Naturgy Energy Group, S.A. (NTGY) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining our webcast for the full year 2024 results and new strategic plan of 2025 to 2027. The agenda is very simple, we're going to be handling and covering the full year 2024 results first. And after that, we will explain and unveil the details of the new strategic plan. As always, we will ask you to submit the questions to the webcast in written form, and that will happen after the presentation is over, okay? So without further ado, I will hand it over to Steven to start off with the 2024 results.

All right. Thank you very much, Abel. As you've seen in the presentation that we released this morning, we're going to cover a range of topics during today's presentation. Starting off with the 2024 results, obviously, going to a review of what the '21-'24 strategic plan looked like and the key achievements that the company had. And trust me, we have to be selective because there is quite a few of them, and ending with a view of the 2025-2027 strategic plan together with the financial outlook. So we ask you for your patience, we'll try to make it as painless as possible and, of course, leave enough room at the end of the presentation to answer any queries that you may have. When we think about 2024 results, I think it's important to start highlighting the fact that the year has been marked by a very challenging scenario, specifically on the energy side, resulting in lower prices across the board. And you see in the slide that we're introducing here some of the main references for us. You see that the Brent has gone down, TTF has gone down quite dramatically, electricity prices as well. So across the board, this has been the key theme that we've had to deal with during the course of this year. Despite this challenging backdrop, I think it's important to highlight a few key points for the 2024 results. First and foremost, we think that it's worthwhile highlighting that these are very strong results. These are very strong and resilient results, much so that we are in line with the record highs that we experienced in 2023. And I think that is remarkable, again, thinking against the challenging backdrop that we just explained. On top of that, we closed the year with a very strong balance sheet that provides us with significant flexibility, and that's something very important when we approach the 2025 to 2027 plan. These results that you see in front of you on EBITDA of almost EUR 5.4 billion, net income of EUR 1.9 billion, a very solid net debt level of EUR 12.2 billion and the CapEx of EUR 2.3 billion is a result of the company's capital discipline. Capital discipline, we want to emphasize, is embedded in the company's DNA. This is something that's going to be a theme moving forward as well. But not only capital discipline, also very importantly, the efficient operational management from the group. We want to highlight this because it's also part of our DNA. We want to do things well, and we want to do them better and improve on a day-to-day basis. If we move over to the capital allocation, I think what we highlight here is the fact that the cash flow that generated -- was generated by the group more than covered the CapEx, the dividend, the taxes and other elements throughout the year. We did EUR 2.3 billion of investments. We paid dividends to the tune of EUR 1.3 billion, we paid taxes and levies to the tune of EUR 1.2 billion. This is an important point because it's fundamental to understand the critical role this company also plays to support society and the countries that we operate in. When we think about investments as well, it's also important to highlight that 85% of these were dedicated to networks and renewables. So we are investing in the energy transition. In terms of renewables, we have 7.3 gigawatts of installed capacity today with around 1.6 gigawatts currently under construction. And again, I want to emphasize, when we talk about investments in renewals, specifically, the relevance of capital discipline within the group. We focus on value over size. And we've been talking about this for a while, but it is a key principle for Naturgy. It's been in the past, it will continue being so in the future. Strong cash flow generation during the year despite the energy backdrop that we mentioned before is something also worthwhile highlighting. This, together with the capital discipline that I just mentioned previously, specifically on investments, has led to a level of net debt of around EUR 12.2 billion, broadly unchanged if you compare it against last year. If we translate that level in terms of ratios, we're talking about 2.3x net debt-to-EBITDA and a very healthy estimated FFO-to-net-debt of around 29%. The average cost of debt for the period also remained roughly unchanged at 4% despite increases in LatAm as a result of increasing in interest rates. It's well worth highlighting as well that during the year 2024, the group refinanced and raised financing in excess of EUR 8 billion. There has been a lot of work done behind the scenes, not necessarily visible all the time. But this has led to an overall increase in the maturity of the group to 5 years versus 4 years previously. And when we look forward to 2025, you can expect Naturgy to continue working on this front. And together with a very strong effort from the group to continue accessing the markets and financing our operations competitively, we also ended the year with a very strong liquidity position of around EUR 11.2 billion. I'll repeat that again, EUR 11.2 billion of liquidity, equally split between cash and fully committed and undrawn credit lines. So all in all, we'd like to conclude this by saying when you look back at the guidance that we provided in July of last year, we ended up beating it in terms of EBITDA, in terms of net income, and that's something worth noting. I would also like to highlight one thing that is often overlooked because the reality is at the beginning -- a year ago when we were presenting 2023 results, the market expectations for EBITDA for the group were significantly lower than what we have done. In fact, we've exceeded the initial expectations for EBITDA for the group by more than 12%. So this is a testament of the hard work that all our employees dedicated to deliver results. CapEx, as you can see, was just shy of the guidance. And again, that's a function, not only of some delays in some projects, but also very important of the capital discipline and the company's ability to adapt to a changing environment. So we are flexible, we are fast and we're really taking care of our shareholders' resources. Finally, as you can see as well, net debt also closed below the expected guided figure, again, as a result of a very, very strong cash flow generation generated through the year. And with that, I'll hand over to Rita, who will go over the details for the different businesses.

Thanks, Steven, and good morning, everyone. Starting with gas networks. Gas networks reached, in 2024, a total EBITDA of EUR 1.9 billion, accounting approximately to 1/3 of the gross EBITDA in the period. In Spain Gas, networks experienced remuneration adjustments foreseeing the current regulatory framework as well as lower demand in residential segments affected mainly due to margin. In Mexico, the period was mainly affected by negative FX impact. In Brazil, performance was driven by tariff updates in line with negative inflation indexation as well as lower demand, mainly in vehicle and residential segments. In Argentina, substantial tariff increase to compensate forecast inflation and higher demand with moderating trends in terms of inflation and FX depreciation. Finally, in Chile, the positive comparison versus 2023 is mainly due to higher tariffs and demand as well as the positive impact of the provision of Transportadora de Gas del Norte litigation. In summary, growth is mainly driven by LatAm businesses. Continuing with electricity networks, Electricity Networks EBITDA reached EUR 971 million in the year. This is a 14% up to 2023 levels. In Spain, EBITDA increased by a higher regulated asset base due to past investments, and in Panama, the company benefited from both higher demand due to higher temperatures as well as the new regulatory tariffs approved in 2023 that gave us visibility out to 2026. Finally, Argentina benefited the same as in gas from regulatory tariff increases reflecting prior inflation as moderating trends in terms of inflation and FX depreciation. In summary, growth across all electricity networks when compared to 2023. Now turning to Energy Management. As Steven mentioned before, well, EBITDA reached EUR 752 million, that is a 32% decrease versus 2023. And as Steven mentioned before, we had a decrease in energy prices of 30% in terms of gas and of 28% in terms of electricity. The figures reflect the price agreement with Sonatrach for 2024 that we reached during the year and that we already published in July 2024. This agreement ensures price reflects current market conditions as well as shows that there's a solid relationship between Sonatrach and Naturgy. It also proves that Naturgy is committed to security of supply. All in all, the period experienced lower margins and sales due to rebalance of energy price. If we continue with thermal generation, EBITDA reached EUR 602 million in 2024. This is 10% lower to 2023 EBITDA levels, mainly due to lower thermal gap as hydro production has been extremely high this year and also due to new renewable install capacity during the year. In Mexico, just the opposite. We benefited from higher availability and production translating into higher revenues. Let's turn now to renewable generation. For renewable generation, reached an EBITDA of EUR 576 million during the year. This is an increase of 9% when compared to 2023. Spain benefited from higher hydro production, as we just mentioned, and also at the commissioning of a new installed capacity. In U.S., our first solar plant began operations in Texas and we are currently finishing our second solar plant that we'll expect to become operational in 2025. Finally, Australia benefited from new renewable install capacity during 2024, more than 500 megawatts in the year. All in all, growing install capacity and production translating into higher EBITDA. Finally, let's turn to supply activities. EBITDA reached EUR 648 million in the year, this is an 8% lower to 2023 levels. Our supply experienced lower prices, partially compensated by the removal of the regulated price caps. Gas supply for its part experienced margin resiliency in a context of lower energy prices. Meanwhile, the company has recently launched a digital platform to transform clients' interactions with new artificial intelligence tools. I will now hand it to Steven to wrap it up.

So thank you, Rita. And that's it. I mean, that's 2024 in a nutshell. Very strong results for the year in spite of a very challenging scenario, so much so that the results are in line with the record highs that we experienced in 2023. So that's something to be proud of and very specifically for a company that has exceeded its guidance and its targets. '24 now is behind us and it's time to look forward. And that's why we need to start thinking about the 2025 to 2027 plan. But when we think about the 2025 and '27 plan that we're going to discuss with you today, I think it's also very important to understand that, yes, we recognize past performance is not necessarily a good indication of future performance, but it sure helps build credibility. And in order for us to discuss the plan, I think it's worthwhile to take a step back and look at the things that we've achieved during the course of the year of the plan '21 to '24. And by the way, I think this is the right time as well to make a special mention to all the teams at Naturgy that more than 7,000 employees that have contributed to this success. I think it's worthwhile recognizing them publicly. When we were working on this presentation, we started to look back and think about all the things that we had achieved over '21 to '24, and there was quite an extensive list, frankly. We ended up narrowing it down to just a few key points to highlight that we think illustrate how the company has changed over the last few years. And we think it's a good indication or in other words, we think it builds credit when thinking about our ability to deliver the '25 to '27 plan. And this, in a nutshell, are what is illustrated in this slide. We've advanced on decarbonization not electrification, decarbonization. We've continued our efficiency gains. We've continued to very proactively manage our risks and ensure the security of supply, something very important in all the markets where we operate. We enhanced our commercial excellence, continued to invest in talent, which feeds into the company moving forward and continued to invest in ESG and of course, in the process exceeded the 2024 targets. And of course, finally created value for our shareholders. Let's look at each one of these individually just for a little bit before we go straight into the '25, '27 plan. When we talk about the advancements in decarbonization, the reality is over the last few years, we've increased our installed capacity in non-emissions by 2 gigawatts. And we have 1.6 gigawatts under construction right now. If you sum those figures up, you realize that it's an increase of around 23% over the period, which is not something to be discarded. In fact, when you look at the plan '25 to '27, it's important to highlight that we will continue investing on this front to the transition. We've become a more efficient company in the process. We've continued working on efficiency gains across all businesses, and we are happy to see that the results are showing. When we think about OpEx over margin, we're at 24% right now versus 34% in 2021, that's a 10 percentage point improvement in just a few years. And we think this compares favorably when we look at some of our peers as well. If we look at it from an absolute basis, OpEx has declined by 10% over the period as well despite inflationary pressures. So this speaks well to our ability to deliver. We've managed risks and continue to ensure the security of supply. It's very important. When you look, for example, at the percentage of volumes of LNG financially hedged in 2021, 26% right now, 42% on what you'll see in the plants as this number goes up, ensuring that the plan is going to be met. We continue to balance between inframarginal generation and demand in Spain, continue to use financial hedges to cover our risks, and we continue to leverage on our fleet of LNG tankers. So that overall allows us to reduce volatility, has allowed us to reduce volatility over the last few years, and it's going to be a driving theme for '25, '27. We also take security of supply very seriously, of course. If you think about our fleet of CCGTs, we have an increase of more than 50% of the operating hours under restrictions. The realities the Spanish system cannot work without CCGTs and we call on public forums like this today for the recognition of the essential role that they play to ensure security of supply. But it's not just about generation, it's also about being able to provide energy to our clients, for example, in gas. So we've taken efforts to negotiate with our key suppliers, for example, in Sonatrach to ensure that we continue to supply energy to the Spanish market in market conditions. It's also very important to remember that '21-'24 was also a year -- a period of a lot of regulatory movements. In Spain, over 37 measures, across LatAm, over 15 regulatory reviews. And despite this, the company has been able to consolidate its results and present good record figures for '21 to '24. Carlos' Latinos team has also invested heavily on enhancing the commercial excellence of the group. It's very important. We work with our clients. We provide services to our clients. It's important to improve our customer experience, and that's something that we've been focusing over the last few years. We've increased value-added services, including solar distributed generation, energy service certificates, et cetera. And the end result starts to show the client net promoter score has gone up significantly from '21 to '24. This is going to be, again, something we'll continue working on as we continue to provide the best possible service to our clients. In the meantime, that excellence also reflects in lower power introduction -- interruption time, the increase in the amount of solar distributed generation that we have on the portfolio today. And of course, have we been able to continue growing our power market share as a result of that excellent service that we are providing and we're striving to provide to our clients. But all of the above cannot be done with our people. And of course, this is something that we continue to invest in. We're happy to report, once again, we're one of those places named as a Great Place to Work Award in 2024 and 2023, I think everyone in this table would agree. But most importantly, it's the rest of the employees as well that have to agree. And that's something that we see there with the employee Net Promoter Score, people would think Naturgy is a good place, it's gone up quite significantly from 2021 to 2024. It shows an alignment and a passion of our employees in this project. We've also increased the share of women in management positions by 11 percentage points. We've continued to hire young talent with the Flex & Lead program, increasing the number of hires, increasing also and lowering the average age of the employee pool. So all in all, all the things that I've been discussing right now have translated numerically into something that you see here, and it's very important. In 2024, we ended up reporting an EBITDA of EUR 5.4 billion. It's worthwhile making some memory at the time of the '21 to '25 plan. Remember, we said maybe in 2025, we're going to be reaching an EBITDA of EUR 5.1 billion. And if things go well, we'll get to a net profit of EUR 1.8 billion, again, in 2025. And today, in 2024, at the end of 2024, we exceeded those targets. We exceeded those figures. So again, testament of how the group is performing well. We've been very vigilant with CapEx, what I mentioned before, value over size, value over size, capital discipline is part of the company's DNA. Let's not mistake a lower CapEx figure as an unwillingness to participate in the energy transition. We're fully committed, but we want to do it sustainably and responsibly and that implies capital discipline. And finally, we closed the program with a net debt position that provides the company with an unprecedented flexibility in its history, and we're going to be making good use. In terms of our shareholders, we're also happy to announce and highlight, when you think about the plan, we've created value. Our return over an invested capital has increased dramatically by more than 400 basis points. Return on equity, likewise. And if we think about it in terms of the total shareholder return, we've exceeded the returns for the sector almost by a little bit more than 2x. And these are gonna be elements that we're going to be thinking of when considering the 2025 to 2027. Again, we don't ask that you blindly believe in our ability to deliver, but that you just consider our track record because it speaks for itself.

Good morning, everyone. Thank you, Steven and Rita, for your presentation. I'm now going to talk about the future. Before starting talking about the future, I would like to highlight one of the most important messages of what happened in the last years. I remember when in 2022, we were said by some of you that we have been able to capture extraordinary results in extraordinary environment. That was true. But one of the main achievements of that company in the last years have been that working hard, we have been able to transform extraordinary into ordinary. And the resilience of the company is something that is going to share the future presentation, what I'm going to explain to you. I want to start by saying thank you. Thank you to the team. It has been months of hard work before finishing this strategic plan. And the thank you is even more if you consider that the strategic plan has been elaborated in parallel with running business as usual. And the business as usual has been able to provide us the extraordinary results that Rita and Steven have said to you. It has been an outstanding performance thanks to the commitment to everyone. It has been a very good plan that I'm going to introduce to you today, which is the result of a work of most of us. Before starting talking about our commitment, I think that is good that we share how we see our environment for the years to come. It's not going to be easy. And probably these slides today could be obsolete tomorrow, depending on what happens in certain parts of the world. But the most important thing to share is that we are in front of one of the most volatile scenarios in the energy industry in the history. And in parallel, this volatility in the market scenarios are also interfered by the volatility that is produced by the penetration of the new technologies around the energy transition. It is changing the rules of the game, and we are part of this game being a very important actor. That's the reason why 2 important messages could be addressed today. One is the increasing importance of the networks, and second is the selective attitude in front of the renewables. We are one of the convinced, and we were convinced in the past that gas is going to take a very important role in this energy transition. Gas in the form of the natural gas to provide security of supply to both gas clients and electricity clients, thanks to the utilization of the gas turbines, as Steven has explained before in detail, and also gas in the form of biomethane as the quickest, easiest and much easier, faster feasibility to introduce decarbonization, mainly in the industrial clients. We also think that the client is becoming more and more important in our business. We have experienced since liberalization of this industry, an important increase in demand from the clients in terms of products and prices. And now it incorporates also the service. And we are really convinced and committed to continue to be performing and exceeding our clients' expectations by introducing new tools of client management. Our model, our industrial model is based on 3 pillars, 3 pillars, which are going to be crucial to support and warranty the resilience that Steven has explained before. And the 3 pillars are around integration model; second, multi-energy; and third, client in the center. When we talk about the integration model, we explained that our model that combined generation of energy, distribution and commercialization has a natural hedge in the risks that every activity individually may incorporate to a business. And the most important thing here is trying to capture the integrated margin. This is what our teams are doing. Our organization helps to provide supports and synergies in this margin capitulation. And the most important thing is that we base the resilience in our networks, which are going to support with its cash flow, the needs of investments that other parts of the business may have. When we talk about multi-energy position, we want to be clear saying that we don't regret any technology that may be incorporated in the portfolio to warranty supply to our clients. And in particular, in these times, we want to continue investing in renewables, but be more selective because the situations in the market are changing. As Steven has repeated a couple of times in his previous presentation, we still believe in capital discipline as the cornerstone of our investment policy. And finally, the client. We are fully committed to continue maintaining the client at the center. Technology helps us to drive this mood in a much more efficient way. We can incorporate new technologies in IT to help the client service to become much more excellent. And this is something that we are not forgetting for the future. How are we going to continue to operate? Our execution principles are also 3 and very important. Number one is excellence. We are not the largest, but we are the most excellent, we think, in our operations, in both in the day-to-day operations and how we deal with the client. And this is something that we want to maintain, we want to increase, we want to perform. We are not going to reduce our efforts and commitment to maintain operational excellence in the center of our execution principles. Number two is about financial discipline, financial discipline for investment and also financial principle -- financial discipline, sorry, for our bondholders. BBB Standard & Poor's rating is our minimum floor, and this is something that we are going to protect. And in parallel, having opportunities that we never give up, and we continue to be monitoring any opportunity that may arise should be discussed and analyzed under the scope of being clearly value creator drivers. This is why we have always said that, for us, value has much more importance than size. Shareholders are also very important for us and being a proper and adequate shareholder remuneration maintained the company interesting for most of our investors. And that's the reason why our remuneration policy for our shareholders must be attractive and sustainable. We are not a company that moves up and down the dividend policy. We want to maintain a sustainable growth policy for the future. In parallel, we are clearly convinced that our free float should be boosted. One of the reasons that 1 year ago, we were, at the time, excluded on the MSCI indexes was because of our limited free float volume. And one of the proposals we will bring to the next AGM on the 25th of March is by through voluntary tender offer, try to recover the level of free float that may operate us again in the MSCI indexes. We don't forget about ESG. As we have said before, we have clear principles with our clients and our investors, but we are also committed with society. And one of the clear commitments we can incorporate is our ESG objectives, divided in 3 important pillars. One is about climate; second is social; and third is about governance. In terms of environmental ESG targets, we can reduce by saying that we want to install more and more non-emissions generation technologies. At the time that we elaborate more and more technologies that may reduce the existing work. In terms of social, one of the most important things is about our people. And we want to maintain the growth of gender parity in our governance bodies, including the management positions and also to continue monitoring our suppliers in the same trend. Governance means commitment from the top down. And this commitment is considered in the scheme of how managers are paid, which is clearly linked to the objectives on ESG that we have declared as key principles. The scenario, again, is quite challenging. We don't see the next 3 years in an easy way. If you take today the screen and you walk on the forwards, you will see that gas prices and as a consequence, electricity prices are expected to continually decline. This is the scenario in which we need to work and we need to develop our activities. And we cannot, in this case, be prognosis our figures against the trend, which is a fact. But the next 3 years are going to be, again, shared by investment. CapEx is going to be higher than the last 3 and is going to be concentrated mainly in 3 pillars: networks, renewables and energy management. Between networks and energy and renewables, we are going to invest 80% of our figures, what demonstrates our commitment with the energy transition. When we talk about geographies, Energy transition is a fact that needs to be speed in Europe, and that's the reason why 75% of this investment is going to be focused in Spain. And we talk about technologies. As you can see, renewable gases will participate, which is an important part of this investment, and we need to consider that for the next 3 years after that, we will continue to be boosting the investments in biogases, biomethane in particular. It will go, in particular, to the second 2 pillars of this CapEx program. Networks, Spain gas around the deployment of smart meters, Spain in power grids mainly to upgrade the continued needs driven by new demand in the electricity. And in Latin America, we will commit with our regulators' programs of investment in parallel with the tariff regulation reviews. Renewable energies, we will divide into 2 important programs about power. Power needs to be cautious because of the new circumstances, and we will focus mainly in 2 aspects. Number one is wind repowering, including hybridization of the existing plant; and second in solar, mainly with batteries to warranty that the security of supply is flat and we can capture adequate prices to recover the investment. And gases will be more around the biomethane deployment, which is, as I said before, an easy and quick way to increase our commitment for decarbonization. I am going to hand over to Rita, who is going to be business by business in more detail about the programs for the next 3 years. Thank you.

If we move to Networks business, our ambition in the following years is to enable energy transition, capture growth opportunities and maintaining best-in-class in terms of operations. In terms of existing sources of growth, we see opportunities in biomethane connections and digital meters deployment in gas Spain. We also see opportunities lifting investment in electricity Spain in the context of the new tariff review in order to connect new renewal capacity and to meet new potential demand. Second, we still focus on continuous improvement in operational efficiency and best practice implementation for our network businesses. These initiatives include digitalization and also full automation and remote control that will improve quality of service as well as operational efficiency. Additionally, we expect ongoing practical regulatory management with a special focus on electricity networks tariff review that we expect to be published this year. And also within that network [ sustained ] for 2027. Finally, the group will also focus efforts on the negotiation of concession extensions in Latin America with a special focus on Brazil on 2027. If we move to Energy Management business, as Francisco Reynes mentioned before, we're expecting a normalization of the energy scenario in 2027 as well as a decline in volume commitments during this period due to contract termination. We are not expecting signing new contracts to compensate these volumes. Our ambition is to show competitive supply and reduce exposure to commodities through active hedging and risk management initiatives. At the same time, we expect to capture value through asset optimization. At this point, 60% of our LNG volumes are sold or hedged in 2027, providing visibility into the period with substantial reduced volatility and commodity exposure. For the period, we expect to reach price revisions agreements, as we did in the past, in order to reflect massive conditions with our best suppliers. Let's turn now to thermal generation. We believe CCGTs will still continue to demonstrate its essential role to guarantee continuity of supply in the face of high renewal penetration that will bring intermittency as well as production volatility into the system. In terms of operational efficiency, we expect continuous operational improvement and full automation and remote control of our slate. Furthermore, we expect to successful management of nuclear phaseout that will start on 2027 onwards with the closing of Almaraz. Additionally, we expect the approval of capacity payments mechanism to guarantee systems stability during the next month. In Mexico, the group will focus on the renegotiation of the expansion of existing PPAs that will start to expire in 2027. Let's turn now to renewable generation. As mentioned before, Naturgy will keep throughout the plan its commitment with energy transition as well as a strict capital discipline with a very selective growth approach in terms of renewable projects. In this sense, the group will focus on several geographies and will prioritize wind power, hybrids and batteries technology. Naturgy is expecting to increase installed capacity up to 9.5 gigawatts in 2027, along different geographies and following our current strategy, balancing risk and leveraging on our client base as well as on PPAs to reduce risk exposure. If we move to renewable gases, Naturgy is determined to push biomethane after strategic investment in order to offer a [ particular ] recognized alternative to our client base. We believe Naturgy's best positioned with the strong capabilities in order to lead this industry in Spain. In order to achieve our ambition, the company holds a large and solid pipeline of projects and will still actively look for alliances to accelerate growth. The development of [ expansion ] program also will be also a big key during the period. Finally, if we move to supply business, our ambition is to lead our customer service, operational efficiency and growth in clients across activities. We expect to increase market share in electricity and in distributor generation, growing services, protect gas position, while at the same time, pushing biomethane as an alternative of decarbonization to our domestic and industrial clients. It is worth highlighting that the company has recently launched a new digital platform, transforming customer service and operations that will implement new artificial intelligence tools to achieve operational and service excellence. Now I will hand it back to Francisco Reynes.

Thank you, Rita. Let's move on the key financials for this period. Let's talk first about capital allocation. You know our obsession of having proper capital allocation to increase the optionalities of the company to move forward and at the same time, the optionalities for our shareholders to have a proper return. In the period, 2025-2027, we are going to move around EUR 19 billion. That's a very important figure, which is mainly going to come from the result of our cash flow generation. And this EUR 19 billion are going to be dedicated to an equilibrium between the future and the investment, CapEx, dividends to our shareholders to maintain attractivity of the company for the market, taxes and levies in order to be consistent with our commitment to society and share repurchase that I will refer it later on. The plan considers a solid adaptation of our dividend per share evolution between 2024 and 2027. That represents a 6% annual growth. All of it has a floor that is committed to rating. We have always said that our dividend policy will never jeopardize our interest to maintain BBB rating of Standard & Poor's overall. When we go to the repurchase, one of the most important things is that the Board unanimously have decided to become Naturgy, a truly listed company. And truly, it's the company means that we need to have proper liquidity for our shareholders and proper free float. The reason why we have proposed to the AGM the approval of this plan is exactly to improve liquidity and return to the MSCI indices. It can be done, thanks to a very solid balance sheet and solid resources that give us the money enough to be able to buy these shares. How are we going to restart the free float? Number one, by acquiring shares in the market at a price of EUR 26.5 a share, up to 10% of treasury shares in our balance sheet, which is the maximum legal threshold that we can afford. And after that, with all the time for this, Steven and his team will restore the free float at the company's discretion with enough time to be done on our interest. We expect all this process if it's approved by the AGM to be finished by July 2025. All the efforts that we have explained will be translated into figures, and we are here today to commit the most important figures based on 3 principles. Number one, we are going to maintain efforts in investment growth. As you can see here, the average level of investments in the next 3 years is going to be higher than the average efforts in investments in the last 3 years. Maintaining high results, record-high results in both EBITDA and net profit. The evolution of the debt is going to be the consequence of the mobilization of this EUR 19 billion. The commitment of BBB Standard & Poor's rating is based on the fact that these figures are clearly above the minimum threshold that Standard & Poor expects for our BBB rating as an 18% FFO net debt. And finally, as I said, dividend is going to move step by step up to a level of EUR 1.9 a share as a floor. As a summary, 4 ideas around our industrial model and 4 ideas about our financial goals. Number one is our commitment to extract value from an integrated position in a multi-energy offering. Continued commitment with the energy transition and that's the reason why we have explained our basis of investment policy, this investment to be done with financial discipline. And clearly, without forgetting our commitment to be operationally and at the same time client focus excellence in our day-to-day work. Financial goals. Number one, maintaining record results. Those results that everyone thought that they were going to be in a year will become stable for the next 3 years as they have been stable during the year 2024. Shareholder remuneration remain attractive and sustainable as well. Rating, preserving rating in any metrics. And finally, reestablishing free float to become a truly listed company. This is the end of the presentation. I would like to hand over now to Abel, who is going to manage all the different questions we are receiving from all of you. And we will try, together with Rita and Steven to give you proper answers. Thank you very much.

Thank you, Paco. So indeed, let's get started with a few questions received through the webcast. We're going to start covering first the generic questions, and I'm going to try to organize them by various blocks, okay? So there are a few questions around guidance and whether we can provide any sort of granularity in terms of the trajectory of EBITDA between 2025 and 2027. And also linked to that, whether or not the plan contemplate any inorganic or organic movement.

Well, I think that after the figures I have shown with an average figure of EUR 5.3 billion and a lending figure of EUR 5.3 billion, we can expect to be around the EUR 5.3 billion during the cross period. There may be some ups and downs depending on how the environment moves, but not big changes. And that's the reason why we have spoken about an average and also a point of delivery in 2027. We don't expect big changes, but it may be slightly changes among the period, which are not going to change the average figure of EUR 5.3 billion.

Any M&A or divestment in '25...

Not M&A at all. We are not saying no to the M&A. We are saying yes to the optionalities of M&A but not considering the plan. We are not forced to go for any M&A acquisition during the period. We think that this is the best way to feel free and to continue adapt our investment policy to value over size. Of course, there may be opportunities in the market. We will not say no to anyone before studying them, but we are not forced to do anything during the period.

Thank you, Paco. So now there are a number of questions as well with regards to capital allocation and the balance between investment and shareholder remuneration. What have been the short-term versus long-term trade-offs? And what's the thinking of the company around that topic?

Well, you talk after me if you want to say something in particular, Steven. Just 2 important remarks before talking about capital allocation. Number one is, remember that we are an utility and utilities are also understood not only but should be understood as a yield company. And we don't regret about being a yield company in the market, and that's what we want to show. We have some stability in our results, which is prepared to provide stability in our shareholder remuneration and become interesting investment for those that are looking for yields. At the same time, it's true. Our balance sheet may provide us some optionalities for more investment, something that we haven't said no. We have included all the organic projects that we have already in our pipeline, which are clearly above our minimum thresholds of return, which warranties value creation. And of course, any other optionality that may arise, we will consider it. The important thing of having flexibility in terms of our balance sheet is that we are not forced to sell and buy if there is any opportunity. But I want to remark one important thing is the mobilization of EUR 2.5 billion in the sale repurchase is also been possible, thanks to the fact that we have a balance sheet that today helps us to do that. We could not be doing that without the capabilities of the company and the power of our balance sheet. We are also committed to having an efficient balance sheet, and that's why we have clearly stated also in our presentation that we will continue to be looking for opportunities to optimize our balance sheet.

And just to add on to this. I think there is a trend that we have seen from sector peers, and you guys cover the utility sector. So you know it very well, which I think should lead you to draw some conclusions. And perhaps one of the conclusions you can draw is that the market has shifted. When we look at the returns that you can get from new investments, for example, in some of the renewal projects right now. I think we could all agree that it's not the same than it used to be. So maybe that is a function of a temporary market disruption or whatever you may call it. But the reality is that in some instances, it's not that we are sacrificing growth, it's simply that we're putting it on hold until such a time when the market conditions allow us to continue to create value for shareholders. It just so happens that the company is generating a lot of cash. And it makes absolutely no sense whatsoever to keep that cash yielding. And by the way, our team does a great job in placing that cash, but it doesn't yield the same as an investment. So it yields maybe 3%, maybe 4%, depends where you place it. So we're not going to continue hoarding cash. I think that's the worst message that we can send to the market. So I think it's the worst message that we can send to our shareholders. We're not going to hoard cash. If we don't find good investment opportunities that create value, it makes sense for that cash to be reallocated in part, not in full, in part to our shareholders, and that's what we're doing. When you're thinking about shareholder remuneration, you should be looking at the dividend. You should not be looking at the share repurchase program because, as Paco has mentioned, the destination for those shares is something completely different.

Thanks. I think that at least tackled a number of other questions already but just to continue on the capital allocation topic and, in particular, shareholder remuneration. So what would our priorities be in protecting the rating? Would we cut dividends? Cut CapEx? Consider an equity raise? How are we thinking about it?

We are firmly and deeply committed to a BBB rating. Within the context of this strategic plan, we've done a significant analysis, stress-testing it, et cetera. And there is absolutely no scenario today we can contemplate that would lead to a downgrade from the rating agencies below BBB. So it's not something that we contemplate. But because we are committed to it, we will take all necessary steps in coordination with the rating agencies to make sure that we protect it should come to be the case. But there's absolutely no scenario, even under stress that would lead the company to lose our BBB rating to them.

If you allow me, Steven to say a word on that. We presented, Steven and myself, there was 2 weeks after Steven still joined Naturgy at the time. We presented the first strategic plan in 2018. We fix some targets and today, you have seen that in the last 7 years, we have really delivered on what we have said. I know that the sentence of Steven has said that last profits do not warrant future profits, but at least creates credibility. The credibility we think we should have in front of you is to have done all proper analysis, that what we are presenting today have quite robust cushion to say that we don't envisage this scenario where the dividend requires for the rating to be cut or CapEx required to be cut. You have seen our prognosis of the scenario for the next 3 years. And within this scenario, which in particular and compared to other peers may seem a little bit more conservative, it's also a good sign of that our dividend policy has been established in a way that we can deliver.

And just complementing this matter, there are also a couple of questions with regards to what are the thresholds in terms of -- if any, in terms of net debt to EBITDA or FFO to net debt that we're looking at?

So the rating approach from rating agencies is holistic. I feel like I work for a rating agency selling their strengths. It is a holistic approach. I think looking at it exclusively from a quantitative perspective, and this is a big part of the picture, which is qualitative. And this is something that Paco has mentioned, I think track record does play a role in the rating assessments. It depends on the rating agency, some of them are going to be looking net debt. Some of them are going to be looking at FFO to net debt. I mean you have -- their methodologies are available. I think if you think about it in terms of FFO to net debt, a desirable level to keep -- a comfortable level to keep the BBB rating would be 18% FFO-to-net-debt. We're not hitting that in the plan at all. So we have plenty of space there. But again, I want to emphasize, more importantly, the qualitative elements of this, the commitment to the energy transition. The companies continue their commitment to grow, et cetera. And these are things that we are delivering to the agencies. In fact, today, we're going to be having discussions with them where we introduce the plan. And these are going to be some of the topics which we think they will be accommodating to.

Thank you. So now there are a few questions as well regarding the proposed tender offer. So let's jump into them. The first one is, I guess, a quantitative clarification, which is, does the EUR 16 billion net debt target by 2027 incorporate the tender offer? And also, does it incorporate the potential or future placement or share allocation to shareholders?

So the net debt incorporates the effect of the share repurchase, and it does not incorporate any potential cash in derived from the placement of those shares back to the market.

A few questions as well around the potential timing and vision to carry out the share repurchase.

I think that Manuel Garcia Cobaleda, our General Secretary, may probably give you all some more clarity on that process. Manuel?

Ideas that this proposal is submitted to the General Shareholders Meeting will be holding next 25th of March. This AGM will be publicly called probably this Saturday. So it will take a month. During that month, we'll be working to prepare the tender offer so that once it's approved, it can be presented to the CNMV almost immediately. It takes usually a couple of months to be approved depending on the work charge that the CNMV has. So we envisage to have green light by June. So before summer, the tender offer should be finished. And from that moment on, the company has full flexibility at its own discretion to recreate the free float. There's some planning for that, and we won't be committing to something like that, just the opposite. The tender offer will be explaining that the Board of Directors will have full flexibility to recreate this target.

Thank you, Manuel. Then there are a few questions as well with regards to the allocation and any -- the allocation mechanics of the tender offer. Any restrictions or any minimum tender percentage that we are required to have from our shareholders? Can we please comment or elaborate on this?

As you have seen in the documents, there is a condition for launching this offer that is that all main shareholders and by main shareholders, we mean those that are above the 10% of share participation should tender their offers. This is the best case. We want and we think that this will be possible that they commit to this. So they all have to achieve the target. The Spanish legislation, if we can go to how this is implemented, establishes [indiscernible] tender a privileged treatment for the minority shareholders for the first tranche of the 25%. This means that minority shareholders that want to tender their offers if they have a small percentage in the company, if they want, which is not obvious they will want to. But if they want, they could tender almost all of their package. This is not the case with big shareholders. The maximum that they would be able to tender us around this 10%.

Thank you, Manuel. Continuing with still the tender offer. What would be the criteria for Naturgy to decide when to sell the treasury shares resulting from the share repurchase and whether or not we could contemplate the cancellation of those shares?

I think it's explained well in the documents, the company will restore the free float at its own discretion. We believe EUR 26.50 is a price that does not reflect the fair value of the company. There is value at that. And subject to market conditions, we'll see and analyze different structures and strategies to make sure that we capture as much value as possible. But what was the other question, Abel, sorry?

Yes, whether we could contemplate the share cancellation if conditions were not appropriate.

So I'm sitting here with the innovator of voluntary tender offers for treasury stock, Paco Reynes, who started this back in the day in Abertis. At the time, the stock market regulator introduced a condition or a compromise for the company not to amortize shares within 24 months. We don't know if that's going to be the case in this instance. If it were to be the case, then we would not need to make any such decision prior to at least 24 months. We don't anticipate that to be the case. Again, we have announced a very attractive dividend policy, good prospects for the company moving forward. So we would expect to be in a position to restore the free float well before we get to that stage.

Thank you. I think that should clarify all the dynamics around the tender offer, but if there are any further questions, you can reach out to the capital markets team, and we will try to assist you. But let's now move on to the questions around the various businesses. And so with that, let's start with the networks. And the first question around networks is what are our assumptions for electricity distribution in Spain in terms of what we have included in terms of financial remuneration, in terms of investment caps going forward and so on?

Thanks, Abel. In terms of electricity distribution in Spain, we are, as we mentioned, we're expecting the new [ regulatory ] is keen to be published this year. In this sense, we're expecting the regulator to promote investment to guarantee electrification and integration of new renewals. Therefore, we see 3 main vectors. The first one is the increase of financial retribution rate above 7%; second, recognition of [ unitary ] costs; and third, increase in investment cap, up to 0.16% of gross domestic product.

So if I may add, the 7% is what -- the assumption we think included our numbers, that doesn't mean that this is a good representation of the company [ in full ]. But we want to be conservative, just all the numbers in the whole scheme that the Chairman has explained to you.

Thank you, Rita and Manuel. So continuing on the networks businesses. And clearly, we don't have the same level of visibility in gas distribution compared to electric distribution. But we are asked if we can provide any color on the assumptions that the plan contemplates for gas distribution.

Well, I think that it's important to hear our General Secretary's opinion about the last events around gas distribution, which reinforces the idea that the new regulation is going to continue to be based on the special parametrical formula that today is supplying. No, Manuel?

Yes. Several companies challenged the last cash distribution remuneration scheme that the CNMV established years ago. Those judicial decisions have started to appear. And the main driver of those decisions is that the changes of the CNMV made years ago are correct. We disagree on certain points, and we may challenge at least part of the rulings. But the main driver of those decisions is that the former regime was a mix of parametric formula and [indiscernible] base remuneration and that was only until 2000. From that moment on, there's no more mixed system. Right now, it's only a parametric formula. And therefore, we assume that the [ CNMV ] in its new update of the retribution formula, we'll stick to this ruling of the Audiencia Nacional. This ruling appeared just 4, 5 weeks ago.

Continuing on networks and now moving to Latin America. So there are a few questions as well on the main regulatory assumptions contemplated in the plan. And any risks that we contemplate with regards to the concessions expansions in LatAm?

Okay. So we are expecting a new integrated tariff review in both gas and electricity Argentina in 2025 and in electricity in 2026 that will give us more visibility about investment commitments and also about [ tariff ] updates into the following years. In Mexico, we expect also a tariff revision in 2026, in line with the last tariff provision. In Chile, we don't expect any changes of current regulatory framework. And in Panama, we expect continuity in 2026 tariff review. In Brazil, we are also expecting the resolution of 2023 and 2027 tariff review as well as the renewal of the concession in 2027.

Just to attach to what Rita has explained, it's important to know that our approach to the hypothesis of every review has been realistically conservative, which meant that you cannot commit with figures if you are not quite sure that you can deliver and our approach has been realistically conservative.

So we can now move on to energy management. So let's start with the more generic approach. Can we comment on the key drivers of performance in energy management with also a reference to the price assumptions considered in the plan, please.

Well, as you know, our contracts do not allow us to share prices in particular. The most important thing is that regarding the open volumes with American LNG, all the plan is supported by full hedge on the volumes, '25, '26 and '27 for both Sabine Pass and Corpus Christi, the 2 contracts in the U.S. As you know, the Sonatrach volume is clearly linked to the sold hedge on the commercial domestic market in Spain.

Thank you, Francisco. And then there's a question around how -- on which -- so our energy assumptions for the period, are they based on which references? And how do we see the correlation of gas prices to power prices as well? Some analysts point to the fact that we are seeing EBITDA in the range of [ USD 30 ] per megawatt hour. But nevertheless, we don't see power prices declining in a similar proportion. So what are our views in terms of the energy scenario going forward for gas and electricity?

As I went through the Page 31 in the presentation, we have seen that we also sympathized with the idea that energy prices in gas are going to fall down more than electricity prices for 2 reasons. Number one is within the full pricing mechanism, you need to adapt to the evolution of the CO2 emission rights, which by the way, in the page has shown that they are going up instead of down. And number two, because the electricity [ pool ] price is not only linked to the prices of gas but also for the number of hours that other technologies are marginating in the system. Then we have our own models. I think that the large utilities, all of us work with our own models, and we incorporate the assumptions on the different commodity prices in the market. The TTF, [ PVV ] prices you have -- you are seeing in the page are clearly in the forwards of the 23rd or -- I don't remember exactly the date -- sorry?

22nd of January.

22nd of January, then quite updated. Since then, the prices have been moving up and down, but they are more or less at the same level they were that day. But the reality is that when you translate gas into pricing of electricity, it's not clearly linked. There are other factors over the price of the gas that are affecting the electricity prices.

Thank you, Paco. Then there's a question still in the energy management business, which relates to the potential external developments such as the potential end of the Ukraine conflict and how this may impact the energy scenario. And what could this mean for the evolution of EBITDA in our business or its performance?

A potential end of Ukraine conflict may bring volatility into market, this is obvious, although we still don't know how is this going to be evolving. But as we mentioned before, Naturgy LNG volumes are fully hedged for 2025, and most of the volumes are also hedged for 2026 and 2027. So this gives us visibility into the period and reduces exposure to volatility. And we will keep on with our strategies of risk management and hedging opportunities during the next years.

Yes. Thank you, Rita. There are also a few questions to better understand the hedging. So perhaps it's worth clarifying, Rita, the percentage of LNG hedging how much is financial hedging? How much is back-to-back sales to customers? Of the 64%, if I'm not wrong, I believe that -- the majority of this was related to financial hedges and the remainder is?

So back-to-back sales of our U.S. volumes, mainly, we'll have to contract with that since we signed the U.S. volumes.

Okay. Thank you. So let's now continue into the thermal generation questions. So the first question relates to the capacity payments and what are the main assumptions that we've considered in our projections and the plan?

So we believe, as we mentioned before, that there's a case to instate capacity payments because CCGTs give the grant of supply to the system. And therefore, we expect capacity payments in 2026 and where our assumptions are EUR 15,000 per megawatt for the 60% of our fleet.

Again, as [ we've ] said, with power assumptions, this is a conservative approach, just the assumption that the plan makes, this does not mean this is what we think that will end up happening. It depends on a system of auctions that is still being designed by the ministry. It's right now in -- to provide public comments. So it will depend on the final outcome of those options of the real needs of the system and how many combined cycles are really able to provide such security of supply, not only because it technically can work but also have the needed gas to provide such security of supply. So this is just a conservative figure because we needed to use some figures in order to make the rest of the plan.

Thank you, Rita and Manuel. Still on thermal generation, there are a couple of questions around the evolution of EBITDA in the period. Now considering that we are factoring in the capacity payments, why is that the evolution of EBITDA is declining? How much corresponds to Spain and how much to Mexico? Can we please elaborate further on this?

So we are expecting reducing EBITDA mainly in Spain. And this is linked to an expectation of reduced thermal [ gap ] as more renewable capacity and batteries comes into operation. We also have to remind that 2022 and 2023 have been extraordinary in terms of production. And in terms of Mexico, we are expecting the renewal of PPA are starting to expire in 2027 at current market level. So we expect continuity in the business.

So we can now jump into renewables. And the majority of questions relate to what is the envisioned growth in terms of geographies and technologies. What are our focus areas from now on as it seems that our investments are, in this plan, a bit more narrowed or focused than in the prior one?

So as we explained before, we are still committed with electrification and energy transition, and we are expecting similar growth to prior years for the following period. We're expecting a growth of 2.2 gigawatts but with a selective growth focus on value creation and strict capital discipline. In these terms, we expect growth to be focused on batteries and selectively hybridization as well as wind power and mainly with focus in Spain in terms of geography.

Thank you, Rita. So let's move on to renewable gases. A few general questions on the opportunity of renewable gases. The economics behind the renewable biomethane, and what are the main assumptions that we are incorporating in the plan?

So what we -- our ambition in the plan is to become a leading player in biomethane in Spain. We have a large pipeline and solid pipeline to do so. And we also expect to look for alliances in order to accelerate opportunity. We expect to have a production of -- well, most of our investment will concentrate in 2027. It's important, it's key in this period to have a more regulatory view about incentives. And therefore, we expect to have already 1 one terawatt hour of production in 2027, but this will be significantly growing in 2028, close to 2.3 terawatts per year. Also, our EBITDA for renewal gases is estimated in EUR 30 million, but this EBITDA, as we mentioned, does not include all the investment that will be concentrated and we've done like something like a run rate estimation that will be close to EUR 85 million in terms of EBITDA.

To clarify one idea around biomethane. Fortunately, we have started in Spain, biomethane now and not later. As you know, the position of biomethane in other countries in Europe, in particular, Germany is quite advantaged compared to what it has been done in Spain so far. The commitment now including Naturgy's commitment and the national plan for energy at 2030 approved by the Spanish government last July, incorporates the aim of biomethane as an easy and quickest way to decarbonize those industrial processes which are not easy to be electrified or probably will be never electrified. Then this is the key reason why biomethane has a role to play. In this period '25-'27, the biomethane is going to absorb more cash that is going to generate because it's the time for investment. And this is the reason why we highlight that we have included around EUR 800 million of CapEx in these 3 years, but only EUR 30 million of EBITDA at the end of '27. We cannot compare these 2 figures, we are not crazy investors at multiples over 20x, as Steven has mentioned before. Just to compare these 2 figures, it's important to see how would be the run rate of EBITDA once this investment will be done. But of course, as you know, investments come first and results later and not on the other way around. Then I wanted just to highlight our extreme and strong commitment for biomethane as a quicker and easier way to decarbonization. It's time now to invest. Most of this EUR 800 million of CapEx are already in our pipeline, then we just need to deploy, and we need to develop. And hopefully, this will be done if it's possible earlier than expected but considering this plan.

Thank you, Paco. So let's now move on to the last business, which is supply. And basically, the questions are around the key drivers of performance during the period 2025 and 2027 and margins evolution and so on. And whether or not -- whether we can clarify the evolution of EBITDA going forward.

; So we are expecting increases in electricity sales as well as distributed generation in the period and service penetration while maintaining gas position and pushing biomethane as a decarbonization alternative to our customers, as we just mentioned. This will allow to sustain margins in the context of decreasing energy prices.

Just one additional clarification to this margin strategy on commercial side. I don't know if we have gone too fast in this presentation just to put it value the new digital platform. This is one of the reasons why in this scenario, which is more challenging, we are prepared to maintain the margins with our clients, thanks to the fact that this new digital platform will provide us more competitive in cost at the same time that better quality of managing the client. Then we see, and as Rita has explained, we see a stability in our EBITDA, thanks to maintaining margins working on two sides, on the side of the volume and the side of the cost.

Thank you so much. So these complete and finalizes the main questions received. There are a few other questions of very quantitative nature, which the capital markets team will address afterwards by e-mail. If there are any remaining questions on the tender offer, again, we are here to assist and support. But this concludes our full year 2024 results presentation and the strategic plan 2025-2027. And we hope to see you on the road as we will be marketing our -- this plan in the coming months. And thank you very much for joining on behalf of the whole Naturgy team.