El Economista interviews Juan José Sánchez, CEO of Capital Energy “We are going to become one of the leading renewable energy companies”
- “Around 75% of the finance will come from project finance”.
- “The aim is to reach 5% of the market share in the next few years”.
- “In the short term we don’t want to be listed on the stock exchange. We want to go bit by bit. In the medium term we may look at another route”.
Juan José Sánchez, CEO of Capital Energy, has prepared a five-year investment plan for the Company with the intention of becoming one of the leading green energy generators and retailers in Spain. A few weeks ago, the Company surprised with the announcement of a huge investment plan of €10 billion over the next 5 years, which even makes traditional electricity companies pale into insignificance.
How are you going to finance the €10 billion investment you have announced?
We are just finishing defining the capital structure that we will have. At the moment, projects of this type have a lot of liquidity at their disposal, making them robust, solid, sustainable and long-term, as is the case with renewable energy development. We will have debt and liquidity instruments in place. The investment plan is for more than €10 billion in total, which will be rolled out in phases. There is more investment at the end than now, at a start-up. A significant part will come from project financing techniques to optimise the financial efficiency of the plan. Around 70-75% could be associated with this kind of financing and the remainder needed is going to come from recycling project cash flows as we progressively put them into operation and with the margins from other business lines we are starting up, like electricity retailing. The other part will come from a pool of solutions, such as the corporate debt that there may be or from other types of equity. We value the potential entry of minority partners in some projects who may be able to help us to recycle capital and who are aligned with our strategy. The premise is very serious financial discipline, with low leverage and always closely linked to the projects and the business. The aim will be to have an investment grade credit rating at all the Company's debt levels. It will be easier to do at project level, but as we gain more strength, we will look for it at corporate level.
Is the idea to issue bonds?
When we have groups of projects close to operation , this will be an avenue of exploration and, at a corporate level, in 2022 or 2023, we will be in a position to have a credit rating.
What are the aims for the first few years?
The Company has liquidity to face the first 18 months if we leverage the projects well. Our idea now is to start construction on two 100 MW projects in the third quarter of this year. Around 1 GW will be ready at the end of next year in the late stages of construction.
Are you thinking of rotating assets?
At the moment the aim is to manage construction of the projects we have developed and maintain the assets we construct in operation, at least from the control point of view. We are not thinking about selling assets. If there was an interesting transaction that could boost our strategy, we could look at rotating the portfolio.
Is the idea to grow on the retail side at the same time?
With the access scale we are handling, what we want is a diversified mix of access to the market. When the next auctions are organised with the latest Royal Decree Law at the end of the year, we’ll go and tender. We are negotiating PPAs with various operators and part of the production will go to the market where we will manage risks in a more dynamic way than in futures market.
We want to reach the end-customer to try and balance part of what we generate. Starting from zero with direct sales it will be tricky to get to 100%, but one of our aims is that 50% of the generation from our farms reaches the end-customer directly from us, regardless of whether the end-customers are utilities or off-takers. The focus with this step is to reach 5% of the energy market share on the retail side. We have to have a multi-segment focus. Our start-up focus will be on domestic customers and SMEs. We want to supply them with renewable energy and added value services. In any event, we’ll have to reach the industrial segment to be well balanced, and we are already exploring other routes for collaboration which we are already pursuing such as green hydrogen and energy storage.
Are there definite offers?
We are starting up a testing phase with employees and collaborators. We have been preparing all the regulatory paperwork since the end of last year. We have built all the systems architecture we need. We have taken a lot of care with this because we want to escalate quickly and not just anything would do, so we’ve paid particular attention to this part. The digital assets in which the customers and operator will interact. We started up the testing phase in July with the aim that, if it went well, we could go onto the market at the end of the year.
Will the hook be the price?
Our value proposition is based on three leverage points: being competitive on price (this potential gives you more tools than other retailers) taking our projects to end-customers and having the energy come from projects with a human side. We boast significant geographic diversity. We have a presence in around 1,500 municipal districts in 45 Spanish provinces and 11 districts in Portugal. This means we have a value proposition that is in the immediate environment.
We want to create a memorable customer care experience. In terms of digital experience, the fact that we’re a Company with no digitisation legacy gives us a great amount of flexibility. This is accelerating due to the Covid situation.
Are you planning to buy a retail portfolio?
In the short term our focus is on organic growth. We have taken great pains to choose the best team and our focus is on laying solid foundations. In the medium term we’ll explore alternatives and, if we think it’s good for the Company, then we’ll see.
So, the new access points regulation hasn’t been bad for you?
We have been working with the associations and the Ministry for some time, proposing measures like those that have been passed. It’s a very timely Royal Decree. We’d like to congratulate the Ministry for approving it.
Will it stop speculation?
The Royal Decree Law provides for a moratorium. We couldn't ask for more. The fact that a series of milestones has been provided for and that operators who think that they are not going to reach them have been given three months so they can get onto the market, gives clearer visibility to definite projects.
Does it look like amnesty for speculators?
Yes. In the end it took time because there were other political urgencies and the volume has been increased, but I think it’s a good measure, nonetheless.
Are you planning to go abroad, like you did previously in the USA and Poland?
The focus of the business plan is to develop all this growth in Spain and Portugal, but evolution as we are carrying out the plan may lead us to see routes for growth on other markets, but it's not a priority at the moment. There is plenty of room on the Iberian market but when we do plan it, we’ll do it in a highly selective way to replicate the same model we have here.
Do you have being listed on the stock market in mind? If you achieve the aim of being one of the top renewable energy companies in Spain, would you convert?
We are going to become one of the top enterprises, but we are not thinking about flotation in the short term. We are finishing definition of the capital structure and, in the short term, we are not considering it, but in the medium term we’re not ruling anything out. We want to go bit by bit and in the medium term we may look at another route.
Do you already have any hydrogen projects?
We have several on the table that we’re working on. Having a purely renewable energy portfolio, we decided to include storage and hydrogen to make the portfolio more manageable. We have a team with past experience in Spain and Europe that is structuring various projects in consortium with very powerful technology and industrial companies for submission to various European and Spanish programmes, like the Centre for Industrial Technological Development ones. Some of them are in Fair Transition areas.
Are you going to go into the self-consumption business?
Self-consumption is one of the lines that is furthest ahead within the added value services and will go onto the market alongside the launch of the retail arm before the end of the year. It’s a service that can give a lot of value to the system. The consumer will be at its heart and will have more tools and information. We want to provide consumers with solutions. We will also launch a corporate venturing vehicle which is going to be highly focused on business associated with the end-customer and we want to adapt and anticipate trends. We have already made inroads by taking part in the Positive Energy call for tenders. We have supported two projects relating to end-customers.
Will it have a defined budget?
There is a provision for €20,000,000 over five years. It's not a financial vehicle. It is intended to achieve entry into projects that make it possible to anticipate trends and are highly focused on the end-customer. There will be projects that are focused on the efficiency of the industrial value chain for the operation and construction of our assets, as well as prolonging their service life.
Have you already got agreements in place to purchase wind turbines?
Now, on start-up, we want to create market confidence by doing it project by project. We want to industrialise these processes and, from now on, we will start to have a strategy in line with the volume we are going to have.
Will there be hybrid plants?
It's a natural growth route for our portfolio. It's also good for the entire system. We have been analysing how to optimise it for some time and now that the regulations are clearer, we will apply all the analyses to the projects, as long as they are financially and environmentally feasible.
Are you going to go into the mobility business?
Everything that revolves around the end-customer. We’re going to be looking at it proactively. One of the start-ups we have chosen deals with involvement in sustainable behaviour using gamification. After that, matters like managing home charging points are something we may explore.