Naturgy Energy Group S A

Good morning, everyone. This is Abel Arbat speaking from the Capital Markets Team at Naturgy. Thank you for joining our results call for the first half of 2024. Next to me sits our Executive Chairman, Mr. Francisco Reynes, the General Counsel of the Board, Manuel García Cobaleda, the Head of Financial Markets, Mr. Steven Fernández, and the Head of Control, Ms. Rita Ruiz de Alda. We're going to cover the presentation first, And at the end, we will be addressing questions from analysts and investors. Please remember to submit your questions through the webcast platform in written form. So, without further ado, I'll hand it over to Steven to pass the presentation.

Thank you, Abel. Good morning, everyone. Today, we're going to be explaining our results for the first half of 2024. but also providing us some guidance for the remainder of the year and introducing some relevant considerations for what we think is going to be an exciting future for the company. I can take you quickly to slide four. What we're going to see first, we'd like to underscore the strong results in this area, reaching an income of 2.8 of 1 billion euros respectively. which is in line with the first half of 2023 historical record highs for the company, despite the more competitive scenario. Investment in the period remaining in line with that of last year reached almost 1 billion euros, with capital discipline as a cornerstone for the company's strategy and CapEx deployment. In this sense, CapEx was employed mainly in renewable growth and networks businesses, as you will see throughout the presentation. Net debt declined to 11.8 billion versus 12.1 billion at the end of 2024. It should also be noted that in the period, the company redeemed 500 million euros of hybrids, further reinforcing our balance sheet strength. Some of the highlights for the period include reaching a definitive price agreement with Sonotrack for 2024, which secures competitive procurement prices in the current market. also higher installed renewal capacity a reduction in objects despite higher activity and a higher asset base regulatory productivity and proactive risk management achieving higher margins than initially expected in edge volumes and of course capital discipline including demanding investment return hurdles and efficient debt and liquidity management so in summary these results in a more competitive scenario compared to the past couple of years highlight our efficient operational and risk management, as well as our capital discipline. If we turn on to the evolution of the energy markets on page six, what we'll see is that the first half of 2024 has been marked by lower energy prices compared to the first half of 2023, both in gas and electricity, resulting in a more challenging energy scenario. Following the volatility experience in recent years, energy prices have rebalanced towards pre-energy crisis levels, but they do remain sensitive to ongoing global developments, as you can expect. Gas prices on major hubs experienced relevant declines, with the TTF, JKM, and Henry Hub comparing on average 49, 45, and 29% below the first half of 2023, respectively. Wholesale electricity prices in Spain, for their part, compared 56% below on average versus the first half last year. And finally, the average Brent prices were 5% higher than the same period last year. So, in summary, as you can appreciate, we've had substantially lower prices, notably in gas and Spanish electricity. If we move on to the P&L, despite the less favorable backdrop, naturally efficient operational risk management contributed to deliver strong and resilient returns. Again, strong and resilient returns. During the period, the group's EBITDA reached 2.8 billion euros, flat versus the first half of 2023, which, again, I remind you, was a record year for the company. maintaining a balanced EBITDA contribution between regulated and liberalized activities, which represented approximately, as you can see, 51 and 49% of total EBITDA, respectively. The results by activity and geography were also balanced, contributing to the group's overall resilience. Net income for the period reached $1 billion, along with the record highs of the first half of last year. If we take a closer look at during the first half, liberalized activities experienced lower profitability and contribution compared to the same period in 23. Energy management activities including gas and LNG procurement and supply experienced a significant margin contraction following a very strong couple of years in 22 and 23. On the other hand, the distribution activities proved resilience and experienced growth supported by the positive regulatory developments in some LATAM regions and growth in electricity distribution in Spain. Renewable generation experienced higher production supported by additional installed capacity, while the supply business in Spain benefited from a favorable final port ruling on the electricity subsidies and margins resilience in gas together with growth in service contracts. All in all, EBITDA was in line with H123, a record high, despite the less favorable scenario that we've just seen. If we look at the EBITDA by key drivers, the evolution shows that there's a less favorable macro and energy backdrop. FX movements had a negative impact of 108 million euros in the period, and depreciation was most acute in Argentina, and to a lesser extent in Chile. The U.S. dollar and the Brazilian reais remained stable versus the euro, while the Mexican peso appreciated moderately. The energy scenario and lower gas and electricity prices in Spain, which I've seen, had a negative impact of approximately 325 million euros. And all these effects have been compensated by management and business activity, including recent efficient operational management, as well as the risk management we mentioned previously, especially in the gas side. If you move over then to the cash flow during the first half of the year, then company's cash flow generation remains strong. Free cash flows stood at 681 million euros in the period after net investments and the 500 million euros hydrogen redemption in the period. This allowed the company to comfortably deliver on dividend commitments and reduce its net debt levels. Investment was mainly devoted to renewal generation, roughly around 44%, and distribution networks, another 40%, as exhibited on the right side of the page. If we move over quickly to the net debt evolution, Nasdaq's net debt as of the end of June stood at 11.8 billion euros compared to around 12.1 billion euros at the end of last year. with a net debt to EBITDA at around 2.2 times, which is the same level as the closing of 2023. Note that the decrease in debt level takes into consideration the 500 million euros in April, and therefore, Naturgy's overall indebtedness and balance sheet has further strengthened in the period. The company distributed 384 million euros in April 24. That corresponds to the final dividend of 40 cents per share payable against the 23 results. for a total dividend of 1.4 euros per share in 2023 as committed. Cost of net financial debt increased slightly to 4% due to a higher average cost of gross financial debt in the period. And as of 30th of June, it's worth highlighting that 70% of the gross debt is at fixed rates, so we've increased the amount of floating rates, positioning the company well ahead of potential rate declines. 65% of the company's debt is denominated in euros. Liquidity as of the end of June stood at 9.7 billion euros. That includes around 4.1 billion euros in cash and equivalents and around 5.7 billion euros in undrawn and fully committed credit lines. And with that, I'll hand over to Rita for an analysis of the results by business.

Thanks, Stephen, and good morning, everyone. Starting with gas networks on page 11, gas networks reached first half 2024 a total EBITDA of €961 million, contributing approximately to one-third of the group's EBITDA in the period. In Spain, gas networks experienced a remuneration adjustment for the current regulatory framework, as well as lower demand in residential segments affected by mild temperatures. In Mexico, the previous entitled regulatory tariff updates lower operational expenses and positive effects. In Brazil, performance was driven by tariff updates in line with negative inflation indexation, as well as lower demand in vehicle and residential segments. In Argentina, tariffs increased to compensate for inflation and higher demand compensated FX depreciation effects. Finally, in Fidegas, the positive comparison versus H123 is due to higher tariffs and demand and distribution, as well as the positive impact from Transportadora del Gas del Norte litigation. In summary, growth was mainly driven by Latin businesses. Continuing with electricity networks on page 12, electricity networks EBITDA reached 499 million euros in the year, up 19% versus H123. In Spain, a decrease driven by higher regulated asset base as well as lower penalty on energy losses. Panama benefited from both higher demand due to higher temperatures and the approval of the fourth tariff review with visibility up to 2026. Finally, Argentina benefited from relevant tariff increase reflecting inflation from prior periods as well as higher demand, turning into an overall positive performance despite FX depreciation. In summary, growth across all electricity networks compared to H123. Now turning to page 13 on energy management, EBITDA reached €384 million, a 56% decrease versus H123 as a result of lower sales and margins due to less favorable energies in Europe compared to an extraordinary H123. The figures already reflect the price agreement for 2024 recently reached with Sonatrack. This agreement ensures that prices reflect current market conditions and confirms the solid relationship between Sonatrack and Nutter, as well as naturally commitment to security of supply. At this point, 100% of LNG volumes are sold ahead for 2024, providing with significant visibility into a year. Finally, worth noting that the comparison versus 8-1-23 is also affected by the reversal of financial hedging in effectiveness registered in 2022 and reversed in 2023. Thus, procurement commitments equates to 50 terabyte hour per annum as the contract with Nigeria and parts of Kenya and Tobago ended in September 23. All in all, the period experienced lower sales and margins as the market rebalanced and prices stabilized closer to historical adversity. Continuing with thermal generation on page 14, EBITDA reached €285 million in H-124, up 19% versus H-123, due to strong contribution from Mexico, while Spain was weaker compared to last year. Spain experienced lower production and margins due to higher renewable resources, which translated into lower thermal needs in the period. Mexico, for its part, benefited from higher availability and production, translating into higher revenues. Thermal generation remains essential to guarantee security of supply. In this respect, European Union regulatory discussions are progressing to introduce capacity payments by 2025. Finally, in Mexico, our negotiations focus on the extension of existing PPAs beyond 2027. Let's turn now to renewable generation on page 15. Renewable generation reached an EBITDA of €305 million during that period, an increase of 30% when compared to H123. Spain benefited from higher hydro and wind production, as well as the commissioning of Nipaka City. In U.S., our first solar plant began operations in Texas. The period, however, faced higher expenses to support the start of operations and the management of the development platform. The construction of our second solar plant in Texas is expected to become operational in 2025. Latam experienced higher production and prices in the region. Finally, Australia benefited from higher installed capacity and the positive evolution of the mark-to-market valuation of existing PPEs. All in all, growing stock capacity and production translating into higher EBITDA. Finally, let's turn to supply activities on page 16. EBITDA reached €452 million, up 30% versus H-123, benefiting from the favorable and final ruling on the collection of electricity subsidies in the period 2016-2021. Power supply experienced lower prices and margins due to scenario compensated by determination of regulatory cuts in 2023. Gas supply, for its part, experienced margins resiliency supported by higher visibility on procurement costs and growth in service contracts. Meanwhile, the company has recently launched a digital platform to transform client interactions with new artificial intelligence tools. It is also worth to highlight that NatuG has been the first company in Spain to redeem energy efficiency certificates. I will now hand it over to Steven to wrap up on consolidated results.