Solaria Energia y Medio Ambiente SA

MAD:SLR

Earnings Call Transcript 2022-Q1

[David Guengant, executive]

Good afternoon, everyone, and welcome to Solaria 2022 First Quarter Earnings Webcast. My name is David Guengant. I'm the Head of IR of Solaria. I'm joined today by Arturo Diaz-Tejeiro Larranaga, our Chief Executive Officer. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today.

During this presentation, we'll begin with an overview of the results and the main development during this period given by our CEO, Arturo Diaz-Tejeiro. And following this, we'll move on to a Q&A session. I would also like to highlight that you have to submit all your questions via the web.

Thank you very much again, and I will now hand over the word to Arturo.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Thank you, David, and thank you to everyone joining this conference call. I hope that all of you and your families are keeping healthy and well.

2022 first quarter result has been a record quarter for Solaria in terms of energy production, profits, EBITDA and generation. And if you want, we could start. We will explain extremely fast our strategic plan and updates that we have done, and then we will pass to the Q&A session.

First of all, I think that it's interesting to talk about the situation, the macro situation in European Union. As you know, things are changing extremely fast, especially after February. You know that Ukrainian war is changing the rules and is changing the situation of the European Union. And you know that today, probably energy is a strategic issue, it's not only a financial issue for European Union today. Energy is something completely strategic.

And as you know, during the last month, European Union is changing completely the view that they have about generation and outsourcing of generation. And they have understood that they need to cut the strong dependence of Russian gas and they want to develop its own generation system. The result of this is the abnormal, the amazing increase on targets around renewables that they have done. It's like if you compare during last 3 years, all the time, they are changing its mind and they are changing targets, global targets.

Today, the new target of European Union is 600 gigawatts, extremely ambitious. 45% of generation will come from renewable energy. I think that is extremely ambitious and extremely tough to achieve. But of course, European Union, they have decided, they are putting a lot of weapons in order to develop and to achieve, and we will explain during this presentation countries and targets.

Of course, as we have explained in a lot of occasions for us as since the development of renewables, especially in south of Europe. And 1 year ago and 1.5 years, we explained to the market, south should sell energy to north of Europe. Today, I think that this message has more sense. And even it's a stronger message than a few months ago, it sounds better and I think that we continue to explain to the market the same. I think that it has sense to develop renewables, especially in Iberian region, Spain, Portugal, develop solar, develop wind and to supply electricity to the north of Europe.

You know all the countries including Spain, Italy, Portugal, all the countries are improving global renewable targets. And hopefully, in Spain, we will see improvements of global targets in the short term.

Of course, in order to talk about the results of Solaria and our situation, of course, today, we have 1 gigawatt constructive. As we have planned, we will explain during this presentation 180 megawatts that we have completed and will be connected in June. And hopefully, we will finish this year with 2 gigawatts connected to the grid.

Of course, important points that we want to show to the market. First, obviously, we have doubled our results. It's something that today sounds a standard in our company. Because last 4 years, we are doubling per quarter. And of course, hopefully, we will continue following this rhythm in 2022, 2023, 2024. It's like something standard in Solaria, but believe me, it's not easy to double the size of the company and the results of the company per quarter. It's a strong effort that all the staff has done during last month, last year, I could say. And of course, it's standard but extremely difficult to get. And the results are here, good revenues, good EBITDA, good net profit and close to 100% of growth.

New drivers of growth that will happen in the next quarters. Hybridization, it's something that we were skeptical about the hybridization during last year. Hybridization is to add in the same connection points, additional power that will complement the connection point. In our case, as you know, we develop solar, and the typical hybridization will be with wind.

In some of our locations, we have great conditions for wind plants, and we have done a lot of studies. And our intention is to add in some connection points, not massively, but in some connection points, specific connection points, is to add wind technology. And we will explain during this presentation why.

Of course, new pipeline in Spain. We continue growing. As you know, Spain has done an update around the electrical system, the future electrical system and infrastructure that they will develop, and we are locating bank guarantees. We are booking land around this new infrastructure that will be constructed. And of course, like you know that we are investing and we are vetting for Spain for the medium and long term. And obviously, we want to be the leader. In this case, we need to continue growing our own pipeline.

Italy. In Italy, I think that we are extremely excited with the Italian market. It's like we always explain, it's still too early, but Italy is one of the government more bullish around renewables. They are pushing a lot of European Union around renewable targets. And I think that in Italy, we will see a strong growth in renewables, especially in solar.

Our team is doing a great job, and I think that they are growing a lot of our pipeline. Pipeline, as you know, is the blood of the company. It's the initial part always. But hopefully, in 2023, we will see construction in the good volume, massive volume, and Italy is one of our key countries for the future.

Germany, of course, Germany is a completely different market, north with lessened radiation, but I think that Germany is changing is like European Union. During the last month, they are changing completely its mind. They want to bet seriously for renewables, especially solar. We believe a lot, we think that Germany is a great country. It's the central is like the heart of European Union.

And of course, you know that in the past, they have depended a lot on Russian gas. I think like all European Union, we have done globally a lot of mistakes around energy. But the key point always is if you are able to change and all the countries are changing. Germany is going to be the leader in this enormous change that European Union is going to do. We have a lot of experience in German market, and we want to stay there.

You know that they have approved a global target of 215 gigawatts. That is an enormous target, enormous target, but I'm completely sure because I know the country that they are going to accomplish. And obviously, Solaria needs to stay there, needs to support the growth of the country around solar. And of course, we will talk about this during presentation.

GENERIA is the last part that we have introduced and land. Land is like pipeline for us. Land is other part of pipeline. Today, if you don't manage or you don't control the land, you will have problems because you will not be able to grow because you don't have good pipeline, and I will explain you in the presentation. But GENERIA will give all of our shareholders a lot of good news.

Of course, production sales. I'm not going to spend a lot of time here because, as you know, like always, I have explained, it's a standard in our business but normal growth. Remember, this is the worst quarter for us, is winter, the worst quarter of the year. Probably in the next quarters, you will see better numbers and better growth. Why? Because the sun, sun radiation, more connections, more PV power assets functioning. And of course, I think that the good point is that day, these numbers is the answer to the probably represent the worst quarter of the year.

Of course, we -- in this slide, I want to say only that we have increased even the percentage of transformation EBITDA net profit because we maintain extremely strict control of cost. This is critical because in this business, sometimes, it sounds like you could burn cash and it's not a problem. It's not our intention. Our intention is always to maintain an extremely strict internal politics of control of cost. That is critical in order to support our growth.

Cash flow, of course, we continue investing. This quarter probably is a weak quarter from investment point of view in the next quarters. We will have enormous volume of new investments associated with our massive developments that we are doing. And of course, like always, we maintain a good cash position, associated, especially with our CapEx.

Here, this is important to understand we maintain really good cash position because we maintain a really good CapEx position. At the end of the day, this business depends on the money that you invest, and excellent money that you could invest is serious damage in your cash position. I think that we are really proud to be probably the most efficient company from CapEx and OpEx point of view.

Of course, where we are? Where we are now? We are -- Solaria is a player of 1 gigawatt. Not bad. But I could say that 1 gigawatt in Iberian region probably means that we are one of the leaders in the Iberian region. And the good point is that we are going to add additional megawatts in the next extremely short term.

And we maintain a good rhythm of connection, even with all the problems, all the license problems, sometimes all the connection problems that we suffer with utilities, with, of course, all the plans that you know is to construct this kind of infrastructure assets is extremely difficult, not for construction reasons or license and permits reasons. The good point is that we are improving a lot of rhythm. We are including now more assets.

And of course, our target, as you know, is to finish with 2 gigawatts for the end of the year, 3 years under construction. We have more powers under construction. It's like we feel comfortable. Even in September, 30th of September, we will arrange our half presentation in Trillo. I think that it will be extremely useful because it will be the largest PV power plant function in Europe. And you could see if you want, you could see one of the largest PV asset development in the world. It will be interesting. And it will happen in September of this year.

Of course, 6.2 gigawatts target. I'm not going to spend a lot of time here because you know we have a strong visibility of our global target for 6.2 gigawatts. As you know, that depends on the pipeline law approved by the government. We have a good pipeline in different areas of Spain, Castile-León, Castilla-La Mancha, Navarre, Basque Country, Catalonia. It's like we have a good split and good proportion of assets in different parts of Spain.

As you know, Garoña, probably for September's presentation, we will have environmental permits on site. And we will see probably in the last quarter of this year, hopefully, we will start with the construction. It's one of the largest development of the company. Villaviciosa, the second one, will be for 2023.

And it's like we have a high level of visibility of all our developments. What does it mean? We have high level of visibility of our growth or financial growth. It's like I could say that we are going to maintain the same rhythm during next years because we have high level of visibility of the asset that we are going to connect.

New drivers I have mentioned, but I will spend more time here. Italy, I have said. I think that Italy for us is critical. I think that Italy, you have -- our perception about Italian market is renewables will be one of the key growth -- areas of growth during next years in Italy because they need. And honestly, I think that Italy, they have a great opportunity. They have really good connection with Austria. It's like they could supply electricity from south to the north. It's like in Spain. If they develop renewables and they are obligated. And if they develop renewables seriously, they will have not only the opportunity to reduce the bill of the consumers of Italian consumers, they will have the opportunity to sell electricity to the north. This is the critical part.

I'm spending a lot of time in Europe, explaining that we need to make a global market, a global market. South needs to be connected in the north, and we need to share electrical market. Because the solution for European Union, especially in short and medium term, will come only if some countries support other countries. It's timing for looking for global solutions for Europe. And global solutions will come from south, north altogether.

And in order to explain our situation in the country, our pipeline is growing. We have good land, good connection points, exceptional team. We are extremely excited about this, and we have done an update. As I have explained in the last conference call, this is not a surprise, 3 gigawatt sounds good for us. 5 gigawatts is more in the rhythm of growth of Solaria. And of course, we will see, as I have mentioned, 2023, we will start with the construction in Italy.

Wind. It's still probably too early to talk about wind. Wind is hybridization for us. During last month, we have listened to a lot of wind players talking about hybridization. Our case is opposite, is solar players talking about hybridization for executing wind. We will start with a license part. It's like advantage of hybridization. You will reduce some permits. It's like -- it's more you needn't to develop the full way, the full permitting way. It's like you are going to save some time, but it's not the critical part.

At the same time, you could optimize the connection cost because, obviously, we have done and we have construct infrastructure. It's like they use common infrastructure. And at the same time, that is, for us, the critical partner. And we are lucky because in the place that we have developed our PV power assets, especially in Castile-León, we have great wind conditions.

And we say that we are lucky because at the beginning, it's not -- it wasn't our intention. But wind studies show to us that we have great conditions for wind, and we have opened the door to start with hybridization. It's not a short-term way because it's something that we start now and probably will be developed during the next years, but needs time for license, especially. But I think that it's interesting, and it's a good way that could open to us EPA-based load, concepts. And of course, we could cover more hours of day with generation. It's interesting. We have opened the door, and it's the future, this with storage. And Solaria wants to stay in the future. And obviously, it's an opportunity that we want to stay there.

Spain. As I have mentioned, Spain has approved a new infrastructure -- electrical infrastructure map, okay? It's like during next year, Spain is going to cost -- that it's going to invest in a lot of substations and new grid investments. Our work is to stay there now. It's like we need to be the first trying to allocate land, trying to allocate the best land with environmental conditions for PV assets for PV plants. And our work is to be the first trying to book good situation around these new infrastructures and new grid that Spain will construct.

I think that it's smart from the Spanish authorities to invest in new grid because, as I have said, for us, the future is the interconnection of Europe. Obviously, if you have good grid, you will be able to supply from here to the north. And it's good to invest in infrastructure, and I think that we need to stay there now.

Germany. I have mentioned, we have previous experience in Germany during 2009, 2010, 2011, 2012, 2013, 2014. We spend a lot of time, efforts and investments in Germany. As you know, Spain detained completely the investments in renewables, and we were obligated to move to other countries. Whereas Germany was one of the countries in the past, we earn a lot of money. We appreciate a lot the philosophy, the mentality around renewables of the country.

Unfortunately, during last years, they decided to move to gas applications, especially they moved a lot to supply of Russian gas. And as I have said, I think that all European Union, if you want not made mistakes, they chose a wrong way and they are moving the good point. And I think that the good point today is that smart people correct mistakes, and European Union is changing completely.

And Germany, I think that will be the focus of solar in the next years, and we trust in the country. We want to invest there. We want to stay there. And of course, 215 gigawatts, it's a lot. It's like probably the most ambitious country around solar targets of European Union, and we want to stay there. And we have experience, as you know, in medium, small and large PV assets.

Today, they are talking about small, probably medium. But I'm completely sure if they want to achieve global targets, they will move to large PV assets. And of course, we are following the market. We are following the new rules that Germany is approving, and we will see.

Of course, here, innovation is not only technology. It's something -- I think that usually in technological companies, we always associate innovation with something strange or new around technology. And I think that renewables, in renewables, our surprises during last 20 years, we have seen that we saw opportunities that the market, they didn't see or they weren't interested in. And land is one of the opportunities. Now we have seen that sometimes, land is a limitation around pipeline, and I could give to you some examples.

You have read in the newspapers and you have seen that new players, oil and international groups, utility groups, they are acquiring enormous amounts of pipeline in Spain -- not only in Spain, globally in all European Union. I think that they have understood that renewables is a solution. They need to stay there, and they are investing massively in renewables and in pipeline. But sometimes, I'm completely surprised because they are acquiring pipeline. And honestly, I think that they are acquiring enormous volume of pipeline that depends on third parties.

For example, in land, in land and this is a good example of the business model of GENERIA. It's people that has acquired pipeline and they need to ask to us our opinion and they need to negotiate with us because we are the owner of the land. And -- or at least if we are not the owner, we have a land purchase option. I think that this company is a new company for the market, not new for us because it has 3 years, 3-year functioning.

We have a lot of land options. We could acquire land that will be rent to third parties, utilities, infrastructure funds. And of course, for us is other kind of infrastructure business with other kind of profitability, 8% estimate project IRR, 30 years of contracts, lifetime of the contract with inflation in all of the contracts. It's like it could be a really good business for the future. And I'm giving here only some guidelines of the situation of the company, but I think that will give really good news for shareholders in the future.

We know and we understand that it's a different business if you compare GENERIA and Solaria. GENERIA is raising a lot of interest in some possible partners. What kind of possible partners? Sovereign funds, infrastructure funds, and we don't reject the possibility of M&A inside this company, a percentage of the shares of the company. It's something that in all cases could give enormous profits to Solaria, and as I have mentioned, good news to Solaria.

Of course, if you want, we could pass the word to David and to the Q&A session.

[David Guengant, executive]

Thank you, Arturo. I will now open for Q&A session. And once again, thank you very much for your time. We will wait only 1 minute. Thank you.

The first question is coming from Oscar Nájar from Banco Santander. First question is regarding hybridization, new technology. Will it be 100% Spanish in Spain? Do you have already identified some location? In this case, what could be the load factor? Not always a good places for sun are good for wind. Are you thinking on doing some PPAs for wind or base load wind?

And the second question is Germany. Are you going to attend auction? Are you looking already for location? And are you looking for the PPA coming from the German government?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

First of all, my apologies because I have say hybridization and David has correct to me saying this hybridization. I'm sorry, I'm not Shakespeare. My English is not the best. But in order to answer hybridization, hybridization. It's of course, it's not a new technology. At the end of the day, something new probably in Spain, but is a combination of different technologies in the same connection point, not extremely sophisticated.

At the end of the day, why people is announcing now hybridization applications, storage and all kind of things. Of course, connection point today is a limitation. A lot of wind players needs to increase capacity, and they don't have too much connection points. And one of the ways that they could follow in order to increase capacities to follow this way, this hybridization way.

And it's not the case of Solaria, as I have mentioned. In our case, connection points, we have a lot of connection points growing, and I think it's not the key point over the table. We have a lot of pipeline and connection points. It's not our case. But as I have explained, we have really good location for wind.

And our studies show that we could obtain really good levels of IRR for wind reasons, not for other reasons. At the same time, we have the connection infrastructure. We have the land. It's like -- it's a good game. It's a win-win. It's like you have done the connection infrastructure, you have the land and you have really good wind conditions.

If we talk about PPAs and if we talk about wind or baseload PPA, it's still too early ones or to say, yes, we are going to sign tomorrow a PPA-based load. No. This is something that we will see. This way will be done during the next 3, 4 years. We need time. We will see the situation of the market in the medium term. Medium term is 2 years. This is a crazy market with prices shaking all the time, and we will see.

And about the location. Today, we are extremely focused in Spain, about the location of our [ postural ] growth following this way. Because as I have explained, in Spain, we have done the studies. We don't reject in the future other places, Italy or Portugal. But today, we are extremely focused in Spain in this application.

Germany, if we are going to attend the auctions, we will see because it's still German government is going to approve new laws that they will announce or technically. We have received this message that they need to approve, they must approve a lot of new laws if they want to develop this 215 gigawatts. Of course, if the auction is interesting, why not? We have participated in the Spanish options. We have participated in the Portuguese options. Why not in Germany? We will see conditions and we will just stay there.

About locations, yes, we have an internal team today in Germany working in locations, good locations, good connection points like in Spain and internal local team like in Italy. And of course, like always, our intention is to continue growing following an organic way and developing all of our [ pylon ] from 0 until 100. And it's something that spend a lot of time and efforts, and our staff has spent a lot of time and efforts executing this pipeline, but at the same time, give to us a lot of money because our cost is extremely low.

[David Guengant, executive]

And it's coming from José Ruiz from Barclays. What return can you achieve from this hybrid project by entering into onshore wind? What savings in upfront investment in wind project can you realize with this hybridization? And last question is, will you apply the same policy of using low-cost solar panel in your European expansion strategy?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

About returns, always, if we don't achieve double-digit return it hasn't got sense for us because it's one of the key points of our strategy, and do we think that here we could achieve? And savings, to give a number of savings that we could obtain in the connection point or in the land is extremely difficult because you need to study case-by-case.

But in all cases, we are suffering a lot today with the solar assets, with infrastructure and connection issue. What does it mean? It's like or getting the substation for getting the final connection permits. Sometimes we spend a lot of time, money and efforts with utilities, local utilities and constructing substations that depends on local authorities, the approval, the final approval, license approval. It's like in this case, we are going to save all of this money because work done was done for the solar asset and we could use.

And about the land, obviously, as I have explained, when you contract solar land, when you contract land for solar asset, obviously, you can't fit perfectly to the size of the solar asset. It's like you contract 200 hectares and sometimes you use less than this number for your solar asset. The other part of the land is like you are not using and, obviously, you are losing money if you don't use. In this case, we will use. But it's difficult for me to say today this number or this order.

Low-cost solar panels. This is something, for me, not low-cost solar panels. We don't use low cost. We are obligated, especially by project finance players, to use always tier 1 solar panels players, and tier 1 is the official list of tier 1s. Nothing only associated to Solaria, all the players of the market if they want to receive good project finance, good conditions and good prices, use tier 1s.

And in our expansion to Europe, we will continue using tier 1 solar panels. If you are asking link with solar modules manufacturing in Europe, not too much European players today working on this business. No, I don't know in the future. But today, the situation is that the most important part of the volume of solar modules come from Asia, China, Korea and Taiwan.

[David Guengant, executive]

Next question is coming from Jorge Guimarães from JB Capital. First question, if we can do some update -- CapEx update also next year. Second question, how do we plan to fund as a new land company? And third question is, when do we expect to have project in Italy reaching ready-to-build status?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

First question about CapEx. As we mentioned, for 2022, our CapEx will be EUR 0.4 per watt. For 2023 and 2024, today in the actual wall, it's difficult to say because if -- I know that all the people is extremely nervous about cost of material and cost of materials. And in my mind, I'm not worried, but my message is the same during last years because it depends on your expertise and the knowledge that you have about solar. And I think that we have, after 25 years, we have strong knowledge about solar.

My view is that in CapEx, we are not going to see worse situation than today. It's like, in our view, in the worst case, we could stay in EUR 0.44, EUR 0.43. And I think quarter-by-quarter, we demonstrate to the market our CapEx and our OpEx record. We maintain our cash, we invest money. Even we invest in land exotic. But even we have invested [ EUR 60 million ] in land, full equity.

It's like money. We generate money. Why? Because we have a really extremely good CapEx. This is a critical part. Why are you not burning cash? Because you have good CapEx. This is the answer. And I'm completely sure in the future, we will maintain about the new land company, which is our plan. Today, we have received a lot of proposals, even people that wants to purchase this company. I think I understand because I think that probably today, we don't see the value. The value of this company is still too early.

In my view, it will be a revolution, but of course, I'm always extremely optimistic. But in my view, it will be our evolution. I'm not the only one that thinks this because I have maintained conversations with infrastructure funds or sovereign funds, and they are more excited than myself with this idea. They think that to control the land will be critical, especially in European Union. To control the land will be critical for pipeline, but not only for pipeline. This is the beginning, but not only for pipeline.

I think that if you don't have, it will be extremely difficult to develop renewable assets. But in order to answer your question about to plan the fund the new land company, probably, we could open the door to one of these enthusiastic partners that could stay with us in the medium and long term. And this operation, this M&A operation could give to us profits in Solaria and could give, of course, funds for the growth of this company.

I have lost the last question. When would you expect to have projects in Italy? Of course, at the end of the year, hopefully, we will achieve ready-to-build concept in Italy. And hopefully, in 2023, we will start with the construction of volume in Italy.

The key question here is, and I have talked with the Italian team, and I have said, "I need a massive volume in order to start with the construction." And I know that they are going to achieve. I know that in 2023, we will surprise the market with a massive volume of construction in the Italian market, and we will see. But our target is to start with the construction in 2023.

[David Guengant, executive]

Next question is coming from Eduardo González, Banco Santander. First question is, could you give more color on GENERIA? Are you going to rent this land to third parties? Or are you going to use them for your own project? Now your intention is more to buy land or to rent?

And the second question is the same question as Manuel Palomo from Exane BNP. Can we explain the quarter-by-quarter decrease in the achieved price per megawatt hour? I will maybe explain this one as this one is due to the old assets.

You know that we still have some subsidized assets in Solaria. So each quarter, as far as we are getting more and more new assets going to merchant, this average price is coming down each quarter. In this case, even if in the pool price, you can see EUR 200, and remember that we have the claw back in Spain, so we get only half of this EUR 200. So for that reason, each quarter, our achieved price may go down because we may connect more and more assets.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Coloring on GENERIA. GENERIA for me is like other business opportunity. I could give to you an example because GENERIA should work for all the people, not for Solaria, obviously, for all the people. Why? Suppose that we are vetting or we want to get why we made GENERIA. Because in the past, we have seen the opportunity. We try to get a connection point and we lost. Why?

Because other competitor obtained. And they called to us saying, "Of course, you could give me your land because I don't have land and for me it could be useful." And we gave to them for free. Why? Because, of course, I don't have the connection point. It's like I'm not going to earn nothing here. I don't have the connection point. And of course, the land -- the value of the land for us in this case is 0.

And I negotiate. I spent time negotiating with the owners the rent agreement or the acquisition agreement. And finally, I'm not going to be able to develop my PV asset. But I received calls from oil groups, utilities, international groups. And of course, I have got, I want your land. And of course, we decide why we are not going to get money here.

We have good knowledge. We have good land. We have done an effort. Why we are not going to rent to these guys or why we are not going to obtain a fee for the work that we have developed? This was the reason because we made GENERIA in order to obtain money from all the efforts that we develop our own land.

In this case, for example, if we buy, it's okay. It could be a long-term agreement, and we will be the owner of the land. But suppose that we rent the land, we could obtain a fee or something like this, and we will pass through to other players. It's not our intention. Our intention is to acquire, but we don't reject the possibility we have signed a good rent agreement, to obtain a fee or something from the player that will develop the PV asset.

In the future, you will see a lot of connection points, people. Unfortunately, not -- Solaria is not going to obtain all the connection points in Spain. And you have today a lot of different players trying to get, sometimes they allocate bank warranties. They -- sometimes they don't know about if it's good from an environmental point of view, if it's good from a land point of view.

It's like we will try to support this kind to give these kind of services to these new players, new international players. It's something that we have done with infrastructure business, substation business, and now we are getting a lot of money from this. I'm completely sure GENERIA, we will have the same.

[David Guengant, executive]

Question is coming from Fernando Garcia, RBC. First question is profitability of this GENERIA business, debt equity structure. And do we have any debt-related for GENERIA?

Second question is, do we have some news about environmental permit to all Trillo? And third question, so are you noticing the speed up of permitting?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Debt equity structure, David has answered the question. But today, we have done investment full equity. Why? Because as you know, we don't have corporate debt. And obviously, we don't want to change this internal rule. It's the reason because probably in the future, GENERIA will be a spin-off of Solaria with a private player in the charts of the company that will generate profits in Solaria and, of course, with different rules because it comes reasonable to establish a good financial structure debt equity. Today is full equity.

In Trillo, as you know, we have all the permits exception set in Peralveche. Hopefully, in the next weeks, we will obtain the final permits of Peralveche. And speed up of permitting, I think that this is the typical questions in all the quarters. You know that Spain has approved a new accelerated process, but I'm not optimistic about this acceleration process of the Spanish government because today they don't know exactly what it's like.

I'm not optimistic about acceleration. I think that acceleration of the projects should come from our own work. It's like experience and the staff that we have that they are doing a great job. It's the people that need to accelerate. I don't trust too much in new laws that government could approve that could change completely the situation. You know that is the rumor always in the market. In European Union, in the Spanish government, you know that Spain has approved a new law. Italy has approved a new law. European Union is mentioning all the time that they will approve a new law. But at the end of the day, you depend a lot on national, local, regional agencies, and it's extremely difficult to obligate to them.

Of course, obviously, with the actual targets of European Union, if they don't execute nothing new, probably the rhythm is not going to be improved. And the futures, I suppose they will try to approve new laws or something that will change.

[David Guengant, executive]

Question is coming from Jorge Alonso from Societe Generale. First question is regarding wind capacity installation. Is it for 2030? Or do we expect some capacity by 2025? Second question is our PPA market. Can we give some update? And third question, if we can accelerate in Italy before 2030.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

First, yes, hopefully, in 2025, we could achieve something of our [ wind ] capacity. It's -- today, we have a team, internal team, developing the license part. Hopefully, before 3 years, we will obtain some results. And how many megawatts? It is still too early to say. I think that we will have more visibility in next quarter. I think that, as I have mentioned, it's easier than the actual permits because you are going to save some final steps, but you need to develop the license.

The PPA price market situation in Spain, I think that price, as you know, is raising, it's growing. Today, the price of PPA is crazy if you compare with 1 year or 1.5 years ago because people don't know exactly which could be the situation in 1 year or in 1.5 years. In this point, I'm sorry, but I'm absolutely negative about the evolution of the prices. Good for Solaria but for the market. Why?

Because I think that all the solutions that countries are putting over the table, LNG gas, supplier from north of Africa, Qatar, [ Algeria ], I think that are not real solutions. They could be but with extremely high prices more than we have today. It's like probably Europe, in the next month, you are going to see prices, enormous prices and volatility. I think that, unfortunately, for Europe. It's good for Solaria probably. But for Europe or European Union, we depend on Russian gas and I don't see solutions in the short term.

Short term, I'm thinking about 1.5 years or 2 years. Being realistic because it's important to being realistic in this point because European Union during last years wasn't realistic about the supply of energy. I think that LNG gas will be a solution in 2025.

In the short term, if you want to receive LNG gas, you are going to pay incredible bills. It will be extremely expensive. Shipments is one of the problems, but not the only one. Logistic and transportation is sort of problem. And finally, if you want to obtain these shipments, you will pay more, you need to pay more than Japanese players or Asian players like China. It's like you are going to compete ship-by-ship with third countries that needs energy.

We will have extremely [ took ] winter this year and next year. For this reason altogether, it's difficult to say today this is a good price for PPA or not. I think that we need to see quarter-by-quarter.

As I have mentioned, we are negotiating with some oil groups and almost oil groups and we could announce a new deal. But honestly, I have detained the signature because things are changing all the time. And as you know, Spanish government is announcing during the last 3 months a new law. They are going to eliminate the gas, obviously, to sign-up PPA and to change the rules.

After to sign is not a good idea, and we are waiting for the final solution of the Spanish government that they don't approve and they don't show to the market. And after to approve this new law, probably we could announce new deals, but we are going to wait.

About Italy and the acceleration process, of course, we are trying to accelerate. They have approved a new law, accelerating small developments of less than some megawatts and 20 megawatts. And of course, we are optimistic about 2023. As I have mentioned, in 2023, we will start with the construction.

[David Guengant, executive]

Question is coming from Bosco Ojeda from UBS. First question is, have we have analyzed the wind condition in our plants and if that this is suitable for wind project? And the second question is if we can consider new capital to finance this new expansion project in wind, Italy, Germany and real estate?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

About the first question, of course, yes and not only for wind reasons associated with wind plants. In the past, when you develop a solar plant, one of the key points always is the structure, the tracker [ Orica ] and because you need to survive with a high level of wind situation. Unfortunately, some of our PV plants has a lot of wind. Unfortunately, I'd say because we have spent a lot of money in iron and truckers.

And one of the initial studies that we need to develop is, of course, which is the wind situation in this PV asset. It's my first question always, which is the wind situation. We have a lot of wind. Unfortunately, yes, and I say, of course, do something in the south of Spain, please, because here, you have a lot of wind, always close to the north, of course.

Today, this is an advantage because if you have good wind conditions, for solar it's not good. For wind assets, could be extremely good. It's the reason because we have opened the door. As I have said, we were a skeptic about hybridization, and we have opened the door for this reason.

About our expansion projects in Italy, Germany, and wind, I'm going to talk about Solaria and then GENERIA. Solaria needed capital because as you have listened in a lot of occasions, we have good level of project finance structure covering sometimes more than 100%. We are going to continue. In my mind, it's not a different situation in Italy, Germany. We will see. But of course, the problem in Germany in last years ago in the past was the price of electricity, if you compare price of electricity of Spain and Germany was completely different.

But today, unfortunately, all European Union share the same problem. And honestly, I don't think that the situation in Germany is better than the situation in Spain from a price point of view, and the price defined the level of project finance that you could get.

The e-banks that are supporting today Solaria comes from Germany. It's like they have strong experience in project finance. The banks that are covering our projects with more than 100% comes from Germany. And from, for example, European Investment Bank, with European Investment Bank, we have really good relation. And of course, we are optimistic about our proportion of debt that we are able to raise.

And GENERIA, GENERIA is another question. No, we haven't touched the debt area in GENERIA. As I have mentioned, we have done investment full equity. And I think that it's more interesting to attract in GENERIA, in the shafts of GENERIA to attract an investor, probably a sovereign fund or infrastructure or insurance group that will stay with us in the medium and long term.

[David Guengant, executive]

Coming from Fernando Lafuente, Alantra. What is expected CapEx for 2022? And the second question is, what if -- on top of the 2 gigawatts in operation by the end of this year, what our estimate of capacity under construction [ advising ]?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Of course, in the first quarter that I have mentioned that is the worst quarter for the company. And we have invested EUR 70 million, [ not bad ], about EUR 70 million in new assets. And during this quarter and next quarter, you will see an enormous growth, an acceleration of all of our investments. Difficult to say now the number exactly, but you will see enormous amount of money that we are going to spend and to invest during second and third quarter.

And of course, yes, our commitment is to achieve 2 gigawatts under -- connected to the grid or 2022. Of course, it's a good target. As I -- as you know, probably with 2 gigawatts, Solaria will be one of the leaders from a solar point of view globally, and these 2 gigawatts will generate enormous amount of EBITDA and profits.

And probably at the end of this year, as I have mentioned previously, we will have under construction Garoña, that is 600 megawatts. And hopefully, more PV assets that we are going to add. A lot of different number -- names, sorry, in different places.

[David Guengant, executive]

Question from Manuel Palomo, Exane BNP. First question is, if we have any view on the potential impact from the cap on the gas price to be implemented in Spain? And the second question is, can we update as the main bottlenecks or the delivery of new installations?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Of course, Manuel, you have done previously a question about the average price that we pay, and David has answered. The reason is because, honestly, sometimes I myself is completely lost about the numbers, the price per megawatt hour because the Spanish government has approved a lot of new laws in the last month. It's like the gas claw back, a new limitation.

Now they are talking about a new limitation in price of gas, and they are going to update at the same time the gap on the gas price and the claw back. And I think that is complicated. Because today, my view about this, my strategic view and then we will add some points about the number, but my strategic view. I have a strong doubt about the approval of the European Union of this gap on the gas price. In all of my conversations, European Union, we need to see. We need to see, honestly.

We maintain a neutral position on this. Utilities, as you know, they are extremely aggressive about this, this gap on the gas price. We have preferred to maintain a neutral position. But I maintain common contacts with all the utilities of Europe, all the utilities, and that I always with all the series of important utilities of Europe. And I talk a lot with European Union. We will see if they approve or not the cap on the gas price in the next weeks. Spanish government is saying yes and the lifetime of this cap on the gas price.

And sorry, I think that in order to complement, David, if you want.

[David Guengant, executive]

Yes, maybe a quick comment on that. You know that today, we have 30% merchant, 70% PPA on this 30% merchant with this gas claw back. We are receiving more or less 50% of the pool price. So it pool price is around EUR 200 in our accounts, we are receiving EUR 100 with this new regulation, which is possible new regulation in June, and maybe we can achieve active price of around EUR 85 to EUR 90. In the worst situation, our merchant exposure may receive around EUR 85 to EUR 90 from June 2022 to June 2023.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Bottlenecks for the delivery of new installations is always the same, I think. The main bottleneck is permitting, license, connection, final connection. That depends sometimes of utilities, and they don't spend the most efficient work sometimes. And of course, the ELA is always associated with permits.

I'm not worried about materials or construction or other issues because we are receiving the materials on time. We are not worried about this. We are -- we have good construction teams working on site. It's like always the key problem is license. And of course, the typical problem in this business.

[David Guengant, executive]

Question is coming from Henry Tarr from Berenberg. Have we enough resource and management time in the company to manage all these different strategy? How many people are you hiring to deliver on this strategy? And do you think that this new REPowerEU strategy will actually help the permitting process?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

I think that Solaria today, we have a really good management team, and I'm not including myself because I think that the reason because this company is growing is for the extremely amazing team that we have inside the company, not only in Spain, in Italy and Portugal, in all the countries that we have, people in Germany. And I think that today, we have a comfortable situation because we have people with really good skills, with high level of knowledge, remember 25 years in this business.

It's like long time, long time, 25 years, and I think that probably Solaria is the oldest company in the solar markets. Sounds bad, but it's the truth. It's the truth. And I think that we are contracting always new people. We are growing, but we don't want to via utilities like you are not going to see an enormous team of people inside Solaria. I think that we need to be extremely efficient. We need to have really good people with clear targets and good management. And I'm extremely proud about the management team of the company. And I think that, yes, different strategies that we are following in the past.

Remember, this company has grown a lot in the last 4 years. And in my view, it's more difficult to grow from EUR 5 million to EUR 7 million or EUR 8 million of revenues than to move the company in the actual levels. Today, we are talking about project finance of EUR 400 million or enormous development of 600 megawatts or 700 megawatts. In the past, it was extremely difficult because we talk about developments of 6 megawatts, 10 megawatts, 5 megawatts. You need and you require the same team for developing 6 megawatts or for developing 600 megawatts.

[David Guengant, executive]

Sorry for that, but just maybe we will answer to the last 2 questions. And if you have more questions, please let me know tonight or tomorrow.

One of the last question is coming from Mikel Zabala from Bank of America. Speaking about the new criteria for the new auction of grid capacity in Spain. The question is, how does Solaria aim to compete in those new auction against other players in this auction in -- after disconnection, for example, of old thermal plants?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Difficult to answer because Spanish government is changing its mind all time about this. As you know, on the first quarter, Spanish government -- not in the first quarter, previously I think, they arranged a tender process for the Andorra connection point. Andorra, north of Spain, a thermal plant of Endesa that they have closed and they have destroyed. They arranged a tender process. We have participated like other project -- or other players. I think that 8 large players, they have participated, and we are still waiting for the answer.

And honestly, who knows if we are going to receive an answer during this year? Hopefully, we will obtain. But what does it mean? It's like tender process is efficient. If you want to achieve 600 gigawatts of capacity in European Union, spending 1 year for the answer is like sounds not the correct way. Probably a new capacity, a new capacity that the government is going to approve probably because nobody knows exactly. Probably they will follow the rule of first in, first out.

The first at present projects are the first that get the project, and we will see. Obviously, we are going to participate in all the options. We are going to participate in all the new laws for pipeline that the Spanish government will approve.

[David Guengant, executive]

Last question for today is coming from Alberto Gandolfi from Goldman Sachs. How many profits would we see from leasing land by 2025?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Difficult to estimate, but our global target is to achieve a global EBITDA of EUR 250 million, EUR 300 million of recurrent EBITDA with inflation for 30 years. This is the way that [ possible farmers ]. This is the number, that possible numbers are using today in order to give value to Solaria -- to GENERIA, sorry, and in order to give value to the shares of GENERIA.

Thank you very much for being part of this conference call. Like always, our Investor Relations team will be available for any additional information. Thank you, and my regards.