© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us for our 2021 First Quarter Results Presentation. Secondly, we wish you a healthy year 2021 for all of you and your families.Now onto the reason why we are all here, our Q1 results presentation, which will follow our normal format. Firstly, we will begin with an overview of the results and the main developments during the period given by the senior executive team that we usually have with us: Our Chairman and CEO, Mr. Ignacio Galan; Mr. Francisco Martinez Corcoles, Business CEO; and finally, the CFO, Mr. Pepe Sainz. Following this, we will move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web. So please ask your question only through our web page, www.iberdrola.com.Additionally, we expect that today's event will not last more than 60 minutes, hoping that this presentation will be useful and informative for all of you. Now without further ado, I would like to give the floor to our Chairman and CEO, Mr. Ignacio Galan. Thank you very much again. Please, Mr. Galan.
Good morning, everyone, and thank you very much for your participation in today's conference call. The results we are presenting today demonstrate our commitment to promote incremental recovery and sustainable growth in all our geographies.In the first month of 2021, Iberdrola is performing better than expected despite COVID-19 and its negative effect on economic activity. The key reasons for this positive evolution are higher revenues, mostly due to increased demand, more production, new tariff frameworks, higher number of contracts and better prices. And also for our ongoing effort of operating efficiency with net operating expenses flat despite increase in activity.We have also accelerated our investment with all our major projects, most of them in offshore wind, achieving relevant milestone. This is allowing us to contribute to economy recovery, with close to 6,000 new internal recruits globally in the last 4 months and several [ definite ] thousands of new jobs created along the supply chain.The integration of PNM Resources of New Mexico and Neoenergia Distribuição Brasilia are progressing better than anticipated as well. We are continuing improving our financial profile, driven by increasing cash flow. And in the current volatile markets, we maintain FX impact better than expected due to our geographical diversification and our [indiscernible] policy.All this has allowed us to offset unexpected negative factors that happened in the first 3 months like the COVID impact, as I mentioned, which unfortunately is still affecting some of our markets. And also the impact of major weather event in Spain with Filomena Storm in Mexico. As a result of these factors in the first quarter of the year, adjusted net profit increased by 12% to EUR 1.082 billion. Reported EBITDA reached EUR 2,814 million, up 2%. Excluding COVID and foreign exchange impact, EBITDA grows 12%, showing the group's strong underlying performance.Investment increased by 45% to more than EUR 2.5 billion, confirming the acceleration anticipated in February despite difficult external circumstances, with 8,700 megawatt of renewable capacity currently under construction and a 65% growth in Networks investment.Thanks to these green investments in January alone, we have incorporated close to 2,500 professionals to our group. And we combined growth with an even stronger financial position. As shown by all our solvency ratios and our liquidity to close EUR 17 billion. Driven by all these factors and after record year reached in 2020, the Board of Directors has proposed to the Annual General Shareholders Meeting a total remuneration of EUR 0.42 per share, 5% increase compared with the previous year.Reported EBITDA, as I mentioned, was up 2% to EUR 2,814 million, mainly thanks to the good performance of our Renewables business which grew almost 30%. Excluding COVID effect of EUR 65 million and foreign exchange impact which amounts to EUR 231 million, adjusted EBITDA growth 12%.Renewables EBITDA reflect the contribution of new operating assets like East Anglia ONE in the U.K., the group's largest offshore wind farm, as you know, up to date; a higher production of existing assets, driven by increased availability and load factors, mainly in onshore wind in Europe and in Brazil and hydro power in Spain.Growth in Networks EBITDA was driven by increasing result in United States, thanks to the New York rate case approved in November 2020, additional transmission project and tariff reviews in Brazil and the expansion of U.K. regulated asset base.Finally, Generation and Supply was affected negatively by higher electricity prices to the storms in Spain and Mexico. The contribution of A-rated countries to EBITDA, like United States, U.K., Spain, Germany, Australia, France reached 81%, reflecting the group optimal geographical diversification.As mentioned, over the quarter, we have accelerated our investment up to EUR 2,500 million, 45% more than the first quarter 2020, with 92% allocated to Renewables and Networks. In the coming quarters, we will continue progressing in line with our plans and doing our part to promote a green recovery through the creation of activity and jobs in the communities where we operate.Networks represent half of the total investment, up to 65%, driven mainly by Brazil, which includes EUR 400 million on the integration of Neoenergia and distribution of Brasilia, expanding United States. Renewables investment increased by 30%, with growth coming mainly from European Union countries, Australia and United States.We continued to lead the build out of new renewables in all our markets. In Spain, since the beginning of 2020, we have installed more capacity than the 3 next competitors together, and we have 8,700 currently under construction. Globally, 1/3 is being built, mostly in European countries like Portugal, France or Germany as well as Australia, with almost another 1/3 in the United States, and the remaining 33% mainly in Spain and Brazil.And by technologies, 2,600 megawatts correspond to offshore wind in Europe and United States; 2,800 megawatt of solar; PV, 2,000 megawatt of onshore wind and 1,300 of storage technologies, including Tâmega pumping storage hydro facility as well 150-megawatt of battery located in Australia, Ireland and U.K. And we add other secured projects, we will reach -- if we add other secured project, we will reach 8,750 megawatt. This means we have secured already 100% of the capacity for 2021 and 2022 and 3/4 of our target for 2025, when we expect to reach 60,000 megawatts of Renewables.We also continue to identify and adding new high-quality project in our pipeline. We have reached 78,000 megawatts with unexpected success rate of more than 60%, in which a balanced mix that includes more than 20,000 of offshore wind. Over the last 12 months, we have expanded significantly our portfolio in this technology market with high-growth potential and ambitious target.In Japan, the country with the largest offshore wind target worldwide, 45,000 megawatt, we have closed 2 transactions, creating to have more than 3,000 megawatts of projects. We also reached agreement to gain access to large project in Sweden and Poland, they will mature by the decade. And very recently entered a once attractive offshore market, we took project of 600-megawatt each. The country is already preparing action to achieve a target of 15,000 megawatts of offshore wind by 2035.Finally, we closed an agreement to develop the folio of 3,000 megawatt in Ireland, and we are already working in the Brazilian market as well. After 40 years working in the offshore wind industry, today, we have a team of highly skilled professionals of 30 different nationalities, fully dedicated to offshore, which in the next month will reach 1,500 people in 10 offices across the globe in engineering, construction and maintenance, with operation coordinated from our core centers in Boston and London, and more recently also in Tokyo to develop the Asia Pacific market.And we are expanding our presence in a hub approach to combine critical mass and global know-how with strong local support. All these together, with our proven track record of project delivery and our long-term strategic agreement with suppliers. That reinforced Iberdrola's excellent position to lead the development of onshore wind and benefit from the impressive momentum of this technology all over the world. We want to take full advantage of our expertise as first mover to reach at least 12,000 megawatt operational by 2030.We already have 1,300 operational in the U.K. and Germany, which contributed close to EUR 300 million EBITDA last year. And for project construction totaling 2,600 megawatts with our progression according to plan. 500 megawatts Saint-Brieuc project in France will be commissioned in 2023, already in construction. And in United States, Vineyard Wind off the coast of Massachusetts will become the first largest scale offshore wind farm in the country. The project completed yesterday all permitting authorization process with a record decision submitted by BOEM, and its securities PPA with Massachusetts Electric distribution company. And Park City Wind already secured a PPA with the State of Connecticut as well with 100 megawatts and is progressing through the permitting and procurement process.Finally, for the Baltic Eagle in Germany with nearly 500 megawatt, we closed the selection of main contractors and started the construction of the offshore substation with full commission of the wind farm expected by 2024. Beyond this project already under construction, the auction announces in the next 18 months will bring new routes to market for our project in different geographies. We already have 3,600 eligible to compete in auction that will take place in the United States.In U.K., 3,100 East Anglia hub will be ready to participate in the full round of allocation Contract for Difference. In Windanker in Germany, the 300-megawatt project will take part of the next offshore wind auction, which a preferential right for the site. We also have projects to compete in the next 3 auction in Japan. And are looking and buying in process in France where Iberdrola has already been prequalified up to 1,050 in -- megawatt in Normandy and Scotland, Poland, Denmark, Ireland and Taiwan.Moving to Networks. This business takes 50% of the group investment with increases in all markets. In the United States, the New England Clean Energy Connect transmission project initiated construction last January. The first steel pole had been installed and works on the DC converter station have started. This high-voltage transmission line to transport zero carbon hydro generation from Quebec to New England will involve a total investment of almost $1 billion.In New York state, the Rochester area reliability project was fully completed after several years of work, and we are increasing transmission and distribution investment following the New York rate case closed last November.In Brazil, Networks investment almost tripled, driven by the integration of Neoenergia Distribuição Brasilia, increased investment in [indiscernible] distribution companies and the significant expansion of the transmission grid driven by the auction won in the last year.Finally, in Spain, we continued to invest in development of smart grids and distribution reinforcement. But recognizing the National Integrated Energy and Climate Plan, more investment will require in the future to achieve in Spain decarbonation target. We already had presented to the government a plan of EUR 4,353 million for this activity, which represents 80% more than the previous period, providing a great tool to us in green recovery in the country. The group's strong operational performance is fully reflected in our generation of cash flow which reached EUR 2,270 million in the first quarter, up 7%. As a result of our -- our financial ratios improved with FFO to adjusted net debt growing 140 basis points to 23.2%. In addition, our liquidity position reached EUR 17 billion, proving our access to financial -- to financing in very competitive terms.Over the first quarter, to give you an example, Iberdrola signed a new credit line with 21 banks linked to sustainable indicators for EUR 2.5 billion, and launching the largest sustainable commercial paper program of a Spanish company with a maximum balance of EUR 5 billion, linked to our contribution to United Nations sustainable development goals. With these 2 transactions, the group reinforced its global leadership in green and sustainable financing, reaching EUR 32.1 billion to date.As you know, our listed subsidiaries, AVANGRID and Neoenergia, released their result in the last days, showing a strong performance. In the case of AVANGRID, adjusted net profit increased by 50% to $354 million. EBITDA reached $752 million, up 21%, thanks to the increase in Renewables and Networks. Gross investment rose by 24% to $663 million. In the case of Renewables, the company is building 1,600 megawatts of offshore wind, 900 megawatts of solar and 400 megawatts offshore wind.In Networks, investment grew by 42% following the approval of NY rate case, as mentioned. As you know, we also expect to close the transaction with PNM Resources of New Mexico in the coming months, creating additional growth opportunities for AVANGRID Networks business. Major federal permits have been -- have already been obtained as well as the approval from the Public Utility Commission in Texas last week. And the company has reached a settlement with several key parties in New Mexico. So the transaction is on schedule to close in the second half of the year.The performance of this quarter has driven an increase in the company guidance with full year's adjusted net profit now expected to reach between $696 million and $750 million in 2021. This will represent an increase up to 21% compared to 2020.In the case of Neoenergia in Brazil, registered 50% increase in EBITDA to BRL 2,284 million, driven by ongoing investment in the Networks business and a strong growth in Renewables. This, together with the reduction of financial expenses, led to a 75% increase in net profit, exceeding BRL 1 billion for the first time in the quarter in the company's history.Following the tariff review just approved by Celpe Pernambuco company, up to March 2025, all Neoenergia distribution companies have already regulatory framework fixed, at least up to April 2023. Gross organic investment increased almost by 85% to BRL 2,027 million, more relocated to construction in transmission project, the expansion of distribution networks and the addition of more than 1,000 megawatts of wind capacity.As I said, Neoenergia Distribuição Brasilia acquisition was closed in early March. This integration is moving faster than expected. The company has achieved already one of the best among the industry for quality supply ever recorded, and we expect already positive contribution from April.Our investment plan for the coming years are increasingly supported by global ambition and climate action. The consensus on this subject was shown once again in the latest summit on climate organized by the Biden administration 3 weeks ago, where all major economies announced reinforced target to achieve net-zero emission. The European Union, who has led elite action globally for years, reached an agreement for new climate law that included an emission reduction target of at least 55% in 2030 from 2019 levels. United Kingdom, which will host the upcoming call in Glasgow, increased his reduction commitment for 2035 to 78%. This is the world's most ambitious target in comparative terms in this moment. And after the United States rejoined in the Paris Agreement, the country has now committed to cut emission at least by 50% to the end of the decade compared by 2005 levels.By the transformation of the energy sector implies by this announcement will only be implemented if there is full coherence between target energy policies and regulation. And we also have a good news on this front. Some governments are already creating the framework required to reach net zero and at the same time to build back better from the pandemic.In the case of the United States, American Jobs Plan will dedicate $100 billion to reach a fully decarbonized power system by 2035, with more tax incentive to promote investment in renewables, in storage and high-voltage interconnectors. There will also be an additional initiative to modernize electricity grids and boost innovation in technologies like green hydrogen. The federal administration is also promoting the development of the offshore wind industry with more agile permitting and new leasing areas to reach 30,000 megawatts of capacity by 2030.In Spain, the climate change and energy transition law is concluding its approval process with significant consensus. And the government has already submitted to European Commission its recovery in the resilient plan, choosing clean energy investment as one of the main destinations for European Union funds. A proposal to create capacity market has also been published. We still have to see the final version of this regulation, but this shows the awareness of the Spanish authority about the relevance of maintaining same capacity in the system and bringing more storage to secure supply in the context of growing penetration of renewable generation.Finally, the U.K. is promoting its green industrial revolutions. Based on their 10 points plan, the support initiative in offshore wind, green building, zero emission cars and green hydrogen. This increased climate ambition is fully aligned with Iberdrola pioneering strategy. We anticipated energy transition 20 years ago and started taking decision at that time to close all our coal and oil power plants and to invest heavily in renewables, networks and storage.Over this period of 20 years, we have often found the position of energy company regulators in climate change in others. Fortunately, today, there is a consensus on the need to reduce emission and instead of opponent we only have competitors. And we still continue improving. This first quarter of the year, we emitted only 28 grams of CO2 per kilowatt hour produced, which are -- is around 10x less than average emission in our peers.On top of that, 90% of Iberdrola's long-term plan is included in the list of investment considered sustainable by European Commission in its taxonomy. We have also zero coal and fuel oil production. This will avoid additional risk as well as -- as well as the commissioning and labor costs that other competitors will probably need to incur. And through green investment, we will accelerate net zero and contribute to the economic growth and creation of thousand of qualified jobs. Only in Spain, our investment -- actual investments are sustaining 30,000 new jobs in our supply chains.But the challenge is huge. Net zero implies transforming the energy consumption, all sectors to promote electrification and investing in the renewable energy power networks and the energy storage required to support it. We need all public and private agents onboard. And Iberdrola, after 2 decades leading this effort, is now creating several strategic alliance with major companies from different industries to accelerate green investment.In the financial sectors, we have formed a co-investment vehicle with a leading insurance company in Spain, Mapfre, to accelerate the build-out of solar PV and onshore wind in the country. We're also partnering with other energy companies, especially large-scale investment project, mainly in offshore wind, like Total, with a joint venture to participate in the next auction of offshore wind in Denmark and to develop onshore wind, install and operate it together in France.In electric mobility, we are closing the strategic partnership with leading car manufacturers like Volkswagen, Renault, Mercedes, to accelerate the deployment of charging infrastructure, manufacture batteries, create a full value chain for electric vehicles and decarbonate their facilities. Also, with charging system developers at Wallbox.And we are entering commercial alliance with leading distribution company named Mercadona to install charging point and electrify their fleets. Finally, we are closing agreement with industrial companies interested in reducing the carbon footprint to lead development of green hydrogen for different uses. Green ammonia production for Fertiberia, the supply of hydrogen to the fleet of buses of Barcelona metropolitan transport company, the generation of heat in distilleries for companies like Diageo in the U.K. or to produce ceramics in Porcelanosa, among others. This agreement and synergies are the ones need to take full advantage of the potential of the upcoming European recovery funds to create job and industrial development.In our previous presentation, I announced we have proposed more than 150 projects for this Spanish recovery, transformation and resiliency plan to access to the next generation new program. Involving close to 350 small and medium-size companies, we will mobilize investment for more than EUR 21 billion. But we have continued working with several companies to bring new ideas and framing of our proposal for a strong recovery. As a result, we are already leaning or taking part in 175 projects with a EUR 30 billion investment with a capacity to generate 60,000 jobs along the supply chains. I can say that all our projects are included in the scope of the plan presented by the Spanish government in Brussels.I will now hand over to the CFO, who will present the group financial results in further detail.
Thank you very much, Chairman. Good morning to everybody. As you can see in the slide, first quarter reported EBITDA was EUR 2,814 million, up 1.5% versus last year. Excluding EUR 65 million COVID impact, our adjusted EBITDA increased almost 4%.FX impact in this quarter has been large, EUR 231 million, after the devaluation of all our reference currencies: 9.1% the dollar; 3.7% the pound; and 27% the real. Excluding also the FX impact, our EBITDA would have grown 12.2%, showing the real recurring performance of the business as the first quarter of 2020 was marginally affected by COVID.Revenues increased 7% to EUR 10.1 billion and procurements 12.4%, reaching EUR 5.5 billion. Gross margin rose by 1.3% to EUR 4.6 billion, and 10.7% excluding COVID and FX impact. Net operating expenses remained flat at EUR 1 billion, thus improving the efficiency of the group by 110 basis points as gross margin grew by 1.3%. Excluding positive FX impact, net operating expenses grew EUR 99 million due to the contribution of new businesses, including Neo Brasilia from second of March onwards as well as storm costs in the U.S.From Q1 2021 onwards, net external services include as other operating results, the gain and loss on the sale of controlled assets following the Spanish Securities and Exchange Commission recommendation and IAS-1 draft expected to be approved. In this respect, Q1 '21 has not registered any relevant amount. In the annex in Page 44, there is a more detailed explanation of this change.Analyzing the results of the different businesses and starting by Networks. Its EBITDA grew 4.3% to EUR 1.3 billion, and 19.5%, excluding EUR 161 million negative FX impact and EUR 26 million negative COVID impact that will be partially recovered. Excluding FX and COVID impact, EBITDA grew in all geographies. As you can see in the slide, Spain contributed 32%; Brazil reached 25%; the U.S. were 23% of the total; and the U.K. contributed another 20%.In Spain, EBITDA grew 8.8% to EUR 421 million due to the impact of EUR 15 million of positive settlements from previous years as a consequence of improvements in quality and 11% lower net operating expenses driven by efficiency plans, and despite lower remuneration that came down from 6% in 2020 to 5.58% in 2021.In the U.S., IFRS EBITDA was 17% up to USD 358 million due to increasing investments and to past cost recognition but affected by storm costs. Excluding COVID impact, EBITDA would have grown 21%. U.S. GAAP EBITDA amounted $438 million (sic) [ $483 million ], $125 million over IFRS EBITDA, mainly due to the difference in the timing of accounting of the levies that in the IFRS are fully accounted in the Q1, and in U.S. GAAP along the year.In Brazil, EBITDA grew 44% to BRL 2,126 million, driven by BRL 338 million positive impact from tariff reviews in distribution companies and increasing contribution from transmission assets. BRL 8 million are due to the Neo Brasilia integration from March 2 as well as cost contention due to efficiency plans. Excluding COVID impact on demand, EBITDA would have been growing 48%.Finally, in the U.K., EBITDA fell 1.6% to GBP 235 million, affected by GBP 7 million lower demand due to COVID. Excluding COVID, EBITDA would have grown 1.4%.In Renewables, EBITDA grew close to 28% to EUR 932 million, and 34% excluding EUR 46 million of negative FX impact, driven by strong growth in Spain, the U.S., Mexico and Brazil. Production increased 19% with 8.5% more installed capacity that reached 35,200 megawatts and higher load factor, with average price in Spain and the U.S. As you can see in the slide, Spain contributed 35% to EBITDA; UK, 25%; the U.S., 23%; and Iberdrola Energy International, 10%.In Spain, EBITDA was EUR 322 million, 76% over last year, thanks to higher sales price to the supply business and 40% higher output with 54% higher hydro, 17% higher onshore and 128% higher PV whose installed capacity has already reached to 1,264 megawatts.In the U.S., EBITDA increased 76% -- 74% to $260 million, with positive impact from the Texas cold snap and from the new capacity. In the U.K., EBITDA fell 2.5% to GBP 209 million, due to 29% lower onshore production, partially compensated by 56% higher offshore production due to East of Anglia 1 contribution and also the decrease has to do with lower prices.In the international business, EBITDA fell 16% to EUR 91 million due to the lower contribution from Wikinger and higher development costs despite Infigen and Aalto Power increased contribution.In Brazil, EBITDA grew 64% to BRL 197 million, thanks to positive impact on settlements in hydro concession agreements. And finally, Mexico, EBITDA grew 68% to $46 million, thanks to higher operating capacity coming from Pier and Santiago onshore plants and Cuyoaco PV plant.Generation and Supply, EBITDA decreased 31.8% to EUR 528 million, and 24% excluding EUR 21 million negative FX and COVID impact. The business has been negatively affected by extreme weather conditions, as I will comment.In Spain, the EBITDA was down 39% to EUR 279 million, with 13% lower output and higher energy purchases at higher prices, with additional impact of the Filomena Storm and COVID.In Mexico, the EBITDA decreased 33% to USD 147 million, negatively affected by the Texas cold snap on price gouges of around $50 million that are expected to be recovered as CFE tariffs will reflect the higher cost of gas. In addition, there has been an increase in access fees.In the U.K., the EBITDA grew 30% to GBP 106 million with higher sales despite COVID effect, mainly due to weather conditions and improved margins in electricity and gas. Excluding COVID, EBITDA grew 49%.In Brazil, added BRL 118 million to the EBITDA, highlighting the better performance of our CCGT plant. And in the international business, EBITDA was EUR 14 million negative, affected by cold snaps, development costs and lower revenues due to COVID.EBIT was up 3% to EUR 1.7 billion. Excluding FX and COVID, EBIT grew 14.4%. D&A fell 2.6% to EUR 986 million, but excluding FX, grew 4.3%, mainly due to the increased asset base and activity. Provisions were up 20% to EUR 115 million, but excluding FX and COVID impact, grew 56%, mainly due to Texas cold snap provisions and others.Net financial expenses grew EUR 85 million to EUR 265 million, driven by EUR 111 million mainly linked to one-off positive FX hedges accounted for in Q1 '20, more than offsetting the EUR 26 million improvement in debt-related costs; EUR 13 million due to the lower cost of debt that improved 12 basis points and EUR 13 million positive results due to lower average debt.Our reported credit metrics improved. First, the adjusted net debt due to the decrease in adjusted net debt of EUR 1,319 million to EUR 36.3 billion, despite divestment efforts and thanks to the hybrid issues during last year. Second, due to a resilient business model, improving cash flow generation even in these difficult times. As a consequence, our adjusted net debt-to-EBITDA remained at 3.6x, FFO adjusted net debt improved 1.4 percentage points to 23.2%. Retained cash flow net debt improved to 21%, and our leverage ratio strengthened to 41.9%.As the Chairman has mentioned, 2 recent transaction reinforces our group leadership in green and sustainable finance. Iberdrola has signed with 21 banks at EUR 2.5 billion new sustainable credit facility at pre-COVID levels. After this transaction, 90% of the group credit lines are sustainable, expecting to reach 100% shortly. The line was linked to 2 sustainability indicators related to environmental and social issues. It is also the first transaction of a Spanish company referenced to risk-free rate instead of LIBOR.And let me also highlight the social innovation component. For the first time, a facility will include an annual contribution to a sustainable project. The contribution will vary according to the degree of utilization of the line, and we will be making collaboration with all the financial institutions that have been -- that have signed this sustainable credit line.Also, last April 15, Iberdrola launched a EUR 5 billion sustainable promissory note program. And Iberdrola, as of today, remains the world's largest private issuer of green bonds.Adjusted net profit grew 12.4% to EUR 1,082 million compared to the Q1 '20 adjusted net profit of EUR 963 million. Adjusted net profit excludes extraordinary impact, including COVID and other nonrecurring items, but not FX impact as we consider FX part of the risks that brings being a global player.Regarding corporate taxes. In March, the U.K. government presented a new tax package that increased the corporate tax rate from 19% to 25% starting on the first of April '23. As a result, we expect to account EUR 450 million negative impact of deferred taxes in '21 in our P&L, but with no cash impact. This will be accounted when finally acted, either in the second or the third quarter of the year. We expect this negative impact to be totally or partially compensated by other positive impacts.There is today, in the press, some related news that we are still analyzing. In the annex, you will find the calendar for the final dividend payment.Now the Chairman will conclude this presentation. Thank you very much.
Thank you, Pepe. To conclude, I would like to highlight that the first quarter results have exceeded our expectation and forecast. 20 years ago, we saw clearly the need to decarbonize the economy and the opportunities that this could bring in terms of investment, industrial development and job creation.Since then, we have been leading the deployment of clean energy and power networks, and now we continue accelerating. In fact, we are already ahead of the plan we presented to you last November. 75% of the renewable capacity addition expected by 2025 are operating under construction of secure. 90% of our distribution investment are covered by regulatory frameworks already closed at least to 2023, and we continue to expand our transmission activities.We expect our subsidiaries in Brazil and United States to continue performing ahead of estimate, driven by a strong business outlook and the integration of Neoenergia Distribuição Brasilia and PNM Resources. Our offshore wind projects are progressing faster than initial plan, and we are -- and we will benefit for increasing opportunities, thanks to the new auction and the growth platform we have recently created in countries like Japan, Poland, Ireland and Taiwan.And finally, we are reaching relevant and strategic alliances to accelerate electrification with leading companies in different industries. All this give us an even additional assurance to reaffirm our guidance for 2021 and beyond.Today, so we confirm our 2021 outlook to EUR 3.7 billion to EUR 3.8 billion in reported net profit. This excludes, as mentioned, potential adjustment due to the changes in tax regulations underway in some countries, which is the case like U.K., largely being noncash items. Growth will be driven by the contribution of new renewable capacity, positive impacts from new rate cases and additional Networks investment and the ongoing improvement in operating efficiency in all countries. Given this net profit outlook today, we can also ratify our outlook for a shareholder remuneration of EUR 0.44 per share against 2021 results.Now we'll be more than happy to answer your question in this moment. Thank you.
The first question comes from Robert Pulleyn, Morgan Stanley.First of all is the clarification of the guidance 2021. The net income guidance now excludes nonrecurring items and the deferred tax charge. Does this, therefore, exclude COVID impacts? And if so, to what quantum? Can you give us a guidance for EBITDA in 2021? Or at least your views on the different business countries?
So well, I think what I can say is what I said already, the execution of our plan is progressing better than expected in 2021. I think we have already had higher revenues, the demand recovery, new tariffs, prices, higher production, operational efficiency, the acceleration of investment, Saint-Brieuc, Vineyard, et cetera, integrations of P&L resources, Neoenergia as well define our financial performance, which is improving our ratios, the FX impact and the control due to the geographical footprint, which are already offsetting all these negative factors.So we are already expected to close PNM Resources along the second half of the year. And in terms of net profit, which we are not already expecting, despite results of hydro higher than average, they are not already expected anything different on that one. With relation to countries, I think in Networks, I think United States is performing well. And I think their expectation is they're going to continue performing well, and they have already updated their outlook. In Brazil, I think is -- the results are moving very well as well, and I think they are increasing heavily. And I think we are not expecting any negative things in this direction.So in Renewables, we are already expecting to add between 4,000 and 4,500 megawatts -- new megawatts before the year-end, which I think they are going to contribute as well. And the new prices, I think we expect and they are ready to -- as well to have already positive impact in our -- that -- I think is -- in another side, I think the negative side of the COVID, we hope with the vaccination which is being made and the situation, which is in most of the countries coming back to certain normality, I think that can be already -- be much minor than it was already in the first month.So I think the only thing what we can already say it as nonrecurring, I think is this tax impact with noncash, which we need to already to adapt, to adjust already to our accounts of -- because of the British changes in the tax -- corporate tax from '20 -- from '19 to '25, I think. So -- which I think that can represent something of a few hundred million, EUR 400 million, EUR 300 million which we can already adjust of our -- from our deferred taxes. That is what we are contemplating in this moment.There are things, as Pepe mentioned, which still we have not already included because we have still not properly analyzed this recent news which appear in the media today about the hydro tax in Spain. That -- but I think still, we have not already have tied to -- we will let you know. I think in this moment, we will provide it as soon as we make already an impact about the numbers will be affected. Should be certain positive, but we will let you know how much it's going to be.In any case, that is something which is not affecting to the tariff. That is going to be something which is directly connected between the Ministry of Finance and the companies, is not at all already -- not related with the tariff itself. So -- but I think those are the main things I would like to clarify to you.We are very comfortable with the outlook we are giving to you because I think the things are going better than expected, and we are not seeing, for the time being -- apart of these tax things which I'm mentioning, we have not seen already a special risk is in the horizon. So we are already positive in our approach.
The second question comes from Jorge Guimarães, JB Capital, and Fernando Garcia, RBC, and is related to the topic you mentioned before. Is related to the tax effect and the writing of this question is the following.Could one of the tax effects mentioned as compensation for U.K. impact to be related to today's news in Spanish press about the recovery of the hydro tax in Spain for 2013 and 2014? If so, is it possible to quantify this hydro tax recovery?Probably the question has been already answered, but if you could add something additional.
As I have mentioned -- in the U.K., I mentioned this already...
That's right. I mean...
In Spain as well, I just insist on that one. I think that is positive. We have noticed still -- we are studying the impact and how many years will be affected. We will know in the next few days as soon as the lawyers can read it in detail. But I think we know that it's not affecting at all to the tariff deficit. That is something which is between the companies and the Ministry of Finance.
Third question comes from Javier Suarez, Mediobanca; Jorge Guimarães, JB Capital; and Manuel Palomo, Exane BNP Paribas. Comments from other company on aggressiveness from other suppliers in Spain. What is our commercial policy, sustainability and supply margins currently?
Well, it's funny. So well, I don't know -- I think it's true, the country is increasing competition in entrants. So I imagine they are talking about that one. I think I will say in all time they welcome competition. I never been already criticizing the new entrants come, I think is good. So that's why I don't know what -- about what competitors are talking about.What I can say in Iberdrola, we have a very good marketing team. So I think it's -- our marketing people are already making a good product, good services. They are already a very competitive cost of sale. They are a wide range of offers. And a brand which is already well positioned in the country. And I think that is helping ourselves to maintain our customer base.We don't need to go already to the price goal for that one, it's not our style. And I think that is not what we are making already in this -- this particular time. I imagine they're talking about the newcomers, which I think their job to do. I don't know what they're talking about. But I think what I can say, our marketing team is gaining their money. So I think they are well paid, but they're working very hard.
Next question comes from Harry Wyburd, Bank of America Merrill Lynch; Rob Pulleyn, Morgan Stanley; and Antonella Bianchessi, Citi Group. Is related to the power prices in Europe. What is Iberdrola view on the sustainability of the higher prices given the forward cube in Spain is heavily backward dated to 2024 forwards, well below 2022?Second point is, do you fear any windfall tax to compensate? Number three, are you seeing renewables PPA prices rise in response to higher power prices? And finally, can you remind us on power price hedge for '21 and 2022?
Well, the first thing is the prices what is happening in Europe is very simple. I think it's -- the CO2 is represent roughly EUR 50, which I think that is more or less, it's contributing to the price on the range of EUR 20 to EUR 25 on the tariff. The second one is the price of the raw material. I think the gas is already at levels of EUR 60 or EUR 65 per megawatt hour, which I think altogether, it makes a price on the range of what it is we are achieving today on the range of this one.In the case of Spain even more, because we have already a 7% increase -- a 7% tax in the production. So I think it's something which is absolutely logic. And as I used to say, the carbon prices are not coming from Saudi Arabia. The carbon is already a tax, which is already -- is already being used for another purposes for carbonizing the economy. I think that is collected by the fiscal authorities in different countries and which can be used already, and is being used for -- already for -- giving already support and other activities and taking the decision to move from 1 part on day one. So what that makes that one? Certain, we expect then the PPAs prices can already be made according with the prices of the market. So I think PPA is not something different. It's not [indiscernible] of the reality. So I think those at the times, I think is something which is all across Europe. So the natural gas prices are increased, the CO2 prices have increased for helping to make already decarbonization of the economy. And I think that 2 things is driven already the price of electricity, which is already making in this moment.Saying that, I think a position -- Paco, our position of prices and hedges, et cetera, can you explain on that in detail?
Yes. Starting with the figures for 2021, we don't expect any impact because all the price-driven output is fully hedged right now. For 2022, 70% is hedged around this at EUR 75 to EUR 80 per megawatt hour in the United Kingdom. Similar [Technical Difficulty] and in this case, 100% of the price-driven output of the planning. This is very important because planning is one thing, and the reality is another one. So when we have to face the reality, there are adjustments in terms of demand increases and production that cannot be produced.And that's for 2022, as I finished, as I already tell you -- or told you. And for 2023 onwards, we saw decreasing annual quantities, according with customers' appetite. And I can say that, for instance, for 2023, we have 30% already sold and so on. So that's our position. The open position now with the forecasted prices at the higher levels will allow us to recover more money that we probably have forecasted before. And in this case, this 30% that is sold for the next year will allow us to get more money.Still early to provide specific figures, but this is what we are seeing coming on. And for sure, when you have extreme weather conditions that we have had in Mexico or in Spain, all these hedges work partially.
I think I would like to add at this point that Paco has already mentioned. I would like to add that -- I mentioned that the Storm of Filomena has already affected our P&L in Spain. However, returns in Spain. Why? Because we are forced to buy electricity, buy already gas at very high prices to sell to our customers where we already agreed fixed prices. And we have already hedged -- we have hedged already a normal demand but not a punctual excess of demand, and nothing that is affecting to our results for this reason.I think we are already covering hedging -- the normal than expected, normal demand. And -- but I think when they are already extraordinary circumstances, I think we are already affecting negative. The same thing already in positive. So I think we have not -- we have already not all the electricity hedged, as Paco mentioned. So I think the prices are higher, we have 30%, which still is not already hedged for 2022 and the prices are higher, we can already benefit these better prices for the future as well.
Next question comes from Rob Pulleyn, Morgan Stanley, and [indiscernible] and this is related to offshore wind.What impact from global supply chain inflation and bottlenecks should we anticipate for Iberdrola? Is Iberdrola concerned by inflationary pressures reducing offshore wind IRRs given fixed price for future and costs yet to come?
So the first thing, I hope, in this temporary situation on the price of the raw material, steel, copper, oil, et cetera. In our case, our needs for investment already are almost covered. All the projects underway have a very high share of CapEx costs already fixed, let's say, 80%, 90%. A major recruitment contract has been -- had price indexation generally hedged as well. And I think I will remind to you that I think last year, we advanced orders for EUR 14 billion, this year for EUR 4 billion, I think all together EUR 18 billion, which I think that is already with prices, we have already reached an agreement.I think in the case that's becoming structural, I think ensure that will be passed into the price in the same way we have already happened with increases in price of the equipment in the past. I can give you an example of solar in the last few years, we have been already happen in this manner. So -- which I think give you already tranquility that most of our investment are already for the next period -- already with contract already signed and with hedges already done, and the minor part is already still not in this. But I think if that is not already temporary, that is structural, that will be passed to the prices and sure that is going to happen.
Question #6 comes from Harry Wyburd, Bank of America Merrill Lynch; and Javier Suarez, Mediobanca.What are your most recent expectations for European Union stimulus funding from projects? And could there be upside to the CapEx plan if you are successful with your funding applications?
So I think you know that Spain has already sent the plan to Brazil. As far as I know, has been welcomed because that is absolutely fitting with the European plans and expectation. We have already -- we are leading this part on that one. As I mentioned, we have already made -- present 175 projects in several fields, in floating offshore, green hydrogen, electric mobility, energy storage, with very many partners, I think it's 300, 150 people, already companies which are together with us.In certain of those projects, we are leading. In certain of the projects, we are already participating, but we are not already leading those projects. I think all together, that represents roughly EUR 30 billion investment already presented. We can already create jobs for 65,000 people. As far as I know, all who has been present in Brazil, all our plan are already allowed to participate in this one. So I think all are already being included in this.So -- but I would like to insist on that one. In our investment plan, in our long-term plan, is not already including those things. I think that is an additional thing that have to be already added to our existing targets. So I think our 2025 plan, then you know, EUR 75 billion investment is not included all these things, which it shall depend already of the different process of what ones will be approved in Brazil have to already pass through to the countries, and they will make already a margin just, a certain market mechanism whatever for making already action of whatever thing to have access to those things. But we will see when that will be approved.
Next question comes from Rob Pulleyn, Morgan Stanley.What impact does Iberdrola see from the U.S. climate plan and proposed as credit changes for its business given the company 2030 plan was outlined before the U.S. announcements? And is there a sufficient balance sheet flexibility to do more growth CapEx?
So with no doubt, that will bring massive investment opportunities. I think it's -- but the positive thing is the main proposals are very well aligned with Iberdrola plans, so -- which I think as we've been for 20 years, dreaming and that happened, and it's already happened.So tax incentives for clean energy in storage could accelerate renewables. Push for power grids driven by tax incentives or transmission -- to transmission and measures to improve efficiency is positive as well. New target of 30 gigawatts of offshore wind by 2030 is good. They make already more agile permitting, I think you know that yesterday, we got already the final permit, would allow us to build Vineyard Wind in Massachusetts. So I think it took a long time. Now they would like to make already this in a more agile manner.But I think we have already 7,000 megawatts of pipeline in lease areas for that one in the United States. So all the things, which are related to this ambition of offshore, we are ahead of the road because we have already decided. The site is analyzed, the project designed, et cetera, et cetera.And I think the Networks, I think the only point is the potential increase in corporate tax. We don't know if it's going to happen or not. But in any case, I would like to stress that our -- 80% of our business is Networks and is -- has already regulatory favor, which are based on after-tax returns. So means whatever changes in taxation is going not to affect in an important manner, apart to the one-off that can already happen as it's going to happen in the case of Britain, noncash cash item, cannot already affect our P&L.In renewables, I think that -- there increases in taxation has a positive effect in the sense of a faster monetization of our tax credit. So I think it's -- that is going to help already in all these things. So -- which I think globally, we feel is very positive. So I think it's already absolutely in line what we've been dreaming for years. And I think that -- I'm sure that is going to provide to our subsidiary, AVANGRID, just huge opportunities of growth, either in Renewables, onshore, offshore, especially offshore and as well in terms of Networks and transmission.
We have a couple of questions from Elchin Mammadov from Bloomberg. First of it is, can you please provide an update on the regulatory political situation in Mexico and Brazil?
Well, in the case of Mexico, we have no news. I think from the last presentation. I think -- as you know, the proposed modification of the electricity law was now suspended by courts.In the case of [Technical Difficulty] has approved just the new tariff for Celpe for Pernambuco,, has already adjusted the annual tariff for oil by consent. The integration of Brazilian utility is going well. I think that is going to start in April. The construction of the transmission line, what we won in the past are going very well. And we continue for looking new other opportunities of the new auctions, which is going to happen. So I think the administration is maintaining very stable and predictable regulation, and I think is -- a good example was already the contact COVID, that the make for helping finance the distribution companies during large year already COVID confinement. So which I think that is the news.So Mexico, no news apart of the modification of the law is already suspended by courts and the company is already performing with normality. And in Brazil, the things are going really very well.
The additional question from Elchin Mammadov is related to offshore wind. Some peers had problem with offshore transmission cabling, is that at risk for Iberdrola?
So it's funny, that one. Well, I say the answer, no. We have not that one. I think it's -- we've been already making this sort of projects of -- in Networks, in transmission for 100 years. So I think we know a bit all those things. Our offshore wind farms are designed to minimize this impact of water stream and cable. So I think that is not new for us. I think -- that to remind to me, what is happening in -- what's already happened a few months ago when one of these guys was already suffering this problem, talk about the blockage and wake effect.So which I said the same thing. Thinks of our experience, we consider all these operating scenarios when we design, and we include all this in our future operation and maintenance costs. I think for us, not a secret, and we are already taking all these when we make already in our design to avoid negative surprises. I think when we design and we make our calculation of CapEx and OpEx coming into the auctions, we take into consideration all these potential scenarios included in our design, included in our operation cost for the future. So I think we have not that one.
Next question comes from Fernando Lafuente, Alantra; and Elchin Mammadov, Bloomberg.Your cost of debt fell 12 basis points in Q1 year-on-year. How do you expect your cost of debt to develop in the coming years if the recent increase of the bond yields continues? Debt expected by year-end as well.
Pepe?
First, what I have to say is that we have most of our debt fixed even with forward swaps. So at this level, our group debt is fixed at levels of 75%, mainly the euro and the dollar because in the Brazilian real, there is a pass-through between the remuneration and the cost of debt. That is the part that we have more open, and a little bit also with the British pound.So we are -- obviously, if interest rates -- well, the loan part of the curve, that doesn't mean that interest rates are going to rise. So this means that not necessarily an increase in bond yields will affect strongly our cost of debt. It could affect, as I was saying, the Brazilian real race, but that is compensated by a bigger EBITDA.So in principle, obviously, if we finance our long term, that will have some impact, but we don't think it's going to be very big if it happens, at least in the next couple of years.And the debt that we are expecting by the end of the year, if we -- including the PNM acquisition will be around EUR 43 billion. If we exclude that, we'll be in the EUR 36 million, EUR 37 billion, but we expect us, as the Chairman has said, to close P&L before the year-end.
Antonella Bianchessi from Citigroup makes the following question.At which level are currencies hedged for 2021?
We have already done them. I would say, around 80%, 90%. We always leave a margin depending on the results, et cetera. But I think that we are comfortably fixed and at better rates, what we are seeing today, for example, in the dollar.
Javier Suarez, Mediobanca, and Elchin Mammadov, Bloomberg makes this following question.After volume approval, what other projects should follow Vineyard Wind in the U.S.? Do you see permitting process accelerating? What IRRs are we targeting?
So as I mentioned, in the United States, we have already in this moment, Vineyard Wind started construction. And I think we have already Park City with we -- we have already a PPA with Connecticut. So -- which I think is the next one. We are going to continue construction. I think one is, we plan to be by 2023, another one I think is 2024. So which I think that one followed another one. So altogether, it's 1,600 megawatts.I think we have already another additional 6,000 megawatts, 7,000 megawatts, which I think is mostly concentrated in Kitty Hawk in North Carolina. And in the Zone 522 in the Massachusetts Water, which I think is going to be part of the new offshore auction, which is going to be already produced in the next few months. I think it's announced new auctions in New York and announced new auction for Massachusetts. And I think Rhode Island I think as well, 1 of those. So I think that is the point.In terms of our returns, so I think the return of the Park City is similar levels of Vineyard. And I think we will see already for the next one, we will try to make as we are making always that we will already -- gave already just some basis point over our WACC in all cases, which I think that has been happening up to now, which returns in most cases is over 200 basis points above the WACC, and that is our expectation.So we are already -- the next -- we start construction is already Park City, which is already awarded. We have the PPA, we have all the thing, and we are already in the process of the permitting, which I hope with the new administration that is going to take much shorter than Vineyard for obtaining. And I think our plan on that one is one in '23, another one in '24 will be fully in operation.And another one, we win already with our 7,000 megawatts -- close to 7,000 megawatts of sea bed available -- site available. I think we will participate in the new auction, which is going to appear in the next few months for Massachusetts, for New York, for certain of New England, and as well for Carolina, one of those states as well. So -- which I think we are working on that one, and we are a very good position on this.I think I mentioned that we have already in Boston -- just a very good team in design, and I think we are already making all this for development of the zones of North Carolina, which is Kitty Hawk project. And the Zone 522 we won a few years ago as well for being ready for participating in this auction in the future.
Question #13, from James Brand, Deutsche Bank. What new markets would you like to enter in Renewables offshore?
Well, I think we've been ready. It's a good question because in the last 12 months, we've already opened very heavily the number of markets. I think we have started 50 years ago in Britain. So I think it -- because that process takes a long time. I think it's -- now we have already 1,300 megawatts already close to that one in operation. We followed with Germany, with -- we expanded to France, what we are already in construction. We continue with Germany, we have one in construction. We moved to the United States, where we have already a couple of them already awarded with PPAs and we have started construction of both.And I think in the United States, we won already sites in North Carolina for Kitty Hawk. We won already site as well in the Massachusetts area, 522 area. And during the last months, we had already got new opportunities in Japan, in Taiwan, in Ireland, in Poland, in Sweden. And we are -- even we are looking some opportunities in Brazil. I think we are -- I'm telling you that because this project takes, in most cases, very long period of maturity. I was telling you that we have started with that one East Anglia. I think if I don't remember that was, we got already the permit of sea bed in 2008, 2009, 12 or 13 years ago.So it took 12, 13 years before that -- this wind farm start already construction. So that way, I think we have to move already fast in all these things and try to get already new opportunities. But I think we -- I can say we are all across the globe in this moment, from Japan to the States. From Taiwan to Sweden. And from Poland to Britain and from Britain to Germany and from Germany to United States or Brazil.
Last question for today comes from Javier Suarez, Mediobanca, and he said the following. How important do you think that for a utility is to be vertically integrated and structurally long [ clients ] versus generation? Would this mean that expansion on Renewables has to come together with a proactive supply strategy?
Well, I think we've been traditionally an integrated company, so -- which I think is not new for us. I think is -- it depends on the places. I think certain -- if they are not ready, you have to look who is going to buy your electricity. I think you are in a country that you have already millions of customers, and I think we have dozens of million customers in some countries.So certain, you have already the possibility of selling your electricity for your customers. But if not, you have to make your -- you have to look for your customers as well, unless they were already in auction, and the system already takes all this electricity. But I think we are already this very proactive supply strategy. I can tell you, for instance, the case of Brazil, that we have started recently to be already active on that one. I think we have in this moment, so hundreds of thousands or million of customers where we are selling electricity. We are the same thing already doing in Britain or we are doing the same thing in Australia that we win recently.So yes, I think we feel -- as you know, I'm coming from the industry. And I think -- you need in an industry -- you need a factory, but you need as well a market. And I'm very much convinced that we need to ready to be very efficient in our factory, but to be very efficient in our marketing approach.[indiscernible] question then some of your colleagues make before about our behavior in Spain. They go in saying our marketing people are doing very well the job. And I think that is what they have to do. The marketing people and the sales force to do the necessary for selling in a good condition, the electricity we produce. But I think that's positive in any case.
Okay. Now please let me now give the floor again to Mr. Galan to conclude this event.
So thank you very much for being part of this conference call. As always, our Investor Relations team will be available for any additional information you may require.Thank you very much. But I think I would like to give you the last word. I'm optimistic about how the things are performing. Thank you.