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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today. We are delighted you are able to be with us for the presentation of our 2018 first half results. The presentation will follow our customary format. Firstly, we will begin with an overview of the results and the main development during the period given by the top management that usually we have with us: Our Chairman and CEO, Mr. Ignacio Galán; Mr. Francisco Córcoles, Business CEO; and finally, the CFO, Mr. Pepe Sainz.
Afterwards, we will move on to the Q&A session. We'd also like to point out 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.
We expect the event will last no more than 60 minutes. Hoping that you find this presentation both useful and informative.
Now without further ado, I will hand over to our Chairman and CEO, Mr. Ignacio Galán. Thank you very much again. Please, Mr. Galán.
Thank you, Ignacio. Good morning, everyone, and thank you very much for your participation today in this conference call. In the first half of the year, operating net profit grew 27% to €1,368 million, reflecting the investment made by the company during the past five years' worth €20 billion, including the 2.4 -- €2,478 million invested in the first half of this year. This, together with the normalization of the operating and weather condition in Spain and the U.K. and the further improvement in efficiency globally, allow us to reach an EBITDA of €4,436 million, 17% up. Excluding foreign exchange impact, we totaled a €260 million during the first half, EBITDA increased by 24%.
Last year, net profit included over €400 million of extraordinary positive impact deriving from the capital gains in Siemens Gamesa in a gas price adjustment. And in spite of this, our reported net profit reached €1,410 million, only 7% less.
Operating results continued to evolve positively in all businesses with a double-digit growth in almost 21% in networks as consequence of the annual increase in tariff in Connecticut and New York and also thanks to the tariff reviews in our distribution companies in Bahía and Rio Grande do Norte in Brazil in April 22 as well as the consolidation of Neoenergia.
The performance of our renewable business also improved significantly, reflected in a 25.5%growth.
In Spain, output gross is 29% higher than year earlier due to the normalized hydro condition and a higher wind resource. In the U.S, the additional offshore wind capacity commissioned during 2017 contributed to a 12% increase in wind output.
In the U.K., improved results were driven by the better wind condition and the new capacity added.
And finally, in Germany, our 850 megawatts Wikinger offshore wind farm entry is gradually into service and is now fully operational. Generation and Supply EBITDA also increased in comparison to the last year, thanks to the normalization of market condition in the U.K. and also to the higher retail activity in the Spain. Excluding a positive one-off gas price revision in 2017, as I mentioned before, the EBITDA of these businesses will have increased 33%.
Net investment have reached €2,478 million in the first half of 2018, broadly in line with 2017, minus 3%, and we have €7.8 billion of capital in progress. The Network Business represent 42% of the total investment with 36% coming from renewables and the remaining 22% coming from Generation and Supply.
423 megawatts of capacity have been installed during the first half of the year. And for the rest of the year, we expect to complete the installation of an additional 2,326 megawatts mostly in Mexico, including the 1,800-megawatt combined cycles of Escobedo and Topolobampo. In the onshore wind farms in Pier and Santiago, we totaled 326 megawatts. During the first half of the year, significant progress has also been made. In network, our new subsidiary, AVANGRID, has continued to progress development of the New England Clean Energy Connect transmission project for which it was selected earlier this year. In June, the company secured a contract with Massachusetts' selected distribution companies in Hydro-Québec. The project is expected to come on line by 2022.
In Brazil, ANEEL, the regulator, has approved the tariffs for the new five years regulatory cycle of Bahía and Rio Grande do Norte with an increase of around 60% average. This will have a positive effect on the 55% of our total distribution regulated asset base in Brazil. In renewables, the construction of our U.K. 714-megawatt East Anglia One offshore wind farm is well on track with the first jacket already installed and the offshore substation completed and ready to ship into the North Sea. And the onshore work is on track as well after some delays as a consequence of the discovery of Anglo-Saxon archeological remains close to the site.
Also in offshore wind, a number of projects have been awarded and confirmed. In the German Baltic Sea, we were awarded with the 486-megawatt Baltic Eagle with commissioning expected by 2023. In the United States, AVANGRID was awarded with 800-megawatt Vineyard Wind farm off the coast of Massachusetts with 400 megawatt expected to be commissioned in 2021 and the remaining 400 just one year later. And finally, in France, Saint-Brieuc, a 496-megawatt offshore wind project, has been recently confirmed to be in operation in 2023 as well. Total investment for these offshore projects €6 billion.
In offshore wind, Neoenergia will add 471-megawatt of new capacity to the Paraiba offshore -- onshore wind farm complex by 2022, reaching 565 megawatt and becoming the group's largest wind farm in South America. Also in Brazil, 122 megawatts hydro capacity has been commissioned in Belo Monte. And in Portugal, works for the Támega hydroelectric complex are well on track for commissioning on the first dam, Daivões, of 800 megawatt in 2021 and the remaining capacity in 2023. Early this week, we signed, along with the European Investment Bank, for the financing of up to €650 million of this project under very competitive condition.
In solar photovoltaic, a total of 226 megawatts in Mexico are ready for commissioning during the third quarter of the year and the construction of two new plants with around 400 megawatt of total capacity will be announced shortly to be in operation by 2020. And we have announced the construction of 391-megawatt solar photovoltaic plant in Extremadura in Spain with commissioning also in 2020.
Finally, in Generation and Supply, ScottishPower has already installed 1 million smart meters. And in Mexico, CFE tariff increased by 10.7%in July as a consequence of gradual implementation of additive tariffs. We also completed the repowering of Monterrey combined cycle.
All in all, we can affirm that the delivery of our investment plan is well on track. Project awarded recently had raised a percentage of CapEx secured for new generation capacity network project to 86% from -- of the 2022 plan. Beyond the current plan, we already have €1 billion committed post 2022 to finalize the renewable project for Saint-Brieuc, Baltic Eagle and Támega as well for the smart meter and network investment already committed in distribution in the U.K.
Our efficiency measured by the net operating expenses to gross margin ratio has improved by 100 basis points just one year, excluding the positive non-operating adjustment in gas price already mentioned.
Efficiency will continue to improve in the second half as Neonergia in Brazil and in the rest of the group companies continued to benefit from synergies and implementation of best practices.
Our American subsidiary, AVANGRID, maintained adjusted net profit relatively stable at $371 million in U.S. GAAP, thanks to the good performance of both businesses. Renewable adjusted net profit increased almost 90% driven by new capacity in networks view by 4.4%. The results were negatively affected by the impact of major storm and the delay in commissioning of El Cabo and Tule onshore wind farms. Excluding these adjustment, net profit would have increased by 10%.
The company continues delivering on track -- on its strategic plan, having executed contract for 378 megawatt of the new wind project in the year, included 221 megawatt in Texas announced yesterday by AVANGRID. Also in renewables, the company has under construction almost 500 megawatt of onshore wind and solar photovoltaic capacity, all which will be in operation by 2019. In networks, AVANGRID has five new multiyear rate cases for Connecticut Gas Natural & Berkshire Gas in Massachusetts with new tariff effective from 2019.
In addition, as I already mentioned, the company was awarded two remarkable projects. Vineyard, the first large offshore wind farm in the United States at a moment in which this technology prospect is gaining momentum in the country. In networks, the New England Clean Energy Connect project, which includes a 1,200-megawatt high-voltage direct current transmission line linking the electrical grids in Québec and New England to bring clean electricity to Massachusetts within the next 20 years.
Finally, executing AVANGRID's commitment to raise the dividend in 2018, the company's Board of Directors approved on July 11 an increase of this quarterly dividend to $0.44 per share payable in October. In Brazil, less than 1 year after its merger with Electro, Neoenergia registered an EBITDA of BRL 2,159 million in the period, growing 43% and net profit increased by 144% to BRL 671 million. As part of the integration process, synergies and best practice improvement had driven BRL 100 million in savings, already exceeding the expectation of the first half and will increase during the second half of the year.
The tariff increases in Bahía, as I mentioned before, 16.95% and Rio Grande do Norte 15.61%, will benefit to the 55% of our total Brazilian distribution regulated asset base from May this year during the period of five years. New renewable capacity will be in operation in the first half in Belo Monte, and additional wind capacity will start construction to operate from 2022 onwards.
Finally, the financial discipline, the good operating performance and the lower interest rate are leading to an improvement in the company's financial cost, I will mention after with the financial director. As regard, financing, we have continued to improve our debt profile. During the semester, the group has issued €4,450 million in bonds, including hybrids, 58% of which were green. And €5.3 billion plus €2.5 billion will arise in credit lines. As of today, 23% of our total debt portfolio is green and 75% of our credit lines are linked into environmental factors. In general terms, this allow us to attract more demand and obtain more favorable financial conditions.
The group net debt currently stands at €34 billion in line with our plan. In the coming months, we expect this level to be reduced as new investment continued to deliver result and we proceed with the plan of divestment. By the end of the year, we expect the net debt-to-EBITDA ratio to reach around 3.7x.
I will now hand over to Pepe Sainz, the CFO, who will present this result in further detail.
Thank you, Chairman. Good morning. As the Chairman has explained, 2018 first half operating results have been strong, positively impacted by better operation -- operating conditions, the NEO consolidation and new installed capacity, partially compensated by negative FX impact as the result of the evaluation of our basket of currencies, the U.S. dollar 11.7%, the pound 2.2% and the real, 19.5%. Our operating net profit grew 27% and our operating cash flow was up 5.6% to €3.5 billion, but grew 12.3%, excluding the Gamesa dividend of €198 million accounted as cash flow in 2017.
Revenues increased 17.5% to €17.6 billion and procurements grew 22% to €9.9 billion. As a consequence, gross margin rose 12.2% to €7.7 billion. Energia global consolidation accounted for €741 million, more than compensating the FX impact that lowered gross margin by €320 million. Excluding both impacts, gross margin grew by 9%. Net operating expenses were up by 11.8% to €2.1 billion, driven by the Brazil organization, partially compensated by the FX impact. Excluding these two effects, net operating expenses remained almost flat.
Levies improved by 3% to €1.1 billion, mainly thanks to €45 million positive FX impact, €10 million lower U.S. taxes with no impact at year-end, partially offset by €27 million increase of Spanish taxes on generation due to the higher output. Analyzing the results of the different businesses and starting with networks, its EBITDA was up 20.7% to €2.4 billion with positive evolution in all geographies. As you can see on the slide, Spain contributed 37%; the U.S., 24%; the U.K., 19%; and Brazil, another 19%.
In Spain, EBITDA grew by -- to -- by 15.9% to €893 million, thanks to positive settlements from previous years and the positive court rulings on assets given by customers, of which €53 million is a one-off. In the U.S., EBITDA was 3.6% up to $706 million due to the growth in rate plans, positive IFRS impacts, partially compensated by storm costs, which were $40 million higher than last year, reaching close to $129 million, which is an extremely high amount that should not be repeated in following years. According to IFRS rules, we have not yet accounted for future reduction in EBITDA following the tax reform that will happen once regulators officially adjust the tariffs now under discussion.
In Brazil, EBITDA grew BRL 1.4 billion to BRL 1.9 billion driven by the NEO consolidation and the tariff revision in Bahía and Rio Grande do Norte in place from May 2019. Finally, the U.K. In the U.K., EBITDA grew plus 3.1% to GBP 400 million with higher revenues, both in transmission and distribution.
Renewables EBITDA grew by 25.5% to €1.2 billion, with positive evolution in the most relevant geographies and output increasing by 20% to 35,000 gigawatt hours. With a 4 percentage points higher load factor, mainly thanks to our strong hydro growth in Spain and the U.K. onshore business. As a result, Spain is now the main contributor to the renewables EBITDA with a 41% stake followed by the U.S., 23%; the U.K., 20%; rest of the world, 9%; Brazil, 5%; and Mexico, 1%. In Spain, EBITDA reached €491 million, 32% higher than last year, mainly driven by a 48% higher hydro output, partially compensated by lower prices than the first -- compared to the first half of 2017. And you remember, there was a big spike on prices in January on higher levies, linked to higher volumes. The EBITDA growth is also due to a 12% higher output in wind and better prices for wind.
In the U.S., EBITDA grew 4.4%to $334 million, due to an 11.3% higher output, partially compensated by lower prices and the impact of some positive high power hedges accounted for in 2017. In the U.K., EBITDA grew 27% to GBP 205 million as a consequence of 12% higher output with 195 megawatts increase in average operating capacity, higher load factor and better prices that boosted gross margin by 19%.
In Brazil, EBITDA grew BRL 195 million to BRL 253 million due to the NEO consolidation. Mexico EBITDA decreased 24% to $20 million with higher output not compensating lower prices. Finally, in the rest of the world, EBITDA reached €106 million due to the gradual entry of Wikinger, which, as the Chairman said, is now fully operational.
Generation and Supply EBITDA improved 1.7% to €863 million as a consequence of the recovery from the adverse operating environment in 2017 and despite the positive one-off accounted for in gas in Spain in the second quarter of last year that reduces the growth path compared to the first quarter. As you can see in this slide, Spain accounts for 45%; Mexico, 28%; the U.K., 22%; and Brazil, 5%. In Spain, the EBITDA fell 27% to €397 million impacted by the already mentioned positive one-off accounted in the gas business. In addition, output fell 10.7% due to higher renewable production and 12% lower nuclear. Retail activity was strong and prices are improving for the year.
In the U.K., EBITDA improved GBP 125 million to reach GBP 166 million, with a 32% increase in gross margin, thanks to the normalization of margins. In retail, it's up 20%. And in generation and wholesale, it's up to GBP 45 million, recovering from the 2017 loss. In addition, net operating expenses fell 8.6% as our internal operational conditions improved and customer acquisition costs are now included in D&A.
In Mexico, EBITDA grew 3.2% to $299 million, driven by the operating improvement of the generation fleet and the recovery in prices versus the first quarter that will continue during the second half of the year. And Brazil added BRL 184 million to EBITDA as a consequence of the NEO consolidation.
EBIT increased 17.4% to €2.5 billion, despite €141 million negative FX impacts. Depreciation and provisions increased 16.8%, mainly due to the Brazil organization and higher activity.
Net financial expenses reached of €563 million, €156 million more than previous year, mainly due to the full consolidation of the NEO financial expenses, that's €115 million. A €27 million increase in non-debt-related costs are also due to the IFRS 9 that adds €70 million to our debt related costs. Our average net financial cost was 3.49% as the higher Brazilian real weight increases the average cost of debt. And also we already mentioned the impact of the IFRS 9. Excluding NEO, our cost of debt decreased three basis points to 3.06% despite the 10 basis point impact of the IFRS 9.
As you can see in the slide, year-on-year net debt grew by €4.6 billion to €34 billion, driven by Brazil, investments and one-off tax payment of €665 million that will be recovered hopefully next year. Nevertheless, we expect it to fall by the end of the year as divestments are achieved in the second half.
Our FFO over net debt was 20.2%. Retained cash flow over net debt reached 17.6% and leverage ratio reached 43.7%.
Our net debt to EBITDA was 4.1x. But as the Chairman has said, we expect to improve our year-end net debt-to-EBITDA ratio to around 3.7x. Operating net profit grew 27% to €1,367 million due to the strong operating performance of the group, while reported net profit decreased 7.1% to €1.4 billion due to the €420 million lower nonrecurring results.
As the year passes by, these impacts will be diluted, and we expect a net profit positive growth by the year-end, as the Chairman will point out in his conclusions. Thank you very much.
Thank you, Pepe. To conclude, I would like to highlight, then after the good first half of the year in operational terms, I would like to say very good. We are expecting an even better performance during the last six months of 2018. In networks, the tariff increases enforced in May in United States and Brazil will improve the result through the second half of the year.
In renewables, we expect acceleration in results, thanks to the increase in output provided by the new capacity of the onshore wind farm in Mexico as well as the additional power of Belo Monte in Brazil, the 350-megawatt offshore German Wikinger, which is now working out too low. And additionally, we have already higher hydro reserves than the normal average. In Generation and Supply, we expect the CFE tariff in Mexico to continue improving, and forward prices in Europe are showing a positive trend for the remainder of the year.
In Spain, nuclear output will normalize now. The outage of two plants have concluded. In Generation in Mexico, the contribution of the new cogenerations San Juan and the repowering of Monterrey will complement it by the new combined cycle capacity in the last quarter of the year. And finally, the acceleration efficiency measures in all geographies along the year and the implementation of synergies in Neoenergia are also expected to speed growth during the following two quarters.
We also continue our active balance sheet management. It will enable us to achieve financial ratios in line with the plan. All in all, the result we have presented today allow us to reaffirm our 2018 outlook of about €9 billion at EBITDA level and close to €3 billion in reported net profit. And to ratify and deliver our commitment, we offer increase shareholder remuneration in line with results.
So thank you very much for your attention. Now, we are ready to answer your questions you may have.
Okay, we are going to start with the Q&A session. The first question comes from Rui Dias, UBS; and Stefano Bezzato, Credit Suisse. Regulatory environment in Spain. Did you have the chance to meet with the new administration following such contracts? If any, do you think that the regulatory outlook is indeed improved?
Well, we have already had some meetings with the new administration at different levels. And I can say that the first comments of the government and really very much in line who has been our way and our vision during many years. I think the first intervention of the Minister in Brussels was already supporting the winter package of the commission and supporting the target of 32% of renewable for 2030, and the first comment is already in line with the commissioning power plants, which are already fossil and more in favor of renewables. So I think the impression and the expectation we have from the government is really real change in the policy, and the approach to the climatic change and the policy approach to energy transition.
Next question is regarding nuclear assets in Spain, and it's coming from Daniel Rodriguez from Fidentiis and Jorge Guimarães, Haitong. They are asking about the possible extension of useful life until 50 years of the assets. And in that case, which is the situation of Enresa funding.
Well, in line with what I mentioned before and with the strategy with European Union and the Spanish government is already fixing, we have subscribed in Spain and perfectly can already achieve the target of this 32% of the total energy, so that means 70% of the energy produced in electricity coming from renewable sources without being affected at all the supply and even with the potential reduction in the cost of power generation. For that, it will be necessary, and that has been the comments as well of the minister, closing the coal power plant, which today are already emitting on the line of 60 million tons a year, which represent more than 20% of the total emitting of the country. With respect to the nuclear fleet, according with our studies as well and according with the government has already indicated, the nuclear power plant are already thinking to close at 40 years, and our vision is perfectly achievable without affecting to the supply to the country. You have to be aware that for extending the operation over 40 years will be necessary, investment of several billions, which, of course, they will have already have to be remunerated and they will already affect to the prices.
And another positive side, I'm trying to transmit, what is the government is saying, a plan of 70% renewables will provide a plan of investment in the country in the range of €70 billion, €80 billion in between the new power plants and the networks, which are needed to be integrated. And that will generate a generation of jobs of several hundreds of thousands of jobs in the country. At the same time as well, the decommissioning of the actual power plant, so the coal power plant and eventually the nuclear power plant, will keep in maintaining the big part of the jobs, existing job, actually, during a long period of time, certain up to 2030. That will make the use of words we haven't used for some member of the government that will create a new industry of -- the commission in industry in the country. At same time, we are developing all reinforced and reinforcing the industry of construction and installation of new power plant of network. So I think that is our position with respect to this point.
Third question comes from Daniel Rodriguez of Fidentiis, and it's related to generation and supply business in Spain that is currently suffering higher cost of procurement cost. We are seeing the prices over there, generally, these days and finally, the condition of the raw materials. The question is regarding if we are going to be able to pass the cost to the customers. And additionally, we are feeling or we are suffering the new commercial pressure from another new competitors.
So I think, perhaps, Paco, you can already comment more in detail. But I think it is a fact in this moment across Europe that the commodities prices is increasing. So coal prices increased, gas prices increased, carbon prices increased, fortunately, finally. And I think that is affecting, that is affecting to the whole structure of the cost. So -- and that is something which is not new.
In particular case of Spain, most of the time of the market, the price is fixed by precisely coal power plant. So coal is more expensive and carbon is more expensive, but those things are affecting to that one. So I come back to my previous approach. If instead to having already dependence of so much of traditional fossil fuel power plant will be more already producing more renewable, probably that will be noted as affected -- that this affected at present.
Any comment from...
Would you like to add anything, Paco?
No. Yes, [indiscernible] regarding the net buyer, we are -- we have to manage that situation, I mean that wholesale market anticipating the procurement in the wholesale energy that we need for our sales because we produce less than we say. So this is part of the fact. And for us, we are suffering these high prices. And the fact is that we are passing to the customers all the prices. And in a like-for-like basis, we saw their information. We are selling, for instance, 2018 at €67 per megawatt hour. And if you want to be homogeneous with other competitors, you have to transfer -- to transform these price to €70. That is the price that is homogenous with the one that report others. And that means that we are experiencing the ability to pass this to the customer for the time being. And we are seeing this price -- the final price for this year is around €57, and for the next year in €54. So we expect that this will be moderated, and this is now where [indiscernible] we are net buyers.
Okay, next question probably has been already answered and it came from Stefano Bezzato, Crédit Suisse; and Jorge Alonso, SocGen and is regarding the same thing that has been just answered. Next question comes from Stefano Bezzato, Crédit Suisse, and he see if we can give an indication of the growth in recovery net income or not in net income, recurring net income at the end of the year.
Well, as I mentioned, last year, we have -- our results were affected for several extraordinary and nonrecurring items. And this year mostly, all our result is just based in recurring thing as we saw. So I think, on this €3 billion net profit, around €3 billion we are mentioning, mostly will be already affected just by recurring result.
Next question comes from Carolina Dores, Morgan Stanley; Javier Suarez, Mediobanca, and it's related to AVANGRID. Are you including the U.S. transmission and offshore project as a part of the guidance and CapEx already? Second question regarding AVANGRID. Can you quantify how large were the storm cost impact in the U.S.? Is there any minor deduction you can -- should be taken to revert recent operational underperformance? And finally, AVANGRID talked about selling wind pipeline in the U.S. yesterday. Is selling project and assets in operation as a part of Iberdrola's strategy? Or is this just at AVANGRID?
Well, I think the first part, the storm, we have already took kind of a storm considering our -- and United States in AVANGRID ones which are recognized by the regulator, for me, part of the future wrap, which is the major storm. And there are certain amount, which is already in the -- inside of the rates, which is for major storm. No money, that is already more or less fitting what is already historically affected. This year, the first half of the year, we have already had a lot of these major storms, which is going to strike to the P&L. We expect in the second part of the year will be not as much, and that will be already coming to the normalization of what is the normal major storm during the year. I said, the major storm normally that goes -- they pass through to the right. And related to the measure, it was mentioned that without these affected major storm, which is already affecting the first half, and we hope in the second half, we'll be no affected. So in such way that the total amount we have already awarded in our rates will be enough for covering this one.
And the second important thing was already affected for two wind farms, which has been already delayed the construction. Now, these two wind farms are fully in service. So I think that is going to generate already what was expecting during the year. You mentioned about our transmission and offshore wind to be part of the guidance and CapEx already. Well, I think that is the insight of our global plans. So I think there is no changes in our growth plan. I think with certain project, it was defined. Certain projects were not defined, and that is part of those who are not certain -- or they're not defined, but this is in the total amount already planned for the investment up to 2022 in United States.
There's one regarding the pipeline. The pipeline in the U.S. The pipeline in the U.S. that they announced yesterday.
Well, I see. Yes. I think that is a normal thing. I think they announced yesterday that they are going to buy some wind farm, which is just in construction from company Amazon reached an agreement, and that India is another one, which I imagine is the same thing. I think that is the normal rotation of the pipeline. There are areas in which we have already certain advantage for operating, and we would like to keep their certain area, which another one has better facilities for operating and we are selling. So I think that is part of the normal way of how they operate, so -- which I think is good, but I think it's part of normality. It's not an exceptional, and it's going now to change very much the picture of the company in this respect.
Next question comes from the Alberto Gandolfi, Goldman Sachs; Antonella Bianchessi, Citi; Jorge Alonso, SocGen, and he's related to offshore auctions if final -- basically see if, can you update us on upcoming offshore auctions in the U.S., U.K., rest of Europe? And where do you feel more confident? Can you give an idea of the size of the tender in terms of megawatts and if we can expect profitability?
Well, I think with that, as I mentioned in this moment, our total expression to offshore is on the range of €8.5 billion. €6 billion is -- well, has been awarded. €2 billion or €2.5 billion is the one which is already in operation. So I think in this moment, we are already a part of those one. The day before yesterday, the Minister of Energy in Britain has already announced new auctions for offshore in May 2019, in which we have some project in East Anglia. Another one is East Anglia Three, which is on the range of up to 1,200 to 1,400 megawatts that we are already preparing for that one. I think they are -- they will be probably in the future, so more in Germany that we are already looking for this opportunity. And in France, for the time being, there is nothing announced, but I think we are already concentrated on that one. So I would like to say, a part of the three what we have now in construction, which is I believe in France, the Baltic Eagle in Germany and East Anglia ONE, we have already prepared East Anglia, East Anglia Three in Britain. And in United States, there are several of this one, apart to the Vineyard in Massachusetts, the 800 megawatt I mentioned. We have already the site -- we have sites as well, and this site has already capability for much more than this one, then probably we are going to bid for in the future from there. And we have already as well inside in North Carolina that we will -- in the moment, there will be some opportunity, we will be as well ready for bidding full.
Next question comes from Javier Garrido, JPMorgan, and it's regarding the carbon framework of Renewables under the European Union umbrella by 23 -- 2030, sorry. Is it possible to see higher scenario for new countries in terms of development of Iberdrola in Europe?
Well, I think we are already in new countries in Europe. I think we are in Portugal with the largest investment ever made in a company in Portugal and in the Tâmega River with this three dams. We have already in Germany, as I mentioned. So one wind farm in operation, another wind farm -- offshore wind farm in construction. We are in France within -- in a -- with a wind farm. We have -- recently, we are awarded with this small thing. But in a small country as Greece, we got as well another one. And I think we continue in this line. So we are, but I think we are not in a special different -- Those one that we are already at present. So we are now looking for different countries, those ones where we have already established in this moment.
Next question comes again from Javier Garrido, JPMorgan. It's regarding possible disposal of -- according with press news of thermal assets in the U.K. and cogen plants in Spain.
Well, I think in the first quarter, we did something a small thing in cogeneration. And as far as I know, there are another in negotiation, different power plant, thermal power plant in different places. And cogeneration, and they have set the team, which I hope during the second half of the year, all those things will be already materialize. There are now very -- they're in negotiation, and I hope they can be known sooner than later.
Next comes -- next question comes from Carolina Dores, Morgan Stanley, and it's regarding Brazil. If we are interested in new opportunities like the [indiscernible] in that country.
Well, as I mentioned, our people in Brazil yesterday, I saw them in the media. I think they look for all opportunities, but I think what you can't be sure is our internal procedural mix that we are very, very solid in the way we analyze the alternative. So I think some of those one, I saw today that we -- has been awarded for somebody else, the [indiscernible] in the media. And we even has not already offered for it. So I think, there are -- we are not -- we see opportunities. We analyze the opportunities, and they are already possibilities of creating value. We are ready for bidding forward, but we see that this is impossible and to -- and create value on the condition without putting for that one. We are not ready for those one. I think we -- Brazil, as you know, is a country, where we have quite a lot of interest. I think that we have -- apart of the distribution companies that we have presence in this moment. We have already been awarded with some transmission line beginning of this year that we are now making, making for those one, and we'll continue. But I think always, always in a very disciplined manner, never already offering more than the value than the things has already for ourselves.
Probably the answer given to Carolina Dores has already answered the question from Javier Suarez, Mediobanca, that was in this regard -- quite similar to the previous one in Brazil. So next question is related to the debt. If we can provide the evolution of the figure of debt in the first part of the year and taking -- giving some comment about cash flows, et cetera. And it's coming -- the question from Daniel Rodriguez, Fidentiis.
Pepe, you reply?
Yes. I think that there is a -- some -- there is a difference about how you measure the working capital from one side to the other. In the one side, what we consider is that the way you fund financially. With financial debt, the working capital is not included in the working capital. And there are some other methodologies, which include the financial -- the evolution of the financial debt. So the different basically has to do with the reclassification of the financial debt in short term and long term. Actually, as we say in the prospectus, the working capital is actually very flat in the group, okay?
And the last question is coming from Javier Suarez, Mediobanca, and it's related to net debt to EBITDA. And basically he's going to see the relatively high level, higher than 3.5x during the next three years, and the payout should stay at the level of 70%. Should the company decelerate CapEx to underpin better its balance sheet?
Well, I think that we have a plan and we are complying with this plan. We know that there is a little bit of investment into the -- into '18 and '19. Especially from '20 onwards, there is margin. I think that the target is to end the plan with the below 3.5x, around 3.5x. We think that this is a reasonable level. And the good news that we have is that we have a lot of opportunities to invest and to create values, and that will support the growth for the next decade in the group.
Okay. So the Q&A session has finished. And now, please let me now give the floor to Mr. Galán to conclude this event.
So thank you very much for participating in this conference call. We are quite optimistic in the next -- in the second part of the year. So following -- and we expect to continue offering more increased visibility of the business as always and reaffirming what I was already saying that our expectation for the year-end in line with these €9 billion and this around €3 billion in terms of net profit.
So for meantime, I wish you all good summer holidays. Thank you very much, and we'll be already in touch with yourselves across the next six months. Thank you very much for your attention. Thank you.