Trump and Colombia lead to a 556 million loss in EDP Renováveis

EDP Renováveis has disappointed market expectations by posting losses of 556 million euros for 2024, a year that CEO Miguel Stilwell de Andrade acknowledged, in statements to analysts, was “not great” for the electricity company. The company justifies the drop with the impairments it decided to set up in relation to offshore wind energy projects in the United States, given the uncertainty created by Donald Trump’s policies, and also with the decision not to go ahead with two projects in Colombia.

EDPR’s net result, according to the statement published on the website of the Portuguese Securities Market Commission (CMVM) on Wednesday, was mainly impacted by the subtraction of a total of 777 million euros in non-recurring items, explained by impairments related to offshore projects in the US and the decision not to proceed with investments planned for Colombia, which had already been communicated in December.

Hours after the presentation of results, the figures for the parent company, the EDP group, were released, which also showed a drop, albeit a slight one, of 16%, and remains in (very) positive territory. EDP made a net profit of 801 million euros, with the “strong performance of the energy generation and management activity in the market and the increase in the contribution of the electricity networks activity in Brazil” more than offsetting the reduction in the contribution of the subsidiary EDP Renováveis, it said.

The decision to drop investments in Colombia dates back to last December, when it was announced by EDP Renováveis. The company had entered the Colombian market in 2019 through two projects, Alpha and Beta, with a capacity of 0.5 gigawatts (GW), located in the Guajira region. “The projects received 15-year contracts in the competitive auction and were signed with various distributors”, reads the latest annual report.

However, since then, the company has experienced several delays, first in the environmental licensing process, then in the interconnection. As early as the end of 2022, EDPR signalled to the government the need for urgent measures to rebalance the economics of the projects. The government responded with a decree that was eventually postponed in court until 2023.

The Portuguese company claims to have taken several measures to try to unblock the situation, but until last December, measures that EDPR and the sector association in Colombia saw as “crucial” to allow the construction of wind projects were still missing.

“EDPR considers that these projects do not fulfil the company’s investment criteria and risk profile and has therefore decided not to go ahead with the remaining investments needed to build the wind farms”, read the statement sent to the CMVM at the time.

At the time, the clean energy company also assumed that this decision would imply losses of up to 700 million euros, emphasising that these would not affect recurring results or the dividend policy. At the same time, it promised to take all necessary legal action to protect EDPR’s interests in Colombia.

Now, in the presentation of the financial results, the company describes that “between impairments, provisions for guarantees still to be incurred and taxes”, the decision to abandon the projects in Colombia had a total impact of 590 million euros on the 2024 results.

Turmoil in the United States is felt in EDPR’s results

Ocean Winds, a consortium owned equally by EDPR and Engie, has recorded an impairment of 133 million euros, at EDPR level, in relation to its offshore business, “due to the current uncertainty surrounding offshore projects in the US following the presidential executive orders issued on 20 January”, the company wrote in the statement sent to CMVM on Wednesday.

On the 20th of January, among several executive orders, the new White House administration issued one entitled ‘Unleashing American Energy’. One point worth highlighting is ‘Ending the New Green Deal’.

It stipulates that all agencies must immediately suspend payment of funds guaranteed through the Inflation Reduction Act of 2022 or the Infrastructure Investment and Jobs Act. According to the Financial Times, Trump is putting the brakes on the application of more than 300 billion dollars to the green transition, an amount that was also used to finance renewable energy projects.

All US agencies must review their processes, policies and programmes for awarding support, contracts or otherwise, in accordance with the guidelines for protecting endogenous resources. Agency heads have been given 90 days to report the findings of this review, including recommendations to strengthen alignment with the executive order.

Before these guidelines were released, and even before Trump took office, the President-elect had already left a more direct message to the wind industry. “It’s the most expensive energy there is. It’s many, many times more expensive than natural gas, so we’re going to have a policy where no wind farms will be installed”, he said at a press conference on 7 January.

According to the statement published by EDPR this Wednesday, Ocean Winds has three offshore wind projects under development in the United States: Southcoast Wind, Bluepoint Wind and Golden State Wind. In the call with analysts that followed the presentation of results, EDPR’s CEO, Miguel Stilwell de Andrade, recognised that “there is regulatory uncertainty in the US” and therefore the company has tried to “navigate it prudently”.

“Regardless of the political uncertainty, it’s very clear to us that energy demand in the US should see good growth over the decade”, the manager emphasised, revealing himself to be “cautiously optimistic” about the United States.

In addition to the major shocks, “overall, we had lower gains from asset rotation and higher financial costs, so it wasn’t a great year for EDPR”, Stilwell added on the call with analysts. In asset rotation, the company made gains of 179 million euros, which compares favourably with 460 million euros in 2023. Financial costs rose from 132 million to 183 million euros in the same period.

EDP Renováveis will put the brakes on investment

The head of EDP and EDP Renováveis said that the company is slowing down its level of investment, preferring to “prioritise profitability over volume”. Rui Teixeira, who is responsible for the company’s finance portfolio, revealed that the company’s investment is expected to be around 3 billion euros in 2025 and to fall below this level in 2026. Gross investment totalled 4.1 billion euros in 2024, with more than 80% of its Capex invested in Europe and North America.

On the same call, Rui Teixeira also informed analysts that he expects improvements in cash flows from operations and gains from asset rotation in the coming years, as well as a reduction in net debt, without quantifying it. Throughout the call, the managers indicated that they should update their outlook after the summer, when the regulatory framework they face becomes clearer, particularly in the US.

Faced with the question of whether EDP Renováveis had grown too fast, Stilwell contradicted this thesis. “You grow as fast as you can”, he said, adding, however, that the sector has faced some “traumatic events” such as shocks in the value chain, technological disruptions and others related to capital costs.

“Projects take time to develop and build. But we can’t stop and start”, he argued. From the manager’s point of view, it’s important to maintain consistency in growth, because “the market can change very quickly” and the company wants to be ready to react. “You can’t overreact because otherwise you’ll be caught in the next cycle”, he explained.

“Despite short-term challenges in the market, solid growth fundamentals in EDPR’s key markets support a profitable long-term growth strategy”, Stilwell concluded.