EDP, S.A. (EDP) Earnings Call Transcript

Good morning, ladies and gentlemen. Thanks for attending EDP's 9 Months 2022 Results Conference Call. We have today with us our CEO, Miguel Stilwell de Andrade; and our CFO, Rui Teixeira, which will present to you the main highlights of the 9 months 2022 financial performance and an update on strategy execution. [Operator Instructions] This call should last close to 60 minutes. I'll give now the floor to our CEO, Miguel Stilwell de Andrade.

Thank you, Miguel. Good morning, everyone. So thank you for attending this results conference call. We move into the presentation to talk about the first 9 months. I think the first thing to highlight is that we had a strong EBITDA performance in this period. So we had an increase of around 21% to EUR 3 billion. This is mainly as a result of the wind and solar capacity growth, good resource, so higher wind and solar, and higher selling prices. On the electricity networks, given the inflation impact on the tariffs update and the ForEx in Brazil, there was also a good increase there in EBITDA. We also had an increased thermal activity. And finally, but on a negative note, we had the hydro production continuing very low in the third quarter of 2022 with the hydro shortfall increasing to around 3.3 terawatt hours versus the expected for this period. At the net profit level, we had a 1% increase year-on-year to EUR 518 million. So we saw an increase in financial costs, mostly due to Brazil, just given the interest rate hikes and FX, but this was more than compensated by the inflation impact on EBITDA from networks that I just mentioned. Net profit was fully supported by our international operations, with net profit in Portugal staying at negative EUR 181 million in the 9 months, strongly impacted by the hydro shortfall that I mentioned. Also in the first 9 months of the year, they were marked by good investment execution, so ramping up with gross investments amounting to approximately EUR 5.5 billion, out of which 96%, so practically all of it, focused on renewables and electricity networks. At September, we have a record 4.3 gigawatts of capacity under construction in the 15 markets, and we're also investing in networks, as you know, namely with transmission growth in Brazil. If we move on to the second slide, just to give you a note about the situation in Portugal, in the 2023 electricity regulated tariffs proposal. As you know, this typically comes out mid-October and then the final approval is in mid-December. In this case, the regulator, ERSE, presented on the 17th of October an increase of just 2.8% for 2023, which given the current market context and energy prices throughout Europe I think shows that this is an extremely resilient system. So it's a moderate increase in tariffs, any reduction in system debt. So as you know, the Portuguese system -- so why is this happening? The Portuguese system has a high penetration of renewables. These are remunerated mostly through a feed-in tariff, a fixed feed-in tariff, which is updated to inflation, and that's around EUR 90 per megawatt hour. So having this stable feed-in tariffs, basically this used to be additional cost versus the wholesale price, it's now providing a surplus or discounts to the wholesale price when the wholesale price is expected to be around EUR 260 per megawatt hour for 2023. So the system is, in effect, buying at EUR 90 per megawatt hour and then selling at EUR 260. And so it generates tariff surplus to the Portuguese electricity consumers. This stability in the regulated prices for consumers is not being achieved at the expense of the increase in system debt, which, as you can see, has decreased this year already from EUR 2.1 billion in 2020 to EUR 1.4 billion the end of September of 2022. So overall, I think this just shows it's the value of a system with a high penetration of renewables and a stable regulatory framework. We've actually talked about this as a case study for many -- with actually many policymakers South Europe because it shows really the value of locking in these long-term contracts and the resilience that it gives to the system. If we move on to the next slide, we can talk about networks and networks in Portugal, in particular. So the proposal presented by us also discloses an update to the rate of return for the Portuguese electricity networks. The regulated revenues should increase around 2% to EUR 1.05 billion based on a preliminary rate of return of around 5%. So it's an increase of 33 basis points versus 2022. However, what I'd like to highlight is that this rate of return is indexed to the average 10-year Portuguese bond yields for the last 12 months until September of 2023 next year, so the preliminary rates of return 5%, 5.03%, considers an average Portuguese bond yield of 1.4%. Well, taking into account that the average bond yield for the first 20 days of October was at around 3.3%, this would result in a rate of return of 5.6%, as you can see on the graph on the right. So clearly, room for upside in 2023 here. Finally, it's also worth mentioning that the regulatory asset base and the TOTEX are inflation updated based on the GDP deflator. For 2023, it was considered the average for the last 12 months ending in June of 2022 of around 1.5%. For the 2024 tariffs, there will be a clear upside since the IMF projects a 7.8% GDP deflator for 2022. Let's talk a little bit about Brazil. So here, I'd like to talk about the positive macro trend we're seeing in Brazil. I had the opportunity to be there with the team a couple of weeks ago and clearly seems to be countercyclical to what we're observing in Europe and the U.S. The electricity wholesale price, the PLD, has declined to around BRL 60 per megawatt hour, which will have a positive impact on final consumer tariffs and it reduces the regulatory pressure. As you know, in Brazil, it's been raining a lot, and that's obviously had an impact on the decrease in the wholesale price. In relation to inflation, the Central Bank of Brazil has intervened in a very quick manner. So that's -- they ramped up their interest rates. That's led to a slight slowdown. We've actually seen deflation in the third quarter of 2022. So inflation seems to be under control now in Brazil. If this decline in inflation is persistent, then that would allow the Central Bank to start to cut interest rates by the second half of 2023. So definitely countercyclical to what we're seeing in some of, for example, the U.S. and in Europe. On our presence in Brazil, we've seen a strong business execution with a total investment of EUR 0.9 billion in the first 9 months focused on electricity networks and renewables and this represents a 75% increase year-on-year. We're reducing our exposure to conventional generation as we committed to in the strategic plan, namely through the hydro disposal completed in August. And we also releveraged, we recapitalized the thermal plant, Pecem, which we announced in September, and that creates options to reach the goal of removing coal activity from the EDP Group revenue mix by the end of 2025. Overall, in euro terms, EBITDA in Brazil increased 48% year-on-year and net profit increased 16% year-on-year. Going on to Slide 8, I'm talking about renewable growth in both Europe and in the U.S. So we've covered already quite extensively these 2 topics in the EDPR results call just on Wednesday, but I would just like to reinforce the unique long-term growth opportunity that we have because of the approval of the investment of the Inflation Reduction Act in the U.S. So that gives us 10 years of visibility on the renewable tax credits framework and allows us to really plan ahead and develop a good solid pipeline and set of projects. Regarding the RepowerEU, the measures to foster renewable growth, we've already seen developments in some member states. We talked about Germany, Portugal, Italy as examples, where we are seeing simplification of some of the bottlenecks that exist to rolling out renewables. Also in Europe, just to mention that the context of high prices is pushing European governments to take different price stabilization mechanism and measures, and obviously, the idea is to provide stability of prices to consumers. In some cases, this is done through higher taxation of companies. Other cases, it's through caps. I think the important point in which we like to stress and value is that there should be an attempt, and that's what the European Commission is doing to try and create transversal regulations, so to avoid fragmentation and to avoid creating more regulatory instability and uncertainty in each of the European countries. Now, obviously, there is an increased political intervention risk. I think we're all seeing that. In the case of Romania and Poland, there's been some recent legislative drafts on price caps and windfall taxes which have raised some concerns. We hope to see some more balanced final outcomes towards the end of 2022. In relation to Romania, I would like to think that there would be positive developments there. Poland, I think, is still out in terms of uncertainty. So let's see what happens over the next couple of weeks. Let's go on to Slide 9 and talking about capacity additions. So over the last 20 months since we presented the business plan, we've already increased the secured capacity for the '25 period to around 11 gigawatts, 10.8 gigawatts, which represents 55% of the target. We have 8.1 gigawatts already installed or under construction, which is around 40% of the 20-gigawatt capacity additions target. However, I think we've recognized that there are short-term challenges that mean that some projects have been transferred, well, quite a few projects have been transferred from 2022 to 2023. On one hand, we have supply chain delays and the regulatory uncertainty in the U.S., which has created challenges for the import of solar panels, in particular, and that's moved projects to 2023. So now we're expecting overall globally additions slightly above 2 gigawatts in 2022. On the other hand, we expect that more than 4 gigawatts will be added in 2023 of which 3 gigawatts are already under construction. That's more than 4 gigawatts. We can -- will then go and updating over the next years to exactly what that number could be. We also see that the medium, long-term renewables growth opportunity for '24 and '25 and beyond continues to be supported both by the RepowerEU and by the inflation Reduction Act initiatives. So definitely good for the medium and long-term growth perspectives. If we move on to Slide 10, so talking about asset rotation strategy, definitely continues to deliver value. We're talking about EUR 3.4 billion of asset rotation proceeds for the '21 to '23 period, so 40% of our EUR 8 billion target. We sold 2 gigawatts in this period, '21, '22, so far. So below the 1.4 gigawatts per year average that we assumed in the business plan for '21 to '23, but we've already achieved with that EUR 1 billion of total gains in this period, so an average of around EUR 500,000 per -- or EUR 0.5 billion per year, so exceeding the target of the EUR 300 million that we had per year. So good execution there. Overall, we expect a good performance in terms of value creation. We've shown this time and time and time again, gains per megawatt at around EUR 0.5 million per megawatt, which is more than 2x the guidance provided in the business plan. So we're selling fewer megawatts but overachieving in terms of gains and in proceeds, which is obviously a good place to be. And as you know, some of those portfolios have been sold very recently, both in Italy and in Brazil, showing that clear value creation. Okay. Let's talk about Iberia and 2023, and how we see since the electricity prices evolving and that hedging strategy. The first thing I'd like to highlight is that the generation and the energy management businesses were penalized in this first 9 months of the year by the hydro shortfall. So as you know, we've been very public. We've ended up with a short position in '22 at a time when wholesale electricity prices were at all-time highs. The hydro shortfall, as I mentioned at the beginning of the call was around 3.3 terawatt hours below the long-term average in this period, and that resulted in an over hedging, which caused higher sourcing costs on the energy management. As you know, the gas markets have also been quite volatile, and gas prices were high in the third quarter of 2022. So this implied an increase in the gas sourcing costs since we had to buy gas in the spot market, given some slightly lower volumes from long-term contracts. On the positive side, and I think that's what justifies that we end up being in line with last year's net profit and above in terms of EBITDA, so to mitigate the impact of the hydro shortfall in Iberia and given the energy crisis in Europe, thermal generation has increased around 5.6 terawatt hours year-on-year. So for this period or for the next year, 2023 to '25, we'll optimize the EDP hedging strategy through a structural reduction of maximum hedged volumes and so to reduce the over hedging risks that could happen. As you can see on the graph, electricity forward prices remain high for this period, '23, '24 and '25, and as such, we can expect an average selling price upside in the following years as the hedges roll over and hedging strategy is optimized. Finally, just before I turn it over to Rui. On ESG, we continue stepping up on the green leadership position. We've had fantastic performance across the different metrics and on the ESG rankings. So in August, we issued our first sustainability-linked loan in which the cost is impacted by 2 ESG KPIs: the reduction in greenhouse gas emissions, and the percentage of renewables installed capacity. Overall, the green bonds already represents 46% of EDP's outstanding bonds, with EUR 2.3 billion of green bonds issued just in '22. In terms of recognition by top-tier institutions, so we maintained our position in the top 10 weight of the S&P Global Clean Energy Index. I think that's important given the tighter requirements from that index which ended up impacting other integrated utilities, and we've maintained in the top 5% in the FTSE4Good Index with an improvement in the score in September of 2022. So I think these are some of the key issues to highlight. I mean, we've got other things on the slide but for the sake of time, I'll stop there and turn it over to Rui. I'll be back at the end. Thanks.

Thank you, Miguel, and good morning to you all. So going into EDP's financial performance for the 9 months, I would like you to move to Slide 14, please. So recurring EBITDA increased 21% year-on-year to about EUR 3 billion in the 9 months 2022. The recurring EBITDA for the wind and solar platform was up 62%,supported by higher average installed capacity, of course, the strong recovery of wind resource that were in line with long-term average and the improved average selling price. In electricity networks, recurring EBITDA increased by 20% year-on-year, mainly driven by the growth in Brazilian networks, and due to a positive annual tariff update and significant depreciation of the Brazilian real. Just finally, on an integrated basis, EBITDA from client solutions, energy management and hydro decreased 32%. This is, of course, penalized by the 3.3 terawatt hour hydro production shortfall that Miguel already referred to combined with high electricity Iberian pool prices that reached an average of EUR 186 per megawatt hour in the 9 months this year. This was partly mitigated by a higher thermal generation in Iberia. I was going to explain the wind and EBITDA -- sorry, wind and solar EBITDA performance, a 62% increase year-on-year. As I was mentioning, this is, of course, driven by the 10% growth in installed capacity in renewables. The fact that we have achieved and recovered the -- on the resources side, on the wind resources aligned with long-term average, and of course, the contribution from higher selling prices of EUR 66 per megawatt hour that's a 29% higher versus last year. And also the fact that we closed 3 deals, asset rotation deals in 2022 with an impact of EUR 264 million in gains. Moving to Slide 16 on the networks. The 9 months this year continue to demonstrate the very strong performance of our networks platform. Recurring EBITDA increased by 20% year-on-year to EUR 1.1 billion. In Brazil, the EBITDA rose almost EUR 200 million to EUR 465 million. And of course, this is on the back of the inflation update on the tariffs, the electricity demand recovery also with a growing number of customers, lower losses from the sale of electricity volumes surplus in the wholesale market, and the ahead of schedule integration of EDP Goias in our transmission activity in Brazil, and effectively favorable FX impacts, and of course, driven by depreciation of the Brazilian real. In Iberia, EBITDA decreased 2%. So while in Spain, the positive impact from Lesividad recovery in the 9 months last year was mitigated by the efficiency gains in Spain from the integration of Viesgo. In Portugal, OpEx increased, given the recovery in the economic activity post COVID. If we now move to Slide 19. From an integrated perspective, client solutions and energy management and hydro is where we see the impact from the drought in Iberia and the recurring EBITDA decreasing to EUR 207 million year-on-year. In Iberia, the results in these 9 months were impacted by the extreme droughts and hydro resources in Portugal being 66% below average and in a period of very high energy prices. This was partly mitigated by an increase on our thermal generation that was 5.6 terawatt hours higher versus last year. In Brazil, EBITDA increased 14% in euro terms on a flattish performance in the local currency, but of course, impacted positively by the Brazilian real appreciation versus the euro. Now on Slide 18, just deep diving a little bit on the generation and supply business in Iberia. The third quarter EBITDA from generation and supply business was EUR 69 million. This is slightly higher than the average obtained from the previous 2 quarters, and this was driven by, on one hand, hydro volumes, about 0.5 terawatt hours below the expected volumes. But on the other hand, thermal volumes with the 2.4 terawatt hours increase year-on-year with good spreads, both for coal and gas, and some higher thermal costs, namely due to high TTF gas prices since we had to buy some quantities in the spot market. On Slide 19, as we move now into the financial costs. Excluding FX differences and derivatives, adjusted net financial interest increased EUR 188 million. That's a 55% increase versus last year, resulting in a 100 basis point increase in the average cost of debt. But this is explained by Brazil, which is more than doubling its financial costs to EUR 242 million given the rising cost of the Brazilian real denominated debt, which is indexed to inflation and represents 14% of our total debt financing. This increase, impacted by inflation and FX, of course, is more than compensated at EBITDA level, as I mentioned before, after the tariff readjustments. So note that's our average cost of debt in Brazilian reals increased from 9.7% to 13%, so 9.7% to 13% in the 9 months this year. Financial costs excluding Brazil increased only 20 basis points from 2.4% to 2.6%. So overall, interest-related costs increase was mainly driven by inflation and FX impacts on the Brazilian real denominated debt. Now moving to Slide 20, an update on our financial debt. In 2021 and 2022, EDP issued around EUR 4 billion through green senior bonds and hybrids, closing significant volumes of long-term financing under very attractive market conditions, which is especially important given today's market environment. So in 2021, we issued a EUR 2 billion green hybrid bond at an average of 1.7%. In 2022, we issued around EUR 2.3 billion of green bonds of which EUR 1.8 billion and around USD 0.5 billion, average cost, 3.3%. So as of the 9 months, we closed EUR 2 billion of pre-hedge interest rates for 2023 and 2024 refinancing needs. So thus, we are reducing the interest rate risk for this upcoming refinancing over these 2 years. The pre-hedge interest rate was closed at an average of 1.8% for euro and 2.6% for U.S. dollar. And regarding the debt structure, roughly 70% of the debt is contracted at fixed rates, of which 38% represented by green bonds and more than 50% of maturities scheduled post 2025. So I think this places in a very strong liquidity position, as you can see on Slide 21. As of September, we had EUR 9.3 billion of available liquidity, of which EUR 3.5 billion of cash and equivalents and EUR 5.8 billion of available credit lines. Additionally, as mentioned in the previous slide, out of the EUR 2.3 billion issued in 2022, EUR 1 billion was issued in October 2022, EUR 0.5 billion and USD 0.5 billion, which puts us with EUR 10.3 billion of available liquidity. So through the graph, you can see that on the right-hand side of the slide, there is this financial position that gives us confidence that our short- and medium-term needs are covered beyond 2024. And finally, just a brief note on margin calls. We have been applying a conservative policy, thus reducing the exposure to energy price exchanges. And therefore, as of September 2022, EDP has EUR 0.5 billion in cash calls from energy market derivatives. On the net debt, on Slide 22, increases to EUR 15.3 billion. This is impacted by a recurring organic cash flow of EUR 1.4 billion on the back of, of course, a higher EBITDA, but impacted by EUR 1.1 billion of temporary working capital due to higher commodity prices and higher financial costs, accelerating, of course, the next expansion investments that amounted to EUR 2.9 billion, following the growth in renewables and networks, the acquisition of Sunseap, EDP Goias in Brazil and investment in offshore through Ocean Winds. This, of course, also includes the positive impact of EUR 1.5 billion of proceeds from asset provision. Annual dividend paid in April. Finally, the effects of exchange rate, which has a negative impact of EUR 0.6 billion on the net debt due to appreciation of Brazilian real and U.S. dollar, which is impacting the end of the period. Just a final note on net profit, that amounts to EUR 512 million, just above the net profit for 9 months 2021. This is mainly impacted by increased financial costs in Brazil, mostly driven by the FX and higher cost of debt indexed to inflation and a higher noncontrolling interest on the stronger performance, mostly from EDP Renewables. So again, thank you very much for your time today. I would now hand back to Miguel for closing remarks.

Thank you, Rui. So just before going to Q&A, I'd like to give you an update on our expectations for the future. For 2022, and I know this is for sure one of the questions you'd be asking me so I'll answer it upfront, we still expect recurring net profit to be above 2021, and we expect that, that would be driven by the continued strong performance of renewables, volume growth, good average selling prices, asset rotation, execution. We expect a good performance also on networks to continue, namely with inflation updates and efficiency and also higher thermal generation. Now obviously, we are living volatile times. A lot of uncertainty. I think we all know that on this call. So there is a certain amount of uncertainty given hydro volumes for the remaining part of the year. I think the good news, look outside, it's cloudy, and October has been, I'd say, above average. But still, who knows what November and December would be, but at least we'll take the rain when it comes. So we're assuming rain levels in line to the average for the fourth quarter, both lower hydro generation versus the average because we need to refill the current low reservoir levels, okay? So one thing is rain. The other thing is generation and also storage. With respect to business plan execution, so we're on track to deliver the '25 target for renewable capacity additions. We've talked about this many times, but 55% of the 20 gigawatt goal already committed. On the asset rotation, we've been doing particularly well, I think, front loading a good part of that with good execution in 2022. We've already secured about EUR 3.2 billion, which represents more than 40% of the EUR 8 billion target in the '21, '25 period. Finally, just to say that we are expecting to come back to the market in March of 2023 to host the Capital Markets Day in which we would present updated strategic and financial targets for the period reaching out to 2027, including -- the world has changed dramatically since last year on energy prices, regulatory frameworks, interest rates, FX among others, so the idea is to be able to update you and to provide more visibility on how we see the next couple of years going forward. So with that, thanks for attending this quarter's results, and we can now move to Q&A. Thank you.

Thank you, Miguel. So we go now to Q&A. We can start with the first question from Alberto Gandolfi from Goldman Sachs.

I think 2 of the 3 are [ in relation ] of what we discussed a couple of days ago. So using Miguel's words, the world has definitely changed an awful lot in the past 12 months. So considering that investments are clearly under acceleration, we can tell from the accounts and with your words, the net debt-to-EBITDA on EDPR is actually going to continue to increase. And considering tighter credit conditions, higher cost of debt, how are you thinking about funding the CapEx on an ongoing basis? I know you're going to address that in March, but just like every day you need to take an investment decision, I was wondering, isn't it cheaper to use some equity right now rather than issuing 6.5% green bonds in the U.S.? And if so, would you accept to be diluted? Or would you subscribe to -- so are you keen, basically, to keep the same stake you have right now in EDPR in the next 12 to 24 months? The second question is on farm-downs. We have seen lots of capital chasing these assets. You clearly outperformed. If we move into a world where cost of capital is 5% to 6%, even if you were to achieve 200, 300 basis points over WACC, do you worry that the exit multiples on farm-downs may deteriorate? And if so, what would be the solution? To invest a bit less? Or you would have to actually rethink a little bit capital allocation in that case? And last question, just on 2023, because so much has gone on between renewables, spreads, supply, energy management, if we assume -- can you maybe tell us -- give us some indication of unregulated activities? So a bit of a guidance on what should be a level for client solutions and energy management, and if you can add more to that, the achieved price in our regulated hydro you expect from next year.

Okay. Thank you, Alberto, for the questions. So in relation to the first one, I'd probably, just to reiterate what we said, I mean, we -- when we went out to the market last year, we had a fully funded business plan, and we continue to believe that that's the case. We've been doing well on the asset rotation, and we continue to execute on the portfolios, as I mentioned, both the Brazilian and the Italian, our very recent one, so July and late September. So talking about portfolios that are already incorporated, not only an increase in interest rates but also the higher energy prices, and that's reflected in the good value creation that was achieved. So asset rotation is going well. We've already raised equity last year. We see higher energy prices going forward, which I think will flow through to the EBITDA and cash flow, and so I think that will also provide a good tailwind in terms of our ongoing results. So I mean we think that we are good on the balance sheet and we're -- obviously, there is short-term volatility on balance sheet around net debt, and we can get more into that. It has to do with FX. It has to do with working capital, margin calls. A lot of these things will work themselves out. And so we need to look is at the medium-term ratios, and we need to be comfortable that they're there. So I'll leave it at that. Obviously, we will be back in March, and we'll have run a more in-depth analysis on updating all of the variables by that time. On the farm-downs, so obviously, cost of capital goes up, but so do the PPA prices and, let's say, the returns that people are asking for. So I think I gave you a couple of data points which are, for me, are very -- they're interesting because they show in a very clear manner that there is a repricing of PPAs. There's a repricing of the returns to follow the increased cost of capital. So in the latest PPAs that I've been looking at and that we've closed or are closing, we're talking about still keeping the 1.4x IRR over WACC and we're talking about sort of 9% cash yields in the U.S. So we're talking about pretty rich projects, which obviously reflect higher CapEx. They reflect the higher cost of capital. But in any case, I think they do give us some comfort that we are continuing to create value with these projects and that we'll be able to do that sustainably going forward. I mean we're in this to make money. So we are certainly repricing. I think the sector is repricing as a whole. And so I think that's -- and there is still demand for these assets as we've also seen. So I think -- I mean, obviously, we'll continue to monitor the situation. If things change, we'll obviously update you. But as I said, the latest data points that we have are the ones that I mentioned. In terms of 2023, Rui, I don't know if you want to provide some guidance on that.

Thank you, Miguel. Alberto, I mean, without providing specific guidance, what we would expect effectively [ is an ] improvement. I mean everything else in equal, we should expect an average hydro year. We are seeing, of course, higher energy prices. And as we think about the hedging position, so we are, at this point, around 75% hedged, prices above BRL 60, and we would be exposed to some of the upside on the power markets. So I would say that, again, even if you levelized for a normal hydro year, I would expect a positive evolution on this client solutions, energy management and hydro.

We can go to the next question from Arthur Sitbon from Morgan Stanley.

The first one is on FFO to debt. I was wondering where you expect to end the year on that ratio. And how that compared to the, I think, the 19% threshold level that S&P looks at for your current credit rating? And if you end the year below that level, I was wondering how fast would you expect to go back above the threshold? My second question is on the debt maturity. My understanding is that you have around EUR 6 billion of maturity in 2023, 2024. I understand that you pre-hedged EUR 2 billion of them, so if I understand well, that leaves EUR 4 billion to refinance. I was wondering how much room for maneuver do you have to left to avoid expensive refinancing here on this EUR 4 billion? And if you can repay part of that without issuing your debt thanks to the cash you have on your balance sheet or if it's not possible, I don't know, maybe because of the risk of further margin costs, for example.

Okay. Thank you for the question. On the ratios, I think that -- I mean on the net debt to EBITDA, I think that we should be ending slightly below where we are today. FFO to net debt, I would expect to see a small improvement. What I'm expecting is that net debt by year-end to be around the EUR 15 billion. Of course, EBITDA also recovering in funds from operations also recovering a little bit. I mean, by the end of the year, of course, we are expecting the execution of the CapEx, the asset rotation proceeds. I mentioned organic cash flow also improving. I mean considering a stable FX, just from a math perspective, this would impact positively the ratio. Yes, so I would say round about EUR 15 billion net debt and improvements from the current ratios, both on the net debt to EBITDA and FFO to net debt. On the refinancing, the way we have been approaching this is, as you know, quite conservative. So throughout the year, we issue different forms of debt to be prepared for the refinancing needs on the '23, '24. And also with this pre-hedging, we effectively locked in the cost of funding for this EUR 2 billion of needs of refinancing. Until the end of the year, we are not expecting to go back to the market. And as we move into 2023, we'll see what is the best moment to go back and then refinancing. I would highlight still that, yes, I mean, whatever refinancing we may do in 2023 outside of the pre-hedging, there will be an impact from the mid-swap. But from a spread, we actually even saw the last euro bond that we issued, a small compression on the spread. So I think that the market is providing a strong message also to what concerns the quality of the portfolio and the strategy going forward.

Okay. So we can go to the next question from Jorge Guimarães from JB Capital.

I have 2 questions, if I might. The first one is still related to the cost of debt, and related to the cost of the bonds issued in dollars, 6.3% to what would be -- what was the rationale of issuing at a high cost? The second one is related to the evolution of working capital in Q4. I believe probably Rui also answered it partially to it now, but what is your expected evolution of working capital in Q4, considering that ETF prices are going down? And the final one, it's related to your full year guidance. Looking at the current guidance for EBITDA, financial cost and net income, it seems that you are guiding for the close to consensus of EUR 0.86 billion, but financial cost guidance -- or the financial cost consensus, sorry, it's EUR 0.68 billion and we are at EUR 0.58 billion currently at 9 months. So should we assume that EBITDA should be above EUR 4.1 billion, that financial costs will be above EUR 0.68 billion, and then we reached the EUR 0.84 billion, EUR 0.85 billion that your guidance is?