Encavis AG

XETRA:ECV

Earnings Call Transcript 2020-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to the Encavis AG conference call regarding the Encavis interim statement Q3 9 months 2020. [Operator Instructions] Let me now turn the floor over to your host, Christoph Husmann.

[Christoph Husmann, CFO & Member of Management Board]

Good morning, ladies and gentlemen. A warm welcome from our side. We welcome you. This is Dierk Paskert, the CEO of Encavis AG; Jörg Peters, Head of Investor Relations and Public Relations; and myself, Christoph Husmann, CFO of the group. We appreciate that you take the time in these turbulent days to discuss with us our interim statement Q3 9 months 2020.Ladies and gentlemen, let's first turn to the highlights we had in the second -- the beginning of the second half of this year. As you might know, Encavis is a green company which is focused on sustainability, but we did not line out all what we did regarding sustainability, and therefore, we started now to publish first insights into its sustainable strategy to fulfill the requirements of the market and to inform you all over. You'll find that on our website under -- as it's shown here, encavis/en/sustainability.In addition to that, Warburg Research reinitiated active coverage of Encavis AG with a buy rating at the target price of EUR 17.20. And HSBC initiated its first active coverage of Encavis AG with a target price of EUR 21 in the buy rating. BlackRock, in the meanwhile, increased its shareholding in Encavis AG from 3.5% to 4.1% and now 6 -- 5.8%.In the meantime, Encavis, expanded its participation in several minorities where we acquired our -- and bought out all the minorities. So in France, for instance, we now hold, like in the U.K., 100% of the participation of all our parks. In total, from all our solar parks, we own an average 95% of the participation. Encavis Asset Management acquired additional wind farms in France as well as the first floating solar park in the group in the Netherlands for their respective investors.And finally, financially, we got refinancing, secured EUR 63.8 million nonrecourse project financing we could refinance in Italy, where the total capacity of the parks of 29 megawatts. These are 10 ground-mounted photovoltaic parks covered, and we substantially, by more than 240 basis points, could reduce the interest rates. SCOPE Ratings reaffirmed in September our issuer grade rating BBB- with stable -- as of October with stable outlook on Encavis and Encavis Finance BV.But the most important part of success we had in the first -- the third quarter of this year was that we got La Cabrera connected to the grid. La Cabrera is the second biggest park in our group, 200-megawatt park in Spain in Andalucia. And as you might recall, during the lockdown due to COVID-19, we were afraid that there could be some delay in the park. We could speed up the overall -- the construction of that park and got it connected to the grid nearly on time, so that date for commissioning was the 20 -- 25th of August. And we -- and the park is producing energy, and we fulfilled the PPA with Amazon and sent out the first bills to them. So that park is running, and this is an important step for the group since this is the first totally subsidy-free park which we do have in our group.Regarding Talayuela, this is the largest park which we have in our portfolio, the 300-megawatt located in Extremadura in the desert southwest of Madrid on the way to Portugal, and that park is underway. And it looks that this park, it will be connected to the grid in time as well, maybe with a very short delay. As you can see here, the high-voltage sector is finished and the cold commissioning is going on. The grid connection is planned here for November 2020. And in the photovoltaic section, in average, we are pretty close to the 100% finalization, so that is expected to be done within the next 2 weeks as well. And then the electrical works shall be finished then end of November, so that in the second half of December, the connection to the grid will be expected. And the hot commissioning is expected for the first week of January, so that we will be able to fulfill our obligations under the PPA contract with the undisclosed [ Northern ] European utility as well. The positive thing is here that the speed-up costs for both projects accounted to EUR 240,000 for La Cabrera and EUR 250,000 for Talayuela, which, compared to the overall investment cost, are neglectable.Ladies and gentlemen, let's now turn to the figures of the year 2020. If we have a look into the development of our figures in the respective quarters, we can see that in the first quarter, we exceeded all the figures of previous year. The reason for that is that there was no timing effects in our first quarter results neither in 2019 and 2020. And in both years, we had the same positive meteorological effects. So therefore, there was no deterioration of the figures. While in Q2, we had 2 effects in addition to that -- 3 effects in total, sorry. Firstly, we had a shortfall in meteorological effects in the second quarter 2020, still positive meteorological effects but not as positive as they had been in Q2 2019. And in addition to that, Q2 2019 enjoyed a positive contribution from the disposal of minorities from sales of a 66-megawatt wind portfolio to a financial investor which was not repeated in Q2 2020 yet, so therefore, this will be compensated later during the year. And thirdly, due to the strong stock price increase, we had a burden from additional provisions for our stock option program.Why do I repeat this story? Because it is exactly the same story we have in Q3 2019 as well. We have pretty much the same revenues as we had in the third quarter of 2019 with EUR 79.5 million, but you have a negative deviation in this respective single quarter in EBITDA and the EBIT and cash flow and EPS, and this is due to the 3 effects. Let's go more into details. Well, in total, in the first 9 months of 2020, we had an increase of the revenues of 5% and a slight decrease in EBITDA and EBIT by 3% and 7%, and EPS by 14%.Let's talk first about the P&L figures. Here, as I've stated already, we do have a meteorological effect. And if we take that meteorological effect out, then we see that we had EUR 12.9 million of positive meteorological effect in the first 9 months of 2019, while we have just a positive meteorological effect of EUR 7.1 million this year so far. As one investor recently told me, "Listen, 2019 was, meteorological-wise, a fantastic year; and 2020, just a normal one." And this is exactly what we see here. So we see both cases, positive meteorological effects, but a lower one in 2020, with a difference of EUR 5.8 million negative deviation here. So therefore, if we take out both positive meteorological effects in 2019 and '20, then we have a positive change in revenues of 8%; the EBITDA is on level of previous year; while the EBIT is slightly lower. So as you might know and assume, we do not manage meteorological effects at all. So therefore, our guidance as well as our reporting then includes the comparison without such meteorological effect.In addition to that, as I pointed out,, in Q2 2019, we had a bit of disposal of minorities in wind farms. And as you know, we plan to do such a disposal of minorities every year. So this is planned for this year as well. The process itself is running very smoothly, and we expect to announce here a positive news within the next 4 weeks. So still, there is a positive effect regarding that of EUR 5.9 million in the 9 months 2019. We just had a small disposal of a technical entity on positive effect of EUR 1.9 million this year, so there is a negative deviation in the profits of EUR 4 million. If we take that out, then the negative deviation is not there in EBITDA and EBIT anymore, both effects, meteorological effects, and this one-off time effect.In addition to that, we have a very positive development of our share price seen last in this year, and that amounts in additional provisions for virtual stock option program for the management of EUR 4 million in 2020 compared to EUR 1.1 million last year. So therefore, this additional EUR 2.9 million burden is a burden to our profit as well. If we take all that out, then we see that we have a positive development of 8% in revenues, a positive development of plus 5% in EBITDA and plus 4% in EBIT, and that goes absolutely in line with our guidance.If we then have a look into the operating cash flow, the operating cash flow is developing further positively. There is one timing effect in it as well, so we had EUR 9 million of capital gains tax burden last year incorporated in the figures and the positive EUR 9 million this year. If we take it out, there's still a double-digit strong increase in operating cash flow, and that is due to the fact that we enlarged our portfolio due to newly acquired Danish farms in last year, contributing EUR 9.1 million of additional cash flow this year. And we have seen this year so far a positive swing in operating cash flow contribution of Encavis Asset Management this year with EUR 8.7 million, both as planned.Having said that, I would like to have a look with you into our segmentational report. The solar parks have, in the first 9 months 2020, slightly lower revenues than we have shown in the first 9 months 2019. But please be aware that there was a positive meteorological effect in the solar parks last year of EUR 15.1 million in the first 9 months, while there was only now a positive meteorological effect of EUR 9.1 million this year. So there's a negative swing of minus EUR 6 million, and this is mainly due to the solar radiation in Italy and in France. Both were this year substantially lower than expected, Italy even slightly below the long-term average. So therefore, the reduction in the EBITDA margin and the EBIT margin relies on this meteorological effect and additionally on a smaller fraction of the stock option program allocated to this segment to the management of this segment.In wind farms, we do not see any meteorological effect, not any material one. We had a negative meteorological effect of EUR 2.2 million in the first 9 months of last year and minus EUR 2 million this year, so it's more or less the same meteorological effect. But due to the 81-megawatt acquisition of Danish wind farms at the end of last year, they contributed heavily on the revenue side with EUR 11 million so far. And therefore, we see here a positive development in revenues. And there is a shortfall in EBITDA margin. This is due to the profit from the acquisition -- on disposal of the minorities last year in the first 9 months 2019. But we are positive, as I pointed out, that during the course of this year, we will have such a minority disposal as well and show such profit contribution as well.The technical services enjoys the profit from the disposal of a smaller entity, as we already pointed out. And in the asset management, we have seen a positive swing in the first quarter specifically, then a more calm development in the second and third quarter. We see here the same development as in real estate, where the activity of the funds moves more to the fourth quarter. So the profit contribution of asset management this year will be more back loaded, but we see here very positive developments and are confident that they will fulfill their goals. If there is reduction of the EBITDA by almost 50%, then this is due to the allocation of the cost of the respective stock options to the management of these -- of this segment. The headquarters are increasing cost of EUR 6.2 million to EUR 7.4 million. This is mainly due to stock option program as well.Ladies and gentlemen, as we pointed out at the very beginning of this year, this year 2020 is a year of transition. We are investing heavily in securing early-stage projects, which have to be developed over the year. Next year, with hopefully even better energy prices, again, we guess that we will then get these parks connected to the grid. So the development process is well underway. But the need for liquidity this year was not as strong as it was in the past years. So therefore, we only rose this year EUR 45 million of cash via bilateral debt as well as credit lines. So our equity ratio sticks solidly as pointed out and planned at approximately 25%.As you might have heard, and we already pointed that out, SCOPE Ratings reaffirmed its investment-grade rating for us and with a positive outlook. Specifically, it highlights the risk-adjusted business model we do have, although we do have nonrecourse financing. In the meantime, what becomes more and more important in the market as well, our ESG ratings. As you might know, since 2017, '18, we do have climate bonds initiative rating as well as the ISS ESG rating, and now we have a new MSCI rating with the investment rating A as well.If we then do have a look into the consensus, it is that the consensus figures, well, you produced or the analysts produced in the end in the last weeks, we're between EUR 80 million and EUR 0.18 EPS. The Q3 single quarter is slightly below that expectation, but which is due to this -- these very special reasons. While in the -- if you have a look then on the full year expectation, we see here that with above EUR 280 million, we are more or less in the range of the target guidance of EUR 286 million, with above EUR 220 million in range of the EUR 224 million you do expect and with EUR 130 million EBIT in, all in all, in the range of the EUR 134 million you do expect. With operating cash flow expectation of more than EUR 200 million, we are above the expectation of the consensus. And with the operating EPS with EUR 0.41, we are exactly on line with our guidance.Well, having said that, we do expect for the full year, and the Executive Board had a look on the guidance again and confirmed it, with revenue expectations of more than EUR 280 million, so 6% above the previous year's weather-adjusted figures. That is very important to take the weather-adjusted figures here. The guidance is weather-adjusted as well. The operating EBITDA with more than EUR 220 million, so approximately 5% above the previous year; and the EUR 130 million of EBIT, 4% above previous year; as well as the EPS of EUR 0.41, 2.5% above previous year's figure.The -- we see here the positive contribution of our PV, wind and technical service, which continuously contribute positively to the P&L. And we still expect and confident that we will announce proceeds and profit contribution from the disposal of minorities this year, and we will have an extraordinary good fourth quarter, as again, as asset management -- as the business tends, as I pointed out, to be more backloaded.If we then do have a look into our business segments, we are confident that we will reach these guidances with the so respective here mentioned contributions. And therefore, I think I am finished with my presentation. I think I do not have to take an outlook on our Fast Forward 2025, which I already have explained to you or shown to you several times. So therefore, open for questions as well as Dierk Paskert, Jörg Peters and myself. Thank you very much.

[Operator]

[Operator Instructions] And the first question comes from Charlotte Friedrichs from Berenberg.

[Charlotte Friedrichs, Analyst]

I've got 3. The first one would be, what's your firepower right now for acquisitions?The second one is, what sort of a weather effect have you seen in the fourth quarter so far? Do we still have a sort of a drag compared to the prior year?And then the third question is a bit more general on the market dynamics that you're seeing, in particular, for PPA. Which regions are currently attractive for you, given that Spain has become, I understand, a little bit hot this year so far?

[Christoph Husmann, CFO & Member of Management Board]

Good. So how about I take the first question, which is regarding the firepower. Our current firepower is above EUR 90 million, 9-0, EUR 90 million for the equity of such acquisitions, which is, on short term, available to the group.So regarding weather effect and market dynamics, Dierk, do you want to take these questions?

[Dierk Paskert, Chairman of Management Board & CEO]

Yes, I can take those questions. First of all, also, good morning, everybody, from my side. Probably a little bit early as we have only half of the fourth quarter now underway to give any, let's say, good forecast for the end of the year. What I can see so far is probably average weather conditions above all in wind. So solar doesn't contribute anyway too much now at this time of the year, but what I could see is probably average, what we have seen. So no negative or too positive deviations.On the PPAs, the third question, which regions, surprisingly, it's Germany, which is really demanding a lot of PPA. So there is only little projects available currently. We have a few in the pipeline, so therefore, that's a very positive outlook. Spain, yes, that's true. It's becoming a little bit hotter. However, one has to say that, overall, if we look at the different regions, in most regions, the PPA prices have recovered from the, let's say, first pressure through COVID-19. So we are back to more or less normal levels, a little bit below in some regions, but definitely strongly above the lows in times of -- in the first time of COVID. And currently, we do not see any, let's say, effect from COVID on the prices, not yet, as we do not have any significant shutdowns above all not in the industry. So therefore, positive outlook for the PPAs above all for the next year.

[Operator]

The next question comes from Jan Bauer from Warburg Research.

[Jan Bauer, Analyst]

I've got 3 ones. So first one would be on the EBITDA margin for your PV service segment. So you now already have some EUR 3.1 million in EBITDA from the PV service segment, and you're guiding for approximately [ EUR 2 million ], if I'm right. So can you give us a little bit more insight why the 9-month figures for the technical service segment have been that much higher compared to the previous year?

[Christoph Husmann, CFO & Member of Management Board]

Okay. So if you want, I'll tell you the answer. So Mr. Bauer, so the technical service has a positive development of the EBITDA margin because it enjoys this year a EUR 1.9 million gain from the sale of one smaller technical entity. So therefore, if you take that out, they are pretty much in line with previous years.The first question, I'm not sure whether I got it correctly.

[Jan Bauer, Analyst]

No. That was the first question, so only one question.

[Christoph Husmann, CFO & Member of Management Board]

Just one, okay.

[Jan Bauer, Analyst]

Additional one that topic. So you acquired Stern Energy, or you intend to acquire it fully. So when do you expect a major impact from that acquisition in your technical services segment?

[Christoph Husmann, CFO & Member of Management Board]

So I think we have -- thank you very much for that question. Differentiate here in 2 ways. Firstly, there is already now a very positive impact because we work together with them in many countries where they take over the technical service for our parks. And they do a fantastic job, which is more forward-looking and not only repairing what is broken. So it is really a predictive maintenance, what they do. And so therefore, we see a very positive contribution all over our PV portfolio.If you ask me for the first real profit contribution, since this is a minority, we have to wait for the year's end results to show their profits as soon as they are stated. So there will be a slight minority participation in the technical segment. In 5 years from now, we -- according to our plan, we will have a full consolidation after taking over the majority. And in 6 to 7 years from now, we will be 100% owner of the group. So we will have to wait for some years for revenue contribution. But profit-wise, the contribution will start approximately next year.

[Jan Bauer, Analyst]

Okay. Second question would be regarding further acquisitions in 2021. So do you -- can you give us already a feeling of in which countries you might acquire or try to expand your PV portfolio?

[Christoph Husmann, CFO & Member of Management Board]

Dierk, will you take that?

[Dierk Paskert, Chairman of Management Board & CEO]

Yes, I can take that question. So it's -- first of all, on -- as you know that acquisitions of new parks, let's say, which are already connected to the grid or ready to build, we do on an opportunistic basis. And so therefore, it's hard to give any guidance on that, what comes in next year and will satisfy our margin expectations. We have a better outlook on our pipeline, which we develop with, in the meantime, 9 or 10 solar developers. I would say the countries to focus on is definitely Germany, Italy, so those are the strongest ones, and Denmark. Those are the countries where we have most activities. And then also other countries but to a smaller extent.

[Jan Bauer, Analyst]

Okay. And will you give us some kind of guidance or an outlook by the beginning of next year which acquisitions from your corporation partners are on the agenda for next year?

[Dierk Paskert, Chairman of Management Board & CEO]

Well, yes, let's wait until the end of the year, so if we have better visibility. I mean, as we are still -- these are parks which are under development. And it's -- I mean, you can always take an optimistic view, but if, at the last day, you don't -- do not get the last license, then it's hard to do that. We probably can give a range, so -- but let's come back to that at the end of the year. So we will definitely be a little bit cautious on that. But let's see.So there is -- I mean, we have our long-term outlook until 2025, which is doubling our capacity. So that stays intact. So -- and if you slice that then in 5 years, you come to an average figure of 300, 350, 400 megawatts per year. So that can give you a little bit of guidance, but please take into consideration that 1 year or the other year can be stronger or a little bit weaker. So we maintain our long-term target, 1.7 that we are 100% committed. But let's say, year-by-year, we might see slightly changing contributions.

[Jan Bauer, Analyst]

Okay. Perfect. One last question. So from my understanding, the Eastern Europe market is currently gaining some traction on getting the hot place for renewables, especially Poland. Do you think about expanding your local footprint a little bit more to the Eastern Europe countries?

[Dierk Paskert, Chairman of Management Board & CEO]

We are always taking looks into various markets where we are not yet active in. Poland is one of which. And we did not pursue any business, let's say, with a certain political risk there, but PPA business definitely can be of interest. And from, let's say, weather conditions, Poland is a very good market. There's also strongly increasing demand for green energy. So therefore, yes, it qualifies in the PPA markets as an interesting market, and we will definitely, over time, look at this market.

[Jan Bauer, Analyst]

Perfect.

[Dierk Paskert, Chairman of Management Board & CEO]

But as we do also into other markets. So that's -- it's not, let's say, restricted to Poland.

[Operator]

And the next question comes from Anis Zgaya from ODDO.

[Anis Zgaya, Analyst]

Yes. I have one question, if I may. On Statkraft's acquisition of Solarcentury, what could be the potential impact for Encavis?

[Dierk Paskert, Chairman of Management Board & CEO]

Yes. Thank you. I'll take that question. Not yet to be seen. The first announcement, which we -- and let's say, our -- in our first talks with Solarcentury, it was clearly stated that Statkraft wanted to maintain the relationship between Encavis and Solarcentury. However, we have to wait now until closing of the deal, which is not yet done. It was just signing of the deal, and then we will have first meetings with Statkraft. We know them, let's say, also from various deals, so it's not an unknown party to us. We will be in discussions with them. So far, not to be seen that we have any negative effects out of that deal, but also that as we, let's say, revisited once we have met them first time.

[Operator]

The next question comes from Igor Kim from Bankhaus Lampe.

[Igor Kim, Analyst]

I've got a couple of questions from my side. First, I appreciate you can't really give a lot of comments on the next year pipeline, projects and et cetera. But looking at your pipeline, is there something of a similar size like what you had in Talayuela and La Cabrera? I think -- and you mentioned 200 or 300 megawatts, I mean, in terms of better project.The second question, you haven't really been affected with the first lockdown. So we should expect that in the second partial lockdown, you also will not have any effects. Is that correct? No effects on supply chain, delays of acquisitions and et cetera? Yes, that's it so far.

[Dierk Paskert, Chairman of Management Board & CEO]

Yes. If I can take the first question on the projects, not to an extent like in Talayuela 300 megawatts that is still unique as we are, let's say, lacking the, let's say, the space for -- to build such large parks in other parts of Europe. However, it comes close to that, but to something like La Cabrera. So at least, in Denmark, we are looking at a 200-megawatt plant. Germany, it goes up to the 120s, a little bit still under discussion. So there is significant size and definitely a multiple of the average size, which we have in our portfolio. So clearly, we are going into scaling also the size of our individual plants and into the -- definitely 2-digit megawatt numbers and sometimes also 3-digit megawatt numbers.On -- probably Christoph and I, we can jointly answer that question on the effects, at least what I can see from the technical development of our plants and also of our operations. I can't see any effect currently out of the second COVID wave in Europe, so nothing we can see there. And I would also not expect even if we have further lockdowns in various countries, I can't see that this really materially would affect us from what I can see from today's perspective. And probably, Christoph, is there anything further to add on cost base?

[Christoph Husmann, CFO & Member of Management Board]

Absolutely, as we referred to, for the second wave and the first lockdown, there was somewhat -- could be seen an irritation all over, I think, in all segments of the market, not only in renewables. So that slowed down some of the development slightly. But what you might have seen that we immediately turned around and acquired parks, which we already knew all the minorities, which we acquired. That was exactly done in that period of time. But now, as Dierk pointed out, in the second lockdown, we do not see any irritation anymore, but business is going on as it was before.

[Dierk Paskert, Chairman of Management Board & CEO]

And probably also to add, even if prices would collapse for a short time, so that we have a similar effect like we have seen in March this year, even then, it wouldn't harm us immediately because we have always a certain time frame where we can lock in PPAs. So even if a plant gets ready to build this -- within the next months and prices would collapse, which we can't foresee from today's perspective, but if that would happen, then we could even wait another half a year or whatever before we lock in the PPA price. So therefore, we can manage also these circumstances if they -- if the market shows that.

[Operator]

Our next question comes from Martin Tessier from Stifel.

[Martin Tessier, Research Associate]

Two questions from me. The first one is on the 2021 revenue guidance. It was previously above EUR 320 million. It's now up to EUR 320 million. So could you give us a little bit of color on that? What is the underlying reason? Is it a price reason? Is it a volume reason?And the second question is that you provide an indication for the additional EBITDA from the 2 solar parks in Spain, so basically EUR 27 million. Many thanks for this indication. Could you give us a separate figure for the 2 plants?

[Christoph Husmann, CFO & Member of Management Board]

Yes. Thank you very much for that question. Yes, indeed, as you might know, we are a conservative company, and so therefore, if there is something happening in the market, we try to reflect it in our figures as soon as possible. So honestly said, as we all have seen is that the Spanish -- the country Spain is hit severely by COVID-19. We had a very strong lockdown during that year, and it had an impact there on the energy prices. With our PPAs, we are locked in with the prices for 75% of the capacity, which we have in the 2 respective parks; and the 2 different PPAs, we're locked in with a very good price. But for the remaining 25%, there has to be a short-term PPAs or whatsoever being signed. And in the current market, it could be that for the next year, maybe there is not the pricing possible, which we might have expected. And therefore, we reduced our expectation very slightly just to be on cautious side. And then the EBITDA was reduced here accordingly.Regarding your question on the split of the revenues, it is that Talayuela, in total, contributes approximately 55% to 60% of these revenues; while La Cabrera, the rest.

[Martin Tessier, Research Associate]

Okay. And is it the same on the EBITDA, the same range?

[Christoph Husmann, CFO & Member of Management Board]

Yes, it is.

[Operator]

At the moment, there are no further questions. [Operator Instructions] There's one question coming from Frank Wellendorf from Vermögens-Management GmbH.

[Frank Wellendorf]

Yes, first of all, Spain seems well planned and operate more or less on time. I would congratulate on that because in such a year, I think that is really -- mention more and really extremely positive thing to mention.My question here is, does this success mean that you will do more projects with Amazon? That's the first question.Second question is, do you disclose the prices per megawatt hour you receive in the PPAs in Spain?And my last question is here on the details of the figures. You mentioned the EUR 4 million EBITDA impact from the stock option program. If I look on the segmental reporting, which you have shown on Page 13 in the presentation, there, I don't see this extraordinary effect. Maybe you could explain that. I would have assumed that this is in the HQ area.

[Dierk Paskert, Chairman of Management Board & CEO]

Yes. So if I can...

[Christoph Husmann, CFO & Member of Management Board]

Do you want to answer the first ones?

[Dierk Paskert, Chairman of Management Board & CEO]

Yes, I would, first 2 ones, and then you go for the last one. So Amazon is a welcome customer. Now in La Cabrera, so first time, definitely on our list of key accounts also in the future, but not in any way exclusive. So therefore, what we will do and are already undergoing is that we put out RFQs for our PPAs so that we place the PPAs in the market, and then we get quotations from various parties, and we select the best ones. So that is the way how we place PPAs in the market. Amazon can, let's say, participate in these RFQs, but they are not in any exclusive situation, neither we nor they. So therefore, that's the answer to that.Then prices disclosed, no. I mean, there is a certain transparency on PPA prices on various pages, web pages, where you can find reference prices, but we do not disclose the individual price because that's, above all, if somebody logs in the volume for its trading activities, you do not want to disclose these prices. So therefore, no disclosure of the prices.

[Christoph Husmann, CFO & Member of Management Board]

Regarding the distribution of the EUR 4 million of provisions for the stock option program, your question is absolutely correct. No, the EUR 4 million are not in headquarters alone because it is unfortunately not the case that just Dierk Paskert and myself enjoy these provisions. It is distributed over a bigger group of approximately 20 members of the management. And so they work, some of them in the headquarters, like the Executive Board, Investor Relations, public relations, legal, IFRS controlling. But the major part of these people work in their respective segments. And since the personnel cost of these people are allocated to the segments as well, it is that the cost of the stock option program allocated to the segment, too. So just only to give you a gut feeling, out of the EUR 4 million, approximately EUR 2.3 million are in the headquarters; while there are approximately EUR 800,000 in asset management, EUR 700,000 in solar and EUR 200,000 in wind.

[Dierk Paskert, Chairman of Management Board & CEO]

And if I may add and give also some information to that to the audience. As you can see, I mean, yes, this retention program or stock option program really cost some money for the group. Yes, that's true. However, we also have a quite stable, let's say, first-tier management level, so where we do not have any levers. So therefore, the management team of Encavis is really incentivized and locked in also through this incentive program, which gives us a really good stability into the market, and I can clearly see that there is one or the other competitor reaching out to the one or the other manager of our group. But we can really retain them, and that's very positive for the further development of the group.

[Operator]

Okay. So the next question comes from Anders Knudsen from SEB.

[Anders Knudsen, Portfolio Manager]

It's Anders Knudsen here from SEB. Just wondering on the debt side, is there any dynamics there that's worth being aware of? And do you have any refinancing opportunities coming up in 2020 -- or '21, sorry? And could you talk -- yes, talk a bit about how cost of debt is developing, please?

[Christoph Husmann, CFO & Member of Management Board]

Yes. Thank you very much for the question. Yes, on the debt side, there are currently in this market a lot of opportunities. We have currently an average interest rate throughout the group of slightly below 3%, and it is reduced year-on-year. And the reason for that is that with new parks being acquired and connected to the grid, the project financing, the nonrecourse financing here in this low-interest environment we are currently in becomes cheaper and cheaper year-on-year.And secondly, we do look for opportunities to refinance existing older parks, as I pointed out, the Italian portfolio. We used here our interest rates by 240 basis points. That gives relief to the group. And yes, it is the clear strategy of the group to utilize all opportunities where we do not have too high early termination payments. So it must be IRR accretive. And because if we have a too high burden for the early termination payment and if that would be a burn to the IRR, then we most likely would not go for it. But yes, we do have specific plans for the remaining years to go for some refinancings.

[Anders Knudsen, Portfolio Manager]

So the Italian example is probably exaggerating what you can do to average cost of debt, but it's certainly -- do you have any expectations for how it could come down in '21?

[Christoph Husmann, CFO & Member of Management Board]

Yes, we do have some expectation here. So we plan to take selective parks, wherever it is possible, in the expectation and average to reduce the interest burden by 50 basis points or so. So the spend -- so the Italian parks which we refinanced were really a fantastic opportunity. And you should not expect us to do exactly the same of 240 basis points every year. That would be an expectation which will be far too high. So if we can reduce the interest rate burden by 50 basis points on each of such refinancings, that would be fantastic.

[Operator]

There are no further questions, so I would like to hand back to you, Mr. Husmann.

[Christoph Husmann, CFO & Member of Management Board]

Yes. Thank you very much again for dialing in. Thank you very much for your interest in our company, and we hope that you will come through these turbulent times and these annoying times. I think there is some hope in the market for some vaccine, and we hope that this will work so that in future we will have the opportunity to meet you physically again whenever it's possible. In the meantime, we do our best to fulfill the expectations you place in us, and that we -- our commitment is, again, then to fulfill our guidance this year on respective from all the issues we discussed today. Thank you very much for your interest. Thank you very much for dialing in, and stay safe and healthy.

[Dierk Paskert, Chairman of Management Board & CEO]

Thank you. Bye.