EDP ‘comfortable’ with higher interest rates

  • Lusa
  • 7 December 2022

The Portuguese company reveals to be "comfortable" in terms of financing to face a period of higher interest rates but needs to remain prudent.

Portugal’s power utility EDP is “comfortable” in terms of financing to face a period of higher interest rates but needs to remain prudent to maintain a strong balance sheet, the company’s chief executive said on Wednesday.

“We have sought to have a prudent financing policy. Just last year, the rating agencies raised EDP’s rating to ‘BBB’, a more solid rating, in a gradual rise over the past few years,” Miguel Stilwell de Andrade told reporters during a visit to a floating solar park in Singapore.

The CEO said the company had strengthened its balance sheet through capital increases, including €1.5 billion in 2021 to invest in renewable energy projects and €1 billion the previous year to strengthen energy networks.

“We have been looking for measures to have a solid balance sheet, and therefore we are comfortable now to face this period with rising rates,” he explained, referring to the successive increases in key rates implemented by monetary policymakers, for example, the US Federal Reserve and the European Central Bank, to curb inflation that accelerated with Russia’s invasion of Ukraine in February this year.

“Obviously, we have to be prudent. The times are changing very quickly and we have to ensure that we have this solid balance sheet from now on,” he added.

Asked about the 2022 balance sheet, Stilwell de Andrade stressed that it was a year with a lot of volatility, “many unforeseen things, starting obviously with the war in Ukraine, which obviously has an impact on fossil fuels, then it ends up having an impact on the price of electricity”.

Regarding 2023, he said EDP expects more volatility, “but once again, we anticipate that there will continue to be a major boost in renewable energy, not only in Europe, with the Repower EU plan, which was approved in recent months, and also in the United States, with the ‘Inflation Reduction Act’, which was also a very important support for the growth of renewable energy in that country.

In February 2022, EDP Renováveis (EDPR), which is 74.98% owned by EDP, announced it had completed the acquisition of a 91% stake in Singapore-based Sunseap, one of the largest solar energy companies in Southeast Asia, for €600 million.

Miguel Stilwell de Andrade noted that the goal was to reach an installed capacity of 2 gigawatts (GW) in the Asia-Pacific region by 2025.

Asked if the operation will force EDP to review the growth targets of installed capacity by region in the strategic plan 2021-2025, and in which out of a total of 20 GW, the ‘rest of the world’ represents 1.4 GW – compared to 8.8 GW in North America, 6.7 GW in Europe and 2.9 GW in Latin America – the CEO said that the question is being studied.

“We still have to manage things over the next few months. We are doing an update on the plan, so we will also give news soon, over the next few months, on what that will look like, what regions we will invest in,” he explained.

“We see a lot of potential here, but we also see it in other regions – Europe remains a very important point, the US also, Brazil also, and what we can say is that currently, we have seen a lot of investment opportunities,” the CEO concluded.