EDP Renovaveis Meets EBITDA Expectations

We are currently maintaining our fair value estimate of EUR 22 for no-moat EDP Renovaveis EDPR as we roll our model to include full fiscal 2022 results. EDP Renovaveis’ EBITDA was EUR 2,157 million, slightly above consensus expectations of EUR 2,125 million, and having grown 23% year over year. During the year, EDP Renovaveis rotated nearly 1 GW of capacity. Net profit fell short at EUR 616 million versus the anticipated EUR 634 million as construction delays in Colombia resulted in a noncash impairment of EUR 54 million.

Management has announced the intention to introduce a new scrip dividend program through a bonus issue, with the added intention of the 2022 dividend payout target range to be 30-50%. This transition is awaiting approval on April 4, 2023. We view shares as fairly valued, while it is possible to gain exposure to EDP Renovaveis through its parent company EDP which trades at a discount to its fair value estimate of EUR 6.

Europe’s EBITDA grew 51% year over year as selling prices per MWh increased to EUR 106. North America’s EBITDA grew in the teens, slightly hindered by the 3% decrease in selling price. North America continues to draw the most capital expenditure per region, accounting for 54% of the EUR 3.4 billion invested in 2022, while Europe’s capital expenditure declined slightly between 2021 and 2022. Regardless, the firm grew capacity by 2.1 GW globally to 14.7 GW with over 400 MW being added in Europe.

Looking toward 2023 and beyond, EDP Renovaveis has another 4 GW of capacity globally under construction. Additionally, the financial impact of clawbacks in Romania and Poland are anticipated to be much lower than previously mentioned as forward electricity prices declined at the start of 2023. Based on current forward pricings, the potential clawback costs for fiscal 2023 have been reduced from EUR 0.3 billion to EUR 0.1 billion, which would be more in line with the costs seen from Romania, Poland, and Italy that totaled EUR 98 million in 2022.