Iberdrola SA

MAD:IBE

Earnings Call Transcript 2022-Q2

[Ignacio Cuenca Arambarri]

[Foreign language] Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2022 First Half Results Presentation. As usual, we will follow the normal format given in our presentations.

We will begin with an overview of the results and the main developments during the period given by the senior executive team that usually is with us: our Chairman and CEO, Mr. Ignacio Galan; Mr. Armando Martinez, Business CEO; and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session.

I would also like to highlight that we are only going to take questions submitted via the web. So please ask your question only through our web page, www.iberdrola.com.

Finally, we expect that today's event will not last more than 60 minutes. Hoping that this presentation will be useful and informative for all of you. Now without further ado, I would like to give the floor to our Chairman and CEO, Mr. Ignacio Galan. Thank you very much again. Please, Mr. Galan.

[Ignacio Galan, Chairman & Chief Executive Officer]

Good morning, everyone, and thank you very much for joining the result presentation. In the first half of 2022, net profit reach €2,075 million, up 35% from 2021, driven by the increased result in all the geographies, which offset the 26% decrease in the Spanish net profit. EBITDA grew 18% to €6,444 million, driven mainly by United States and Brazil. And operating cash flow reach €5,560 million, 31% more than the first half of 2022. Gross investment increased by 5% to €4,741 million for a total of €10.2 billion in the last 12 months, in which we have installed 3,500 megawatts of new renewable capacity with 10,800 more already under construction or secured with PPAs after having been awarded in U.K. close to 1,400 megawatts of offshore wind, 396 megawatts of onshore wind and 326 megawatts of solar PV in the recent CfD allocation round.

In Networks also, in the U.K. Ofgem published the draft determination for RIIO ED2, including the TOTEX allowance of ScottishPower of £3.4 billion for the next 5 years. And Neoenergia was as well awarded with 2,000 kilometers additional transmission high voltage capacity -- transmission capacity in the last transmission auction organized by the regulator.

With all these new project, we are reinforcing even more our growth prospect for the coming years, an expansion that is fully compatible with our balanced business profile in which our strong financial position with liquidity is reaching €25 billion.

Finally, in the annual shareholders meeting celebrated last month, we registered a quorum of 72%. All the proposal included that year were approve with an average favorable vote of 98%, including annual shareholder remuneration of €0.449 per share, 6.4% higher than the previous year.

As mentioned, EBITDA was up 18% to more than €6.4 billion with a positive evolution in all countries except in Spain. Networks EBITDA increased by 32%, contributing already 53% of group EBITDA, thanks to the higher asset base in all geographies, additional revenue due to tariff increases in the U.S. and Brazil. And the positive impact on the -- of the order issued by the New York regulator, this allow us to register certain regulatory asset. Going forward, this will also provide more stability to the group results. Energy production and customer EBITDA increased by 9%, driven by 3,400 new capacity installed last year, which offset -- year-on-year -- which offset the lower wind and hydro output mainly in Spain, and the best evolution in retail, both in Spain and U.K. This was partially compensated by a positive impact relating to court rulings.

As mentioned, Spain was the exception to the general positive evolution of consolidated first half results, mainly due to the complex energy context. Production decreased by 5%, driven by lower hydro and wind output and nuclear outage, forcing us to increase production with expensive gas and to purchase additionally in wholesale market. These 2 effect impacted our margin as we maintain the fixed prices previously agreed with our customers. Result were also affect by the negative impact of regulatory orders and court ruling mainly in Networks, as well by increasing amortization, partially offset by lower charges. Overall, Iberdrola Spain, net profit decreased by 26%.

In the first half of 2022, we continue to increase our investment 5% against the same period of the last year, reaching more than €4.7 billion, with 90% allocated to renewables and Networks. Renewables was the largest destination of the gross investment with 7% increase year-on-year, thanks to the acceleration of offshore and onshore project, mostly in the U.S., U.K. and Brazil. Networks investment increased slightly, representing 13% of the total, with the growth coming from Brazil, U.K. and Spain. We expect to accelerate investment in the last month of the year as usual trend that could be faster if administrative and permitting process continue to speed up.

Over the last 12 months, we have put in service 3,400 megawatts of solar PV in onshore wind as well as hydro and battery storage reaching [3,700] megawatts of renewable capacity. Additionally include 1,200 megawatts of solar PV in Spain, U.S., Brazil and Australia, Portugal, more than 1,000 megawatts of onshore wind in Brazil, the U.S., Spain and the rest of the world, especially in Australia where we have significant growth expectations, thanks to our pipeline and the increased support of clean energy provided by the federal and regional governments. We have also installed close 1,000 megawatts of hydro pan storage in Portugal after completing the construction of 2 of the 3 dams, Alto Tâmega giga battery, Gouvães and Daivões. Last week, the fact -- the Prime Minister, Antonio Costa inaugurated this complex, the largest clean energy project in Portugal history, and one of the most relevant pan hydro project built in Europe in the last 25 years.

Finally, we commissioned 100 megawatts of battery storage in U.K., Australia and Spain. On top of that, we have more than 10,800 megawatts already under construction and secured with PPAs globally, of which 5,500 correspond to offshore wind, to make a detail by geographies. Almost 1/3 comes from United States, mainly in offshore wind, 25% from Spain and Portugal, mainly solar PV, more than 20% from the U.K., mostly related to the offshore, onshore wind and solar. And the remaining 20% is located in Brazil and the rest of the world, including our offshore wind project at the construction in France and Germany. A significant part of this secured capacity correspond to auctions won very recently that will provide additional growth in coming years.

In the U.K., we were worthy with 2,090 megawatts in the recent auction of contract for difference, including 1,400 of offshore wind corresponding to our East Anglia 3 project, 400 megawatts of onshore wind in 5 different locations and [indiscernible] of solar PV for a total capacity to 326 megawatts. All this capacity has procurement contracts already close ahead, and will be in operation from 25th to 27th.

The total investment of this project will be on the range of £3.7 billion, with expect to return between 150 to 200 basis points over WACC. On the -- over the last quarter, we also secured significant additional investment in Networks. In the U.K., Ofgem published its draft determination for the RIIO ED2 framework, which, as you know, cover the period between April 2023 and March 2028. Total low expenditure for ScottishPower reach £3.4 million -- £3.4 billion in the nominal terms with an equity remuneration of 4.75% post taxes that we've adjusted with inflation plus incentives, and a low leverage of 60%. We expect to continue improving this framework up on the final decision that will be taken by December. We add to this investment, the remaining investment of RIIO ED1 and the £1.8 billion already approved for transmission in RIIO T2. Altogether, we reach close €6 billion in network investment in U.K. up to 2028.

Finally, in Brazil, Neoenergia was awarded as well with an almost 2,000 kilometers of high-voltage, high lines in the transmission auction held in June, reaching a total of 8,000 kilometers of the transmission line in 18 substation obtained in the auction held in this country since 2027 -- 2017, sorry. This project, which will be built up to 2027, would represent total investment of BRL 15 billion, which -- as well with an average spread of 150 to 200 basis points over WACC.

Moving on to energy policy and regulation. We see common effort in all geographies to reinforce self-sufficiency as well to protect consumer for increasing energy prices. The European Union has just agreed the reduction of gas consumption that will reach up to 15% in the coming winter. In addition, the green taxonomy was finally approve, including on a transitory basis, nuclear and gas. In the case of gas, the taxonomy include other restricted conditions. The European Parliament also adopted more ambitious target for energy efficiency and renewable energy. And following the latest communication from the commission, the debate on future electricity market -- European electricity market design is starting. In the U.K., a new energy bill was introduced, including incentive for green hydrogen and heat pumps, and Ofgem is consulting on reform of the price cap methodology and the cost recovery mechanism, which hopefully will contribute to solve carbon inefficiencies.

Additionally, the government has introduced a temporary increase in taxes in local exploration and production of oil and gas. In Spain, a cap on gas prices in the wholesale electricity market was introduced, creating a subsidy to gas used for electricity production that is financed by consumers and the regulated tariff, and also by customers in the liberalized market as they renew their contracts, as there has been an announcement of a potential tax on oil and gas, electricity companies with excess profit. As far as I know, the energy companies, which are increasing their result in Europe, are oil and gas companies, not electric utilities. On the other hand, following the mandate of the European Commission, the Spanish government will reform the design of the regulated tariff, which is unique in Europe in order to award price volatility.

On the -- in the United States, the New York regulator has published in order to allow us to accrue certain regulatory asset in consolidated accounts. This will provide more stability to revenues. Also, a new rate case was filed in New York and CMP, in Maine, also sent a notice for intent to the Maine regulatory commission. We expect new rate cases shortly in Massachusetts and Connecticut. In New Mexico, the Public Regulatory Commission is starting to move forward with the appointment of these new members by January 2023.

Finally, in Brazil, the government is reducing taxation of electricity. Our 2 listed subsidiaries, AVANGRID and Neoenergia, have already presented their first half results showing a strong performance in both cases. Our banking net profit increased by 46% to $329 million, mainly thanks to the positive impact of new rate cases, increase in our production and the restructuring gain to the agreement with CMP. Adjusted EBITDA reached $1.2 billion. Gross investment reached $1,571 million with $850 million located to Networks and the rest to renewables. In the first half, AVANGRID installed 281 megawatts of onshore wind and the company has close to 100 megawatts of onshore wind and solar under construction. 50% of this capacity will operation in the next 6 month, and the rest of 2023. Additionally, the company is progressing in the construction of 1,600 megawatts of offshore wind projects.

In Brazil, Neoenergia net profit grew 14% to reach BRL 2,287 million, mainly driven by higher asset base in networks, the impact of target reviews, and the consolidation of Neoenergia Brasilia. EBITDA increased by 40% to BRL 6,395 million. Gross investment reached BRL 4,569 million, 30% more than last year, and almost 75% allocated to Networks and 25% to renewables.

Our operational performance demonstrate the resiliency of Iberdrola business model in the current macro scenario. 90% of our European production comes from 0 emission sources, with gas contributing only 4% of our EBITDA in Europe, and we do not depend at all on gas and oil from Russia. Also, following our procurement policy, we have already secured supplies for 2020 to 2023 with prices close of hedge. In terms of financial structure, around 75% of our debt has fixed rates. Our average debt maturity is 6 years. Our liquidity position has reached €25 billion. And due to our strong cash flow generation up to 31% to €5,560 million in the first half, our FFO to adjusted net debt ratio has improved 110 basis points to 24.7%.

Finally, our General Shareholders' Meeting held last month approved a 6.4% increase in annual shareholder remuneration. Accordingly, a supplementary dividend of €0.274 per share will be paid next week. We, together with the interim dividend of €0.170 per share paid in February and the engagement dividend of €0.005 per share already paid after annual general meeting, leads to a total remuneration of this €0.449 per share.

I will now hand over to the CFO, who will present the group financial result for -- in the detail. Pepe?

[Pepe Sainz, Chief Financial Officer]

Thank you very much, Chairman. Good morning to everybody. As the Chairman has explained, EBITDA was 18.4%, up to €6.4 billion, and the net profit grew 35.5% to €2.1 billion. Our FX evolution has had a positive effect on results of almost €400 million at the EBITDA level and €6 million at the net profit level as we have already hedged -- we are already hedged for the year. In near term, the dollar rose against the euro by an average of 9.8%, the pound by 3.5% and the real by 17%. Revenues increased 30% to €24.4 billion and procurements grew 42%, reaching €14.6 billion. As a consequence, gross margin rose by 16% to €9.9 billion and 9% excluding the FX impact.

Net operating expenses rose by €372 million to €2.5 billion as a consequence of the group's growth and FX appreciation. Excluding FX, net operating expenses grew 10%. This evolution was also -- negatively affected this quarter by €80 million positive in the Q2 of '21 impact from the asset rotation at the other operating income level. Although in the first quarter, there was a positive impact accounted for €73 million in pensions.

Analyzing the results by business and starting by Networks, its EBITDA grew 32% to €3.4 billion. EBITDA included 2 nonrecurring impacts in Q2, a positive in the U.S., partially compensated by a negative in Spain. Nevertheless, our increasing asset base, inflation recognition and operating efficiency are the recurring factors that explain the good evolution of the business. In Spain, EBITDA decreased 24.4% to €632 million, mainly due to the already mentioned €195 million negative one-off linked to a legal case on determined assets and has been accounted in this quarter. There was also a €22 million negative impact as a consequence of positive settlements accounted for in '21.

In Brazil, EBITDA grew 33% to BRL 5,807 million, driven by our increased asset base, positive impacts in distribution from tariff adjustments, and operating efficiency. In the U.S., IFRS EBITDA was 89% up to USD 1,265 million after a $550 million positive one-off recognized in this quarter linked to the New York order that allows to accrue the recognition of certain regulatory assets into group earnings driving, as the Chairman has said, more stability in future revenues. In addition, there is a recurring positive evolution of the business derived from the rate cases linked to higher investments and higher asset base. U.S. GAAP EBITDA increased 15% to $927 million, not accounting for the above-mentioned impact, which is only in the IFRS.

Finally, in the U.K., EBITDA increased 4.5% to £465 million, thanks to our higher asset base. Energy production and customers business EBITDA grew 9% to €3.1 billion and 5%, excluding €109 million of FX impact. In Spain, EBITDA was €1,400 million, 6.6% up despite the very high price environment, as a consequence of the group's fixed price policy sales, as the Chairman has explained previously.

In the U.S., EBITDA decreased 22% to $351 million due to the positive contribution of the Texas cold snap accounted in the first quarter of last year, partially compensated by a 5.2% higher output due to new installed capacity and better wind results versus '21. In the U.K., the EBITDA was flat to £441 million, improving the results of the first quarter, in the context of higher energy procurements and higher prices due to the higher sales that -- than expected in the SVT tariff, compensated by higher wind output and better prices. In addition, the SVT will be raising again in October. So we expect that the results will continue to improve.

In Mexico, EBITDA grew 11.6% to $467 million. $21 million was negatively affected by the Texas cold snap. This has been partially compensated by lower thermal production in '22. In addition, there is a €29 million positive one-off. In Brazil, EBITDA grew 56%, improving 33% increase at March to BRL 936 million driven by the Termopernambuco CCGT. Finally, in the rest of the world, EBITDA grew 20% to €206 million, with higher contribution from both onshore and offshore business across the different geographies.

EBIT was up 21% to €3.9 billion. D&A plus Provisions grew 14.5% to €2.5 billion and 8.6%, excluding the FX impact. D&A grew mainly due to the higher network asset base and activity, renewable growth and the FX impact. The growth was 12%. Provisions were up 37% affected by FX, and some negative one-offs for around €40 million. Net financial expenses grew €444 million to €960 million. Debt-related costs explained €291 million, €159 million due to the higher cost of debt in Brazil that nevertheless is more than compensated at the EBITDA level by revenues indexed to inflation.

Excluding the debt in Brazil, our cost of debt improved 4 basis points to 2.86%, the results of €49 million increase due to the higher average net debt balance. Non-debt-related costs increased €153 million. Half of this impact is explained by net positive one-offs accounted for in Q2 '21, and another half linked to the FX hedges.

Iberdrola's balance sheet is well positioned for the rise in inflation, as the Chairman has explained, as we have had a prudent approach in funding. Our debt is 88% fixed, if you exclude now, including €4 billion of forward start swaps. As you can see in the slide, our fixed debt structure is much higher than our fixed revenue structure. Around 30% of our EBITDA is directly linked to inflation and another 20% indirectly linked. At present, we maintain an ample liquidity up to €25 billion, 27 months coverage of financial needs and 21 months in a stress scenario. Iberdrola has been able to close up to date transactions totaling over €5 billion in different markets with a very -- in very competitive conditions, anticipating all our second half financing.

In addition, our sources of financing continue to be highly diversified. Currently, the bond and commercial program market represents 66% of our sources. Bank finance is 14%, giving us opportunity to increase this kind of funding if required, and supranational lenders that have increased in these first months, have another 14% share. Our average life debt is 6 years.

As you can see on the slide, our strong cash flow generation with our FFO up 31% in the period, compensates the gross investments and dividend, allowing the company to maintain debt under control. As a consequence, our adjusted credit metrics continue to improving. Also, we have had a working capital active management that has allowed us to neutralize negative impacts of -- possible working capital impacts of commodities in our debt. Our adjusted net debt to EBITDA improved to 3.2x. Our FFO adjusted net debt rose to 24.7%. Our retained cash flow adjusted net debt was up to 22.4%, and our adjusted leverage ratio strengthened to 40.7%. Net profit grew 36% to €2,075 million.

Equity method includes €218 million of positive nonrecurring impact as a result of the Vineyard Wind restructuring agreement reached with CIP that was accounted in the first quarter. In the second quarter, this is partially compensated by a €60 million of impairment in our U.S. engineering profit. In addition, the negative one-off related to U.K. taxes recorded in '21, favorably affects the evolution of our net profit with positive evolution in all countries except Spain.

Now, the Chairman will conclude the presentation. Thank you.

[Ignacio Galan, Chairman & Chief Executive Officer]

Thank you, Pepe. The sector result demonstrate that despite the current energy and macro scenario, we have continued to make progress ahead of our plans, and we expect this trend will continue to the second half of the year, driven by an expected normalization of hydro and wind production, the addition of 3,000 megawatt of renewable capacity along the year and increase in Networks investment to reach €4.5 billion in the full year. We also expect our operating result will reflect the positive evolution of exchange rates as seen in the first half, mainly in Brazil and United States. And thanks to our debt structure, we don't expect impact of higher interest rate in our financial costs. All in all, we reaffirm our net profit outlook for 2022 on the range of €4 billion to €4.2 billion.

To conclude, over the first 6 months of 2022, we have exceeded our target in the challenging environment that our global diversification -- and we have continued expanding our footprint to ensure additional growth in the years to come, taking advantage of the increasing investment opportunities linked to decarbonization and energy self-sufficiency. We will provide more information about our plans and projections for the next years in the coming Capital Market Day that will take place in London in November. Our Investor Relations team will send you all the details in the next few weeks.

We now will be more than happy to answer your questions.

[Ignacio Cuenca Arambarri]

Okay. Before starting -- sorry, the Q&A session, and given that today is a day full of results, we will try to be brief on the duration of this event. So, for the reason, I'm summarizing. The following professional have asked the question that I will be putting to the top management in the next few minutes. Alberto Gandolfi from Goldman Sachs; Robert Pulleyn from Morgan Stanley; Manuel Palomo, Exane BNP; Javier Suarez, Mediobanca; Fernando Garcia, Royal Bank of Canada; Jorge Alonso, Societe Generale; Ahmed Farman, Jefferies and finally, Jorge Guimaraes, JB capital markets.

The first question is related to the guidance. What can we expect for the second part of the year in terms of EBITDA and net profit, considering the new renewables capacity, et cetera? Same EBITDA as H1 is recurring, €6.2 billion?

[Ignacio Galan, Chairman & Chief Executive Officer]

So, I think the main factor is, from one side, level of production. We expect to normalize the year. Recovering nuclear plant of Cofrentes is now producing already. We now put -- recover in the second quarter, and we expect a better hydro output in the second half of the year. We know that we are in a terrific drop in Spain, but I think we hope that, that will end in some time. This will reduce the need of energy purchase in wholesale markets, which I think that was affecting negatively to ourselves. We will have as well certain contribution of additional investment.

I think I mentioned, we have around 3,000 megawatt of renewable that is going to be installed during the year, and we will continue making the investment in our Networks, we will -- up to €4.5 billion in these 2 months. We will generate as well certain returns. It has been mentioned, I think the positive impact of FX in operating results, especially in Brazil and United States. And that's why I think we are already maintaining our guidance of €4 billion to €4.2 billion. I think you have to be aware about this very volatile environment. And I think this very volatile environment we would like to be, let's say, prudent, or we would like to use the word conservative.

[Ignacio Cuenca Arambarri]

Second question is, what is your best guess of net debt by the year-end? And how the cost of debt could evolve in the next year in 2023?

[Ignacio Galan, Chairman & Chief Executive Officer]

Pepe?

[Pepe Sainz, Chief Financial Officer]

Yes. Well, we are expecting to end -- it depends a little bit on the FX, but we are expecting to end the year with a net debt of around €45 million to €46 billion net debt. In terms of the cost of debt, we will give you more information on the Capital Markets Day. But obviously, most of our debt in -- with -- except the Brazilian real is fixed, and it will depend a little bit on the evolution of the Brazilian real. In '23, we are expecting that the Central Bank of Brazil will start cutting rates a little bit. So in that sense, we will see what -- perhaps we would see a positive evolution on the debt. But as I was telling, we'll give you more information on the Capital Markets Day.

[Ignacio Cuenca Arambarri]

Next question. Would it be possible to get an update on the evolution of bad debt in the different markets you are exposed to, percentage and total amount, if possible?

[Ignacio Galan, Chairman & Chief Executive Officer]

Pepe?

[Pepe Sainz, Chief Financial Officer]

Well, we have increased the provisions on the bad debt because, obviously, the amounts are a little bit higher. But in terms of percentage over sales, they are -- we are maintaining those quite stable. So that is good news. We are maintaining a percentage of bad debts over sales in line with last year.

[Ignacio Cuenca Arambarri]

Next question. What can we expect for financial results considering higher cost of debt in Brazil, U.S. and FX impacting debt?

[Ignacio Galan, Chairman & Chief Executive Officer]

Pepe?

[Pepe Sainz, Chief Financial Officer]

Well, we are expecting to see in terms of growth, reduction in the percentage of growth, taking into account that in this first we have accounted some negative impacts of one-offs that will not happen in the second half. So I would say that the growth of our financial expenses for the whole year will be around 25%, something like that, coming down from the current level that we have, which is a 40% growth.

[Ignacio Cuenca Arambarri]

Next is, can you help us to quantify the negative impact of regulatory orders and court rulings?

[Ignacio Galan, Chairman & Chief Executive Officer]

Pepe?

[Pepe Sainz, Chief Financial Officer]

The negative impact of regulatory order?

[Ignacio Cuenca Arambarri]

Between impacted column -- negative impact of regulatory orders and good court rulings.

[Ignacio Galan, Chairman & Chief Executive Officer]

Quantify this one, how much we have fully introduced into our accounts of these provisions.

[Pepe Sainz, Chief Financial Officer]

Let me give you -- court rolling in Spain, you mean? In Spain?

[Ignacio Cuenca Arambarri]

Yes. The wording of the question doesn't appear that, but it's related to this, yes.

[Pepe Sainz, Chief Financial Officer]

Okay. So basically, this comes from a divergence in the valuation that we have on certain assets. So there has been an order that has been given by the Spanish government on that. And we are appealing to the court as we think that we are correct in the valuation of these assets. And we expect this to be accepted and won finally by the courts, but given our conservative policy and given the order passed by the government, we have decided to provision this. And it has to do, as I was saying, regarding the valuation of some assets in our distribution business.

[Ignacio Cuenca Arambarri]

Next question is, what could be the impact of an Italian type of tax applied in Spain based in year 2022 and 2023 results expectations? How could it be split among utilities and other energy companies?

[Ignacio Galan, Chairman & Chief Executive Officer]

Well, one, this -- probably we'll provide more information. I think -- I would like to remember that 75% of total energy -- they are talking about energy. And energy -- 75% of the energy consumed in oil and gas and only 25% electricity. And even more than half of this electricity generated as well from fossil fuels. So as you have already seen our results, we have not extra profit, as shown in the results I just presented to you. And I think with the public information and oil and gas companies, that is not the case in all over the world.

[Ignacio Cuenca Arambarri]

Next question is related again about Spain, is, could you let us know if results in Spain includes the change of accounting related to the new renewables regulation in Spain? If yes, what is the impact in H1? And how much you expect in the full year results?

[Pepe Sainz, Chief Financial Officer]

So, I think it's -- in my opinion, does not impact, in my knowledge, and that is not depending on results. I think just in advancing cash that, in any case, we have to be [indiscernible] to return later on. So I think that is not an impact in our accounting result. It's an impact in the cash flow of the company only for the time being.

[Ignacio Cuenca Arambarri]

Next is related to the U.K., [green fuel] taxes in U.K., with the green pool proportion for the market reform, opinion and expectations?

[Pepe Sainz, Chief Financial Officer]

So I think it's the U.K. government has already launched this process last week. I think we need more time to analyze in detail this reform. As soon as we have already analyzed, we will be already able to give you some answer. But I think the -- as much as I know, that's already launched this -- already this process and I think we will analyze.

[Ignacio Cuenca Arambarri]

Next question. Could you please tell us about to what extent have you already been able to pass current electricity prices to your final customer in the different countries?

[Ignacio Galan, Chairman & Chief Executive Officer]

Armando?

[Armando Martínez]

We have already sold to the final customers 100% of our own generation for 2022. And our -- the sale -- already sold more than 80% in 2023, 60% in 2024, and more than 40% of 2025 of our own generation has been already sold to final customer.

[Ignacio Cuenca Arambarri]

Next question is, how would you qualify the degree of approval of environmental permits requesting in Spain versus your expectations? Should we expect delays of capacity installation in 2022 and 2023?

[Ignacio Galan, Chairman & Chief Executive Officer]

So -- well, I've been called by the European authorities, Mr. permit. Many years I've been already claiming because of the fact that their permit process is too slow. It's too bureaucratic. It's not a question of one country, and the one is general. The fact that European authorities is already publishing, or plan to publish things how to make some kind of directive, how to minimize the timing re quired for these delays. The fact -- I think we have had some -- I think, several countries, I mentioned, already started implementing new regulation to avoid these present little bottlenecks.

But as far as I know, to now, they are not very more detailed. I was last week in Portugal in the inauguration of the opening of the giga battery of Tâmega with the Prime Minister. He told me that he's already preparing a special law for already diminishing the bureaucracy for already the permitting. But as far as I know, I've not already seen that, that has already been published yet, so in Spain as well. They are already announcing these short-term measures in the case of Britain. Same thing in the case of European Commission as well. But saying that, in our case, in the first quarter, we have already had a very small impact in our 2 facilities in United States, where one of the points where we have -- already more prominent that one, mainly for the supply of solar panels.

Now this supplier of solar panels in the state has been removed, and we don't expect the impact in the next few months. So that one because it's already -- 2 years already, which we will not already affected this tariff for the imports of this solar panel. So it's something we have to resolve. Still it not solve, but they are already -- all countries knows about the problem and all countries trying to do their best for implementing measures, which is always going to happen in the next future. I think I'm sure is the only way for reducing our dependency of fossil fuels for third countries is to accelerate the construction of renewable. In the construction of renewables, I think we have already had projects ourselves in other companies in debottleneck, continuing that one. But I think it's already a real drive in all countries to try to solve this one in the short term.

[Ignacio Cuenca Arambarri]

Next question is related to -- on previous calls, Iberdrola commented the impact of the cost inflation for renewables. Could you please provide an update up to now?

[Ignacio Galan, Chairman & Chief Executive Officer]

So, I think most of our operating result, as has been mentioned by the CFO, are protecting for inflation since revenues increased with inflation in different businesses. In Networks, thanks to regulatory framework in most of our countries. In renewables, we have certain PPAs and of course, the CfDs which are linked to inflation. Also in renewables, we are convinced if the inflation persist in the CapEx. As consequence of that one increases, we will transfer to the prices to the final consumers. And -- but in any case, in our -- for our suppliers in 2022, we have already almost secured with prices close of hedge in advance.

You'll remember in 2020 -- in 2021, we make already large partners of equipment for already protecting our supply chains. And I think we are not very fitting still from the prices we fixed already in the past. So I think in -- another consequence of the inflation is the increases of interest rates. As Pepe mentioned, 75% of our debt is at fixed rates. And the only area where we have not that one is in Brazil, which inflation is also [indiscernible] in revenue, so which I think we are already natural-hedged in the country in that one. So we are not already -- much affecting this moment for the inflation itself.

[Ignacio Cuenca Arambarri]

Next question is related to the PNM deal. And is, could you please provide an update on the status of the proposed acquisition and the expected time frame?

[Ignacio Galan, Chairman & Chief Executive Officer]

Well, I think -- as I mentioned in our conference call, we remain optimistic. We have already an agreement with PNM until mid-2023, and we are sure that the -- confident that we can execute transaction fund by then. We have already filed an appeal to the second court in New Mexico against the decision of the New Mexico regulator. Also, I mentioned in my speech, the process to renew the New Mexico Public Regulatory Commission has already started, with appointment of the nominating committee which nominate the new regulatory commission, which is going to be in place by January 2023. So I think it's already 2 months, that this regulatory commission remain in job. And I think most important in all those things, is the transaction makes sense for us, for New Mexico citizens and for the investors.

I think the fact, 23 of the 24 parts already presented in the -- to the regulatory commission in New Mexico agreed with it. So even the attorney general in New Mexico has publicly supported the transaction. So I think those are the facts. And that goes already just -- for whatever reason, the actual regulatory commission was not already following. The 23 of the 24 parts were already supporting the transaction. I think we hope the new regulatory commission, which is going to be appointed by January this year, will already analyze the thing in a different manner. And also, the Supreme Court in New Mexico will take into consideration the number of people which are already present in this process to support already the transaction. So that's why I already remain optimistic.

[Ignacio Cuenca Arambarri]

Next question is, when do you believe that the repower EU might lead to further upside to your investment plan in Europe? Can you broadly quantify, if any?

[Ignacio Galan, Chairman & Chief Executive Officer]

So, I think you heard to me the Fit for 55, I used to call Fit for self-sufficiency. It's the opportunity of Europe for becoming self-sufficient. At the same time, we will become already a net 0 or diminish our emission. REPower Europe is a very positive regulation because precisely pretends to reach this self-sufficiency, at the same time that reached already the decarbonization target. As you know, we have already a very clear plan. Our strategy is no change in the sense of continue -- investing in helping to decarbonization, helping the country to become self-sufficient.

But I think since then we will meet all of us in our market -- Capital Market Day in November, will lead more detail about these things. Many things is going to happen in Europe in the next few months, so in all sense. So we are seeing that almost every week is already meeting of ministers -- energy ministers in Europe for different reasons. So I think the fact Europe is already wake up about the need of becoming self-sufficient. And the only sources for becoming self-sufficient in Europe are renewables. And for those countries, we would like to make -- build nuclear or to remain with the existing one -- is the only one we have already present, and I think Europe is very aware about that one.

[Ignacio Cuenca Arambarri]

And the last question is the following. Given the rising focus on Europe and U.S., are you contemplating any debasement disposal in emerging markets to fund investment in Europe or U.S?

[Ignacio Galan, Chairman & Chief Executive Officer]

So, I think in terms of a new investment, I think you know we are very clear. I think we continue with our process of PNM. I think that is in terms of new investment in -- corporate investment is -- P&M is the focus. And in terms of asset rotation, I think we are already continue doing independently in the Europe or other countries. I think we are already rotating those edges and we consider either are not strategic for us, either are already helpful to make the rotation to invest in another area. So I think we continue with the rotation, and we continue already with partnership. So I think -- in many areas. We have partnership not only in renewable, we have partnership in green hydrogen. We have partnerships -- we are going to also partnership as well in the -- for charging station -- electricity charging station for electrical vehicles. We have already many, many of those things which are already helping to our future growth without affecting much to our financial structure, to our balance sheet.

[Pepe Sainz, Chief Financial Officer]

I just wanted -- because I made an estimate of around €45 million, €46 billion of debt, really. This was not including some asset rotation. So in the end -- and I was assuming a little bit of higher FX. In the end, what we have in our revenue is somewhere of around €44 billion, okay? Just to make it clear.

[Ignacio Cuenca Arambarri]

Okay. Now, please, let me give the floor to Mr. Galan to conclude this event.

[Ignacio Galan, Chairman & Chief Executive Officer]

Okay. Thank you very much for taking part in this conference call. As always, I want to thank you for your questions. Always very, very interesting question, very intelligent. As always, our Investor Relations team will be available for any additional information you may require. And for those of you who take days off, let me give you a very nice summer break. So thank you very much, and see you in November. Thank you.