Earnings call transcript: EDP Renovaveis sees steady growth in Q2 2025

EDP Renováveis (EDPR) reported solid H1 2025 results, with underlying EBITDA up 20% year-on-year, excluding asset rotation gains, and recurring EBITDA stable at €960 million. The company expanded installed capacity by 18% to nearly 20 GW and increased generation by 12%, despite a 9% decline in average selling prices. EDPR remains on track to meet its 2025 targets, including 2 GW of capacity additions and reducing net debt to €8 billion, driven by strong asset rotation proceeds and robust demand for renewables, particularly in the U.S. market, which also offers profitable storage project opportunities.

Analysis

EDP Renováveis (EDPR) demonstrated strong underlying operational performance in its H1 2025 results, effectively navigating market headwinds. While recurring EBITDA remained flat year-on-year at €960 million, underlying EBITDA, excluding asset rotation gains, grew by a robust 20%. This growth was driven by an 18% increase in installed capacity to nearly 20 GW and a 12% rise in generation to over 21 TWh, which successfully counteracted a 9% decline in average selling prices. The company's operational efficiency is a key highlight, with adjusted core OPEX per average megawatt improving by 11%. Management reaffirmed its full-year 2025 guidance, including 2 GW of capacity additions and a recurring EBITDA of €1.9 billion, signaling confidence in its execution capabilities for the second half of the year. The strategy centers on disciplined capital allocation, with a pivotal asset rotation program expected to generate €2 billion in proceeds in H2, enabling a reduction in net debt from €9 billion to a targeted €8 billion by year-end. While the associated €100 million in expected gains is modest, this is attributed to the strategic sale of higher-CAPEX vintage assets and the balance-sheet-optimizing structure of a 49% minority stake sale in the U.S. The company has strong visibility into its U.S. growth pipeline, supported by robust demand from data centers, regulatory clarity, and profitable storage projects yielding double-digit IRRs, though it awaits final safe harbor guidance in August for its post-2027 outlook.

Key Decisions for Investors

• Investors should closely monitor the execution of the asset rotation program in H2 2025, as the receipt of an expected €2 billion in proceeds is critical for the company to achieve its year-end net debt target of €8 billion.
• The upcoming U.S. regulatory guidance on safe harbor criteria, expected in mid-August, is a key near-term catalyst; a favorable ruling would de-risk the post-2027 growth pipeline, while a restrictive one could impact future project economics and costs.
• Consider that the current capital allocation strategy prioritizes balance sheet deleveraging and high-return organic growth over immediate shareholder returns or large capital gains, which is reflected in the modest gain guidance from the ongoing asset sales.
• Assess the company's ability to maintain its gross profit margins, which stand at an impressive 79.44%, especially in the face of potential market volatility and the execution of its large U.S. project pipeline.