Acciona SA (ACXIF) Management on Nine Months 2018 Results - Earnings Call Transcript

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About: Acciona S.A. (ACXIF)
by: SA Transcripts

Acciona SA (OTCPK:ACXIF) Nine Months 2018 Earnings Conference Call November 16, 2018 5:00 AM ET

Executives

Raimundo Fernández-Cuesta – Director of Mergers & Acquisitions

Jose Julio Figueroa – General Counsel

Analysts

Oscar Najar – Santander

Jorge Ruiz – Macquarie.

Jorge Guimarães – Haitong

Manuel Palomo – Exane

Raimundo Fernández-Cuesta

Good morning, ladies and gentlemen, and welcome to ACCIONA’s presentation of its results for the Nine Months of 2018. Our nine-month results built up on the positive trends seen in earlier quarters and put us on track to meet our full year targets. Our operating results show strong underlying growth in both our core businesses of Energy and Infrastructure.

In the Energy division, as in previous quarters this year, the main drivers are the increasing output, which is back at normal production levels following a weak 2017, and also, the contribution from new projects, because all these attractive investments that we’re making in the renewal business resulting higher EBITDA. With respect to the operating results in – of the Infrastructure division, the Construction business continues to be the highlight, maintaining high levels of production and improving EBITDA margins.

As you’re well aware, in Q2, we completed the disposal of the Spanish CSP fleet and Trasmediterranea, which have resulted in proceeds of EUR 1 billion over and above the EUR 224 million of debt that was classified as help for sale in the Q1 accounts. These disposals are contributing to fund a strong investment activity, they bring further strategic focus to the group and help us to achieve our gearing targets.

During the first nine months of the year, ACCIONA invested just over EUR 900 million, when we include the share buyback program and the investment in real estate inventories. Managing working capital remains our key priority for ACCIONA as always, but in particular, now that we are delivering a handful of very large construction projects that can introduce higher shrinks than as usual in the norm. The incremental working capital outflow during the third quarter is of less than EUR 30 million, and the cumulative figures for the first nine months remain substantially below last year’s levels.

The Construction activity, which represents the bulk of the movement in working capital has actually improved marginally, relative to the previous quarter. We continue to stick to our year-end target of EUR 250 million. Finally, we recently announced the agreement to sell our 20% stake in Testa Residencial to Blackstone. This transaction is expected to close shortly during Q4. It bring forward our full exit from the residential rental property business and proves our point that being patient and finding the right transaction is the way to maximize long-term value for ACCIONA. The transaction will have a meaningful contribution to year-end net debt-to-EBITDA ratios, accelerating our de-gearing.

In the next slide, we outline the key metrics for the nine-month period. The results and its comparability with last year’s are affected by major disposals during the last 12 months, namely the CSP assets, and Trasmediterranea early this year and Ruta Ciento Sesenta at the end of 2017. The results also contain significant non-recurring items, largely related to capital gains on disposals, although the year-on-year comparison at the net profit level is not that distorted as they represent EUR 33 million so far this year, relative to EUR 75 million during the first nine months of last year.

Starting with the EBITDA, which in absolute terms declined marginally to – by 2.6%. In like-for-like terms actually, it grew by 10%. We have included in the appendix of this presentation a table outlining the like-for-like calculations, which should serve as a helpful reminder of the contribution of these assets last year and during the first part of 2019, until they were the consolidated.

Our earnings before tax, as reported, fall by 2.3%, although on a like-for-like basis and excluding the non-recurring items, the underlying growth is of 9%. Interest of investment, gross capital expenditure amounted to EUR 443 million relative to EUR 669 million last year.

Taking into account payments to CapEx providers, related to the recent commissioning of the two wind farms in Mexico and Australia, the total disbursements amount to just over EUR 650 million, which is in line with the comparable figure for the previous year. Net investment cash flow, including this CapEx, plus the investment in real estate inventories, net of the EUR 1 billion disposal proceeds, amounted to EUR 229 million positive net cash inflow. This figure does not include the EUR 173 million of share buyback during the period, which should leave the total investment almost at par with the cash proceeds from assets sold.

Net debt fell from EUR 5.2 billion at the end of 2017 to just over EUR 5 billion. A year ago, net debt stood at EUR 5.7 billion. In Slide 5, we lay out the capital expenditure during the period, which amounted to a total of EUR 443 million, relative to EUR 669 million in the same period last year. As usual, the Energy division attracts the majority of our CapEx, and we remind you that this is all growth CapEx. Our maintenance and replacement expenditure is expensed and therefore, reflected above the EBITDA line.

Investment tax accelerated during the third quarter with the completion of Mt. Gellibrand and El Cortijo in Australia and Mexico and as the Construction of additional projects gather space. As we said at the first half results, during this year, ACCIONA will be working on the construction of renewal projects that amount to 1.3 gigawatts in total.

Our share of these current projects amounts to 1 gigawatt, of which more than 70% will be fully consolidated. Of this 1 gigawatt of capacity, 84 megawatts were initially added during 2017 and 252 megawatts during the first nine months of the year. As of September 2018, this year, we have 674 megawatts under construction. All in all, we would expect to add between 450 and 500 megawatts during this year, including our share of equity accounted projects.

With respect to investment in the Infrastructure division, I would like to remind you that the figures for the first half year – of last year, included the acquisition of Australian construction company, Geotech for EUR 139 million, whereas the first half 2008 figures include the acquisition of Andes Airport Services for EUR 33 million, which was announced last year but was completed during Q2 in 2018. Let me go through the complete investment divestment picture in the next slide, which looks at the cash flow movements during the period.

So Slide 6. We show the drivers behind the movement in net debt between December 2017 and September 2018. In December, debt stood at EUR 5.2 billion and has come down to just over EUR 5 billion. A year ago, the debt was EUR 650 million higher, like we said before. Starting with the operating cash flow, it was positive. We generated EUR 264 million, relative to being slightly cash flow negative last year.

The improvement is mostly due to lower working capital outflows and lower financial charges. Working capital for the nine months of EUR 344 million is notably lower than the nine-month 2017 figures, where it peaked at almost EUR 550 million. During the last two quarters, working capital has increased only marginally and our aspiration and target is to do better than that by year-end.

Roughly, EUR 300 million of the total outflow is working capital related to the Construction activity and here, we have seen a small improvement. With respect to Sydney, by virtue of the constructive discussions with our client that started in the spring, the contract was practically de-risked in terms of incremental negative cash flow for ACCIONA. And that can be seen – perceived in the relative stability of our overall working capital since the Q1.

Our conversations with our client to reach an overall agreement continue and are held in a constructive environment. We aspire to have a satisfactory outcome agreed by year-end, and we actually think that there’s a good chance of achieving this. As a fallback position, with respect to this contract, we have a very strong legal case, which is gaining obvious strength in the recent weeks.

You will understand that given the sensitive nature of the negotiations and the timing, we won’t be able to say much more during the Q&A. This contract, by the way, will be practically delivered by year-end and fully completed in Q1 2018. CapEx has accelerated in Q3, which will be our most intense quarter of the year in terms of investment.

Net investment cash flow, we have on the other one – on the one hand, EUR 1 billion proceeds from the disposal and on the other hand, we have investment of EUR 753 million, which results in positive cash flow of EUR 229 million. This is largely offset by the share buyback program, where we spent EUR 173 million during the first nine months of the year.

In other words, when you look at all of this together, we have EUR 900 million of investment, offset by EUR 1 million – EUR 1 billion of disposal proceeds. In terms of Q4, we expect to be relatively light in terms of CapEx and as you know, the bulk of the buyback program was already achieved during the first nine months of the year. Another item to highlight is the annual dividend for 2017, which was paid during the third quarter of 2018.

In Slide 7 – we show you the profile of our net debt and the comparison with December 2017. We note that the corporate debt allocation here is analytical, and the reality being, that we have upstream in recent years all the corporate debt up to the parent company. The project debt, as you’re aware, is mostly related to the Energy division and is linked to projects in less lucrative currencies or where we have partners or where they’re – it is either very cheap or it has – it could be expensive to buyback.

Project debt, as a proportion of total gross debt, stands at 25%, and this percentage should reduce over time as the existing project debt is gradually amortized and incremental CapEx is for the most part going to be financed with corporate debt. The weight of fixed rate debt stands at 84% relative to 41% at the beginning of the year. And with our news indicated loan transaction in Q2 and the related refinancings, this is what – they played a key role in increasing this percentage. Our current target is to maintain levels of around 60% in terms of fixed-rate exposure.

We move on to Slide 8. Here we show our debt maturity profile and liquidity position. I would like to remind you, again of this new EUR 1.3 billion five-year news indicator loan facility, signed earlier this year, that was used to selectively refinance outstanding debt maturing in the years 2020 and 2022. And this has increased our maturity, has fixed the cost of our higher proportion of our debt, this has been done without increasing our cost of debt actually reducing it.

We have not used officially to refinance shorter-term data, as we take advantage of very attractive terms of short and credit lines and loans as well as the commercial paper market, and we can do this thanks to keeping very strong liquidity. In particular with an unused committed revolver of EUR 1.4 billion, maturing 2023. I hope this is helpful to understand the relative weight of 2019 maturities. Moving now to the operating performance of our businesses.

Let me start with Energy as usual. EBITDA growth is affected by the sale of the Spanish CSP portfolio. These assets were deconsolidated from 1st of May, contributing EUR 29 million of EBITDA during the period, whereas last year, they generated EBITDA during the entire nine-month period, which amounted to EUR 82 million. That is a delta of EUR 52 million, as you can see in the EBITDA bridge chart, which is contained in this slide.

As a result, headline EBITDA growth same year 1.2%, but on a like-for-like-basis, EBITDA grew by 13%. What is driving the strong growth on a like-for-like basis? Here the trends are consistent with what we have been discussing in previous quarters, basically the normalization of power output in both the Spanish and international fleets, following an unusually poor 2017, during – due to the very low hydro conditions in Spain, the Mexican earthquake and so on.

Total consolidated output is up by 11% and is now just shy of our budgeted figures, which correspond basically to a normal year. In Spain, output is up by 5%, with hydro production particularly strong, following very high rainfall in March and April. As of September, the Spanish system hydro reserves stood above the – their 10 year averages, they’re slightly below at the moment. Output in our international portfolio is up by 20%, a bit more than half of that being driven by output normalization and the rest by new assets in operation.

In terms of the Spanish business, looking at prices, prices have not been a major driver for EBITDA. As a result of the regulatory banding mechanism, the majority as you know, of our output is under the regulated regime. And also, our hedging volumes, which are – what we intend to hedge is the assets that are out of the regulatory protection mechanism. Nevertheless, the prices in the Spanish wholesale market, they have continued to increase despite the hydro production.

This is in our view, the result of the surge of carbon prices and thermal commodities, whilst the rainfall that has come and has been used by those who can to store it and replenish low reserves and optimizing the timing of the output. Average wholesale prices in Spain during the first nine months of the year reached EUR 55.4 per megawatt hour, relative to EUR 50.3 per megawatt hour last year, which implies a 10% increase.

On the basis of forward prices, the average for 2018 should be around EUR 58 per megawatt hour, relative to EUR 52 a year ago. Forward prices for 2019 are trading at almost EUR 62 per megawatt hour and in our view, they have been consistent with the CCGT marginal cost during the year, although, now there is a growing gap. Our volumes for 2018 remain open, mostly for the part that is out of the regulatory mechanism.

With respect to the international portfolio, the evolution of exchange rates, the U.S. dollar and euro in particular – versus the euro, in particular having a negative factor. In the slide, you can also see, the evolution of capacity during the last 12 months. We have added 336 megawatts basically El Cortijo and Mt. Gellibrand wind farms in Mexico and Australia, respectively, as well as around 2/3 of the capacity of our small repowering in Spain.

On the other hand, we have the disposal of 250 megawatts of CSP in Spain, plus the reversion of 12 megawatts of water reaching the end of a concession in Spain as well. The new international assets in operation have contributed EUR 18 million during the period, with most of that coming in Q3 given the recent completion of construction of Mt. Gellibrand and El Cortijo. We expect these assets that we just commissioned to generate around EUR 50 million of EBITDA, when they are at full rate and that is, of course, the two assets together.

Now I would like to move to Slide 10 with the overview of the Infrastructure division. Total EBITDA increases by 8.3% to EUR 310 million with relatively flat revenues and improving margins. Construction is the main contributor to the EBITDA growth, as you can see in the chart on the upper-right hand. The backlog remains very healthy, although the reduction in the Construction backlog is the result of the very high levels of production linked to the simultaneous delivery of five large international projects, as you know well. We are focused on profitability and risk management.

In Slide 11, we look in more detail at the individual businesses within Infrastructure division. Starting with Construction, we maintained the high level of revenues and the margins improved significantly at the operating level, with Quito Metro, which is one of our landmark contacts with high margins, increasing its weight in the revenue mix.

Our five largest contracts continue to represent more than 50% of Construction revenues this year. And as we said at the first half results, these large contracts represent a larger part of the mix, with Quito in Dubai accelerating, and that explains partly why the margins are improving.

In Spain, revenues are up by more than 10%, although the base is very low, representing just over 15% of total Construction revenues. Despite of lack of optimism before the summer, public tendering activity in Spain has picked up since. Moving to the Industrial EPC business, it is doing well, as evidenced by the growth in revenues, margins and backlog. In terms of concessions, the concession businesses is down as a result of the sale at the end of last year of Ruta Ciento Sesenta in Chile, partly offset by a full consolidation of autopista de los Vinedos motorway, and this is in Spain, as a result of buying out our partner.

With respect to water, as commented at the first half results, the completion of the desalination plants in Qatar has an impact on the EBITDA of the business as we transition towards new desalination projects in the Emirates and Saudi Arabia, which come in addition to other large ongoing projects like the Panama and Canada with water treatment plans.

We are very excited about the surge in desalination projects being tendered at the moment in the Middle East. With respect to Aigues or ATLL, let me hand over to Jose Julio Figueroa. Jose Julio is our General Counsel, and he will take you through some of the main points we want to make. This is a sensitive situation as you can understand we won’t be able to say much more during the Q&A. So Jose Julio.

Jose Julio Figueroa

Thank you, Raimundo, good morning. As you might know, ATLL has challenged in the courts the decision made by the Regional Government of Catalonia to opt for an early termination of the water concession contract that the company was awarded back in 2012. Based on the ruling issued by the Supreme Court in February 2018, we believe that are – that there are very strong arguments to support the resumption of the tender process queuing the flow that has resulted in the current dispute.

And accordingly, the contract would remain in full force and effect. However, if the courts confirm that the contract will be subject to a retermination, ATLL has estimated that the compensation to be received from the Catalonian Regional Government in accordance with the contract and public tender law, should be roughly EUR 1 billion. This figure is based on evaluation report issued by one of the big four accounting firms, which has been recently confirmed by an additional report commissioned to another big four firm.

The methodology used to make these estimates was confirmed by two members of Cabinet of the Regional Government in a formal response to ATLL back in 2014. Although the Regional Government of Catalonia made public, its preliminary estimation of the settlement payment due to ATLL last week. For the amount of minus EUR 38.4 million, ATLL believes that the position adopted by the government is based on seriously flawed, legal and economic arguments. Therefore, ATLL low hopes that the Regional Government will amend its preliminary position on the basis of the alligations the company is currently preparing. In case it does not, ATLL will pursue all the legal remedies available to obtain a compensation payment in accordance with the concession contract.

Raimundo Fernández-Cuesta

Thank you, Jose Julio. Then we carry on with the review of ACCIONA’s divisions, in Slide 2 – 12. We show the performance of the other activities of the group. Here, the perimeter changes have played a significant role in the evolution of results with EBITDA declining by more than 50%, although on a like-for-like basis, EBITDA grew by 7%.

Starting with Trasmediterranea, as you know it only contributed until the 1st of June. The EBITDA’s generated during the summer months, so these nine months of 2018 do not capture the high season. The disposal implies a negative delta of EUR 36 million for the other activities as a whole, when we compare the nine months results against last year.

Real estate is also impacted by changes in the perimeter as we contributed the majority of our rain-generating assets to Testa Residencial in exchange for a stake that is equity accouter. In addition, the one-off sale of certain development projects boosted EBITDA last year. As we have said before, the real estate businesses is deep in the investment phase of its property development strategy, which should result in a significant EBITDA contribution as the portfolio projects mature and reach cruise speed.

Finally, with respect to Bestinver, it’s EBITDA contribution is up 8%, reaching EUR 52 million of EBITDA, which is a great result. And this is underpinned by the growth in average funds and the management relative last year. Net client inflows have been strong during the period, however, market volatility may affect average assets under management during the last quarter of the year.

So Slide 13 are conclusions to this presentation. I would like to say that we are having a good year from an operating performance perspective and also, in terms of making further strides in our strategy to continue strengthening the company’s growth prospects, it’s balance sheet and focus. The 10% underlying growth or like-for-like growth in EBITDA for the nine months put us on track to deliver our single-digit target for the full year.

In terms of growth, we have great visibility with almost 700 megawatts under construction and another 620 megawatts that have been improved by our investment committees. During 2018, we will add 400 to 500 additional megawatts including equity accounted and have visibility for another two years of similar growth.

And at the same time, we continue as you know, to work to secure additional projects that add value to ACCIONA. In terms of total investment, we had an intense third quarter, and we expect Q4 to be lighter, as we said before. Nevertheless, our investment may end up being a bit higher than the EUR 900 million target, but at the same time we have accelerated asset rotation with the disposal of the Testa stake, which should take net debt-to-EBITDA ratio at year-end to better-than-expected levels very comfortably below four times.

The exit from the residential rental assets, which has been implemented in stages, talking of course about Testa Residencial. We think it’s a great success story and proves our point that it pays off to look for the right transaction with a long-term value for ACCIONA’s overriding priority.

Finally, with respect to working capital, it is being actively managed, and we believe the evolution in the last quarter’s evidences this. Thank you, ladies and gentlemen, I would like now to open the Q&A session. I’m here with Jose Angel Tejero, our Group CFO; Juan Muro Lara, who you know well, Chief Corporate Development and Strategy Officer; and also he’s the Head of other Activities of the group. And the rest of the team is here too.

As last time, I would like you to state your name and institution. Please speak slowly, and we would be very grateful if you stick to two questions. And then, if you want to ask more things then you can jump on the queue again, but this will make it more efficient for us. Thanks so much.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Oscar Najar of Santander. Oscar your line is now open. Please go ahead.

Oscar Najar

Hi, good morning thank you for the call. Hi Raimundo, couple of questions from my said, the first one is regarding Sydney. I know it, you are not going to comment, you are under negotiations. I think that news to see finally before year-end, we have an agreement. But could you please remind us what is the amount of the extra watts in 2017 and 2018? And the second question is regarding the full year target. The like for like has been very strong, almost 10% and your full year target is single digit EBITDA growth, so could we expect something like in between 5% to 10%, or in the upper part of that range? Thank you very much.

Raimundo Fernández-Cuesta

Okay, let me start with the last one. As you know, our initial guidance at the beginning of the year was mid-single digit and last set of results, we said single digit, which I think is consistent with the type of growth rates that you are just mentioning. In terms of the Sydney, I’m afraid, we cannot say an awful lot more really. So apologies for that.

Operator

Our second question comes from Jorge Ruiz of Macquarie. Jorge your line is now open. Please go ahead.

Jorge Ruiz

Good morning. The first question is if you could clarify why the CapEx is going to be slightly higher than EUR 900 million? Which division is justifying that small difference? And the second question is regarding your hedging policy. I mean, do I understand that you have not hedged a single gigawatt for 2019? Thank you.

Raimundo Fernández-Cuesta

All right, thank you, Javier. Let me start with the last question. When you look at our portfolio, as you know, we roughly generate 10.7gigawatt hours consolidated output in Spain every year, out of which four gigawatt hours are under the regulated regime and therefore, we don’t hedge that because it’s already hedged – is hedged in terms of value and you have the banding mechanism. So it’s not the right thing to hedge that.

With respect to the rest of the output, we are relatively open, I mean, we have hedged a small proportion of that for next year, but you could say, we’re relatively open. But again, when you look at – we talked about volumes, when you talk about revenues, actually 75%, because the prices are higher in the regulated part. 75% of our total revenues are already hedged without doing anything.

So it’s just the rest of the 25% that we opt to hedge according to our views in the market, and this where we are relatively exposed to the power price for the next year which is very healthy at the moment. To CapEx, I think it’s – of course, CapEx as a whole is the Energy division always and here we had, depending on the pace of how projects go, we had an acceleration of CapEx in Q3 and also, I mean, very much driven as we said by the completion of these two projects, where we have supplier financing or vendor financing and therefore, we made these payments.

So I think we’re talking about a small variations over what was the initial target at the beginning of the year. As you know, all of these investments of EUR 900 million will includes the share buyback, the investment in the Infra division and all the CapEx – all the general CapEx that we talked about.

Operator

Our next question comes from Jorge Guimarães from Haitong. Jorge your line is now open. Please go ahead.

Jorge Guimarães

Good morning and thank you very much for taking my question. Firstly, can you elaborate on the expected IRR of the Ukrainian project? Is it possible that you are taking now a lower expected return just as a – when you are testing the market to assess future opportunities? Or is it already profitable on its own? And secondly, given the expected increase in installed capacity in solar, first of all back in Spain, with cost going down, why are you not investing more in these area? Or is it that market is taking returns, which are too low for your expectations? Thank you very much.

Raimundo Fernández-Cuesta

Okay, with respect to Ukraine, I think it’s not what you suggesting that when we go to our new market, or perhaps, a bit more exotic like this one, we settle for lower returns in order to enter. It’s exactly the opposite. This is a high risk market. In general, in any case, when we go to new markets, it tends to be because we’re early, and we manage to capture these high returns and in Ukraine particular, we are looking for very attractive rates of return.

We’re going with partners, and we are wrapping that with multilateral protection on the debt as you can imagine for this type of market. Again, this is a marginal part of our growth, but we try to look for the additional markets, high returns and the bulk, I mean, for our investment, bread-and-butter coming from markets like Mexico, U.S., Australia and Chile. Your second question about PV in Spain and I think, that translates also into wind.

We have not found the returns to be attractive in Spain as yet, and we – as you know, we have focused on investing outside of Spain where the returns have been more attractive. And actually, reducing our exposure to the Spanish market and recycling significant amount of capital into new CapEx abroad as you can see with the CSP transaction.

Operator

Our next question comes from Jorge Ruiz of Macquarie. Jorge your line is now open. Please go ahead.

Jorge Ruiz

Hello, Just a follow-up question on the last one. I mean, I – you have mentioned about lower returns of solar PV in Spain. What about wind? And basically, I wanted to frame it within the last comments from the government regarding the energy transition plan. I mean, do you see this as an opportunity or do you just going to stick to your policy of investing outside of Spain . Thank you very much.

Raimundo Fernández-Cuesta

Thank you, Jose Javier. As we said, when we talked about PV, it’s also applicable to wind. We look at our investments in Spain being less attractive at the moment at all the opportunities we have outside of Spain. And that’s just basically the driver.

And with the CSP transaction as we said, we recycle capital into more attractive opportunities, and we’ve also balanced, which is a good thing, the exposures are now roughly 50% of EBITDA Spanish, 50% international. If the Spanish market, with these sort of regulatory initiatives or legal initiatives, becomes more attractive, I think we’ll be open to consider. But at the moment, it is more attractive to invest outside, and this is what we’re doing.

Operator

We have a follow-up question from Jorge Guimarães of Haitong. Jorge, your line is now open. Please go ahead.

Jorge Guimarães

Just a quick up – follow-up on my question on Ukraine. Should we expect double-digit returns for this project? Thank you.

Raimundo Fernández-Cuesta

Of course.

Operator

Our next question comes from Oscar Najar of Santander. Oscar, your line is now open. Please go ahead.

Oscar Najar

Couple of questions regarding the net debt on Nordex, this first one on the net debt. Obviously, you’re going to cash in the Testa disposal before year-end. But I just want to ask you about the order investment cash flow, that’s usually around positive EUR 100 million in a full year basis in the last two years, but in the last month has been like minus EUR 200 million. What can we expect for year-end in this line? And what is the reason behind this?

And the second question is regarding Nordex. Last year, you made an impairment test, and I calculate that the book value is around 21 units per share. Taking to account the performance this year of the stock, are you thinking on doing the same for full year? Thank you.

Raimundo Fernández-Cuesta

All right, Oscar, thank you. I think you were talking about net debt for the full year in the context of, I think, CapEx and the couple of hundred million that we had of what we’ve got a supply of finance and movements in cash flow related to CapEx. I think CapEx – the convention is always to – I mean, when we talk about CapEx, we report the movement in fixed assets, and which tends to be very similar to the actual cash flow number.

And then we show you this sort of movement in – actually the adjustment to make that into proper cash flow CapEx. This time around, it’s a bit particular or unusual in terms of the size, because we completed this two wind farms, that we talked about in Australia and Mexico, and then we have substantial payments of CapEx. So the CapEx was progressing, we were not paying for it, now we pay for it. By year-end, we would expect that number, that figure of roughly EUR 200 million to be smaller as we construct other projects that add megawatts or add CapEx, but in cash terms, we’re not paying for it.

So this is a normal, perhaps, what has been more unusual is that two wind farms. Last wind farms were completed at the same time and they had these supply financing. So that – this is why we’re insisting in looking at the overall CapEx figure, not to focus so much in the EUR 450 million roughly that we did in the first half. We, of course, report like that and we give you the breakdown. But that’s why we’re insisting that the CapEx was more like EUR 650 million that is comparable to the previous year. With respect to Nordex.

Your question, I think was about impairment test. We run an impairment test on all of our assets at year-end, and Nordex is no different from that. The – in terms of the underlying share price, I think your conclusions are a bit higher. I think we are accounting that implicitly at 19.5%, and we are very happy with the – with how things are going at Nordex. Nordex is performing as planned during 2018 and is delivering results with guidance provided.

This is important because we don’t mark-to-market our stake in Nordex. We have – the impairment test is run on the basis of the fair value of Nordex and so far this year, everything they are doing and announcing and delivering is in line with what they said they were going to do and with our underlying assumptions. As you know, the company reported results recently. We think that they have a very good visibility for the next 24 months, and there have been experiences of very solid order intake.

They are executing the product transformation, and this is going according to plan. And the new turbine is prototype. So when we look at the share price, we don’t think that the recent evolution of the share price is really reflecting what is going on from a fundamental perspective at the company and is not consistent, that share price, with what – the results that are being generated. So in our view, the company’s executing as planned, and it has better sort of more upbeat outlook for 2020, and it’s delivering the new products on their supply chain.

I think you probably saw, Oscar, the news this morning, which I think are a – on a very strong signal of support for the technology and for the company, which is the order that E.ON has just announced of Nordex turbines. We’re talking about 475 megawatts for one of the largest onshore wind farm that is being constructed in Europe, which is in Sweden. So again, this is a very good news and I think it will support to the company’s case and – on the order intake. I answer your question on net debt and Nordex, so hopefully, that’s fine with you. Thank you.

Operator

Our next question comes from Manuel Palomo of Exane. Manuel, your line is now open. Please go ahead.

Manuel Palomo

Manuel Palomo of Exane, thank you for taking my questions. Just to – first one is a follow-up on Slide Number 6. And I say a follow-up, because you have already answered about the order investment cash flows. My question is just to make sure that it is the working capital EUR 344 million by the nine months, would you expect to come down by the levels of EUR 260 million?

And also wanted to know what is your view on the other two topics that have increased in the last quarter, which are the other operating cash flows and the real estate inventories, whether you could give us some guidance for the full year?

And my second question it’s a more general question, given the company expertise and also the huge amount of assets that you’ve got in Spain. I wonder whether you could share with us what is your view? Or what is currently the installation cost on a per megawatt basis that you see for both PV and wind farm technologies? Thank you very much.

Raimundo Fernández-Cuesta

Let me just gather data for a second, but with the working capital, I think, you have three items that you wanted to look at. One of them, I will need to gather the data. But certainly, on – when you look at working capital of EUR 344 million, this is the number that we’re targeting to have around EUR 250 million. Of course, there could be some swings around that number depending on the timing of payments of the large projects that we’re doing, and Sydney may play a role there as well.

In terms of the – I think the other figure that you were talking about, was it the other investment cash flow? Yes, this one we said that we expected to be lower by year-end. As we advance CapEx – I mean, it will move to CapEx and that number should be a little bit lower. And then in terms of – I don’t know if that’s all the questions you had on the cash flow?

Moving to the cost of PV and wind, of course, that also is something that depends on the particular market and the particular site, on the size of the site, but we normally see PV installment costs beyond, clearly, EUR 1 million, including everything. And wind tends to be a little bit higher than that, maybe at EUR 1.1 million, EUR 1.2 million, depending on the market. [Technical Difficulty] real estate inventories.

I think we would expect that to be between, I mean, this is a EUR 100 million at the moment and that will grow towards year-end, maybe somewhere between EUR 100 million and EUR 200 million, but I think more likely towards the lower part of the range.

Operator

[Operator Instructions] We have no further questions on the line. I’ll hand back to you for any further remarks.

Raimundo Fernández-Cuesta

No further questions. We are really grateful for your – for you attending this call. And anything that you come up in rest of the day or next week, we are here in the office to give you a hand. Thank you.