Acciona Sa

the presentation of ACCIONA Energía first half 2023 results. I will make a brief introduction with the few points I would like to highlight and then pass on the floor to my colleagues, Rafael Mateo, CEO, and Arantxa Espeleta, CFO. I believe Acción Energía is now a better company than when we did the IPO two years ago. Higher value, larger scale, more profitable, better and more pipeline, and on the right track to prove our capacity to execute the 2 gigawatt a year of new capacity target. All in all, as I say, a better company than two years ago. Our investment activity is accelerating rapidly with 2.2 gigawatts under construction and one gigawatt of secured projects that will enter into construction in the next 12 months. So we are on track to deliver 1.8 gigawatts of installed capacity by the end of 2023. and very confident that we can at least install the same amount in 2024. From then on, we believe that we have the means, the pipeline, the balance sheet capacity, the supply chain, the manpower, and the know-how to continue installing north of two gigawatts a year in the foreseeable future. 2023 is the year when we prove our capacity to add new profitable megawatts at the pace announced at the APO, which I expect will ease the negative market sentiment that has been holding a share price back over the last six to nine months. Of course, there are other renewable sector-wide investor concerns. Inflation, interest rates, capex costs, supply change, deglobalization policies, or network congestion are undoubtedly challenges to be considered. In our case, we believe we have all those challenges sufficiently under control. Undoubtedly, we have experienced some delays in achieving our growth targets, but 2022 was a very unusual year with all the above-mentioned problems in their epitome. The war in Ukraine, total disruption in the global supply chain, anti-circumvention chaos in the US PV market, regulatory instability, the PGM connection collapse, markets getting acquainted with inflation, and interest rates hikes. an environment of unusually high energy prices that we also, as temporary, thus somewhat making us victims of our own success, as the levels of profitability would be very hard to match in future years. The ultimate change in the power price methodology for the current regulatory period in Spain has added to widen the delta relative to last year. But let me try to send a message of calm and predictability. In my view, the long-term outlook for the industry remains very bright. First, megatrends. The fight against climate change is more urgent than ever. There is an ever-growing number of countries committed to take measures. Social awareness is higher than ever. And we have the technologies available to transform the model. Also, energy independence has become a key strategic aim in many countries as the war in Ukraine has proved it necessary. All of this is leading to unprecedented policy support, privileged access to finance, economic incentives to develop the less mature technologies in the context of strong electrification of the global economy. We believe supply chain problems are pretty much over, and notwithstanding capital capex and financing cost, returns remain healthy as energy prices have settled significantly above pre-COVID levels. We are delivering profit above market price, and our initial expectations, market expectations, and our own initial expectations in the order of 600 million more EBITDA in the period 22-23, and enjoyed exceptional ROCE in the last two years. Return on capital employed. With respect to capacity additions and commercial activity, we will be adding three gigawatts of total capacity since the IPO by the end of this year, and that's two years ago, and signed around eight terawatt hours of PPAs in the last, in that same period. In terms of our 20 gigawatt target by 2025, the one that we announced at the IPO, we are approximately one year behind, but our projects are still here. with significant new additions to our pipeline, and we will deliver in 2023 more than three times what was on our business-as-usual annual growth in the IPO, before the IPO. We believe we will be able to maintain and increase a similar pace of growth in coming years while being very selective and disciplined in terms of risk, returns, and our balance sheet. We have invested 3 billion since the IPO, and our net debt has only increased by 1.1 cents. It is, I believe, too harsh from the market to attribute negative value to this. And in terms of paving the way for future growth, we have selectively opened new markets in Southeast Asia and Latin America and strengthen our presence in our core Australian, European, and North American markets, which, as you no doubt are aware, are poised for tremendous growth. We are also positioning ourselves in additional emerging technologies such as batteries, hydrogen, or floating. And of course, we are preserving our investment-grade credit rating and our balance sheet strength, which in the current volatile world, it is a very important competitive advantage. As for ESG, we have obtained ratings systematically at the top of the rankings, and I dare say we are a sector benchmark. We work to ensure long-term economic, social, and environmental sustainability, always sticking to our core values, while also strive to maximize our short-term delivery. At the second anniversary of the IPO of Acciona Energía, I reiterate, I firmly believe that the company has made great progress since that date, since the listing, and the general market is the general market environment is looking as good, if not better, than two years ago. As you see, I am optimistic despite a significant disconnect between the reality of the company and what seems to be the market perception judging by the stock price. I am confident the markets will soon recognize the progress made in the last couple of years and in the exciting future that lies ahead of us in Acción Energía and the rest of the group's sustainable infrastructure business. Thank you very much. Rafael, the floor is yours.

Thank you, José Manuel, and good morning to everyone. Let me please start with the key headlines for the period, defined as operating profit level but power prices coming off the peak of the energy crisis we saw last year. especially affected by the untimely changes in the spanish regulatory bonding mechanism for the regulated assets i like to mention that although the current price levels are more moderate they are still being a very good prices with around 100 euros per megawatt hour expected for both 2023 and 2024 so we still have a very good year 2023 and at least another one or two years of elevated power prices. The Spanish generation EBITDA in the last six months of 2023 is not very different from what we had for the entire year before the COVID. In 2023, we are seeing the benefit of the balance hedging and contracting we did last year, looking at very rich short-term prices for 2023, more than 160 euros per megawatt hour, and also securing significant long-term PPAs at very attractive prices backed by our existing Spanish generation fleet, both the short-term hedges and the long-term PPAs with much better prices than we expected in our IPO plans. The output remains below long-term average, especially because of the poor global resources, mainly in hydro. We increased our stake in Renomar, a Spanish wind company where we have owned historically 50% with our partners. The company owns 494 megawatts and its average production is 1.1 terawatt hour. This is not a big acquisition. It's basically normal because of our business, very natural things. for us to do as this asset that we developed in the past and we are operating since the start, now we are pleased to take the opportunity to increase our stake to 75% in this high quality portfolio of win assets as one of our partners decide to exit. We have paid just under 120 million euros for the 25% of the stake and Renomar had significant net cash position, implying that we are able to trade below 0.9 million euros per megawatt with a fantastic asset base. The transaction is generating a significant capital gain in the year that is helping to compensate at the bottom line the operating results. In the next few slides, I want to focus on our construction plan for the current year and also for the increase in visibility for 2024 and 2025. I will also provide you with our update financial expectation for the current year 2020. Starting with the construction plan 2023, as you know, our commitment is to install approximately 1.8 gigawatts of new capacity in the year, which is very concentrated in two geographies, North America and Australia, with ongoing U.S. solar projects such as Fort Bend, Union, High Point, Ritter Hawk, and our largest project under construction, the McIntyre Wind Farm in Queensland, Australia. We are broadly on schedule with a busy second half of the year, but on schedule. During the past six months, we completed the installation of 142 megawatts and our construction schedule is back-end loaded, planning 650 to 700 megawatts constructed in each of the next two quarters. Starting with McIntyre in Australia, we are currently in full turbine erection with 38 machines of 5.7 megawatts each completed as a few. And in the process of increasing our current installation rate of 10 to 12 new turbines per month. Yesterday, we had 47 turbines or 270 megawatts already erected. In the US, in contrast with the disruption in module PV supply that we had in 2022, aggravated in the past by the anti-circumvention issue, this year the things are going very much better. Although we had at the beginning of the year some potential delays with one of our Chinese suppliers, which was anticipating the problems with the U.S. border, today we have been able to resolve well early in March, procuring more from our new tier one manufacturer coming from India. Today, our module procurement plan for Red Tail Hawk in the U.S. market has even accelerated by a couple of months, which means that we are receiving all the modules for the project. And if everything goes according to the plan, we could potentially even increase the plant distillation at this site from the initial 150 megawatts in the year to 250 or 300 megawatts in this year, 2023. In Spain, we are expecting to get the construction permits and local license immediately to get working on the sites as soon as we can. In Peru, we are on track with our Marcona wind project. Looking at the big picture, we have a lot to do in the next six months, and there are obviously some challenges, but also some upside opportunities. and we are really very confident that we will be able to reach the target of 1.8 gigawatts new capacity installed at the end of the year. This is at the top of my list. We are extremely focused on completing the plan for the year and we have the capabilities to deliver and to maintain this new pace of growth going forward. Turning to the slide number eight, we have been very busy evaluating many projects in the last few months, approving more than one gigawatts of new capacity, as well as rejecting or postponing opportunities in some markets that today were not matching our expected return targets. Past February, at the full year result presentation, we were showing to you 1.2 gigawatts of identified capacity addition for 2024. basically comprising the tail end of McIntyre, the Red Tail Hawk, the first part of the Aldoga PV plant in Australia, a couple of wind projects in Australia, as well as a batch of new Spanish assets, which had, after a long wait, obtained environmental approval. As of today, the total fully secured capacity for 2024 stands at more than 1.7 gigawatts, with the addition of 40-mile wind farm in Canada, 280 megawatts in the phase one, another 160 megawatts of PV in Dominican Republic, with very high PPAs, more than $90 megawatt-hour PPA, and some additional Spanish projects. We have included also in the charts 413 megawatts PV project in India that we are securing the next weeks in which we'll add 125 megawatts extra in the 2024 construction schedule with the rest of the project delivered in 2025. We are also increasing fast the visibility, not just the visibility of 2024, we are increasing the visibility of 2025 and we have already a very good idea of what projects we are going to build in 2025. In the slide, we show you the expected regional split. We are not showing you the names of the projects as yet as some of the projects are in the internal process of getting the final investment decision. But they will be approved in the next few months and they will serve to fill the activity in the next years. That is including additional solar in the US in the PGE market, Potentially batteries and other battery storage in ERCOT in Texas and potentially some projects in the UK market. In India, I mentioned the large solar project we are securing that will contribute both 2024 and mostly 2025 in terms of capacity. South Africa, we are advancing with a view to contract and build three wind projects, totaling around 325 megawatts, and considering also a new battery project for the next tender in South Africa next month. In Australia, we will complete the final 185 megawatts of the 433 megawatts Aldoga project. So we have additional wood visibility of a couple of PV projects in Central America, adding more than 200 megawatts. And same in Croatia with our project solar PV Promina with 183 megawatts. And in Iberia, we have a significant pipeline of solar projects, mostly hybrid, and we are considering only the most efficient for now or the best contracted. With all these projects, we are secure, as I said before, not just 100% of our capacity for 2024, but most of our new capacity to be installed in 2025. So we think we have today very high visibility of at least 1.7, 1.8 gigawatts in 2024, and we can do, without any doubt today, another two gigawatts or more in 2025. With that, we will reach our IPO target of 20 gigawatts by the end of 2026, sometime in the early 2027 as the latest. We expect to reach and stay at the 1.8 gigawatt marks in 2023 and 2024, which is a well-balanced target for us. And then we will increase to a speed of around 2 gigawatts per year. We are living today in a world of plenty of opportunities for investment and higher proper prices, but also with more uncertainty for permitting, for read access, with higher and more volatile capex and higher interest rates. Even the module prices, the PV module prices, are falling strongly. Today, each project has to be analyzed in its own merit. Each project has to fight its own case. They are not blanket green light for any particular region in the world. We can say that achieving the right returns is easier in some geographical areas, Australia, the U.S., Spanish for wind, Spain for hybrid PV. But in other markets, we may have to develop and to be ready for the correct moment. This is the case of Brazil today. where we are waiting for the current moment or in some markets we are postponing projects we don't see today our required return. We can do that because we have a well-diversified pipeline and a well-diversified geographical presence in several markets and because we are not in the race to growth at any cost. We will grow in the future at unprecedented rates We have the origination and the execution capacity for a run rate of two gigawatts or more per year, and we want to capitalize on our increasing momentum. But we will grow at the right pace, at the speed that we can digest from a financial and a credit perspective point of view, and always protecting our highly profitable existing business. We are, for example, considering some sizable development opportunities in battery storage or in utility-scale floating offshore in the future that will significantly increase our capacity plans in the next few years. To accommodate the run rates of 2 gigawatts per year or more in our balance sheet, We will be open in the future when we need it or when our financial ratios demand it. That is not today. We will be open to alternatives such as minority partnership or as well as selective rotation and mature assets if it would be the case and the opportunity. In the next slide, number 10, and with respect to Outlook 2023, we have today half of the year behind us. the Renomar deal secure and the minimum for power prices stabilized around 100 MWh mark. In this context, our current EBITDA expectation for the full year is in the range of 1.2, 1.3 billion euros, based on the Spanish full prices of around 100 euros per MWh and consolidated output for the global fleet of around 22 TWh this year. taking into account the low hydro output for the rest of the year. In June, in the past month, the unexpected and extraordinary review in the Spanish regulatory price assumptions, the change of parameters for the current three-year period had a significant negative impact in our expectation. Nevertheless, it's just an accounting effect, not affecting cash, not affecting the value of the company, and we will recover in the future this positive accounting effect in 2026 in the year in the following years the renomar transaction is contributing both at the operating profit level and at the bottom line on top of the capital gain generated by the revolution of the company as it becomes today fully consolidated in our accounts all in all the this evita that we're projecting for 20 23 is still above the levels that we expected at the time of the IPO, despite the lower output in the year and less investment in 2022. This beta implies a significant growth relative to 2021 that was already a variable year if we look through the absolutely exceptional 2022. In terms of net investment cash flow, we expect to be close to the 2 billion. and the net debt to EBITDA ratio will be around 2.5 times. Finally, I want to share with you some decisions I have made with respect to the top tier of the organization. In the light of the rapid growth in size, in geographical footprint, in new, more renewable technologies and more activities related with the energy transition, I want, I need to reinforce the operational control of our global businesses. For that, I have created a new position, a new Chief Operating Officer position, designed to supervise all the global and operating activities of the company. That's a position that will be assumed by Arantxa Espeleta from next August the 1st. Cos Entre Canales will assume on the same date the role of the Chief Financial and Sustainability Officer on top of his responsibilities in strategy and corporate development. Congrats to both. Arantxa and Jose will work even more closely and more directly with me supporting myself in the most relevant operating and financial matters and decisions. Thank you very much and let me hand the floor to Arantxa to review the financial and operating performance during the first half of the year. Thank you.

Good morning. Thank you, Rafael. Let me quickly run through the key financial and operating figures. Revenues fell by 20% to 1,760 million euros as a result of lower prices in generation and supply activities. Generation revenues fell by 24%. ABTA is down to 686 million euros, falling by 25% in line with revenues. Generation ABTA in Spain is down while international improves. Earnings before tax are flat at 567 million euros, despite declining EBITDA and slightly higher depreciation charges, thanks to the Renomar revaluation financial charges that are not increasing significantly, and the partial reversal of the power concerts that we mark to market through the P&L, which last year contributed a significantly negative result, and this year is a positive contribution, thanks to lower market prices. Net investment cash flow of 1.5 billion euros is twice as high as in the previous year, evidencing the strong acceleration in our growth. Net debt increases by around 1.5 billion to 3.5 billion euros, reflecting the front-ended profile of our investment this year and the payment of the dividend. We expect net debt to be lower at year-end. WITH RESPECT TO THE KEY OPERATIONAL FIGURES IN THE SLIDE, LET ME MENTION THAT CONSOLIDATED CAPACITY STOOD AT 10.8 YIELDS, GROWING BY 1.5 YIELDS, OUT OF WHICH ALMOST 500 MILLIWATTS ARE RELATED TO THE CONSOLIDATION OF RENOMAR. CONSOLIDATED OUTPUT GREW BY 2% TO 10.5 TERAWATT HOURS, while the average price fell by 26% to 86.2 euros per megawatt hour, which explains the 24% decline in generation revenues. Availability improved to 95.8% and contracted output stood at 77.3% for the period. With respect to the ESG metrics in the slide 13, on the social side, we report a large increase in staff due to integration in Acciona Energia of the Acciona Group Renewable Energy ONM Services Company, EROM, last year. We increased the number of women in managerial positions and decreased the accident frequency index. On environment, the alignment of our CAPEX with the taxonomy is total. Emissions increased due to the change in methodology for lease vehicles that go from a scope three to scope one. And we will mitigate this later in the year by reducing the scope two. Waste to landfill increased due to boiler cleaning waste and removal of contaminated soil. Zero use blades go to landfill and we are working on a pilot to reuse blade materials. We have also increased the voluntary tree planting in a major way. On governance, on track to audit 100% of our critical suppliers by the year end. We approve a new ethics channel policy for the protection of those who report on regulatory violations and corruption. And finally, we published our unique impact financing framework, which is very innovative and introduces a local impact component to enhance both sustainability linked as well as green use of process instruments. In slide 14, you can find detail on the breakdown of the 1.5 billion euros of total investment during the period, with 1.1 billion euros of gross capex concentrated in the U.S., Australia, the Americas, and Spain, and over 400 million euros of net capex deferral. A significant part of it represents the payment in January for the Cunningham battery storage system agreed at the end of 2022 and disbursed in early January. In slide 15, we show the cash flow for the period. Operating cash flow amounted to 383 million euros with negative working capital reflecting in part that we paid back the excess regulatory income casting during 2022 and which was provisional and dependent on the final government calculations which were published very late in the year. Financial results increased from 40 million euros in the same period last year to 52 million euros, reflecting higher net debt and higher average cost of debt. Net investment cash flow of 1.1 billion euros as already discussed, and then the payment of the dividend for 230 million euros. The acquisition of Renomar brought around 100 million euros of project finance debt and 161 million euros of cash to our perimeter. That takes debt before IFRS, 16 to 3 billion euros, and to 3.5 billion euros with IFRS. With respect to the debt position, I would highlight the higher average cost of debt during the period, which increases to 4.3%, with the cost of corporate debt at 3.35%, and project debt at 8.5%. Our cost of debt is gradually reflecting the higher base rates, which have increased by 250 to 300 basic points in the last few years or so, even if the spreads are under control or even lower in terms of incremental financing. We have roughly 50% of our debt variable, as we prefer to have a balanced position and not to lock in the current high rates for the long term, with the view that as inflation pressures ease, at some states interest rates may correct. With respect to the average debt maturity, it has increased mainly as a result of the Australian dollar corporate facility device for Macintyre project, which has a 16 year door to door term, which was possible thanks to the structuring with the Spanish sport credit agency under its green policy. We issued our third benchmark green bond in Euro at the end of April, a 500 million euro seven-year bond with a coupon of 3.75%, implying 78 basis points over mid-swaps. It was another very successful transaction on the back of our profile as pure play renewable energy company with top ESG credential and investment grade rating. We tend to trade and price tighter than similar rated companies. For your review, we include the summary of the Spanish power market dynamics in this slide. Much lower prices than the previous years with the first half of 2023 at 88 euros megawatt hour versus 206 euros megawatt hour in the same period last year in a context of declining energy commodities of the peak. The blend of actual prices so far this year and forwards suggest a price of close to 100 euros megawatt hours for the year as a whole, and this has tended to stay relatively stable in recent months, and prices in the forward market in December are higher than the realized price in December 2022. Forward for 2024 are around at the 100 euros megawatt hours, and they have traded between 90 to 105 euros per megawatt hour for a few months now. Hydro reserves for the country remain below five-year averages in another very dry year. In slide 18, you can see the main driver for the Spanish generation business with revenues down 32% to 569 million euros. Output is up by 3% to 5.1 terawatt hours with lower proportion of regulated given the very high prices in the last couple of years, which has been in turn contracted to maintain a highly visible profile. The average active price falls by 34% to 112 euros megawatts, reflecting the lower wholesale prices, uplifted with a significant benefit from the hedging carried out for the period, and with limited impact from the regulatory drivers. The gas flowback during the period amounts to 19 million euros, which is why the achieved price in the unhedged volumes for the period is seven euros megawatt hours, rather than close to 90 euros megawatt hours. In the next slide, the total EBITDA in the Spanish business declined by 38% to 419 million euros relative to an exceptional first half in 2022 of 676 million euros. Generation EBITDA fell by 36% to 430 million euros with lower prices and some impact from the lower output when we exclude the new assets, as well as the regulatory change we have already mentioned. The contribution from the new assets and renumeration aggregate mitigates part of the effect of the lower prices. In slide 20, you can find some statistics on the markets we operate, as well as the evolution of commodities and the main exchange rates that affect us. I would note the pattern of very high prices globally during the mid part of 2022 and how that has corrected following the path of energy commodities. With respect to the key drivers for international generation revenues, volumes are up by just 1.4% with another year of weak resource more than compensated with the output from new assets. The average price falls by 8% to 62 euros megawatt hour, with prices declining in all markets except for Mexico, where we had high income from capacity payments. Generation revenues declined by 7% to 334 million.