The Spanish government has recently approved a series of regulatory measures in the context of the environment of high energy prices and the war in Ukraine. With regard to Acciona Energía's business, the most relevant are the extraordinary review of regulatory parameters, changes in the tax on excess remuneration caused by the high price of gas (gas rebate) and intervention in the market to limit wholesale electricity prices for twelve months. The company estimates that the first two measures will have a relatively neutral impact in terms of both P&L and value, but that the price intervention will limit its ability to fully capture extraordinary electricity price levels.
The extraordinary review of regulatory parameters is ongoing and will be applicable from January 1, 2022, one year before the end of the three-year regulatory semi-period (January 2020 - December 2022), in order to align the level of regulatory revenues currently being received by operators of regulated assets with the higher energy price environment, and also adjust revenues to take into account the higher prices obtained in the 2020-2021 period as a whole. As a result, the company estimates that its annual regulatory revenues in 2022 could fall from around E195 million to around E65 million. This effect could be mitigated in terms of the profit and loss account by the increase in recognized energy prices in accordance with the new regulatory price bands, which are expected to be around E122/MWh by 2022 (E49/MWh at present). Acciona Energía considers that these changes will have a limited impact on the value of its regulated assets.
The gas undercutting mechanism has been extended by three months, until the end of June 2022, and the exemption regime has been modified, which means that incremental price hedges contracted from April 1, 2022 will no longer be exempt. The company does not expect these changes in the mechanism to have an impact, as energy contracted in advance will continue to be exempt from the tax.
With respect to intervention in the electricity market, the Spanish and Portuguese governments have agreed with the EU to impose a twelve-month cap on gas prices for electricity generation, starting at E40/MWh and averaging E50/MWh over the period, effectively limiting wholesale electricity prices to a range that could oscillate between E115-140/MWh, which is significantly lower than current levels.
Installed capacity and construction plan- the total installed capacity as of March 31, 2022 reaches 11.3 gigawatts (9.2GW consolidated), with eighteen megawatts (18 MW) of new wind capacity having been added during the first quarter of 2022. As of March 31, 2022, capacity under construction stood at 1,596 MW, up from 691 MW at the end of December 2021, a significant increase driven by the start of construction of the Australian MacIntyre wind project (923 MW). The company is working towards the goal of completing construction of 828 MW during 2022. The investigation recently launched by the U.S. Department of Commerce for possible circumvention of tariffs on imports of PV cells and modules produced by Chinese manufacturers in Southeast Asian countries could significantly exacerbate the existing global supply chain problems faced by the sector.
The average price achieved increased by 59% to E115.4/MWh, compared to E72.5/MWh the previous year. The average price captured by the Spanish assets in the wholesale market increased by 193%, which compares to a 407% increase in the Spanish pool price during the period. In the international portfolio, the average price achieved decreased by 24%, mainly due to the fact that the high Texas prices recorded in the first quarter of the previous year were not repeated.
Energy contracted in the Spanish market
Acciona Energía's price hedges for the current year 2022 stand at 4.4 terawatt hours at an average price of 127 E/MWh. Of the total contracted volumes for 2022, 0.8TWh correspond to bilateral contracts entered into by the Company with large industrial and commercial customers, most of which are five- and ten-year contracts. The company is preparing for the early maturity process of part of its regulated business in Spain as a result of the high energy price environment, which makes it possible to recover the invested capital at a faster rate. Acciona Energía is therefore accelerating the implementation of its GenerationCommercialization strategy. This strategy consists of replacing volumes that lose regulatory protection with new medium-term supply contracts and longer-term PPA contracts at attractive prices, thus maintaining a low-risk profile similar to that of recent years, with around 80% of production contracted.
With respect to 2023, the company's current contracted position in Spain amounts to 2.2TWh, through financial hedges and marketing contracts, as well as through volumes backed by new assets and which have been contracted under PPAs and regulated auctions.
In January 2022, the company issued its second green bond for 500 million euros, in a transaction with an oversubscription of more than four times, thus consolidating Acciona Energía's position as a benchmark for sustainable financing in the capital markets. This new bond was issued with a ten-year term and a spread of 98 basis points over the midswap.
Project portfolio in Brazil
During the first quarter of the year, the company added a new project to its development portfolio in Brazil. This is the Ipupiara wind project in the state of Bahia, with a capacity of 354 megawatts, which is in the process of obtaining permission to access the grid. This project complements the 850-megawatt Sento Se project, as part of the strategic objective of making Brazil one of the company's main markets in the coming years.
In February 2022, Acciona Energía enters the French energy efficiency and management market by acquiring an 85% stake in the French company Eqinov, thereby expanding its energy services offering to its global customer base. In March 2022, Acciona Energía and its partners inaugurated the Lloseta plant, Spain's first industrial renewable hydrogen plant with a production capacity of 300 tons of green hydrogen per year. The plant is powered by two solar photovoltaic installations of 8.5 MW and 5.9 MW respectively. In the offshore sector, Acciona Energía and its partner SSE have applied for an offshore siting license to obtain development rights for offshore wind farms in Poland.
Acciona Energía maintains its outlook for 2022, and expects solid double-digit ebitda growth, net cash flow from investments of between 1.0 and 1.2 billion euros, financial debt similar to year-end 2021, and a lower Net Debt/Ebitda ratio, improving the credit profile. [Ebitda: earnings before interest, taxes, depreciation and amortization.]