Good morning, ladies and gentlemen, and welcome to REN First Quarter 2025 Results Conference Call. We appreciate your presence today. Joining us are the members of REN's Executive Committee, Rodrigo Costa, our CEO, Gonçalo Morais Soares, our CFO, and João Conceição, our COO. Rodrigo, will begin with his opening remarks, and this will be followed by a detailed overview on REN's operation and financial performance, for the first quarter. Following the presentation, we will open the floor for your questions. Thank you again for your attention and continued interest in REN.
Thank you, Madalena. Good morning, all. I'm sure we will have some questions about the blackout today, which probably we will have less questions than usual about the business. As you know, the quarter results were fine. We had a busy quarter with good results in Portugal, also in Chile, and all in all, everything was going perfectly without surprises until, of course, April 28. Even that, we managed properly. Gonçalo, will guide you through the presentation as usual. Just a note on the Q&A, and the blackout. We have been communicating a lot since the event start. We shared information publicly. We made several interviews during and post-event. Just to anticipate what will happen on the Q&A, we will try to answer all the questions, but we are not going to go beyond the facts we have.
As you know, there are multiple audits in progress, some in Portugal, some in Spain, some at the European level. We trust that in a few weeks, we will be able to have more data, and for sure, that will be shared publicly. With that, we move to the presentation.
Thank you, Rodrigo. Good morning to you all. Slide four on the summary, just to say, the financial results of the quarter are good. I'd say they are uneventful. They are completely in line with expectations. In terms of EBIT, it was pretty stable, so no major news there. I'll go into that, but I'd say pretty stable with small increase in Portugal, small increase in Chile, but I'd say pretty stable. Net profit, is increasing quite a lot, but that is given to the fact that typically on the first quarter, due to the accounting of the full amount of the levy, it's very small. Since we are also now, as we had explained in the full year accounts, accounting for the 25%, of the tax incentive, that we have, that kind of creates this variation, but it's mostly due to that.
In terms of net debt, strong decrease. This is given to the fact that there is small CapEx, still in this, abnormal in this quarter. I would not expect this level of cash flow going on on average, so we are happy with it, but I'll go into a little bit more detail. Relation to CapEx, it's a little bit too early. I think everything is okay, but it's a bit early to give you any, I'd say, any proper feedback. Let me hand over to João, that will go through the operating part. João?
Thank you, Gonçalo. Good morning to you all. From the operational side, obviously, the blackout of last 28th of April, is probably the most relevant issue. As you know, the causes of this blackout are still under investigation. There is lots of information that we have already, but still, it's still impossible to have a plausible and solid conclusion of what were the causes of all this. We managed to put the system into operation fully in Portugal, in less than 12 hours, before midnight Lisbon time. We did this with full articulation with the Portuguese authorities, as well as the other stakeholders, both generators, the distribution operator, as well as our counterpart in Spain. Coming back to the other indicators, from the renewables energy sources, this first quarter, we stay above 80%, of renewable sources supplying the total consumption of Portugal.
This is a slight decrease versus last year, last 2024, first quarter. Having said that, if we take the picture with a couple of months more, wait to the end of April, we increase a little bit this 80.5% to 83%, with an important share of hydro generation, as we are going through a quite wet year. We have plenty of water in our dams, which is very positive for the hydro generation, into the system. Jumping into slide number seven, you have an overview of the operational indicators. As I mentioned, renewable share in electricity decreased a little bit versus the first quarter, of 2024. Still, with the latest information, this 8.5%, is increasing. Now, until the end of April, we are having 83%. In terms of consumption, we saw a slight increase of consumption of electricity in Portugal.
Even if we do the normal corrections for temperature and the weekdays, this increase was around 2%, which is a figure that we are anticipating to be the one by the end of the year. Gas transportation, consumption of gas, basically, it did not change very much the overall consumption of gas in Portugal, although there was a change in the sense that what we call the conventional consumption, so industrial and households, decreased around 6%, versus the first quarter of 2024, which was offset by an increase of the usage of gas to generate electricity, on our combined cycle plants. When you look to the consumption of gas from the distribution perspective and you see this decrease of 8.2%, versus last year, this is almost in line with the overall figure of conventional consumption that we have for the country.
In terms of the availability rates, as well as in the average interruption time, in the first quarter, nothing much to be said. Of course, the 28th of April, event was later than that, and we are still waiting for the decision of the regulator regarding if it is considered to be an exceptional event and therefore is not considered in terms of our quality of service indicators. With that, Gonçalo, I give it back to you.
Thank you very much, João. Slide number eight, is just the main numbers. I'll jump through that and go straight to slide number nine, in EBITDA. On asset and OpEx remuneration, this is mostly driven by amortizations and by the solar agreements that are contributing to this increase. In OpEx, I'd say that there's some timing of some costs and some costs that are actually recognized also in revenues. I'll go a little bit into that. In international segment, I'd say that it is increasing now around 12%, in line with what we expected. You see that international grows a little bit as the weight, but as you can see, Portugal, is and always will be the priority, and international is around 5%, now.
Looking at slide 10, on road revolution, there is basically no major change, so that's why you see that base roars are basically flat versus last year, so no change there. In terms of investment, this is a little bit too early to tell you, so you see an increase. We are expecting a strong CapEx year. Execution is going well, but it's too early to make any other comments. I'd say that everything is going according to plan, and we should expect, as I said, a strong CapEx year. In terms of slide number 12, you see the evolution of the returns of the several businesses, so electricity growing mainly by asset-based evolution.
Actually, if you make the calculations of the REB evolution, taking into account the solar agreements, what you'll see is that from 2023 to 2024, adding the solar agreements, we grew around a little bit over 2%, so around 2.3%. What we are expecting this year, if everything goes according to plan, is that that growth will increase again. We should be around 3.5-4%. Let's see how things go. We are accelerating the growth on the electricity assets, as we had told you in the business plan. Gas transportation, is still coming down due to the asset evolution, and gas distribution, is more or less stable. Okay? In terms of OpEx, what you see is this increase of close to 9%.
Personnel costs, is the smaller part here, and we know that they are growing as we are still growing people, but they are, I'd say, more or less stabilizing on core external. Part of these things relate to the electricity in the LNG terminal, as you see. You cannot see that this EUR 700,000, is more or less neutral than or will be neutral in terms of EBITDA, because we also have more revenue, so it's not really additional OpEx. OpEx, is growing on the core external costs, less than we are expecting. Some of other costs, I'd say, are also there's some timing issue. Yes, we'll have costs growing this year, but I'd say a little bit less than what you are seeing here. Okay? In slide 14, talking about Chile, as I said, no surprises. TransML, the electricity company, growing as expected.
EBITDA, growing around 13%. We are back to this growth trend that we were supposed to see. I think that this is going to consolidate over this next year as the options that we have been winning and some of the other construction start to come online. Just to note that we did announce the acquisition of that small company, Tenza. It operates around 190 km in Chile, so this is completely in line with what we want to do in terms of strategy, which is to grow organically and very small, I'd say, asset acquisitions without increasing Chile, above a small percentage of what it represents inside REN. Eletrogaz, the gas company, is, I'd say, pretty much stable and with no major news. Below EBITDA, see depreciation evolving in line with revenues also of amortization, so no news there.
In terms of financial results, they are, I'd say, also having they had a very good evolution this quarter. Average cost of debt, is stable, as we had said, so they are, I'd say, in the 2.77, so slightly below 2.8. We don't think that this is going to change materially now. There is also an impact, and we'll see that, of net debt coming down because of several reasons that impact the financial results. And there's also some impact of positive exchange rate evolution. As you know, last year it was negative. The year before, it was positive. So it's something that kind of every year is positive or negative and is more or less neutral on the longer-term kind of view. In terms of taxes, so what you see here is the full amount, of the levy being accounted.
There are no, in relation to the levy, there are no new news. There is nothing new that we know apart from what we already told you on the full-year event. There is no other news from the courts. There is no other news from the government or from the budget. I would say everything is as it was. Although the news were positive and the trend is positive, and we are very hopeful that this is going the right way as of now, we are still being conservative and putting it into the account. As you know, this is only paid in October, so we will see how this evolves along the year. Furthermore, as I said, we accounted for EUR 7.5 million, which is our best estimate as of now of what is 25%, of the full-year amount of the tax incentives.
We also had some other positive impacts around a little bit below EUR 2 million, of other taxes, that we recuperated from previous years. Okay? That is why it is kind of slightly lower also than we had anticipated. In slide 16, the full picture. I would say EBITDA flat, and you have a good contribution from financial results and from income tax, that helps this growth. It is a little bit like this on a full-year amount. This will change because, as you know, the tax incentive, was fully accounted for last year in the fourth quarter. On the full-year amount, you will see this kind of level out. On the first, second, and third quarter, we will always have this, I would say, positive year-on-year impact of the tax incentives. Going to net debt on slide 17.
This had a very positive evolution, and there are several reasons to this. On one side, still some correction on tariff deviation, so I think this is now stabilizing around the EUR 100 million, number that we should expect. It can be a little bit higher. It can stay where it is, but it was, I'd say, some of the final corrections. Secondly, CapEx is, I'd say, a lower quarter in terms of execution, so slightly less burden. The dividends are not paid here, so it is part of what you'll see in the second quarter. Also, finally, on the other, you see that there is a positive impact there of minus EUR 76 million almost. Part of this is relating, or most all of it is relating to the solar agreements, around EUR 70 million.
This is what, as we told you, we receive some of the money in advance as we are executing the agreements. There is going to be, at the start, sometimes in any given quarter, we may receive it and execute the following quarter. In any given quarter, you can see a positive impact, or you can see the CapEx, being a little bit higher than what you're expecting. This is completely normal, and this is related to the solar agreements. Maturity, as you see, is still a little bit above five years. You can expect that in the second and third quarters, this is going to come down a little bit until we issue a new bond, which is expected before, and then I think this will recuperate.
We are also always refinancing the loans that we have, so we are aiming at maintaining this around this, but it may come down a little bit and go up a little bit more, but I'd say no news on the net debt side. Slide 18, just sharing evolution. I think we've been having a good share price evolution this year, even despite some turbulence. Recently, I think it was pretty stable, and we are clearly ahead of peers and the market. Okay? Moving very quickly through the ESG information, and to slide 20, just to tell you that we are continuing to develop and execute our strategy. What you see here in terms of gas emissions, going up is mainly due to the fact that in the beginning of the year, more CCGCs, were used, so we had more gas-produced electricity.
Because we had more gas-produced electricity, we feel this a little bit, but I'd say that is the normal. For instance, as João said, as more renewables come online, you'll see slight changes in this figure along the year, so I'd say nothing very different. Slide 21, I will not go into it. It's just for your reference. It's a little bit more information. Slide 22, is just to tell you that, as you see, our efforts are being and continue to be rewarded in terms of the ratings. We do not live for these ratings, but this is a reflection of the good work that is being done, and they are having positive evolutions in most of them and in some of them the same, but I think this shows the work being done on the ESG front.
As closing remarks, I'd say pretty good results, very much in line with what we expect. It's a stable EBITDA, strong CapEx, that you'll see full year, net profit growing on tax reasons. I'd say unusually high cash flow contribution, as I explained before. Bear in mind also in terms of dividend, that the dividend is being paid now on the 13th, and today, and it's the expected dividend date, so that's why you see correction on the price in the market. We will be paying the dividend as agreed. Thank you for your attention, and we'll now open for Q&A. Thank you.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 11 again.
Please stand by while we compile the Q&A roster. This will take a few moments. Now we are going to take up our first question. It comes from the line of Flora Trindade, from Caixa Bank. Your line is open. Please ask your question.
Yes. Hi. Good morning. Thanks for the presentation and for taking my questions. The first one, and I know you can't share a lot of details on the blackout, but just wondering if you have been asked any compensations following the blackout, and how will you manage this potential risk. Then two questions on results. You mentioned that you don't see this performance of cash flow, throughout the year, but you have ended the quarter, with EUR 2.3 billion, net debt, and you have a target, of EUR 2.5 billion-EUR 2.7 billion. Can we see a lower than the target debt for year-end?
On the target set in the capital markets day, for net profit, these were not including the incentives on the recapitalization of operating companies. I was just wondering to understand whether it would be simply adding this incentive or if you do see any other adjustments that we would have to make to this target. Thank you.
Okay. I will start, and then we move to Gonçalo. In terms of any type of compensation, we are not being asked any compensation, and for the moment, we have no comments to do in relation to that. João, briefly mentioned how the event will be classified, etc., but nothing to share from our side.
On the results, on the cash flow. I mean, as of now, we are not revising that number on the net debt.
As I told you, it's an, I'd say, an unusually better than expected quarter, in terms of cash flow, but I think as time goes by, what you'll see is that now we are going to pay the dividend. Now we are going to execute some of the CapEx , that we already received. Now João, is going to execute more CapEx, in the third and fourth quarter, as is usual in relation to this. What you'll see is things happening in line, more in line with what we said. We are not anticipating any major difference. It can be a little bit below what you said or what we said, but we are not seeing anything. On the incentives, I mean, there's other adjustments, of course, versus the plan because in the plan, but we don't issue differences.
For instance, interest rates are lower than they were in the plan. What you see is slightly lower rates of return in some cases than you had in the plan, slightly lower costs of funding that you had in the plan. I'd say that this one, the tax incentive, is clearly a large number that was not included. That number, you can add because it was not included at all. Okay? Thank you.
Thank you.
Thank you. Now we're going to take up the next question. Just give us a moment. The question comes from the line of Ignacio Domenech, from JB Capital. Your line is open. Please ask your question.
Hello. Good morning. Thank you for taking my questions. The first one is also in relation with the blackout in Iberia.
I was wondering on the IMDT incentive, okay, the regulatory incentive, could this blackout have an impact on the KPIs? In turn, you would be entitled to have a lower regulatory incentive in 2025. Still on the blackout in Spain, you are now in Iberia, sorry, you are now approaching the regulatory review. I was wondering if using this could change the stance from the regulator in terms of incentivizing networks in Portugal. Okay? My second question, is related to Chile, on the recent acquisition of Tenza. I was wondering if you could give us some color on the strategy there, if you think this is an interesting market. Do you think we could see other minor acquisitions there, which could also give REN, some scale in the Chilean market.
Lastly, on the taxes in 2025, you put the special energy tax, in the quarter. Last year, we saw in the last quarter, an offset following some decisions from the Constitutional Tribunal. I was wondering if this situation could be again repeated. I understand that you do not have any notifications yet, but I would assume this could be something going forward. Just a bit of color there. Thank you very much.
Thank you for the questions. I will start with the IMDT incentive. As you know, the IMDT incentive, has three components: the availability rate of the network, the interruption time, and the interconnection capacity. Starting by the last one, all the decisions that are being made in the interconnection capacity are fully articulated with our government, so that will depend on the position of the government.
Whereas the two others will depend on the decision of the regulator regarding if it considers an exceptional event, this event. All the indicators show that the event started not in Portugal, and therefore, we will have to wait for the decision of the government. In addition to that, I think that it's relatively conscientious that the work that was done after the blackout was considered to be good work by everyone. Therefore, we will have to wait for this decision on the regulator specifically to see if there is any impact on the IMDT, although we are positive.
Regarding what is the impact of this event in the minds of the regulators, government, energy agencies, and European Commission?
I think this event was so strong and so sudden that it's making all the decision-makers, all the stakeholders thinking about what should be done in the future. We all know that we have to do a few things probably differently in the future. We all know that probably it will be needed more investment. People understand more the type of risks we all face as countries. I'm sure this will have an effect in terms of how people see the financing and the investments, in the future for energy. I think the expectation is that things will change with this extra concern that we have now in our minds, and it's not going to be different in the future.
Okay. Relative to Chile, and your app, this is completely in line with what our thoughts were. This was a very small asset acquisition.
If we have or if we have another opportunity that is similar, we can look into it. The issue here is that first, in terms of returns, we are executing things where returns are actually very much aligned also with greenfield execution. We are being very disciplined on this. Secondly, when we do these small asset acquisitions, we are also substituting some of the CapEx or the capital, that we would be allocating in the following years on options. We are not thinking about allocating much more capital or more capital to Chile. This is more a way of sometimes anticipating things and making things go a little bit faster with similar returns. At the end of the business plan, instead of Chile, going from 4.5% to 6%, imagine it is going from 4.5% to 6.5%. It is exactly the same.
We are not going to make any major change. We like it, but it's small, and it will continue to grow in this small step. In terms of the quarter, and the offset of the levy that you asked, there is no news. The only thing I can tell you is that if tomorrow we have more cases that we won, that we were sure that we would be receiving the money, we would account for them as we accounted for them last year. The accounting policy, is the same. We just have to wait for the news to come from the court. We have no new news relating to that. There is nothing new that I can tell you. Of course, every year, new court cases are decided. The most likely thing is that something will happen during the year, but we do not know.
Okay? Thank you.
Thank you very much.
Thank you. Now we're going to take our next question. It comes from the line of Fernando Garcia, from RBC. Your line is open. Please ask your question.
Good morning. Thank you for taking my question. Since the blackout, there was a change in the system operation. As far as I know, Portugal, just resumed imports from Spain. I think this is limited to 1 gigawatt. My question there is, when do you think you can start operating normally? Maybe you need to wait until the reasons of the blackout are known.
The second question comes as a follow-up of a previous comment that you already did, that it was in that sense, if you have any feedback from the Portuguese regulator, about investment that needs to be done in order to limit the risk of the blackout in the future. I take this might be a little bit too early, but any indication here would be highly appreciated. The last one is, did you experience any frequency oscillation coming from Spain, that was very different to normal in the minutes, hours, days before the blackout? Thank you very much.
Starting further by the first, when are we expecting this to come to normal? The sooner as possible. We are being implementing these measures that are known, completely articulated with our government and the Portuguese authorities.
We are following very closely the outcomes of the wholesale daily market and what the Spanish TSO, Red Eléctrica, is implementing as additional measures for security. As soon as we can consider that there is more information and also clear evidence that we are all coming back to normal, we will obviously adjust and change the status of the interconnection to normal. Jumping to the last question on the frequency oscillation, yes, we do confirm we had some voltage oscillation, and slight frequency oscillation, some minutes before. The major event happened, as you know, in just five seconds at 11:33 A.M. Lisbon time.
On your question about feedback from the regulator, so far, as you anticipated, it's still early. We do not have any feedback from the moment. Of course, we have contacts. We speak with them. They speak with us.
We follow the event, and we exchange information. This is just in the beginning of the process. The regulator, they will have to go through their process of reviewing the future regulation. As I said before, this is going to have an impact for sure in the way the people think about the future. João, already mentioned. In fact, we had a very, very good interaction with the government during all this situation. I think they allow us to do our job. We manage all the process as we wanted. I think we did it. Of course, this is our view. I think overall, the evaluation is extremely positive in the way we did it. We were very well trained. This is the first time it happened.
I would say it's the first time at this level that happened in Europe, since there is an organization of energy like the one we have today. You don't do a live training. It's impossible. This was the first time that it happened. I'm sure we deserve a lot of trust from all the regulators, energy agencies, the government, everybody.
Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star, 1, 1 on your telephone keypad. Once again, if you would like to ask a question, please press star, 1, 1. Now we're going to take our next question. The question comes from the line of Enrico Bartoli, from Mediobanca. Your line is open. Please ask your question.
Hi. Good afternoon, everybody. A few questions on my side.
First of all, if you can elaborate on what you are seeing in terms of requests for data centers to your electricity transmission grid in Portugal, and what is the outlook that you expect from this source of demand over the next years? If you can give us some guidance on the CapEx, that you expect for 2025. I have a question regarding results. I saw that there was a significant increase in the OpEx revenues, in electricity transmission in the quarter. If you can elaborate on the driver for that, and if this is, let's say, a trend that you are going to expect also over the next quarters. Thank you.
On the data centers, I do not know if João, wants to add some comment, but the type of requests we are seeing is we have several projects being evaluated by the investors, several connections being evaluated by ourselves. It is a little bit a hot topic everywhere in the world with the ups and downs. We see some of the projects in Portugal moving, like the Sines data center. They are moving with their plans. They finished the first phase. We believe they are very committed for the next phases. I do not think we can really comment much at this point. João, do you want to add something?
Everyone is following the regulatory and legal procedures. They are presenting the requests to connect to the grid as consumers, data centers, and other bigger industrial consumption.
We have to check if there is the availability of the network for those connections to be granted. If that is the case, we give them. If there is an overload of requests versus the capacity that is available, we have to inform the Portuguese authorities, both the government and Direção Geral de Energia, as well as the regulator, requiring the analysis of a possible special area for big consumption of these industrial sites. That is where we are now. We are also waiting for some feedback from the government and the regulator to follow on the next steps.
On your question on CapEx, as I said, we are expecting a strong CapEx here. I would say that if everything goes to plan, we can get about EUR 400 million, of CapEx this year. Let's see. It depends. It is a little bit early.
We clearly have a target to execute more CapEx this year. We will see where we end up. We end up closer to EUR 400 million, a little bit above EUR 400 million. I would say that in terms of revenues, there was nothing, I would say, unusual. It is the normal TOTEX revenues, the normal asset revenues. I mean, there was nothing unusual in the numbers or below the numbers that we are seeing. We are seeing the solar starting to contribute. I would say nothing out of the ordinary on the EBITDA, from the revenue side. Okay. Thank you, Enrico.
Thank you.
Thank you. The speakers are on for the questions for today. I would now like to hand the conference over to the management team for any closing remarks.
Thank you all. We appreciate your time and your questions.
As usual, we remain available offline for any additional issues you may have. Have a good day. Thank you all. Thank you.