Good day and thank you for standing by. Welcome to the REN's 2023 First Quarter Results Call and Webcast. At this time all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, you can please press star one and one again. Please note that today's conference is being recorded. I would now like to hand over to speaker Madalena Garrido, Head of IR. Please go ahead. Thank you very much, thank you all on the line for joining us today for our Q1 2023 results conference call. As usual, we have here our executive team, Rodrigo Costa, our CEO, Gonçalo Morais Soares, our CFO, and João Faria Conceição, our COO. Rodrigo will start with his opening remarks then João and Gonçalo will guide you through the main operational and financial highlights. We will move to a Q&A session on which we will be taking your questions. I will now pass the word to Rodrigo. Thank you, Madalena. Hello and welcome. Thank you for being here with us today. Our apologies for changing to anticipate a little bit the hour of the meeting, we appreciate the fact you were able to adjust. Yesterday we announced the quarter results, we also had our annual shareholder meeting. It was a good meeting, the first face-to-face meeting in three years, it was great to have the opportunity to talk in person with our shareholders. As you probably know, we had 100% of favorable votes in most of the agenda items, all of them well above 98%, which is, you know, it's a good result. Today on my introduction, I will just cover one item that is driving several cash questions, and after Gonçalo addresses, we will be available to address any topic you want to go through. Since we are getting questions about the recent developments regarding CESE, I want to share a few notes on the impact of a ruling regarding a court claim from a gas distribution company regarding the 2018 CESE. The decision that was published in March by the Constitutional Court has been filed by a natural gas distribution company, not from from our group. The court came to declare the unconstitutionality of the 2018 CESE rule. The court followed the arguments of the natural gas distribution company in the part in which the CES is levied on the assets of natural gas concessionaries for violation of the principle of equality. Our analysis is also that we can extract strong arguments for our CES case, in particular regarding the natural gas sector concessionaries. We believe there are also strong arguments applicable to REN electric, which is of course good news. The content of the ruling, which is basically follows our line of argument, shall in our view be transposable for all years from 2018 onwards and inclusive to 2018. For all REN concessionaries, as they are not part of the electricity generation sector. This will need to be confirmed by the court. We do not want to anticipate much more. You know, we are in a phase that we are working very close with our lawyers. There is many, many cases on the courts that we will need to understand what's going to be the decisions. Of course, we will be available to talk a little bit more about the topic if you want. With that, Gonçalo? Hi. Thank you, Rodrigo. Good afternoon to you all, and thank you for joining. I'm just going to slide number four to guide you through the highlights before passing to João. We believe we have in this first quarter a strong operational performance. EBITDA grew over 11% to close to EUR 132 million. This was on the back of, one, the domestic business, which was and continues to be impacted by the increase of the rates of return on one side, and also by the decrease of certain costs, namely electricity that last year had a negative impact. Secondly, also a continued, although smaller, but a continuous positive contribution from the international business. Net profits have been increased to almost EUR 13 million. Bear in mind that the percentage increase is influenced by the fact that we account for the entirety of the sales levy in the first quarter. Smaller changes then make a very large percentual and year-on-year changes. It's more impacted by this than something else. Although taxes and the levy still impact negatively, I think that represented a strong performance here, which was also impacted by the increase of financial costs that was expected by us and is the normal in the regulated company. In terms of CapEx rose quite a bit. As we've said, we expect a good year. There are still some delays in the transfers to RAB, but I think it's very early to make any comments. On the operating side, I'll pass it on to João, for him to kind of summarize what are the main message. João? Thanks, Gonçalo, and good afternoon to you all. I would suggest we jump to slide six, which you have the summary of the business highlights and from the operational perspective. Well, the key message are, as you may heard or may seen, we have recovered the renewable share within the electricity system in Portugal, basically because we came back to the normal levels of hydro generation. Last year, we were at 12% hydro in the total share of electricity generation, we increased this share to 34%, which makes the overall account of renewables in the total consumption to increase from the 49% to 72%. In terms of consumption, we are recovering slightly the consumption levels. It decreased to 2% versus last year. The flip coin of this is the natural gas consumption, which decreased, mainly explained by the fact that we use much less combined cycle plants to generate electricity. Therefore, the consumption of gas to turn from these these plants decreased significantly. Basically, it decreased almost 40%, and this will drive a decrease of almost 20% in the total consumption of natural gas. The good, the good point of this is that with these figures, we are clearly complying with the directive and the objective of natural gas consumption reduction due to the Ukrainian Ukrainian crisis. In terms of quality of services, nothing really important to say apart from the fact that we are at the very maximum levels of quality of service. What electricity is concerned, the average interruption time was, in this first quarter of 2023, 0 minutes. The combined availability rate, 98.6%. Both clearly above the thresholds that the IMDP regulatory incentive set for these two variables. On that regard, we are okay, and we are complying with the targets set by the regulator. On the natural gas side, combined availability rate for the transmission was at the maximum level. Our distribution operation, we keep improving in the emergency response time from what we had the previous year. With that, Gonçalo, pass back to you. Thank you, João. If we move to slide seven, it's just the main highlights of the financial results. As I said, EBITDA grew over 11%. Financial results also were worse because of increasing financial costs, but that didn't prevent net profit from increasing close to 115%. We will go now a little bit deeper into these items. On slide number eight, you can see the consolidated view. There is a positive impact of almost everything, you see that the main impact is driven by the increase of asset remuneration, that is ROAR, rate of return. Secondly, you see that there is a positive contribution from Transemel. Thirdly, that positive contribution from the international segment that you see continues to increase its weight. It was last year at this time, a little below 4%, and it's inching towards 5% in this quarter. If you go to slide number nine, you can see that impact of rates of return. You see that there is a 90 basis points increase in electricity and a 90 basis points increase in gas, both distribution and transportation, and it has had a positive impact. It is driven by the fact that the Portuguese bond yields are increasing. That also translates into higher rates of return and into higher financial costs. If we look at CapEx and looking at investment, and to give you some color on these numbers. What we see is increase in CapEx, a strong one in the 1st quarter. We also see still small number in terms of transfers throughout. In terms of CapEx, I would say that it is early to say, but we do expect a year with strong CapEx numbers. We said that we expect this clearly to grow versus last year and to be at the levels or higher than 2021. We are being a little bit careful because we do feel, and this also relates to the transfers throughout, we do feel that in some cases, licensing and permitting processes still are a challenge. I think they are a challenge to whether they are to many other TSOs in Europe. That being said, I think that from a financial point of view, I think namely in electricity, since we are now in a TotEx model, we do want to make things as fast as possible for operational reasons. From a financial point of view, if it's in January instead of being in November doesn't really make an impact in our accounts. It's more being driven to make these investments and pushing decarbonization as fast as possible rather than having a negative impact on the financial side. On slide 11, you see the evolution of the regulated asset base. It's the first quarter, you still don't have a lot of transfers, everything is coming down, which I'd say is more or less normal. In slide 12, what you get is the impact in different ones. You see that there is a positive impact in all of them of the rate of return. There is a positive impact of the asset base on gas distribution, electricity, and a slight negative impact in gas transmission of the evolution. As you know, the new CapEx that will come in gas transmission driven by hydrogen, as João explained in our last call, is going to be coming in a few years' time. For some time, you will still see some pressure on the asset base of gas transmission. On OpEx on slide 13, what you have is a positive and a decrease. I would say that you should not expect this amount of decrease for the year, but what you can expect, and you can see this trend. There is an increase in personal costs. That is normal, and this is being driven by two reasons: not only are we adjusting, although partially, but we are adjusting salaries for the inflation, but we are also increasing the number of people that we have, given the amount of activity, namely in the operational areas that is happening right now. On the flip side and on the positive side, you can clearly see lower electricity costs, so this is the reverse of what happened last year. We are seeing these costs decrease and that has a positive impact versus the costs of last year. There's other costs, operational and maintenance and IT costs that also came down a little bit on this first quarter. That kind of represents it. Again, we think that we are in a good position in terms of costs, but this should not decrease as much for the full year. I think this is a more also temporary impact given the quarter where we're in. On slide 14, you have some color on Chile. Things keep going as they were last year. You can still see a quarter that is increasing a lot. Again, you should not expect this amount of increase for the full year in Electrogas because it was driven, and it grew starting a little bit later last year. Everything is going well. Transnorte is growing, driven by the organic investments that we have been doing. We are looking again at the new auctions that are coming to see if there are good organic growth opportunities in Transnorte. I think on this side, everything is going okay. Operationally and quality of service, everything is going okay. Electrogas continues to have very high volumes, being driven by those higher tariffs and higher volumes in that in Chile, and that is pushing revenues and EBITDA upwards. Below EBITDA, so depreciation in line with asset evolution. Taxes, I think that Rodrigo already explained the main point which is relating to sales. Let's see how that goes moving forward, but I think we clearly believe that these are good news. On the financial result side, this was mainly expected, the financial cost is now around 2.4%, and this is basically driven by the evolution of the arrivals year-on-year. This has on average almost an impact, an increase in our arrivals of close to 4%. This is what it is. Although we have refinanced everything up front, although we have fixed a good amount of the debt, it's impossible not to have some kind of impact in terms of cost of funding, and this is what we are seeing now. We do not expect the full average cost of debt to be much different from the value that we already have on the first quarter. This 2.4% is, I'd say, a good guideline for what you should expect for the full year. Unless something would happen to arrivals again in a dramatic manner, I would expect this not to change. Slide 15 kind of shows you and wraps everything up. What you see is that some increase in financial results does not take away the increase in the EBITDA driven by the rates of return and good cost performance. We have this almost a 115% increase in terms of net income. On the debt side, what you see is an increase in debt. This is basically driven by the increase or the variance in the tariff deviations. As you knew, last year, there was a massive non-recurring positive increase in our favor of this tariff deviation that made net debt be abnormally low. That is now shifting as we were expecting. We are giving back that money. That deficit that we had in our favor or that super profit is decreasing. If you take that out of the equation, what you still see is a strong cash flow generation. It's also, it's also normal because it's the 1st quarter, CapEx is lower. We haven't paid dividends, so it's normal that in the first quarter you have this, I'd say, slightly higher than usual for a quarter asset variation. That being said, completely within our expectations. One comment on the, on debt maturity, and just to clarify certain things. The reality when you look at our maturity that is now slightly below three years, it is lower, but because we have a lot of committed liquidity lines which have much longer maturities that are not being used because of technical reasons, because of this, we wanting to optimize the cost of debt. They are completely free to be used, and if we use them, the reality is that we could increase these three to almost five years of maturity. We are not doing it because it doesn't make any sense for us to increase abnormally the cost of debt. This is an issue that some analysts asked us in the past, I wanted to make that clear that we are not driving maturity down in any, I'd say, aggressive way. Actual maturity is actually higher, and we always try to maintain duration kind of balance between both sides of the balance sheet. Okay? Slide 18 just summarizes price and returns. I said that we are more or less in line with market. Nothing to comment there. In slide 19, just to comment on the ESG standard. It's not that we are... we live for the ESG rating, but we do feel very strongly about the work that we are doing on ESG on all of the fronts. We are happy that that work, which is what is important to us, is being reflected in the ratings. There's been a, in S&P Global, we've come two years ago from a 42 and now we are at a 62. We've been improving two years in a row. In the CDP, we came from a D rating to a B rating. We've been improving in two years in a row. In Sustainalytics, we were at 19.4, we are now at 18.3. We have been improving two years in a row. In MSCI, we were at triple B and we are now at triple A. We were improving two years in a row. The only one that we've been stable is ISS, is kind of the outlier. This shows you, I think, the recognition from several different rating agencies that we've been very serious about this work, which we think is very important, a very important pillar in our strategy. Just closing remarks very fast. Slide 21. Good financial performance and strong, I'd say, balance sheet also performance along the year. First time that we should have a very strong CapEx and investment year. I think everything is going to plan. In the AGM yesterday, we approved the remainder of the 16.4 dividend to be paid, the EUR 0.09. We will next week announce the exact day that it will be paid. It should be within the normal delay that we have between general assemblies and the paying of dividends, upfront. With that, I conclude the presentation, and I open up for any questions that you may have. Thank you. Thank you. As a reminder, to ask a question, you need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, you can please press star one and one again. Once again, please press star one and one if you have any questions or comment. Please stand by while we compile the Q&A roster. This will take a few moments. Thank you. Once again, please press star one and one if you have any questions or comment at this time. We are now going to proceed with our first question. The questions come from the line of Enrico Bartoli from Mediobanca. Please ask your question. Hi, good afternoon, thanks for taking my question. The first one is related to your comments on the decision of the Constitutional Court on the energy levy. I was wondering if you can give us some color on the next steps that you could expect for this decision, and how long you think that it could take in order to have more visibility on the impact on you and on the possible, at least partial, revision of the special levy. Second question is related to the RAB evolution in the quarter. Actually total RAB declined by 2% compared to last year. If you can give us some comments on what you expect in terms of evolution over the next quarters, considering the evolution of CapEx during 2023 and the transfer to RAB of the CapEx. The third one is related to the rates of return. We have seen this substantial increase linked to the evolution of the Portuguese bond yield. If you can also give us some comments on what you expect for the coming quarters if, according to the rollout in the rate of returns or the evolution of bond yields, expect a further increase by the end of the year. Thank you. Thank you. I will take the first question on CESE. What can we say at the moment? This is very difficult to give you know, with a timeline. When we talk about courts, to be honest, we never know, you know, how fast they will Come forward to clarifications. Also, on the other side, we also need to go through the cases and understand what we should do and how they will react. We believe that the conditions of financial exceptionality that according to the previous case of law of the Constitutional Court, justify this extraordinary validity of CES cease to exist. Namely, the duration of the excessive deficit procedure, which ended in mid-2017. I think this is one of the reasons why the decision of the Constitutional Court changed. From 2018, the tariff deficit trajectory, you know, means that the CES no longer has the same sense of urgency that it had when it was created in 2014. The lack of fundamental connection of CES to the generic purposes of the energy sector sustainability, you know, also, the, let's say the purpose of other than reducing the tariff deficit is proven. In particular, the link between the CES and companies operating outside the electricity generation sector no longer makes sense. I think because of all these together, you know, for once, it is a very complex case. You know, we need to, you know, do a deep analysis. We also know that more decisions will be announced soon. You know, there is plenty of cases. We have our own cases also, and we are expecting. You know, for sure we are expecting some positive impact, but we cannot anticipate, you know, timelines or even decisions. You know, we know it's positive for sure. We believe this is going to create a change in the direction of the analysis of the case. As you can imagine, I had a lot of help from our internal lawyers to tell you what I'm sharing with you. It shows the complexity of what is going on. You know, in the end of the day, I think, it will be immediately public any decision that they disclose. I'm sure we will talk again and, we will keep, you know, addressing the topic very carefully. It's very important for us. The... For us, it's all upside for sure. If the one from the other questions that you have on the RAB evolution. I say the, on the first question is the first question, as I said. If you look at gas distributions and gas transmission, the evolution that you have in 2022 versus 2021 is not going to be very different from the one that you have in 2023 versus 2022. That's more or less the trend. On the electricity, I think you have to bear in mind a couple of things. On one side, there were some projects that last year were delayed coming through this year. That's on one side. The second thing is that we are a little bit more careful because of what I explained. There's some permitting and licensing issues that sometimes delay in a specific year, the project. Sometimes it delays the evolution when you cut it at the end of the year of the RAB. Okay? The third comment that I would make again to you, and that I made in the presentation is, it's not in the electricity part, it's not so important to focus on the RAB evolution on a yearly basis now. Right? We are on the CapEx model. What we have to look at is at the window of the four years. If we are slightly late or it doesn't really have, doesn't change what our returns are, what the amount of money that we are making, it should not impact it in a material way. What it does impact is what your third question was, which is the rates of return. I mean, yes, I mean, of course it depends on how rates stay and evolve for the rest and until the 30th of September. If things stay as they are, you probably can expect to a small increase in the rates of return of the assets, but not as much as we've seen up until now. I think that we have a major increase that pushed this 80 to 90 basis increase. As of now, I think you may see an additional increase, but not that material. Okay. Thank you. Thank you. Once again, ladies and gentlemen, if you have any questions or comment, please press star one and one on your telephone. We are now going to proceed with our next question. The questions come from Ignacio Domenech from JB Capital. Please ask your question. Yes, good afternoon and thank you for taking my questions. The first one is on the dividend timings. Not sure if you could provide some visibility on the timings of the dividend payments this year, if anything has been decided yet. The second question is on the positive contribution of OpEx of EUR 4 million to EBITDA on gas transmission. I think you mentioned on higher pass-throughs, but maybe if you could clarify where is the increase coming from. The third question is on the cost of debt. You were mentioning, We should expect cost of the two remains stable throughout the year. My question is, looking into 2024, 2025, given the maturities of your debt, before you were mentioning, you know, the credit lines. maybe what's the level, you know, the cost of debt in the upcoming years, if we should see a material increase? Thank you. Let me answer, question one and three. The second one I didn't, but let me cover this, and then you can repeat the second question. On the dividend payment, there aren't any definite dates, but typically we pay the dividend two or three weeks after we do the AGM, more or less. I don't know, you can check. It's the normal. And that will be the second part of last year's dividend. The anticipated one should be paid more or less at the same date as we paid last year. We typically what we will do is have a board at the end of November with the accounts up to 30 of October to set the interim dividend and pay it in December. That's more or less the date. I'm not substituting the board. These are things that not relate for this next one, but the other one will still go to the board. It's, I'd say, what you should expect. On the cost of debt, what I can tell you that, yes, it can still go up. Of course there is a major drive, which is the fact that there was this major increase in rate. Rates are now stabilizing, so if rates stabilize in the market, you can still see a small drag of increase of average cost of debt. You should not see a major increase, so you'll probably see it still increase a little bit, but not materially versus the numbers that you have in 2023. Yes, you can have a small increase. Yes, depending on how rates evolve in the market, you do have part of them are variable. There is a lot of funding that we have already done up in advance. We have already locked in a lot of funding already, so it doesn't have to be that we have a major increase in the cost of debt in 2024 or 2025. It should be a, I'd say, small increases versus 2023. Your second question, we didn't get it quite well. I don't know if you mind, you don't mind repeating it? Yes. Ignacio. Yes, it's on the contribution on EBITDA, gas transmission. I believe there's a EUR 4 million increase from OpEx. Okay. EUR 4 million contribution. I'm not sure if you can clarify where is this contribution coming from. Okay. I think there was something related to pass-through costs, but maybe if you could give us some light here, would be useful. Thank you. I'll have to check exactly that number. I mean, the core OpEx is evolving, basically driven by the electricity cost. I have to check exactly. We can check what the number. I am not seeing here the EUR 4 million, but I can check with you exactly what those numbers are after the call, 'cause I'm not seeing them here, I want to be sure that I know exactly what the number is. Okay? Okay. That's fine. Thank you. Thank you very much. Thank you. We have no further questions at this time. I'll now hand back the call for closing remarks. Thank you. Hey, Ignacio, just to say something. Relative to Ignacio, this is basically the cost, I think, of electricity. That's the main contribution that is being driven, those, that evolution on gas transmission. Okay? Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.