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 2025. Next to me sits our Executive Chairman, Mr. Francisco Reynes, the General Counsel to the Board, Manuel García Cobaleda, the Head of Financial Markets and Corporate Development, Mr. Steven Fernández, and the Head of Control and Energy Planning, Ms. Rita Ruiz de Alta. We will begin with a presentation, followed by a Q&A session addressing questions from analysts and investors. Please submit your questions in written form through the webcast during the presentation, and we will address those at the end. So let's get going, and I will hand it over to Stephen to start off on the presentation.

All right, so let's go straight to page three. Thank you very much, Abel, and good morning, everyone. Thank you for joining us. The key highlights of the H125 results that we announced earlier this morning can be found here. Basically, you'll see that we had a very strong performance on the first half of the year, and we believe that this demonstrates the company's and assets resilience amid macro uncertainty. A key highlight also of the first half of the year is the outcome of the tender offer that you saw, which supports our objectives to increase the pre-float and consequently increase share liquidity. with an objective of returning to the MSCI indexes. We have also announced the first dividend against 2025 results, amounting to $0.60 per share, which is higher, I may add, than the consensus assumptions, and that takes into account the current 10% Treasury stock position. It's worthwhile mentioning that the current macro and energy scenario, combined with our strong current trading and outlook for 2025, certainly reaffirmed the attractiveness of the 2025 and 2027 strategic plan, and this is a point that our chairman will elaborate. And finally, today we have announced the guidance for 2025. That, as you can see, is also above the market expectations. To move over to the next slide. Energy trends for the period have been marked by a decoupling of gas and oil indexes. In particular, if we look at the average Brent prices, they were around 15% lower in the first half of 2025 compared to the same period of last year. In contrast, natural gas prices were substantially higher across the key benchmarks. For example, on TTF, it's up 42%, the Henry Hub up 68%, and the JKM up 27%. Iberian electricity pool prices also increased substantially from 39 euros per megawatt hour in the first half of 2024 to 62 euros per megawatt hour in the first half of this year, mainly driven by higher gas prices, as we have mentioned previously, and also CO2 prices, in addition to higher demand for gas fired generation in the theory. If we move on to the next slide, The resulting effect has been an EBITDA of close to 2.9 billion euros in the period. This is maintaining record high levels that we started establishing last year. Net income amounted to 1.1 billion euros, almost 1.5. This is also a significant increase relative to the previous year. We have announced a dividend amounting to 576 million euros. This takes into account, again, the impact from the 10% Treasury stock. And at the same time, our net debt remains at a very subdued level of 13.7 billion euros, despite having paid a dividend in the first half of the year and despite having invested 2.3 billion euros in the period. All in all, these results, as you can see, are very strong and resilient, even if we take into account the one-offs that we had in the first half of the year. If we move over to slide seven on the income statement, EBITDA remained in line with last year, although this half of the year, there are no positive extraordinary events like we saw in the previous period, H1 2004. Hence, it's worth highlighting that the underlying results are stronger. From an EBITDA contribution perspective, 47% of the EBITDA was generated by networks, 53% by energy management, generation, and supply. which demonstrates the well-balanced portfolio that the company has. 54% of the EBITDA was generated by gasoline activities, while 46% electricity. And as you can see, roughly 60% of the EBITDA comes from stable geographies like Spain, whereas 42% comes from the international activities. The group's diversification across the business's activities and geographies obviously supports its earnings resilience. As you can see, also net income reached record results close to 1.15 billion euros. We move over to the cash flow evolution. The cash flow after minorities reached almost 1.3 billion euros, demonstrating the strong cash flow generation in the period. For the first half of the year, natural G invested more than 3 billion euros overall. But remember that part of that is associated to the tender offer for our treasury stock. If we exclude that effect, the net investments roughly amounted to around $870 million in the period, of which 42% was dedicated to the networks businesses, 37% was dedicated to renewal generation in projects that had already been launched and that meet our very strict capital discipline criteria, while the rest of the capex was dedicated to other businesses. It's also worth noting that 169 million euros of hybrids were amortized during the period as a result of the recent liability management exercise that we performed, which means that only 330 million euros of hybrid instruments remain outstanding. Overall, we will continue to follow strict capital discipline, deploying capital to ensure value creation on our investments. At this time, it's important to remember what we've always been saying. We prioritize value over size. So all in all, Naturgy delivered strong cash flow in the period to back investments and shareholder remuneration. If we move over to the next slide, what we'll see there is the balance sheet remains very strong post the 2.3 billion euro tender offer. Remember, on April 9th, Naturgy distributed its 2024 final dividend of 60 euros per share in cash, 60 cents per share in cash, which was equivalent to 576 million euros. Net debts to EBITDA over the last 12 months, as of the 30th of June, stands around 2.6 times at the first of the half. So it's a very, very comfortable position for the company. Excluding the effect of the tender offer, net debts to EBITDA would stand just above two times. Overall, the cost of debt remains at around 4%, while the percentage of fixed rates has decreased to 63% in the lower interest rate environment. Finally, liquidity remains very strong at the group, at a level of around 8.6 billion euros, including 3.1 billion euros in cash, and around 5.5 billion euros in ungrown credit-committed lines, again, after taking into account the tender effect, the tender offer effect. And with that, I'll hand over to Rita to go over the different businesses and their performance during the first half of the year.

Thanks, Stephen, and good morning, everyone. Starting with networks on page 10, networks reached in 2025 a total of 1,344 million euros. This is an 8% lower when compared to 2024 levels, mainly due to an extraordinary impact in Chile last year. In Spain, gas networks experienced a remuneration adjustment foreseen in the current regulatory framework, as well as an increase in demand in residential segments, mainly due to temperature effects. Additionally, a public consultation has been launched to companies in the sector, marking the beginning of the regulatory review process for the 2027-2032 period. In electricity, EBITDA increased driven by a higher regulated asset base and the publication of the 2021 and 2022 definitive remuneration. The CNMC has already published a draft of the resolution of the new regulatory scheme for the 2026-2031 period. We are preparing our allegations, which must be submitted before the 8th of August. In Mexico, results may be impacted by negative foreign exchange evolution compensated by tariff updates. In Brazil, results are also affected by currency depreciation. In Argentina, EBITDA has improved as substantial tariff increase was implemented during 2024 to offset inflation while we are observing a moderating trend in currency depreciation. Furthermore, a new tariff review was approved for the 2025-2030 regulatory period in line with our strategic plan estimates. This new regulatory review provides visibility for 2030 and includes month inflation adjustments within a stable regulatory framework. In Chile, performance declined when compared to last year due to an extraordinary effect in 2024, as of the partial reversal of the provision related to TGN conflicts. It is important to highlight that during 2025, the group has reached a final agreement with Transportadora del Gas del Norte regarding this long-standing conflict stemming from 2009. Therefore, this legal process is now officially closed. In Panama, results were negatively affected by lower demand due to temperature effects and increased operating expenses stemming from higher maintenance activity. In summary, comparison is affected by extraordinary impact in Chile in 2024 and currency depreciation in Latin America. Now, turning to energy management, on page 11, EBITDA reached €524 million, which shows an increase versus 2024 of 36%, mainly due to higher margins on hedge sales. On average, European gas prices were 42% over H1 2024. Standard energy prices decreased significantly during the first month of 2024, followed by a gradual recovery throughout the year. However, we have observed increased volatility in recent months, driven by growing uncertainty related to commercial policies, and more recently by international conflicts. As mentioned during the strategic plan presentation, the group is fully hedged for 2025, having adopted a very active risk management approach in a context of high volatility and uncertainty. The figures already reflect the current market condition of cash contracts in 2025, while negotiations with Sonatrac are still ongoing. Overall, the period benefited from higher margins supported by a market that remains uncertain and volatile. Continuing with thermal generation, EBITDA reached €313 million in 2025. 10% over 2024 EBITDA due to higher activity in Spain, partially offset by lower revenues in Latin America. In Spain, the increasing results was supported by higher production despite a context of record hydro generation. This was due to higher demand in auxiliary services from our combined cycle fleet. Ancillary services mainly support voltage control, contingency response, and help to compensate for photovoltaic drop-off during the evening. Therefore, CCGTs are critical to ensure system stability. In Mexico, production and margins remain stable. However, revenues from availability markets decline, mainly due to an exceptionally high revenue base in 2024. Now, let's turn to renewable generation on page 13. Renewable generation reached an EBITDA of €322 million during the period slightly above 2024 levels. In Spain, renewable production was 10% lower when compared to 2024, mainly due to lower wind and hydro generation, given the exceptionally high levels of hydrocontracts production in our basins during 2024. This negative impact was partially offset by the commissioning of new salt capacity and higher electricity prices. The United States' results are higher when compared to 2024, mainly due to higher energy prices. The group completed construction of its second solar plant in Texas, 261 megawatts, which has recently started operations. In LATAM, activity continues with impact due to currency devaluation in Mexico and Brazil. Finally, in Australia, performance benefited from additional 556 megawatts of install capacity added when compared to H1 2020. Most of this new install capacity is wind technology. All in all, higher results in renewable generation due to commission of new capacity and selective growth prioritizing value oversize. Finally, in terms of supply, EBITDA has been 386 million euros. This is 15% lower when compared to 2024 levels. It is important to remember that during 2024, we had an extraordinary impact due to the positive ruling in favor of nitrogen regarding tariff subsidies. Gas margins have shown resiliency supported by higher visibility and procurement costs, but negatively affected by regulated tariffs. In terms of electricity, the group has expanded its client portfolio in a highly competitive environment, leveraging on its integrated model and diversified generation mix. Meanwhile, the company has recently launched a digital platform aimed at transforming client interactions. We are introducing AI applications that enhance customer service as well as efficiency. I will now hand it over to Stephen to wrap it up. Thank you.