Grenergy Renovables SA

MAD:GRE

Earnings Call Transcript 2022-Q4

[Daniel Herrera, executive]

Good morning, and welcome to our full year 2022 earnings results presentation. I am Daniel Lozano, Chief Strategy and Capital Market Officer. I'm here with David Ruiz, CEO and Chairman of Grenergy; Mercedes Español, Chief M&A Officer; and Javier Muguruza, our ESG specialist.

Well, at the end of the presentation, as you may know, there will be the Q&A session. [Operator Instructions] Now I'll hand you over to David.

[David Ruiz de Andrés, executive]

Okay. Thank you, Daniel. You can hear me correctly, right?

[Daniel Herrera, executive]

Yes.

[David Ruiz de Andrés, executive]

Okay. Good morning, everyone. Thanks once again for being here with us. Today, we have invited Mercedes, our -- from Daniel, our Head of M&A; and Javier from our ESG team to join us. I will try to make my presentation as short as possible to leave more time for them and Q&A.

It has been a long and difficult year, like, I would say, like every single one from 2020. At least it seems the pandemic is really over, not really in the news anymore, but we have some other strong hot topics. And to briefly summarize this year, I think in Q1 2022, we still had some concerns with supply chain and cost inflation. I think those concerns are way over now. Maybe, I would say, with the exception of substation and high-voltage materials that we see a bottleneck there, and we are more than glad to elaborate in the Q&A, but the PV cost and storage CapEx, which is more and more important for us, is now moving down, and logistics cost is nearly back to where they were before COVID.

In Q1, the situation in Ukraine changed everything, changed it all, and it's been the strongest acceleration factor we've ever witnessed in our industry. I think all markets, particularly in Europe, are booming. The IRA in the U.S., next-generation funds in Europe, storage best is booming all around. And hydrogen does not seem like a distant dream anymore. And I think we expressed -- like we expressed in our previous presentation, we feel we are so lucky to be in this industry with opportunities all around, right?

And as we explained in detail in the last presentation, we are doing our best as a company to get the most of this momentum. And we have an ambitious development plan in Europe, right? Apart from Spain, we are now in Italy, the U.K., Poland and Germany. And in the U.S., as we have recently announced, we purchased 100% of Sofos Harbert. I believe more than ever that the timing was perfect to purchase this company. Initially, we purchased a 40% interest and now we have 100%. And we are now accelerating the development plans in the U.S., which hopefully will become our largest market a few years from now.

In storage, well, we have, I believe, one of the best dedicated teams in the industry, and our first projects, we will inform about them very strongly, coming from Chile. But if we have to mention the biggest constraint for us in the last couple of years would be definitely the delay in permits and permitting. We can be slightly more optimistic today. We finally, as we announced, obtained all DIAs in -- for some of our largest plants in Spain. I'm talking about the Tabernas, Ayora and José Cabrera projects. They finally came, I would say, with 2 years delay, but right at the end of the deadline. But, well, the truth is we are -- we have them, and we are starting construction in Tabernas already, and procurement, and we will start construction very, very soon in Ayora's and José Cabrera.

A very busy first half of the year in capital markets, capital increase of EUR 90 million in June. And earlier on in the year, we raised EUR 52 million in bonds at 4% rate. It seems like a very, very good deal now. And we've been also using the program of commercial paper during the year, right?

Moving to key highlights, and I will review very, very briefly. EBITDA of EUR 50 million. This is 21% up and if you look in more detail, I think Daniel will elaborate more about EUR 36 million already coming from our IPP division, which is nearly 3x more, and is basically what we expected at the beginning of the year, right? And this is coming just with 500 megawatts on average fully commissioned during the year. Remember, we started the year at [ 5 5 ] something, right? And we now have 2 gigawatts, well, 1.6 gigawatts in operation, under construction and plus a backlog of another extra 0.5 gigawatt which will be very soon under construction. [ So Daniel ] can give you an idea of where we are heading to, right, 1.5 years or 2 years from now.

EUR 22 million of EBITDA came from our build to sell division, which is approximately EUR 12 million, EUR 13 million lower than expected. But as we explained, when we transfer 3 plants in Chile to a regular investor, regular client in the U.K. and only 1 of them was in the accounts of December, and the other 2 were the accounts of January due to some condition precedents of minor permits that were not met until the end of January. Otherwise, the picture would have changed, and we would have been EBITDA of 60-something, a net profit above EUR 20 million, but I think this is a one-off and net profit is down, 30% down. I think Daniel will elaborate that. The reason, if you look at -- the main reason is the EUR 18 million of exchange rate differences from the situation at the end of the third quarter until the end of the year. The U.S. dollar jumped from -- well, the euro jumped from 0.95 to 1.10 in just a matter of 3 months. And this has a very important effect in our accounts since we are reporting in euros, right? Anyway, we can elaborate more on this.

About sales, we were very close to EUR 300 million, EUR 293 million. This is 33% up from last year. But looking in detail, we see nearly EUR 60 million already coming from energy sales. This is up 3x from around EUR 20 million in 2021 and 0 in 2020, so it gives you an idea of the exponential growth. We are having EUR 2.6 million operational maintenance and EUR 232 million coming from our Construction division, EUR 50 million to third parties and EUR 182 million for our own CapEx, right?

If you look at the situation only 2 years ago, in 2020, we were reporting EUR 113 million, and EUR 23 million EBITDA. So it's -- well, we are multiplying by 3 the size of the company every 2 years. This is what we are expecting in the next 2 years in '23 and '24.

Looking at pipeline, well, it's 1.6 gigawatts in operation and construction. This is roughly 0.7 gigawatts operational or fully completed and 0.9 gigawatts under construction. We have also a backlog of 0.5 gigawatts that we will start constructing very soon. Most of these parks are in Spain. And we have a backlog of 2 gigawatts. And altogether, we're talking about 4 gigawatts, giving very high visibility on our 2025 5-gigawatt target. We have barely just recently started the procurement of some stations and closing the procurement of main materials for Tabernas plant, 250 megawatts in -- is the largest plant so far that we have ever built and is located in Almeria, as you know.

And about sustainability. Well, when it comes to this area, we are very -- we are once again very proud of our great achievements. We are really positioning ourselves at the forefront of sustainability. And indeed, this is supported by the main ESG ratings for which we are playing. For example, very recently, we were really going to highlight this successful improvement in CDP climate change from B- in 2021 to A- in 2022. It should be pointed out that CDP is one of the most globally recognized climate change ratings, and it really reflects our commitment and increasing level of vision in -- of our climate strategy.

I would also like to highlight the accomplishment of 100% of our ESG objectives for the action plan 2022. And not only 2023 ESG targets have been approved and are already in progress, but also, we are working on an update in the ESG road map for 2024 -2026 period, which will be released at the end of the year and will give plenty of visibility.

And last but not least, I'd like to highlight that we've publish on first -- for the first time audited by a third party, the sustainability report of 2022. And in this way, we provide our stakeholders with stronger credibility, quality of information and better ratings. So thank you. I give the floor to Daniel.

[Daniel Herrera, executive]

Thank you, David. So let's move on to the financial part. So if you go to Slide #5, you can see how total revenue reached EUR 293 million. That is 33% increase year-on-year. Development and Construction division increased around 20%, 17.8%. In the last quarter, we have been able to [ protect ] one PMGD asset in Chile and 222 megawatts of projects under development in Peru, 150 megawatts Lupi, so it would be Lupi project, and 72 megawatts in Emma-Bayovar. Energy sales tripled to EUR 57.8 million compared to EUR 19.9 million. This figure will be increased every quarter as we are connecting projects.

So moving to next slide, which is #6, we can see how this revenue was reflected in EBITDA. So starting from the Development and Construction, we have a lower figure this year, EUR 22.1 million compared with EUR 33.1 million. That small contribution was what David explained at the beginning of the presentation and the highlights. There has been a non-expected delay of rotation of 2 PMGDs assets that represented around EUR 11 million that will be registered in Q1 2023.

Even though the EBITDA contribution from this division has been EUR 17.1 million in the last quarter of the year, Energy EBITDA is first time the main EBITDA driver of the company, moving from EUR 13.3 million to EUR 36.1 million in the period. Also to mention that corporate expenses moved up a little bit from EUR 5.3 million to EUR 8.5 million. As you may know, we are speeding up our European and U.S. platform, and that is where OpEx, the part that is not CapEx, is registered.

So if we go to Slide #7, well, we have been speeding up the investment in the last quarter of the year. Grenergy, in the full year, invested EUR 194.4 million, mainly in solar projects under construction, utility scale and distribution projects and as well, development CapEx that, for the same reason we are increasing our corporate expenses, development CapEx that is the way we are investing to generate pipeline, has moved up to EUR 15.9 million and is expected to grow as we are speeding up the development of pipeline in solar, wind and storage, and speeding up in Europe and U.S., as later will explain Mercedes.

Then in Slide #8, you can see the evolution of the cash position during 2022, and the evolution is from a starting cash balance position of EUR 68.7 million. Then we have deposited EBITDA of EUR 50.2 million, a positive working capital, first time in the year, reverting the negative working capital we were having now is EUR 20.2 million positive. There has been some financial and tax expenses, cash out EUR 31.9 million and some cash exchange rate difference, EUR 1.9 million. And the growth CapEx, I have explained, EUR 194.4 million, then some small short-term liquid, investment treasury share, EUR 1.2 million. And it has been mostly final with the bond and commercial paper program in place, the financial debt that is mainly project financing, it's in corporate debt of EUR 56.5 million and the share capital increase that we did in June 2022 of EUR 90 million to reach EUR 105.7 million by the end of the year.

Then finally, in Slide #9, that is the evolution of our net debt. It is mainly the explanation of the cash flow, but there has been as well some non-cash-out exchange rate differences of EUR 35.5 million. Mainly because we have the debt in dollar, there has been an impact in the appreciation of dollar in the part of the debt. So total debt at the end of the period was EUR 339.7 million. That is overhead leverage of 6.8x net debt EBITDA. For covenant reasons, the corporate leverage was 3.0x net debt EBITDA. That is below our 3.5x corporate leverage covenant.

And now we move into pipeline. I'll leave the floor to David again.

[David Ruiz de Andrés, executive]

Thank you, Daniel. I'm just going to be -- make it very short to leave more time for Q&A. And I think we have -- in the previous presentation, we explained our strategy. We really want to get the most out of this fantastic opportunity. And in the medium and long term, we are working very hard in the U.S. and in the new markets in Europe, right? I think hopefully, we will -- we could start the construction of our first projects in Italy and hopefully something in Poland at the end of next year. And I think the first project in the U.S. as well, and this is going to change the profile of the company completely.

Going to the total pipeline, we are now -- we have 11.7 -- close to 12 gigawatts under the different stages of development. We don't consider in this figure the plants that are operational. And I think in next quarters, you will see a very pronounced acceleration of these -- of identified opportunities in early stage and many projects move from early stage to advanced development. These we will incorporate plenty of new projects in the new markets -- in the new regions, right? It's very important, this is a slide to show how the profile of -- and the areas, the geographies where we are developing is where the company is changing, right? You can see very clearly that the U.S. announced 2.5 gigawatts. It is very close to take on -- overcome Chile as our largest market. I think definitely, will be our largest market in terms of megawatts under development very soon, maybe in the next update, with plenty of new identified opportunities come in, in new areas.

Chile still remains quite strong, right? But we are not really incorporating new identified opportunities. There will be some coming up, but the market is a lot more mature. In the case of Spain, close to 2 gigawatts, but look at the U.S. now we have 2.5, 2.5 Chile, 2 gigawatts in Spain and many of them are very mature, right? And then around -- well, now more than 1 gigawatt in Italy, more than 1 gigawatt in Poland, and we have lower activity in the U.K. with strong focus on storage, and lower activity in Colombia and Peru. So that's kind of the profile of the company and where we are heading. And again, we might expect an acceleration in some regions of valuable opportunities at an early stage very, very soon.

Looking at the picture, right, we are now putting together what we have in operation or included plus what we have under construction plus what we have in backlog. And again, many of these projects, we will start construction very soon. In the next few weeks, we are talking about 2 gigawatts. And we have also a big visibility on this extra 2 gigawatts that are now -- some of them are coming from the new markets like U.K., Italy, Poland and the U.S., plus what is coming from [ appraisal ] markets like Spain, Chile, and Colombia. We might expect as well, many projects to jump from early stage to advanced development in the near 3 quarters. And many of these projects, in particular, some of the large projects in Chile, will soon get it through and make it to backlog, right? So -- and keep an eye, I think in the next few weeks and months, I think we will be announcing very important agreements in terms of PPA agreements, right, to give full visibility on whatever we have under construction and all our backlog, right? So we might expect big announcements in Spain and Chile and also in Peru, right? So I think in the next few weeks, once this PPA starts fully by then, we will announce at the market, and we will give you plenty of information.

So I think next quarter, we will have a strong focus in explaining those PPAs. So I think I give the floor to Mercedes to an update on the build-to-sell activity.

[Mercedes Español Soriano, executive]

Okay. Thank you very much, David. It's a pleasure to participate in the presentation. And we'll give you an overview of our build-to-sell activity as well as our current situation and plans in some markets as the U.S. and Europe.

As you might know, we have had a unique and successful rotation asset program, which since 2017 has mainly involved Chilean assets, PMGDs, where we have sold around 500 megawatts in 55 different projects. This is more than $550 million, allowing us to generate during that period the require cash flow for our build-to-own business model and growth strategy. So last year, 2022, has been a good example of our -- in terms M&A activity. We sold 3 PMGD plants in Chile totaling 29 megawatts, and 2 almost relatively -- I mean under development projects in Peru for a total of 222 megawatts, contributing more than EUR 22 million to the EBITDA of the company.

In addition to this already significant amount, towards the end of the year, we agreed a third transaction with the same buyer as David mentioned before, of 2 additional PMGDs for a total of $30 million, but the signing what took place in January this year. So as I said before, this transaction -- the contribution to our EBITDA could have been up to $33 million.

As part of the Grenergy strategy, we are expecting during 2023 few additional rotations in Chile, probably in Colombia. And regarding Spain, we are also launching -- well, it's public now, a transaction for the rotation of our minority stake in a 1 gigawatt portfolio, fully secured, which we have developed from scratch, all to be contracted with Tier 1 figures and constructed by our own EPC company. We call it Valkyria and we consider it a unique opportunity in the market. We are actually seeing a huge interest for -- from a different type of investors. Around 60 were willing to participate and around 20 of them have been granted access to the first phase. We might receive NBOs in March. And after a pre-market research service carried out in December, we are expecting an enterprise value above EUR 1 billion. So once this is concluded, it will give us a possibility to increase the cash position for our growth plans in other strategic markets for the company such as the U.S. or other countries in Europe.

So moving to the next slide, some words for one of the most promising markets, as I say, for us, the U.S. As you might know, upon the publication of the Inflation Reduction Act, the IRA, there is much more clarity and certainty on how the government is pushing for the growth of renewables in the country. The program allocates $370 million -- $370 billion, -- sorry for U.S. tax credit and direct payments for renewable energy. So the government is expecting PV deployments to increase from around 60, 70 gigawatts to 1,000 by 2035, and that was one of Grenergy's drivers that result in the purchase of 100% of Sofos Harbert, the developer that we totally integrated early this year. So this full acquisition gives us a real opportunity to accelerate our activity in the market, which with the consolidated team of close to 20 people, I think we are in a privileged position in this market where we start with almost 2 gigawatts. This pipeline what mostly located in the Southeast is now strongly complemented with projects in MISO PJM, and also ERCOT, which is a key and more liquid market to diversify our presence in the U.S. And that also gives us the possibility to participate in different schemes, either through PPA with corporate, public or wholesale market. A very promising situation in the U.S., as you can see, and we're very happy regarding this full acquisition and integration of the team.

So going to next slide. Around 3 years ago, we strongly focused in Europe, driven by the European commission plan, REPowerEU and, well, accelerated by the Ukrainian war. So we are becoming, I think, very well prepared to participate in this acceleration plans, fast forward the green transition. As you know, the strategy is to double the current solar capacity by 2025 and install 600 megawatts by 2030 to reach the target. So most of the countries are pushed to implement laws in this sense and to accelerate the permitting process, which is crucial at this point. So there's a perfect momentum for renewables in Europe.

Going to the -- very fast to the specifics on each market, we have presence in 5 countries. We are not well consolidated apart from Spain, of course. Italy, Poland and the U.K. with a staff of around 15 to 20 people in each of our offices there, and an overall pipeline of around 2.5 giga in these 3 countries. We are, in any case, launching significant acceleration plans in these markets as we're really confident about their potential.

We are successfully establishing ourselves in Germany with a local staff of 20 people for the moment. The country has an extraordinary potential for PV and storage, and has very ambitious and specific plans targeting 250 gigawatts by 2030. This means the installation of around 21 gigawatts per year, which is huge. So this country will, therefore, be key through our growth strategy in Europe, and we are putting all efforts in terms of human resources and allocation of CapEx in order to have a significant market share in a couple of years from now.

It's equally important to point out our M&A buy-side activity here, where we are frequently analyzing different portfolios and projects, giving us the flexibility and possibility at a certain point to accelerate our activity. So as said, we have very ambitious plans in these markets, which represent with, what, Spain, more than 80% of the European energy demand, and we are sure that they will contribute to position ourselves on the right path to achieve our 5 gigawatt target by 2025. So I give the floor now to Javier for ESG.

[Javier Muguruza, executive]

Thank you, Mercedes. It's an honor to take part in the presentation. If we move to the main ESG commitments, in the next slide, we can see on the left part of the first page, you can see the achievement of the ESG Action Plan 2022 with the accomplishment of full 2022 ESG objectives. On the right part of the slide, we can see the Q4 objectives, integration of ESG aspects in the procurement process. The main highlights to point out are the update of the procurement procedure and supplier code of conduct with the integration of ESG clauses yet and also ESG risk assessment and [ modulation ] process.

Next Q4 objective, project-level human rights impact assessment. In this objective, we have carried out an identification and assessment of potential human rights impact in the operation process and supply chains of Grenergy. In order to identify human rights impact, we have conducted human rights training for key personnel, country risk analysis, and internal and external questionnaires to conclude with the identification of these potential impacts.

And finally, the water use program, Grenergy is aware that water is a limited resource, an irreplaceable natural resource. In this sense, we have extended and improved the direct water footprint measurement and according to ISO 1446. To calculate this, we have considered data collection based on the origin, operational use and location of water stress areas. And with these inputs, we have computed Grenergy's water impact and established finally some improvements to implement.

If we move to the next slide. David, can we move to the next? We can see the last phase of the ESG road map '21-'23 Here, we can see the 12 objectives for the whole year, explaining the implementation in the quarterly progress reports with a quick Q1 objectives already in progress. The ESG 2023 action plan was presented and approved by the senior management and the Board of Directors at the end of this year. And we are already working on updating the ESG road map '24-'26 plan, not only to comply with all current and future ESG regulations but also to improve our ESG position in the industry and address stakeholder expectations.

And finally, if we move to the last ESG slide. We can see that in the expansion, improved positioning and leadership ratification in ESG ratings, in this sense, we have submitted in 2022 CDP climate change, upgrading from B- to A-, placing in the leadership category. Also in 2022, we expanded our ESG rating coverage, in this case, Refinitiv, and when we obtained an outstanding ranking of second position out of 79 companies in the renewable energy sector. And in addition to the previous ratings published in Q4, it is worth pointing out the following ESG ratings accomplished in 2022. First of all, remarkable top ESG-rated distinction evaluated by Sustainalytics, out of 15,000 companies having industry and regional distinction, ESG risk is almost negligible by Sustainalytics. Furthermore, MSCI, improved performance in MSCI obtaining the highest AAA score. And finally, A- score in ISS with a very high level of transparency.

[Daniel Herrera, executive]

Okay. Thank you, Javier. I think now the presentation is over. So let's move on to the Q&A session. [Operator Instructions] Miguel, I now think we have Fernando Garcia from RBC.

[Fernando Garcia, analyst]

So I have 2, first on this Valkyria project of divestment of Spanish assets. So we would like to ask probably Mercedes about timing then on PPAs for these projects. Not all of them they have PPAs, so are you expecting as well to sign PPAs for this project that they don't have it in the short term?

Then on the cash inflow, I will probably expect that maybe we can expect something when you sign the deal. And then maybe a part when the assets are commissioned, can you explain a little bit better how this is going to work in your idea. And then if a P&L, how this is going to work, is this going to be in line with the cash flow of the 7 operators when they are commissioned on?

And final one, probably this is for David, if you can comment on what are you expecting for the proceeds, know it can be quite significant. Second question, it looks like CapEx is going down. Could you update on that as well a little bit on OpEx and financial costs? And I will appreciate, based on that, if you can elaborate a little bit on your expectations of returns in 2023 versus 2022. So these are my 2 questions.

[David Ruiz de Andrés, executive]

Thank you, Fernando. I think we've got plenty of questions. I can try to reply or, well, if [indiscernible] wants to join. But I think I can reply very quickly. But clearly about the PPAs, we are expecting to announce -- well, the whole idea about Valkyria is offering the market something that is really unique. There are many deals in the market. There is also a strong appetite on the involvement sell side, buy side. So we wanted to make something be unique. And I think one of the key aspects was to make sure that all the portfolio was fully contracted.

And well, you know that on one side, we have Escuderos. We have Belinchón. These plants are already operational, and I think you had information for the PPAs. We will announce very shortly the off-takers. On one side, we will have an off-taker for Tabernas, Ayora and Jose Cabrera. Part of this has already been agreed. We are extending to the full package. I think during March, we will announce a single off-taker for all these packets. And we'll also announce very soon, maybe next week, the off-taker for [indiscernible], which is part of [indiscernible] project.

About -- I think Fernando, maybe you can mute. Yes. Thank you. About the proceeds, it's -- well, you're talking about different -- we're talking about different scenarios, right? On ones that, as Mercedes pointed out, there was a very high expectation on this process. But some bidders are looking more at COD, some others are looking at investing -- are ready to build, so depending on which partner we finally bring in, it will be a different situation in terms of cash flow. Obviously, we will try to maximize the value. Again, we believe this is a unique opportunity fully contracted, really skin in the game from the sponsor. We are building the plants. We have developed all of them from scratch. We will be in charge of deprecation maintenance and asset management, right? But depending on for some existing operational projects like Escuderos and Belinchón, we might expect the proceeds to be cashed in very quickly, as early as Q2, Q3. But for the remaining plants that will be under construction, we -- it really will depend on the final profile of the investor whether the proceeds -- we have visibility on the proceeds at the end of this year or during 2024. Anyway, we -- once we conclude, obviously, this process, we will give you visibility.

About the -- your question about CapEx, OpEx, in terms of return, CapEx is going down. For solar, it's mainly due to the reduction in the price of panels. I think we're now procuring panels for EUR 0.20, EUR 0.21. This is compared to -- well, sorry, that's U.S. dollars, right? So this is compared to 0.24, 0.25. And this is beaten really our estimation, right? If you remember, we were in November talking about -- I think we have a slide here. We were talking about a bit below EUR 500 million. I think our expectation now is that we will be EUR 570 million, maybe EUR 575 million, EUR 580 million. Once again, this is for a very large plant in a country like Spain. If the plant is smaller in a different market, it would be slightly higher. So OpEx cost, there's more inflation there, right? I think the operational maintenance is a very mature market. So we're talking about prices of 4,000, sometimes 3,500 per megawatt here, right? But there is some inflation in the land and the cost, of the lease cost of land in some markets, right? And this is something we are witnessing in Europe now where we are all struggling to grab and to secure the best land available in markets like Poland and Germany, and it's been the case of Italy. So we see some inflation there, right? And I think considering the rest of components of CapEx, as I mentioned earlier on, we -- no supply chain issues at all, right? Logistics are, well, back to pre-COVID, I would say. We're paying now, again, $2,000 per container. But maybe only the substations and the high-voltage materials, everything that is coming from Hitachi or General Electric or Siemens, we really see a bottleneck there, right? It's -- and prices are increasing and the delivery times are becoming an issue in some cases.

So in terms rate return of projects, the project IRR, we are happy to say that we are very close to double digit in our main markets in Spain and Chile, and still the finance, the market is very competitive and we can increase the -- especially in Europe, the equity IRR quite a lot to meet maybe in some cases, 14%, 15%. And well, Fernando, this is more or less an update on the situation.

[Daniel Herrera, executive]

Thank you, Fernando. I think we have now Jorge Guimarães from JB Capital. [Operator Instructions]

[Jorge Guimarães, analyst]

My question is related to the prices of PPAs. If you can give some color on the type of prices of PPAs that you are getting in Spain and in Chile and the duration of those PPAs. Thank you very much.

[David Ruiz de Andrés, executive]

There are no changes. I mean the conversations we are having in Spain, we've been having those conversations on those negotiations for more than a year. So where we are now is we are finalizing the agreements. And I think, as I mentioned, we have managed to sign PPAs in the region of mid-40s, right, in some cases, slightly higher. I'm talking about the new PPAs. I'm not talking about the PPA for Belinchón that was in the low 40s. And as you know, the PPA of Escuderos was in the high 30s. And to compare apples with apples is always what we say, we are talking about PPAs starting at Belinchón, Escuderos, we were talking about 12 years, right? Belinchón is starting at the beginning of 2025. It means that we're going to have more than 1.5 year full merchant, right. The plant -- we already start commissioning of the plant, I think, in April, May. Hopefully, in June will be fully operational and selling energy, and that will be 1.5 year full merchant and then the PPA will start. So when we are comparing one PPA with another, you also need to consider that each one is a very different animal, right? In new PPAs we're closing in Spain, we are talking about PPAs starting mid or the end of 2025, right? And we're talking about PPAs in the mid-40s and for 15 years, and we're securing around 75% of the estimated production of the plant. We are strong believers that the plants should be contracted. And the higher percentage, normally the better, right? But we also recognize that there is an upside in the short term in high merchant prices, right? That's the situation in Spain.

Situation in Chile, we announced -- we have big announcements to make. I think in the next weeks, we announced, firstly, the PPA for Gran Teno and Tamango plants that are under construction. And those PPAs were closed in low 30s. But you have to consider that -- well, we're talking about mid-30s, sorry, mid-30s but we -- mid-30s in U.S. dollar, but we have high radiation there, and it's a big difference. Those PPAs are indexed. So maybe already in -- when the plant gets commissioned, we will be in the high 30s. And maybe 10 years from now, we will be in the mid-50s. So it's completely different, the normally PPAs in Latin America. And I think it will be the case in the U.S. we'll have some kind of indexation. In Europe, you're talking about a fixed price. So again, it's hard to compare, right? It's an altogether different -- different animals.

[Daniel Herrera, executive]

Thank you, Jorge. Now we have Naisheng Cui from Barclays.

[Naisheng Cui, analyst]

Can you hear me all right?

[David Ruiz de Andrés, executive]

Yes, perfectly fine.

[Naisheng Cui, analyst]

Perfect. Two questions from me, if that's okay. So the first one is, leverage ratio increased the third time in a row. Just wonder, will Grenergy consider [ equity ] rates this year? If yes, could you please provide a little bit of color on the timing and magnitude?

Then my second question is, strategy wise, what is your key focus for 2023? And do you have any target for capacity under operation?

[David Ruiz de Andrés, executive]

Thanks for your 2 questions. I was trying to find to reply your second question. Yes. Okay. About the leverage rate here, well, it's been very minor increase. If we have it reflected in our accounts, the 2 PMGDs that we transfer at the end of January, and it was really a deal that was agreed in Q4 but it couldn't be completely formalized until very early '23, I think the rate deal would have been better, right, even below 6, so it's what we say. I mean we -- when we are doubling, we are now really in a very strong investment period. We are increasing multiplying our CapEx by 2 in a matter of 12 months, right? So sometimes CapEx and the debt that is associated to this CapEx comes first, and the EBITDA from the generation of these plants, normally, there is a mismatch of around 2, 3 quarters, right? So it's hard to compare. You will even see increased levels of leverage in the next few quarters, and then it will tend to stabilize, right?

So I don't think it's something that we are concerned. We are -- as we have mentioned, we are fully financed for this year, right? Obviously, we are a public company. We have plenty of room for further capital increases if these are needed, right? We might look at them as we have expressed many times, maybe for 2024. It will depend on the evolution also of our build-to-sell activity. These Valkyria projects and the sale of minority interest, it's a fantastic opportunity to raise capital in a different way. But at the end of the day, is a similar effect to a capital increase.

So we are fine. We are not expecting any deals this year. And obviously, we will look at -- we have very strong acceleration factors in our equity story and in our business plan in the U.S., Germany. Those are markets where we are accelerating also our storage plan. So at one point, we might need to raise new capital, but I reckon it will not happen until 2024.

Your second question about, I think it was about strategic -- what was our key focus for 2023, well, we want to focus on execution, execution and execution. Finally, I think some of the permitting bottlenecks are clear. And we are very happy to say that from next quarter, we will have more than 1 gigawatt under construction. This is really a lot. I mean we are talking about delivering 600, 700 megawatts per year now. And we really want to focus on execution on one side in our main traditional markets like Chile, Spain, which is really where the construction activity now is focused. But at the same time, we don't want to miss the huge opportunity we have had, and we are accelerating our development plans. We are really recruiting more people focused exclusively on development in our new markets, mainly the U.S., Germany, Poland, Italy and the U.K. And I think this is where we're going to be really focusing in 2023.

[Daniel Herrera, executive]

Now we have Henry Tarr from Berenberg.

[Henry Tarr, analyst]

Thanks very much for the presentation. Just to sort of follow on from that last point, really. Are you seeing improvements in the permitting processes across different countries? Do you think there are processes which are getting easier or governments are getting better at pushing these permits through? And then I think you're mentioning building up the teams, et cetera. You can do -- you're looking to do 1 gigawatt per annum. Do you have enough resource within the organization today to really deliver that? And where are you looking to build?

[David Ruiz de Andrés, executive]

Well, it's -- you've mentioned 2 of the -- well, when we always mentioned the biggest constraints we have, we do mention permitting is one and talent is the other one, right? I think some way or another, we always find a way to finance our plants, but building the right teams now is really challenging, right. It's really challenging everywhere in this industry, but there are some markets like the U.K. or Germany, on the U.S. where it's really becoming very, very challenging. And we are doing our best. And I think we are -- okay, building a team of 20 in Germany from scratch in 6 months, considering in this market they need to give like 3 months notice, [ average ], it's really, really an achievement, and we're very, very proud of our human resources team. And what we are doing our best, we are offering the key employees access to stock option plans, which is something that traditionally has had great results, and it's a very fair deal, we believe, to make them part of the success of the company. And we keep -- we are now -- we now we identified that the lack of the right people is one of the major bottlenecks that we might face in our expansion. So we are working very hard in every market.

We are now a company with more than achieving -- we're getting close to 400 employees. More than 100 are focused exclusively on development, and this number will definitely grow in the next few quarters.

About permitting, something is moving. I don't want to be that pessimistic. I am more optimistic now. I mean well, maybe it's because we just got the environmental permits in Spain that we have long awaited, but I think it's something is moving. I mean in the new markets, what we call new markets for us or for like Germany, something is really moving in many regional governments. In some cases, they're promising some periods for approval of a year. They seem -- they look impossible, but in some cases, they're opening like fast tracks, and some lenders in Germany, some regional governments are really publishing new fast tracks and new laws to accelerate the permitting process. I think in Italy, we are looking at some changes in some regions, some others is still near plenty of time, but Sicily and Alassio and Basilicata, things are moving faster now.

And well, in Spain, we are [ insisting ] we are now fine, that finally we got -- we've made it, right, the environmental permits now. It's the rest of permits we need are really -- should be fine to get them, right? So it's -- and the thing is that it's been identified by all administrations at the EU level, at the country by country, as one of the major constraints in the industry. And I think this is good, right? That at least it's been identified, and we need more renewable energy, we need this energy now, and I think the main constraint is permitting.

[Daniel Herrera, executive]

Now we have Flora Trindade from CaixaBank BPI.

[Flora Trindade, analyst]

I have a question on the tables you usually provide on pipeline. If we compare with the data from 9 months, there should -- there seems to have been a decline, I think, mainly in Chile. If you can explain some projects moving into 2024? And also, if we adapt those projects, we reach around 400 megawatts to be added or with COD in 2023 versus the 1 gigawatt you expect to have under construction. So this is your central scenario in terms of additions for this year? That would be my question.

[David Ruiz de Andrés, executive]

Okay. Thank you, Flora. I think you might refer to this table here, right? Well, we have a very large plant in Chile under construction. This is Teno. I think it's expected to be fully operational in -- I think the date we now have is November this year, so it's Q4 2023. It's really going to change Chile because we're talking about 240 GWh. We have next door, like a smaller plant, Tamango. We are using the same off-taker, in fact, the same financing for the 2 plants, right? And this -- the last date we are considering is January 2024, so it is first quarter 2024. So altogether, we're talking about 300 GWh here, right?

Then we have our PMGDs. It's business as usual. We keep building those plants. We now have 60 plants for us. We closed the financing for this 140 with Natixis. We are looking now on either an extension of -- with Natixis or using another bank to finance this lot plus this lot here of 130 that we are starting construction very, very soon. It's a new scenario for PMGDs. Some of them will be full purely solar. Some of them will already incorporate storage. So it's a different scenario, and we are working now with -- banks really need some [ education ] on this. And we're working very hard in Chile for the PMGDs.

So we are expecting, in any case, to connect in Chile before the end of 2024. We are talking about Teno and Tamango utility scale, these 300 GWh plus at least another 200 GWh in PMGDs, this is our expectation from 2024. For 2025, we have new plants coming up that you will see them very shortly, I think the next update, in backlog, yes. We have plenty of large plants here. We have a fantastic pipeline and we are securing the PPAs first. And I think we'll give some light very shortly, right? That's the situation in Chile.

In Spain, we have, well, Belinchón, we are missing 50. This will be completely finalized at the end of next month. And then we have Tabernas, and we are about to start construction, on procurement very soon of Ayora and Jose Cabrera in Spain. I mentioned all this. And well, that's more or less the -- how it helps. But next update, you will see a big increase in backlog coming from the large project in Chile. And hopefully, we will include one-off of Clara Campoamor, maybe 275 out of this 575, which we are announcing the PPA also very shortly.

[Daniel Herrera, executive]

Now we have Daniel Rodríguez from Bestinver.

[Daniel Rodríguez, analyst]

I have, more or less, a theoretical question. When we have seen that all the permitting -- all the permits, environmental permits have been approved like in a single date for everybody, I mean all of you, all the developers are announcing these projects. And I'm a little bit concerned that what is going to happen in 2023 and 2024, whether this could have an impact on creating another bottleneck, either on connection, on construction or on PPA negotiation. So this could be a concern on whether this could trigger the possibility, because I have seen all the PPAs you have in place are basically in Spain, payers produced, so whether you could consider a more sophisticated type of PPAs in light with this higher competition? This would be my question.

[David Ruiz de Andrés, executive]

It is a very relevant question. I think that's the reason why we are securing everything with PPAs. I think maybe a month from now, we will make all the announcements on all our pipeline in Spain. I'm talking about this pipeline, right, is from whatever we have under construction to whatever we have in backlog and even whatever is advanced development, everything will be fully secured with PPAs. So we will not be competing with the rest on this potential outflow of projects. I have to say, anyway, that I don't know. I've been a bit, I think, changing my mind about the situation in Spain. It's true that there are many projects coming up. But many of the DIAs that were published are -- you're talking about projects that, for one reason or another, they are not going to be built. But this is my expectation because some of them, they have very long interconnection line and some of them are impossible to build, and anyway, it will take a while. You don't expect 50,000 megawatts under construction next year. That's not going to happen for sure, right? That's going to happen from 2024, 2025 and beyond, right?

And let's see how the market evolves, right? Don't underestimate the -- I think this is something we are insisting the government, right, that we need a legislation of storage, right, because the more storage, the more PV, right? And we need a legislation of storage, the sooner the better, right? Storage is becoming very competitive and it's -- sometimes is the answer, right? We are not going to -- I read on the news this morning that there were predictions of 60,000 megawatts of solar in 2030. That's going to be more than possible, but with plenty of storage, right? And that's something that we have to work very strongly.

Apart from that, I don't really expect -- one way or another, we're going to find a way to build these parks. The biggest bottleneck, I would say, will be interconnection, [ subscribe ] substations, [indiscernible] and Siemens is sold out for the next 2 years. GE is sold out. So we're going to start working in some cases. We have already secured our deliveries for all this portfolio, but I'm sure that some of the developers have not, and that's going to create a bottleneck.

[Daniel Herrera, executive]

Now we have Anis Zgaya from ODDO.

[Anis Zgaya, analyst]

I have only two questions, one on build-to-sell and one on build-to-own. So starting with the build-to-sell business, you have sold ready-to-bid projects contrary to usual. Is this a change of strategy, and what is your target for '23? In the build-to-own business, just the contribution on the energy business was relatively weak in the fourth quarter. Why?

[David Ruiz de Andrés, executive]

Okay. In terms of build-to-sell, we had forecasted to raise around EUR 35 million in EBITDA, and the figure is lower than that, but because of these 2 deals that were finally reflected in January, right? If -- other than that, we would have been really in this figure.

And in terms of megawatts, we have to transfer -- it was in a different way. On one side, we transfer PMGDs, so it was business as usual for us. But on the other, right, but we have been transferring making -- considering the reductions in CapEx, we've been making a higher margin, so we didn't need to sell more, right? That we had need to meet our target. So we finally transfer these 4 plants during [ the end of ] the year. And we have also transferred some nonstrategic plants in Peru, right? And this being another deal we've made and another way of raising of the build-to-sell plants.

How are we going to approach this in 2023, where we will keep transferring 100% interest in some plants, as Mercedes mentioned earlier on? But we are definitely exploring the alternative of transferring minority interest, which is another way of doing build-to-sell deals. Of course, if this happens, we will need to explain the investment community and all the analysts. I'm sure you are all aware, but that's -- it's a different way of approaching a build-to-sell. It doesn't go through our P&L, but it's a fantastic way to raise capital. And we make a profit after all, so we will try to -- if this happens, we will try to explain. I don't know we will talk about adjusted EBITDA or whatever, but we will try to explain very well the effect in our accounts of these deals, right? Because when we keep control, we will keep consolidating full EBITDA, but still, we will raise plenty of cash through these deals.

About your second question about the relatively low production of plants in Q4. Well, on one side, we have a very weak November and December in Spain. This was affecting Escuderos plant. Just keep in mind that we still have a relatively small number of plants. So if in one quarter, we had low prices of energy in our plants in -- for Chile, in Quillagua, and we had a very bad rainy fourth quarter and particularly November and December in Spain. On the contrary, January and February are performing extremely well. So it's still a matter, and whenever we have a more diversified portfolio, I think the plants in the Southern Hemisphere will compensate the plants in Northern Hemisphere. So we have like a more compensated approach.

[Daniel Herrera, executive]

Finally, we have Paul Chabran from Kempen. We cannot hear you. Okay, I think Paul is facing technical problem. So as the timing is all over already 15 minutes, we are going to contact Paul to answer his question. I think we can finish the presentation.

[David Ruiz de Andrés, executive]

Okay. Thank you. Thank you very much once again to everyone. Thank you. Have a great day.

[Daniel Herrera, executive]

Thank you very much. Bye.