Grenergy Renovables, S.A. (GRE) Earnings Call Transcript & Summary

Good morning and welcome to Grenergy's First Quarter 2025 Results Presentation. I am Ruben Gomez, Head of Investor Relations. The presentation is going to be led by Daniel Lozano, our Chief of Strategy and Capital Markets Officer; and Maria Coimbra, Manager of the Sustainability Department. We are going to take you through our business, financial and sustainability review. At the end of the presentation, there will be a Q&A session for sell-side analysts. Please, Daniel, the floor is yours.

Thank you, Ruben. Good morning to you all. I'm very happy to lead this quarterly presentation. Actually it is the best quarter presentation that we have done ever. So thank you, David, to allow me to lead this quarterly presentation that, as you can see, is purely financial and sustainability results from this quarter. We wanted to split this quarterly presentation from the main operational pipeline update that normally we are providing to the market. But in this case, we are going to include that in the Capital Markets Day that we are presenting in 1 week. So we are going to focus in financial and sustainability as I said. Let's move to the highlights. In Slide 3, business highlights, I'm just explaining what we have already told to the market. We keep executing quite well in financing. In Q1, we could close another $324 million in this case for the Phase 4 of Gabriela that we are building as you know. In addition to this amount, there were another $700 million so above $1 billion of financing already closed for Oasis de Ataca. Then there was also good news regarding Quillagua that the Phase 1 is already in operation. Phase 2 will be ready soon. And the operation of Quillagua even though it is not a project that we are going to keep, it has been sold to ContourGlobal. We wanted to let you know that the operation of this storage facility that is our biggest hybrid storage facility till now is operating quite well. Any more operational information will be provided in the Capital Markets Day. Then 1 terawatt of energy we have been able to close in this first part of the year, it's impressive. Our PPA department keep executing new contracts. The first baseload in PPA with Codelco, this is a mining company investment grade, for 15 years that in addition with other PPAs like the 1 signed with a utility 390 gigawatt hour, so that will help us to contract. The revenue of the project we will present shortly. So these PPA are key in our strategy and being able to contract 24/7 is a step forward. We can be extremely competitive with just solar plus storage against traditional energy sources and this is happening in Chile. I assume that that will happen in every single market. Then recently we have presented a new agreement with BYD 3.5 gigawatt hour of storage for the Phase 6 of Oasis de Atacama. Well, this is a huge agreement. It's much more of what has been installed in most of the European markets. And in next week there will be occasion to explain the way we are going to build this Elena project; the financing, the energy sale, everything is well on track. Then I'm repeating it every minute. We have a very important Capital Markets Day next week in Bank of America headquarter in London. If you cannot be there personally, you can access of course through streaming. You can find the link in this column in the business highlight. Anyhow, we will send a notice to have the link ready. It will be also in our website. Then moving to financial highlights that I will explain later. But as you can see; revenue times 2 compared with last year, EBITDA almost times 3 compared with last year and net income times 5 to EUR 32 million. So not a very difficult set of result to be presented. Then CapEx is a KPI that I like the most because it's the way we are showing our execution capacity. In just 1 quarter we have been able to execute what we were executing 1 year some years ago, EUR 165 million that is 124% more than a year before driven by, as you know, solar plus storage project. Then net debt remains in a very similar position compared with last year, 3.7x and 1.3x corporate. If you take into consideration the agreement we have done and that are coming into our P&L and balance sheet that the pro forma level will be much better. I will let you know later. But then we have also released today a notice regarding our share buyback program. It's the third year in a row that we are using part of our cash flow to buy our shares. In this occasion, we have been able to buy EUR 27 million representing 2.44% of the company at an average price of EUR 37.75, well below our current share price. So we are generating value to shareholders, buying at a very nice price where we are terminating it after the general assembly accepted the reduction of capital and the Board of Directors approved it. So we cannot have the share buyback anymore. But anyhow, we are doing this time to time and we'll be ready in case it is necessary. And then Maria will let you know later the progress in sustainability. We keep providing sustainability KPIs every quarter. Sustainability means happy local community, reducing operational risk and construction means happy employees, good governance, reducing risk. And what we are doing since 2019 is allowing us to have an excellence in this matter, having a positive impact. And then rating, that is not the goal, but is the way this is reflected. Ratings are providing us very good ranking position within the industry. So let's move into the key operating and financial data. So you can see that there is an increase of total installed capacity just around 2%. We are increasing it because of some distribution asset in Colombia. Regarding production, we experienced 52% increase in total output. This is coming from Gran Teno solar asset, Tamango and some distribution asset PMGDs in Chile that now they are 100% producing. Contracted volumes increased 80% and represented 88% of our total electricity production. That is an excellent KPI showing the way we are contracting the energy sale. Furthermore, load factor has recovered to normal levels in comparison with first quarter 2024. And realized price increased to EUR 45 per megawatt hour explained by the recovery of merchant prices, which went up to almost EUR 26, increasing more than 90% compared with last year. On the right hand side, you can see the summary of the financial KPI that I will explain you later. So moving to Slide 5. This is the revenue and EBITDA breakdown. The total revenue in the first quarter of 2025 amounted to EUR 237 million representing an impressive increase of 116% year-on-year and this growth, as you may imagine, was fueled by the successful M&A transaction through asset rotation in LatAm. Development and Construction was also plus 125% growth compared with last year. Anyhow, energy revenue also is growing 56% mainly driven by Chilean asset. Retail revenues, that we will let you know more in detail in the next Capital Markets Day, increased 108% linked to the well performance of the number of clients and the increase of energy prices. Finally, services grew 14%. So Q1 EBITDA was EUR 62 million representing an impressive growth of 165%, almost times 3 and boosted by, as I said, Development and Construction division and the Energy division. Then let's move into CapEx that, as I said, is a way of reflecting our execution capacity and we have split between the first 3 column that is the CapEx we are keeping in our balance sheet and then the fourth column is what we are building for third parties, in this case, Oasis de Atacama. So Oasis de Atacama Phase 1, 2, 3 represented EUR 81.9 million. And then in the first columns, we have EUR 9 million development CapEx, EUR 53 million mainly Gabriela Phase 4 of Oasis de Atacama and Spanish project EUR 21.6 million. This is the very last column that we are building project like Ayora, Tabernas and Jose Cabrera. Then Slide 7, this is our cash flow in Q1. So you can see that even though we have had a positive EBITDA of EUR 61.7 million, then there has been a negative net working capital position. So the CapEx that we are investing, EUR 165.4 million, that is not affecting totally because we are recovering from the revenue of EPC that we are getting from the asset rotation. Then also to mention financial debt is growing, but that is project financing. And other debt that was negative EUR 70.7 million refers to the deal we did to buy Repsol and Ibereolica, the Elena, Antofagasta project in Chile. Then I think it is the last one that I will present. We have leverage and liquidity. As I said, you know our leverage is affected both by the Energy revenue that is growing, but as well Development and Construction that is M&A and when that happened moved down. So now we are in a very comfortable position of 3.7x. That might change while we are investing in CapEx and will improve whenever we have the EBITDA addition of M&A. We wanted to include a pro forma column including the deals we have closed that they're still creating EBITDA and positive cash flows like Oasis de Atacama deal and the Allianz deal. So including those deals, the total leverage would move in a lower position to 1.2x and the corporate leverage will be almost 0x to 0.2x. And that's all from my side. Maria is going to explain the main messages about sustainability.

Thank you, Daniel. So good morning, everyone. The first quarter of 2025 marked an important step forward in our climate strategy. We have just published our climate change policy, which is a cornerstone document that reinforces our net 0 ambition. It sets out clear principles and guidance and it's fully aligned with our broader sustainability policy. Earlier this year we also reached another major milestone with the publication of our 2024 Nonfinancial Information Statement and Sustainability Report following the requirements of the CSRD for the first time. This marks a new chapter in how we report with greater transparency, accountability and alignment with European standards. In the next slide, you can see that in parallel, as Daniel commented before, we continue to consolidate our ESG positioning. Our performance remains strong across ESG ratings reflecting consistent progress and robust practices. And although our current ratings reflect solid performance, we remain focused on going further, raising the bar and driving positive impacts and positive outcomes. In this context, our ESG road map continues to guide our efforts, embedding continuous improvements across all areas of our business from governance and climate to social impact. And that's everything on my side. Thank you very much.

So we are now moving to the Q&A session. Please if you have any question, raise your hand. And obviously we suggest to ask 1 question per participant, please. So first question from RBC, Fernando.

One quick question, Daniel. Can you drive us through the expenditures and cash-ins of disposals this year? I mean what's going to be the CapEx that you will invest in the assets that you have already sold, which is basically those in Spain and the first 3 phases of de Atacama? And when do we consider the proceeds or you are receiving the proceeds from the buyers, both expenditures and proceeds in disposals?

Okay. So regarding EBITDA cash-in so we have 2 big deals that has been done in the past that will provide EBITDA this year. The first one is Oasis de Atacama, we sold 3 phases. For the moment, we have registered EUR 110 million in 2024. In Q1, there were sales for EUR 55 million. We expect those sales to reach EUR 103 million in the year. However, total cash of the operation around $256 million in this case were received in 2024 so a positive working capital. So around $70 million will be received during 2025 and a little bit might be received later depending on some earnout. Most likely, the impact during this year will be around EUR 40 million in cash. Then for the deal of Allianz, remember that was a deal we did in 2023. I think it was around EUR 1 million per megawatt for those solar assets in Spain. We expect around EUR 70 million EBITDA as that project was sold. The commercial operation date, we expect that to happen mostly in Q3. But those capital gains of EUR 70 million will also be -- there will be some equity recycling coming. So in total it should be around EUR 110 million. Those are the figures we are using to create that pro forma leverage. Then regarding CapEx, it's a difficult question, but we are executing this year not only Phase 1, 2 and 3 of Oasis de Atacama; but as well 4 and there will be more projects coming soon in Central Chile and in Spain. Let me wait to next week where there will be a time line of the project so you will easily make some estimates on CapEx.

So next question from Henry Tarr from Berenberg.

Very much looking forward to next week and the Capital Markets Day. I guess just a quick question on the quarter. The net working capital growth, is that down to equipment? Is that the battery storage moving into Chile?

Maybe, Ruben, do you have the answer?

Yes. I mean if you remember last year, working capital at the end of the year in full year '24 was very positive. It was of EUR 200 million positive. So it's logical that now we have those payments to the batteries and it's related to this.

Exactly. Batteries, they have good working capital condition that is positive for the financing; but also in a moment, you have to pay it. So that's the way it's affecting in Q1 cash flow.

Yes. Okay. And then just 1 other question, if I could. Just on the price outlook in Chile for merchant. I know you're sort of 80%, 90% contracted at the moment and that's going to stay high. But how do you see price development in Chile at the moment?

There was an impact. If you compare our figures to last year prices, you can see that there has been an improvement and that is happening because last year, 1 of the assets we have sold, Quillagua having some curtailment and affected negatively to the merchant prices. That's why we decided to hybridize every single project we have. By hybridizing it, you avoid having cannibalization. So that's the way to solve the solar prices issue. How do we see the evolution of merchant prices? As we said, as more batteries are introduced into the system, we assume the prices curve will trend to flatten. So that will mean that we will move cheap solar energy to night peak prices. So solar prices should move up and at night or so, they will have a deflation effect. So we are taking care of course about those 2 issues.

Next question from Ignacio Domenech from JB Capital.

So 2 questions. The first one, I'm not sure if you can disclose the CapEx per megawatt on the deal you signed with BYD or if we have to wait for next week. In any case, it would be interesting to have a reference there. My second question is on the output in Chile. If you could disclose what was the output in Q1 from Gran Teno and Tamango because I believe there were some curtailments in Chile in Q1 in last year. And also the output in wind because I'm not sure why is there a decrease if it's coming entirely from [ cost ].

Okay. So first question regarding CapEx per megawatt hour. We will provide you a guidance in next Capital Markets Day. That's why we haven't included it. I can tell you, I can assure you that the CapEx trend is going into the right direction. It keeps moving down and that is very good news for the competitiveness of this technology into Europe because it will provide very good project return very shortly in European markets. So we will be able to replicate this incredible business model we are creating in Chile into Europe. So wait for next week, please. And then regarding production per project, normally we are not providing it, but I think I have here the number. So correct me, Ruben, if I'm wrong, but the production in Q1 was 140 gigawatt hour. Last year as the project was not 100% producing, it was just 12 gigawatt hour of energy. So that is an increase of 1,000%.

And on curtailments in Chile, can you give us some color on the situation this year versus last year?

Again curtailment are there. Normally where there is more solar penetration, there's more curtailment. For us now the market with lower solar prices are helping us to create this business model of getting that spread between the day and night. So again in [ energy ] market, they have kind of 13 different electricity market and that the electricity market is more affected by this situation. Anyway, for us it's not a problem. It's a great opportunity to be able to capture growth and spread and returns.

Okay. I think we have no more questions. So thank you very much for attending and see you very soon at our Capital Markets Day. For any more doubts, please contact to the Investor Relations team. Thank you very much.

Okay. Thank you very much to you all. See you in 1 week.