Solaria Energía y Medio Ambiente

Good afternoon, everyone, and welcome to Soria 2023 Full Year Result Webcast. My name is David Gangon. I'm the head of IR of Solaria. I am joined today by Arturo Díaz-Tejero Larrañaga, our chief executive officer. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. During this presentation, we'll begin with an overview of the full year results and the main development during this year, given by our CEO, Arturo. And following this, we will move on to the Q&A session. I would also like to highlight that you have to submit all your questions via the web. So thank you very much again. And I will now hand over the word to Arturo.

Thank you, David, and thanks to everyone joining this conference call. Like always, I will move extremely fast in the presentation of 2023 results of Solaria, and then we will pass to the Q&A session. Of course, here now. This year, I think that we have achieved a record from generation perspective. We have increased our generation, if you compare with last year, in 62%. Revenues continues growing. We have achieved 230 millions of euros. EBITDA, additional 36% of growth, 2023 versus 2022, and net profit. I think that this year was an extremely good financial year for Solaria. We continue growing. All the numbers continue growing. EBITDA, net profit, revenues, and energy generation. From capacity perspective, we have finished with close to 1.7 GW of capacity installed and connected to the grid, and we have under construction more than 1.5 GW. With these numbers, we can say that we are the leader in the Iberia region in solar photovoltaic technology, with more than 3 GW installed and under construction. Extremely important for us was the approval that we received on January of Garonja, the final approval, the final permitting process that we obtained at the beginning of January. Garonja today is under execution. Civil works we are doing and we are executing now the civil works and hopefully in the next 10-12 months, we will connect to the grid. It's our second flagship project, extremely important. As you know, after Trillo, Garonja for us is the second flagship project of our portfolio in the north of Spain, close to, in Burgos, close to the city of Burgos, and one of the largest PV plants that will be constructed in Spain. In order to give a global idea of the situation, something that we have explained during past presentations, but we have secured the financing for the 5.6 gigawatt portfolio that we are going to construct in the next two years. We have secured the financing with the European Investment Bank. with a credit loan of 1.7 billion euros, project finance structure. It was a great success that we announced on September of last year and that we are using now and we are using this project finance capacity in all the projects that we are going to construct during this year. Extremely important, price of PV modules, 500 MW that we have signed this contract a few months ago, one month ago approximately, two months ago approximately price record price of 0.093 euros per watt that is the lowest price in the history of solaria from purchasing point of view purchasing of modules point of view no good point i think that in the next days probably next weeks we are going to announce a new deal of 500 megawatts a new deal of acquisition of pb modules 500 megawatts additional 500 megawatts and probably We are going to stay in similar or even less level of price of modules. This is extremely important. At the end of the day it's CAPEX. CAPEX that we are improving all quarters and as you know PV modules is one of the key parts of the CAPEX. of the global capex of the PV assets. This price is a record price and it's extremely important for us. Of course, we have adjusted a bit the targets, 7%. Why? Because, as you know, the Spanish government at the end of last year approved the 7% tax for renewables, for renewables for all the generation, not renewables, globally for all the generation, and it's 7% of the sales. And we have adjusted our EBITDA targets according with this new tax approved by the government. Of course, we continue with our business plan, 18 gigawatts until 2030. The key point here is that we are including today more information about Italy and Germany. We are expanding activities out of Spain. We have today a good situation from pipeline perspective in Italy and in Germany. I think that more than 50% of our global pipeline will come from these countries. And this is extremely important because it's a geographical diversification that we are going to execute during the next years. And it's extremely important because Solaria in the next year will be the key player in the European Union from a renewable energy point of view. Of course, in order to enter in financial numbers, capacity increase and Garonia. As I have mentioned, we have started with the civil wars in Garonia. in extremely important for us from a strategic point of view and we will explain deeply during this conference call but garania will be one of the key assets not only for solaria globally for spain no and i will explain uh the good point is that we have increased our capacity originally was 595 megawatts and and we have get additional capacity and it was approved And today the project is 700 megawatts. I can say that is the largest PV asset in Iberia region. And the largest development or the largest photovoltaic development in Iberia region. As I have explained, 10-12 months will be connected to the grid. Of course, as always, we maintain some concepts that for us are fundamental. We need to be the top from ESG point of view and we maintain high level rating in ESG concepts. And we continue thinking that is one of the key points, especially if you work in renewables, especially if you are a renewable energy company. diversification not only from geographic perspective that i have mentioned italy spain portugal and germany no and not only from geographical perspective in technology wind and solar from wind perspective today we have more than 18 percent of our pipeline was associated and is associated with wind technology and will be developed and constructed in the next three years. And of course this is extremely important because today we can say that Solaris is not only a photovoltaic solar energy company, it's a renewable energy group involving different geographies and involving different technologies at the same time. Even I can say that we are not exactly only a renewable energy group, no? We are an infrastructure group, that groups not only in generation, that works in other applications and we will explain during this conference call, no? And profits, something that we always explain, no? We need to maintain a profit and healthy financial situation because, as you know, we are not rotating assets. We are not increasing capital and obviously all the cash comes from actual assets and future assets. 12% of minimum project IRR that we have always explained. Probably Solaria today is the best in class from CAPEX and OPEX perspective, globally in Europe or probably in Spain and globally in Europe. We don't acquire pipeline or similar, we develop all of our pipeline with our own team and we are not raising capital and we don't see this option for the future and we maintain all of our financing associated with project finance structure, deals that I have mentioned, European Investment Bank and additional deals that will be announced. And today this project finance is covering close to the 100% of our capex. Of course, financial numbers, production record, I think that I have mentioned, but it's important to say again, production record, sales record, of course, EBITDA record. It's important to mention, because all the market is extremely worried about this, merchant exposure. Today, our merchant exposure is around 30%. 70% approximately is close with fixed price with PPAs and 30% go to the merchant markets. EBITDA, net profit, we continue growing as I have explained. cash flow we maintain a really good level of cash after to invest more than 320 millions of euros that we have invested in 2023 that it was a strong effort for a medium-sized company like solaria we maintain a really good level of cash without any asset rotation without any increase of capital or similar and with the cash flow and the generation of our our pb assets and covering our capex with project finance Debt and situation of the debt is important to mention, especially with the actual situation of interest rate. All the market is worried about the situation of interest rate and when it's going to decrease. The average cost of debt is 3.5. That is not bad. It's good, especially because it's long-term debt. The average... 10 or for our project finance debt is 15 years, 14.4 and 3.5, 15 years is reasonable in our mind and more than 90% is project finance debt associated with our assets. Our level debt EBITDA is good, 4.9, hopefully during this year we are going to improve and hopefully during this year, especially with the reduction of our capex, we will improve all of these numbers and quarterly you will see the evolution. Of course, as I have mentioned, we adjust the numbers that we present with a 7% tax. Unfortunately, government has decided to approve again the 7% tax. In my mind, it's an enormous mistake because it's an old tax that it was a mistake of the previous government and they have decided to introduce again in the system. I think it's an enormous mistake that delay or damage in general generation not only renewals in general but today we have over the table and we have to include in our projections no but even with this effect of the seven percent we maintain a global EBITDA target for 2025 of more than 300 millions of euros that is significant probably is best in class for solar photovoltaic companies. And good news, at the same time that government has recuperated the 7% tax that I have mentioned, at the same time they have cancelled the clawback, that it was a direct attack to the renewable energy technologies. And good news, because they have cancelled the clawback and they have cancelled the Iberian exception, that it was an awful law approved by the government. Good point. Today we compete apple to apple with other technologies in the same situation because 7% is something that affects to all the technologies, not to renewables or inframarginal technologies. Clawback, an Iberian exception, was approved for inframarginal technologies. We have included here, this is extremely important for us, as you know, at the end of the day, the key point for us is project IRR levels. And we have included here an estimation based in our CAPEX, 0.375 euros per watt. And of course, projection about electrical prices is extremely difficult to make or to execute projection based on electrical prices, because as you know, It's all the time shaking and changing all the time. And I think that all the people is like in soccer. All the people knows about soccer. All the people knows about the future situation of electricity prices. All the people has opinion about price in the future of electricity. Honestly, after 25 years, I'm not completely sure about the situation of prices of electricity in the next 10, 12, 15 or 20 years. But usually people, all the people has opinion. But we will talk about this. I'm completely sure in the Q&A session we will talk about this. But even in the worst scenario that we have included, 39.6 euros per megawatt hour average price... The project IRR that we obtained, theoretical project IRR, is 14.2. That is acceptable with our criteria of 12% of minimum project IRR. asset rotation as you know solar is not extremely focused in asset rotation probably is the only company that is not focused today in asset rotation all the renewables and energy market is focused on asset rotation i understand with inflation situation but in our view asset could be rotate in the correct price no and in the correct strategy and the correct price could be rotate like always we have explained no As you know, we closed an asset rotation one year ago, or more than one year, in 2022. We closed a small asset rotation of 100 MW. We are negotiating new asset rotation in the Basque Country for 500 MW that could be increased, but today is based on 500 MW. 25%. As you know, Basque Country has a special law from tax point of view that they include 30% of tax credit on capex invested and this is extremely relevant for us. And probably this operation could be closed in the next 2-3 months. And it's good from financial perspective and it's good from tax point of view. Of course, this is something that I have mentioned, the portfolio, we are focusing the diversification of our portfolio, not only from geographic perspective, technology perspective, solar, wind, and geography, Spain, Italy, Portugal, Germany. And I think that more business will come. I think that Solaria at the end of the day is an infrastructure player looking for new business based obviously on generation, on renewable energy generation. but for us it's important to innovate and to make new business flagship projects and when we are going to enter in these new flagship projects you know because we have explained in all of our previous presentations Basque Country enormous project that will be extremely strategic for us and more than two gigawatts enormous probably the largest pb asset in europe and probably one of the largest in the world garonia that we have started with the construction civil works a trio that was done and we have now the second phase we are constructing the second the second phase it's 150 megawatts And more projects. We have included here Italy, because Italy is today an important country for us. We think that during especially 2025, 2026 will give to us a lot of surprises and good news. And of course, we have included here. Italy, we include the details. As you know, our target for Italy is 5 gigawatts. It's a complicated country, not easy to develop pipelines, not easy to construct PV assets or wind assets, not easy to sign PPAs. Great for us. It's the perfect place for us. Not easy, great. And I think that we are getting good successful. It's a complicated country. I love it. And 2.28 gigawatts was secured during last month, last quarter. And we are growing. Hopefully in the next quarter we could give update about new developments, situation of our pipeline. And hopefully during this year we will start with construction, massive construction in Italy. Of course, new concepts and things that could happen in the next year and during this year. A lot of things could happen here, but new business that we have over the table. As you know, Solaria, as I have mentioned, is not only a renewable energy generation company, it's an infrastructure player. We are constructing a lot of new substations. As you know, grid and substation is one of our key investments and is important in our CAPEX, the substation and the grid. And this grid and this substation is used not only by solaria, it's used by third parties, and even we are constructing substation and grid for third parties. It's one of our activities today because some players of the business of the renewable energy space, They appreciate our know-how and they are contracting and subcontracting us in some specialized works associated with substation, with grid, and it's good because it's healthy for us and it's a diversification of our P&L. power lines. We have today hundreds of power lines constructed and under construction. And hopefully we will have more than 1,000 kilometers of power lines in the next one, two years. And it's important because In two years we will be one of the key players from grid infrastructure point of view in Europe, not only in Spain, globally and the countries that we are working now. And this is extremely important for us because I think that will born a lot of new business associated with this. And we are going to rent, we are going to offer services to our not competitors our friends and colleagues and a new business will come from this investment that we are doing now and like always generia is growing we continue acquiring land or using hectares of land and we continue growing hopefully generia during this year could give news and we will see opportunities if you want we could go to the q a session and and we could answer the questions

Thank you, Arturo. I will now open the Q&A session. And once again, thank you for your time. The first question comes from Fernando Garcia from RBC. First question is what our assumption in terms of power price that we use for the new guidance of EBITDA. The second question is do we expect to connect more renewable in the short term? And then if we can give some capacity, capacity reading for the coming two years.