EDP Renewables SA · EURONEXT:EDPR
EDP Renewables SA — EDP Renováveis — Investor Presentation (June 2018)
70 slides from EDP Renewables SA's investor presentation, June 2018
Slide 1: EDPR Presentation June 2018
& renovaveis EDPR Presentation June 2018 www.edpr.com
Slide 2: Disclaimer
This presentation has been prepared by EDP Renováveis, S.A. (the "Company“; LEI 529900MUFAH07Q1TAX06) solely for use at the presentation to be made on June, 2018. By attending the meeting where this presentation is made, or by reading the presentation slides, you acknowledge and agree to be bound by
Slide 3: EDPR installed capacity and rankings by market
30 MW #4 5,234 Offshore under #2 develop MW ment 71 418 MW MW Offshore 410 under develop 200 ment MW MW 521 #3 #1 Offshore under MW develop ment 1,253 MW #3 144 MW 331 2,395 MW MW Notes: As of Mar-18: Installed capacity includes EDPR’s Equity consolidated: 152 MW in Spain and 179 MW in the US; Inclu
Slide 4: Renewable competitiveness, growth in main markets, EDPR well positioned
Ongoing renewable competitiveness improvement… Renewables are a competitive andQuality cheap technology 1 assets (wind LCoE -67% since 2009 ) to cope with the increasing energy demand and the need of a low carbon economy …supporting increasing growth in main markets… Solid specific market fundamenta
Slide 5: Core Business and UN Sustainable Development Goals
UN Sustainable Development Goals Core Business Direct impact EDPR supplies affordable & …impacting positively on communities …ensuring decent work, gender clean energy while mitigating & fostering innovative infrastructures equality & preservation of the the climate change… & circular economy… envir
Slide 6: CMD Strategic Agenda
CMD Strategic Agenda Results Review & Outlook i Sustainability Annex
Slide 7: CMD Strategic Agenda
Se renovaveis CMPD Strategic Agenda
Slide 8: Selective growth, operational excellence, self-funded business
1. Selective growth 2. Operational excellence 3. Self-funded business 2016-2020 2016-2020 2016-2020 Prioritize quality investments in our c.700 Technical expertise to >97.5% Investing in visible €4.8bn MW/year maximize production availability growth opportunities investments core markets High visibi
Slide 9: Increasing 2016-2020 capacity additions and technological mix
Increasing 2014-17 Business Plan… …into a new with stronger capacity additions and technological mix Capacity Additions Capacity Additions Drivers (MW; %) (MW; %) Emerging Solar PV Markets North Wind Onshore: fully 20% 10% 65% America1 competitive technology Brazil 10% 500 MW/year United 700 MW/year
Slide 10: Production Tax Credits strategy under safe-harbour conditions
Production Tax Credits EDPR strategy under “safe-harbour conditions” to scheme phase-down maximize projects returns Capacity additions (GW) Project Name MW State CoD Start of construction… Secured Projects built (#3) 428 3 states 2016 2016 2017 2018 2019 2020 2021 Under negotiation/identified Projec
Slide 11: Canada and Mexico growth projects
CANADA MEXICO 248 MW 248 MW wind farm in Alberta Sharp Hills In operation 20-year supply contract COD 2019 200 MW 100 MW wind farm in Ontario 200 MW1 wind farm Eólica de Coahuila 20-year supply contract 100 MW 25-year PPA COD 2019 Nation Rise CoD 2016 All projects with PPAs already awarded Platforms
Slide 12: Europe: Portugal, Italy, France
Europe represents c.15% of EDPR growth plan Portugal Italy Capacity Additions Completion of Ventinveste projects Auction based system with 0.2 GW (MW) 20-year feed-in tariff of projects already awarded Spain +0.2 GW +0.2 GW Portugal France France Spain Identified & pipeline projects Projects awarded
Slide 13: Brazil
BRAZIL 331 MW 120 MW installed capacity Baixa do Feijão > 45 % load factor CoD 2016 127 MW JAU & Aventura + CoD 2017 mid/high double digit IRR 137 MW 137 MW under construction Babilonia CoD 2018E PPA price inflation linked + Increased profitability 219 MW 384 MW projects with PPAs due to higher prod
Slide 14: 2016-20 additions breakdown and market dynamics
EDPR 2016-20 additions breakdown Different markets dynamics US: ITC scheme1 By technology (MW) Start of construction… United States 2016 … 2020 2021 2022 2023 … Solar PV …end of construction The core growth market 10% +3.5 GW boosted by ITC extension Full ITC (30% capex) 2016-2020 26% ITC Wind Onsho
Slide 15: Offshore: United Kingdom and France
UNITED KINGDOM FRANCE CfD awarded PPA awarded Moray Le Tréport Firth 0.5 GW + 0.5 GW 950 MW Iles d’Yeu et de Noirmoutier CfD1 awarded in Sep-17 auction EDPR/Engie/CDC joint-venture EDPR/DGE/Engie joint-venture (43%/47%/10%) Completion expected until 2022 Selected in May-14 for the MoU signed with CT
Slide 16: Load factor, availability and production targets
Delivering second-to-none metrics based on unique wind …to maximize assessment know-how… asset value Load Factor Technical Availability Production (%) (%) (TWh) +3pp +10% CAGR 97.6% > 97.5% 30% 21.4 2015 (P50) 2020E 2015 2020E 2015 2020E Accretive contribution from Predictive maintenance and O&M Gro
Slide 17: Revenue maximization and cost control
Ongoing implementation of innovative Keep high levels power enhancing products of availability Revenue retrofits cut-out add max uprate >97.5% Maximization vortex power Reduction of downtimes by managing warehousing Maximizing operating wind farms output of critical components Comprehensive O&M stra
Slide 18: Operating costs breakdown
Operating Costs breakdown (2016-2020) Levies & Core Opex1 per Avg. MW Strong focus on efficiency Other and cost control benefiting -1% from economies of scale and… CAGR 2015 2020E …supported by a superior and Core Opex higher efficient O&M strategy… ~80% Core Opex1 per MWh -3% CAGR …leading to impro
Slide 19: Unique O&M strategy
Unique O&M strategy at the end of initial contract warranty Portfolio by O&M contract type (%; MW) Modular Maintenance Model (M3) lower costs Segregate & insource main maintenance activities EDPR ISP1 OEM2 ~50% Full ~70% scope 100% 90%-70% Self-perform (SP) Insource more activities: preventative, M3
Slide 20: EBITDA growth drivers
EBITDA growth supported by new and accretive capacity additions along with increased efficiency EBITDA growth Expected EBITDA growth drivers (vs. 2015 Adjusted; € million) +8% MW Addition Efficiency Other Items1 CAGR +11% +0.5% -3.5% CAGR CAGR CAGR New MW Ex-MW growth US 10-yr PTCs €1.07bn in operat
Slide 21: Retained cash flow and investment plan
Quality portfolio generating robust RCF1 Rigorous investment plan to deliver solid returns Retained Cash Flow Cumulative for 2016-2020 2016-2020 (€ billion) 6.8 Capex & Financial Investments €4.8bn Onshore + Solar PV > 90% Offshore < 10% 3.9 New Asset Rotation up to €0.6bn (based on projects with PP
Slide 22: Self-funding strategy
1 Self-funding Strategy (1) 2 Accelerate value growth Asset Allowing the execution Rotation Crystallise projects’ of additional market NPV, capturing & opportunities Investment value created with superior returns Operating Cash-Flow Dividends Interests IRR double-digit IRR single-digit Source Use Re
Slide 23: Asset rotation transactions and implied EV/MW
Proceeds are re-invested in the development of quality and value accretive projects, enhancing its growth and accelerating value creation 348 MW 191 MW 71 MW 54 MW Scope 270 MW 30 MW 1,101 MW 30 MW 1,002 MW 100 MW2 49% 49% 36% 49% 34% 49% 49% of total 664 MW EV/MW Implied €1.3m C$3.3m $1.5m $3.1m $1
Slide 24: Sustainability
Se renovaveis Sustainability
Slide 25: Environmental, Social, Governance
Environmental Social Governance Ensure solid & independent Protect the climate Guarantee responsible operations management Engage with biodiversity Contribute to Local Communities Foster transparency & accountability Preserve natural resources Promote access to energy for all Commit to high ethical
Slide 26: Climate change and GHG emissions
EDPR core business inherently implies the reduction of GHG … protecting valuable air and emissions and does not produce SOx, NOx, or mercury emissions… water resources RE portfolio Clean energy production Avoided CO2 (MW) (GWh) (kt) +700 +10% MW/year +10% CAGR CAGR 2015 2020E 2015 2020E 2015 2020E …
Slide 27: Biodiversity
EDPR contributes to the prevention of loss in biodiversity and aims for a global positive balance Feasibility studies detecting the constraints to be considered since the early stages of the projects Monitoring plans established during construction and operation Implementation of preventive, mitigat
Slide 28: Resources, waste and blades recycling
Main drivers Blades recycling Low waste generation Industry challenge turbines’ O&M and administrative activities Wind energy uses no water Partnership with TRC - R3FIBER technique water consumed is for human use Minimize the impact of its operations Analyzing other potential suppliers considering t
Slide 29: Health & Safety, labor practices, human rights
Health & Safety Labor practices Human Rights Certification Non-discrimination & equal Respect for dignity management systems based on opportunities rejection of any form of forced labor OHSAS 18001:2007 specifications culture of diversity or child labor, harassment, discrimination, abuse or other ty
Slide 30: Sustainable supply chain
Sustainable Supply Chain >5,050 Registration & Contracting Monitoring suppliers contributed Qualification to our success Suppliers’ sustainability Uniform requirements Inspections on site guide for O&M and BoP 93 critical suppliers Risk assessment Turbine contracts ad-hoc Corporate audits Sustainabi
Slide 31: Headcount
Headcount 1,220 International Qualified 1,083 1,018 919 >82% 890 34 nationalities university qualification Equal Young opportunity 38 years 32% average age women 2013 2014 2015 2016 2017 EDPR 2017YE Data 31
Slide 32: Joining, being and growing with EDPR
Joining EDPR Being EDPR Growing with EDPR Attract Transparency Training Foster diversity Efficiency Development Integrate Flexibility Mobility EDPR offers a customized value proposition through the journey 32
Slide 33: Social Investment Policy
Social Investment Policy As an integral part of the communities… (Priorities) Analyse Culture & Art consider communities’ specific characteristics when interacting & making impactful decisions Social inclusion, Sustainable ways of living & A2E Communicate ensure continuous dialogue and maintain clos
Slide 34: A2E strategy
EDPR’s A2E strategy… 2018-2020 Provide clean energy in developing countries based on Investment in A2E 12 companies M€ decentralized renewable energy solutions… Philanthropic 1 …and energy efficiency with profitable business cases… initiatives M€ People impacted 200,000 …and high impact on the commu
Slide 35: Corporate governance model
(1) General Meeting of Shareholders Board of Directors Executive General Secretary Committee Nominations and Related-Party Audit and Remunerations Transactions Control Committee Committee Committee EDPR’s corporate governance model is designed to ensure transparency and accountability through a clea
Slide 36: Remuneration Policy
(1) The variable remuneration 2017-19 is defined in line with the Remuneration Policy strategic pillars through 12 KPIs operational economic ESG Fixed compensation (BoD) Appreciation of the & Opex/MW EBITDA Remuneration Committee Capex/MW ROIC Cash Variable compensation Satisfaction (E.C.) Increment
Slide 37: Ethics and anticorruption policy
(1) Ethics Anticorruption Policy Scope • Involves a series of procedures regarding the relationships of EDPR employees with external • Employees of EDPR Group parties • Representatives acting on EDPR’s behalf • Suppliers: required to respect the Principles • Defines approval processes of actions reg
Slide 38: Sustainability targets
Maintain leadership in renewable energy • Growth in installed capacity: 700 MW /year 1 production of electricity • Avoided CO2: +10% (CAGR 2015-20); Emitted/avoided CO2 < 1% • EBITDA: +8% (CAGR 2015-20); 2 Create value, while maintaining a low risk profile • Core OPEX/MW: -1% (CAGR 2015-20) • Net Pr
Slide 39: Results Review & Business Plan Execution
Se renovaveis Results Review & Business Plan Execution
Slide 40: Se renovaveis
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Slide 41: 1Q18 highlights
Quality Selective and Self-funding assets profitable growth business 97.3% availability +597 MW installed YoY UK offshore 20% sale down despite the high levels, lower vs 97.8% >1.0 GW additional capacity already anticipating value creation in an due to adverse weather conditions under construction e
Slide 42: Installed capacity
Installed Capacity1 YoY Under (EBITDA MW + Equity Consolidated) Additions Construction Rest of Europe Portugal Brazil +423 MW +679 MW 14% 11% 3% +47 MW +226 MW Spain 11.0 GW 22% North America +127 MW +137 MW 50% +597 MW > 1.0 GW Average Installed Capacity increased +7% YoY 597 MW added YoY and 1,042
Slide 43: Load factor and technical availability
Load Factor and Technical Availability EDPR Quarterly Load Factor vs. long-term average (%) 2017 2018 +5% 1Q18 D% YoY 1Q18 vs. Average (P50) 110 36% +4.2pp % +1% 102 41% +0.8pp % -1% 24% -9.1pp 89% -3% 105 -4% 38% +2.3pp % 1Q 2Q 3Q 4Q EDPR Availability1 97.3% -0.5pp In 1Q18, EDPR reached a 38% load
Slide 44: Electricity production
Electricity Production TWh (TWh) r% YoY +14% Mainly supported by strong wind 8.8 +16% resource in Iberia: Spain (+22% YoY) and Portugal (+22% YoY) +0.4 7.7 +0.7 Impacted by YoY capacity additions +12% with higher expected load factors Reflecting mainly the capacity +8% additions 1Q17 Capacity D Load
Slide 45: EDPR price evolution
EDPR Price Evolution (€/MWh) 1Q18 r% YoY1 +1%: mix production Higher realized prices in ES +1% and -6%: price: new MW & performance PT +2% offset by RoE; RO -32% -10% -5%: fx (mainly USD) €77.8 -3% (expected reduction by half of GC) & PL -34% (lower substitution fee) €60.5 €54.2 US (-8%): hedges gai
Slide 46: Revenues performance
Revenues Main drivers for Revenues performance (€ million) - Higher output: +14% YoY; +7% Avg. MW YoY +7% ex-fx 528 528 High availability (97.3%) & Load factor (38%; +2pp) Volume: +€79m YoY Lower average selling price: -10% YoY Mainly due to capacity additions mix and lower price performance in the
Slide 47: Opex
Opex (excludes Other Operating Income) (€ million) - Core Opex/Avg. MW (€k) (Supplies & Services and Personnel Costs) 160 160 -4% -1% adjusted(2) Levies & Non-recurrent 10.0 9.6 Core +3% Opex(1) 1Q17 1Q18 1Q17 1Q18 Core Opex increasing YoY on the back of higher installed capacity Core Opex/avg MW -4
Slide 48: EBITDA per region
EBITDA EBITDA per Region(1) (€ million) (%) +2% Portugal +8% ex-fx 23% 373 381 RoE 15% Brazil 1% Spain €381m 23% North America 38% 1Q17 1Q18 Reported EBITDA totaled €381m (+2% YoY; +8% YoY ex-fx) benefitting from 7% top-line growth ex-fx and Adjusted Core Opex per MW performance (1) Includes hedges
Slide 49: 1Q18 EBITDA to Net Profit
1Q18 EBITDA to Net Profit (€ million) r€m YoY EBITDA Positive evolution from operating performance 381 +€7m despite forex translation D&A 128 +€3m Fx impact despite higher capacity As a result of EBITDA performance EBIT 252 +€10m and lower D&A costs (1) Financial Lower average debt YoY and Gain from
Slide 50: 1Q18 Retained Cash Flow
1Q18: Retained Cash Flow (RCF) 1 (€ million) Quality assets delivering +2% cash-flow generation mostly +9 +17% from PPA and Feed-in Tariffs (29) (60) 284 (16) Lower interests costs from lower 381 average net debt (-5% YoY) RCF1 of €284m (+17% YoY) EBITDA LT receivables Current Interests, TEI, Divide
Slide 51: From RCF to Debt and TEI variance
1Q18 from RCF to Debt and TEI variance 1Q18 Debt and TEI Breakdown (%) (€ million) +17% - 8% TEI €1.1bn Other & TEI 285 (270) 60% 46% Gross Debt Loans - with €3.4bn (65) 32% EDP 54% (51) RCF Asset Cash Dividends to Forex r Net Debt Debt & TEI Currency Type Rotation Invest.1 EDPR & Other and TEI & CT
Slide 52: Growth, top line, efficiency
Growth Top Line Efficiency +597 MW YoY 93% of fixed revenues Cost Control +7% YoY avg installed capacity top line stability backed by higher capacity in operation and with higher load factor PPA/FiT assets & hedging strategy lower unitary adjusted cost 1Q18 strong wind resource Accretive Growth O&M
Slide 53: Operational excellence, sell-down strategy, financial discipline
Operational excellence Sell-down strategy Financial discipline Quality projects Offshore strategy executed Balance sheet optimization with long-term capturing early stage leading to lower cash flow visibility project value Net Interests costs Risk management Projects’ NPV crystallization Net interes
Slide 54: Growth visibility of capacity additions
Strong growth visibility backed by value accretive projects and technological mix GW build/secured BP 2016-20: 3.5 GW Target 1.0 GW under construction PPA/Auctions/Tariffs 1.0 68 Offshore 992 MW (43%) 0.8 0.8 950 MW (57%) 55 0.6 Onshore 77 0.2 GW 26 Solar PV 0.2 GW 679 2016 2017 2018 2019+20 137 202
Slide 55: 1Q18 key takeaways
Solid capacity growth (+597 MW YoY) together with positive evolution of load factor: +14% YoY output growth Revenues stable YoY notwithstanding fx, 10-years PTCs expiring and changes in RO & PL (+7% YoY ex-fx) Positive performance of Core Opex/MW (-1% adj. YoY) & Financial Results (lower avg debt &
Slide 56: Renewable market & Competitiveness
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Slide 57: Wind and Solar competes with all sources of energy
Wind and Solar already competes with all sources of energy Levelized Required Revenues by technology (€/MWh, 2017; %D2010-2017) 0% +11% +9% 112 +5% 92 94 -57% 88 -39% -78% 71 46 49 CCGT Coal Nuclear Hydro Wind onshore Solar PV Wind offshore Wind onshore is today amongst the cheapest and most competi
Slide 58: Solid growth drivers and renewables worldwide additions
Solid growth drivers in addition to its competitiveness 2016-20: Renewables Worldwide Additions1 (GW) Wind Environmental concerns 150 Onshore • New global agreement under COP21 • CO2 reduction targets in EU, US and China Solar PV Utility 104 • Replacement of old/retiring capacity (namely Coal) Solar
Slide 59: Europe opportunities and EU 2030 targets
Europe short term opportunities to… …escalate medium term, supported by: EU 2030 targets 2016-2020: Wind and Solar additions in Europe • 40% cut in greenhouse gas emissions compared to 1990 levels Expected additions in EDPR geographies • ≥27% share of renewable energy consumption 57% Wind Onshore De
Slide 60: Brazil and Mexico growth fundamentals
EDPR’s strategy… …for growth in selective countries with strong fundamentals BRAZIL MEXICO Strong renewable +10% Wind the main +15% Mainly from electricity demand CAGR 15-20 growth driver CAGR 15-20 wind onshore Good natural resources c.50% Top-notch 34%-45% Competitive (load factor) Load factor win
Slide 61: Wind vs CCGT levelised cost in the US
Wind competes for PPAs mainly in two different segments Wind vs CCGT: Levelised Cost of Energy LCoE $/MWh Wind 110 Load factor 1 RPS demand for new renewable builds 100 23% 90 • Several Sates need to comply with renewable quotas • Market is based on REC systems and long-term PPA 80 29% 70 34% 60 40%
Slide 62: Wind vs CCGT LCoE and oil prices
Wind Energy competes with the most efficient conventional technology Wind vs CCGT: LCoE1 LCoE Wind Recent oil prices €/MWh load factor Wind Energy Costs are unrelated to 120 commodities, providing greater visibility 110 100 21% 90 23% 80 25% 70 29% Legend: 34% 60 CCGT load factor @ 23% 50 40 CCGT lo
Slide 63: United States
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Slide 64: US main drivers and new political landscape
Main Drivers PTC phase-out approved in 2015 by a congress Bipartisan Support = dominated by Republicans; New Treasury secretary supported current scheme in Senate hearings Wind is a competitive and cheap technology Technology presenting an ongoing decrease of its LCoE Industry Competitiveness (c.26%
Slide 65: Levelized cost of energy comparison
Levelized Cost of Energy Comparison1 Map of Lowest Cost Electricity Resource2 $/MWh (unsubsidized; by region) Solar Wind Gas Utility 200 $183 180 98 MW 160 $143 (CoD 2017) 202 MW 140 (CoD 2018) 157 MW (CoD 2016/18) 150 MW 120 (CoD 2019) 200 MW 300 MW 167 MW 100 $112 (CoD 2019) (CoD 2017/18) (CoD 201
Slide 66: RPS states, utilities and C&I demand
Renewable Portfolio Standards 29 states RPS defined at state level + DC RPS policies cover 56% of total US retail electricity sales 2 states increased quotas in 2017 (MA; MD) Utilities´ Portfolio Demand 36 GW Utilities officially announced: coal-fired plants being shuttered Coal Retirement old & non
Slide 67: Jobs, industry and local economy
Job creation Industry >300,000 Jobs >500 wind manufacturing facilities on the wind/solar industry; more than coal in 43 states Wind and Solar jobs growing at a rate >600 manufacturing plants producing 12x faster vs the rest of the US goods for wind & solar across 45 states Local Economy Infrastructu
Slide 68: US tax reform impact
Asset Base New Projects PTC/ITC phase-out schemes were kept unchanged Tax rate reduction from 35% to 21% which seems to enjoy solid bipartisan support Approved full 100% expense of capex as option P&L annual tax Reduction in annual tax vs. typical 5-year MACRS schedule provision provision ($15m - $3
Slide 69: IR & Sustainability Contacts
IR & Sustainability Contacts Head of IR, P&C and Sustainability Rui Antunes Investor Relations Maria Fontes Pia Domecq Marten Menke Sustainability Angela Saenz De Valluerca E-mail: ir@edpr.com Phone: +34 914 238 402 Fax: +34 914 238 429 Serrano Galvache 56, Edificio Olmo, 7th Floor 28033, Madrid - S
Slide 70: EDPR powered by nature
renovaveis powered by nature