Good morning. We welcome you to the Naturgy H1 2023 results presentation conference call. During the presentation, all participants will be on a listen-only mode. There will be an opportunity to ask questions after the presentation. If you wish to ask the question during the Q&A session, you may do so by pressing the star key, followed by five on your telephone keypad. If you are experiencing any difficulty in listening to the conference at any time, please make sure you have your headset fully plugged in, or alternatively, please try calling from a different device. I now hand the conference over to Ignacio Jiménez Carrasquilla, Capital Markets. Please go ahead, sir.
Good afternoon, everyone. This is Ignacio Jim é nez, speaking from the Capital Markets team at Naturgy. Thank you for joining us today for the presentation of H1 2023 results. Next to me is our Executive Chairman, Mr. Francisco Reynés; our Head of Financial Markets, Mr. Steven Fernández; our Head of Financial Planning and Control, Mr. Jon Ganuza; and our Secretary of the Board, Mr. Manuel García Cobaleda. As you will understand, our management has a quite busy agenda today, so we will need to stick to the scheduled time for this presentation, which is 1 hour. We will start going through the presentation and continue later on with a Q&A session, first with the questions on live, and then we will finishing with those submitted through the webcast that have not already been answered.
With that, now I hand it over to Steve to start with the presentation.
Thank you, Ignacio. Good morning, everyone. We'd like to start off today's presentation by focusing a little bit on what's happened over the last 6 months, beginning with the demand evolution in the main markets where we operate and where we can actually see mixed demand across those markets, with declines mainly happening in Spain and in Brazil. It's worth highlighting Spain, for example, that we've had a very mild winter. This has had a negative impact in terms of gas demand. In the case of Brazil as well, it's also worthwhile reminding you that last year, at least H1 of 2022, was a very wet period.
This year in particular, actually, was a very dry period, and this year is very, very wet, which means that there's a lot less gas demanded for electricity generation, and that explains that decline. If we move over to the main evolution of the energy markets, we can also see decline in most of the indices that we follow. You can see the Brent, the TTF, of course, the Spanish electricity market. This is a function of a number of elements. On the one hand, we do see weak demand across some of the key regions, for example, in Asia.
That's having an impact in terms of the commodity prices, as well as I mentioned previously, in some of the markets where we operate, mild weather conditions, which have also affected the overall prices. On top of that, it's worthwhile reminding you that last the H1 of 2022 was also highly marked by the war in Ukraine. What we are seeing right now is more of a normalization of prices or a resumption of normalized trends. If we move across to FX, what we've seen is basically all the currencies in which we operate have appreciated, albeit moderately, with the exception of Argentina. As a reminder, in Argentina, this is a year-end figure, not an H1 figure, as a result of the hyperinflationary economy that it is.
Overall, the impact of FX on the results has not been particularly high, so we can say almost negligible. With that said, if we move over to the consolidated results, first point that we have to remark is EBITDA growing by around 39% to shy of EUR 2.9 billion, with a net income of around EUR 1 billion, up 88%. We've also spent quite a bit of effort investing in the company's behalf, so our overall CapEx has grown to almost EUR 850 million, up 16%. On top of that, the net debt of the company has been reduced by 11% to a level of EUR 10.7 billion. I think when we look at these results today, we can say that they are very solid, and it's been a very solid H1 of the year.
Indeed, that net debt reduction that I mentioned previously is supported by a strong cash flow generation across the board. It puts the company in an enviable position to continue investing and looking to the future to continue deploying its cash for the 2023-2025 period. It's true that these results have been marked nonetheless by a lower demand, as we previously examined, and a decrease in energy prices, which makes them more remarkable, if we may. Finally, a quick word on the dividend policy. We are announcing today a EUR 0.50 dividend that is payable on the 7th of August. This is part of the new revised 2023-2025 dividend policy of EUR 1.4 per share, which we'll detail a little bit more in a later slide.
All in all, the markets businesses, so that will be markets call, contributed around 57% of the group's EBITDA. Networks and renewables, if we combine them together, contribute around 85% of the CapEx. That is a testament of the group's great effort to invest in the energy transition, I think it comes through with these numbers. As you'll see later on in the presentation, this is going to be a trend that is going to be sustained in time. In terms of cash flow, the strong EBITDA results, coupled with a change in working capital of almost EUR 1 billion as a result of the moving prices, have allowed us to significantly reduce the net debt level position as of the H1 of the year.
In fact, when we look at it from a metrics perspective, I think it's worthwhile understanding that net debt to EBITDA has moved from 2.4x as of the end of last year to around 1.9x today. We are still in a very good position with the gross cost of debt increasing to around 3.8%, which is roughly the level where we expect the year to close. This does not fully recognize the strong remuneration that we're getting from our cash position, which hovers somewhere between, depending on the instrument, 3.4% and 4%. Fixed rate levels are around 79%, so roughly unchanged relative to where we were at the end of the year.
The company, again, is in a good position to offset the increasing rates environment that we have been seeing as of late. With this, I'll hand over to Jon to go over the performance by business units. Thanks.
Okay. Thank you, Steven, thank you, all of you. First of all, starting with Networks Spain. The Networks Spain EBITDA has decreased by 9%, basically that has been in the case of gas distribution Spain, due to lower demand. Well, now I think it works. We had a small technical glitch, the things of going live. Well, you appreciate that also going live has some advantages, like the Q&A, so you do please have some level of understanding. In gas distribution, it was mainly due to lower gas demand that we had on the one hand due to a milder weather, also industrial consumption was lower due to the higher gas price environment.
In the case of electricity distribution, although we did have a lower demand, that did not impact on the level of EBITDA that we had, and basically the lower EBITDA was due to the lower accumulation on the incentives and on payments that we have. In the case of Networks LATAM, our EBITDA was 32% greater than it was last year. Here we always have to take into account, first of all, that last year we had the negative effect of TGN, the provision that we had to do last year, that it was almost EUR 100 million on an EBITDA basis, although on a net profit basis it was almost EUR 200 million.
In all of the geographies, we have seen an improvement in the demand, except in the case of Brazil, as well, as Steven has already explained. Since the lower demand that we had in Brazil, it was in generation, the impact that it has in margin, it's much lesser than the one that it has on the overall demand. FX was relatively flat, except in the case of Argentina, but I think that the good news came on the regulatory front, or in the case of Panama, we already settled for the regulatory period until 2026, although we still have pending the regulatory periods for Mexico and Brazil. In the case of energy management, I think that the first thing that we have to take into account is that we've changed how we report it.
We have consolidated markets and procurements with the LNG business, and further, from now on, it's going to be reported as LNG and markets. As I think we already explained in previous results presentations, we think that both results were highly entangled, and therefore, showing them as different reporting business units, I think that it led to more confusion that actually it helped in order to understanding what was the underlying results of the businesses. The second thing that we have to take into account is that, as we already explained on the result presentations of 2022, the results have been affected by the hedging efficiencies, which did have a negative effect in 2022, but are having a positive impact in this first semester.
Actually, if we take into account this positive effect, actually the results that we would have this year in LNG and markets would be below the ones that we did have last year. In the case of thermal generation Spain, basically what we had is lower production, which has been offset by higher margins. In the case of thermal generation, LATAM results more or less have been in line with the ones that we saw last year. In renewable generation, the results improvement has been really important, so we think that EBITDA has increased by 34%, but also the CapEx has increased by 29%. This means that our installed capacity has increased by 7%.
In this case, it does not reflect yet the Ardian operation because it has been closed after the closing of this semester. In this sense, I think that we have good news to convey to all of you. It's that this operation has been finally approved by the CNMC. This operation has been completed. In the case of the production, has also severely increased, also not only due to greater installed capacity, but also because the hydro production this year has been almost 100% greater than the one that we had last year. Finally, moving to supply.
In supply, I think that it's good to remember that last year we had a really lackluster first semester, mainly due to the fact that in electricity generation, we had a long sell fixed price position, which was had generated losses in a environment where the electricity prices had increased, and also in the case of gas, because we've had fixed price contracts that did not accommodate to the increase of the gas prices that we did have in our gas procurement contracts. The situation has been improved as we have been able to equilibrate our selling and procurement positions, and also as we have been able to renegotiate and renew most of our sales and procurement contracts. With all this, I would hand it back to Steven.
All right, thank you, Jon. As a brief summary and conclusion of the 2023 H1 results, we'll start off with, you may remember last February, when we announced the expectations for the year-end and figures in terms of EBITDA, they should be at a similar level to 2022. As a reminder, those numbers last year were shy of EUR 5 billion. As a result of the performance thus far for the company, we now expect EBITDA to exceed EUR 5 billion. We have to be mindful of the fact that we previously hinted at the reality of the commodities market still being volatile, and we've seen it. We have it in one of these slides.
There's quite a bit of movements that makes it very difficult to land the final number. We can say with a high degree of confidence that EBITDA for the full year is going to exceed now EUR 5 billion, that's an increase relative to what we initially expected at the beginning of the year. This is on the back of what we expect when we have seen a solid H1 results for the year. Continued net reduction on the H1 . This trend, moving over to the H2 of the year, should see should be somewhat reverted as we ramp up on investments and we step up on our dividend.
Also, recognizing, as Jon mentioned, that the figures that we have presented for the H1 do not include the EUR 650 million payment for the wind assets that we recently bought. We expect to the company to continue focusing on the energy demand that we're gonna be experiencing over the next few quarters and the next couple of quarters, and we'll see what the expectation there is going to be. You know, we expect it to pick up somewhat from what we've seen in the H1 of the year.
Finally, we will continue delivering on the dividend that we announced, the EUR 0.50 that we have announced payable today, on the 7th, there is still going to be another EUR 0.50 by November, more or less, and the Chairman's going to go into more detail about that. All in all, good, solid set of numbers for the H1 of the year, which kick off a good starting point for the delivery of the 2023-2025 plan. That is a continuation of the 2021-2025 plan that we announced in July of 2021, and which the Chairman is now going to explain a little bit more in detail.
Thank you very much, Steven, and thank you, Jon, for your explanations. I think that it makes sense after what we heard to make a brief overview of what has been done by the company in the last five years, and also updating our strategic and financial targets for the next coming two years and a half. If you allow me first to go back to June 2018, when we established our figures for the next five years at that time, I can tell you that the team has been working hard. The conditions under which we have been working were not the best. Remember that during the year 2020, we suffered the pandemic. During the year 2022 started the Ukraine war.
Including within this environment, we can proudly said that the work of everyone has been conducted in the right direction in order to achieve, even to increase, the level of deliveries in the main targets that we set up in June 2018. We established four important measures. One was EBITDA, the second CapEx, the third, efficiencies on annual OpEx savings, and finally, in terms of net debt. As you can see in the slide shown now, all these targets were exceeded, confirming that the company is prepared to commit and also prepared to deliver. If we move now on what happened since July 2021, when we came to you and explained what were going to be our targets for the next five years. At that time, different conditions were having in the market compared to what we have today.
No doubt that after the Ukraine war, many plans has been reoriented and some other key measures have been taken by both the European Union and the US, the REPowerEU and the IRA in the United States, we had changed completely the environment. Many regulations were incorporated during that period. Energy supply has become part of the key fundamentals of our industry and for the society in general. Inflation has come back, together with inflation, higher interest rates, which are changing the macroeconomic panorama for the next coming years. Clearly, the energy scenario have shown a level of volatility much higher than we were used to. Finally, trends towards self-consumption and swapping different sources of energy has been incorporated today in an equation that didn't exist before.
I may list others on top of that, but we thought that were enough to make a very clear review of our commitments with the Horizon 2025. First, we have updated the scenario, the scenario on the energy, which is affecting us, not only some of the businesses that are clearly impacted by the figures, but others that may have its consequences in increasing or reducing demand and in swapping from different sources of energy. Together with our regular sources of information, we have adapted the newest scenario for the figures I'm going to show. In order to maintain our level of transparency with all of you, we have incorporated all these different figures in the slide that you have in the presentation.
Second, we have incorporated, and wanted to highlight again, the role that the company is prepared to play in this new scenario. Our role we based on three main pillars. We want to maintain security of supply as part of our cornerstone of our strategy, and that's the reason why we continue maintaining a diversified portfolio of sources of energy, gas, and also for generation of energy between nuclear, combined cycles and our big bet on renewables: hydro, wind, and solar. We want to be more sustainable, which is the second part of our equation. We don't see any future in our industry without reducing, step by step, the footprint of our CO2 emissions, and that's the reason that our plan incorporates a target that by 2025, at least 50% of our capacity will be produced without emissions.
Finally, we are also committed to make our services more affordable for all society. This is the reason that just six months before the Iberian Exception was introduced in the level of fixing prices in the market, we, Naturgy, led the market by incorporating a different type of tarifas compromiso, commitment tariffs, that were clearly going ahead of the different trends within the industry, in a demonstration that our business pretend to be long-lasting, and therefore, our clients and our customers should feel proud of being supplied by our energy. The reality is that our vision remains quite intact, because within that, Naturgy is well-positioned to support the energy transition and to contribute and balance a solution for this energy trilemma. If I would need to highlight the most important things that we are prepared to confirm in our strategy, I would say three pillars.
Number one is be aligned with the energy transition, respecting our past and thinking on our future. In this sense, one of the most important thing is that our investments will be mainly based in the renewables part of generation of energy and the adaptation of our grids, networks of gas, grids of electricity. The second part of the story is about operations. Operations requires being efficient and also requires a certain level of technology leadership. In this sense, efficiency and digitalization form a part of the same equation. We are clearly committed with our clients that they will take benefit of all these different action plans behind an aim to be best in class. Finally, sustainable capital allocation. Since day one, by June 2018, we have established as part of our strategy, our financial discipline in investment policy.
We continue having that's the reason why we have reviewed all the list of potential investments, have we clearly erased those that were not mixing our targets of profitability. It is not that we try to reduce the level of investment, it's just because we want to invest to create value. This conclusion, it will be forming part of the figures I'm going to show now. In terms of CapEx, we have a commitment to be, for the next three years, of around EUR 10 billion of investment. As you can see, this EUR 10 billion of investment are forming part of the EUR 13.2 billion that were defined for the period of five years, and this EUR 10 billion are belonging to a period of three. Main objectives of this investment planning is, number one, renewables.
mainly generation, including renewable gases, second, networks, and the rest of the businesses, and in particular, the maintenance of the rest of the business, as it could not be on a different way around. EBITDA today compared to what we had in 2022 may have up and down. Clearly, the scenario is going to affect for the next 3 years, as has been described before by Jon Ganuza, which I will give him the floor to explain more in detail this bridge.
As a consequence of two important things: number one is the development of our regulatory agreements with regulators in Latin America, and second, the speed of investing in renewables, we are going to compensate this newer scenario that we have in front of us, more realistic, less aggressive, and more stable for the next coming years. I will probably give now the floor to Jon. You can explain a little bit more detail what's the bridge we have in front of us, Jon.
Thank you, Pablo. I think that one of the key things and one of the key questions that might be in everyone's... Looks like technology and me are not on a good footing, let's see if this works. I think that the figures are more consistent than our technology. On the one side, I would say that how feasible and how challenging are the new or the revised figures that we've set for 2025? I think that what we've tried to be here is something that is sensible, and I want to try to explain how well does it be.
Networks Spain, let's remind that in the next 3 years, we still have to factor in almost EUR 100 million of negative regulatory effects for the period 2021-2026. Basically, what we're doing is, through activity, increased activity and increased efficiency, we are making up for the regulatory negative regulatory impacts that we have in gas distribution. In Networks LATAM, in 2022, we did have the negative TGN effect in 2022, and the figure that we're aiming for in 2025 is basically the same figure that we expect to have this year, and this, that is after having resolved all of the regulatory periods that are still pending in Mexico and Brazil.
In the case of energy management, the decrease that we have, almost half a billion compared with 2022, that reflects basically the fact that some of our long-term gas procurement contracts are going to end. That also factors in the energy scenario that the Chairman has previously presented, and also in the case of CCGTs, we also see that the production is going to be reduced as the renewables penetration in Spain is going to increase. Renewable generation, we do see an increase of almost EUR 0.3 billion, and that's basically the reflection of the extra 10 gigawatts of installed capacity that we will see in the period.
Renewable gases, we think that if there is no change in the current regulatory status, we will see a negligible impact in results, but we see that much more as an upside than anything else. I think that, in that sense, what we've seen in the PNIEC, the draft of the PNIEC that was published by the Spanish government these last few weeks, we do see that this goes in the right direction, though the ambition, we think that it should be greater than the one that there is. In supply, more or less, we see that the results would be online, in line with the ones that we're seeing this year, though we think that the contribution from PV, a distributed generation, it would be one of the levers that would allow us to improve our results in 2025 compared with 2022.
Thank you, Jon. Hopefully, this has been enough for the attendees to understand, but as you said, we may probably have other questions in the Q&A part. If I follow with our capital allocation, I would like to highlight three important ideas. First one is solid cash flow. It is going to be the main source of our uses, mainly driven by solid hypothesis, non-aggressive, and as Jon has said, clearly compensating upsides with downsides and with still other upsides to incorporate if they come at all. The level of debt that is increased during the period is low enough to be clearly on the safety side regarding rating agencies level. Second message is clear compensation between CapEx and dividends. These form part of the same story.
This is a clear remuneration for our shareholders with a long-view investment, CapEx, and with a short view, cash collection, dividends. In this sense, you can see that two-thirds of our uses are clearly focused on increasing our CapEx, therefore investing for the future, and one-third on the dividend side. Point number 3, review of the dividend policy. Back to July 2021, we highlighted that by mid-2023, we were going to review the dividend policy for the period, depending on the results we may have had in the last 2 years. Now is the time, and at that time as well, we fix as an average, 85% of payout ratio for dividends in the period.
The 1.4 that we are announcing today is clearly based on these two commitments, the commitment of reviewing and the commitment of the 85% payout for the remaining period. All in, these are our best estimates for the year 2025, that are reviewed compared to the originals that we presented in July 2021. Growth in EBITDA, growth in net income, same level of CapEx, just erasing those projects that were not performing or they are not achieving the minimum target of returns, high dividends, less debt, and maintaining FFO net debt ratio, that for the rating agencies, is a security of remaining at the same level of rating as of today.
Thank you very much then, for this first part of the, of this presentation, and I will hand over to Steven to conduct the second part of this presentation.
Thank you very much, Mr. Chairman. I think we are ready to take live questions from the conference call. We do ask, please, that you identify yourself and the company for which you work. As a reminder, the press should refer their questions to our communications team. Thank you.
Thank you. Ladies and gentlemen, the Q&A session starts now. As a reminder, if you wish to ask a question, please press star followed by five on your telephone keypad. Our first question comes from the line of Jose Ruiz from Barclays. Your line is open. Please go ahead.
Hey, good morning, everyone, and thanks for taking my questions. I just have two. First of all, regarding the target of, EBITDA, above EUR 5 billion, how much are you including of the reversal of the provision? Second question, in terms of hedging 2024, how determinant is what, gas prices do in the H2 of this year in terms of, commercial activity? Thank you very much.
Thank you very much for the question. We are not disclosing yet the figure regarding the inefficiency of the hedging, therefore, we are not going to give exactly which is the figure that is included in the guidance that Steven has given regarding 2022. Regarding the hedging of 2024, I can say that for our LNG gas procurements, the level of hedging that we will have in next year is more or less in line with the one that we have this year.
Next question, please.
Thank you. The next question comes from the line of Javier Suarez from Mediobanca. Please ask your question.
Hi, good morning, and thank you for the presentation. First question is on the capital, on the CapEx guidance. During the presentation, the company has mentioned EUR 10 billion of CapEx during the next 3 years. That means a significant acceleration for the level of annual CapEx that the company is implementing as we speak. You can help us to understand how the company intends to accelerate so significantly CapEx versus history and versus recent delivery? That is the first question. The second question is on the bridge of EBITDA between 2022 to 2025. I think that the putting a lonely story so we can.
The message is that the company is going to invest more on renewable energies. It's going to extract more value and growth from that activity, and that is compensated by the decrease in the energy management business because of the normalization on energy prices. It is fair to say that you are considering that the profitability that you have seen on that energy management business in 2022, and probably 2023, you are assuming that it's going to be sustained at least by 2/3 by 2025. Is that the thing that you are saying? I'm referring to this because the profitability in last 2 years has been in excess, significantly higher than what history is telling. You can elaborate on why that assumption should be seen as conservative enough.
The final question is on the cash flow statement. That is a question on the positive contribution from working capital that we have seen during the H1 of the year. You can help to understand the reason for that and what you are expecting by the year end. Thank you.
Thank you very much, Javier. The first question regarding the CapEx guidance, it's true that we see a level of acceleration.
... I think that's one of the messages that we've tried to stress in the past, is that what had happened with our renewables investment is not so much that we had canceled it was that we had rebalanced it or we had delayed it. We all know that this past year and a half, 2 years, they have seen a substantial increase in the unitary CapEx of renewables. That means that in order to be compatible with the strict financial discipline that we have, what we have to do is we had to work with the existing projects that we had, be either with the PPAs, renegotiating them, or either renegotiating or redesigning them.
What we've seen is basically that a substantial part of our projects have been delayed, and we think that these projects will be or are already in built, and that's why we think and we're confident that in these next three years, we will be able to deliver the level of CapEx that we have announced in the revised, in the reviewed strategic plan for the next three years. Regarding the profitability of the gas business, I think that actually what we're seeing is that already this year, the profitability of the gas business is almost the same as last year, as we said. If we take outside the... At least in the H1 of the year.
If you remember in the bridge where we showed, it was that the results were going to be almost EUR 0.5 billion lower than the ones that we saw in 2022. We see that with the normalization of the gas prices, the margins will somehow decrease, and also the volumes that we're going to have, they're going to be lower. I would also like to point out that last year, when the prices started going up, we were not necessarily reaping all of the benefits that we should be reaping, because part of our business, part of our sale contracts were indexed to gas prices that were much lower than the spot gas prices.
I think that the overall picture is not so clear, seeing that it has been a huge increase and it's going to be a huge decrease. I think that there was a bit of an increase last year, and what we will see is that slowly, we will see a reversal to the normal in the next few years. Regarding working capital, working capital this half of the year has been substantial lower than last year, but also it's because the overall revenues that we had have been substantially lower. I think that by the end of the year, it still remains to be seen, but we think that maybe it will be not so as positive as we've seen this half of the year, but it should be, at any rate, positive.
Is there any additional question online?
Thank you. The next question comes from the line of Manuel Palomo from BNP Paribas Exane. Please go ahead.
Hello, good morning. Thanks for taking my questions. First of all, I'd like to start with renewables. In the new guidance that, if I'm not wrong, is quite a decent downgrade to 10 gigawatts, I wonder in what areas are you planning to reduce your installations? Also, you mentioned that there's been obviously an increase in installation costs. I wonder whether you could give us a hint on what is your view? Where do you see them landing now, at least for PV and onshore wind? And also, I wanted to ask you something on CapEx. I mean, the coming 3 years of 2023, 2025, you plan to deploy around 10 billion CapEx.
I wonder whether this includes any additional inorganic opportunity other than the one that you have announced in, well, a few weeks ago, when it was in Spain. Lastly, I guess that deliberately, the word Gemini is not in the presentation, but I wanted to ask you about where we are on the Gemini Project, whether this is still a valid option, and whether, of course, there's any redress from yesterday's election outcome on the potential success of that project. Thank you very much.
Thank you, Manuel. I will try to answer the last two questions, and Jon will jump in details on the first two one. On Gemini, very, very simple and very clear again, as we have said since we introduced the idea of Gemini project into the market, is number one, is makes industrial sense. It had made industrial sense since the beginning. If it would be the other way around, we would never have introduced that. Number two is the figures you have seen for 2023 to 2025, confirms the feasibility of the project. Of course, the company has been continue working towards that.
Demonstration is the level of reporting that you have seen, including with the organization that is in place, demonstrates that, in reality, we are already working as two companies within one group. Too early, still too early to fix exact dates, because we are analyzing all the implications that may interfere for all the different alternatives. As soon as we have more clarity on that, of course, we will disclose them. On the investments on non-CapEx, but M&A included in these figures, I can say very clearly, zero M&A is included in any of the different businesses.
... we are, as we were, in 2021, including a hypothesis with this non-M&A will be introduced in our figures. We will just purely opportunistic, not obliged to achieve any figure. The figures that you have in your, in the slides are not including M&A. The company is not working with any project in M&A for the time being.
Thank you, Manuel. Regarding where we expect to grow in renewables, I think that we do have a strong position in Spain, Australia, and the USA. We have a organic portfolio of projects, that give us enough visibility in order to feel confident with the target that we set ourselves for the next three years, to achieve that increase in 10 gigawatts in installed capacity. I think that, as the chairman has said, there is no need for any inorganic or any acquisition. Just with the current portfolio of organic projects, taking into account the level of development that we have in most of them, we do see ourselves that unless there is a substantial or disruptive change, we should be able to do that. Regarding the unitary CapEx, I think that there's.
It's a bit more complicated to give a view of what's happening there. Why? Because, as some analysts analyze the evolution of the unitary CapEx in real terms, I think in real terms we're seeing that, for example, in PV, costs are starting to go down. In nominal, taking into account that the inflation these past, two years has been substantial, the figure has changed completely. I think that we're seeing a normalization in real terms, but I think that inflation is also taking a toll in the nominal unitary CapEx. I think that the most important thing is not so much how much or higher or lower the unitary CapEx are being.
I think that the important thing is whether we have been able to adapt the existing portfolio of projects that we have, be it on the revenue side or be it on the cost side, in order to make them be able so that we are able to create value, and so that they meet our financial discipline guidelines. I think that's what the team has been working really hard these past two years. I think that although that has meant that some of the projects have been delayed, I think that we see that we are able to deploy those projects, creating value for the company within the next three years.
Okay, I think, we have some questions coming from the webcast, Nacho?
Yes, most of them have already been answered. Nevertheless, we have some of them. First, is, "What is Naturgy's exposure as an offtaker for Yamal LNG in terms of volume, take-or-pay commitments of destination clauses? Is there any pressure from government or any ESG-sensitive investors to cut volumes from Yamal?
As the government knows well, our commitment with Yamal as an offtaker of LNG gas was signed many years before the Ukraine war started. We have just been performing our contract as per it is written. We haven't taken any additional volume, and of course, we are obliged to continue being supplied by the Yamal until there will be other obligations, legal obligations or decisions by the responsible authorities to stop them.
Okay, some other questions about in the strategic plan. First is about international LNG. "Should we expect Naturgy to reassess the size of its international LNG portfolio, with higher LNG volumes coming into Europe in the new energy scenario? What should we expect from Naturgy?
Naturgy is a key player on LNG. We have quite a calibrated portfolio today. We are not planning to increase our exposure to LNG, but we maintain our contracts as flexibility, considering that in the future some of the contracts that today are in place are finishing between 25 and '27. Therefore, the position of Naturgy is quite safe in order to be self-supplied for the coming years, but with no aim to increase the exposure to this market.
Okay, we have 2 additional question, one from Latam, the other one for renewable gases. Latam portfolio: "Do you see opportunities to dispose some of your assets in generation or gas networks in Latam?" In referring to renewable gases: "Can you elaborate on the business case for renewable gases and the internal rate of return target?
In terms of asset disposals, we have been also very clear, not in LATAM, but in general, we are industrial players that run our industrial assets. We are not close to consider any opportunistic opportunities, sorry for the redundancy, that it may arise. In between, we should continue be running our assets as we are. Our commitment is as long as these assets or these concessions are alive. In this sense, biogases, in particular biomethane, we consider as a very important opportunity for the short-term future. Everyone speaks about hydrogen, which we consider that it will be for sure, but more the midterm.
We have an opportunity next to our door in biogases, where we want to be an important player, and we are targeting returns at the same level that other investments in our domestic market, in particular in Spain, which are clearly double digit.
If I may build on to what the chairman has just said, I think it's worthwhile. When we think about renewable gases, we're thinking about both biomethane and hydrogen, as the chairman expressed, it's true that we see a trend where everyone focuses on hydrogen. The reality is, when we look at the growth curves for biomethane and compare them to hydrogen, at least until the year 2030, there is a significantly faster growth from biomethane. We like that idea because we think there is also going to lead to some regulatory push that is going to be critical for the full development of this. What's important when we think about biomethane is to remind you guys that we have the largest portfolio in Spain for development right now, with more than 60 sites.
We believe we have an enviable position and a natural position to commercialize this gas, and we also have the clear capabilities to build and operate not only plants, but also connect those plants to the network. All in all, when we think about the returns, obviously subject to the size of the investments and the size of the plants, but we're thinking of in terms of project IRRs, high single digits, which makes them quite attractive.
Okay, final question: you say annual dividend floor revised to EUR 1.4 share for 2023, 2025 is subject to maintaining a BBB rating through the period. Does that mean that if your rating comes under pressure, would you reduce the dividend or would you reduce CapEx?
We have an industrial plan, and I think that we have shown also the metrics that are clearly driven the rating BBB level on the Standard & Poor's that we have fixed. For those which are not aware of, this rating, FFO net debt should be above 18%. As you can see, it is above 21%, which demonstrates that there is still room for certain turbulences, and the rating is quite warranted. Having said that, reviewing the dividend policy based on an important change on the FFO net debt, which may be the case if it arises, it will impact in a global revision, not only on CapEx or on dividend.
I think that after what we have shown before regarding our level of delivery of our commitment, you know well that, we also play with solid figures, and for the time being, we don't see any reason to be worried of.
Again, to build on the Chairman's comments, for us, the rating is very important for the normal conduct of our businesses. It's also very important in the context of Gemini. I think there was a question about Gemini before. Rating in the context of Gemini is critical for us, and we target a BBB for both companies. As the Chairman mentioned, we expect, and we have no reason to believe, that we can maintain a BBB rating through the period to 2025. But should that, for some reason, become compromised, then it's the company's commitment to do whatever it takes to make sure that we comply with that objective of BBB.
That could be in the form, as the Chairman mentioned, of reducing the dividend, which would probably be one of the first things to look. We have to take a look at the CapEx as well, et cetera. There's a number of instruments that give us complete flexibility in terms of making sure that we maintain the BBB rating, which is absolutely important for us.
Okay. Well, that was the last question. We want to thank you again for joining today's presentation. Just as a reminder, the Capital Markets team remains available to answer any further question you might have. Nothing more on our side. Thanks, and have a good day.