A key element of EDP's strategy is to maintain a strong financial profile while delivering growth targets under remuneration regimes that enhance the visibility of free cash flow generation over the medium term. EDP's financial deleveraging efforts follow hand-in-hand with a strict financial criteria underlying investment decisions, timely execution of projects and a risk-controlled growth strategy.
Our funding policy is structured to promote efficiency and costs savings. EDP’s financial debt is essentially raised at holding level and then on-lent to its subsidiaries. Our centralized financial management promotes efficiency and allows for costs savings. EDP raises funding through both international debt capital markets and bank loans. The funding that is raised at subsidiarity level is mostly project finance related, at EDP Renováveis level, and the result of our ring-fenced policy for EDP Brasil, which raises its funding needs locally.
We have a strong liquidity position backed by highly diversified sources which reinforces our low-risk profile
EDP keeps a strong liquidity position, favouring committed facilities at competitive cost over cash and maintaining at least 12 to 24 months of refinancing needs ahead. We diversify our sources of funding, tapping the most efficient markets and maintaining a wide range of strong banking counterparties. We keep an active management of foreign exchange risk, namely through the maintenance of a net investment hedge policy by raising funds in the same currency of our investments, as well as a dynamic management of interest rate risk, defining fixed vs. float and debt duration targets and through interest rate pre-hedging of refinancing needs, allowing for cost of funding optimization.
We target to maintain sound credit metrics and overall portfolio quality as an additional lever to improve our financial risk profile. In particular, we aim at an FFO/Net debt of ~20% by 2026, backed by strong organic cash flow and capital reallocation towards an even lower business risk profile. We believe these credit metrics are consistent with our commitment to maintain a BBB credit rating.
Green funding is an important tool to finance the energy transition, which assumes a particular relevance for EDP given our growth plan is mostly based on renewables, as such, EDP established a Green Finance Framework to align both our sustainability and financial strategies.
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