Endesa Sa Madrid

Good morning, everybody, and welcome to the 9-month 23 results presentation, which will be hosted by Jose Bogas, our CEO, and Marco Palermo, the CFO. Following the presentation, we will have the usual Q&A session, open to those connected on the call and on the web. We kindly ask you to limit your question to the financial and operational performance of the company during the period, and to wait until the 23rd of November for the strategic plan update. And now, thank you, and let me hand over to Jose Bogas.

Thank you, Mara, and good morning, everybody. Let's start with the highlight of the period. 2023 has been characterized by a gradual normalization of the extraordinary market and energy conditions seen in 2022. In this context, we recorded an EBITDA of 3.4 billion, slightly lower than in the nine months of 2022, heavily affected by a negative delta of non-recurring impacts, which we will detail later on. Without these effects, EBITDA, like for light, would have grown by 7%. FFO reached 2.8 billion euros with an outstanding improvement thanks to the normalization of the negative market dynamics that affected the evolution of working capital last year. Finally, Endesa has distributed to its shareholder a gross dividend of around 1.59 euros per share against 2022 results. This dividend implies an additional 9% dividend yield to the stock market performance, bringing the total accumulated return in 2023 to 18.3%. On slide number four, you can see the solid development of the main operative indicator across all businesses. Mainland renewable capacity stands at around 9.3 GW, up 0.8 GW over the past year, with an emission-free output of 79%. It should be noted that in August we received the green light to shut down Asponte's power plant, taking the plan out of operation at the beginning of October. This closure will make way for the company's future E plan in the area aimed at developing renewable projects as well as reinforcing our social commitment within the region. The set of fixed price contracts covered with emission-free sources is slightly reduced by the greater proportion of fixed price sales. The number of customers in the liberalized market remains stable at 6.9 million, consolidating our leadership position. We continue to accelerate the deployment of charging stations, which increased by around 50% in the last 12 months, showing our commitment to drive demand electrification. Continued improvement in network quality metric with an interruption time reduction of 4% versus the previous year. On slide number five, we summarize how market dynamic evolved over the period. European gas references have remained stable, consolidating the 40 euros per megawatt hour floor. TTF and PBB spot reference prices were down by 69 and 64 percent year on year. Despite this hard drop, prices still remain high. In Iberia, average spot electricity prices were down 51% due to the reduction in commodity prices, the falling demand, and the record level of renewable energy production. Mainland demand decreased by 4.4%, strongly influenced by the combined effect of the economic slowdown that lies behind industrial and small and medium business demand destruction and higher self-consumption, which accounts for 1% of this draw. Demand in Endesa's area decreased by 3.4%. On slide number six, sales to liberalized customer with the scope of our free power margin amounted to 57 terawatt-hour, out of which fixed price sales increased by 6% to 40 terawatt-hour, 75% baked by our CO2 free generation. Solid development of free power margin will reach 54 euros per megawatt-hour, which shows a gradual normalization for early years record, mainly resulted from, first, the generation margin improvement, mainly due to better achieved prices in renewables, with a thermal margin increase in a favorable market context. Second, the normalization of supply margin, attaining levels around 13 euros. And lastly, the positive result obtained in the management of our short position. On the forward sales side, we continue to make steady progress in hedging energy sales, with more than 90% already closed for 2024. Now, on slide number seven, let's focus on the evolution of the gas margin, which compared negatively with last year of the standing results. Demand at country level recorded a 13% drop. In this context, our total gas sales were down 8%, mainly as a result of the normalization of CCGT load factor and a decline in conventional demand of our clients of our clients in the Iberian market that has been compensated for by sales in other market. Total gas unitary margin decreased year on year, reaching a negative three euros per megawatt hour essentially due to first the effect of the above-mentioned conventional demand reduction compared to contracted volumes has resulted in a negative effect and that has had an impact throughout the year and affects in particular the second and third quarter. Second, some inefficiencies that arose in the hedging strategy due to exceptional and temporary mismatches between TTF and PBB closed at the end of the last year for 2023, affecting mainly in the second and the third quarter. And lastly, other non-recurring effect book in the third quarter. It is important to stress that the weakness of the third quarter result will not be repeated to the same extension during the fourth quarter when we expect a strong gas rebound supported by a high level of visibility, allowing a return to positive levels and partially neutralizing the nine-month figure. And now I will hand over to Marco who will detail the financial results.

Thank you, Pepe, and good morning, everybody. As commented before, EBITDA reached €3.4 billion, slightly lower than previous year in comparable terms, while net ordinary income came in around €1.1 billion, 20% lower than previous year, because of financial cost increase and higher taxes. On the other hand, FFO is robust and accounts for 2.8 billion euro, improving by 2.3 billion euro versus previous year, mainly due to the normalization of working capital that was heavily affected by the market context in 2022, as we will see later on on charts. Moving to the main drivers of the ABTDA growth, I'm now on slide 10. First of all, it is worth to highlight that the EBITDA evolution has been negatively impacted by the delta of non-recurring items for €364 million. You can see in grey colour in the chart. The 1.2 extraordinary levy negative impact was recorded in 2023. while in 2022 it was booked the positive effect of the social bonus, both of them affecting the structure line of the P&L. If we strip out these effects, EBITDA would have increased by 7%. The generation and supply results in the dotted box on the chart remained almost flat versus previous year, with a positive performance in supply recovering from extraordinary low levels of last year, renewable increase thanks to higher volumes at better prices, And these positives were offset by the deterioration of conventional generation, in particular of gas margins, as I will summarize in the next chart. Networks stood at 1.4 billion euro, up by 230 million euro, in the absence of negative resettlements that we booked last year. Overall, gross capex amounted to 1.5 billion euro in line with previous year, with 76% devoted to our main strategic pillars, renewable deployment and network digitalization. If we move now into a deeper analysis on chart 11, generation and supply EBITDA reached €2.2 billion flat versus previous year, with a sound increase of the free power margin by €882 million, as Peppe has just commented, with all the components providing positive results. The gas business recorded a negative change year on year for around 700 million euro when compared with last year's outstanding results. The negative performance seen in the nine months is explained by a weak retail margin affected by lower demand and inefficiencies in some derivatives as was mentioned before. I want to stress here that the weakness of the third quarter results will not be repeated to the same extent during Q4. And we have ample visibility that gas results in the last quarter will show a significant rebound back into positive territory. of the margin decreased by €122 million, mainly explained by the negative net impact of the market, partially offset by positive contribution of the non-mainland business with better recognition of fuel margin. And finally, a slight increase in fixed costs, largely due to the inflationary context and higher activity. On slide 12 now, distribution EBITDA increased by 20% to €1.362 billion, explained by a positive delta of gross margin due to the negative one-offs recorded in 2022 of around €200 million, and a slight fixed cost improvement. Continuing with the analysis of the results, now going below eBTDA, I'm on slide 13, net ordinary income amounted to around 1.1 billion euro, down 28% compared to previous year, reflecting the dynamics observed at eBTDA level and strongly impacted by the increase in DNA and provisions by 128 million euro year on year, mainly due to higher investment in renewables, distribution and retail, and an increase in bad debt figures as a result of worsening collections from residential and B2B customers. Net financial results increased by 284 million euro on the back of a higher financial cost as a result of higher interest rate market environment affecting the cost of debt. The average gross debt remains stable thanks to the collateral's reduction. A negative delta from the financial provision update, only partially offset by positive net exchange differences. There is also a decline in income taxes by 149 million euro, driven by lower results, while the tax rate increased to 29%, heavily affected by the non-deductible revenue levy. Finally, minorities decreased by 28 million euro. Turning to cash flow, and now on chart 14, FFO reached €2.8 billion in absolute terms, showing a sound improvement compared to last year, thanks to the positive working capital dynamics. In particular, the regulatory working capital continues to improve in the third quarter, recovering €0.7 billion from the negative peak recorded in Q1, mainly thanks to the collection of settlements related to the non-mainland systems. positive impacts also from the net trade receivables and payable due to energy and commodity price normalization, which recovers from the unusual market environment in 2022. All this was partially offset by an increase in tax payments as a consequence of better results in 2022 and by higher net financial expenses paid. I would now like to turn to the evolution of debt on slide 15. Net debt came in at 11.6 billion euro. Over the period, the FFO contributed positively to net debt evolution for 2.8 billion euro, more than enough to cover this period's investments. Dividends paid last July amounted to 1.7 billion euro. Gross debt decreased by 24%, driven by a strong reduction in collateral requirements. Moreover, the cost of our debt remained at 3%, so in line with our first half 2023, following the substantial increase in interest rates in the first months of the year. Finally, our financial management shows strong credit metrics over the period. Net debt and BTDA leverage remains at healthy levels, while FFO to net debt ratio stands at 34%, up 19 percentage points year to date. And now let me hand over to Pepe for the final conclusions.