Endesa Sa Madrid

Hello, good morning, everybody, and welcome to the nine-month 2024 results presentation, which will be hosted by the CEO, Jose Bogas, and the 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. We kindly ask you to limit your question to the financial and operational performance during the period, and to wait until the 19th of November for the strategic plan update. Thank you, and now let me hand over to Jose Bogas.

Okay, thank you. Thank you, Mara, and good morning to everybody. Let me, first of all, just to express my condolence to all the families affected by the storms yesterday and tonight, mainly in Valencia and Albacete. Having said that, let's start with the highlights of the period. During this nine months of 2024, we recorded a strong financial performance underpinned by a strong delivery across all businesses. EBITDA grew at 16% versus nine months 2023, reaching 3.9 billion euros, while net income increased by 33% to 1.4%. FFO showed a positive evolution during the period, reaching 2.7 billion euros, with a strong improvement of the cash in the third quarter. This good performance has allowed FFO over net debt ratio to stand at healthy levels. All this confirms that we are in a comfortable position to achieve the upper end of the target set for the full year. On slide number four, a brief explanation of the performance of main operational indicators. Emission-free output on the mainland is increased to 88% of the total after expanding renewable capacity to more than 10 gigawatts. The intensification of competition in a context of sustained low prices has led to a reduction in the customer base, although in the third quarter we have seen a change in trends. I would add that our investment in distribution, where we have allocated 50% of CAPES, have resulted in the good quality indicators that we see on a sustained basis. Slide 5 illustrates market dynamic evolution year on year. Average electricity prices in the first nine months of 2024 were 42 percent down versus last year, despite showing a remarkable rebound in the third quarter due to the seasonality of the demand in the summer month and a pickup in the CO2 and gas prices. Moreover, pool price volatility remains high despite a more stable commodity price scenario due to higher hydro and photovoltaic contribution. It should be noted that solar photovoltaic production keeps setting new records in Iberia, while hydro availability increased significantly, especially quarter on quarter. In the same way, mainland electricity demand has continued to show signs of a recovery in the last quarter, which led to a year-to-date demand growth of 1.5% once adjusted by water and calendar effects. Demand in Endesa's area decreased by minus 1% or minus 0.2% in adjusted terms. The decline in energy-intensive industrial consumption, in particular in the paper and metal industries, was mostly offset by higher activity in the service sector and residential consumption. Finally, 2024 forwards in the remainder of the year are trading activities at around 80 euros per megawatt hour with terms into around 60 euros per megawatt hour expected average price for 2024. Energy forwards for the next two years are trading at 70 and 65 euros per megawatt respectively on the recovery path from the first quarter levels. On slide number six, a few more details of the generation mix evolution. 78% of our mainland capacity is based on CO2-free technologies. As a result, 88% of our production has been CO2-free, an increase of 9% year-on-year. It is also worth highlighting the important contribution of renewable energy during this period, with a 36% output increase. This improvement was the result of higher solar capacity and a significant boost in hydro production thanks to higher rainfall and a strong reservoir level which has brought about a 69% output rise year on year. On slide number seven, as you know, last July we announced the incorporation of a partner, Mazda, to a portfolio of solar assets as a part of the deployment of a partnership business model representing two gigawatts of photovoltaic solar assets from 48 plants in operation. For Endesa, the operation retains full control of a strategic asset within our integrated business strategy, adding value through a 15 years power purchase agreement, PPA, for 100% of the output. This is strategically significant as it allows the company to maintain control over critical assets while securing a long-term agreement for energy procurement at a competitive cost, providing financial proceeds to maintain future growth. Now on slide number eight, we detail the main drivers of the liberalized power sales performance. The different actions and commercial campaigns allowed us to stabilize our portfolio at 6.7 million customers, same figures as in first half and above the average level of the last five years. As we expected, the decline in our customer portfolio observed in the second quarter is considerably in the third quarter. The action plan implemented by the company to retain the most valuable customer together with the expected evolution of last quarter prices make us confident to stabilize the portfolio in the coming months. Deep diving into the performance of our integrated strategy on slide number nine. Unitary free power margin recorded a strong performance, reaching 57 euros per megawatt hour. This is the result of a stable margin at 3 billion euros in absolute terms, but lower liberalized sales. the margin resilience was mainly due to the following factor. The first one, lower generation margins where the expected normalization in thermal activity is mitigated by a better performance of the inframarginal margins. Second, positive results achieved in the management of the soil position returning to more moderate levels due to lower volumes. And third, sound improvement of supply margin to around 18 euros per megawatt hour, which proves the resilience of our strategy. Progressing in our hedging strategy, we have already secured almost all of our 2024 and 2025 output, and 70% for 2026. The energy price reference for the last two years is around 65 euros per megawatt hour. Turning to slide number 10 on gas business, total gas sales were 15% down due to a significant drop in industrial customer demand and the sharp decrease in CCGT's load factor, resulting from the increase in renewable output during the period. Gas unitary margins increased from around minus 4 euros per megawatt hour recorded last year to a more normalized level of around 2 euros per megawatt hour, in line with our full-year forecast. Our hedge volumes give us comfort in meeting the 2024 margin target and providing a high degree of protection going forward. And now I will hand over to Marco, who will detail the financial results.

Thank you, Pepe, and good morning, everybody. As we had anticipated, financial results had an excellent performance, notably in the third quarter, in terms of both EBITDA and net income. EBITDA reached €3.9 billion, up 16% on the first nine months of 2024, while net income was €1.4 billion, 33% higher than previous year. Finally, a strong cash generation in the period with a remarkable performance also in this third quarter. We now turn to the analysis of the eBTDA evolution key drivers. I'm now on slide 13. In distribution, 7% eBTDA increase, as we will explain later on. The integrated business of generation and supply increased by €0.4 billion on the back of the strong performance of customers eBTDA, both in power and gas. the larger contribution from the renewable business. And on the other hand, conventional generation remains flat. The main factors behind this flat evolution are the normalization of the thermal activity and the lower short position contribution that are offset by better gas margin. the structure and adjustment segment, which reflects the 1.2 levy impact in both years, remains flat. Moving into deeper analysis, we are on slide 14. Generation and supply BTDA is up 20% versus 2023, reaching 2.6 billion euro. Looking at the moving parts of the period, gas business, which represent the bulk of this increase, recovers from last year's extraordinary negative situation, as already detailed. Free power margin is mostly in line with last year, as Pepe just commented on. Finally, our ongoing focus on efficiencies drove fixed cost improvement. On slide 15 now, grid's EBITDA stood at 1.5 billion euro, up by 7% versus previous year, driven by a gross margin increase, mainly explained by the positive outcome of the final remuneration for the year 2020, and the fixed cost and other improvement thanks to the provision reversal associated to the sale of the optic fiber network and achieved efficiencies. Moving now to the analysis below ABTDA, I'm on slide 16. DNA increased mainly due to the investment effort carried out in renewables, distribution, and retail. Net financial results decreased mostly on the back of lower average gross debt, but in a context of higher interest rates. And finally, tax rate reached 27% affected by the non-deductibility of the 1.2% temporary energy tax booked in Q1. As a consequence of the above, net income EBITDA rate improved 5 percentage points versus previous year. Moving to the next slide related to the cash generation, FFO reached €2.7 billion, the main moving parts being, first, negative working capital of around €0.6 billion, mostly affected by the payment of the Qatar arbitration in Q1. And second, a favourable evolution of income tax outflows, while net financial expenses were slightly above last year. Excluding the mentioned extraordinary gas arbitration paid this year, and taking into account the last year we cashed in around €0.4 billion from non-mainland regulatory working capital accumulated backlog, FFO would have increased by €0.8 billion, proving the sound cash generation throughout the period. On slide 18 now, net financial debt remained flat versus the full year 2023, standing at €10.4 billion. The strong cash flow generation of the period was enough to compensate our investment needs as well as the dividend payment. Moreover, gross financial debt slightly decreased over last year, while cost of debt rose to 3.6%. Finally, our strong commitment to a strict financial discipline has resulted in robust credit metrics. Good examples are the 2.4 times leverage or the 44% FFO on net debt ratio. And now I hand over to Pepe for the closing remarks.