ENCE Energía y Celulosa, S.A.

Good afternoon, ladies and gentlemen. Welcome to the ANSES first quarter 2021 results presentation. I now hand over to Mr. Ignacio Gormenares, Executive Chairman, and Alfredo Abello, CFO. Gentlemen, please go ahead.

Good afternoon, ladies and gentlemen. Thank you for joining ANSES first quarter 2021 results conference call. Our CFO, Alfredo Abello, and our head of IR, Alberto Valdes, are also connected. After the presentation, we will be pleased to answer any questions you may have. Let's start in slide number three with the main highlights of our presentation. Park prices are rapidly recovering after one year at minimum levels, driven by a tight supply and demand balance. European gross hardwood pulp prices currently stand at $936 per ton. Additional gross price increases are expected in Europe to match current net prices in China. $1,090 per ton has been already announced for May. As expected, pulp business results in the quarter was driven by still low pulp prices and the annual maintenance shutdowns carried out at both biomass in March. Despite lower sales and higher costs because of shutdowns, pulp business EBITDA increased by 55% year-on-year to 8 million. On the other hand, Renewable business results were driven by the deconsolidation of the Porto Llano CSP plant last December. If we exclude the deconsolidation, comparable EBITDA improved by 13% year-on-year, boosted by 29% higher energy sales and a better regulated sales price. We have a strong balance sheet. Net debt stood at 227 million at the end of the quarter, with 475 million cash in balance. Net debt increased by 49 million in the quarter, driven by a 20 million reduction in the use of factoring lines, and payments of 28 million carried over from the strategic plan investments made in 2018-2019. We continue operating safely despite the pandemic. Our priorities remain the health and safety of our staff, the reduction of costs, and the increase in sales of differentiated products. We are moving ahead with all the permits required to develop our renewable energy pipeline as from next year, subject to the results of public auctions or PPAs. Moving now to slide number four, we show the rapid pulp price recovery now underway. The vast pulp demand, together with supply and logistics constraints, are tightening the global pulp market, driving pulp prices higher. Net peak prices in China have already recovered more than 70% from their minimum in 2020, and are already at $780 per ton. These price increases are being progressively passed through to the European market, where gross peak prices have only recovered by 38% since December, up to $936 per ton. We are already applying a gross price of $1,010 per ton for spot volumes negotiated in Europe. This price should be reflected in the peak price of the coming weeks. Those gross peak prices in Europe should continue rising to match net peak prices in China. In fact, Suzano has just announced a gross price of $1,090 per ton for spot volumes negotiated in Europe in May. This spot price increase should be fully visible in the PICS price at the beginning of June and one month later in our P&L. Remember that most of our contracts are based on the previous month's PICS price. In the following slide, number five, we summarize our views on pulp supply and demand. We expect demand for tissue and hygiene products. packaging and specialities to remain strong and grow in 2021 and demand weakness for printing and writing is fading as economic activity recovers. Market balance should remain tight in the coming months without any new capacity additions until the end of the year. Strong economic recovery in the US from May. The UK from June and the EU from July, following the vaccination programs and logistics constraints too, we support high prices in third quarter, despite weaker seasonal demand. In the longer term, we expect part demand to clearly add ground supply and support high prices during the coming years. Urban population growth and improving living standards in emerging countries, together with increasing plastic substitution, will continue to support part-demand growth. On the supply side, there are two paper-grade part projects now under construction, Arauco's project in Chile and UPM's project in Uruguay. Metsa's new mill in Finland is only at the project phase. Brazil's swing mill is expected to be more biased towards dissolving bulbs. There are no other new projects confirmed, and as lead times for new projects are close to four years, no further capacity should come on stream before 2025. As you can see from the chart, that the supply-demand balance will tighten each year. As you can see in slide number six, We carried out the annual maintenance shutdowns at both biomass during the first quarter instead of the third quarter as in the previous year. This resulted in a 14% year-on-year reduction in pulp production in first quarter to 224,000 tons and a 2% year-on-year increase in cash costs to 386 euros per ton. Each of these shutdowns took almost two weeks. They were carried out successfully with no accidents and no COVID infections, despite the high number of temporary employees. For the same reason, our bulk sales in the quarter decreased by 10% year on year, as you can see in the following slide number seven. Almost all of these sales went to the European market, with our customers' benefit from ENCE's unique wide portfolio of sustainable products and shorter delivery times. Our differentiated products, which are more sustainable and are adapted to replace plastic and softwood pulp, accounted for 12% of our pulp sales in the quarter. Slide number eight looks at our renewable energy business which was impacted by the deconsolidation of Porto Llano CSP plant after its sale last December. The regulated quarterly remuneration from investment linked to the plant amounted to 6 million. This deconsolidation has been partially offset by 29% higher renewable energy sales and the 6% higher regulated sales price, which has been reviewed this quarter to include a compensation for lower energy prices during the state of emergency in Spain. This is a good example of the government's commitment to the green economy. The increased contributions from the two new biomass plants commissioned in the first quarter of last year and from the Ciudad Real and Huelva power plants have more than upset the major overall revision carried out at Huelva 50 MW power plant since February. I want to inform you that we have just detected a failure in the generator of the Huelva 50 MW power plant during its ramp-up after its major overall maintenance revision. Its repair could take up to three months. Please note that both the generator, as well as the loss of profit, are covered by insurance, so we expect that this incident will have a minor impact on EBITDA. We currently estimate that it could trim our annual energy generation by 100 gigawatt hour in 2021, and it may reduce our annual EBITDA by between one and three million. The next slide, number nine, illustrates our renewable energy pipeline. We continue to make progress in securing all the permits needed to build this pipeline in stages from early 2022 onwards, provided, of course, that the upcoming public auctions or the signing of PPAs allows us to secure the required price. I will now invite Alfredo to review the financial figures in more detail.

Thank you, Ignacio. As you can see in the following slide, number 10, health business EBITDA improved by 51% year-on-year, up to 8 million, despite the US dollar depreciation and the effect in this quarter of the planned annual maintenance shutdowns of both biomeas. Our FX heading program contributed with 2 million euros to our quarterly results, compared with the negative 1 of 5 for the same period last year. Also, the other income and expenses items below our cash cost line were 1.5 million positive compared to 0.5 negative last year. This item includes, among others, the higher operating profits from the sale of wood coming from our southern plantations to third parties. On the other hand, our comparable renewable energy business, EVGA, including the Porto Geno CSP plant sold in December last year, improved 13% year-on-year, boosted by 29% higher energy sales, 6% better regulated sales price, and the collections from the insurance company of a $2.4 million compensation related to the breakdown of the World War 41 megawatt turbine back in 2020. These improvements were partially offset by higher biomass costs during the quarter due to the lower olive gate availability. The group's net result ended the quarter with a negative figure of $9.6 million compared with a negative result of $12 million in the same period last year. As you can see in the following slide number 11, free cash flow before growth CapEx was negative by $21 million in the quarter after a working capital outflow of 31, including a $20 million reduction in the use of factoring lines. Growth and sustainability topics for the quarter amounted to $28 million, mostly related to carryover payments from the strategic fund investments made back in 2019. As a result, the group's net debt increased by $49 million in the quarter, up to $227 maintaining a cash imbalance of 475 million euros and included 46 related to lease contracts. Our balance sheet structure is really solid. Turning on to slide 12, let's have a more closely look at our debt position in each business. Net debt in the power business reached 75 million euros at the end of the quarter, with a clashing balance of €407 million. Only 30 are bank debt while the remaining 45 are related to lease contracts. Long-term maturities and covenant-free structures are the main characteristics of this business debt. Regarding the renewable energy business, net debt amounted to €153 million at the end including a cash imbalance of 68. As you can see, this business also enjoys from long-term maturities. Turning to slide 13, let me update you on our hedging program aiming to mitigate the volatility in the pulp and energy businesses. Regarding effects, our policy is to hedge around 50% of our pulp sales for the following 12 months. Currently, ENCE has secured an average cap of 1.21 US dollars per euro and an average floor of 1.14 for over 45% of its dollar exposure for 2021. This program had a positive impact of 2 million in the quarter compared to a negative one of five in the same period last year. Assuming an average exchange rate of 120 per euro in 2021, Our FX aging program will have an estimated positive impact of approximately 3 million euros in our ABDA. Additionally, and for the first time, ENSA decided during the third quarter of last year to secure better pulp and electricity prices for 2021. We secured an average price of $773 per ton for 24% of our expected pulp sales in 2021. This compares with an average price of $680 in 2020. Following the fall price recovery in the first quarter, these hedges had a little positive impact of 0.4 million euros. Assuming an average fall price of $900 per ton and an average exchange rate of 120, our fall price hedges would have an estimated negative impact of 26 million in 2021 ABDA. Finally, we have also secured an average price of 43 euros per megawatt hour for 33% of our expected renewable energy sales in 2021. This compares with an average electricity price in Spain of 34 euros per megawatt hour in 2020. These hedges will have a mildly negative impact of 0.2 million euros in a quarter. Assuming an average full price of 60 euros per megawatt hour Our electricity prices would have an estimated negative impact of $8 million in 2021's EVDA. I will now return the lead of the presentation.

Thank you, Alfredo. Moving now to slide 14, I would like to mention the highlights of our sustainability performance. Companies that care for the environment, for the staff and for their communities, and companies with a strong corporate governance are more competitive. ENCE is already at the forefront in sustainable forestry, in the circular economy, in social commitment, in gender equality, and in corporate governance. Our best practices have been recognized by independent agencies such as MSCI or Sustainalytics. which ranked ENCE amongst the leaders in ESG in our industry. We have also been included in the FTSE 4 Good Index. I would like to highlight the following achievements in sustainability in the first quarter. Firstly, we have continued to improve all our safety indicators, which are already 10 times better than the average of the industry in Spain. No accidents were registered during the quarter. Secondly, the rigorous application of MFS protocols against COVID-19 has enabled us to continue operating safely and to carry out the annual maintenance shutdowns of our main production centers without any COVID infections. Thirdly, we have continued reducing the order of both bulk bio-mills which already are below 20 minutes per month. And fourthly, in our Board of Directors, we have increased both the percentage of female representation, now almost 40%, and also the percentage of independent directors. Regarding Pontevedra's biomeet concession in slide 15, we expect a first ruling by the National Court in the next few months. Remember that it will be the first step in a legal case that could last for another four years, including appeals to higher courts. To conclude this presentation, I would like to emphasize the following key messages. Pulse prices are now rapidly recovering due to a tight supply and demand balance. We expect gross price increases in Europe to match current net prices in China. The operating improvement of our part business should continue during the rest of the year, following the annual maintenance shutdowns carried out during the first quarter. We will almost fully offset the deconsolidation of Porto Llano CSP plant in 2021. Our priorities remain the health and safety of our staff, the reduction of costs, and the increase in sales of differentiated pulp products. We have a strong balance sheet, and we continue to make progress in securing all the permits required to develop our renewable energy pipeline as from 2022. Thank you. We will be pleased to hear any questions you may have.

Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press 01 on your telephone keyboard. 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 João Pinto from JAB Capital Market. Please go ahead.

Hi. Good morning, everyone. Thanks for taking my questions. I would like to get some color on expectations for the second quarter. So my first question, in terms of cash costs, using the second quarter of last year as a reference, meaning the 375 euros per ton of cash costs, can we expect a reduction versus this level in the second quarter?

Yes, we are aiming to draw a cash cost of $365 in the second quarter of 2021. You have to understand that the first quarter was a high cash cost of $386, and the main reason was the low production due to the 15 days of annual shutdowns in both bio-mills. The prices of the wood stable if we compare to first quarter, but we see a huge reduction in conversion cash costs due to the normal production at both biome. We see a slightly better and lower cost of logistics who have been quite difficult on the first quarter, and we see the same euros per ton in overheads than on the first quarter. Today we are working on the base of being able to report 365 in three months' time. Sorry, in three months' time, on the next conference call related to second quarter. Thank you, João.

Okay, so thank you. My second question also on the second quarter, regarding volumes. Are volumes accelerating this quarter? Can we expect volumes to surpass 207,000 tons in line with the strongest quarter of last year? now in the second quarter?

Yes, yes, you can be quite about that.

Okay. My third question, on top prices, are you receiving any pushback from the latest $8 price hike announced by Suzano?

Yeah, we think that all the market is waiting, that everybody makes these prices during May without any problem, yeah, yeah. Yeah, the market is strong. The market is very strong in Asia because the economic recovery started before that in Western world. The market now is very demanding in the U.S. And the market is strong, just strong in Europe. Tissue and hygiene products are performing very well. Packaging is performing very well. Dissolving pulp, as you know, is improving. And then there is reduction of volumes available on swing mills, and they have switched from paper-grade to dissolving pulp. And the market of printing and writing, although it's not growing, well, it's better than last year. Then we see that we will be able to increase prices in May without any difficulties today.

Okay, just one more question in detail. Can you tell us an approximation of the percentage of volumes that are benchmarked versus the previous month?

I don't understand the question.

So the majority of the volumes that you sell are benchmarked to prices of the previous month, right? Can you tell us an approximation of the... Oh, yes.

Yes, we have almost 85% of our contracts linked to the fixed price of previous months.

Okay, thank you very much.

Thank you to you, Joel.

Thank you. The next question comes from Paco Ruiz from Exxon. Please go ahead.

Hi, good afternoon. Thank you for taking my question. I will make just one question. So it's regarding the pipeline in terms of renewal. How confident you are on getting your targets on this, taking into account the recent lower price that we have seen in previous awards that we have seen in Spain? And are you a little bit concerned about the internal rate of return that it could on these projects versus the estimated, the previous estimated internal return than they have in the budget?

Well, yeah. I would like to stress that we are and have been always very prudent in renewables. We started ENCE Energía back in 2011. We've been growing step by step. We never had a failure on the project. We only bought companies when we were buying at good price. We've been studying and studying a lot each project before starting. And that's what we are doing today in PV. Then we went to the public auction at beginning of the year at the price just below 30, just below 30, because it's the price that We are pretty sure that with the actual cost of the modules, with the budget we have from third parties for the EPC, and with a price of the energy at this price just below 30, and stopping the PV plant in 15 years, not putting a crazy price of 100 euros per megawatt hour from the year 16 to the eternity, we are sure that we are going to get between 8% and 7% within our target, leveraging the plants at 60%, no more, because we don't want to work for the banks. We want, as you know, to have this green energy division in order, like last year, to compensate during the bad years of the pulp business of the company. Then today we are working on the permits of these 340 megawatts of PV we have. We are working on the permits and the engineering of these three biomass power plants we are developing. And we are working, we are waiting, sorry, for the next auction. And in parallel, we are, for the PV business, we are negotiating PPAs. We don't want at all to be a merchant. And, well, I can absolutely confirm that if we don't get between 7% and 8%, we will not do these projects. We will sell the projects in order a third party can construct them. But today, with all the information we have, we think that we can develop these projects and we can start to construct at the beginning of next year. in PV and in biomass well we will have options and we don't need to have to be to have all the volume on the first option we have many years to do that but to be prudent is what we've been doing till now and it's how we will continue growing in in energy thank you okay thank you

Thank you. Ladies and gentlemen, if you have any comments or questions, please press 01 on your telephone keypad to enter a key. The next question comes from from Alhambra Equities. Please go ahead.

Hi. Thanks for taking my questions. Could you please elaborate a little bit more on what has happened at the 50 megawatts biomass facility and whether the issues that you have found during the maintenance stoppage have had any impact in Q1 results. And secondly, you have stated regarding to this that the costs will likely be covered by insurance. I don't know whether there should be some timing difference. Maybe you incur any expenses in Q2 and then recover these expenses in H2. Could you please elaborate on this issue, please?

Yes. I would like to point out before that, as you know, the return on investment has only a requirement is that we produce above 3,000 hours. And these 3,000 hours are not on risk. Then we are going to get 100% of the return on investment this year in well over 50 megawatts. We started the big overall. We do this overall not every year, but every five years, more or less. It is subcontracted to the manufacturer of the turbine. They dismounted the turbine, and they have been doing the overall maintenance during two months on a shop outside of Enfe. and the alternator remained at ence vuelva and the manufacturer of the turbine has been doing the inspection and the maintenance and according to to him everything was okay then he started the ramp up 15 days ago of the uh of the turbine we were very happy because we were five days in advance and suddenly we noticed that there was a problem we stopped And on the alternator, in one of the bobbins of the stator, well, there is a problem. Well, the manufacturer of the turbine estimates that he needs 12 weeks to repair that. And, well, we estimate that we can have a reduction of the empty day we were expecting for this year between one and three million. why one to three million well because we still don't know if it's going to be 10 10 weeks or 15 weeks because we still don't know if the insurance company is going to pay 100 of damage or 80 or 70 percent and because we are reducing the volume of biomass we buy on the market we will require this year between 100 and 140,000 tons less of biomass. And we think that being able to reduce the amount of biomass we are buying in Wolva, we can buy the rest of the biomass at a better price. And all in all, we estimate that we are going to be stocked during 12 weeks and the impact on the EBITDA is going to be between 1 and 3 million. Do you need more information, Álvaro?

Just to clarify whether this 1 to 3 million is already considering that you get to receive something from the insurance or this is all the potential cost and then you may recover some of that?

No, it's the net impact after reducing the price of the biomass to the other two plants after getting a part of the compensation from the insurance company. That is why I say between one and three, because today we don't have a certainty about all the items.

Okay, that's perfectly clear. And also another question going to the pulp business. If you could give us some guidance on the evolution of discounts. I understand that discounts are affected by the high volatility of pulp prices, but I don't know if you could give us some guidance both on what to expect for next quarters and also whether you think that negotiation with clients should allow at some point in the future to cut back on the discounts which currently sit at all-time highs.

Well, yeah, the discounts we have negotiated with our customers for 2021, a kind of flexibility in discounts and with low prices, the discounters are more close to 32 or 33, and with high pressure, they are more close to 34, 35. Then at the levels we are today, we are at around 34%, and that is what we expect for second quarter. We expect for the second quarter, yeah, a price. And when I say a price is, The way we have that on the contracts with our customers, that we are in 85 of our volume, is linked monthly to the peak price of the last week of the previous month. Then today we expect a price slightly above $1,000 in the second quarter, and that will make a discount of 34%.

Did you understand? Understood, thank you. Thanks.

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

Hi, good afternoon. So my question would be on growth topics to review if you guys have changed your mind or if there's anything that has changed in terms of the new capacity or new expansion plans, for example, in FLAP?

No, not yet, Jaime. No, no. We need... Well, even we are seeing that because of the vaccination program, the economy is going to grow tremendously in the States next month and one month later in the UK and two months later here in Europe. as it has been and it is today in China. We need more time in order to be sure that we don't have a risk in six months or nine months with a different kind of virus. Then we want during the full year 2021 to work on reduction of the cash costs to developing and selling these new products we are selling. We want to sell Not 100,000 tons like last year, but 170,000 tons this year. And we are concentrating that. Well, we continue working with the EPC contractors for the FLAF. Today we have a budget, and we know that with 95% of certainty that the investment will be 35 million euros. We continue working with labors and with potential customers. I think that during third or fourth quarter, I will ask the board to confirm the investment, but not before. Then the investment will be done as soon next year. But nothing is going to be confirmed before the end of this year. And regarding the total impact, well, we continue studying the project. We continue working with the technologues. We have, as you know, we have the land. we have all the permits. In FLAC, we have also all the permits, which is very important, because today, in Europe, to have permits for a pulp mill has a value, a big value. We are on all those projects of next generation, and we will see. But today, we haven't decided anything, and we will probably decide anything before also the end of these years. Thank you, Jaime.

Very good. Thank you. I have a second question, which is whether with the current outlook it's possible to start paying a dividend again. Is this something you are thinking about or not yet?

Well, I hope we have a profit after taxes in the second quarter, and then we will decide at the beginning of the quarter to pay a dividend, yes? That would be the normal thing, yes.

Okay, very good. And a final question regarding market outlook. So in China, the first prices seem to be stabilizing. Maybe you can tell us what you're feeling, if there is room for further price increases or is this the highest level that we are going to see? And on this regard, do you see there is further room to increase prices in Europe?

Yeah, I think that prices in China have almost arrived to the limit for the time being. We don't sell in China, then I know almost the same than you, what we need on the report. And I think the prices in China will stabilize and we have started now in China a long period of stable prices at the level where we are. I think that in Europe, well, we will have no problem to pass the new price of $1,090. And, well, we can maybe increase a bit more in June. I don't know. Let's see. But what I don't see is any risk of price reduction, although the analysts are a bit more conservative, and they see a risk of prices falling a bit on third quarter, despite that we will be on the low-demand season because a lot of paper mills shut down for one or two weeks in August. Because of this booming economy in the U.S. next week in the U.K. from June and in Europe from July after the vaccination, And because there is no more capacity, we don't have very precise information about Mapa's project in Chile and about Brazil. But you know, it's clear that the pandemic is not easy. We've been managing our annual shutdowns at Navia and Pontevedra. In both meals, every day we have between employees and contractors normally around 700 persons working. During the shutdown, we have on top of that 1,000 people more in each meal. And believe me, it has been a nightmare to work on barbers with all the tests, doing all these COVID inspections in order to be sure that people were working with masks and with distances. It has been extremely difficult. Then, well, to construct a new mill in Latin America where the pandemic is worse than here in Europe. I think that unfortunately for them, but they are not going to start on the third quarter. They will start if they are lucky at the end of the year. Then I think that we don't have any risk of, today I don't see any risk of price reduction on the third quarter. I see stability at high levels. Thank you, Jaime.

Okay, very good. And just a very last question. It's a very quick one. Can you remind us what is the spot price in Turkey right now? Or what is the selling price right now?

Yeah, it's not the same as in China.

Okay, same in China. Okay, very good. Thank you.

Thank you very much.

Thank you. The next question comes from Bruno Beza from Casabank BPI. Please go ahead.

Yes, good afternoon. So I will start precisely with the new capacity and with Brazil. Because of the very limited visibility that we have, I know that in the presentation you have already given some visibility on your opinion regarding about 0.5 million tons of capacity coming to the market only next year. But we have been seeing some rumors in the press saying that Bracel is preparing a plant with a much larger capacity than the 1.5 million tons, around 1.5 million tons that was officially announced in the market. So if you could provide or give us any call or whatever you can mention on these will be highly appreciated.

This will be my first question.

I'm very sorry Bruno, but I used to go every quarter to Latin America. Now with the pandemic, I haven't been there in the last 12 months, and I don't know more about Brazil than what you know by what you read and what I read. It's the same. I cannot give you more information, sorry.

But following up on this,

Why do you think then that only 0.5 million tons of capacity will come to the market in 2022 from this point? Because that is the best information we have.

Okay, that's clear. So moving on.

No, no, no. That's the information we know from the equipment suppliers and from people we talk to. Okay, that's clear. So moving on to the second question, regarding Ponte Vedra, if you could give us an update on the situation regarding the Ponte Vedra plant and the concession and all the noise that we have been seeing in the press, any call that you could provide on this will also be appreciated. Yeah, coming back to your previous question, just to remember you that we are not quite too much concerned about what Brazil is going to do because they are more biased to dissolving pulp. Prices of dissolving pulp were very low last year. They have increased a lot and today, for them, it will be more attractive to manufacture and sell dissolving pulp than BHKP. That's why we are not concerned about what Brazil is going to do. Talking about Ponte Vedra, well, there are no news. For us, what is important is that We are defending that we have a legal concession on the tribunals, and we are waiting the result of the tribunals. And all the noise around from Devera, which is not the tribunals, is not important, you know?

Do you have any visibility on the timing for the next... No, certainly not.

In summer... Last year, we were expecting something before Christmas. It didn't happen, and now we are waiting something before summer. I don't have more information. I'm very sorry. But in any case, the ones who will lose ourselves or the other parties, they will appeal, or we will appeal. It's a long thing. It's not going to finish this year. We are going to be there on the Fibonacci at least three or four years more, you know? That's clear. Again, regarding Fontevedra, we have been seeing in the press and news suggesting moving the plant to another location in Galicia. I think you already mentioned... We are not suggesting that, sorry. I don't know. In the news, there have been this kind of possibility, not suggested by NC, of course. What is your position regarding this? No, what I told you, we are defending our legal concession and we prefer to stay where we are. But would you consider moving the plant to another location? No, not for the time being. We are thinking in staying where we are. Let's say that just is a supposition. Let's say that in two months the Audiencia Nacional, the court says that we don't have a good concession and we have to leave Pontevedra and the government gives us, I don't know, five, six, seven, ten years to stay there. The government is saying publicly that at least in 2033. Well, we will study if we have to move in Galicia where to move and the size of the mill. But today we are defending the case that we have a legal concession and we will stay in 2073. Okay. So very last question and a quick one. Regarding cash cost, you kept your target for this year, 365, but you mentioned that this is based on stable prices. Sorry, 365 for second quarter, not for the year. For the year, our expectation is 3,700. Does that already include the rising poll prices that we are seeing as of today, or should we expect a higher cash cost based on the hikes that were already announced in the market? Sorry, we were expecting, at the beginning of the year, 365 euros per tonne, At a price of the bulk of 680. But we don't see that anymore. Today we see a price, let's say, about 900. And with those prices above 900, today we see for second quarter, 365, but for the full year, 670.

That's very clear.

Thank you very much for the answers. Thank you very much.

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

Hi, just another question. Thanks for taking me back again from the queue. Looking at your balance sheet in the pulp business, you are right now with a high level of cash on the balance sheet. Are the investments for dissolving pulp and fluff still on hold? And if so, what are you planning to do with all this cash in a context that it does not pay much interest but you are still paying interest on the 500 million gross debt?

No, we are reducing the gross debt. You will see that now we are reducing all the lines in the gross debt in order to pay less interest because it has no sense to have between 470 and 500 million in cash.

Okay, thanks.

Thank you very much.

Thank you very much. Ladies and gentlemen, let me remind you again, if you have any questions, please press 01 on your telephone keypad. Ladies and gentlemen, there are no further questions in the conference call. I give back the floor to Mr. Ignacio Colmenares and Mr. Alfredo Abello. Thank you.

Thank you very much. We meet again in three months time. Thank you. Bye-bye.