Endesa Sa Madrid

Good morning to all the people connected today. Welcome to the first quarter 2025 results presentation, which will be hosted by Endesa's 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. Thank you, and now let me hand over to Jose Bogas.

Thank you, Mark, and good morning, everybody. First of all, in relation to the events of last week, allow me to thank all the Endesa workforce who, from their different positions, worked tirelessly to recover the electricity supply in record time. The blackout is still under investigation by the Spanish government, and it is the system operator who is responsible for guaranteeing the continuity and security of the electricity supply. From the very beginning, we have been working closely with the TSO to identify the causes of the power outage and to implement the appropriate measures. Now let's continue with the highlights of the period. In this first quarter, we recorded a solid financial performance across all businesses, as we will further comment on. This is in a market context saved by growing geopolitical instability, which contributed to further intensifying volatility across global markets and put significant upward pressure on commodity prices. On the regulatory side, this year has a special relevance since, as you know, we are in the midst of a regulatory review process to cover the next six years. We are still awaiting development on the update of the financial remuneration, a critical milestone to address electricity transition and distribution challenges, to attend to new demand patterns and integrate new renewables. And finally, on a different topic, the 2025 Annual General Meeting held last week approved all the resolutions proposed with an 86% quorum. On slide number four, I would like to start by highlighting the excellent results achieved in the first quarter. EBITDA reached €1.4 billion, that is 33% higher than previous years. This remarkable achievement is mainly due to the strong performance of the liberalized business and the negative impact of the 1.2% levy that hindered last year's results. Likewise, net ordinary income came in at around 600 million euros, doubling last year's figure. These good results turn into an outstanding cash generation, which compares very favorably with last year, which I recall was affected by the extraordinary gas arbitration paid in the first quarter of 2024. On the next slide, let's review our progress in capital allocation strategies. In February, we completed the acquisition of Acciona hydroelectric asset, implying a gas outflow of approximately 0.9 billion. This transaction resulted in the addition of a portfolio of 34 hydro plants with a total capacity of 626 megawatts that had been consolidated since March. This acquisition strengthens our position in renewable assets and brings our total mainland hydro capacity to nearly 5.4 gigawatts and total renewable capacity close to 11 gigawatts, increasing our future hydro output by more than 20%. In March, as a follow-up to our partnership business model, Endesa and Masdar entered into an agreement for the purchase of 49.99% of around 450 MW of operational photovoltaic plants in Spain, which we hope to conclude in the second quarter of 2025. Lastly, with the aim of optimizing the underlevered capital structure, I would like to mention our recent share buyback program announced back at the end of March. Launched for a maximum amount of up to 2 billion euros to be executed in several tranches until end of 2027. The Board of Directors approved an initial tranche of up to 500 million euros for 2025 to be executed not later than December this year. Through this transaction, we add alternatives for efficient capital use and increase the attractiveness of shareholder remuneration while supporting share stability and demonstrating management trust in future growth. Slide 6 illustrates the year-on-year evolution of commodity market dynamics, which has not only been driven by a general boost in prices, but also by a significant degree of volatility. In this sense, and in particular, the DTF spot prices have recorded a 70% increase on average, and have moved in a wide band, mainly driven by geopolitical instabilities and the level of the European gas reserve throughout the winter. Also, in average terms, pool prices almost doubled versus 2024 first quarter, although with a sectional level of volatility. In this context, prices above 200 euros per megawatt hour have coexisted. with zero or even negative ones strongly influenced by high solar load factor and to a lesser extent hydropower resources and the lower contribution of wind power. All these bring us to a new evolving scenario that presents new challenges in terms of security of supply and system stability. On slide number seven, we focus on demand evolution, and in particular on the implication for the power grid. Mainland electricity demand has shown a steady recovery, leading to a 2.6% growth year on year, or a 2.5% after adjusting for weather and calendar effects, while Endesa's figure claimed to 2.9% and 3.9% respectively. The evolution of this figure speaks for themselves and shows a clear upturn in both industrial activity and on the electrification of uses. in the rest of the segments. This fitted well with the unprecedented growth in connection requests received over the last year, which, even in a very conservative scenario, would be pointing to a significant demand increase. Spain has a huge opportunity to become a major hub for industrial investment in Europe by attracting this new demand. All that is needed is an appropriate regulatory framework and rate of return to ensure that this opportunity is not wasted. We are modern societies because we are electrified, and for this very reason, Ensuring the security of supply and the competitiveness of our electricity system is fundamental. Let me now hand over to Marco for the financial results.

Thank you, Pepe, and good morning, everybody. Turning to the analysis of the key EBTDA drivers, I'm now on slide nine. As we already mentioned, in this first quarter of 2025, we achieved excellent results, marked by a robust 33% increase in EBTDA. This significant growth can be attributed to several key factors. Firstly, the absence of the 1.2% extraordinary levy, which represented an impact of €0.2 billion in the previous year. Secondly, it must be highlighted the significant increase of 20% in the generation and supply businesses. Lastly, the distribution business remains stable. This performance is consistent with last year's margin and ABTDA, and it aligns with our guidance for this year. Moving into a deeper analysis on the generation and supply businesses, we are now on slide 10. The 20% improvement in EBITDA was driven by the performance in the gross margin, which grew 12%, and by the stability of fixed costs remaining in line with the previous year. This good evolution in gross margin was explained by the improvement in conventional generation, which included mainly thermal, nuclear, non-mainland and gas wholesale, with a gross margin increase of 14%. from no mainland increase by 17%, mainly thanks to 2020 final settlement, strong margin from gas management backed by positive previous hedging, and all of this partially offset by lower margin from short position management as a consequence of the sharp increase in pull prices in the period. And nuclear margin decrease due to higher taxation following the increase in the RESA tax since July 2024 and also the full impact of the 7% tax on generation. Likewise, the contribution from the renewable business remained stable, mainly explained by higher hydro margins, offsetting the lower wind and solar output, and also the higher generation tax impact. Finally, strong performance in customers, both in power and gas. Fixed costs remained flat compared to previous year. in line with our plans to absorb the impact of inflation and growth. Moving now to slide 11, these dynamics are reflected in the free power margin, which was reduced by 7% compared to the previous year to €54 MWh. Its evolution is mainly due to the normalization of the short position in an environment of rising prices, as well as the lower generation margin, mainly from lower nuclear results due to the higher fiscal pressure we have just mentioned. On the other hand, and despite the lower number of liberalized customers, the supply margin slightly improved compared to the previous year, reaching around 17 euro megawatt hour. The resilience of this margin comes from a strategy focused on the most valuable clients, promoting long-term loyalty with a personalized interaction with customers, also through a greater physical presence by increasing the number of service points. Taking a look now on gas integrated business on slide 12, total gas sales were up by 3%, mostly related to higher gas portfolio management activity. and the slight improvement of CCGT's load factors, partially offset by lower liberalized sales. Sound improvement of gas margin, backed by positive previous hedgings, and the price resilience in the B2C segment. This sound gas margin will normalize over the course of the year to reach the target announced in the capital market day. Moving now to the analysis below EBTDA, AMO slide 13, DNA increase versus previous year driven by higher amortization due to investment effort. The net financial results improved on the back of lower average gross debt in a context of lower interest rates. And finally, tax rate landed at around 24%, already not affected by the non-deductibility of the 1.2% temporary energy tax, which penalized the previous year's results. As a consequence of the above, report and net income, same as net ordinary income, is up by a sound 100%, visibly improving the net ordinary income to a BTDA conversion ratio, which represented more than 40% in the first quarter and will normalize in the coming quarters. Going to the next slide on cash generation, FFO reached an outstanding €1.2 billion, that is €1.1 billion higher versus previous year. Focusing on the moving parts, strong EBITDA growth, as seen before. positive working capital of around €0.5 billion, with an improvement in both the regulatory and the remaining working capital, strongly affected by the payment of the Qatar award in the first queue of 2024. And a slight improvement in cash out for taxes, partially offset by higher financial charges payments. On slide 15, net financial debt reached €10.2 billion, an increase of 9% compared to previous year. In terms of recurring activities, the FFO generated in the period was sufficient to cover investment and the payment of the interim dividend. While in this first quarter, we also paid the acquisition of Accionas hydro assets. Gross financial debt remains stable while the cost of the debt decreased to 3.4% following the European Central Bank interest rate policy. Finally, our financial management has led us to enjoy healthy credit metrics. the stronger cash generation is reflected in the FFO to net debt ratio at 46%, while net financial debt to EBITDA ratio kept the level of 1.8 times. Let me now hand over to Pepe for the final conclusions.