Engie Sa Ord

Thank you and good morning, everyone. It's my pleasure to welcome you to NG's Q1 conference call. Shortly, Catherine and Pierre-Francois will present our first quarter 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.

All right, thank you, Delphine, and good morning, everyone. I am pleased to report an excellent first quarter of 2025. with EBIT up versus last year, despite normalization of energy markets over the last quarters, and despite the uncertain geopolitical and economic environment. There's been no let up in our renewables expansion, both organically and via acquisition, and we've had the landmark moment of the closing of the nuclear deal in Belgium, enabling the transfer of our balance sheet of 12 billion euros of nuclear waste storage provisions. It's been really great. It's been great to see how resilient and solid ENGIE has become, our integrated balanced model and our geographical spread, enabling us to maintain earnings by offsetting headwinds and declines in some areas with progress elsewhere. Now, before detailing our Q1 business performance, let's talk a little bit about how we are dealing with the situation in the U.S., which I would summarize as follows. Things are dynamic, but in the case of tariffs, we were already moving before the current administration's action, and we were quite quick to move, so we have largely erased our exposure. To go into some details, our operating fleet, that is to say around 8.5 gigawatts of onshore wind, solar, and base battery storage is unaffected. For the 2.0 gigawatts that is under construction, of which we have 1.3 of batteries, about half a gigawatt of solar, the remainder onshore wind, we are to a very large extent protected. And why is that? Because in batteries, first, we have been very proactive in sourcing, which has allowed us to reallocate batteries that were bought in 2024 to projects in 2025, thus securing safe harbor for several of our projects. And the pipeline that we assume by acquiring BRP is on schedule for completion over this year. On the solar front, Our prior efforts to increase local sourcing of PV modules and diversifying our suppliers have paid off indeed. We are well protected by the near-term timing of our projects, and particularly including the 90-day pause. In wind, we have no impact. Now, for projects under development that have yet to reach FID, that is where we are posing for clarity on future tariffs going forward. also the future of the IRA, and, of course, permitting procedures. With regard to the future of the IRA, when it comes to renewables and batteries, as a very starting point, the first draft of the budget reconciliation bill seems a little bit more constructive than what we might have expected. But, of course, the situation is fluid, and we will be carefully monitoring the evolution of the text in the coming weeks. All that said, what is undisputable is that our customers' appetite for green energy remains strong. Indeed, we have just signed a preliminary agreement to provide up to 300 megawatts to a cipher mining technologies data center in Texas as an example. In addition, there are many markets in the U.S. where significant load growth is expected, and our conviction remains that renewable and best should benefit from their short time to market relative to gas and nuclear. As of now, we benefit from a big level of optionality. Remember, we have a pipeline of 115 gigawatts. 8080 gigawatts of this is outside North America. So if needed, we could allocate capital originally intended for the US into other attractive markets. where we are already well established. Remember, NG has been present in Brazil for 27 years, in the GCC for half a century, in Australia for 29 years, in India for over 30 years, just to give you a few examples. And we are really excited by these opportunities and the optionality that they provide us with. Now, a few words on the recent power blackout in the Iberian Peninsula, which has been already abundantly commented upon. I think it's fair to say that it will take some time to fully understand the root causes, but it is useful sometimes to remind some basics. Electrical systems have grown more complex over time. This complexity needs to be managed. It needs to be managed with sufficient investment in the grids in the interconnection, and very importantly, and we've said that over and over again, in flexible generation assets. These flexible assets, they can be CCGT or CGT, but also batteries with the right configuration, they will play an increasingly important role to guarantee, of course, security of supply, but also to address potential frequency or local voltage issues. As for immediate consequences on the group, I am pleased to report no impact on our personnel, on our assets, on our financial results. Our teams in Spain and Portugal, having managed the situation very well, in fact, they contributed to the recovery of the system as our hydro assets in Portugal were among the first ones to be reconnected. Turning to this next slide, a few numbers, EBIT excluding nuclear was up 2% at 3.7 billion euros, and that was compared to an already high, quite high Q1 2024. The cash flow from operations stands at 4 billion euros. Our balance sheets remain robust. Economic net debt was down 4% over the quarter to 46 billion euros. equating to three times EBITDA below a ceiling of four times. With this strong start, and despite the macro uncertainties ahead of us, I can confirm our guidance for the full year with net recurring income group share between 4.4 and 5 billion euros. A brief run-through of our Q1 highlights now. We added over 0.6 gigawatts of renewables capacity, mainly in LATAM and Egypt, taking our renewables and base capacity to 51.6 gigawatts. At the end of Q1, we had 8.5 gigawatts under construction with 101 ongoing projects, continuing a track record of very efficient execution. Our teams are doing a fantastic job there. In March, we announced two acquisitions in renewables subject to approval from the relevant local authority. First, two fully contracted hydro plants in Brazil with capacity of 612 megawatts, which consolidates our position as the country's leading private hydro generator. Second, an operating portfolio of 157 megawatts of operating onshore and solar capacity in the UK at seven sites, at which we intend to add battery and solar, as well as raising capacity through repowering, which is obviously a very attractive option, given how time-consuming new grid permitting can be. In power networks, we want the tender for a new substation north of Santiago in Chile, in an area in need of network strengthening that has established itself as a hub for photovoltaic development We have an excellent integrated position in Chile, including major positions in renewable, in BES, we're provider of PPAs, and we are number three ranking in power transmission. A word on our progress since the new business organization was put in place in February. It was put in place to seize opportunities from these very dynamic power markets to unlock synergies, to simplify our structures, Please do note the performance impact of €72 million in the first quarter, which already shows a step up in the run rate towards the €1 billion-plus EBIT boost that we are targeting over the 2025-2027 period. We are streamlining through divestments, already making progress on exiting non-strategy businesses of our former energy solution business unit, as announced. Through the sale of our gas generation, we exited Kuwait, Bahrain, and Pakistan. In Morocco, we have reduced our stake in the Safi coal-fired plants from a third to what is now a pure financial investment of 18%. And our only remaining coal is now in Chile at just below 1 gigawatt, which we will exit by 2027 at the latest. Finally, a significant highlight of Q1 with the closure of the nuclear transaction in Belgium, which represents the culmination of complex and time-consuming negotiations. I want to take this opportunity to thank all of those involved for their patience, professionalism, determination to achieve what for our group is a major milestone as it eliminates a major source of financial uncertainty and allows us to focus fully on rolling out our core strategy. We made an initial payment of 12 billion euros on March 14th. The remaining sum of around 3.6 billion euros is to be paid when Siange 3 and Dool 4 reactors restart in November in their new status as quasi-regulated assets owned by JV, between ourselves and the Belgian government. With this, I will pass over to Pierre-Francois.

Thank you very much, Catherine, and good morning to all of you. I'm, of course, pretty glad to be here to present another good start of the year for ENGIE. EBITDA and EBIT, excluding NUC, stand at, respectively, 4.9 and 3.7 billion, in line with Q1 2024, which was, as you remember, a high basis for comparison. We generated a sound level of cash with CFFO at 4 billion, It is a decrease of 1.1 billion year on year, mainly driven by margin calls versus Q124, which was, you may remember, positively impacted by reversal of working cap due to the energy market normalization. Net financial debt is up 1.4 billion at 34.6. You can see that the impact from the 12 billion payment to the Belgian government, Catherine was just mentioning, with the closing of the nuclear agreement, had a limited impact on net debt, most of it being paid through our dedicated financial assets. Economic net debt is down 1.8 billion and credit ratios are improving well below our four targets. Hence, we are confirming our 2025 guidance. Let's now have a closer look to EBIT. EBIT, excluding NUKE, stands at 3.7 plus 77 million organically. FX Effects on scope are negative, with a depreciation of the Brazilian real and some scope out of generation assets in Portugal and Morocco, and the sell-down of a gas pipeline in Mexico. Prices and volatility have a limited impact of minus 74 million, with effects in opposite directions. Negative for B2B and energy management, and positive for networks and B2C. I will, of course, provide more details in the next slide. Volumes are up 92 million thanks to colder temperatures, more than offsetting a less good hydrology than in Q1 last year. Commissioning adds another 82 million to EBIT, mostly coming from renewable and flex power assets, which are coming online in North America and Latin America, as well as some investments made in gas and power networks. Performance at an extra 72 million of EBIT. Other is negative, minus 95 million, and it does notably include some positive one-offs recorded in Q1-24, which were not repeated, of course, this year. Nuclear EBIT stands at 406 million, down 55 million, notably due to the shutdown of Dole 1 on February 14, 2025. despite good availability of other assets during the period. Now let's get a bit more granular with key variations per reporting segment. So you recognize the new reporting segment that we discussed in February, and this slide shows the organic variances in EBIT, not only in this reporting segment, but also the subsegments. Renewable and flex power EBIT amounts to $1,152 million, which is a $176 million organic decrease. Renewable and best is down 59 million organically with lower prices and normalization of hydro volumes in Europe following the exceptional high hydrology of Q124 with an impact of minus 140 million. This was partly mitigated by the contribution from new assets in North America and Latin America for about plus 50 million. Gas generation organic variants or about minus 100 million, is mainly coming from Europe, as in Q1 last year, hedge positions still benefited from the very high prices of the crisis. This was partially compensated by the end of the intramarginal tax in France in 2025. The organic variant is also impacted by the non-repeat of positive one-offs recorded in Q1 2024. Infrastructures reported an EBIT of 1453 million up 469 million organically. Networks are by far the main contributor to this growth, with plus 513 million euros. This increase is mainly driven by new tariffs for gas transportation and distribution in France, which includes clawback on previous years. We also benefited from a colder winter in Europe, and from the contribution of our developments in power networks in Brazil. Local energy infrastructures are down 44 million organically, which was expected, as merchant co-generations in Q1-24 were still supported by high CSS margins hedged during the energy crisis. We are now back to normal price conditions and margins, and a cooler climate and the improved profitability of energy performance services partly offset this negative price impact. Supply on energy management EBIT reaches 1291 million in Q1 2025. It's a 245 million organic decrease versus last year, with various contrasting elements. First, EBIT from B2C activities grew 323 million organically. This is a result of colder climate, also significant positive timing effect in the quarter, and a market that still enables a full valuation of risks to customers. Variance is also flattered, impacted by negative one-offs that we had in Q1-24, including discounts granted to customers. Q1-25 is clearly not a normative quarter for B2C. you should not expect EBIT for 2025 to be four times the Q1 EBIT. Indeed, Q1 is a strong quarter when it comes to volume sold to customer. It's generally about 40% of our volumes which are achieved in Q1. But this year, Q1 2025 is even stronger because it's supported by positive timing effect that will reverse in the coming quarters. As a result, we continue to expect to land B2C EBIT for 2025 around half a billion. B2B EBIT is down 3.49 million organically, notably due to timing effects. You may remember that we recorded in Q1-24 a positive half a billion timing effect linked to winter-summer seasonality, which is embedded in summer contracts. In Q1-25, this timing effect is much lower and amounts only to about 200 million. This timing effect will, of course, reverse over the next quarters, has no impact on the full year. Energy management EBIT is down to 19 million organically, resulting from lower reserve reversal in Q1-25. You remember, maybe, that in Q1-24, the reversal of reserve had a one-off positive impact of about 400 million, due to a sharp decrease in market prices and volatility versus the year 2023. Now, taken together, we continue to expect EBIT from B2B and energy management in 2025 to be around 2 billion euros at the former GEMS scope. All in all, it's a good quarter for our supply and energy management segment, in line or slightly above our expectations. Let's move to cash flows. Cash flow from operations amounted to $4 billion in Q1 2025, which is a $1.1 billion decrease versus a very high comparison basis in 2024. Operating cash flows were strong. They are up by $900 million compared to the first quarter last year, but it does include reclassification elements between operating cash flows and change in working capital, in particular to better track the variation of margin costs. Change in variations of working cap had a 2 billion negative impact on CFFO versus Q1-24. During Q1-24, the variation in working cap had a 1.6 billion positive impact on CFFO due to lower prices and the normalization of market conditions. You remember we explained that we were reversing part of the cash which was trapped in the working cap in the years where prices were very high. Over Q1 2025, the variation in working cap is a negative of 400 million effect on CFFO as working cap level is now normalized and we recovered in 2023-2024 everything that was injected during the crisis. Now, if we dig in the main items of change in variation of working cap, inventory had a 0.5 billion positive effect on CFFO, with both higher withdrawals in 25, lower gas prices, but also less impact from green certificates versus last year. It's mainly a timing point between the quarters in year. Operating networking cap is a negative 1.5 billion, as Q1 24 strongly decreasing energy prices translated into a significant reduction of customers' receivables, as I just alluded to earlier. Lastly, Margin calls have a negative 800 million impact on the year-on-year CFOV variants driven by March physical deliveries and the price effect on European gas. Let's now have a quick look at the impact of the nuclear agreements on our end of Q1 balance sheet. We have included on that slide the evolution of our nuclear provisions during the first quarter 25. As you can see, nuclear waste management provisions amounted to 15.7 billion as of December 24, and dismantling and backend fuel provision to 8.7. The outstanding balance that we can collect from our partners and the Belgian government was about 800 million. At the closing of the nuclear agreement in Q1, we transferred, as Catherine explained, to the Belgian government all Category B and C waste management obligations. As a result, our waste management provision decreased by 12.2 billion. We made, of course, a corresponding payment, finance, by the monetization of dedicated financial assets for 9.5 billion and by cash for 2.6 billion. This transfer had no impact on the economic net debt as a liability, was already booked in and had a 2.6 billion impact on our net financial debt. At the end of March, nuclear waste management provisions amount to 3.6 billion, corresponding to Category A waste management obligation, and this obligation will be transferred to the Belgian government as LTO restart expectation is Q4-25. Let's move now to the net debt. Net financial debt increased from 33.2 billion to 34.6 billion due, as I mentioned, to the funding of nuclear obligations. Looking at the bridge, you can see that the 4 billion positive cash flow from operation is well above, of course, our 1.5 billion capex, the pattern that you've seen last year as well. This illustrates energy's unique position across the value chain when it comes to cash generation. First, like for many of our peers, the cash generated by renewable and flex power is reinvested in the development of renewable power productions and batteries. But second, our infrastructure business is a major source of cash flow with limited gross capex in our gas networks. And lastly, A sizable supply and energy management business is a low capital activity with sound cash flows coming from our B2B and B2C energy sales and from our expertise in leveraging ENGIE's portfolio of assets and energy markets. This unique balance enables ENGIE to guarantee a strong investment grade rating with significant headroom to finance growth while offering an attractive dividend for its shareholders. Economic net debt is indeed decreasing as the impact from nuclear funding obligations is insignificant given the liability fully recorded before. Leverage ratios are quite stable and remain strong, with net financial debt to EBITDA at 2.2 and economic net debt to EBITDA at 3.0, well below our four thresholds. For the guidance, in the context of geopolitical, regulatory and market uncertainties, We keep our guidance for 2025 unchanged. We are dedicated to maintaining a strong investment-grade credit rating and aim to keep our economic net debt to EBITDA ratio at or below 4 in the long term. Our dividend policy remains the same with a 65% to 75% payout ratio based on net recurring income and a floor at 110. We anticipate our EBIT, excluding NUC, to be between 8 and 9 billion euros and net recurring income between 4.4 and 5 billion. Following a robust performance in the first quarter, we are confident in achieving this target. Bear in mind that the exceptional performance of B2C in Q1 includes some one-off events and some timing effects that are expected to reverse in the upcoming quarters. And bear in mind also that new tariffs on gas networks in France will not have a material effect on the rest of the year, when compared to previous years. Indeed, gas networks have limited EBIT contribution in Q2 and Q3, and most of the new tariffs were already enforced in Q4-24. Nuclear and hydro volumes in Europe for 2025 are 81% hedged or contracted, so it gives us protection against changes in market price. But we still have, of course, some open position on nuclear and hydro, but also on flex-gen in Europe and for some of the wind and solar assets. With that, I hand over to Catherine for the conclusion.

Thank you very much, Pierre-Francois. So to conclude, we did deliver a strong first quarter, both financially and operationally. Our results show the benefits of our strategy to become simpler and more adaptable with an integrated business model that is really well suited to the energy transition and to this very dynamic environment. And we look forward to continuing to demonstrate this resilience and strength in the remainder of 2025 and beyond. Now back to you, Delphine, for the Q&A.

Thank you, Catherine. We can now open the Q&A session. Operator, can you please remind the process for asking a question?

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Patel Ajay, Goldman Sachs. Please go ahead.

Good morning, and thank you for the presentation, and congratulations on the numbers. I just wanted to get a little bit more on the 25 guidance. If I look at consensus, it broadly sits at the midpoint at EBIT. The headline numbers for Q1 are pretty phenomenal versus last year, and over the course of the presentation, you are flagging those timing effects on the supply. I just wanted to, even if it's qualitative, understand If you look at this Q1 performance alone and just maybe put the timing effects aside, how much ahead of plan was it to get a sense of what kind of run rate we're developing ahead of the four-year guidance?

Thank you. You have only one question, Ajay. I'm just unsettled because usually it comes by two or three, so that's a good one. That's a good one. It's smart to ask from the qualitative perspective. I think that we are happy with Q1. Let's be clear. For sure, we had, as you repeated rightfully, we had some one-offs. Also, the basis of comparison was easier in some of our segments, not all, as you remember. So, indeed, the Q1 is a good one. However, remember that this was Q1 end of March, right? and that was before all the new events that happened in April. For sure, you know that Engie is not overexposed to market, and we are not, as we have already progressed a lot in hedging, and you know that we have de-risked a lot of our assets, so we have limited exposure to market, but still, we do have some open position. That was my last comment when commenting on the guidance. So we are reasonably cautious given what we have ahead of us, but we are pleased with the start of the year.

Okay, all right, thank you.

The next question is from Harry Vibert, BNP Paribas Exxon. Please go ahead.

Hi, morning, everyone. I'll go for the full two. So firstly on, and I'm sorry, this is tedious, because it was first on the course, but on what was the old GEMS business, A lot of your peers have kind of underperformed. I mean, RWE just missed quite substantially. Centrica warmed recently. And I think some of the big oils suffered a bit in trading. So can you give us any insight into why you seem not to have been impacted by whatever it was that has been impacting your peers? And maybe if you could help us understand a little bit why trading across the market has been quite difficult in Q1. And then the second one, sorry, more for Catherine, just a bigger picture. So on renewables, I wondered if you could just give us a bit of insight into what you're seeing on installed costs, both costs offshore wind, onshore wind and solar. And I'll ask that because obviously the IRA or the budget draft is a bit better than we were expecting. I think maybe that's caused people to rethink political risk in the US on renewables and maybe people might come back and look at fundamentals again. I see one of the groups that has wide capital allocation flexibility. So perhaps you might be able to give us a slightly more unbiased view on this. But I'd just be really interested in your critical view on where you think installed costs and competitiveness of renewables is going at the moment. Because obviously, it will be important if we have an up cycle in renewables that we actually see costs coming down. So I'd be really interested to see what you're seeing on installed costs. Thank you.

I will take the first one. Yes, our performance in Q1 is quite okay with the former gems, if you take together B2B and energy management. You have noticed that we have decided to be more granular and we isolate both. And to be very open, I think we've seen in energy management it was a bit tougher. We've seen part of it. We have identified also some cost increase. For example, if you look across Europe, you see gas transportation tariffs are going up. I mean, our own tariffs are going up, but also clearly we see that in other countries. And this is coming with a cost to a certain extent. When you are moving around gas in Europe, that kind of business can be hurt. And that would come into, I guess, the same trend. So we've seen that in energy management. Now, you know, so we have a very strong B2B business, which is supported by contracts, which are multi-year contracts, and that contracts are much more stable. And indeed, you have a Q1 in B2B, which looks pretty negative compared to last year. But as I mentioned, this is timing, and we do expect to recover actually a lot. You should expect a year to go for B2B, which will be very strong. And of course, much better than last year because this timing effect that was reversing will not happen. That's why we are pretty comfortable with B2B, which has been delivering good. And on that part of the business, we do not see a toughening, a significant toughening of market condition. Of course, we've seen competition going higher over the last couple of years after the crisis started, has been gently moving up. But that is very much in line with our expectation, even if we see a bit more tension on energy management. Our profile is, I think, very strong when it comes to both energy, but even more B2B, and that's probably the reason why we are maybe a bit more resilient than some of our peers.

Okay, Harry. So I think you were asking a bit more macro questions on the renewables market. Maybe on the supply cost, obviously, U.S. is a lot of, of questions on future supply costs. And basically, our best guess is what will happen with tariffs. But I think just very short-term, what we were able to analyze, and frankly, the team has done an incredible job proactively managing the supply chain because the tariff question was there before the current administration. So diversification and trying to localize supply chain has helped us with some protection in the United States. In the rest of the world, we've continued to work very, very closely with our suppliers, and we are forming quite strategic partnerships. Some of them will allow us to indeed look at the opportunity set in Middle East, for example, even more positively than before. Middle East is a market of very big volume. I mean, the projects are very big, so it's it's really, really important to secure the right supply chain and make sure that we are indeed associated with very competitive suppliers, both on cost, by the way, and on technology, because there can be some very interesting technology that impacts the profitability of the project. And so I see in general that this is going well. Obviously, solar panels are very competitive right now. And again, I exclude the tariff effect in the U.S., So that allows us indeed, you know, to look at the optionality we have in our pipeline in a fairly favorable light. We talked about Middle East, India, Europe as well, even though Europe, you know, it's smaller impact by project, so you have the sizes different and obviously permitting is a bit longer. So that's how we are looking at on the renewable and supply chain front. And I should add that the capability of the team to execute is obviously also paramount because it does help making sure that our CapEx are under control and the team is doing a great job there. I think on the IRA, I think what we are really, so two things, there is the tariff question. So we'll see, obviously, there is a bit of constructive development on the tariff with China. We'll see, obviously, post 9th of July or whatever that date and and post all the poses and we see how this story unfolds. But maybe on the IRA, I did make the comment that indeed, you know, the first draft bill that we saw was a little bit more constructive because we were expecting it to be actually worse and then hopefully getting better over time. So the fact that the starting point is slightly better than expected does give us some hope. We knew that IRA was going to fade out in the future. what is being considered today is that that date of phasing out of the IRA would come a little bit earlier. I think there is talks about 2029. Again, I'm not going to go into the details because we expect a lot of fluid developments on the different components of IRA. But I think if it can give us visibility in the short term, obviously that's a positive for us because we have a lot of really good projects in the U.S. So if we can continue to develop them with the IRA benefits, That's fantastic. I think the question is what happens if the IRA completely disappears. That's really now back to the fundamentals of the markets. Again, you have to assume that economic growth will continue in the United States. If that is your assumption, then low growth is going to be very important. There are many markets where low growth projections are massive, and they are actually occurring. You know, the difference between U.S. and Europe is Europe, we talk about demand growth, it's a little bit behind in coming, it's late in coming. In the U.S., it is happening. And frankly, I don't know how Texas can do and meet the low growth without renewables. Just in the supply chain situation in gas generation, you know that the suppliers are very hesitant to invest massively in new capacity. So I don't know how Texas will survive without a new renewables project coming in line in the short term, which makes me think, because I do believe in pragmatism, particularly in the United States. that solutions will be found to make sure that this project gets developed. And we are very well positioned, as you know, both on the battery and on the renewables, to provide the solutions to the market and to the customers. Because, again, you know, customers are still in the U.S. very much demanding both green power but also power and, again, very competitive position on renewables.

Okay, thank you. That's very thorough. Thank you.

The next question is from Bartek Kubicki, Bernstein. Please go ahead.

Good morning, bonjour, and thank you for taking my questions. I would also like to ask two questions. First, if we look at the gas generation, you mentioned that in the first quarter you were still benefiting from relatively high spreads. So I just wonder for how long you are hedged still with those higher spreads we saw in the last couple of quarters previously. And when do you think this business could kind of normalize to today's spreads we are observing on the market? That's the first one. And second one on the nuclear JV, just theoretically, I just wonder whether you could, from a legal perspective, or you would like to probably sell a stake in a JV of the Belgian nuclear deal. Thank you.

Maybe on the nuclear JV, we have, you know, we've just signed and closed, we just closed this agreement and we are, you know, obviously committed to it. So I won't comment right now. We have, you know, a significant operation to conduct in Belgium, both on the decommissioning side as well as the LCO side, and we are committed to it. So, and obviously very pleased to have... the operations and to have this set up. So right now we are committed to it and no additional comment on the structure of the JV.

Yeah, François, you want to say something? Maybe I was unclear, but no, we've seen a sharp decrease of the spread that we have captured in Q1. And indeed, we enjoyed in Q1 24 the benefit of spreads which were high and which were locked in at the time of the crisis. But you remember that in Q4 last year, we have already seen a significant decrease of these spreads. And this is, of course, the case in Q1 year on year. So no, no, we cannot count on our hedging backlog anymore on the spreads. And we are making money out of gas generation, out of the current market. Of course, we have still a few coming from the past, but we are making money out of the flex tool that we are using in a good way.

Okay, thank you. Better to you right now on both sides. Thank you.

The next question is from Arthur Sitbon. Morgan Stanley, please go ahead.

Hello. Thanks for taking my questions. I have two. The first one is just a follow-up question on IRA. There are two specific points that maybe you haven't commented on yet, which are on the transferability of tax credits and as well on the part of the bill on material assistance, specifically with equipment coming from China. So first, I was wondering if you use transferability a lot or not. And second, I was wondering if the part on material assistance and potentially a quicker phase-out for tax credits when a significant share of equipment comes from China is a risk for your battery project, and if your supply chain is significantly different from from competitors on batteries. And the second question would just be on dividend policy. Your performance has been good in Q1, so I'm starting to wonder, in terms of the dividend trajectory for the coming years, is your goal to keep a payout at the bottom end of the range this year to help bring forward growth in dividends for coming years? Or would you potentially increase the payout ratio towards the midpoint of the range to smooth the dividend decline? And if you have also any thoughts on potentially the dividend policy at the moment you pay one dividend, or if you could consider moving some other companies to an interim dividend. Thank you very much.

Okay, so dividend policy, I mean, obviously we have reaffirmed our dividend policy. We're just at Q1. Actually, I don't know that we are going to add much more color to that at this stage, but obviously very committed to the policy as it stands. Maybe a comment on the IRA. The transferability is indeed a very interesting addition that IRA brought to the market. We used to do, obviously, tax equity through banks. transferability gave us more options we use transferability a few times so we are indeed looking at this item as it is being indeed questioned as part of you know everything in that bill potentially it would be phased down a little bit earlier than the other stuff that we like in the IRA. So again, very fluid. We will see. We can operate with our transferability because we used to operate before that, but it just makes that market obviously more liquid and it gives us more options. So we will be looking at it. One point of attention for sure. Let's keep a close eye on that. On the battery, and indeed, you know, the battery origin, even when you source them from the U.S., they continue to be a Chinese component in most of the batteries. Obviously, we're working hard to diversify, so depending on the level of, I mean, at what level of granularity the Chinese content is estimated, That would obviously affect the future supply of base, potentially, so something that we are looking at. Again, we're working very hard with our suppliers to diversify. The second point is that, remember, that we front-loaded the execution of our battery project in the U.S. very significantly, so a lot of the construction that is happening today is actually done already materializing the value that we saw in DRP. So that's really, for us, very important. And we always say that it was a way for us to de-risk ourselves from future evolution on battery. So this is how we will manage. And right now, we're very pleased the execution of the project in batteries is going well. And as I mentioned in my prepared remarks, we had anticipated quite a bit on delivery with some safe harbor equipment. So we feel at this stage fairly comfortable with our battery positioning in the U.S. You want to mention something, Arthur?

Hello, Arthur. Thank you for our question on dividend. Dividend is, of course, a shareholder matter, so there will be a discussion that we'll take with the board in due time. We are also listening to the market, and I would say the dominant message from the market is that we are very impatient to see the moment where INGIE we'll be on a journey of increasing dividend. And with a stable, you know, that kind of gentle growth of dividend that we are after, and that was an important theme of our messaging in February. So I think that gives you a hint where we would like to push, but that would be a decision that will come in the right time when we have the full year result, because we need to have the full year before we make any decision on dividend. That's very important. That's the first point. When it comes to interim dividends, you know that under French law, and we are French-resistant companies, you have some restrictions. It means that first you need to go for an interim clause, which is pretty cumbersome, and we did it in the past. We could do it again, but we try to be more simple, so we have to be also consistent. Let's say that's something we can overcome. Second point, it's also French law is introducing some restrictions to the dividend capacity, which are stringent, and in the case of Engie, doesn't make interim dividends that easy in the long run if we want to be stable again and predictable. But we'll be looking at it because it's a question that we had more over the last quarter, and we are very open to the discussion with the market, so we take due note of this request, which is ramping up.

Thank you very much.

The next question is from Wanda Serwinovska, UBS. Please go ahead.

Hi, good morning. Two questions from me. The first one is on the timing effects in Q125. Can you quantify them, the ones that will reverse? And if you can give us some timing, do you expect all the timings to be reversed by the end of the year? And the second question is on your guidance. I noted that you slightly improved both the tax rate and the interest cost guidance for 2025-2027. Could you please comment about the reasons behind that? Thank you.

Thank you. So on timing, I think that we have a positive timing coming in B2C. which is about 100 million and that we do expect to see a reverse fully at the end of the year. We have a negative timing coming in B2B that I mentioned for about 200 million that we also expect to see reversing fully throughout the year. So most of these timing effects, you can take the reasonable assumption that they are going to be reversed in year. And I gave you the big numbers. Now, our tax rate and financial cost for 2025, this is fine-tuning. I think on the financial cost, what is fair to say is that we were expecting to see a decrease in the short-term rates to happen. It did happen, but it happened a bit later than expected, and that was at the time we were very long cash before the payment of dividend. So it gives us a bit of breath air in the financial cost, and that's the reason why you see this very slight improvement. And that's basically the key point I wanted to flag.

Thank you very much.

The next question is from Zach Hall at Jefferies. Please go ahead.

Hi, good morning. Yeah, just two questions from my side. First one is on batteries. Dialing into the US battery's point, I just want to check, if you don't do any more projects in the US, other than what you've taken FID on, just wondering how that impact the 400 million EBIT target for 2027. And then my second question is on electricity grids, and specifically, I guess, on the M&A portion. It's obviously a key part of your 2024 to 2027 EBIT bridge. And it's not so clear that Angie will be able to execute on this M&A driven growth. I guess maybe some color on what your thought process is around that. And if there are any alternatives to electricity grid M&A in your plan, would you consider pairing back that target of 15% of networks either from electricity or potentially allocate that capital elsewhere? Thank you.

Maybe on the battery and just to complement what I said, we don't see much risk to 2027 on this target because much of the 400 million we mentioned actually came from batteries that were going to be put in line in 2025. And again, I mentioned that we are broadly on track, so we don't see a risk on the target in 2027. Then the second question.

If I get you right on the second question, that if we could not complete our targets on acquisition in networks, power networks, would we be at risk of the contribution missing in 27? I think today we are working on it. I mean, we have some leads that we expect, of course, to bring home. If we cannot, of course, we can always also look at some other prospects. We are working on it, as you can imagine. In ENGIE, we do have a lot of leads, both in internal organic growth, but also in acquisitions. And we are, of course, pretty agile. At the end of the day, what does matter is value. And we are working in power networks. Now, to be also very candid, in renewables, you know that the market has been hit in some places. And there may be some operating assets that we can buy at a good price. If it is value accretive, it's also a way we can redeploy some capital. We would be really driven by value creation as long, of course, as these leads are all fitting well in the strategy.

I think that is really key. We don't put ourselves in a syringe. On M&A, so we have indeed ambition on power networks. By the way, power networks development, we do quite a bit organically as well. Remember, I mentioned Chile. Sometimes it's forgotten. We're also doing Peru, obviously Brazil. And we have options in our capital allocation. So we will not put ourselves into a corner for sure.

All right. Thank you very much.

The next question is from Alex Rochier, Bank of America. Please go ahead.

Good morning. Thanks for taking my question. I've got two, please. The first one is just to come back a little bit on GEMS and on energy management. And I know you already made some comments regarding phasing, but just wanted to clarify if some of the Q1 drop was due out of the market reserve reversal. So if you could maybe extract that from the performance, because I'm just looking at the 200-ish million drop, you would annualize, you would basically go to the bottom end of the 500 to 900 million range you had guided at the capital market day. And then just to follow up on that, I mean, I know we've commented already about some pressure from your peers on trading, including like a a relevant German PI this morning, and I'm conscious again that the perimeter is never the same between all the utilities, but Just wondering specifically if you could expand on some of the strategy within energy management and the risk appetite within GEMS. I know some of your peers have set up some more traditional, perhaps trading capabilities, functioning almost like a commodity hedge fund to some degree. So wanting to clarify again that the risk appetite at ENGIE was a lot lower, as you've already commented, that that would be great to have some color in that. And then my second question is regarding your investment. We've talked about renewables. We've talked about batteries. But I wanted to come back on hydro. And, you know, you've made, again, you know, some demonstration of your appetite there. Wondering if there's anything interesting for you in France regarding some of the changes in regulation for concession for EDF or even perhaps in Germany with some of the unitary assets that could come into play. And if not, if you could, you know, again, in your... flexibility regarding capital allocation and investments organically. And organically, perhaps actually look to upgrade a little bit more your current hydro portfolio with more pumping capacity. Thank you.

Yeah, maybe I'll start with the hydro question, because you're right to say that there is a lot of discussions on regulation changes. in France and potentially opening to the competition. I think, to be honest, it's a long-winded, it's a long-awaited reform. So, honestly, it's very difficult to bet on timing on these things. But, I mean, we have an hydro position in France through CNR, which is quite large, and then Le Chême, which is quite small, 750-odd megawatts. And we really like these assets, but of course, if there was an opportunity to do more hydro in France, we would be interested in looking at it. But again, I wouldn't get overly excited about the timing, if any, if it comes of this opportunity because, yeah, it's quite complicated. And then, yes, I mean, as much as we can, you will see us engaged sometimes in acquisition, like we just did in Brazil, but also sometimes in modernization and then trying to get a bit more power capability from our existing assets when we can. We have, by the way, in France, one asset in Le Chêne, which has potential. Again, here we need regulation clarity, but we could do a little bit of a upgrade of the assets and then increase the capacity of the asset, then it's great because obviously you gain more megawatts on existing assets without having to go through construction permits, etc. And we also have our first hydro in the UK, the big step assets that we have providing a lot of great flexibility power, which is also, you know, undergoing modernization. So, you know, we value a lot of these assets and when we can invest, when we can increase the capacity, we will do so.

For your GEMS questions, first, we don't see energy management training to the low end of the guidance for the full year. I think you remember that last year, and of course there are always these reserves, I was particularly about 500 reversal in Q1 last year. It's 200 this year, so it's indeed a significant decrease. However, If you look at the run rate, it's a bit tricky to annualize. Last year, Q1 was about 40% of the total year. It's not a bad start. It's not a bad place to be. And if you want to get something for the full year, I mean, there is no reason that the pattern would be significantly different. Now, of course, it would be a rebased number because we expect to be much lower than last year. in energy management for the reason that you know about the normalization, but also the reserve the river soul. But I think that we expect the year to go to be definitely well above Q1. So I think that we are comfortable to land in a good place in the guidance for in a range in energy management. For the risk appetite, you know in ENGIE it is emitted. The key principle in ENGIE is that we hedge at inception. That's what we do. We do have still, of course, risk in the market because a lot of this hedging cannot be done straightfully. And you have proxy hedging. You need to manage time. You need to manage some underlying product. That's our job of transformation. And we do manage it through all kind of compliance and risk control framework. especially with value at risk targets. So we do check on that. But I can tell you that indeed, we are not at all a commodity hedge fund. We do not host that kind of thing. And this is not what we want to be. We are supporting the business, supporting our customers, and we bring that into portfolios where we do manage indeed hedging, and in that hedging, some proxy hedging, which explains why we do have exposure. But again, it's limited and always anchored into the business, either our own industrial asset or with customers. Very clear. Thank you.

Operator, can you please take one last question, please?

The last question is from Piotr Diasio-Wielowski, CTE. Please go ahead.

Yes. Good morning, Abad, and thank you for squeezing me in. I have two questions on your supply operations. Firstly, on the b2b segment i wanted to ask you what uh how different is the customer approach now after april volatility versus beginning of the year what do they tell you about the second half of the year do you see a meaningful kind of a lower risk lower appetite for risk and for volumes and we could see a demand decline in the industrial space and second on b2c it seems to me that across the number of European suppliers, we see a relatively healthy supply margins and slow start of a competition. What is your expectations toward the competition? Is it going to start? And what's your approach towards acquiring new customers and volume?

Thank you very much. I think it's fair to say that customers and particularly industrial customers are quite erring on the cautious side these days. Obviously, macro trade, a lot of uncertainty, so we do see that. Obviously, we mentioned that, remember, on the B2B customer side, we have locked about 80% of the margin for 2025, so it's more going forward. But right now, we do see cautiousness in the market and from our customers very clearly. And in B2C, competition is coming back. We are seeing both in our key markets, Belgium and France, So it's really for us obviously important that we want to keep our customers. And here we are obviously making sure that we remain competitive at the same time, making sure that we price in the right manner or the risk breaks that were some key learnings from the energy crisis. But yes, the market's become a bit more competitive, but we have a good positioning and the team are doing a good job to tackle that. I think that's it.

Thank you very much. You're welcome. So this is the end of the Q&A session. Thank you for joining the call today. Of course, if you have any follow-up questions, do not hesitate to call the EIR team. Have a very good day. Thank you.

Ladies and gentlemen, this concludes this conference call. Angie thanks you for your participation. You may now disconnect.