Engie Sa Ord

Thank you for holding, and welcome to NG's nine-month 2023 Financial Information Conference Call. 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 by pressing star and 1 on your touch-tone telephone. I will now hand you over to Delphine Dehaye, Head of Investor Relations.

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

Thank you, Delphine, and good morning, everyone, and welcome to our nine-month results presentation. In a context of rapidly changing energy markets, ENGIE continues to perform strongly, benefiting from both the resilience and the appeal of our integrated model, which is enabling us to upgrade our earnings guidance for the full year. We have a record level of renewable capacity under construction. We've made a pivotal and timely strategic acquisition in batteries in the United States, and we continue on working towards the final Belgian nuclear agreement in the fourth quarter. Considering the wider geographical environment, geopolitical environment, notably the tragic events in the Middle East, we have to recognize that uncertainty has risen. However, I am confident that Engie will continue to do well. with its robust and resilient business mix, combining the electron and the molecule, and due to our expertise in managing market turbulence that we already demonstrated vividly last year. And we simply have some of the best people in the industry. Summarizing a few headline numbers at the nine-month stage, EBIT excluding nuclear grew by a strong 28% organically to 8 billion euros. Cash flow from operations continues to be up sharply. Growth capex, always selective, always adhering to our financial criteria, is up by 27% year-on-year, with 83% in our market-facing business units, namely renewables, energy solutions, and flex-gens. Given the strength of our performance and reduced risk as we approach the end of the year, we are raising our guidance for full year 2023, net recurring income to a range of 5.1 billion euros to 5.7 billion euros. And Pierre-Francois will provide you with the details of this shortly. Moving to the next slide, we continue to progress on our main ESG targets. with greenhouse gas emissions from energy production at 40 million tonnes, which is down from around 45 million last year, benefiting from new renewables and lower thermal capacity, soft demand and mild weather conditions. The share of renewables in our total power generation capacity is now up to 40%. And we are the largest corporate issuer of green bonds at over 5 billion euros in the first nine months of 2023. Actually, overall to date, we've issued around 20 billion euros of green bonds since we started in 2014. Turning to slide six, I'll come back in a moment on a notable expansion in renewables and the pivotal acquisition of the U.S. battery storage company Broadridge Power. But here, I just want to focus on two major firsts. In our network business unit, we inaugurated Hipster, the first renewable hydrogen storage demonstrator in a salt cavern in France. The objective of this pilot is to test this process on an industrial scale and to assess the potential to replicate it elsewhere in Europe. In our energy solutions business unit, we've installed the world's first fully hydrogen-injected gas turbine on-site for an industrial customer's paper mill. These two projects show that from a very early stage, we are playing a pioneering role in the emergence of a hydrogen economy, present along the whole value chain from production to supply via storage and distribution. And they also show that while we are very focused on our short-term performance, we are preparing for the long term. Turning to the next slide, it is a time of record in renewables. At the end of Q3, we had indeed a record 7.6 gigawatts under construction, with 4.6 gigawatts of that started over the first nine months. Construction, including offshore, is largely on track and in line with our expectations. So we are acting on our 23 to 25 target of 4 gigawatts of average annual capacity additions in renewables. But I want to remind you, and we've said that before, this is not just growth for growth's sake. We do not compromise our financial and contractual discipline. We always include the degree of supply chain tension in our development model. Our target continues to be to synchronize CAPEX commitments financing conditions, PPA signing at the time of FIDs, and we continue to pass on higher costs to our prices. In power purchase agreements, the demand is there, and we continue to sign PPAs in the third quarter, reaching now 2 gigawatts in the first nine months of 2023. In fact, Bloomberg New Energy Finance said not only ranked us world number one for green PPAs signed in the first half, but also at number one of all time in terms of our total portfolio of PPAs at 7.3 gigawatts. A word on the repowering of our Kerstatt Waterloo wind park in Germany. This allowed us to reduce the number of turbines by almost two-thirds, while actually quadrupling the electricity output. And now a follow-up on the supply chain situation. We continue to work very closely with Siemens Gamesa on the issues identified in two of our Latin America onshore wind projects. I just want to remind you that the 4X, 5X technology represents around 4% of our total group turbine capacity. In addition, we have conducted a full operational review of all of our wind turbine portfolios. We've identified some limited issues that we are currently addressing, and this will have no impact on our guidance and our growth targets. In battery and energy storage now, we have indeed made a decisive step by acquiring Broadridge Power in the United States. Broadridge has 350 megawatts operating. 880 MW under construction and expected on stream by the end of 2024, and 1.7 GW of ready-to-build pipeline. So we have acquired a growth platform which puts us well on the way to achieving a 2030 target of 10 GW of battery capacity. It's important to stress that acquiring an early mover in the U.S. battery sector is very valuable. It gets us to the front end of the grid connection queue, which is crucial in that market, bringing new capacity at a very early stage. Broadridge's current presence is focused on the ERCOT system in Texas, with the pipeline focusing increasingly on California, so two grid systems that are to a large degree isolated and where renewables targets are highly ambitious. On a financial level, acquiring Broadreach will impact NetEd by $1.6 billion, and we expect the transaction to be earnings-accretive in 2025 and to provide significant EBDA growth in 2024, with yearly average increases of around 100 million of EBDA for the subsequent few years. So we are indeed very pleased with this acquisition. It represents a perfect fit with our integrated model within battery storage, which is an industry that we very much like, as we said before. Batteries, indeed, is a market that is growing, that must grow faster. As we told you back in February, the energy transition will require a remarkable deployment of flexible capacity. Taken on a standalone basis, The batteries offer three potential revenue streams, as shown on the left side of this slide, with ancillary services to the grid. An example of this is frequency regulation, energy arbitrage opportunities, which means we charge at low price hours and then we discharge at peak, and capacity contracts, especially in California, where we have contracting options up to 20 years. Ancillary services and arbitrage are mainly activities. They are exposed to merchant revenues, but they do offer hedging options up to 10 years. So all in all, our objective is to contract 50% of the total yearly revenues. These revenue streams open up substantial value creation potential, and at Engie, we do have the skill set to capitalize. Thanks to a great balance between onshore solar PVs, batteries, and gems, we will optimize battery output, when to store, when to sell into the grid, and we'll be able to extract maximum value for the benefit of our customers and of the group. So with that, here's Pierre-Francois, who will discuss our nine months financial results.