ENCE Energía y Celulosa, S.A.

Good afternoon, ladies and gentlemen. Welcome to the NCEF First Quarter 2020 results presentation. I will now hand over to Mr. Ignacio Colmenares, Executive Chairman, and Alfredo Abello, CFO. Gentlemen, please go ahead.

Good afternoon, ladies and gentlemen. I hope you and your families are all well. Thank you for joining NCEF First Quarter 2020 results conference call. Our CFO, Alfredo Arrello, and our head of IR, Alberto Valdez, are also connected from their homes. After the presentation, we will be pleased to answer any questions you may have. Let's start in slide number four with the main highlights of the quarter, which has been marked by the international spread of the coronavirus and historically low prices. The market seems to be changing. various producers have announced price hikes. I'm proud to tell you that our early reaction to the threat from this virus on February 24th and the rigorous application of our protocols to prevent and minimize the risk of the spread of the virus have allowed us to keep our people safe and we continue to operate normally. All MFES activities from forestry operations the pulp production and the generation of renewable energy have been considered essential by Spanish authorities and must therefore continue during this health crisis. In general terms, the pulp market has continued to operate normally, but prices have been exceptionally low. Demand increased by 7% year on year in January and February. Higher consumption of tissue paper and hygiene products has offset the recent decrease in the consumption of printing and writing papers. At the operating level, the capacity expansions made in 2019 began to be different. Pulp production increased by 9% and cash cost reduced by 4%. Pulp sales improved by 25% year on year with a better commercial. In the renewable energy business, the two new biomass plants built in Huelva and Porto Llano were commissioned on January 31st and March 31st, respectively. These two new plants represent a 44% increase in our renewable capacity, which will be noticed in the second quarter.

They will provide the group with greater stability.

Despite these operational improvements, First quarter financial results continue to be affected by the low pulp and electricity prices with an EBITDA of 5 million in the pulp business and 11 million in the renewable energy business. In order to maximize liquidity and ensure the sustainability of our business, in any scenario, we have grown the 17 million credit line in our pulp business, maturing in 2023. As a result, the cash available in the group's balance sheet at the end of the quarter improved by 24%, up to $281 million. Remember that our two businesses enjoy long-term financing with no relevant maturities in the next two years and with no governance in the PAL business. Our top priorities now are the health and safety of our people, the continuity of our operations, the reduction of costs and leverage, and increasing prices. Moving now to slide five, we can see some of the early measures we took against the coronavirus. First of all, we began to plan and to implement preventive measures long before there was social awareness of the extent of this public health crisis in Spain. These measures allowed us to protect the health of our people and to continue our operations. All the measures are being coordinated by the crisis committee which I serve personally and which has been meeting daily since the health crisis began. In order to protect our people, we began to inform them about different prevention measures on 10th February. We designed a protocol which was distributed on February 24th. At the same time, we adapted the shift schedules so that the plans can operate with the minimum staff. Independent work teams have been appointed for each process, so they do not mix with each other. All these measures have been effective with no infections in our facilities today. In order to protect our operations, we have, first of all, ensure that this protocol reaches and is implemented in every corner of our organization, including subcontractors and logistics services. We have also taken measures to reinforce our liquidity in case this adverse scenario continue over time. Firstly, we have drawn the revolving credit facility of 70 million in the PAL business, maturing in March 2023. As a result, the cash available in the group's balance sheet at the end of the quarter improved by 24%, up to $281 million. Secondly, we closed in April long-term backup facilities with no cabinets for an additional $60 million. Thirdly, we have pushed back to the next year CAPEX payments for an amount of $40 million. And finally, we continue to optimize the use of our factory and confirming lines. These measures have improved our liquidity by 200 million. Moving now to slide number six, I would like to mention the highlights of our sustainability performance. Last year, we defined our sustainability plan which constitutes our roadmap to excel in sustainability and create value for all our stakeholders. Companies that care for the environment, for the people, and for their communities. Companies with a strong corporate governance are companies which are also more efficient, more flexible, more competitive, and more sustainable in the long run.

and that is a better company for the shareholders.

ENFE is at the forefront of the circular economy, sustainable forestry, and gender equality. In addition to all these measures we have implemented in the first quarter to protect our people, I would like to highlight. the successful development of our differentiated and more sustainable products, which already accounted for 10% of our park sales in the quarter. Secondly, the 44% year-on-year reduction in the other impact of our Pontevedra Biomil below 1.5 minutes per day. Thirdly, the 31% year-on-year improvement in our accident frequency index, which is now 10 times below the industry average in Spain. And last but not least, the reduction of water consumption at both diamonds. In the following slide, number seven, we can see the evolution of global pulp shipments and pulp producers' inventories over the last five years. In general terms, the pulp market has maintained its normal operations, having registered an increase in demand of 7% year on year in January and February, equivalent to 600,000 tons. Producer inventories now remain at normal levels, ending the situation of large stocks last year. As we see in the next slide, number eight, demand growth in the quarter was boosted by higher consumption of tissue and hygiene products, which offset the recent decrease in printing and writing.

Higher tissue demand is being fueled as more people stay at home.

At-home tissue is made from virgin market pulp, compared with away-from-home tissue, which is mostly made from recovered paper. Similarly, the consumption of hygienic products is rising rapidly at hospitals, and packaging is being favored as shoppers switch to the internet. As you can see in the following slide, number nine, Pulse prices have remained stable at the lowest levels in the last 10 years. These prices have remained below the cash cost of many pulse producers for three quarters.

Even worse, they were below the free cash flow break-even point of most pulse producers for two quarters.

This situation is unsustainable for most of the industry, and several players have announced price hikes as from April for Asia and from May for Europe and the States. In our case, our estimated free cash flow break-even points, including recurring capex and financial expenses, is $435 per ton below current market prices. In slide number 10, we summarize our views on PAL supply and demand. While it is difficult to forecast this year's demand growth at this moment, the position of the supply side is reasonably clear. There will be hardly any supply growth in 2020, even if all players return to their normal utilization rates. In the long term, park demand will surely add growth supply. Urban population growth and improving living standards in emerging countries together with increasing plastic substitution will continue to support an annual average part demand growth of 1.5 million tons minimum. On the supply side, only two major projects have been executed, Arauco's Mapa in Chile and the UPM project in Uruguay. that lead times for new projects are close to four years, meaning that no further supply will come on stream over the next few years. The capacity expansions we made in 2019 are beginning to bear fruit, as shown in slide 11. As expected, our power production increased by 9% in the quarter, in line with capacity expansions carried out last year. The fixed cost dilution resulting from this capacity increase together with lower corporate expenses and good costs have enabled us to reduce our cash costs by 4% compared to the same period last year. We see no reason to change our annual volume and cash cost targets for now. Our part sales improved to 25% year-on-year with a better commercial mix, as you can see in the following slide number 12. Almost all of them went to the European market where ENCE has significant logistical and service advantages. More than half went to tissue markets. Our strong order backlog should allow us to switch from printing and writing to tissue clients if necessary over the coming quarters. Remember that printing and writing segment only represents 10% of our bulk sales in the quarter. In addition, ENSES differentiated products are more sustainable and are better adapted to replace softwoods like NatureCell and PowerCell, which already account for 10% of our palm sales. Moving now to slide 13 and our renewable energy business. We commissioned two new biomass power plants in Huelva on January 31st and in Porto Llano on March 31st. These two new power plants represent a 44 increase in our renewable capacity, up to 316 megawatts. This increase will be noticed as from the second quarter and will provide greater stability to the group. I would like to remind you that the regulated annual return on investment of our power plants was confirmed at 7.4% for the next 12 years. This implies an annual amount of 63 million with no cost and subject to a minimum operation of just 3,000 hours per power plant. Let's continue in slide number 14 with a summary of our first quarter financial results. Pulp business EBITDA reached 5 million. Renewable business EBITDA reached 11 million. This is a significant improvement compared to the previous quarter, thanks to the stronger operating performance. However, lower pulp and electricity prices complicate the comparison with the same previous Turning to slide number 15, you will find the main cash flow components and our net debt position at the end. Pre-cash flow before growth capex and dividend payments amounted to 16 million in the quarter, while carryover payments from investments implemented in 2019 amounted to 32 million. The group's net debt increased by 21 million, up to 534. including 55 million related to lease contracts. It is important to highlight one more, once more, that our two businesses enjoy long-term financing with no relevant maturities in the next two years and without any covenant in the PAL business. And that our cash balance at the end of the quarter amounted to 281 million. Finally, Let's look at slide 16 concerning Ponte Vedra's bio-milk concession. We have been expecting a first ruling of the national court in the next few months, and this could be delayed until after the summer due to the coronavirus. I will now invite Alfredo to review the financial figures in more detail.

Thank you, Ignacio.

Let me start with our PAL business results, which you will find in slide 18. Pulp sales increased by 25% year-on-year up to 273,000 tons, thanks to the higher production levels achieved after the capacity expansions carried out in 2019. Additionally, pulp inventories decreased by almost 12,000 tons, down to 45,000 compared to the last year 20,000 tons increase in anticipation to the NAWIA plan shutdown for its capacity expansion. higher fixed-cost solutions derived from the said capacity increases, together with lower corporate expenses and wood costs, allowed us to reduce our cash costs by 4% compared to first Q 2019. On the other hand, average sales bulk price decreased by 31% as a consequence of the sharp drop in the average reference price in Europe, also resulting in an 86% EBITDA reduction. including by 15 million euros compared to the previous quarter in 2019. Finally, we recorded negative FX settlements for an amount of 4 million euros in the quarter compared to the 6 million recorded in the same period last year. Moving forward on to the Power Business P&L in the next slide, after EBITDA, depreciation amounted to 16 million. A 11% increase Driven, firstly, by the large investments carried out back in 2019 for the biomass capacity expansions, and secondly, by a larger wood depletion figure coming from our southern plantation's wood sales within our 10-year long-term contract signed at the end of 2018. Next to the right, we show one million related to ENTHES environmental tax provisions in Ponte Vedra with no cash outflow effect. resulting in a negative EBIT figure of 12 million for the period. Finally, financial results of 1.6 and a positive tax effect of 3.4 million euros, and then with our net profit of minus 10 for the period. If we continue to slide 20, we can analyze the PAL business cash flow generation. Normalized pre-cash flow after working capital changes, maintenance capex, financial payments, and taxes attained $7 million, benefited from the working capital improvement coming from our pulp inventories reduction in the quarter. Carryover cap experiments from our 2019 investments resulted in a free cash flow figure of minus $14 million, including non-cash expenses of $3 million. As part of our plans to maximize liquidity and ensure sustainability of our operations in the long run, under the current and foreseeable scenario, Our CAPEX guidance given for the year of 115 million euros in the pulp business will be reduced by at least 35 million euros down to 80. Moving on to slide 21, let me update you on our ongoing hedging program to mitigate currency volatility in our pulp business. In periods since which we were facing large CAPEX commitment, the company was hedging close to 80% of its U.S. dollar inflow. Now that we have postponed certain strategic investments, we're coming back to our standard policy, which consists in hedging only up to 50% of our bulk sales using average cycle prices and limiting the period to 12 months. This program had a negative impact of 4 million euros in the quarter compared to 6 million in the same period last year. If the U.S. euro exchange rate remained at an average of 110 in 2020, the full-year impact in our P&L would be of approximately 15 million euros. If we continue to slide 22, you will find our pulp business balance sheet. Net debt increased by 20 million to 326 million in the quarter, including a 3 million increase related to lease contracts. At the same time, Cash imbalance increased by almost 50% up to 156. Within our plans to maximize liquidity and help shielding our operations against any adverse scenario in the framework of this pandemic, we have drawn down our voluntary facility of 70 million euros with a 2023 maturity. Additionally, as our executive chairman has said, we are closing additional long-term backup credit facilities. for an amount of 60 million euros. Remember that this business is coming on free and enjoys long-term maturities, releasing our balance sheet from short-term pressures. Let's now focus on the energy business in slide 23. The energy volume toll increased in the first quarter by 4% thanks to the initial contribution of the new 46 Ma1 biomass plant in Weldon, commissioned at the end of January. Note that the energy sales of the new biomass plants during their testing phase have been capitalized together with their corresponding expenses, not contributing to the ABDA. Let me also highlight the high generation of our 1.50 megawatt biomass plant and our 16 megawatt biomass plant in Jaén after the improvement carried out in 2019. Also, the Ciudad Real 60 megawatt plant entered into its planned shutdown for its repowering in the first quarter this year. Regarding prices, the average selling price in the first quarter was 11% lower than in the same period last year as a consequence of the fall in the electricity market price. Please note that when comparing periods that the average selling price in Q1 2019 of 97 euros megawatt hour included a provision equivalent to 11 euros per hour for the temporary suspension of the electricity generation tax without impact at the ABDA level. The actual market price is below the four plies set by regulatory code, and therefore, we have recognized an income of 4 million euros in the quarter related to this item, whereas in the same period last year, we provisioned 2 million for the same concept, reducing our revenues at that time. As you can see in the next slide, number 24, the renewable energy business, EVDA, reached 11 million euros in the quarter, a 14% decrease compared to the same period last year, mainly due to the 11% decrease in the average sale price and the lower generation of our Fioreal 16 May 1 plant due to the plant shutdown for its repowering asset in this first quarter. On the other hand, this was partially offset by lower cost of 2.4 million euros. In slide 25, you can find the breakdown of our renewal energy business PMR. Below ABDA, the depreciation and others column increased by 53% up to 10.6 million as a result of the commissioning of the new 46 megawatt biomass plant in Huelva and the transfer of the last remaining assets in Huelva from the power business to the renewable business, once the required administration permits have been granted. Net financial costs for 3.6 million imply a 23% reduction compared to first Q 2019, which included certain one-off expenses related to the 50-milliwatt CSP project financing in March 2031. All in all, following a 0.7 million tax income contribution, the total net result of the energy business shows a negative figure of 2.3 million in the quarter compared to a positive balance of 0.8 in the same period last year. Let's follow in the next slide, number 26, with our cash flow generation. After taking into consideration changes in working capital, maintenance capex, interest, and taxes, Normalized free cash flow amounted to 9 million euros. Strategic plan capex of 7 million in our energy business was mainly related to the pending payments of the new biomass power plants commissioned in the quarter. After adjusting for 4 million non-cash income relating to the regulatory color, the renewable energy free cash flow figure for the quarter was minus 1. Let me conclude this review in slide 27 with our energy business debt situation. This business also enjoys very long-term maturities and ample liquidity. Cash imbalance at the end of the quarter amounted to 125 million euros. Net debt at the end of the period remained virtually flat at 208 million, driving off our financial leverage to a multiple of 4.2 times LTNABDA. However, it should come down close to three times at the end with a full year contribution of the two new biomass power plants commissioned in the first quarter. Let me now please return the lead of this presentation to our Secretary Chairman for the closing remarks.

Thank you, Alfredo.

Let me point out some several things. After the reduction of pulp inventories, producers have announced price hikes. The capacity expansions we made in 2019 are beginning to bear fruit with a strong operational improvement in the first quarter. All the early measures taken and the rigorous application of our protocols to prevent and minimize the risk of the spread of the coronavirus are allowing us to keep our people safe and continue to operate normally. All MTS activities from forestry operations to palm production and the generation of renewable energy have been considered essential by Spanish authorities and must therefore continue during this health crisis. We have a strong order backlog for the year that should allow us to replace potential lower sales to printing and writing customers with higher sales of booming tissue markets. Therefore, we see no reason to change our part volume and cash cost targets for now. New biomass plants commission should boost our renewable generation as from the next year. This regulated business is adding stability to the group. Its regulated annual return on investment amounts to 63 million and is subject to a minimum operation of just 3,000 hours per power plant. We have reinforced our liquidity by 200 million to face any adverse scenario. Our two businesses enjoy long-term financing with no relevant maturities in the next two years and without any governance in the PAL business. Our top priorities now are the health and safety of our people, the continuity of our operations, the reduction of costs and leverage, and increasing prices.

Thank you very much.

Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press 01 on your telephone keypad. You will have the opportunity to make all the questions that you may have. In order to keep it as clear as possible, we kindly ask you to make one question at a time instead of stating multiple questions to our speakers. Thank you. The first question comes from Joao Pinto.

Thank you for taking my question. The first one, briefing and writing was 10% of your sales. Can you compensate health pressures in this segment with tissue? Can you tell us how pop volumes have evolved in April so far and what you expect for the rest of the second quarter?

Yes, thank you very much, Joao.

Well, let's start before by the market. Yeah, where printing and writing represents 25% of market pulp, while tissue represents 55%, almost the double. That means that every 10% of reduction in printing and writing is compensated by 5% increase in printing and writing. During March, April, May, if the situation is normal again in Europe and the States, it is true that as we are not at the office, we are printing less. Less catalogs are published. and the consumption of printing and writing is going down. But at the same time, tissue consumption is booming. As I was saying before, away-from-home market in tissue is only one-third of the market, while at home is two-thirds, and at home is made 100% with virgin pulp, while away-from-home is made almost 80% with recovered paper. Paying more at home, we are using much more tissue. And we are quite confident that the increase of tissue will more than compensate any decrease, any possible decrease in printing and writing. Nevertheless, the last tons of pulp we produce are much more expensive than the 90% The wood we are buying is very far away. It is more expensive. The last megawatts we are buying are more expensive. The last trucks of chemicals we are buying are more expensive. Then as now we are very much committed to increasing prices if by any reason we say that we cannot compensate the sales, the decreasing sales in printing and writing in the booming market of tissue. we will prefer to adjust production.

Thank you, Joe. Thank you.

Please go ahead.

Yes, so my second question on prices. Do you know if clients in China are accepting the price hike announced for April?

And finally, just... Yeah. Yeah, we are not selling in China. The only thing we are hearing is from trading companies and what we are reading. And according to what, I mean, according to all the information I have, yeah, the prices have been accepted in April in China at 100%.

Just two quick ones. Just to confirm, regarding the guidance that 1.06 million tons of poke for 2020, it is a guidance for production or for poke sales? The previous presentation in Q4 refers to sales. This one refers to production. If you could clarify, it would be great. And the final question, again, on energy, can you update us on the possibility of opening?

Sorry. Sorry. You don't mind. We go question by question, okay? Okay. Okay. Then regarding the guidance, yeah, well, I think at the end of the year, 10,000 tons more or less. the production and the sales will be the same. Now we have sold more than what we have produced. Well, we cannot reduce further our stops. Then in second, third, and fourth quarter, sales and production will be the same.

And finally on energy, can you explain some of the possibility of opening the unit for a minority partner?

Well, you know, like the markets are today, we think it has no sense, then that is on the standby, and we will start again as soon as the markets are normalized.

Thank you very much.

Thank you. Thank you. The next question comes from Jaime Escribano from Banco Santander. Please go ahead.

Hello. Good afternoon. So my first question is, regarding volumes in April-May, although you have commented a little bit, but maybe you can be more specific. So based on the orders you are getting for May and what you have sold in April, can you give us a little bit of visibility on what should we expect in terms of volumes in Q2?

Yes, but there is two considerations, Jaime. There is one we don't have visibility is we don't know where we are going to do the annual shutdowns because of the coronavirus crisis because it will be crazy. We stop the mill and we import 1,000 people we don't know to manage the annual shutdown. Then, and we need a lot of foreigners, technicians, technicians, foreigners, they are not coming now. Then let's say that we are not going to do the annual shutdown until July, okay? If we don't do the annual shutdown until July, then the production will be normal and we will sell 100% of what we are producing. On the first quarter, we have reduced our stocks. We cannot do that anymore. Then production is going well, pretty well. We have a good order book. Demand in tissue is very, very strong. we are facing no problems in substituting printing and writing mails orders who are closed, then we have a good visibility when April is gone and good results in terms of volume, both production and sale. And May is going to be the same, and I expect June will be the same.

Okay. Thank you. And in terms of pricing, are you following the price increase of Suisano, and how are your clients responding to potential price increases as of May?

Well, we are not following any movement of Suisano or any other company. We have low results, and we have to improve our results, and then we are increasing prices. And we have announced that to the market. and we are not seeing any special reaction.

Okay. I also had one question regarding cash costs, which is what could we expect for Q2? So we saw a nice improvement quarter on quarter in the cash costs, particularly due to the cost of wood and also due to operating leverage. However, transformation cost, although it went down, I have the impression that maybe there is more room for improvement. Maybe you can give us a little bit more color on where do you see the cash cost in Q2?

Yes, Heidi, we see the cash cost in Q2 very similar to one euro less or up, very similar to first quarter. It's, well, we are operating normal, but we are operating the mills on exceptional situation. And we have some extra costs being operating the mills like we are and they are compensating some savings we are having in other areas at the end. What we see now is a very similar cash cost in the second quarter than in the first quarter. We will see a reduction in the third and fourth quarter because while The coronavirus crisis, although we are running well with meals, well, this new turbine in Pontevedra, the technicians were from Germany, they left Spain, and then we are trying to put this turbine at 100% by telephone, which is not easy. The second part, the dryer in Navia, has not yet started. It was supposed to start two months ago, but the same technicians have gone away, and they will not came till the coronavirus crisis is finished. Then we see that now it's stable, and it will keep like it is. We see further improvements in the second half of the year, and that's why we confirm our cash-cost guidance for the year of 3-7-2.

Okay. Very good. And one final question, if I may, regarding the energy division, which is how should we think about volumes sold or volumes produced in the energy division, bearing in mind the new capacity that you are operating now and bearing in mind also the operational problems that you point out in your 41 questions. megawatt plant in Huelva, which as I can read, it will be stopped until June. Thank you.

Yes, I would like to start to insist in one thing which is very important. According how the regulation is in Spain, all our biomass power plants and our thermosolar as well, but not the new two we have just started now, all the others, we are getting this 7.4% return on investment by the government with an amount of 63 million. And the only requirement to get this 63 million per year, and you are getting that month by month, is that you are operating more than 3,000 hours. Then you have to be able or to stop after 3,000 hours, or if you get cheap biomass and the full prices are good, you can continue operating and you get more money than this $63 million. What means that if World War 41 was supposed to be now working, but again, due to this coronavirus, we are going to delay the startup by four weeks, We have no problem, because at the end, we are going to produce 3,000 hours in World War 41, and it's not going to affect the EBITDA of the company.

Okay, understood.

Okay, yeah, thank you. So, for the full year, you should be close to how much megawatts, do you think, with the new capacity?

Yeah, 1.6 gigawatts. Perfect.

Thank you very much.

This is not really important. What is important is that we get the evidence that we want to get, okay? Okay, yes, for sure.

Thank you.

Thank you. The next question comes from Luis de Toledo from BBB. Please go ahead.

Yeah, good afternoon. Yeah, my main question was already addressed with regard to the power division volumes. Maybe on wood cost, I don't know if you could expect softer prices considering the alternative uses and the potential impact on demand. And if you can remind us indexation formula if we were to expect higher prices, I think this will not impact initially the wood cost. I don't know if you could elaborate on that. Thank you.

I haven't understood very well the second part of your question, Luis.

Okay. It's one question. The wood cost, if you expect them to decline, and if prices were to go up on your indexation formula, if they would be impacted or not for the moment?

Yeah. Okay. It's very easy. Yeah. We see on this quarter and on the third and fourth quarter a slight reduction in the price of the wood because The mix of wood harvested in the northwest of Spain, two-thirds is eucalyptus for the pulp industry, and one-third is pine for the tablero industry. And because of the coronavirus and what is happening in construction and what will happen in construction, large companies producing tablero are stopped, then there are much more people harvesting eucalyptus than before. Then we have a good offer. We have our stocks full. Then we will reduce slightly the price of the wood by one to two euros on the next weeks and months. When the prices of the park decreased at the end of last year, we were not able to translate to the wood the last reduction. That means that the wood producers owe us one euro. Then if we increase now these, let's say, $30 in May, we will not be obliged to increase the price. Then we see net-net slight reductions in the wood coming.

Very clear. Thank you very much. Thank you.

The next question comes from from Kepler. Go ahead.

Hello. Good afternoon. I just have one question, if I may. Do the current problems that you're experiencing with one of your turbines in Huelva change your volume expectations for 2020? And also, what about CAPEX?

Excuse me, we have a problem. It looks like our security chairman is not in the call. They are going to call them back again. Do you mind, Manantonia, to wait for a sec? We'll get Nafi back.

Yes.

If not, we'll continue with you.

Let's wait for Nafi. Thank you. Hello? Hi? Yeah, hello, here I am.

Hello. Did you hear me, or should I repeat the question?

Yeah, yeah, I hear you very well. Can you connect me again, please?

Hello? Are you there? Hello?

Yes.

Ignacio, Ignacio, you are connected.

Ignacio, put the mute in the... Okay. You are in the call, Ignacio.

Yeah, here I am again. Sorry, it was technology.

Well, did you hear my question?

No, no, I didn't. I didn't. I was out for a couple of minutes.

Okay, sorry. So this is Maria Antonia from Kepler Chevret, and I just wanted to ask you, to the current problems that you're experiencing with one of your turbines in Huelva, does it change your volume expectations for 2020? And what about CAPEX?

No, no, it doesn't change, no.

Okay. And what about capex? Nothing as well.

You are asking if the program in this turbine changed the capex in energy. No, it doesn't change.

Yes. Okay, thank you very much.

Thank you.

Thank you. The next question comes from Alvaro Lente from Alantra Equities. Please go ahead.

Hi. Most of my questions have been already answered. I wanted first a follow-up on the question from Luis. You mentioned that you see potential to reduce the price of wood by one euro. I wanted to, if you could clarify whether this is one euro per ton of wood or one euro of wood cost per ton of pulp?

No. I think that we can improve our cash costs from now. comparing to, let's say, the second half of the year by one to two euros per ton of palm.

Okay. In what cost? Okay. That's clear. And my second question was regarding CAPEX, could you please remind us what are the pending payments for the 2019 acquisitions that are still pending for the rest of the year after the investments that you have already paid in Q1?

Yes.

Well, I'm sorry because I was hearing Alfredo Avello telling me that he's out. Do you want me to?

Yeah, could you ask the question? Yeah, sure. My question was regarding the pending CAPEX payments for the 2019 investments that you made last year. what is the amount that is still pending for the rest of the year?

Yeah, okay. Then we started the year with carryover from energy and part of 140 million. And we've been able to negotiate friendly to the suppliers, 30 million delay till 2021. Then now what we have to pay from the investments of last year is 110 million. And this 30 million reduction or postponed has been 100% in part. At the same time, we have reduced by 5 million the maintenance capex in part also of this year. It was forecasted 15 million is going to be only 10 million. Then all in all, carryover from last year and capex from this year, the budget was 165 million. 115 in PALP and 50 in energy, and it's going to be 35 million less. It's going to be 80 in PALP and 50 in energy, $130.

That's very clear and very helpful.

And the other thing is that, well, we were supposed to pay these 165, now 130 million. The part of the energy was going to be paid through the financement of the energy to new biomass power plants. But these 115 million in part, or 80 million now, after these agreements with suppliers, we were going to pay that with our cash. As we have increased the lines with the banks by 60 million at three to five years, well, if something happens during the second half of this year, because of this coronavirus crisis, well, we will not reduce our cash. You understand? We can take these new lines and we can defer those payments three to five years.

Then we are absolutely confident in terms of liquidity. Great. Thank you very much.

Thank you. Thank you. Ladies and gentlemen, just a reminder, in order to ask a question, please press 01 on your telephone keypad.

Thank you. I think there is no further question.

Yes, we have a question from Logan Sagliore from . Please go ahead.

Yes, good afternoon. Thank you for taking my question. Do you have any news for us? about the equity investments in the renewable business. You were discussing towards the end of last year. Is the project off? Or if it is on, what multiple and what valuation are we talking about? And when do you expect the closing? Thank you.

Yeah, thank you. As I was answering before, we are still interested in this project, but it is on standby as the capital markets are today. And we want to sell that expensive. it is on standby and we will start again in one or two months as soon as the capital markets restart again.

Thank you. We have another question from .

Please go ahead. Hi. Just a follow-up question regarding governance. Can you remind us the on the energy division? I saw you have an in the energy division of 4.2 times, and just wanted to know if you feel comfortable with that, and in case you break the covenant, can you renegotiate, or what would be the repercussions? Thank you.

Well, you have to take into account that this ratio of the debt EBITDA is with almost all the investment of last year already paid. As I mentioned before, we only have to pay from the investments of last year's energy 40 million. That means that we have already paid 160 million. They were already paid. And we still don't have the EBITDA. That means that this ratio is a ratio on an extraordinary moment where you have already paid the investment, but you are not getting EBITDA from the investment. Then, as soon as these two new biomass power plants in Porto Llano and Huelva start, and they have already started, this ratio will improve and we'll go to a figure about three by the end of the year, and we feel much more than comfortable with this figure.

Okay. Thank you. Thank you.

Thank you. Ladies and gentlemen, there are no further questions in the conference call. I will now give back the floor to Mr. Ignacio Colmenares and Mr. Alfredo Abellos. Thank you.

Thank you very much. Keep safe and we are in touch. Thank you. Bye-bye.