Engie SA (ENGI) Earnings Call Transcript & Summary

It's my pleasure to welcome you to ENGIE's H1 conference call. Shortly, Catherine and Pierre-Francois will present on our half year results, following which we will open the lines to Q&A. And with my polite request of limiting your questions to 1 or 2 only please. And with that, over to Catherine.

Thank you very much, Delphine, and good morning, everyone, and welcome to the presentation for our first half 2025 results. I can report a robust set of numbers within an economic, political and geopolitical context of some turbulence. Once again, we are able to demonstrate the relevance and resilience of our integrated mix of flexible and renewable generation, our extensive downstream customer portfolio, our unrivaled expertise in energy management and our defensive and highly cash-generative network business. We remain laser-focused on driving forward the energy transition by carefully targeted expansion in renewables, batteries and power networks, embedding a performance culture into everything we do, further streamlining our business portfolio, motivating our talented and engaged staff, winning and retaining the trust of our customers and rewarding our shareholders. Two particular confirmation of recent weeks. First, we successfully completed the initial extension works of the Tihange 3 nuclear reactor following on from the completion of the deal with the Belgian government and transfer of the bulk of our nuclear waste liabilities. And second, something that perhaps isn't that widely recognized, we have become very much a big-ticket renewables operator with the completion of the largest wind farm in Egypt, final negotiation of a PPA for a 1.5 gigawatt solar project awarded in the UAE. In fact, as we speak, we have 37 wind, solar and BESS plants of 250-megawatt capacity or more either operational or under construction. I will also provide an update on the situation in the U.S. Moving on to the next slide, some headline numbers. EBIT excluding nuclear was down 6% on an organic basis at EUR 5.1 billion. I am pleased at the strength and resiliency of our H1 numbers and our activities, both completely in line with our expectations. A couple of highlights. First, a strong contribution from newly commissioned assets at EUR 220 million; second, a notable rise in our Networks business supported by new gas tariffs in France, benefiting from the regulatory clawback mechanism as well as by the construction of new power lines in Brazil. Net recurring income group share comes to EUR 3.1 billion, down from EUR 3.9 billion (sic) [ 3.8 billion ]. Cash flow from operations stands at a strong level of EUR 8.4 billion, benefiting once again from substantial free cash flow that is generated by our networks and downstream activities. The structure of our balance sheet is solid. Economic net debt was down by EUR 1.1 billion over the first half to EUR 46.8 billion, equating to 3.1x EBITDA, the same as the end of last year and below our ceiling of 4x. In view of these good results, despite the macro uncertainties and ForEx headwinds, we approach the coming months with confidence. And I can confirm our guidance for the full year with net recurring income group share between EUR 4.4 billion and EUR 5 billion. As we anticipated, EBIT excluding nuclear is reaching its low point in 2025 as a whole, although within 2025, we are expecting a year-on-year rebound in the second half. In this slide, I would like to talk about how we are dealing with the situation in the U.S., which I would summarize as follows: we have 8.6 gigawatts of operational onshore wind, solar and BESS, all unaffected by new legislation on our proposed measures. We have 2.4 gigawatts under construction, of which 2/3 in batteries, which are largely protected against tariff as we were very quick to move to derisk and safe harbor. For projects under development yet to reach FID, we have more visibility with the OBB bill having been signed into law, with residual uncertainty on tariff and precise definition of safe harbor. In this context, we are ready for FID on 3 projects with combined capacity of over 1 gigawatt, providing adequate risk profiles with tailored safeguards that reflect well the context. I am convinced that onshore renewables enjoy an attractive future in much of the U.S., with, for instance runaway load demand in Texas forecast by the ERCOT regulator, to rise from 85 gigawatts this year to 218 gigawatts by 2031. Renewables backed up by batteries have every prospect of being part of the solution to meet this demand growth. If I am wrong about this, well, we have built a truly global business in Renewables & BESS that adds optionality and cuts the need to be tied to any one country, as I will illustrate in the next slide, which shows that we continue our inexorable rollout of our Renewables & BESS platform with 1.9 gigawatts of additions over the first half to almost 53 gigawatts of capacity. And what I really want to stress here is our growing scale. First, in terms of the sheer extent of what we are building, it's consistently close to 8 gigawatts, close to 100 projects under construction. And second, the nature of the projects completed under construction are one, and the location of these projects. We are capable of building the biggest ticket solar and onshore wind farms in all of our key regions, which is a testament to our efficiency of execution, purchasing, longstanding presence, and stakeholder relationships in these countries that we have built over many years. And as I mentioned quickly, we delivered Africa's largest wind farm in Egypt ahead of schedule by 4 months. And in the UAE, we are in final negotiations of a PPA for a 1.5 gigawatts solar project that we have been awarded, as well as an ongoing bid for a 1.4 gigawatt OCGT project. Finally, in offshore, we recently generated first power at our Îles d'Yeu Noirmoutier offshore wind farm in France, and we expect to have it fully on stream by the end of this year. You can see that our global pipeline in Renewables & BESS is now 118 gigawatts, well split between the regions, but with AMEA more than doubling since the end of 2022, as countries such as India and the UAE embrace energy transition as a response to rising demand. This all sounds really impressive, but of course, it doesn't work unless we find a project that match or exceed our IRR minus WACC spread criteria, which is at least 150 to 250 basis points, that we deliver the project in timely fashion and on budget, and that we use our energy management expertise to maximize the revenue potential of the project. And just to finish on this slide, a word on the volume of PPA signed, 1.2 gigawatts over the first half. Given the U.S. project that I already mentioned and are ready for FID, we are optimistic of a strong H2, despite appetite for PPAs in Europe being somehow subdued. In the next slide, I am pleased to announce good progress in the cleaning of our portfolio, aimed at improving our regional and strategic focus, exiting coal, recentring our local energy infrastructure business onto its 5 European core markets, as well as Singapore and Tabreed. We are on track to deliver EUR 4 billion of debt reduction via divestment for the period '25 to '27. And as our markets normalize, we are doubling down on our efforts to optimize not only our business portfolio, but also on our performance. Running parallel to what we're doing on the portfolio is indeed a big effort to bolster our performance with an EBIT boost of at least EUR 1 billion by 2027 versus 2024. In other words, almost double the pace of previous years. I am determined to instill a culture of performance throughout ENGIE via numerous measures that have been identified. As -- if we want to be the best energy transition utility, we must make the most of our integrated and flexible asset mix with a constant striving for efficiency and affordability. We're making good progress with a EUR 246 million impact in the first half, on track for our EUR 300 million to EUR 500 million target for the full year. Almost half of the improvement comes from elimination of loss-making sources, in particular, EV Box, together with operational excellence initiatives in areas such as networks, flex power, PPA renegotiations, cleaning and local energy infrastructure contract portfolio in France. What we expect to accelerate as ongoing measures take hold are in what we term -- we call culture and competitiveness, where we are seeing initial contributions from actions such as travel, events and consulting as well as efficiency in IT and digital. Headcount efficiency measures that we expect to kick in from next year. Finally, in Belgian nuclear, focus has switched to the first stage extension work of the 2 reactors that will belong to the joint venture between us and the Belgian government. Works on the first reactor, Tihange 3, were completed successfully. The plant was reconnected to the grid slightly ahead of schedule. Now works on the second unit Doel 4 have been underway since the start of July and should be completed by the start of November, at which point the remaining sum of around EUR 3.6 billion will be paid. So gradually, in H2, our exposure to merchant will fade away to be replaced by our Flex LTO structure for Tihange 3 and Doel 4 with output at a quasi-regulated price. At that point, it is a new chapter that kicks off for ENGIE in Belgian nuclear with our earnings set to be relatively modest, but very importantly, derisked and stable, with our balance sheet free from the millstone of nuclear waste liabilities. And with that, I will pass over to Pierre-Francois.

Thank you very much, Catherine, and good morning, all. Let's go through our first half '25 results, which reflect a continued solid performance in what are the last quarters of normalization across our markets. After a very strong Q1, Q2 is coming exactly as expected. EBITDA and EBIT, excluding nuke, stand at EUR 7.4 billion and EUR 5.1 billion, respectively, both slightly down compared to last year, reflecting a high comparison base and some foreign exchange headwinds. Organically, the decline is contained at minus 3% for EBITDA, minus 6% for EBIT after more than 2 years of continued decline in energy prices. We continue to generate strong cash flows with CFFO at EUR 8.4 billion, confirming the healthy fundamentals of our operation and the high quality of earnings. Net financial debt stands at EUR 35.7 billion, up EUR 2.4 billion due to the EUR 2.6 billion payment in cash related to the closing of the Belgian nuclear agreement in Q1 that Catherine was just mentioning. Economic net debt is down by EUR 1.1 billion, and our credit ratios remained stable at 3.1, well below our 4 target. We are getting closer to the awaited inflection point for EBIT, excluding nuke, and we anticipate year-on-year growth in the coming quarters, namely in Q4. In this context, we are confirming, of course, our 2025 guidance. Let's now turn to the EBIT evolution in more details. We closed H1 '25 with EBIT excluding nuke at EUR 5.1 billion, down organically by EUR 349 million compared to last year. This evolution reflects a mix of external headwinds and internal drivers. Starting with 4 negative impacts, all expected. First, ForEx had a minus EUR 98 million impact, mainly due to the depreciation of the Brazilian real. We expect the BRL impact to fade a bit in H2, but the effect of the U.S. dollar will be more visible in the second half. Secondly, scope effect amount to minus EUR 80 million, primarily driven by the disposal of Senoko in Singapore and Uch in Pakistan and the deconsolidation of Safi in Morocco. Thirdly, price and volatility contributed to minus EUR 258 million, mostly within our Supply & Energy Management activities. This reflects normalizing market conditions and increased transportation costs in Energy Management and a high comparison base in B2B and B2C, which included positive price-related nonrepeat and timing items last year. Those headwinds were significantly mitigated by tariff increases in our network activities. Fourthly, volumes were down minus EUR 392 million, largely due to lower hydro volumes, following exceptionally high levels in H1 '24. On the positive side, 2 long-term trends relentlessly supporting earnings growth. Commissioning added EUR 221 million. This includes around EUR 150 million for Renewables & BESS and EUR 70 million for Infra, highlighting the relevance of our development strategy and our very disciplined execution. Performance contributed to EUR 246 million, reflecting operational improvements across all our segments, and I will provide more details later on. Other impacts amount to minus EUR 166 million, and it includes notably the cost of our employee shareholding plan for a bit more than EUR 50 million, along with various one-offs. Finally, nuclear EBIT stands at EUR 500 million, down EUR 267 million with lower captured prices, the shutdown of Doel 1 in February and the conformity outage of Tihange 3 in the second quarter. Overall, while market normalization and lower volumes weigh on EBIT, our investments and performance initiatives are delivering at pace and secure further our trajectory for the year, and I should say, beyond. Let's start the review of our reporting segment's performance with Renewables & Flex Power. EBIT was impacted by scope and FX, minus EUR 111 million, split almost evenly between both ForEx and scope. Organically, EBIT was down minus 9%, of which minus EUR 104 million on Renewable & BESS and minus EUR 91 million on Gas Generation. The decline on Renewables & BESS is driven by lower volumes, which had a minus EUR 340 million impact, reflecting a return to more normal hydrological conditions in Europe after an exceptionally strong H1 '24. This was partly offset by high level of commissioning, plus EUR 155 million and by lower hydro taxes, plus EUR 66 million. We added 1.9 gigawatt of capacity over the period, and we achieved prices for hydro in France basically stable at EUR 110 per megawatt. Turning to Gas Generation. EBIT decreased organically by EUR 91 million. The main driver was a minus EUR 243 million impact from lower captured spark spreads in Europe, reflecting a hedging strategy under normalizing market conditions. However, this was partially offset by the absence of inframarginal taxes in H1 '25, which had a positive plus EUR 108 million effect and also by a positive one-off in Chile and a favorable price effect in Australia. So while market conditions were less supportive in Europe, our balanced portfolio, our investments and disciplined operations helped mitigate the impact with a compelling H1, and we continue to build momentum in our growth platforms. Let's move to Infrastructure, which delivered an outstanding performance in the first half with plus 43% organic growth. Scope and FX had a slightly negative impact with the depreciation of the BRL. Networks EBIT increased by EUR 633 million organically, supported by new tariffs in both Europe and LATAM. This was partially offset by lower spreads in gas storage in the U.K. and Germany, reflecting again, market normalization after a persistently strong 2024. Importantly, our investment efforts are paying off with a plus EUR 52 million contribution to EBIT from newly commissioned assets. Connected biomethane capacity in France increased to 13.8 terawatt-hours per year at the end of June '25. Looking at local energy infrastructures, performance improvements helped mitigate the impact of lower spreads on cogeneration assets, notably in France, which drives EBIT margin down compared to last year. All in all, infrastructure is now back in being a strong and stable contributor to the group's results with further growth driven by both regulatory frameworks and our disciplined investment strategy. Moving on to SEM, Supply & Energy Management. As anticipated, EBIT for the segment was impacted by the market normalization, resulting in a minus 32% organic decrease compared to H1 '24. B2C activities are in line with expectations. The decrease versus last year is largely due to a high comparison base, which included then a positive nonrepeat and timing items in '24. That said, we maintained sound commercial margins in H1 '25 and benefited from performance actions, which helped cushion the impact and are supporting a full-year ambition close to EUR 0.5 billion. In B2B, EBIT was down to EUR 220 million, mainly due to a reduction in seasonality spreads, which led to a lower positive timing effect. This effect has no impact on full year as it reverses over H2. Moreover, we are in a good commercial momentum with a Q2 stable compared to last year, excluding a positive one-off that should translate into a stronger H2 than previous year. Energy Management was more significantly affected by market normalization, leading to, first, lower market reserve reversals that was something we commented already in Q1; two, a negative one-off related to the revaluation of loss-making gas transportation contracts following tariff increases in Austria and in the Netherlands. And three, softer activity in Q2 due to geopolitical and economic uncertainty. Volatility is there, but it is driven by unpredictable geopolitics. Therefore, we remain cautious with the hedging strategies in Q1 '25, and we decided to reduce volumes, which led to lower margins. Overall, SEM performance is on track, and we expect former GEMS, B2B plus Energy Management, to land the year close to EUR 2 billion EBIT. A few words on our nuclear activities. As expected, EBIT came in at EUR 503 million, down from EUR 770 million in H1 '24, reflecting a 35% year-on-year decrease. This evolution is explained by price, by volumes and higher depreciation. First, we recorded lower capture price from EUR 104 to EUR 97 per megawatt hour, which is a 6% drop. This was partly offset by the absence of the inframarginal tax in France in H1 '25 and also a lower G2 tax in Belgium, which helped cushion the decline. Net year-on-year impact is a negative EUR 149 million on EBIT. Second, volumes went down from 16 to 13.8 terawatt hours with the phaseout of Doel 1 in February and a drop in availability in Belgium from 88% to 81%, driven by the conformity outage of Tihange 3 in Q2. It translated into a minus EUR 71 million year-on-year impact on EBIT. And then depreciation and other effects had a minus EUR 47 million impact due to higher depreciation on investments in Belgian assets, which were commissioned in '24, '25, and these are being depreciated now over a very short remaining lifetime of the asset. So while the year-on-year comparison is negative, the performance is in line with expectation, and we continue to manage the nuclear fleet with discipline as we transition through the end-of-life phase of several units. Let's now turn to our performance program. In the first half of 2025, performance initiatives contributed EUR 246 million to EBIT, putting us firmly on track to deliver our full year target by year-end. As you can see, all 3 performance drivers are now contributing. Operational excellence delivered EUR 96 million. This includes tangible actions such as PPA renegotiation, asset and contract portfolio optimization, procurement efficiencies are not one-offs. They reflect a strong and sustainable momentum across the group, and we have delivered that now for a few years. We also made our first gains on culture and competitiveness, our new plan with EUR 38 million of EBIT contribution. Good example is the LEI business, which is leading the way by simplifying its structure, such as removing a management layer in France. Expect this effort to continue in H2. On loss-making activities, we saw a EUR 112 million contribution driven by the closure of EV Box activities, but also the positive impact from performance action in the supply activities. While some one-off impacts in a few entities slightly weighed on the net result, we expect a stronger contribution in the second half. All in all, we are well on track to deliver our performance target, and we remain focused on embedding these improvements structurally across the organization. Let's take a look at the main items driving net income, EBIT we discussed. Net financial expenses is stable at EUR 1 billion as lower average cost of gross debt was offset by lower cash remuneration resulting from the decrease in the short-term rates. Recurring income tax decreased slightly to EUR 1.1 billion with an effective tax rate at 25.8%, which notably includes the special tax in France. As a result, net recurring income group share stands at EUR 3.1 billion compared to EUR 3.8 billion last year. The reported net income group share amounts to EUR 2.9 billion after accounting for nonrecurring items, including minus EUR 0.2 billion from mark-to-market on energy derivatives and minus EUR 0.1 billion in restructuring costs. Let's look at the cash flows. CFFO reached EUR 8.4 billion in H1, a high amount, demonstrating the group's ability to generate cash flow on a sustainable basis. Please remember that we do not have tailwind anymore from prices decrease in our working cap variation, which was still substantial in H1 last year. Operating cash flow remained strong despite normalizing market condition again and the EUR 0.3 billion negative year-on-year impact on variance in net working capital comes from margin calls, which are higher following the decrease in commodity prices. Taxes and interest paid were largely stable. As you can see, not much to report in this item, except for our confirmed ability to generate cash. Let's now move on net debt. Net financial debt increased from EUR 33.2 billion to EUR 35.7 billion due to the funding of our nuclear obligation in Q1. CapEx and dividends were largely covered by strong cash generation in H1. You may have noticed that our net growth CapEx were down compared to last year. This is mainly due to timing of acquisitions and also higher sell-downs in the U.S. Economic net debt is down EUR 1.1 billion to EUR 46.8 billion, and our leverage ratios remained solid with net financial debt-to-EBITDA at 2.4, economic net debt-to-EBITDA stable at 3.1, well below our 4 threshold. We are very pleased to see our credit ratios remain stable and well within target despite a significant payout made in Q1 as part of the closing of the Belgian nuclear agreement. To wrap up, we delivered a robust financial performance with a good start of the year. Q2 came in as expected, supported by strong cash generation. We confirm our 2025 guidance with EBIT excluding nuke in between EUR 8 billion and EUR 9 billion and net recurring income between EUR 4.4 billion and EUR 5 billion. We are confident in achieving these targets. It's a strong start to the year. Just keep in mind the expected FX headwinds ahead, particularly from the U.S. dollar. We are a utility, and our priority is not to upgrade or beat our guidance each other quarter, but to deliver consistent, predictable, durable growth of earnings. On that note, we are now at an inflection point for EBIT, excluding nuke, and we expect year-on-year growth to gently resume in the second half of the year, especially in Q4, leaving most of the consequences of the energy crisis of 2022 behind us. We are entering normalized quarters. And going forward, we expect momentum to build with the contribution of new investments and performance. This sets the stage for the confirmed growth trajectory in '26, '27, which we remain very confident about. With that, I hand over to Catherine for the conclusion.

Thank you, Pierre-Francois. So to conclude, we delivered indeed good results in what has been an unpredictable macro environment. Very importantly, and this has been truly a guiding principle for the whole management team at ENGIE for now a few years, we are very focused on delivery and execution. So we are implementing the plan that we shared with you earlier this year. We are confident about our earnings guidance for 2025 and indeed looking forward to delivering on our growth strategy from next year onwards. Thank you for your attention, and I am turning it back to Delphine for the Q&A.

Thank you, Catherine. Operator, can you please open the lines to Q&A?

[Operator Instructions] First question is from Harry Wyburd, BNP Exane.

So 2 numbers-focused questions from me, please. So firstly, Catherine, I think in your opening remarks, you mentioned that EBIT ex nuclear in the second half is expected to be up versus last year. So if I've done the math right, that would be a floor, I think, of EUR 8.37 billion for the full year, which is obviously not far off your midpoint guidance of EUR 8.5 billion. So would it be fair to extrapolate that floor to being quite close to the EUR 4.7 billion midpoint for net income? Are you effectively saying that you can still achieve the net income midpoint? And given the number of one-offs and effects -- scenario effects in 1H, if we were to normalize the 1H '25 net income to construct the base for 1H '26, could you help us on what will we be adding or subtracting? So what's the overall effect from one-offs and scenario in 1H of this year? And then the second one is on the dividends. I think you've alluded in the first quarter call to an ambition to raise the dividend from a floor in 2025, so started growing a year earlier than earnings. I guess if I was -- sort of look through that, it gives you a bit of an incentive to make next year's earnings grow rather than this year. So I'm interested to know, are there any levers you can pull to kind of move earnings into next year, which should make it easier for you to raise the dividend given the payout ratio dynamics next year?

Yes. I'll maybe just talk a little bit about our dividend. And just a reminder, a few key principles that we obviously reaffirmed our profile as a utility company. So we understand the importance of dividend to our shareholders. We also are very attached, as you know, to the consistency in our dividend policy, reminded you that back in February. We are also obviously listening to the market. We understand the appetite to have a gently growing dividend trajectory. We heard that. On the other hand, we have a dividend policy, which is a proportion of our net recurring income, which we will stick to. And obviously, being a decision that will be taken with the Board, it will be taken next year. And so it's really early to comment more than that, Harry. On the other hand, obviously, we are listening, and we understand the importance of trying to get to that trajectory. You want to...

Yes. On the one-off, I think that it's globally a wash. They are actually slightly negative in SEM for, let's say, EUR 50 million to EUR 100 million, and they are slightly positive in R&F, let's say, same kind of amount. So you can say that H1 is globally a wash in terms of one-off. So it's a fair representation where we are. And then, yes, you're right. I mean, if we -- we do expect EBIT excluding nuke in H2 to go slightly up indeed compared to last year, which is at the end of the day, very expected because it means it's pointing to the midpoint. It is true that it would take something that we struggle to see today, to miss the midpoint on the guidance. And this is achieved despite significant FX impact bearing in mind that we have about EUR 100 million in H1. We expect even a bit more than that in H2. So we are over EUR 200 million of negative headwind on FX. But with that, we are indeed comfortable to target our midpoint. And then just -- I'm not going to elaborate on the dividend, but we are not moving results from 1 year to the other. We are managing, of course, our business and driving our business. We are steering risk management, of course, to prepare the future, and that's for sure, and that we are doing intensely in 2025.

Next question is from Arthur Sitbon, Morgan Stanley.

The first one is a follow-up to the question on EBIT evolution for H2. I was wondering if you could provide a little bit of granularity on which divisions will drive the rebound in EBIT in H2 basically. And the other question that I have is on the situation in the U.S. I think we're waiting clarity on the implications of the recent executive order on renewables. I was wondering if you could provide some thoughts on that? And what would be to you an outcome that would be particularly challenging and would require you to revise your ambitions?

Yes. Okay. Let me maybe start with the U.S. Indeed, the situation has been super fluid. But maybe one general statement is that the fundamentals on the market -- of the market remain very strong and customers' appetite is present. And I mean, you just listened to some of the announcements that you've heard from hyperscaler on their CapEx spend in the coming weeks, coming months, it's just spectacular and everything will need to have energy. And as you guys know, this power will have to come from renewables because it's just a plain queue in terms of nat gas, all nuclear will not be able to meet all this additional demand in the United States. So fundamentals remain very strong on renewables. Now when you go into the details, it's -- you really have to follow it on a week by week, which is what our teams have done, I think, with frankly great success. I'm very pleased on where we sit. So just to de-zoom a little bit, as you know, we have 8.6 gigawatts under operation. So these assets are great. They're doing well. And in fact, if anything, their value in my mind is only going to increase given the power demand situation that we are going to experience. For the projects under construction or the ones who are advanced development, they're moving along. They're largely nonaffected because we took some supply chain actions. Remember, there was already some tariffs looming. And so what we did is that we accelerated some deliveries. We also had obviously, project contingencies and a strong execution. So all this is going well, no issue. And then what we did is that we used the clarity that came with the new bill to be able to indeed FID 3 projects for the total sum of 1.1 gigawatts. And so if I look at what this IRA or the OBB bill gave us in terms of more clarity on the IRA is the fact that wind and solar that starting construction by end of 2025, they are completely okay. They will get the ITC, PTC, so there is no issue. Then you have the ones starting in H1 2026. And then there is this little qualifier of FEOC, which is really do you have too much Chinese content and there are different thresholds. So this is something that we are obviously reviewing. And then battery and energy storage will benefit from IRA, but only there will be qualifier again on Chinese content. So all of this now is clarified, and we can really manage with confidence the 3 projects that we have just FID-ed. The nice thing about these 3 projects that they will contribute EBIT to '26, '28 too. So really largely what we see for the current period '25, '27, our U.S. plan is quite solid and robust based on these projects that we have -- that we are moving along. Now there remains one uncertainty, which has been well commented. And again, not to go into too many gory details, but it's really about what we can call start of construction. We're awaiting clarification on August 21 on this. The current definition, which exists today is obviously a low threshold. So there is definitely room for us for this threshold to be worsened. So we don't really see a scenario where FID projects would be in trouble. But if they were, then obviously, we would have not taken too much commitment. So we will not be in a too dire situation, but it would be a welcome clarification for sure that we will wait sometimes in August. And then if I look beyond this, it's really -- we're taking it project by project. It depends on the technology, the permit risk. Obviously, the offtaker risk appetite, and I should have commented maybe the fact that the projects that we are moving along, they are of a different nature in terms of the, I would say, Ts and Cs that we have with our offtakers, which is, by the way, a reflection of the need for these off-takers to secure the power. And so we are managing to balance much better the risk distribution in order for us to move this project under confidence. So that's a little bit the view on the project. And again, we'll be looking at beyond these 3 projects, depending on all of the aspects, whether we are able to move some more forward. I very much look forward to that. I hope that it will happen. And if not, then Arthur, as you guys know, we have choices. We have options. We've created an incredible situation at ENGIE, where we have a geographical footprint, which is not huge. It's not all over the place, but we have a few countries where we have depth where we can actually develop and reallocate some capital, which we have shown a little bit examples of today. And if we need to, we will continue. But big picture in the U.S., the power demand being such that we think that our renewable projects are going to be contributing to this demand for the coming months and years, and we will find a way.

Thank you, Arthur, for giving me the opportunity to talk a bit about the phasing. And clearly, that's a place where we can improve a bit also in the way we share you the information. So in H2, what do we expect? So for Renewable & Flex, the 2 big tickets is that the hydro normalization will come. So we expect much less adverse trend in there. And also, we are done now with the bulk of the spread decline in Gas Generation in Europe. So this is behind us. That was more a Q1 event. So going forward, we expect more stability. And then, of course, we have the benefit of CODs. We have the benefit of performance. So we do expect indeed R&F to be positive in H2. Networks, we are also done with the big impact of tariff increase in France, but we still have some good wins coming from other places. It will depend, of course, on climate. But we will, again, expect network to be in good shape for H2. And then, of course, the big ticket is SEM, where there is a lot of seasonality and moving parts. Here, we need to [ speak it. ] On Energy Management, remember that H2 last year, especially Q4, was not that strong. So we do expect indeed to see normalization kicking in, in H2, probably negative still in Q3, but much better in Q4. On one B2B, you see that Q2 was actually improving compared to last year, and we expect this to keep going in Q3 and Q4, especially Q4. You remember that in ENGIE, Q1 and Q4 are important and more important than summer. And that's even more true for B2C, which is highly seasonal. A lot of our business is done in Q1 and Q4 for B2C. And here again, of course, we do not expect to be as strong in Q4 than we were last year, but we expect indeed H2 to be positive and especially in Q4 again. So you see that cycle coming through. And clearly, the key topic is that in H2, we start to have the benefit of the normalization of market. It took a while. It took more than 2 years. It started, you remember, in the first half of 2023. But given our hedging policy in 3 years, I mean, crisis has been actually spread over some time. But now in H2 '25, we are getting close to the point where we are more normal in terms of pricing. And that's why we expect indeed EBIT excluding nuke to start picking up towards the end of the year. I hope it helps.

Next question is from Ajay Patel, Goldman Sachs.

I guess I wanted to focus on a strategy question. So like over the years, if I look at the success of your strategy, it's been amazing what you've achieved. And clearly, you have a lot of opportunities in renewables, batteries, quite a large scope around the portfolio. I would say, if I was being critical, the area that hasn't delivered to the same speed has been that full old definition of energy solutions. And even though we have a reduced scope this year, it seems that, that business hasn't really taken huge steps going forward. And I'm just wondering, when does it become -- it's a small amount of the portfolio. You have a lot of opportunity in other parts of your portfolio. Does it make sense to have this business as in what are the merits of having this within the portfolio, I guess, is the better question? And when do we sort of really hold you accountable to its delivery going forward so that we have a better understanding of that longer-term trajectory of it?

All right. Thank you -- thanks for the direct question. We appreciate. And maybe a couple of points. I think we've shown as a management team that we are not shy to rationalize the portfolio. And so this is something that we have and almost no emotions to do. So when we think that something doesn't belong to ENGIE, we tackle and we address the problem. In the case of LEI, we do think that LEI today has a very unique positioning to deliver the energy transition with our customers and in a decentralized manner. And we believe strategically that being able to have this decentralized position among our customers, among industrial is going to give us a unique position on the flex side of the energy transition. And if you look at flexibility, which we talk a lot about on the production side, at some point, it's going to have an emerging value on the demand side. I think you see that in some businesses on the B2C side, some companies actually have a very strong positioning there to leverage the flexibility of the demand side. And we believe that LEI being a very successful business in decarbonizing customers will have a special value within ENGIE being able to provide flexible service. So I know this sounds a little bit conceptual, and we agree today, we are not able to show that value. So right now, the focus for LEI and here, the accountability is there. I can tell you, Ajay, it is there, and I can tell you that the LEI team really feels it, is to focus, to perform, to industrialize, to digitalize as well and to be good at what they do. And I really believe that this recovery that is taking a bit longer maybe than what we would have liked is today taking place and that we will be with the market able to show indeed trajectory that are free from the one-offs because we have a bit suffered from one-offs here and there, which have blurred this trajectory curve that we would like to show -- we would have liked to show quicker. But I'm pretty confident with what's happening and recentering on 5 key European markets, barring Singapore and Tabreed, collapsing the layers and actually, the LEI team having done that are really at the forefront at ENGIE of doing a lot of the simplification, span and layer, et cetera. So they are all doing the right thing. So we will show soon, hopefully, those curves and give you and share with you the confidence and excitement that we have with the market. And then in the coming years, being able to have more proof points about indeed how strategically it does fit into a portfolio, particularly providing flexibility services to the whole energy transition and to our portfolio. Finally, I would also add in terms of synergies, the fact that there are synergies also with energy management that we are actually already today materializing, but obviously not yet to be reported to the market.

May I ask one more question? Hello?

Sure. Yes. Yes, please.

I was just thinking -- it's just also really been nice to hear sort of from clearly like data centers increasingly get more and more attention as the months go by. From your perspective, what have you seen over the last 12 months? And how is that picture evolving for you going forward? And do you think you could communicate on a more frequent basis how that opportunity is materializing for you so that we can sort of gauge the value that potentially can present to you?

Yes. No, look, the data center, obviously, you guys know that a lot of the PPAs, a lot of the renewable projects that we do are actually for data center operator or hyperscalers. So it is definitely a big driver of our business. And so we are obviously working because data center is obviously a massive opportunity as a supplier because data center, they want PPAs, they want green electrons. There is also quite a lot of excitement about having at ENGIE very specific positioning, for example, having connections to the grid. And that obviously in itself can make a completely different conversation with data center where we can bring something to developers that they don't have. So it's not just about PPA, it's also about our quite unique positioning. And so we're definitely working on a lot of things around those topics. And so when we're ready, we will indeed communicate more Ajay, on the topic. But we are very, very excited about what we are doing with data center.

Operator, next question please.

Next question is from Zach Ho, Jefferies.

Two questions from me. Firstly, on earnings. I think on hydro, you mentioned in your slides that there's a minus EUR 340 million year-on-year impact in the first half. I'd just like to know how much did you budget for 2025 in terms of lower volumes? I remember that in your February presentation, I think that the earnings bridge showed minus EUR 300 million to EUR 500 million. So I'm trying to figure out basically what needs to come through in the second half for -- in terms of hydro volumes for us to kind of gauge whether or not it's above or below your expectations? And then quickly on GEMS. I think Pierre-Francois, you mentioned that in second half, you expect B2B to be higher year-on-year. I just want to know if you can provide a second half 2024 figure for B2B because I don't believe that -- I think that, that isn't disclosed. So I just want to know what the starting base is for second half 2024 for us to see an earnings increase. And then my second question would be just a quick follow-up on Ajay's question and asking about data centers and more specifically, your aim to offer 24/7 green power to customers, which you briefly talked about in your February presentation. I just want to know what the progress is like or what you're seeing on the ground with regards to that offering? What needs to come through for you to get closer to that goal of, I think, 20% of your PPAs being 24/7 green power? Is it just a technology thing? Or are there more developments that need to come through for you to kind of realize that ambition?

Yes. I mean I'll start with the last question, and I can sense the excitement around data center. So point well taken. In terms of '27 ambition, it is progressing quite well. We have a few customers where we have advanced discussions that are also a bit pioneering the concept and helping pushing us towards being able to offer this type of product. The key behind this ambition for us, it's really to have the right portfolio. It really is a portfolio play, the 24/7, which is why we think we have quite a good position and a unique position because you need -- obviously, you need renewables, but you also need battery. You need to be able to integrate a lot of different profiles in order to fit that customer profile. So these deals take some time. They are quite complicated to put together, but our teams are working on it, and we are seeing quite a few customers indeed very, very interested in those products. So again, we'll make sure that we follow up and give more data as we progress on the topic.

And maybe a couple of answer on your very good technical question, Zach. One on hydro, we budget -- for whatever is climate-related, we budget on P50, as you can imagine. So we -- compared to budget, what we have seen in H1 was not a big surprise. So no significant impact. We knew that was coming. So it was embedded in our guidance. And same goes for H2. We don't know yet what's going to happen in H2, but our budget, which is, as you can imagine, underpinning our guidance is based on midpoint in terms of forecast. So again, we are already covered for that. And then when it comes to B2B, last year, you remember that H1 -- you should have the numbers, but I just can share the numbers with you. H1 last year was [ EUR 1,108 million and H2 was minus EUR 29 million. ] But the seasonality was very strong, and we have been working hard on the seasonality to make sure that our contracts are better shaped. So clearly, we expect H2 to be higher, significantly higher than the reference that you have to 2024. And we expect B2B to come with a very nice year, and I mentioned that during Q1, and this is confirmed with a very good commercial activity in B2B, very pleased with that. Not only we are indeed selling well, but we are locking margins and we are even locking margins for longer maturity. So it's really a business we are very pleased with.

Next question is from James Brand, Deutsche Bank.

Just one question for me, and that was on the outlook for batteries or storage in the U.S. You talked a little bit about the U.S. and how your investment was kind of coming down a bit. And obviously, it's understandable that the outlook is a little bit more mixed on the renewable side given some of the changes. But I was wondering whether you could just talk to batteries specifically because you've been very positive about batteries in the past. And as I understand it, the subsidies have largely remained in place. So do you still see the outlook as being very positive there? Or have there been some changes that make you feel a bit more moderately positive?

No, we are very positive about, in general -- about battery prospects in the -- I would say, in general, in all of our key markets. They are very positive also in the United States, underpinned by the acquisition that we did from BRP a couple of years ago. And what's really important today for us on batteries is that we're really delivering on the pipeline that we purchased from BRP. So when you look at the pipeline that we purchased from BRP, they had 2-something gigawatts. We had 800 megawatts in advanced development. And we are today in 2025, executing on all of this pipeline, putting these batteries in services -- in service, and that's going really well. We have a little bit of bottleneck, which is very punctual and has nothing to do with the IRA or regulation, which is in ERCOT, where testing when -- at the time when you commission battery, you have to do some tests, and these tests are taking a bit longer. So within intra-year 2025, we are seeing a little bit of slippage. But apart from that, the delivery on battery is going very well. Now obviously, going forward, batteries, as you know, is -- will continue to enjoy IRA tax credit benefit. So that's the good news. So we have now that anchored. The remaining issue for us is this famous FEOC, F-E-O-C, which is basically putting a threshold or a maximum amount of Chinese content on those batteries. And so this is really going to be now a supply chain play, whether or not we can be below this threshold because if you are above this threshold, then the tax credit don't apply. And so then it's going to be a matter of whether the battery is economical or not. So that's really for us the question. But in terms of already delivering the value of BRP, we are pretty much there, so no problem. And then again, taking a step back, what we are seeing today is that batteries, opportunities across all of our key markets outside in the U.S. So we were, as you know, very quick and very ambitious in the U.S. But we were -- there was not really -- I mean, the international non-U.S. markets were lagging behind the U.S. And now what we are seeing is that international markets are catching up. And so we have really good performance, good development opportunities in Europe, in Chile, in Australia. And so that's really the good news because, obviously, we feel that we have a very, very strong position in batteries in general.

Operator, can we take last question, please?

Last question is from Juan Rodriguez, Kepler Cheuvreux.

I have 2, if I may. The first one is on CapEx and related to the U.S. growth CapEx that you are now signaling around the EUR 2 billion level for 2025, '27. Looking back, it represented around 1/3 of your renewables portfolio. And looking now, how can we see the EUR 21 billion, EUR 24 billion growth CapEx that you signaled at your CMD? Can you expect lower growth CapEx or that it would be mostly compensated by other regions as you signaled or maybe some M&A angle on it? So that would be the first question. And the second one is on the economic net debt and mainly on the leverage ratio. We know you're going to fall well below the 4x economic net debt to EBITDA. But where do you expect the year to end given the current CapEx trends and so on?

Maybe on your CapEx question, and if I understood properly the question, it was about the U.S. contribution to this growth CapEx. And I think a good proxy for renewable CapEx is to look at the pipeline, and we gave you the geographical split. And you can see that it's moving a little bit, and you will see that our share of pipeline from North America is actually decreasing to the benefit of AMEA. So you can use that as a proxy for CapEx. And so you might see a bit less U.S. CapEx and a bit more in AMEA in terms of renewables. But all in all, we don't expect to change our growth CapEx. As we mentioned, we have optionality, and that's really, really important for us.

Yes. On that note, indeed, we have identified a couple of potential acquisitions in renewables, which are, as you know, a midsized acquisition, you know the story. And clearly, the market has opened a bit of opportunities here and there. So sometimes you can buy good assets. We are very pleased to secure this acquisition in the U.K., but that was very small in H1. We have a couple of leads. If we were able to close this acquisition at year-end, it would, of course, help a bit of our CapEx for this year. As Catherine said, I mean, there is a good year, there is less good year in terms of rolling out, but no worries about the global envelope. And then on the net debt to EBITDA, yes, we expect it to rise. Clearly, if you compare to a couple of years ago, we are expecting this ratio to rise much quicker. The hard fact is that we have been able to harvest longer and higher the benefits of the crisis. So we are now exiting with a ratio, which is a bit lower indeed than what we expected. However, for year-end, we do expect a further rise. It may -- yes, it would be below 3.5, that's for sure. So below the level that we want to steer the group. So it will still leave significant room for more. So indeed, somewhere between 3.1, 3.4, that's where we are trying to get at year-end, depending again on the pace where we can roll out of CapEx and what is done in H2 '25 will be done in H1 '26.

So this is the end of the Q&A session. Thank you all for joining the call. Of course, if you have any follow-up questions, do not hesitate to call the IR team. Thank you.

Thank you.