Enel Spa Unsp/Adr

Good evening, ladies and gentlemen. A warm welcome to our full year 2021 results presentation, which will be hosted by our CEO, Francesco Staraccio, and our CFO, Alberto De Paoli. In this presentation, Francesco will provide some highlights of the period and will sum up milestones achieved, while Alberto will walk you through the operational and financial performance for the group. Following the presentation, we will have the usual Q&A session. We ask those connected to the webcast to send questions only via email at investor.relations at nl.com. Before we start, let me remind you that media is listening to both the presentation and the Q&A session. Thank you, and now let me hand over to Francesco.

Thank you, Monica. Good evening, everybody. We are in the chart called Key Highlights of the Year, chart number two. Let's start with the highlights. of the period. The operating dynamics of 2021 showed a significant recovery of all industrial KPIs with a growth curve which is now landing at a level back to pre-COVID-19. The recovery of the operating business performance and the contribution of the stewardship business model translated into strong financial results with both EBITDA and net ordinary income at the top of the range, up by seven and 8% respectively year-on-year. We have achieved a new record of additional renewable capacity, which picked up to 5,100 megawatts new build in 2021, 2,000 megawatts more than 2020. In light of the results achieved and of our remarkable operating and financial delivery, we will propose to the next AGM, a guaranteed DPS of 0.38 euro per share for 2021, which is a 6% increase versus the 2020 number, and implies a 7% dividend yield at current price. Let's now move to our positioning across the various businesses. We are now on chart number three. On generation, we have further strengthened our position in renewables with a greener installed base accounting for 53.4 gigawatts of renewable capacity. This huge renewable asset base generated 118 terawatt-hour output over the year, allowing us to reach 62% of emission-free production in 2021. Our continued investment in grid digitalization resulted in 45 million smart meters installed with the efficient management of our networks through a platform operating business model that allowed us to increase the level service quality with a salary down by 6% versus 2020. The increase in the rate of electrification of our client base has fueled the electricity sold and has driven in parallel growing needs of flexibility and value-added services. Focusing on the progress we've made in renewables, we now move to and green power. This is slide number four. As we said, total renewable capacity represented 60% of our total installed base, exceeding the 53,000 megawatt benchmark. We added 5,100 megawatt renewables this year, marking a step up in our delivery track record. And this year, impacted in particular by tough logistic dynamics within the sector. We made further progress on cold closure, We shut down 1,100 megawatts in Iberia and almost 900 megawatts in Italy for a total of 2 gigawatts, bringing the coal-installed capacity now below 7 gigawatts. Thanks to a continued effort on decarbonization, renewable production accounts for more than 50% of our 230 terawatt-hour total production, overtaking once again the conventional generation notwithstanding the severe drought we faced in 2021 in many geographies. CO2-specific emissions reached 227 grams per CO2 per kilowatt hour, almost in line with last year, due to the lack of hydro resources and a 23% lower than the end of 2018. This acceleration is made possible thanks to our pipeline, which is depicted on chart number 5. As of today, the pipeline has reached more than 370 gigawatts. This has broadened the project's optionality and has secured both flexibility of capital allocation and protection on returns. Mature pipeline is now worth around 100 gigawatts, out of which around 46 are earmarked for the 2022-2024 period. 50 are already covering projects for the 2025-2026 period. Over the last 12 months, our mature pipeline grew by around 40 gigawatts. The mature and early stage pipeline dynamics positions us optimally for our growth prospects. With respect to the 23 gigawatts that are targeted additions for the period 22-24, we now stand at over 50% of that target addressed with around 12,000 megawatts currently in execution. The residual target is covered 4.8 times by the related portion of mature pipelines. This translates into negligible delivery risk and high confidence of achieving even more than this. Moving now to the operating achievements from global infrastructure and networks, you see in chart number 6 that in 2021, volumes of electricity distributed increased by 5%, fully recovering the pandemic dynamics across all geographies of operation. This now stands at a level of electricity distributed in line with pre-COVID levels. Our efforts to reach quality and efficient targets resulted to remarkable progress with Saidi. This is down across all grids by around 6%. Activities on networks remain centered on the digitalization of the networks, with installation of 700,000 smart meters in 2021. At the end of last year, around 60% of our 75 million end users are digitized. Let's now take a closer look at customers on slide number seven. Our position on customers has strengthened in the last 12 months, both via our retail traditional operations, as well as on services and platforms offered by Enel X. Around 1.7 million new customers have been added in the free market, mainly in Europe. Energy sold in the free market is up to 9%, with volume increasing by both B2B and B2C segments driven by the economic recovery. Looking at NLX, the division performed extremely well with double digit increase recorded in all product lines. More than 130,000 charging points have been added, reaching now the number of 319,000. Storage behind the meter has increased by more than 10 megawatts. 7.7 gigawatts of demand response capacity was offered globally. Electric buses reached now more than 3,000 units in 2021. Then we can move to schedule the remuneration of slide number 8. The resiliency of the business model, the high standards of operating performance, and the managerial actions we have put in place allowed us to deliver sound operating and financial results. Therefore, we will propose a dividend per share of €0.38 per share. up by 6% versus previous year, which implies, as I said, a 7% dividend yield at the current share price. For 2022, we confirm the simple and predictable dividend policy presented in November 2021 with a guaranteed fixed dividend per share of €0.4 per share. Now I hand over to Alberto. He will go through the details of the 2021 financial performance. Thank you, Alberto.

Thank you, Francesco. Good evening, everybody. And I'm now on page 10 for financial results of the year. EBITDA stood at 19.2 billion euros, up 7%, and group net ordinary income came in at 5.6 billion, increasing by 8% versus previous year, both at the top of the guidance range. I will detail later some non-recurring items into the net income that are waiting on the performance. For now, let me just highlight that excluding the negative impact of liability management and operating and fiscal non-recurring items, net income would have been up by 23%. Episode reached 11.8 billion euros, up 3% versus 2020, despite the impact of some temporary regulatory items adopted to soften the energy crisis that affected the cash flow dynamics for around 1.7 billion euros. Moving now to an analysis of the period, I will kick off with the EBITDA evolution, and I am on page 11. As said, ordinary EBITDA up 7%. worth to open the performance in blocks of analysis to make a clear comparison vis-a-vis last year. Starting with the operating growth, in 2021 we experienced the full recovery of the operating performance across all the businesses which worth 1.3 billion euros. In particular, the lion's share of the operating growth is associated with global power generation where amongst other effects that I will detail later, the development of new capacity contributed for around 300 million euros. Then the progressive recovery in the level of electricity distributed in LATAM coupled with the quality and digitalization of networks in Europe contributed around 500 million euros. The uptake of commodity service particularly in Italy for 150 million euros, and then a higher level of efficiencies in networks and renewables for 340 million euros. All these items relate to the 1.3 billion euros of operating growth. Then we got on a stewardship business model, the 1.8 billion euros related to the open fiber state disposal. And all this solid operating performance has been affected by 300 million euros of Cardinus' devaluation and negative dynamics for around 1.4 billion euros, out of which 1 billion were related to temporary headwinds. This 1 billion in particular is related to roughly 450 million euros for the severe growth in Chile, and the gas shortage that consequently affected the price in Chile. And around 500 million euros linked to the exceptional energy crisis we are living since 2020. In particular, 250 million euros are related to lower prices set in 2020 during the COVID-19 pandemic. And the remaining portion is associated with a sudden increase in electricity prices cost during the last quarter of 2021 that increased the cost of supply, though reducing the margin in retail business. The other negative dynamics that are not temporary include some settlement on gas contracts and mainly the tariff adjustments in Europe, in Italy and Spain for around 300 million euros. Moving into a deeper analysis, we are now on slide 12 on global power generation, where the global power generation ordinary EBITDA stood at around 6.5 billion euros, down 6% year-on-year. Operating growth accounted for 370 million euros as a strong contribution of renewable new store capacity for around 500 million euros. that then has been partially offset by a different profile of development of the U.S. generation, and around 100 million euros efficiency, mainly in European countries. Delta low-recurring items impacted positively for 370 million euros, so the negative dynamics are related to the weak hydrology in Chile, as already said before, The lower prices in Italy and Spain due to energy contracts signed during the pandemic crisis has already outlined. And the effect related to the settlement of previous years' price adjustment on gas funds. So the vast majority of the negative temporary dynamics, the negative dynamics are temporary because they are related to things that are now in the phase to be sold or purchased. So now fixed to a different level. Then we can discuss a little bit this point. Then moving on page 13 and talking about infrastructure and network. Ordinary bid for network to the 7.7 billion euros. And we have an operating growth here of roughly 750 million euros. mainly attributable to around 300 million with the investment deployed for digitalization of our grids and to improve the quality of services in Europe, mainly in Italy, which contributed to our regulated asset base. Around 200 million euros linked to the higher electricity distributed across all the Latin American countries, coupled with the effect of the assets revaluation, particularly in Brazil, and around 250 million euros of efficiencies. These positive items were offset by a year-on-year on 450 million euros of non-recurring items, occurred last year, so the positive non-recurring. Around 300 million euros associated with tariff adjustments in Spain and Italy for the new regulatory parameters and lower previous year's regularization, and then the current speed evaluation in LATAM for 140 million euros. Worst highlight, that net of delta not recurring and effects evaluation, EBITDA would have increased by around 6%. Now we move on retail, on page 14. EBITDA for the retail business came in at around 3.1 billion euros, while the slight decrease attributable to the evolution of the regulated markets. The group expanded its free market customer base by adding 1.7 million new clients over the last 12 months, on the back of the end of regulated tariff in Romania, and increasing customer base both in Italy and Spain. Looking more closely at the EBITDA of the free and regulated market, free market EBITDA is flat year on year, thanks to a better performance in Italy and Spain, which compensated the negative EBITDA evolution in Romania. In Italy, EBITDA increased by 3% year-on-year, driven by a 9% increase in volumes in both B2C and B2B segments, which are now back to pre-COVID-19 levels. In Iberia, EBITDA is up 5% versus previous year, mainly driven by a 24% increase in unitary margins in the B2B segment as a consequence of the economic recovery post-pandemic. In Romania, retail EBITDA decreased by more than 100 million euros, mainly due to the higher cost of sourcing as a consequence of the energy crisis we experienced. Regulated marketed EBITDA is down around 100 million euros on the back of the elimination of regulated tariffs in Romania and the decrease of the regulated customer base. Worth to highlight that NLX EBITDA increased by almost two times versus 2020, reaching 300 million euros driven by energy efficiency programs and customer needs of energy flexibility services. In the next slide, we will show in detail the earning evolution during the period. We are now on page 15. Ordinary group net income came in at $5.6 billion, up 8% on higher EBITDA and reduction in minorities, which more than offset the higher DNA, financial expenses, and the normalization of the tax rate at 30% versus 28% in the previous year. Net of the non-recurring items such as tax reform and the liability management program net income would have increased by 23%. For the single items, we recorded a negative impact on DNA of around 320 million euros due to the higher level of investments deployed during the year, which more than offset the reduction in bad debt accruals related to the COVID-19 impact recorded in 2020. Net financial charges increased by 24% versus previous year due to liability management program executed this year. Net of these no recording items, net financial charges decreased by 6% versus last year. Worth to highlight that financial expenses on debt remained stable versus previous year thanks to our refinancing strategy that reduced by 20 basis points the cost of debt, leveraging on cheaper, sustainable instruments and hybrids. Taxes were up by around 290 million euros as a consequence of the increase in the nominal tax rate due to the government's tax reform in Argentina and Colombia and the adjustment on the deferred taxes in Iberia. Minorities decreased by 27%, mainly reflecting the increase in Enel America's take and the higher contribution of Italian companies. Now, moving to the cash flow of slide 16, it said FFO stood at 11.8 billion euros, strongly affected by measures implemented by local governments to smoothen the impact of increasing prices in customer bills. The impact is around 1.7 billion euros. Excluding these effects, FFO would have reached 13.5 billion euros, increasing around 2 billion euros versus previous year, with a cash conversion at around 70% compared to 64% in 2020. The dynamics underlying the FFO evolution can be summarized as follows. Higher bidda after provision, networking capital minus 3%, 0.8 billion euros, as said, impacted by around 1.7 billion of regulated items of measures implemented in Italy and Spain. Net of these effects, working capital would have been positive, driven by the recovery of the negative movements recorded in 2020 due to COVID dynamics, and in line with the capital curve of the last quarter of the year. Higher taxes paid mainly due to advanced settlement tax payment at the end of last year and higher financial charges paid related, as said, to the liability management program performed. Let's now take a look at the capital allocation evolution of slide number 17, where you can see that we invested more than 13 million euros in the period, an increase of 27% versus previous year. In the ownership business model, investments were almost entirely allocated to renewables and networks. They totaled around 5.8 and 5.3, respectively, with the remaining portion deployed on conventional generation and customers. From a geographical perspective, around 70% was spent across Europe and U.S., of which 6.7 in Europe and the remaining 2.3 in North America. 3.7 were spent in Latam. We have invested around 400 million euros through the stewardship business model, focused primarily on the renewable capacity managed through our joint ventures and NLX. Words to highlight that the full contribution of the new renewable capacity installed in 2021 will be visible in 2022 and we will generate around 500 million of EBITDA. I will now move on that evolution on slide number 18. Net debt is equal to €52 billion, that is below the 53-54 range announced back in November, thanks to an higher than expected FFO and a better cash conversion. Net of the pure accounted effects of FX and leases, which accounted for around €0.7 and €2 billion, the net debt would have landed €49.3. with the following operating dynamics. Negative average flow for 1.3 billion, as already commented. Dividends paid for 5 billion euros. Active portfolio management activity, mainly related to Enel America's PTO, for 0.8 billion euros. In the period, we accounted as equity about 3.2 billion of hybrids. out of which 970 related to the change in the accounting treatment following the consensus solicitation process and around 2.2 billion of new hybrid issued in 2021. Growth debt stands at 72 billion, increasing by 22% versus December as a consequence of the already mentioned increase in the net debt, Then the increase in financial receivables associated with credits related to cash collateral payment following the commodity prices scenario and a higher level of cash to finance 2022 activities performed at the end of the year. So we issued more at the end of the year and so we add the cash of decisions at the end of the year in cash. Before the closing remarks, I would like to highlight the soundness of our liquidity profile and limited exposure to fluctuation in interest rates. Our total liquidity at the end of December stood at around 24 billion euros, of which roughly 9 billion euros in cash on end and the remaining 15 in readily available committed credit lines, reducing refinancing risk. This level of liquidity covers 1.4 times the debt measuring throughout the 2022-2024 plan period, amounting to 17 billion euros net of short-term debt that is routinely rolled over. Finally, worth mentioning that more than 84% of the 2021 long-term debt has been swapped into fixed rate, limiting the exposure to interest rate fluctuations. We consider the group liquidity position as more than satisfactory to face the turbulence we are living, and we don't see any short-term grief that might impact the solidity of our balance sheet. Now I hand over to Francesco for some closing remarks. Francesco.