Engie Sa Ord

Thank you for holding and welcome to Engie's Q1 presentation. For your information, this call is being recorded. It will take place in a listen-only mode and you will have the opportunity to ask questions after the presentation. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I will now hand you over to R2 Single. Please go ahead.

Thank you, and good morning, everyone. It's my pleasure to welcome you to our Q1 conference call. Shortly, I will hand over to Catherine and Pierre-Francois, who will present our first quarter performance, following which we will open the lines to Q&A. And with my usual polite request of limiting your questions to one or two only, please. And with that, over to Catherine.

Thank you, Artie, and good morning, everyone. Let me start this morning's presentation with the actions that we are taking towards enhancing the security of supply given the current context. A context that is triggered by the war in Ukraine that is having such a tragic impact on lives. Engie prides itself in being a responsible and compassionate company. We are engaged in many ways to help the humanitarian effort directly, but also in partnership with NGOs. The ongoing crisis reinforces the relevance of our strategy, a strategy that aims at a balanced, resilient, and affordable energy mix. Our business model is built upon the strength of world-class industrial global business units that position us strongly to steer through the current energy crisis and to create sustainable value in the long term. We are indeed among the world leaders in renewables, and that is a platform that we are continuously developing. The strength in renewables is complemented by a large portfolio of flexible generation assets, which are absolutely key to addressing intermittency. And we own and operate significant critical networks and distributed energy infrastructure. All of these activities, in combination with our unique global energy management expertise, help us find solutions to the energy transition commitments of our customers. Our teams are more focused than ever in contributing to the transformation of the energy mix, to the development of both renewable power and renewable gases. As a major energy player in Europe, we are playing an active role in shaping the future of energy. First, we have diversified and increased sources of gas supply to address volume risks. We have entered into new contracts. We are maximizing volumes from existing ones, such as with Norway. Second, our networks are delivering strong operational performance and reliability in the backdrop of such higher utilizations. For example, our three LNG terminals in France have operated close to maximum capacity with a record 64 ships unloaded in the first quarter. And we are enhancing LNG operational capabilities. We are taking dedicated actions to de-bottleneck and also to expand the import capacity for the next three years. Third, our supply teams have significantly stepped up efforts to help customers with extra support in these very difficult times for many. We are always mindful of our role as a utility and of our responsibility towards affordability. We are engaging with governments and regulators to play our part. For example, through working capital support, to enable the regulated gas service freeze in France. And there are many other examples, such as power and gas customers in France with fixed service being protected from the price increases in the last month, and individualized cash management support by increasing the number of payment instruments in Belgium, France, and Romania. We are advising customers on how to better manage their payments, and we have also increased our resources to respond to customer calls. For example, in Belgium, we have increased the number of staff members in call centers by about 30%. Lastly, we are helping prepare for the future. We truly see an inflection point in unlocking the potential of renewable gases. More on this later. Before turning to the highlights of the Q1 performance, first, a few words on Engie's gas positions in Europe. We have a portfolio of gas projects and gas supply contracts. We procure gas for sales to B2B and B2C customers and for our own consumption via CCGT power plants, and these volumes total around 400 terawatts a year, and that is talking about Europe. Related to this commitment, we are structurally long gas. The delta is sold in wholesale energy markets. In the current context, obviously, we have adapted our risk policy and hedging strategy to actively manage our exposures. Pierre-Francois will cover this more in detail later. On the topic of payment terms for gas funds, Engie has taken the necessary steps to be ready to execute on our payment obligations in compliance with European sanctions framework and without modifying the balance of risk for Engie. Moving now to our operational and strategic progress, Engie has continued to perform strongly. We posted an EBIT of 3.5 billion euros growing 76% year-on-year on an organic basis. GEMS delivered very strong performance in exceptional market environments, optimizing our flexibilities in long-term contracts, but also responding to strong customer demand. Again, strong operational performance enabled us to capture high prices, particularly in nuclear. Renewables performed strongly as well. And European thermal also saw high contribution from higher spread as well as ancillary services. Supply contribution increased in the market conditions that we know. The group has benefited from its strong balance sheet and liquidity, supporting temporarily higher working capital requirements. Finally, we are upgrading the guidance for 2022 in light of this very strong Q1 performance. And with updated assumptions for commodity prices, we will cover that in more detail. Importantly, we have made strong progress on the execution of our strategic plan, a plan which is designed to build a solid foundation for long-term growth with a focus on simplification and value creation. We have advanced further on our disposal program. Last week, we signed the SPA with BRIC after conclusion of the consultation period with relevant employee representative bodies. So we are on track for the completion of the equivalence transaction in the second half. And this, of course, will represent a major step in the implementation of our strategy. We have also completed the disposal of a further 9% of GTT and the sale of Endo, which is a subsidiary specialized in industrial maintenance and energy services. And we've progressed with the sale of 17 energy services companies in Africa, further rationalizing energy solutions activities. We have maintained the momentum and efficiency improvements across the group through the implementation of our performance plan that is focused on operational excellence, improvement of support functions, and fixing of loss-making entities. Renewable growth is on track, and energy solutions show strong commercial momentum, particularly in distributed energy infrastructure, winning contracts in local energy networks and on-site generation, such as the signing last week of a global contract with Forestia, where energy will install, operate, and maintain solar panels across 14 countries. In renewables, we are continuing to work and develop a strong platform. We're targeting 50 gigawatts of total installed capacity by 2025, with an average of 4 gigawatts addition per year to 2025, always with a return-focused approach. In terms of progress in the first quarter, we have secured a French hydro portfolio with a CNR concession extension granted to 2041. We have continued to strengthen our operating asset base, as well as our project pipeline, with the closing of the acquisition of Aeolia in May, which is reinforcing our Iberian platform. And we have also acquired Photosol in the U.S., which will bring 17 early-stage development projects. Really pleased with OceanWinds that is making strides in its offshore program. Ocean Wind was only created in 2020. Since then, its portfolio has doubled, reaching 11.2 gigawatts of offshore wind projects in operation, under construction, or under development. For example, in the first quarter, Ocean Wind has been awarded a lease area in the New York by Offshore Wind Energy Auction for a site with a capacity of up to 1.7 gigawatts. In the context of rising global inflation and supply chain constraints, we are geared up to operate in what is a new normal. So the focus is on mitigating the risk of price increase and shortage of critical supplies. Our renewables and procurement teams are working very closely, doing a fantastic job. They're working with existing and new suppliers. They are leveraging economies of scale even more so with the organization, the Global Business Unit. And then I'm very proud to share that ENGIE recently launched a new initiative to enhance the acceptability of renewables by society. It's a certification that we are calling TED, which will be audited by Bureau Veritas, founded on nine concrete commitments that go beyond regulatory requirements which is demonstrating energy's strong commitment on sustainability. From renewable power, let's now move to renewable gases. Renewable gases have a critical role to play in the energy transition. This is recognized by the Repower EU Plan, as the Commission is presenting proposals to boost biomethane production, aiming for 380 TWh by 2030, which is doubling the current ambition. This new target corresponds to around 20% of current Russian imports. They will support the acceleration of biomethane production in France, which has the largest potential in Europe, and this is driven by its strong agricultural sector. French biomethane production capacity has been growing strongly over the last years. They have reached 6 TWh in 2021, and we believe that the current 2030 target could actually potentially rise to at least 60 TWh. We have been engaging with public authorities to accelerate the development of biomethane in France, very encouraged by the fact that the regulatory agenda has progressed with new incentives such as production certificates, large standards, and increased level of support on grid connection costs. Our regulated gas networks in France are already contributing to biomethane development. For example, with around 500 million euros are expected to be invested for grid connections alone from 22 to 24. And this new momentum in renewable gas will obviously play a very important role in achieving our 2045 net zero target. Alongside biomethane, We are at the forefront of developing hydrogen. Let me give you a few examples of the project we're working on. Reuse, a project to produce synthetic fuels from captured CO2 combined with green hydrogen. That green hydrogen will be produced by an electrolyzer installed by ENGIE. URI, a partnership through which we will be producing green ammonia from green hydrogen, and that project is in Australia. And Rhino, a proof of concept in South Africa, where we just inaugurated the world's largest hydrogen-powered mining truck, aiming to reduce diesel emissions in mining operations. There are so many other examples from across the group, such as the partnership that we signed with Alstom to offer the rail freight sector a solution to replace diesel with hydrogen as a fuel. And let me remind you that ENGIE is targeting to deploy four gigawatts of green hydrogen production capacity by 2030. Lastly, a quick update on . As you know, the Belgian government decided to consider the extension of the operational lifetime of two reactors to 2035. We are obviously contributing to this rethinking. We are working with the government on studying the feasibility and also the implementation condition of such a scenario. Given the project scale and timing, the group would engage in such projects with a balanced risk-sharing approach. In the shorter term, our priorities in Belgium are to maintain high operational availability, which has been very strong so far, prepare the upcoming shutdowns, and enter into the process of the triennial review of nuclear provisions in H2. Let me now hand over the floor to Pierre-Francois.