Engie Sa Ord

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 to all of you. I'm very happy this morning to report that Engie has posted another strong performance in the third quarter of 2024, which means that we can be confident of achieving the upper end of our full year guidance, even in the face of an uncertain environment. During the quarter, we continue to showcase our ability to manage and complete multiple renewable projects on time and within budget. Meanwhile, Our battery business, where we've become a major player in the space of just a couple of years, brought further capacity on stream and enjoys exciting growth momentum for the coming years. And we also delivered on our objective of raising the share of power within our network activities by being awarded the major lot in the recent transmission auction in Brazil to add to our existing network business in this core strategic country. Few headline numbers. EBIT excluding nuclear was down 11% at 7.1 billion euros at the nine-month stage, which is to be compared to a very high 9 million 2023. If I look at Q3 in isolation, EBIT was up by a very strong 18%, led by renewables and gems, and also boosted by the start of the new network regulatory period in France, that allowed us to start recouping the revenue shortfall that was built up over the previous years. Cash flow from operations stood at 11.8 billion euros. It's down by 1.1 billion euros year-on-year, but still at a high level. Our balance sheet remains robust, with only minor changes in net debt since the start of the year. The economic net debt to EBITDA ratio is at 3.0, well below a maximum level of 4. Finally, we reaffirm a full year guidance for net recurring income group share of 5 to 5.6 billion euros, but now confident of reaching the upper end of the range despite the market and political environment. A quick word on this, on the current French political and budgetary context. as clearly it has been a subject of uncertainty for the financial markets. From where we sit today, we can be cautiously confident that we have sufficient contingencies baked into earnings guidance to be able to absorb the additional taxation on French earnings proposed by the projet de loi de finance as it stands today. Avenirbo's growth continues at pace and uninterrupted. We added another 1.3 gigawatts of new wind and solar capacity in Q3, making 2.3 gigawatts since the start of the year, so we are well on track to achieve our annual target of 4 gigawatts. At the end of September, we had 67 projects under construction with capacities of over 7 gigawatts. As I've said before, execution is paramount. It couldn't be otherwise. especially if you remember that we've consistently been running at least 60 renewable projects for the last couple of years around the world. And we are continuing to deliver on time, on budget, with an average delay of just a few days and an average investment cost overrun of just over 1%. I am so proud of the model that our teams have built, a truly industrial development, construction, and operating machine. On top of this, we are able, through the expertise of GEMS, to better commercialize our renewable generation as it becomes larger and increasingly accompanied by a green, flexible battery storage. We need to maintain this capability of more sophisticated offers because the demand, while strong, is without doubt becoming more demanding. I'm pleased to report that we have signed 2.6 GW of PPAs over the first nine months, up 27% year-on-year, with 1.5 GW of more than five years' duration. Renewables remain our main growth engine, with capital employed set to double in the three years to the end of 2024 and a target of 80 GW in 2030 versus 44 GW now. I am as optimistic as ever that we can continue to achieve the targeted 150 to 250 basis point spread at the least, through the combination of this tight control of project cost and timing, together with this ability to sell our output at prices that reflect the sophistication of our offer and the quality of our portfolio over many years. Quick update on batteries, where we had less than 100 megawatts as recently as the end of 2022, and where the business is now going from strength to strength. You may have seen that we announced a gigawatt of new base capacity in our main market, the U.S., so far in 2024. This was mainly through standalone projects from VIP that we acquired only just over a year ago with a minority via units co-located with our renewable plants. Again, we have been able to open our new units on time and on budget. And it's not just the U.S. We announced earlier this week that our 100-megawatt project has been selected in the capacity remuneration auction in Belgium, meaning that we are now at half a gigawatt of battery capacity online, under construction, or in advanced development in Europe as well. So for the whole group, we now have 2.3 gigawatts of operating capacity in addition to which we have around 3 gigawatts under construction, meaning that we're already halfway to our 10 gigawatt battery capacity target for 2030. In other words, well ahead of schedule. Turning to my next slide, very happy that we have taken a significant step forward in our aim to rebalance our network business more towards electricity. with this win of a 30-year concession to build and operate 1,000 kilometers of power transmission lines in Brazil, which, as you know, is a core market for us. This means that where we are now operate or have been awarded over 8,000 kilometers of power lines in Latin America. The five states included in the new concession include Parana, where we already operate the Grala Azul line, also about 1,000 kilometers in length, which is enabling us synergies. We've been present in the south of Brazil since back in 1998, so we have built long-term relationships with the relevant stakeholders, and it is these advantages that are enabling us to make the best bid in the auction while maintaining a strict financial discipline. With that, I am going to turn to Pierre-Francois, who is going to discuss the Q3 and nine-month financial results in detail.

Thank you very much, Catherine, and good morning to all of you. Indeed, we are rather pleased with another strong quarter for ENGIE, which confirms once more our ability to capture value in normalizing energy markets and the relevance of our integrated model. During this quarter, we delivered 18% organic growth of EBIT at EBIT level excluding NUC versus last year. If we include NUC, the organic growth is even standing at plus 32% quarter to quarter. This is an achievement considering the lower energy prices and volatility. Renewables, networks, and gems notably led that performance despite some heavy lifting in energy solution in the US. Over nine months, EBIT excluding NUC stands at $7.1 billion, a decrease that was expected due to the market headwinds I just mentioned. I will comment separately, and sorry to be a bit long, Q3 and year-to-date to help getting a sense of what's happening in the business. Cash-wise, we generated a strong CFFO at 11.8 billion, and we maintain stable credit ratios and net debt. Last but not least, we should land in the upper range of our guidance for 2024, as Catherine just explained. Let's start right away with the variation of Q3 EBIT. The scope had a positive impact of 18 million coming from the acquisition of BRP in the US and from some renewable assets in South Africa, partly offset by TAG partial disposal that was completed at the beginning of the year. FX is negative 50 million, mostly affecting the lower Brazilian Rio. Organically, Renewables is up 161 million, mostly thanks to the contribution from commission capacities plus 107, while the positive impact of volumes plus 137 due to good hydro conditions in Europe is partly offset by hydro taxes minus 89 and also lower prices. For Q4 24, you should expect, despite some negative one-offs, a strong contribution but not at the level of Q4-23, who benefited from very good hydro conditions. Networks recorded a strong quarter, an increase of 96 million versus Q3 last year, resulting from tariff increases in gas distribution and transmission networks in France, partly offset by lower volumes on GRT gas. We expect organic growth to further increase in Q4, with higher impacts from tariff increases and full-year EBIT should land above 23 level overall. Energy solution was down 116 million organically. And following the difficulties that we faced last year on two US contracts, we indeed carried out a global review of our energy solutions activities in the US. As a result, we booked new provisions on the construction contracts, but also on some other activities that we have decided to restructure. We are also well advanced in disposing of our asset-light activities in the US. TechGen organic growth stands at 26 million, benefiting from higher ancillary services in Europe, thanks to good market environment, which was supported by weather conditions in the UK, in the Netherlands, and also in Italy. For Q4, we expect a contribution significantly below Q4 last year due to lower hedge prices. Retail decreased by 1.11 million organically, with significant timing effects. In general, you should not over-emphasize quarterly results in this business. Margins were negatively impacted by lower volumes, one-off, and commercial discounts. Q4 contribution is expected to be strong with positive timing effect and significantly above Q4 last year that was negatively impacted by long positions that were sold at low market prices. Others increased by 169 million thanks to GEMS with positive impacts from market reserve reversal and also positive one-offs on the restructuring of gas contracts partly offset by the continued negative effect of energy market normalization. Others is also including the cost of the employee shareholding plan that was launched in Q3 this year. For GEMS, in Q4, we expect higher provisions to be accrued at year-end and also lower commercial activity in the second half of December as usual. We continue to forecast a 2.5 billion EBIT including market reserve reversal for 2024 with an underlying performance close to 2 billion. Lastly, Nuke is up 209 million euros with better capture prices positive 125 and higher availability of our nuclear power plants resulting in higher volumes that is plus 66 million. DOL4 is expected to resume production after November 30. Now, if we look at the nine-month EBIT evolution by GBU, we see that the FX amount to minus 41 million, mostly due to the Brazilian real depreciation, and the net effect of scope is very limited, with the contribution of BRP in the US and from acquired renewable assets in South African Brazil offset by the partial disposal of TAC and the sale of Pompasul. Renewables recorded a $229 million organic increase, with hydro, wind and solar all contributing to the growth. You will recognize the key drivers of H1 and Q3, namely the contribution of new capacity, that is plus $379 million, including a scope effect of plus $88 million, but also excellent hydro conditions in France and Portugal for about plus $300 million net of the hydro tax, Lower capture prices, minus 200. And you may remember a positive one-off in Brazil on hydroconcession extension last year that we did not repeat, of course. Networks is down 72 million organically due to the normalization of energy markets, which impacts Torengi in Germany and in the UK, and also GRT Gas, who could not repeat the premium sales of France to Germany transit of last year. The nine-month EBIT stands at 1564 million with increasing contribution coming from power networks. Energy solutions saw 11% organic increase in EBIT. Excluding the U.S. provision recorded in 23 and in 24, organic growth stands at plus 20% despite the mild climate, lower gas prices, and reduced margins from cogeneration in France. was driven by significant improvements in operations, notably on district heating networks in France. EBIT from FlexGen increased by 258 million organically through higher capture spreads in Europe, higher margin in Chile with excellent hydrology, and also some positive runoffs, especially in H1. It more than offset the impact of higher inframarginal tax in France and reduced load factors of gas-fired power plants in Europe. Retail EBIT is down 2.93 million organically. This decline is mainly explained by lower volumes and timing effect. GEMS EBIT is down, as expected, due to energy market normalization and the reduction of volatility. EBIT was driven by good momentum in the client risk management and supply business. EBIT is also supported by several non-recurring and timing items, such as the release of market reserves, albeit at a lower level than in 2023, in line with the acceleration of the normalization of market conditions, and also the restructuring of gas contracts in the third quarter of 2024. Last but not least, nuclear EBIT increased by $740 million as a result mainly of the end of the inframarginal tax in Belgium on June 23. Cash flow from operations is 11.8 billion euros. 98% of our EBITDA is converted into CFFO, which illustrates our focus on cash generation and the positive impact of net working capital reversal triggered by the normalization of energy markets. We are now close to the end of this reversal. CFFO benefited from strong operating cash flow, also $1.9 billion lower than last year. It includes reclassification elements between operating cash flow and change in working cap, in particular to better track the variations of margin calls. Change in variation of working cap had a 0.3 billion positive impact on CFFO versus last year, with several contrasting factors, very similar to those mentioned during your H1 presentation. I mean, higher decrease of gas stocks in 23 versus 24, led by the significant drop on gas prices during the first nine months of 23, resulted into a 2.3 billion negative impact on inventory variations. The variation of net receivables helped for 4.3 billion due to the lower energy prices and volumes. Supply tariff shields had a negative impact of 2.5 billion, mainly coming from a strong cash flow in H1-23 in France. And this was partly offset by the positive 1.2 billion outcome from margin calls. Let's move to the impact on our net debt. The net financial debt amounts to 30.5 billion plus 1 billion. Our cash equation is overall balanced. We see FFO funding our growth and maintenance capex, nuclear obligations, and the dividends. This translates, indeed, into rather stable net financial debt and net economic debt. Main use of cash were capital expenditures for 6.9 billion, the dividends paid to shareholders and also to non-controlling interests for a total of 4.1 billion, and the Belgian nuclear phase-out funding and also expenses amounting to 2.4. These factors were financed by cash flow from operation 11.8 and also other elements for a total of 0.4, mainly related to the partial disposal of TAG earlier this year. The economic net debt is decreasing by 1 billion due to positive cash generation excluding NUC funding, which is already accounted for in the economic net debt. The leverage ratios remain stable with an economic net debt to EBITDA at 3.0 well below a 4.0 threshold. With this strong Q3, we expect now to land in the upper range of our 24 guidance. We have updated assumptions for the rest of the year. Notably, energy prices are set with market forward as of September 30. We use the former 0.1 billion nuclear contingency in consideration of the temporary closure of Dole 4 and the ongoing investigation on its concrete structure. The recurring net financial costs for 2024 are now expected between 1.8 and 2.1 billion, taking into account the evolution of interest rates and our cash position. The 2024 income tax rate should stand between 27 and 29%, an increase to reflect the potential tax implications of the PLF draft budget that was presented by the French government. We expect The strong balance of year, growing versus Q4-23, on the back of the new tariffs from networks, and strong contributions from retail and also nuke. We have considered normal hydro volume for renewables, while they were particularly high in Q4-23, a strong comp pace. Flex generation contribution should be significantly below Q4-23 due to lower hedge prices. and James Ebit should land, as expected, near 2.5 billion for the full year. The other parts of the guidance related to rating and dividend remain unchanged, and with that, I hand over back to Catherine for conclusions.