Enel Spa Unsp/Adr

Good evening to all the people connected. Welcome to the first quarter 2025 result presentation. Enel CEO Flavio Cattaneo will start with a quick highlight and our CFO Stefano De Angelis will present the economic and financial results for the quarter. 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 both the presentation and the Q&A session. Thank you and now let me hand over to the CEO.

Thank you, Omar. Welcome to everybody. I'm not used to comment on the first result, but after two years since my appointment, I'd like to highlight some achievements. Some of these achievements are stock performance up by 33%. Dividend paid amount to more than $9 billion. TSR stands at 52%. We have delivered seven quartet of growth, stable, organic, and sustainable, reaching this quartet the highest result ever, obviously on a like-for-like basis. These are the result of clear managerial actions. We have been first mover in resharping capital allocation, adopting a no-ideological and selective approach. We achieved efficiency in every country, including developed ones. We reached already 60% on this 27th improved target. We have increased visibility on future evolution. reduce the exposure to macro volatility with the BDA secured at 90% over the planned period. We have improved the quality of our customer base, focusing on the most valuable client, reducing financial and industrial risk. In addition, We have optimized capital structures and the group is now financially stronger than in the past, ready to catch value of creative opportunity and implement the share buyback program already started in Spain. We have been the first mover also in the shift from Greenfield to Brownfield model, maintaining strict capital allocation criteria. Market opportunities are emerging now, and with our strong financial flexibility, we are ready to capture them. We are now finally at the end, on the right side of the market timing. We have sold when prices were high, and now we are in the best position to catch any opportunities. And our strategic proposition enables value-accretive asset swaps, optimized risk-return profile, reinforcing P&L and balance sheet, and increasing profitability. We manage this company, as you know, with the same care and responsibility as it is our own. And as you know, I have personally invested and in the company and now our interests are totally aligned moving on with a summary of delivery for the first quarter well we're continuing to delivering on the strategic pillars we are highlighted at the capital market day Our concrete approach drives solid and predictable results both on operating KPIs and financial performance. Groups' profitability continues to be strong with both EBITDA and net income up 2% year-on-year. Growth optimization on cash cost is visible also in this quarter due to the continued management focus on value at creative processes and services. Lastly, we're progressing on sustainability, both financial and environmental, and this means a strong financial structure and a greener generation as the base with almost 70 gigawatts of emission-free capacity. will grow without a perimeter effect or one-offs. As a consequence, reported and ordinary results now are aligned. This is true not only for this quarter, but also for the coming ones. And on this visibility, I confirm 2025 guidance. Further, we stabilized results and raised the bar with a full year BDA target 30% higher versus the result of 2022. Now I will hand over to Stefano to comment on the first quarter result.

Thank you Flavio and welcome to everybody. I'm going to start with a quick overview on how our business is secured against current volatility and geopolitical turmoil. On investment, worth to highlight that quarter deployment reflects capital allocation guidance already set in our industrial plan. Most of the capital were deployed in networks, mainly in Italy, on projects already approved aimed at increasing grids, resilience and quality. In terms of geographical mix, most of the GABEX is deployed in high-rated countries where we have an integrated presence with Italy and Iberia accounting for 80% and no exposure to the tariff issues. Looking at the plan and exposure to the present turmoil on tariffs, on network we have framework agreements in place and limited portion of investments associated with equipment costs outside Europe and zero from US. Furthermore, regulatory frameworks naturally protect against inflation and cost increase. On additional renewable capacity, from one side, you may see how the greenfield project pipeline was already squeezed, limiting exposure at the present uncertainties on multiple variables, and how this brought a significant CapEx slowdown that, on the other side, was used to finance the Spanish hydro brownfield acquisition. Out of the 43 euro billion investment, only 5% was said to be allocated to US, where no capacity was planned to be added in 2025. EV anticipated most of our COD dates of assets under construction to avoid the expected volatility driven by the political scenario. Moreover, we are well aware since the last year that this global scenario could present unprecedented brownfield asset opportunities. A concrete and ready-to-payout pipeline explored leveraging on our business development and M&A capabilities empowered by our unique financial strength and capital allocation flexibility. Let's now move on the performance of the group. ABTDA reached around 6 billion Q1, up by 100 million on a life-for-life basis. From a geographical perspective, the main moving parts of the performance were as follows. In Spain, EBITDA increased by around 100 million, mainly thanks to the strong results recorded in the integrated business that benefited from higher production and an improved integrated energy management, now supporting a commercial proposition focused on value instead of volume. North America performed strongly year-on-year, driven by the positive contribution from the 1.1 gigawatt of new capacity installed in 2024. Latin America, on a life-for-life basis, proved flat year-on-year. It is worth to highlight that the performance was affected by the negative impact linked to currencies devaluation, especially for the Brazilian real, worth around $80 million. Excluding this impact, EBITDA would have increased by 100 million versus Q1 2024, now withstanding the perimeter effect. Finally, the result in Italy is still impacted on a year-on-year comparison by the completion of the retail repositioning. Prices are now 30-40% lower than last year, with customers repositioning at tariffs in line with the current macro scenario. As a result, monthly churn rate halved versus 2024, showing positive returns on our effort of improving customers' engagement and loyalty. I would like to stress that for the rest of the year, we expect now a linear evolution of the BTDA in Italy, standing at around 2.7 euro billion on average per quarter, in line with the second part of last year. On the next slide, we will discuss about our capital allocation and how it's improving groups operating KPIs. I'm on page 7. The 70 gigawatt non-emitting capacity resulted in one... terawatt-hour growth of CO2 free generation, and an emission-free production that reached 84% on total, supporting our financial delivery tech also to a reshaped energy management process. In our domestic market, Shell reverted its trend, and in the supply business, we had 100,000 customers versus last year. Along 2024, we assessed our customer portfolio. We are now focusing soundly the most valuable segments. As a consequence, some contracts with high levels of contracted volumes but low marginality sales have not been addressed, while we recorded an increase in B2C and small-medium enterprise segments, reducing also our exposure to commercial and financial risks. Last but not least, the higher investment deployed on grids boosted the value of our regulated asset base, which now is reaching €46 billion. The solid operating delivery resulted in visible and concrete financial results that we described on page 8 of the presentation. EBITDA reached almost 6 billion, driven by stronger performance in grids in Italy and higher results in the integrated business in Spain and the rest of the world. Net income came in at 2 billion, increasing by 2% on a like-for-like perimeter basis. Worth to remind that at the bottom line, the perimeter effect takes into account also the disposal of Slovesk Elettranev as EPH exercised the call option at the end of 2024. Net debt on the BTDA ratio decreased to 2.5 times versus the 2.7 times of last year, on the back of an improved profitability from business operation, and the 2022-2024 leveraged task completion. I will now focus on the evolution of each business, starting from grids. Grid stability reached almost 2.2 billion in the quarter, increasing by 4%. We delivered another quarter of solid performance in Italy, up by more than 100 million, thanks to the higher capex deployed and the positive impact linked with the implementation of the new remuneration framework, more than offsetting the slight work reduction in the second part of 2024. Spain proved flat. On top of the ordinary business execution, we maintain our focus on the new regulatory framework outcomes, crucial to improve the network resiliency, increase investments and improve returns in the country. Finally, that AME BTDI was almost flat on a like-for-like basis as the positive contribution of distributed energy volumes and tariff indexation offset the negative impact related to CPI and local currencies devaluation. And now we move to the evolution of the integrated business on slide 11. Sorry, slide 10. Integrated business and BTDA stood at €3.8 billion. On a like-for-like basis, renewables increased by €100 million versus previous years. Thanks to the positive contribution for new capacity added, they more than offset the impact from slightly lower resources availability. Flexible generation commodity management was broadly flat year-on-year with a consistent trend of normalization in thermal generation output. Finally, retail and BTDA performance reflected the already mentioned customer base reposition in Italy, partially offset by positive delivery in Spain. It's worth to highlight, as I said before, that we expect a linear evolution of the performance over the course of 2025. And now we provide on next page an energy management, energy strategy update related to Italy. As already highlighted in the full year 2024 presentation, we moved from a commodity volume-driven approach to an end-to-end integrated process, maximizing the resources allocated in the entire value chain with a new approach and focus on our large and resilient residential and small-medium business customer base. Renewable generation is now naturally matched with retail sales, while financial pre-edges are a lever to add incremental value and optionality to our generation fleet. As you can see from the chart, on the 2025 sales side we have priced almost all the customers contracted with fixed price offering and we are progressing in confirming or adjusting tariff conditions for 2026 and 2027 contracted volumes. Looking at the generation, 2025 is consequently fully hedged at prices in line with plan assumptions, while for 2026 and 2027 we already hedged the planned generation for almost 90% and around 35% respectively. Worth to highlight that almost 100% of generation is covered by contracted customers with fixed price conditions already set. The repricing at the expiration date is an actionable option to align price conditions according to significant changes in the market scenario that may be in the two directions. As of today, the generation average contracted price for 2026 is €112 for MWh, compared with the planned scenario that is at €180. And now move to earnings evolution on page 12. Ordinary net income came in at 2 billion euro. DNA is slightly increased versus previous year, driven by higher amortization on increasing level of CapEx deployed over the year. Financial expenses are up by around 60 million at profit and loss level on the back of the following dynamics. A decline in charges on debt, mainly driven by the 5 billion reduction in gross debt, as compared to Q1 2024, we have executed a disposal plan and recorded a reduction in financial receivables, mainly associated with a 1 billion repayment of the shareholder loan from EPH, occurred in January this year. A lower contribution from associates, mainly due to the solid performance of Sloveske Elettrarne recorded in 2024, were to highlight that this represented a non-cash item having dividend distribution constraints in Sloveske arising from the debt covenants of the company. Income taxes are almost in line with previous year, while minorities stood at around 400 million, almost stable versus previous year, as a result of the lower dilution from disposed assets that offset the impact from the partnership business model implementation. Finally, it's worth to highlight that the reported net income stood at 2 euro billion, in line with the ordinary net income and increasing 10% for a like base. Let's now move on the slide related to the FFO. Group cash regeneration continued to be strong, with an FFO standing at 4.5 euro billion, once adjusted for the impact of payable change related to CapEx deployed in the recent months, and the one-off related to the payment of Italian club bet that, as you probably remember, was accrued in Italy in the first half of 2023. Cash generated in Q1 more than covered the deployment of organic capex, as well as the acquisition of hydroassets in Spain, with FFO minus capex being positive for plus 1 billion euro. The main operating accounting items that impact the net debt are are the following. Hybrids were positive for around €1 billion, as in January we issued a new hybrid bond for €2 billion, and in February we repaid €900 million hybrids that were already refinanced in 2024. Non-operating cash items related to the close-back in Italy, already mentioned, and the Electropaolo pension fund repayment in Brazil, and Non-cash accounting items related to the temporary FX impacts on debt, hedging derivatives, and IFRS leasing accounting practice. As you know, we have in all the quarter and the full year this kind of impacts, non-cash. Finally, and this is cash, dividends amounted to 2.5 billion euro as we paid the the interim dividend of the holding in January. As a consequence, they came in at around €56 billion, almost in line with the year-end 2024. Let's now finalize the presentation with some closing remarks. The economic and financial results recorded in Q1 are solid and based on an organic and recurring performance of the company asset base. This provides visibility also for the coming quarters, for which the trajectory observed in the first three months is set to persist. We will continue to lever on the financial flexibility achieved to optimize the capital allocation deployment in the next quarters, supported by both brownfield and greenfield pipelines in line with our strategic guidelines. The visibility we have on the underlying evolution of the business strongly supports our target for the year. This implies also an appeal in shareholder remuneration in light of both the current dividend policy, which foresees a structural and organic positive trajectory, and the new share-by-back program that will be proposed on May 22 to the General Shareholding Meeting.