Earnings call transcript: EDP Renovaveis Q2 2025 sees mixed financial results

EDP Renovaveis (EDPR) released its Q2 2025 earnings report, highlighting a mixed financial performance. The company posted a 7% year-on-year increase in underlying EBITDA, reaching 2.6 billion EUR, while its recurring net profit fell by 3% to 752 million EUR. Despite an increase in organic cash flow, the company’s net debt rose to 17.2 billion EUR. The stock experienced a slight decrease of 0.1% in early trading, reflecting a cautious market reaction. According to InvestingPro data, EDPR’s current market valuation appears elevated, with the stock trading at high EBITDA and revenue multiples.

Key Takeaways

• Underlying EBITDA increased by 7% year-on-year.
• Recurring net profit decreased by 3% year-on-year.
• Organic cash flow increased by 400 million EUR.
• Net debt rose to 17.2 billion EUR.
• Stock price decreased by 0.1% following earnings release.

Company Performance

EDP Renovaveis demonstrated resilience in its Q2 2025 financial performance, with a notable increase in underlying EBITDA. The company maintains impressive gross profit margins of 78.35%, according to InvestingPro analysis. The company continues to expand its renewable energy capacity, with plans to deliver 2 GW of new wind and solar capacity in 2025. However, the decrease in recurring net profit and the rise in net debt indicate challenges that the company faces amid a competitive energy market. InvestingPro analysts have identified concerns about the company’s ability to service its debt obligations, with a debt-to-equity ratio of 1.02.

Financial Highlights

• Underlying EBITDA: 2.6 billion EUR (+7% year-on-year)
• Recurring net profit: 752 million EUR (-3% year-on-year)
• Organic cash flow: Increased by 400 million EUR
• Net debt: 17.2 billion EUR (up from 15.6 billion EUR at 2024 year-end)

Outlook & Guidance

EDP Renovaveis has upgraded its 2025 recurring EBITDA guidance to between 4.8 and 4.9 billion EUR. The company targets a net profit of 1.2 to 1.3 billion EUR and aims to reduce net debt to around 16 billion EUR. The company plans to continue its focus on expanding renewable energy capacity, with 1.5 GW of capacity additions planned for 2026.

Executive Commentary

"We had a good first half. I think we’re well positioned for the good second half," said Miguel Stoudenderen, CEO of EDP Renovaveis, expressing confidence in the company’s future performance. He also emphasized the importance of adequate investment remuneration in a competitive market.

Risks and Challenges

• Increasing net debt could strain financial flexibility.
• Decreasing recurring net profit may affect investor confidence.
• Competition in the renewable energy sector could impact market share.
• Regulatory changes in key markets like Brazil and Iberia could pose challenges.
• Economic volatility may impact electricity demand and pricing.

Q&A

During the earnings call, analysts inquired about the company’s performance in the first half and its outlook for the second half of 2025. The management reiterated its focus on value creation and opportunities in Brazil’s market liberalization, while addressing ongoing discussions about network returns in Spain and Portugal.

Full transcript - EDP Renovaveis (EDPR) Q2 2025:

Conference Moderator: Good morning. We welcome you to the EDP First Half twenty twenty five Results Presentation Conference Call. During the presentation, all participants will be in a listen only mode. There will be an opportunity to ask questions after the presentation.

I now hand the conference over to Mr. Pierre Biena, Head of IR and ESG. Please go ahead, sir.

Pierre Biena, Head of IR and ESG, EDP: Good morning, ladies and gentlemen. Thank you for attending EDP’s first half twenty twenty five results conference call. We have today with us our CEO, Miguel Stoudendrat and our CFO, Matthijs Scherer, which will present you the main highlights of our strategic execution and financial performance in the first half twenty twenty five. We’ll then move to the Q and A session, in which we will be taking your questions posed by phone or written questions that you can insert from now onwards at our webcast.com. I’ll give now the floor to our CEO, Miguel

Miguel Stoudenderen, CEO, EDP: Stoudenderen. Thank you, Miguel. Hello, everyone, and thank you for attending our first half results conference call. I just say we we had a strong and solid set of of results here in the first half, and I think this is setting us up well for for the full year, which is why we also have a set provision of the of the guidance upwards. And so if we go into slides into the first slide, and I can do a quick recap, basically, of our our first half.

First, underlying net profit increased by 27% year on year, reaching 752,000,000. So that shows, I think, the value of the integrated business in Iberia, and we’ll go more into in-depth in that later on. Solid delivery by EDPR, which we talked about yesterday, and also resilient electricity networks. Integrated business in Iberia had good results. I mean, we had a structural increase in demand for flexible generation.

We had good hydro volumes well above average. But we also had solid results from our electricity networks segment. We had EBITDA growing 6% year on year, excluding asset rotation gains and and FX. And, that shows strong operational performance across all geographies. So, again, we went into quite a lot of detail on the the call yesterday on that.

The wind and solar front’s underlying EBITDA was up 20% year on year, supported by the ramp up of new capacity added in the in the fourth quarter. Asset rotation gains, immaterial this semester, only 9,000,000 compared to a 143,000,000 in the first half of last year. Again, strength of our underlying performance. And so overall, just a strong set of results showing the value of our integrated model. If we move forward to the next slide, slide four, talking a little bit about flex gen demand and also the need for for more investment.

Clearly, we’re seeing a shift in market dynamics. I mean, there’s much more value being placed on flexible generation assets. I mean, the value of flex gen is becoming very clear when you look at the final electricity price in Spain. We see that the share attributed to ancillary services and restrictions has been steadily increasing. So from around €5 per megawatt hour back in 2015 to around €18 per megawatt hour in the 2025.

The same time, we’re also seeing a growing momentum around new remuneration schemes for this type of assets. And so just to highlight that in Spain, there were around €700,000,000 in grants for energy storage that submitted this month, and there’s also the launch of a new capacity mechanism, which is currently under public consultation. So we’ll see the result of that over the next couple of months. All of this going hand in hand with the need for additional investment in electricity networks. So particularly in Iberia, our main market, I think it’s pretty clear to everyone.

I think that’s a market consensus that is key to support and to accelerate investments in grids. First, there’s more electrification of the economy, particularly in the industry heating and electric mobility. There’s also a lot more development of data centers and green hydrogen projects. And so just looking at some of, you know, some key data points and looking at EDP’s numbers, we’ve seen an increase of around a 126 in e mobility related supply points in the 2025 versus the ’23, so in the the two year space. And we continue to see a rise in electricity demand with electricity distributed by EDP increasing 3% year on year in the 2025.

Also, penetration of intermittent renewable technologies like wind and solar. And as you know, in Iberia, clearly, a lot of resources for that, so abundant resources on both of those. And in our distribution companies, we’ve seen an increase of 18% in renewables connected to the grid in the ’25 versus the first half of of twenty twenty three. Finally, and as we stressed in previous presentations, mean, I we think it’s really critical to invest in a more modern and digital grid. So in Portugal, for example, I think I’ve given this number before, but it’s worth reiterating, around 45% of transformers are over 40 years old.

So I think that just shows the urgency of having a infrastructure renewal in both Portugal and Spain. If we move on to the next slide and talk about, hydro. So we had really strong hydro resources in Iberia in the first half. Hydro inflows were 41% above the long term average, so even higher than the the level seen in the 2024, which was already quite strong. Despite that, hydro generation was lower year on year, and that’s because the rainfall was primarily used to establish reservoir levels, mostly during the first first quarter, which started the year at around 60%.

And that was already, you know, significantly below the 80% that we’d seen at the beginning of twenty twenty four. So we use a lot of that rain to replenish the reservoirs. And you can see that on the left hand side of the slide, the year on year delta in in hydro production was largely stored in the reservoirs. And so now we’re at 83% in July, so well above historical averages and the highest levels in the the past decade. So positioning us well, I think, for the next couple of months.

So even though we had lower generation year on year, the hydro output remained above average, and the uncontracted volumes were sold at higher prices year on year with the Iberian pool price reaching €62 per megawatt hour versus €39 per megawatt hour in the 2024. Contracted volumes, however, were sold at a lower price, namely €70 per megawatt hour versus €90 per megawatt hour in the first half of last year. So that was already pretty much expected. I mean, as you know, we we go on forward hedging, and and, obviously, the hedges for this year were were lower than last year, but that was already baked into, I think, to everyone’s estimates. Overall, the strong performance in the first half half of the year, combined with the high reservoir levels, gives us very strong confidence for the remainder of the year.

If we move on to slide six. So as I mentioned, a strong first half of the year, meaning that we update our guidance for the segment in 2025 to the top end of the range we’d previously given. And so at the time of the last results conference call, we’d said that, you know, integrated Iberian EBITDA of around 1.1 to 1,200,000,000.0. We’re now expecting to be more towards the 1,200,000,000.0 with the bulk of it already locked in, so around 80% margin locked in. Key drivers for the delivery of this guidance are, high weight of locked in margin, so assuming the normalized volumes and going forward, A strong first half, but with some normalization already seen in the second quarter.

As usual, third quarter, which just naturally has lower hydro volumes. I mean, July was lower than than average, but in general, this this quarter is is lower. And then towards the second half of the year, we expect higher sourcing costs. So in line with the trend we’ve experienced in the second quarter, we expect that the system operator will continue to call on thermal generation, which, as you know, has lower margins in terms of the the ancillary services. So this combined with the summer months will lead to a lower weight of hydro generation in the total generation mix, so increasing our sourcing costs for the second half of the year.

Then on the last quarter, we’ve already faced some costs with ancillary services on the supply side, which we expect to persist in the second half of the year. On the positive side, we have very strong reservoir levels, as I mentioned, and we are seeing an increase in the Spanish future power baseload forward prices at more than €70 per megawatt hour in the 2025. So some positives, some negatives, I think, driving us through the second half. If we move to electricity networks in Iberia on slide seven and the the regulatory outlook, I’d say the first point I wanted to make here is that it’s really important to have a supportive framework and adequate returns to enable the investments for the energy transition. As you know, in Spain, the regulator launched a public consultation proposing a 6.46% return for the next regulatory period together with the phase transition to a totex model starting in 2029.

However, believe that these returns or the proposed returns are clearly short of European average, where the returns for electricity networks are above 7%. So we hope that the ongoing discussions will result in an improved return that Spain could converge to this benchmark. The proposal from the regulator is currently under public consultation. We’ll be submitting our comments by early August. And by the end of the year, we should have the new regulatory framework and investment limits approved.

I mean, hopefully, well before that, we’ll have better visibility on on these issues. In Portugal, the need for higher returns is equally important. And as you recall, we have proposed a 50% increase in high and medium voltage investments, which has already received a favorable opinion from the regulator without any material impact on the end user tariffs. However, the implementation is still subject to the final regulatory framework and return definitions. As I just mentioned in relation to Spain, the same is true for Portugal.

So the return rate in Portugal should clearly be adjusted to ensure that the required investments are attractive and can be executed. We need a more modern, a more digital, and an expansion of the the grid infrastructure. And I think it’s important to note in that in Portugal, we still have the extraordinary tax, although that’s not applicable to new investments and meters that are not remunerated. So, clearly, there needs to be an upward adjustment of the returns if we are to see investment. Regarding the key milestones for Portugal, in relation to the regulated revenues framework for 2026 to ’29, we should get visibility on that on the October 15 so that the regular regulator will release the proposal for for the regulated revenues in 2026 and the assumptions also for the new regulatory period.

December 15, as usual, is when we would have the the final decision. But, hopefully, the proposal will already reflect the big the the key guidelines and and numbers. If we move on to slide eight and talking a little bit about networks in Brazil, couple of important points here. First, we recently signed, so earlier this month, the thirty year concession extension for EDPHBH sent. So that’s now in place until 2055.

This was really important. I know we’d already got and we’d flagged some visibility that this was going to be extended, but we’ve now actually signed the contract in a with the presence of the government and and the the state governor. And we’ve been working, obviously, very closely with the Brazilian government to to get this done. The concession for Sputnik was expiring now in July, so it was really important to to get this extension actually formally approved and signed, and and that’s been done. They’ve been renewed with no upfront financial burden, but, obviously, with clear performance standards in terms of quality, efficiency, and and financial metrics.

I think one of the things interesting things about Brazil is they’ve extended the concessions because they recognize that we’ve managed them well. We provide a good quality of service. We’ve provided good investments, you know, contributed to the electrification of of the economy. And so I think we are reference players in the sector, and our operations are are clearly aligned with the the regulators requirements. So that was very positive news there.

We also expect EDP Sao Paulo concession to be extended from 2028 to 2058 under similar terms. That renewal has also been approved by the regulator. We’re still pending the the signature, but the the regulator has already given the green light on that. Looking ahead, the tariff review for EUBSP sent a scheduled for August 2025. They’re setting the regulatory parameters for the the period ’25 to 2030.

So the regulatory periods has been extended from three years to five years. And just, you know, some preliminary figures from the public consultation, I think they show a return on RAB increasing from 7.15% to 8.03%. So it’s and also a 46% increase in the regulated asset base. So good recognition of the investments that we’ve executed over the last couple of years. All in all, I think reinforcing long term visibility and stability of our distribution business in Brazil and supporting our investment plan of around BRL 3,300,000,000.0 in electricity distribution in Brazil for 2025 and 2026.

If we move now to slide nine and winds and solar, again, just quickly highlighting a couple of of comments here because we we already touched on some of these in in yesterday’s call. We’re on track to deliver the two gigawatts of new wind and solar capacity in 2025. 70% of it planned for the fourth quarter. The execution is progressing on time and on budget, so I think highly confident on that. Looking ahead to 2026, we already have good visibility with up to one and a half gigawatts of capacity additions, of which 65% is already secured, mostly in low risk markets with The US and Europe, and the rest is under advanced negotiation.

On the asset rotation side, execution also progressing very well. As you know, we we targeted around €2,000,000,000 of proceeds for 2025. We’ve already closed a significant percentage of this in Spain, US, Belgium, France, more recently, Greece. The remaining €1,300,000,000 is already under binding bids. As we’ve previously stated, we expect around €100,000,000 in gains.

Most of the proceeds concentrated, obviously, in the second half of the year, more towards the end of the year. Besides the wind and solar transactions, I just also wanted to highlight that we are successfully executing our capacity additions plan and ensuring we have the financial flexibility to reinvest in future growth. I just wanted to touch here very quickly on, on the issue one of the issues which was raised around data centers. I mean, we we have strong connections with a lot of the the clean the the big tech. We have assets and expertise that allow us to really benefit from and and support the expected data center growth.

The focus has been on our side in promoting load or either just supply contracts as we’ve been doing with many of the solar and wind projects having PPAs directly with the big tech. But we’ve also been promoting load colocation with renewable development, so leveraging on shared grid connection infrastructure and lands and and powered land opportunities. I think we do have a good good portfolio that’s very suited for colocation opportunities in both The US and Iberia. I mean, in The US, you know, we have renewal assets with mixed technologies with scale so we can facilitate connection to to large data center developments. And they obviously have a wide geographic footprint.

Some of our assets are located near existing or potential data center hubs, and our assets can also operate as a door to electricity grid through our substations and power lines. So reducing costs and time to market, and and that’s something we’ve been working on in our and there’s even some public news recently in Texas, for example, relating to that. In Iberia, we have several renewable assets under development that may connect directly to data centers or in Spain be leveraged to secure grid connections for demand. So we also have several plots of land on the sites of thermal power plants, some of them in in good connections, good location for for data centers. Recently, for example, we also did a or we have an agreement with Merlin to do a a 100 megawatts actually behind the meter sort of with a direct connection to a data center that’s been developed there.

So I think we have a lot of good examples of the way that we are continuing to serve this demand growth that’s coming out from from the data center growth. If we move forward to OpEx, here, again, very strong performance, really delivering a lot of efficiency gains. We’ve done a big organizational simplification and streamlining, and we are also investing heavily in digital and just sort of automating several of the process. I mean, this is an ongoing continuous process that we are driving throughout the company. We actually reduced nominally OpEx, so it decreased to around 930,000,000 in the 2025, down from 960,000,000 in the ’24 despite 3% inflation in this period and despite a tremendous growth of megawatts and and grids in this period.

So a 6% decrease in real terms at the same time that we are significantly growing the company. So this is really significant gains in productivity and efficiency. We are obviously working very much on the supplies and services side, but we’re also working on our workforce structure, making sure where it’s aligned with our future growth trajectory. You can see the number of employees actually decreased 5% year on year, and and there’s been just an an overall decrease in headcount since the the 2023. If you look at the OpEx over gross profit, clearly, the trend is very positive.

We’re decreasing from 26% down to 24% in the ’24 if 2025. And, again, very focused on having lean operations, centralized procurement, implementation of AI and digital driven initiative to optimize O and M, decision making, customer experience, and all of this while making a really strong effort to keep also the human side of the business. So we are very focused on keeping talent, making sure people are engaged, making sure they’re adapted, making sure that there’s full dedication to being enablers of this transformation. So we’re focused on making sure that we have the best people to actually drive this change and drive these productivity gains. Looking ahead, definitely committed to embedding this culture of continuous improvement, leveraging technology and data to unlock further efficiencies, and making sure that we keep our cost base agile and scalable as we grow and continuing to drive these economies of scale.

Looking at 2025, we’re upgrading the guidance for ’25 or following the strong performance in the the first half of this year. So the integrated business in Iberia has continued to outperform, as I mentioned, and that’s the key driver for this upgrading guidance, so contributing to around 1,200,000,000.0 of EBITDA, as I mentioned, above average hydro generation and strong demand for flex gen. Electricity networks, we’re seeing solid underlying growth supported by higher electricity consumption and the inflation update on regulated revenues. Wind and solar, we’re targeting around 1,900,000,000.0 of EBITDA, and we expect to deliver around 100,000,000 in asset rotation gains in the second half of the year. And so as a result, putting all of this together, we’re saying that our recurring EBITDA, we now expect it to be in the 4,800,000,000.0 to €4,900,000,000 range.

Net profit, 1,200,000,000.0 to €1,300,000,000 range, and net debt remaining at 16,000,000,000 around 16,000,000,000, assuming 2,000,000,000 in asset rotation proceeds and a billion in tax equity proceeds. Obviously, and I’ve mentioned this before, we will be doing the Capital Markets Day on November year, and we will be able to provide additional color and and visibility on not just twenty twenty five, but ’26 and beyond and sort of talking a little bit about the strategy and and the growth outlook. And with that, I’d just stop there and pass it over to Roy to to go through some of the financial numbers in more detail. Thank you.

Rui, CFO, EDP: Thank you, Miguel, and good morning. So let’s move now to Slide 13 to review the financial performance, which I believe it’s a very strong one in the first half of this year. If you look at EBITDA, it reached €2,600,000,000 in the first half of the year. That’s a 7% increase on underlying year on year, so excluding the asset rotation capital gains from last year. If we exclude also the FX impact, actually, it went up by 9%.

So if you now look at the recurring figures, removals, clients and energy management decreased $41,000,000 year on year. This includes a $30,000,000 decrease in hydro, clients and energy management, with the year on year comparison impacted by low gas sourcing costs in the 2024, this was in Iberia, but also an FX impact in Brazil, and the stable performance from EDPR. However, when excluding the asset rotation capital gains, EDPR’s EBITDA increased €159,000,000 and this shows the strong underlying performance. On the network side, EBITDA declined by €72,000,000 again due to the absence of asset rotation this half these first six months, which reached €71,000,000 in the 2024. So excluding those, the segment stood flat year on year, supported by the strong electricity demand across all the geographies, but obviously impacted by the effects of the Brazilian real.

So now sorry, moving to Slide 14 to our Hydro Clients and Energy Management segment. EBITDA for the first half stood at EUR $858,000,000. This represents a 3% decrease versus last year. And this is a reflection of a mixed set of dynamics. So in Iberia, first half last year was impacted by extraordinary impacts on gas sourcing costs.

Hydro generation volumes were down at 7.3 terawatt hours versus 7.8 terawatt hours in the ’4. That’s a 6% decline. However, hydro and contracted volumes were sold at higher prices, with a 58% increase in electricity spot price, which rose from €39 per megawatt hour €62 per megawatt hour. Pumping generation increased by 13%, and CCGT generation tripled from 0.6 to three terawatt hours, reflecting the system operator requests, and this was mainly after the blackout. However, it’s important to note that CCGTs have lower margin as compared to hydro, and therefore, it has an impact on the gross profit.

I would also that in the ’5, we had an increase in the ancillary services revenues from the generation side, but also some costs on the supply side, which we expect to persist in the second half of the year. On a net basis, the impact from ancillary services was obviously positive. In Brazil, EBITDA declined slightly from €97,000,000 to €75,000,000 but that is mainly due to FX impact the Brazilian real devaluation impact. Overall, despite the slight decline in headline figures, the segment continues very solid. If we now move to Slide 15 and turning to Electricity Networks segment, recurring EBITDA reached €765,000,000 in the first half of the year.

It represents a 9% decrease year on year, but the decline is primarily explained by the absence of asset rotation gains that amounted to €71,000,000 in the ’4. Excluding these gains, the underlying performance was solid, obviously impacted by Brazilian real effects and therefore, EBITDA remaining flat. So you see a €23,000,000 increase of EBITDA in Iberia following the inflation uptake in Portugal and rapid growth in Iberia overall and then a €24,000,000 decrease in EBITDA in Brazilian operations, excluding gains. If we exclude the FX impact, actually, Brazil would increase 7% following what is the performance of the distribution as well as the transmission businesses there. So all in all, EBITDA for electricity networks, excluding asset rotation gains and ForEx impact, increased 6%, showing a strong operational performance.

On Slide 16, wind and solar, underlying EBITDA grew 20% year on year or 21% if we exclude FX, And this reflects naturally the strong performance that we highlighted yesterday on EDPR’s call. So that’s a 12% increase in electricity generation driven by the ramp up of new capacity added in 2024, impacted also by a slight decline in wind resources compared to the first half of last year, with lower wind resources in Europe offsetting better resources in North America. Also, average selling price decreased by 9% year on year to around €55 per megawatt hour, and this is mainly due to lower realized prices in Europe and Brazil. So now moving to Slide 17, financial costs. Recurring terms increased 6% year on year, resulting from higher average debt in the first versus the ’4 and cost of debt increasing from 4.6% to 4.8%, reflecting higher Brazilian real denominated cost of debt.

If we exclude the Brazilian real cost of debt, the rest, which is mainly or primarily euros and U. S. Dollar, stayed stable at 3.3. Obviously, here, this first half, we had lower capitalizations that have an impact in terms of the financial costs reflected into the P and L. On the right hand side of the slide, average nominal debt by currency shows a decrease of U.

S. Dollar denominated debt in line with our strategy to reduce the exposure on the balance sheet to this currency. And finally, highlighting that in May, we issued €750,000,000 of green bonds with a 4.5% coupon and maturity in 02/1955. So we continue to actively manage our debt and liquidity needs. Net debt on Slide 18 stood at €17,200,000,000 up from the €15,600,000,000 year end 2024.

This increase is the consequence of executing the investment plan, the annual payment of dividends, with proceeds from asset rotation and tax equity expected to be mostly concentrated in the second half of this year. So the key drivers on the change in net debt include, as said, 1,500,000,000.0 organic cash flow, reflecting better working capital performance, with organic cash flow increasing 400,000,000 on year from around €1,000,000,000 in the first half last year $800,000,000 of dividend annual payment executed in May $1,900,000,000 of net cash investment, including $2,100,000,000 of cash CapEx That includes 400,000,000 related to working capital, the changes with PP and E suppliers. And this is offset by around $200,000,000 of asset rotation proceeds and $100,000,000 of tax equity proceeds on this half of the first half of the year. Also, 600,000,000.0 of regulatory receivables and about 100,000,000.0 from FX and other. This is mostly from U.

S. Dollar denominated debt. So despite the higher debt, the leverage ratios remained solid. Net debt to EBITDA stood at 3.8x and FFO to net debt at 19.5%, so really strong metrics. Obviously, this is the reflection of a very disciplined financial management and expectation also of strong cash inflows during the second half of the year as we close asset rotations, as we close the tax equity proceeds, and this will support further deleveraging to achieve our €16,000,000,000 target by year end.

Now on net profit, Slide 19. Recurring net profit at €752,000,000 so that’s a 3% around 3% decline versus last year. And this is mostly reflecting the lower EBITDA, the €72,000,000 year on year, as I said, because of the asset rotation gains. If it was not from for that, actually, it would be increasing. The higher depreciations and amortizations and provisions, increasing €64,000,000 year on year as a result of the investment plan increased net financial costs due to the higher average cost of debt and lower capitalizations, again, that cost of debt driven primarily by the Brazilian real denominated part of the balance sheet, lower income taxes and lower noncontrolling interest.

So excluding capital gains, the underlying net profit shows a strong 27% increase versus the ’4. So definitely, a good performance in this quarter and coming across all the business lines. Reported terms, net profit reached $7.00 €9,000,000 including the negative impact of €43,000,000 which is most related to U. S. Ocean winds.

With this, I would hand over to you, Miguel, for closing remarks. Thank you all.

Miguel Stoudenderen, CEO, EDP: Okay. Thank you, Rui. So just a couple of quick comments before we wrap up and and and pass to to q and a. Reiterate strong first half results. Underlying EBITDA, up 7% year on year.

Underlying net profit, up 27% year on year. Organic cash flow, up point 4,000,000,000 year on year. So clearly, strong improvement on operational performance driven by solid wind and solar delivery, good electricity networks results, and a solid integrated business in Iberia. So quite frankly, I think we’re very pleased with the first half results. Improved outlook for integrated business in Iberia.

Reservoir levels at historical highs, 83% in July. A high weight of locked in, margins and also growing demand for flexibility in ancillary services seen as a structural change in the market. So, again, positive outlook for integrated business. Electricity networks, some key regulatory milestones coming up in 2025. There’s a public consultation underway for new remuneration framework and also return on investment in Spain, which is gonna be really important for us to take decisions on that.

In Iberia, modernization, digitalization remain key. I’ve I’ve talked about that. I’ve talked about sort of the age of transformers and sort of the the amount of investment that is required. And so an improvement of returns is required to foster investment. In Brazil, we have this concession extensions of thirty years for EDP Speedy Cent signs, tariff review in August 2025 and also formal approval of thirty year extensions in in EDP Speeds in Sao Paulo.

Overall guidance upgraded supported by this first half performance in all segments. And the 2025 guidance EBITDA, 4.8 to 4.9. As I mentioned, net profit, 1.2 to 1.3, and the net debt at around €16,000,000,000. So overall, as I say, good first half, well positioned for second half and for the let’s say, for meeting the the guidance that we have for the year. Finally, I just mentioned it, but Capital Markets Day, November 6, we will be providing a lot more color.

So even if we don’t get into a lot of detail today on the q and a, obviously, we will take note of of all the questions and and request for information then come back to you November 6. With that, I’d stop and pass it over to to Miguel for q and a.

Conference Moderator: Thank you, ladies and gentlemen. The q and a session starts now.

Pierre Biena, Head of IR and ESG, EDP: Thank you. So first question comes from the line of Pedro Alps from Caixabank. Pedro, please go ahead.

Pedro Alps, Analyst, Caixabank: Hi, good morning. Thank you for the presentation. I have just one question on how should we think about the group strategy and capital allocation ahead of the Capital Markets Day. So we continue to see on one hand some consolidation rumors out there, send out some on the structural direction of the equity story of the group. So can you please tell us if we should expect EDP to present an organic growth plan in November with EBITDA net profit growing organically while keeping our balance sheet under control?

I think it’s fair to say that you are not probably in your comfort zone in terms of balance sheet. So can we expect EDP to eventually increasingly shift into the sale of minority stakes, raise the stock of the hybrid bonds or even consider an equity raise like one of your peers recently did? Sorry. I know you you may want to to elaborate on all of these in the capital market side, but any early thoughts on on that would be helpful. Thank you.

Miguel Stoudenderen, CEO, EDP: Sure, Phil. Listen, Let’s be very clear. What we are working on is a business plan which allows us to continue to deliver on long term value creation for the company and both, you know, organically 2025, ’26, and beyond. We will be setting out EBITDA, net income, net sort of a net debt estimates and how we see the business developing over the next couple of years. I would I didn’t not I I’m not sure I quite understood your point about the comfort zone of the balance sheet.

I think we have a solid triple b balance sheet, and that’s going to continue to be a key pillar of our strategy going forward. And so we’ll continue to manage basically the, let’s say, the three pillars, growth, dividends, and balance sheet, and we’ll be constantly adjusting and sort of optimizing for for those three pillars. But you can I would say it’s part of our strategy, and I don’t think we have any plans of changing that? Keeping the triple b rating, you’ve continued to have a solid dividend policy and continue to have sort of a solid and profitable growth plan going forward. I mean, we have no objectives or or targets of doing any capital raising.

I think we are comfortable with the current structure and comfortable with the current outlook for for the business. So, I mean, we are updating the market in terms of estimates beyond 2026. That was our commitment, but I think that’s what sort of you can count on organic growth, profitable, taking advantage of all the opportunities we see out there, keeping a solid balance sheet, and keeping sort of a a attractive dividend policy. But, obviously, we’ll be giving you more color and more detail on that in the Capital Markets Day.

Sky Lennon, Analyst, Redburn: K. Thank you.

Pierre Biena, Head of IR and ESG, EDP: Thank you, Pedro. So the next question comes from the line of Arthur Sitman from Morgan Stanley. Arthur, please go ahead.

Arthur Sitman, Analyst, Morgan Stanley: Hello. Thank you for taking my question. The first question is you flagged in your presentation that electricity distributed in Iberia for EDP is up 3% year on year in H1 twenty twenty five. I think it’s a bit of a different trend to what we’ve seen in the first half of the year in North Of Europe, where demand is seems less dynamic. I was wondering if this 3% increase is largely related to the heat wave that there was in May, June?

Or if basically you’re really starting to see a pickup in electricity demand? And if so, what do you attribute it to? Is it data centers? Is it broader electrification? Any granularity that you have in your database on the type of clients driving that or the type of equipment?

I guess that would be quite interesting to know. And the second question, I was wondering, you flagged very quickly this agreement on data centers with Merlin. I was wondering if you could provide some more detailed financials around this deal, in particular, the IR WAC spread of the agreement? And if there is anything worth mentioning about the deal versus usual solar contracts that you signed? Thank you very much.

Miguel Stoudenderen, CEO, EDP: K. Thank you, Arthur. So on the on the demand growth, I’d say it’s just the economies have been doing well. I mean, both Portugal and Spain had a pretty robust economy over the last certainly, over the last couple of months and years. But and so we see electrification.

We see new clients being connected. We see, you know, more EVs. I I gave that data point. We see data centers. So just it seems to be a broader, more general growth and demand driven by the economy, not any sort of particular or certainly not sort of you talked about the heat wave.

I don’t think it’s sort of a specific one off like that. So I think it’s a more structural growth, but let’s see also how it develops. On the second point, so this was I mean, this is a project which is is still to be developed, but I think it’s it’s publicly announced. It’s it’s a 100 so they’re developing a data center in Quechagad, actually very close to one of our CCGT plants just to slightly north of Lisbon, and it’s it’s a 100 megawatt DG project. But we don’t disclose specific well, clearly, the returns are attractive.

They’re above our our targets. We don’t disclose specific numbers for for projects, but but they definitely meet our investment criteria. And as I say, it’s it’s an interesting project because it’s it’s a direct DG large DG project, which then connects directly into the the data center. But but we don’t give out the specific numbers on on projects.

Arthur Sitman, Analyst, Morgan Stanley: Maybe maybe without giving specific numbers, is it is it a contracted profile on the solar plant? Or do you Yep. Do you need to be certain profile? No.

Miguel Stoudenderen, CEO, EDP: It’s it’s it’s contracted. I mean, it’s fully contracted. So it’s there’s a specific PPA with, you know, payers produced specific price, which guarantees us, you know, an attractive return on that. So we’re working on on that development. But as I said, listen.

We have many, many other examples of that. I think it’s we certainly, in the capital markets that we can then take a step back and look at some of all the different projects that we’re signing, whether it’s here or or in other geographies as well.

Arthur Sitman, Analyst, Morgan Stanley: Thank you very much.

Pierre Biena, Head of IR and ESG, EDP: Thank you, Arthur. So the next question comes from the line of Josh Kim Reyes from GB Capital. Josh, please go ahead.

Josh Kim Reyes, Analyst, GB Capital: Good morning. Thank you for the presentation. Two questions, if I may. The first is the follow-up on your mention to the ancillary services impact. We mentioned that it’s positive.

And I was wondering if you can give us some color on the monetary impact of the blackout, what this translated into Q2 gross margin and what we expect should we expect until year end? The second is a bit to have your view on the new remuneration proposal in Spain, not so much on the financial remuneration rate, but on the OpEx allowance, which seems to be pretty harsh on the CNMC proposal. And the third one is related with the recent with the message that Ghain is conveying about sales. If you expect that based on the rulings about the sales on gas in Portugal, we could see first a reduction on the sales going forward and potentially some recovery of past amount delivered. Thank you very much.

Miguel Stoudenderen, CEO, EDP: Okay. So on the ancillary services, I’ll ask Rui to touch on that. I’ll just talk about the the other two points. So in the remuneration in Spain, two points as as you mentioned rightly. I think it’s important to look at the overall parameters and and not just focus, obviously, just on the headline number, although that’s an important point as well.

Clearly, we would like to see a higher headline number. Six forty six is obviously higher than the current 5.6, but it it seems below the sort of European average. And And there’s a public report on that which points towards more than seven. So that’s on one side. In terms of the allowed OpEx, for us, bear in mind that we have suddenly smaller distribution companies in Spain, which have their own allowed OpEx sort of parameters.

And so we have a slightly different take or a slightly more positive take on that issue maybe than some of the others, but but I’d I’d prefer to comment once we have the overall package put together. But what I’d say is we we don’t think we’d be as much affected as as some others about the the review and the the allowed OpEx parameters. On the sales, what I’d say is the following. First, it’s I’ve said this often, but clearly, a tax which doesn’t make a lot of sense. It’s on assets.

Having said that, our understanding is that the sales does not apply on future investments, but it’s obviously still applicable to the stock. So over time, that would go on decreasing. We think that, clearly, this tax is unconstitutional at the moment given that it was created in an extraordinary moment, and that extraordinary moment has long gone. It was created back in 2014 when Portugal has been intervened by the Troika. I mean, we are in 2025, it makes no sense to continue to have this tax.

And I think I’m not sure exactly what Red said about the message, but what we would assume is that it doesn’t make sense to have an extraordinary tax when you clearly don’t have any extraordinary moment any longer. So we would hope to get some conclusion on this and some visibility from the courts on this, you know, soon, but, obviously, the the courts have their their time. Maybe on that, I pass it over to Rui for the the first point. Yep.

Rui, CFO, EDP: Thank you, Miguel. Hi, Josh. Listen. On the ancillary, I mean, the negative impact so as a again, just repeat. Overall, it’s a positive.

The the negative part of it, it was around the 107, a 100,000,000 in the first half. Second half, we estimate, you know, slightly below half of that. So around the EUR50 million, EUR52 million maybe.

Pierre Biena, Head of IR and ESG, EDP: Okay. Thank you, George. The next question comes from the line of Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead. Good

Alberto Gandolfi, Analyst, Goldman Sachs: morning. Thank you for taking my questions. I’m going to start the first one on guidance for this year. It looks like you’ve already achieved 60% of your net income in the first half. You’ve not booked capital gains yet.

I know you don’t know how much is going to rain in the second half, but when I also dig a little bit deeper, it seems you have achieved 65% of your Iberia and Energy Management clients and Energy Management EBITDA again for the year. And again, know the hydro, but can you maybe tell us what do you think could be slowing down in the second half of the year? I mean, you were to continue to do $300,000,000 EBITDA in Iberia clients and Energy Management for the rest of the year, you would obviously beat the revised guidance already quite comfortably. So I was trying to understand if you’ve been prudent or if there’s any problem that maybe I don’t see that you see in the second half. The second question is, again, it’s a little bit of follow-up from last night.

Can I ask you, in your priorities, where does a higher EDPR share price stand? Because usually, every 10% increase in EDPR is at least a 5% increase in EDP or 4% to 5%. So how central is going to be EDPR when you think about your capital allocation going forward and the share price in particular of EDPR? And the last question is historically, this is a bit provocative, so apologies, but I think historically, issue with EDP Capital Markets Day has been that there was a lot of CapEx, but the EPS growth has disappointed in the past compared to the original expectations. And so that has also been the case for EDPR.

So I wanted to ask you, when you talk about organic growth, how can you be comfortable in delivering organic growth going forward? I was looking at the slides, for instance, in Brazil power grid, 8%, I know it’s real, but inflation is like 55.5%. Borrowing costs are extremely high in Brazil. Aren’t we running the risk now that you you pulled lots of CapEx in Brazilian power grid, but then there’s not much net income growth because it’s all eaten away by financial expenditures, essentially? So maybe can can you tell us how this time is different from bottom line growth?

Thank you.

Miguel Stoudenderen, CEO, EDP: Hey, Alberto. Thank you. A lot to unpack there. First, on the first point, I mean, we see no problem in the second half. Let’s be very clear about that.

I think we had is a very strong first half. And so we had very strong hydro. We had the strong ancillary services, and and what we see is a normalization of hydro. We see a normalization also in even in terms of prices, which will be lower than than what we had in the the first half. So I think it’s just assuming a more normal second half, and you can’t take last year’s second half sort of as a reference because we had a strong second half last year, which was above normal.

So so I think that’s the key issues that I had mentioned. Obviously, not any issue any problem. It’s just a normalization of the results. We do see some additional pressure from gas and higher sourcing costs compared to the previous year in the second half, and we’ve already seen part of that in the in the second quarter. But we can obviously then unpack that if you want to offline with with IR, but but I’d say that that’s the the key issue.

It’s not, yes, we’ve done a significant percentage of the net income and and EBITDA already in the first half, but that’s because it was a very strong first half. And the second question, I mean, EDPR share price is extremely important for us, and it is the central priority. And, obviously, EDPR is a very material part of our business, of the overall EDP group business. It’s absolutely core. And, therefore, we are very focused on identifying ways of increasing the EDPR share price, but namely by having a good solid business plan and taking good investment decisions, managing the balance sheet, and making sure that we can drive that sort of medium, long term earnings growth.

EDP Capital Markets Day. Listen. Let me take a step back. And you know us well. You know the company well.

For years and years, we had net income at around 800,000,000, including significant and very material capital gains. We are now talking about guidance for the year of 1.2 to €1,300,000,000 excluding any capital gains. If you do the CAGR on that, that is a very material earnings growth. So I would just encourage people to go back and look at the earnings growth that we’ve had over the last couple of years, particularly if you strip out the whether you include capital gains, but if you strip out capital gains, then it’s even more impressive. And I think that shows that, definitely, we have been able to translate investments into earnings growth, and that’s what we’ll, like, continue to try and do going forward.

But I I really encourage you to look at the historical CAGR of our earnings. You can look at it including capital gains, but you can also exclude it, and I think you’ll be quite impressed. Thank you.

Alberto Gandolfi, Analyst, Goldman Sachs: Pretty good answers. Thank you, Miguel.

Pierre Biena, Head of IR and ESG, EDP: Thank you, Alberto. So the next questions come from the line of Olli Jaffrey from Deutsche Bank. Olli, please go ahead.

Olli Jaffrey, Analyst, Deutsche Bank: Thanks very much for taking my question. Just one. In Q1, when talking about the changing the structural change in the market in Iberia and the potential opportunity that gives you, regarding 2026, you said at Q1 that you saw EBITDA from hydro clients in the area close to $1,000,000,000 versus kind of 900,000,000.0 to $1,000,000,000 previously. I just want to check, is that still where you see the level of EBITDA for that business? Have you seen any improvements to that?

Obviously, power prices are still pretty similar to what they were about then before it’s around ’63. So any thoughts on your evolution of thinking on that division

Alberto Gandolfi, Analyst, Goldman Sachs: and the

Olli Jaffrey, Analyst, Deutsche Bank: benefit from the structural change and how you see that would be great. Thank you.

Rui, CFO, EDP: Hi, Ale. It’s Uri here. So so, yeah, the answer is yes. So we are, you know, thinking around the sort of a billion as the number for what would be the the run rate

Miguel Stoudenderen, CEO, EDP: to cruise speed. Maybe just a

Rui, CFO, EDP: couple of data points here. So as of now, we have about 70% hedged at €64 per megawatt hour for €26 so supportive, actually slightly above what we had when we saw last year when we guided to $20.26 euros in terms of power price hedges. So that’s 70% at 64%. Also, as we mentioned in the first quarter results, this the hydro pumping contribution, ancillary services net contribution, We know that this I would say, let’s say, if this year, we are looking at around 200,000,300 million euros of added EBITDA contribution, maybe above normal, I would say 40% of that should be structural going forward. So that’s why we are looking at this billion as a good reference for ’26.

Olli Jaffrey, Analyst, Deutsche Bank: Thanks very much.

Pierre Biena, Head of IR and ESG, EDP: Thank you, Oli. So the next question comes from the line of Sky Lennon from Redburn. Sky, please go ahead.

Sky Lennon, Analyst, Redburn: Thanks very much. I wanted to ask about the hedging in the integrated Iberian division and specifically the outlook for the hedging. We’ve kind of like changing power supply dynamics, I. E, far more solar generation during the day, meaning that maybe your hydro generation is increasingly shifting to be more focused on peak demand periods. Can the hedging strategy be maybe adjusted somehow going forward to perhaps better capture higher power prices during these peak periods, or is that not the way we should be be thinking about this going forward?

Thanks.

Miguel Stoudenderen, CEO, EDP: That’s great. So I think what we what we’ve done in the past was to already change our heading strategy so that we’re we’re not hedging a 100% of our expected volumes, but 80% of our expected volumes. And that was on the premise that there’s more asymmetrical, price movement on on the upside than than on the downside. And so that would allow us to then capture sort of increased prices. I think what you’ve seen as a result of that strategy is that we’ve been able to take advantage, for example, of these increased hydro volumes also as well and and higher prices.

And we are able to get deep pricing or sort of a realized price for our hydro that’s significantly higher than than baseload. As you say, quite rightly, as you have more solar, you start getting prices going to zero during the day or or even negative. And so you get quite a good arbitrage opportunities, particularly for the pump storage. So higher realized prices on the hydro, higher pump storage spreads. But in terms of our hedging strategy, understood as locking in sort of future prices for baseload power, The basic change we did was moving to, let’s say, around 80% of future expected loads.

I’m not sure that there’s much more to to say in relation to that, let’s say, to our hedging strategy than that.

Sky Lennon, Analyst, Redburn: Thanks. Useful color. Yep.

Pierre Biena, Head of IR and ESG, EDP: Our last question from the phone comes from the line of Arturo Murua from Jefferies. Arturo, please go ahead.

Pierre Biena, Head of IR and ESG, EDP0: Thank you for taking my question. My question is regarding Brazil. There’s an ongoing discussion around an electricity sector reform, mainly focused on market liberalization and improving sector balance. What’s your view on this change? And any color will be helpful to see if this creates an opportunity to EDP in Brazil.

Thanks.

Miguel Stoudenderen, CEO, EDP: You you’re talking about in in Iberia or more generally in in Europe? Oh, Brazil. You’re talking about Brazil?

Josh Kim Reyes, Analyst, GB Capital: Brazil. Yeah.

Miguel Stoudenderen, CEO, EDP: Okay. Brazil. Yeah. Yes. Three stages.

Yeah. Yeah. So so Brazil, we’re following that very closely, and we’ve had our team, you know, look at that. And what what I’d say is the SME segment is going to be further liberalized. And so we are what you used to have is very large sort of customers which were in the liberalized market, but the rest was basically you know, you had an integrated distribution and and supply business.

And that’s now you’re getting sort of unbundling of of that or expected over the next couple of years. As I say, I think 2026 for the SME sector, residential segment expected for around 2027. We’re looking at how we could take up advantage of, of this. We have, like, obviously, extensive experience of liberalized markets both in Europe and in The US. And so we are we have a strong position, obviously, particularly in some areas like in in Sao Paulo.

So we’re waiting to see sort of how the regulation develops and how sort of some of the the key parameters come together. But it’s definitely when these changes happen, they could be good opportunities. So we’re looking at this as a there’s a positive development of the Brazilian market and really understanding how we position ourselves for that opportunity. But, again, something we can probably develop a little bit more in the Capital Markets Day in November. But what I’d say is we have a lot of experience in these type of markets, the liberalized markets.

So in Brazil, we I think we would be well placed to to take advantage of that.

Pierre Biena, Head of IR and ESG, EDP0: Thank you. And can I ask one more question?

Miguel Stoudenderen, CEO, EDP: Sure.

Pierre Biena, Head of IR and ESG, EDP0: It’s quite small regarding to EDPR, specifically in APAC. Should we expect provisions in the second half coming from Vietnam issue? I know it’s small. I think it was like around EUR 40,000,000, 50,000,000, but we should expect this in the second half?

Miguel Stoudenderen, CEO, EDP: Listen, I would say base case, Just based on the most recent information we’ve received, but, obviously, it’s an ongoing situation. But I’d say that let’s say the latest information we’ve had is that we should be okay there. But, obviously, if there is any material updates, we would obviously inform the market and and provide further color on that.

Pierre Biena, Head of IR and ESG, EDP0: Perfect. Thank you so much.

Pierre Biena, Head of IR and ESG, EDP: Thank you. So we have finished the questions on the line and we still have we have reached one hour of the call, but still time for one question from the web. Question from Andrew Mulder. With competition from capital, are you worried that the low network returns in Spain and Portugal, if not increased, will result in companies investing elsewhere and that the grids in Spain and Portugal will deteriorate rather than improve?

Miguel Stoudenderen, CEO, EDP: Thank you, Andrew, for the question. What I’d say is that there’s a competition for capital in the world. We’ve seen and and capital will flow to where they get the more attractive returns. Clearly, the current rates in Portugal and Spain are not attractive. I think we need to be very clear that the current 5.6 in Portugal and Spain are not attractive and would not attract let’s say, would not incentivize investments here.

I think if you look at sort of some of the public consultation numbers that have come out, they’ve been pointing sort of more towards the seven plus range. And so we would like to see, you know, material movement in that direction. I mean, we’re not going to comment specifically on on ongoing consultations that are happening in Spain, but but what what I’d say is if you want to incentivize investment, you need to remunerate that investment adequately in a competitive world where capital is fungible. So that’s basically what I’d say at at this point. I don’t want to say much more given the the ongoing public consultations.

So we have finished me so maybe for some final remarks. Yeah. I mean, very simply, just reiterating, we had a good first half. I think we’re well positioned for the good second half. That’s why we’ve also, you know, updated our guidance.

Honestly, feeling good about where we are and looking forward to to talking to you further about 2026 and beyond in in the Capital Markets Day. So I think we have the teams working flat out, including on the holidays, at least some of them, to to really put together, I think, what could be an an interesting Capital Markets Day and and be able to give you sort of additional information on all of these different areas of the business. With that, what I’d say is wish you all, if you’re taking some time off now in August, get a good rest, and look forward to talking to you again September. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.