Endesa Sa Madrid

Good morning, ladies and gentlemen, and welcome to the first quarter 2023 results presentation, which will be hosted by our CEO, Jose Bogas, and our CFO, Marco Palermo. Following the presentation, we will have the usual Q&A session open to those connected on the call and on the web. Thank you, and now let me hand over to Jose Bogas.

Thank you, Mar, and good morning, everybody. Let's start with the highlights of the period. During the first quarter of this year, we saw a significant reduction of gas market tensions that characterized 2022 and that have resulted in a certain relief in power prices. The sound operative performance and the firm commitment to decarbonization that led to the commissioning of new renewable capacity in the past 12 months, allowing us to reduce our sourcing costs. In this context, we have recorded an excellent set of results thanks to the resiliency and versatility of our business model, which clearly proves the competitive advantage of being an integrated player. 2023 Annual Shareholder Meeting held last April 28th approved the distribution of a gross dividend of 1.585 euros per share against 2022 results to be paid on July 3rd, implying a dividend yield of 9%. In that sense, I would like to mention that all proposed resolutions submitted to the general shareholders' meeting passed with a quorum of more than 84% of the shareholders' base. On slide number four, we analyzed the main dynamic of market context. During the first quarter, European gas references dropped sharply thanks to a milder winter, weak industrial consumption, and several gas demand reduction measures promoted by the European Union and implemented in different countries, all of which have ensured to maintain historically high levels of gas storage. TTF spot reference was, on average... 46% down quarter-on-quarter. In turn, PVV reverted past the coupling trend and recorded a similar evolution with 47% decrease over the same period. Accumulated mainland demand fell by 2.7%, clearly affected by energy-saving measures, the increase in cell consumption, and an abnormally mild winter. And this has mainland demand performed better and decreased by 2%, with services and residential segments trimming its demand by 3.9% and 2.1%, ...respectively due to the aforementioned effects. Against this backdrop, average spot power prices in Iberia fell by 58%... ...driven by the comparatively more normalized gas inflow and record results of renewable output... ...thus limiting the application of the gas cut mechanism... In this context of a beginning to return to normality, the European Commission has opted to maintain these time-limited measures in place as long as needed, reducing the risk of additional regulatory measures. Likewise, to prevent future energy crises, Such as the one experienced in 2022, the European Union has launched the discussion of electricity market reforms. There is no doubt that the main lesson learned is the need to accelerate the deployment of renewables in order to reduce dependence on fossil fuels and avoid new crises. And with this aim, and I am on slide number five, we continue to de-risk our generation capacity, which increased around 900 megawatts over the last 12 months, attaining new milestones in shifting our generation mix towards a cleaner one. Renewable capacity is 10% higher than previous year, while CO2 free sources now represent 71% of our mainland install capacity. It should be noted that around 100% of the 1.1 gigawatt capacity addition target for 2023 is already in execution. Total mainland output reached 13 terawatt-hour. 4% higher than previous year, with a significant 32% increase in renewable production, allowing us to obtain 83% share of CO2 free sources over total mainland mix. In the specific case of hydro, Hydro production increased by 32%, recovering from an extraordinarily dry 2022 first quarter. Nevertheless, reservoir levels are currently below the 10-year average, and 2023 points to being yet another dry year. Now, on slide number six, our successful commercial strategy enabled us to consolidate the liberalized customer base with close to 0.5 million new customers in the last 12 months. This commercial approach that builds on protecting customers in a scenario of still high prices and volatility enabled us to lead the Spanish market. As a consequence, liberalized power sales increased by 3%, upsetting the drop in regulated sales. More in detail, sales to B2C segment increased 13% versus the 1% decrease in B2B sales. In this sense, and in line with the proposed reform of the marginal market... We continue to develop our commercial offer of long-term energy sales to our industrial customers, which ensures their hedging against market volatility. Finally, we further widen our range of service, and in particular, I would like to highlight that we continue to accelerate recharging points deployment, reaching more than 15,000 That is a 51% up that allows us to maintain a solid leadership position in Iberia. On slide number seven, free. Sales included within our integrated margin amounted to 19 TWh, plus 2% versus previous year, with a strong increase of 9% in the fixed price sales, while in index sales decreased by 16%, reverting the trend seen last year. Fixed price sales were covered almost 80% by our CO2 free generation, ensuring competitive cost of energy to our customers and providing further support to our integrated business commercial strategy. Some performance of free power margin that reached 65 euros per milliwatt hour, more than double versus past year, mainly resulting from, first, the outstanding thermal margin, which is still benefiting from a favorable market environment. Second, the higher renewable margin thanks to hydro output recovery quarter-on-quarter and the contribution of new installed capacity, which altogether have contributed to narrow pool purchases. Higher supply margin, returning to normalization levels of 11 euros per megawatt hour, fully recovered from the negative margin of the first quarter of the last year, which was affected by sourcing cost increases, no transfer to fixed price customers. And finally, the positive results obtained in the management of the sole position. Regarding forward sales, we continue to make some progress in hedging energy sales to fixed price customers for the coming years. A focus on the gas business on slide number eight. Total gas sales remain flat with a slight increase in retail demand offset by lower CCDT volumes compared to previous years. Total gas unitary margin significantly increased from 1 euro per megatower to 6 euros per megatower year-on-year, supported by a positive evolution of our gas business in a still favorable market context. Volumes hit on our sourcing contract come to 87% and 35% for 2023 and 2024, respectively. Moving to the operational parameters on networks, and I am now on slide number nine, distributed energy remains stable in 33 terawatt hour. Our effort in digitalization of the distribution network resulted in higher quality grid, with the average time of interproximity down by 12 percent. However, despite All of our efforts, losses, slightly increase as a result of record high levels of fraud seen in this period. Grids are the fundamental enabler of the energy transition, which have to manage not only new renewable asset capacity and charging points, but also the penetration of new distributed generation. In this regard, our e-distribution branch experienced a strong boost in 2022 and has already managed around 150,000 self-consumption connections to the grid. Therefore, huge investments are needed to guarantee security of supply. Given the current inflationary environment, it is particularly important to adapt the regulatory framework to ensure the attractiveness and stability of investment. And now I will hand over to Marco who will detail the financial results.

Thank you, Pepe, and good morning to everybody. 2023 starts with a strong financial performance that proves the solidity of our business model. I'm on slide 11. EBTDA stood at €1.5 billion, marking a 60% growth year-on-year, while the net ordinary income came at around €600 million, in an extraordinary quarter that still benefits from the inertia of the second half of 2022, something that we expect to be normalized over the course of the year. Main drivers of this performance will be detailed later on. Reported FFO improved 80% despite being impacted by a regulatory working capital increase. Finally, we continue with our investment efforts to secure future EBITDA growth, with investments up to 2%, reaching €0.4 billion, clearly focusing on decarbonization and networks. Turning now to the detailed analysis of financial results, and I'm on slide 12, we posted an EBTDA close to 1.5 billion euro, marking a sound 60% growth, mainly driven by the management of the integrated business, contributing more than 700 million euro to the quarterly growth, with a positive evolution in conventional generation and renewable businesses, enjoying as well a normalization in the supply business, as Pepe mentioned before. Distribution in BTDA slightly increased by 4% to €451 million, and lastly, it should be stressed that eBTDA is impacted by the 1.2 extraordinary levy, which we have booked in the structure line in the gray color in the chart, and that's it, not passed to our customers. I will now dive into the eBTDA evolution. We are on slide 13. Starting with the generation and supply business, we were successfully managed the different market context in this period. EBTDA reached around 1.2 billion euro with the positive contribution of the free power margin of 672 million euro that is basically due to three things. First, a better marginality of the generation business, driven by higher thermal margin following 2022 inertia and inframarginal volumes increase. Second, the expansion of the supply margin, now back to more normal levels, partially offset by higher ancillary services and shape costs. resulting in a unitary margin at approximately 11 euro per megawatt hour, as commented before. Third, the positive contribution from short position management. Gas business improvement, as well, And lastly, a negative delta of €51 million in other effects, which includes the negative net impact of mark-to-market gas and power, partially compensated by a higher contribution of the non-mainland business of €53 million, due to the recovery of the fuel margin compensation that, however, remains negative. Finally, fixed costs and others slightly increased, mainly explained by the inflationary context and higher activity. On slide 14, distribution EBITDA increased by 4% to €451 million, explained by the positive delta of gross margin due to the negative previous year's resettlement booked in the first quarter of 2022, and a slight fixed cost increase as a result of some positive non-recurrent booked last year NCBI impact. Below EBTDA, I'm on slide 15, net ordinary income came at 594 million euro, up by 76% year-on-year on the back of the dynamics commented at EBTDA level. DNA grew by 47 million euros year-on-year, mainly due to the investment effort carried out in renewables distribution and retail, while bad debt stays almost flat. Financial results increased by around 100 million euros, mainly due to three things. Higher expenses on debt on the back of average gross debt increase, coupled with an interest rate worsening scenario affecting the cost of debt. Second, a negative delta from the financial update, both for the workforce restructuring and the dismantling provisions. And third, All of it partially offset by positive net exchange differences as a result of the favorable euro-dollar exchange rate evolution. Rise in income taxes by 160 million euro, mainly driven by better achieved results, and the increase of effective rate up to 31% affected by the 1.2% revenue levy that is not deductible. At this point, it is worth highlighting the high tax contribution made by Endesa, which in 2022 increased by 28% versus previous year, and continues to rank among Spain's top three largest taxpayers, with more than 3,800 million euro of tax contribution. Moving to cash flow on slide 16. FFO recorded a slight negative figures, but with a sound improvement versus last year. Deep diving into the different dynamics that affected the working capital and others, regulatory working capital increased by around 0.3 billion euro, most of it on non-mainland business. 0.6 billion euros negative impact from the usual first quarter seasonality, additionally affected by high prices at the beginning of the year, that is set to rebound in the next months. And the temporary cash-out impact on working capital from the collateral settlement in March amounting to 0.3 billion euros. Let me highlight that the quarter-on-quarter EBITDA increase of roughly €550 million has translated into an almost equivalent FFO improvement. Finally, absolute FFO would have amounted to more than €200 million positive net of regulatory working capital effects, which should improve over the year. I will now move on debt evolution on slide 17. Net debt stood at €11.6 billion, increasing by 6% versus previous year, impacted by the negative FFO already commented, and around €600 million of capex cash outflows. Worth to highlight that regulatory working capital stands now at €2.6 billion. This is an abnormal situation that means accumulating a debt which tripled versus 2021, and that the regulator should be aware and seek to resolve in the short term, especially in the current rate context. Solid credit metrics in the period with leverage measured as a net debt to BTDA ratio remaining flat at two times. well below the industry average, and adjusted FFO to net debt ratio at 32%, increasing by 2 percentage points versus last year. Gross debt decreased by 9% due to the sharp margin call reduction of 37%. As a consequence of the recent rising progression in interest rates, the cost of our debt reached 2.8%. Hedged debt ratio stands at 74% once deducted energy market cash collaterals, and once considered the recently AGM-approved intercompany transactions. Regarding the financial position on slide 18, the company is facing a revised scenario, both in the energy market and in the financial context, after multiple interest rate raises at fast pace. Following a volatile 2022, we have implemented a number of financial initiatives to strengthen the liquidity position, ensuring levels we find adequate both in the medium and long term. End of March, available liquidity amounts to €10.8 billion, reinforced in early May with the recently executed €1.1 billion credit line and €1.9 billion loan, both executed with Enel. The first quarter closed with 3.2 years debt average life. Our aim is to further extend such ratio, providing a more flexible maturities profile, so we are quickly progressing to sign in the second quarter new bank long-term transaction for more than €1 billion. Together with the already executed €1.9 billion loan with Enel, the resulting ratio will be above four years. Let me now hand over to Pepe for the final conclusions. Okay, thank you Marco.