Thank you very much. Thank you all. I would like to thank you for making the time for joining us today for our Q1 results conference call. As usual, we have here our executive team, Rodrigo Costa, our CEO, João Conceição, the COO, and Gonçalo Morais Soares, our CFO. Rodrigo will start with his opening remarks, and then João and Gonçalo will guide you through the main operational and financial quarter highlights. We will then move to our Q&A session, in which we will be taking your question. I will now pass the floor to our CEO, Rodrigo Costa.
Thank you, Madalena. Good afternoon, and welcome all to the call. This quarter was very different from any previous quarters we ever had. We had a change in our regulation, as you know. We had parliament elections. We had a second wave of COVID in the beginning of the year, and we thought that would be the last one, but apparently it is not. We also have a war in Europe, and tomorrow will be the ninth day of the conflict. Regarding the future, we see the same you all do. We see inflation rising, we see more geopolitical tensions brewing, we see interest rates rising, transport and trade disruptions, supply shortcomings, and all that resulting in market uncertainty. It's simple to talk about all these facts. It's very hard to predict what will happen next. Are we here today?
The results are the facts. What we did already disclose are the facts. The energy transition investments and security of supply investments resulting from the war will keep us extremely busy in the coming years. The demand for projects has never been so high. The main concern now is how we will deliver. The dramatic growth of renewable generation, adapting the grid and all the systems, the search for alternative clean energy, including the green hydrogen, and develop and encourage our people to deal with all that changes, it's a big challenge. We are and we will be very busy in the coming times. For us, this is the time to focus on all these urgent needs while we deliver on the security of supply.
We never worked so hard to meet the demand and contribute to solve these threats we are all facing. In Portugal, we believe we are on the right track. Although we have all these challenges, we believe we have a good grasp on the situation, and we know we will be able to do whatever it takes to keep everything under control. We are doing the best we can to develop alternatives and deliver without disruptions. In Chile, the situation is stable with our both operations, and we are moving on the right direction. We remain very positive looking forward. Now, with this introduction, I will move to Gonçalo and João, and after we will of course take your questions.
Thank you, Rodrigo. Good afternoon to you all, and thank you for joining. I think that looking at slide four, despite this tough context that marks the beginning of 2021, we managed to have a positive quarter, both domestically and internationally. Looking at EBITDA, you see that EBITDA grew 3.5%. Domestically, we see the impact of the new way we are accounting for TOTEX revenues. I'll go into that in a little bit more detail. That positive impact comes even despite the negative impact of higher electricity costs. Internationally, businesses are growing well and grew more than EUR 2 million in terms of EBITDA.
Net profits also increased and improved to around EUR 6 million, mostly due to EBIT improvement and some better financial results, which I will also go into more detail after this. CapEx is decreasing, but it's really too soon. The numbers are not meaningful yet to comment. We still expect a strong year in terms of investment. As you can see, and João will cover this in a little bit more detail, renewable sources are around 50%, and that is a sign of the severe drought that the country continues to endure. Looking at the sector overview, there aren't any major news ongoing. We are working hard, setting up teams to promote the hydrogen agenda.
We have a task force that is being now set up to promote investments and to adapt to the network to this new challenge. We are pushing for projects, mainly in Sines, the H2 Green Valley relating to hydrogen. This is something that we are also keeping at the top of our priorities. ERSE has announced some exceptional setting of the electricity tariffs. This is due to the high prices that have been registered in the first few months with them, and they are trying to find ways to stabilize the tariffs along the year. It is nothing that should impact us in any meaningful way.
Going to slide number six, and before passing to João, I wanted to explain a little bit to you how we are accounting now for the TOTEX revenues, because this is an entirely different way of looking at it. Basically, what we are doing, and this has been already talked with the auditor, we are recognizing the annual rent fixed by the regulator. They have fixed a certain amount for this year, and this is what we are recognizing every month. How is this going to be adjusted? In 2022, it's going to be adjusted by two factors. One is the rates of return. As they go up or down, also this revenue will be adjusted and also the volume drivers. The amount of kilometers of network that we grab.
As of 2023, and on top of these two items, then it will be adjusted by inflation and by the efficiency factor. Those two criteria have already been included for 2022 in their calculations, so they will not impact this year. That's the, I'd say, the first element and how we account for that. The second one is the efficiency sharing mechanism. This is something that the regulator will define at the end of the period. As of now, we are including no efficiencies whatsoever because we feel that it's too early in the period to start including them. Our idea is that towards the end of the period, it doesn't have to be only in the last year, perhaps in the year before the last, we can already start to do that.
As we start to become a little bit more certain if there are any, in what amount are the efficiencies, we'll start to account for them. This and next year are years that we will probably be not accounting for anything relating to efficiency. Thirdly, the incentives, which as you know, changed from the ERSE to the IMDT incentive. We are also recognizing the amount that the regulator estimated at their central case. This is what you have in the accounts now. Relating to this, of course, there will be a calculation that will be done at the end when we ascertain the exact numbers and values for the parameters. We are expecting here to end of the year with a figure above that central case, as also is our expectation. Okay.
We can go a little bit more into detail or explain again this to you, at the end in the Q&A. For now I'll pass to João that will comment on the operational highlights. João?
Thanks, Gonçalo. Good afternoon to you all. Jumping to slide eight, you have an overview of the operational highlights. I would start by then the electricity consumption. As you can see, there is a slight increase versus 2021. Our expectation is that throughout the year we will kind of recover these from these two consecutive non-typical years with all the COVID effects that have an impact on the national electricity consumption. As Gonçalo has already mentioned, we see a significant decrease on the share of renewables, and the reason is very simple, is due the significant drop from the electricity generated with hydropower plants due to the very dry year that we are going on.
Just for you to have an idea, we are at the levels of 30% of what we consider to be an average year for electricity generation. The other types of renewables, they are approximately stable or even increasing slightly like solar, but not with an amount to offset this very big drop on hydro. In terms of quality of service, we continue to have a high levels of quality of service. You have two indicators here, the average interruption time and the combined availability rate of our network infrastructure, electricity network infrastructure. Both indicators are quite above the minimum thresholds that the regulator has set for this IMDT new electricity incentive.
On the natural gas side, we also see an increase in terms of consumption, mainly driven by the sharp increase in electricity generated from combined cycle plants to compensate the drop in the hydropower plants. That's accounting for the overall increase in consumption as the other types of consumption in Portugal, mainly industry, has decreased as a consequence of the very high prices of natural gas that we are facing nowadays. In terms of quality indicators, things could not be better. We have a combined availability rate of 100% within our transmission infrastructure. When it comes to natural gas, the drop you see in terms of gas distributed is the flip side of this decrease in industrial consumption, sorry.
which basically reflects a decrease in the overall gas that was distributed by our Portgás distribution company. With that, Gonçalo, send back to you.
Thank you, João. If we go to slide number nine with the financial highlights. These are, I'd say, I have already commented on them, very much in line with our budget and our plan. You see the EBITDA growing 3.5%. You see net profit growing almost 33%, which is not the net expectation of growth that we should have for the full year. You see net debt coming down 17%, and this, I will comment again on this, is also driven by high electricity prices, and mainly the tariff deviations being generated again at the REN Trading level. Moving to slide number 10. You can see the evolution of EBITDA.
What you basically see is this around EUR 2 million impact on the domestic front and EUR 2 million on the international front. You see the assets remuneration going up because of higher rates, higher asset bases, the new TOTEX accounting that I spoke about. On the OpEx, it's mainly the impact of electricity that pushes it down, the EBITDA domestically. On the international part, as we have already expected and said, both companies are doing well, both Transemel and Electrogas. That translates on the international components going up from the 2.2%-3.8% of EBITDA from last year to this year.
Electricity is basically stable, gas distribution also, and you see gas transmission coming down a little bit as a % of EBITDA. Looking at rates on slide number 11, we can see that there is a pickup in REN rates since the end of last year. This rate ticking up, you can see that's pushing up a little bit our rates of return. Electricity is the same as last year, but as you may remember, the starting point in regulation was actually slightly below at 4.4, so it's already slightly higher than we and the regulator had anticipated.
In gas transmission and distribution, I see clearly the impact of this increase in rates, and you can see a 20-30 basis point impact, which if you start to look at the asset base, translates in a few million more of EBITDA that we have already seen if things stay the same for the full year. Going to slide 12, as I said, it's too early to comment. The numbers are really not meaningful because last year we were recuperating in the first quarter a lot of projects that had been delayed from the end of the previous year due to the pandemic. We are expecting another strong investment year.
Yes, transfers to RAB will be lower because of exactly that reason, but we are still expecting very strong CapEx this year, mainly in electricity. That being said, as I commented before, we are also trying to push for new investment in hydrogen, but you still won't see it. This is something that between this and next year will start to show somewhere also in the number. As João will comment a little bit more on the Q&A. In slide 13, you see this big increase in electricity without premium assets. There's a big increase that comes on the back of what we had last year as transfers to RAB.
The rest, I'd say, is more or less the normal trend, which is gas transmission and LNGs coming down and gas distribution being more or less stable. In terms of the remuneration and for some time I think that we haven't seen this, you see although one is almost zero, but you see a positive impact of RAB remuneration in every single business. In gas, mainly because of rates of return. In electricity you already see small impact of asset base, but the reality is that it's interesting to see this inversion and this trend that we hope will continue to develop as you see the impact of CapEx and as you see the impact of rates of return going up.
Looking at OpEx, this is a quarter and we had an expectation that actually costs would come down. There is this pressure coming from electricity costs. This is an increase versus last year of EUR 2.7 million. Not only is it because the prices of electricity have remained high, but as you may remember, they only started to increase significantly more towards the middle of the year. The first quarter last year, they were particularly low. Yep. You can see that the increase versus last year is a little bit higher than what we would expect for the full year. That being said, we have a strong decrease also in O&M costs on the operating side that compensates on the core external costs. You see that personal costs are basically the same.
We hope that if the price of electricity stabilize or starts to decrease with some normalization along the year, we should see good performance or better performance in terms of costs for the rest of the year. Internationally, we have good performance that we have already anticipated. Just a comment on Chile. We see it's a little bit more stable. There's some changes going on. The constitutional revision is still underway. Let's see, but it seems a little bit more stable. Then on the energy side, they have a very similar situation to ours, with very severe drought. Some infrastructures play a key role, both electricity and gas, in promoting energy security of supply in Chile.
That's one of the reasons why Electrogas is performing so well. There's also new contracts that we already have that will come along. You have an increase in tariffs that were already expected, so you see this 25%+ increase in revenues in that company. Transemel the same, also a 25%+ increase in revenues, and mainly driven by the growth in construction that came online last year. We are still recuperating a few construction from the pandemic. I would not clearly extrapolate these times forward. That's not the way to do it, but we are expecting a strong performance from Chile in the rest of the year. Looking at the consolidated view, can I comment?
On the financial results side, there is a stability of the cost of debt, basically the same, around the same 1.6% that we had before. We also have, and this is the flip side from the last quarter of last year, we have a positive impact of FX rates from Chile. Last year, with the uncertainty going on, we had a negative impact. As you know, we hedge partially, Chile, but we do not hedge it, perfectly. We do not have, local loans, at this stage because of the cost difference that, when we, a few years ago, took that decision that we have. We are considering to do it in the future. That would, I'd say, more perfectly hedge, the group in terms of the variations of the Chilean business.
What you can see is that we have EUR 1 million-EUR 2 million negative impact last year. We are now having a positive impact. It's a little bit the recuperation of the exchange rate, nothing very, I'd say, abnormal or strange. On the funding side, just to say that we continue to refinance our revolving credit facilities to maintain our two-year liquidity looking forward. That's not in the short term, but I'd say more towards the end of the year or beginning of last year, we are thinking about issuing a new bond. We will keep an eye on how rates evolve. We will keep an eye if it makes sense to anticipate a little bit, given the carry cost also. We will be taking that decision in the coming quarter.
On the tax side, I'd say everything in line. Effective tax rate is around 27.5%, very similar to last year. On the levy side, it's still there. It actually increased a little bit more because we have higher assets. It's still there, and this year it was already fully accounted as normal in the first quarter, with its EUR 28 million impact. Looking at slide 18 and the full impact of everything, you have this increase that is coming from not only the EBITDA growth, but then also a good performance on the financial results that compensate the increase in taxes and depreciation. On the debt side, looking at slide 19, there is again a decrease in debt.
We see it now at close to EUR 2.1 billion. There is a normal decrease that happens in this first quarter, but the reality is that you can see the tariff deviations again came down close to EUR 120 million. 90%-95% of this comes from REN Trading and the same dynamic that played out last year. As you can see now, we already have a balance end of the quarter of EUR 386 million. Our debt, if we correct it for this, will be closer to EUR 2.5 billion. This is not a problem. We actually would prefer in terms of treasury management not to have these swings in tariff deviations, but it's also not negative per se, okay?
We are now giving this money back to the tariffs. We will see what the decisions are from the regulator, if they want to ramp up the way that these deviations are given up to the tariffs. For us, doesn't really have a major impact. The evolution of this will depend also on the electricity prices that come in the coming months. To be honest, it's not a drag. Going to slide 20, and just to say that we've had a good performance in terms of stock. TSR as of now, as of this date, is closer to 20%.
I think that if we adjust it for the dividend that we already paid, we would clearly be above the EUR 3 price per share that we haven't been for quite a long time. I think that we've had during these first months of the year a good performance in the stock market. Just concluding on slide 22. Just to wrap up and say that we have a good quarter with trends being there that we feel are there for the rest of the year with the good impact of TOTEX revenues, good impact of international operations. I'd say an impacting cost that should be incorporated a little bit as the year progresses. Strong CapEx going to be deployed for the rest of the year.
We paid the dividend a few days ago. That was the EUR 0.15 per share that we had already announced in the business plan revision. With this, if I conclude the presentation, I will open up the floor to any questions that you may have.
Thank you. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone keypad. If you wish to cancel your request, please press the hash key. Once again, please press star one if you wish to ask a question. The first question comes from the line of António Seladas. Please go ahead.
Hi, good afternoon. Thank you for the presentation, and thank you for taking my questions. I have three questions. First one is related to TOTEX revenues. I don't know if you can provide an idea of the breakdown between the items that you aggregate before on the TOTEX revenues. The second question is related with all these news on the price. I don't know if you can comment on it or not, about natural gas, about more links between Iberia and France, and also about transshipment. I think that last week there was a news saying that you'll go for an investment of EUR 30 billion, EUR 40 billion, or EUR 14 billion. Last question is related with the transfers to RAB.
I think that there was an increase of transfers without premium. Nevertheless, as far as I understood, the new regulation will just apply for the current year. If the transfers were done last year, probably we should see an increase on transfers with premium. I don't know if you can clarify why the transfers to RAB are so high without premium. Thank you very much.
Okay, António. The first question relating to TOTEX revenue, and I'll pass it. Most of the, basically the TOTEX revenues are the two items that you had before, which was basically the rate of return remuneration plus your CapEx. Those are the two main items that are within our TOTEX. If you want to go into a little bit more of the nitty-gritty and the detail, you can have it with Madalena more on a bilateral. These are the main two blocks that are included in TOTEX revenue.
Okay. Thank you very much.
Well, regarding your second question and what the news that have been published in the press, what we can comment is that we have been asked by the Portuguese state to study the possibility of both using the Sines LNG terminal for transshipment operations to supply natural gas to northern European countries, namely Germany. Also, the possibility together with our counterpart in Spain to have developments on the pipeline infrastructure, the third interconnection between Portugal and Spain as well as the interconnection between France and Spain. The transshipment is basically, if it will be implemented, it will be an operation through several upgrades. The first one, technically speaking, ship-to-ship transfer, so the natural gas pass from one ship to another.
Further on, some other solutions, more robust solutions using the terminal. Regarding the interconnection, these are talks that have been taking place between us and our Spanish counterpart, as well as the French TSOs to see if this pipeline infrastructure can be developed and how fast it can be implemented. Okay.
Okay. Basically you cannot say anything more concrete at this point in time.
Well, this is ongoing.
Okay.
Studies and negotiations, and it is not just about what can Portugal do. You know, when we talk about transshipment, it's necessary that to have making sure that the operators who own the gas will seek for available ships to do the transshipment and the ship-to-ship, you know, projects that may happen. From a technical perspective, we can make it happen, these type of projects. The question is, will the operators and when they will start to do. As you probably have been reading in the newspapers, you know, there's a lot of talks with the Polish government, with German government and other countries to understand what will be the best solution. We are here to make it happen if and when they decide.
Okay. Thank you very much.
This issue of premium and without premium is more related also to the new model. Basically the rev is a constant amount for the four years, and now it's calculated without premium. If you want that, we can also then go when we explain to you the amount of the revenues and the details on that, if you want on a more bilateral, so that we go into a lot of detail here. We can try and explain to you why it comes out without premium versus with premium, but that's just reflecting the new model for the coming years. Okay?
Okay. Thank you very much.
Thank you, António.
Thank you. As a reminder, please press star one if you wish to ask a question. The next question comes from the line of Ignacio Domenech from JB Capital. Please go ahead.
Hi. Good afternoon, and thank you for taking my questions. I have two questions. The first one is on the total generation mechanisms. I was wondering if you could provide us with the average yield or the 10-year bond yield during the 2020 to 2025 period, which has been used to arrive to the EUR 264.3 million annual remuneration. My second question is related to the financial results. I believe you reported EUR 3.97 million financial income during the quarter, out of which EUR 2 million are related to exchange rate difference. It would be helpful if you could provide more details on what is included under this line and looking forward, where should we be thinking for the full year.
My third question is on the international business, namely on Transemel and Electrogas. I was wondering what was the part of the year-on-year increase, which was driven by FX tailwind or exchange differences. Thank you.
Okay. I hope we got this right. The first one, what they have assumed as their rate of return for their calculation in the TOTEX model for this year was 4.4 for this year and, I think, the remainder of the years was 4.4%. Okay. Which was the starting point that they had in their curve. We are already now at 4.5. I think that if we stay where we are now, we'll probably end up a little bit above that amount, that rate for the full year. I don't know if it's at 4.6, but it will be a little bit above. On the exchange rate, we don't have any expectation on that. I think that there was.
That's kind of more FX projections for Chile. What we are seeing is that things stabilize a little bit more in the last few months. They recuperated to a more, I'd say, normalized level. I'm not expecting things to worsen or improve in any significant way. Okay. So they can still improve a little bit. They can come back. So it depends a little bit on the instability in the coming months. It depends on how the constitutional revision process ends up. So there's a few items that can either reduce a little bit the risk and improve again the FX or create a little bit more uncertainty and worsen. Okay. In terms of Electrogas, and you were saying the FX. So basically, the biggest impact in Electrogas are not related to that.
It's new contracts that are coming from new players that wanted contracts to supply gas there. Secondly, the revision of tariffs. Tariff revisions there are indexed to inflation, and they were impacted positively by that. And thirdly, there's also other new small revenues that have tried that some time ago and reappeared. For instance, I'll give you an example since you asked. Electrogas is now having again some revenues with an old dock, a very small old dock that they own, which is a backup for all the other two CCGTs that operate in the area, and that, given the stress in the system in terms of gas supply, are now requiring it again for this, let's say, backup plan to be online, which was something that was discontinued some time ago.
It was mainly driven by this, let's say, sector dynamic.
Okay. Thank you, Ignacio.
Thanks. Gonçalo, if I may, follow up on my first question. I'm not sure if I got it correctly. I think you mentioned 4.4% as a starting point, but is the 4.4% actually the average ROR throughout the 2022 to 2025 period, or is this just for this year?
It's for-
Huh?
For-
If I understood your question, you're asking if the update on the average ROR reflects for the remaining period or only for this year. That I understood well?
No, for the regulatory period, yes.
It's for the entire.
It's for the entire, yes.
Yes. Yes.
They assume 4.4% in 2022, 2023, 2024, 2025.
Okay, perfect. That's it. Thank you very much.
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone keypad. Once again, please press star one if you wish to ask a question. We have another question from the line of Ignacio Domenech from JB Capital. Please go ahead.
On the net debt evolution, I think you are mentioning the EUR 386 million, which is expected to be reverted. Is this the final amount that we should be thinking that should be recovered or reimbursed, or should we see this number increase throughout the year?
I mean, there's two dynamics here. There's the dynamic of the money that we are giving back from last year, which was a lot, and the dynamic of the money being created again in the tariff deviations. If we wouldn't, it could cancel out depending on how electricity prices behave. Secondly, and going back to the tariff mechanism, what ERSE is considering is to speed up the mechanism of giving up the deviations being created this year because they are seeing that they are creating again a lot of deviations, and they want to manage tariff. I'd say that the most expected part is that you will end up with this stock much lower and with the debt higher, and that we will be giving this back in a faster pace.
For us, that's okay. We understand that there is a, say, an exceptionality to this, and to be honest, we don't really need or want to have money in the bank that is not earning zero. It's not really our business. We have the money there, but it doesn't really help us in any way. Okay.
Okay. The EUR 386.2 million includes any tariff deviation.
It is the entire stock that we have at the end of the first quarter. You always have. It doesn't mean that the entire amount will be given up until the end of the year. It depends on how things evolve with the electricity prices. Okay?
Understood. Thank you.
Thank you.
Thank you. Next question comes from the line of Gerrit Navis from Investa. Please go ahead.
I would like to ask if you expect a material increase in your regulated asset base due to this transshipment operation in Sines. Also on the hydrogen part during next year, also if you should see already some boost also in RAB. Thank you.
Thanks for your question. I think it's a little bit early to answer if it's going to be a material increase or not. It will depends on the solution that both countries, Portugal and the receiving country, namely Germany or Poland or some others, will decide it. If it's a simple adjustment on our operations, it's not going to be a material increase. If it's a more ambitious solution, including transshipments, a new jetty, new storage tank, it will be a significant increase on RAB of the terminal. Regarding the hydrogen, we have, as we have been mentioning, some forecast for upgrades in our natural gas existing infrastructure to accommodate the share of 10% of hydrogen blending.
Those figures are the ones that we have been saying. There is not any change on that regard. We are working in parallel for this Sines project, this H2 Green Valley in Sines, which will probably imply some additional CapEx on our infrastructure.
Thank you.
Thank you. There are no more questions at this time. I would like to hand back over to Madalena Garrido for final remarks.
Thank you very much all for connecting today. Of course, we remain available to discuss any bilateral questions or doubts that you might have. Thank you all in the name of the management team here for all your time. Thank you.
Thank you.