Voltalia SA

PAR:VLTSA

Earnings Call Analysis

Strong Performance Despite Challenges in Brazil

In the first half of 2024, Voltalia experienced a 13% increase in power generation, which led to a 28% rise in turnover and a 34% growth in EBITDA. The company's project pipeline grew 7%, reaching 17 gigawatts. However, a potential power curtailment in Brazil may impact 2024 EBITDA by up to EUR 40 million. Voltalia remains optimistic about finding technical and financial solutions to this issue. The company reaffirmed its 2024 EBITDA guidance of EUR 255 million and set ambitious goals for 2027, including 5 gigawatts in operation and a EUR 475 million EBITDA.

Growth Metrics Showcase Strong Performance

Voltalia reported a robust first half of 2024, with power generation increasing 13% year-over-year. This resulted in turnover soaring by 28%, reaching EUR 249 million, driven primarily by an increase in Independent Power Producer (IPP) activities and services. The company’s EBITDA surged by 34%, resulting in a healthy EBITDA margin of 30%, a 1-point increase compared to the same period last year. Notably, solar production now accounts for over half of Voltalia's total production, reflecting a significant shift in their energy mix.

Earnings Growth Despite Challenges

Despite these positive figures, Voltalia is facing an unusual curtailment issue in Brazil that poses a significant risk to their financial forecasts. The curtailment, initiated by the Brazilian grid operator, could lead to an estimated EUR 40 million reduction in their 2024 EBITDA if unresolved. The projected EBITDA before curtailment is targeted at EUR 255 million, with EUR 230 million expected from energy sales. The company actively seeks solutions to mitigate the impact of this curtailment, including both technical and financial compensation measures.

Strong Future Pipeline Enhances Growth Potential

Voltalia's project pipeline continues to impress, now exceeding 17 gigawatts under development, representing 5.6 times their current operational capacity. This growth is vital for long-term sustainability and profitability. Specifically, the company aims to have more than 5 gigawatts in operation or construction by 2027. Furthermore, the firm has recommitted to ambitious climate goals, including a target of reducing carbon intensity by 35% by 2030, in line with French regulations.

Financial Position and Debt Management

As of June 2024, Voltalia maintains a sound financial position despite increased gearing ratios of nearly 60%. Their total financial debt amounts to EUR 2.2 billion, mostly composed of project finance, demonstrating a strategy focused on leveraging low-cost debt for growth. The company has also recently secured a EUR 294 million syndicated loan, which strengthens their liquidity position and aligns with their refinancing strategy up to May 2026.

Services Segment Performance Indicates Potential

The services segment also displayed resilience, generating a turnover of EUR 80.2 million, which is 32% higher than last year, although EBITDA for this segment remains negative due to seasonal factors and costs linked to ongoing development. Nonetheless, the overall service business continues to be a critical growth area as Voltalia expands its operational and maintenance services.

Outlook Summary: Key Challenges and Opportunities

In conclusion, while the first-half results demonstrate substantial growth and a healthy operational pipeline, Voltalia must navigate significant near-term challenges, particularly the curtailment issues in Brazil. The resolution of these challenges is vital for achieving the forecasted 2024 EBITDA. Investors should closely monitor the company's progress on these fronts while recognizing the broader growth strategies and commitments that promise future value.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning. This is the conference operator. Welcome and thank you for joining the Voltalia Half Year 2024 Results Presentation. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Sebastien Clerc, Chief Executive Officer of Voltalia. Please go ahead, sir.

[Sebastien Clerc, executive]

Thank you and good morning to all of you. Happy to have you being with us this morning. I am here with Loan, who will follow just after my introduction and then Sylvine. So Loan, who is the Head of Communications and Marketing. She will be followed by Sylvine, who is the CFO for Voltalia and then Yoni, who is the Head of Investment Funding. And I will start with a few key messages about this first half. We had a good first half with power generation increasing by 13% with then a turnover that has increased faster than production at plus 28% and EBITDA growing faster than turnover at plus 34%. These proportions between production, turnover and EBITDA are a continuation of what we've seen last year. But also in the medium-term dynamic, if you look at the EBITDA and the capacity in operation, you can see that it has increased steadily year after year by a rate of 40% per year for the EBITDA and 36% per year for the capacity in operation.

These are the 6 months or the first half numbers so the dynamic that you see here is semester against semester, but the same trend is also visible when you look at our annuals. After looking backward, we are also fueling the medium-term growth thanks to our pipeline of future projects and this pipeline of future projects is also growing steadily year after year. We passed now the 17 gigawatt mark for sites which are currently under development, a growth of 7% and a pipeline representing 5.6x the capacity that we today have on our portfolio. So as you see, we have a lot of fuel in the tank to continue to move in the medium term. So first half with a good dynamic. And then if I move on to this summer. We have made an announcement in August about power curtailment in Brazil.

This is impacting 2024 and, as announced, we could have a EUR 40 million impact on our 2024 EBITDA if the curtailment is extended in the coming months and if this curtailment is not partially compensated and if the exchange rate is at 6 between the Brazilian real and the euro. We will provide you with much more details later on in the presentation. But I'd like to first mention that we are carrying on a series of actions with 2 goals, stop the curtailment as rapidly as possible and also to be financially compensated for this curtailment. We are confident that technical and financial solutions will be found. This is an unusual situation that has no reason to stay for more than a short period of time. But again, we'll get into details of that in a few minutes.

So with all this in mind, please, Loan, would you tell us about the business highlights.

[Loan Duong, executive]

Thank you, Sebastien. If we zoom in on the power producer activity, you can see on this page the total secured portfolio; meaning the capacity in operation, under construction and the capacity awarded and that means not yet under construction; it amounts to 4.5 gigawatts for the semester. That has been growing by more than 400 megawatts compared to last year. It is a diversified portfolio with 47% in Europe and 38% in Latin America and with a large part of solar energy with 74%. If I look to the moving parts, the capacity in operation have been growing by more than 400 megawatts and the capacity under construction is still at a high level at 600 megawatts compared with the record level of last year.

On the next page, you can see the plant commissioned and the ongoing construction. A lot of things are going on. If I pick on 1 geography, I would select U.K. where we have almost 200 megawatts under construction with 4 solar plants; Clifton, Higher Stockbridge, East gate and Paddock. In Africa, now you remember we announced that we won a project in Tunisia, a 130 solar project backed by long-term contract signed with the Tunisian state-owned grid operator. We in Egypt making progress in hydrogen. We announced in 2022 a partnership with TAQA Arabia to keep on developing a cluster combining renewable energy and green hydrogen production and we did a new progress with the signature of a framework agreement this first semester.

Related to Uzbekistan, we are building solar project, Sarimay Solar of 126 megawatts. In fact here we made new developments in storage. First, you can see that we are making progress with the first expansion in the Sarimay cluster with a storage project of 100 megawatt hour project and the new development also is on the right part of the page. The fact we signed a framework agreement for a project that will be among the biggest worldwide cluster in storage with 1 gigawatt hour size. And both projects will be backed by long-term PPA allowing us to have the full visibility on the profitability. Related to the highlight now of service providers, we have been signing new contracts. Illustration here is in development. We one more time signed a new project in Brazil that will be soon ready to build.

Relating to the construction services, we're happy to sign a 128 megawatt project with Orsted, its first project in Ireland where we have a strong experience there. And finally, for maintenance, we exceeded the 6 gigawatt mark of capacity operated for third parties thanks to new contracts across Europe and Brazil. It's a new step towards our target of 8 gigawatts of capacity operated for third party for 2027. Last highlights I wanted to share with you is the financing. Relating to the financing, we shared with you in the past months that we have launched a process on that and last July, we announced that we signed a new syndicated loan of EUR 294 million with a pool of 15 banks. We here refinanced all our credit lines until May '26, including the convertible bonds, the Oceane, that is due to January 2025.

Now I will let the floor to Sylvine for the financial highlights. Thank you.

[Sylvine Bouan, executive]

Thank you, Loan. Good morning. So financial highlights. Let's have a look to the turnover first. So as for the turnover, as Sebastien mentioned it, we increased for the period by 28%. This 28% arise from both increase in IPP and services activity. And as you can see, services contributed by plus EUR 19 million while among the IPP, I'd like to draw your attention to the main contribution of solar activity. Overall, whatever the geography we are, it increased by EUR 31 million together with Europe, Latin America and Africa. So we reached EUR 249 million turnover in H1 2024. Looking at the EBITDA. So again we increased as well even higher, plus 34%. This is coming as well from a better contribution in IPP and services activity. We indeed have, and we see that later, higher nonrecurring cost on corporate.

But I'd like to draw your attention about the significant contribution from the plants commissioned in '23 and '24. Actually, this contribution of the plants commissioning is even higher coming from the other countries than France and Brazil. What does it mean? It means that the increase from other countries than Brazil and France is such that the share exceeds 1/3 of the IPP EBITDA at the end of the half year 2024. So let's deep dive in terms of activity, energy sales first. Turnover increased by 26% reaching EUR 168.7 million explained by on one hand, volume effect, we mentioned it previously, 13% increase of power production. But looking at the plant commission during the period, the production increased since June '23 by 24%. It has been compensated partially by some disposal of plants end of last year and lower load factors.

One point to mention here is that for the first time, the solar production accounts for more than half of Voltalia's total production. Looking at the price effect. Thanks to our inflation indexation of power prices as per our long-term contract, we do have a positive effect for the period as well and, therefore, turnover increased by 26%. What about the EBITDA? EBITDA increased by 34%. It's a 60% EBITDA margin, which is 4 points higher than the last year half year result EBITDA margin. So it's a strong growth thanks to as per geography contribution from several areas. Brazil first, we did have a positive effect of the new plants commissioned. However, it was partially offset by some plants sold end of last year '23 and indeed lower wind resources, we'll come back to that point, as well as we usually perform preventive maintenance work concentrated on the first part of the year meaning a lower wind resources season.

Looking at Europe, more specifically France, we had a sharp increase thanks to new plants commissioned in '23 and '24 more than exceeding the one we sold end of last year. As I mentioned before, in other countries than these 2; it's plus 79% EBITDA thanks to average higher resources level than in '23. New plants commissioned in Portugal and Albania hence including early generation at the Karavasta with high fixed prices ahead of long-term energy sales contracts. Having a look on load factors so on the next slide. Here you can see overall we are comparing our H1 '23 versus H1 '24 load factor towards with the long term of Voltalia. Globally for Brazil, the result for H1 '24 and for instance in solar for France, it's not satisfactory.

However, I'd like to draw your attention that since 1st of July, wind resources is above the long-term average. And however, I'd like also to draw your attention that in other countries than these 2, the resources increased on the first semester. Looking at services activity. So services activity is a turnover reaching EUR 80.2 million, increased by 32%. The internal activity is much lower as expected compared to the record level in '23, but let's focus on external turnover. It increased by 32% thanks to on one hand development, construction and equipment procurement segments and as well as operation and maintenance segments, which also increased by 7%. Looking at the EBITDA, it's minus EUR 10 million. Just let me remind you that it's a seasonal activity for us within Voltalia. However, it improved by 17% compared to last half year.

So first of all, development construction and equipment; it generates minus EUR 10 million, improved by EUR 3.4 million. And within this activity, we have on one hand the development, which is stable thanks to on one hand lower cost, lower expenses linked to the growth of the portfolio for the pipeline for the future projects balanced by lower sales we've done on the first half year 2024. Looking at construction and equipment procurement, it rises sharply thanks to construction contracts in Ireland, which more than offset the fall in solar panel prices that continue to weigh on supply contracts as in 2023. Second segment within services, operation and maintenance remains at break-even though the turnover decreased due to temporary drop of additional services provided under long-term contracts.

So having a look now from EBITDA to net result. The sum up of these 2 activities reached to an EBITDA before elimination of EUR 102.2 million for H1 '24. Then we deduct from that EBITDA the elimination, we mentioned it before, decreased compared to the prior period. We after deduct the corporate items. What does it include? It includes costs from headquarter and some nonrecurring transformation costs such as IT consulting services to support an efficiency plan, which has been higher amount on the first half of the year. We ended up with the EBITDA EUR 75 million, it's plus 34%. But again, I'd like to highlight the improvement of the margin, which overall for Voltalia it means 1 point of margin gain, 30% overall.

Then we deduct our depreciation amortization provision increased by 7% while mainly linked to all the plants we commissioned in '24, '23 and the full year effect as well as last year we did have high amount of provision reflecting inventory of solar panels with writeoffs and charges associated to exceptional regulatory measures under that line. So deducting the EUR 48 million as well as other operational income and expense, we end up with the EBIT of EUR 22.2 million. We then have the financial results, financial actually loss, which is EUR 36.7 million, which mainly includes the cost of financial debt increase due to the growth of portfolio that we'll deep dive after the financial part. And finally, we have the tax charges, which is significantly lower than last year thanks to deferred tax income recognition that we booked related to our Jordan plants thanks to future compensation and profitable plants over there.

After minority interest, we end up with a net result group share, which is still a net seasonal loss; however, better than last year H1 '23; it's minus EUR 15.7 million, which improved by 19% compared to the prior period. Finally, let's have a look to the balance sheet. Overall, the balance sheet and total assets exceed EUR 3.9 billion. It's mainly driven by increase of fixed assets, fixed assets linked to power plants under construction as well as the one we put into operation during the period, it's increase of EUR 125 million. Cash and equivalents are stable, but slight increase of EUR 10 million. Regarding the equity, we have an amount of EUR 1.2 billion. It decreased compared to prior period, but linked mainly to translation reserves and allocation of the net profit of the period.

Financial debt stands at EUR 2.2 billion. The increase of EUR 272 million mainly due out of the total for EUR 254 million to the raising of new project financing and we'll come back to that point just after. The net debt is EUR 1.8 billion meaning a gearing ratio of 59%. Finally, other current and noncurrent liabilities amounts to EUR 404 million. It decreased and it's mainly linked to the completion stage on our construction activity related to the working cap evolution.

So let's now have a look more detail to financing cash and debt focus with Yoni.

[Yoni Ammar, executive]

Thank you, Sylvine. Good morning, everyone. Let's have a look to the cash variation for this semester. So starting from our cash position at the end of the year of EUR 319 million. We had, can add, a very robust operating cash flow of EUR 70 million driven of course by the EUR 75 million of EBITDA for this semester. This is a very nice performance and very solid. Then going to the working capital actually is roughly stable with minus EUR 1 million. Investing cash flow so we invest into our plants EUR 267 million of CapEx, growing the assets of Voltalia and we financed this by net variation. So the net variation is the drawdown and the repayment for a total amount of EUR 292 million of net variation of debt. The EUR 59 million of interest are paid to banks and obligors for the plants in construction and in operation.

Finally, we have a EUR 20 million negative effect on FX coming from the devaluation of reais in the first semester compared to last year and the other currencies. We end up with EUR 329 million of cash, increasing EUR 10 million from our last position. Next slide, let's go to the debt variation itself from the gross debt for the end of '23 to the net debt at June 24. Mainly, the main effect here is that we grew EUR 700 million and reimbursed EUR 413 million. It comes from, if you remember, we had bridged long-term financing with corporate financing. So here we see the shift from the corporate debt to the long-term project finance debt. This is the main variation for the gross debt reaching EUR 2.181 billion at the end of June, of which we subtract the EUR 329 million of cash to reach the amount of EUR 1.852 billion of net debt at the end of June '24.

If we go with a bit more of detail about the debt, it's on the next slide. We actually remain in line with the characteristic we had at the end of '23. The debt structure is still mainly composed with project finance at 61%, slightly higher than at the last annual results. But here you can see that we do not have any more significant bridge on the balance sheet. The green bonds represent now 11% of the debt structure as the total amount of debt slightly increased. In terms of currency, we are still mainly in euro with of course roughly 1/3 of reais debt. And in terms of rate structure, we remain with a 15% of variable rate because of course of the revolving facilities we have; but 85% of the total debt is fixed, hedged or indexed and we remain fairly well protected with the evolution of the interest rates for the debt. And of course each time we are continuing to invest and to raise project finance, we have long-term hedging on our debt.

Finally, the banks of our corporate facilities that you can see at the bottom right. I would like especially actually to thank the Groupe BPCE, Groupe Credit Agricole, BNP Paribas and Mizuho as lead arranger for our last facility; but as well Piraeus, Arkea, CIC, Goldman Sachs and La Banque Postale who actually contributed to that specific new facility, which is an important milestone in the refinancing and financial strategy of Voltalia. And when Loan was talking about the 15 banks of our pool, of course it includes all the banks from Groupe BPCE and Group Credit Agricole. Coming now to the '24 objectives of course. First, as Sebastien mentioned, before curtailment impact, we reaffirm our financial performance with a targeted EBITDA of EUR 255 million and of which EUR 230 million from energy sales. But of course there's this curtailment indeed. As announced in August, we are suffering curtailment. But what is the curtailment?

Curtailment is when the grid operator decide to limit the transmission of our electricity. We, Voltalia, are the producer. Let's imagine actually we are a tomato farmer, okay? So we are producing tomato and to send tomato to the retailer, we need trucks to transport the tomatoes. Actually here the truck provider is limiting the number of trucks in order for our tomato to go from our field to the retail shop. This is exactly what's happening here today in Brazil, which is not a sustainable situation. The context of this curtailment in Brazil. Across the overall country, this curtailment is imposed by the Brazilian grid operator with unusual level. Coming back to my tomato example. It is a bit like if your truck provider who would have 100 trucks would decide one day to allocate only 50% of the trucks to the transportation keeping 50% of the truck in reserve if we would have too many [ potatoes ] or if there would be too much road which could be a bit unstable.

So we believe in Voltalia, this is really highly unusual and irrational. In addition, in the Northeast of Brazil, the completion of new transmission lines are delayed meaning actually we missed some trucks and trucks are coming. With the completion of the new transmission lines, we aim to strengthen the grid. What is the impact of that contract? As Sebastien said, if this situation is extended over the coming months, if there is no financial compensation and if the average euro-real exchange rate remain at around 6 for the overall second half, then Voltalia '24 EBITDA could be cut by EUR 40 million, of which EUR 10 million coming from the euro-real exchange rate. But of course we have an action plan to move forward and fight against this situation.

And we proved of course through sector association, I remind you that, all players in Brazil are suffering the same situation of Voltalia. And directly as Voltalia, we started litigation actions at a federal level, but as well at the local level. And I remind you that as per law, we need and the states need to provide for financial compensation. Of course we are fighting legally, but we have as well constructive discussions with the grid operator on the technical side and with public authorities on political side in order to rapidly stop curtailment and accelerate the financial compensation. It can take many -- actually to mitigate and to decrease very fast this curtailment, we can have a lot of solutions coming from a pure compensation going through spreading this curtailment over all electricity sectors because for now it's mainly the renewable, et cetera, et cetera.

But despite compensation might be not perfect and could take time, Voltalia is confident that technical and financial solution will be found. That being said, let me run you through our assumptions for the 2024 EBITDA forecast. So in addition to the EUR 75 million of EBITDA for the first semester, we can break down the energy sale through 3 items. First, EUR 135 million will be produced for this quarter power production of the existing assets until what is commissioned -- what was commissioned in 2023. So this is the running of the existing historical facilities plus the full year effect of what we have commissioned in 2023. Then with what we have commissioned with the plant commission in '24, we added EUR 10 million plus EUR 10 million for early generation.

Sylvine was talking about Karavasta mainly for the first semester will be the same for the second one. So energy sales should amount to a solid EUR 155 million of EBITDA. For services and corporate, we should stand at roughly EUR 25 million of EBITDA for the second semester. This breakdown allow us to end up with a forecast EBITDA for 2024 of EUR 255 million before the curtailment effect, which could affect Voltalia up to EUR 40 million if the different assumptions we described would be met. Finally, we confirm you our operational objective, which is around 3.3 gigawatts of plants in operation and construction, of which around 2.5 gigawatts in operation.

And I'll let now the floor to Sebastien to conclude.

[Sebastien Clerc, executive]

Thank you, Yoni. And I'd like now to talk about the medium term and about 2027 where we confirm our objectives for 2027 on all items. On the energy sales side, we will have by the end of 2027 more than 5 gigawatts in operation and construction, of which 4.2 gigawatts in operation. Then regarding our services to third-party clients, one of the key KPI is how many gigawatts we operate for them and our objective for 2027 is to operate more than 8 gigawatts and, by the way, Loan updated you that we are moving actually faster than expected towards this objective already at 6 gigawatts. And then both energy sales and services together will generate an EBITDA of EUR 475 million. This is a normalized EBITDA assuming real exchange rate and resource at long-term average. Of which of this EUR 475 million, EUR 430 million from energy sales so our power generation.

We have also a set of mission objectives that we confirm as well. Most of them are for 2027, i.e., the first objective to have 4 million tonnes of carbon emissions that will be avoided by our clients thanks to Voltalia's activity. Second, that we have a Stakeholder Engagement Plan aligned with the IFC standards. IFC is a member of the World Bank with 100% of our projects being our target. And third objective for 2027, we will have 50% of our solar plant, which will be located on co-used or upgraded land. So meaning that the land we use for our solar plants is not just there for power generation, but also things like agriculture and so on. Our last objective is for 2030. This is because it's the French law that is requiring companies to have a consistency objective for carbon intensity. So we do have one, which is to reduce our carbon intensity by 35% when we compare it to 2022 calculated as intensity of the megawatts we built.

So with these medium-term objectives confirmed and before getting to the questions, I'd like to summarize a few takeaways. First, we had a quite satisfactory first semester with this production increasing by 13%, turnover faster than production at 28% and EBITDA faster than turnover at plus 34%. Then we go through the 2024 year-end forecast with all the details regarding the second half provided by Yoni. And here the subject is really curtailment, which with the assumptions that we describe could reach EUR 40 million impact on our EBITDA. Looking forward for the medium term, we have continued in the first half to build our pipeline of future projects, which is one of the reasons why we can confirm the 2027 objectives, Finally, it's always important to have a strong base of banks providing us for good liquidity and we've just closed this bank syndicated loan, which is refinancing all of our facilities including our Oceane convertible bonds until May 2026.

And it appears that you have some questions, happy to answer them.

[Operator]

[Operator Instructions] The first question comes from Arthur Sitbon of Morgan Stanley.

[Arthur Sitbon, analyst]

So the first one is on the guidance because you say that you confirm the before curtailment guidance of EUR 255 million of EBITDA. But at the same time, the curtailment impact if I'm not wrong, if I don't misunderstand, the curtailment impact of EUR 40 million includes EUR 10 million of FX. So are you actually saying that with FX, the new guidance pre-curtailment would be EUR 245 million or is it still EUR 255 million? It was not really clear for me, but I may have misunderstood. The other question was on the services business. On the services business, my impression as well here is that excluding project sales gains, the business is actually -- the external business is actually loss making and I think that was the case last year already if I'm not wrong. Is that a structural situation? Is there any plan to improve that? Are you considering action at the group level? And the last question just back to the curtailment issue. Just to understand the nature of the issue. Am I right to think that the main problem financially for you is that there are some contracts like PPAs typically where you still have to deliver the electricity to the client and so you have to buy the electricity in the market to deliver it and that makes the outsized financial impact? Just want to understand that a bit better.

[Sebastien Clerc, executive]

So first, regarding the guidance. Since curtailment is impacting the Brazilian real EBITDA, we have to assume an exchange rate; but the exchange rate is also impacting the other cash flows from Voltalia. So the estimate we gave taking into account the range of cash flows. Regarding your second question on services. The answer is that it is profitable. And why is that? Of course we have very good profitability about sale of development, but we also have costs of sales of development. So if you take away the revenues of development, but not the cost of development; then of course without revenue, any business would be negative. So when you reestablish this in the right way, the answer is it's enough and therefore, services are not negative and this is true for the nondevelopment as well as development.

Finally, the third part of your question is about the curtailment. The effect of curtailment is different whether we talk about regulated PPAs or private sector/corporate PPA and the reality is even a little bit more complicated than these 2 categories, but anyway. So depending on the type of PPAs, the consequence of curtailment can be either some penalties or some effect on the volume commitment that you have mentioned. This is actually a good illustration of why the Brazilian law is specifically saying that if the grid is curtailing a power generator, it should be compensated because the grid cannot say there is no client because we do have a client. And therefore, the law is that I think that we are compensated and this is why both through litigation and through constructive discussions, we are confident that we will get compensation for these categories.

[Arthur Sitbon, analyst]

And just a clarification on the first question. So am I right to understand that the EUR 10 million of FX impact is not related to curtailment?

[Sebastien Clerc, executive]

Indeed, the FX is independent from curtailment. But FX has an impact on Brazilian real, which is in itself dependent on the exchange rate.

[Operator]

The next question is from Paul Chabran of Kempen.

[Paul Chabran, analyst]

I have 2 sets of questions. The first one is still on Brazil. First of all, you mentioned that the legal and amicable actions that you're taking might take some time. Can you share the timeline that you have in mind? Is it fair to expect a concrete solution before the end of the year? Second still in Brazil, did the question of potentially recurring curtailment emerged during your discussion with the grid operator? Is there, in your view, a risk that for the coming 2 or 3 years, we have curtailment in H2? And last one on Brazil. The exchange rate between the euro and the Brazilian real is now at 6.25. Could you maybe give us a sense of the sensitivities of the EBITDA if the exchange rate in H2 was to land at 6.2 instead of just 6? Second set of question on the balance sheet. It looks more stretched than historically. Your gearing is reaching almost 60% because of that 6%. So the question is do you have any covenants on your corporate financing that could become a problem at the current level of gearing? And finally, how do you see gearing and the cost of debt evolving through 2027?

[Sebastien Clerc, executive]

Maybe I'll answer the one on curtailment and then you can follow up. So in terms of timeline, it could go fast because the situation we have now is not so rational from the perspectives of the Brazilian grid and authorities because we are today in a situation where the grid capacity is limited artificially in order, which practically means that some lines that have been in operation for many years are disconnected, to have them as reserve capacity in case the other lines would have troubles, which is itself not so probable. So the situation is the result of not so rational posture among the players in Brazil and it's costing money at least to the country and probably to the Brazilian authorities because legally speaking, they have to compensate. So normally, to answer your question on timing, it should evolve quite rapidly.

It's a matter of just a week coming with solutions [ probably] by year-end definitely possible, but maybe not. It is not depending on us. So we are very confident that solutions will be found both in terms of stopping and limiting the curtailment on one hand on the grid itself and second, on compensation. Maybe the solution will come fast, maybe a bit slower. Maybe half of the solution will come fast in the second half, maybe it comes slower. We are actively discussing with the authorities with a good mood together with the other industry players. So I don't want to provide all the discussions because it's our interest to keep this good relationship and to make things moving forward. So in a nutshell to summarize, it should be relatively quick; but I cannot commit on the timing, which is not depending on [ us ].

[Yoni Ammar, executive]

Maybe I can take the covenant. As you say, some of our ratios are increasing a little bit. Nevertheless, I confirm that we are very comfortable on the different covenant ratio of our corporate debt, which are mainly structure ratio and LTV.

[Sylvine Bouan, executive]

Just maybe to link with the answer from Yoni and also answer your question about the gearing in the balance sheet. I do confirm that indeed we have a gearing which is increasing, but still within our plan it's monitored and when we build our target for 2027, it remains in line with what we have. So we do not anticipate any issue in respect of the gearing.

[Sebastien Clerc, executive]

Then you asked the question on the FX, 6.2 doesn't make a big difference versus 6. So it's really the same guidance on 6.2 and 6.

[Operator]

The next question is from Juan Rodriguez of Kepler.

[Juan Rodriguez, analyst]

I have 2 on my side, if I may, on the curtailment issue. The first is what level of assets are affected by this curtailment in terms of megawatt hours? And the second is what levels of production are you taking into account for H2? So this is the first one. And the second one is a little bit of clarity on this because you signaled that part of it is due to the delays of this Rio Grande transmission line. When was it expected to be commissioned and what is the new timeline as far as you know on this transmission line? And if there are further delays on this asset, can curtailment probably on a lower strength go up to 2025?

[Sebastien Clerc, executive]

On the assets themselves, we are affected on not all, but almost all of our power plants in Brazil but at various levels. So the 1 asset, which is not affected at all is our Oiapoque site because it's not connected to the main national grid, but to a local grid. But the others are affected at various levels and evolving over time since the policy of the grid has been evolving in the right direction actually compared to August, but [indiscernible]. So I don't have the precise our megawatt figures, maybe we'll work on that. But the reason I don't have it in mind is that anyway our goal right now is to have the discussions and to make things moving forward to stop curtailment on all the plants.

Regarding the second part of your question. The H2 curtailment assumption of our scenario is in line with what the grid has told us in terms of their forecast, which is a high level. Hence, this big impact in terms of euros. We are feeling that their assumption could have more curtailment than what is reasonably expected, but this is what we took. Finally, about this local transmission line in the Rio Grande do Norte that has a specific impact on the plants we have there. A new transmission line has been under construction for some time. It was expected to be completed during the summer and it's close to being complete as we speak. So it should come for sure before year-end. But we don't have the exact details about the relationship between the grid and the sales contractor doing the grid. So we don't have a precise view, but it's almost complete as we speak because when we get on the site, we can see the line. So it should not take too long.

[Operator]

There are currently no more questions from the conference call. I'll hand it over to Mrs. Loan for any written questions.

[Loan Duong, executive]

Thank you for your questions. I can see several ones. I have one Oscar Najar from Santander. Some of them you already answered Sebastien, but I will repeat. How confident are you regarding the possible past and current compensation from Brazilian regulator? When are you expecting the networks to be updated to avoid future curtailment? And a question related to the share price. At this level if the share price does not go up as asked you few months ago, why don't you consider a share buyback or buyout of the company?

[Sebastien Clerc, executive]

Yes. Actually the first part of the question, we've come through already quite a bit. The one that maybe is complementary to the future overview of future curtailment in Brazil. Curtailment is a subject which is existing in a series of countries. We don't have to go very far from here in Paris to see some examples. For instance, the problem has been there for much longer than Brazil. When we look at Germany where negative prices, which is the exactly the same one as the phenomenon of curtailment, has been going on for quite many years. And I think this subject is there, it has been and it's becoming a bigger [ view ] in the future versus in the past. And Brazil is a country like another one because it has a very strong grid that has been specifically similar to grids that we see in Europe.

But it happens that as we speak today in Brazil, there is a not so logical management of the grid. I gave you a good illustration of that. By stopping to use voluntarily lines that have been in operation for many years to give them a reserve line, which is not so logical. So on that matter, again we think that the situation will get back to normal quite rapidly. And the situation in Brazil is not -- except for this illogical part that has happened just for a few weeks is going to go away with Brazil becoming like any other grid, managing curtailment like everybody else because it's a subject that is a matter for any grid in the world and for decades. Regarding the second part of the question, stock price is really low as we speak. It's not reflecting the true value of the company.

And of course when that is the case, it is normal that the question arises about buyout like you are mentioning. You remember that the same question was asked back in April. And I think the situation today is like it was in April so it's a logical question. It's a logical question for Voltalia and a logical question for other renewable company, which are listed in the stock market. The question of buyout is an open question and of course there is not much more that I can say because we are -- it's more a question for shareholders than for the company itself. Again, it's a very rational question that anybody has to ask itself as we speak.

[Loan Duong, executive]

Moving to other questions. I have a question from the [indiscernible] related to the U.K. plants as we sign PPAs and how will you sell the electricity in U.K.?

[Sebastien Clerc, executive]

Okay. Maybe you want to answer?

[Yoni Ammar, executive]

Of course. So yes, you know that we have few sites under construction in the U.K. Most of them have PPAs already signed in order to move forward and to get in operation. Some others are under contracting and should be announced promptly. But definitely, we remain on our strategy to have a long-term PPA signed for all our plants avoiding any merchant asset. And of course U.K. market is a very illiquid and dynamic market for the PPAs. So we are very comfortable to move forward and to be fully covered at commissioning date.

[Loan Duong, executive]

Looking at other questions. Operator, do you have other questions at the conference call?

[Operator]

Yes, madam. We do have a follow-up question from Mr. Paul Chabran of Kempen.

[Paul Chabran, analyst]

I wanted to take the chance to ask about the sale of a project in Brazil. So you sold a project in advance development for 500 megawatts. I understand that the contribution from this project, [indiscernible] with your teams, understand the contribution is around EUR 10 million, which suggests a multiple of around EUR 20,000 per megawatt. Are you, let's say, comfortable with this level of valuation for assets under development in Brazil and would you be happy to keep selling assets at this type of multiple?

[Sebastien Clerc, executive]

In fact the transaction amount is not public and so it would be difficult for us to comment on it. What I can say, however, is that we've been -- we are one of the Top 3 largest developers in sites in Brazil. We keep them on our balance sheet when the sites are, thanks to market conditions and site quality, meeting our standards in terms of return and in term of risk. One of the risk we want to cover is market risk meaning we want to have a very long-term PPA. But we have many more sites that we developed than what we want to keep for the sites meeting our standards. So we've been selling Brazilian sites year after year for many years. And regarding the price we sell the sites, we cannot provide detailed transaction per transaction; but we have provided you with the average of the sales back in last year and updated in April.

And we hope to be able to update that figure annually, putting together several sites together in order to keep the confidentiality of the transaction. This data that we have shared with you shows a high profitability of developing sites and selling them with selling price and costs of development multiples being really high. The figure that was disclosed was at 8x. So the selling price is 8x bigger than the development cost and sometimes this is playing on a big amount, sometimes on a smaller amount. What matters to us is this multiple. We'd rather sell at a high multiple even if it's a lower price per megawatt than the other way around. This site we sold in the first half was not fully developed so it's not the highest price per megawatt that we have, but the profitability is there.

[Operator]

Mrs. Loan, there are no more questions on the conference call at this time.

[Sebastien Clerc, executive]

All right. So thank you very much for all of your questions and for following Voltalia over time. So we remain happy to answer more questions if you have more subject coming up in the coming days. Loan is always there for this. And in conclusion, I will just say one more time that we have enjoyed the first half, which is according to what we expected and actually better for many things. And curtailment is the challenge we face now and as we have said, we are optimistic it will be solved and we are hopeful that it will be fast. But anyway, it will be solved. So we'll continue to work on this. Thank you so much and look forward to seeing you again sometime soon. Goodbye.

[Loan Duong, executive]

Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.