Enel Spa Unsp/Adr

Thank you, Monica. Good evening, everybody. So let's look at the highlights of the period. So we are in chat number two. Over the second quarter of the year, we have touched the peak of the crisis associated with COVID-19 across all the countries we operated. You will see in the next slide how these contexts have evolved over the quarter and the extreme scenario that has been realized. Despite this distressed environment, the group recorded a solid performance. Net ordinary income is up 6% year-on-year, demonstrating the resiliency of our business model, even against sudden and deep disruptions. Our strategy was not put on hold. Actually, dynamics of the business that we consider as being long-term trend has accelerated. We made significant progress on decarbonization. We commissioned 800 megawatts of renewable capacity, paving the way for a new record delivery for air installations in 2020. We shut down 2.1 gigawatts of coal and announced the accelerated closure of our coal plants in Chile, this is the last one, and one unit in Italy at the Brindisi Power Plant. The simplification of the group fraction progressed as planned. At the beginning of July, we have reached a 65% shareholding in energy. We are well on track on the second share swap in Air America, on which you will receive an update in the forthcoming weeks. In 2020, ordinary earnings will continue to underpin a mid-to-high single-digit growth versus last year. I want to highlight that this business model of ours is solid and sustainable. It is set to capture unprecedented opportunities that will come from energy transition worldwide and will translate into support for growth in future years. In light of the solidity of our company, we are in a state our minimum dividend per share. So this year, the minimum DPS is set at 0.35 euro per share, which underpins a 7% growth compared to the dividend paid last year. So let's analyze now the evolution of the scenario in the second quarter. That said, and we are now on chat number three, the market and micro-trends we observed during the first quarter deteriorated further in the second quarter, closely mirroring the dynamics of COVID-19. Foreign exchange represented the main headwind, which Latin American currencies have devalued significantly since the beginning of the year, on average 18% just in the second quarter alone. Brazil is one of the countries that has weakened the most. At this point of the year, we don't expect any recovery in the effects rates, and we use current levels to protect the financial appearance. So the financial we will hear about are based on the present effects rates and explicitly demand went further down in second quarter, with Italy and Spain making double-digit decreases, widening further the contraction of demand over the third and the previous quarter. Spot prices have shown a sharp contraction in second quarter, with Spain and Italy the most affected. We expect this trend to normalize in the coming months, allowing economies bouncing back from lockdowns and adjusting to a new normal. In July, we already see an improvement in demand in the European countries, as well as in Brazil and Peru and Latin America. Thanks to the integrated margin management, we have already locked in volumes in full for 2020, and so for the 2021 production of 70% in Italy and 90% in Spain, securing far higher prices than current levels are expressing. Foreign exchange was the only headwind we could not control. and more importantly, how this translated into an income impact. This extraordinary environment has put in motion several initiatives to accelerate economic recovery, both at national and supranational level. The European Green Deal has defined climate plans that stimulate a long-term data perspective. A 1.13-year long-term budget reinforced by the 750 billion euro sources allocated through the next generation of new funding will address problems with economic and social damage brought by COVID-19 in Europe in the wake of a sustainable recovery in the eurozone. Resources available could support the sector in achieving both short- and long-term goals thanks to the stimulus and new investment-raising power infrastructures bringing Renovation Automotive and Astra Industries has picked up in the process of fighting climate change and reaching net zero emission by 2050. The next generation EU could be further a boost to support the green energy recovery, adding more firepower and green investment. Furthermore, at council level, England, Spain, and Brazil have already implemented different measures to affect financial distress derailing from the pandemia. In particular, in Latin America, we expect to be constructive on the discussions regarding the measures to be taken to affect the impact on distribution companies coming from a sudden drop in volumes. If we move now to slide number five, which covers investments, you see that CapEx in the first half was equal to 4.1 billion. This was in line, this is in line with last year, despite the measure's articulation. The net of currency devaluation and inflation, capitals would have increased by 5% year-on-year in real terms, signaling the commitment and the capability of the company to deploy investment for the real industrial targets. Around 90% of total investment was devoted to renewables and infrastructure and networks. in the effort, in the accelerated effort to digitalize CREEP and the capitalization of our generation CREEP. From a geographical perspective, gross capex was deployed mainly in Latin America, Italy, and North America. Development capex stood at $2.5 billion, representing about 60% of total investments, out of which around 75% was allocated to renewables, mainly North America and Latin America. Looking at the 2020-22 period, more than 80% of asset development capex is already addressed, providing high visibility on industrial targets for the period of the plan. If we focus on the decarbonization strategy, we can move to chart number six, which covers global power generation. Out of the installed capacity of 83,000 megawatts, Renewables account for 46,400 megawatts, corresponding to more than 55% of the total. This time, we see the surpassing of thermal capacity, which is down by 6,600 megawatts versus previous year. And unsurprisingly, production from renewable sources, which at the end of 2019 overtook production from thermal generation for the first time in energy history, is up 4 terawatt-hours year-on-year. almost twice as much as the production from thermal generation. As a consequence of this significant shifting balance towards renewables, emissions-free production is close to 70% of total production up by 11 percentage points versus previous year. So we can say that we have reached, two years in advance, the target of emissions-free production quota we have set in our 2020-2022 business plan. Looking more closely to the progress on the plan for renewables, you see that with around, this is now chart number eight, with around 10 gigawatts of capacity built and addressed, we have secured 70% of the 14.1 gigawatts that we plan to add in the period 2022. It is worth to highlight that one year ago, we were at around 73% of the targeted addition for the 1921 business plan, which I remind you, entails the deployment of 11.6 gigawatts, almost 3 gigawatts less than current target. So what needs to happen is that we cover the remaining 4.2 gigawatts, and these are covered more than three times by the portion of the mature pipeline with completion, operation date by 2022. The mature pipeline is up by 4,000 megawatts versus Q1, and now stands at 44,000 megawatts. This provides ample comfort on the delivery of the residual target and offers significant leeway to increase the level of commission. In light of the progress achieved on the delivery, as well as the size of our pipeline, we are in position to confirm our 14,100 megawatts commitment, and actually we are certainly that the renewable capacity that we will deploy by 2022 will exceed significantly this level. Actually, you can see from the slide that the gross pipeline is in excess of 100,000 megawatts. We have been working extensively on growing this pipeline to support future deployment targets. A larger diversified pipeline ensures a profitable growth, minimizing operating risks. So if you go now to the thermal generation, you see in chat number nine that we are accelerating further our coal phase-out. In the first half of 2020, we have shut down 2,100 megawatts of capacity, bringing the group's total coal capacity below 10,000 megawatts for the first time ever. Production from coal stands at 6.1 terawatt-hours in 2020, down by a remarkable 72%. from 22.1 terawatt hours, which we produced in the first half of 2019. So it's six now, it was 22 in 2019, first half. In terms of turnover, revenues from coal amount now to 2.6% of the total, which is half of what we had in June 2019. Over the past weeks, we have taken further steps ahead in our decoil process. Enel Generacion Chile, obtained the authorization to terminate the operation at Bocca Mina by December 2020. This is three years earlier than the original schedule, as well as obtained the early closure of Bocca Mina 2 in May 2022 versus the original deadline of 2040, so 18 years earlier. In Italy, the Ministry of Economic Development has given the green light for the early closure of Unit 2 of the Brindisi power plant, which was expected to happen in January 2021. This progress solidifies our commitment to the decarburization of our fleet by accelerating closure of around 1,000 of capacity ahead of plan, and leading to a total coal capacity installed in 2022 that will be more than half than the level that we had in 2019. Time to move to networks, so chart number 10. volumes distributed at down 8% overall and across all countries of operation, with a degree strictly correlated with the timing and magnitude of the COVID-19 outbreak. This operating parameter does not, I repeat, does not translate into an economic effect in Europe, as revenue cap regulatory frameworks typically of European countries are not sensitive to volume distributed, but it does affect Latin American countries. In Brazil, our biggest operation in Latin America, we reckon that the regulator acted promptly to ensure that the financial sustainability of the sector, and we are currently engaged in discussion on how the economic effects also can be absorbed. Throughout the period, despite operating difficulties, our efforts for the digitalization of the grid remained unchanged. bringing the number of second-generation smart meters installed to 14.9 million, up year-on-year by an outstanding 48%. Out of the 74 million end users we have in our network perimeter, 60% are now fully digitized. As a result of investment in quality, the SAIDI and SAISI indexes have decreased by 10% and 7%, respectively. A decrease of these indexes means an increase in quality of service. Let's now take a closer look at customers. This is chart number 11. Customers' positioning continues to strengthen via a retail traditional operation as well as on new services and infrastructures. Progress on customers will allow us to tap the value pool associated with the uptake in unitary consumption, which yields expected to accelerate further in Europe on the back of the green recovery and electrification of the economy designed for the continent. Customers in the free market, now at 17.3 million, are up by 600,000, with an increase in the customers based in free markets concentrated in Italy. Energy sold in the free market is down by 9% due to the COVID-19 and lockdown measures in countries where we operate. Alberto will give you details later on the economic performance of the retail business. Looking at Enelix, the division performed extremely well despite COVID-19 and recorded significant progress in the deployment of charging infrastructure, which is up 41% year-on-year, with almost 90,000 charging points installed, extended its leadership on demand response with $6.20 of capacity offered globally, Battery stores increased by 36% during the year, reaching a capacity of around 110 megawatts. Fiber deployment reached 8.7 million households, passed up 45% year-on-year. I now hand over to Alberto for the analysis of the results.

So, Alberto, up to you. Thank you, Francesco. Good afternoon to you all. So, now I am on page 13. And now let's move on the financial summary for the first part. As said, the DGA stood at 8.8 billion euros in line versus previous year. Group net ordinary income grew by 6% year-on-year, came in at 2.4 billion. This financial performance was achieved despite a strong devaluation of currencies and the impact of the pandemic of both volumes and bad debt that I will detail later. SFO reached €2.1 billion, down 58% versus last year. This decrease is mainly attributable to movements in working capital due to COVID-19 crisis and some differences in timing versus previous years. Group net debt increased to €50.4 billion. I will be back on this in a few slides. Before moving to the detailed analysis of the semester, let's take a look at what effects of COVID-19 means in the semester for our financial results right now on slide 14. As you can see, the group EBITDA was mainly affected by two negative impacts. 370 million euros were from the devaluation of currencies. and 300 million units associated with the sharp contraction of volumes, impacting retail activities worldwide and networks in Latin. As you probably know, there is a discussion ongoing with regulators to find the way to assess the mechanism to this situation. The net of both COVID-19 and effects, as we've done, would have been up by around 8% year-on-year. Looking down the profit and loss, we recorded a negative impact on DNA worth 130 million euros driven by bad deprivation accelerating in the second quarter at 13. On the group's ordinary net income, the COVID-19 crisis translated into around a burden of 200 million euros topped up by a negative effects impact of around 800 million euros bringing the overall impact in the range of 300 million units. Notwithstanding these major headwinds, our integrated and sustainable business model out of the decision financial performance. And I'm now on slide 15. As the way we commented, we reported the ordinary data at 8.8, probably faster. showing a solid improvement of the underlying operating performance despite the adverse scenario. Resiliency of our European networks has been supported by solid regulatory frameworks, while in LATAM, volume dynamics have impacted the operating performance as well, as we will see later in the presentation. We require a coordinated and decisive action to be taken by the Latin regulators in order to tackle the current emergency. On regeneration and retail business, the integrated margin management has protected the economic results against market repercussions. In the next slide, I will focus on the main global business line drivers. Now I am on page 16, so before talking about the single business line, let me comment around our progress in efficiencies. As you can see from the chart, in the first semester, credit expenses decreased by 7%, or more than 300 million euros, mainly thanks to the efficiencies registered in the period. recorded efficiencies for more than 170 million, well-balanced between the detailed conventional generation and networks, thanks to an acceleration of the efficiency plan. And we are now well on track to reach our target of 1.2 billion euros accumulated in 2020-2022 plan. Finally, we recall that as already commented during the first quarter result call, the current level of OPEX, which amounts to 3.6 billion euros, has been positively impacted also by the provisions released in pay for 356 million euros. So now we will go through the details of the operating performance for the semester. We are now on page 17. where we take a look at the performance of the global power generation business line, while in the following two slides, we will go more in detail to the performance of energy power and the conventional generation. The ordinary EBITDA of the global power generation increased by 9% and reached 3.4 billion euros Excluding the impact of FX devaluation in the TAM, performance was up by 15% versus the previous year. The improved profitability of a global power generation with a higher share of renewables is highlighted by the 10% increase in unitary margins. that last year, performance included around 100 million capital gains associated with the full consolidation of our North American assets, as well as 160 million positive contributions associated with the termination of a PPA contract in Chile. As we delighted during the first quarter call this year, in this year, we had the results has been positively impacted by a provision reversed on its pain of around 170 million euros. Last year, 270 million euros of one-off this year, 170, 100 less. In the next two slides, dedicated to energy and power and conventional generation, I will analyze the main components of the performance, and now we can move on page 18. For renewables, Ordinary EBITDA came in at 2.3 billion euros, 1% increase versus last year. Net of negative effects impact, EBITDA would have increased by 7%. As mentioned in the previous slide, in the first half 2019, we recorded a net capital gain and an end determination of the PPA contract in Chile for a total amount of 180 million euros. No impact, one-off impact has been registered this year. So the operating performance was mainly impacted by the following dynamics. 100 million euros coming from the additional capacity installed in 2019, 150 million euros of increase from the positive contribution of hydro plants performance, mainly in Italy and Colombia. Seventy million of increase as a result of higher prices, fully hedged, driven mainly by Italy and Latin America, and 20 million coming from efficiencies. The overall impact of the effects evaluation of LATAM currencies is in the range of 130 million euros. Now we can move to the conventional generation, and I am on page 19, where you can see that ordinary EBITDA increased by 32% and came in at 1.1 billion euros. As already said, the semester was positively impacted by the provision results on the same that accounts 170 million euros for this specific business, for the conventional generation business. While last year, the ordinary EBITDA included the positive contribution associated with the early termination of a PPA contract for around 80 million euros. Made of these items, the underlying operating performance has recorded an improvement of 23% year-on-year, or around 170 million euros. And this is mainly due to 130 million as a positive result coming from the group's short position, plus 60 million resulting from higher prices for the edge, mainly in Italy, around 55 million euros coming from efficiencies, mainly in Italy and Spain, The effect depreciation impacted by around 60 million euros of decrease in depreciation. Moving now on page 20, you can have a look on the infrastructure and . Here, ordinary data came in at 3.8 billion euros, almost flat year-on-year. Net of the 170 million euros that impact on currency evaluation, EBITDA would have increased by 3%. Reversal provision in Spain impacted zero in EBITDA for around 180 million euros, while last year the EBITDA was positively impacted by the regulatory settlement in Argentina for around 200 million euros. Also here, the net effect of the one-off 2019 and 2020 is almost the same. As a result, the underlying operating performance has been broadly stable, demonstrating the resiliency of the business, particularly in the European countries. In Latin America, the business performance was impacted negatively for around €80 million, mainly in Brazil, by the 7% drop in volumes of electricity distributed. As said before, Discussions with regulators are ongoing, and we expect, further to what has already been done to offset the financial impact, other action to be taken to offset the economic impact. In addition to the volume impact, the main moving parts of the period have been the following. We added 100 million euros related to the investment in digitalization and improved service quality. We added 40 million euros for efficiencies. We've got the indexation in Latin America for 80 million euros that has partially compensated the decrease in volume. And then the current evaluation impacted negatively for around 230 million euros. And lastly, on page 21, I'm on the retail side. As you can see, EBITDA evolution reflects a really challenging environment, which has seen a drastic shift in annual customer base consumption. The descending base at the end of a period that we consider the worst of the year, being affected by severe lockdowns, in particular, Retail operations continued to work properly, and in one day, the customer base remained stable. In Italy, we added 500,000 new customers in the centralized market. Additionally, around $17 million cost reduction has been due both in free and regulated markets, out of which $14 million in Italy. Looking closely at the free and regulated markets, The free market in BIDA declined by around 70 million euros or 5% year-on-year. The decline is mainly attributable to the following offense. In Italy, BIDA declined 7% or around 70 million euros due to a temporary longer position driven by a sharp contraction in volumes led by B2B customers. And also lower gas consumption mainly as a consequence of a mild weather. The average unitary margin for both B2B and B2C markets were broadly unchanged versus last year. In Spain, a decline by 6% or around 20 million euros on the same temporary long-duration dynamics observed for Italy, driven by a decline in the electricity sold. Regulated EBITDA increased by more than 20 million euros on better energy margins. Regulated market EBITDA decreased overall by 1.5% or 10 million euros. And now that we have gone to business drivers, we can move to the financial section. I'm on page 22, where you can see that ordinary group net income came in at 2.4 billion euros, or plus 6% versus last year, mainly thanks to lower financial expenses, a better result from equity investment, and the reduction in minority interest, which more than expected increased in DNA and higher tax rate. DNA increased by around 130 million euro mainly refers to the higher level of adverse accruals related to COVID-19 scenario, for which discussions with regulators and managerial actions are ongoing to compensate the impact. The decrease in financial expenses reflects the continuous decrease of the cost of tests which declined by around 30 basis points versus the end of 2019, with now an average cost of debt at 3.8%. Results from equity investments stood at 35 million euros, while taxes increased by around 165 million euros versus last year, mainly due to $35 million for higher earning before taxes and others for recognition in 2019 of deferral tax in the U.S. and in Argentina and also on the cost in 2019, we booked some positive one-off items such as the fiscal incentives on intellectual property in Italy. Minorities decreased by 18%, reflecting operating dynamics mainly in Spain and Latin America, and an increase in Latin America and Chile state, followed by our share swap activity. Now moving to page 23, we can have a look on the cash flow. As said before, FFO stands at 2.1 billion euros, strongly impacted by the COVID scenario, which reached its peak during the second quarter of the year. In more details, dynamics underlying the FFO compared to the previous year can be explained as follows. EBITDA came in line with 2019, considering also that the provision reversal in Spain has no cash impact. Change in provision increased by around 400 million euros, mainly attributable to increasing the debt for COVID dynamics already commented and the resolution number 50 in Italy. Working capital was impacted for around 2 billion euros by the lockdown in different countries as already anticipated during the first quarter result presentation. Payment of taxes increased last year had been moved to July, so this is a difference in fact, this is only a time difference. Out of the 2 billion euro tax extraordinary impact, we expect to recover around 1.2 billion in the second half of the year, on top of the usual working capital recovery as a consequence of the return to a stabilised situation worldwide and to the reabsorption of the capex curve. leading to a €2.5 billion better for recovery from working capital management in the second half. Worth to mention that ANEL in Brazil has already approved the measure that will support the reabsorption of around €500 million by the year end. Negative leakage flow is a consequence of the dynamic mentioned above. which we expect to partially recover in the second half of the year, bringing our cash generation to cover investments. And now let's move to take a look at net debt on slide 24. Net debt to the 50.4 billion euros. Changes are driven maybe by an increase of 200 million euros related to new leasing on IFRS 16. The negative FHUO impact of 2.1 billion already commented and dividend already paid for 2.6 billion euros. And cash outflows related to the further increase in the share of Central America and the Chile through the equity swap. And then we recorded 700 million positive FHUO impact from the valuation of local currencies against the euro. It's worth to highlight that net debt at price-to-price for that gender is 500 million lower. We have already around 4.5 billion euros of hybrid still full-accounted debt. And in Brazil, we will shortly receive 350 million euros from the financial relief program for the distribution companies. Our growth debt increased by around 2 billion euros as a result of devolution of the test, which has increased by around 5.2, and the reduction of cash deriving from the liability management activities performed at the end of 2019 to finance 2020, which helped us also in reducing cost of debt by 30 basis points compared to the end of 2019. In the following slide, you will appreciate our strong liquidity position and credit metrics. As you can see, our total liquidity as of the end of June stood at 26.5 billion euros, which 5.9 in cash on end and the remaining 20.6 in available committed credit line. This level of liquidity covers 1.5 times the debt measuring by 2023 amounting to 18 billion euros net of short-term debt that is routinely rolled over. Our credit metrics show a stable level of leverage, notwithstanding the extremely adverse impact on cash dynamics arising from COVID-19, with an EBITDA ratio of 2.8 in the last 12 months. The solidity of our credit metrics is further testified by current rating levels and outlooks expressed by rating agencies, which acknowledge the sustainability of our credit metrics, even in the latter distress scenarios. And now let me conclude this part of the presentation driving you through our new financial target for the year that you can see shown in the slide. Over the course of the presentation, we have commented in detail the many factors that have come into play in the past month. All these variables contributed to the creation of the extraordinary circumstances we are operating in and that will remain with us for the foreseeable future. Looking ahead, we are extremely confident on the long-term performance of the group, and the solidity of our business model provides itself once again, showing resiliency against turbulences and in extreme scenarios. There is an ongoing extensive effort to offset the impact of these crises through discussion with local authorities and regulators, as well as through managerial actions. Not all factors can be assessed, with effects being an exogenous variable and debt dynamics associated with broader economic conditions and regulatory intervention. We do not expect a recovery of currencies by year-end, and we must reflect this new scenario into our 2020 guidance. Based on the updated currency projections, we decide to expect it to come in at around 18 billion euros while net income is expected to be in the range of 5-5.2 billion euros for 2020. Medec, starting from 50 billion, yet just commenced, is projected to fall in the 48-49 range, depending mainly to the completion of active portfolio management opportunities that we are exploring. Shareholder remuneration, backed by the 0.35% Europe's share minimum guaranteed dividend set for 2020 will accuse a mid-high single-digit year-on-year growth comprised in the range between 7% and 9%. I finish here. Francesco, I am over to you for closing remarks.

Thank you, Alberto. So, as you have all heard, we've been experiencing an extreme, quite unforeseeable scenario with headwinds. ranging from all sides, from macro variables to operating dynamics. So I should say that if there was to be a proof of the resilience and validity of our integrated business model, this is the proof. Despite this very challenging environment, we have been able to deliver a solid operating performance on the back of this very resilient business model that we were talking about, coupled with our efforts to ensure business continuity across all segments and countries, leveraging heavily on the digitalization of our asset-based processes. Our long-term strategy is confirmed and is accelerating, driven by the structural changes in the market, further enhanced by the economic stimulus under definition. The increased support on a green recovery will drive investment upwards and will open up new value pools that we are more than ready to capture. Earnings are set to grow mid-high single-digit underpinning an increase in the shareholder remuneration of at least 7%, which is further supported by the minimum guaranteed dividend per share policy. It is worth to highlight that our dividend policy has not changed, and we will continue to pay the highest dividend per share between the 70% payout mechanism and the minimum guaranteed, which has remained unchanged for all the years of the plan. So thanks for your attention, and let's now open to the Q&A session, Monica.