Acciona Sa

José Manuel Entrecanales, Chairman and CEO at ACCIONA. Welcome to the 2023 results presentation for both ACCIONA and ACCIONA Energía. On my right, the CFO of ACCIONA Group, the Head of Infrastructure on my very right. CEO of Acciona Energía on my left, Rafael Mateo, and the CFSO at Acciona Energía. I will be making a short introduction, and then I will pass on the floor to Rafael first, Acciona Energía, then the CFSO of Acciona Energía, and then on to the group with José Díaz-Caneja, head of During 2023, which has been the warmest year since records began, we have seen the acceleration of both the effects of climate change and the transition towards a decarbonized economy, with around 145 countries with net zero targets covering close to 90% of global emissions. It's a transformation that is producing what some say is the biggest relocation of capital in history. Clean electricity, the main vector of decarburization, needs to triple to meet the demand required by conventional or new users, such as electrification of transport, industry, big data, or clean hydrogen, to name a few. It is estimated that an additional investment of 1.7 trillion annually is needed. This figure more than doubles when considering the non-energy infrastructure required for resilience, transformation and adaptation to the effects of climate change or the increase in urban population with its transportation, housing, sanitation, waste or water implications. Fortunately, despite some marginal debate on the causes of climate change. These challenges enjoy unprecedented policy support and investment appetite, and notwithstanding some interest rate uncertainties, demand for infrastructure investment is at its highest level on record. Private asset managers are sitting on approximately 350 billion of dry powder, that is cash on the sidelines, looking for suitable investments while just in our four main markets, Spain, Australia, Brazil, and the U.S., the pipeline of global infrastructure projects for tender is expected to exceed 125 billion only in 2024. Indeed, a healthy balance of supply and demand with the only caveat that the projects need to go from green to brownfield in order to become suitable for investment by the financial community. The demand for smart infrastructures, we call smart infrastructures to those which are sustainable, appropriate for mitigation, adaptation, resilience, and transformation. I said the demand for smart infrastructures, both from promoters, usually governments, and investors, is guaranteed. And few companies in the world are better suited, experienced, and recognized in the field than Acciona. There is a scarcity of players with the necessary technical and financial capabilities. ACCIONA is one of the few companies that can deliver such a broad portfolio of sustainable solutions. The successful execution of complex projects has been our best credential for achieving our record year in securing backlog and pipeline. Acciona also has a valuable asset base, which includes 13 gigawatts of renewables, 1.8 billion of gross asset value in real estate assets, and operating and under construction concessions with an associated investment of 1.4 billion. that will continue to grow on the basis of our 34 billion infrastructure backlog and our 40 gigawatts of renewables pipeline. These figures are the result of broad infrastructure capabilities, global footprint, while local expertise. All that generates unique originating opportunities, diversifies risks, and allows for superior talent attraction. Rotating this asset base will provide us with ample capacity to take advantage of our privileged position as one of the few global suppliers of brownfield assets to an avid investor base. we are creating a broad portfolio of innovative solutions that provide a comprehensive response to the challenge of decarbonization and the sustainable transformation of the economy. Our aim is to move beyond the delivery of zero-impact solutions to those that have a positive impact on nature and society. Along with this objective, Our CAPEX in 2023 has reached 99% alignment with the European taxonomy of sustainable activities. A figure that for a company that qualifies in a dozen different subsectors within the infrastructure universe makes Acciona the most complete provider of sustainable infrastructure solutions in the market. The sector-brought taxonomy-selective investment approach enables the generation of predictable returns from our existing asset base, good margins from construction of projects, and a comfortable asset rotation capacity that will allow us to continue growing and developing new opportunities. That is indeed the essence of ACCIONA. a greenfield to brownfield developer that turns projects, blueprints, into valuable assets. By the end of this year, we will have over $17 billion of invested capital at network value in highly sought-after liquid energy and infrastructure assets. We are in a privileged position to continue growing through infrastructure investment while maintaining a moderate and stable risk profile. 2023 has been a record year in terms of new megawatts installed with a total capacity of 13.5 gigawatts, and it is worth mentioning the acceleration in our installation rate. with Acciona Energia reaching 1.7 gigawatts in a year for the first time. This is about three times higher than previous years, thanks among others to our Australian footprint, mainly, particularly McIntyre, the McIntyre wind plant, which is, you may know, is a one gigawatt project. a remarkable leap forward in the US with over one gigawatt added in 2023, or the expansion of new markets with a good risk-reward equation, such as Peru, the Dominican Republic, selected Southeast Asian markets, Canada, India, or Croatia. As for innovative growth, We have deployed large-scale batteries, pioneered green H2 hydrogen projects, continued to invest in state-of-the-art biomass generation, electric vehicle charging, and advanced in floating offshore to transition towards a more sustainable and resilient energy landscape. 2023, It's also been a record year in non-energy infrastructure, managing to reach record highs in sales, backlog, and increasing operating margins with a good performance from our three non-energy business lines, construction, water, and concessions. It is worth highlighting the completion of some landmark construction projects, such as the Follow Line in Norway, the Quito Subway, in Ecuador or the Sightsee or the Rockwood dams in Canada and Australia, respectively. In addition, ACCIONA has been awarded several emblematic concessions, such as the I-10 highway in the United States, in Louisiana, and major transmission lines like Humblin-Colorana in Australia. We are indeed well-positioned to continue winning concession projects that will further enhance our asset base and allow for future asset rotation with significant IRR compression and its value-enhancing consequences. 2023 was a pivotal year for Acciona Water. with important milestones such as the award of the concession for the construction, operation and management of the second largest desalination plant in the world fully operated with renewables in Casablanca, Morocco or the Alkimos seawater desalination plant in Perth, Australia. These projects integrate into a concession portfolio of more than 1.4 billion of associated investment in the next few years and already in place, already invested, operating or under construction, such as the Line 6 in Sao Paulo Metro or the diversion channel of the Red River in Fargo in the US, that should significantly increase in value as they approach the brownfield status. In the coming years, we will intensify our activity in the concessional deployment of sustainable infrastructure in all of the sectors of expertise. This strategy has translated into an EBITDA of $2 billion and a net profit of $541 million in a challenging macro and energy price environment. Substantial net investment cash flow totaling 3.3 billion. Our prudent financial management ensured that our leverage ratio stood at 3.3 net debt to EBITDA, well within the confines of our financial policy of less than four times. Our investments will be supported by the company construction cash flow, the operating cash flow derived from our operating asset base. traditional and green debt financing and a systematic brownfield asset rotation that will make sure we comfortably maintain our investment grade rating and a stably growing dividend policy. Our proven greenfield infrastructure developing capacity together with a wide portfolio of operating assets will allow us to continue supplying de-risked assets to the world's broad investor base with its return multiplier effect, while keeping a prudent and stable risk profile and healthy dividends to our shareholders. Looking ahead in 2024, at group level, we anticipate single-digit growth at EBITDA level, excluding capital gains. from asset rotation and healthy double-digit growth all in all. As for the medium term, we aim for sustained double-digit growth in both cases. Our net investment cash will reach 2.2 to 2.5 billion in 2024 and stabilize at around 2 billion in the coming years, always remaining consistent with our investment grade and dividend commitments. with a healthy net debt to EBITDA ratio below 3.5 times and a stable single-digit dividend growth in 2024 and in the medium term. With that, I thank you for your attendance, and I pass on the floor to Rafael Mateo Teo of Acciona Energy.

Thank you, José Manuel. Good morning, ladies and gentlemen. Let me start with the ACCIONA Energía 2023 results presentation, starting with the key highlights and then take through the main strategic messages that we'd like to convey today. 2023, as José Manuel said, is a year of record levels of organic growth with 1.7 gigawatts of new capacity, which is more than three times the run rates that we had in the previous years. We met what was our key target for the year, also fulfilling our IPO aspiration of stepping up our growth to a new level of capacity. The global disruptions of 2021 and 2022 are largely behind us, but the context appears today to signal a better operating environment. Today, total installed capacity rates 13.5 gigawatts and consolidated capacity grow even more by 2.25 gigawatts, reaching 12.1 gigawatts, thanks to the growth and also to the consolidation of Renomar and Mora, as we have been increasing our stakes in some of our EV assets developed and operated by the company. In 2024, we will install at least another 1.7 gigawatts, and we have the origination and execution capabilities to consistently deliver high levels of growth in the new Valleja creative projects, although our approach to medium-term capacity additions will be quite flexible. As José Manuel mentioned before in his introduction, we see very strong growth potential in renewable energy in the world today. It's a market that is exploding due to the huge investment needs to reach the net zero conditions and the very strong policy support and the very strong availability of capital seeking to participate in this huge opportunity. We see a great opportunity for increasing our value as a developer on the back of our 30-year track record and global reach. on the back of our origination and execution capabilities and the strength of our pipeline, our balance sheet, and our large and profitable asset base from which we can rotate if we want or if we need to do. Jose will elaborate more on this theme, but in this new environment, what makes sense for us is to rotate as many assets as needed in order to grow as much as is profitable to grow. provided that we can maintain our credit ratings and there is a healthy asset rotation market. Other highlights of the year in terms of growth includes our pipeline, which stands at 40 gigawatts across all the mature and emerging technologies in the markets where we are operating. In Spain, we complete the acquisition of an additional 25% stake in Renomar, consolidating 494 megawatts of capacity that was developed and operated by us. The price was very attractive at the implicit of 0.9 million euros per megawatt, and this was an important strategic milestone for us in 2023. We are also very happy to have a new and large project in India. After some years of very low activity there, we will contract construct the largest PV plant in the country with 413 megawatts peak and also in South Africa where we are very advanced in the structuring of private PPAs and financing for 200 megawatts of new wind farms. We are also back to Canada with 280 megawatts of wind under construction and the potential to increase the capacity to 400 megawatts. We commissioned in Spain our first hybrid plant, PV plus wind, out of a very large pipeline. In Southeast Asia, a very new region for us, new opportunities are coming along with the awards of PPAs for pipe projects in Thailand and also being selected in Philippines by the government to develop a new wind project. Strategically, the company has also made a very good progress during 2023 with the commissioning and operation of our first utility-scale battery. Battery storage has advanced faster and is now becoming a tangible near-term opportunity in some markets like Texas or Australia. Our next battery project may come quite soon if negotiations of the tolling agreement progress is coming as expected in Queensland, Australia. This is a large battery of 200 megawatts, two hours of storage. And we are analyzing close to approve another U.S. project of storage in the U.S. market for 2026. In the field of PPAs, we achieved our target of contracting around one and a half terawatt hour of new contracts. And we will highlight the 12 years PPA signed with Stonewell for the 487 megawatts Aldoga PV plant. Stonewell is a key client for us, strongly supporting our renewable energy growth in Queensland, Australia. We have also advanced during 2023 with respect to our green hydrogen strategy, particularly with the Navarra 25 megawatts electrolysis projects. In terms of financial results, they are very solid. considering the partial normalization of the energy prices and the surprise change in the Spanish regulatory parameters. Our hedging strategy was given a significant contribution, helping the company to mitigate the impact of prices. New assets are also contributing positively, especially in the Americas. The output was also higher thanks to the new capacity and the consolidation of Renault Mar. despite the weak energy resources across the fleet. The new commissioned capacity will start contribution to production in 2024-2025. Our credit ratios remain very solid and within the medium-term investment rate thresholds, despite the record levels of investment. It's important to note here that higher investment is driven by acceleration of capex and for the new projects. and by the postponement to 2024 of the monetization of the 30% stake in McIntyre Australia, and not by cost overruns. Additionally, this major acceleration in investment implies that warring progress was exceptionally high at the end of the year, which is reflected in the debt figures, but not yet in the output in the EBITDA. The asset rotation will contribute in 2024 with capital gains to our EBITDA and helping us to maintain healthy credit ratios in combination with CapEx flexibility. On the distribution of 2023 post-tax results, the board has proposed a dividend per share of 0.48 euros per share while currently maintaining the payout ratio at 30%. Moving to the next slide, I want to highlight our realistic optimism on the ability of Acciona Energía to continue to create value with new investment. EPA prices remain robust in our key markets and are significantly higher than pre-energy crisis, in many instances compensating for the higher capex and the higher cost of finance. There's still the scarcity of solid projects that remain untracked and uncontracted, and customer demands continue to grow. That allows the company to be different, to differentiate itself, and to obtain better prices from the customers. Contracts are today more balanced, protecting us against the growing development lead times and the uncertainties. There are certain factors that have improved, such as the stabilization or even the decline in the unit capex cost, particularly in solar PV, or the inflection point in the interest rates, or the easing of supply chain constraints. We see a very large volume of new projects opportunity, but it's critical to be very selective and to use wisely our balance sheet capacity. Not all the projects and make our return expectations, and we are discarding sizable opportunities and putting on wait-and-see certain markets. We are particularly keen on Australia, North America, and Europe. In next slide, with respect to our commercial policy in Spain and also in international markets as well, I'd like to make the point that our level of contactness is not random. It's based on a sophisticated approach to managing our risk across the market where we operate, according with the local dynamics and according with the size and the mix of our portfolio. We also carefully monitor our sales at risk across the entire fleet and the diversification across our contractual arrangements, technologies, or geographies in order to reduce the risk. Our philosophy of 80-20 contracted versus merchant is appropriate for our business, although we make some small changes to adapt to evolving dynamics. A merchant component is protecting us from being short energy, which can be a considerable risk in times of high price volatility, and also allow us to capture historically some extra value for our shareholders. In the next slide, I want to provide to you some data from the Spanish generation business and our hedging policy as we always do. The portfolio is close today to 75% hedge for 2024 in terms of volume and about 50% today for 2025. We will increase towards the 80% level for both in the year 2024. In the current context, we are considering reducing the weight of the short-term financial hedge in favor of the higher long-term contracts. We are setting ourselves an objective of closing an additional one terawatt hour or so of medium to long-term baseload contracts during the year with delivery of energy starting in 2025. In the current environmental crisis, it's providing a good opportunity to increase our visibility while not having an opportunity cost in terms of the difference in between the spot or the ppa prices as they are quite similar at the moment in the next slide we have laid out some scenarios for power prices and the company's generation revenues based on current omit forwards The point I want to make here is that price events tend to be more biased to spike events, and our scenario modeling based on Omip for the next few years is as strongly asymmetrical as shown in the slide. The distribution of potential revenues for 2024 is more symmetrical, given the high level of hedging, while in 2025 it's more skewed to the upside as hedging is lower at this point in time. Now let me hand over to José Entre Canales, Chief Financial and Sustainability Officer.

Thank you, Rafa. Good morning, everyone. Let me start with a comment on the balance sheet. We ended the year with a solid balance sheet position, capable of supporting our growth plans. We are a company with a strong cash flow generation, thanks to our large and efficient asset base. Power price volatility on our merchant generation does not change that fact. If we look at the period since our IPO, we have funded around 55% of our CapEx program and our dividend payments with our internal cash generation. This, together with our limited medium-term CapEx commitment, gives us a good ability to manage our leverage profile. Furthermore, taking our 2023 operating cash flow, we're trading at an implied yield of over 10%. Even in the current environment with somewhat lower power prices, we see similar levels of cash flow generation. As I mentioned, our credit ratios remain solid and within investment-grade thresholds, consistent with our expectations at the IPO. It is true that our leverage ratios have increased in 2023 from the extraordinarily low levels of 22 as our investment peaked in 2023 and power prices normalized. We are, as a result, no longer an undergeared company, but we are not an overgeared company either. We are simply a company that has to actively monitor and manage its credit profile, which is neither abnormal nor a reason for concern in management's view. I want to note that the credit agencies are not merely looking at a single year's ratios, but taking a through the cycle view. We need to be within the thresholds on a sustained basis, which is normally a three to four year view, and that is what we will do. Protecting our ratings remains a top priority, and we will plan and react accordingly. This translates to taking a more flexible approach to medium-term capacity additions to be evaluated together with the other key lever to manage our balance sheet, which has already been mentioned, asset rotations. Given our current trading levels and the growing divergence between public and private market valuations, rotating, operating de-risked assets is the most competitive source of capital to fund our growth together, obviously, with our internal cash generation, of course. The context has changed. Interest rates are higher. CapEx per megawatt has stabilized, if not increased, compared to pre-crisis levels, and renewable stocks have become somewhat out of favor. Therefore, we need to adapt. In this environment, we say clearly... that it is not desirable to target run rate growth of 1.8 to 2 gigawatts per annum of new capacity, nor to chase a 20 gigawatt capacity target, which has ceased to have much meaning in the context of the asset rotation strategy that I was describing. We will adopt a flexible and selective approach to new project investments. We have significant committed capital in 24, but only a modest amount in 2025 and none thereafter. Our projects tend to be smaller in size and with shorter development lead times than in offshore wind. So we have the ability to move swiftly and to accommodate our investment commitment to changing circumstances in a 12 to 18 month period. Our intention is for net debt to post a modest increase by the end of 2025 relative to December 23. And we will do that on the basis of CapEx flexibility in 2025, and asset rotation activity in both 2024 and 2025. Beyond 2025, we would like to leave it quite open. In the current context, we would say that 1.25 to 1.5 gigawatts of gross annual new capacity may be compatible with prudent ratios, provided a good level of asset rotation activity. Needless to say, these capacity additions are contingent on meeting our return targets and staying within our credit rating thresholds, which in turn will depend on the pace of asset disposals. So they should not be interpreted as fixed targets, but rather as an indication of the direction of travel. As we have said, the overriding principle is to manage our asset portfolio and our investment activity as needed to maximize our value as one of the few integrated renewable developers with a sizable base of operating assets. going into our asset rotation strategy in more depth. In addition to acting as a driver of new investment, it will also allow us to crystallize value across the portfolio, streamline our geographical footprint, and accelerate the reduction of exposure to Spain. Rotation also gives us the opportunity to maximize the value of our origination and execution capabilities, finding the most competitive pools of capital for every asset in the portfolio and every project in the pipeline. We're targeting run rate capital gains from asset rotation of around 200 to 300 million per annum, and we're making good progress with the first transaction in Spain, where initial indications of interest are encouraging and very much in line with our original expectations. In terms of outlook for 2024, we see consolidated output of around 26.5 terawatt-hours, and an average achieved price for the global fleet of around 65 euros per megawatt hour, with higher achieved prices in Spain and lower prices in the international portfolio. In terms of EBITDA, before capital gains, we see a central scenario of approximately 1.1 billion euros before capital gains, dependent, of course, mainly on output and wholesale prices, which are volatile and difficult to predict in the current circumstances. Including capital gains, EBITDA could grow by 5% to 10% relative to the previous year towards the 1.4 billion euro mark. Medium-term EBITDA growth, taking 2024 as a base, which is likely to be a normalized power price year, We see in the mid to high single-digit CAGR to 2028 in terms of investment gross capex net of the monetization of the stake in the McIntyre project is expected to be around 2 billion euros and net of tax equity proceeds and taking into account the 56 million already spent in the share buyback program and in the first few months of 2024, the total net investment will be in the 1.8 to 1.9 billion euro range. Net capex will naturally be lower when we factor in the proceeds from the asset rotations in the year. And in terms of the distribution of 2023 results, as mentioned by Rafael, the board has proposed a dividend per share of 0.48 euros, maintaining the payout ratio at 30%, which implies a distribution of 158 million euros. And now let me give a quick overview of full year 2023 financials. Revenues fell by 18% to 3,547 million euros. with lower generation and supply revenues due to the lower achieved power prices in general in Spain and international, while consolidated production increased by 9% year-on-year. EBITDA stood at 1,285 million, down 22%, with international up by 37%. to 547 million and Spain down by 41% to 739 million. Net income of 524 million fell by 31% and includes the capital gain resulting from the full consolidation of Renomar, which added 145 million euros. Net investment cash flow increased from 1.3 billion the year before to 2.3 billion, with intense construction activity and new projects. The monetization of the 30% in Macintyre was postponed to 2024 and will reduce net investment in the current year. Net debt at year-end, including IFRS 16, amounted to 3.7 billion, and net debt to EBITDA ratio stood at 2.9 times. In terms of main operating metrics, we have already mentioned a significant growth in installed capacity and consolidated capacity. Underlying output was weak, with low resource across the portfolio. The average price fell by 24% to 86.4 euros per megawatt hour, and availability increased slightly by 1.5 percentage points to 95.7%. In terms of key ESG indicators, I would highlight the full alignment of our CAPEX with EU taxonomy. Scope 1 and scope 2 emissions increased as a result of new accounting standards that reclassify fleet vehicle emissions as scope 1. However, we remain well within our SBTI target, and we have made a substantial reduction in our scope 2 emissions. On the social front, we have reinforced our programs for recruitment and development programs for female leadership. And we've also increased our social impact management programs to 133 with more than 290,000 individual beneficiaries. In July, we published the new sustainable impact financing framework for the entire ACCIONA group. with several innovative elements, including the possibility of adding local impact features to traditional green use of proceeds or sustainability linked instruments. And these are already being implemented in real life. In terms of investment, you can see the breakdown of the 2.3 billion euros of CapEx invested during the year, related mainly to our US PV assets, the Cunningham Battery in Texas, our 40 mile project in Canada, and back in time in Australia, as well as in Spain, including the payment for the acquisition of Renomar and the San Juan de Marcona wind project in Peru. This slide shows the main cash flow items for the year. As discussed, we have capex peaking at 2.3 billion, Working capital includes the resettlement of 2022 regulated income, given that the new ministerial order resetting tariffs came late in the year, and we handed back late in the year 2022, and we handed back the excess collection during early 2023. It is worth highlighting the net debt associated to assets that are either under construction or that have not contributed to a full year of production in December 2023 amounted to 2.9 billion euros. which reflects the fact that our capacity installations last year were very much backloaded. Moving to the next slide, you can see the main metrics of our financial debt worth highlighting. The cost of financing has increased, mainly as a result of higher base rates. We have extended the average maturity of our debt to almost six years, and the proportion of debt with fixed interest is of 56% while floating represents 44% of our debt, which will allow us to benefit from a falling rate environment. Going to Spain and main revenue drivers, the average price achieved price was 109 euros per megawatt hour compared to 167 last year. We note that the gas clawback is now accounted as an operating cost in contrast with last year, where it reduced revenues following, and we made this change following the European Securities and Markets Authority guidance in this respect. And worth noting that our hedging strategy contributed significantly to improve the average achieved price in 2023, given the reduction in prices throughout the year. In terms of operating results, Spanish generation revenues fell by 29% to 1.1 billion as a result of lower prices, and supply revenues also fell significantly for the same reason. Generation EBDA of 749 was 41% lower despite the contribution from growth, as you can see on the bridge on the right-hand side of the slide. In the international portfolio, volumes increased by 9% to 11 terawatt hours thanks to new capacity, with underlying production only 1% up on a like-for-like basis with a relatively low energy resource. The average international price remained flat at 66 euros per megawatt hour, with particularly strong prices in Mexico, Higher prices in the U.S. and improving prices in Chile. Australia saw a steep correction in prices, which reached unprecedented highs in 2022 in the context of the energy crisis. And to finish, international revenues fell by 3%. to 1.1 billion euros, with generation revenues increasing by 9% to 746 million, while supply and other fell to 375 million. Generation EBITDA in the international portfolio reached 550 million, increasing by 26% year-on-year, mainly due to the contribution of new projects. All markets except for Australia, where prices fell heavily, improved their results year on year. And with that, we finish the Acciona Energía results presentation, and I will hand it over to José Ángel Tejero.