EDP Renovaveis SA (EDRVF) Q2 2024 Earnings Call Highlights: Strong EBITDA Growth and Strategic ...
Generation Increase: 5% year-on-year increase to 19 terawatt hours.
Capacity Additions: Increased by 2.9 gigawatts year-on-year.
Average Selling Price: Stable at EUR61 per megawatt hour.
Core OpEx Reduction: Declined by 8% year-on-year.
Asset Rotation: 800 megawatts rotated with an average EV of EUR1.6 million per megawatt.
Electricity Sales: Increased by 5% to EUR1.1 billion.
EBITDA: Increased by 26% to EUR960 million.
Net Debt: EUR7.5 billion as of June 2024.
Net Profit: EUR210 million for the first half of 2024.
Expansion CapEx: Increased by 18% year-on-year to EUR2.3 billion.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
EDP Renovaveis SA (EDRVF) reported a 5% increase in electricity generation year-on-year, reaching 19 terawatt hours, driven by new capacity additions and improved wind conditions.
The company achieved a 26% year-on-year increase in EBITDA, reaching EUR960 million, supported by new capacity additions and asset rotation gains.
EDP Renovaveis SA (EDRVF) successfully rotated 800 megawatts of assets, generating EUR1.2 billion in proceeds and EUR171 million in gains, with an average return on invested capital of 15%.
The company signed 1.3 gigawatts of PPAs in the first half of 2024, primarily with major global tech companies, ensuring long-term revenue visibility.
EDP Renovaveis SA (EDRVF) reported an 8% year-on-year reduction in core operating expenses per average megawatt, attributed to improved efficiency and intra-group synergies.
Negative Points
The average selling price is expected to decline to EUR55 per megawatt hour for 2024, down from EUR61 in the first half, due to lower spot electricity prices in Europe.
Generation volumes for 2024 are anticipated to be at the lower end of guidance due to lower-than-expected wind resources in Brazil.
The company faces challenges in Colombia, with ongoing renegotiations and no significant progress in discussions with the regulator and government regarding economic conditions.
Net debt increased by EUR1.7 billion to EUR7.5 billion, driven by expansion CapEx and financial investments, with limited refinancing risk in the short to medium term.
There is uncertainty regarding the timing of asset rotation transactions, which could impact the realization of capital gains within the current fiscal year.
Q & A Highlights
Q: The new guidance for average selling price (ASP) is EUR55 per megawatt hour, but it seems conservative compared to the EUR61 delivered in the first half. Was there any exceptional factor boosting the second quarter results? A: The strong second quarter results were partly due to good results from REC sales in the US and Poland. We are not expecting similar positive impacts in the second half, and some older PPAs with lower prices will come into effect, leading to the EUR55 guidance.
Q: What are the most interesting markets for storage, and how are these projects being funded? A: The US, particularly with the Inflation Reduction Act, offers robust economics for storage, both stand-alone and co-located. The UK is also interesting due to its sophisticated regulation. In the US, storage is often co-located with solar projects, and we secure long-term contracts like tolling agreements.
Q: Can you provide an update on the Colombia project and the potential economic compensation from the government? A: The environmental license is critical for the go/no-go decision. The government has been supportive, but we are exploring partnerships to de-risk the project. We will make a decision by year-end based on the best available information.
Q: How are the battery projects being remunerated, and is there a mix of capacity payments or trading opportunities? A: Battery projects can be remunerated through tolling agreements, where a fixed fee is paid for the use of the battery, or through revenue stacking in markets like the UK, which includes capacity payments and additional services like frequency modulation.
Q: What is the outlook for asset rotation, and are there any specific markets where you see opportunities? A: We have several transactions in progress, mainly in Europe and the US. In Europe, Poland might see some activity. We will provide more information once these deals are finalized.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.