Enel Spa Unsp/Adr

Good evening to all the people connected. Welcome to the first half 2025 result presentation. Enel CEO Flavio Cattaneo will start with the highlights of the period and our CFO Stefano De Angelis will present the economic and financial results. 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, media is listening to both. Thank you, and now let me hand over to the CEO.

Thank you, Omar. Welcome, everybody. The positive trend is also confirmed in the first half. a 4% net income increase on a like-for-like basis, marking another quarter of growth, driven by our action to reduce risk and secure results. On shareholder remuneration last week, we paid the final 2024 dividend installment, equal to 25.5 euro cents per share, with total dividend for last year at buying a yield of about 6% at current prices. In addition, as we have already done for Endesa and Enel Americas, today the Board approved a tranche of the Shared Payback Program at Enel's file level for €1 billion. to be executed starting from tomorrow until the end of December. This is another clear signal. We deliver on our promises and optimize capital allocation to maximize shareholder returns. Due to our action, we have improved the announced earnings profile. We resolved increasingly the couple from power price vulnerability, ensuring a lower risk, greater visibility, and enhanced resilience. We also improved visibility on our regulated assets. Our advocacy actions are delivering results. In Italy and Latam, we have made progress on distribution concessions renewal. While in Spain, with the proposed framework, it doesn't provide adequate support for the investment effort required by the PMEA. We are engaging with the authorities to reach a fair and sustainable outcome. Let's now have a look at the first half results. The group performed strongly across all P&L lines. EBITDA reached 11.5 billion euros after 100 million year-on-year, including the perimeter effect. If we take out the exogenous negative effect of exchange rate, EBITDA would have reached 11.8 billion euros, improving the solid result already achieved last year. Net income came in at 3.8 billion euros, up by 4% versus last year. Cash generation remains strong. FFO net debt stood at 25 over the last 12 months. This proves once again our delivery is driven by reliable and organic growth, and not one-off. The quarter evolved as expected and we are executing our strategy and turning into stable and visible results. We are on track to meet our full year target with net income expected at the top of the guidance range. Now let's move to our strategic priorities. We continue to improve our group risk return profile. Over 55% of CapEx was allocated to networks, ensuring stability and long-term visibility. 80% of total investments were deployed in Europe, our core markets characterized by low risk. As shown in the slide, industrial KPIs confirm our progress. Arab customers reached 658 euro, boosting asset profitability. Renewables now account for 75% of total production. Emission-free production now stands at about 85%. Fixed sales covered by renewables reached 93%. Its vote highlighting our commercial campaign significantly reduced churn in Italy. These results are fully aligned with the plan presented last November. Now we move from promises to delivery and from delivery to results. As for brownfield opportunities, we made solid progress moving on the next slide. As a result of our selective and return driven capital allocation, we acquired over one giga of renewables in Australia, applying the stewardship business model. We signed an asset swap deal with Gulf Pacific Power, increasing consolidated renewal capacity in the U.S. by 285 megawatts. In addition, we are at the final stage of negotiation for graphic asset acquisition in the U.S. and the EU, and continue to scout other opportunities aligned with our strategic approach. Now move to the other two strategic pillars, efficiency and sustainability. On efficiency, the short optimization is on track. We have already achieved 1 billion in savings, 67% of our improved target for 2027 announced in the last capital market day. This shows our commitment to efficiency without compromising on safety and quality of performance. On financial sustainability, balance sheet flexibility has been restored, net debt to EBITDA now stands at 2.5 times, and we are ready to catch long-term value creation opportunities. Now I'll hand the floor over to Stefano for a deeper dive of numbers.

Thank you, Flavio. Good evening. I start the presentation with some operating highlights. The capacity deployed in the last quarters supported a growing renewable production year on year, despite some shortage of resources in Spain for wind and in Italy for water, and the impact from curtailment in Brazil. Having a growing concern on this topic and the sustainability of the renewable shape in the spot market, we continue to deploy Greenfield best capacity, reinforcing our leading position on storage that stood at 11.5 gigawatts. Moving to the retail segment, in our domestic market we anticipated a churn reduction and we got it thanks to the final execution of the customer's portfolio reshaping and price normalization for B2C and small medium business. Last but not least, the strong investment deployed on Greece boosted the value of our REB, which has now reached more than 45 billion euro, increasing the resiliency of our ETA looking forward. The solid operating delivery resulted in a solid set of financial results. I'm now moving to page 2. As we have just mentioned, the year-on-year BTDA extension is driven by the growing investments in the network segment, coupled with fair sustainable returns. This action applies to the Italian regulatory framework, but we are confident Spain and Brazil will evolve in the same direction. About the net income, it is important to keep in mind that the closing of the disposal of Slovensk Elettrane, based on the collection granted to EPH in 2015, generates a negative non-cash accounting loss. in 2025, while during 2024 we have to register the pro-quota of the positive net result achieved by the company. None of these topics has cashed in but was included in our EBITDA or EBIT in our presentation. Instead, the deal generates a 1.1 billion net debt reduction that for ready agencies impacts positively the adjusted net debt. Finally, our organic, plain and business-driven financial results translate into a coherent, solid net cash flow that reduces our net debt by 2 billion resulting in a net debt to BTDA ratio stable at 2.5 times. These results have been achieved notwithstanding exogenous impacts. That's why on page 9 we have detailed these dynamics. Around 70 million euro impact from currencies devaluation is mainly associated with Brazilian real. And I'm referring, this is important, to the 2025 FX scenario. presented at the capital market day, not the year-on-year ones that have a greater impact and that is normally not adjusted by annual units results reported ordinarily. In this case, we are referring to the difference from the assumption that was the base of our guidance also in November when we set our business plan for 2025-2027. The second impact is the disruption related to the absence of regulation about the TSO operational management of the network system security that generate unexpected negative impacts for EUR 200 million. More in detail, in Spain, as already presented not just by Endesa but also by Beldor, for example, the blackout caused an increase to the cost of services Related to the ancillary services worth around 150 million that impact the retail business. In Brazil we face the containment of generation on lack of capacity of transmission line or forecasted offer demand unbalance forecasted that are made by the TSO. Moving into the country-based analysis, I will now jump directly to page 14, where there is an analysis related to Italy. It's already clear that the BTDA in Italy has to be analyzed separately. Networks have been already commented. to remind that the Italian regulatory framework allows us to use our financial file power and the return is visible and fair, also because we are allocating here 50% of our group capex, not the second capex, but the group capex, in these six months. Moving to the daily, we have a normalized second Q result as guided, but the price reduction of our customer base to align the first quarter 2023 repricing at the market condition is still waiting on the semester. Relevant achievement is the chart reduction in the residential customer base that imply an extension of our customer base lifetime of approximately 2 years. Finally, the commodity positions and consequently ABTDA is now moving into a new normal level of profitability and have more linear results in our books. On the following page we see, and now it's something that we'll show you in all our presentation of the financial report results, our customers and generation business in ebony with the edging strategy we are applying by approximately one year and a half. So, as already highlighted in the previous presentation, 2025 is already priced, I am referring to the B2C and small medium business fixed price volumes of power. For 2026, we have introduced the 2026, as I told you again, 2025 is full-priced, and this means that the renewable generation is full after. For 2026, we have already priced one-third of the total volumes. expected for 2026, but it is important to keep in mind that the renewable generation is entirely covered by the expected consumption of the segment I have mentioned. This means that it is entirely matched with the consumer has no business volumes based on existing contracts power consumption with fixed price offer this is why we explain that the power retail contracts are perpetual contracts with the fair and sustainable flows that allow us to change the price of the megawatt hour. So in the case there is a spike in the commodities, price, we can change the price. If the price goes down for two years, we will probably have to adjust the price, but it's not something that we have to realize immediately after a change into the wholesale full market price change. What we have to manage is the churn of the customers, that's why the lifetime increase is so relevant, because the area of that part of the 2026 that is churn and acquisition means that they have approximately 7% less customers per year. And the customers move into the mesh, the one with perpetual contracts. So, what I have to manage, going back to the point, is the churn and the acquisition. The churn, clearly, is a customer I lost, and I have to maintain the best customers in terms of their value. the retention activities. At the same time, I have to acquire new customers. Is the price of the market price move up or down, this will be reflected into the new contracts. So this 80% today may have a different pricing in the acquisition phase. Then I can adjust if I use a promotional price for six months. Then I can adjust after one year if the market moves in some direction again, up and down. Sorry it will be long, but I think this is quite important to understand the business. In the next page, I complete the exchange and the topic and I go to the group net income. This came at 3.8 euro billion. And I will focus just on some specific topics. One that is not mentioned in the blogs, let's say, is that they have a positive direction, let's say, especially in Italy. And we have, I'm sure, also the same movement in Spain. And these are the retail-driven bad debt. Then when you see bad debt, this also refers to the South American regulation framework regarding the final customer that is served by the network of aid. In this sense, it's always more important to analyze the debt separately from the customers that I have a relation also on price condition and a customer that I have a generation of price conditions that are based on a regulated bid or something like this, and that is just related to the financial condition of the customers. In this sense, clearly, Rio de Janeiro has a performance that is not aligned with San Paolo zone, and this is a point that will be very important into the negotiation of the concession terms. Another important point is the financial expenses that are down by around 150 million at the profit and loss level, on the back of, clearly, the change related to the gross debt. Reduction debt accounts for €9 billion. So when you see the €2 billion reduction in debt, you have to consider that there is a reduction of €9 billion in gross debt. And we have reduced the liquidity and the other figures that are related and are accounted as liquidity. Also because with the reduction of the Euro interest rates, I have expected that it is negative when I maintain too much liquidity on my accounts. Let me say, until 2023 this was not so evident, now it is evident, so we are acting in this way and we have registered the positive impact on the net income and also in the biggest flow. We have presented also the reported net income, and here it's important to highlight that around 400 EUR million difference is based mostly on the Slovak electronic accounting loss that we have to register also is not completely affecting our cash and our FFO, our land debt. Moving into the FFO, Group's cash generation continued to be strong, with an FFO standing at €6.7 billion, once adjusted for the impact of payable change related to CapEx. Cash generated in H1 more than covered the deployment of organic CapEx, as well as the acquisition of the hydro assets in Spain, with an FFO minus CapEx being positive for €700 million. The main non-operating accounting items that impacted their debts are the following. Irish were positive for around 1 billion, as in general we issued a new hybrid bond for 2 billion, and in February we had to repay the 900 bonds that were already refinanced in 2024. Not only the cash items related to the growth back in Italy, this was a negative accounting post for 20-23 results, but the cash impact is registered in this semester, and this was already registered in the first quarter because the payment happened in February. And this refers to the blowback of the 2022-2023 crisis of the energy market. Then we have the Electropaolo Pension Fund repayment in Brazil. Another important topic is the payment of the cash out related to the capital gain that was registered in our companies in Latam for the sale of the Peru, especially the generation business. The tax is paid, like in Italy for example, on the following years and these have an impact of half a billion in the cash flow of this first half. It's not relevant after we have commented on this impact, but in this we have also 200 million related to the first program of buyback from Endesa, because if you remember this started during the second quarter, so we have the first 200 million that was created, not in our market day projections. Then, at that, related to the comparison between the end of year 2024 and first half 2025, degrees 400 million. The 2 billion was the comparison in the last 12 months net cash flow value. It's worldwide. Also, you see that we are starting to comment Brownfield Acquisition. The first one, relevant, you remember, was signed also last year when we presented the Capital Market Day. So this is a strategy that was already implemented as direction in our Capital Market Day business plan We have already stated this will part of the opportunity that we had thanks to the flexible financial profile, the optionality that this flexibility gave to us. So, we didn't mention in the presentation, but it was highlighted that we have just signed an agreement to acquire 150 megawatts of a wind asset in Greece to further expand our renewables footprint in Europe. The estimated enterprise value of this asset is approximately 200 million. Let's finalize the presentation with the Fourier guidance, saying that, as highlighted at the beginning of the presentation, this year we faced effects and regulation-driven headwinds that resulted into negative dynamics we have been able to offset thanks to resilient and risk-averse business model. We expect these negatives to be fully compensated by the operating performance delivered by the delivery of a growing EBITDA by the grid segments across all the geographies. So this means that the results achieved so far and the visibility we have for the second part of the year provide confidence in confirming our guidance. And now I go over to the CEO for some closing remarks.