Solaria Energía y Medio Ambiente, S.A. (SEYMF) CEO Arturo Larranaga on Q4 2021 Results – Earnings Call Transcript

Solaria Energía y Medio Ambiente, S.A. (OTC:SEYMF) Q4 2021 Earnings Conference Call February 28, 2022 ET

Company Participants

David Guengant – Head, Investor Relation

Arturo Larranaga – Chief Executive Officer

Conference Call Participants

David Guengant

Good afternoon, everyone, and welcome to Solaria 2021 Full Results Webcast. My name is David Guengant, the Head of IR of Solaria. And I’m joined today by Arturo Diaz-Tejeiro Larranaga, our Chief Executive Officer. During this call, we’ll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectation as of today. During this presentation, we will begin with an overview of the results and the main development during the period given by our CEO, Arturo. Following this, we will move on to a Q&A session. I would also like to add light that you have to submit all your question via the web. So thank you very much again, and I will now hand over the word to Arturo.

Arturo Larranaga

Thank you David and thank you to everyone joining this conference call. I hope that all of you and your families are keeping healthy and well. 20021 was our record from results point of view, we have grown in all the numbers of the company, we have grown our EBITDA, we have grown our revenues, will have grown our net profits, and I think the company is accomplishing with our business plan. And next years, we will continue growing as previously. In order to start we are going to talk about a situation of the solar in Europe and globally in the world. You know the situation, especially the new situation, that the dramatic situation that we are living in the center of Europe, with Ukraine and Russia. I think that today, it’s more important than before, to increase our presence and to increase the installation of renewables in Europe globally. We need we must develop renewables in Europe is not only an issue an economic issue or generation issue, I think that if we want to maintain the European Union status, it’s necessary to grow the volume of gigawatts of renewables.

And that today, we have in different countries presence, Solaria is present in different countries in Spain, in Italy and Portugal, the three countries are growing our own solar, Spain today we have a global target for 2030 of 40 or 39 gigawatts probably government will give a date soon about this global target, Our feeling is that they are going to grow to 50 or even more. Italy, in Italy, you know that the global target from the government is 52 gigawatts by 2030. Is the same probably it will be updated in the next month, because all the counties needs more gigawatts. And today, it’s more important to understand that the only solution comes from solar and wind is the same with Portugal, today that global target is 10 gigawatts by 2030. And probably we will see more. Price of electricity, you know the situation better than us is dramatic from price of electricity. All the countries are suffering the global situation. And today you have an average price around EUR 250. Sometimes even in countries like Spain and Portugal, something more like EUR 277 per megawatt hour that is an impossible price to maintain in the medium and long-term.

Solution solar and wind. And I think that Solaria will be part of the solution. And we will explain during this presentation. Solaria part of the solution as I have mentioned, we have great know how, we are in the best places from solar point of view, and we are in the south of Europe. If you have follow the company during last year, we have repeat the same strategy. Europe, Europe, Europe, we need to find a solution for Europe for the situation of the energy supply in Europe. And we have explained to the markets during last years that it’s critical to increase the volume of gigawatts that should come from renewables especially from solar. We have developed during the last years really good pipeline in the south of Europe, Spain, Portugal, Italy.

And now we are on the development side, we are constructing we are building and we are trying to be part of the solution for Europe. From profits point of view, as you know, Project IRR that we are getting is more than 12%, our CapEx is one of the best CapEx in the global markets of EUR 0.4 per watt and our OpEx per year is better, we are improving all the years our OpEx. More volume in the same areas obviously, we are reducing a lot of our OpEx. And of course, our strong expertise local focus is given to us important advantage if you compare with new players that are trying to entry or utilities or large oil groups that wants to enter in these business.

Numbers, most during last year’s we have explained that Solaria is a growth company might not only a growth company is a profitable company. And here we show the results. We have increased our net sales, our EBITDA and our profits, not before taxes and after taxes. And our growth is close to three digits figures, in all the numbers. I could say that probably and in order to give some guideline during 2022, we are going to grow our EBITDA following three digits figures. It’s like this company is going to maintain the growth next year is one of the key points of our strategic growth with profits.

Today, we have more than 800 megawatts connected to the grid, and we have more than 2,000 megawatts under construction. And we will add some more megawatts under construction in order to achieve the global number that we have mentioned always to the markets. Important points that we want to mention during this short presentation. First financing secured to reach 2 gigawatts for this year. Today, we have announced to the market global project finance deal of EUR 375 millions for more than 700 megawatts with three important Bank Groups. And I think that the conditions that we have close are exceptional 16 years global, non-recourse debt, always and project finance. And with our really good and competitive cost, the final cost was around 1.9 fix inter rate for 16 years. Remember that this nonrecourse debt. It’s like with this deal, we are giving strong visibility to all of our construction for 2022 is like money today’s not a problem for Solaria for the construction plan of Solaria during 2022. And next deal that is extremely important. I’m going to mention this rotation, is the rotation of capital that we have done is the first rotation that we have done in the business plan of Solaria. It’s a small rotation, not significant. But good volume with good numbers in two PV power plants of 50 megawatts, 100 megawatts, we have rotate 30% of the equity of the shares of the companies, the final price is EUR 1 per watt. It’s under construction. What does it mean? It’s not actually under construction, it’s under development. And it will be construct probably in 2023 for being connected in 2024. First Q of 2024.

It’s a good price is EUR 30 million of cash that we are going to receive, fresh equity. Important because it’s in the north of Spain. It’s in the Vizcaya, in the Basque Country. And it’s extremely important in our view, because it’s going to give good method of valuation of the assets because EUR 1 per watt for assets in the north of Spain, that will be connect in the first year of 2024. Then, we have included in the presentation new fresh equity, what does it mean here in this slide? What we have tried to include these two important issues that have happened recently? First is a new law that the Portuguese government has approved. You remember that in 2017, we achieve in the Portuguese-tender process option we get a PPA with the Portuguese government for using a price of EUR 19.95 per megawatt hour. Our promise to market was to report to give to our shareholders a minimum private IRR of 5%, the Portuguese has approved a new law that say that these assets needs to be connect for August 2023 and the law say that if you connect previously you will receive pool, what does it mean? Solaria is going to receive pool from now until August 2023. What does it mean? Is like we will receive during 12 months the same CapEx that we are going to invest globally in the asset is like we are able to pay all the project finance that we have received for constructing this asset in only 12 months.

It’s great profit, not including our business plan at the origin, obviously private IRR is not 5%. And it’s an exceptional, new for Solaria, EUR 20 million of additional cash, and the infrastructure business we have been good here an estimation of EUR 30 million in the next three years, I think that is a conservative number, our infrastructure business is growing a lot and is going to give good news and go through price to the market. And we are investing in grid, in substation we have done in the past. And we continue doing. It’s important from a strategic vision and strategic point of view, because it’s something that gives to us control of new investments in renewables, and at the same time, it’s going to generate cash.

Numbers, I’m not going to spend a lot of time here as I have mentioned, we have double practically all the numbers during this year and hopefully next year will be the same and the next year’s I will say, and it’s I have mentioned growth company that combine growth with profits. Of course reasons because we are extremely efficient is because if you see we maintain a strict operating cost control is critical for us, we always repeat the same CapEx, OpEx cost control is one of the key points of this business to be extremely strict in the control of cost. And I think that the expertise of Solaria and our knowledge and our staff is responsible of the successful. Of course, our leverage, our net financial debt versus EBITDA is improving per year probably in the short term, even during this year, we will achieve the investment grade concept from net debt EBITDA and we are going to improve these numbers in the next quarters and why because we are increasing a lot our EBITDA, and we are more efficient in CapEx. At the end of the day is like we are improving net debt EBITDA volume and from cash point of view, we have to increase the cash of the company. Cash is not a problem today in Solaria, we are investing in CapEx and we are growing and at the same time we are generating cash. Debt structure, project finance, as you know, practically the 90% is private finance, fixing their rate and decreasing this average cost per year, the deal that I have mentioned less than 2% of inter fixing the rate. And today, the average cost is 2.5 but probably in 2022 we are going to improve. ESG, as you know, when we mentioned ESG, Solaria probably is the word that define ESG concept, and we are doing strong efforts in order to improve our rating our situation around ESG.

About ESG I think that we need to think about the ESG concept and this crisis that we are living and with Russia and all the players you find idea about what does it mean when we talk about ESG? Solaria is really as the solar green activity, social responsibility and we are seeing now a lot of players with interest, global interests that probably are not ESG. In Solaria and I think that is a critical point for us. We will give — we can give to all of our shareholders trust that they are investing in our real ESG Company.

Portfolio as I have mentioned we continue growing, we have constructed close to 400 megawatts during this year 2021. In 2022, we are going to multiply this number, we continues constructing with really good CapEx and OpEx. And I’m not going to spend a lot of time here because the guideline, the global guideline for 2022 is to finish with two gigawatts connected to the grid, two gigawatts that probably, these two gigawatts are going to generate this year probably our mix merchant PPA is going to stay in 70% PPA, 30% merchant is like we are going to increase our exposure to merchant. We think it’s a good idea, you know the situation of merchant prices and we want to maintain a mix of 70% PPA, 30% Merchant. Trillo, we have under construction, Trillo is our key project as you know, Garona hopefully in the next month we will start with a construction. We have included in the presentation Q4 of this year, but probably it will before of the Q4 of this year. Hopefully we will start construction in the second half of 2022.

We are going to stay focused especially in large volume PV plants like Garona or Trillo or Villaviciosa that give to us volume, good CapEx and good OpEx. Expansion, international expansion that this one of our key points it’s critical. As I have mentioned, Europe’s needs to find solution we have repeat during last two years, it’s important to supply from the South to the North solar and electricity will be part of the solution south to the North solar electricity. And we believe in this idea. And we are investing in Portugal, Italy, Greece and south of Europe. In Italy, the good news is that probably in the Q4 of this year, we will start with a construction of 40 megawatts. And it’s important for us because it will be the first important project under construction in Italy is like the beginning of Solaria in Italy and in 2023 the explosion of Italy will come and for us Italy is critical.

We are spending a lot of efforts in order to grow our own pipeline, land and all the issues that we need for constructing our PV plants. And hopefully 2023 will be the explosion for Italy. Today 2022, 40 megawatts that we will start.

Portugal, inn Portugal, I think it’s important to talk about innovation, floating solar PV, the Portuguese government is going to arrange several tenders basing the floating solar PV technology. We will be there and hopefully we will obtain place and position in the tender process. We are growing, will of Portugal is like Spain and we think that is a great country for growing. We have assets functioning as I’ve mentioned and hopefully in the short term we will add 440 megawatts. Of course in order to finish and I think that in order to give global guideline of the situation of the company probably or may we will arrange a Capital Markets Day. We have a good price to present to the market good news for shareholders. And not including any business plan but will be exciting may we will arrange a Global Capital Markets Day. And we will continue with our growth and Solaria is going to be a player for pushing solar, with growth with profits and with innovation. Innovation is one of the key points in our strategy. If you want we will go to questions. Guengant?

David Guengant

So thank you, Arturo. I will now open for Q&A session and once again, thank you for your time.

Question-and-Answer Session

Operator

[Operator Instructions]

David Guengant

The first question is coming from Banco Santander. Regarding today announcement of financing EUR 375 million for 736 megawatt. Are these amount 100% of the CapEx needed? So are you financing everything with debt, is implicit CapEx per megawatt is 0.51, is a real CapEx for the project, if your CapEx is lower, what are you going to do with the extra cash?

Arturo Larranaga

Thank you for the question. Yes, this financing cover more than 100% of the global CapEx, yes, our CapEx is 0.4 and we are going to receive project finance that — I don’t know 0.50 something is like we are going to generate an excellent of cash and we believe that we are going to use correctly and we are going to obtain strong profitability of this additional cash that we are generating. But obviously, yes, the project finance is covering today more than the global CapEx that we need.

David Guengant

The next question is coming from [Indiscernible] from a JB Capital. First question is, can we give an update on the status of environmental permits for key projects in Spain? Order capacity for the 1,250 megawatt under construction already has order permits?

Second question is estimate for CapEx for 2022? And third question is clawback? Are you afraid that capacity operating under merchant condition in Spain may suffer some kind of clawback? Not only is your gas clawback and the last question is, how much of your CapEx have you already spent for the asset today to be connected in 2020.

Arturo Larranaga

Of course, for the key projects, we are fully permitted and under construction and key project as you know is Trillo Andorra, and when we talk about Garona, we are waiting for final approvals. Hopefully we will achieve in the second half of this year. But even we will obtain previously, for the 2,250 megawatts all that we have include under construction, some of the projects needs additional permits and we are working on it. We are — when we say that we are under construction, because we are developing the service station, we are acquiring materials. It’s like we have done previous works. But some of them especially needs final approvals of local authorities. And of course, capex, the capex, as we have mentioned in the third quarter presentation, our CapEx for 2022 is 0.4 and it was fully book. And it was close a few months ago, I have explained in the third quarter presentation that unfortunately, we suffer a strong delay in Trillo but the good point is that we sign a lot of contracts associated with Trillo on April of last year. If something that the good point. And you don’t have good points in this kind of delays. But the good point is that we have close cost, we have fixed cost, using prices of one year goal. And CapEx evolution we see better prices for modules or quarters, we are talking with all the players with all the suppliers and of all kinds of materials.

We are seeing improvements. It’s difficult to talk about this because you have a lot of noises in the market, not real noises. But at the end of the day is not an issue or something that I always explain it’s not an issue of demand is like Chinese players have tried to increase prices. But at the end of the day, they don’t have demand that support this increase on prices. And our projection for the future on CapEx is extremely positive as always, we think that module evolution will continue and we will see better CapEx in next years. Clawbacks, difficult to say if government is going to approve something new, because is the same you have a lot of noises in the market. Obviously, price of electricity that we are paying is tracing and in my view, it will be worse in the short term, because we will see the situation of the Ukrainian conflict in the short term but Russia manage and control the cost of energy in Europe and we will suffer more dramatic situation in the short term. Obviously, if we suffer more, talking about price of electricity, governments will be obligate to take new measures or to define new laws.

In all cases, I think that European Union, the intention of European Union today, especially today is not to damage the growth of renewables because if they damage the growth of renewables, they are going to destroy European Union is the only solution. And I think that if they approve new clawback or similar, is not going to be associated with renewable is our feeling.

David Guengant

Next question is coming from Eduardo Gonzalez Martine from Banco Santander. His first question is Arturo, 494 megawatt order permits. I think Arturo already answered to this first question. Second question. Given the permitting delays suffer in the last quarters, do you still see the 6.2 gigawatts installation target by 2025 feasible? And the second question of Eduardo is, can we explain more in detail how we expect to increase merchant exposure up to 30% in 2020?

Arturo Larranaga

About delays, in my view, the final target of the company is to obtain 18 gigawatts and previously 6.2 gigawatts. In the middle of the way we are fighting is like, for me, it’s like, of course, we have a delay. And of course, we should accept it. No, no, no, it’s not the game here. Our game is to achieve the 6.2 gigawatts that we promised to the market and during next year, and this year, we need to recuperate our delays. It’s not easy, obviously. But we are doing a stronger force in order to recuperate. Our business plan is extremely serious for us. We have defined global targets. And like main investor of this company, I have a lot of shares of this company, in my view, when we talk about 18 gigawatts is 188 gigawatts not 16 or 15. And when we talk about 6.2, it’s 6.2. It’s like, of course, unfortunately, we have suffered COVID, Spain watch and prepare for renewables delays. But the good point is that large PV assets like Garona or Trillo are entering, and this is critical because it’s like we are shooting with a strong weapon. If we construct at the same time 600 or 700 megawatts is like an important advantage if you compare with a situation of Solaria two years ago talking about PV assets of 20 megawatts, or 30 megawatts. And we are optimistic about the final situation of our business plan in 2025. And we think that we will solve all of our previous delays.

About merchant, of course, it’s extremely difficult to sign additional PPAs today, and we offer strong demand, people that wants to entry new deals, but honestly, we have detailed all of our activity around PPAs because which is the correct price is 40,50, 60,70. I don’t have visibility in the medium term to say that 50 is a good price, or 60 or 70. I don’t know if the conflict between Ukraine and Russia is going to be solved in the short, medium or long term. And obviously Russia dominates price of electricity here in Europe. In the short term, it’s impossible to change. Why? Because we didn’t do our homework and are now we have the situation over the table. In that short or medium term, volatility will define the situation of pool prices during next quarters. Our idea to maintain 70:30 Merchant, PPA.

David Guengant

Next question is coming from Bosco Haider from UBS. First question is regarding CapEx for 2022. I think we already answered this question. We have stated EUR 0.4 million per megawatt and we are not expecting much increase in CapEx. We are seeing slowed, well, a small decrease in PV modules below $0.25 million per megawatt. So the question is expectation on prices? Do we have any approximate range of electricity or PPA price for 2020 to 2023?

Arturo Larranaga

About CapEx, I think that is the something that we have discussed during the last year, the reason because Solaria is probably the most efficient company from EBITDA and cost point of view. If you see our EBITDA and our numbers, it’s basically like you have the answer about our cost. At the end of the day, one of the key points, the critical points in this business is to manage correctly, capex. If you have the expertize if you know about this business, you are able to be extremely efficient Solaria, other competitors either new players, oil roof, utilities is something that we’ll have discussing a lot of occasion, I listened a lot of comments about CapEx and I have listened during this last three years a lot of different message in my view, without knowledge about the real situation of the energy markets and about the real situation of the solar markets. Our view today, we are 4.4 and hopefully in 2023-2024, we will be able to improve. About PPA prices, as I have mentioned previously difficult to predict, difficult especially to say that 50 or 60 is a good price, we have over the table some proposals talking about this kind of prices. And that we will be in tender process. I mentioned in the third quarter results presentation that we stayed in the 10 Spanish than their process with price over 70 on 75. In our view, price of electricity is continuous, you will see even worse price of electricity is like more than 250 or more than 300. This situation is not going to find a solution in the short term, it will be worse in the next quarter probably, difficult to say if this is the correct PPA price. We have over the table today proposals and if you see the [Indiscernible] and the projections of PPA price is improving and of course good for us because today demand is growing and price are improving but we maintain, today we are quiet and we are waiting before to sign new PPA deals.

David Guengant

Next question is coming from a Manuel Palomo from XM BNP. Could you please give us your view on potential extension of the gas clawback? And also could you share your view on the carbon clawback? And final question few quarters ago you mentioned you might be thinking about providing with some EBITDA or net profit guidance. Could you share with us your expectation for 2020?

Arturo Larranaga

Of course extension of gas clawback, I think probably will government is going to do. Why? Because the situation is not changing. And obviously my view is that they are going to continue. Carbon clawback, it could happen and even not only carbon, nuclear, some people are talking about nuclear clawback, it’s like as I have mentioned situation is worse than previously we have imagined and is not going to improve and the governments are completely are looking for solutions that are not solutions. Clawback is not a solution from legal point of view, be sure that will be completely canceled by courts in few years will be complete cancelled, but they are looking for short-term solutions like always in European Union. And of course, short-term solution is not a good solution. About guideline, I have mentioned during this presentation, it is not an official guideline. But I have mentioned that three digits growth is not what for us. And the official guideline of the company is 2,000 megawatts of PV assets connected to the grid. And we think that we could maintain growth using three digit figures.

David Guengant

Next question is coming from a [Indiscernible] from Societe Generale. Can we provide any more color on CapEx? Are funnels price going down? Are they expected to fall anytime soon? Then the second question is regarding the permitting, due to the delay in commissioning on permitting issue, can you consider that this issue will remain in coming years? Do you see that the government can take some action to speed up permitting and out? If not speaking of permitting, can you say that as of 2025, target could be more visible in 2026?

Arturo Larranaga

CapEx and module situation is improving, as I have mentioned, and we are touching price, it depends of the day, because it’s changing a lot, depending on the day but $0.24 per watt, $0.24 something with tier one players. And a few weeks ago, we touch prices of $0.25 something, $0.26 is like we are seeing improvements especially because we don’t see demand answering to these suppliers of modules, it is like they are not fully booked. This is critical to understand at the end of the day and it’s complicated to explain in a conference call. But China has tried to introduce inflation in the system, not only modules in all the materials, price, commodities, logistics, but it’s not associated with demand. And this inflation is not associated with demand, is associated with the offer that China is doing to the world. And in my view is not a real situation. And obviously, they have capacity, manufacturing capacity that is free is like is they are not fully book. And the situation is changing progressively. It’s difficult to say we will achieve 0.23 in two weeks or three weeks or in one month or two month, difficult but the projection is reduction on prices permitting and government actions. Yes, the government wants to approve an accelerate process. But at the end of the day, my view is it’s impossible. Unfortunately, why? Europe needs, they should approve something because we need immediately gigawatts. Even I will say that we need to interconnect all Europe. I know the opinion of French players and the French country. But we need to interconnect full Europe in order to solve the situation but it’s not realistic. It’s extremely difficult to approve an accelerate process for permitting because you depend on local authorities, community regional, and the constitution of Spain and other countries like Italy protect the rights of regions and local authorities in the permitting process is like it’s impossible. When I talk with people that talk about no nuclear could be a solution to obtain an environmental permit in Europe for a nuclear plant, you could spend 15 years 16 years. It’s like it’s impossible. When people talk about new nuclear capacity is like they are talking about traveling to the moon. It’s not realistic, not a solution over the table. I think that if you talk about new nuclear capacities, like you are talking about Russian gas, it’s like I’m going to depend on Russian gas. I will continue with this situation. But in order to answer your question about 2025, we live with the situation is like we are not waiting a miracle from the government with an acceleration process from permitting. When we have talked about 6.2 gigawatts 2025 and all the numbers we are including this actual situation. There were situation if you want difficult to achieve permits.

David Guengant

The next question is coming from Chris Lonar from Credit Suisse. Is there any update that you can give on the progress for environmental impact studies to enable connection rights for a royal decree of 2020? And the second question is what is the blockage stopping keeping install capacity flat between first half of this year to end of this year at 800 megawatts?

Arturo Larranaga

Environmental permits and the new law that the government approved few months ago the leg in the April final stage — April due date. Of course, I think that even the government today with the actual situation they are not able to take a decision. The projects are in the same situation is like few months is not going to change the global situation of all the projects block in the system. And difficult to solve, I don’t see is the same that I repeat in all the calls and in all the conference call. And in all the interviews all the — when people asked to us, I don’t see an enormous volume of gigawatts entering in the system in the next quarter is not realistic, if they don’t detain the speculation and people moving papers is like, new projects to entry with new projects in the system will be extremely took, the good point for us, our assets, the value of our assets will grow. Because you don’t have to watch assets with good quality and good situation, the value of our assets is enormous. And unfortunately, we are not optimistic about connection, global connections in Spain. And the second question is –

David Guengant

Way we are flat in 800 megawatts.

Arturo Larranaga

Of course, we haven’t complicate too much our presentation, the message that we are giving in this presentation is like we are going to install all at the end of this year, obviously is not going to happen. Obviously, a part of this hopefully will be installed before the end of this year. But we prefer to be conservative and our guideline and our global touch — our global target is to finish this 2022 with two gigawatts connected to the grid.

David Guengant

Next question is coming from Manuel Purnomo from EXP BNP. Looking at your installation cost guidance and the amount achieving the project finance. It looks like you get well above 100% leverage, is that right? And asset rotation, I understands that the multiple is EUR 1 million per megawatt enterprise value, right? Thank you.

Arturo Larranaga

Yes, we are achieving more than 100% of our CapEx, our CapEx is 0.4 and global deal I don’t know 0.50 something three or four I don’t know. But it’s like we are going to receive more cash than we need. And the valuation of our assets is that today’s not a real asset is a project under development will be connect to the grid in the first Q of 2024. And the value is EUR 1 per watt for the global asset is like our new partner is going to invest EUR 30 million of equity in this PV asset.

David Guengant

Next question is coming from Philippe Patreon from [Indiscernible]. The question of Philippe is according to the small delay in the last quarters if we maintain our target for 2022, 2023, 2024, 2025 and going on.

Arturo Larranaga

As I have mentioned, our global target for 2022 is two gigawatts connected to a grid. And our global target until 2025 is 6.2 gigawatts and we maintain the global target for the company. As I have mentioned, we are trying to do a strong effort in order to recuperate the delays that we suffered during the last two years. Hopefully, we finish this year with two gigawatts or probably we will be the key player in the Iberian region from solar perspective and we will see.

David Guengant

Next question is coming from Alberto Gandolfi from Goldman Sachs. [Indiscernible] 25 gigawatt under construction? What percentage of the CapEx is secure? And what percentage are the fixed price? And what percentage of the revenue are already contracted? And the second question is [Indiscernible] 25 gigawatts. What percentage is merchant and what merchant is PPA? And as the third question is why we are not signing PPA in the last month.

Arturo Larranaga

About CapEx cycle, as I have mentioned we have secure our CapEx for 2022. About merchant exposure is approximately 70%, 30% approximately and about new PPAs is like I have explained it’s difficult moment to sign additional PPAs. We don’t know exactly the correct price. Of course, the answer for this common goal of course, if you get a good project IRR why you don’t sign don’t worry about price of electricity. Yes, it’s true. But suppose one year ago we close using EUR 65 per megawatt hour. Today EUR 65 is like nothing, and of course, price of electricity, we think that it’s going to continue growing and we prefer to maintain good merchant volume. We have really good PPA deals, are good volume and we are going to finish this year, we will have a good opportunity with good price, who knows we will sign additional PPAs but we maintain a conservative position today. We prefer to see movements in the bull market in the merchant market, it is difficult to predict prices.

David Guengant

Next question is coming from Fenella Fuente from Elantra. You announced sales as a 30%. What will be the timing of the cash inflow? Is this EUR 1 service per megawatt already close? Will disposals become part of the business model of the company of so of logistics? Will you consider selling operating assets?

Arturo Larranaga

Of course. And theoretically during 2023 and 2024, we will deliver this deal probably 50% during this year 50% next year, but it’s difficult to say 50 or 40, 60. It’s an EPC contract at the end of the day we are going to supply the PV asset. And the final schedule is to connect this asset the first Q of 2024. If we are able to connect before we will do but it’s not critical to connect in the next 12 months. It’s on a strategic partnership. I think that is totally interesting. And we will have more collaboration with them in the future. I’m completely sure. We are considering to sell operating assets. The answer is today not now why because, as I have explained the value of the asset today is growing and we have a really good cash position. We have a good mix of equity debt. As I have mentioned our net debt versus EBITDA is going to improve probably we will achieve investment grade rating net debt EBITDA from net debt EBITDA point of view is like globally, the company, the debt situation is extremely good. We have cash and as I have mentioned, we will arrange our Capital Markets Day, we will present to the market, our new business, our new area that will give cash, and lot of cash to the company is like cash today, we are not extremely worried about this. In the future, you can say never because who knows value of assets is growing. And we have a lot of players that wants to entry in the asset business. And we will see opportunities, but in the short term in the extremely short term, we don’t want to sell assets.

David Guengant

And maybe a last question. And the last question for today is coming from Henrietta from Berenberg. Do you see the supply chain issues improving through 2022? Are prices for solar panels impacting the total CapEx outlook?

Arturo Larranaga

The world change extremely fast and complicated to predict nothing and you can imagine you see that world change all days and we live in a crazy world. And my view is that from a technology point of view modules should must reduce prices, cost of production, because from a technology point of view, the manufacturing process of solar modules is better all quarters is improving and we are improving the efficiency, the final efficiency of the solar modules. At the end of the day, if you have more efficiency in the same size. You reduce the cost of the module euro per watt but the situation the global situation and not only associated with solar is complicated and I don’t know if in two quarters China could increase again logistic cost or similar. Our projection, our information after the talk with a lot of players I think that with all the players of the market that supply components supply modules supply inverters, supply trackers, our feeling is that they are improving cost, they are going to improve cost in the next quarters. Suddenly the world will change, today I can’t secure nothing because wall is changing all the weeks.

David Guengant

We have a lot of question, but maybe last one from coming from a Chris Lonar from Credit Suisse. What is the new area of the business that we speak about in the Capital Markets Day?

Arturo Larranaga

Surprise, and it will be a surprise, a good surprise for all the investors.

David Guengant

Okay, so thank you everybody for joining to this call. And I will let the floor to Arturo.

Arturo Larranaga

Thank you very much for being part of this conference call. As always, our Investor Relations team will be available for any additional information you may require. And thank you and have a great evening.