EDPR’S STRATEGY IS BASED IN THREE MAIN PILLARS
In accordance with EDP Group strategic priorities of controlled risk, superior efficiency and focused growth, EDPR’s strategy is based in delivering higher profitability supported by the performance of its premium assets and selective growth through a self-funded business model. To capture new growth opportunities and expand operations, it is important to successfully select the best projects, managing its performance under standards of excellence and to minimize dependence on external sources of funding.
Optimizing performance throughout a project’s life-cycle is a key priority at EDPR. EDPR’s superior know-how, with a team fully dedicated to wind resource analysis, and expertise guided by internal models drives operational metrics above the market, resulting in premium net capacity factors and high levels of availability.
EDPR’s focus on high operational efficiency metrics, with a comprehensive O&M strategy, is crucial to keep costs under control and key to achieve quality financial metrics.
In order to feed and support this strategic pillar EDPR set 3 targets for the 2016-20 period:
With more than 10.4 GW of installed capacity across more than 11 countries, EDPR strategy to grow profitably and create solid value is based in a low risk strategy when it comes to energy prices. By entering markets with predictable prices through long-term power purchase agreements, EDPR is able to define its future in advance and achieve solid visibility of the projects’ stable cash-flow stream.
EDPR installed capacity exposed to the spot market represented c.10% of EDPR’s portfolio. EDPR continues to pursue new long-term PPAs along with contracts awarded in energy auctions, as these provide predictable prices over the useful life of the projects, allowing the company to define its future in advance and to create value through projects with solid and visible cash flows.
For the 2016-20 Business Plan, EDPR plans to add 3.5 GW of new capacity, of which 90% wind onshore and 10% solar pv capacity, both with long-term sales agreements. Growth will be focused in North America, Europe and Brazil.
EDPR has a target of €4.8 billion of investments for the 2016-20 period, which will be supported by assets’ cash generation and enhanced by the Asset Rotation strategy, EDPR implemented a financial policy that embraces being independent from external funding sources to pursue its growth strategy.
In capital intensive businesses, such as renewable energy, it is crucial to have visibility on the company’s ability to raise funds to add new value accretive projects when a project is still in the final stages of development. With this mind-set it is of the upmost importance to make sure the retained cash-flow generated by the assets already installed is maximized as this will be the main source of funds for the company’s growth.
In order to achieve this strategic pillar, while maximizing the execution of growth opportunities, EDPR implemented its Asset Rotation Strategy.
The purpose is to sell minority stakes in operational assets with a low risk profile and reinvest the proceeds in new higher value accretive projects.
With the successful execution, EDPR also crystallizes the value of the asset upfront and accelerates the value growth cycle.
In addition, EDPR always aims to find external financing to its projects, mainly through tax equity structures, typically in the US, and through project finance structure. The case of tax equity in the US also enables an efficient utilization of the benefits provided by the project thus improving its economics.
In the case of project finance, mainly in Brazil, it is also a mean to contract long-term debt in local currency at competitive costs in order to mitigate the refinancing risk and to reduce the foreign exchange risk by having a natural hedge between revenues and expenses.