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FY23 EBITDA +11%, in line with consensus'' expectations FY23 EBITDA was positively impacted by good progress with the Iberian liberalised business supported by the strong hydro output recovery and healthy supply margins. EDP reported Net Profit FY23 of EUR952m, Adjusted EUR1.29bn. The strong operational performance was partly offset by the higher DandA (+11% YoY) and the impairments, which amounted to EUR461m. Impairments were split between Brasil (Pecem EUR107m and other assets EUR6m), EDPR (EUR187m of which Colombia EUR178m booked in 4Q23) and Iberia (gas power plants and other assets EUR161m). The financial results were flat while non-controlling interests decreased by 23% after the buyout of EDP Brasil. The ND figure climbed to EUR15.3bn (EUR2.1bn above FY23). Reassuring message on FY24 outlook EDP''s updated target for FY24 is Recurring NP of ~EUR1.3 (flat vs FY23) on higher hydro reservoirs, energy management optimisation, effective hedging strategy and the full integration of EDP Brasil which is expected to add EUR120m to NP. However, EDP shared a constructive but milder message on the FY26 outlook given the increasingly challenging energy scenario and the prioritisation of returns vs volume in EDPR which might result in lower installations. Estimates and TP update - below consensus and guidance, but valuation still attractive We have reduced our estimates to reflect the tougher energy price environment mostly impacting EDPR (please see EDPR: Quality at attractive valuation, upgrade to Outperform). Our estimates are high-single digits below consensus for FY24 NP and below company guidance for FY24 EPS, on more conservative liberalised margin assumptions. We also lower our TP from EUR5.5 to EUR4.5, almost entirely attributable to the mark-to-market valuation of EDPR in our EDP SOTP (EDPR share price moved from EUR18 to EUR13.1 since our last update in January). We continue to see value on EDP and its integrated model and find the valuation...
EDP - Energias de Portugal EDP-Energias de Portugal SA
Strong results above consensus and our expectations Both EBITDA and NP (+25% and +83% YoY) were above consensus and our expectations on hydro volume recovery (+61% YoY), stronger margins in the liberalised business and capital gains from asset rotations (Spain and Poland, EUR393m). The increase in ND (EUR16.92bn) and cost of debt (60bps) were not enough to offset the strong operational performance, the lower tax rate (6.7% in 3Q23) and the decline in minorities (-20.4%) after the acquisition of EDP Brasil. Guidance upgrade EDP''s new FY23 guidance is EUR1.2-1.3bn Recurring NP (from EUR1.1bn), ~EUR5.0bn recurring EBITDA and ~EUR15bn ND. Management also announced expected cost savings of EUR50m in FY24 as short-term upside to the business plan and hinted at some growth in 2024 (vs 2023). BNPP estimates upgraded We have upgraded our estimates because of a more positive liberalised margin outlook in Iberia supported by the sharp hydro recovery, the expectation of a fully normalised 2023 (hydro and wind load factors) and stronger-for-longer supply margins on the back of company hedges (50% at EUR100/Mw in FY24) and current fwd prices. Already attractive and more to come? Upgrade to Outperform The upwards revision of our estimates is key factor of our TP upgrade (from EUR4.7 to EUR5.0) after rolling over the debt to 2024, adjusting upwards our interest rate scenario and including EDPR mark-to-market valuation (from EUR17.8 to EUR16.1). EDP is a well-managed company with top-quality assets trading at attractive multiples (2024e 11.7x PE and 8.3x EV/EBITDA). We upgrade EDP to Outperform after its YTD underperformance (-9%) and highlight that if we factor in our EDPR TP in EDP SOTP (instead of mark-to-market), our EDP TP would increase to EUR5.5.
EDP group published satisfactory results for 9M23 solely due to the boom in hydro generation in Iberia which contributed +€1bn vs 9M22. This excellent recovery after a drought year in 2022 totally offset the weak results from EDPR (Wind and Solar) due to poor wind resources and lower selling prices despite additional capacity, and the slightly lower results for the networks.
Good results despite poor EDPR performance in the quarter The strong EBITDA growth (1H23 +23%, 99.8% in 1Q23) was entirely supported by the strong performance of the liberalised business on the hydro recovery and strong supply and thermal generation margins, FX and the stability in the regulated business (1H23e -1%). Net Profit 1H23 (+43%) was also strong and above expectations. Net debt (company reported) increased in 1H23 to EUR15.3bn (from EUR13.1bn in 1Q23), due to dividend outflow (EUR0.8bn), capex (EUR2.9bn gross) and regulatory WC impact (-EUR1.9bn). Updating estimates and valuation: Broadly in line with updated outlook Our estimate update is largely explained by the expected poorer performance of EDPR (please see EDPR: A weak quarter doesn''t erase a good strategy) which we expect to be largely offset by the stronger performance of the Liberalised business in Iberia, led by stronger than initially expected hydro load factors as well as healthier supply margins and a positive FX impact. EDP updated its FY23 outlook, now consisting of ~EUR5.0bn Recurring EBITDA, EUR1.1bn Recurring Net Profit (excludes -EUR61m of Pecem impairment, -EUR8m Tax Romania, -EUR7m of PPA cancellation in US and -EUR4m from liability management). FY23 Net debt target is EUR15bn (company expects the securitisation of Portuguese tariff deficit). Our updated estimates are broadly in line with the company outlook. Remain Neutral after adjusting our valuation In our SOTP, the higher value we now ascribe to the Liberalised business in Iberia is fully offset by the lower mark-to-market of EDPR. We also adjust for the dividend. We see the shares as fairly valued (2024e 13.9x PE and 9.2x EV/EBITDA with a dividend yield of 4.5%) and believe that the potential catalysts in the 2H23 will be mostly concentrated at EDPR, which is our preferred option within the group.
EDP published strong earnings as it benefited from a +68% recovery in hydro generation in H1 23 after recording a +125% recovery in Q1 23 following the extreme drought in Portugal last year. EDP indicated that reservoirs in Portugal are currently at a 10-year high for this period. This important upturn in hydro was able totally offset the 22% decline in Wind and Solar EBITDA negatively impacted by weaker wind resources and a lower average selling price
The combined effect of a hydro power recovery with purchases on the wholesale market at lower prices led EDP’s EBITDA to surge in Q1 23 (+7% vs cons). The group confirmed its 2023 guidance at €1.1bn of net income, which is in line with our expectations. However, the non-normative feature of the hydro contribution leads us to remain cautious as a potential drier summer coupled with a rebound in wholesale market prices could potentially dampen the outlook in the coming quarters.
Strong 1Q23 EBITDA (99.3%), above expectations Strong operational performance beat market expectations (7.4%) thanks to Renewables and Client and Energy management, which was supported by: 1) higher output (+11% YoY) on hydro recovery; 2) higher average MWs installed (+8% YoY); 3) higher avg. selling price (+8% YoY), mainly in Europe; and 4) slight exchange rate tailwind, namely USD and BRL (+EUR9m YoY). Strong bottom line a touch above consensus The EUR303m was 3.7% above consensus expectations. The strong operational performance was partly offset by the increase in DandA (+10%) and mostly by financial charges (+50%) reflecting the increase of 90bps of the average cost of debt to 4.8%. Net debt (EUR13.2bn) remained almost flat on the back of FCF (EUR0.4bn) and EUR2.0bn capital increases and despite the negative impacts from regulatory WC (EUR1.1bn) and Capex (EUR1.3bn). Positive message on outlook, net debt evolution to be monitored though EDP management stated it was comfortable with FY23 consensus'' estimate for Net Profit (EUR1.1bn), but also that FY23 Net debt figure is expected at ~EUR15.0bn and that the TEIs might increase to c. EUR2.0bn by FY23. The outlook is clearly positive, although the projected debt increase (despite the EU2.0bn capital increases) generated investor concerns given that debt was flat in 1Q23 evolution. Fairly valued After updating our model for 1Q23 results and the new 2023-26 Strategic Plan we believe that EDP is on track to achieve EUR1.1bn Net profit but we find it fairly valued (2024e 14.2x PE and 9.3x EV/EBITDA) after its recent outperformance. We keep our Neutral stance with an unchanged TP and flag our preference for EDPR within the group.
A solid plan for 2023-26 EDP''s Strategic 2023-26 Plan is supported by EUR25bn gross investments, with the aim of growing the company''s asset base to 33GW in generation and achieving a regulated asset base of EUR7.6bn in distribution and transmission by FY26. Investments, mostly devoted to renewables, will be split between Europe (40%), the US (40%), South America (15%) and the APAC region (5%). The plan will be financed through organic CF, asset rotations (1.7GW/year) and the two announced and completed capital increases at EDPR (EUR1.0bn to finance growth) and EDP (EUR1.0bn to fully control EDP Brasil). Net debt is expected to increase to EUR6bn. We recently published a report discussing the implications of the updated 2023-26 plan for EDPR (please see EDPR: A top renewables play). The delisting of EDP Brasil and the associated EUR1.0bn capital increase On March 2nd, EDP announced its intention to raise EUR1bn equity to fund a takeover offer to acquire the shares held by the minority shareholders of Energias do Brasil (c. 44%). EDP had previously entered into investment agreements with CTG, GIC and ADIA that committed to subscribe in aggregate up to EUR0.6bn. We believe that the delisting of EDP Brasil makes sense since it will eliminate FCF leakages, allow faster decisions and optimise the impact from potential sales. We expect it to be EPS accretive considering the trading multiples of the two entities. Updated / Upgraded estimates broadly in line with guidance Our updated numbers are aligned with the company''s guidance on hydro normalisation, the higher prices impacting renewable output and the stronger outlook for EDP Brasil. We note our dividend assumption is aligned with EDP''s guidance (60-70% pay-out ratio) and increased DPS floor. Neutral rating, TP EUR5 (unchanged) After updating our model for FY22 results and the new Strategic Plan 2023-26 we find EDP fairly valued (2024e 13.9x PE and 9.2x EV/EBITDA), keep our Neutral stance on the...
After a challenging start to the year EDP staged a recovery and delivered guidance in a distorted energy markets environment, supported by a strong rebound in the last quarter of 2022. There was a strong progression in all business units including renewables, but also in networks and thermal generation, enabling the group to record better operational cash flows and also improve its financial profile. The challenge for 2023 will be to attain better hydro production and maintain good renewable generation.
9M22 EBITDA +22% and NP +2%, 2% and 5% above of consensus respectively EBITDA growth was explained by the strong performance of Brazil (Networks EBITDA +75% YoY, Hydro +12.6% both on operations and favourable FX) and EDPR (+62%, please see EDP RENOVAVEIS SA: Strong results above market expectations). Iberian networks remained broadly stable (-0.4%) while the main negative remained the shortfall in hydro production (3.3TWh), which was largely offset by an increase in thermal (Spanish coal) production. Below EBITDA, we note the DandA increased by +6% on capex acceleration and FX, the material increase in financial cost (+63%) on higher debt (EUR 3.7bn higher YTD) and cost of debt (+4.3%) and the increase in minorities (125%) on the good performance of the listed subsidiaries (EDPR EUR277m and Brazil EUR130m) and electricity networks in Spain (EUR43m). Asset rotation is the good news, the higher Net debt the growing concern Asset rotations at EDPR continue to be the main positive highlight (1GW/year at EUR0.5m/MW unitary gain vs 1.4GW/year at ~EUR0.2/MW initially projected) while hydro performance in Iberia the most negative (3.3TWh shortfall in Iberia on persisting droughts). The evolution of the Net debt (company guiding to EUR15bn FY22 ND), largely impacted by inorganic capex (Sunseap, Kronos, CELG-T, etc.), has become the major concern for the market as it might challenge future growth. Our view is that EDP still has flexibility to adapt to the new scenario while creating value for shareholders. Reiterate Outperform recommendation despite more limited upside Trading multiples are inexpensive (2023e 15.6x PE and 9.9x EV/EBITDA) and the FY22 target (Ordinary NP to be above FY21''s EUR826m) achievable after the 2 additional asset rotations announced to be closed before year end. The forthcoming CMD (March-23) is likely to be a catalyst while the evolution of the debt needs to be closely monitored.
Just this once, EDP managed to get back on track after a disastrous start to the year, supported by renewables activity in Europe and the electricity networks in Brazil. The group suffered from the extreme drought that impaired hydro production and high electricity prices in the Iberian wholesale market. EDP maintained its FY2022 guidance with a recurring net profit higher than in 2021, conditional on hydro conditions.
A solid set of results for EDP, which had not been a foregone conclusion given the group’s exposure to hydro headwinds and high procurement costs. While EBITDA rose materially particularly due to spreads capture by the thermal fleet, surging financial costs and minorities still weighed on the net results. Be that as it may, the overall signal sent was a positive one. EDP confirmed that is is still targeting growth at the net profit level for FY22.
A tough Q1 22 for EDP as earnings fell into negative territory due to hydro production shortage. This resulted in weak CFO combined with intense M&A activities that led net debt to shrink. However, the figures remained better than our expectations thanks to an extensive use of thermal plants and the strong performance of the Brazilian regulated assets. There is no doubt that EDP handled this mini-crisis well, even if this leaves little room for manoeuvre for the rest of the year. Caution is advised.
EDP delivered a mixed bag of results with the predominant sentiment of disappointment. The slight miss on EBITDA vs our expectations (-0.8%) is mainly attributable to low renewable generation and adverse energy prices / high energy sourcing costs. On the other side, a material acceleration of the network activities (+46% yoy) as part of asset rotation paves the way for a rebalancing towards a less risky profile. To be confirmed in subsequent periods.
In line with peers, the performance of renewables (EDPr) disappointed. However, an increase in network tariffs and, above all, a strong rebound for the hydro assets offset this, allowing the Portuguese utility to meet expectations. Asset rotation is well on track to expand geographic diversification, the element key to enabling EDP to achieve a solid quarter. Positive view confirmed.
What if the best solution for the energy transition were … nuclear power? Nuke is back at the heart of political debates in the context of the current energy crisis and massive but insufficient investments in renewables. This short review provides an overview of nuclear power in Europe and speculates on options. This ‘nuke optionality’, hinging on a favourable green taxonomy, is a game-changer for EDF, Centrica, Fortum but also Engie, Iberdrola, Enel and EDP.
In line with peers, EDP faced a mixed H1 penalised by lower generation from renewables and lower margins due to increasing wholesale energy prices, but positively impacted by the recovery in the industrial sector. This did not prevent the group from confirming its FY21 guidance. We like the strong development in renewables capacity, one of the fastest in the sector, even if it mechanically weighed on net indebtedness. Positive recommendation confirmed.
The Portuguese utility beat estimates for the first quarter as the decrease in EBITDA (-8% yoy) is almost fully attributable to FX impacts, but the solid performance from hydro and networks compensated. A strong pipeline combined with a promising and risk-averse asset rotation plan should support the group’s results and lighten its balance sheet. Positive view confirmed.
EDP released its FY20 results yesterday, which were globally in line with expectations. The big news comes from today’s Strategic Update that set out the group’s strategy and investments for the coming years. EDP announced its ambition to become all green by 2030 and to provide itself with a significant capex plan to reach its ambitions. EDP does not do things by halves.
Overall, the operating figures show the good resilience of the business model. Despite an 11% drop in capacity (rotation of hydroelectric assets and closure of thermal assets), total production is down by only 4%. The financial figures (expected for 24/02) should be in line with our model. We confirm our positive recommendation, despite the limited upside.
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