EDP SA (EDPFY) Q4 2024 Earnings Call Highlights: Strong Financial Performance and Strategic ...

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Fri, Feb 28, 2025, 12:06 AM 5 min read

Recurring EBITDA: EUR5 billion, stable year-on-year.
Recurring Net Profit: EUR1.4 billion, 8% increase year-on-year.
Net Debt: EUR15.6 billion, better than consensus.
FFO to Net Debt Ratio: 21.5%.
Electricity Networks EBITDA Growth: 7% year-on-year.
Hydro Volume: 16% above average hydro year.
Installed Capacity Growth: 17% year-on-year.
OpEx Reduction: 4% decrease year-on-year.
Dividend Per Share: Proposed increase to EUR0.20 in 2025.
Share Buyback Program: EUR100 million to be executed in the short term.
Cost of Debt: Decreased from 5% in 2023 to 4.5% in 2024.
Asset Rotation Gains: EUR179 million in 2024, down from EUR460 million in 2023.
Electricity Demand in Brazil: 7% increase in distribution areas.
Renewables Generation Mix: 95% of total generation.
Scope 1 and 2 Emissions Intensity: 29 grams of CO2 per kilowatt hour, 84% reduction since 2021.

Warning! GuruFocus has detected 8 Warning Signs with EDPFY.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

EDP SA (EDPFY) successfully delivered or outperformed its 2024 financial guidance, with a recurring EBITDA of EUR5 billion.
The company achieved a solid 7% EBITDA growth in electricity networks, supported by strong demand and expansion in Brazil.
EDP SA (EDPFY) reported an 8% year-on-year increase in recurring net profit, reaching EUR1.4 billion, surpassing the previous guidance.
The company has significantly advanced its commitment towards decarbonization, with 95% of its generation mix coming from renewables.
EDP SA (EDPFY) is implementing a share buyback program of around EUR100 million, reflecting strong financial performance and shareholder value focus.

Negative Points

EDP SA (EDPFY) faces potential challenges with FX volatility in Brazil, impacting financial results.
The company has seen a decrease in average selling prices for EDPR, with a 3% year-on-year decline due to lower power market prices in Europe.
There is a perception of a negative market reaction to EDPR's performance, affecting overall investor sentiment.
EDP SA (EDPFY) has experienced a decrease in recurring EBITDA for generation and supply businesses by 2% year on year.
The company is facing regulatory uncertainties in Portugal and Spain, which could impact future investment and returns in electricity networks.

Q & A Highlights

Q: Can you clarify the net CapEx and EBITDA expectations for EDPR, and why not consider a buyback of EDPR shares instead of EDP? A: Miguel Stilwell d'Andrade, CEO, explained that both EDP and EDPR stocks are compelling. The decision to do a buyback at EDP was based on short-term earnings accretion and dividend yield benefits. The net CapEx for EDPR is expected to be slightly below EUR1 billion, with EBITDA around EUR2 billion. The decision on buybacks will be reassessed based on share price performance and balance sheet flexibility.

Q: What potential upsides are not included in the current guidance, and is there room for more share buybacks? A: Miguel Stilwell d'Andrade, CEO, mentioned potential upsides such as regulatory remuneration in networks, acceleration in global renewables build-out, higher power prices, and efficiency improvements. Regarding share buybacks, EDP is open to considering them if balance sheet space allows, and decisions will be based on share price dislocation and opportunity cost.

Q: What are your expectations regarding the regulatory review in Portugal, and what could trigger increased investment in networks? A: Miguel Stilwell d'Andrade, CEO, stated that the market expects regulatory returns around 6% to 7%. A 100 basis point increase could have a EUR30 million positive impact. Investment will depend on regulatory returns, and EDP has proposed a 50% increase in investment for network rejuvenation and digitalization.

Q: Can you provide details on the significant reduction in net debt in Q4 2024? A: Rui Teixeira, CFO, highlighted that the reduction was due to less cash CapEx, working capital initiatives, sale of CO2 licenses, and closing of tax equity transactions in the US. These factors contributed to the improved net debt position by year-end.

Q: What is the impact of the technical change in hybrid equity content on EDP's ability to issue hybrids? A: Rui Teixeira, CFO, acknowledged the change by S&P but emphasized that hybrids remain an important part of EDP's capital structure. EDP is evaluating options and will inform market participants of any decisions. The change has not led to negative rating actions, highlighting EDP's credit strength.

Q: What is the current capital allocated to US offshore after the EDPR write-off, and why was the market reaction negative? A: Miguel Stilwell d'Andrade, CEO, stated that post-provision, the capital allocated to US offshore is around EUR0.3 million. Regarding the market reaction, he suggested it might be due to a misunderstanding or lack of clarity in guidance, as EDP aimed to be conservative with EDPR projections.

Q: Can you provide a breakdown of the 2026 EBITDA guidance, especially for EDPR? A: Miguel Stilwell d'Andrade, CEO, provided the breakdown: Networks EUR1.6 billion, Integrated Iberia EUR0.9 billion to EUR1 billion, Integrated Brazil EUR0.2 billion, and EDPR EUR2.1 billion to EUR2.2 billion.

Q: What are your expectations for the extraordinary tax appeals in Portugal? A: Miguel Stilwell d'Andrade, CEO, expressed hope that the Constitutional Court will rule in favor of the sector, as the tax is seen as counterproductive to investment in networks and renewables. The timing of the court's decision is uncertain.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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