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.