Orsted A/S (OTCPK:DNNGY) Second Quarter 2022 Earnings Conference Call August 11, 2022 9:00 a. m. m. ET
Participating companies
Mads Nipper – CEO and Group President
Daniel Lerup – Group CFO, SVP, Head, Commercial and EPC
Conference Call Participants
Casper Blom – Danske Bank
Alberto Gandolfi – Goldman Sachs Group
Kristian Johansen – SEB
Sam Arié – UBS
Robert Pulley – Morgan Stanley
Mark Freshney – Credit Suisse
John Musk – RBC Capital Markets
Vincent Ayral – JPMorgan Chase
Deepa Venkateswaran – Sanford C. Bernstein
David Paz – Wolfe Research
Jenny Ping – Citigroup
Peter Bisztyga – Bank of America Merrill Lynch
Operator
Welcome to the Orsted Q2 2022 earnings call. [Operator Instructions]. Today’s speakers are Executive Director Mads Nipper; and chief financial officer, Daniel Lerup. Presidents, please get started.
crazy pliers
Thank you very much and happy afternoon to all. I hope you had a delicious moment of rest. And for those of you who are still on vacation, thank you so much for your time today. We had a strong first part of 2022 with our EBITDA, new partnerships, amounting to DKK 11. 4 billion, a cumulative 48% compared to last year.
The benefits of increased offshore and onshore asset production, as well as higher wind speeds than last year, offset the negative effect of inefficient hedging similar to the delay in the commissioning of Hornsea 2. Our combined heat and power plants have benefited from higher electric power costs and our fuel business has been able to optimize the extraction flexibility we have in our fuel operations in Northwest Europe.
Market situations continue to be highly volatile and the strong functionality of our business in the first part of the year once again highlighted the strengths and benefits of our diversified portfolio. In addition, the strong functionality led us to build our EBITDA orientation for the year. 2022 from DKK 1 billion to DKK 20 million to DKK 22 billion. With the expected superior functionality driven by higher gains in bioenergy and others, as well as on land. Daniel will further expand our recommendation towards the end of this presentation.
In that regard, I will provide the strategic highlights of the current quarter, which was eventful and incredibly vital to us and our ambition for a world that runs entirely on green energy. While on the same day I went to spend time with my family, he announced that Orsted had been awarded a contract for the difference for our 2. 9 gigawatt Hornsea 3 allowance in the UK. The award is another vital victory and milestone towards our 2030 Ambition of 30 gigawatts of installed offshore capacity, and the allocation will be the world’s largest offshore wind farm. Hornsea 3 will supply electricity to more than 3. 2 million homes in the UK and is expected to be operational until 2027. I’ll move on to the details with the value on the next slide.
In the Netherlands, we partnered with Total Energies to submit joint bids for the Dutch 1. 5 gigawatt offshore wind tenders, Holland Coast West. With Total Energies, we will leverage our strength as a global leader in renewable energy and offshore wind to help the Netherlands accelerate offshore wind structure towards 2030 and beyond in a state-of-the-art environment that respects the environment, within and within the framework of an embedded energy system. Our green innovation tender proposal would replace dating between wind farms and ecology and with its measures, an unprecedented monitoring programme and close collaboration with companies, institutes, universities and NGOs.
Our proposal focuses on engaging with all parties, foreign and local, to gain the wisdom needed for the wind farm to nature by default. Our formula integration proposal would leverage our development expertise with green hydrogen to supply an electrolysis capacity of six hundred megawatts. It will be the world’s largest green hydrogen cluster until 2027, powered only through Holland Coast West to decarbonise business activities in Zealand, complementing it with batteries, electric shipping and direct electrification to optimise the integration of offshore wind into the energy formula. The winners of the tenders are expected to be announced through the Dotch government in the current part of 2022.
In 2021, we entered the European onshore market by securing Brookfield Renewable Ireland’s onshore wind platform from which Astris is drawing high-potential projects that will contribute to the group’s expansion ambitions towards 17. 5 gigawatt onshore renewable capacity until 2030. a successful onshore platform and, in line with our strategy to further expand our European footprint, we entered the Spanish onshore renewable energy market with several strong solar and wind energy partnerships and signed an agreement to obtain the German and French onshore developer, Ostwind.
I will cover the Ostwind acquisition in more detail in a few minutes. Our onshore access in Spain is formed through four partnerships with Glide Energy, Rolwind, ARBA Energias Renovables and Ereda, which will drive the progress of the project. in the progression of new sites and in combination shape a complementary geographical footprint.
The short-term objective of the company is to expand a transfer of onshore wind and solar photovoltaic energy in Spain that will allow us to participate in the next auction of the Spanish network inspected in 2022 and constitute rights for the right to expand a gas pipeline of several gigawatts, solar and wind energy. The long-term purpose is to expand large-scale garage and solar PV allocations that can be traded through government auctions or the expanding market for companies’ forced takeover deals.
Spain is one of the largest renewable energy markets in Europe and the Spanish government has set itself the goal of achieving 70% renewable generation by 2030 and then one hundred percent renewable generation by 2050, making Spain an absolute leader in the transition to green energy. Onshore partnerships complement our efforts to explore floating offshore wind energy opportunities in Spain, with Repsol, as announced earlier this year.
The presence across all technologies will enable us to offer a full set of responses to help our business and government partners decarbonise and complement the ambition of Orsted’s offshore activities in a key market. Together with all our partners, we have a solid progress experience and local wisdom of the Spanish market. And as a result, we can provide large-scale green energy responses for green transformation in the country while creating price for our stakeholders.
In our onshore operations in the United States, we commissioned the 268-megawatt wind portion of the combined solar PV and wind project, Helena Energy Center. And in Europe, our 62-megawatt Kennoxhead 1 onshore wind farm in Scotland was effectively commissioned in June. In addition, we acquired Ford County Wind in Illinois, USA. This 121-megawatt onshore wind farm strengthens our presence in the MISO area, where we acquired Lincoln Land last year.
I am pleased to announce that our flagship Danish power-to-x assignment, Green Fuels for Denmark, has received IPSA prestige through the European Commission. IPSA is short for vital allocation of common European interest and characterises allocation that contributes to sustainable economic growth, task creation and the competitiveness of the EU economy. IPSA’s prestige is vital because the Danish government has decided on green fuels for Denmark as one of only two Danish power-to-x allocations eligible for public investment, provided that the European Commission identifies it as a common European interest. The Danish government has allocated a total of DKK 850 million to finance the 2 shortlisted allocations. IPSA is a key catalyst for the creation of a green and energy-independent Europe, as it unlocks a very large investment to mature electricity from X to a central generation in the fight against climate upgrading in a hard-to-reduce sector and as an obviously established European trading force.
We have set the ambition to be a global leader in renewable hydrogen and green fuels, and are building a strong and varied portfolio of Power to X allocations across sectors and geographies. The European Commission’s resolution to give IPSA’s prestige to the flagship green fuel allocation for Denmark is a testament to the strength and maturity of our Power to x project, which is based on concrete, feasible and scalable allocations in partnership with key buyers. and aviation.
And when fully developed, it aims to achieve an overall electrolysis capacity of 1300 megawatts capable of generating 275,000 tons of renewable fuels according to the year. And in addition to Greenfields for Denmark, 3 other asset projects have been shortlisted under the IPSA procedure and the European Commission is expected to finalise its IPSA notification procedure later this year. As everyone knows, last May, Gazprom Export asked us to pay for the fuel source in rubles, to which we refused because Orsted has no legal responsibility to do so under the contract.
As a result, Gazprom Export cut off Orsted’s fuel source on June 1. We were prepared for this scenario and therefore did not have a monetary exposure similar to the Gazprom Export contract as of June 1, 2022. We are in talks with the government, and we have the government that had a review of the source scenario in Denmark, they are ready for the scenario.
And let me end this review by highlighting our good fortune to be named one of Time’s hundred most influential companies for the time being year in a row. The time has begun for the expansion of offshore wind in the United States. The category of innovators to the category of leaders this year is the popularity of our ambitious efforts in the framework of the renewable energy structure and the many projects now planned along the East Coast.
Let’s move on to slide four and our record win in the UK. On 7 July, the UK’s Department of Business, Energy and Industrial Strategy, or BEIS, awarded us a contract for difference for our 2852 megawatt Hornsea 3 offshore wind farm and a strike price inflation index of GBP 37. 35 consistent with the megawatt hour at 2012 prices. The contract comes with a flexibility point for the trader, as the CFD grants the mandatory flexibility to be able to reduce the contracted capacity by around 25%.
This means that we can potentially stay around 700 megawatts outside the CFD framework. The CFD has a duration of up to 15 years, from the commissioning of the wind farm, which is scheduled for 2027. And we plan to make the final investment decision within the next 1. 5 years and possibly as early as the end of the year. This award is another testament that offshore wind is a large-scale local source of blank energy that will help the UK meet its climate targets and develop its energy. independence, while creating local jobs and business development.
Now more than ever, an additional progression of renewable energy is needed, not only to address the developing threats of climate change, but also to increase the stability and resilience of the energy source. And we look forward to working with colleagues from government and industry to drive the deployment of offshore wind, not only in the UK, but also around the world. Towards the end of this decade, we plan to invest more around £14 billion in the UK and the allocation of 2. 9 gigawatts Hornsea 3 will play a key role in the continued progression of a larger and sustainably competitive UK supply chain to the next phase of the UK offshore wind fortune story.
We have already secured key supplier capacity for around 2/3 of Hornsea 3’s CapEx and have announced a multi-million dollar agreement for Hornsea 3 to be the first and largest visitor to SeAH Winds’ monopile plant in Teesside. With the victory of Hornsea 3, the Hornsea domain awarded exceeds 3 or five gigawatts. We can unlock significant synergies by taking a holistic view of the portfolio at the source and length and location of Hornsea 3 alongside our existing wind farms on the UK’s east coast with almost four gigawatts in operation.
Hornsea 3 will particularly contribute to Orsted’s ambitions to install 30 gigawatts of offshore wind power globally by 2030, and the allocation itself has more than met our annual structure ambition of approximately 3 gigawatts. In addition to the Hornsea area already allocated, we are reaching our Hornsea 4 allocation, which could have a capacity of approximately 2. 6 gigawatts. Hornsea 4 is being planned recently and the resolution is expected to occur in early 2023.
Let’s move on to slide five and our acquisition of the German and French onshore renewable energy platform, Ostwind. I am pleased to welcome the Ostwind team to the Orsted family, as the company has an impressive and proven track record in future projects as well as a strong cultural alignment. The talented team has a significant presence on the local network and we will get a solid and fully incorporated platform from which we can create value. Ostwind develops, builds and operates onshore wind farms and photovoltaic solar power projects. The company has been active in the progression of onshore wind energy for more than 20 years with a balance sheet of more than 1 gigawatt of active projects in the 2 countries.
Today, Ostwind has an active portfolio of 152 megawatts in operation and under construction, approximately 526 megawatts in complex progression and approximately 1 gigawatt more in its progression pipeline. Our success with the acquisition of Lincoln Clean Energy and the upcoming execution of the portfolio gives us confidence that we can run the additional capacity beyond the name portfolio.
For reference, Lincoln Clean Energy’s pipeline for 2022 at the time of acquisition was 2. 5 gigawatts compared to our actual operating portfolio in the U. S. UU. de nearly four gigawatts of commercial instances with price creation that exceed initial expectations. Ostwind’s existing control team will continue to lead the company, which will be incorporated into Orsted’s onshore business unit over time. We expect significant synergies between our onshore and offshore activities in Germany, whether in terms of choosing answers for our consumers and the combined renewable energy capacity for long-term renewable hydrogen production.
And I look forward to welcoming the Ostwind team to Orsted. La Orsted’s onshore renewable energy platform now covers four of Europe’s largest large-scale expansion markets. These key onshore markets have a renewable building capacity of approximately three hundred gigawatts between 2021 and 2030, corresponding to annual expansion rates of approximately 10% in all markets. And the European portfolio will complement our core expansion market in the United States, where approximately 400 gigawatts of onshore renewable capacity are expected over the same period.
Now let’s move on to slide 6, where I move on to give an update of our structure and pipeline projects starting with the structure of the projects. The structure of Hornsea 2 and Greater Changhuan 1
In Great Changhua 1
And so we now plan to commission the last turbines in 2023. South Fork’s 130-megawatt offshore wind farm in the U. S. The U. S. department of construction has entered the structure and with our component, Eversource, we are now moving forward with ground structure work, adding the substation where the assignment will connect. The marine component of South Fork is expected to be built in 2023. And our 2 German wind farms, Borkum Riffgrund 3 and Gode Wind 3 are progressing as planned.
As for our renewable energy allocations on land under construction, where lately we are structured over gigawatts 1 gigawatt. In Europe, our 2 onshore wind turbine structure assignments, Lisheen 3 and Ballykeel, are progressing as planned. And as mentioned, we ordered the wind component of the Helena Energy Center. In April, we took FID on the 201-megawatt sunflower wind power allocation in Kansas, USA. In the U. S. , and we begin the structure phase. The allocation is progressing as planned and we still expect commissioning in the fourth quarter of 2023.
For solar assignments in the United States, we are recently building Old 300 and our first combined solar and onshore wind allocation, Helena Energy Center. We work with our suppliers to ensure compliance with the requirements of the Uku Forced Labour Prevention Act and verify deliveries to target commissioning in the first part of 2023 and 2023, respectively. For our award-winning portfolio, we are advancing our progression allocations in the United States. In June, our Ocean Wind 1 offshore wind farm reached a vital milestone when BOM published the draft task in the environment a week ahead of schedule. Verify that there is no other option with a particularly smaller effect on the environment than the task we have designed. The next step in the task is to download the final environment will have an effect on Array that is expected by 2023.
And at the end of this process, a resolution report is issued. Commissioning of the wind farm is still scheduled for the end of 2025. For our Ocean Wind 1 project, we used the GE Haliade-X turbine. Dispute between GE and Siemens Gamesa, and we perceive that there are viable answers for very advanced projects such as Ocean Wind 1 to continue without impact. empower ambitions and unlock the climate and economic benefits that the industry represents for the country and the world.
In our Sunrise Wind and Revolution Wind projects, we continue to expand all 2 projects with our JV partner Eversource. We expect the projects to be fully licensed by 2023 and up and running by 2025. Sustained progression and execution efforts mean we remain on track towards our strategic ambition of approximately 50 gigawatts of installed renewable capacity through 2030.
Let’s move on to slide 7 and an update on our offshore wind outlook. With the CFD price of ROUND four, the UK allocated the largest offshore wind capacity ever achieved in an individual auction. We continue to see a significant number of auctions and tenders around the world. taking a global position in our main markets in 2022 and 2023. And we look forward to the final results of the New Jersey offshore wind transmission auction, as well as the Holland Coast West tender in the current part of 2022. And in addition to the auctions and tenders planned in the near future, we continue to see better policies for the advancement of renewable energy.
In March, the European Commission presented a first communication on how to decrease imports of Russian fuel and tackle high energy costs in Europe. In May, the committee presented a more concrete plan, which included several measures, adding the proposal to build the 2030 renewable energy target to 45%. This will oblige the Member State to designate renewable energy progression zones in line with the 2030 renewable energy target, to give all renewable energy projects the prestige of a higher precept, as well as the 75% hydrogen target. used in industry to go green until 2030.
The global and European desire to deploy renewable energy at a much faster rate than the current one to achieve some energy independence and combat climate change. Closer collaboration between North Sea countries is a perfect way to better take advantage of this region’s immense offshore perspective. Last May, I had the privilege of attending the North Sea Summit in Aspen, where the Heads of Government of Denmark, Germany, Belgium and the Netherlands took a big step towards achieving the EU’s climate neutrality purpose by jointly signing a joint declaration. that will make the North Sea a green power for Europe. Together, the four countries want to harvest at least 150 gigawatts of offshore wind by 2050, which will enable the declaration to supply green electric power to 230 million European homes.
Finally, we are encouraged by the fact that the US Senate has passed the Inflation Reduction Act, or IRA, and the US House of Representatives is scheduled to vote tomorrow, Friday. The IRA will be a landmark investment in white power in the United States. will allocate billions of dollars to facilitate a blank energy transition. And it’s not only expanding existing tax credits for onshore solar PV wind power and offshore wind power, it’s also introducing new ones for critical blank energy technologies like power garage and green hydrogen. Additionally, it aligns tax credits with incentives to create good-paying jobs and expand the domestic supply chain for targeted energy technologies.
Orsted is well placed to take advantage of the law and leverage its current commitment to the local workforce and supply chain. We evaluated the effect of the ERI followed recently, and the first signs expect a significant construction in double-IRR of digits in the cases. The next step in the procedure is the additional address provided through the Treasury Department and the Department of Labor, and we will be very close to that procedure. The law has been a key lever in countering the inflationary strain we have noticed and ERI will be instrumental in ensuring the continued momentum of the offshore wind industry in the United States.
And with that, let me turn to our CFO, Daniel.
daniel lerup
Thank you Mads. Et smart afternoon to everyone. Let me start with slide 8 and EBITDA for the current quarter of 2022. For the group, we achieved an overall EBITDA of DKK 3600 million, an increase of 27% compared to last year’s EBITDA, excluding new partnerships. our activities abroad amounted to DKK 1900 million, a decrease from last year if we exclude the effects of the new partnership from 2021.
During the current quarter of 2022, we had wind speeds higher than last year, which had a positive effect of around DKK 800 million, although wind speeds were slightly below the overall wind during the quarter. The increase in production due to the Hornsea 2 increase was partly offset by a reduction in production capacity at Borssele 1 and 2, following the 50% reduction in the fleet in May 2021. For the quarter, offshore power generation increased by as much as 32%. Market scenarios with peak values and significant volatility during the current quarter, we learned the negative effects of higher equilibrium costs and the value of effective hedges.
In addition, we have noticed an increase in pricing as a result of the expansion of our operating portfolio, due to higher operating expenses and new pricing. We had a negative impact of DKK 400 million due to excessive coverage basically similar to Hornsea 2, as paint commissioning progressed more slowly than expected throughout the quarter, but accelerated particularly in July, combined with below-standard wind speeds, resulting in a decline in forecasts and production coverage.
With regard to Hornsea 2, I would like to point out that the negative impact of DKK 2 billion of overcoverage will be offset over the useful life through the advantages of indexing CFD inflation throughout the CFD period. Within our existing partnerships, we recorded revenue of DKK 600 million, which basically came from the structural paints for our partners in the Greater Changhua 1 allocation in the current quarter of 2022. Finally, in the offshore sector, our allocation progression costs more than DKK 0. 2 billion, driven by the continued expansion of our presence.
Profits from our onshore operations increased sixfold to DKK 1100 million, thanks to the significant increase in production from newly launched assets, as well as the advantages of higher electricity costs in the US. In the U. S. In the U. S. , benefit from higher electric power costs in the acceleration phase of our assets under construction, where PPAs only began at commissioning.
In addition, some of our newer PPAs have upward pay-as-you-go structures that capture more gains in times of peak values. In the Biopower division and others, profits increased by up to 29% thanks to the particularly high profits of our cogeneration plants due to superior electrical power. The build-up was partially offset by a negative effect on the value and effective coverage for the quarter. Last year, we replaced the corporate functionality precept with IFRS nine, as it has become less difficult to apply IFRS hedge accounting for our energy hedges. However, since we cover a 5-year horizon and in low liquidity markets, we use indirect hedges, such as location, commodity and time spreads, in addition to the hedges that lately correspond to our exposures. This is something we’ve been doing for many years and it’s pretty normal.
Due to high energy costs and volatility in 2022, we have noticed that more of our transactions are considered inefficient under IFRS 9, which happens when the price of indirect hedging is greater than the replacement of the underlying exposure. As a result, we identified a negative market price of those inefficient hedges in the EBITDA of our offshore and Biopower segments during the current quarter of 2022. The effect we have recognized in our accounts is purely a temporary effect, as the negative effect on EBITDA for this quarter would have been recognized in a different way in the coming periods. Our overall proxy coverage price is positive, which we usually see and with fairly low volatility given our conservative VAR limits. Within our Gas and Infrastructure Markets business, our garage business recorded lower revenues.
Let’s move on to slide 9, which covers our net income, ROCE, and equity. Net profit for the era amounted to DKK 300 million, which corresponds to last year after the adjustment for similar agricultural profit or Borssele 1 and 2. Remember that the timing and third quarter are the weakest quarters of the year due to seasonality. Our transfer of contracted capital was 15%, with an accumulation compared to last year due to higher EBIT during the 12-month era. Our equity at the end of June 2022 was DKK 61. 3 billion compared to DKK 96. 9 billion a year later.
The relief is explained by the unrealized losses in the coverage reserve for electric power hedges and, to some extent, fuel hedges due to the significant accumulation of prices. At the end of June 2022, the after-tax hedging and currency conversion reserve amounted to DKK 49. 2 billion. This reserve will be offset against the longer-term overdraft income of the underlying assets when the contract comes into effect. Approximately 60% of the reserve will materialize before December 31, 2023, expanding our assets.
Let’s move on to slide 10 and our indicator of money flow, net debt, and credits. Our net debt amounted to DKK 41. 4 billion, a cumulative of DKK 11. 4 billion in the quarter. Our cash flow from operating activities reflects EBITDA offset through a net outflow of money from ongoing paints and the transitional security deposit of DKK 4800 million due to higher electricity and fuel prices. time. Our gross investments totalled DKK 6. 4 billion, thanks to our continued investments in offshore and onshore wind and pv funds.
In addition, we distributed dividends to our shareholders in April and saw a negative effect of changes in the exchange rate due to the appreciation of the pound sterling. Our key credit indicator, FFO to adjusted net debt, reached 18% for the 12 months ending in June 2022, particularly below last year’s point, due to the vital transitory security deposit I just described. We have taken several steps for our monetary resources, adding a parent corporate collateral issue of €1 billion in the current quarter of 2022 to decrease the initial margin and, to some extent, Adjusted Array variation margin invoices for those security deposits over the past 12 months, FFO to adjusted net debt credits would have been 46%. We remain fully committed to our FFO target for an adjusted net debt point of 25% and expect to be close to this point by the end of the year if no additional pledges are made.
Let’s move on to slide 11 and our monetary reasons. In the current quarter of 2022, our taxonomy eligible profit percentage is 68%. Our operating expense percentage is 80%. Our EBITDA 91% and the percentage of gross investments 98%. The ineligible portion of our earnings relates primarily to our long-term legacy fuel business and ineligible electric power sales. The percentage of green energy stood at 92% at the end of the moment. quarter, an increase of 89% at the same time last year. This is basically due to a greater number of wind and solar farms in operation, as well as higher wind speeds, partly offset by the decrease in the production of electricity and heat based on biomass. move to security. We had an encouraging start to the year with an improvement in the overall recordable injury rate to 2. 8% in the first part of 2022 compared to 3. 1% in the first part of 2021.
Let’s move on to slide 12, where I’ll define the main earnings drivers that are expected for the full year within our portfolio. As Matt commented in his introduction, our strong monetary functionality has led us to build our DKK direction for the full year. 1 billion to DKK 20 million to DKK 222 billion, excluding new partnerships. As you may have noticed in the first 2 quarters of the year, we have noticed significant effects on earnings due to higher values and market volatility across our portfolio with Combined Effects. In our offshore activities, we unfortunately suffered a negative effect of approximately DKK 2500 million in the first part of 2022, basically similar to the hornsea 2 overcoverage and the negative effects at the moment. quarter. These negative effects within the offshore sector will be more than offset by the positive effects of our onshore activities, combined heat and power plants and fuel activities around 2022.
As I mentioned, our onshore income in the first part of the year is helped by high electricity costs in Ireland, the UK and the US. Within bioenergy and others, we expect higher revenues from our combined warmth and strength. plants due to higher electricity costs. As we basically cover the electrical energy we co-produce with heat, we plan to continue to take advantage of the increase in electric power costs. Expansion of the year’s earnings in our fuel markets and infrastructure businesses. We were able to optimize our fuel operations in Northwest Europe and secure gains from retirement flexibility on some of our fuel source and garage contracts in a highly volatile market, leading to a higher –than expected profits in 2022. Lately we do not expect an additional influence on Gazprom’s export contract in the rest of the year in addition to the net loss we achieved in the first part of the year.
The sum of these securities and volatility has a net positive effect on portfolio effects of approximately DKK 500 million. The net positive effect reflects the fact that, thanks to our exposure to traders, we obtain advantages from higher power values, which offset the negative effects of dust jacket. During the first part of the year, we saw perfect operational functionality across all of our assets and wind speeds were slightly above standard. the overcoverage caused by the Hornsea 2 heist combined with very high electric power values, we would have noticed that the EBITDA of our offshore and onshore operating assets increased by up to 28% compared to the first half of 2021.
In addition to those effects, we expect a build-up of profits from existing partnerships due to the resumption of the provision of the cable coverage formula in the first quarter of 2022, as well as an accumulation of structural gains for partners. In the effects of our offshore sites, we expect a negative impact on the delayed increase of Hornsea 2 and Greater Changhua 1 and 2. Finally, we expect the acquisition of Ostwind and Ford County Wind to make a contribution to higher profits in the latter part of the year. Summarizing all those effects, we are outperforming our full-year initial EBITDA guidance of DKK 1 billion. Given the unprecedented volatility of the market, the main ongoing and extended demanding situations for our structure projects and the incredible advances expected in our fuel contract. , this is an upward revision of the forecast, reflecting the continued strength of operational functionality and showing the strength of our business model.
Finally, let’s move on to slide thirteen and our outlook for 2022. As explained, we have a higher EBITDA direction for the full year 2022 in a range of DKK 20 million to DKK 222 billion in the higher expected earnings in bioenergy and others as well. as on land. We have replaced directional instructions for bioenergy and other activities at a particularly higher level than before. Directional rules for offshore and onshore activities remain unreplaced. , reflecting the acquisition value similar to the Ostwind transaction. We remain steadfast with our long-term financial goals, adding growth in EBITDA, recovery of contracted capital and a contraction in the percentage of profits.
crazy pliers
And thank you very much, Daniel. Before moving on to your questions, allow me perhaps a little to upload some final comments. While we are not satisfied with the monetary effects of our core overseas business in the first 2 quarters of the year, we fundamentally see our offshore business as on a very positive track. The operational functionality of our assets was again strong and our offshore power generation increased by more than 30% compared to the current quarter last year. Due to those winds and the In the first part of the year, we have finished the facilities and now we have the largest Hornsea 2 wind farm in the world in full production. .
Our competitiveness at Orsted continues to be strong, securing an allocated capacity of 4. 5 gigawatts in 2021 and, so far, only around 3 gigawatts this year with more potential. to that, despite some headwinds from inflation and the supply chain, we can continue to create prices abroad. So overall, in addition to the record effects and strong traction of our onshore and bioenergy businesses, we remain positive and positive about our overseas momentum. with that, we will answer your questions. Operator, please.
Q&A session
Operator
[Operator Instructions]. The first comes from the Line from Casper Blom to Danske Bank.
Casper Blom
Congratulations on the updated guide. My first query has to do with the balance of prices or expenses that you had to face in offshore activity. And sorry if it’s too simple, but if I perceive correctly, you should notify the regulator a day in advance. How much production do you plan to do? And then, if there’s a variation, you have to buy that electric power on the market. Since that’s how the setup works, why don’t you tell the regulator that you plan to produce a little less?of what it does and then avoid additional equilibrium prices?
crazy pliers
Yes. Thanks for the question, Casper. There is a discrepancy in that. So, it is true that we nominate and volumes a day in advance, and then we have to adjust today, depending, for example, on how the wind is. Blows. And the dynamic is that if there’s a lot of wind in the system, and we’ve produced more wind, then there will be, in general, a lot of production in the system, and therefore, it will be low.
If we are below the planned production, it will be a scenario where there will probably be little wind and where we will have to use backup production that can be very expensive. Or we go to the market and buy it elsewhere at higher prices. So there’s an asymmetry toward the negative in the way this setup works. And it’s a very giant, liquid market, so it’s anything we’re used to. But of course, when you see very high prices, the absolute balance the burden becomes superior. But in many cases, the relative equilibrium load does not increase.
Casper Blom
It is ok. But just to make sure I understand, when you make that appointment that day in advance, wouldn’t you have an incentive to be a little conservative given the asymmetry being talked about?
crazy pliers
Jajaja
Casper Blom
I mean, why say you can produce 100, if you can only say 95% and the penalty?
crazy pliers
Because over time, the savings will be for us to bid with what we expect.
Operator
In fact, I see that Deepa is hooked in 2 lines. So I’m going to check the line of moment that she composes in the last one didn’t work. So Deepa, I’m checking your line for now. Can you communicate about this line?
Deepa Venkateswaran
Sorry, can you hear me now?
Operator
Yes, we can Deepa, we listen to you.
Deepa Venkateswaran
I had a question about proxy coverage and also about how the market reacted to its effects today. So, one, I just sought to understand what you identified, is it a waste of economic money that we identified early?Or is it a marketplaceplaceplace price loss that is reversed when you make the delivery?And so, I mean, the marketplaceplaceplaceplace doesn’t show up in your update given the reaction or maybe the marketplaceplaceplace assumes there are other money losses?And to what extent is it money versus non-money?
daniel lerup
I’ll take a look to answer Deepa. Et, of course, I can’t comment on how the market reads this. But the loss we suffer in our P
crazy pliers
And maybe I don’t. We are doing generous work, but it is very important that this allocation is due to this asymmetry in the way IFRS conducts hedging accounting. Million. So, in this sense, we are not involved in the actual economic effect of those indirect hedging effects induced through IFRS 9.
Operator
The next comes from the lineage of Alberto Gandolfi of Goldman Sachs.
alberto gandolfi
I hope you will allow me a spontaneous comment before the consultation. I mean, I’m surprised enough to see that accounting under IFRS 9 is getting to EBITDA. Most of your competition does it in financial expenses or has adjusted the EBITDA because I think it adds a lot. of volatility. So it probably doesn’t do it enough justice. That’s what I mean. But anyway, unsolicited comments, and I apologize for that. But my query is the following.
Now I see that with the existing high point of commodity and electric power prices, your desires for liquidity for margin calls are increasing, you seem to win at a much higher rate of good fortune compared to your business plan. Crazy, he said 4. 5 gigawatts last year, he has already earned 3 gigawatts now, essentially the only very big stock he has so far, more bids to come. It is looking to expand into pipelines. So, I guess my query is: When do you think I could Want more investments for this?And I think here, I don’t see anything with the issuance of equity if you keep hitting above your weight and win more projects. But can we perceive a little how you plan to reconcile the total circle of liquidity desires?, higher rates of good fortune and desire for financing.
crazy pliers
I can release him and then Dan can complete and I will endure the truth. Merci. Et also thank you for the first comment. I think, I mean, we can’t comment on the main points of when an ABB capital buildup comes into play. But, of course, we stick to that. But right now, it is: we’re making pretty much progress as planned. Yes, the acquisition of Ostwind came first, but it is not enough to cause. But obviously, I mean, as we move forward and if we continue with the major win rates and see those opportunities, it can cause it. But it is very unlikely that at this time we will say more exactly when we are going to take out the cause. So, this is not something for which we can unfortunately percentage more main points at this point.
Operator
Our next one is from the line of Kristian Johansen at SEB.
cristian johansen
So I had a question about the implications of the IRA in the United States. First of all, just to clarify, Mads. Do you think you said that this implies a significant accumulation of double digits in the IRR?So, are you referring to your current offshore projects? And I guess when he said double digits, there will be basis points. But you can also comment on the implications for your onshore business and if this becomes law, it would boost your structure and also your US P-X project. In the US, the clarity of the IRA, what does that mean for IDF in this project?
crazy pliers
Yes, absolutely. Thank you, Kristian. Yes, you are right. Sorry, if I forgot to say those are basic problems and just said two numbers. Yes, it’s for our existing award-winning portfolio. We say that what we estimate is a significant double-digit construct. There will be some variation and it’s still not very, very accurate in the length of stocks that we will qualify for given the local content and other criteria. we are incredibly well located and better located than any other due to our already existing deep commitment to building a supply chain in the United States.
Therefore, this will give a remarkable flavor to those cases. But of course, given the long-term nature of air, it’s also anything we think we can and will get merit for long-term projects beyond that. This is also a merit for onshore projects. . And I don’t know whether to say that it will propel us even further, but in fact it reinforces the fact that continuing to invest in the United States as our main onshore expansion market despite our European expansion is a very attractive thing.
And finally, I’m sure you’ve read the same analysis, but at least some argue that with tax credits of up to $3 for green hydrogen, if they’re eligible for that total amount, the U. S. will be eligible for that total amount. The U. S. could actually be the cheapest position. to produce green hydrogen, which we find incredibly encouraging, either for some of our existing plants such as, for example, the letter of intent we have with Maersk on green methanol for their ships, but also for an imaginable long-term expansion. of power-to-x. We still want to explain the main points of this size of hydrogen from the IRA, but we see it as something that makes the US a great deal of hydrogen. The U. S. is relatively very, very hot for this expansion.
daniel lerup
And maybe just to climb a little bit on the land side. At first glance, the IRA seems literally smart, and the direct effects of this can actually materialize into a superior IRR that accumulates compared to the foreigner. However, since they also have to faint and get the corporate APIs, of course, there is a payment detail where we could place ourselves in a scenario where consumers would need to recover part of it. But it seems literally smart for the foreign component: the domestic component is also moving to one hundred percent PTC.
cristian johansen
If I stuck to your offshore portfolio. You said earlier that inflation has diluted the IRR in the portfolio a bit. Would it be fair to say that this accumulation in IRA fully compensates for this dilution?
crazy pliers
We can’t comment on that, Kristian. And I think we don’t want to get used to commenting on the kind of quick projects or short-term portfolios. But obviously it’s anything that helps.
Operator
The next one comes from the Peter Bisztyga line of Bank of America.
pierre bisztyga
Yes. Just a query about Hornsea 3, please. You said they gave you the kind of ability for that. And I wonder if they gave you fixed-price appliances or if your suppliers, whether in turbines or whatever, included some kind of logistics and other load-passing clauses?So, some concepts about it would be useful.
crazy pliers
We can say that, as we said, Peter, we ensured the capacity and for some of them, we agreed on the costs. And for some of them, we have framework agreements that cover that, so we know what we know necessarily which is at least very close to what it will cost. And then, for some of them, it will still require ongoing negotiations. But within certain limits, it’s not something we’re just going to do, it can fundamentally change. a combination of already constant costs with anything for which we have yet to finalize constant cost negotiations.
pierre bisztyga
And just to clarify. So don’t you expect to settle for any charges that transfer to logistics or something like that?
crazy pliers
No, I think it will be too specific. But normally, I mean, for example, on some projects, we cover the metal threat in some of our contracts. And that would be, it’s probably anything that we’d also be or probably anything that we’d see here. we’re encouraged to see, and I’m sure you know that as well as we do, however, we’re starting to see that after some of the excessive spikes that we have, for example, the heavy metal plates are starting, they’ve started in the recent weeks to spend particularly below the peak. So this is a manageable exposure, even if there is a commodity threat that would stay with us. And as we’ve said before, we infrequently decide to lock them in on opportunities, as we did with a significant portion of the US East Coast short-term projects with the metal pre-purchase that we did there.
Operator
Our next one comes from the Rob Pulleyn line at Morgan Stanley.
Robert Pouleyn
If I can continue with the investment factor, and my apologies, it’s a bit multifaceted. So, first of all, we detected this collateral release that you mentioned, and it would be interesting to know to what extent it was slow motion. This year? And given where the credit measures are, does it accelerate the need to borrow more given that you have less cash due to security deposits?And because of the credit parameters, does that mean there’s a higher debt charge related to this?And all in line with the previous question, does this increase the need for new equity to, frankly, drive expansion and increase capacity targets?I wonder how all those other investment dynamics are compatible in combination. what does the current scenario look like compared to what it might have been 6 or 12 months ago?
daniel lerup
And we’re in a scenario where we have a smart liquidity reserve. And in the quarter at the moment, we do not see a net slowdown in the liquidity of the security deposit, because we also issued this PCG, therefore, 1,000 million euros. However, in our credit metric, it is a drag due to the fact that we have noticed adjustments in the guarantee, but where it was in the margin of variation where the PCG only covers the initial margin and the variation component goes to the FFO of the metric. as far as funding desires are concerned, this is not a driving force for our long-term funding desires. But of course, if we continue to see that we exceed expectations in the auctions we participate in, this could, of course, be a cause of that.
Robert Pouleyn
If I can ask for something, I think many other people wonder when and, despite the respect I have for Mads’ previous answer, exactly when it is. Would you at least build a capital this year?
crazy pliers
I don’t think so, honestly, Rob, I mean we’d like to do it, but I don’t think we’re going to rule anything out. anything at this point.
Operator
And the next one comes from the line of Mark Freshney of Credit Suisse.
marc fresney
I was intrigued when he communicated about Hornsea 3. De notorious way, he won a CFD on a component of it, but discussed the trading side. So, it looks like he’s still running the business case. Is it fair to say 3. 5 gigawatts? What is the maximum size?And can you tell us about the procedure to follow to find out if you are using this additional commercial capacity and if you want commercial PPAs before IDF?And how can this be connected to the rest of the allocation in terms of prospective synergies and CapEx relief consistent with the unit?
crazy pliers
Thank you very much, Marc. No, I’m sorry, if I haven’t been transparent on this component. The overall allocation capacity is 2. 9%, and that’s what we have 2,852% to be precise. But that’s what we earn as CFD 4. What we have is market flexibility of up to 25%, which means that if we do, when we get closer to completing the task, we can. . . Let’s play with a situation where if the costs are still something like, the energy costs are still very high. We have the option of having up to 25%, so about 700 megawatts as a component of 2. 9% will be marketable. This is an option we have right now, given the opportunities in the electric power market. in terms of the attractiveness of PPAs, etc. But the starting point is that we will take the full CFD for full capacity. But we’re talking about that because, I mean, obviously, the energy markets are pretty extreme.
And I would say we all think it’s probably uncertain. So we think it’s a wonderful flexibility if we decide to do that. And we’re going to, as we move through the project, while we take FID on the structure one and stick to the market, we’re going to compare from the beginning, obviously, looking for what kind of opportunities for a CFD contract tax would be more value-generating and it would be right to do so. This is a procedure we will stick to, however, it will be anything that starts closer to the COD in 2021.
marc fresney
So, your business case is based on CFD prices, I think, 38, 39 or 2012. You have a flexible option for actually IRR by taking a 700 megawatt trader and going to market looking for various features for him and so on. And as far as it goes, is there anything you can give us about IRRs or that deserves us to refer to our own personal spreadsheets?
crazy pliers
We can only say that this project, even if it were an obviously competitive value to sign up for the winning package, is anything that is in our guided range. Therefore, we are comfortable with the project. And you’re right, just for the first component of your conclusion, is that our business case is based on CFDs, which we know we can get and if there’s an opportunity through trader flexibility, that’s an advantage.
Operator
The next one comes from Vincent Ayral’s lineage at JPMorgan.
Vincent Ayral
Going back to the observation that was made earlier, if IFRS nine here, we’re just talking about non-cash and not what we’ve noticed with some other investors who have indirect aging that costs them money. I’m basically thinking about promoting NG forward in France for the Belgian generation or Uniper in Germany for Northport. If it’s actually an economic value of 0, think about it, a tight number would obviously have helped the market today. I’m going to make a query about Hornsea 2. So it has a late increase, but now it’s up and running. I understand that you might have some flexibility in relation to the start of the CFD and that you can also sustain it prospectively. So, he would be willing to perceive If this is the case, what positive outlook can there be only for the rest of the year?How long can it last only you?And is it included in the tips, please?
crazy pliers
So we have already driven 2 of the stages and we can next year push a phase as well. But remember, the – so we don’t get any source of CFD income from Hornsea 2 this year. It’s commercial. But as you know, we have completely covered our offshore production, which means that there is no accumulation this year even in the value accumulation forecasts.
Vincent Ayral
And by next year, will it be fully covered?It’s fair to assume.
crazy pliers
We are close to completing the policy for next year both on the offshore component and onshore and Bioenergy.
Operator
The next one comes from Sam Arie’s lineage at UBS.
Sam Arie
Can you hear me well?
Operator
Yes she is.
Sam Arie
Listen, thank you for the presentation and explanation about the canopy part, which I think we’ve all removed. I tried to go back to another topic, which considers the maximum costs of electricity in Europe and the UK and what can politicians do to deal with them?And in that context, I need to make a query that I also made to RWE this morning, which is. . . I mean, if you concentrate on the UK, I guess the query is what can the new pepper do what to do with the higher energy costs, adding electric power costs?
And assuming that some kind of intervention is going to happen, what would the industry do voluntarily to prevent something less appropriate from being unintentionally imposed on it?And the specific concept that I’m picking up in industry discussions and so on is if you can just take existing built assets with exposure to the value of market strength and offer them a voluntary CFD maybe kept at the point of the new CFD asset, in which case, I guess the concept is that you would take the few gigawatts of assets you have in the UK in the Rob program and the Have. Bid for a CFD, in the short term you will get lower values than in the detail of the trader of the ROC asset.
But in return, you might still get 10, 15 years of inflation index, constant strike prices, which are kind of higher multiples, more tradable and have more leverage, etc. And in this case, I find it to be a solution that the industry can also log in to voluntarily. So I asked myself: do you think this is a smart concept that can also be a component of the solution in the UK or other markets?Do you hear anything from Dortmund that has concrete problems in this type of direction?And if there were FD features for your existing assets, would that be something you would bid?
crazy pliers
To be very transparent, this specific concept is not something we have discussed much. We are in a very close discussion about the dangers and the characteristics to contribute to them. And since we have such a huge contract percentage in the UK, we see it in the way we care about ensuring value stability, which is very complicated, few people do. I think this is just a quick reaction, rather than something that wouldn’t be considered a providence tax, having something like that would be an option, it would be something we would have interaction on constructively. of CFDs or covered volumes end up being taxed in any way. As long as that’s the case, we’d be open to discussing other answers because, of course, it’s a more complicated scenario for consumers.
Sam Arie
If I may show a comment that my area friend made earlier on an accounting topic. It turns out to me that in the UK in particular there is a very short window in which safe decisions are going to be made. It seems to me that there would be great merit in having some kind of solution to decrease expenses and increase costs in the short term, which the industry can do voluntarily. I think it would be a very strong message for the market. there were some sort of interventions that were agreed upon in the industry that can just say, “Yeah, we do this, and we don’t have to settle for that, but we do it because it’s smart for us. “And the existing CFD asset turns out to be at least one of the other few candidates. So I hope we can keep an eye on that and keep talking about long-term goals.
crazy pliers
Absolutamente. De fact, we will pay attention to it and discuss it with our British colleagues.
Operator
The next comes from the lineage of John Musk of the Royal Bank of Canada.
Musk John
Let us return, I am sorry, once again to the balance sheet and specifically to the consultation of the guarantee. Can you update where the NOK 12. 9 billion has moved since the semester?And in doing so, maybe it will just give us an indication of what motivates this. Should we take a look at the general point or electricity prices?Or is it a little more confusing around the apparent coverages it might have on other raw materials?
daniel lerup
Therefore, it depends a lot on electric power and fuel prices. And the year or the semester, the net guarantee is quite solid because we have removed it from the guarantee with this PCT of 1000 million euros. So if we hadn’t done that, we would have had an additional burden of DKK 7. 5 billion.
Musk John
And so, the NKK 12. 9 billion is still a figure that hasn’t moved much since June 30.
Daniel Lerup
Since June 30, of course, there is, in July, an increase in value, which, of course, also has an impact on the guarantee, but I do not have this recent figure.
Operator
And the next one is a follow-up to Danske Bank’s Casper Blom.
Casper Blom
A query on slide 12, which I found interesting. I just sought to perceive the kind of dynamic of looking a little further ahead. Suppose on the 23rd we also see the same kind of value and volatility in your portfolio that you have noticed. This year. And then cutting the overcoverage in Hornsea 2, would it be fair to assume that the ground and Danish power plants would give it a merit of, say, NKK 2. 5 billion over, say, a normalized situation?Would that be a fair guess for next year?
crazy pliers
Oui. Je I think I can release him. And again, invite Daniel to comment, Casper. But he is surely right to make it clear that what has not outweighed all the benefits we are seeing, hence the improvement of NOK 1 billion in our forecast for the whole year, no, by far, most of that is due to the delayed ramp of Hornsea 2. There are other effects and even if there is a higher balance load with higher power, then it is a completely different level. I mean, it’s a lot, much smaller number. And that’s what will probably remain. But you’re right, there would be a significant component of that cogeneration and that increase on land, which would be natural because we would only see a smaller component of the resistance on our coast unless we had other things like, say, a year of exceptionally weak wind anything else, then it would be a delay, as you described it.
Operator
The next one comes from the lineage of Deepa Venkateswaran.
Deepa Venkateswaran
Second question. I just need to focus on the security deposit and the FFO to the net debt ratio. Therefore, some corporations also come with the collateral margin as accounts receivable and offset it. And it turns out that scoring agencies are taking that into account. So, I was wondering if credit scoring agencies assume you’ll never get this guarantee in return. Or have you had such a discussion because it turns out, again, you observed that it would be something that develops over time and deserves not to give a contribution to your basic debt position. So can you explain what the company thinks about this, especially if you don’t have a counterparty threat in this collateral?
crazy pliers
So I agree, is that we are right, or we are in an ongoing discussion with the rating agencies to keep them, of course, aware of this. And since it is a timing effect, we are sure that it will not be anything that penalizes us. And again, we also expect this metric to return to our target level, and we also have the final divestment of Hornsea 2 later in the year, which will also lead to a giant capital inflow. But you’re right, there are some fun effects of those margins when they hit other put options on the P.
Operator
Our next comes from the Jenny Ping lineage of citi.
jenny ping
Only in the sense of the last consultation in terms of FFO’s net debt. I was just wondering, your guess is evident that there is no longer a guarantee for the rest of the year. What if there is one? What if from here things happened messy?What levers do you want to pull?Can you take into account more corporate guarantees?Obviously, Hornsea’s capital inflow will help, but what are the features on the table, please?
Daniel Lerup
Oui. Il is the PCG form. It can make bilateral agreements like the RCS, it has more short-term debts. So I think we have, and we already have a strong reserve of money. So I think we’re very likely to think if we saw a bigger tie in the guarantee.
jenny ping
And I’m sorry, just a follow-up, given that we’re in a round of questions right now. Just in terms of its Taiwanese assets, obviously, the political threats, it turns out that it is expanding between China and Taiwan. As we went through the auction circular and set up FID for the contracts you’ve already won, which I guess, the attached threat premium is now higher. So how can you tell us how you foresee long-term investments in the Taiwanese project, please?
crazy pliers
I can release it. In fact, I was personally in Taiwan last week. So I think, I mean, we’re significantly intensifying our dialogues with geopolitical advisers who are very closely attached to the political landscape. And as later in the day, we learned that vice The president of the Taiwanese government was traveling for 10 days in Beijing. And really, what we constantly hear is that the transparent expectation is that even if it were a spike, we’re really of the opinion that structurally it doesn’t increase the threat. Obviously, we did a very quick assessment, either of the threat to our people, to our existing assets, etc. But we’re really right now, we don’t really see that the threat is expanding structurally and continuously. So, this is not something that leads us to wonder if we deserve the further progression of renewable energy in Taiwan, either fundamentally or at least to a significant extent, the accumulation of the threat premium.
Operator
Our next one comes from the line of David Paz of Wolfe Research.
david peace
I just need to make sure you can hear me. So I had a consultation for the IRA. Can you elaborate on that? I think he talked about a diversity of double-digit baselines. So, obviously it’s a very broad diversity. I mean, does this apply to all projects with contracts, like the Northeast cluster, Ocean wins, and Skipjack 1 and 2?And is the wide diversity of possible increases due to the progress of some of those projects, and therefore, some possibly just don’t succeed at this local content threshold?
crazy pliers
Oui. Je think, thank you, David. Es that’s why we’re talking about a significant double-digit increase. You’re right, there’s a gap, however, right now, with our existing calculations, it’s not type to 10 or 12 basis points. But there are diversifications depending on the state of progress, our initial assessment?How much would we qualify for existing assignments? But obviously, with everything we can do, we will do everything we can to make it the best we can. But I cannot also percentage because we will still have to qualify those figures. We were in a hurry to check to calculate to at least give you an indication of the effect and it is as close as possible. But it varies from task to task depending on how much we think we can claim. And then also depending on the presence or not of situations in which to return all this to the taxpayers, which we would negotiate flagrantly with the States.
david peace
And just if I can stick to that, can you talk about how the portability provision affects existing contracts and any other potential transactions, adding farm closures, etc. in the United States?
daniel lerup
Oui. Et, the language about portability is not at a point where it is transparent, but precisely how we can use it. Therefore, we will seek further recommendations from the Treasury to perceive this better. So, it’s probably not as smart as direct payment. , however, we believe it can at least lessen the dangers of the way you use ICT, and there may be other benefits to that. And in the numbers we’re talking about here, the first calculations we’ve done, we haven’t added price to portability yet, although we think there’s price there as well.
Operator
Our next one comes from the line of Alberto Gandolfi of Goldman Sachs.
alberto gandolfi
Could you give us express guidance on year-end net debt, talking about what you think might be a transitional margin charge you expect relative to actual underlying net debt?
daniel lerup
No, I give you a figure on net debt. But as we also said earlier, we expect the FFO on net debt to be around 25% by the end of the year if we don’t see any deterioration in the collateral aspect due to higher electricity and fuel prices.
Operator
The next one comes from the line of Rob Pulleyn, Morgan Stanley.
Robert Pouleyn
Considering the time I have 2 fast. First, her spouse Eversource has revealed her goal of selling a stake in the JV. A common query we receive is whether Orsted would be interested in getting this stake. And it would be wonderful to hear the company’s public opinion on this issue. And momentarily, just as a procedural order, can we ask what is included in the implicit rules of the part of the moment to balance prices and fees similar to proxy coverage?If anything, just to make sure expectations are in the right position for what you’ve guided.
crazy pliers
Thank you very much, Rob. Je can say, I mean, in terms of the percentage of Eversource, they are part of the projects and the seabed that we have. We don’t rule anything out, but I’ll also say no. – I mean, I can’t percentage of the main points on that. But we’re comparing whether any of that would be meaningful for us to take over. But this is not something that we can exclude and that interests us.
daniel lerup
And can you repeat the other question?
Robert Pouleyn
Yes, of course. I think Mads responded to the first one. The moment is given by the disconnect between expectations and quarterly reality, say, for many quarters. Could we be perfectly transparent in the forecasts for 2022 that you gave, in the current part of the year?What is included to balance long-term prices and fees in representation coverages, if any?Presumably, this volatile market continues in commodities and as a result, there will be break-even prices and possibly more fees for your representation hedges as well. I wonder what is included in this direction that we are all on the same page.
daniel lerup
Therefore, we assume a point close to the usual for the rest of the year, without knowing precisely what our earnings will be like in the future, as it depends on how volatility and correlations evolve. So, this is all we hope to be able to capture on our guided beach.
crazy pliers
And just to complete. Again, repeating without being able to give you very precise figures, even if equilibrium prices remain at the existing upper grades and potentially even at slightly higher degrees compared to where we are now, this is not something that puts our orientations at risk. To be explicit about this, as equilibrium prices might seem dramatic, however, this remains a relatively small component of this overall hole for the quarter. So, while this continues, it’s nothing that worries us about the validity of the update. Guidelines.
Operator
And we have a query in the queue. This is in the vein of Mark Freshney at Credit Suisse.
marc fresney
I only sought to keep up with local spouses in North America because we clearly saw Eversource’s statements. And PSEG has also made comments that we are tracking returns, and I see that they paid 30 million euros this quarter. But my question is in fact, when you move to new regions like the United States or Taiwan, your previous address was transparent that you will want local spouses, especially in some territories. And the No. 1 spouse you might want for Dream for PSEG might want to sell, Eversource makes your decision. How worrisome to you is that you can’t get local content, if you want, from the capital side?And what kind of sale would you have on the spouses of those projects?I mean, do you have a preference and can you decide on your own spouse or are you at the mercy of a monetary budget that possibly doesn’t have the political connections you want in those states?
crazy pliers
We’re not worried, Mark, for 2 main reasons. There are more than 2 main reasons. The first is that we obviously disagree that PCG needs to sell. I mean PCG is deeply committed. We’re also working with them on the wonderful streaming offering we have in New Jersey so we don’t have that fear. at the same time I will say that it is very vital for us when we say that spouses are needed, in many cases we tell ourselves what can the local spouse bring us?
Is it a political lever?Is it local content?Is it market access?Is it access to projects? And so, now that, for example, also with the decision of Eversource, Eversource has been a fantastic partner to introduce us to the market. But we also know that we are now in a position with the largest pipeline and that we are already a political voice in Washington and in the states where we are active. We already have this influence ourselves. So, I mean, we would have liked to continue working with Eversource, but it’s nothing negative for our way forward.
And similarly, we are in Poland, where we are entering the market with our partner, PGE, but we already know that we will not be working with PGE for the time being. And that’s only natural because PGE has helped us access the market, access the right stakeholders, etc. Therefore, it is not an uncommon progression that partners are not eternal and forever. And that’s why this mix with the two GWPs, we don’t see them anywhere and also the fact that the partners are there for a while, and then fortunately we divorce. And that’s good.
Operator
And since there are no additional questions from attendees at this time, I’ll pass it on to our speakers for closing remarks.
crazy pliers
Oui. Et I just need to thank you all. Great questions as always. And if you have any other questions. We, [indistinguishable] and the rest of the IR team are happy to answer them. So thank you very much. Stay and have a wonderful day.