we'll be taking your questions, and the call is expected to last 1 hour.

I'll give you now the floor to our CEO, Miguel Stilwell de Andrade.

[Miguel de Andrade, executive]

Thank you, Miguel. Good afternoon, everyone, and I hope you're all doing well. So it's all great to speak to you and I think in this quarter, we have a couple of interesting points to talk about, and we'll do that over the next hour. So let's move into the presentation. First thing I'd start off by saying is that our first quarter numbers showed a really strong growth in EBITDA, so up 46% to almost EUR 400 million, very much supported by the expansion of our asset base with installed capacity increasing 13% year-on-year. We had strong renewable resource, namely strong wind volumes in this quarter. So 2% above the long-term average for our portfolio. And April is also doing pretty well. So I think clearly, very positive that we are above -- we had a wind resource above the average.

Finally, we also saw a good improvement in the average selling price, and that increased 12% year-on-year with some positive impact from the increase of the electricity market prices. Net profit increased 75% to EUR 66 million, reflecting the strong EBITDA performance.

Focusing on the capacity additions. So we have a total of 2.8 gigawatts added in the last 12 months. EDPR is progressively ramping up to growth towards the 2025 target of 20 gigawatts of additional capacity. Regarding the execution of the strategic plan, so we added 1.1 gigawatts of projects contracted and committed since the beginning of the year. And now we have a total of around 9.6 gigawatts secured or committed capacity for the period until 2025. So that's close already to the 50% of the 20 gigawatt target that I just mentioned.

I think, good execution on that side. As you know, there are a couple of PPAs that we were renegotiating at the end of last year, and most of that came through in the last couple of weeks. So that's that additional 1.1 gigawatts that I just mentioned. So overall, solid ramp-up of growth and good returns across all regions in technology.

On value, just a couple of comments here. So we completed the first asset rotation of 2022 in Poland. We announced that last year. We closed it already. Strong multiple EUR 2 million per megawatt and about EUR 0.3 billion of proceeds. So we're expecting to have a total of EUR 1.8 billion of proceeds already achieved in 2021 to 2022. And we have other transactions under negotiation that we expect will bring us above EUR 300 million of asset rotation gains this year.

We expect to close the Spanish portfolio also in this quarter, the second quarter. So we'll have closed both the Polish and the Spanish in the second quarter. On the excellence, so in terms of operational excellence, clearly recognized as an enabler of the energy transition, best-in-class regarding ESG performance, have several achievements in the first quarter of 2022, and we'll talk about that later on in the presentation.

We move to Slide 6. and talking about renewables development for '22, 23. So we're on track to deliver the renewable capacity addition of the 3.5 gigawatts annual average in '22 to '23. We have 6 gigawatts secured for the period. That's 86% of the capacity additions targeted for these years. I think though it is important to highlight that there are some short-term issues around the uncertainty on the current anti-circumvention investigation in the U.S. and also restrictions in the supply chain, namely in solar. So that implies that the annual capacity additions are now expected to be in the 2% to 2.5% range in 2022, with a shift from 2022 to '23 of between 700 and 900 megawatts of capacity additions, mostly in the U.S. linked to the anti-circumvention investigation by the Department of Commerce and also partially as a result of the supply chain constraints we flagged previously. So obviously, this uncertainty around the investigation is not helping in terms of taking the decision to -- for start of construction.

We're keeping the target for the '22, 23 cumulative period as we expect to recover in '23, the lower capacity additions of 2022. And in terms of cash flow, we don't expect it to have a material impact since most of this capacity was scheduled to start operating in late 2022, and now it start operating in 2023.

Moving on to Slide 7. So I would like to highlight that there's been a strong focus by governments globally and particularly in Europe to reinforce energy independence and the concerns on reducing energy costs. This represents a good opportunity for faster renewals growth as the right answer to the current energy crisis. And I think we're all very aware about what's going on in the world in Europe, with the Ukraine invasion and everything. And there are a couple of good reasons, I think, why we believe that the governments will be pushing for this even stronger now.

Environmental reasons, obviously, compliant with the Paris Agreement. That was already something that everyone was aware of, but increasingly, the issues around energy independence, the idea that 1 megawatt hour produced with our own resources is 1 megawatt hour less of gas or coal or some other fuel -- fossil fuel that's not imported. And third, I'd say that the renewables provides predictable energy prices that you can lock in for the next 10, 20 or 30 years. So I think these 3 reasons, environmental, energy independence and predictable energy prices are strong drivers for a more positive outlook for renewables.

And we've seen that the several governments have been trying to approve or to implement various measures targeting to simplify and reduce the timing for the permitting of renewables. It has to do with not only the environmental permitting, but interconnections, more focus also on the development of storage and other technologies. So it's not going to have a material impact in the short-term capacity additions, but definitely, I think in terms of medium, long-term growth prospects, it is definitely positive.

Slide 8. Over the last 15 months since our Capital Markets Day in February last year, we've increased this by over 60% or approximately 3.6 gigawatts that we've added in terms of secured capacity. And so we've moved from 6 gigawatts to the current 9.6 gigawatts of capacity. So this includes all the capacity that already has long-term contracts or CapEx committed, includes the 3 gigawatts that are already operational, 2.4 gigawatts that are already under construction. So these 9.6 gigawatts of capacity secured represent close to the 50% that I mentioned earlier of our 20 gigawatt target additions until 2025.

Note also, I think that this contracted growth continues to follow our investment criteria with the average IRR over WACC above 1.4x and that IRR spread over WACC of around 300 basis points on average. So as I mentioned, I think we took some time to close some of the additional PPAs, but to make sure that we were able to close them with the profitability targets and sort of the investment targets that we look for. We are definitely confident on the execution of the business plan 2025 targets. And as I mentioned earlier, we see that positive trend on the renewables medium-term prospects.

Couple of comments, maybe just here in terms of the U.S., I mean, clearly, the renewables are critical for the national decarbonization targets and keeping energy costs under control. So we do have some expectations that the government and legislation will contribute to promoting the renewals medium term. And then although Europe and North America represents close to 80% of our capacity additions until 2025, we're also seeing good growth prospects in South America and APAC. And I mean, if you think about South America and especially the countries we're in like Brazil, but also Colombia and Chile, I mean there's incredibly competitive renewable resources with extremely high NCFs, both wind and solar. It's got fast-growing economy, strong demand for electrification. So we are seeing a lot of good opportunities there.

And we're also very excited about Asia Pacific. And together with the Sunseap transaction, we think we are really positioning ourselves there for areas that have good energy demand, high dependence on fossil fuels, but also this desire to move to more renewable sources. And so we think that's an untapped growth opportunity that we can take advantage of.

We move to Slide 9 and talk about PPA pricing. So this is something we've been mentioning. I mean it's been impacting our sector over the last 12 months. I mean, CapEx inflation. I know we've discussed it. You've asked a lot of questions about this already probably for the last 9 months or so. We have seen upward revisions of CapEx cost in the renewable project between 5% and 15%. It's being more material in solar than in wind. And this has been translated into upward revisions of the PPA prices of between 10% and 15%. Obviously, for PPA prices that were under negotiation and for new PPAs that we're bidding for. So making sure that we're preserving our rates of return and our investment criteria.

So everything that was already committed, as we've mentioned previously, so everything that didn't have necessarily PPA, that was open. We already had a big part of that CapEx already closed. So we don't think that this increase in PPA prices has impacted our competitiveness. Clearly, we see that this is a sector-wide movement impact. And so from an offtaker perspective, the PPA prices continue to be well below the alternatives, especially in the current context of the high gas and power prices. And I think that that's very clear when we showed that we were able to renegotiate the PPAs and come out with over 1 gigawatts of long-term contracts now in the last couple of weeks after having renegotiated that.

We have another around 6 gigawatts of PPAs under negotiation or shortlisted and we'll obviously also be participating in public auctions in all of our markets. So typically, for the CFTs or the PPAs that happened in many of the different countries.

If we move to Slide 10, talking a little bit about our energy position. Here, EDPR's asset portfolio, I mean we have a high level of long-term contracted revenue that's always been a characteristic. It's something that we value because it really provides that stability to the portfolio. So we have close to 93% of long-term contracted in 2022 for the good times and the bad, but at least it's been part of our philosophy of investment. In any case, that still does leave some -- even though we have a higher level of long-term contracted, we do have some exposure to the current market environment of higher prices, mainly in Europe.

Going forward, as the hedges gradually roll over, we will be repricing our renewable generation more in line with the current market environment. So the merchant exposure as a percentage of total revenues should be on average around 17% in 2023 to 2025, and that will allow us to reach average selling prices above the assumptions that we had in the strategic plan. We're also adjusting our hedging strategy slightly to increase exposure to the market on a more structural way and to avoid overhedging in the case of low renewable resources and high Merchant prices.

On the other hand, we are also seeing several cases of short-term government interventions in the energy markets. That's clearly the case in Spain of the gas clawback and the negative impact on cash flow from the regulatory changes that were approved in the Parliament in Spain. We're also seeing clawback taxes implemented in other European countries, for example, the 1 in Italy has a very limited impact in our Italian portfolio. The clawback tax in Romania does have a more material impact. In any case, we think that it is, let's say, or we think the impact is going to be lower than perhaps what we would have thought a couple of weeks ago.

Overall, we expect a net positive short- and medium-term impact from this gradual repricing of our renewable generation, even considering the negative short-term impact from government intervention in the electricity market. So obviously, some positives, some negatives, but net-net, we expect it to be positive.

If we move to Slide 11, just talking about the asset rotations. So we are seeing still very strong demand for renewable assets. We continue to see high appetite from investors, and we expect another solid year in terms of the asset rotation execution with gains above the business plan average target for the year, which, as you know, was around EUR 300 million. We've already closed 1 of the 3 transactions: the Polish portfolio I mentioned of around 150 megawatts, closed at EUR 2 million per megawatt. And as I mentioned, we expect to close the other Spanish portfolio still within this quarter.

Apart from that, we've also kicked off, earlier this year, 2 additional transactions or asset rotations, one in Europe, one in South America. And we have good indications of that, both in terms of the demand for these assets and also in terms of the, let say, the value of those assets. So all in all, completing the transactions that we already signed, moving forward with the additional 2022 transactions. Overall, we expect to be above the EUR 300 million in 2022, but below the 2021 numbers, which, as you know, were very high, was almost double the EUR 300 million. So we'll be somewhere in between those.

Moving on to Slide 12 and before turning it over to Rui. Just a quick word about Ocean Winds. I think Ocean Winds is actually doing really well. I mean, it's continuing to grow -- it's now got a portfolio of 11 gigawatts versus 6.5 gigawatts at the same period last year. All the European projects are well protected against inflation, namely France and Poland. We've been successful in also in recent tenders over the last couple of months this year. So Caledonia very close to Moray East, and Moray West, so it's contiguous. So 1 gigawatt of seabed lease there. We've also been granted the electricity business license for 870 megawatts in South Korea. The model is slightly different, but basically, the award resembles a seabed lease, and we've also been given exclusive rights to develop around 1.7 gigawatts at the New York Bight seabed tender. So I think a lot of positive news flow around Ocean Winds over the last couple of months.

As I mentioned, we now have a total portfolio of 1.5 gigawatts of installed capacity, 2.6 gigawatts of under-development projects with long-term revenues contracted and 7 gigawatts of under development projects with seabed and connection rights secured. So clearly, Ocean Winds is becoming a reference in the offshore sector. I'll pass it over to Rui to walk you through the 2021 results, and then I'll come back again for closing remarks. Thank you.

[Rui da Silva Teixeira, executive]

Thank you, Miguel, and good afternoon to you all. So now let's move into the first quarter results. So I'd say it's characterized by a strong financial result. And this is, of course, on the back of the solid performance on the -- on our base portfolio. So starting with the P&L. We achieved a EUR 394 million EBITDA. This represents a 46% increase versus last year. And the net profit reached EUR 66 million, and that's EUR 28 million above what we booked in the first quarter 2021. We generated 9.2 terawatt hours of clean energy. That's a 14% growth year-on-year, and this is mainly due to the new capacity in operation and improved the renewable resources as I'll show in more detail in a while. EBITDA growth was driven by the impressive performance from the base portfolio. We had very strong financials in Europe due to high average prices and as well as a strong performance in North America, and this is mainly driven by a strong renewable resource.

On the other hand, financial costs increased EUR 20 million, mainly due to the increase in debt associated with the execution of our growth CapEx plan, which this quarter included the Sunseap acquisition, some adverse ForEx impact namely from stronger U.S. dollar and the increase in average cost of debt from 2.8% in the first quarter of 2021 to 3.3% in the first quarter of 2022. We had also an increase of depreciation following the growth of installed capacity some higher taxes and noncontrolling interest, given the improved profitability of operations in which we have minority partners.

Just a quick note on the balance sheet. Net debt increased to EUR 4.2 billion. That's an additional EUR 400 million approximately. And tax equity increased to EUR 1.5 billion approximately, so also an increase versus last year of about EUR 600 million.

So on Slide 15, to highlight the operational performance. So EDPR grew 2.8 gigawatts of wind and solar year-on-year. This is the highest capacity ever installed by EDPR in a 12-month period, and this demonstrates the ramp-up of the company's growth rate. By the end of the first quarter, we had 2.4 gigawatts of capacity under construction, and that is 1.6 gigawatt of wind onshore and about approximately 0.8 gigawatts of solar capacity. At the end of March, we have a portfolio of 14 gigawatts, and this is after successfully completing approximately 1 gig of asset rotation deals. And this portfolio has a very balanced mix across North America with 50%, Europe, 41%, Brazil 6%, and already APAC with a contribution of 3% to the 14 gigawatt portfolio.

So in the first quarter, we achieved a sound operational performance with 35% load factor. That's a 1 percentage point increase versus last year. And this reflects a renewables index, which is 2% higher than the expected long-term average as we call the gross capacity factor. In the back of this, with the result, the electricity output increased 14% year-on-year. And of course, the benefits from the capacity additions and the higher renewable resource which compared to first quarter last year, where renewable resources were 3% below the long-term average. As a result, we generated 9.2 terawatt hours of clean energy in the first quarter, and this means that we have avoided close to 6 million tonnes of CO2 emissions.

If you move now to Slide 16 to look into the price line. The average selling price in the period was 12% higher year-on-year at EUR 58 per megawatt hour. In Europe, the average price increased 15% to approximately EUR 86 per megawatt hour, and this is mainly due to the Italian and the Polish assets. But this is partly offset by Spain on the back of the hedging structures that we have for the generation in Spain.

In North America, average price increased 2% with higher Merchant prices as well. Brazil, average price was 4% higher versus last year on the back of higher inflation. So all in all, revenues increased by 27%, totaling EUR 569 million, and again, mainly due to the additional capacity. So it's a EUR 79 million year-on-year, driven by the capacity, higher renewable resource that is approximately EUR 20 million year-on-year, and the positive ForEx [ relation ] and others of approximately EUR 27 million year-on-year.

So now looking at the net profit on Slide 17. We totaled EUR 66 million. That's an increase of approximately 75% year-on-year. So in total, EUR 28 million more versus the first quarter 2021, of course, on the back of the performance on the top line, which has been very good. Financial costs were up by EUR 20 million. As I said before, this is mainly due to the increase in debt associated to the execution of our growth CapEx plan, including the Sunseap, some adverse ForEx impact, particularly from the dollar. And the cost of debt, as I mentioned, that went up to 3.3% in the first quarter versus 2.8% last year.

Taxes. We had an effective tax rate of 19%. I mean as we've said it, I mean no capital gains were recorded in the first quarter. And minorities increasing EUR 29 million to EUR 61 million on the back of this positive top line performance in the portfolio where we have the minority partners.

On the net debt, on Slide 18 was at EUR 4.2 billion, so that versus December '21, that's an increase of EUR 1.3 billion. This is, of course, as a matter resulting of the acquisition of Sunseap, but also the higher CapEx as the company keeps ramping up its growth. I think it's important to note that we keep a high weight of fixed rate debt. That's almost 90% of the total debt. And we fund our investments in local currency. We -- I mean, of course, this meets our risk management strategy to ensure that we keep assets and liability balance. And overall, the euro and U.S. dollar-denominated debt represents more than 80% of our total debt.

The tax equity, as I mentioned also before, remained mostly flat over the quarter at EUR 1.5 billion compared to end of last year. And just before I hand over to Miguel for the final remarks, last but not least, on ESG, I think the year-on-year evolution reflects an acceleration of the growth. So starting by the environmental performance, we keep 100% of our CapEx fully aligned with the EU taxonomy as a CapEx plan is completely focused on renewables. So we avoided nearly 6 million, EUR 5.7 million to be precise, million tons of CO2 emissions. And of course, we are, as such, actively contributing to the global challenge of the net zero. And we have improved our [indiscernible] with recovery ratios up to 77%.

On the social dimension. And of course, towards the diversity goal, still keep on increasing the percentage of female employees. We increased it to 33%. That's a 2 percentage point improvement versus last year. Health and safety, we had an average of 1.3 work-related accidents per million hours work. This reflects, of course, the acceleration of growth in construction activities and also the size of the portfolio. And from a community standpoint, in the first quarter, we invested something close to EUR 1 million, slightly less than EUR 1 million, which is a material evolution. So definitely also delivering on the ESG targets as well.

And now, Miguel, just back to you for any closing remarks.

[Miguel de Andrade, executive]

Thank you, Rui. so just to finalize a couple of key messages on EDPR performance and the overall environment and outlook. First, reiterating, I think, strong first quarter results, 2% above average renewable resource, 12% increase in average selling price. And all of that resulting in an EBITDA of around EUR 400 million, net profit of around EUR 66 million. So strong growth on both EBITDA and net profit. 6 gigawatts total secured capacity for '22 and '23, representing 86% of our 2022 '23 growth target and with ramp-up trend from '22 to '23.

As I mentioned earlier, clearly much -- a lot of projects moving from '22 to '23. Committed capacity, reaching 9.6 gigawatts with good returns and risk profile. It's approximately 50% of the business plan target, which was for 2025, as you know. A note about the hedges. So we expect that the gradual hedges rollout will have a positive impact on the average selling price over this period, 2023 to 2025. A word about Ocean Winds operating capacity of 1.5 gigawatts as of the first quarter and the total portfolio of 11 gigawatts, so also growing very significantly versus a year ago, so versus the 6.5 gigawatts we had a year ago.

Asset rotation appetite still very high. One transaction closed in April, as I said, another transaction we expect to be closed till this quarter. And we have other deals under negotiation, which should allow us to get more than the EUR 300 million gains expected for 2022. Overall growth continues strong, and we are very well positioned to capture it globally. We now have leading platforms in all of the key growth regions. And so I think that enables us to really focus on executing our plan in delivering on the targets for our strategic plan.

[Operator]

[Operator Instructions] So our first question comes from the line of Jorge Guimarães from JB Capital.

[Jorge Guimarães, analyst]

I have 3, if I may. Firstly, is it possible to give us a clear view about the about the number of megawatts you expect to rotate this year when you say that you're going to deliver more than EUR 300 million of capital gains, but less than EUR 570 million? So this would be the first one. The second one it's a clarification on the CapEx evolution. You mentioned plus 5% to plus 15% year-on-year. I assume that is for CapEx for 2022. And -- what are the first indications about CapEx for 2023 since I assume you already -- you are already closing projects for that date? And the third one is you were mentioning that you are going to delay or move 1 quarter to the other 0.7 to 0.8 gigawatts of projects in the U.S. due to the tariff investigation. If this continues for longer, and if the measures are still effectively implemented, what could be the impact in terms of costs going forward on solar PV?

[Miguel de Andrade, executive]

Thank you, Josh. So just a couple of comments on that. First of all, in terms of the megawatts rotate this year, we're expecting in line with really with what we had in the business plan. We're not expecting, if anything, perhaps even less because we're typically getting more premium, more value per megawatt than we needed. So like we did last year, we ended up with much higher multiples than what we had in the business plan. We're expecting the same this year. So I would say, total number of megawatts, maybe we can get that later, but it will be -- let's say, we're not selling more megawatts to get higher gains on the contrary because we're getting higher multiples, we're actually selling less megawatts to get the same gains.

In terms of the second comment in terms of the CapEx. So that increased 5% to 15% is versus what was, let's say, the base CapEx. And so we were negotiating PPAs on a certain basis for both wind and solar, mostly solar in this case. And what we saw was a significant CapEx inflation, mostly at the end of last year of around 5% to 15%. So it's not, let's say, the overall CapEx numbers, it's more the CapEx per project, and that's what's then reflected in the PPA price. So when we say the 5% to 15% increase, it's because we're then saying, let's say, per project because then that's having an impact in terms of how much we're increasing the PPA to make up for that difference.

On the third question, so the 0.7 to 0.9 gigawatts that we would probably move to 2023. That is circumvention, I mean, I'm not a lawyer, I don't have a specific -- but I believe that they have to have a final investment -- final decision by August. And so let's say that's our base case in terms of when that decision would be taken. There is quite a lot of -- I'm not going to say pressure, but certainly a lot of movement from the industry in the U.S. to see if they can take the decision even earlier because obviously, this is creating a lot of uncertainty, not just for us but for other players like NextEra and others. And obviously, we prefer not to take an investment decision until we know exactly the impact of that investigation.

So I'd say August is, let's say, the long stop date. I think the Department of Commerce has to issue its preliminary determination within 150 days, so end of August of 2022. And so I think that's, let's say, the -- what we're working in. Having said that, there's a lot -- there's a big movement and a big push to actually get a determination before that. So the industry can take a -- to take that decision or start moving forward with the construction earlier. I mean there's actually some comments by the solar industry, which talk about perhaps half of the forecasted deployments in 2022 being delayed. I mean it's the Solar Energy Association. We talked about that delay and sort of -- and obviously, they're pushing hard so that, that decision can be anticipated to reduce that impact, otherwise, as they say, you could lose half of the deployments in '22 as a result of that. I think that's pretty much it.

[Operator]

Our next question comes from the line of Alberto Gandolfi from Goldman Sachs.

[Alberto Gandolfi, analyst]

Three, please. The first one, can I please have some comments on the first quarter CapEx. How much of the organic CapEx, excluding what you paid for acquisition is actually a function of an upgrade versus your own business plan versus perhaps some projects that were delayed at the end of last year and maybe overflew in the first quarter? Because it seems to me the CapEx is growing I was just trying to separate the 2 effects.

The second question, just to be clear on CapEx cost inflation. When you say 5% to 15%, you just commented on that, but just to be crystal clear, is it on existing projects you are developing for '22, '23? Or is it 5% to 15% on marginal new megawatts that now you've just been awarded and you've just contracted right now? And I guess the same on the 10% to 15% PPA increase. So I assume this is on new projects, but just trying to see from some of the existing projects, there's also some CapEx cost inflation we should account for.

And the last question is on the Spanish pricing reform. What is your understanding of the reform. So the idea of having a cap at EUR 40 growing to EUR 50-megawatt hour. What do you think will be the impact for you. Do you expect EUR 120, EUR 150 megawatt hour price and that's it? Or do you think that potentially the gas clawback will be extended and it will be also applied to forward sales? So how should we think about the merchant portion of your Spanish portfolio? .

[Miguel de Andrade, executive]

Thank you, Alberto. Maybe just in terms of some clarifications and I'll pass it also to Rui regarding the organic CapEx. But on your second question, just to be crystal clear, so I'm talking about marginal new megawatts. So -- and we've highlighted that in previous calls. So for what was already under construction, what was already been built, that's all locked in. It's really for the marginal megawatts that there is this inflation on the CapEx side, which also resulted in an inflation on the PPA increase. So it's marginal. So for example, for new PPAs that we are negotiating now, we're looking at let's say, the latest estimates from the solar panel manufacturers and BOPs, et cetera. And that's, let's say, where we're seeing that increase, and that's what we're also reflecting in the PPA price.

In terms of the Spanish pricing reform, then we could have a debate about an hour, well, about this topic. I think the most important thing I can probably say is it's still not clear. And the full extent or the full impact, given that not a lot of details have been released. Yes, let's talk about the EUR 40 to EUR 50 per megawatt hour on the gas and what that obviously has an implication in terms of electricity price. In terms of the duration, also, there's talk about the 12 months, which would take it to probably the end of first quarter, second quarter of 2023.

I think in terms of the impact on gas clawback could potentially be extended. I would say that -- the impact of the cap, we don't expect it to be -- I mean, to really have an impact on us because typically, we are taking investment decisions on -- based on long-term PPAs and sort of auctions. And what is in the market is typically already hedged or certainly, weren't expecting prices above the EUR 40 to EUR 50 per megawatt hour gas price implicit in the electricity price of 100 to 150 thereabouts. So I'd say we don't expect to have a negative impact basically bottom line. But listen, it's still early. I think there's a lot of details that still need to be come out clearly in this -- in something like this, the devil is in the details. And -- and so I'd prefer to reserve more comments for probably a later stage.

[Rui da Silva Teixeira, executive]

Alberto, it's Rui here. I mean, regarding the first question, I would say, I mean, it's definitely a mix, and we definitely can follow up in more detail off-line. But it's definitely a mix of some of the CapEx, which is still from late Q4 additions that just materialized in the first quarter, and also from the 2.4 gigas that we have under construction. But I would say, I mean, it does reflect the ramp-up in terms of growth in terms of installations. So it's much more volume related. And of course, I mean, mix, depending on what are the mix of geographies and projects that we are building. But it's fundamentally driven by the volume and mix from the business plan. But we can follow up in detail offline.

[Operator]

Our next question comes from Javier Garrido from JPMorgan.

[Javier Garrido, analyst]

I would like to follow up if I may on the circumvention proof in the U.S. because what happens is if the investigation finds that circumvention has actually occurred, the duties that are being discounts, 50% to 150% are very significant. So what could that mean for the industry and EDPR? Is there are going to be a total stoppage in capacity ratios for the next few years in U.S. solar?

The second question would be on your capacity secured for '22 and '23. You have secured now 6 gigawatts out of the 70 gigawatts that would come from an average of 3.5 gigawatts. Are you in time to have the missing 1 gigawatt? Or should we assume that such capacity could only come in '24, '25? Then a third question would be on Spain. I wonder if you have the number, but what would have been the price achieved in Spain, you have average load factors, because I assume that part of the heat comes from being over contracted due to the lower load factors.

And a final question, if I may. What is the estimated impact on EDPR on the -- from the change in the regulatory renewals in Spain, the decision of the Spanish government to bring forward the date of the recalculation of prices and the subsidies going forward?

[Miguel de Andrade, executive]

Okay. So on the different topics. On the anti-circumvention, so what happens? First, I think if the decision was that there would be some issue, we would obviously have to go back to the offtakers and either renegotiate or pull the project. I mean drop the PPA and renegotiate new ones or renegotiate with the current ones. So I think that's why we are being slightly more prudent here in the sense of just holding on for a couple of months, we think it's worth, let's say, holding back, making sure that we have full visibility on this before moving forward with the start of construction.

So I'd say that what happens is that we go and we renegotiate based on the, let's say, on the whatever tariffs are finally determined. I mean the tariffs -- so 2 decisions. One is whether or not this -- whether the Department of Commerce thinks that this has any validity. And that, let's say, I think the consensus is that it won't go ahead, in any case, but still, let's say, we've seen where the things happen. But the second thing is what would be the rate that would be applied. So I mean, obviously, it could be high rates, but it could also be much lower. And to be honest, we've also heard that in some scenarios, it could be lower rates, which would be manageable.

So we just prefer to hold off a little bit, get that additional visibility so we can really move forward. As I said, we're not in the business of just doing megawatts for the sake of doing megawatts, okay? So we want to do megawatts but make sure that we have good profitable megawatts and we're getting the investment returns and profile that we like. And so for that, we need to just be comfortable with whatever is the decision that is coming out of there. Hopefully, it'll be sooner rather than later. So before August, certainly, we're pushing for it. The whole sector is pushing for it.

In terms of your second question, so as you say, we have 6 out of the 7. We're still working towards reaching the 7-plus in this time period. So we have -- we certainly are not assuming -- certainly not as of now that we're moving this to '24 '25. So I think there's still time to still fit in a couple of more projects for 2023, difficult in '22, but certainly for 2023, we still think there's space to close that gap.

On the third question, I don't have the specific numbers that I'll pass it over to Rui, maybe he's already has that. On the fourth one, I'd just say that we consider that it's generally positive. It's something that would be reflected probably in the future quarters and months. We're not providing let's say, numbers on that. But generally, I would say it's positive. All things considered, in any case, I'll pass it over also to Rui on the load factors.

[Rui da Silva Teixeira, executive]

Javier, so I mean, we had a lower production in Spain of around 140 gigawatt hours versus what we expect in terms of long-term average. This meant that we have about an impact of around EUR 31 million less revenues because of that and given that we have those hedges in place. So I think this basically addresses your I mean your question, so it's about -- you can consider around EUR 31 million impact in revenues.

[Operator]

Our next question comes from the line of Arthur Sitbon from Morgan Stanley.

[Arthur Sitbon, analyst]

I have 2. The first one is on the impact from, well, intervention in Romania. You mentioned that's a material short-term negative impact. I was wondering if you could quantify that on EBITDA by any chance. And my second question is that while basically, we're seeing some of the main equipment suppliers of -- renewable equipment suppliers having quite a tough time at the moment, I was wondering if you could share or at least give us a rough idea of the breakdown of your equipment supplier mix, both in solar and onshore wind.

[Miguel de Andrade, executive]

So in terms of the intervention in Romania, which is basically a clawback tax above a certain level, I think, [ EUR 450 million ]. I would say that the impact is expected to be probably mid-double digit pretax EUR 1 million EBITDA or pretax, if you want. I mean we have been able to mitigate a big part of that impact. Initially, we thought it would be higher than that. But as I said, Currently, we're estimating it at mid-double digit. Part of that's already been recognized in the first quarter and another part will be recognized over the next couple of months. But so this mid-double digit. Part of that is already in the numbers of the first quarter and the rest will be over the next couple of months. In relation to the second question, I think we'll probably -- well, I'll pass it over to Rui, but I think we probably need to get back to you with more specifics. I'm not sure we have the numbers off here with us.

[Rui da Silva Teixeira, executive]

I mean, yes, we can follow up off-line in terms of more detail, but just to give you a sense, in terms of wind onshore and naturally keep working with the Vestas, GE, Siemens Gamesa and Nordex, so the main Western Union players. In the solar -- in the modules, we have been working with LONGi, with Trina, also discussing Boviet. So we can follow up in more detail in sort of the allocation.

[Operator]

Our next question comes from Jenny Ping at Citi.

[Jenny Ping, analyst]

Two questions from me, please. Firstly, just going back to the 12% that you talked about in terms of the increase in average selling price -- my understanding is that there was an exceptional boost from Moray East, where you haven't contracted the ramp-up period, and that's effectively skewed some of the numbers. Would you be able to give what that number would be if you ex out effectively this one-off as Moray East then rolls on to the CFD contract?

And then secondly, just going back to the OEM, previous question. Let me ask a slightly different angle. Obviously, all of these OEMs are in some form of financial trouble, whether it's Vestas or GE or Siemens Gamesa. Are you seeing them actually coming to you to renegotiate -- or sorry, negotiate contracts going forward, not the existing contract, but looking forward, on how they can pass through additional risks to you, whether it's input cost or any other factors? Or are you -- or do you have any confidence whether you can sort of pass on any additional margins that they would like to make going forward? -- to ultimately through to your PPAs? Because I understand there's 1 thing passing through the rising input costs, and that you can explain quite easily, but to pass on margin somebody else could potentially make to your end consumers through the PPA, that's presumably going to be more difficult.

[Miguel de Andrade, executive]

Right. So on the first one, Moray East is not included in the plus 12% selling price. So because it comes in through Ocean Winds as an equity method, it's not incorporated as part of the consolidated numbers or sort of, let's say, on the -- it's not fully consolidated, so it's not in the numbers that we're presenting when we do those comparisons. So it would not impact its, let's say, independently of how long Moray continues working in the market, it's not going to have an impact on that selling price.

On the second question, listen, I think it's in everyone's interest that we have a healthy ecosystem and across the whole value chain. And that means that everyone needs to be making money. I mean at the end of the day, this is a business for everybody. And so it's normal that not only ourselves, but also the OEMs should have not only recovering their variable costs, but also be making some profits. I mean that's what we have no interest in them losing money, because then it will not be sustainable in the medium, long term. This is a question of pricing. And clearly, there is -- not that they're coming to us to renegotiate. I think for new PPAs or for new CapEx estimates, they are providing their best estimates and obviously, the competitive market. So we will go with whoever is most competitive.

But I assume that they're passing through, let's say, the pricing that they think is adequate given all the context. That's what we're then using to price PPA. -- we're not looking at whether it's coming necessarily just from commodity price inflation or whether it's coming from margin. I mean we're not -- let's say, it's not transparent to that extent. So we are reflecting the CapEx, estimates that they give or the costs that they give us independently of the source of why that's rising.

What I think is important to note, and I mentioned it earlier, but I think it really is important I mean renewables was already incredibly competitive before the energy crisis. I think now the impact is -- I mean it's just much more competitive. When you have wholesale prices at EUR 150, EUR 200 per megawatt hour. And we're discussing whether an increase in PPAs from 52 -- or sorry, from EUR 30 to EUR 35 or EUR 35 to EUR 40. I mean it's still incredibly competitive and certainly much lower than sort of the gas prices and wholesale prices.

So I think clients are have been quite receptive to looking through that and just incorporate whatever is the right PPA price to develop the project. And so that's what we're seeing. I think we just need to be careful is when there are market dislocations as happens over the last 6 months, that's why we did take some time out to renegotiate it because we were hit by dislocation. But once it's stabilized, whether it's higher or lower, then it makes it easier to then proceed with the PPA negotiations. Hopefully, that helped answer the question.

[Operator]

Our next question comes from Olly Jeffery at Deutsche Bank.

[Olly Jeffery, analyst]

Thanks. Three questions for me, please. The first one just is on the capital gains guidance, it's a second year in a row now where you guys achieved very good prices on a per megawatt basis. If you were redrawing the business plan today, do you think given the fact you've had 2 years of good prices, that gives you more confidence that these high prices could be sustained?

[Miguel de Andrade, executive]

So we lost the connection, I think.

[Operator]

I think you've lost him, unfortunately. I think he's dropped out. So I'll just put through the next question, which -- or would you like to continue answering what was already asked.

[Miguel de Andrade, executive]

Perhaps -- well, if he's drop off, maybe we'll come back to that when he's back on.

[Operator]

Okay. So the next question comes from the line of Manuel Palomo from BNP Paribas.

[Manuel Palomo, analyst]

I'll stick to 2. The first one is again on asset rotation. You give a guidance of above EUR 0.3 million -- sorry, EUR 0.3 billion for the period. However, looking at the first transaction, this [indiscernible] transaction on the multiple, I mean, I see that the number of megawatts needed to reach that EUR 0.3 billion is going to be, I think, much lower. I mean, at the strategy update, you mentioned that you would be targeting between 1.4 and 1.5 gigawatts. And looking at these selling multiples, either you will need to include much lower amount of megawatts or the most recent signed deals maybe draw a much lower unitary gain. Any color on this will be helpful. And also if it is the case of multiples remaining healthy, if you are already considering selling less megawatts and sticking to a similar total amount of net megawatts, given that you're going to have lower installations in the year 2022.

And the second question is a bit on the weight of the different geographies. The U.S. was in the last many years, that's a key market for EDPR. And I appreciate the increased diversification to Latin America and others. But -- my question is whether the weight of the U.S. will remain the same or any type of hurdles such as this regulatory uncertainty in the U.S. could modify the initial expected weight of the U.S. in the future growth of EBITDA? And in that case, if other geographies could be enough in order to compensate a drop in the U.S. installations.

[Miguel de Andrade, executive]

So I think in relation to your first question, as I mentioned we will be above the EUR 300 million gains, but not reaching the level of 2021. So 2021, we showed EUR 530 million of asset rotation. Our expectation as of today is that we will be below that number for 2022. That's above what was in the business plan, okay? So somewhere in between. I think we are getting healthy multiples, as you mentioned, and we will continue to do that. And as I mentioned, not just in the other transactions, the Spanish portfolio, which we expect to close this quarter, but also in the other 2 that we're seeing already nonbinding offers, which are pretty healthy or a very healthy as well.

So I think that's definitely a good trend. Will we sell less megawatts? I think I said it before, but -- we are very much focused on the balance sheet and on the proceeds necessary to, let's say, to be able to continue to finance our growth while keeping the healthy balance sheet, so the BBB. And that's really what drives, say, the volume of asset rotations that we do. If you can do it with less megawatts, then we'll do it with less megawatts. I mean we're not going to sell more unless we don't find a way -- because we want to then grow more then we'll think about it. But we're not going to do more megawatts just to get more proceeds just for the sake of it. So I think that hopefully helps answer the first part.

In relation to the second question, I mean, it's a great question. And really, I'm glad you asked it because it gives me an opportunity to talk about the value of our diversification -- geographic diversification because it really shows that sometimes some markets slow down for some unexpected reason, anti-circumvention in this case. But generally, the U.S. has, over the last couple of months, has had some uncertainty around it, which you expect to be transitory, to be very clear. But in the meantime, we see a lot of growth in other markets. So we see Europe clearly ramping up in terms of their ambitions. You've seen Germany, you've seen many other countries, so really increasing the level of ambition. We see Asia Pacific, we see LatAm. So I think that allows us to really go on managing our portfolio and maintaining a relatively high level of growth and build out. And some market is a little bit slower. Maybe it's a good opportunity in another market, and we'll take advantage of that.

So going forward, long term, we expect the U.S. to continue to be the main market, as a stand-alone market. So the U.S. clearly has a huge opportunity there. It all has had, and we believe it will continue to have. We're currently going through a slump in 2022, but it doesn't change our medium long-term outlook on the U.S. But we will be, let's say, because we are in other markets, we will be able to invest in other markets sort of and ride out slightly slower year for the U.S. But as I say, 2023 for the U.S. looks good, '24 and '25 are already beginning to see good projects coming up. So I don't think it's changing our structural long-term view of the U.S.

[Miguel Viana, executive]

Actually, we lost Olly so maybe we'll follow up with Olly on private. And then I think we can go to final remarks by our CEO, okay? Please, Miguel, just if you want to go for final remarks.

[Miguel de Andrade, executive]

No, I think just in terms of quick final comments. So I think it was a good quarter. The last couple of quarters, we've had some bad wins. And particularly, when you look at last year, this time last year, we were talking about the solar -- the polar vortex in Texas, and we're talking about a very low wind capacity in the U.S. in general. And clearly, this year, it's different. We are looking at a much higher renewable energy resource in most geographies, excluding perhaps Spain. That obviously translates into better numbers, both EBITDA and net profits. We've talked a little bit about some of the impact on the net profit line in terms of the financials. But overall, I think, pretty strong numbers.

I'd say that the 9.6 gigawatts is a good number. We really accelerated over the last couple of months. And we talked about that. And I think showing this jump of the 1.1 gigawatts just in the last couple of months and the overall almost 50% of the business plan target, I think that gives us good reason for confidence. I think the fact that we are looking at the higher energy prices and seeing opportunities there as the hedges roll off, that will be an upside. And I think even some of the recent changes of the regulation in some different countries, net-net will be positive. So -- we'll talk about that for sure, over the next couple of quarters.

Ocean Winds, I think, very positive over this quarter, quite frankly, I mean, Scotland, New York Bight, South Korea, continuing to work on -- just recently, I was in Poland and then sort of seeing some of the opportunities there. So I think that's also given us good reason to believe Ocean Winds is really doing well and has great opportunities to continue to grow. I mean Moray East is a great example. We built Moray East pretty much on budget before time. And it's obviously having -- creating a lot of value just in these months.

Overall growth, I said it, but I'm going to reiterate it because I really believe it. We were very focused on the growth in renewables because it's a good business towards one hand or primarily, but also because it was very much aligned with our ESG targets and meeting the Paris Agreement, doing the energy transition. But now things like energy independence and just the predictability of renewables, the fact that you can lock in these 10-, 20-, 30-year prices that are fixed, we're seeing a lot of, let's say, the government is really reacting to these issues and really moving it up on the agenda. There are short-term challenges, for sure, the regulatory uncertainty in the U.S. licensing, permitting, having access to the interconnection that those continue to be challenges, and -- but listen, that's part of the business, otherwise it'd be too easy. But I do believe that certainly medium, long term, this continues to be -- we should continue to see very strong growth prospects going forward.

So we'll be back in the next couple of months to talk about how the business is doing, but I'm sure we'll have good news to tell you. So thank you.

[Operator]

Thank you for joining today's call. You may now disconnect your lines.