EDP Brasil’s strategic plan provides R$10 billion in investments by 2025

RIO DE JANEIRO, BRAZIL – The company estimates an annual growth of between 8% to 10% of income before taxes in the period.

EDP Brasil foresees a compound annual growth rate of 8% to 10% for earnings before interest, taxes, depreciation and amortization (EBITDA) in its strategic plan until 2025. The power company expects the power distribution segment to account for 39% of EBITDA in 2025, slightly higher than the current 35%.

Over the next few years, the group also expects higher EBITDA contributions from the transmission (from 13% to 18%) and solar generation and commercialization (from 6% to 10%) segments. In the other direction, conventional generation (from 26% to 21%) and thermal generation (from 20% to 12%) should contribute less to EBITDA.

From 2021 to 2025, the power company has an investment plan of R$10 (US$1.84) billion. Of this amount, R$6 billion will be directed to energy distribution: the company holds two concessionaires, in São Paulo and Espírito Santo, and expects the net regulatory remuneration base to reach R$8 billion in 2025, from R$5 billion in 2020.

Another highlight of the investment plan until 2025 is solar generation, which should be allocated R$3 billion in investments. The company intends to continue investing in large-scale solar plants and distributed systems, but will not participate in auctions in the regulated market for this source.

In view of the decarbonization commitment assumed, EDP Brasil is seeking a solution for the coal-fired thermoelectric plant of Pecém (CE). “We have many scenarios in perspective, the decommissioning I would say is the ‘plan Z’, the last one,” said the group’s CEO João Marques da Cruz, during a virtual meeting with analysts.

The company is still unclear about the future of the plant, but it will not be able to do the accounting consolidation of the enterprise before 2025.

“We can think about decarbonization in two stages. In a first stage, we reduce the participation within the whole, virtually breaking down the plant. In a second moment, which we are looking at carefully, is an offset [of emissions] along with green hydrogen within the Pecém plant.”

“The sum of the two will provide us a first perspective of how to do this decarbonization,” explained Luiz Otavio Henriques, vice-president of Generation, Transmission and Trading.

Distribution

EDP Brasil expects the market of its two energy distributors to improve throughout 2021, and may end the year with figures slightly above those posted in 2020, said the vice-president of Distribution, João Brito Martins.

“The market is recovering, particularly the industrial one, our expectation is that industry will continue to grow. In the case of Espírito Santo, the industry is very export-oriented, so it reacts relatively quickly.”

“In the case of São Paulo, the site is more linked to the automotive industry, we have some uncertainties. However, the outlook is positive”, he said.

The executives again expressed their interest in increasing their stake in the state-owned company CELESC, in which they already hold 29.90% of the capital. “We are interested in an eventual privatization of CELESC, but this does not depend on us,” stated EDP Brasil’s CEO.

Partnership for free market

EDP Brasil intends to build large solar projects, aimed at the energy free market, in partnership with EDP Renováveis, a vehicle of the Portuguese group with global operations.

“Ours is a ‘win-win’ relationship. We are combining a company that knows the technology with a company that knows the Brazilian market to make utility-scale solar plants, and then each one consolidates a part,” said the company’s CEO João Marques da Cruz, in a virtual meeting with investors.

Solar generation is one of the main focuses of EDP Brasil’s strategy for the coming years. The company currently has about 50 megawatts (MW) in operation and expects to reach a portfolio of 1 gigawatt (GW) by 2025. This growth should come both from large-scale projects and distributed systems.

However, the company rules out participating in government auctions for this source. “You will not see us taking part in auctions of the regulated market. Should the EDP group participate, it will be through EDP Renováveis,” said the vice-president of Finance and IR, Henrique Freire.

Transmission

EDP Brasil intends to continue growing in the power transmission segment, but will start applying an asset rotation strategy to maximize value creation, Freire said.

“The set of lots that we have today has a RAP [annual revenue allowed] over Capex of about 15%. This value is much higher than what we see in the market today, we see transactions of 7%, 8%. Therefore, a very interesting opportunity to apply asset rotation opens up,” he explained.

EDP Brasil has a portfolio of 7 transmission projects, totaling just over 1,500 km of lines. Of this total, about 1,200 km are under construction.

“We are ‘on time’ and ‘on cost’ for the completion of the works we have this year,” said Luiz Otavio Henriques, vice president of Generation, Transmission and Trading.

Source: Valor