Our future financial performance

 

The swift execution of EDPR’s strategy for the 2012-15 period is expected result in top value creation for our shareholders. High cash-flow generation from our growing portfolio of assets, coupled with stronger balance sheet solidity provided by our new funding strategy, are the cornerstones of this plan.

Strategic core competences and quality portfolio

The starting point for EDPR’s 4 year business plan is its core competencies. These have been crucial for ensuring good operational and financial performance in the past and are expected to remain the drivers of our future growth. The consolidated know-how in development and wind assessment, engineering and construction, and O&M and asset management have all been essential for EDPR’s business performance.

Based on its core knowledge of delivering assets with high net capacity factors and its strategy of a low risk approach to energy prices, EDPR is able to secure premium revenues and superior visibility on its income. Whilst from a costs perspective, the preventive maintenance schemes, good management of warranties and a diversified portfolio of turbines ensure top OPEX ratios. This all adds up to a solid stream of operational cash-flow that is the key to providing shareholder value.

Selective growth generating strong cash-flow

In addition to our current installed based, within the next years we expect the addition of projects that exhibit above portfolio average profitability metrics. Furthermore, as a result of our continuous focus on efficiency, we expect a positive evolution of our main Opex ratios for the whole portfolio. The combination of these effects is expected to produce an increase of 25% in our core profitability metric: EBITDA per average MW in operation.

A knock-on effect of our increased profitability should be the positive evolution in EBITDA. This metric is expected to reach 1.35-1.50 billion euros by 2015. The capacity installed in EDPR’s current growth markets as well as in new markets/technologies will play a significant role in achieving this target.

Funding

EDPR’s new funding strategy is supported by three main components: operational cash-flow from installed capacity, proceeds from the execution of our assets rotation strategy and debt from competitive project finance deals.

ASSET ROTATION STRATEGY

EDPR’s asset rotation strategy leverages on our critical expertise in creating value through the development, construction and operating phases of renewable energy projects. Based on this superior expertise, EDPR is able to transform a project with high risk – when it is in the development and construction phase – into a project with a low risk profile, long useful life and with a stable and visible cash-flow stream.

The sale of minority stakes in our operating portfolio allows EDPR to capture the value created through the phases with higher risk, crystallizing the value of the projects cash-flows and providing valuable proceeds to reinvest in the business.

During 2012, EDPR successfully completed two major asset rotation deals. The first in the US, consisted of the sale of minority stakes in 4 wind farms (599 MW). Whilst the second, in Portugal, was the first of a series of expected transactions with CTG that fall under the strategic partnership signed with EDP.

These and similar transactions are expected to generate proceeds of over 2 billion euros in the 2012-15 period, constituting a significant share of the global funding for this period.

PROJECT FINANCE

Over the last couple of years EDPR has successfully signed a number of project finance deals for the financing of projects in all of its major geographies. The completion of the agreements allows for EDPR to access an additional source of competitive funding. It also highlights the quality of the projects that have to comply with the strict criteria of banks and other members of the global credit markets.

During 2012, EDPR successfully signed 3 project finance transactions, relating to projects in Spain, Belgium and Romania.
The three deals included wind farms accounting for 239 MW and 273 million euros of long-term financing at competitive rates in casino.

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