Solaria Energia y Medio Ambiente SA

MAD:SLR

Earnings Call Transcript 2023-Q1

[David Guengant, executive]

Good afternoon, everyone, and welcome to Solaria 2023 First Quarter Results. My name is David Guengant. I am the Head of IR Solaria. I'm joined today with 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 last quarter, given by our CEO, Arturo. And following this, we will move on to the Q&A session. [Operator Instructions]

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. We will start explaining the most important numbers of our first quarter results 2023, and we will move, as always, extremely fast, and we will pass to the Q&A session.

Of course, we continue delivering strong growth. Our numbers -- all of our numbers continue growing, production sales revenues, EBITDA, net profit. It's important to explain that this quarter, we have grown a lot around production, more than 50%. At the same time, we have suffered, if you compare first quarter of 2023 with first quarter of 2022, we have suffered a reduction in the average price of electricity. And our sales -- we have grown our sales in 16%, but less than our production for this reason, the average price of electricity.

Our total revenue is growing that is significant, like EBITDA, net profit. It's the same in EBITDA. We continue growing our EBITDA number. We passed the EUR 40 million, and we obtained EUR 25 million of net profit.

Our capacity continues growing. We have under construction and enormous volume, as you know. And we finished the first Q with more than 1.5 gigawatts of PV installation connected to the grid. This year, we will continue with our construction plan and especially in the second part of 2023, 2024, 2025, we will suffer as our own construction of new megawatts and we continue with our plan to achieve 6.5 gigawatts at the end of 2025.

Of course, today, as I have mentioned, we have 1.5 gigawatts connected to the grid. Hopefully, we will finish this year with more than 2,000 megawatts. Probably with this number, we will be the leader in the Iberia region from number of megawatts connected to the grid. And we continue with our plan to finish 2025 with 6.2 gigawatts connected to the grid. And this an exponential growth that will continue during 2024, 2025 and later.

Of course, as I have mentioned, more than 50% of growth in our production. Obviously, the new assets functioning given results. And at the same time, sales growing 6%. I'm not going to repeat, but the average price, if you compare with 2022, we have some reduction in the average price, approximately 34% of reduction. It's the reason because our sales don't grow as our production.

Positive point. Our infrastructure revenues grow. We have obtained more than EUR 8 million of results that comes from the infrastructure division. Why? Because this market today, we are leaving a crowd market from competitors and players' point of view, a lot of companies that wants to develop or that was to connect installations to the grid. And obviously, more competitors more play in trying to connect more resource in our Infrastructure division because more people need to use or they are obligated to use our substation or our grid.

CapEx, this is one of the key points. And obviously, in the next years, we will increase a lot our CapEx and our investments. And if you see the numbers 2020, 2021, 2022, 2023, it's incredible in the growth. We are investing a lot of money. We maintain our philosophy of being extremely efficient from a CapEx and OpEx perspective. It's one of the key points, and we will talk during this conference call. But one of the key points in this business is to maintain really good levels of CapEx and really good levels of OpEx. It's the key point of our business.

As you know, interest rate is growing, then obviously something that could affect your IRR levels. But the key point always is to be the most efficient player from a CapEx perspective. And of course, as I mentioned, we are living now the Russia from construction point of view and execution of our business plan. And obviously, it's something that we could see in the numbers in the figures here from millions of investment point of view.

Cash flow. We maintain same level of cash that we finished in 2022, and our philosophies like we explained in all of our conference call. We are covering all of our CapEx with project finance. Sometimes the project finance, when we finish the quarter, we have some delays in the payments of banks. And sometimes, we have movements in always around EUR 150 million, EUR 100 million, EUR 140 million, EUR 130 million of cash that we maintain. And depending on payments of banks, it will happen in April or with delay of 1 month or something like this. But at the end of the day, we maintain the same philosophy to cover all of our CapEx with project finance structure with that, and this is extremely important for us.

As you know, one of the key points that we announced a few months ago is that we have closed a deal with the European Investment Bank for EUR 1.7 billion that will cover our project finance for the next years. And of course, we will explain during this presentation, but we maintain the same philosophy to cover all of our CapEx with a project finance structure.

Critical, especially in the actual moments of high level of interest rates. We have 96% of our debt is nonrecourse debt. Average cost of debt is 3.1%. That is reasonable in our view. 20 years of lifetime of the debt. It's a good and reasonable project finance structure in our view, and it's one of the key points of our strategy. We have a healthy financial situation. And probably with the connections that we are going to do in the next quarters, we are going to improve more our net financial debt ratio versus EBITDA because more assets functioning, more assets generating cash. Obviously, more assets generating EBITDA, and during 2023, we will see a reduction in this ratio.

It's important that -- to announce that we have closed the deal of European Investment Bank as we announced few weeks, a few months ago. It's something that will cover 50% of the project finance that we are going to raise during 2023, 2024 and 2025. Probably on July or June, we are going to announce a new deal for 1.1 gigawatts that will cover new investment that we are going to do during 2023. And our structure will be 50% European Investment Bank and 50% of the players that now are participating in the tender process.

Of course, as you know, during, especially after January, we have received a lot of important news around authorization and permitting. I think that permitting processes today is not a big deal. It's like we have solved this problem. We have obtained a normal volume of different authorization. From an environmental point of view, we get full successful, and we have obtained all the environmental permits. And we have done additional steps, and we are now in the final part of this long travel that we started a few years ago. Now the last part is to obtain the construction permitting process, not the final construction permit. And it's something that we have -- will happen, and we will receive in the next 2, 3 months. It's like no surprise. We will reside full permitting process for construction and it will happen before the end probably of July. And according with low approved by the government 2 years ago.

We are going to achieve all the targets that we defined 2 years, 3 years ago. And we will have more than 4.5 gigawatts approved that needs to be connected before the end of June 2025.

Our schedule of construction. I think that today, the good point, if you compare with our presentation of last quarter, even last year that we have a strong visibility of our pipeline. It's like, we -- as you know, one of the key problem was debottleneck associated with the permitting process is something that we could say that it's solved. This problem will be solved completely in 2 months, but this is extremely important because we are extremely focused today in the construction, in R&D labors, in the generation business, and paper was planned in the Q&A session during this presentation, but first point that we need to explain correctly and that it's important to understand, Solaria is not a utility company.

Solaria is an infrastructure company that manage and construct infrastructure and maintaining the balance sheet of the company during the next 25, 30 years. Our philosophy is to be an infrastructure player. We have a normal volume of PPA signed with different players, Tier 1 players. Probably Solaria started with a signature of PPA a few years ago. I remember with Repsol, and we have signed with all the key players in Europe.

I think that today, the merchant position versus PPAs something similar to 70 -- or 65-35. Our intention is to finish with 70-30 and next year in 2024 moved to 75-25, 75% PPA, 25%, merchant situation. And we think that price today, if you compare with 2022 or with 2021 from a PPA point of view is better today than 1 year ago or 2 years ago is like you have more players, even not only utilities or oil players, you have today final consumers that wants to sign PPAs, and they are offering better prices than the traditional players, the traditional energetic players. And of course, probably we will announce, as I have explained in other calls, we are pacing company. We need the perfect price and the perfect conditions, but we will announce new deals in the medium and short term. Today, we have a big volume covered by PPA, more than 1.6 gigawatts, and we will continue signing PPAs deals.

Of course, tax credits for us is extremely important because the company is generating profits. And obviously, our intention is to pay less taxes or at least a small number of taxes. And this is extremely important. We are one of the reasons because we have invested in the Basque Country. And today, we have more than 2 gigawatts under development in Basque Country.

One of the main reasons is because they have approved a law that gives some tax advantages to the investments in renewables in the area. And in our first project that was signed with the government of the Basque Country, they are members. They are in the shares of the company in Burberry, 30% of the shares, the owner is in the Basco Energia, the government of Basque Country. They have recognized tax advantage based in EUR 1 per watt. It's like they have recognized EUR 30 million of tax credits and our estimation for the future for the 2 gigawatts that we are going to develop. It's difficult to say, but probably will be around 30% of the CapEx that we'll be investing or at least that will be recognized. It's difficult to say exactly, but we have included in this slide an estimation between EUR 190 million to EUR 400 million.

It's an enormous value that we are going to create for shareholders of the company. At the end of the day, I see this like a subsidy in the CapEx of the asset. If you receive tax advantage, it's like a subsidy, a direct subsidiary that you receive in your investments in the PV asset. It's like you reduced your CapEx at the end of the day. We have included this because in our view is one of the reasons because we are now investing in the north of Spain in new developments.

This slide is extremely important, especially as I have said, with all the noises and rumors and nervous that we have around solar prices scenario where we are will be, it's difficult, the projection because after 20 years working on this business, now, I have listened a lot of things about a lot of things about future disasters on prices. And of course. This noise is always over the table, about solar price scenarios.

In our view, we think that it is critical for us to be the most efficient player from CapEx, from OpEx point of view and getting the best project finance structure because if you are extremely efficient, obviously, even in the worst case, in the worst solar price scenario, you are able to generate cash, you are able to generate good IRR levels.

We have included here 3 scenarios, including a cost of EUR 0.45 per watt. That is more than actual cost of Solaria, but I think reasonable. You have there in the slide, you have all the assumptions that we have included reasonable, I think, PPA prices, less than we are touching now, tax using our tax advantage, load factor. I think that all the scenario that we have included here is extremely reasonable.

In the worst case, including prices of electricity of '25 not affected by inflation. It's like inflation in the worst case is 0. Our project IRR will be 11.4% in the medium case could be 13.1% in a reasonable case could be 15.5%. Acceptable numbers for us because as we always explain, we invest in projects, if we obtain project IRR of 12%.

Even in the worst-case scenario, we could say that we are going to obtain this project IRR level. Honestly, in my view, this is not a realistic price scenario, EUR 25 without inflation for the next year, but it's a lower scenario that we have included in the slide. This is a resilient business model associated, especially with our OpEx and CapEx. My comment, obviously, is if you don't have this CapEx and you don't have this OpEx and some of our competitors today, they have CapEx of EUR 1 per watt or even more some of them, OpEx that are not competitive, this project IRR changed completely.

In this case, I think that a lot of a lot of players not involved or not professional in the solar energy market, probably, they will think, again, they need to think if it's a good investment to enter in the solar energy market. I have a strong doubt about the 40 gigawatts that all the people are saying will be developed and construct in the next 2 years that they are going to receive project finance. If you suppose a CapEx of EUR 0.8 or EUR 1. It's like EUR 40 billion in project finance that will come in the next 2 years. And people without experience of construction without experience in construction, without experience signing PPAs, without experience getting project finance, they are going to construct perfectly in the next 2 years. I don't believe. But today, we have over the table, this possible scenario. We will see because it's something that will happen in the next quarters, and we will see the evolution of the solar market.

Of course, this is something that we have worked during the last 2 years. It's not something new, storage and batteries.

European Union, as you know, they want to focus, and they want to give subsidies, and they want to push the batteries and the storage market is necessary, I think, that they need to do. We have developed 6 R&D innovation project, innovative projects associated with batteries that will improve our numbers because at the end of the day, the battery is like when you move the electricity from 5:00 or 4:00 to 6:00, 7:00 that theoretically, you are going to receive more price, better prices because less solar players and better conditions at the end of the day from consumption point of view, price or electricity prices point of view.

We will start with the installation of these batteries probably in the second half of 2023 and during 2024. And it's extremely simple. I think that includes intelligence -- artificial intelligence and other applications, but this technology is not complicated. And we are working now on it, and we will execute during 2023, 2024.

Of course, in September, we will talk. We will arrange a solar strategic update. Important because one of the key points, as you know, in our strategy is the international development of the company. We are now in Portugal, but we are going to expand our activities in Portugal, but it's important to talk about Germany and Italy. New markets for us, not new because we are working on it for a long time, but we need to give news. We need to explain our diversification process, and we need to talk about new developments of the company out of Spain.

I could say -- I can say today that from in Spain, we are the leader. We have a great position. Business plan will be complete during, as I have said, during last years, the key point always in our presentation was, of course, execution of the business plan, paperwork -- bottleneck and paperwork. Today, I think that we are not worried about this. The execution will come and the paperwork was sold.

Spain, I could say we are the leader. We are going to maintain a really good position in the future. And okay for us.

New targets should be associated -- must be associated out of Spain, with Italy, with Germany and other countries. It's a diversification that will give a lot of value to Solaria's shareholders.

Of course, if you want, I will now hand over the word to David, and we will start with the Q&A.

[David Guengant, executive]

Thank you, Arturo. I will now open for a Q&A session. And once again, thank you for your time. So we will just let 1 minute to read your questions. So the first question is coming from Ignacio Dominic from JV Capital.

First question from Ignacio is what condition must be fulfilled in order to be eligible for the tax credit in Spain over the next 4 years? The second question, when can we expect news about PPA for capacity to be completed in 2023 and 2024? The third question is what is the average solar price for the scenario in our presentation.

Maybe I will answer the central scenario is 49. So low scenario with CPI is 38 in and the worst-case scenario is 29, okay, average price.

And the last question is if we have any news regarding a potential asset protection.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

About conditions to fulfill in order to bill for the tax credits, I think that today, it's a law approved by the, and if you execute the project, you receive the tax credit. It's nothing that they need to choose or that you need to participate and attend or something like this. No, if you execute the project, you receive the tax credit. It was all approved, I don't remember, 2, or 3 years ago.

About the PPA when it will be complete soon. Difficult to say, but soon. Soon is it could be in the short term be soon. No, we are negotiating. We are following the market. We are seeing the evolution of prices. We are not nervous because we have a lot of PPA signed. And suddenly, we could announce something that could cover an important part of our future backlog. But soon, it's difficult to say next week, next month or whenever. No, I prefer to say soon.

Average solar PV prices, I think that, David, you have answered different scenarios. It's difficult to predict the price and the evolution of prices of electricity, which scenarios complicate to predict the situation of the Spanish market in 5 years or 6 years, but we are using technical and financial advisers that are in the market.

About potential asset rotation, we have several options. We are studying, and we could close. But as I always explained, we needn't to close as soon as possible because we needed the cash for this. We are focused on the construction. We are focused on the development of our paper work in new countries. And of course, we could close strategic agreements with partners that could support ourselves in the future, and it could include the asset rotation at least of a percentage of our assets. But I can say in 1 month or whenever. I prefer to say that it's something that we are doing.

[David Guengant, executive]

Next question is comes from Eduardo González Martin from Banco Santander.

First question is what remuneration scheme we expect to close for the megawatts that are pending to obtain final administrative authorization by the end of July? And the second question is after the decline in pool price in Iberia, our PPA price still at mid-40s.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

As we have explained, our intention is to close 75% with PPA, 25% merchant basis. Today, we don't have this mix, but it's around 65-35. We will finish in 70-30, and our intention is to continue with this philosophy. It's difficult to say exactly 70% or 75% or 75% or 65%, but approximately, this is the number.

And the PPA prices, it's important. It's complicated to explain about decline of PPA prices. If it's something that affects PPA or not. No, it's not affecting because people that understand the market that negotiate PPA knows that in April. You could suffer decrease on prices and probably with the air conditioning functioning on July, you could suffer an enormous increase on prices because summer is arriving and with summer, unfortunately, you don't have wind. Unfortunately, it's extremely difficult situation of the hydraulic part. Not easy. Unfortunately, in Spain, we are suffering -- took situation from rain water point of view, and you have only gas and solar. Unfortunately, solar is not able to cover all the consumption that will come associated with air conditioning and other applications. We will see the evolution of merchants, especially in the summer. It's complicate to see the price evolution only associated with 1 month. But PPA players know this because they have -- they are using projections of prices based on average prices of the year. And today, we are touching similar prices.

[David Guengant, executive]

Next questions are coming from Fernando Lafuente from Alantra.

First question is what is our estimate of infra revenue for the full year? And the second question is regarding CapEx. How is CapEx evolving in the first quarter? And what is our expectation by for the rest of the year?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Infrastructure for us is extremely complicated to predict because it's associated, we are living a crowded situation around renewables, not only solar wind, a lot of players that want to develop, construct, connect PV or wind assets and obviously, something that give to us benefits associated with the infrastructure area, but we will see the evolution of this situation in Spain.

Theoretically, if we receive final construction approved in 2 months, not only Solaria, a lot of different players, we will receive more players that we need to connect installations that needs to use our substation or our grid, and this business could grow. But it's extremely difficult for us to predict next movements.

This market is crazy. You have a lot of players that theoretically, they are developing projects. But honestly, I don't believe they are going to execute and in to make a business plan based on these kind of players could be a mistake because probably they are sellers, not constructors. They are not interested in the construction process or in the asset. They want only to sell paperwork.

Honestly, in my view, to acquire today paperwork is extremely risky, more than a few months ago, more than a few years ago because you are entering in the rush hour, 2 years for connecting. To acquire today paperwork, it's extremely risky. I think that players. They are not going to acquire a pipeline, and we will see the evolution of the market.

CapEx and the situation of CapEx. Our intentions to stay in less than EUR 0.4 per watt. This is one of the key points. In order to be efficient with the interest rate of project finance growth -- growing and the global situation of inter rate growing, I think that our work is to be efficient. CapEx is the critical point.

[David Guengant, executive]

Next question is coming from Alberto Gandolfi from Goldman Sachs. A lot of questions regarding PPA. I think we already answered that. Today, we're up 65%, 35%. We may close the year at 70-30, and we may be in 2024 at 75%, 25%.

Second question coming from Alberto is are we still comfortable with our capital structure or do we require additional funding from shareholders? And the third question is coming from how is the administrative approval of those 4 gigawatts with environmental payment going, still on track for late July?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Of course, about the capital structure because PPA, we have answered, I think, 70-30, reasonable for us. It could be moved to 75-25 or something like this, but it's a good mix and meets our intention to stay around these numbers. About capital structure, we are not going to increase capital, as we always explain. Capital structure in my view, my position should grow, but this is my personal vision. I should -- or in my view, it's a good moment to increase significantly my personal position inside the company, but this is not associated, I suppose, with your question.

And about the administrative approval situation in 2 months, I think that we are going to receive the full amount construction permitting processes. In 2 months, you will have 4.5 gigawatts completely approved and ready to be build from civil works perspective. It's like 4.5 gigawatts. That depends on our work of our construction work only and is the final step and will happen in 2 months before the end of July.

[David Guengant, executive]

Next question come from Philippe Ourpatian from ODDO.

Can we give some color about, so German land acquisition or German project.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Around Germany and Italy, I think that I prefer to wait to September CMD. We are spending money and efforts in the expansion of the company there in both countries. I think that this is the best diversification that we could execute now, Europe, and this both countries and Italy and Germany. We are spending money and efforts.

We are all the companies focused in the international expansion. As I have explained, we are worried about Spain, but Spain was done and we have a good amount of [indiscernible] in Spain, good growth, especially that will come from Basque Country. But I think that we have a reasonable growth inside Spain. Our growth will come from Germany and Italy. In September, we will explain name of project, situation, where we are and our construction plan and number of gigawatts. I think that both countries has a really good situation for the expansion of solar, and we will be there.

[David Guengant, executive]

Next question is coming from Naish Cui, Barclays and from Manuel Palomo from BNP Exane regarding the amount of megawatts that we have to do till the end of 2025. So the question is the capacity growth from June 2025 to the end of 2025 is huge, 1.7 gigawatts in 6 months. Can we please provide some bit of color on that?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

It's important to understand that 1.7 gigawatts is not like U.S. start and you finish 6 months. Some of them, we are now executing some of them. It's something that we explained in all of our calls. We start purchasing equipment. Sometimes we start with the construction of the substation of the grid that spend a lot of time and efforts. And sometimes, we have spent 6 months in the construction of substations and grid associated with the project. Then we start the civil works. It's like usually a project like Aronia or like [indiscernible], we are spending 18 months or even 20 months in the construction not only in civil works, construction, global construction process.

And all of our pipeline today, the 4.5 gigawatts that we are mentioning, all of them, we are now acquiring equipment. We are developing substation, not only Solaria. We signed contracts with, for example, Red Electrica for the construction of the substation, and we have done payments associated with this 4.5 gigawatts, and they are executing now substation associated with this 4.5 gigawatts of pipeline. It's not like you start on June and you finish on December. It's not exactly like this.

[David Guengant, executive]

Next question is coming from Manuel Palomo from BNP Exane. Given the relevance in your EBITDA of other revenue and infra revenue, can we provide some guidance on these 2 drivers? And the second question from Manuel is regarding drivers in cost and returns in the storage project.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Guidance, I prefer to give a global guidance for the 2023 year. I think that EUR 195 million is the consensus of EBITDA, and we are comfortable with this number that include all because infrastructure to split infrastructure and generation is not easy. I can, I think that we have a good idea of the players that will use our infrastructure in the next quarter, but we are negotiating with them. And this is, it's important to understand that the cost it is, the price is not associated with cost, not difficult to say exactly the price of some new players that what they are going to pay for the connection. It depends on a lot of things. But the global guideline for the company, we are comfortable with EUR 195 million, and the other is the returns in the storage projects.

Cost of storage depends on the number of hours that you want to cover. 1 hour, 2 hours, 3 hours, it's like you could define all kind of scenarios, suppose that you want to move the electricity from 6 p.m. to 11 p.m. In this case, you need to be able to keep inside the battery and electricity for the next 5 hours, not more. It's more expensive.

But in order to give a global idea, the cost that we have included in our projects approximate cost that we have included in our projects that are waiting for some subsidies from European Union is EUR 0.35 per watt. For a global cost, the global CapEx associated with batteries and all the components associated with batteries, the application of the battery.

As you know, Spanish government, arrange tender process, not at end a program of subsidies associated with projects. They are starting now the projects. And hopefully, before the end of this half, we will obtain a final answer from the Spanish government. I think that we have tried to allocate good amount of money. I don't remember, it's EUR 30 million or something like this, EUR 30 million that could come on subsidy format from the Spanish government, no associated with batteries, we will see.

[David Guengant, executive]

Next question are coming from Henry Tarr from Berenberg and from Margarita Christina from Citi. Can we give maybe some more color regarding the tax credit? How and when will the tax credit be recognized? And is there any limitation to a vast project that we have to consider?

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

The recognition will come with the execution of the projects. The first project will be the 100 megawatts that we announced and that we have with the government of Basque Country, and it will happen during 2023, 2024, the recognition.

The other amount that is close to 2 gigawatts will come in 2024, 2025 and probably 2026. And it's an enormous amount of money because considering EUR 1 per watt is enormous, the amount. It could be more than EUR 400 million is the reason because we are extremely interested in this investment.

And our new projects, remember that we obtained the connection point few months ago. I remember we announced in November. It's like we have started now with the process. We are going to spend 2 years or 3 years. But probably, you will see associated in our P&L, you will see tax credit associated in 2023, 2024, 2025, 2026.

[David Guengant, executive]

Next question is coming from Fernando Garcia from RBC and from Jorge on-site from Societe regarding asset rotation update, if we can do -- give a little update about the possible asset rotation.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Yes, it's something that we have repeated in all of our conference call. Asset rotation could come -- it's something that we have always the possibility over the table. It's something that could happen, 3 different types of asset rotation that we have studied. First and for me, the most interesting is an asset rotation for the Basque Country area because, as you know, we have done in the past, and we have now 2 gigawatts. And for me, the first target is to rotate this asset. But it's still under discussions. It's a normal volume, and we will see because it includes additional advantage not only associated with money and financial return.

Second target could be to rotate 30% of the shares of some assets. And we have some funds extremely interested on this, and the price is good. And of course, it's something that we haven't decided to going forward with this, but it's a possibility. And the other is to sell an asset, a complete asset of an amount of asset a full complete asset. And we have strong interest from a lot of players that wants to acquire full assets and of course. But in my mind, if I can choose, I choose the option of the Basque Country, and we are focused on this.

[David Guengant, executive]

Next question is coming from Roland from Societe Generale. How far economics of battery are being attractive? Our battery will be financed banks do project financing battery only if they get regulated revenues.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Today for banks is like trackers is something that you add to the installation and you obtain something more. It's like a tracker. Of course, the CapEx is this and you are going to improve based on projection of prices. You are going to improve in few euros. Your price of electricity is good, and the return is this one. And it's important to understand that, for example, we receive the subsidies that we have present to the government, they are going to cover practically the full amount of the battery. It's like you need them to raise project finance because subsidies are going to go at this.

Government is talking all the time about payment for capacity, and it's something that they have over the table, not only Spanish government, European Union government, and probably they will approve something associated with the payment for capacity in the future. They are always talking about this. You know that even they are going to approve a new program of subsidies and incentives based on batteries and storage, and we will see, but payment for capacity will happen.

[David Guengant, executive]

Maybe just a last question coming from Henry Tarr from Berenberg. As EIB financing being already fully agreed at this point.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Yes. The key point of the AIB is that they are going to cover 50% of the full deal in all of our project finance and we have the term sheet agreed with them. And the key point now is the other part of the other 50%. Obviously, for commercial banks, it's not easy to achieve prices of European Investment Bank, and we are trying to do our best in order to allocate banks that will stay in similar prices than European Investment Bank. It's a good support, good point here is that you have a great [indiscernible], and that is going to cover an important part of our future deals and the successful is warranted for this reason. Now is an issue of price, and we are trying to get the best price. Honestly, today, we don't see strong problems in order to raise project finance. We have a lot of players that want to entry banks institutional investors. On July, June, we will announce new deal for 1.1 gigawatts. The key point here is the price. The final price that we are going to obtain, and we are fighting strongly in order to obtain the best price because at the end of the day, it's something that will define our project IRR.

Trust on us because in the past we have demonstrated that we are able to raise really good project finance in really good conditions. We are extremely attractive for all the international players. And I think that we will get really good conditions associated with our project finance.

[David Guengant, executive]

So thank you for joining today's call, and I will let Arturo closing this call. Thank you.

[Jose Arturo Diaz-Tejeiro Larranaga, executive]

Thank you very much for being part of this conference call. I think that the final message I know that today, probably market is more focused on price of electricity. It's more focused on interest rate. As I have mentioned a few quarters ago, the market was extremely focused on our execution plan. Today, execution plan is not a problem. And I think that all the markets are going to recognize that. In the next quarters, you will see an enormous amount of megawatts that will be connected, that will be executed. It's like execution plan in Spain, it doesn't matter, and it sounds aggregate, but it's a real situation in a few months is not going to be a problem.

And I'm completely sure price and interest rate in the next quarters, this noise that we have today in the market will disappear because we are going to include batteries, we are going to sign, and we will continue with our business model.

Our business model is based on CapEx, OpEx good prices, good conditions and to be an extremely efficient infrastructure player. I think that Solaria today probably is the best platform in Europe for solar and probably for renewables. I think that we have a really good pipeline in Spain, in Portugal, in Italy and Germany, and we will explain in September. But I understand that the market is nerve for other issues.

Our job is to try to give comfort to try, to give security, to continue explaining our business plan and the advantage of our business plan. And my job is to continuous acquiring shares, and hopefully, we will change the actual situation of noises and all the things that worry the market. Thank you, and have a great day.