EDP Renovaveis Sets 2026 Guidance in Line With Our Estimate, Plans a EUR 1 Billion Rights Issue

We are currently maintaining our fair value estimate of EUR 22 for no-moat EDP Renovaveis EDPR after it has released its 2023-26 business plan with financial targets in line with our estimates. The firm plans to finance EUR 1 billion of its intended EUR 20 billion gross investments between 2023 and 2026 with an equity offering. The price range for the offering is slightly below our fair value estimate (EUR 19.25-EUR 20.5), but we do not anticipate this will materially affect our fair value. Shares are in 3-star territory, meaning there is not enough margin of safety to buy them at the current share price.

The firm increased its goal to more than 4 GW on average of gross additions per year through 2026 from approximately 4 GW through 2025, aiming to more than double its installed capacity of 12 GW in 2020 to 27 GW. The previous 2023 target was 18 GW, which may prove a bit tough after ending 2022 with 14.7 GW. On a net basis, that is after asset rotation, it plans to install 3 GW annually, up from 2.5 GW in the previous 2021-25 business plan.

Wind onshore and solar will continue to draw the most investments, accounting for approximately 90% of the EUR 20 billion gross investment. Solar is expected to double from 2020 to 2030 given new technologies like floating solar. Its newest target is 9.4 GW in gross additions by 2026, and wind onshore a 5 GW increase. In the previous business plan, solar was targeting 9.3 GW by 2025 and wind onshore 9.1 GW.

While the firm was previously guiding for a +7% CAGR on its EBITDA from 2020 to 2025, management has increased its forecast to a 9% CAGR between 2022 and 2026 and has increased recurring net income’s CAGR to 9%, as well, from 8%. This would put EBITDA around EUR 3 billion, above our estimate of EUR 2.9 billion, and recurring net income at EUR 0.9 billion, in line with our 2026 forecast. Net debt is expected to increase by roughly EUR 4 billion by 2026 to help fund the higher rate of investments.