Galp Energia, SGPS, S.A. (ELI:GALP)

CMD 2021

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Jun 2, 2021

Ladies and gentlemen, welcome to GAP's Virtual Capital Markets Day. Our team is thrilled to have so many of you joining us online. Today's agenda will begin with a strategy presentation by our CEO, Andy Brown, which will demonstrate how Gal plans to thrive through the energy transition. During the presentation, Andy will be joined by our CFO, Felipe Silva, when covering our next 5 years' financial plan. We will then have a short 5 minutes break and open up our Q and A session, where the remaining executive members of the board will also participate. At the Q and A, we invite analysts and investors to submit their questions by using the chat tool available on the streaming platform. The questions may be submitted during and after the presentation, and I will read them out in the Q and A session. We have invited all sell side analysts at Coverdob to participate live in video, and therefore, we expect to have some of them joining at that time. We may need to limit the number of questions made during the session to control the total events timeline. Before we start, Please note that today's presentation will include forward looking statements based on the plans, estimates and projections. We refer you to our initial cautionary statement for further information. We will now start the presentation. Andy, the floor is yours. Thank you, Otello, and good day to all of you, wherever you are, it's a pleasure for me to be able to present Galp's 2021 Capital Markets Day. I've been in the company for 4 months now, and I've got to know the people, the assets, the opportunities and the challenges. And we've undertaken a comprehensive strategic review together with the Board of Directors. And I'm really pleased to be able to present our plans to you today. What I found in Galp, a great asset, great people, great opportunities, A company that can grow and decarbonize and distribute competitively. What I'm going to do, I'm going to discuss some of the conclusions first from the Strategy Refresh before deep diving into the individual businesses. I'm going to touch on our ESG performance before handing to Philippe to talk about the financial framework. And I'm going to come back And make some concluding remarks. In our strategy refresh, we really challenged ourselves To offer shareholders a resilient investment case against an accelerated energy transition, but also one that offered an upside in the base case. If we look at the next decade, our industry is not going to be static. The pace of energy transition We'll accelerate. Our markets will change. So it's not just economically appropriate for us to change. It's also the right thing to do. And we're lucky that we have such a strong portfolio. It is resilient with a growing Upstream, actually coupled with Galp size, its agility, Its innovation places us really strong for the energy transition. We are already a leading player in the markets We operate in. And we've already started to change. We have a leading position in solar in Iberia. We're a leader in sustainability. We have a very low CO2 emissions in our upstream business. So we have a strong starting point for the energy transition. But our traditional markets in Iberia will decline in oil and gas. But every change is also an opportunity, an opportunity In renewable power generation, in renewable electricity sales, in renewable fuels, in hydrogen, in the battery value chain. So Galp can and will thrive through the energy transition. But we know this is going to require change. And that change will be about our portfolio, but also about our culture. And that's why with the board, we've agreed a new purpose in Galp. Let's regenerate the future together. This is a purpose that will be about our portfolio, about our relationships, But also about our people, a portfolio that would shift to lower carbon products, Prudently, step wise, but we'll have made significant progress by the end of this decade. We want to refresh our relationships with our customers and with society offering new products To the almost a half a 1000000 people that come to our forecourt every day or the hundreds of thousands of people we serve at home To expand our brand, to expand from quality and service to also be innovative and caring. But thirdly, we want to re energize our people to develop and acquire new skills to thrive through the energy transition, To bring increased agility to the way we work, to motivate our staff, to allow everyone to achieve their potential, Today, we will cascade our new purpose. It will set a direction for us internally and externally for us to adapt into that future. And for me, regeneration means a new chapter in Galp, one that is refreshed and energetic. Now let's look at the businesses and how do we think about these businesses and how we allocate capital. We see 4 discrete themes, which kind of reflects our thinking. The cornerstone of our business is still our upstream growth. It's high quality, it's high margin, it's cash generative, and it's low CO2. We also have a Downstreams Transformation business predominantly in Iberia. This is a business with an opportunity to grow And transform at the same time, moving to lower carbon products. Thirdly, we've got our renewable growth business. We made an important step last year, already in a material position, but we want to expand that In size, in geography, in technologies and to integrate down the electricity value chain. And fourthly, we have a new segment, our New Energies business. This is a business that will be fast moving, low CO2, With complementary skills and assets to what we hold today, and particularly looking at hydrogen and the battery value chain. So we have 2 growth themes, 1 transformation theme and 1 new business theme. So what does this mean in capital investment? Well, firstly, it will be a disciplined net capital investment of between €800,000,000 And €1,000,000,000 per year over the 5 years. 50% of that will be in traditional oil and gas And 50% will be in low and 0 CO2 products. These low carbon products will be Fast growing renewable energy, advanced biofuels, electrical mobility, convenience and other value pools in commercial, but also future opportunities like Hydrogen and the battery value chain. Now our distribution of that capital will be 40% in our upstream growth, 25% in our downstream transformation businesses, 30% in our renewables growth and about 5% in New Energies over the 5 years. We're expecting strong IRRs Of more than 20% in our upstream business at a $60 oil price, At between 10% 20% in our commercial business and above 15% in Industrial and Energy Management. And on a life cycle basis above 9% in our renewables growth business. And in new energies, at least 10% IRRs. Over time, we see our upstream growth business growing in cash flows. But upstream proportion of the total pie will reduce. And why is that? Because our low CO2 businesses will grow even faster. So this is a strategy of growth and decarbonization. We want to set clear capital allocation guidance. Our current leverage is close to around 1 net debt to EBITDA. We want to maintain this level of balance sheet strength. We want to allocate between $200,000,000 and $1,000,000,000 net CapEx to grow and transform the business, and we may need to rotate To stay in this range, but the quality of our investment portfolios means that we can marry growth and decarbonization, but using less than 50% of our operational cash flows. We also want to offer a resilient base dividend of €0.50 per share. And when there are additional cash flows And our balance sheet allows we will distribute dividends up to onethree of our operational cash flows. And we'll distribute the base 2 times per year with a variable element after approval at the AGM and with full year results. So this is a unique investment opportunity To reshape the portfolio and to provide a competitive yield, we have growth from our established legacy businesses, Our renewables growth business, our new energies business, as well as competitive distributions with upsides. In our base case premise, we can grow our operational cash flows by 35% by 2025, And we can distribute 35% of our current market capitalization in dividends. And for the first time, we are committing to be a net 0 CO2 emission company by 2,050. So let's look at the individual businesses. Firstly, our Upstream Growth business. This Upstream business is the envy of our industry. We built it up over the last decade, and this decade is a decade of free cash flow and growth. In my career in Upstream, I think this portfolio has all you want in an Upstream portfolio. The core is the Brazilian pre salt. Long life, high margin, low decline rates, large resource pay with longevity and growth. This is also a resilient portfolio with low unit operating costs and low CO2 intensity. It also has an enviable growth funnel of opportunities that we are ready now to commit to. So it's a portfolio with medium term growth and a lot of options for the future. So in numbers, we aim to grow our production by 25% by 2025, offering very low production costs around $3 a barrel of oil equivalent. We have a portfolio with IRRs at $60 more than 20%. And the operating cash flows from this business over 5 years will deliver more than $6,000,000,000 And we have future growth opportunities beyond 2025, but we must extract value from these opportunities in a disciplined way. So putting this portfolio in graphical context, it is one of the most competitive We have lower CO2 portfolios in the world. The average NPV 10 breakeven of our project is around $25 a That puts us in the top quartile of all projects. And our CO2 intensity is less than 10 Kilograms per barrel oil equivalent. This is half of the IOGP average. So As you can see, this is truly a leading portfolio. And the jewel in the crown of this is 2P and Iracema. Almost 80% of our production comes from those fields. They have produced more than 2,000,000,000 barrels already, but still Just a fraction of the ultimate recovery that we can get from these fields. It is still early days in the full field development of TUPE and Irasimha, and there are attractive investment opportunities still to come. And this year, we will be submitting and agreeing a plan of development for the fields. And within that, there's possibility for a field lifetime Extension. But we have other fields. Iara, in particular, with Berbigas, Sururu, Atapu. This is still ramping up this year. In Angola, in Block 1432, we're strongly in harvest and with strong cash flows from those fields. This year, we're going to start up CEPIA in Brazil, a 120 180,000 barrel a day FPSO. And next year, we think Coral FLNG will also start up In Area 4 in Mozambique. Since last year and the COVID crisis, we've taken strong capital discipline in our upstream. But still, we have a healthy production outlook from short term cash engines alone. As I said, we have some significant growth opportunities ready to launch. And this week, you will have seen that we have FID'd The Bacalar project. This is an amazing project. It's a project which we have 20% stake in, Costing around $8,000,000,000 It's a project we actually made good progress already with the 220,000 barrel a day FPSO. It's a project will recover more than 1,000,000,000 barrels of recoverable reserves. It is a low CO2 intensity project around 9 kilograms barrel oil equivalent with a breakeven price well below For $35 a barrel. We expect this project to come online in 2024 And yield a working interest volume for Galp of £40,000 a day. This is really our next step In our upstream ghost story and a significant boost to our cash flows from 2025. But our opportunities don't stop there. Coral FLNG is just the tip of the iceberg in Area 4. There are significant gas resources And we're working with our partners to reduce the cost of the Rovuma development. This is a multi train development. And we see also potential to improve it further through synergies with Area 1. Of course, we're awaiting the security situation To stabilize the 4 proceeding, but we're confident to the efforts are being made to engage The communities to improve the security apparatus and we expect the right conditions to emerge over the coming years. I've been really impressed with Galp's depth and quality of resources, but also The exploration portfolio, the next 2 frontier wells in Giaka in Sao Tome and Bob in the deepwater in Brazil are world class and really want to drill these the end of this year and perhaps into next. But such, if the depth and quality of the resources discovered already that after these two wells and the follow-up, we are going to halt Frontier exploration. We believe because of the lead time to bring those online, It is prudent to preserve our capital for the low carbon opportunities that are emerging. Now our downstream transformation. And first, the commercial business. This is a strong business, particularly in Portugal, but also in Spain and some African countries. It's a project, a business that spans oil products, Gas, LPG, renewable electricity sales, which spans B2C and B2B. In Portugal, we are a market leader. We have a strong reputation as the flag carrier of Portugal. And we're known for the quality of our services. The merging of our Gas and Power and Oil Products business has allowed us to Expand and cross sell all types of projects, leveraging our digital tools, expanding and strengthening our brand To our loyal customers, and we believe we can expand our offer and our customer experience over time. There are almost half a 1000000 people that come to our forecourts every day. These are unique touch points with customers where we can sell more than traditional fuels. We're privileged to have such a great network, A network that can provide key convenience to customers, where already our non fuel receipts exceed our fuel receipts. We are actually the largest coffee seller in Portugal. We want to modernize and Expand our offering with a new hub concept, offering new products, new service, including EV charging up to 10 1,000 EV charges by 2025. As a result, we believe we can double our non fuel contribution to our operating cash flows by 2025. So we're strong today. We have a lot more to offer with relatively minor investments and innovative solutions. But not only can we expand on the forecourt, we can expand in the home as well. We have a strong position in gas, which we can expand, particularly in renewable electricity, both through the grid, but also from solar panels through our new Spin off company, Energia Independente. We have an ability to cross sell using Digital tools. Just to give you an example, in April, we added 10,000 customers. And a lot of those actually through what we call the 3 minute app. You can get it online, but you can also find it in our retail stations. And that app will allow you to switch just in 3 minutes. But also we have an excellent B2B business and a strong market share in gas and oil products. Here also we think we can expand Our renewable electricity sales. And we think we can do this profitably. And we think we can more than double our electrical sales by 2025. The foundation of this is a competitive supply portfolio of renewable electricity. And integrating potentially also to our renewable generation position. It's about cross selling. It's about integrating customer solutions. Innovation and digital tools are going to be key in this journey, where we tailor individual consumer and business solutions. To give you an example in that area, we have a Promising new e mobility application for fleets called Flow. That is also building our capabilities around accessing customers. So EI, Energy Independent Flow, A demonstration of Galp's agility, ability to innovate, which has a very short time to market, we will continue to expand those innovative solutions to customers. As a result, we believe that we can grow Contribution from commercial, up to €400,000,000 operational cash flows by 2025. We think we can do so in a capital light way, A high return way, growing the bottom line despite a shrinking oil product demand. And the cornerstone of this is going to be The non fuel contribution expanding from 20% to 40% by 2025. The other half of our Downstream Transformation business is in Industrial and Energy Management. Within industrial and particularly in refining, improving resilience is going to be key, but also decarbonizing the products that we produce. We want to focus on good high return projects with short paybacks. But also, energy management is key here to taking a full integrated approach across our oil, gas And renewable electricity value chains. Our decision to close Matasinos in 2020 Has significantly improved the resilience of our refinery position. It's allowed us to focus on the gradual conversion of Sinesh From a gray to a green energy hub. From 2017 to 2,000 30, we aim to reduce the Scope 1 and 2 CO2 emissions from our refining business by 50%. We're going to do this prudently. We're going to do it stepwise. Decarbonizing Sienaise Whilst improving our refinery margin, expanding our proportion of low carbon products, There will be low hanging fruits in high return efficiency projects, but important additions, particularly in biofuels, But also desulfurization to improve the flexibility of our crude sourcing and to reposition Siena's Higher up the Iberian refinery league table. At the end of the decade, With hydrogen, we can decarbonize further, but this will also be a platform for new fuels. CNIS is in an excellent location with low cost renewable electricity, Fundamental for green hydrogen in the long term, but more of that later. Looking specifically at our projects. Firstly, optimization. Optimization in energy and operational efficiency We'll allow us to reduce our underlying OpEx by 15% to around $1.70 a barrel by 2025. We're going to leverage the digital applications we're already installing to fully harvest the potential of fiddly digitalizing Our refinery. But we're also going to put in a desulfurization project that will desulfurize the 20,000 barrels a day of fuel or fraction. This will allow us to expand the crude diet. This is a high return project costing a little less than €300,000,000 but it improves our long term resilience right into the next decade. But we want to do more than just survive with Our refinery, we want to thrive. So we want to expand into biofuels, particularly developing a 270 kiloton HVO Renewable Fuel Unit, a unit that's aligned to RED-two, but also has Capability to produce drop in sustainable aviation fuels. We think this is going to be positioned as one of the most competitive HVO units in the world. Why? Because we can recycle equipment from Masinos. We can drive synergies From Siena, particularly surplus hydrogen available there, a project we believe we can deliver for less than €200,000,000 We fully appreciate that securing long term feedstock is going to be crucial for this project, and we will do that ahead of FID, which we plan to have next year. Moving then to Energy Management. When we did this full strategy refresh, the recurrent theme in almost every work stream was energy management, Whether it's how do we market associated gas in Brazil, it's about placing the very competitively priced LNG volumes we're going to pick up in 2023. How do we optimize our LNG from Nigeria or our gas from Sonitrack? How do we get competitive crude sourcing? What opportunities do we have to trade crude and products, particularly around Zenith, Which has a world scale storage facility around 3,000,000 meters cubed. How do we source competitively feedstocks for the HVO unit? How do we place our renewable energy, electricity with maximum value, Trading of value and risk, looking at merchant and PPA solutions, but also integrating To our own consumption, sourcing electricity competitively for our customers, also for our hydrogen business. There is an enormous opportunity to focus on that integrated margin and risk management, Deliver value through our supply and trading, to offer low carbon and bundled solutions, To drive for different products and services, we're currently reinforcing our energy management team considerably because we really think we can extract more value from Galp's expanding asset and customer base. And we believe we can deliver more than €120,000,000 Operational cash flow on an annual basis. Moving to renewables growth. We made a really important move last year, 75% acquisition of ACS. This is a material position. And today, here in Lisbon, the sun is shining. We have a gigawatt of capacity online. The solar capture price in last weeks have been around €70 per megawatt hour. So we're happy with this new business we have. Of course, going forward, we have a much more conservative assumption on the solar capture prices, but We're making really good progress on the energy transition. We want to expand firstly in Iberia And then diversify our geographies, but also the technology moving to wind and storage, battery storage that is, But also leveraging partnerships, at the same time being very financially disciplined with project financing And selling down our positions once they are de risked and leveraging up our own equity returns. But then through integration of risk management, unlocking the most value from the electrons that we're producing. As I say, today, we've got around a gigawatt in operation. We actually have 2.8 gigawatts of deals done with projects under development, 2 gigawatts with ACS in the ZeroE joint venture and about 800 megawatts outside that joint venture in Spain and Portugal. The development funnel of opportunities we're looking at today is much bigger than that even. But today, we're focused mainly on Iberia, but already exploring new geographies, recruiting a strong team with the global capabilities. By 2025, we want to have an operation 4 gigawatts And then up to 12 gigawatts operating by 2,030. Most of that growth In the second half of the decade, we'll be outside Iberia with a particular focus around the Americas. This is not about bragging about gigawatts. This is about returns and cash flow. As I said before, on a life cycle basis, we want to get more than 9% IRR Contribution from our equity in this business. We've taken a more conservative solar capture price in our premises going forward. We think we can leverage up with financing 60%, 70%. And as I say, we want to rotate our assets around 50%. This means we keep real discipline with our net capital, but we will retain the energy and asset management for all these assets. We're also building some distinctive capabilities with behind the meter battery storage options Around hybridization between solar and wind particularly in Spain. We're taking A varied approach on risk management in Iberia, we will have a mix of long and short term PPAs and merchant risk. Outside our barrier, we're more likely to take long term PPAs early in the process, lowering our merchant risk. On a pro form a basis, we want to deliver in excess of €100,000,000 operational cash flow by 2025 And €250,000,000 to €30,000,000 by 2,030. This business will be deconsolidated off our balance sheet. So this will take the form of cash injection or dividends. We hope to be free cash flow positive, in other words, receiving dividends in the second half of the decade, Contributing income to Galp's bottom line, but still growing at the same time. This will become a ratable long term cash flow with, I think, increased options for value capture around energy management and storage all the time. Moving then to our new energies business. In addition to our End to end renewable energy business. We have other exciting opportunities, particularly in new energies, where there are valuables With adjacent to our assets or transferable skills where Galp's innovation capabilities will come into play, But more industrial in scale than what we were doing in commercial. 2 focus areas in new business development for us today is hydrogen and battery value chain. We believe this can be really important for Galpin in the future, but also aligns to what Portugal and Europe is really focusing on at the moment. Now we talk about around 5% capital in the 5 years. This may be more in a success case. But in the second half of the decade, we do believe we will be ramping up more capital investment in these businesses. Let's look at those business. Firstly, green hydrogen. We believe we have everything that's needed for success in this business. Low cost renewable energy, cost effective execution with a skilled workforce, an ability To build at scale and to come down the cost curve, but also a conducive regulatory environment. Cenish in South Portugal has all of these and allows us to move Cenish over time from a gray to a green Energy Park. It does this by offsetting the cost of gas, the CO2 costs, but also utilizing the RED2 directive. So this decade, we hope to reduce We'll replace all of our gray hydrogen with green hydrogen. That's about 600 megawatts of electrolysis capacity, 60 kilotons of hydrogen. And we aim to have the first 100 megawatts already in the first half of this decade Because we're building this scale, we think that's just a start. Because CNH is one of the most competitive Places in Europe for green hydrogen, we see other opportunities, like spiking hydrogen into the gas network, Distributing to heavy duty vehicles through our retail positions, but also New opportunities for efuels or other green applications such as ammonia or industrial applications, particularly in Hard to abate sectors of the global industry. In addition, we believe there's an opportunity in the battery value chain. The growth of battery demand, particularly because of the growth of EVs is going to be more than tenfold in Europe by 2,030. Securing a European battery value It becomes actually a point of energy security in the European Union. An end to end battery value chain that with green credentials has In a particularly important place in the thinking of the European Union. Portugal is really well placed. Portugal and Northeast Iberia have both some of the best lithium geology in Europe. And Galp is already in discussions for an offtake of the raw materials from a mine here in Portugal. But our focus isn't mining. Our focus is going to be lithium processing. And today in the whole of Europe, there are no Lithium hydroxide processing facilities. In a continent that looks to me 400 kilotons of what's called lithium carbonate equivalent demand by the end of the decade. Portugal, I'd say, really well placed. It has the geology. It has the deep seaports. It has the competitive and skilled workforce, but also The cost effective renewable energy. And Galp as a company has transferable skills, But we're also building partnerships and we're in advanced discussions with a leading EU battery manufacturer, considering Our first lithium processing facility of at least 25 kilotons. Both The hydrogen and the battery value chain is in business development. But with the right condition, this could be fast moving. This is a 5% of capital allocation in the 1st 5 years, but gaining weight in the second half of the decade. Those were the 4 themes. Now to our decarbonization path. And if we look, Galp Has a strong ESG performance, a strong track record. We think our business plans strengthen our ESG position, And we have an ambition to remain a leader in ESG. We've embraced transparent reporting on environmental and social issues. We have an active Board who has the desire to lead Galp through the energy transition. We've already been acknowledged in ESG By the Dow Jones Sustainable Index, to be the leader in our oil and gas sector in Europe, we aim to retain this lead. And in this regard, we are going to increase the number of decarbonization parameters we were going to disclose, But also the pace in which we plan to decarbonize. Last year, We committed to a carbon intensity index of the products we sell to reduce by 15% by 2,030. We're increasing that now to 20%. But in this update, we have 2 more parameters. Firstly, is our Scope 1 and 2 CO2 emissions. The CO2, we're emitting in our operations From 2017 to 2,030, we're going to reduce that by 40%. Now admittedly, the Matsyenosh closure was a big step forward, But we are going to also decarbonize Sinesh. But we're also introducing a new parameter and that's about CO2 intensity of the energy we produce, whether it's this is scope 1, 2, and 3, whether it's an upstream Or renewable energy. And by 2,030, we want to have reduced that by 40%. We introduced this because this is where we're spending most of our money. We also in this update I've moved from saying that we're going to move in line with Europe on getting to net 0 by 2,050 by Unequivocally saying that we're fully committed to be net 0 by 2,050. And as you can see, by 2,030, we will be already making good progress. I'll hand over now to Filipe, who will talk about the financial framework. Thank you, Andy. Let's then see how this refreshed strategy translates into our 20 21, 'twenty five numbers. First, for reporting purposes, we are not changing the 4 business segments you guys already know. We have only renamed Refining and Midstream to Industrial and Energy Management. Now this new name serves to highlight we want to broaden the scope and to decarbonize Our industrial activity is beyond traditional refining. We also want to highlight the bigger role we want energy management to play going forward. Cash generation at group level. Our key guidance is based on Operating cash flow, so OCF, that's our measure of clean CFFO without working capital variations, inventory effects and special items. And as most of renewables will be deconsolidated, we add here their Pro form a OCF contribution as if renewables were consolidated, and that's proportionate to our equity stakes. Now this year, group OCF should be over 1,700,000,000 With refining and commercial still recovering from a rather difficult Q1. Group OCF should increase to over €2,300,000,000 in 2025, and that's using our Base case macro deck, which includes Brent at $60 Now be mindful that this growth in OCF It's relatively back ended, so with Baqalau operating at close to full capacity in 2025. So we are not Factoring in a lot of OCF growth over the next couple of years other than the growth we see coming from The gradual transformation of our downstream businesses. For 2021, we have revised up Our EBITDA guidance to over €2,000,000,000 and this should be over €3,000,000,000 by 2025. CapEx guidance for this year, it remains unchanged at €500,000,000 to €700,000,000 And that is net of the recent Gg and D divestments. Now the plan has an average of €800,000,000 to €1,000,000,000 in net CapEx per year. This represents a 20% reduction versus the previous plan and mainly from project realignments And cash preservation measures. Now most of this CapEx is underway With a very good line of sight, I would say, such as Baqyliao and the existing solar pipeline in Iberia, Plus the recurring investments into P and commercial, we will continue to keep our CapEx discipline. What is different in this plan is also that around 50% of net CapEx will be allocated to low to no carbon, such as renewables, biofuels, convenience, hydrogen and the battery value chain. For renewables, We assume that we project finance off balance sheet at around the time of COD, so commercial operation date. And we monetize half of what we have just developed very soon thereafter. So we want to keep this business as reasonably asset light. Now if I zoom in on Upstream, we have over €6,000,000,000 in OCF during the planned period. Until 2024, OCF should be stable within SEK1.1 billion, SEK1.3 billion, And this will increase to over €1,400,000,000 in 2025 with baculhau. EBITDA follows a very similar trend, Rather stable until 2024, €1,700,000,000 €1,800,000,000 and then increasing to over €2,000,000,000 From 2025 onwards. Now we saw on the previous slide that Upstream had some 40% of group CapEx. This will have to be supported by potential portfolio management to control overall investment levels in the group and to keep the balance sheet And given the current uncertainty around Hovuma LNG, we are not including much CapEx For the onshore projects within the planned period. Coral FLNG is on track, so that's obviously included in our plans. Commercial activities are picking up really nicely now, but after the slow Q1, we keep a prudent OCF Of about $300,000,000 for the full year 2021. OCF should gradually rise to $400,000,000 or so And EBITDA to €450,000,000 by 2025. So and for the entire 5 year period, we have over 1 point $6,000,000,000 in cumulative OCF in commercial, and that's across all products and all geographies. Now diversifying the commercial offer is obviously important to offset declining hydrocarbon demand. By 2025, 40% of commercial OCF should come from C Stores, convenience, gas and power sales, Electric mobility and decentralized solar, for example. So this should continue to be a high multiple business. And for that, we have allocated $500,000,000 to $600,000,000 in commercial CapEx during the year. On industrial and energy management, the plan is, As Andy said very clearly, to improve resilience and to decarbonize. So for now, OCF will be largely driven by refining margins, which currently are relatively weak. Hopefully, this will improve soon as jet fuel demand normalizes. In 2021, we also have the one off costs related to the access To the regasification terminal in Portugal. So for this year, 2021, OCF from Industrial and Energy Management is expected to be only €100,000,000 to €150,000,000 and EBITDA lower than that, about €100,000,000 as it does not include the associates' contribution from our stakes in the gas pipelines, which will expire anyways this year. Cogeneration, logistics and other nonrefining industrial businesses should bring in some €25,000,000 to €30,000,000 per year in EBITDA and HVO will add another €50,000,000 or so to EBITDA once it starts in or before 2025. Overall, Industrial and Energy Management OCF should be over €350,000,000 by 2025, with Energy Management contributing with over 120,000,000. The majority of CapEx will be directed to transformation, HVO, desulfurization. These are investments which are adjacent to our very core operations. So it reinforces the competitiveness and the Decarbonization of the overall Synash complex. On an accumulated basis, We have some SEK1.2 billion in OCF during the period and some SEK700 1,000,000 in CapEx. Now the CapEx bar on the right hand side is already net of the recent divestment in G and G and D. On renewables, the plan is to keep this business fully deconsolidated with its own capital structure And project financed. And as our pipeline is gradually built, by 2025, Pro form a OCF should be about €100,000,000 This assumes we have about 50% of the equity on the Over 4 gigas, we expect to have operating by 2025. Our share of the projects should generate over $300,000,000 in OCF during the planned periods. But this, however, becomes very meaningfully higher from 2026 onwards. Renewables CapEx to total some $1,200,000,000 during the 5 year plan, and that's already net of asset rotation. So the plan is to keep and fund 100% of the projects During the develop and build phases, project finance at about the time of COD and then rotate half of our equity very soon thereafter. So this supports our overall CapEx plan and leverages the returns of renewables. New energies, green hydrogen, the battery value chain, this should make up, I would say, about 5% Of group net CapEx, this is ballpark. It will depend on how quickly these projects get off the ground. And most likely, we will have partners in some of these projects, and we'll be raising finance also at the asset level. So we expect OCF from new businesses to be positive in 2025. Now the OCF bar here doesn't show new businesses OCF as 2025 positive OCF is actually eaten up by negative flows during the initial years. Now putting it all together, we have about SEK9 1,000,000,000 in OCF over the 5 years. And here, OCF is as we report. So not with a pro rata OCF from the deconsolidated business. This is just with a dividend that we actually receive from, say, renewables after renewables has services its own project finance So where are the $9,000,000,000 going to? About 45% is going to CapEx. About onethree is going to dividends to the Galp shareholders, that's the base dividend and the variable components, About 10% of minorities and the rest for finance costs and there's a little bit of deleveraging in that plan as well. And because we have much lower sustained CapEx than our peers, Given the youth and the long life nature of our upstream portfolio, we have room to grow our business and decarbonize On the dividends, now we should be Already under onetime net debt to EBITDA this year, so which will support the variable component of the dividends. And the way this will work is as follows. The base dividend of $0.50 is paid semiannually, Say half is distributed this fall and half is paid in May after the AGM, and that is when the variable component is added as well. I will stop here, just highlighting that the plan has free cash flow covering 1.2x total distributions. So the quality of the dividend policy is quite robust, we think. Andy, back to you. Thank you, Filippo, for that impressive deep dive into the financials. I'd like to make some concluding remarks before we go to the Q and A. I hope you've seen that we can thrive through the energy transition. We can and will accelerate the decarbonization of our portfolio. We will grow in a resilient and value driven way whilst maintaining a robust financial position. But we will also offer competitive shareholder returns. Can I illustrate and compare with our peers? We're offering leading cash flow growth of 35% of operational cash flows to 2025, A strong pace of decarbonization versus our peers. We're growing in a capital disciplined way with only 45% of our Operational cash flows put into that growth. And we're offering a third of our CFFO in dividends. This is truly distinctive. We're going to work with the board with the support of my EXCOM colleagues, and we are committed to take on this challenge. So let's regenerate the future together. Thank you. Thank you, Andy. Thank you, Felipe. So this concludes the presentation. I hope it was an insightful one for you. We will invite you to watch a small video now, and we will come back in 5 minutes. See you in a short while. How are we going to reshape Upstream growth, improving our industrial resilience and reducing carbon footprint, unlocking value from Welcome back. And firstly, thank you so much for listening to our presentation. We now have the Q and A, and hopefully, we can answer all your questions and explain our plans further. Before that, I have got some support from colleagues from the ex I want to just introduce them. Firstly, I think a lot of you know Atelo. He's going to be our master's ceremonies. He's in charge of IR. We've got Felipe, who is my CFO. He keeps me on the straight and narrow. We have Carlos Postapina. He's our CEO Corporate. He will answer questions around sustainability. We've got Susanna. She's in charge of Renewables and New Business Development. We got Toure. He's responsible for our upstream growth business. We've got Sofia. She's responsible from our commercial business. And we've got Carlos Silva, who is responsible for our industrial and energy management business. So I have the whole team here ready to answer your questions. And I'm going to hand to Otello to actually introduce all those questions for us to answer. Otello? Thank you, Andy. Before we jump into Q and A, a couple of organizational questions. So we will be having sell side analysts connected through video, And we will also read some questions made through the chat platform. Because we already have a lot of participants, we will need to limit some of the questions. Please, for the video participants, we will limit your questions to 2 per each, okay? We will try to limit the Q and A up to 90 minutes. And I'm told that I already have the first in line for the questions. Joshua Stone from Barclays Capital. Joshua, good to see you. Floor is yours. Two questions, please. Firstly, you defined a base dividend level of €0.50 Can you talk about why is that the right level for Galp? Should we consider it as sacrosanct regardless of the environment? Or is it defined by a particular oil price? And then my second question on Brazil. You mentioned recovery rates. Are you able to say where we are today? You previously talked about a Long term ambition of 40%. Is that still the case? Or has that now gone down the order of priority? Okay. So thank you very much for that. And firstly, let's talk about the dividends. I've got Filipe to help me here. But I think you had a question about the base. And why do we set the base at 50 and then have a variable component? Well, it was very much So as you explained, this is a base case, a resilience case. And in our planning, we actually looked, Particularly if we have an accelerated transition, and I mentioned that at the start of the presentation, what kind of prices may we get in oil and other Parts of our business and what can we afford as a base dividend. And our conclusion was the €0.50 was resilient Through the cycle to keep our balance sheet in shape. And then the variable component is very much related to if we go to macro more like the base case that, that would start to pay out. Do you want to add anything to that, Philippe? Josh, so the $0.50 is designed to withstand Macro events. And we all learned our lesson last year, so we want to avoid this. Does $0.50 stand If Brent is below 50%, refining margins go down, yes, it does. The upside and you see Andy said about 35% of our current market cap could be distributed in the plan. So if you do the math, that would be on average about $0.20 across the period with breadth at $0.60 So 5th is resilient. There is upside. 1 of the questions we also get asked a lot, Josh, is buybacks. And what we've kind of tried to provide this solution on having the variable components Working a bit like a variable dividend if we have excess cash flows. So that is a lot. Joshua, then your second question around the recovery factor, particularly of what we will now call the 2P field. And what do we think that recovery factor is? That's something that we really need to Petrobras to reveal to the market as the operator. But to answer your question, no, we haven't changed our view on how much oil we can recover from this field. As I said in my remarks, We are really just produced a fraction. We're essentially in plateau now, but with a lot of development opportunities still to come. So actually, it's kind of premature to really count on those last percentage of recovery. But there is because we're not announcing that number today, it is not because we've changed our view on the field. But it is contingent On a green, a plan of development and possibly a field lifetime extension, which will be part of discussions this year. I don't know if Tore you want Add any more to that. I certainly would like. You guys that have followed Gartner for many years know that I think the world about 2P It's world class by any standard. 6 years ago, Galp launched on its Capital Markets Day the ambition that Really drive up the recovery on Lula and Tupi Erasema. Actually, last There was a major breakthrough on this because then we agreed in the partnership that we should sign an MoU where the whole purpose is that we are Working this year in order to agree a new plan of operation and development, which we have all the ambition to deliver by the end of this year, This will be a significant step in order to realize that long term ambitions, which I have to say I'm extremely proud of What the Galp team have contributed and how they have been asserting into the partnership that we should really drive for this. I remind you, 1 percentage point increased recovery on 2Pietta Zema is nothing less than 200,000,000 barrels. That's a good day at work for any explorationist. Thank you, Thierry. I think we can move on. We will now have Mehdi Enibati from Bank of America. Mehdi, we are happy to take your question. Hi. So good afternoon, everyone, and thanks for taking the questions. So two questions, please. One follow-up on the dividend That you detailed a little bit. I mean, it seems that you are accepting For your dividend to be quite volatile. Let me give you an example. Imagine the oil price this year will have we have $70 per barrel. So you will have a relatively strong cash flow from operation. And next year, we go to $60 per barrel. Then you might have to lower the dividend in order to respect your new dividend policy. So Am I understanding well when you say that your dividend could be quite volatile in the coming years depending On the oil price. And just one very small question on that. You expect €2,300,000,000 of CFFO By our OCF, let's consider, it is roughly the same, by 2025. So if I am understanding well, does that mean Something like €0.92 dividend in 2025. Next question regarding your production growth in 2025, Okay. So you provided a 25% growth compared to 2021 production. So this gives around 160 KBUD guidance in 2025. However, currently, your production at plateau is around 140 kilobytes Excluding the pandemic impact. And Bacalhau will add another 40 KBOED at plateau. So that means that makes your production significantly above your guidance without even including Coral Sepia production, We should add another 10 ks boed. So my question is very simple. Are you expecting a significant deflation rate From your existing production in Brazil, to justify 160 kelvi and why? Or do you already take into account some delays regarding But allow start up and ramp up due to pandemic situation in Brazil. Thank you. Thank you very much, Mehdi. And So let's first answer your question around will this dividend be quite variable? The answer to that is yes, it will be, but it has The resilient $0.50 And it has an ability and your calculations are right that in 2025, it could be up And it could be more like $0.90 or 9% yield at that point. As Felipe pointed out, on the average, if we look at our plan, it's Around 7% over the 5 years. Clearly, if we have a real dip, we will use the balance sheet a little bit to smooth out And allow the debt to go up a little bit if and still pay the €0.50 So it has a floor, and it has this flexible Variable element that is very much aligned with the macro because we're pretty clear about how much capital we're going to spend, and we've got Clear ideas of how much cash our business can generate. So I think the answer is yes, you are right. It will have their very moment. But it means our shareholders are enjoying the business when we're enjoying it. And as Felipe says, it Avoid this situation is boom and bust that we have to cut the dividend and everyone's disappointed and you don't have any understanding Stability of where we're going. Now you understand steady base with variable that reflects the macro. I think, Roy, just leave on the dividend and move on perhaps then to the and I'm going to get asked Tore to contribute here. The numbers and so we've got backlogs at 40% in 2025. How do we think about that 25% increase? Does that mean our base is declining? Perhaps you can explain a few things around that, Tore. Thank I think it's very important to factor in here that even in 2025, Bakalau will be in a ramp up state. We're expecting no delays to the start of our Bacalhau. But as we have guided you to, this is second half twenty twenty four. 2025 will be a ramp up year. And then we have put into and is in our plan that there will be a natural decline from the existing fields. In addition to that, we have put in an element of cautiousness where we have sort of, in general, assumed On some of the Brazilian assets that we have a somewhat lower production efficiency because we see that the units will require more maintenance. So you can Say it might be prudency. We think it is good business practice to put this in, and we're feeling comfortable, therefore, with the 25% Growth target that we have put forward for 2025. So I think so the base is pretty stable. I think that's the conclusion. And the backlog comes up, and it's still in ramp up in 2025. That really fundamentally, I think, is the answer to that one. Yes. Thank you for the question, Mehdi. And the next in line will be Ozil Klim from Bernstein. Ozil, good to see you. Please go ahead. Thank you very much, everybody. Andy, it's refreshing, I guess, to hear your enthusiasm About the upstream, your developments and even exploration, certainly in this day and age. But I wanted to ask you around what's the longer term growth rate Do you think it's possible beyond or what should be targeted given your accelerated de carbonization targets today, please? And Secondly, I wanted to ask around the retail network, the B2B and the cross selling. This is new, I think. This is A strategy, it wasn't on the agenda before. It certainly felt very shell like listening to it. But we know the business through Repsol in Spain. But others like sepsa, I think, have been less successful trying to replicate them there. So I can see why Galp should be successful. But Why is it not done before? Why are you confident? And the 20% to 40% uplift here, is that back end loaded or is that ratable across the next 5 years. Thank you. Yes. Thank you very much, Oswald. Let's I mean, we're not disclosing numbers Beyond 2025, you can see that. The exploration, I have to be clear, and I think this is quite an important point. After the 2 wells that I have indicated with follow ups, we are going to halt our exploration, our Frontier Exploration Program. This is very much You know, Usain, we have enough in our resource base to stimulate growth for some time. 2 point 4,000,000,000 barrels of 2P and 2C resources, 50 years at current production rates. That's a lot of oil and gas currently discovered, which gives us an ability to grow after 2025. Clearly, what happens to Mozambique when that LNG project Broad Online is an important element in that. But we're not guiding on long term production for very much the reason you indicate. We're taking a cautious approach today. We're growing our alternative businesses. We have the options in Upstream, And we will pursue those when, for instance, the security allows and when they become very attractive opportunities Within our capital discipline, and we talked about our new energies business, our hydrogen business, battery value chain, so we're going to have options For investment after 2025, that today we can't be fully predictable. So it isn't at this stage, I think, appropriate for us To be giving you production numbers beyond 2025 when we really don't understand which are going to be the most attractive investments for Galp And which fits our long term strategy. So we come to the commercial business and Yes, I think this realization that we can do so much more with customers, I think, is one that yes, I think it is A new fresh approach in Galp. It's I brought something in, but Sofia, who's only recently Joined our executive also has brought that sort of insight. I think in particularly I think particularly in Portugal, We have such a strong brand. We know we are the market leader. We have the opportunity to offer Much more to our customers than we're offering today. And I think I'm very excited about the opportunity that this gives. We're Already on the journey. So this isn't just like, let's do that tomorrow. 2020, we actually started to do quite some exciting things. And we're going to have some of these new hubs online relatively soon. So we're going to lean into this quite quickly. And I'm going to hand over to Sofia to perhaps talk About a couple of things we're doing and just a touch on how quickly we're going to be able to offer more services and hopefully make more money In the nonfuel space. Sofia? Thank you, Andy. And thank you, Oswald, for your question. We are super excited to speed up on this transformation. I mean, we believe that we have the right to be on this area. I mean, actually, these C stores represent €60,000,000 of EBITDA today, And we believe that we can double them until 2025. Why? Because we have and as Andy mentioned before, we have Half a 1000000 of people entering into our stores, customers that are engaged with our strong brands that have but that have been engaged with more digital Tools that we are implementing. And on the other side, we can also cross sell, as you mentioned, to these customers and Touch them during their day, not only on our ecosystem of e mobility, but also in our ecosystem of the home. And as Andy mentioned, we are Rethinking and we just conceived 3 concept stores for the new service hubs around mobility and around With this, we are going to offer products and services totally different around these new trends, these community trends. And you know the world has been changing, so we are also changing. We believe that with this, we'll be able to go from 20% of low Carbon contribution into 40 in 2025. And it's true that it's something that it's new and it's something that other companies didn't succeed, But we believe that we have the right to do because we have such a broad portfolio that allows us to really cross sell and to touch point with the customers On all of these journeys. And on top, we had recently launched new businesses like UI and like Flow that are also being speeding up towards our customers and towards the B2B. And with also these new energies, We'll be able to cross sell and to maximize the value towards our customers. Yes. So I mean And last year, I mean, we started to expand in Uber Eats and Glovo, and we found customers really like Ice cream, particularly in the evenings. And so you get this array of products that we're able to offer customers But I think we hadn't really discovered previously that I think we'll be very successful for the future. So Next time you think of an ice cream, just call us. So now next guest is Rafael Dubois, Salut Rafael from Societe Generale. Please, we're happy to take your question. Thank you very much for setting up this event. And you should not be talking about ice cream, I'm starving now. Anyway, two questions, please. You show on Slide 31 Your expectation for €100,000,000 of OCF by 2025, Can you please share with us a little bit more your assumptions behind this number? What kind of power prices is embedded? And also what will be left once project finance debt servicing is achieved? That's my first question. And the second one is on the offtake agreement that you mentioned in the new energy business for lithium. I think you talked about the mine. Are you referring to the project of Savanna Resources? And if not, can you maybe share with us a bit more information? And what is the plan B if this mine of Sabana Resources is not Up and running by 2025. Okay. Thank you, Rafael. I think we look, let's It's really important for us to perhaps explain a little bit around the cash flows around our Renewable Energy business. We have taken a more conservative approach. We have increased the number of PPAs and therefore the risk management of that. And perhaps Filip, can you explain how we manage the debt and how much of the €100,000,000 that we can recover? It's actually quite a simple business. The price at which you sell the electrons drives CapEx is relatively standardized, certainly in Iberia now. So if you have a solid capture price, which we've now assumed at a deeper Count to base load prices pulp prices, and you take €35 to €40 And you multiply by 20% yields on your installed capacity, and that's a net of 2 gigas, Not 4. So because we're assuming we're rotating out of half of what we have, then you get that sort of number. So fairly straightforward. What is left? So this is a deconsolidated business. So this money in 2025 is Not coming to Galp, we are servicing the debt of the project companies, and we're redeploying Excess cash into new projects. So free cash flow positive only a few years after. What we are not factoring in, in this plan is dividend recaps, and that's a huge upside. So there's very little point in having this great business, delevering quickly, not paying dividends. So most likely, Given that it's such a low risk business that you'll do a dividend recap and upstream cash into Galp much earlier than we are building up in the plan. So look, if I can perhaps then just address the whole issue around We are assuming a decline in solar capture price off the pool prices. We are assuming that we're going to take a fair amount of short- and long term PPAs. We've got some merchant exposure as well. This is Iberia. Outside Iberia and the rest of the world, we think we'll take a larger amount of PPAs. But some of these things, clearly, as time goes on, we see opportunities To leverage up returns more than perhaps just even the 9% that we've put into the presentation. I'm going to ask Susanna to say a little bit about How we might think about we might even get some more from this base plan, which I think we've conservatively set. So Susanna? Thank you, Andy. So of course, as Andy have mentioned, we have considered a larger share of PPAs in our portfolio. We are I mean that by the end of this period, we'll have between 80% 90% of all our projects under PPA, more outside Europe, of Of course, than in Iberia. But I think there's a lot of upsides that you can put on top of these returns with PPAs. Of course, you have financial returns. You have asset management fee returns. You have some short term hedges returns that you can improve the economics of the projects. But AIM is also especially excited about, let's say, 4. One of them is because of our integration with the commercial business, we can take some merchant risk And I can balance across our business, so we can take some of this upside. And I think for me, it's also very important, as Andy already mentioned, the asset management, Where we will be able to anticipate some of the value of these projects and rotate the capital for further projects, and that will also increase the overall returns of these projects. But maybe for me, because I'm also into innovation, the 2 that I'm most excited about are storage behind the meter batteries. We are already working on a pilot That we hope to have ready by Q1, where we see a huge upside about being able to balance the production curve and being able to capture The hours of the day with higher electricity prices and of course, also hybridization with wind. This is an upside everywhere, but especially here in Iberia, where you can get up to higher 50% more capacity on your connection point. And by combining solar and wind, you are able to create a much more base load profile, more profitable for our clients. So this is a very conservative scenario, a lot of upsides, a lot of leverage that we can have in order to increase these IRRs going further. Thank you, Suzanne. And let me now address the whole issue of the battery value chain. And I did mention that we're in Discussions with a mine, and you may well have seen a press release where our HOA lapsed at the end of last week. We don't like negotiation about our press releases, but we're in discussions with the mine still, so I have to confirm that. But This is a lithium prone area that spans across North Portugal into Spain in Northeast Iberia. So It's an area where we believe there will be more opportunities. But because we're planning On the processing side, over time to perhaps take a really big position, we also have to consider opportunities also to import some of the raw materials. So We're looking at all sorts of options, but our focus is on lithium processing. And for that, we're actually working with a leading European battery manufacturer on understanding how we can work together. As I said, there's no lithium processing in Europe. There's going to be an enormous demand. So we see a key opportunity. Obviously, Sourcing renewable feedstocks is going to be crucial. Clearly, the mine in Portugal It's Juan that we have been working, we've done some due diligence, and we need to work with them on how we could work that particular mine. These things have to come together For us to make this whole chain, but Galp really wants to be right in the middle of that chain, working from the sourcing of the spodumene through to the delivery to the cathode manufacturers onto the Gigafactories. So it's early days. It's by the week Things are moving fast. But I have to say, as a business leader looking at the future of Europe And the future battery demand of Europe and the geology of Portugal and the deep sea ports and the capabilities of Galp, This is a business that I think could be really very big for Galp for the future and very much aligned with the energy transition. So I will take the opportunity to read one of the questions that we received in the platform from Georges Guimaraes From JB Capital Markets. Sysdalp is not a renewables developer. How do you expect to create value in the development phase In order to fund down with the profit later, the 50% we expect to fund down. I assume partly will be capturing the margins of electricity supply from cheaper sourcing, but even so, the question remains. So Felipe, you can say this one? So we do have very significant capabilities. And you will have noticed our CapEx into renewables Has gone up compared with our previous plan. So we are assuming we'll hold on to the projects during the build, Develop the risk phase, project finance only at that stage and find partners whilst before the plan had this monetization much before. So there is significant value to capture in using our skills, our balance sheet, Derisking PPA commercial contracts so that we monetize the premium that comes with higher risk as well. And we have very significant demand by Very low risk, very low cost of capital. Investors that would like to come in at that stage with a much lower cost of capital. So the rotation part of the build, derisk and sell down is integral to our business case. And our next question comes from Biraj Borkhataria from RBC Capital Markets. Biraj, please go ahead. Thanks for taking my question. I hope you can hear me. 2, please. The first one on your decarbonization targets. The base year is 2017. Could you talk about The impact of the refinery closure on those targets as we look at 2020, 2021, I would hope that that's quite a significant step, both in absolute basis and in FEMTIP. And the second question is on Bacalhirao. At one point earlier on in the process, you were talking about Cooperating units. Is that still being considered at all? Or is that completely up to Thank you. I didn't quite hear you. Can you repeat the second question, Biraj, sorry? On back to land? At Blacheriano, Thank you. Hi, Biraj. Good to see you again. Clearly, Matsyenas closer has helped us with the overall Scope 1 and 2 decarbonization And also, towards the 50% reduction in the refinery CO2 emissions that we have. I think on the refinery, of the 50%, around 27% is actually from the Matosinos, if I'm right. So it's an important part of it. And clearly, refinery closures and the CO2, we save from that. But the rest of that, and I look at the 50%, we're talking at Sinesh, or the refineries in total, is going to be various decarbonization projects that we're going to go Through low cost decarbonization project, but also then introduction of hydrogen over time in Zenith. So that really are the key elements for us On a whole gulp basis to reduce 40% from Scope 1 and 2. And so the second question was related to Bacalhau and the second unit. And so what happens? We've Got the first fave FID yesterday, great news. So Tore, where's the second unit? First of all, I I have to say that I'm so proud of Galt also in this case because we are the only original partner in Bacalhau. The others disappeared. Equinor and Exxon came in that really accelerated it. And yesterday, we had then the FID of something that is a world class product by any standards. And yes, we think there are more. That will happen in the 2nd phase. What we need to do before we decide on that is to do further appraisal work. And based on that appraisal work, we will then decide what will then be the best way of developing the next phase. Several options. It could be a tieback, could be a standalone unit, but we need more appraisal. But the big, big time today for the Galp team yesterday that actually was the only original investor in the Bakalava field. Good. Thank you, Tore. So more news to come on further development to Bacalae beyond Phase 1. Okay. Next one from Peter Low from Redburn. Peter, good to see you. Please go ahead. The first one was on renewables. Most of your growth Post 2025, looks like it will be outside of Iberia, which on the face of it is your natural market given your existing customer base and brand. Is that because you see competition and returns in Iberia as more challenging versus what is available elsewhere? Or what's driving that switch? And then the second question was just a clarification. You talked about portfolio management in Upstream to help manage the CapEx commitments Can you just clarify what that means? Are you looking to reduce your stakes in certain projects or actually other parts of the portfolio you would consider exiting? So good. Let me answer The first the second one first. So around portfolio management in Upstream. Clearly, No company wants to reveal what they may be thinking and selling, but Galp has an enormous upstream portfolio. And I talked about the €2,400,000,000 Of contingent resources, we have a lot of exploration positions. We have pipelines. We have positions on production. What I'm really keen to get a message across is that we are going to manage that portfolio for value. And it means doesn't mean we're going to stop all new business development. It means that we're going to keep Tore strictly to its capital net capital number, And we're going to manage the portfolio, which means selling some things. It means developing some things, but it's too early For us to give you a definitive list of these things that we're firmly planning to sell. On your First question around renewables post 2025 and why leave your home base in Iberia? This is about this is really about risk management, be honest with you, but also growth of capabilities. Iberia is a competitive market. Iberia is a fantastic market for solar because of the opportunity, how much solar radiation there is, The drive of the Spanish and Portuguese governments who bring more renewables into the portfolio. But as we also mentioned, it is Somewhere where with a lot of solar penetration, you're going to get a disconnection between solar capture prices and pool prices. So in order to manage this as a well managed risk portfolio, we're looking to expand overseas As well, and we see overseas locations where you get much more attractive long term PPAs, where we're building a team with Some real capabilities of understanding some of those locations. And with an opportunity to move into markets, Perhaps also earlier in the evolution where there are some higher returns than we think we may be able to enjoy in So risk management, diversification of both using solar, using solar and wind in order to make sure that we have a well risk managed, high yield portfolio. I don't know. Susan, do you want to add anything to Maybe one thing is, yes, we are building a team, but we already have an outstanding team. So over the last year, we have built in A team that has been developing thousands of gigas in I'm sorry, tens of gigas around 35 countries around the world have managed assets, gigas of assets also in many countries, have also built these assets. So we have a very robust team already with experience that, as Sandy, very well said, we are continuing to expand and bring new capabilities Into these teams. And I see it not as a risk, I see it as an opportunity. As Andy very well said, this growth is enormous. It's enormous around the world. We have the capability. We have the agility that we have shown in building the team and building the assets. We have the financing power that small players don't have. We have the ability to partner. So I think one of the things I like the most about Galp It's what a great partner it is and how easy it is to partner with Galp and the great relationships that it has with its current partners, And we already mentioned the team. So for me, what is important about new geographies, as Andy said, Stable market for PPAs, where you can have businesses taking PPAs and much more attractive conditions We have today in Iberia, countries where we have reasonable country and currency risk and renewable growth, Well, we have long term investors that are interested in asset rotation and sticking To those assets in those markets, and as he said, in order to also come into these markets earlier where we can To greenfield or develop early stage projects in order to maximize the returns for Gala. So it is not that we want to leave our home market, Is that we are ready to grow internationally. And can I just say, I've come in as CEO of Galp, Obviously, having had an international career, I find such good competent people here and very international people as well? And I think there's a great opportunity for Galp to continue to develop business overseas. As you see, everyone speaks excellent English. That's very lucky for me. And I think they have the potential to expand internationally, and I'm very excited about that. And Spanish, and we'll continue with the Spanish accent because we will now have Pablo Cuadrado From Kepler Cheuvreux, Pablo, the floor is yours. Happy to take your questions. Hi. Good afternoon, everyone, from Madrid. I hope all of you are fine. Two questions, please. The first one is, you can clarify a little bit, which is the assumption that you have on the upstream volumes by 2,030, Basically included in your target of 40% reduction in your carbon intensity production figure when compared to 2017. Particularly, I'm looking if you are assuming on those figures, Robuma and NING and the level of production that you are including there. And the second question will be on the announcement on the Biofuels HBO investment. I know that the FID is next year, and You are talking about 300,000 tons capacity, but I was a little bit surprised when you talk about IRRs above 15% Because if we compare to other peers that they have announced investments on HBO, iOfWell, I think that level of returns seem to be a little bit soft. So I was wondering if you can detail a little bit more the basis of that investment, what type of feedstock You have in mind, I guess, probably something linked to waste. If you can also share the margin that you expect per ton that you think you can make on Or basically the numbers that you used to get to those €50,000,000 EBITDA that I think Felipe mentioned as a potential contribution. And on that front as well, and I finish, is that the first step, this potential FID, but you still see that you can Enhance more that business exposure. Yes. Thank you. Thank you, Pablo. And let me First, say on the 40%, look, I don't really want this to be an opportunity to try and back calculate to see what our production numbers are. It's a target that we take on today that we mean to adhere to. And if we have more production, we may need more renewable energy. I think this is something where I don't want you to this to be an engineering way to back calculate our production number. You just have to believe that this is something that we're going to be very focused on. And as I say, we're giving this 40% production number. A lot of people have been looking at the sales. And yes, we're going to do that in 20%. But for me, we spend our money 70%, 30% in renewables, 40% in upstream growth. Gosh, that's where we're spending our money. That's our contribution to the world in terms of new energies New energy supplies, so that's the number we're focusing on, the 40% reduction. And we have a plan, but that plan will change over time. And as I said before, it is too early for us to give you some definitive numbers post 2025. On the HVO project, I'm going to ask Carlos Silva in a minute to talk a little bit about the sourcing. And as I said before, Obviously, this HVO unit, what we have to position it is in within an Iberian context and predominantly, of course, Portugal for us and some Spain in terms of how much HVO is going to be needed to meet the Red two directives in each of the countries, so how much space is there for it And achieve the margins we expect to achieve, we also have made a very strong point that we think we've got Some tailwinds on the project in terms of cost with the Maastrichtow Synos equipment reuse and some spare hydrogen capacity that exists in Synash today. So I'd like Carlos to really focus on then the feedstock sourcing and perhaps also explain that we have some experience already. Thank you. Pablo, the HBO project is really an opportunity To a value creation project at Synge New Synge Energy Green Energy Park. We this project will allow us to be aligned with the Red 2 in the that is coming on stream, And it will give us the opportunity to Assess new value pools on the industrial arena. In regarding to the feedstocks, we have already experienced regarding the feedstocks For biofuels, we are already in the international market. So we have some partnerships that we are keep developing. And by that mean we are derisking the feedstock for this for our project. As well, we are progressing with the studies in terms of engineering and construction. So towards the FID early next year, we will be ready for it. Thank you. Yes. And so perhaps I can just we're going to be looking at used cooking oils and animal fats and other Produce, we're looking at Asia, we're looking at Americas, Latin America, Europe. So we have a global sourcing On at the moment to make sure that I think certainly 75% or so I think Carlos, we're going to want to have Some kind of long term agreements in place ready for the FID moment. And the €50,000,000 EBITDA, I think you mentioned, That really is calculating where we assume these feedstock costs are going to be and where we think the renewable fuel we place. Taking into account the Red 2 multiplier that will enjoy the market. Next question comes from Sasikanth Shilukuru from Morgan Stanley. Sasik, good to see you. We are all ears. Hi. Thanks for taking my question. I had 2 related ones, please. The first one was You've kind of highlighted that there's no material contribution from Mozambique Rohuma LNG in your CapEx forecast or CapEx guidance. I was just wondering, is that a view that's kind of shared by the other partners as well? In case this project does come back Onto the drawing board during 2021 before 2025. I was just wondering if you Does that mean there's upside risks to the CapEx? Or is it something to do with your asset rotation as well? Would you be Looking to exit Mozambique, Rohu M LNG, for example. Okay. Sati, can I just take that? I think it's very for us to actually give you a date of when this project will FID, we'll almost Presume we understand how the world will develop and then how the social scene there will develop. And We really regret the loss of life that happened in Parma just a couple of months ago. And I think the Mozambique government is working hard To restore stability there. And I think we're hopeful that the situation will stabilize. We haven't put capital in the 5 year plan for that. That doesn't mean to say we don't think the project will go forward. There is a scenario where we go forward with the project. And because Tore is under some pretty strict guidance on net CapEx, If he wants to do that, he may need to find how we can release some capital elsewhere in order to afford that. So this is very much our saying, it is premature for us to declare a date. We have a clear amount of CapEx we're allocating to our Upstream, so 40% of the €800,000,000 to €1,000,000,000 And then Toure is going to have to manage all his portfolio to make the numbers work. So too early to say this is Going to be divested, too early to say when it's going to FID, but the discipline will stay in place. And I will take the chance to read one of the questions that we received from the platform from Richard from BC Canada. And it seems to be concerned about the dividend policy uncertainty as the cost of capital would be increased due to the variability. Why buybacks We're not being considered. Sir, Felipe, this is yours. Richard, I'm not so certain it's going to be that variable. If you set a dividend policy based on free cash flow, so post you get All the volatility that comes from volatile CapEx, CFFO as the anchor It's actually quite stable even if you have big variations in, say, brand prices. Brand prices collapses, You release a ton of working capital that's within CFFO. So you do have quite high visibility on That is designed to be variable in the first instance. So $0.50 baseline, the 20% that is supposed to be variable is actually Not that variable itself. So I would Reinstate that the base dividends withstands very low macro conditions, everything that comes on top, and we're assuming If it's more than $60 then dividends could be quite meaningful. And you know just as much as we do because it's a very simple One times net debt to EBITDA, all is distributed to you with a cap of onethree. In the plan, we hit the cap all the time because we do have our very strong balance sheet throughout the entire period. On the share buybacks. On the share buybacks. So if you look back at the last, say, decades, a lot of the buybacks Have really been to neutralize scrip dividends. Now we pay good old Cash dividends. We generate cash. We distribute cash when we can. The concern of using the buybacks As a top up to a base dividend because it's true that you can be more volatile If you do buybacks when you can afford it, we've kind of replicated this with a cash variable dividend. So it's not that different. There are no scrip dividends to neutralize. So hence, 100% in cash. Okay. And we'll come back now to the video platform. Now we'll have Pedro Aldous from CaixaBank BPI. Pedro, please go ahead. Hi, everyone. Thank you very much for the event. So I have here one question Regarding your guidance for the new Industrial and Energy Management division, we see here a big jump in EBITDA From the 1st years of around €200,000,000 to €400,000,000 in 2025. And I'm sorry if I'm missing something, but I'm struggling to reach these levels only by incorporating the refining margin of $4 per barrel and the $1.7 of OpEx. And obviously, the contribution from Advanced Biofuels and €120,000,000 of energy management. So Could you please clarify the bridge to get this €400,000,000? And then my second question regards to renewables. I think you mentioned partnerships to expand the business. So do you consider eventually M and A to reach the 12 Gigawatt target by the end of the decade. And if not, if you don't plan M and A, can you give us more visibility On the status of the pipeline of greenfield opportunities to reach those 12 gigawatts target. Thank you. Thank you, Pedro. On the first question, I'm going to ask Felipe to make the bridge and talk about the one offs, some of the one offs that we're experiencing in the Yes, Pedro, it's really the 400 is a lot more normal than the starting point. So I'm not Certain, the market appreciates how bad this has been, both with our gas trading And the hit we got with re gasification costs and how bad refining has been. So we start with a very low base. So if you normalize refining margins closer to $4 per barrel, adds the efficiencies we're building, add the new units And a very significant investment in energy management across all products, that's power as well, gas and oil, of course. So we get to that sort of number. So the base effect is what is driving your question. Yes. I think and particularly this year, we've had the regasification costs have been as you mentioned, Philippe, it's quite a big one off hit. I think we hope to not have that Going forward. But yes, if you look at Energy Management and the HVO unit alone, that gives you more than 1 170. So that's a big contribution to that future. And the second question was around Help me. Oh, the Renewables Partnership's M and A. And I'm going to I'll ask Susanna to perhaps give a little bit color about how much we're looking at. Obviously, nothing firm yet. But At the moment, we will continue to look whether there are any attractive renewable platforms for us To acquire. We haven't any firm plans at the moment. At the moment, our focus is on organic growth. And why? Because we think we get a higher return from that, Because the platforms are quite highly priced at the moment because, obviously, renewables is in the vogue at the moment. So we think we get a better return from our own capabilities going in very early in the piece into a development with And then taking it over and develop here. So Susanne, perhaps give a bit of color of how because we look at a lot of these options all the time at the ex com. Definitely. I think as Andy said, we may do selective M and A opportunities, but it will be very rarely. We still believe with the growth there In the market, there is a lot of opportunities for greenfield or maybe early stage development. So it doesn't have to be pure greenfield. So just for example, you know that we acquired 2. Gigas from the ACS group last year. But on top of that, we have added Another 900 to the portfolio, and that adds to the 3.8 that you saw. But only this week, we have closed Already, we have executed some contracts for another 200 close to 200 megas, not exactly 200. And we expect to close another 500 in the next month or 2. On top of that, we have a pipeline of at least 2 gigas Of projects that we are looking at outside every year. So we feel very confident about being able to develop our pipeline Through greenfield or mostly, as I mentioned, early development projects. And maybe in some markets, we may Choose some M and A opportunities, but we are more cherry picking good projects than just trying to make massive acquisitions for the future. And we feel confident with the team we have and the capabilities we have and the ones we are building. We are I will say, at this point, at the end of the year, we will be ahead of our targets. So yes, I think Susanna is very much keen to go even faster than We're revealing today in the Capital Markets Day. And look, I have to say, never say never. We will continue to screen Opportunities for inorganic acquisitions as well, but it's not part of our core base plan in the short term anyway. Okay. I will take the chance to read one of the questions made into the platform. It's basically related with Bacallian North. The question It's actually asking when should we take FID on Bacalhau North? How do you think about the possibilities to monetize the associated gas in there? Any production for Knit included in the 25% production growth by 2025 Should we clarify? I think, sorry, is Bacalar North in our plans? Is it going to be producing gas or not? What can we say? Good questions. 1st, it is not in our plan. We have not included any contribution to Bacalhau North in by 2025. How we're going to handle the gas in the second phase is still to be discussed. As you know, in the first phase, All the gas of Bacalhau is being reinjected into the reservoir. And as part of the appraisal plan that we're now going to go through, we will also then decide what would be then Development concept for Bacalhau Nord. So nothing included now. That's an upside for the period beyond 2025. Good. Thank you. And we'll come back to the video questions. We have now Alejandro De Michele from NOW Securities. Alejandro? Yes. Good afternoon, and thank you very much for the presentation. A couple of questions, if I may. If I start as a follow-up with on renewables, please. I think, as Kathy mentioned, the importance of having And integration between the commercial and the power generation part. And the question is, as you go abroad, Can you see a situation where you start internationalizing the commercial business so you can extract even higher returns for that business? And then the second question, moving on the upstream and cash flows. Brazil is due to auction some of the fields of the pre salt fields again Later this year, how should we think about your position in those fields and those auctions, please? Okay. Thank you, Alessandro. And Yes. Firstly, renewables integration down the value chain in overseas locations, Saying that we're going to build a commercial position, I think, will be a bit of a stretch. Saying that we will have energy management capabilities To place the renewable energy for value and to understand how we can Bundle our offerings to customers is something that we will look at. But as I said, we're also looking at quite a heavyweight So long term PPAs in some of our overseas businesses. But as we get more confident in that market, we may evolve that strategy. But the first plan is for long term PPAs. But we're going to have, as I talked about, reinforcing our energy management capabilities in Galp Doesn't just mean in Iberia, it means internationally. So that will open up opportunities. Let's go to the transfer rights. And I as you might imagine, We have now seen Transfer Rights, Atapu, SEPIA, we're in them. We have some unique experience on SEPIA also. Are we interested? Well, I'm going to come back to Tore and say, well, Tore, it's are you interested? You've got a net CapEx you have to stay within. So tell us, what do we think about this ToR bid round? Are we interested? Are you going to have enough money to do anything there or not? And the money, that depends on you actually. But no kidding aside, Brazil is a really a key country for us. And we are continuously examining all business opportunities. And if we see that we can find something That is really is value creating. It's adding value to that already very competitive portfolio we have with there's a development Breakeven now at $25 per barrel at NPV10. Yes, certainly, we will then present it. But we have also then taken on the big challenge That Andy has given us, namely that we need to keep in within that CapEx framework we have, I. E, we have So we are doing both. We are, on the one hand, really looking into it. There is more information to come from Brazil by June with respect And then we will also look into how can we finance that in a smart and creative way. Thanks. Yes. So I think with the ToR round, we've seen some of the bonus numbers significantly down from the last round, which obviously gets people like Toure quite excited, but he also knows the rules of this game on capital discipline. So We'll have to see if we can make anything work there. Great. We are getting close to the end, not before we go to Edinburgh And Jason Kinney from Santander. Jason, good to see you. I hope next time you also have a Portuguese flag behind you. Good afternoon, everyone, and thanks for the refreshing outlook and the reenergized strategy. I really like it. Going back to the Upstream. The new development sanctioned $21 to $25 NPV $25 a barrel. You've highlighted Bacalhau As a most attractive project with an NPV, dollars 35 a barrel. So I'm just wondering if you could remind us of the range of breakevens Some of the other projects that you are sanctioning in 2021 to 2025 to give us the average of 25. And I realize that there's a number of smaller projects within assets you're already developing. But if you could just go over some of that, that would be great. Secondly, on green hydrogen. I mean, is there a specific or formal role for Galp In the MoU between Portugal and the Netherlands to supply green hydrogen by 2025, I think it is. And how much of the Conversion of SINA's will need EU grant funding. And what kind of level of funding would you see by 2025 or 2,030 Thank you, Jason. And I let's address this The below 35. I think we sell well below 35 for Bacalhau. And what else are we doing? Well, we're doing a lot of infill drilling, which is pretty low breakeven price. So and I thought you may say some things, but it's a combination of where we think Back allows it where we have the other opportunities we have in particularly These very attractive infill opportunities in place like 2P, we'll give a blended that is in around 25. Anything more to add to that? No, the Only thing that I will add is perhaps also factor in SEPA into that equation, which is a very attractive field that is will come in production In the Q3 this year. So that is the add on. And then I think I will just underline what Andy said, namely Well below the reflection. I'll leave it for that. You're going to get into trouble, sorry. All right. Green hydrogen, yes, indeed. So I think I can formally say that we're She's stepping out of H2Sienish of the consortium that was planning to deliver this Liquified hydrogen to the Netherlands. We did that a little bit because we want to actually go fast. We want to get we kind of crack on. The main customer for green hydrogen isn't the Netherlands. It's finished. It's our own Great hydrogen position. So that needed for us to be our focus is to start moving on that. It doesn't mean to say that as we Get into this. As part of the Portuguese national plan, there is a plan to build up hydrogen. And as I say, we've got the low cost renewable energy. We believe with skilled workforce here, competitive workforce, we can build Relatively cost effectively. But the third thing is this whole incentives and how many of the EU funds do we need and which ones. Now this is obviously something it's too early for us to pick where and how. But there is a combination of Attracting some of the funds that the EU is offering in this area, but also the regulation around How hydrogen and hydrogen fuels are treated in the market? And so all I can say is that The will of the government, the will of Galp to actually move fast, I think, is going to come and give a good conclusion here. And I think the H2 CNS Consortium is going to continue to explore the opportunity of making the hydrogen for the Netherlands. But Our focus is going to be firstly on what we need, secondly on further industrialization of Cenas itself With efuels, with gas into the hydrogen into the gas grid, with hydrogen sold to heavy duty transport And perhaps ammonia and these other products, I think, for us are more obvious and immediate and we believe economic. And that should be where Galp is focusing today. And we come to the end of the Q and A. So is that the end of the Q and A? It is. Well, look, can I just say to all of you, thank you for your patience? It's been a long presentation and A long Q and A. I hope you can appreciate that we believe Galp has a very Distinctive investment case, an investment case of growth, of growth in renewables, of growth in upstream. We hope you also understand that we believe we're decarbonizing and we've given you some of the metrics faster than some of our peers. We are going to keep financial discipline. I hope you got that message in terms of our capital discipline, In terms of our balance sheet, in terms of being able, therefore, to distribute competitively and to offer the shareholders The upsides when the macro allows. I think it's an exciting plan. The team here is also excited to deliver that. So I've just got one message to you. Let's regenerate the future together. Thank you.

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