Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Corporacion Acciona Energias Renovables SA (FRA:5BP, Financial) has a strong commitment to climate action and is advancing towards a net zero economy.
- The company has a substantial share of regulated and contracted volumes, which has been crucial in navigating unfavorable market conditions.
- Corporacion Acciona Energias Renovables SA (FRA:5BP) anticipates significant growth in capacity additions, expecting to reach approximately 15 gigawatts by the end of the year.
- The company has observed increasing market interest in its asset rotation policy, receiving formal offers for approximately 6 gigawatts of its asset base.
- Corporacion Acciona Energias Renovables SA (FRA:5BP) has a robust pipeline of battery energy storage systems and new projects in various geographies, indicating strong future growth potential.
Negative Points
- The first semester of 2024 was characterized by weak electricity demand in Spain due to mild winter temperatures, leading to some of the lowest pool prices in the Spanish power market history.
- The company had to significantly reduce production as it was often not economically viable due to low prices.
- Non-Spanish operations also faced an adverse semester with weak volumes and grid output limitations.
- Corporacion Acciona Energias Renovables SA (FRA:5BP) experienced curtailments equivalent to 9% of potential output, impacting overall production.
- The company reported a 39% decline in EBITDA to EUR419 million due to lower prices and higher depreciation and net interest charges.
Q & A Highlights
Q: Can you provide an update on asset rotation for the rest of the year, including geographies, portfolio size, and valuation?
A: We have a significant amount of capacity in conversations with different buyers globally. There is a big appetite for high-quality assets, and we expect to close transactions within the next semester to meet our targets. However, we must limit the information we share on this topic for strategic reasons.
Q: Are you seeing a pickup in demand for PPAs and supply?
A: Yes, the appetite for clean energy from corporates remains very strong globally. There is an increased desire for contracting energy from existing operational assets, particularly wind assets, due to their ability to deliver clean energy immediately and reliably. This, combined with healthier demand and resilient renewable energy certificate prices, provides a positive environment going forward.
Q: Can you explain the effect of the regulatory banding mechanism in the second half?
A: The regulatory banding mechanism requires us to account for the recorded banding of our assets, depending on their profitability. This year, with the normalization of prices, two vintages came back into the regulatory system, resulting in a EUR60 million regulatory payable in the first half. This will unwind throughout the rest of the year, and we expect a net positive effect by year-end, with an average regulated price of around EUR85 per megawatt hour.
Q: What is the impact of the EUR76 million impairment reversal related to the Spanish hydro assets on your EBITDA with capital gains target?
A: The hydro deal announced will generate a total capital gain of EUR170 million, with EUR76 million recorded below the EBITDA line and EUR94 million to be recorded in the EBITDA line upon transaction closure. We consider the full EUR170 million towards our EUR200 million to EUR300 million capital gains objective for the year.
Q: Could you provide details on the installation timing for new assets in 2024? Will most capacity be operational in the fourth quarter?
A: Capacity additions for 2024 will be mainly back-end loaded, with approximately 1.2 gigawatts to be installed in the second half of the year. Projects like Aldoga in Australia and Forty Mile in Canada will start contributing meaningfully towards the end of the year.
Q: With Nordex reentering the US market, do you expect to shift more investments there?
A: Nordex's presence is not a major variable in our investment strategy. We are strongly focused on the US and Australia for capacity additions in the next few years. While Nordex's presence helps, it is not a significant element of change in our strategy.
Q: What is the sensitivity to volumes and power prices?
A: For every EUR1 per megawatt hour change in power prices, the impact is around EUR2.5 million in Spain and EUR4 million internationally. For volumes, a one terawatt hour change would impact revenues by approximately EUR65 million.
Q: Is the one gigawatt installation objective for 2025 conditional on certain levels of asset rotation proceeds?
A: The one gigawatt planned for 2025 is almost committed and not dependent on our asset rotation policy. The CapEx involved is half of what we used in 2024, contributing to improved ratios in 2025.
Q: What are the EV to EBITDA multiples for the hydro divestment?
A: The implied multiple for the hydro assets is around nine times EBITDA, with an EV per megawatt multiple of around EUR1.6 million per megawatt. We consider this a fair price for high-quality assets.
Q: What are the implications of a potential Republican administration on your US investments?
A: We do not expect significant changes with a potential change in the US administration. The fundamentals of the market remain strong, with growing demand driven by data centers and high-tech industries. Our investments in Texas during the previous Trump administration were successful, and we expect similar outcomes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
