EDP - Energias de Portugal, S.A.

Good morning, ladies and gentlemen. Thanks for being with us today in the conference call on EDP's first half 2020 results, which this time the results are being reported exceptionally right after the summer of this period.

We hope you manage to take some rest and recharge batteries. And we'll begin with the main highlights on the results and then we'll provide an update on the strategy execution.

We will then move to the Q&A session in which we'll be taking your questions both by phone and via our webpage, www.edp.com. The call is expected to last no more than 60 minutes.

I'll give now the floor to our Interim CEO and also CFO, Miguel Stilwell de Andrade.

Hello, welcome everybody. Thanks for taking the call and I hope you had a good summer break.

I'm pleased to present a pretty solid set of results for EDP this morning. You all have seen it came out last night and to take you through it.

Maybe just before I go through the some of the numbers, just to mention that COVID definitely presented some challenges over these last few months, but I really think it also shows that the strong foundations of our business and resilience and the robust response has allowed us to continue to make progress on execution of our strategic business plan. To talk about the Viesgo acquisition in Spain, which we announced in July, and it was a significant achievement for us.

And it really allows us to grow in activities that we believe are fully aligned with the energy transition, namely, networks and renewables. We also continue to see important regulatory developments and a growing public support.

So, the green agenda technologies in our core markets in Europe and the U.S., I think that's come out also very intensely over the last couple of months. And while I think we've also felt the impact of the COVID pandemic, it's also been really a catalyst for progress in an era where we're very well positioned to generate additional value and more opportunities.

So, in a couple of months, but I think it's also highlighted the strength of our business. So, let's go to the presentation.

In terms of the highlights for the first half of this year. For this period, EBITDA fell 3% year on year to around €1.9 billion.

On one hand, EBITDA benefited from the recovery of the hydro in Iberia to close to the historic average in the first half of 2020. So compared to the various rise first half of 2019, with the hydro cycle was approximately one.

We also have very robust results in the energy management segments. And this was driven by our hedging strategy and in the energy markets.

This benefit is obviously from the significant decline in the energy prices and the decrease in the energy markets volatility. However, we also saw some negative pressure on EBITDA from the appreciation of the Brazilian real and the contraction of the electricity demand in some of our key markets.

Obviously, this affected both our supply operations in Iberia and also the performance in our distribution business in Brazil, where not unbundled as you know, the supply and distribution are essentially healthy. In terms of recurring net profit, this increased by 8% to €509 million.

This was exclusively driven by the Iberian business and an increase of €120 million so it almost doubled. This is a really strong performance from the Iberian businesses this year.

This more than compensated EDPR and EDP Brazil's lower contribution. In addition, we also saw the average cost of debt improved by 70 basis points to 3.3%, and this is essentially as we've seen more competitive refinancing costs compared to our maturing debt.

Overall, the reported net profit decreased by 22%. So, this was dragged by non-recurring items in the first half of 2020.

Essentially, the key items here impairments in the coal assets following the closure against the closure of Sines Coal plant in 2021 will now set in July. And also the one-off cost of the hybrid bond repurchase, which we did the first quarter of this year.

Net debts down 2% year-to-date to €14.1 billion, and obviously, this reflects in the first half of payments of the annual dividend in the second quarter. This is a recurring event of the year.

So, this more pressure on the second quarter. I also like to note that the net debt at June 2020 was flat versus June '19.

So as a result, the ratio net debt to EBITDA was 3.7 times in June 2020, slightly above the 2.6 in December '19 and clearly below the 4.1 December, last year -- year-to-date last year June '19. In terms of cash flow, recurring organic cash flow rose €0.8billion to €1 billion, and this is obviously supported by better performance and activities in which we don't have partners and minority interest and also the lower interest costs.

So, despite the COVID restrictions and I think this is important to note, our expense and investments continued to move forward at a good pace in and reach around €0.8 billion, of which almost 90% was allocated to new renewable projects and the remaining is an expansion of electricity networks in Brazil. We've also made good progress on the implementation of our strategy post June 2020.

So as you know, we've closed the agreement for the acquisition of Viesgo to good valuation. This includes as you know, the long-term partnership with Macquarie for electricity distribution business in Spain.

It reinforces our regulators and long-term contracted risk profile, and we've had the opportunity to talk about this in detail in July. So, I won't spend much time on this.

And obviously, as it associated this, we raised a €1 billion for the rights issue represents around 8.5% decrease in share capital. I think this was well received by the markets while it's critical to support the Viesgo acquisition.

I'll touch a little bit more on this later on, but I think the general perception was very positive. Finally, we also announced over the last month through asset rotation deals totaling €1.1 billion of enterprise value.

For the first deal, which we announced in mid-August, was 240 megawatts in Spain, at an easy multiple of €2.1 million per megawatt for a portfolio with an average age of nine years. The second view, which we announced this week, refers to 560 megawatts in the U.S.

that gives us $2.1 million per megawatt as of COD. So I just highlight as of COD to the reference that says that we should use.

Implicit valuations and these transactions did support the positive outcomes that we've shared with you in the first quarter conference calls. So, I think it's reinforcing this trend that we've had.

Let's move forward to the next slide. So on EBITDA, the breakdown by business platform.

So as I mentioned, consolidating EBITDA down 3% year-over-year, but it would have been flat excluded the ForEx impact, namely the Brazilian reals, which depreciated 20% versus the euro. Within renewables and despite the 82% increase in our hydro production in Iberian, the 4% below historical average, the hydro EBITDA had an 8% decline, mainly due to the decline in the wind and solar.

This in turn is explained by the winds resource and our global wind farms portfolio was 9% below long-term average. The average capacity and operation decreased by 6% and this is essentially due to the asset rotation last year 51% stake in a 1 gigawatt wind portfolio, so obviously that has a relevant impact EBITDA level, it was €7 million year-on-year impact on EBITDA.

Obviously, at the net profit level, this is much less relevant since it also costs minorities. Finally, the decrease in asset rotation gains by €74 million year-on-year.

So, in the first half of 2020, the asset rotation gains were €145 million, reflecting valuation in the shareholding adjustments from the transfer most of our offshore wind assets. The new 50-50 wind offshore joint venture with Engie as you know is called Ocean Winds.

Turning to networks, the 7% fall on EBITDA is mostly related to the depreciation of the Brazilian real. In local currency, the EBITDA from networks in Brazil grew 12%, supported by the expansion of the transmission activities fully mitigating the 8% decline versus demand in our distribution areas.

In Iberia, EBITDA evolution reflects the decline of regulated returns in Portugal to 4.9% roughly and in Spain around 6%. Finally, the improvements in client solutions in energy management, I think this is a strong improvements, it's fully driven by the positive hedging results in Iberia, partially offset by the 70% decline in EBITDA from supplying Iberia, mostly given the contraction in electricity supply more than by 7%.

This is most relevant in the B2B segments, where the decrease in volumes reaching 14% and was only partially mitigated by the 1.5% increments in the B2C segment. Let's move forward to the next slide on financing costs.

Here, interest costs down 60% supported by 70 basis points decline in the average. As I mentioned in a 6% increase in the average that's now this better performance and it's due to the more active debt management, as the rates of maturing debt were much higher than those four new financing, we've got this year.

But it's also mentioned, it's also a significant reduction in the short-term rates in Brazil. So as you can see here on the table on the right hand side, we continue to have some short-term debt maturities which relatively high rates that will be maturing over the next quarter.

So this has continued to support the downward trend on the average cost of debt over the next couple of years. This is something I think we've been flagging and you guys have also asked us about this for the last year or so.

And I think we're seeing that's flowing through now the P&L. Let's move forward to the next slide, on recurrent net profit.

So, here's the negative effects impacted EBITDA is almost we more diluted at the EBIT level, and even more at the net profit level. We typically fund our operations in the local currency.

So below EBIT, the positive impact from lower net financing costs, and there's also lower minority interest both the EDPR and EDP Brazil. This is partially offset by a slight increase in effective income tax.

So, overall recurring net profit is up 8% to €509 million. Reported net profit significantly impacted for the reasons I've already mentioned and they recall and the repurchase of the hybrid volume.

Let's move now to strategy and execution and just a few spikes on this as a key messaging. Just quickly recapping what we've done.

Since we announced the strategic update back in March 19th, so I think we've really shown in this period, it's basically a year and a half, that we've been front loading execution of this plan. So this has been really important, particularly given what's happened in the last couple of months with COVID.

Because we've managed to really lock in a lot of value creation and put us on the right path to extract value from growth opportunities that we've been developing for a number of years. Then renewables, as you know, 84% of the 7 gigawatts targets for this period long-term contracts.

We're well positioned now for accelerated growth in Europe in the U.S. Brazil delivering on the transmission project ahead of the regulatory schedule even taking into account the COVID restrictions.

Viesgo, stronger presence in activities aligned with the energy transition in our core markets and I think also a significant number of synergies. Regarding portfolio optimization, so we've already closed our greed more than 55% of the fourth of the proceeds related to capitalization.

On top of that, we've balanced at 2.7 billion proceeds from two disposals in Iberia, so the six hydro plants in Portugal and the two CCGT and the B2C supply portfolio. Overall, if we consider this proactive portfolio restructuring has been a major source of value creation.

On the balance sheet, obviously reinforce €1 billion of rights issue, and as mentioned to reinforce the low operating risk profile with the increased weight for funds with the regulated activities and efficiency fully on track to meet the targets in our strategic plan, OpEx decreasing 3% year-on-year in the first half of 2020. Obviously, part of that has to do with COVID, but it's also really allows us to accelerate some of these savings, given increased digitalization and also greater operational efficiency that we were redesigning during this period.

So, it's given us a boost in that respect as well. On shareholder remuneration, so we're comfortable with the sustainability of our dividend policies as you know the $0.19 for target payout 75% to 85%.

And we're completely committed to reinforcing our green positioning and accelerating our decarbonization. So as you know, that's a key part of our strategy and it will continue to be.

In the first half of 2020, 80% of our electricity production came from renewables and our CO2 emissions factor decreased by 57%, obviously, this is very much supported by them 74% contraction in coal production. Our reposition is also reinforced not only by then the closure of coal, but also involvement in some of the energy transition projects, including -- we're beginning to participate in the green hydrogen project.

In Portugal, we have some storage projects under analysis for Soto 3. And we also have some renewable projects that we intend to develop in Viesgo's coal sites, which are being decommissioned in the south of Spain.

So, definitely green positioning is extremely important to us. Let's just move forward to the next slide, so just a quick note here on the rights issue.

So as you know, successful 8.5% increase, I won't do all much on this, but I think the market reaction to the operation show the merits of the combined acquisition and the rights issue deal, and as I say, which is done. We will move forward to the next slide, Slide 10.

I think, yes, this is I think an interesting slide. And it shows how we've been active in reshaping our Iberian portfolio.

So, just reminding you in December, we announced the disposable 600 plants in Portugal for the €2.2 billion, so really talking to the EU merger control approval, and we believe this Portuguese regulatory approvals are also on track. In May, we have the sales to Total of the two CCGT and the B2C portfolio, EU merger control already approved this transaction, as you know, last couple of weeks, and the transaction and the restructuring and carve out of the assets is ongoing, so again on track.

And then in July, we also announced the acquisition of Viesgo, more recent deals. So it's still ongoing approvals, both at the European and Spanish regulatory level.

But again, we think that's on track and expect that to be done by the fourth quarter. In fact, we expect all these transactions to be completed in the fourth quarter.

As we indicated in the strategic update, so the overall aim of the group is to reduce merchant pricing exposure and to really enhance the visibility of our revenue by increasing our long-term contract and assets. So, I think these recent transactions are really strong step in this direction.

A note here, just regarding the integrated industrial project for Viesgo, so we're already working on a plan to be implemented in the first hundred days. And we expect to kick-off just after the financial closing of the transaction.

But this is something we're ready to have the team working on fully developing the hundred day plan. Let's just move on to Slide 11.

Maybe note here on the asset rotation. So, last couple of weeks have been really busy for the teams here in terms of finalizing these deals.

That can always be announced for sale of the 240 megawatts as I mentioned in Spain, 2.1 million per megawatt, by comparison our previous asset rotation deal in April was at around a multiple of 1.6. So, significant uplift in value despite a slightly older portfolio, I think here the message is a lot of competition, despite the COVID situation and very attractive prices.

This week, we announced the sale of an 80% stake in a 560-megawatt portfolio in the U.S., so both wind and solar for an implicit PV multiples $2.1 million per megawatt as a series as I mentioned. If we only consider the wind assets, the multiple would be around $2.4 million per megawatt.

So, that's also significant increase versus our previous transaction in North America. So, obviously, the EV multiples expansion in these transactions is not only due to the lower interest rates both in Europe and in the U.S.

As the 10-year government bond yields are declined by about 1% in Spain and about 2% in the U.S. But we continue to see, as I mentioned, strong appetite among institutional investors for the stream of assets with regulators or long-term contracted revenues.

So I think there's a strong market there for the product. Let's move forward to Slide 12.

So here in terms of build out. So despite the COVID, we've managed to keep strong execution of the PPAs.

We have 84% of 7 gigawatts, as I mentioned. In terms of project delivery, there have been postponements, as you know, as we've mentioned earlier imposed by COVID on some construction activities and also on the manufacturers value chain.

In some cases, this could imply some delays for up to around 500 megawatts of wind, which we had on the construction in the U.S. for 2020.

It might split from the fourth quarter to the first quarter of 2021, but I don't think this has any impact or material impact from the valuation perspective. The PTCs will still be there.

So it's really just COD will be beginning of '21. As you know, there was this extension for versus the previous PTC versus the previous target of December 2020.

So we're pretty comfortable there. In relation to install capacity, by 2020 though, the number should be offset by the consolidation of the 500 megawatts of wind capacity coming from Viesgo, which -- financial closing is also expected before year-end.

Regarding offshore wind, the JV is done. So established Ocean Wind's, as you know, brings positive impact because the assets we transferred, and the evaluations that were done.

Two remaining assets we transferred from our side Mayflower and so in the U.S. and Wind Float in Portugal before the end of this year.

And on the Engie side, Seamade in Belgium is also expected before the end of this year. In relation to our projects, the Wind Float Atlantic, this was commissioned in the summer.

I think it's an interesting, some have asked us about this project. It's an interesting milestone for the offshore industry.

The largest turbine ever installed on a floating platform. And the two projects more also in relation to offshore two other projects that are pretty advanced stage of construction.

So Seamade in Belgium and mores in the UK, I think, also great to be good references for offshore targets, so they continue to evolve in line with the construction schedules. And I think that's on track.

Let's move on to Slide 13. And here's just I think a more high-level note just on the additional opportunities on the green recovery.

I think we've seen important developments and public support for the green technologies in general, and obviously, for wind in particular. In Europe, number of mechanisms have been designed by European institutions for the economies environments, digitalization, basically aiming to promote a recovery on a -- based on a more sustainable economic model.

So, this really fits well with our strategy. I think we're really well positioned to benefit from this.

Overall, the National Engie plan estimated over 240 gigawatts of newer onshore wind and solar capacity by 2030, of which 55% correspond to 8 European countries where we're already present. So, it's important also not to forget other investments that will be key, namely the hydro-electric, mobility, smart grids are also being very active.

So I think in general, good news for where we are strategically. The European institutions also created the transition funds, which can also be used to support regions affected by the coal plant shutdown.

So I think this will also be an added incentive to accelerate this transition and really accelerate the shutdown of coal and moving renewals. In the U.S., definitely, we benefit from the expansion of DTCs and also some pretty ambitious energy transition policies that will be discussed in the run up to November's election.

So, again, pretty exciting times, I think for the great economy. Now, let's move to Slide 14 and just a word on Brazil.

Brazil has obviously been significantly impacted by the pandemic, but I think it's also been interesting to see that the Brazilian institutions have reacted, and I think, in a really solid way to create several mechanisms to support electricity companies in the sector in the consumers, so just to highlight a couple of these. In distribution, I would like to mention that the creation of the COVID account for this increases liquidity for the companies.

It's also a pass-through of costs related to the estimated COVID impact and this surplus as long-term contract electricity volumes. So last July, EDP Brazil got essentially around BRL100 million referring to the COVID accounts, which reinforces the financial liquidity.

So, it was a good measure for the sector as a whole. And obviously, we've benefited from that.

In generation, there was a recent approval by the Senate of new legislation to solve GSF issue. I think this is a critical step to reduce the regulatory uncertainty.

It's still the presidential approval, which is required to proceed, with the release of the detailed rules from the regulator. The solution involves the expansion of concession periods for some hydro plants in exchange for some upfront payments that will solve some pending financial settlement.

So, it will solve uncertainty that existed until now, and I think that's also an important step that took place in August. In transmission, we had some delays in the construction works given COVID, but the construction has resumed, 71% of total CapEx for which the transmission lines is already executed.

Last month, we announced the completion of the second part of the Lot 11 in the Maranhao state. It's fully operational now 12 months ahead of schedule.

And regarding future transmission options, we will obviously continue to review opportunities, but we'll also be disciplined in the way that we approach this is, we are, when we go into these auctions. Looking at the macro environment and strong appreciation of Brazilian real, so that worsens our financial in euros, but also some positive indicators from a macro view in Brazil, namely, really low interest rates in record low interest rates, the Salic, with the benchmark rate just recently we set up 2% by the Brazilian central bank, so in that sense, also greatly reducing the funding costs and results.

In March 2020, from the beginning of the crisis, Brazil took several preventive measures to protect financial liquidity, obviously those with a lot of uncertainty at the time. So, they initially cut the dividend proposals and they had some CapEx postponements and increase of credit lines.

But as a result, they had a very strong financial liquidity of BRL3.4 billion, low leverage of around two times, net debt EBITDA. But given the strong position, they seem to be recovering.

Results just now announced a share buyback program within the application on this dividend policy setting a different sort of than BRL1 per share, 50% payout on adjustment of profit. So this is how much in line with the dividend proposals announced by Brazil in March, it's withdrawn because of the COVID that we're now reaffirming that and maintaining that for the next few years.

And in the release, in the press release that the Company makes, is also stated that the absence of investment opportunities in Brazil and attractive conditions, the remaining cash flow would be distributed either as buybacks or additional dividends. But basically, the ideas to have an optimized capital structure in Brazil, and make sure that it's efficient.

Let's just move to Slide 15, talk a little bit about something as I know also interests, many of you which is Iberian energy markets. Those, as already mentioned, we had pretty solid results in energy management from the first half.

This just compensated the negative effects from weaker volumes and low energy prices. For the rest of the year, we expect much lower energy management results below the average of the last five semesters.

So really, the first half and particularly the first quarter, was exceptionally good. And obviously, going for it in terms of the remaining months of the year, the second half will be, the reason for this is on the back of hedging, and it's got to do with seasonality in basically the recovery of energy prices, so just wanted to remind you though that, this expectation is already reflected in our guidance, which we've been providing.

Also in relation to '21 and also something like a highlight and we've been doing that over the last couple of months is we are reducing our merchant exposure. So disposal to hydro, as I mentioned, CCGT plans, the B2C portfolio are shutdown of the coal.

So, all of this contributes to reducing our merchant exposure in Iberia. We also have now almost 100% of our hydro nuclear production hedge at an average price of around €45 per megawatt hour.

So the line was before prices. And 60% of our effective GAAP production CCGT production at mid single digit spread on average.

This is essentially 2021. So let's just quick measure on Slide 16 on impact just to say as I've mentioned before, it really shows about this really challenging time.

You're shown a lot of resilience, particularly in the second quarter of 2020, was particularly tough in terms of the lockdown in terms of the impact on the economy. And I think despite that, we're able to have solid results.

Of course, this has to do also adaption capacity of the Company, but also our people. So there's a lot of focus here on the business plan execution.

And throughout the spirits, despite the lockdown, and ever being remote, there's a lot of support for our suppliers to clients, I mean, just the community. So I think, in general, we try to really have a holistic stakeholders view here.

This translated also into a good quality of service also, even in terms of both the supply and the distribution business. Coming out of this, I think there's really an opportunity to take some of the lessons learned and benefit not only from an efficiency point of view, solvency relevance, and digitalization, but I think also new ways of working.

And so, I think this is really making us also reflect on how we even post pandemic how we will reflect that in the way that people interact here in the office and everything. And so I think that will bring a lot of benefits also in terms of motivation for our team.

Last slides, let's just moving to summary. So we're maintaining the financial guidance that we shared with you just a month ago in the Viesgo acquisition and the rights issue presentation.

So despite 2020 being difficult for COVID, we are keeping solidarities resilience. Recurring EBITDA 3.6 billion, recurring net income up 85.9 targets, as you know, our recurring net profits assumes the status of non recurring so if you take that out versus 0.8, and including the sense.

In terms of its use, we expect to do in the fourth quarter. We expect to conclude in the fourth quarter, I think that will be deposited, obviously, for the post 2020 period.

So we see Viesgo, clearly the earnings enhancing significant value from the industrial project. And also, I think the better than expected terms of the Viesgo acquisition deals allow us to take a more optimistic view versus our strategic plan assumptions regarding the transactions over the next couple of years.

So, we still have around 2 billion so the lesson has to do in the next couple of years. I think what we've seen in terms of the after rotations over the last 18-months to 24-months, has allowed us to be slightly more optimistic versus our assumptions.

We also see improved growth opportunities for renewables plus wind onshore, offshore, solar, hybrid may include also storage green hydrogen, I think just there's a lot of moving pieces here, which I think will give us good opportunities to create value, improved economics, a lot of public support, both in Europe and in the U.S. So, I think, we have some tail winds here.

In the portfolio restructuring into focus both in the long-term contracted and regular activities, also meant to reduce our merchant exposure and improve our low risk profile. And that's together with very supportive credit markets and lower yields for longer term allows us to also continue to reduce our average cost of debt.

So, this overall combined effect allows us to feel comfortable about the dividend policies I mentioned. So, just generally, I think we continue to see a very positive outlook regarding EDP's capacity to lead this energy transition to really continue to create value for our stakeholders and our shareholders obviously.

So, we'll see then have a couple of annexes. I'm not going to go through that.

But you have a lot of information we typically provide in other presentations, and we will refer to that in the Q&A if necessary. Let's stop here and turn it back over to the Miguel Viana.

Yes, we can start now the Q&A session. And maybe we'll start with the questions on the phone, please.

Thank you so much for taking my questions. I will stick to three.

And the first one is a bit pedantic and I apologize in advance, but just to be clear on your 3.6 million EBITDA for 2020 and 0.85 billion to 0.9 billion, you call it retiring, I think out there, there's different definition but different, people like obviously investors. Would you be surprised to tell us how much asset rotation or offshore JV gains you are included in there?

And what one-off costs did you include in there? I would tell you this because you're talking about 190 million one-off costs from the bottom line from, Sines, the liability management early purchases a bond and you start in any talks.

But you don't explain it here. That's also not recurring.

So, I was wondering, how you treat that here. And lastly, either you're not really leaving here as big as COVID impact like some of your competitors.

So, I was wondering, can you give us a medium euro figure impact from COVID, not currency, but perhaps volumes and maybe adjusted for some of the extra gains in energy management you have? So, the grace to really get to a clean, clean, clean figure here to understand your underlying earnings power, which I believe is the key debates today.

Second question, I'm really intrigued, Miguel, by your comments is that talk about85% secured of the 7 gigawatts, and if I put that together with your recent balance sheet measures. Say interesting the sentence you use that you said we are well positioned for growth opportunities in Europe and the U.S.

Can you elaborate on that? The balance sheet or GDP by year-end, when once you close all those transactions are going to be €5 billion stronger and now really €5 billion broadly, so securitization, asset rotation, disposal.

What are you going to do with all this money? I mean, I guess your growth opportunities, you talk about renewable.

Can you give us more? Tell us what is the organization ready to deploy?

Is it going to 3 to 3.5-4 gigawatts within the next three years of gross capacity additions, I'm not asking your review of the CMD, but just trying to understand what's the potential here. Last question very quick, also quite surprised, given that most of your enterprise value is renewables.

And you do not seem to show a pipeline here. Can you share it with us a gross pipeline.

We know some projects will never materialize, we know some projects will. We know you need to keep every day working to beef up the pipeline.

But can you tell us a snapshot of where it is today? Thank you.

Thank you, Alberto. So in relation to your first question, just how much asset rotation is in the recurring numbers I was talking about?

So, we're expecting that for the full year, we should be close to 0.4. So, I think we had 145 in the first half, and we've had two recent deals which will be closing in the second quarter.

I think, from the multiples you can assume that there's obviously going to be relevant capital gains associated with that. So, I think we'll be well ahead of what was our initial expectation.

That's allowing us to mitigate the impacts of COVID, which was the second part of this question. So asset rotations close to 0.4 and what I would like to highlight though, also it does show the recurring power of this business model, because it's not one it's not two, it's not three not four.

It's already several transactions that we've been doing over the last couple of years or not, certainly last two years, selling majority stakes where we have consistently showing not only the market appetite for these assets, but also the interest and the sort of the attractiveness of these assets, which is obviously increased even during this period. And also, in this question in terms of one-off costs, so as I say, in Sines, we're obviously impairing the asset value, we're also impairing some of the core value, and restructuring costs associated with that.

The liability management is what it is. It's obviously the hybrid buyback at the beginning of the year and understands as well.

And I think this is detailed in the presentation. But essentially, that's sort of the one-off which is clearly signaled and is not part of these numbers.

In relation to the Spanish coal, we'd already done that last year. So really the big Sines-- the coal is really -- Sines now in the second quarter.

In relation to COVID, so we were obviously impacted by COVID and heavily impacted by COVID. Everyone was.

It has an impact to EBITDA level, let's say above 0.1 billion in terms of then don't forget, a lot of this was also in Brazil. So when it gets down to the net profit line, it's mitigated.

And in Iberia, it was also impacted our commercial business, and then that was also mitigated by part of our energy management. So I certainly wouldn't draw yourselves on the contrary, we were heavily impacted by COVID.

But fortunately, we also had other leavers, which then allowed us to mitigate that impact. So if on a recurring basis, we ended up in a good place.

It was just your second question. So then well positioned for growth, I think we focused on the business plan, as I mentioned, with solidity 4%.

You can look at it as well a positive way before, say that we still have some work to do to get to 100%. We would look at going to the market to be in this 2021 and providing an update on how we see the Company going forward for the next couple of years.

And we would then be able to elaborate a little bit more. But just in also in relation to this question, I think it's a relevant point.

I mean, our balance sheets will be attended the year, where we wanted it to be in other words. We are still a BBB minus rating.

And we have the objective of trying to move to a BBB rating. And so that means that we need to be consistent in the way that we move in this direction.

So it's not the transactions we're doing are allowing us to get a little bit more freedom and to move towards the BBB doesn't mean that suddenly, you don't have a huge amount of space. And so we are moving in the right direction, but on track in life expectancy.

So I'd say that in relation to the capacity for more growth. Really, I'd like to probably answer that when we do a full sort of CMD, when we can take all the different pieces, put them together and have a sort of a solid coherent plan rather than just answering it, part of it in relation to security renewals.

And in growth pipeline, for the third question, you're right. We don't typically provide a lot of information on pipeline.

And obviously, as we go on closing the PPAs, we provide that. We have a very large pipeline, which has allowed us to exceed, it's basically a funnel and I think we've talked about this a little bit in the past, I mean, some of the conversations that sometimes you need to be developing this pipeline four, five, six years in different geographies until you actually get it to maturity.

So we don't provide that information. But I think the fact that we are able to deliver the PPAs and deliver the growth shows that it's a pretty solid pipeline that we have, that's backing that up.

Just to be clear on the first answer and thank you. That was very comprehensive.

So you have 400 million gains from rotation before taxes even those not a very high pass rate here. And then you have 200 million one of course, 100 million volume cost on both on a pre-tax basis and on the 100 million some of the big chunk of the proceeds.

So, it's kind of, if I were to think EBITDA would be 400 gains and 100 cost, right?

Yes.

Thank you.

Roughly.

Thank you so much.

So thanks for the questions and so maybe on positives and negatives versus May. So I think in May, we were, we'd already tried to factor in a lot of the moving pieces, which is also as I mentioned earlier, we were hit hard by COVID.

There are also some positives that we were already beginning to see. And so we sort of built that into to our view at the time.

And positive, we have already seen the lower interest rates. We were seeing already higher gains in the asset rotation.

Some of the negatives that have been highlighted over the last couple of months, and the stronger devaluation of the Brazilian real and obviously the demand, so I think, definitely those pieces have continued to move, but the positive ones we're already seeing, I think the Brazilian real has continued to devalue a little bit further versus where we, we were back in May. And in terms of the energy management also for the remaining part of the year, I think, as I mentioned, we had an extremely extraordinarily strong first quarter.

Second quarter was good but obviously the strong and typically the second half of the year is less strong than the first half. So, as I mentioned, that's already built into our target.

So, we're already now in September, but you had the chance to sort of incorporate the latest assumptions. And I think these positives and negatives needed to be comfortable with the guidance we provided amongst them.

And in relation to your question on the net profits, so, yes, the guidance is already assumes the gains that may come in from moving the remaining projects into the JV. So, that's also built in essentially Mayflower and Seamade, which are the ones, that have will have the greatest impact on that.

So, that's a relatively quick question. And I think you also asked about the euro dollar that's 1.15 roughly, is what we were assuming for that forecast.

In relation to the legal case was not really very much I can add to what he said in the past. So, timeline is uncertain, but certainly it's something that we don't expect a lot of news in the short-term to check on is, the legal cases enforceable, typically do drag on for a number of years.

And there's not any information that can provide no news. This was August as a pretty slow month.

Because for holidays, and nothing more to say here.

Okay, many thanks. And just on the on the legal cases, if you have to provision anything in your accounts for that?

I'll be very clear about that. We have not provisioned and we have no intention of provision.

I mean, there's, in fact, there's not even any number out there that we could possibly even try to understand what it was as a reference for that. So, no provision, no intention of provisioning and no even not even a reference that exists.

We can go to the next question on the phone please.

Good morning everyone. Thanks for taking the question.

I've just got two questions. Well, one regarding Portugal, and which I will ask you to please update us on the latest from this tax?

And two, related to recent auction, what's your view on the results home from that auction on why you did not gain, while you were in other words, if any of these projects in the under the different optionality for the auction? Second one, and again, I'm not trying to preview your CMB in the future, but I was wondering whether you could tell us what is their run rate in terms of installations that EDPR could do?

Are you already at the peak of that, or do you see as still some room for improvements in the coming future? Thank you.

So, in relation to Portuguese regulation, I think essentially, we have three different topics that we typically talk about, which is the sale, the call back, and the social tariff. And I would say that in relation to the sales sort of extraordinary tax, clearly there is commitments to have this evolves, and that was set out in the government's budget for the year that it should be reduced in line with the system debt.

Unfortunately, this coincides with the COVID and so the system that is actually not expected to decline this year. We do expect it to continue to decline going forward because the COVID is obviously a one-off impact.

So, it creates short term pressures this year, but then we continue when we look forward to when we project the tariffs going forward and then the systems debt. We continue to see it's completely sustainable and will fall away for the next couple of years.

So in that respect, I think that political commitment this is still there. And it's a question now of following this and seeing how it evolves.

In relation to the call back, again, I think some -- maybe some positive news on that, which we hope will come out over the next couple of weeks maybe, and essentially, some steps were taken. As you know, the Secretary of State's already mentioned that we should net off the sales and social tariffs against the callback.

And so that now needs to be detailed and reflected in specific regulatory -- regulation. And that's being done.

So hopefully, we'll have some news coming out of that, probably. In terms of the social tariff, not really any news on that, so no change there.

But that's Portuguese regulation. In terms of solar auction, so we obviously go to these auctions and we participate in the same way we participate in many other auctions around the world.

And, we do our best, we setup teams, we try to find the locations we use our pipeline. But then we're also disciplined about what we see is the return that we expect for these type of projects.

And so we'll go in and we'll have a price that we're willing to go to. And then it goes beyond that, and will step out and will invest elsewhere.

I think it was interesting to see the solar auction. So obviously they know we participated last year.

They know we were awarded, not in the auction, but afterwards the project there. But this year, it had a particularity which is you could also bid with storage.

So 75% of the solar of the 700 megawatts ended up being taken in the modality which is solar plus storage. That ended up being extremely competitive and stayed on a CFD basis if we had to do in one case, it was €11 per megawatt hour and in some cases it could even potentially be negative, so very aggressive prices.

I'd have to also mention here that's half of those megawatts, were won by a South Korean company, which is also a producer of panels and storage. So they may have a different view on the economics.

And so they're able to be more competitive there. I can't really tell, but I guess it would be certainly interesting to try and understand a little bit more of those economics there.

But it's part of life. I mean, we go to these auctions, we win some, we lose some, and that's just have to be disciplined in how we approached this.

In relation to the question on the runway, so clearly, we're ramping up as you know, in renewables. We were at a run-rate of around 700 megawatts, and we're ramping up to around 2 gigawatts.

We have the pipeline. And I think that's something that we've all stressed is the big change.

I think strategically that we had, was to build as much as we can. And then if necessary sell part of it to continue to recycle that capital.

From an organizational perspective, we've also been ramping up. We've been hiring a lot of people.

We've been sort of building out the organization, obviously, to match that. So this year will be already, obviously now, the COVID, it's slightly delayed.

The number of megawatts we're building this year, but we'd already be getting close to 2 gigawatt, so within 1.5 to 1.9 type range. And some of those megawatts have slipped into 2021, but I think the organization is there.

So we continue to ramp up the organization. I think we had the heart of it, the core, we already had in terms of energy assessment in terms of the relationship of the turbine manufacturers.

So I think that's there. And so we're really fleshing out to this in the different markets and in some markets where we already are to make sure we can continue to deliver those megawatts.

And I mean, this is all just to say, we're comfortable with different rates 2 gigawatts. I'd wait to see sort of the full CMG to talk about any other numbers are from that.

We'll try not to answer some questions from the web. We have here some questions regarding Viesgo acquisition in terms of integration.

So it's definitely a battle from Credit Suisse and just memorize from GE Capital. Are you in position to provide more detail on the expected synergies and tax benefits from relation with Viesgo.

Is it now possible for a more detailed view about potential synergies and also what happens with the same the same direction? Miguel.

As I mentioned, we're focused now and so some executing the M&A and we're trying to get that close by the end of the year, and you're getting this through the different regulatory hurdles. We're also parallel working on the integration plans for the first hundred days.

So we're, this will be basically doubling our size more than doubling our size in networks for permanent concessions by combining two industrial projects. So obviously, I think we can all intuitively understand that this has a lot of value creation potential.

And I've seen some of the numbers from some of you guys, outside analysts, and we're comfortable with those numbers. I think they're aligned with the benchmark for these kinds of deals, certainly our internal numbers would not be very different from those, but I really can't share much more detail than that.

I would just also say in relation to the tax issue, I mean, obviously, since we will have more than 75% in the distribution holding Company. We will have the full fiscal consolidation with the EDP Spain parameters.

So, we expect that to also generate significant salaries.

We have then a question also regarding from [Jose Marange] in terms of coal plants of Viesgo impact on EBITDA in 2021. I think is slightly maybe, we don't expect any EBITDA contributions.

So, we expect that all the extraordinary costs for shutdown will be already accounted for in 2019 and 2020. And finally, I think we have, we are reaching the end of the call on the fixed income from James Farrow, BNP Paribas.

And can you talk about your funding needs after the capital increase and recent debt sales, having issues equity, you no longer need to issue EBITDA will the focus be more on easing shipper senior depth in future.

The answer here is yes. I mean, we'll continue to issue senior debt.

Probably most of it will either be Euros or dollars. We also think it's important to distinguish with dollars.

Most of our growth or the part of our growth is also U.S. dollar driven.

And hybrid was inevitable, and we may use them in the future side. So, I have never say never.

We need to reinforce credit metrics, but certainly we don't have any plans to do that at the moment. Just focus on executing the deleverage plan which doesn't require any more habits for that.

The capital increase is almost just necessary because of the Viesgo requisition.

I think we can we can conclude, Miguel, if you have any final remarks?

Look, I think, it's -- there has been obviously the second quarter was a tough quarter and we would have liked to go after you guys on July and present on that. But as you know, it wasn't possible.

I think we are very comfortable, we have solid results. We're comfortable with the guidance and we're comfortable, in terms of the asset rotation deals.

We're comfortable in terms of the way we're managing energy management. So, we're feeling very positive about the Company.

And, in several of you raise this in terms of our future prospects, I would prefer to have a, let say, a comprehensive discussion and presentation on this in the future, but certainly we're feeling very good about the Company and about the prospects going forward. So, I think we're in a good place.

We finished the call. Thank you very much for your participation and hope to have you in the next weeks in some interactions in several conferences and then on the third quarter results conference call that this is reaching very close already.

Bye.