Repsol Sa Sp/Adr

Good morning to all. Welcome to REPSOL's fourth quarter and full year 2024 results presentation. Today, our conference call will be hosted by Joshua Yonimath, our chief executive officer, with other members of the executive team joining us as well. Before we start, let me draw your attention to our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in the disclaimer. I will now hand the conference call over to Josuyon.

Thank you, Pablo. Good morning to everyone and thank you for joining us. Today I'll take you through the numbers and main messages that explain our 2024 performance and the outlook for 2025. As usual, after the presentation, I'll be and we will be available for a Q&A session. One year ago, we shared with you our strategic update to 2027, setting the basis that will help us consolidate Repsol's multi-energy proposal. Today, 12 months later, we can affirm that 2024 was a positive year for us. a year in which we made material progress towards the execution of the strategy founded on a solid performance across the businesses. Operating under the capital framework of our plan, we successfully fulfilled our remuneration commitments, prioritizing shareholder payouts, maintaining a strong balance sheet while investing in profitable growth. Bolstered by our robust fourth quarter, we achieved an adjusted income of 3.3 billion euros and delivered 6.3 billion euros of operating cash flow ahead of our latest guidance before accounting for the Sinopec transaction. Total shareholder remuneration amounted to 1.9 billion euros, equivalent to 31% of the operating cash flow. The cash dividend was increased by approximately 30% to 90 cents per share, and we redeemed 60 million shares, equivalent to 5% of our share capital at the beginning of 2024. Over the last three years, Repsol has canceled an equivalent to 24% of its share capital. Net debt closed at 5 billion euros, a half billion reduction compared to September, The GIDIN ratio, including leases, closed at 14.7%, and excluding the 4.3 billion euros of leases accounted in a reported net debt, the GIDIN stood at 2.4%. Total liquidity stood at 9.5 billion euros, more than 3.5 times our short-term debt. Net capex after disposals and asset rotations was 5.7 billion euros, but this figure didn't include the second installment for the disposal of Colombia of 0.3 billion that will be posted in the first quarter of 2025. The investment level in 2024 reflects the higher development activity of the first part of our strategic plan, mainly associated to the FIDs taken in the upstream over the past few years and the implementation of low carbon projects as an indication of the capex intensity reduction that we anticipate for coming months the fourth quarter of 2024 registered the lower quarterly capex of the year both gross and net in that period i mean the last quarter of the year that traditionally has concentrated a higher share of absolves annual investment looking forward We remain committed to a net capex of 16 to 19 billion euros in the four years of our plan, with the net investment for 2024 and 2025 projected to reach a maximum of 9.5 billion euros. So it seems to me that we trend to be in the low range of the committed net capex of 16 to 19 billion euros that we anticipated for the four years of our plan. The group's capital expenditures are expected to normalize by 2026 once the investment peak of the upstream development cycle is complete. At the macroeconomic level, during 2024, the main drivers of the industry converge to more normalized levels notably the refining environment compared to the situation of the previous two years. These factors combine into what we see as a supportive market scenario with an oil price of more than $80 and with a refining margin indicator averaging $6.6 per barrel, higher than the historical trend. In the upstream division, full-year adjusted income was 1.5 billion euros, 16% lower year-over-year, mostly due to lower gas prices and lower volumes. Full-year production averaged 571,000 barrels per day at the lower end of our guidance. Production was impacted by divestments, forced mayoral events in Libya, and unadjusted activity in unconventionals in response to low gas prices. In the first quarter, we successfully divested our assets in Colombia, where we produced around 12,000 barrels of oil per day. An active management of our assets continues to drive the high grading of our portfolio, increasing cash flows, lowering break-evens, and reducing the carbon footprint of our production. Looking ahead, our organization continues to work on the preparation for a potential liquidity event. The development activity in 2024 stressed the efficient delivery of the key growth projects on time and on budget. Leon Castile in the Gulf will start production in August, contributing an average of 10,000 net barrels a day to 2025 production. And in Alaska, the first phase of PICA is planned to reach first oil before year end. Campus 33 in Brazil and Block 29 in Mexico continue progressing on Schedule 2, with both projects looking to initiate production in 2028. Our plans in Mexico were reinforced by the positive results of the Jopat 1 well. In Libya, once the last interruption was lifted in October, we managed to bring the field to its maximum production since 2020, and it has been running at peak levels since December. New exploration activities currently being carried out in Murzuk for the first time in 10 years. Ingur is a promising low-cost basin well known for Repsol since many decades ago. For 2025, we project an average production between 530,000 to 550,000 barrels per day. Let me say that we will be in the high range, in the high part of this range. But I mean, we always want to have some kind of flexibility in the unconventionals depending on prices. But it's true that, I mean, it seems to me that HeavyHub is going to perform in the right way this year. So I'm more comfortable saying that we will be in the high range, in the high part, sorry, of this range. The production is going to be impacted by the Columbia disposal. And as I mentioned before, the activity in unconventional depending on prices. The share of oil in our production mix is expected to increase compared to 2024 due to Libya and the startup this summer of Leon Castile in the Gulf. And in unconventional, our team continues to closely monitor natural gas prices in the U.S. with flexibility, as I mentioned before, to adapt operations if needed. We expect to resume drilling activities in both assets, Marcellus and Eagle 4, during 2024. And in our budget, we are assuming a heavy half price of $3, with roughly 55% of our North American gas volumes hedged through a non-cost collar structure between $3 and $6 per million BTU. In the industrial division, full year earnings reached 1.5 billion euros, roughly 1.3 billion lower year over year, mainly due to the normalization of the refining margins, but still solid thanks to the excellent performance of the trading businesses. The strong refining environment observed in 2022 and 2023 persisted in the first part of the year. Since April, however, margins declined until reaching their annual lows in August, mostly driven by weaker diesel and kerosene differentials. A combination of seasonal effects, higher op-ed supply, and run rate cuts allow for a partial recovery of margins as we approach the end of the year. The average margin indicator was 40% lower compared to 2023, mostly due to a weakening of metal distillates and, to a lesser extent, narrower gasoline differentials and a pricier Maya. The average premium over the indicator was $1.2, including a negative $0.4 impact due to the fraud practices that affected the Spanish fuel market in 2024. So that is the effect of FOB, CIF, depending on the export to internal market distribution of these products. The utilization of our distillation capacity was 88%, three percentage points higher year over year. The run rate of the conversion units reached 100% in line with 2023. And in our transformation projects last March, production started in our new SAF and HBO plant in Cartagena. In Puerto Llano, the current retrofitting of an existing gas oil hydrotreater produced HBO is expected to begin operations early 2026. So far, in 2025, the margin indicator has averaged around $5.5 a year, $5.6 a year to date. including $7.1 a barrel this month in February, as average. For the full year, we project an average indicator of $6 per barrel, based on the expectation of a higher demand and the new refining capacity being balanced out by announced closures, either in North America, Europe, and Asia. The average premium over the indicator is projected at around $2 per barrel in 2025. Demand for biofuels is forecast to recover during 2025, mostly due to the implementation and expansion of regulatory mandates. Anti-dumping measures on Chinese spurts could lead to a further strengthening of the HBO spread against the UCO. Lastly, the turnaround schedule for this year includes activity in the hydro treatment part of Bilbao, Porto Llano, and catalyst changes in Tarragona refinery. In the chemical business, Repsol's full year margin indicator was 3% higher compared to 2023, with sales staying in line year over year. And despite this relative improvement, the EBITDA contribution remains negative. For 2025, we expect to reduce our EBITDA break-even by half 15%, from 260 to around 220 euros per ton. That is because all the measures we are taking in terms of reducing costs, efficiency, improving feedstock in our chemical plants and so on, And moreover, we expect the new projects coming on stream, largely the expansion of CNES to contribute additional 100 to 140 million euros of a bit than coming years, depending on an acid or a central margin scenario. In circular economy, last month, we took the FID for the first gasification plant in Europe using urban waste to produce biomethanol. The facility will be located in Tarragona, in our petrochemical complex, and will start operations in 2029 and will reach a capacity of up to 240,000 tons per year of renewable methanol. And total investment will amount to 780 million euros, of which around 120, 130 million will be deployed in 2025. project has received more than 130 million euros of funding from the european innovation fund and finally as we progress in 2025 we expect to advance in the approval process of three electrolyzers one in cartagena one in bilbao and the third one in tarragona all three have been selected to receive public funding in the case of tarragona electrolyzer will support the economics of the gasification plant just approved thanks to a higher methanol yield and lower CO2 footprint. These FIDs will allow us to achieve something in between 0.6 to 1.2 gigawatts of renewable hydrogen capacity by 2030 of which 350 megawatts correspond to the hydrogen produced in the steam reformers from biomethane. We are adjusting our roadmap due to the delay in the market development and the evolution of the regulatory framework and public funding. So we are prioritizing return and balancing the capital allocation over any capacity targets. so we will face down from 1.9 gigawatts in 2030 previously announced to the range of 0.7 1.2 gigawatts roughly speaking we are now in some way facing that in the customer division full year adjusted income was 659 million euros 7% over 2023, mainly due to higher results in service stations, aviation and power and gas retail. The accumulated EBITDA to December reached 1.2 billion euros, a historical figure in Repsol, a 13% improvement year over year, and on track to deliver the 1.4 billion targeted for 2027 in this division. In the mobility business over recent months, we start to see the results of the anti-fraud regulatory measures and control mechanisms adopted in Spain. This, let me use the term, stabilization of the market enabled us to increase our sales of road transportation fuels by 6% in the fourth quarter compared to the same period in 2023. The number of digital clients reached 9.3 million by the end of 2024, a 17% increase over the previous year, contributing to an increase of business-to-consumer sales in service stations. In power and gas retail, we had more than 330,000 clients in 2024, reaching the record figure of 2.5 customers. No, not 2.5. 2.5 million customers by the end of December. This increase was fully organic and self-financed, allowing the business to generate a positive free cash flow to the group. So we are growing in this business, having clients, and at the same time generating free cash flow. And that is, let me say, a consequence of this integration business in the power view we have in Rexall integrating the low carbon generation and the customer side. Furthermore, Repsol's growth in 2024 has been the highest for unknown incumbent power and gas commercialization company in Spain since the complete liberalization of the electricity sector in 29. Finally, low carbon generation for year adjusted income was 23 million euros negative, 98% million lower year over year, mainly due to a lower contribution from CCGTs and renewables. This result is explained by a lower production in the combined cycles, the negative impact of elevated levels of hydropower generation in Spain, and the contribution from equity affiliates. The lower result also reflects the cost associated with the integration of ConnectGen and the development of our renewable growth platform. This platform is prepared to operate an extensive pipeline of three to four times our current generation capacity, but in this phase is supporting the cost of this development and this growth. The average pool price in Spain was 63 euros per megawatt hour, 28% below year-over-year. The total power generated by Repsol reaches 7.8 terawatt-hours, including 5.9 in Spain and 1.4 in the U.S. The startup of FRI solar project in the U.S. and of several projects across Spain allow Repsol to reach 3.7 gigawatts of renewable capacity under operation by year-end. Repsol's global wind and solar generation increased by 67% year-over-year. In 2025, we plan to add more than 1.0 gigawatts of new generation capacity. 500 megawatts will be added in Spain and 1.1 in the U.S. and Chile, mainly as the outposts and Pennington solar projects in Texas reach full commercial operations. Capital optimization will continue through our active asset rotation model to finance new investment and reduce our risk. One rotation in the US and another in Spain are in their final stages, expected to be announced soon. Our deep development pipeline allows us to select the best projects, prioritizing returns and minimizing financial exposure. By 2027, we expect to be at a maximum of nine gigawatts of assets in operation, comparing with the range of nine to 10 gigawatts that was the strategic range of generation capacity. Finally, we are also exploring opportunities to increase our returns by leveraging on the development of data centers, Yesterday, we were granted with 402 megawatts of interconnection capacity for this development of data centers in the northeast part of Spain, in Aragon. So we are going to benefit from our large project expertise and the synergies with our generation assets. Moving now to the financial results. In this slide, you may find a summary of the figures we have discussed today. Regarding the Green 4 tax in Spain, the cash impact in 2024 was €335 million. This was the last payment related to this extraordinary tax, as the proposal for its extension was not ratified by the Spanish Parliament some weeks ago. For further details on our results, I encourage you to refer to the complete set of documents released this morning. Let me highlight that the 2024 integrated management report has already been drafted according to the requirements of the new European sustainability reporting standards, anticipating the transposition of the corporate sustainability reporting directive to the Spanish legislation. In addition, and aligned with stakeholders, requests over these years. This year we have also substituted the previous target of achieving a 30% reduction in absolute scope one, two, and three net emissions by 2030 with a new target of achieving by 2030 a 20% reduction in absolute scope one, two, and three emissions based on products sold and with no consideration of avoided emissions. You know, we have had, let me say, a deep discussion over years about this concept, but finally we are delivering this information related to this criteria that, let me say, most of you were defending. This further reaffirms the consistency of our decarbonisation pass with the objectives of the Paris Agreement and the global ambition of Net Zero 2050. Moving on to our outlook for 2025, we are assuming an oil price of $75, with $3 of Henry Hub, $6 of Refining Margin Indicator, generating between $6 and $6.5 billion of cash flow from operations. We expect a net capex between 3.5 and a maximum of 4 billion euros, and we are including here the refacing of hydrogen and the renewables investments. This figure also includes the closing of the Bungie acquisition expected next month after receiving all the required authorizations. This level of net capex will enable us to start up Leon Castile, and Alaska this year, to progress in Campus 33 in Brazil, to conclude our chemical differentiation projects, mainly CNES, to complete the advanced fuels unit in Porto Llano, I mentioned before, and to launch the EcoPlanta, this classification unit using urban waste, and these 300 megawatts of electrolysis capacity I mentioned before. All of these together with the objective for reaching 5.2 gigawatts of renewable capacity and increasing our customer base in the power business. In terms of remuneration, in 2025 Repsol will distribute a cash dividend of 0.975 euros per share, an 8.3% increase over 2024, complemented with a minimum share buyback of 700 million euros to reduce capital. This will put total shareholder distributions at 30 to 35 percent of the cash flow from operations, again, at the higher end of our 25 to 35 percent strategic distribution range. Aligned with this, the Board of Directors approved yesterday to propose to the next AGM, a capital reduction of shares to be acquired for an equivalent amount of 350 million euros to be executed before the end of July. I mean, with 300 million to be acquired through a share buyback program, and a reminder, 50 million through the settlement of currently existing derivatives. In conclusion, Repsol is evolving, grounded on its competitive advantages and the organization is transforming while we continue investing and optimizing the traditional businesses. Repsol completed last year a solid start to its strategic horizon in 2027, setting a framework for sustainable and profitable growth. We deliver a resilient, strong set of results and operating cash flow, cash is king, keeping debt under control and meeting our remuneration commitments. We look confident into 2025, confident on the execution of our strategy, and confident in our capacity to adapt our roadmap to changes in the market environment. Assuming a prudent macro scenario, this year we expect to generate a similar level of operating cash flow than in 2024, increasing the distribution to shareholders according to our plan. Net debt will remain in check, reinforced by a lower net capex and within the full boundaries of our financial frame. We maintain our broad objectives on the energy transition, adopting new metric standards as requested by our stakeholders. And we continue believing in a profitable transformation with focus on improving our upstream portfolio improving the barrels we produce, decarbonizing our industrial hubs, developing new low-carbon commercial businesses that are growing, and giving us an additional cash flow from generation coming, cash flow from operations, sorry, coming from these businesses, and at the same time, increasing our renewable generation capacity. So with this, I will turn it over to Pablo as we move on to the Q&A session. Thank you very much.

Thank you, Yasuyun.

Now, as usual, before moving on to the Q&A, I would like the operator to remind us of the process of ask a question. Please go ahead.

Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 1 again.

Thank you, operator. Let me now move to the Q&A session. Our first questions come from Alessandro Pozzi from Mediabanca. Please, Alessandro, go ahead.

Thanks, Pablo. Good afternoon, all. I have two questions. The first one is on production guidance 530 to 550. you mentioned you hope to be, or you plan to be towards the top end of the range. Can you give us maybe some color about what are the moving factors within that guidance? Because also the top end of the range is, I think, with Q4, and you will have two more fields coming on stream before year end, Leon Castile and and PICA. So I suspect that probably towards the end of 2025, the exit rate will be maybe higher. And I don't know if you can give us maybe some thoughts of what could be production in 2026, also on the back of the new startup. But also, I think you have Libya as well. I was wondering how conservative you are when you factor in production from Libya and also before the gas prices have been quite volatile. That's the first question. The second question is on the disposals. You mentioned 2 billion. Can you give us maybe a bit of additional color of what assets you're planning to sell this year and the timing? Thank you very much.

Grazie mille. Thank you, Alessandro. So, I mean, I'll give you a range of production, but as a disclaimer, I underline production. Today, in our budget, we are in the high part of the range, at around 550,000 barrels a day. We are factoring 20,000 barrels a day, less than the production we had in 2024. The reason to give you this range is because, as I mentioned before, in case of SIN, that today is not the central scenario, a low gas price in the US and so on, we could be more reluctant to invest and to introduce a new rig in the Marcellus in coming two months. I think that that is not going to happen, taking into account the current arena and mainly taking into account that we are already hedging through this collar with no cost. I mentioned before a 55% of our production for the whole year. with a floor of $3 million BTUs and capturing the price till $6, $6.1 per million of BTUs. So, I'm comfortable in the top end of the range today. The moving factors, I mean, accepting this, let me say, unconventional I mentioned before. I mean, if we compare with 2024, we are going to have more Libya, but more Libya is not only because the force majeure we had in 2024. I mean, let me stress that in 2024, in gross terms, due to new worlds, we have an ad production in Libya that could be equivalent to, roughly speaking, more or less 37,000 barrels a day. I mean, 37,000 barrels a day will be 6,000-7,000 barrels a day net for Repsol. I mean, we are adding new wealth due to this production campaign in Libya. But on top of that, this year, in 2025, we are going to finalize the trading of 32 new wells and we are going to add more than 15 000 gross barrels to this libya production so we are now increasing in a significant way the production in libya of course we have to translate to net repsol this this figure and uh i'm also optimistic because in the last day of the year in december 31st we launched an exploration campaign in libya at the nesterwell after 10 years of delay. We have two rigs contracted. On top of that, I mean, we are analyzing further bid rounds in Libya that are going to be the first in 20 years. So let me say that this represents in a very good country with a very good geology, a country that has experienced, I mean, difficult years over the last 15 years. But even in this difficult, let me say, social and political arena, they always have respected their contracts with a very strong rule of law and with, in some way, legal security in the country. So that is going to be a part of the increase of the production this year. We have divestment, I mentioned before. If we take into account Colombia, Trinidad and Tobago, and the part we dispose in Eagle 4, we are going to lose, roughly speaking, 20,000 barrels a day. So that means that this part is going to be lost. And it's probably the difference between the 2024 and 2025. So it's mainly disposals. And on top of that, I mean, we have some kind of natural decline in Bolivia, 2,000, 3,000 barrels a day. We also could have in the unconventional, mainly in JGL4, because the reduction of investment over the last two years, a reduction in production. But what is important, we are increasing in the Gulf of Mexico already this year, because Leon Castile is going to start producing in July. We are going to add more than 8,000 barrels a day, net, this year, over the whole year, for Repsol. We have a small decline in CNC, but in the Gulf we are growing. And we are going to see also some additional production in the UK, because of higher efficiency, mainly in Claymore and Piper. We are not factoring any kind of production of Alaska this year because we are going to start producing in December. So it would be pretty optimistic, let me say, to include figures about Alaska, taking into account that production is going to arrive in December. But Alaska, already PICA is going to be producing the first part of the project, gross, roughly speaking, 30,000 barrels a day for next year. I mean, you know that we have a 49% there. And before the end of the strategic plan, 2027, we will be, I mean, fulfilling the PICA targets of 60,000 barrels a day growth. I mean, I remind you, you perfectly know, Alessandro, we have almost a half of this project. So we don't see, I mean, we could have, of course, any kind of opportunistic rotation of assets in the upstream, but we are not. seen any significant disposal this year in 2025. I'm going to the disposals figure, 2 billion. Let me say that 300 are going to come from Colombia. That's the money we are going to cash in about the disposal. We close in the end of 2024. So this quarter we are going to receive this money. Some, let me say, small additional potential marginal disposals we could have in some businesses And 1.5 is going to come from the low-carbon business, including the asset rotation and, in any case, the potential consolidation of debt. So this 1.5 is related to the... As I mentioned before, the Gallo project, 400 megawatts in Spain, is going to be closed probably this quarter. And we have an advance in this rotation. We have... the FRIE plus the Jicarillas projects that are also advanced this quarter. I mean, 750, 770 megawatts. And by the end of the year, we are preparing a basket of 700 megawatts in Spain. And on top of that, we could have also, I mean, 600, 700 additional megawatts in the States before the end of the year, mainly related to the outpost project. All in all, I'm not going to say that it's not challenging, but taking into account that, I mean, probably a figure close to a half of this figure is going to be at around the end of first quarter, including Colombia plus these two asset rotations this year, we are quite comfortable about these 2 billion disposals for this year. Thank you, Alessandro.

Thank you.

Thank you. Next question comes from Irene Gimona from Bernstein, SG. Thank you.

Yes, hello. Thank you very much. You mentioned the preparation in upstream for the liquidity event. I wonder if you can say whether you're still working towards an IPO or could it be a different type of deal? And then secondly, And thank you for providing the guidance with the results this morning. Thinking about the buyback of 700 million as a minimum this year, how much flexibility is there in your gross capex budget in case not all of the 2 billion asset disposals materialize, please? Thank you.

Thank you, Arlene. I mean, first of all, You are right. We always talk about liquidity event. You perfectly remember, Irene, that you know the company and our statements that at the very beginning, we start talking about IPO. We prefer to talk about liquidity event because IPO is an option depending on the market conditions, but we have additional options. I mean, a reverse takeover is another option. a private liquidity event is another option. So the commitment we have is to prepare the vehicle together, and we are fully aligned, our partners of EIG and Repsol, by the end of the first quarter of 2026, in case of seeing market conditions, to be prepared to do that. And the range of options is open as I mentioned before. And as I always repeat, Irene, the end of the road is important, but also it's important what we are doing in the midst. I mean, disposing countries with no growth or capacity of creative value. So let me say cleaning a bit the perimeter and the scope of countries where Repsol operates in order to make our company more understandable for an American investor, increasing the position in the U.S. I mean, we are betting in favor of the U.S. Already at 31% of our capital employed as Repsol is in the U.S. We are comfortable investing in the E&P business and some other businesses in the U.S. And I think that that is positive in terms of making and developing a strategy for American investors for the future. And on top of that, we are increasing the cash flow from operation of the barrels we produce. I mean, the barrels we are going to add in the Gulf and in Alaska this year are better barrels than the barrels we are disposing. And all that is going to be positive. It's true. I mean, because people, Alessandro and so on, they were asking and they were right about the concerns about production, where we are going to be. Remember that we said that when we presented the strategic plan, that we were going to have some kind of floor in 550,000 barrels a day. This year is going to be the year of the floor because we are starting to add barrels in July, in December, and here we are going to have a higher production than the production we have today. But what is more important, not only more barrels, that is not our target, we are going to have better barrels. we are always betting in favor of a value over volume. I mean, the buyback is going to be there. First, the buyback is going to be related to the cash flow from operations in any case. And let me say that we have a range of 600, sorry, six to 6.5 billion euros of cash flow from operation. And when I'm calculating these 700 million euros, we are taking the low part of the range. I mean, 0.3 multiplied by 6. So I'm comfortable because, I mean, I think that there is ground taken into account, not only the market conditions, but also what we are doing in terms of having a more efficient company and so on. to be not necessarily in the low part of the range. But I prefer to be prudent about that because we are in February and we will have the opportunity to talk about that in coming quarters. But even in the case of six, I mean, we will have a 1.8 that taking into account the cash dividend, we have programs to have a buyback of 700 million euros. What I want also to underline is the financial balance sheet and capacity of the company. I mean, as I mentioned before, accepting this, we are in a net debt of 2.4% as given. And saying that, I also mentioned when I presented the strategic plan, if we have, let me say, a worst environment or macro scenario, we will reduce the gross capex of the company. I mentioned before, quite comfortable about disposals because a half of them could be materialized in coming two months, so that is going to be positive for Repsol, but we have quite a strong flexibility, mainly in the low-carbon business to reduce the effort of this gross capex over the year. We could also, let me say, delay a bit some kind of FIDs we could take over the year. I mentioned before three electrolyzers. I think that the aim and the target we have is to be producing by 2030, before 2030, because you know that we have We see an opportunity because, I mean, fulfilling the European regulation in terms of renewable fuels with non-biological origin makes sense and gives us the opportunity to have the right returns in these electrolyzer projects, but we have some room to delay some of that. Thank you.

Thank you very much.

Thank you. Thank you very much. Irene, let's go for the next question from Michele de la Viña at Goldman Sachs.

Thank you very much. And just to join, congratulations on a very strong set of results. I wanted to ask you two questions, if I may. The first one is in your EMP business. It looks like you've got the best pipeline of growth projects you've had for a long time. I was just wondering if you add all together these projects, how much overall cash flow? um do you think that will add to the company's um emp division in the coming years and perhaps if you could expand a little bit on block 29 in mexico how large you think that development can be after the recent success and then secondly you highlight a material disposal of renewable assets this year that i think very welcome news i was just wondering if you can comment a little bit on the market for these asset transactions in the past you talked about 1.3 times the value to invest in capital. It feels like perhaps it's slightly deteriorated, but I was just wondering if you could give us a mark to market of where you see it at the moment. Thank you.

Grazie mille, Michele. Thank you. I mean, roughly speaking, Michele, and we could go to the granularity of what I'm going to say now. as far as you want. Or later, if you like, checking with our IR team. But, roughly speaking, I mean, remember that when we presented our strategic plan, we said that we are going to improve the whole barrels we produce in Repsol in 4.5 dollars a barrel the cash flow for an operation roughly speaking the average of the whole barrels because the effect of the new ones so if we take roughly speaking again let me take that is not the figure it's only to to make maths easier 200 million barrels a year of production that means that we will be adding 900 million dollars the total amount of the cash flow from operation from the upstream at the end of the road. And that is because the fact that the new barrels, and when I say new barrels, I'm mainly talking about the Gulf and Alaska, they are going to have a figure close to $40 a barrel of cash flow for operation. So we are comparing this $40 per barrel of these new barrels with an average in Repsol of 14 we had at the beginning of the strategic plan. So, because this effect, and I have to take, let me say, and still want to calculate a bit the number of barrels, what the percentage and so on, but because this effect, we are improving in $4.5, $4.6 a barrel, the total basket of Rexol. So, the combined effect could be at around, as I mentioned before, 200 million barrels a year, multiplied by 4.5 at the end of the plan, $900 million, more or less, roughly speaking, the new or the improvement in terms of cash flow from operation in the upstream. Going to the block 29, I mean, we could be, first of all, let me say that, you know, that we are here in the 29 and we are also part of of the Geopath project. So I think that there is room to analyze how to develop all this area in the mid-term. But today what we are seeing in the B-29 could be 60,000 barrels a day gross production, roughly speaking. And the development could be a development with a capex at around 500, 600 million dollars, more or less gross. So that could be the figure we could today share with you. But I mean, I think that there is room to go on analyzing this figure in the close future, because as I mentioned before, I think that there is room to optimize this project, developing the whole area. Going to your last question, market for asset transaction renewables. I mean, let me say, the market is very positive in Spain today. It's a mixture, let me say, of good PPAs, a better financial framework in Europe, comparing with what we have in the U.S., the main part of the projects we have in Spain are wind. And wind, you know, wind now is almost gold in renewables. And so we have a very positive scenario in Spain. I'm not going to hide you that it's more complex in the U.S. And we have had I mean, I'm being, let me say, close to an end to the first basket of assets in the U.S. This first part has been tougher than it was before in Spain. And the reasons are, first of all, the financial arena in the U.S., but it's not the only one. Remember that these projects, they work. start developing them in 2022, more or less. At that time, the PPA level was lower than it was today in the US. And at the same time, we also suffer the inflation costs coming from not only the post-pandemia, but also the Ukrainian crisis and so on. So it seems to me that the second rotation we are going to develop at the end of this year is going to be easier than what we are going to deliver this first part of the year and we are now in the in the close to the closing process uh thank you michele thank you thank you thank you very much michele our next question comes from alejandro vigil from banco santander

Go ahead, Alejandro.

Thank you. Hello. Thank you, Justin, for taking my question. Congratulations for the solid outlook for 2025. Two questions, if I may. The first one is about the U.S. natural gas market. We are seeing, I would say, a boom in terms of activity related to data centers and gas generation, and you have a portfolio there that looks well-positioned to leverage that opportunity. If you can explain your thoughts about your plans in that area, in that business. And the second question is about the low-carbon generation business that is already about 20% of your capital employed, 6 billion euros, but looks more difficult to crystallize the value here. So if you can elaborate about your thoughts about the strategy of all of this business, the level of annual investments, returns, etc. Thank you.

Thank you, Alejandro. Going to your first question about the US natural gas market. We are proud and proud is reflected in the figures of our budget for this year. Remember that I talked about three dollars million btu in the american market as harry had but the view we have seen is a bit more positive and it's going to be probably more positive also forever sold because i i am i mentioned before a 55 percent of the total production we have this year related to harry hub is already hedged through this color i mentioned i mean and we are going to capture with a floor of three all the potential upside we have till 6.1 million, 6.1, sorry, dollar per million B2. What we have seen, and I think that you mentioned some key aspects, Alejandro. First of all, there is a potential increase and a real increase in demand that is not only, let me say, due to seasonal effects. We know that in the US we are experiencing a cold winter. I said we because, I mean, on Sunday we are going to go to Boston to start the roadshow after this presentation. I mean, it's quite cold today and those days in New England and all the northeast part of the US. But on top of that, I think that there are some structural effects. One of them is the potential increase in industrial demand in sectors like chemical. There is also everything related to data center, and you mentioned before, that is in some way pushing in a positive way the PPAs in the renewable sector. We are experiencing that. Remember my last answer talking about the increase in the PPAs we are seeing in the U.S., in the renewable power generation, but I mean, renewable is not enough. We need some kind of a base generation. And on top of that, what we are seeing is that, I mean, the new nuclear, mini nuclear and so on is okay. That is not going to be in operation in coming five, six years. So gas is going to be needed. Gas is going to increase its efficiency demand in the US, and we are seeing also new licenses. And in this sense, the effect of the Trump administration is going to be very positive for the American gas, because the new licenses to export LNG are going to increase the demand in the American market. It's positive for American producers as Repsol, and let me say more, it's very positive for Europe. because it's going to push LNG prices down in the world, and it's going to be very positive for the European industrial sectors. And on top of that, let me also say that that is going to help to reduce the carbon emissions in the world, because the Global South is going to have a cheaper gas, and they are going to be able to do what they can't do over the last three years, that is shifting from coal to gas. These new energy policies are going to boost the gas sector in the U.S. We are well prepared to be there. We have our assets in Marcellus, many Marcellus, and also the Eagle 4. And because what we have seen, that we are preparing a new rig in Marcellus this year in April, May, to start, let me say, taking advantage in case of needed, of this opportunity. If we go to your question, I mean, we have to take into account, first of all, that it's true that this business is growing and probably grew in the 2024 more than expected in relative terms in the strategic plan, because I mentioned before, we are going to have the main part of rotation this year in 2025. But again, we are, first of all, fully committed in terms of prioritizing returns over any kind of consideration. And returns are there, and I'm going to develop this idea. Secondly, the maximum of the capital we are going to employ in this business over the period 24-27 is going to be between 3 and 4 billion euros. as I expressed when we presented the strategic plan. And that is written in stone. That is, let me say, a limit, another line we are not going to overcome. Thirdly, let me say that we have a capital employed that is not working because it's all the pipeline and all the capital that is under construction. So the capital employed in real terms is significantly lower. And also, let me say that in all projects we are investing in, the return on the equity we apply there is above the 10%. And, I mean, we have, let me say, a problem, that is our problem, not yours, that is not sometimes easy to see the crystallization of value of this business in our accounting. Why? Because apart... of the recurrent value generation of this business is the rotation model. The rotation model with significant capital gains. I mean, if we take the development of the model over the last three years, we have had 300 million euros of capital gains for the 100% of the disposals of rotation we developed, but you can't see these capital gains in our accounting. because we are consolidating the projects, retaining the 51% that is in our balance sheet, but is, let me say, is not in the P&L. So that is, let me say, we are going to develop in coming weeks, months, some kind of, let me say, pro forma methodology to try to explain in a better way that because you are right, you have not seen this positive effect in the P&L, so it's not your problem, it's mine, because we are not able to explain that, but we are going to do our best to reflect all that in our, let me say, in our explanation to analysts and to investors. So, saying that, let me say that this return And this capital presidency is over any kind of consideration. And because that is real, remember that, I mean, last year, one year ago, we talked about something between 9 to 10 gigawatts as a range for being or having in operation by 2027. And today I said, okay, we are in some way moderating our ambition. And probably we are going to be at around or roughly below 9 gigawatts in operation by 2027. And that is because we are going to prioritize, in any case, returns, and we are going to prioritize also in our considerations the pregnancy in terms of this capital input. And let me only add one thing. I mean, we have been able to build 2.5 customers-based business over the last four years. starting from 600,000 in our retail power business in Spain. And that is due, of course, to the great job of our customer side people. That is also because the competitive advantage we have because the production of low carbon generation we have in Spain. So thanks to the low carbon generation business in Spain, we have built a business with 2.5 million customers that is value creation, and on top of that, a business that today is not consuming any cash to the company, has a positive free cash flow, 25, 30 million euros last year, in 2024, and adding month after month new clients that were more or less 300,000 new customers last year. And this year, I think that we are going to be, at the end of the year, in a similar growth we had last year so the value is there the value is crystallizing in a prudent way but you are right we have to explain in a better way this value creation thank you very much alejandro very clear thank you very much alejandro our next question comes from uh viras borcataria from rbc go ahead with us

Hi, thanks for taking my questions. I have three, if I could. The first one is on the low-carbon segment. Sort of early to mid last year, there were some reports around you potentially selling down a stake in the entire business to a strategic buyer. Could you just say whether there's still active discussions on that one? And then the second question is on mobility. In your slides, you mentioned specifically the anti-fraud strategy. regulatory measures. And then the result there was particularly strong this quarter. So could you just help me understand exactly what's changed there? And then the final one, just on the U.S. gas hedging, given the curve in the U.S. has been moving higher, have you started to think about or put in place 2026 hedges? And should we expect a similar approach to 2025? Thank you.

So thank you, Birgit. Going to the farming down of the entire low-carbon business. I mean, you know, and I think that I mentioned that in the last call, we have had a non-solicited approach from a company willing to be a shareholder partner in our low-carbon business. and i underlined that it was is a non-solicited approach and the discussions are still there are active and i'm sure villa you understand that i can't deliver more on that but i mean it's active secondly a The mobility anti-fraud measures, I think that what has been very important, first of all, there is a change in terms of what is happening in the market. As I mentioned before, I mean, in December 2024, we have seen in December, because this effect started in November, more or less. And in December, we saw an increase of 11% in our mobility business in Spain versus the same period of 2023. So we are talking about figures now that are in line with those of December 2019. So we are recovering pre-pandemic figures in our mobility business. That is very important. I mean, I think that that is not usual in Europe, taking into account the evolution of European market. We are recovering the pre-pandemic figures in mobility. What has changed there, mainly that, I mean, the Spanish government, Spanish parliament, and the Spanish political parties, they are working in the right direction to avoid this fraud, this fraud against Spanish taxpayers and against the environment because they were also, let me say, not fulfilling the obligations, the incorporation of biofuels established by the regulation. So, growth change was that the Spanish Parliament approved some kind of VAT payment deposit for any operator operating in Spain before taking or lifting the volumes. And that is making hard for people involved in the fraud to go on with the former operational way they had. So on top of that, I mean, I also want to congratulate the police, the Spanish Guardia Civil and all the security forces in the country and the judiciary, because they are fully committed to work together against this fraud that, I mean, probably in a year term could be a fraud of 1, 1.5 billion euros against the Spanish taxpayer, a huge figure. And now I think that all the Spanish institutions, as I mentioned, parliament, government, security forces, and so on, all of them are working together to avoid and to solve this problem. Going to the hedging, I mean, you are right. What you mentioned, I think that is a good strategy that we are trying to develop or to perform. I mentioned before the hedging figures for 2025. If we go to 2026, we have already a 50% of the total production expected this year in 2026. a hedge through a caller with no cost, $3.2 to $5.1 million B2. That means that we are guaranteeing a minimum price for a half of the production of 2026 of $3.2 million B2, and we have the whole upside till $5.1 with no cost. And we are starting in a prudent way, probably a 10% that has been done hedging the production of 2027, taking advantage of this moment of the market. Thank you very much, Viraj.

Thank you. Thank you very much, Viraj. Our next questions come from Henry Patricot at UBS. Go ahead with your question, please, Henry.

Yes, thank you. Hello everyone. My two questions please. The first one on the shell returns. I was wondering if you can come back on the rationale for adopting this upper end of the range, the 30-35% of cash flows for this year and whether that should be the standard range going forward. And then secondly, on the cash flow guidance this time and taxes, because in 2024, you had pretty low cash taxes paid. I want to get a sense of what's embedded in the guidance for tax payments in 2025. Thank you.

Merci, Henri. Thank you. I mean, you know that we announced at a range of 25, 35 for the whole period. Why are we taking the 30, 35% for this year? Mainly because two reasons. I mean, we are comfortable, comfortable, of course, in taking into account, I mean, the different scenarios we could have with the environment, what we have seen in terms of oil price, gas price, refining margin, is giving us some kind of comfort about the environment we need to sustain this remuneration range, also the balance sheet of the company. I mean, we could do it. And third, we are also comfortable in performance terms. I mean, businesses, development of projects and so on, they are performing in the right way. And all that gives us the comfortability to be in the upper end range of the remuneration we committed at the beginning of the strategic plan. So 30, 35%. I mean, if we go to 20, 24, I mean, and taxes, there are, I think that two effects, one of them that you could see that in the tax uh the average tax for the upstream business has been slightly below the average at around 40 40 40 last year 41 in 2024 and that is because i mean in some jurisdiction international jurisdiction we had over the year opportunities to optimize the tax position of the company And in terms of tax paid, I mean, there are some temporary effects in terms of our relationship with the Spanish administration. But I mean, nothing unusual. And in any case, 2025, I think that is going to be, I mean, taking into account that year after year in the international arena, we are improving our position. That is also true. But it's going to be a normal year in terms of tax paid 2025. And of course, this normality is fully included in the cash flow from operation of 6.5 billion euros I mentioned before, and it's going to be fully aligned with the strategic plan. Thank you, Henri.

Thank you. Thank you very much, Henri, for your question. Now, our next question comes from Ignacio Domenic at JBC. Please go ahead, Ignacio. Thank you.

Hi, thanks, Pablo. Hi, Jefferson. Thank you for taking my questions. The first question is on natural gas prices. You could provide us some color on the level of strides in Europe and the volatility that we could see throughout the summer, and if this could have an impact on your gas wholesale and trading division. And then my second question is on chemicals. It seems that it's been roughly now like 10 quarters with negative operating income in this division. So I was wondering if the outlook could improve in the coming months or still 2025 dynamics still look a bit depressed. and my my last question is on on data centers in spain if you could clarify what is your strategy here and how do you expect to to monetize data centers if it's just through power sales vpas essentially what's your view there thank you very much thank you i mean you mentioned our gas trading division and so on at the very beginning of your question

And let me comment, I mean, taking advantage of your question, that when we talk about the P&L of industrial business, I mean, we mainly talk about the refining margin. And that is important. But more and more, we have two hidden businesses, you know, industrial division that are the liquid trading and the gas trading division that this year in 2024, last year, which I said, They had already 1 billion euros of combined EBITDA between both businesses. And this year, they are going to be also there. So that is an important activity, this trading of liquids and gas. So what could happen? In Asia, I don't have, as you could imagine, as you say and you know, a crystal ball. But it seems to me that, first of all, we have, and we have experience at quite medium cold winter in Europe after two mild winters. And in some way, everybody thought that, let me say, what we saw last year and two years ago was the new normal, and that is not the new normal. I mean, winters could be cold in Europe. And gas consumption was, I think, the figure I have in mind, the storage was at around or below 50% at the beginning of February, and probably could achieve a figure in weeks of 25, 30%. That means that we have to fulfill probably the European storage capacities to prepare the next winter, because I don't know what is going to happen. I don't have a crystal ball about geopolitics, but I think that to anticipate now that the peace in Eastern Europe and so on is going to come in a quick way. I mean, it's not easy to anticipate. So I think that it makes sense to prepare Europe for next winter. And all that is going to put a pressure on gas prices in coming weeks, months. But again, that is a central scenario that things could change. And all that is probably to put a pressure to push or to maintain current gas prices that are expensive or to push these prices up or evolve the average in previous years. Previous years, I'm not talking about 2021, 2022. I'm talking about a normal year in Europe. That is not good for European markets. consuming industry in general terms. I'm thinking about steel mills, about paper mills, and some others. And I mean, because we have a long position in the Gulf in the US, in the LNG projects, so we could have a good position to arbitrage this gas between the US and Europe. Going to the chemical, I don't have a positive outlook for coming months. And I'm going to link this question with the previous one, Ignacio. High gas prices are also impacting in a negative way on the European chemical business, including Repsol business. That means that I mentioned before, we are going to have, and our expectation is this year, that we could have a positive EBITDA, but we are not going probably to have a positive EBIT this year. We are going to have a negative EBIT in 2025. All that is included in the figures of cash flow for operations I mentioned before and in our guidance. And what we are doing more and more is, in this sense, reducing the break-even been more efficient. I mentioned before that we have reduced the break-even of our chemical business to 220 euros per ton of international margin, and preparing the ground for 2026, where we are going to have the new projects producing already a significant new EBITDA that is going to put this business in positive numbers. I don't have a positive approach for coming months for the chemical business. I mean, saying that, we could see, and we have seen some small recovery in demand terms, but it's not going to be enough. In going to data synthesis, yes, I'm going to clarify. What we expect is, of course, to monetize our position, but monetize our position, I the package we could offer to a partner ready to invest in a data center. So what we could offer and could be quite unique is the interconnection capacity. I mentioned before, 402 megawatts. Land, we have land in the area. We have water in the area. And as you mentioned, we could offer, of course, a project, a PPA, in a project that because the regulation considers that it's a self-consumption project, so could have a lower cost outside the system. So with no investment, I mean, only the investment if we develop, let me say, an unshortened investment in the project of renewable power generation, but we could offer a package that is quite unique and we could monetize to someone ready to invest. now because we received yesterday the authorization for for doing that we are going to prepare this package and work on that in coming uh weeks months but again that is not a repsol investment it's an investment that is going to offer to our third party taking advantage of the unique position we have and monetizing this position

Thank you very much, Ignacio. Now our next question comes from Pablo. Go ahead, Pablo. Thank you. Pablo, are you still there? Now our next question comes from Giacomo Romeo from Jefferies. Please, Giacomo, go ahead with your questions. Thank you.

Yes, thank you. A couple of questions remaining. First one is, I believe you have a 1 million tons contract starting with Centrica started in January and of course by now you should have had your offtake from Venture Global and probably is not going to start until April. Just wondering whether you have any price risk associated with these deliveries. Second question is, we are hearing about issues with regards to Maya crude deliveries in the Gulf of Mexico. Are you experiencing similar issues with your Mayan deliveries? And if I can squeeze the third one, there has been yet an adverse ruling in Alaska with regards to the road access for the PICA unit. Is there going to have this, do you think this could cause any sort of impact on the project cost or timeline? Thank you. Thank you.

Thank you, Giacomo. Thank you. I mean, as far as I know, the venture global contract we have is nothing related to Centric. I mean, it's a new LNG coming from venture, from the Gulf. And, you know, I mean, we have an arbitration demand against them. I'm not going to elaborate too much because the confidentiality... for this arbitration. But on top of that, this week Venture Global announced that this facility, that is the Calcassieux Pass facility, is going to start operations in April 15. And that means that we are going to start receiving this gas from the contract we have with Ventures. And that is going to improve, of course, as I mentioned before, Repsol's gas trading activities on top of the demand we have because the significantly long, let me say that, commissioning process of this LNG plant. The price for this delivery, I mean, we are going to take let me say, a heavy half plus the cost that is a quite competitive energy plant in cost terms, probably one of the best of the Gulf. And we are going to have the arbitrage to put this gas in Europe, in Europe, in Asia, taking the advantage of the TTF or MVP or JKM or some other markers in the market. Yes, we have this Maya crude plant problems not similar to some others because i have read that some operators or refiners they even have difficulties to to formulate gasolines and diesel because these maya conserves in our case i mean we had to reduce in in one of our refineries only one two of our refineries the the the distillation capacity because this water problems in the crude oil And we have an additional cost, but roughly speaking, the total cost of this problem Pemex had with the Maya because this water infiltration could be at around 15, 16 million dollars for the whole operation of Repsol. So, I mean, it's material that when we compare with the margins of our funding business, I mean, it's something that we could deal. And of course, we could negotiate for the future with the provider. But we have been producing in a normal way. That is important. You know, refineries, diesel and gasoline over January and the period where we have this problem. In terms of going to Alaska, I mean, there is no... any kind of impact in timing and in cost terms for this road access to our Alaska PICA facility. So, I mean, we don't have any additional cost above what we forecast, and we announce and deliver in capex terms, so we don't have an additional cost. What we have seen, and that is not exactly related to your question, is that we have seen in PICA, on top of this project, the new approach of the American administration to the energy sector, prioritizing security of supply and the competitiveness of the American energy sector. What we have seen is the possibility to have in the future new prospects, not for tomorrow, but in Alaska related to federal lands. So I think that that is an opportunity to have an upside in value creation for the future for this Alaska project. Thank you.

Thank you very much, Giacomo. Our next question comes from Lydia Rainford at Barclays. Go ahead with your question, Lydia.

Thank you, Pablo, and good morning and good afternoon. Thank you very much for all of the colour that you've given us today. I actually do have three questions still. Just to, you've talked about a lot of different things today, but just on the cash flow guidance for 2027, I think in the original plan that was 8 billion euros and obviously talking 6 to 6.5 billion for 2025, you've outlined a lot of the projects that come upstream and particularly in the upstream and how free cash flow generative they are, but there's also those changes in the If we're putting everything together, we're still comfortable with that 2027 guidance plan. And then, secondly, just to come back to data centers, and it's a fascinating area. Are you seeing a willingness for the data center providers, the hyperscalers, to actually pay more from the power side to actually differentiate and go, we want access quickly to electrons, and so we're willing to pay a premium, whether it's for clean or for reliable energy? And then just finally, on the refining side, it does look that we're seeing some real differences regionally at the moment, and particularly parts of Germany being weaker. And just kind of realistically, what you're seeing in terms of just a quick summary of the outlook for the refining part. Thank you.

Thank you, Lydia. I mean, we are... And we are seeing this 8 billion euros you mentioned by 2027. And what is the gap between this 8 and 6.5 in 2025? First, the new uptrend production in absolute terms, because we are going to have more production in 2026 and 2027. And we are going to have additional cash flow from operation because, as I mentioned before, the barrels are going to enter this year. And a part of them are not in any case factor in 2025. That is PICA, is Alaska. They are going to add $40 a barrel of new cash flow from operation in coming two years. So that is the first part. The second, I mean, the list I have here is the increase in 200 million euros in the customer business of EBITDA and cash flow from operation from 2024 to 2027. Third is also the growth in low carbon businesses that is going to add in more or less, roughly speaking, between 300 and 400 million euros of EBITDA by 2027. And there are two gaps. that i have today a more clarity or more expectation about the possibility of recovery that is the hbo margin that is going to add also a part of this increase by 2027 and going to the chemical business i mean we are going to have 140 million euros more coming from the projects that is going to happen and probably this scenario is going to be worse than expected in the chemical business in 2027. Saying that, we are working hard in efficiencies, Lydia. We launched, and I don't want to talk about figures because I prefer delivery than previous announcement, but last summer in 2024, when we were seeing some kind of concerns about the macro scenario in the world, we launched a very intensive efficiency and synergies program in the company This year, in 2025, we are going to see the fruits of this program. Probably the high range of the cash flow from operation is also in some way related to these new efficiencies we are going to have in Repsol. And you know that we have a quite good experience in the efficiencies program in this company. And that is going to cover the gap we could have in the chemical business or in some other businesses to guarantee that this 8 billion euros are going to be as ambition in cash flow from operation in the central scenario in 2027. I agree with my reluctance about the renewable hydrogen. For that reason, we are reducing in a dramatic way the installed capacity we announced as ambitions four years ago or three years ago in the low carbon day here in Madrid, in Mostoles, to the current situation. So we are going from 1.9 to something in between 700, 1.2 gigawatts in 2030. And as I mentioned before, 350 megawatts are going to come not from investment, but from biomethane that is going to be transformed in the reformers of power refinery. And what we are taking as hydrogen ambition and target by 2030, Lydia, is the part that is going to be used in our own refineries to produce the renewable hydrogen, renewable hydrocarbon molecule. That, as you know, that is going to be and is already in the European directive regulation a need and we are going first of all this hydrogen is not competing with a great hydrogen is competing with the import of hbo a molecule and on top of that we have to produce a one one percent of our total production we sell to our customers in spain has to be produced one percent with renewable fuels with non-biological origin the only way we know to produce that is today and the most competitive using hydrogen and this 600 700 megawatts of floor i mentioned is fitting with this obligation so we are going to produce hydrogen with returns above the 10 percent rely on this regulation and i have let me say the same concern and skepticism you could have or you showing your question about the capacity of some other sectors like steel sector, paper sector, cement sector, or chemical sector to use this hydrogen substituting natural gas. For that reason, we are facing down in a dramatic way our hydrogen investment and our hydrogen expectation by 2030. Going to the refining side, I mean, in this strategic plan, we have a central case For this year, 2025, 2027, $6 a barrel is the budget we have this year. And an acid case, $4.5 per barrel. Let me say that we are comfortable today with the central case because I mentioned before demand is growing. We see 1 million barrels a day of new capacity for this year. Closures increasing. announced for this year at more or less, roughly speaking, around 1 million barrels a day. And we are comfortable with that. But again, even in the case of the acid case that we are not there today, 4.5 dollars a barrel, let me stress, Lydia, that the range of our cash flow for operation is not going to suffer because we will be in that case, in the low part, 6 billion euros of cash for open operations and even under this 4.5 dollars above the scenario we will be committed to this 700 million euros of share buybacks for this year i mentioned before thank you thank you thank you very much for your questions the next question comes from sasi kanchi likuru from morgan styley go ahead with your questions

Hi, thanks for taking my questions. I had three, actually. The first one and the second one is kind of leaning on to the previous question as well. The first one, I wanted to understand the current dynamics in the refining market. The refining margins have improved. I've picked up, I suppose, to $7 per barrel, if I'm not wrong, for you. Just was interested to hear what you thought were the key reasons behind the current increase in these margins. Are you in any way seeing any effects of the proposed U.S. tariffs? for Canada and Mexico, albeit they've been delayed to 3rd March. Perhaps if this has already led to any change in the logistical setup or gasoline or metal distillate flows. Also interested in your view of if the higher TTF gas prices have had any effect on the premium, which you also see at $2 per barrel for the full year. The second one was related to the cash flow guidance. I was wondering if you could help me bridge the cash flow from the 6.3 billion euros CFFO generated in 2024 to the average 6.25 billion guided for 2025. Because compared to 2024, production is guided to be down by around 30,000 barrels per day at the midpoint of the guidance. And due to your reference conditions, I suppose print prices and refining margins are down You're also pre-booked the tax credits a quarter early in 4Q instead of 1Q next year. I recognize India prices as higher year on year and they're moving for taxable. I was wondering what else was improving as well. The final one is related to the dividends to minorities, particularly to EIG related to the upstream business. Actually very limited to no dividend payments in the second half of 2024. I was wondering if this was because there's limited free cash flow generated in the upstream business or whether this has been, the dividend payments have been delayed to 2045.

Thank you, Shashi. I mean, if we want to do your first question about the refining margins improvement, let me say that the main driver is the strong demand of gas oil and diesel. That is the main driver we are seeing. And there are some factors that are related to that, that is the gas price. I mean, high gas prices, and as I mentioned before, answering to a question, I can remember, I think that it was to Alejandro, high gas prices means that people is shifting from gas to fuel, from gas to gas oil, in many heating applications all around the world. So that is helping to improve refining margins. And demand is also growing in structural terms in the world. I want to stress the fact that the International Energy Agency, that is not, let me say, the most oily agency in the world in their expectations, they announced some weeks ago that the oil demand is going to grow in one million barrels a day in 2025. So, main rationale, demand is growing. And when demand is growing, you have new capacities plus shooting downs or closures of plants. And today, the best consensus, taking into consideration the delay in a Mexican refinery and so on could be at around 1 million barrels of new capacity by 2025. And when we take the either executed or announced closures, I'm talking about the US, Houston, Europe, including Grangemouth and some other announcements, plus some refineries in China also announced the closures in 2025 could be at around 1 million barrels a day. So that is the rationale behind that. So gas prices are not necessarily bad, are bad for some other businesses like chemical, as I mentioned before, but in the case of refining, I mean, they are increasing the demand of liquids in the world. What could happen in terms of, I mean, tariffs, Canada, Mexico, I mean, I don't know because I don't know what is going to happen in coming weeks. But let me say it's actually any difficulty to use the Canadian or Mexican heavy oil in the North American or US market means more products in the market, higher discounts, and opportunities for the refining business. I mean, probably nothing is going to happen, but in case of seeing something like that, it's not bad for our refining business at all. When we go to the, I mean, this comparison between 2024, 2025, why are we seeing, let me say, a similar cash flow from operations in 2025 and what is happening in this bridge? You mentioned, and you are right, we have a lower rent. So, pushing the cash flow down. We have apparently higher Henry Hub, pushing a bit up the cash flow, a lower refining margin than we had in 2024, so cash flow down. We have also a lower production, I mean, 20,000, 22,000 barrels a day, I mentioned before, so that is reducing in some way also the The cash flow, we are going to have slightly, as I mentioned before, a higher EBITDA in the customer business and in the low carbon business. In tax terms, I mean, probably we are going to have less temporary effects this year, but that is not going to be dramatic. And in any case, this factor in this cash flow for operation And I also have to include this efficiency and margin improvements program we have in our hands and that could push this cash flow preparation to the high part of the range we announced today. But again, the cash flow is going to be similar because these positive effects and these negative effects I mentioned before. And let me say that in terms of this defer payment, the next payment is going to come soon. And I mean, the partner and the JV, we are fully focused on this liquidity event I mentioned before. And all the minorities payment in the upstream, I mean, today are in the framework of the contract and using the temporary flexibility we established and we settled in the contract with our partners. So things are happening in the normal way. Thank you.

Thank you very much for your question. Our next question comes from Matt Noftin at J.P. Morgan. Matt, please go ahead with your question.

Hi, Jens. Thanks for letting me rejoin the call. Just two quick follow-ups, if I could. First, Joshua John, you listed many of the moving parts on CFFO a minute ago. I just wondered if you could zoom in specifically on chemicals and the refining margin premium over the benchmark and share or help us understand how much improvement year-on-year in the financial targets you're assuming specifically from those two components. And then secondly, I just wanted to ask your confidence in the growth projects across the business for the next 12 months and specifically coming back to the earlier comments on PICA. I think some understood that the operator's base case was more sort of mid-2026 with weather-dependent upside sooner than that. So I wonder if you could help us just cross out any disconnect there. Thank you.

Thank you, Matt. I mean, I have to check, but in chemicals, we are slightly improving the cash flow from operation in 2025. But again, I'm going to give you the figure in some seconds. I'm checking now the figure in my notes. I think that we are going more or less to improve the EBITDA in a figure close to 100 million euros this year, comparing with 2024, because the main effect is this reduction of, we have to take into account that we produce more or less in polyolefins terms, a figure close to 2.5 million tons a year. So if we are improving in 30, 35, 40, euros a ton, the break-even, that means that we are improving the EBITDA in 80 or 100 million euros. So that is going to come from the cost side and we are not factoring any significant amount because a better environment or improvement on the business environment. In the case of the refining margin premium, there are What we are taking this year in 2025 is $2 a barrel. In 2024, it was $1.2 a barrel. And the main improvement is going to come first, the energy efficiency programs. We are emitting, roughly speaking, 150, 170,000 tons a year of less CO2. That means less energy consumption. So that is improving the margin. Secondly, the turnaround program is a bit less intensive this year than last year. And third, a slightly better expectation of the HBO and SAF for this year. And here we have, let me say, two effects. One of them is purely operational. We start operating the C43 in March. We have the commissioning process in April and so on, but I mean, you have to optimize the plant. This year we are operating in a normal way. That is important. On top of that, I mean, we are factoring in $800 a ton more or less as average the HBO minus UCO margin. That is slightly above the figure we had in 2024. So that is mainly behind. going to the alaska is true that when we announced i think that in summer 2022 the the fid we announced mid 26 but the operator and agreeing with repsol they have changed the plans and they changed let me say the development of the project anticipating in the program some parts of the wells that are going to be producing and anticipating the first oil. For that reason, as I mentioned before, we are going to start producing, I think that's a figure close to 30,000 barrels a day gross in 2026. And we are going to see a ramp up over the one and a half year, more or less, achieving at the end of the road, the 60,000, sorry, 80,000, sorry, 80,000 barrels a day. That is the gross figure at the end of the period. So we have a ramp up. In this ramp-up, probably, we take, let me say, the area of the integration of the production figures could be all in all similar, but we are anticipating production at the end of 2025, and that is the reason of this comment you did, Matt. Thank you.

Super.

Thank you.

Thank you very much, Matt. Our next question comes from Matt Smith at Bank of America. Please go ahead with your question, Matt. Thank you.

Hi there. Thank you very much. Just the one left from me, hopefully not too details orientated, but just reflecting on the strategy update that you gave previously over the years that you presented, I think the sort of financing costs, which includes your interest, your leases, your minority dividend payment, etc., was running around a billion euros per annum, if I remember correctly. And just look at your net debt evolution table that you present today. I mean, the interest and other movements line is closer to one and a half billion. So I guess I just wanted to reflect on Some of the drivers for that this year looks as though you've been adding quite a few new leases throughout the year. And then, of course, the question is really whether you expect that to normalize closer to the outlook run rate that you gave earlier in the year. Thank you.

So thank you, Matt. I mean, it's true that we add one billion euros of leases this year. But let me say that is not the new normal. I mean, there are sometimes some strategic steps in that case. It was because the fleet we need for the increase in the LNG business of the company. We were mentioning before that we are going to start a new operation from the Gulf coming from Ventures and so on, from Calcassier Pass. And that is, let me say, a step increasing the the activity of our fleet, and that is behind. That is not going to be replicated, let me say, year after year. Thank you.

Thank you very much, Matt, for your question. Our next question comes from Anis Kapadia from Palisades. Please, Anis, go ahead with your question. Thank you.

Yeah, good afternoon. Just a first question on the cash flow. I was just wondering if there's any significant working capital impacts you're expecting in the first quarter or through the year in 2025. And then the second one with relation to the 25% that EIG bought in the upstream business. Can you just update if there's any further payments still due from EIG and then kind of going forward in a scenario where they retain that, there isn't an IPO, how do you see cash flow flowing out of the upstream business to EIG? Is there any kind of set dividends or kind of policy around that that you can talk about? Thank you.

So, thank you, Anish. I mean, first of all, I mean, you know, the working capital depends on price evolution and so on. So I don't want to be, let me say, too close about this answer. But let me say that at stable prices, we don't see any significant working capital movement over the whole year. I mean, if things are going in the right direction in Venezuela, we could see, let me say, 150, 200 million dollars of increase because the increase of activity there. But I mean, I don't see any increase over the whole year. We could see, let me say, perhaps at these prices in January, because the refining margins are growing, so that means that products prices are growing. We could see a big increase, but that is going to reflect, let me say, the EBITDA increase, because prices But, I mean, in a flat curve of prices over the whole year, the working capital has to be flat. I mean, going to our partner in the upstream business, I mean, there is no any delay. We are in the payments. We are under the contract. And the contract has some temporary flexibilities to some interest rate at around 8%, sorry, 8%. in the framework of a time period, and we are, let me say, in the contractual terms, in terms of flexibility, so there is no any kind of non-fulfilling of the contract. We are in this framework. Thank you.

That was our last question. With this, we will be our fourth quarter conference call to an end. Thank you very much for your attendance today. Thank you. Cheers. Bye-bye.