Acciona SA

MAD:ANA

Earnings Call Transcript 2022-Q2

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Good morning. Welcome to the Acciona First Half Results Presentation for year 2022. With me today, my right, Pepa Chapa, our Investor Relations Director; Jose Angel Tejero CFSO. And in the room, we have Luis Castilla, who's the Head of Infrastructure business; Andres Pan de Soraluce, Head of our Real Estate business, Quique Perez-Pla, Head of Bestinver; Carlos Sotelo, Head of Mobility; Juan Muro-Lara, Corporate Development and Strategy Officer at Jose Luis Blasco, Head of Sustainability.

Let me start by highlighting the main figures of the first half of the year in which Acciona reported a strong EBITDA growth in the first half of 66% -- plus 66% versus ’21 and 36% net income increase versus ’21, driven mainly by Acciona Energia and better construction margins, despite a challenging inflationary environment.

Also during the same period, our infrastructure backlog has reached an all-time high of EUR20.6 billion, which is an increase of 14% over last year. Bottom line results were significantly affected by an impairment of our assets in Ukraine and by the Nordex negative first half contribution, EUR35 million negative and EUR108 million negative, respectively. During the period, we invested a total of EUR1.217 billion, in which, EUR770 million were in energy and EUR447 were in sustainability for such solutions.

All in all, it was a good half and we managed to overcome significant challenges all over our business areas. The Energy business, as we all know, continued to thrive and despite a very volatile regulatory environment, despite supply chain tensions, significant network curtailments and low resource. In general, Acciona Energia had an excellent first half.

For the medium term outlook, notwithstanding some short term delays in the 2022 new capacity targets, we do reiterate our medium term objectives and expect to be doing most of the catch up by 2023. Our pipeline continues to grow, both in volume and in expected returns. As for demand from private clients is very strong and higher CapEx costs are quickly being absorbed by significantly better PPA prices and indeed medium term projections for merchant prices.

We are, of course, very concerned about the regulatory and tax volatility, but not only because of the impact in our P& L, but also because we believe that these arbitrage decisions significantly increase the risk perception and the cost of capital, hence, deteriorating the asset values and the propensity to invest in those countries where regulatory volatility become endemic. Globally, however, renewable energy continues its unstoppable race, having increased by more than 60^ over 2020 and continuing its strong growth over the first half of 2022.

The evidence is becoming clearer that sustainable infrastructure is the best -- probably the only option for mitigation, adaptation, resilience, and of course, to counteract the effect of the negative economic cycle. But the size and the complexity of the project has increased over the years to an extent that only a few global companies are suited to address them. These two concurrent trends, sustainable infrastructure demand on the one hand and project size complexity on the other has resulted in a significant improvement in the risk reward equation of the industry and a record backlog.

And among the essential infrastructures of the future, water and cities deserve special attention. Climate change is worsening the secular water deficit deriving from population growth, providing water where it is most needed should be a global priority and today reverse osmosis desalination has become the only possible solution in a growing number of regions around the world. Testament to this urgent necessity, and of course, to our team's excellent work our water business has obtained a new historical half year sales record with EUR560 million in revenues, maintaining our now 10 year leadership as the world's largest desalination company.

Acciona credential in this area, coupled with those in renewables place us in a privileged position to lead the path towards water scarcity solution. Not only from a human consumption point of view, but also possibly for agricultural use with incredible global consequences that would entail. Major infrastructure projects that transformed cities is another of our strategic priorities. Projects such as the one we are developing in Sao Paulo, the Line 6 Metro is a good example of the capability of sustainable solutions to transform cities. And the effectiveness and high technical qualification of our teams to embrace the complexity of this kind of project. You can find more examples of these in Norway, Canada, Philippines or Australia. Now Australia, being our first market for infrastructure globally.

We have woken up from the pandemic with a different vision of the spaces we live in, the cities, shifting the center of gravity from cars, from people, or regenerative developments. In this transformation of new more sustainable urban spaces, the experience and focus of our real estate division is becoming a reference in main cities flagship urban regenerative development. Among them, the recently inaugurated space developed in collaboration with [indiscernible] in Madrid, Hombu, will soon be recognized as an iconic project in sustainable urban transformation.

And continuing with the sustainable transformation of cities, in electric mobility our sharing business continues to improve after a hard period of reduced urban activity. Our two wheel vehicle, the [Cylance] (ph) Motorbike, has consolidated as the bestselling electric motorbike in Europe. And our urban electric microcar is quickly approaching market readiness, hopefully by the beginning of next year. In parallel, we are increasing our presence in the mobility landscape through a strategic partnership with Embraer in eve, one of the most promising EV toes, electrical vertical takeoff and landing vehicle projects globally.

Finally, Westinberg, despite a very bad first half in equity markets, continues to grow in the infrastructure fund side, which is a line of business that can eventually become a key complementary advantage to Acciona’s infrastructure and concession activity. By driving the decarburization of the economy, regenerating cities, ensuring water supply or providing clean urban mobility, we are creating a truly distinct portfolio of assets and solution focusing on making a sustainable future possible. But while providing sustainable solutions is our strategic long term objective, in the shorter term we strive to continue to be a major source of wealth for countries and social protection, employment, inclusive development or tax contribution.

To put this in context, our total tax contribution in 2021 was EUR0.3 billion, four times our net profit and six times our dividends. The dividends we paid to our shareholders naturally. We directly employed 44,500, 5,500 or 15% more than the year before. And we are proud to say that our operations globally granted revenues of over EUR5 billion to our suppliers. As I said, beyond our contribution to social welfare, employment, economic development or social progress, we work to deliver sustainable solutions to major global challenges. We believe this is a new critical sector, one that will allow the world, as we know it, to thrive towards a brighter future.

We very much appreciate the support of the financial community, your support, in helping us work in this direction. Thank you for your attention. And let me hand on the floor to Jose Angel Tejero, Chief Financial and Sustainability Officer.

[Jose Angel Tejero, Chief Financial and Sustainability Officer]

Thank you, Jose Manuel. Good morning, everyone. I would like to start with the key financial highlights of the group for the first half of the year. As you can see, revenues grew by 46% and EBITDA grew by 66%, mostly driven by energy. Acciona Energia EBITDA grew by 81.7%, while the EBITDA contribution from the rest of Acciona Group grew by 8.5% relative to the previous year. Below the EBITDA level, the results include an impairment of our recurring assets for EUR35 million. After this impairment, the net book value of our assets in Ukraine has been reduced to EUR34 million.

The results also include a negative contribution of our stake in Nordex of minus EUR108 million versus minus EUR18 million in the first half of 2021. Attributable net profits reached EUR201 million, 36% more than the same period of last year. We have invested EUR1.2 billion in the first six months of 2022, our net financial debt at the end of the year stands at just above EUR5 billion versus EUR4.3 billion at the end of December ‘21.

Moving on to slide -- going to slide seven. You can find our ESG highlights and key environmental and social performance metrics. Even though the execution phase of some of the infrastructure projects causes some indicators to decrease, the evolution of sustainability indicator has been very positive in almost all categories, related to people and planet. We would like to highlight the 85% increase in the number of projects with social impact and 91% of the company's CapEx is aligned with the European taxonomy. On top of that, for the second year in a row Acciona has been included in the 2022 Carbon Clean 200. And for the third year in a row, Acciona has reached the highest class in the S&P Global sustainability year book. In relation to sustainability finance, we have launched in the first half of the year seven green financing deals and two operations linked to sustainability commitments.

In slide eight, we provide you with details on the investment by division, which reached a total amount of 1. -- a little bit more than EUR1.2 billion, most of it in the energy division. Acciona Energia invested EUR770 as was explained yesterday in detail by the Acciona Energia team. In Infrastructure, we have invested more than EUR143 including around EUR100 equity commitments in our concessions portfolio, mainly in line six of the underground of Sao Paulo in Brazil, which is our main concession asset. The figure also include a positive EUR20 million obtain with the sale of part of our stake in the [indiscernible] concession in Canada.

Our activities with total investment of EUR223 million includes EUR139 million invested in the capital increase carried out by Nordex in June, which was 100% subscribed by Acciona. As a result, Acciona’s stake in Nordex went up from 33.6% to 39.66 % and the subscription price was EUR8.7 per share. Also, as we all know, during this month of July Nordex has carried out another capital increase of EUR212, of which, we have subscribed slightly above our proportional stake. After that, we currently own 86.8 million shares of Nordex, which represent 40.97% of sales capital. The commitment of Acciona with Nordex is explained by what in our view is one short term -- one off liquidity needs due to volatile operating environment, but also strong and medium long term growth prospects for larger and efficient turbines.

And obviously, also Acciona Energia development pipeline is strongly geared to Nordex product, which give us a lot of confidence in the company. Investments in other activities also includes EUR28 million allocated to Eve and Embraer subsidiary in which we have invested to participate in the development of our global and sustainable urban air mobility ecosystem. We have also invested EUR82 million in property development in the first half of the year, which includes the acquisition of land bank for EUR29 million.

On slide nine, you can see the main cash flow items that explain the evolution of the net debt during the first six months of the year. The most important moving part has been, obviously, the EUR1.217 billion net investment already mentioned, working capital outflow of EUR169 in the first half of the year is very much in line with the same period of previous year and in line with its usual seasonality. And we see working capital evolution for the rest of the year to remain flat.

Financial results amounted to EUR75 million have been 20% lower than in the same period of last year. And it is mostly due to the reduction in corporate debt cost achieved post IPO by Acciona Energia in the first half of 2022, and the lower volume of debt of the group as a whole in June ’22 versus the same period in '21. Other operating cash flow includes mainly taxes, minority interest, and the operating income of associated companies. As a result, we have finished the first half of 2022 with EUR5 billion of net debt.

Going to slide 11 and going to the numbers of Acciona Energia, the operating results. We present the main operating and financial data for Acciona Energia here. I will not elaborate much of Acciona Energia, given that it has already published its first half result in full detail yesterday. Revenues grew by EUR112 million to EUR2,206 million and EBITDA grew by 81.7 % to EUR909 million. Mostly due to the Spanish business. International EBITDA fell versus last year, given that in the first half of 2021 it included extraordinary results obtained in the US markets related to the storm in Texas.

In terms of capacity additions, total installed capacity stood at 11,2012 megawatts at the end of the first half, while consolidated capacity stands at 9,328 megawatts, a 2.2 % increase in the last 12 months. At the end of June, we had 2.1 gigawatts under construction, which is paving the way for a strong acceleration in the new megawatts in 2023. Expected additions in 2022 now stands at around 540 megawatts, relative to the 830 megawatts initial target and it is due to delay in installations in the US. Lastly, total and consolidated productions remained fairly flat, with weak results in Spain, both in hydro and wind and worse unexpected production outside of Spain. By geographies, production decreased by 5.9% in Spain and increased by 6.6% abroad.

And in the next slide, you have details of Acciona Energia construction plan. We have started construction of close to 1.5 gigawatts in the first half of 2022, taking the total to 2.1 gigawatts under construction. Which will be maintained at the end of the year with the completion during the second half of close to 500 megawatts and the start of construction of a similar number of megawatts in the second half of the year. In 2023, we are going to see an important increase in the number of megawatts installed with the completion of the bulk of the McIntyre project in Australia.

Thank you. Let me hand the floor to Luis Castilla to talk about the Infrastructure business.

[Luis Castilla, Head, Infrastructure]

Good morning. I’m Luis Castillo, CEO of Infrastructure. Supported by the strong healthy backlog that will be analyzed later today, we have been able to recover our growth path in terms of revenue, reaching a historical maximum of EUR2.65 billion in the first semester of 2022. This figure represents an increase of 21% over the same period in '21, and mainly comes from the 25% recovery of our construction business and 9% of our water business.

As per EBITDA, we are already on track with a whole figure in the division of more than 5.6%. This is thanks to a good EBITDA of the water business with 7.8%, our solid concessions EBITDA and the good capacity of response and performance in our construction activities with 5.6% of EBITDA. The 4.2% EBITDA that appears on the presentation is due to the negative impact that some specific industrial EPC contracts have caused on the conventional civil construction activities in 2021 and 2022. Effect that will disappear in the short future.

The first half of '22 has followed the positive trend we achieved in 2021 in terms of new awards won. We have obtained more than EUR4.5 billion in new contracts in H1, implying that our backlog is above EUR20 billion. This number includes EUR15.4 billion in Acquisition and cost structure activities. If we take into account the backlog associated to our activities that are consolidated by the equity method, for example, most of our concessions and some of our water activities. Our total backlog number at the end of H1 ‘22 is close to EUR30 billion.

Here you have in this slide a map showing our international footprint with some of the major projects in the different regions. In blue, you can see the new big projects added in ‘22. It is worth to mention that 74% of our revenues is allocated in OECD countries with Australia and Spain as our two fresh countries with 17% and 20% of backlog. The rest of our projects are distributed among the rest of Europe, Poland and Norway. Mainly, LatAm, the Middle East and North America. And our remaining 4% in one of our growing markets in Southeast Asia.

As you can see, H1 ‘22 has been a semester of very good performance in terms of new awards. I would like to underline our capacity to originate, develop and win, a well geographically diversified and healthy portfolio of very iconic contracts. As mentioned before, the Construction business has achieved in the first half of 2022 a 25% growth in revenues, having a strong presence in Brazil, Australia, Norway and the Philippines. Australia has consolidated its position as Acciona’s main construction market accounting for 35% of construction revenues in H1 ’22, compared with 27% at the end of August in 2022, prior to the Lend Lease Engineering acquisition. In terms of EBITDA, we have achieved a good recovery from the COVID-19 slowdown, mainly working focused on profit, efficiency and risk control throughout the whole life of our projects from origination, to final delivery.

In this sense, the construction EBITDA margin has increased to 4.2% compared to the 3.5 % we have at the same period in '21. New awards in '22 are following the good trend of '21 with almost EUR4 billion of new projects awarded in H1. With awards such as the Line 11 in [indiscernible] Metro, Palma de Mallorca, El Paso, Los Edena Hospital in Chile, McIntyre Wind Park in Australia or [indiscernible] in New Zealand. We are consolidating our presence in Nordic countries with our first contract in Finland and alliance contract of around EUR500 million. There is a clear global trend to increase the demand for large and complex infrastructure projects worldwide, where Acciona is one of the few players with the skills and size to address them.

In the short term, we are handling the current challenging cost of materials, energy and logistics increased situation. We are focused on risk management and a strict cost control. We are active in product negotiation with our clients and we are incorporating higher contingencies in our current bids. It's important to mention that in our concession business, growth rates are distorted by the assets sold throughout '21. Therefore, the fall in EBITDA is due to change of perimeter for the assets sold last year. In the first half of 2022, our concession business has managed to close a long term nonrecourse financing for Lalinea sales of metro in Sao Paulo being the first of its kind and size in the country.

There has been a partial divestment of a stake in the [indiscernible] Parkway Highway in Canada, implying a multiple of EUR5.2 millon over the invested capital on an average of 40%. In terms of new developments, concessions has submitted bids with a total associated investment of over EUR4 billion, EUR 3.1 billion in Australia, Chile, Peru and Colombia. We have been prequalified for the first transmission line concession in Australia, Central Westorona Power Station in New South Wales involving an investment of more than AUD5 billion. In 2022, our concession business has progressed its strategy as global sustainable greenfield developer with a clear focus on deploying capital in new greenfield profitable projects that can provide long term steady cash flows, leveraging on the group's technical and financial capabilities.

The outlook for the concession business seems very promising. The team is working on the origination of new opportunities and is currently working at geographical and sector diversified pipeline of more than 75 projects worth over EUR86 billion all around the globe. Our concession business is currently working on the launch of newer sustainable complementary business, such as transmission lines, district heating, data centers that can provide further diversification to our portfolio and are complementary to our management and operational capabilities. These activities will start contributing additional stable cash flows to the concession business in the coming year. We expect to win three to four new projects per year in the ’22, ’26 period.

Regarding our Water business, the first half of 2022 has been extremely positive in sales with a new historical half year. Sales record with a 9% increase compared to H1 ‘21. And in particular, a significant jump in the water concessions area due to the increase resulting from new international contracts, such as the contract for the management of the integral water cycle in Belaku in Mexico.

Due to higher energy costs in our O&M contracts, we have experienced a slight EBITDA margin erosion. We continue with a significant presence in the MENA region, which account for 56% of revenues, mainly in the Middle East, but also in North Africa. We have also consolidated our presence on the conventional water treatment international business. We have won this half year several new wastewater treatment contracts in BOT format in Medina, Buraidah and Tabuk, all of them in Saudi Arabia. A new integral water management service in the south cluster also in Saudi Arabia or the O& M contract of Bahr-al Baqr, the largest wastewater treatment plant in Egypt and Africa.

Finally, it is worth to mention that Acciona has maintained its leadership on the large scale desalination projects. As the world's largest desalination company by cumulative capacity in the last 10 years. In particular, the last major desalination project that we have won this year is the [indiscernible] designation plant in Chile for the company [indiscernible].

And that's all from my side. I would like to hand over to Andres Pan de Soraluce. Thank you very much.

[Andres Pan de Soraluce, Head, Real Estate]

Thank you, Luis. Good morning to everyone, and thank you for the opportunity to give an update of our first half of the year in our real estate division. Starting with our key financial figures, revenues in the first half of the year amounted to EUR25 million, which is 35% less than the first half of 2021, due to the different timing in 2022 relative to last year. As we expect to have most of our deliveries in the next six months. So far, we have delivered 108 units compared to 156 during the first part of 2021.

EBITDA in the first half is minus EUR9 million, but I would like to highlight that the contribution margin of the deliveries in the first half improves relative to 2021. We expect 80% of our annual deliveries to take place in the second semester, more than compensating the EBITDA performance in the first half of the year so that we achieve our positive EBITDA expectations for the full year. We have a very high degree of visibility on this as 96% of the pending deliveries this year are already sold.

In terms of gross asset value, we have a total of EUR1.5 billion, of which, 83% of the value, including our rental properties is located in Spain and 17% abroad. The gross asset value has increased 9% relative to December 2021, in line with our budget of land acquisition and works schedule. We have a total backlog of 1,628 dwellings pre sold, that represent in aggregate EUR536 million of revenues with an average selling price per unit of EUR329,000 versus EUR300,000 in June ‘21. 264 units are out of this backlog were presold during this semester, in line with our budget.

During these months, we have acquired land plots for EUR29 in aggregate, which give us the potential to develop another 350 new dwellings and 105,000 square meters for logistic uses that are strategically located next to one of the most important airports in our country. In addition, we are currently negotiating new land acquisitions that will allow us to develop around 500 additional residential units, 50% located in Madrid.

In the bottom -- in the bottom right hand side, on the column chart you can see our current land bank, which allows for the delivery of 6,659 dwellings until 2026, more than 61% of these units are already under development. Moreover, we keep identifying very good additional opportunities which are strongly aligned with our strategy. As I said, we have 1,628 dwellings as total sales backlog, which represents 71% of our total product in the market, which as you can see, amounts to 2,283. Around 2,500 units related to build to rent projects, with 850 units that have already been sold. And in the near term, we can add another 1,650 from our current land bank.

To conclude, and as our Chairman said, I would like to mention that we have delivered with great success our iconic office project on Ombu with Foster & Partners as architects, who were able to transform an early 20th century coal gas factory in an iconic office building, which is now a world landmark in terms of sustainability and urban regeneration. The building contains the largest wooden structure in Europe. The singularity of the project has created an extraordinary attraction on the office market for this asset. Thank you very much.

[Pepa Chapa, Investor Relations]

Now Quique Perez-Pla, COO Bestinver. Thank you, Quique.

[Quique Perez-Pla, Head, Bestinver]

Thank you, Pepa. Good morning. Bestinver results for the first half shown an 11.3% fall in revenues from EUR62 million to EUR55 million with EBITDA down by almost 19% from EUR34 million to EUR28 million. These trends reflect mainly the very negative performance of global equity markets over the first half of 2022, which has had a major impact on both our asset management and securities businesses.

In Asset Management, AUMs are down by 22% versus year end 2021, of which, 17% driven by performance. And this despite a very positive evolution from our Bestinver infra fund, which has reached over EUR200 million in capital commitments, of which. 85% are already invested. Our securities business has suffered mainly from lower ECM activity than last year although we have participated in various ECM and ECM transaction over the first half.

With regards to outlook, we plan to launch new [indiscernible] in new geographies and strategies, developing our product range and traditional funds. We expect the final close of our infra product, which will lead us to design and launch asynchronous infra fund in the upcoming months. And finally, at Bestinver securities, we plan to complete the structure of our different teams in our new corporate finance activities. Thank you very much. And I leave you now with Carlos Sotelo, our Head of Mobility.

[Carlos Sotelo, Head, Mobility]

Good morning, everybody. Let's talk about the Urban Electric Mobility division in Acciona, which have a strong growth in the Silence division, which is the vehicles manufacturing and Sales, with an increase in the first half of the year over 72%, with 6,500 units sold in this half of the year, whereas 3,800 vehicles were sold last year. We are now targeting a new official numbers for end of the year, about 14,000 units is what our target now. And we have actually 30% of the market in Europe, where we see that as a potential market in the Urban Mobility around 700 vehicles sold a year. And what we are trying to achieve is covering all the mobility vehicles in two, three and four wheelers. And as we presented last time in in this meeting, we are very close to launch -- to start the production of our SO4 end of this year or early next year.

We are as well with battery as a service deployment in Spain during next year. And we was testing in the first half of the year in our headquarters. And actually, we are with around more than 200 users that are not buying the complete bike and are using the battery as a service. This is in the shy of the manufacturing company and in the service company. The mobility in the place we are doing the business in Spain and Italy is still under pre-pandemic levels with less than 50% in Spain and under 80% in Italy. But the motor sharing services, all the motor sharing services are increasing around 25 % in these markets.

And if we talk about our services with Acciona moto-sharing, we are better than that and with 31% on trips in Spain and Italy. Our revenues increased during the first half of the year 50% and our number of users are more than 62%, that make us as a scripters over 500,000 total users of our mobility service. We concentrate to expand our business in Madrid Sur, in Gandia, in [indiscernible]. And we can say that with these two companies, we are still a small size company, but we have 400 employees, we will finish the year with around EUR75 million revenue. We are the leader actually in Europe in manufacturing, sales and services in this category, in the electric light vehicles in the urban communities. And we are investing in [TIM] (ph) and products preparing the company as all our indicators say that the market is coming and the market is growing very fast in the next year. Thank you. Thank you very much for your time.

[Pepa Chapa, Investor Relations]

Thank you, Carlos. Thank you all. Now, I think we are ready to start the Q&A session. We have received three questions from Fernando Garcia from Royal Bank of Canada. The first, he wants to know if you could give him an update on the inflation protection that we have in our construction portfolio? How do you see inflation impacting 2023 construction results?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Jose will start with it and then pass it on to Luis.

[Jose Angel Tejero, Chief Financial and Sustainability Officer]

Construction business is, I mean, is exposed in general to the rising raw material and price and supply chain. But we have clauses with price reviews in many contracts that provides us some potential. We have done an analysis of the main 131 main construction of other contracts that represents around 90% of our portfolio value. And we have around 60% in those -- of those contracts have full or partial review process. Also, taking into account -- I mean, going into contracts that have no review clauses, part of the impact can be directly or indirectly attributed to the pandemic and this reflected in claims, negotiation and agreements that we can reach with customers.

I mean, we have reached successful agreements with clients in Spain, Poland, Chile and Portugal that mitigates this impact in raw materials and the new business and tenders we are bringing, of course, including a price level -- very generous level of contingencies in our bids. About the impact in 2023. I mean, it is a volatile environment, but we think that we can manage the ongoing projects as discussed with the review clauses. Claims negotiation to minimize the impact. And all in all, we think that we have a very high quality order book.

[Luis Castilla, Head, Infrastructure]

Okay. Adding to Jose Angel comments, I would say that in general strategy, it’s worth to say that we have reduced our bids during the last months, something around 25% of our bids, the bids that we analyze have been rejected because of lack of sufficient and consistent budget or lack of sufficient contractor protection from -- to escalation. It's also worth to mention that several countries have established a specific temporal and regulatory laws like Spain, Italy, Poland and Portugal, and other COVID protection laws that are affecting to the place escalation. And finally, to say that we are addressing this problem in every single contract that we have in the division.

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Yes. I would like to add also that we are very closely following our own supplies price evolution. And over the past two months we are actually experiencing a deflation of -- double digit deflation over the past month and a half. We follow -- we have our own index on the main -- on our key supplies. That's corrugated plate, cement number of things, number of key elements. And we are experiencing a very significant reduction in prices, including transport. That together with the fact that next year we would expect the base will already be a much higher base because it will come from this year's inflation. We do not see a high inflationary environment last year. Then again, who knows? Okay. Thanks.

[Pepa Chapa, Investor Relations]

Okay. Thank you. Next question from Fernando Garcia from Royal Bank of Canada and Oscar Najar from Banco Santander. They would like to know our opinion about the proposed tax by the Spanish government from the legal point of view. Do you see any option of not paying this tax due to the EUR1 million 2019 revenue rule of the 50% of revenues in energy. What could be the potential impact of this tax in 2022?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

We don't know yet. It is too early to say. We are -- we only have a few lines on this topic and we really don't know where we are. Our opinion on the new levy, well, you can imagine our opinion, it's not very favorable and not very positive. And we believe it's highly -- it's a very volatile moment in terms of regulation and taxes. And we're not, of course, very happy with it. But we'll have to see what it is. And precisely what’s the effect to us means.

[Pepa Chapa, Investor Relations]

Next question from Fernando Garcia again, Royal Bank of Canada and with [indiscernible] from Banco Santander. It's about Nordex. They say Nordex is generating a very significant negative volatility to Acciona results. Do you maintain your strategy with regards to this stake?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Yes, we do. We have just been in this -- in the capital increase, which is anticipated increase our share. And this, as Jose Angel has mentioned, there are three main reasons. One is that, we believe this situation was very much a one-time situation derived from inflation, having increased cost of turbines manufacturing while contracts for supply and having a fixed price because of having been generated a number of months, sometimes even years earlier, which is a complexity in the industry that needs to be solved and that we are working in -- that Nordex is working in solving. We as developers command the turbines a year or two years in advance and then the manufacturer has to manufacture them and the OEM has to manufacture them. And of course, if there's a price hike like we've experienced in the past few months, the OEM has to has to vary most of the cost of that manufacturing and the capacity to convey to pass on part of that increased cost to the developer is limited.

So that we believe will no longer be the case in the future. As a matter of fact, the opposite circumstance may happen. And in any event, the -- so we believe the -- as a key client to this company, we believe they have possibly, difficult to say, but possibly the best product in the market. Nordex is leading new contracts in a number of regions and that's not a coincidence. We believe it is an extraordinary good piece of machinery. And as a loyal customer and as a final user of this product, we are great believers in this company, not only because of the quality of the product, but also because of the trends in the industry. Which needless to say, are extremely favorable. So those are the two major reasons, so quality of the company, quality of the product, evolution of the industry, evolution of the demand, positioning of Nordex, plus being a one-time need in this capital increase, plus a very important factor, which is that, most of our pipeline has been authorized with Nordiex turbines. So we are in many ways are committed to the Nordex turbines. So all these elements put together make us comfortable about the capital increase and maintaining, and if possible, even increasing our participation as we have done in Nordiex in the future.

[Pepa Chapa, Investor Relations]

Okay. Thank you. Next question comes from Jose Porta from Kepler Cheuvreux. He wants to know how should he think versus the EBITDA contribution of the other infra businesses going forward?

[Jose Angel Tejero, Chief Financial and Sustainability Officer]

Other infra business are composed of mainly year one services business. The way that this business is going to have looking forward compared to the rest of the infrastructure business is to maintain the similar weight. And for that to happen, the business should be predicted with double digit growth on year on year basis.

[Pepa Chapa, Investor Relations]

Thanks, Jose Angel. Next question is about property development, Fernando Garcia from Royal Bank of Canada. He wants to know given rising interest rates, what is Acciona’s strategy in the real estate business? I think, Andres?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Andres, you take it. You have to press your –

[Andres Pan de Soraluce, Head, Real Estate]

Thank you. I honestly think that this is very different for each of the actors in our industry. Our industry, as you all know, it's a very commoditized industry and not very marketing oriented. Our strategy is exactly the opposite in terms of branding, product and growth, reinforced with strategic alliances. By differentiating our product with a very segmented strategy, taken advantage of our brand recognition, I’m very regarded. And with an extremely strategic and analyzed expansion plan we honestly think that this one effect our specific target market, we are convinced. This is not -- we are not totally vaccinated, but definitely we are very protected.

[Pepa Chapa, Investor Relations]

Thank you, Andeas. Next question from Jose Porta from Kepler Cheuvreux. About our construction order book. Your construction order book is at record high levels. How should we think in terms of that order book being translated into revenues in the next two to three years? And what sort of margins are embedded in it?

[Luis Castilla, Head, Infrastructure]

Our existing backlog, something around EUR15 billion in construction and EUR20 million in the total backlog for the division should translate into 5% to 8% sales increase in the coming years. Talking about the margins, we think that margins around 4.5% to 4.7% at the EBITDA level are sensible assumption.

[Pepa Chapa, Investor Relations]

Thank you, Luis. Next question from Fernando LaFuente from Alantra. About our debt position, he would like to know what's our estimate about the net debt at the end of the year?

[Jose Angel Tejero, Chief Financial and Sustainability Officer]

Well, In terms of -- I mean, we want to be with a stock of debt that puts us around three times net debt to EBITDA. The EBITDA, which is similarly or slightly above last year, which is a strong revenue in our view.

[Pepa Chapa, Investor Relations]

Next question from Fernando too, Alantra, it's about our expectations of CapEx in the non-energy businesses in the second half of 2022?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Yes. I think that this one follows the last one. And you have to take into account in the second half with the investment that we have now in Nordex, total investment in H2 for the non-energy business activities could be around EUR500 million.

[Pepa Chapa, Investor Relations]

Thank you. Next question from [indiscernible] from Banco Santander and Fernando Lafuente from Alantra about our construction margins. Construction activity and margins have been strong in the first half, what explains such a strong performance? Can we assume that this can be repeated in the second half?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Let me take that one, please. There's two sides to it. In the positive sides, we had a couple of projects [indiscernible] project and the increase in activity in Brazil, the 9.6% in the first half. And on the negative side, we've had some negatives in the industrial activity in construction -- industrial construction. So one for the other, in the first half, but yes, the answer is yes. And that's kind of same answer as Luis has given for question number six in which you asked about margin going forward. As I said in my speech, the conjunction of higher demand, more higher complexity of projects. Many regions in the world using infrastructure development and infrastructure investment as an anti-cyclical policy, fiscal policy. Obviously, our very well rooted presence in many of this -- of these OCD countries where we are present, say, Australia, Northern Europe, Spain, of course, Latin America, Canada, all these elements -- and now Southeast Asia. All of these elements make us be very optimistic about the nature of -- the evolution of the business in the coming years. There aren't that many players -- agents in the market that can assume the complexity and the size of the projects. And never forgetting that this is a volatile industry, let's not forget that. It is a difficult industry and often you find that you have big surprises in projects. So that's in the nature of the industry, in the nature of the job.

We have advanced a lot in a type of project which is greatly diminishing the risk with -- the risk profile of this project, which is the alliance project, which is now a more -- a very normal type of project in Australia, becoming more and more common in Canada and also in Northern European countries where basically it's kind of an open book contract with a cost plus fee with penalties and premiums if you improve or you deteriorate the cost, but with a great -- with much smaller risk levels because at the end of the day, what you're risking is your fees, not the basics of the job or the budget of the job, which is the more traditional risks that this industry would incur. So yes, the prospect is positive. And yes, we believe it's maintainable, sustainable in the future. Anything you want to add, Luis?

[Luis Castilla, Head, Infrastructure]

No.

[Pepa Chapa, Investor Relations]

Thank you. Next question about our stake in Acciona Energia. It comes from [indiscernible] Banco Santander and Fernando Garcia, Royal Bank of Canada. At these share price levels of Acciona Energia would you consider at any point to sell a further stake into the market?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

No. Not at this stage. We do not need to sell, and despite the price may look high, the truth is that, we are still trading at a significant discount to our peers. And more importantly, we believe the underlying reality, the prospects -- industrial prospects of the company have improved significantly in the past months since the IPO. And therefore, we believe the level of -- the trading level at which the industry is trading is perfectly justifiable. So no, we don't need to and we don't think the stock is in any way overpriced.

[Pepa Chapa, Investor Relations]

Next question about real estate. It comes from Fernando Lafuente from Alantra. He wants to know what's the outlook for our real estate business, both in terms of activity and EBITDA for 2022 and 2023?

[Jose Angel Tejero, Chief Financial and Sustainability Officer]

We expect positive EBITDA, but in a lower range than what we reported last year. 2021 results were affected by the sale of a landmark logistic development with very high impact. In 2023, we expect an EBITDA level similar to 2022. Beyond 2023 we expect a significant increase in results as delivery of dwellings take off.

[Pepa Chapa, Investor Relations]

Next question from Fernando Lafuente from Alantra. It's about the [indiscernible] project in Brazil. First, he wants to check the equity that we have invested in the first half. He says that if it's around one EUR120 million. And also he would like to know what's additional equity commitments that we have in this project?

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Yes, you're right, with the investment in [indiscernible] first half is EUR120 million. And also our projections for Line 6 over the life of the project is of around EUR320 all in all. And in the entire -- in the current concession business is around EUR400 million all in all.

[Pepa Chapa, Investor Relations]

Next question from Jose Porta again from Kepler Cheuvreux. It's about Urban Electric Mobility. What sort of contribution should we expect from this business going forward? Can you provide an estimate of the capital employed in this business so far?

[Jose Angel Tejero, Chief Financial and Sustainability Officer]

Yes. The capital employed in the Urban Electric Mobility right now is around EUR100 million. That is the aggregation of both the sharing and mobility business and the manufacturing business. The projections is that, this business combined start providing positive results in ’23 with a strong jump in the results in 2024 on.

[Jose Manuel Entrecanales, Chairman and Chief Executive Officer]

Let me add that as you probably are aware, but let me stress that this is a -- very much a venture capital business type and therefore returns -- when if they happen and we believe they will. And we believe they will. The returns are high, but then again, the risk is also high. On the motorbike, on the two wheel side, we already have a very well tested model and product, which is actually bestselling motorbike -- electric motorbike in Europe. And we expect to be able to replicate that with our four wheeled product with some additional values like, for example, the battery as a service, so we won't need to sell the battery, we can -- we will be able to rent out the battery with a significant diminished reduction in price of -- the acquisition price of the vehicle. And with our battery serve -- with battery as a service and battery stations, our clients will be able to swap their batteries without needing to go to spend to charge themselves or keep them in charge and that they can do because you may know, the batteries are extractable from the vehicle, so you can take them home and charge them.

So it's a new model and new models always have -- very often have surprises and we are not exempt from that. But we already -- we're already testing the batteries as a service model and it's working very well. And let me add that there is an -- we believe there is very important contribution potential addition to our business from the side of the batteries, because at the end of their life cycle, which is a very short life cycle in the mobility business, because we normally amortize them in a four, five year period. All those batteries which are normally 80% capable, 80% in terms of charge -- charging capacity, we expect them to be usable for energy storage. So there is a complementarity, enormous complementary -- potential enormous complementarity a few years down the line, which could become a very interesting -- very valuable -- added value and competitive advantage in the renewable energy side. So we'll see how it goes. But we are -- it fits the business, it fits entirely into our sustainability strategy. We are satisfied on how things are going, although we would urge Carlos Sotelo and his team to bring up the car as soon as possible, but when it's ready only when it’s ready. We expect that to happen in the beginning of the year and we'll see. We hope that you all buy one. In the meantime, you can buy the bike.

Okay. Well, thank you very much indeed. I think that's all in terms of questions. And we'll be seeing you again soon. Thank you very much. Bye.