EDP-Energias de Portugal (EDP) experienced a significant rise in shares following a 40% increase in net profit, driven by hydro earnings. The company also announced a dividend raise for 2023.

Financial Highlights

  • Net Profit: EDP reported a net profit of 952 million euros for the year, a notable increase from the previous year's EUR679 million.

  • Revenue: Energy sales and services, along with other revenue sources, reached EUR16.20 billion, representing a 22% decrease year-on-year.

  • Earnings Before EBITDA: EDP achieved EUR5.02 billion in earnings before interest, taxes, depreciation, and amortization, with renewables accounting for 71% of the company's EBITDA.

Key Drivers of Performance

Analysts from Jefferies noted the following factors contributing to EDP's positive results:

  • Hydro Generation: A significant recovery in hydro generation in Portugal bolstered the company's performance.

  • Brazilian Subsidiary: EDP's Brazilian subsidiary made an increased contribution to its overall earnings.

  • Asset Rotation Gains: Higher gains from asset rotation also played a role in driving the company's success.

Future Outlook and Challenges

Despite the strong performance, there are challenges ahead for EDP:

  • Renewables Performance: Wind and solar operating performance decelerated in 2023 due to a 15% decrease in realized prices, raising questions about profitability.

  • Market Trends: Power prices are on a downward trend in Europe, impacting companies like EDP with significant exposure to renewables.

Dividend Proposal

To reward shareholders, EDP plans to propose a dividend of EUR0.195 per share for 2023, marking a 3% increase from the previous year. This dividend raise represents a positive move for the company, as noted by RBC Capital Markets analysts.

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