EDP ​​goes to the markets today to issue green debt

EDP ​​is heading to the markets today to issue green bonds with maturities of 6.5 years, Refinitiv reveals. This is the first foray into the Portuguese electricity market this year.

The last trip to the market was in September 2023, when bonds worth 1,350 million euros were issued with maturities in 2029 and 2032.

At the time, the group led by Miguel Stilwell d'Andrade announced that the two issues would be used to “finance or refinance, in whole or in part, EDP's green projects, which consist of renewable projects.”

Goldman Sachs on Monday announced an upward revision to its EDP Group price target by 10 cents to 5.40 euros.

Contributing to this upward adjustment is the “larger contribution” of hydropower in the Iberian Peninsula, with larger quantities and higher prices, as well as lower net debt.

GS identifies several risks to the operation of EDP: delays in the American Development Program, IRA; Adding new capacity is less than expected; Decrease in the value of the dollar and the riyal. Lower than expected energy prices; Higher sovereign interest rates would increase the discount rate, which is a “negative in a capital-intensive industry.”

At the same time, Goldman Sachs lowered its EDP Renováveis ​​recommendation to 'neutral', but maintained its 12-month price target at €19.50, a potential upside of more than 10% compared to the previous close.

“We see further upside elsewhere and have therefore lowered the stock price to 'neutral' (from 'buy'),” analysts at North American Bank wrote.

GS believes that interest rates may have already been reached and that a higher interest rate scenario favors “longer-duration capital-intensive assets, especially those with perpetual (electricity) growth such as renewables.”

Analysts expect revenues to rebound in 2024. “Before asset rotation gains, we estimate 25% growth in EBITDA, more than double net profit, thanks to resilient energy prices (…) and capacity additions,” it can be noted. Read it.

But analysts also warn against the asset rotation strategy, considering that it limits the company's profitability. “Between 2024 and 2026, we expect return on invested capital (ROIC) to reach around 7% before asset rotation gains. In our view, this level of profitability is lower than that.” Peers It reflects a strategy of asset rotation – divesting in older projects as profits have benefited from inflation updating to add new assets generating limited net profits – and poor profitability in certain areas. We believe that less visible use of asset rotations and renegotiation of power purchase and battery start-up contracts will ultimately (strongly) improve profitability, according to the note.

EDP ​​rises 0.13% to €4.55 in today's session, while EDP Renováveis ​​falls 0.46% to €17.27.