[Foreign language]
I would like to start by emphasizing once again our full commitment to the decarbonization process. I would like to confirm that during this quarter, we continued to implement the measures that we disclosed to you in the 2020 results presentation, that is, two months ago.
Decarbonization cannot be postponed, and our company's vision is that we have to decarbonize now by researching and innovating in future technologies and by doing everything within our reach with those technologies we have available today. Reducing emissions is not about slow but steady progress.
Every reduction adds up. At Enagás, between 2018 and 2020 alone, we already reduced our CO₂ emissions by 30%, and we continue to make steady progress to becoming carbon neutral by 2040. In total, since 2014, we have cut our emissions by 63%.
With regards to our commitment to ESG, that is, environmental, social, and governance criteria, S&P Global Ratings acknowledged the sound of Enagás on environmental, social, and governance criteria. Enagás has been awarded the highest rating that this agency has published in Spain across sectors so far, and also the highest in Europe in the utilities sector over the past year.
You can see the recognitions awarded to the company for the details in the presentation. With regards to Q1 results, they were very positive and are fully in line with our goals and budget. We reported a profit after tax of EUR 92.9 million. As you know, on January 2021, the regulatory forum for the 2021-2026 period became effective, and its impact is already reflected for the first time in these results.
Nevertheless, having a stable regulatory framework gives visibility to the company's regulated revenue for the 2021-2026 period as a whole. Let me also remind you that in the 2020 results, we reported a positive, non-recurring financial result of EUR 18.4 million, which of course, has not been the case again in this period.
In this first quarter, our cash generation is fully aligned with our year-end goal, and so is our debt, which we have been able to curb slightly. We also improved our debt financial cost, which went down to 1.8%. We have an excellent liquidity position that stood at EUR 2.802 billion on March 31st. The contribution of our affiliates to net profit after tax continues to increase and has already risen to 38.1%.
To conclude, the company's performance during this quarter was very positive and very much in line to meet all of our annual targets. Okay, concerning our infrastructures regarding natural gas demand, it is already slightly above pre-COVID crisis levels. So far this year, that is to say at April 18th, last Sunday, total demand is already 0.8% higher compared to the same period in 2020.
You should bear in mind that this entire period of 2021 has been affected by COVID-19, while last year, the state of alarm did not begin until March 13th. Conventional demand, which includes both households and industries, accounts for about 86% of total demand of natural gas in Spain and has climbed by 4.7% so far this year.
Specifically, residential demand has increased by 9.3% due to the impact of Storm Filomena in the first half of January, when household consumption Rocketed by 30%. In terms of industrial demand, which is a lot more representative of the current economic situation in Spain, the accumulated figure for fiscal year 2020 went up by 2.6% year-on-year, taking into account that last year, January, February, and part of March were not affected by the pandemic.
This proves the key role that gas and gas infrastructures have played in ensuring supply in the face of COVID-19 and the biggest cold front experienced by Spain in recent years. It further proves the key role that they have and will continue to have to achieve the decarbonization objectives ahead.
I would like to touch upon the most noteworthy achievements of our international affiliates. With regards to Trans Adriatic Pipeline, TAP, there are two relevant milestones. First, the financial completion date has already been reached.
This means that the banks financing the project have released the guarantees provided by the shareholders during the project's construction phase. The second milestone is that this development has started to contribute to Enagás results significantly. As you know, this gas pipeline began supplying Azerbaijan gas to Europe in December 2020, and on March the 19th, it reached the first 1 billion cubic meters, 1 BCM delivered.
The use of this infrastructure, which is critical to European energy security, is evolving as planned and became fully operational in Q1. Currently, TAP continues to get ready for the launch of the binding phase of its market test by early July 2021, which could result in the infrastructure's increased transport capacity. In the United States, where Enagás is present through Tallgrass Energy, the energy market in this country as a whole continues to pick up favorably.
In the first quarter, the Energy Information Administration reviewed its forecasts upwards for oil and gas production in 2021 and 2022. The extreme cold wave that hit the U.S. in February and that triggered an energy crisis in some regions and states placed value on how strategic Tallgrass infrastructures are to supply some relevant markets in the country. Even in such adverse circumstances, all such facilities remained fully operational.
The Tallgrass business performed very well over the first quarter. Still in April, the company is optimistic about reaching the upper end of the financial target range set for the whole of 2021, which we already announced in our February strategic presentation.
Excellent news is that a strategic alliance has been closed with Bridger Pipeline LLC. This is an affiliate of the True Companies Group. This transaction strengthens Tallgrass to achieve its global goals for the 2021-2026 period.
The company thus adds the second-largest pipeline operator in the Bakken basin. The Pony Express business is strengthened, increasing its long-term contracted capacity, and Tallgrass diversifies its access to other production basins. You have more detailed information about this new joint venture and the performance and outlook of Tallgrass in the presentation.
In other countries where Enagás operates, our affiliates are playing an important role in securing energy supply. I would like to highlight a significant milestone in Chile in the Quintero LNG terminal.
The final investment decision approval for the construction of the fifth cistern loading bay, which represents an investment of $6.5 million. This figure is perhaps not very significant, but from a qualitative perspective, it proves that this asset is working practically at 100%, and that's why we had to start building this fifth cistern loading bay.
These cisterns are the ones that carry LNG through motorways up to certain consumption points for manufacturing purposes. Information about the rest of our affiliates is also included in the presentation, and the results reported by all of them are positive and in line with expectations.
Just like every quarter, I would like to provide you with an update on the Gasoducto Sur Peruano situation. The arbitration proceeding is taking place according to the established procedural schedule, and at Enagás, we uphold our willingness to reach an amicable agreement with the Peruvian state.
As part of our commitment to the decarbonization process, we continue to work on developing renewable gases. We have already submitted more than 50 hydrogen and biomethane-related projects to the various calls for tender launched by the Spanish government.
Specifically, right now, we have 34 hydrogen projects and 21 biomethane projects across Spain's autonomous regions, together with more than 50 partners. All the projects that we promote and that we are trying to develop meet the criteria that you already know.
That is, there are six criteria, namely, contributing to decarbonization by optimizing costs to a fair and inclusive transition, driving the entire value chain, promoting the development of the Spanish industry, creating sustainable employment, always with other partners, and offering a suitable return on investment.
Some concrete and relevant examples only in the first quarter include the following. We have commissioned the first hydrogen refueling station in Spain for long-range fuel cell electric vehicles together with Toyota and other partners. We have also reached an agreement with Naturgy to produce green hydrogen from wind energy in Asturias.
We have also joined a European industrial alliance to produce green hydrogen in Spain. Together with Ilunion, we have created Llewo, a socially and environmentally sustainable logistics operator as an evolution of the startup Gas2Move, arising from the Enagás Corporate Entrepreneurship Program.
We announced the first biomethane connection to a private gas network in Spain in a small location called La Galera in Tarragona. We are also making progress in the works on the first LNG supply ship to be built in Spain.
We have signed an agreement with the transmission system operator in southern France, Teréga, and with GazelEnergie and DH2 Energy to explore the development of a renewable hydrogen value chain between Spain and France. Last week, we announced that we became a shareholder of Satlantis, a leading space company that measures methane emissions with very high precision.
These are some examples of how the company is advancing in developing specific projects and partnerships in the field of renewable gases and decarbonization. Before wrapping up, I would like to remind you of our goals for the current fiscal period, 2021. We estimate a net profit by year-end of around EUR 380 million.
Our solid cash generation will reduce net debt and while we keep a solid and optimal balance sheet structure. Thirdly, we continue to intensify our overhead control and savings plan, doing away with all that is not essential to our business continuity and current and future activity.
We also maintain our commitment to employment and likewise, we maintain our commitment to our shareholders and their remuneration. Our cash flow generation enables us to guarantee our dividend policy, specifically for 2021.
As you know, it will be set at EUR 1.70 per share, which accounts for a 1% increase compared to 2020. Some conclusions. I will finish up with a few brief conclusions. We have a firm commitment to the ecological transition and to becoming a carbon neutral company by 2040.
We now have a regulatory framework in place until 2026 that provides high visibility of a significant portion of our regulated revenue over the next six years. We envisage good prospects in all our affiliates, and specifically in Tallgrass, whose partnership with True Companies is a highly positive milestone for both Tallgrass and Enagás.
We already have a pipeline of 55 renewable gas projects with over 50 partners that can mobilize a total joint investment, if all projects are completed, of around EUR 6.3 billion on all accounts.
Finally, the high visibility of cash flows expected for the 2021-2026 period secures the company's commitment to our dividend payout policy. Thank you for your attention. Now, if you have any questions, please feel free to ask, and as usual, we will do our best to answer them as fully as possible, together with the rest of the team members. Thank you.
Hi. Good morning, and thank you very much for the presentation. I have three questions. One, with regards to hydrogen projects on which you are working, you have mentioned that you are working on 55 projects and you could mobilize up to EUR 6 billion.
The question on this, what is the corresponding investment by Enagás out of this EUR 6 billion in this joint investment on which you are working? A question in line with this, in the strategic presentation at the end of February, we already spoke about this, the topic regarding hydrogen is accelerating and the opportunity is accelerating.
I would like to know a little bit more about your vision in terms of when the company will see an impact in its CapEx, whether 2023 or 2024. When do you think that the company will perceive that impact and considering that the RAB is decreasing to a company where the RAB is going up? With regards to Peru, we've seen some escalation by the Peruvian government in the dialogue with Enagás.
If you please could explain what's the status on this and how you think this can be resolved and when it can be resolved. The third question regards the affiliates, the international affiliates. There's been a significant growth, and I would like to know the detail of the EUR 49 million contribution, if we can have the breakdown of the most important affiliates. Thank you very much.
Thank you. Thank you, Javier. We will discuss briefly and we'll reply immediately. Thank you very much, Javier Suárez. I'm going to reply quickly to your three questions. One, with regards to the 50 projects or over 50 projects. If all projects were completed, the equity, we know that we're with other partners, it could be around between 400, 500 or 600 million.
We don't know which projects will be carried out. With regards to the schedule, the best estimates that we have right now is that we would need to look at the pace at which the projects are approved by the European Union, by Spain, and by other countries.
Our estimations is that for 2023, we could start to have the impact of this investment as a new investment by Enagás in a different field to which we are accustomed. With regards to the second question, recent events do not affect the proceedings in the arbitration before the World Bank.
The question to provide the breakdown in terms of the contribution of the affiliates, I'm going to give the floor to the chief financial officer, to Borja. Hello, chairman. Hello, Javier. With regards to the contribution, TGP, it's TAP at 9.3, Quintero 7.7, BBG 6.1, and Tallgrass 4.4%. The top one was 30%. Thank you very much, Javier Suarez, and we are ready to answer other questions. Next question.
Thank you, Javier. Next question is from Alberto Gandolfi from Goldman Sachs. Good morning, and thank you very much for taking questions. The first two are related to Tallgrass. Could you give us an update on the renegotiations of contracts with Tallgrass? Is the term going to be short-term? Are you renewing long-term?
What are the margins that you are seeing in the first quarter, which is very different to the one in the beginning of the COVID? Can you give us more detail on Tony? It's not clear to me whether that's a recapitalization mission. Out of the 25% of Bridger, how much is transferred or how much is used with assets, how much is done with the cash flow?
There's somewhat a dilution in this deal, and I would like to know what's the percentage. With regards to the hydrogen, and I don't know whether there's some sort of an update with regards to the regulatory framework to regularize the EUR 200 million, and how much of those are local.
Thank you very much, Alberto. We will discuss briefly and we'll reply immediately. Thank you very much, Alberto Gandolfi. To the first questions, I will ask the CEO, Marcelino Oreja, to reply, and I go for the third one. Marcelino, you have the floor.
Thank you, Chairman. With regards to Tallgrass and the regulation. With regards to REX, we didn't go forward with the hiring between West and East. We will work these months. We are working on the hiring between the West and the East.
With regards to the operation that we are announcing, we haven't closed it yet, so we cannot provide more details up until the following weeks when we expect to close the operation. They provide capital and infrastructure and assets so that we together, we can do all the flows and in the long-term contract. We have contracts of up to seven and 12 years.
We will also reinforce the contracts that will regulate both, that will provide more value to our infrastructure. It's a good operation. As soon as we have further detail, we can provide more details through the Investor Relations team or through myself if you want further details.
I see that they provide robustness in terms of crude and turning Pony Express in one of the critical infrastructures to transport crude from North to South and other products in the United States.
Thank you very much, Marcelino. I move on to the third question. We have two type of revenues related to renewable gases, and more specifically, hydrogen. They're regulated, which would be the investments measured to make the high pressure network in Spain and in other countries is able to allow hydrogen transport, i.e., through blending or in a specific manner. We don't have expected schedule right now.
We don't know specifically when the regulator will give us the green light for the investments. These investments could count for EUR 400 million, EUR 500 million or EUR 600 million, but are not related to the ones I mentioned before, for a period that I don't dare to say right now. It could be four, five years.
These investments will be made as from 2023, 2024 or 2025. This will depend on the decisions made by the European Union generically. This would be a regulated investment that could be around EUR 100 million a year for around five to six years.
As for the schedule, we could start 2024 or 2025. The second bundle are direct investments in projects. I reckon these would be deregulated and, considering our knowledge, all the gas transmission will be deregulated.
This, I've given the figure before, and this could be developed, as I say, as from 2023 or 2024. We're still awaiting the type of objectives of the hydrogen projects all across Europe. The European Commission and all the national regulators need to say how we ought to act with these two investments that we're working with.
We are working in a parallel fashion, and as you said, and Javier Suárez said this as well, the hydrogen and renewable gases is speeding up. Some years ago, no one spoke about this, and right now it's all very certain, and we have different types of ways.
I think this is going to speed up the decision-making processes that the European Union is going through, especially related to taxonomies and more specifically with regards to the regulated roles of the TSOs every quarter.
In between quarters, we will be ready to provide more information to the extent of our knowledge, of course. Thank you very much. We are ready for the next question, chairman. The next question is from Javier Garrido from JPMorgan. Go ahead.
Hello, good morning. With regards to the agreement with Bridger, you cannot give further details, but there's one question with regards to what appears in the presentation. You said that 95% of cases, if there are preferential installations, it means that this will happen over a specific duration of time?
What does that 95% mean in your presentation with regards to this? There's been an update published on the European TSO plans with regards to the needed investments up to 2040 to adapt the network to the hydrogen-based economy.
If that's the case, could you tell us if there are any news and any changes? Because I see that there might be some different criteria with regards to building new pipelines or to have to adapt the existing ones. If you can provide further detail on this. Thank you.
We will discuss briefly, and we'll be replying immediately. Thank you. Thank you very much, Javier Garrido. We will reply to three questions. Marcelino, CEO, if you can please give more details.
As we said, we have announced the closing of the operation, but it's not fully closed. We see it 95% is defined, and 5% is not defined because we're still waiting the final agreement. With regards to the EBITDA and the profit, the situation is improving in terms of Pony Express, and we need to consider the future flows of that asset.
We increase the capacity of Pony Express, including fixed assets, and we provide access to new accounts. We link up with the second-biggest producer, which is Cruz, and this can lead to increasing the value of this infrastructure, which is a critical infrastructure in the North-South of crude in the United States.
Thank you very much, Marcelino. I'm going to answer the second question. You're right, Javier, there's been an update of the European Hydrogen Backbone, which brings together different TSOs. The first update is the difference between the first document and the second document. There are many players that were not there before.
There's been more people joining. That's one of the changes. Another thing is that for 2040, there would be a European consolidated network for hydrogen transport in different ways, and that's for the north-south, south-north backbone, and it's based on two principles.
This is a requirement by the European Commission, and the European Commission has expressed this in different documents, i.e., that the hydrogen transport, it mustn't be an unnecessary extra investment.
We need to make the most of what we already have, so it would be far more economic to use the existing high-pressure network, if whenever possible. That's the first criterion. The second criterion, the map suggested by the European Backbone publication, is that for 2040, the entire hydrogen volume, I can't remember the figure.
T hat three-quarters of this hydrogen could flow through existing pipelines, and the fourth could flow through networks that have to be built purposely. That would be the nitty-gritty of the latest update. We are partners of this association. This association is doing an excellent job with regards to seeing the outlook of how hydrogen will develop in Europe, how the green hydrogen is going to work in Europe. Thank you very much, Javier.
Thank you very much, chairman. We are ready for the next question. We are ready. The next question is from Lillian Stark from Morgan Stanley. Go ahead. Good morning. I have two questions.
One, with regard to Tallgrass, just to understand if that joint venture will affect the dividend policies of Pony Express, and could we keep that dividend flow towards the joint venture where Enagás is present after the joint venture with Bridger? Coming back to the European Hydrogen Backbone, so that I understand the plan, how do you consider the evolution of the demand?
Do you consider a scenario that we should have so many points of demand? How can you manage that capacity? What's the demand scenario that you consider so that we can reach the guideline of 2040?
Thank you very much, Lillian. Thank you very much for your questions. We'll close the lines to discuss this briefly, and we will reply immediately. With regard to the first question, please, Marcelino, if you can give further detail on Tallgrass.
Thank you, Chairman. As I said before, the economic flows and the dividends from Tallgrass to Enagás and from Pony Express will not be affected. Actually, the opposite, a crude producer will ensure future flows, north and south, and economic flows. In the States, assets that work in the center are working. For the infrastructure's operations, we are contributing with value.
We are ensuring a longer-term operation using this infrastructure. This is an operation that we will complete in the future weeks. Coming back to what the CEO has said, I remember that in the results presentation, we made a comment that we would anticipate that with the change of president in the U.S. would have an impact in the energy sector.
One thing that would happen is already happening. The new infrastructure projects have been stalled, and the developers have said that they won't develop these projects. This is something that we anticipated, and in line with what Marcelino has said, this provides greater strength to the existing infrastructures, and they have the opportunity to enlarge the transport levels and the number of customers.
We think that this will happen in the years to come, and this agreement will be very much in line with this pragmatic line with all the operators of leaving aside new projects that could make sense and to focus more on what we already have on the existing projects.
Coming back to the second question, in the second agreement of the publication of the European Hydrogen Backbone, what is stated is that studies show that there could be an acceleration of the hydrogen demand increase. Maybe in the near future, more concrete figures will be given.
The figures discussed, which I won't quote because they're not definite, are in line with a greater acceleration compared to six months ago. We will provide more information as soon as we have access to that information. Thank you very much. Thank you very much, Chairman.
Go ahead with the next question. The next question is from Ignacio Doménech from JB Capital. Go ahead. Hello, good morning, and thank you for taking my questions. The first question is with regards to Tallgrass. I know that you cannot provide more details and with the relationship with Bridger.
What's the increase of crude capacity increase? You mentioned that the good results in Tallgrass, they could get to the high end of objective and the EBITDA would be around EUR 735 million in 2021. If that's the case, would the non-cash and cash EBITDA?
The third question, if you can provide further comments on the impact too on Pony Express with regards to the exemption by the Biden administration to keep in operation the pipeline. What percentage of the network of Enagás could be used? Thank you very much, Ignacio.
We will discuss briefly, and we will reply immediately. Thank you very much, Ignacio. The first and third question with regards to Tallgrass, Marcelino Oreja will reply. The second question, we will give the floor to the CFO, and I will finish with the last question. Marcelino, can you go with number one and number three?
Thank you very much, Chairman. With regards to volumes of Pony Express, the infrastructure has a volume of about 420,000 bbls a day. With this operation, we are ensuring a greater volume than what we had before and had contracted. we have more guarantees that the forecast that we had in February will be complied with, and we will ensure this.
How much will be hired in a fixed form between seven or 12 years, according to the agreement. this will be thanks to the operation that works with short, mid, and long-term contracts. The infrastructure won't increase the rated capacity.
It will increase the contracting. It would be a critical infrastructure in crude transport North-South in the United States. With regards to the third question Yes, the Pony Express question. Yes. we've done a temporary authorization of the use infrastructure.
The base case is that the infrastructures will work as usual. With the crude transport, there will be other infrastructures that won't be built. Others have been stalled and stopped, and there will be other infrastructures that have been planned and will affect the position, the crude position with regards to crude transport to other parts of the country.
Thank you very much. For the second question, please, Borja, you can provide the EBITDA data. In the February presentation, we provided a guidance between EUR 685 million and EUR 735 million.
The company expects that we will be in the high end, and the latest figure for the entire year is EUR 278 million for EBITDA. Thank you very much. I will reply to the last question. With regards to the ranges of the high-pressure network can transport hydrogen in a summarized manner would be as follows.
Up to 2% of the total volume, we mustn't invest specifically, and we could do it at the moment where we can have green hydrogen. We are in contact with the regulator to still look at the different topics, the regulatory topics, to finish putting this possibility in writing.
The second level and the third range, which is more linked to the European Commission's policy, is to reach 10%. Technically speaking, the European network, and more specifically the Spanish network, with certain investments, not too big, can transport, in a blending fashion, green hydrogen, even in a greater extent than 10%. 10% would be a further stage.
It's still pending a technical decision, and it would form part of other decisions that are related to the regulatory framework. It could be around EUR 500 million or EUR 400 million or EUR 600 million over a period of time, which are technical, is to change in compressors in certain points.
These investments will allow to reach blending levels which would be very high, hydrogen blending levels. For this to happen, there need to be many green hydrogen manufacturing points or producing points, and this is where we're working on right now.
All TSOs, what we are saying is that networks can play a very important role, but it's very difficult for me to provide specific hydrogen figures because right now, no green hydrogen or in other country is produced in a very significant manner. It's more at a lab level. As these projects go forward, and as this hydrogen is consumed and transported in a parallel fashion, all the TSOs, we will have to adapt up to first 2%.
Up to 2%, there's no significant investment needed. From 2%, then we do need an investment, and that we are pending other countries. This has sped up a lot. A year ago, we couldn't speak about this, and now we are speaking a lot about this. We will provide further detail as we see that the European Union and different countries finish or give further information on these measures. Thank you.
Okay, we are ready for the next question. The next question is from Fernando Lafuente from Alantra. Please go ahead with your question. Good morning, everybody. I have two quick questions on my side. The first question concerning the dividend payout policy from Enagás. Taking into account the improvements reported over the past months, which is your guidance with regards to dividend for this reporting period?
Do you think that this could have some kind of impact on your key financials? as for M&As, when you presented a strategic plan, you say that this is something that you are considering. I would like to know the alternatives to these or your vision in this regard.
E ven if we do not consider this to be a sale of assets, are you planning at any point in time to sell the Peruvian business, taking into account that there are still three years ahead before the arbitration ruling is awarded? Are you planning to do that?
Thank you, Fernando, for your question. Again, we will discuss your question and will answer shortly. Thank you. Thank you for your question. Let me answer the question with regards to the sale of the assets package, and then I will hand over to the CFO. As we have already mentioned, and humbly speaking, we are not a very large company.
However, we do have experience investing, selling, et cetera, and therefore that's, of course, within the scope of our regular, that is to say, to do some disposal of assets at some point in time, but we are not planning to do that for the time being. This is something that we, of course, bear in mind, and we analyze this situation whenever an interesting possibility may arise.
As for the guidance with regards to the dividend and affiliates, I would like the CFO to confirm the data we already provided you in the results presentation. Marco, you have the floor. Thank you, Mr. Chairman. In fact, as we mentioned, our guidance for the overall period amounts to EUR 120 million with regards to dividends coming from the affiliates.
We feel pretty comfortable with that guidance, and we intend to keep that guidance that we reported approximately one month ago. Okay, good. Thank you, Fernando. We can move on with the next question, please.
The next question comes from Jorge Ruiz from Barclays. Please, you have the floor. Good morning. I have one question only. Could you provide us with some guidance as to natural gas demand growth for 2021? Thank you for your question. We will answer shortly.
Thank you. Twice a year. We had some guidance at the beginning of the year, and in June, we are going to have a second guidance for the rest of the period until the closing of this year. At that time, we might provide you with more accurate data. However, today, we are already a little bit ahead of what we had estimated under the guidance.
Thank you again for your question. Thank you, Mr. Chairman. Thank you for your question. Next question, please, if any. There are no further questions on the Spanish room and over the telephone conference call. We are going to give the floor to Mr. Velázquez to close the conference.
Thank you very much. If there are no further questions, we thus come to the end of this conference call. Again, if you have any further questions, do not hesitate to contact the investor relations team for any further clarification. Thank you again, and have a nice day.