Acciona, S.A. (ANE) Earnings Call Transcript
February 28, 2023
Earnings Call Speaker Segments
And now we will go on to the questions that we have received relating to Acciona Energia, which will be addressed by Arantza and Rafael and the key management team who's currently present in this room.
So let's start with the question from CaixaBank, Flora Trindade, in which she is asking about the current interest rate environment and competition for new projects. If we can -- within that environment, if we can comment on the IRRs of most recent projects. I reiterate my comments in the -- in my introduction, we have not seen a significant change in the financial structure of our investments in energy because as prices -- costs have risen in the -- in CapEx and financial costs have also increased by about 200 basis points. They have been offset by the increase in energy prices. So our returns going forward, and the curves that we use as a reference, which is a mixture of all the public curves plus our own future projections and our own curves, all those elements put together throw out IRRs that remain in the ranges that we were using before in -- when we announced -- when we came public and made our assumptions in the IPO. So no, the answer is no. It has not changed substantially in any way. Obviously, there's variations in regions, but no, the change is not substantial in that front. I don't know if there's anything you want to add, Rafael or Arantza?
No, maybe on top of the prices, also the RIN certificates are increasing the price. So the addition -- energy plus RIN certifications are compensating and offsetting the increase in the CapEx.
Okay. Second question is about M&A, M&A and the possibility of M&A helping reach the 2025 target. Indeed, that's something that we've always kept in our -- as a possibility. And in fact, we have done a couple of M&A -- smaller M&A projects, a few M&A projects in the past 18 months, one of which has added capacity in the battery space, and we expect to continue to have opportunities of that nature. On -- that was a question from Fernando -- sorry, from CaixaBank, Flora Trindade again and Deutsche Bank, Olly Jeffery. The third question is from Fernando Garcia at Royal Bank of Canada, which goes on regulatory banding will be neutral in the future, will achieve prices evolve with just market prices and hedge prices in Spain? So Arantza or Rafael?
Yes. Thank you. So you're right that the reversion of the banding is one-off accounting item in 2022, but we are doing just the same of the rest of the utilities in the sector in Spain. Most of our regulated assets will not have regulatory income going forward. We're estimating only between EUR 2 million to EUR 3 million in the coming years and will consume any residual net asset value before the end of their useful life. Going forward, in Spain, you're also right that the regulatory drivers are going to be very marginal. It will be only -- it will all be about how we sell the electricity through long-term contracts, financial hedges and also the portion of merchant. And I will suggest that you have a look at the slide in the appendix where you can find some detail on how the mix of volumes may evolve in Spain in the future.
Thank you, Arantza. Then there's another question from Fernando Garcia at RBC. What is the output subject to gas clawback in Spain in 2023?
Yes. Thank you. We are estimating that at P50, that would be around 2 terawatt hours of consolidated Spanish output. And this is taking into account the hedges we put in place before April 2022, and the long-term contracted energy that is below the price of EUR 67 per megawatt hour.
Okay. Question #5 comes from a number of attendees to the conference -- comes from Fernando Garcia at RBC, Oscar Nájar from Santander, Jorge Alonso from SocGen, Paul Chabran from Kempen and Olly Jeffery from Deutsche. The question is, based on your guided capacity installations, would you need approximately 4 gigawatt additions in 2025 to reach your 20 gigawatt guidance for 2025? I guess he means 24 gigawatts in 2024 and '25. Anyway, it says 4 gigawatts in 2025. Do you maintain the guidance, which I guess is the key part of the question? So Rafael.
Yes. We are going to build 1.8 gigawatts in 2023. And for the next couple of years, '24 and '25, we need to do at least 2 gigawatts per year, and we are reaching this target. We have some opportunities in the market. As I mentioned before, we are in today talking with some developers in the U.S. markets with opportunities in PV totalizing 2 gigawatts. And with some of these opportunities, we are comfortable with filling that up to reach the target.
Okay. Question #6 from Arthur Sitbon at Morgan Stanley. Would you mind providing the underlying commodity and government intervention assumptions for both your low point EUR 1.5 billion and your high point EUR 1.6 billion EBITDA guidance 2023? Rafael, go ahead, please.
We are not expecting more interventions in the year more than the clawback extension until the end of the year. In order to guidance -- to the guidance and EUR 1.5 billion, EUR 1.6 billion, we are considering prices around -- for prices for the year, EUR 130 to EUR 150 per megawatt hour.
Yes. So our expectation is that there will be no significant changes in the model regulatory-wise in the next year, in the present -- in the current year. And the impact, as Rafael says, will be mostly on what happens with prices. On question #7, also from Oscar Nájar of Santander, Ranieri from Stifel and also from SocGen, Garrido from JPMorgan, Chabran from Kempen and Tar from Berenberg is, in PPAs, lately, you have signed several PPAs. Could you please give us some feedback about types, prices and length? I think it's worth giving the floor to Javier who's sitting there, Javier Montes, who's the expert on the topic, and he will give some color on details.
Acciona Energia signed in 2022 34 PPAs, representing 2.53 terawatt hours of corporate PPAs and another 300 in some feed-in tariff contracts in Croatia and the Dominican Republic. Of this, more than 95% are 10 to 15 years in length, only some 250 gigawatt hours are on 5-year contracts in Spain, which represent interest from some retail clients. Around 40% of the electricity contracted corresponds to baseload contracts in Spain and are supported by assets from our operational fleet, which were coming out of the regulated environment. The rest are pay as produced and almost all for new assets. Prices have increased around the world with healthy trends, even though the pace might be slowing somewhat in -- as we expect in 2023, but the increase is very substantial compared to 2021. Those increases range from 20% to 60% and are more strongly felt in Europe and the U.S. compared to other jurisdictions.
Thank you, Javier. Then question #8 comes from Jorge Guimarães, JB Capital. When do you expect CapEx cost pressure in the U.S. to abate? I will pass on to [indiscernible], Head of Construction CapEx.
Thanks, Jose Manuel. Yes, we are, in fact, already seeing this reduction in cost in PV in the U.S., mainly due to the module polysilicon and logistic decreases. So we are already taking advantage in our current projects under construction and this CapEx reduction. For the rest of the BOP and future projects, the trend is also going down, not so heavily as it's happening for polysilicon and logistics.
Okay. Question #9 from Jorge Alonso at SocGen, Javier Garrido, JP and Swabey at HSBC, is when do you expect to bring into operation the pipeline of battery capacity and -- that you acquired in the U.S.A. and whether there are any expected additions of batteries in '23 and '24?
Well, in the U.S., we acquired a pipeline with these projects of batteries, something around 1 gigawatts. The projects are secured in land, not yet the interconnection, they are pending on the interconnection, and we expect to finish the development in 2025. We are seeing other opportunities of storage in other markets as in Australia.
Let me add to that, that there is a line of analysis and research and opportunity around the second life batteries of mobility -- of vehicles, and we're working hard on that. It's still probably not for the next few years, but it will have an impact in the storage capacity of the electrical system. Okay. Question #10, what is -- from Ranieri at Stifel and Garrido at JPMorgan, what is your expectation on the pool prices in Spain for 2023? Arantza, if you want to?
Yes. Thank you. So our current expectation is for the Spanish pool prices to be in the range of the EUR 130 to EUR 150 megawatt hour, but this will also very much influence and depend on how the second half of the year evolves in terms of temperature, gas storage and prices, LNG market and so on.
Very good. Question #11. U.S.A. Inflation Reduction Act policy and how does from Charles Swabey at HSBC, whether it's possible -- whether it's positive in the 2024, '25 capacity addition? Or is this more of a 2025 beyond story? Is the potential acquisition of the mature U.S. PV pipeline related to IRA to the Inflation Reduction Act policy. I think this question, Rafael Esteban, Head of Development can deal with it.
Yes, sure. Thank you, Jose Manuel. I mean, the IRA really helps us in terms of more visibility of the market to attend 10, 12 years of visibility. So it really helps to build up and to continue making the pipeline. In the cases of the portfolio that we are looking -- the pipeline of projects that we are looking doesn't relate specifically to it. Of course, it helps. But what we are looking is capacity addition. So from that pipeline that -- some of them could go on '24, '25 and other ones could go beyond that time.
Thank you, Rafael. And this is a question that we can share between Rafael Esteban, Rafael Mateo, because it's quite generic. It's on the Brazilian market. Could you give us a color on the Brazilian market? And what are the key factors for growth? And what's driving PPAs in Brazil? So...
Yes. As I said before, we are developing today in Brazil 1.1 gigawatts in 3 wind farms -- in 3 wind projects with a very high load factor. The idea is today to finish the development to reach the ready-to-build situation and to wait for the best moment to look for an off-taker to sign a PPA. Brazil is very dependent on the hydrology. Today, they are living in a window of very low prices. So we need to wait after reaching the ready-to-build the best moment to sign the PPA. We are permanently talking with potential off-takers in order to close the best moment.
Okay. Well, thank you very much. That does away with the questions on energy, and we will then -- we will now address the questions on infrastructure in general. I will start with question #1, which is, can you please explain the drivers behind the strong construction EBITDA margin and share your expectations for 2023. Let me pass on this question to Luis Castilla.
Thank you, Jose Manuel. There are several facts affecting the good evolution of the EBITDA. The first one probably is the good control of the escalation in raw materials and product selections. It's also another explanation coming from -- in the second half of the year, we enjoyed an increase in the production of certain large contracts, for example, the Line 6 Sao Paulo Metro in Brazil. We are also increasing the number of alliance and collaborative contracts in our division that will continue contributing to the good EBITDA and a strong EBITDA. And finally, we see more stability in the countries we are working on with lot of opportunities. The market is growing. We can select the opportunities and will affect the EBITDA in a positive way.
I would like to stress that last point which I was mentioning in my introduction. The demand is growing for very large projects, very technically complex projects. And that puts us in a privileged position in terms of being able to be more selective with countries, legislation, contracts, clients, type of projects, all of that as a whole, particularly the contractual types that we are -- that are spreading fast, which is the alliance type of contract is improving the nature of the market very consistently and very fast. All that added to the capacity to select countries with a strong rule of law, which is a significant improvement in the potential margin protection process of this industry. Question #2, can you please give some granularity on the CapEx ex energy, real estate, mobility, et cetera? Why don't you take that one, Jose Angel, please?
Yes. I think that in my intervention, we have gone through almost all of the items, but I will repeat. Nordex is -- the capital increase in Nordex, we invested EUR 243 million. Our main capital contribution to construction contract is to Line 6, EUR 101 million. Also, we have invested heavily in heavy machinery for construction related to the reconstruction contracts that we are undergoing right now is another EUR 128 million. We have invested in real assets, another over EUR 100 million. Silence, we have invested an additional EUR 14 million. And then the rest is in different items like urban services contracts, IT and so on, and that adds up to the invested amounts that we have done externally.
Thank you, Jose Angel. Now question #3 is -- comes on given continued losses at Nordex and the need for capital, almost EUR 0.7 billion since 2019. What is your strategy for this company. This comes from Fernando Garcia at RBC and [indiscernible]. Now the past losses of Nordex are related to very specific situations. One, which, by the way, are, I would say, in the case of Nordex, one of the least acute problems in the industry. So put in context, Nordex is in better shape -- in better relative shape than most of the industry. So we do not believe that circumstances will repeat in future years, very much in the contrary. We have very positive expectations for Nordex in the future, not only in the day-to-day turbine business in which it's quality product, it's excelling in most markets where we are present but also in new lines of business such as utility-scale large hydrogen projects and even floating offshore, which it's being under analysis. But yes, we do have a great deal of trust in the future of Nordex. And it is an essential part of our development capacity. We do have a good service. And for the time being, our strategy remains to be committed to this company. Any additions on that, comment? Very good. So the next question, it's net debt ex Acciona Energia in Acciona, from Fernando Garcia. Net debt, ex Acciona Energia increased by almost 0.9. How do you see capital structure at Acciona? Do you plan any remedy? I don't see that we need any remedy. Quite frankly, we have a very low leverage as a group and taking the pieces of the group aside and analyzing them independently is probably a good theoretical effort, nonetheless, it's not reality. The reality is that we have a consolidated debt system, group accounting, and that's what count. And that's what doesn't, at this time, needs any remedy. Jose Angel, if you want to develop on the details?
No, I just insist that the way we see our dialogue with their investors on a consolidated basis, although we are fully separated from energy, in terms of credit profile, we have improved actually this year from what we did last year. And an increase in debt is actually in investments that actually will produce further revenues and improve the credit profile of the group in the coming years.
Question #5 comes from Oscar Nájar at Santander. Concession strategy, do you see it as a key of the division going forward as a #2 behind construction? Let me add -- let me answer, but then I'll pass on for more details to Luis Castilla will give you. But indeed, I wouldn't qualify it as -- to put a number on to it, quantify it #2. It is certainly a key element of our construction strategy or our infrastructure strategy. Our construction capacities give us a very strong pipeline of new concessions -- of new potential concessions. And the greenfield concession development and the turnaround into brownfield and putting into the market eventually is that -- is a strategy to follow. And definitely, it will be a very important, it has been in the past. We had a couple of M&A transactions which were very profitable a couple of years ago, 2.5 years ago, I think, and that will continue in the future. Of course, the maturity process of these transactions takes a few years, but the accumulation of assets, concessional assets that is happening and will continue to happen will prove to be a very important source of returns and capital enhancement in the company. Luis, anything to add there?
No, just to confirm that we are seeing a very clear growth on the global infrastructure world, and we wait something around EUR 2.5 trillion in 5 years investment in our markets. 2023 will be an active year for the construction business in Acciona. We are working on various projects with a total CapEx of more than EUR 11 billion. The pipeline that we are analyzing for the short term will be -- is worth more than EUR 80 billion. So I'm sure that we will increase the size of our business.
Very well. Well, that was the last question. So thank you very much for attending this 2022 conference, and we'll see you in 6 months for the half year conference. Thank you very much, and thank you very much, all.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete Acciona, S.A. transcript - plus 252,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to Acciona, S.A. earnings transcripts and 252,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.