EDP Energias de Portugal SA reported robust financial results for the first quarter of 2025, with a notable increase in net profit and recurring EBITDA. The company maintained its full-year guidance, highlighting strong performance across its integrated generation and supply business in Iberia, as well as improvements in its electricity networks. Trading at €3.65, the stock has gained 10.37% year-to-date, supported by an attractive 6.15% dividend yield. According to InvestingPro analysis, EDP currently appears fairly valued based on its comprehensive Fair Value model.
Key Takeaways
- Recurring EBITDA increased by 6% year-on-year, reaching €1,400 million.
- Net profit rose 19% to €439 million.
- Organic cash flow amounted to €800 million for the quarter.
- EDP maintained its 2025 EBITDA guidance at €4,800 million.
- Strategic focus on expanding renewable capacity, particularly in the U.S. and Europe.
Company Performance
EDP demonstrated strong financial performance in Q1 2025, driven by its integrated generation and supply business in Iberia and the improved performance of its renewable energy segment, EDPR. The company continues to benefit from resilient electricity networks and a strategic focus on efficiency and digitalization. InvestingPro data shows EDP maintains a FAIR financial health score of 2.48, with a solid current ratio of 1.09. The company’s operations in Brazil also contributed positively, with a 7% increase in electricity distributed.
Financial Highlights
- Revenue: Not specified in the earnings call summary
- Recurring EBITDA: €1,400 million, up 6% year-on-year
- Net Profit: €439 million, a 19% increase year-on-year
- Organic Cash Flow: €800 million in Q1 2025
- Net Debt: €16,100 million
Outlook & Guidance
EDP maintained its 2025 EBITDA guidance at €4,800 million and net profit guidance of €1,200 million. The company expects net debt to be around €16,000 million. It plans to add two gigawatts of new capacity in 2025, with a significant portion coming from solar and storage projects in the U.S. and Europe. EDP remains optimistic about its integrated generation business in Iberia and plans to provide a strategic update at its Capital Markets Day in November 2025.
Executive Commentary
Rui Teixeira, CFO, highlighted the strength of the Hydro Iberia business, stating, "We are looking at the segment more towards €1 billion as opposed to €900 million." CEO Miguel Stroud Andrade expressed confidence in the company’s current structure, noting, "We’re very comfortable with the current structure," and emphasized a cautious approach to financial strategy, saying, "We’re not trying to preempt or do an additional acceleration above and beyond what would be necessary to keep the triple B form."
Risks and Challenges
- Potential regulatory changes in Spanish networks could impact operations.
- The complexity of grid management is increasing due to electrification trends.
- Market volatility in Iberia could affect the value of flexible assets.
- Supply chain challenges could arise despite current partnerships to mitigate risks.
- Economic conditions in Brazil and Iberia could influence future performance.
EDP’s Q1 2025 results reflect a strong start to the year, with significant growth in net profit and EBITDA. The company’s strategic investments in renewable energy and grid infrastructure are expected to support its long-term growth objectives, despite potential challenges in the regulatory and economic landscape. With an EV/EBITDA ratio of 9.29x and a debt-to-equity ratio of 2.04, the company maintains a balanced financial structure. For deeper insights into EDP’s valuation and growth prospects, InvestingPro offers exclusive access to comprehensive financial analysis and over 30 additional key metrics in its Pro Research Report.
Full transcript - EDP Energias de Portugal SA S (EDP) Q1 2025:
Conference Moderator: Good morning. We welcome you to the EDP First Quarter twenty twenty five Results Presentation Conference Call. I now hand the conference over to Mr. Miguel Biena, Head of IR and ESG.
Please go ahead, sir.
Miguel Biena, Head of IR and ESG, EDP: Good morning, ladies and gentlemen. Thanks for attending EDP’s first quarter twenty twenty five results conference call. We have today with us our CEO, Miguel Stroud Andrade and our CFO, Rui Teixeira, which will present you the main highlights of our strategy execution and the first quarter twenty twenty five financial performance. We’ll then move to the Q and A session in which we’ll be taking your questions both by phone or written questions that you can insert from now onwards at our webcast platform. I’ll give now the floor to our CEO, Miguel Stroldendrat.
Miguel Stroud Andrade, CEO, EDP: Thank you, Miguel, and hello, everyone. Thank you for attending our first quarter results conference call. So I’d like to start, for those of you that, weren’t able to listen to to yesterday’s call from EDP Renewables, just start with a brief remark on the unprecedented blackout of last week in Iberia. I think the first thing to note is while it’s yet to be fully explained and we don’t know the root root cause, it’s really important to recognize how both countries were able to fully restore power and safety to the population. And I want in particular to thank the people at EDP and EHEDS, the distribution company in both Portugal and Spain, for all the hard work and the dedication and sort of all the hours they put into to get this, you know, the power back online.
So I think great work done by the team. On the other hand, I think the event also really underlines the need for continued investment in the grid infrastructure and interconnections, in particular interconnections between Spain and France. It’s been clear for many, many, many years that this is absolutely critical, and it would have certainly helped also in this context. But also the need for investments in energy storage and also complementary solutions, for example, the ancillary services. So together with renewables, I think these are the elements that are key to ensure an electricity system that provides clean, reliable, and affordable energy to all.
So I think that’s just the the note I’d like to make on last week’s blackout event. Now turning to this quarter’s results. I think if we go to slide three, just starting with a quick recap on the the first quarter numbers. EBITDA increased 6% year on year, so it reaches 1,400,000,000.0 in the first quarter. This is clearly a very good quarter, particularly for the integrated generation and supply business in Iberia.
We had a lot of rain. We had higher power prices certainly versus last year, and we also benefited from a strong demand for flexible generation and ancillary services. So that was good. On the electricity network side, we also saw good resilient performance. It actually increased 7% if we exclude the asset rotation gains and FX from last year.
Bear in mind that last year, we recorded €134,000,000 in asset rotation gains split between the transmission and EDPR transactions. And this year, we’re not recording any gain, and yet we had this underlying growth. Wind and solar underlying performance was also up 20% year on year, excluding gains, as we talked about yesterday, supported by an increase in installed capacity after the record additions executed in the fourth quarter of last year and also improved renewable resources. So overall, profit increasing 19% year on year, reaching €439,000,000 and reflecting this very strong top line performance. If we go to Slide four, and I think this is a particularly interesting slide because it shows there was a quarter with really strong hydro resources, 42% above average, so even better when compared to last year’s resources, which were already 38% above average.
However, hydro generation decreased year on year since the strong rainfall was crucial to strengthening the reservoir level. So we took the advantage to really fill up the reservoirs. They were at 60% at the beginning of the year. They’re now well, versus 80% in early twenty twenty four. So if you look at the left hand side graph, you can see that the delta on the production year on year was mostly stored in the form of reservoirs.
So we go into this, let’s say, and third quarter with strong reservoir levels. Despite being lower year on year, hydro generation was still above average, so about half a terawatt hour above average. And those uncontracted volumes were sold at much higher prices when compared to the first quarter of twenty twenty four. So the electricity pool price in Iberia was almost double the first quarter of last year of twenty four, and it was €85 per megawatt hour in the first quarter of this year. So all in all, reservoir levels are standing at roughly 93% in early May, so maximum highs of the last ten years.
April was also a very good month in terms of hydro resources, so 52% above average, which leaves us confident for the remaining part of the year. Obviously, the fourth quarter is also an important quarter for us, and so we’ll have to see how that goes in relation to hydro. If we move on to Slide five. So five, I think what we wanted to talk about on this slide was really stress the value of our flexible generation fleet. We can definitely extract additional value from price volatility in the market, and this is key to complementing intermittent technologies.
We’re seeing a clear trend of more value being attributed to this type of assets. So if you look at the final price of electricity in Spain, can see that the component of it that’s attributable to ancillary services and restrictions is constantly increasing. And this is due to a combination of factors: on one hand, increasing electrification, so grid management complexity higher penetration of intermittent resources And so all of this increases the demand for balancing services that can be provided by flexible generation assets, hydro, gas. Those are really the key assets for us, obviously, pumping. On the other side, this higher penetration of renewables leads to expanded intraday spreads.
You can see that on the right hand of the slide, which leads also to improved hydro premiums. And so talking about EDP’s figures, hydro pump spreads as a percentage of baseload prices stood at more than 50% in the first quarter of twenty twenty five and are showing a clear growth trend when compared to past years as a result of this new market profile, which we expect will continue to be like this going forward and even to well, and so it’s more of a structural issue. If we move on to Slide six, so looking for at the overall integrated business. This improved market context, together with the first a good first quarter in April as well, means that we are updating the guidance for this segment in 2025. So previously, we pointed to an integrated Iberian EBITDA of around 1,000,000,000 to €1,100,000,000 We’re now targeting EUR1.1 billion to EUR1.2 billion.
Most of that has already been locked in. So we have about EUR0.5 billion of EBITDA already recorded this quarter, EUR0.4 margin locked in already for the remainder of the year. That leaves us with 0.3 still not locked in. We expect that to come mostly from flexible generation, hydropump storage, gas. These have lower risk, namely hydro, which, as I say, has very healthy reservoirs as of May.
So key drivers for this guidance are strong first quarter and also good numbers for April, reservoir levels at 93 in early May, high weight of locked in margin assuming normalized volumes, positive prospects for flexible generation with increasing demand for flexibility services and also, obviously, a very resilient client base that provides stability, and that continues to show us an increase on services penetration. So positive outlook for this integrated business. Talk about networks. So on Slide seven. As you know, by the end of twenty twenty four, we proposed a 50% increase in investments for the next regulatory period, 2026 to 02/1930, in the medium and high voltage electricity networks in Portugal.
There’s typically a multi annual investment program that we have to present every couple of years. We did that with this proposed 50% increase. This proposal has now received a favorable opinion by the regulator. It’s the first ever regulatory opinion without any cuts proposed. So I think there’s a general consensus in the sector that there is a need for additional investment in the networks.
And I think it’s this is obviously good news for the investment in our Networks business. And I think we all recognize that it’s absolutely critical for ensuring the energy transition. I’d also like to highlight here that according to the regulator, the impact on tariffs is immaterial. We’re talking about the 0.7% accumulated increase in the 02/1930 tariffs versus 2025 in nominal terms. So it’s not this is not a CAGR.
This is accumulated increase of 0.7%, which is absolutely immaterial in the context of the cost of the systems. And we want to invest in several fronts here in the networks. Around 45% of the investment in our plan will be allocated to modernization of the grid, around 15% to digitalization and around 20% to electrification and decarbonization. Finally, and this topic has grown in importance over the last two weeks, twenty percent of the investment will be allocated to making our networks more reliable and ensuring a continuous robust service as the renewable penetration in the grid grows. I think it’s consensual in the system or in the sector that we need to ensure adequate returns for the electricity networks to support these higher investments and to enhance the assets modernization.
On the right hand side of the slide, just a quick wrap up of the key regulatory milestones we’ll have this year. So we have the new regulatory period starting in 2026, as I mentioned. We will be expecting to get a proposal from the regulator on the October 15 in relation. So that’s a draft proposal for the next regulatory period. So we have more information then.
And then, as you know, typically, on the December 15 is when we get the final decision from the regulator on the on the next regulatory period. So two key milestones, October 15 and then the December 15, to get first a draft and then the final opinion. So I think we’ll be hopefully having public hearings and discussions over the next couple of months. But at least on the investment side, the we already have a positive regulatory opinion on this. It’s still dependent on the government approval.
And then we also have to have a discussion around the returns of this additional investment. Talking about networks in Spain. So if moving on to Slide eight. Here, as you know, we’ve been reinforcing the weight of electricity networks in our portfolio over the last couple of years. So we did the VSCO acquisition back in late twenty twenty.
We basically doubled our networks in Spain. We already had the Iberico Networks up in the North in Asturias with the Viesgo acquisition, mostly networks in Cantabria and also part of Asturias. So contiguous networks, we got a lot of synergies out of that. I think we were able to to really show the the value that came out of that and deliver on the assumptions that or overdeliver on the assumptions that were that were underlying that acquisition. This is an area in the North Of Spain which has quite a good growth potential due to high industrial demand per capita and also increasing renewables generation.
However, and this is something that we stressed before and many other players in the sector, we think that the investment conditions in Spain have room for improvement. The return on RAB is currently 5.6%, and there’s no inflation update. On top of that, there’s an investment cap of 0.13% of GDP. So you can’t invest the sector as a whole can’t invest more than 0.13% of GDP. We’ve seen that the government the Spanish government acknowledges this and recognizes that this needs to be changed.
We believe that the regulator agrees that this is urgent and that the current rate should be increased. The Spanish regulatory period there’ll be a new regulatory period also starting in 2026. The current investment plan for the twenty twenty six-twenty twenty eight period is under discussion with the regulator. It was submitted to the regulators on April 30 after a favorable opinion from the regional government. But this plan is still respecting the current investment caps.
So we’ve also proposed another plan with a significant increase for the twenty six to twenty eight period beyond the current cap. So if there’s an increase in the cap, we already have an alternative plan already prepared. By the end of the year, we expect that the regulators should improve the new investment limits. This is our estimate on the deadline. It could be that we have further visibility either in the second or third quarter of twenty twenty five.
And regarding the due remuneration framework and regulatory assumptions, we should have a public hearing soon either in the second quarter, and then the regulators should approve this by year end. So all in all, for this regulatory period, the key message is that improvement of returns is critical to attract private investment in the networks and critical to support the energy transition. So we’ll see how this evolves over the next couple of quarters. Move on to Slide nine and talk about electricity distribution in Brazil. So here, we continue to see a continuous increase in electricity demand.
And as you know, this is extremely for the returns for the networks in Brazil. This has been supported by demographics, by economic growth, by electrification trends. The electricity distributed increased 7% in our areas as of the first quarter of twenty twenty five. It’s after a similar increase in 2024 and an increase of 5% in 2023. So definitely, this reinforces the need for additional investment in the electricity networks in Brazil.
Towards highlighting that our two distribution companies in Brazil continue to be a reference in the country in terms of quality of service indicators. EDP Sao Paulo has registered its best historical record in the duration of interruptions in electricity distribution in 2024. And now EDP Speedy Scent has also achieved this landmark. So both of our distribution companies are committed to delivering best quality of service and capitalizing on this market growth. On the right hand side of the slide, a recap in terms of the distribution companies.
So this is obviously a very important year for EDP SPE Ascent. The new regulatory period starts in August of this year. The regulator has released the regulatory WACC for 2025 at 8.06% versus 7.15% currently. Distribution concession process is ongoing. The regulators recommended that the concession be extended for thirty years with the ministry on the April 29, and we expect that there will be the signature of the new concession contract still in the month of May.
And so Spiritsent will have this additional thirty year concession. And as I say, we expect to hopefully announce that in the coming weeks. We move on to Slide 10. Just a quick overview on our transmission business in Brazil. So over the last nine years, we’ve delivered more than 12 transmission projects, and we’ve been unlocking value both through operating those lines as well as through asset rotation.
We’ve sold six lines since 2021, amounting to around BRL0.7 billion of gains and BRL6 billion in asset rotation proceeds, including the asset rotation deal concluded last week on Lot 21. Currently, we hold seven transmission projects. Of these, three are under construction. They’re the lines that we won in March of twenty twenty four. And the investment associated with this is BRL2.6 billion, so around €500,000,000 The regulator expects these projects to enter operation between 2027 and 2028, and we expect to reach double digit equity IRRs with these projects.
On the right hand side of the slide, regarding our asset base, we expect it to continue growing through the period of 2025 to ’twenty seven, reaching BRL6.7 billion in 2027. Regarding wind and solar on Slide 11. So as I mentioned I’ve mentioned already previously, two gigawatts of new capacity to be added in 2025 on track, all projects under construction, around 70% of the targeted additions with expected commissioning by year end. Just giving you a little bit more color on these additions in terms of geography, The U. S.
And Europe representing 80%. In terms of technology mix, approximately two thirds of new capacity coming from solar and storage. And I wanted to take an opportunity to talk about supply chain strategy because this is something that we get a lot of questions on. So we adjusted our supply chain strategy over the last two or three years, since, you know, we had an incident back in 2022 and 2023. Since then, we’ve prioritized the use of domestically manufactured equipment and established partnerships with U.
S.-based suppliers. And we this allows us to mitigate the risks associated with the import tariffs. For twenty five and twenty six secondured capacity, we’ve already ensured the necessary infrastructure to keep the projects on track. Most of the equipment is already in The U. S.
We’re not subject to tariff because it’s either domestically made or they’re specifically exempt. And so we estimate tariffs will have a limited impact in our revenues or secured capacity, totaling less than $25,000,000 or around 1% of these projects’ CapEx. I also wanted to just highlight here our multiyear agreement with First Solar. We announced that back in March of twenty twenty three, and that ensures access to The U. S.-manufactured solar modules, and it gives a lot more visibility and comfort surrounding our project pipeline for 2026 and 2027.
On the PPAs, we continue to see strong resilient demand, mostly backed by regulated utilities and corporate entities. And on PPA pricing, it will likely be adjusted depending on market changes. At the same time, the Inflation Reduction Act tax credits framework remains a key pillar for our investment strategy. Even yesterday, we’ve had several Republicans signing a letter defending the maintenance of these tax credits. We have around 1.5 gigawatts of projects secured under safe harbor agreements, and we’ve protected our developments from potential legislative adjustments.
So all in all, confident in our efforts in the supply chain management that will pay off and that we can continue to grow in The U. S. In a sustainable and value enhancing way. Just another two slides before I pass it over to Rui. One, talking about efficiency, on Slide 12.
I wanted to just highlight here that we think this continues to be a key competitive advantage. We’ve been spending a lot of time focusing on this, and this has been reflected also in our numbers. As of the first quarter of twenty twenty five, OpEx decreased 2% nominal year on year. If you look at the 2023 numbers, you can see a continuous decrease, so minus 3% versus the first quarter of twenty twenty three in nominal terms, meaning a decrease of 8% versus the first quarter of twenty twenty three in real terms. Because over this period, we had around 5% of inflation, 3% nominal decrease, so around eight percent real decrease.
I think this is really impressive when you think that over this period, we grew our installed capacity by 11%. We grew our distribution network. We grew our transmission business. So just the result of several measures. I mean, these efficiencies, we’ve obviously simplified our corporate structure.
We’ve resized and restructured some of our platforms. We’ve increased the digitalization and automation as way to optimize the workflows and resources. And these are having an impact on EDP Financials, and they will continue to do so in the coming years. So growth and decreasing costs, I think that’s a fantastic sort of equation to keep. So tight control over OpEx, really prioritizing cash flow generation and shareholder value.
And with that, that brings me to guidance for the year. I think we’re looking at sort of strong integrated generation supply business, helping us feel very comfortable about our EBITDA at €4,800,000,000 net profit, 1,200,000,000.0 and net debt around €16,000,000,000 for the end of the year. Let’s say, structural improvements from the flexible generation activity, obviously, had a very good first quarter and sort of a strong start to the year. We have hydro generation above average in the first quarter and in April and sort of high reservoirs in May, so we can manage over the next couple of months. We have resilient electricity networks, and the underlying business is positively impacted by this growing electricity demand and the inflation update on the revenues.
Wind and solar is having an increased contribution from new capacity added in fourth quarter of last year. But on the other hand, we have and are expecting lower asset rotation gains this year versus 2024. On the negative side, we are facing weaker dollar and Brazilian real versus the euro. And so putting all of that together means that we are confident in delivering this guidance for 2025. Net debt guidance at €16,000,000,000 for the year, we’re assuming around €2,000,000,000 of asset rotation proceeds, mainly from EDPR and also assuming around €1,000,000,000 of tax equity proceeds.
And then looking forward, we’re working on a new strategic update for 2026 onwards. That will take into consideration the new regulatory frameworks for the electricity networks in Spain and Portugal. And hopefully, we’ll also have more visibility on the outlook regarding the energy policies in The U. S. So we expect that we’ll have more visibility on the Inflation Reduction Act, how that sort of settles down over the next couple of months.
And so all of this will feed through into the new strategic update from 2026 onwards. And with that, I pass it over to Rui for the financials. Thank you.
Rui Teixeira, CFO, EDP: Thank you, Miguel, and good morning to you all. So let’s move to Slide 15 to start reviewing the financial performance of the first quarter. The recurring EBITDA reached €1,400,000,000 That’s an increase of 6% year on year or 8% if we exclude the ForEx impact in this period. And this is basically reflecting the renewables clients and energy management being up by €134,000,000 driven, as Miguel said before, by the hydro client in Energy Management, which benefited from higher flex generation, also improved power prices in Iberia year on year. Also EDPR with an improved underlying performance year on year by €23,000,000 up and actually €81,000,000 up if we were to exclude the asset rotation gains that, if you recall, were €58,000,000 in the first quarter last year.
Networks, they are down by €72,000,000 but this reflects the absence of asset rotation gains this year versus €76,000,000 last year. So if we exclude the gains, EBITDA from this segment increased €4,000,000 year on year, following the strong electricity demand across the different geographies and the performance across the different geographies. Finally, I would like to highlight the efforts on efficiency in a growth context. OpEx decreasing 2% year on year in nominal terms, so the efficiency measures we have been implementing are already positively impacting the bottom line. If we now go through the segments and we go to Slide 16, just a quick wrap up on the EDPR performance, which we have detailed yesterday.
So underlying EBITDA went up 20%, an improved performance year on year, and this is on the back of 70% growth in installed capacity, following record additions in the first quarter in the fourth quarter of twenty twenty four improved wind resources versus the first quarter last year with the renewables index at one percentual point above the long term average, and this led to a 10% increase in electricity generation. On the other side, the average selling price decreasing 5% year on year to EUR 57 per megawatt hour. This is a combination of lower realized prices in the European portfolio. As we said yesterday, it has to do with the shift in terms of the energy mix with higher weight from regions that have lower prices, also lower average hedging prices, but partially offset by higher realized prices in U. S.
All in all, EBITDA increased 5% year on year, with the underlying performance being mitigated by no asset rotation gains in the first quarter this year versus the €58,000,000 capital gains that we had in the first quarter twenty twenty four. Now going to the segment of Generation and Supply, so the integrated margin. So on the Slide 17, a deep dive on the EBITDA. Recurring EBITDA on the segment increased 27%, reaching EUR $523,000,000 this quarter. This is really great performance.
This is obviously backed by our integrated business in Iberia, where we saw a high demand for flexible generation and backup services. Hydro generation in Iberia was 13% below year on year as we took the opportunity to substantially increase the reservoir levels, as Miguel showed before. And obviously, this follows the strong hydro resources in the quarter, which were 42% above the average versus and actually versus our expectation, we generated an additional 0.5 terawatt hours that were sold at much higher prices versus last year. So if you recall, electricity prices or the spot price increased 90%, so almost doubling versus the first quarter twenty twenty four to this quarter where the price booked was €85 per megawatt hour or the average price on the market was €85 per megawatt hour. Reservoir levels at 93% as early May, and therefore, this brings us this gives us confidence for the upcoming quarters.
Slide 18. So really solid performance on the Network segment, accounting for 30% of total group EBITDA. The EBITDA from this segment, excluding gains, stood pretty much flat or slightly up year on year. So a 6,000,000 increase in Iberia following the increase in electricity distribute, so additional 3%. Also, the increase in supply points, 1% year on year.
I think it’s worth highlighting here that we continue to see a strong increase of connection requests related to the energy transition, mainly for new renewable power to be connected that has increased 25% year on year. In Brazil, EBITDA excluding gains relatively stable year on year with the 7% increase in electricity demand being offset by the FX impact in this period. So if you look to the underlying values in Brazil in real, both in distribution and in transmission, they are increasing year on year. EBITDA, including asset rotations, was or the capital gains from the asset rotation last year was about 15% below, And this is obviously after the €76,000,000 gain in the transmission deal that was booked in the first quarter last year. So now moving to Slide 19.
Net financial costs in recurring terms increased 8% year on year, resulting from, in one hand, cost of debt that increased from 4.7% to 4.9%, and this is reflecting a higher Brazilian real denominated cost of debt. If we exclude that Brazilian real debt, cost of debt stays stable at 3.3%. So cost of debt in mostly in euros and U. S. Dollars, it’s stable year on year.
Also, on the other hand, higher average debt versus the first quarter twenty twenty four. So this is what combined has this increase of 8% year on year on a financial cost. On the right hand side of the slide, average nominal debt by currency shows a decrease of the U. S. Dollar denominated debt in line with our strategy to reduce exposure to this currency.
Finally, highlighting that at the beginning of this year, we issued €750,000,000 on green bonds with a 3.5% coupon. More recently, we have signed €500,000,000 in loan agreements with EIB to fund renewable energy and redevelopment projects. So I think this shows that we are continued to actively manage our debt and liquidity needs. On organic cash flow, very quickly, it amounted to €800,000,000 in the first quarter twenty twenty five. So that’s EUR 100,000,000.0 above the first quarter twenty twenty four and really translating the EBITDA performance.
So a good conversion of operational performance into cash generation. On the right hand side of the slide, CapEx decreased from EUR 1,100,000,000.0 to EUR 900,000,000.0, with electricity networks weight increasing from 19% to 22%, of which 60 is allocated to Iberia, 40 Percent is allocated to Brazil. The net debt on Slide 21, as of the first quarter this year, stood at €16,100,000,000 main drivers being organic cash flow of 800,000,000.0 and this partly funding the cash investments that amounting to EUR 1,200,000,000.0, mainly from investments in renewables and networks and including EUR 300,000,000.0 from payments to PP and E suppliers, slightly offset by €74,000,000 of tax equity proceeds. So as we showed yesterday, there were some proceeds already booked in the first quarter this year from the tax equity in U. S.
I would also highlight here the share buyback program that we concluded in April. It was a program of EUR 100,000,000, embedding an average price of EUR 2.89 per share ex dividend. So I have to say, I think it was a very successful initiative, implying a PE multiple for 25 of 9.9 times and a dividend yield of 6.9%. Overall, we are maintaining solid credit ratios, namely FFO net debt at 21.3, and we remain fully committed to our BBB credit rating. Recurring net profit, euros $439,000,000 for the first quarter this year.
That’s a 19% increase versus the first quarter last year, at €71,000,000 in absolute terms. Increasing EBITDA, reflecting the strong performance on the operational side, also higher D and A and provisions increasing €34,000,000 year on year as a result of our investment path. Increased net financial costs during due to the higher average cost of debt and increased cost in Brazilian reals denominated debt higher income taxes following higher effective tax rate due to the lower asset rotation gains year on year that have a different tax treatment and also higher noncontrolling interest. So excluding capital gains, the underlying net profit shows a very strong 69% increase versus the first quarter last year. Again, I think it really is the reflection of the very strong performance of the quarter coming across all the different business lines.
In reported terms, net profit increased 21% to €428,000,000 So with this, I would hand back to Miguel for closing remarks. So thank you.
Miguel Stroud Andrade, CEO, EDP: Thank you, Rui. So just as a final couple of comments, I mean, points. First, good solid first quarter numbers supporting strong underlying performance. Net profit up 19% year on year, driven, as you saw, by the integrated generation supply business in Iberia, improved GDP renewables underlying performance and also resilient electricity networks. Second, this integrated business in Iberia, we have a positive outlook for 2025, strong first quarter and also a good April month of April.
Reservoir levels at 93% by early May, high weight of locked in margin, positive prospects for flexible generation, increased demand for flexibility services and higher intraday price volatility. So all of that driving this positive outlook for the integrated business for 2025. The networks, resilient electricity networks, significant investment opportunities and positive regulatory outlook for the next period, 2026 and beyond, both in Portugal and in Spain. And also, the new regulatory period and concession extensions for EDP, Spiritsense, in the new regulatory period for Spiritsen and expect the concession extension already this month for Spiritsen. On wind and solar, good visibility on the 2025 additions, the two gigawatts on time and on budget and all under construction and the supply chain under control and limited exposure to import tariffs in The U.
S. Finally, the overall 2025 outlook, I think we feel comfortable. We have good visibility on the underlying performance in the various business segments, reinforcing our integrated utility with a low risk controlled profile. The 2025 guidance for EBITDA is still at €4,800,000,000 net profit, 1,200,000,000.0 net debt at €16,000,000,000 around 16,000,000,000 And finally, as I mentioned earlier, we expect to do the Capital Markets Day in November of twenty twenty five, providing a strategic update post 2026. And by then, we expect to have already better visibility on the regulatory outlook for the distribution and also on the energy policies, particularly in The U.
S. With that, I’d stop there and turn it over to Q and A. Thank you.
Conference Moderator: Thank you. Ladies and gentlemen, the Q and A session starts now.
Miguel Biena, Head of IR and ESG, EDP: Thank you. So I would ask please to take only two questions by each person. So the first questions come from the line of Pedro Alps from CaixaBank. Pedro, please go ahead.
Pedro Alps, Analyst, CaixaBank: Hi, good morning. Thank you for the presentation and taking my questions. So my first question is on the structural improvement in flexible generation. So clearly, backup services and pumping spreads are performing very well in the current context. Looking ahead, as we are still shut off batteries in Iberia, is there anything that can stop an even stronger demand for balancing services and even higher power price volatility and therefore higher contribution of these assets in the next few years?
And the second question is on the full year 2026 guidance. If you can reiterate at this stage the guidance for next year despite the weaker FX that we have right now, Will the integrated portfolio in Iberia be able to compensate for that? And also, how much asset rotation gains should we expect for next year as the effect of the bad vintages in EDPR portfolio fades? Thank you.
Miguel Stroud Andrade, CEO, EDP: Okay. Pedro, thank you. So great point here on the FlexGen. I think, certainly, as you say, without a significant amount of additional batteries, I mean, we will expect to continue to see sort of these high spreads between peak off peak. That’s just a function of the energy mix that we have currently in Iberian Peninsula.
Then, obviously, depending on the weather, you could have higher volatility in in the intraday market. But I’d say that, in general, we expect that FlexGen will continue to be a strong contributor going forward, or or we or, you know, it’s been increasing over the last couple of years, and and we expect that it’ll stay like that also going forward until you have a significant amount of additional batteries or or some structural change in the market, which we’re not seeing. On the 2026 guidance, yes, I think we, you know, we’re keeping the same assumptions. We have no reason to to change them at this point. We continue to see sort of energy prices, which is obviously one of the big drivers still, if anything, even slightly higher than what we guidance we’ve given, you know, when we gave it out last year in 2024.
In terms of FX, I mean, FX is is pretty volatile, so we’re not sort of making any big adjustments for that. I think they’re positives and negatives, which can offset each other. On the asset rotation gains, I don’t think we’ve given out that that specifics yet. So I would keep it, for now, just take that overall guidance between the various different pieces and packaging. And then, obviously, we can provide further information when we come back to the market probably in the Capital Markets Day in November.
Okay?
Pedro Alps, Analyst, CaixaBank: Thank you.
Miguel Biena, Head of IR and ESG, EDP: Thank you, Pedro. The next question comes from the line of Javier Guerreiro from JPMorgan. Javier, please go ahead.
Javier Guerreiro, Analyst, JPMorgan: Yes. Good morning, everyone. Thanks for taking my questions. I will stick to the two. First one would be if you can comment on the impact on EDP from the disconnect between the Portuguese and the Spanish power markets and the resulting higher prices in Portugal since the blackout?
And the second question, obviously, is on your 2025 guidance, which is still making me scratch my head. Is your €1,200,000,000 net income guidance for ’25 a realistic central case scenario? Or is it a worst case scenario with the information that you have today? Thank you.
Miguel Stroud Andrade, CEO, EDP: So in relation to to your first question, I mean, we don’t have an estimate of impacts, but I’d probably break it down into so there was the the actual day, which there was no no energy during that day. And then there were a couple of days after that when there was basically quite a strong market splitting and no imports from Spain. But we are now back to a situation where there’s already flux of energy going between both countries. So we expect that this is now normalizing. And so overall, we’re talking about maybe a couple of days with some markets, you know, higher than normal market splitting, but we don’t expect that, at least based on the information that we have, that that would have any material impact.
In relation to the 2025 guidance, I mean, what what I can say is it’s our best estimate as of today, and so we’re comfortable with that number, or we feel even more comfortable than than we did before. But there’s obviously still several months ahead of us. And so that’s you know, we think it’s a realistic number. And if we if later down the road, we see reasons to to change it or to update it, obviously, you guys will be the the first to know. But But as of today, I’d say it’s a realistic outlook.
Miguel Biena, Head of IR and ESG, EDP: Thank you, Javier. So the next question comes from the line of Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead.
Alberto Gandolfi, Analyst, Goldman Sachs: Good morning and thank you for taking my two questions. Actually, on similar topics, I mean, net income before asset rotation gains is already 40% of your guidance, so for 2025. So with high levels of reservoir, can I ask you what concerns you that prevented you from upgrading guidance for 2025? What visibility do you have on ancillary services? I mean, you’re talking about 1,100,000,000.0 1 point 2 billion euros but I suspect ancillary services are not hedged, They depend on the volatility in the market.
So do you worry that there’s going to be a bit of a contraction in ancillary services? Or do you think those would be stable as well? Because otherwise, myself also, I truly don’t understand why not changing upgrading, I should say, guidance right now. The second question is on Spanish allowed returns. I’m not asking you to comment on press reports or media.
But for me to understand the way you’re thinking about it, if really returns were to come out at a 6.5% nominal, say, without any extra add ons, would you still upgrade CapEx in Spain? Or would money be better allocated in renewables at EDPR? So should we see CapEx go back up? Or maybe EDPR could be a share buyback potentially. So what would be the best use of capital if returns in Spain don’t go to where the industry seems to have been asking?
And I leave it there, you see if I can ask about any deeper buyout this time. Thank you.
Miguel Stroud Andrade, CEO, EDP: Okay. Thank you, Alberto. So, well, just in relation to your to your second question, I think, quite simply. I mean, we’ve seen speculation about or speculation or or reports about the the six and a half percent. I think what the sector has been asking for is seven and a half.
And, you know, six and a half seems low if you want to attract private investment, which we think is obviously very necessary in the Iberian Peninsula. Obviously, it’s not just about the the returns. It’s it’s also about other regulatory assumptions, and so we have to see all of the framework before taking a decision on whether we increase investment or not. But what I’d say is we would certainly hope and expect and and think it’s desirable for the system as a whole. I mean, that’s that you have higher than the six and a half.
On the the net income, listen, I think a couple of things. So first, we we obviously had good gas margins and events last year, which are not we’re not expecting this year again, I mean, including sort of things like the Natuzzi and stuff like that, which which were not recurring versus last year. Also, we had hedged this year at 70 versus around 90 last year. So also for the rest of the year, that’s you know, we’re looking at sort of these lower hedge numbers than we had versus last year. Also, in terms of market prices, for example, in April, they were slightly lower.
So we had a very first high good first quarter with the sort of €85 per megawatt hour, but but April’s come down. So we’re also being prudent there in terms of power prices over the next couple of months. And so these services, I think we’re assuming is is pretty much stable going forward. I mean, the combination of all of these things make us feel comfortable with the guidance. And as I say, you know, if we have reason to then upgrade it at any point, obviously, we would let you know.
But as of today, we would certainly reiterate our our existing guidance of the 4.8 and the 1.2.
Alberto Gandolfi, Analyst, Goldman Sachs: Very clear. Thank you.
Miguel Stroud Andrade, CEO, EDP: Thank you.
Miguel Biena, Head of IR and ESG, EDP: Thank you, Alberto. Next question comes from the line of Olli Jeffrey from Deutsche Bank. Olli, please go ahead.
Olli Jeffrey, Analyst, Deutsche Bank: Thanks. Just coming back to the Flex generation. If I remember correctly, I think in 2023, pump storage did 50,000,000 And this year, if you say it’s maybe around 100,000,000 maybe you could comment on that. But the rest of storage and CGTs, I mean, that might imply GBP 200,000,000. I’m just interested to see how for the Flex generation ex pump storage, how that’s changed from last year to this year?
And then on a medium term, for the Hydro Iberia and Supply business, previously, you guided medium term for around GBP 900,000,000, for that business. Given the structural changes we’re potentially starting to see, do you see that number now being a bit higher given the desire to have more firm power and for ancillary services? Thank you very much.
Rui Teixeira, CFO, EDP: Ole, it’s Rui here. Do you mind repeating the question? Because I have to say I was a bit lost. Can you repeat? Sorry.
Olli Jeffrey, Analyst, Deutsche Bank: So I was just asking I was asking about the flex EBITDA number this year where you see there’s about GBP 300,000,000. I’m just trying to understand for how much of that is pumped storage and how much of that GBP 300,000,000 is CCTs and the rest of your ancillary services? I’m just trying to understand how the rest of that has grown from last year. So have you seen how much have you seen the ancillary services benefit increase this year versus last year? How much that contributed in the higher EBITDA?
And then the other question was just medium term. I think you guided to Hydro Iberia being around €900,000,000 on a normalized basis. And just given the structural changes we’re now starting to potentially see around ancillary services and a greater desire for firm power in Spain, you see that €900,000,000 bigger medium term being higher?
Rui Teixeira, CFO, EDP: Okay. Got it. So again, on
Miguel Stroud Andrade, CEO, EDP: the ancillary
Rui Teixeira, CFO, EDP: services and flex generation, it’s hard to say how much. But yes, we are expecting it to slightly go up. So and as Miguel was saying, I mean, we see it as an outcome of what is happening structurally in the sense of what is the current market matrix, and that’s how or why we see that upside. So then we can follow-up offline. Can help you do sort of splitting between what is a CCGT versus other elements of the ancillary services.
And on the and you’re right, what basically we said was that sort of a cruise speed, this segment of the business should be around the EUR 900,000,000.0. I think back in February, we also stated that this could be around the 910,000,000.00 actually, exactly because of what we see of the contribution from this from the hydro pumping spreads versus the base oil prices, the contribution of different ancillary services. So yes, I think that we are looking to that segment more towards the €1,000,000,000 as opposed to the 900,000,000.0 But we can follow-up offline on the other topics.
Gonzalo Borvani, Analyst, UBS: Thanks very much.
Miguel Biena, Head of IR and ESG, EDP: Thank you, Olli. The next question comes from the line of Josh Gimarej from GB Capital. Josh, please go ahead.
Pedro Alps, Analyst, CaixaBank: Good morning. I have two questions. So the first one is related to the potential of setting thermal plants in Portugal with so called black start. What type of remuneration could you get from the regulator, if any, if you were to fit more plants with this type of facility? And the second one is related with your outlook for the distribution in Portugal.
If you can give us not getting in advance of the Capital Markets Day of November, but if you could give us some idea about what would be the impact in the gross margin of distribution in Portugal from the CapEx plan you presented to the regulator? Thank
Miguel Stroud Andrade, CEO, EDP: you, Josh. So in relation to the Black Start, so as you know, currently, there are two power plants in Portugal that have this ability, which is Cristal Bod, which is one of our hydro plants, and Tapado Dolotai, which is a thermal plant located up in the North, which is not ours. It’s already been announced by the government that there would be two additional power plants, so Al Kiev, hydro, and Bashabur hydro as well, which would also be fitted out with the Black Start. I’d say that the remuneration, I I don’t have exact numbers, but it’s it’s low low single digit. I mean, we’re we’re or single digit numbers.
We’re not talking about material remuneration for for this service. On the impact on gross margin, I don’t have the exact detail, so I’d leave that for later. But obviously, I mean, what we’ve said in the past is that this increased investment over the next couple of years would lead to, you know, mid single digit growth in RAB and sort of over that period. And so then you can probably back out what that means in terms of increasing gross margin. Thank you.
Pedro Alps, Analyst, CaixaBank: Thank you.
Miguel Biena, Head of IR and ESG, EDP: Thank you, Josh. The next question comes from the line of Arthur Sitbon. Arthur, please go ahead.
Josh Gimarej, Analyst, GB Capital: Hello. Thank you for taking my question. The first one is on international networks, so Brazil and Iberia. I think on the last conference call, had talked about €1,600,000,000 of EBITDA in networks in 2026. I was wondering if you would expect any improvement from that given the regulatory review on in Brazil that you talked about in the presentation as well as the regulator opinion on the investment plan for coming years and maybe your updated expectations on the two regulatory reviews in Iberia.
So that would be the first question. The first one is just ahead of the CMD in November, I’m conscious that you probably can’t say much at this stage. I was wondering how you think about financial leverage. Basically, would the goal for you be to have delever significantly by November in order to have a less conservative business plan on capital deployment, whether it’d be focused on growth investment or cash distribution? And I was wondering actually if maybe one of the reason why the guidance for 25,000,000 doesn’t increase is that maybe you assume some dilution from disposal?
Or is the idea to deliver delever gradually during the business plan and have an approach more focused on discipline on capital deployment really at the at the cost of the the new plan? Thank you very much.
Miguel Stroud Andrade, CEO, EDP: K. Thank you, Arthur. So in relation to to the first one, the the guidance that we gave regarding networks, it it already includes some assumptions regarding sort of an, you know, increased investment and and return. So, obviously, we’re already even though we don’t have the the numbers or even a draft proposal, but we already had certain assumptions built into that into that guidance number. And then, obviously, what we’ll have is confirmation and and sort of the final numbers, and so we’ll we’ll be able to then give a more precise value.
But look. We already had a certain amount of assumptions in terms of increased investment and returns in that. In relation to the second question, I mean, as you know, our and as both Rui and I have mentioned many times, our commitment is to the BBB and and making sure that we maintain that at at all times. And then what we do is essentially try to triangulate between growth, balance sheet, and dividends. And and so that’s the that’s the balance that we’ll be doing for for the Capital Markets Day.
So we’re not trying to preempt or or do an additional acceleration above and beyond what would be necessary to keep the triple b form for the Capital Markets Day. We’re just trying to make sure that we we are able to keep this balance between these three points, and and and, hopefully, we’ll give them more detail in the Capital Markets Day about what our growth rate is, what our dividend policy will be, and also what we expect in terms of ratios and and balance sheets for the coming years. But but don’t read anything into the dilution don’t read anything into the dilution disposals or anything. I think the only thing maybe which I didn’t mention on a on a previous question, I think, a from Alberto is don’t forget that we’ve also we increased slightly our guidance for this year on the integrated margin, and we decreased it slightly on the EDPR side because of lower lower capital gains assumptions. Okay?
But that’s really the only thing you should take into account.
Josh Gimarej, Analyst, GB Capital: Very clear. Thank you.
Miguel Stroud Andrade, CEO, EDP: Thank you.
Miguel Biena, Head of IR and ESG, EDP: Thank you, Arthur. Next question from the line of Gonzalo Borvani from UBS. Gonzalo, please go ahead.
Gonzalo Borvani, Analyst, UBS: Hi, thank you. Thank you for presentation for taking my question. My side, just one follow-up on Alberto’s questions, since he didn’t ask about the potential buyout of EDPR. A broader question also including this topic. I mean, we get from time to time rumors about potential approaches from you or to you with different options, You’ve probably seen them all.
I was wondering what would be your view on any sort of like big M and A corporate transformation. So basically, whether that message has changed in any way and that obviously includes any potential change in the structure, the corporate structure within EDP and EBR. Thank you.
Miguel Stroud Andrade, CEO, EDP: Thank you, Ghansal. I’ll give the same answer which I’ve given many times before. I mean, so in relation to the structure, we’re very comfortable with the with the current structure. And in terms of big m and a, you know, what we’re really focused on as management is is on delivering value. And as I showed, it’s growing the company.
It’s being more efficient, you know, decreasing costs. It’s anticipating the dividends as we did this year or making sure we’re able to sort of have a good shareholder return policy, whether it’s dividends and share buybacks. That’s our key focus. That’s what we are really working on. And and I certainly wouldn’t want to speculate on on anything else apart from that.
Gonzalo Borvani, Analyst, UBS: Thank you.
Miguel Biena, Head of IR and ESG, EDP: Thanks, Gonzalo. So next question from the line of Giorgio Alonso from Bernstein. Giorgio, please go ahead.
Miguel Biena, Head of IR and ESG, EDP0: Hi, good morning and thank you very much for taking the questions. My questions are about the energy hedges, especially in Iberia, if you can provide some more color about for the hydro, the wind, solar, what are the levels for 2025, ’20 ’20 ’6? You have hedged something for 2027. And the other one would be related to the CapEx in renewables, especially in solar outside The U. S, if you expect the CapEx to come down materially and if that could boost the profitability of some of the projects if you are already with some of the procurement open at this stage?
Thank you very much.
Rui Teixeira, CFO, EDP: Jorge. It’s Rui here. So in what concerns hedges for this year, as said already, we are at around 70 per megawatt hour. If we look into 2026, we have already some hedges done at this around €63 per megawatt hour. So that’s for about three point I mean, nearly four terawatt hours.
So I would say good pricing above what you currently see as forward curves in the market. In the CapEx in U. S. I’m sorry, do you mind repeating the question? Because I’m not sure if I follow.
Miguel Biena, Head of IR and ESG, EDP0: Yes. If due to what is happening in with the tariffs in The U. S, you do think that the solar CapEx outside The U. S, simply because of the oversupply of the Chinese suppliers, can be low, and these can create an opportunity for some projects in which the procurement is still open. So the PPA closed, but the CapEx coming down and then creates an opportunity for increasing IRRs.
Rui Teixeira, CFO, EDP: Yes. Okay, got it. Thank you. So maybe starting by saying, mean, we what we have seen is that solar module pricing is at minimum levels versus last year’s. So at some point, I think it’s hard to consider that it can continue to go down.
And as you see some of the solar manufacturers, their numbers aren’t looking great. Then if you look to the other components on the CapEx, I would say it’s hard to think about compressing the labor. So my point being that we are not expecting any major shift in terms
Miguel Stroud Andrade, CEO, EDP: of
Rui Teixeira, CFO, EDP: downwards or reduction on the CapEx. Again, this will vary region by region. But so first of all, we are not counting on that secondly. So when we are negotiating the PPAs or bidding for CFDs, we will take what is the at the moment or how we are going to lock in the CapEx so that we don’t open the position in a sense that we would be committing to the power sale without locking in the CapEx. So to some extent, ultimately, that starts if there was any shift in the pricing on the CapEx side, it starts getting reflected on the PPA prices as well, but targeting always our spread, the two fifty basis points spread to WACC.
So I would say that at least we are not seeing a major contraction on the market in terms of the CapEx.
Alberto Gandolfi, Analyst, Goldman Sachs: Thank
Miguel Biena, Head of IR and ESG, EDP: you, Georges. So we don’t have any more questions from the line. So we are reaching the one hour that we’re supposed to take the call. So I’ll pass to to our CEO for final remarks.
Miguel Stroud Andrade, CEO, EDP: K. Thank you, Miguel. So just final remarks. I mean, obviously, it’s undeniable that this is a good start to the year, the first quarter. And in April, I think also good positive outlook on Iberia integrated business, positive outlook on networks, expecting slightly less in terms of asset rotation gains as we we talked about yesterday for 2025.
But overall, I think feeling good about the business, reiterating our guidance for the year, and and feeling, you know, comfortable with that. And I think the key message is that, obviously, we’re going providing additional information over the next couple of quarters, but we expect to be back in November with a more detailed analysis of of the business and the outlook for the next couple of years. So in November, we would give that sort of strategic update post 2026, but obviously with additional information, ’25, ’20 ’6, and beyond. And with that, thank you very much, and look forward to talking to you again soon.
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