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Earnings Transcript for ENGIY - Q1 Fiscal Year 2021

Aarti Singhal: Good morning everyone. It's my pleasure to welcome you to our Q1 Results and Strategic Update Presentation. We have three speakers this morning, Catherine MacGregor, Judith Hartmann, and Paulo Almirante. A quick view of the agenda for this morning, we will start with our Q1 results with a brief presentation on Q1. This will be followed by Catherine leading us through the strategic update, putting strategy into action. And she will be joined by Paulo Almirante on renewables; and following which Catherine will walk us through energy solutions, networks, and thermal activities, and future energy systems. And then Judith will present on the capital allocation and financial outlook and finally concluding remarks from Catherine. And as usual, there will be a Q&A at the end of this presentation, where you will be able to ask your question directly to management. And without further ado, I'd now like to hand you over to our CEO, Catherine MacGregor. Thank you.
Catherine MacGregor: Thank you so much Aarti and very good morning, everyone. I am so pleased to be here with you this morning to first present to you quickly our strong Q1 2021 performance and then switching gear to show you how we are putting our strategy into actions. We had indeed, a strong start to the year in Q1 where we delivered 10% organic growth in EBIT and that was underpinned by solid operational performance. We have also made strong progress on our group simplification; we have set up a new organization, which I will go back to later. And our strategic reviews are on track, we actually continue the rationalization of our portfolio, with a disposal of ENGIE EPS which was announced and the exit of activities in Turkey. For the full year 2021, we are reaffirming our net recurring income group share guidance in the range of €2.3 billion to €2.5 billion. Our first quarter was indeed underpinned by solid operational performance. We commissioned 0.5 gigawatt of renewables, including our first fixed offshore wind project the SeaMade in Belgium and we are on track to deliver the three gigawatt that we have targeted for 2021. Also, in renewables, we have successfully integrated the 1.7 gigawatts of Portuguese hydro assets that we acquired in December last year. Our networks maintain high level of safety and reliability and in client solution; the activity level was fully in line with our expectations. Finally, our Belgian nuclear assets, which records the level of availability at 95%, which is to be compared to last year Q1 2020 at 69%. With that, I will hand it over to Judith for her financial commentary of Q1 results. Thank you.
Judith Hartmann: Thank you, Catherine and good morning, everybody. It's great to be with here today -- with you today. So, indeed, a very good start into the year, you can see that we had growth on both EBITDA and EBIT and I'm pleased to in particular talk about the 10% EBIT organic growth. We had a negative foreign exchange impact of €77 million. This was mostly due to the Brazilian real and the positive impact on scope of €49 million, which was mostly driven by the Suez disposal, which in fact, Suez had been negative last year in the first quarter. And also a positive contribution from our hydro acquisition in Portugal helped us to drive this growth. Strong cash flow generation helped us to keep the net debt stable and we are very pleased to reaffirm our guidance for 2021 today. On the next page, you can see how this translates into the different activities. Operationally, I would mention the following items that had a very positive impact on our financials. The renewable contribution from the additional commissionings were clearly a positive. Networks had a positive impact in Brazil from both power lines and our gas pipeline, and then of course, the 95% nuclear availability contributed very positively to this result. On the more exogenous factors, the Texas extreme weather event had a negative impact in particular on renewables for about €80 million. The colder temperatures in France were clearly a tailwind for networks mostly. And then we also had a normalization of our chain performance that you can see in others, where of course, last year in the first quarter, with a very high volatility of commodity prices, Jim had had a very outstanding quarter. We've also worked on SG&A during this quarter; it's one of the important topics that you will hear again later in this presentation. And that helped us also to improve the growth that you're seeing in front of you. A few words about the balance sheet, the CFFO of €1.7 billion is funding our CapEx of the first quarter. And hence, the debt is stable. On the CFFO, maybe two comments. One is on Jim; lower margin calls helped us to drive this improvement. That's about two-thirds of the amount and one-third very good performance from our working capital requirements. And again, very pleased about this, since this is a big focus area for us. With that, Catherine, over to you for the strategic update.
Catherine MacGregor: Thank you very much, Judith. And indeed I am very, very proud to be here today with you to share with you our strategy roadmap for ENGIE, a roadmap that is completely fully aligned with the strategic orientations that were decided by the Board last year, as you will see -- and I'm enjoying a full support from the Board, while presenting this to you today. At ENGIE, we have a tremendous strength started by highly professional and committed teams. These teams are very mobilized around our debt, our purpose, which is to accelerate the energy transition. The word is at a pivotal moment for the energy industry with tremendous opportunities which ENGIE can and will seize. But there is tough global competition, a competition that does not stand still. So, to remain a leader, ENGIE is taking several steps. These include an in-depth review of a portfolio of activities, a simpler and more efficient organization, and a stronger focus on execution. It is my conviction. It is my commitment that ENGIE has to be managed in a more integrated and in a more industrial approach. It is this project that I am carrying today -- together with my executive committee who is with me this morning. It is this project that I want to embark all ENGIE employees on and it is this project that I'm presenting to you today. We have a buoyant and transforming energy sector. It is indeed an incredible moment for us and for the industry. We are entering a new growth cycle, which is driven by increasing climate commitments and robust energy demand. Renewables development is booming and the word is expecting to more than triple its renewable capacity over the next 20 years, which represent more than 7,000 gigawatt. In the same time, events such as the Uri storm in Texas accurately highlights the need for the transition, these energy transition to bring affordability, reliability, and security of supply. Many governments are prioritizing climate action in their recovery plans, there is such a strong momentum. Policymakers, cities, and corporates have now to decide what should be the energy systems of the future. The new energy word is really at the heart of all these major developments and we have all intention at ENGIE to play a leading role. Today, we are building a simpler, more industrial ENGIE, focused on renewable and infrastructure. We are setting four global business units who are all contributing to this reliable, affordable, and sustainable energy transition. Renewables to generate clean power, energy solution, developing low carbon distributed energy infrastructure; networks, delivering affordable energy for customers; and thermal and supply, offering flexibility to balance this renewable intermittency. These four global business units have infer like business models with largely contracted earnings and in fact completed complimentary profiles. Renewables and energy solutions on one hand, offers strong earnings growth opportunity. Networks, thermal and supply activities, on the other hand, provide stability and strong free cash flow generation. In this buoyant market, one of our priority is to simplify the group at pace. We are concentrating on core activities. We are refocusing our geographic footprint and business development effort from 70 countries in 2018 to less than 30 by 2023 and we are streamlining our organization. We are simplifying drastically from 25 multi activity business units to four focused global business units. They all have clear P&L and cash accountability to drive delivery of growth and operational performance targets. Renewables are led by Paulo Almirante, who will talk very shortly after. Networks by Edouard Sauvage; Energy Solution by Cecile Previeu; and thermal and supply by Sebastien Arbola. Now, this organization will continue to leverage our long standing presence in our geographies as it is critical to maintain strong relationship with all our stakeholders including our customers. On client solutions, we are progressing on the creation of two new leaders in their respective domain; energy solution which is a leader of low carbon distributed energy, infrastructures and related services. And I will talk more about energy solutions later. And then BRIGHT which is temporarily named, which is a new leader in emergency technical services with differentiated skills around air conditioning, electrical systems and building renovation, and is very important project is being led by Jérôme Stubler. Both entities are supported by very strong tailwind to fuel their development. The project BRIGHT, it is progressing on track. The consultation with employee representative that started mid-February is expected to be completed by the end of Q2. We are therefore on track for BRIGHT to be managed as a full-fledged entity within ENGIE by July 1st and this will be followed immediately after by a marketing phase. BRIGHT is a very significant project for us. I'm very pleased with its progress. Jérôme Stubler and his team are doing a tremendous work to embark the 74,000 employees of future BRIGHT and to position this new entity as a leader in its markets. For the rest of this presentation, we will be focusing on ENGIE's future perimeter. Turning now to performance improvement, we have defined a performance plan with clear accountability of each EVP with dedicated actions. We will put focus on sharp execution to drive improved efficiency. We are leveraging a deep industrial expertise across all our businesses and we will set clear operational performances KPI and targets to link with finance results with a renewed focus on cash management. Alongside operational excellence, we are also looking to increase the efficiency of our support functions through deployed increased use of shared services and standard processes and systems. Ultimately, we aim to deliver over €1 billion of gross improvement, driving your net EBIT contribution of €600 million during the period 2021 to 2023 as strong capabilities in data and digital will be instrumental to achieve this performance. Globally, ENGIE has 2,000 data specialist which include 350 data scientists and 1,000 developers -- software developers were building together a software platform. They have indeed a deep understanding of our industrial activities and over the recent years, we have crystallized this knowledge which has been gained over years of experience, hundreds of studies and hundreds of projects into seven global proprietary platforms. These software platforms they cover the whole value chain from origination to operation and maintenance. NEMO, for example, offers a full software suite to support the design as well as the development of complex district heating and cooling networks. It models their energy needs and it optimizes the necessary CapEx. The platform is now deployed on all our major DHC networks and has become a true competitive advantage. A great example is a carbon and energy performance contract that we have with the Canadian government in Ottawa through. Advanced modeling NEMO made it possible to commit to achieving up to 30% of energy saving, while limiting the risk for our company. And our goal with all these tools is really to accelerate the deployment the deployment of these platforms across each of the GBUs. While our performance plan leverages our digital and data competencies, of course, none of this would be possible without the commitment of our people. ENGIE employees at truly making the difference through their professionalism, their unique expertise across the whole energy value chain and their engagement, which is rooted in the energy transition to contribute always further to the decarbonization. In a yearly employee survey, 90% of them are proud to work for ENGIE and more than 80% are committed. Last year alone, we received 800,000 series. Ability to attract the best talent is in my view, an additional competitive advantage for ENGIE. Social improvements are an integral part of our key objectives. We have targeting -- we are targeting by 2030, a full gender parity in our management, a 10% level in apprenticeship across Europe. And of course, continuous improvement in our injury frequency rate for employees and our subcontractors. We will leverage the strengths of a human capital to enhance a culture of performance to focus on execution and increase accountability. One of the reasons I was so proud to join ENGIE is that this company is recognized as an early mover in climate commitments for years. And while we are, of course, pleased that our peers have joined this fight, we clearly intend to remain at the forefront of the race against climate change. This is at the heart of ENGIE's purpose and it is a societal and business responsibility. This is why I am very proud to announce today our commitment to Net Zero by 2045 across all scopes. The combination of speed and breadth of this commitment which includes the use have sold products make these more challenging than most than most of our peers' carbon ambitions. And our strategic update today already shows how we are ready to translate these into action. We will achieve our ambition following a well below two degrees C trajectory with intermediate targets. We are currently working to obtain a SBT certification accordingly. Our teams have achieved tremendous work over the past year to take this challenging commitment and to translate it into a concrete roadmap. Some of the actions we are taking is rolling out our quality plan by 2027. Reducing the carbon intensity of our power generation as well as the emission linked to the use of solar products and this reduction will be drastic to 2045. We are aligning our future CapEx and we will only invest in projects, of course that are compatible with our carbon ambition and we will assign -- we are assigning carbon budget to each of our GBU. We are also incentivizing at top management on cabin objectives. I announced in February our exit from coal by 2025 in Europe and 2027 globally. At the end of 2020, it's important to note that our coal in our power generation portfolio had already decreased by more than 70% since 2015. For the remaining capacity in our portfolio, which was 4.3 gigawatts at the end of 2020, we have a clear exit plan, an exit plan that implies first closing of the core plans, then converting to gas or biomass to plants when it makes economic sense. And ultimately, when the decision of closing or converting is not in our hand, we will consider a disposal of our participation. We will always favor just transition when considering this plan. All in all disposal should concern only two plants out of 10. I would like to take some time to share with you our recent joint announcement that we did with the Chilean government where we presented ENGIE's coal exit plan by 2025 in Chile. Our ambition there is three shored. First to develop 1.8 gigawatts of renewable capacity. We will close our oldest coal plants and we will convert the most recent ones to gas or biomass. Ultimately by 2025, we will have transformed our generation portfolio in Chile from 1.9 gigawatts installed capacity with 60% coal to 3.4 gigawatts installed capacity with 60% renewable. I am very proud of our teams in Chile. They have worked really hard and now they are contributing so positively to the country, they are setting the energy transition in motion and I would like to take this opportunity to thank them again. Turning now to the highlights of our medium term plan and how we are indeed putting a strategy into action. The major focus areas I just covered are simplification, strong commitment to tackling climate change, performance improvement, which together helped drive value creation through disciplined capital allocation. During this plan, we anticipate €9 billion to €10 billion of disposals to significantly simplify the group. We have moved at pace since the announcement last July. ENGIE has repositioned its strategy towards renewable and infrastructure as we see significant opportunities to allocate capital to projects with attractive returns and high predictability. Overall, during this plan, we are planning to invest €15 billion to €16 billion of growth CapEx of which 40% to 45% will go to renewables. And of course, Paulo will elaborate more on this in detail. The investment plan will enable us to increase earnings and deliver sustainable growth in shareholder returns. The Board has reaffirmed the group payout policy of 65% -- 65% to 75%. To the three-year plan announced today, ENGIE expects to dividend per share to increase driven by earnings growth. Separately, energy is also introducing a dividend flow of €0.65 per share for the period 2021 to 2023. And, importantly, we will maintain key credit matrix with economic net debt to EBITDA of less than or equal to four times. We have already adjusted our investment process, as rigor in execution is critical. We have clear financial and ESG criteria, of course, and Judith will cover them later, but we will also have greater selectivity. We are already today prioritizing projects, which are in line with our strategic and geographic priorities. We will also make sure that we always leverage industrial and operational know how to generate value. Shortly, you will hear from Paulo on how the renewables GBU, for example, is working and improving its competitiveness. So, disciplined approach to capital allocation, which is aligned with top management incentives. We are proposing for shareholder approval new short-term and long-term incentives. These incentives apply to the 500 top leaders at ENGIE. The short-term incentives focus on profitability, cash flow, balance sheet, and ESG criteria. These ESG criteria include safety, CO2 emission, growth in renewables, and gender diversity. With respect to the long-term incentive, I would like to highlight that half of the total will be measured relative to performance of our peers, namely net income, growth, and total shareholder return and we have updated a benchmark to reflect our new ambition. Turning now to the financial outlook to 2023, where we expect net recurring income group share of between €2.7 billion and €2.9 billion in 2023. Net income is expected to grow throughout the period driven by investment and performance improvements. It's important to note that 2023 figures reflect the future ENGIE perimeter remoter assuming no contribution from BRIGHT. And as I said, the Board has reaffirmed the group's payout policy of 65% to 75% and we are mentioning our commitment to a strong investment-grade rating. Turning now to a snapshot of how we expect our business mix to evolve beyond 2023. Now, by 2025, we expect our capital employed to fully reflect our strategic priorities, with more than 90% of capital invested in renewables and infrastructure. In particular, capital employed in renewables is expected to double compared to the 2019 levels. Overall, through this transformation plan, post-BRIGHT we have the ambition to deliver high single-digit earnings growth. And now we are going to review each of our GBUs to share the opportunities we see, our competitive advantage, clear priorities for delivery of this medium term plan. And we start with renewables, which is in a very strong key growth pillar for us at ENGIE and Paulo is going to take over from me. Thank you. Paulo?
Paulo Almirante: Thank you, Catherine. Good morning everyone. As mentioned earlier by Catherine, we want to make renewables a strong growth platform for ENGIE. I will present today the roadmap to achieve that focused on profitable growth and supported by a clear investment plan. Let me start with a brief view of the market. Strong support from government and from watch consumers are driving a fast transition to clean energy. Let's remind that in 2020 wind and solar generation accounted for only 10% of the global power generation mix. This is expected to increase to 30% by 2030, which creates a massive market opportunity for renewables. At the same time, the increase in the market size are driving significant price reductions. You can see in the slide that LCOE is expected to reduce at least by 30%. This is driven by technology and more efficient manufacturing processes, making renewables a competitive option and the most cost-efficient solution for many regions in the world. As you can see on the right side of the slide, Europe is leading the way on new capacity in wind, onshore, and offshore in the U.S. on solar PV. 330 gigawatts of new build capacity is expected in our key regions by as soon as 2025, which provides us a great position to benefit from our existing asset base. So, we are in front of a massive market that is growing fast, driven by a very competitive power price and even better in the regions where we have a strong presence. Our existing assets have total installed capacity of 31 gigawatts at the end of 2020. These figures are 100% [ph] and are consistent with the role of ENGIE. We develop, we build, and we farm down at commercial operation. In many cases, we continue to do join them, as well as the energy management on behalf of our partners. In the annex, you have more detailed information per technology, and consolidated share. France accounts for 60% of our capacity in Europe, with 7.5 gigawatts of which is either and we are the number one in wind and solar capacity in the country. In Latin America, Brazil accounts for 13 gigawatts and we are the largest private generator. In the U.S. we have a fast growing position, only in 2020; we built 1.8 gigawatts of new wind and solar assets. Globally, our portfolio is ideally contracted, including either wind and solar at an average level of 70% for the period 2030. This provides resilience to the portfolio and stability of earnings. Our wind and solar assets are really new, with an average life of around six years for onshore wind, and 40 years for solar. This opens significant opportunities to optimize operations. For example, by internalizing O&M, or by reducing the filler rate, which is normally high at the beginning of an asset life. We have a leading position on hydro generation, which remains the foundation of our renewables portfolio with around 57% of the total capacity. In Europe, these are flexible assets, providing services to the grid and benefit nowadays, from a market where security of supply are driving prices up quite significantly. In Brazil, our portfolio of 11.8 gigawatts is largely contracted. Overall, our other assets are idly contributive and provide a strong level of cash flow. Our strategy here is to look at opportunistic acquisitions in markets where it can complement our position. We are not developing either assets organically. On this slide, you can see that we have stepped up growth since 2019. We are delivering on previous commitments with three gigawatts organic growth and this is three times the average capacity additions of the previous period. As you can see on the slide in 2020, so during COVID, we did three gigawatts of new built assets and two gigawatts of M&A. For 2021 as Catherine said before, we are on track to deliver three gigawatts. So, I think we can see that we are able to step up growth and we are delivering on previous commitments, even in the circumstances that we all faced last year. We present on this slide for the first time a detailed view of our renewables pipeline. The total pipeline is 56 gigawatts, supported by 1,200 specifically identified projects at different levels of maturity. This is a solid pipeline. 26 gigawatts are under construction are secured or at an advanced stage of development. An advanced stage here means permitting is almost finalized. In terms of technology, our pipeline is well-balanced between onshore wind, offshore wind, and solar PV. In terms of geography, our development is also prioritized with two-thirds of the pipeline located in Europe and North America. And in Europe, our focus is in France; in North America in the U.S.; and for Latin America, we are focusing in Brazil and Chile. Let me walk you through this slide to see how the pipeline will be converted into new installed capacity. We start with the 56 gigawatt total pipeline, then we have 32 gigawatts on the second bar, which corresponds to the pipeline that will deliver projects between 2022 and 2025. This pipeline compares with 16 gigawatts of additional capacity to be commissioned on that same period of four years and this results in a cover ratio of two times. Around 70% of that 16 gigawatts will be built in the four priority countries that I've mentioned before, which are countries where we are well-established. So, the size, the margin, and the location of our pipeline confirms that we have a nice level of confidence to target an average of four gigawatts per year of additional capacity in the period 2022 to 2025. So, the market is massive and we are well-positioned with a solid pipeline. The question now is how can we differentiate from competition. In renewables today, there are two critical success factors; first, the permitting process during the development stage; second, the route-to-market. The permitting is more and more complex; we all know that, with bottlenecks related to administrative processes, sometimes at local level, sometimes at both the local and the national level. I think the ramp-up that I have shown in the previous slides demonstrate that we have built a strong and delivering development machine. We are deeply attached to our local stakeholders for many years, with a global team of 4,000 employees fully dedicated to renewables. So, this gives us a clear competitive advantage in our key markets. Our energy management platform is also a competitive advantage and allow us to link renewable assets upstream with different downstream options, being them the corporate PPAs, our B2B supply portfolio, or our unique position in the most sophisticated mentioned markets. As an example, in the last two years, we have been able to capture important market shares with clients such as Amazon, Air Liquide, or L'Oreal. And this has positioned us number two, in the U.S., in Europe, and in Latin America. In addition, we are activating other industrial levers. You can see in this slide an illustration of our industrial hood map to increase competitiveness. The circle on the left shows the components of LCOE in a French wind farm. As you can expect, CapEx and O&M account for almost 80% and these are the two areas where we want to focus. Our industrial hood map is also supported on the new global organization dedicated to renewables, as presented before by Catherine. This will prove the standardization of engineering and construction practices, as well as the bundling of procurement volumes, which we already do, for example, for solar PV panels, but we want to extend to other equipments and services. On the O&M side, our assets are at the phase of life where original services contracts are coming to an end, which opens opportunities to internalize operations and maintenance. Again, another example in France, we have shifted 400 megawatts of wind farms to what we call the self-performed model and we are switching another 300 megawatts from the original supplier to independent service providers with the obvious cost savings in O&M. We also have now enough information to review maintenance schedules using data analytics, reducing downtime, and increasing availability. So, overall, we are targeting a reduction of LCOE of 2% to 4%, mainly from better availability and lower CapEx. This is equivalent to a reduction in the average cost of capital of around 50 basis points and can be translated into either additional value creation or improved competitiveness. On this slide, we present a clear investment strategy to accelerate profitable growth. This strategy is built on four pillars; a strong focus on a limited number of development priorities, 80% of our CapEx will be invested in four countries in wind offshore. A significant increase of the CapEx allocated to renewables from a nominal average of around €2 billion to at least €3 billion from 2024. A clear investment criteria centered on WACC+2, but with the flexibility to vary plus or minus 50 basis points and Judith will come back to that later on during the presentation. And finally, a shift of the business model to increase the share of costs related assets by 2025, 70% of our new wind onshore and solar capacities will be on a develop to own model, and this change will increase visibility of earnings. So, our objective is to reach a portfolio of 50 gigawatts of renewables capacity by 2025 and 80 gigawatts by 2030. Considering the starting point of 31 gigawatts, this represents an increase of 2.6 times our current capacity. Those objectives are the step change in our average annual capacity. If we compare with our current three gigawatts per year, we will increase by one-third on the first period 2022 to 2025, going to four gigawatts, and we will double on the second period, 2026 to 2030, going to six gigawatts per year. So, from three to four to six, these are significant increases on the growth rate for wind and solar projects. At the same time, they are realistic objectives, geared towards value creation. So, in summary, we have a solid portfolio of renewable assets supported by a long-term contracted position of around 70% to 2030, which provides a good level of earnings visibility. Our core competencies on operations and energy management are key competitive differentiators for ENGIE, and we are convinced that the new global organization can increase value creation. With a high quality pipeline, a track record on delivering additional capacity, and a clear investment strategy, we have established, ambitious and realistic objectives to achieve 50 gigawatts of installed capacity by 2025 and 80 gigawatts by 2030, with an increase of consolidated assets. With that, I hand over back to Catherine.
Catherine MacGregor: And thank you very Paulo. So, 3-4-6, unprecedented growth in renewables indeed for which ENGIE is so well-positioned. I am now going to cover the other three GBUs and I will start by ENGIE Energy Solutions. In this new GBU, 75% of the operating profit comes from distributed energy infrastructure. The business model, which is associated to this activity typically, includes long-term infrastructure-like contracts with stable and recurring revenues, as well as long-term contracted cash flows. So, it has proved very resilient over the health crisis providing double-digit returns. We are a front runner in these markets and we already have a strong leadership position in each of our businesses, notably in district cooling worldwide, where we are number one. We are also very strongly positioned in district heating, on-site utilities, distributed solar or low carbon mobility. The energy transition is at the heart of most governments' recovery plans and more than 700 cities, 2,000 corporates have joined the race to Net Zero initiative and this in summary, translate to solid growth perspective for this global business unit. In emerging activities, such as distributed solar or low carbon mobility, you will see that we are anticipating double-digit CAGR while in the more established ones such as district heating and cooling and onsite utilities, we are envisaging about 4% to 5% CAGR over the next decade. In this growing market, we have clear competitive advantages. We are a pioneer in this integrated decarbonization project. We have a unique expertise, unique depths, highly experienced operations team, and we also have a proven development platform. We have strong relationship with the key energy transition promoters, whether they are cities or corporates with recognized long-term commitment and investment capabilities. We have in place a stringent performance plan, rationalizing activities, improving our EBIT margin through commercial effectiveness, and also industrialization of our processes, enforcing strict cash management as well. Through leveraging on strong tailwinds, our competitive advantages and these performance improvements, we aim to add eight gigawatts of low carbon distributed energy infrastructure by 2025. These goals translate to around €3 billion investment fueled by a very strong organic pipeline of €11 billion of opportunities, which allows us to be very selective. And through these activities, we are supporting client decarbonization. In fact, we have developed dedicated decarbonization metrics in collaboration with peers and industry experts and we have set a target of 45 million ton of CO2 equivalent of avoided CO2 emission per year for our clients by 2030. To illustrate our ambition in this business, I'm just going to cover one example where very recently we have signed an agreement with JTC Corporation to develop to build, own, and operate the district cooling system for Punggol digital district of Singapore over a period of 30 years. This project is obviously part of the district decarbonization roadmap. By 2024, we will develop a cooling production plant of more than 100 thermal megawatts supplying the business park, its community, its retail, the university campus, and the transport uses within the district. This agreement is valued at over €600 million with a recurring EBIT of double-digit and offer a significant perspective as the district develops driving up the cooling demand. This type of contract also gives us the perfect positioning in the local ecosystem to develop other activities such as on-site PV or green mobility. The district cooling market is obviously a massive growth opportunity for ENGIE, as it is expected to be doubling by 2031. While we welcome electrification as an important enabler to reach Net Zero, a balanced energy mix is essential. It's essential for affordability, flexibility, and overall system resilience. For example, in terms of affordability in Europe and in the U.K., if decarbonization was to be met only through electrification, our own internal estimate, that it will generate additional costs of around 30% by 2050. And this will translate to €150 per year on their household energy bill for the next 30 years. Gas will continue to contribute to decarbonization as the world switches away from coal and oil. And as you can see on the chart on this slide, there is also huge potential for biomethane and green hydrogen, which I will cover a little bit after. For all of this reason, gas is expected to remain at around 25% of the primary energy mix in 2050 as it is today. In this overall context for gas, our networks infrastructure is well-positioned for the long-term evolution of the sector. We are a leading player in gas in France with around €28 billion in regulated asset base. Our networks benefit from stable regulatory framework with visibility, our profitable profitability is largely immune to inflation and volume risk as they are claw backs mechanisms and our networks have consistently demonstrated strong operational performance and the highest safety standards. And we continue to invest to maintain the safety and the reliability of our networks, to enhance energy efficiency through the rollout of smart meters and to adapt for the integration of renewable gases. Overall, our RAB is expected to increase by around 2% per year over 2023. We are building on a deep knowledge and experience in managing regulated assets in France and our geographical presence in certain country to established leadership position in gas and power networks mainly in Latin America. These international assets represent a capital employed of Quasi-RAB of €3.7 billion. They benefit from stable regulatory or long-term contractual frameworks. They earn attractive double-digit equity returns and the EBIT of our international networks actually has more than doubled since 2016. We have major projects in operation and under construction. In Brazil, for example, we operate the largest gas transmission network through TAG and we are constructing 2,800 kilometers of power lines that will be commissioned at the end of the year. Our strategy for international network it is focused, we are working mainly on gas and power transmission, primarily in Latin America, where we can leverage a strong existing position. Similar to networks, our thermal activities contribute to affordability and resilience by bringing valuable security and also flexibility to the system. Europe is a very strong example of this, where 70 gigawatts of dispatchable activity is expected to be retired or closed by 2030; 70 gigawatts, while power demand continues to grow. This is expected to lead to a greater need for dispatchable gas capacity and in this context; our gas feed is very well-positioned. It's well-positioned to support this system, which will face a tighter demand/supply balance. One of the key pillars of ENGIE's heritage in operational excellence actually comes from our thermal GBU, where we manage around 64 gigawatt, primarily of gas asset, mainly located in Europe and in the Middle East. In terms of profitability, 69% of our EBIT comes from long-term contracts. And we have attractive double-digit equity returns and strong cash generation. If I look at the remainder of the EBIT, it comes from short-term contracted and merchant positions. And in a market which faces the potential for rising spreads, we are indeed very well-positioned for a greater role of capacity remuneration mechanism and ancillary services. In fact, our fleet is second to none to capture these opportunities. In 2020, for example, at thermal business in Europe delivered over 20% EBIT organic growth year-on-year. Our teams are very good working on maximizing performance efficiency, agile asset management, and also optimizing our O&M operation. In fact, in this GBU, we have a very highly experienced workforce, a valuable talent pool for our renewable ambition, and the wider group in an evolving energy sector. Looking ahead, as we deliver on the coal phase out, overall thermal capacity will slightly decrease over time, we will invest selectively in new opportunities such as the Belgium CRM auctions, in large water desalination plants in the Middle East, where we have significant experience and industrial know-how. So, alongside putting our strategy into action for the medium term, we are, of course, also positioning ENGIE for the long-term and I am convinced that ENGIE is a frontrunner to do that. I'm going to start with biomethane which has a strong growth potential, in fact, is already a reality here in France. Biomethane production last year reached four terawatt-hours and is to be multiplied by 10 in the next 10 years. So, ENGIE is going to benefit from biomethane on two fronts, on the production side, as we intend to build an existing leading position in France, with the ambition to reach four terawatt-hours of our own production by 2030 and to develop some of these activities in key countries such as U.S. and in Brazil. Of course, on infrastructure, as the development of biomethane ensures long-term sustainability of gas grids, triggering €2 billion investment in networks by 2030. Moving now to hydrogen, which is probably the most important, the most exciting technical evolution of the coming decades in the energy field. This breakthrough will indeed enable the energy system to benefit from renewable power while taking full advantage of the existing gas infrastructure with flexibility, security of supply, short-term, and long-term storability. Now, having said that, I am fully aware that the promise of H2 has been on the radar for quite some time, but we do believe that with today's very strong political support, increasing demand, decreasing costs of production in hydrogen ecosystem is being kick started. With both our gas and our power expertise, ENGIE is simply uniquely positioned to capture this opportunity. All activities will benefit, renewable which will provide green energy as a feedstock, energy solutions, and thermal will produce and supply our clients with new offers to enable the decarbonization and of course, networks which will support the development of hydrogen at scale, through transport and storage. We have actually been a frontrunner in hydrogen with our dedicated business unit since 2018. We have credentials with some projects already commissioned. In Australia, we are building with Yara Pilbara, one of the world's first industrial scale renewable hydrogen production facilities to decarbonize ammonia production. Over the long-term, one can imagine that the hydrogen market will progressively evolve from local hubs, gathering production and demand to an integrated market. In Europe, this translates into this vision fully aligned with the EU ambition to build a hydrogen backbone, connecting production, storage, and demand sites across Europe by 2040. ENGIE, through GRTgaz in France, has a pivotal position here and the group already has several project to test and to adapt our networks and also our storage to the future hydrogen ecosystem. So, we have set some ambitious target for our businesses to pick on here a few, we are targeting green hydrogen production by 2025 to reach 600 megawatts and four gigawatts in 2030, and we have a strong pipeline today of 70 project to support this ambition. We will also develop our pure hydrogen network consistent with the European backbone initiative, targeting 700 kilometer in the next 10 years and then storage adaptation, where we will commercialize hydrogen capacity of nearly one terawatt hours in 2030. And we also aim to develop more than 100 re-fuelling station by 2030. And we that review of the GBUs, I will now hand you over to Judith for the capital allocation plan and for the financial outlook. Judith?
Judith Hartmann: Thank you, Catherine. I will go through the financial levers and show you how this plan is creating value. Driving simplification is one of our major levers here, and of course, the new organization will help us to do so with clear accountability. We're exiting non-strategic activities and geographies. We're also improving the business mix by investing more into renewables and through a disciplined capital allocation. And we're enhancing our performance through operational excellence, but also support function excellence. This will help us to drive value creation and indeed, increase our earnings and the dividend over the next few years. To give some more colors on the financials behind this, so €9 billion to €10 billion of disposals to drive simplification; €15 billion to €16 billion of growth investments, improving the business mix, and €600 million of net EBIT coming through performance. Again, this will get us to an earnings growth that you've already heard about from Catherine and will able us to commit -- is enabling us to commit to sustainable dividend policy. Let's go through each of these levers now. Let's start with the disposals and how we are driving the simplification. €9 billion to €10 billion of disposals, this already includes the €2 billion for 2021 that we talked about earlier this year. Of course, it also includes the BRIGHT disposals. All of this is driven by strategic rationale. So, exiting non-core activities, like we have done -- like we've exited Suez to really then reallocate our funds to where we can make a real difference. Exiting some of the geographies, in fact, as you know, we have already exited 20 countries in the last two years, and reducing our footprint to roughly 30 countries. We are accelerating our carbon neutrality, meaning we are reviewing our thermal footprint, as we are exiting coal progressively and we're also rebalancing from French networks to renewables and infrastructure. All of this will lead to a simpler investor proposition, ENGIE will be easier to understand and easier to value. As we work through this plan, of course, we are going to run rigorous competitive processes around each of these disposals to make sure that we that we maximize value. If you're looking out to our investments, a clear acceleration of course, on renewables, renewables will now be close to 45% of our entire growth investments with €6 billion to €7 billion. This is an increase of 20% versus the period of 2018 to 2020. If you look at thermal and supply, you can really see the capital reallocation at work here. It's now less than 10%, which is a reduction of 40% versus 2018 and 2020 period. 100% of this growth CapEx is aligned with our ambition on CO2 reduction. Roughly 80% of this growth CapEx is expected to be compatible with the EU taxonomy and 55% of this investment is already committed in concrete projects. And as you have heard from Paulo's and Catherine's presentation, a lot of opportunity and a very strong pipeline to be able to select from the best projects. These are very significant amounts. So, it's very important to have a very rigorous investment approach with disciplined capital allocation and we have been working to improving our investment processes. We now have not just a CapEx budget to by GBU, but also a carbon budget. We have started to put in place a much earlier selectivity process where we look at projects much earlier and have a go, no-go decision. We're monitoring our CapEx delivery and we've just heard plenty of examples on how we're moving and improving our industrial track record. Paulo has mentioned a few examples on reducing failure rate, improving availability, or the savings on O&M. We have very clear financial criteria, 200 basis points value creation over WACC in each of the projects; NPV/CapEx of 20% to 25%. We have a strong focus also on short-term cash generation and P&L contribution. And with all of this, the target is to have a 7.5% ROCE at the end of the period. Financial criteria, of course, very important, but we're also very committed to our ESG ambition. So, we're also looking at each of the projects through an ESG lens. It is our conviction that our climate ambition is not just the right thing to do, but it's also creating value. This conviction on ESG that has made us a green financing frontrunner. We have so far issued €12 billion of green bonds and in each of these emissions of -- in each of these issuances of green bonds; we've had a higher rate of oversubscription and it helps us, of course, with the pricing of our bonds. There are an enormous amount of -- there's an enormous amount of money or funds that going into ESG investing and we really believe that this is an opportunity, both on the equity, but also on the credit side. Of course, performance is going to also be very important to be able to drive this growth and we are driving a very sharp execution focus here with a performance plan of €1 billion plus gross improvement that will translate into €600 million additional net EBIT over 2021 to 2023. The difference between the two is quite frankly, we're targeting high to really make sure that we have the net contribution of €600 million. The difference also helps us to be competitive and again, we've heard many examples earlier. And then we're also offsetting inflation in this period. The new organization that Catherine has talked about and our reduction to 30 countries are really going to help us on two elements. It will give us a global view by activity, it's going to drive industrial depth, it's going to help us to do peer reviews and best practice sharing, and that really will be a lever of improvement. And secondly, our consolidation into 30 countries is really going to drive depth in each of the markets, very deep market knowledge, senior leaders in each of these countries that again, are going to help us to execute to the best level that we can. We've heard some great examples earlier from Paulo on procurement optimization already and we're also working on our cash management. In fact, we believe that this is so important that you've seen it in the -- in our KPIs that we are suggesting for the management incentives, because of course, every euro saved can be then invested into the value creation. Let's look at the next page on how this will deliver into our EBIT growth and we've split it into two steps to give you, of course, the middle here with 2021, our confirmed guidance. So, already from 2020 to 2021, we will have €200 million of contribution from investments, performance already will contribute with €100 million and both of them of course, largely offsetting the scope out effect in this basis this year of 2020 which was, of course, very unusual, we have a big block on others, which is mostly COVID, but also foreign exchange and the Texas severe weather event. And then you can see how it will continue. Investments contributing by €800 million in the next two years, a performance of €500 million, and again offsetting the scope out, meaning really we have a growth throughout the period. And you can see on the right hand side the €1 billion contribution coming over the three years not surprisingly, with a large element of renewables given the very strong investments there. So, on a simplified view on the next page EBIT by -- EBIT growth by activity, the growth is of course, mostly driven by renewables, significant growth there from the contribution of €6 billion to €7 billion of CapEx, higher power prices in France will also be a positive, networks will remain largely stable with a lower remuneration rates in France, and then growth coming from international networks. We see growth in energy solutions with yes, a COVID recovery, but also contribution from the growth investments and partially offset by the disposals driving simplification, of course, BRIGHT is in this bucket. Thermal will decrease in line of lowering capacity through the coal exit and we will see growth in supply mostly driven by the COVID recovery. Nuclear, the growth will be driven from higher achieved power prices and over time, we're going to start to see lower volumes due to the Belgian nuclear phase out. So, to give some more detail on the guidance, we've heard already, the net income from Catherine, here you can see our EBITDA indication of €10.3 billion to €10.7 billion and an EBIT indication of €5.7 billion to €6.1 billion. We remain strongly committed to our strong investment-grade rating and again, the starting point of 2021 still includes BRIGHT and the new engine 2023, we have assumed 100% BRIGHT gone and of course, all of the other disposals are also excluded from there. To conclude, I am very pleased to reiterate our dividend policy. The Board has reaffirmed our commitment to a payout policy of 65% to 75%. You have heard how we're planning to increase our net income and with that the dividend is expected to be driven by this earnings growth. We've also introduced the floor of €0.65 per share for the period of 2021 to 2023, to offer greater visibility through this period. With that, Catherine, back over to you.
Catherine MacGregor: Thank you very much Judith. So, ladies and gentlemen concluding remarks. ENGIE has very, very strong position. The key message that I would like to leave you with is that we are very committed to embrace our role as a leader of the energy transition. We are building a simpler more industrial ENGIE with complimentary activities which are very well aligned with industry mega trend. We have a strong commitment to Net Zero and ESG performance. We have a new organization which is very motivated, which has higher accountability, strong performance focus. And we are driving growth in renewables and infrastructure through disciplined capital allocation. ENGIE is also uniquely positioned for the energy system of the future. We have shared with you a lot of targets today and I wanted to share or pick up the ones that I felt was the most significant key operational targets; Net Zero 2045, all three scopes; three to four to six; wind and solar capacity grows through the period to 2030; distributed infrastructure plus eight gigawatts by 2025; simplification of the group from 25 business unit to four GBUs; performance plan, €600 million of EBIT impact over the three-year period; and finally, green hydrogen production, four gigawatts in 2030. I would like to conclude this presentation with a clear message on what is ENGIE and what we do? We are a large energy utility. We are focusing on renewable energy infrastructure. And by doing that, we are supporting our customer's decarbonization. We are building today, the low carbon energy system of the future. Ladies and gentlemen, thank you so much for your attention. And we are now going to open the Q&A session. Thank you very much. Aarti?
A - Aarti Singhal: We will take our first question from Ajay Patel with Goldman Sachs. Please go ahead.
Ajay Patel: Good morning and thank you for taking my questions and excellent presentation today. So, thanks for that. I had two questions, please. Firstly, just on the bridge that you offer on page 60, could you just give us an indication if all the dilutions from the disposals and I guess all the incretion from the investments come through the numbers by 2023? Would there be any residual dilution that you would, for example, expect in 24? For example, I just wanted to understand what's factored in that? And then, just to give us a better sort of feel for how much the business is transitioning. I think you said that networks would be broadly flat. Could you give us an idea of what proportion of -- and rough numbers for 2021 of say, COE, is renewables and energy solutions? And then what percentage would you expect that to be by 2023? So, we can really sort of appreciate how much changes occur? Thanks.
Catherine MacGregor: Yes, so thank you, Ajay for your question. And I will let Judith comment a little bit. But just in terms of dilution, I think one can assume that most of the impact of the dilution of the €9 billion to €10 billion disposal program that we are announcing today will be captured to the period 2021 to 2023. So, there might be some marginal effect left to 2024 and beyond, but I would say, typically would be quite marginal. And then your second question on the business transition, I'm not sure I actually got all the -- you got that Judith? Thank you.
Catherine MacGregor: Thank you, Catherine. And indeed, Ajay, I think on the -- maybe just add on the first question on the dilution to add what Catherine just said, you also have to think of course, that there will be additional contribution from the investments and the performance. And you can assume that those effects again will outweigh any leftover or marginal dilution that is still there. In terms of your equation on how are we shifting the portfolio, we are not given precise numbers for 2021 as you know, so it's a little hard to give you a precise percentage. But I think if you look at page 69, you will get a good idea of just how important this additional renewable EBIT will be. And so that should help you to really show how indeed, we are really moving this company towards a much higher content of renewables.
Ajay Patel: Thank you both. Thank you.
Judith Hartmann: Sure.
Aarti Singhal: We will take our next question from Vincent Ayral with JPMorgan. Please go ahead.
Vincent Ayral: Good morning, everyone. Indeed very clear presentation. I'd like to start with a first question on the numbers. I can see you your guidance, midpoint is about 4% above the consensus, it already includes the dilution from right disposal, which is clean and clear for everyone. It's based on the commodity price on 31st of December. So, if I do a back of the envelope, and mark-to-market, as of yesterday, that would be an extra €200 million or so of net income or 7% additional upside? Could you be kind to just confirm on your mark-to-market what will be the upside as of today would be very useful? And then a question regarding the reinvestments on renewables, again, presentation was very clear, very useful to get 2030 targets, risking our traders. I'm sure there'll be plenty of questions, indeed, from colleagues or investors on the margin pressure and all that. So, my question will be more of a strategic one. As you move from the asset-light to the asset-heavy, have you reassessed a product proposal to your corporate client? I'm thinking here on -- off the energy on-demand, which enables better margin, it's more structured and more complex, but we could see in the example of Texas that you can leave renewable players more exposed to extreme weather variation. So, how do you look at this as of today? Could you elaborate a bit more on your strategy product-wise, so we better understand how you protect the margin there and basically the risk associated? Thank you very much.
Catherine MacGregor: Okay, very good. So, maybe I will start by taking your first questions. You're right to point out that obviously power price have indeed increased, remember that power price is one thing, we also have the effect of spark spreads, we also have less volume exposed to power because of nuclear phase out. So, you really have to look at all the factors when you think about 2023 mix, and the impact of the forwards on our guidance. So, growth back [ph] figure, we feel at this stage that our guidance includes the power price situation that that you are taking -- that you are talking about. Maybe second point -- second question, which is around the way we structured our commercial offers and how we protect ourselves in terms of risk and, of course, I'll give a bit floor for, for Paulo, to comment on this specific, but I have been extremely impressed with the way we are able to in a very sophisticated manner, package our PPAs agreement and have a very adapted adequate terms and conditions to make sure that we are not just exposed to things like Texas. So, Texas, we had the impact, but in general, the T's and C's that we are trying to build in our PPA agreements are really looking at protecting, in particularly, features such as, as produced are some of the things that we're really looking to include in our PPAs to make sure that it's not just a contracted volume, but also we have the right level of risk and we feel we are extremely well set up to manage those. I don't know Paulo if you want to add?
Paulo Almirante: Yes, of course and thank you for your question. I think your question is absolutely right. I mean renewables today are not anymore, feed-in-tariff indexed to something for 25 years. We are going into the core of energy management, the core of managing risks. Even when we do a corporate PPA, which edges priced somehow, we have to deal with unbalancing risk; we have to deal with the profile risk and you mentioned the as consume profile. So that's where we have significant competitive advantages. We can combine that different corporate PPAs, which are with a certain client may be sometimes as consumed other times as generated and we manage that risk together with our B2B supply portfolio or a different mix of hedging products. For us, this is a very clear competitive advantage. There is no unique recipe, depending on the client, depending on the location of the clients; we apply different combination of products. And again, this is different from what was renewables in the very recent past.
Vincent Ayral: Thank you very much. Catherine, I just would like to come back on your answer on the commodities because your guidance says explicitly the 31st of December. So, clean spark may even be a positive wherever tightening, but the outright should clearly mean outside versus 31st of December, for oil price for 2023 will have increased by €10 and you add on the 40%. So, could we have a bit more color? And I'm not sure I understood your answer was -- we already have that in the guidance and I see 31st of December. So, I just want to be sure that my understanding that there could be applied to the guidance if oil price stay where they are is the right one. Thank you. Sorry for coming back on this point.
Catherine MacGregor: No, that's fine. I think one of the points that I want you to make is that you also have to remember that we have much less volume and we'll have less volume exposed to powers as we are also facing our nuclear assets starting at the end of 2022. So, that was the point. We also have remember progressive hedging, so the effects obviously is not fully in -- you can't translate it completely in our 2023 numbers.
Judith Hartmann: And maybe just to add, obviously, the mark-to-market is moving if we cannot take it to the bank every time we desire. It's clearly a positive topic language to serve. But indeed, if I look at just between last week and this week, there was quite a big variation. Definitely power price going to the right direction which is a good confirmation of the numbers that we've just given.
Vincent Ayral: Excellent. Thank you very much.
Judith Hartmann: Thank you.
Aarti Singhal: And we will take our next question from Peter Bisztyga with Bank of America Securities. Please go ahead.
Peter Bisztyga: Yes, thank you for taking my question for the presentation today. So, really two questions from me. Firstly, on your 18 gigawatts renewables target, I'm presuming that is a gross target. So, can you clarify what your sort of net targets are and what your general approach to asset rotation is going to be? And linked to that, does your €10 billion disposal target include proceeds from asset rotation? And then my second question, just further clarification on guidance, I was wondering if you can give us a sense of what EBIT contribution from your Belgian nuclear plants is in 2023, please?
Catherine MacGregor: Okay, so, Paulo, you want to comment a little bit on the console share, just keeping in mind, of course, that our ambition in renewables, as I think Paulo was -- made a very strong point is that in general, and particularly, on onshore wind and solar assets, we will be looking at keeping more on our balance sheet. So, the split between our consortia growth should reduce on those assets over time. I think, Pablo, you want to give this specific and console share?
Paulo Almirante: Yes, so what we have presented and our intention is to increase the level of consolidated assets on our balance sheet. So today, we are doing around 40% of the capacity that will evolve to around 70% from 2025 onwards to wind, onshore, and solar PV. On wind offshore, you know that we have a partnership with the DPR ocean winds, and that will continue the consolidated. The other development in our main geographies will be consolidated. Still, in some other countries where we don't have an industrial platform, we will continue to apply our DBSO. We expect that the 80 gigawatts in terms of consolidation, when we mix all the different technologies will be between 50 gigawatts and 60 gigawatts in 2030.
Catherine MacGregor: Okay. And then there was a question on the contribution of nuclear to 2023. So, really two effects obviously, power price as we talked about is a plus and then in terms of lower volume, given again that we are starting phasing out two reactors, the first one end of 2022, and the other one at the beginning of February. So you have these two effects, but I think you can expect a slight increase from 2020 from contribution from nuclear activities.
Peter Bisztyga: Okay. Thanks very much.
Aarti Singhal: And we will take our next question from Rob Pulleyn with Morgan Stanley. Please go ahead.
Rob Pulleyn: Thank you. Yes, Rob Pulleyn from Morgan Stanley. Congratulations on the comprehensive outlook, it's great to see some 2030 capacity targets there. Obviously, a lot for us all to digest, so if I ask some more clarifications on the 2023 guidance? First of all, can we just clarify for the avoidance of doubt, the dilution from disposals you've included, is that 100% of BRIGHT, I think I heard you say or is it a percentage less assuming you may keep some? And what about the dilution from the remaining disposal plan, is that also included in guidance? Or is that yet to be yet to be seen? Secondly, on asset rotation, may we ask how much asset rotation gains would be included in that 2023 guidance? And just to clarify on your previous answer, it sounds like the consolidating of 70% of capacity is therefore pretty minorities and not post, I just wanted to check that. And lastly, before I ask too many questions, can I just ask on the €15 billion to €16 billion of organic -- sorry, of CapEx? Is that all organic or does it include any assumed bolt-on acquisitions? Thank you very much.
Catherine MacGregor: Okay. So, I will start maybe by taking your last questions, and then I will have my colleagues chipping in. so, €15 billion to €16 billion of CapEx, frankly, our main scenario is indeed mostly organic growth. We have discussed and presented to you a very rich set of opportunities, obviously on the renewable side, but also on energy solution side. I've talked about our €11 billion of pipeline of project. So, we feel that we are very opportunity-rich. Of course, we'll -- could be opportunistic in small M&A type of activities, but you can think of this €15 billion, €16 billion of many organic growth continuing to deploy them in a very selective manner, priorities, disciplined capital allocation, very much targeted towards our growth priorities, which we presented to you today. I'm going now to pass it on to Judith starting on -- if you want to comment a little bit on the 2023 year guidance question?
Judith Hartmann: Yes. Thank you, Catherine. Rob, indeed, the 2023 guidance does assume 100%, BRIGHT out and all the other disposals that I've just talked about. So, I think the best page to look at again, is the page 69, where you can see the bridge and it's very consistent with the €10 billion or the €9 billion to €10 billion of disposals, the investments that are going in are translating into the bricks that you're seeing in 69, meaning -- on page 69, meaning that all the disposals have been included in there, but also obviously, the contribution. I want to point out again that this is a three-year view. So, on investments used example, it adds up to €1 billion over the three years, we will have on a full year pro forma a higher contribution from investments. We're targeting the 7.5% ROCE. So, I think it's easy to do the math on where this may take us. And then like I said earlier, there will be very little -- very marginal leftover scope out for the 24 year from the plan that we've just presented. So, I hope that clarifies. But yes, the 2023 guidance that Catherine and I have said does exclude the disposals. And so the scope out is already included in that guidance.
Catherine MacGregor: Yes, and I think there is a question on the DBSO margin, correct. And just to say that we anticipate a stable level of DBSO margin in absolute terms, but of course, as our capacity is increasing a lot in proportion is much smaller, visual thing of being the outcome of what Paulo has described to take in and to do much more DBO than DBSO in the past. Okay, just going through--
Rob Pulleyn: Yes, that’s all right.
Catherine MacGregor: Go ahead.
Rob Pulleyn: Sorry, that's all very clear. Thank you. And sorry, just the remaining aspect, the consolidated capacity, you'll retain been 70%, I presume by the word consolidated, that is before the minority share as we -- as pertains to Latin America.
Paulo Almirante: So, maybe I can I can take that question. So, 70% is 100% of our additional capacities when the new assets are consolidated. So, plus ENGIE share in SPVs, when new assets are consolidated.
Rob Pulleyn: Okay, I think that's fair. Thank you and I'll turn it over. I'm sure there's other questions.
Catherine MacGregor: Thank you.
Aarti Singhal: And we will take our next question from Emmanuel Turpin with Societe Generale. Please go ahead.
Emmanuel Turpin: Thank you very much. My first question would be on the bridge for COE between 2020 and 2023. Taking a closer look at the two grey bars, the others and first on the on the right, bridging 2021 to 2023, I guess you shown minus €200 million, considering that there will be a rebound from Texas of €80 million. So, all together, there is a negative of around €300 million. I was wondering if you could help us understand that number. Does it include the buffer you mentioned regarding Belgian nuclear, that you mentioned in your press release? Is this a little bit more I would say cautious approach to your guidance or can you actually pinpoint to some of these non-recurring elements of 2021 that would -- positive in 2021, that would disappear between 2022 and 2023? And I would say equally on the grey bar for 2021, I guess, -- again, that includes Texas. So, the underlying is more positive. Is there anything beyond the COVID rebound in that grey bar? Then I would like to rebound on the comment you just made on growth CapEx on the contribution at COE, it's very helpful that you clarified that Indeed, the full 12 months contribution of COE from the growth program will be more than €1 billion as you target 7.5% ROCE assuming 25% tax rate, in order to get to your return, I estimate that you need to derive a COE around €1.5 billion. Do you agree with that calculation? And lastly on dividends, you maintain your dividend policy and you put a floor at €0.65 that will be seen as reassuring. Could we be a little bit more maybe granular and understand how you try to draw your dividend? Should we expect that you will try to grow it year-on-year avoiding the volatility of maybe disposal impacts? So, do you have an overlay of growth in your policy? Thank you very much.
Catherine MacGregor: So, maybe let me start by your last questions, which is a dividend policy. So, obviously, the key here is that dividend policy is being reaffirmed by the Board, 65% to 75% of our recurring net income and the key central piece of our dividend policy is indeed the earnings trajectory that we are committing to. And this is throughout the period, this is across the disposal process that we are presenting to you. So, the key message here is that, yes, we are driving dividend growth from consistency in our policy and earnings growth. That's really, really the key message, Emmanuel, on your questions. And indeed we've introduced a floor understanding and hearing listening to the investors' feedback, also integrating market practices among the peers. We have redefined our peer benchmark group, which is, I think, an important step the way we define performance within ENGIE. And so taking all this into account, we have introduced a floor at €0.65. A bit of an insurance policy, we don't intend to touch this floor at €0.65, because we are on this se growing earnings trajectory, which will drive dividend growth, but having this stability in our dividend policy Emmanuel. So, I hope that answers the dividend question. And I think I'm going to pass it now maybe to on -- the other bricks of the Bridge EBIT the grey boxes, Judith, do you want to comment?
Judith Hartmann: Yes, Emmanuel, bonjour. So, on your question on the bridge and what is in the other topics. So, again, it's obviously simplified to bridge to show you the contributions of the plan. And so yes, we did lamp quite a lot of things into others to, again, have a simplified version. On 2020 to 2021, you've mentioned it yourself COVID is, of course, a tailwind, there is some remaining COVID this year, but a very limited in comparison to last year. Foreign exchange in the Texas severe weather event, if you add those together, then then you can -- you will get to the €400 million to €800 million number. And on the €200 million on the 23 bridge, the topics that I would mention are really -- basically on the page afterwards also, which is the infrastructure remuneration and the thermal reduction. Nuclear volumes are, of course, coming down. You mix that with some of the positive effects that you have mentioned. And you get to the €200 million. So, that is really how you can look at it and again, the important message that we want to get across is the plan that we're presenting today is really moving this company, and you can see it on this bridge. I think you had a question on the contribution of the three-year. So, €1 billion is what falls into this three-year period. I think you mentioned €1.5 billion, which seems very optimistic for the pro forma view. But again, you can assume that obviously the first two years of investment already contributing to the third and then it's only in the third year that you have some overlap over the future periods.
Emmanuel Turpin: If I just may rebound on this, not trying to be optimistic on the COE, but if you target 7.5% of ROCE over €15 billion of CapEx grossed up at 25%, the math are pretty straightforward, hence the calculation. But your message is that it's more than €1 billion.
Judith Hartmann: That is --absolutely.
Emmanuel Turpin: Of course, ROCE is not a static number and it may take a few years to get to full potential. Maybe that's the explanation as well.
Judith Hartmann: Absolutely. So, it's not 100% easy to read across, but yes, it's higher than €1 billion, but lower than your €1.5 billion.
Emmanuel Turpin: Okay. Just -- if I could just return on Catherine's comments on the peer group, many years ago, I guess, management shared with us what peer group; they were a benchmark -- benchmarking themselves against in terms of dividend policy, you said that you revisited that benchmark, would you be able to share with us what companies you put in your benchmarking group?
Catherine MacGregor: So, Emmanuel what we have done this year, two things, we've revisited a peer group. And we also -- as I've mentioned, in my presentation, improved the contribution of relative performance to our long-term incentive plan. So, before we had a TSA as compared to our peer group and now we have added the net recurring income growth over the period. So, we've actually incrementally augmented our focus on peer groups. And indeed, we have disclosed our peer groups in actually in our in our UID. So, I can share it with you. So, we have, notably Enel and Iberdrola, EDP, we have [Indiscernible], and Snam, as well as our RWE, which are the key players in our peer group. So this, obviously, drives the way we look at our performance. So, as exemplary or as demonstrated in our LT plants. But then when we think of you obviously, dividend practices, et cetera, these are the type of companies that we will be looking at as our key benchmark, and of course, it represents the future of ENGIE before you could have some more asset-light service companies as part of our peer groups. And obviously, we took that into account as well as we are projecting ENGIE to its future perimeter.
Emmanuel Turpin: Super clear. Thank you very much.
Aarti Singhal: And we will take our next question from the Stefano Bezzato with Credit Suisse. Please go ahead.
Stefano Bezzato: Yes. Good morning and thank you for the presentation. Two questions from me. The first one on your €9 billion to €10 billion disposal plan, can you go give us a rough idea if that includes anything in networks? In the past, you have mentioned the possibility of opening up the capital of gas networks, would that be something that is included in that €9 billion to €10 billion indication? So that’s the first question. The second question, probably for Paulo on your expectation of a falling LCOE or declining LCOE, can you give us some color on how you think cost of material inflation will play out in that equation? And maybe if you can give us an idea of the plant additions that you have, how much of cost of equipment that is already locked in? Thank you.
Catherine MacGregor: Yes, thank you, Stefano. So, let me take the first question, then I'll pass the following LCOE questions to Paulo. So, in terms of disposals, and just to remember -- to remind why we're trying to do with disposal plan. This -- the whole key objective is around simplification -- simplifying the group. So, obviously, BRIGHT is a significant contributor to the €9 billion to €10 billion. We are also including a decarbonization action; so obviously, coal exit plans are also part of that. And we're also looking at our selectivity on the geographic front where we said 70 to 30, so that is also contributing to the €9 billion to €10 billion. And fourth category, if you like, that we have introduced is this whole rebalancing our networks from very French gas heavy to a bit more international, and a bit more gas to power balance. Now, this is a rebalancing. So, the choice of word here is important. And so decreasing a little bit exposure to our gas infrastructure in France could be considered as part of these €9 billion to €10 billion. So, obviously, we have a range of scenarios, but this could be one of the topics under consideration indeed. Paulo, you want to comment a little bit on the LCOE?
Paulo Almirante: Yes, of course. Thank you for your question. So, regarding what we see now in terms of the increase on the costs of some materials, we believe this is a short-term case. And more importantly, the evolution of technology as demonstrated that is able to compensate for that kind of increases. So, we strongly believe that the LCOE will continue to decrease, maybe in the short-term that it will be not the same level of decrease, but I think we are on that trend. Bifacial panels, for example, larger and more efficient panels, tracking systems on solar, cooling of inverters. So, these are examples of additional performance coming through technology, which will offset, I would say, the short-term impact of materials increase. In terms of what we have locked in, for now, we have about seven gigawatts of assets that are under construction and secured and that’s locked in. So, that's a good level, I would say, for this phase and we continue to negotiate with the suppliers for the next years.
Catherine MacGregor: And maybe just a complement, maybe what Paulo just said, and this whole setup of renewable GBUs led driven by Paulo, who is sorry to -- I don't mean to flatter you, but who has a very strong industrial experience. What are we trying to do here is to make sure that indeed, we can leverage ENGIE's renewable size. In the past, it was a little bit difficult because of the organization which was quite fragmented, by having a GBU dedicated to renewable, the whole ambition, and we've started to do that, is to have very privilege suppliers relationship, able to drive and use the advantage of the size. And as we are growing our renewable businesses, we feel that leverage from an organizational standpoint will be strong and also in terms of volume will actually get stronger. So, this is really a key aspect to counteract some of the inflation effect that you're rightly so mentioning. Thank you, Stefano.
Stefano Bezzato: Thank you very much. That's very clear.
Aarti Singhal: And we will take our next question from James Brand with Deutsche Bank. Please go ahead.
James Brand: Hi, good morning. Thanks for taking my questions, and thanks for presentation. It was very, very clear, concise, sharp. Thank you for that. So, two questions from me. The first is the -- just wondering whether you could just give a bit more detail on the growth CapEx that you're spending in energy solutions, appreciate it's 15% to 20% of the total, but is that -- you're going to go on organic CapEx, on acquisitions? I was particularly interested in whether you thought there are growth opportunities in district heating, because that's one area where assets have been very, very highly, but were traditionally profitable. So, it's been quite stable. But as we kind of move through the energy transition, it seem like having a big role. And then secondly, on your renewable investments, I was wondering whether you could say how much of that you expect them to be covered by government PPA, corporate PPA, and whether you're expecting to take on any margin exposure? Thank you.
Catherine MacGregor: Yes, so let me start on the energy solution CapEx and frankly, this is a bit of a jewel that that we want to make shine over the next few years because we have -- as I think I mentioned in my presentation, a bit of incredible situation here where you have a huge growth and this growth is driven by -- again, I'm repeating myself, but all these climate commitments, they have to be delivered through the development of this low carbon distributed infrastructure. So, a company for example, and every company CEO I meet today is having done this commitment, having committed to Net Zero, is coming to ENGIE and says, you have to help me, because it's not our core activities, and we're not quite sure how are we going to get to this Net Zero? And typically it's around facilities, it's about plants. It's about manufacturing facilities that have a huge potential for decarbonization, often needs an infrastructure type investment, and then the operation model that goes with it and this is where ENGIE is so pertinent. So, in that every now -- in that context, the example, I gave in Singapore is very, very telling. This is a district cooling. So, this is a new district cooling, so it's new. We are building it, and then we will operate it. And then once we there, once you have invested in the infrastructure and the CapEx, additional customers, obviously, from a profitability standpoint, it's an amazing business model as you can imagine. So, very, very excited about the energy solution. In fact, in my mind, there is -- the whole challenge here is about selectivity and picking the right opportunity, because there are so many. So, we can be selective, we will be selective, and this is one thing that that we will be driving the organization for now. So, organic versus M&A, obviously, we'll privilege organic development, but we will look at M&A very carefully, because you're right to say that we have seen in this business some premium that, frankly, we are not ready to pay. So, we are going to be very disciplined, very careful. And always looking at okay, how are we going to bring value? What is our industrial role? How do we make this asset better than it was when before? And there's going to be a very strong focus within this GBU to make sure that we bring value if we were to do M&A in that domain, but really, really exciting energy solution with this infrastructure business. And then there was a question around renewables, again, governance, corporate PPAs, versus merchant exposure. I think, Paulo, since you've talked about energy management -- and before you do that, I just want to make a comment that what Paulo has shown you on energy management is very important, it's super differentiated. And it is something that he is running as part of his renewable businesses. So, the whole idea here is to fully leverage the synergies between energy management organization and a renewable organization with it's truly a differentiating -- it's a competitive advantage. And this either way integration from a deployment standpoint, geographical footprint is going to be really important to us. And Paulo I'll let you take over.
Paulo Almirante: Thank you, Catherine and thank you for the question. So, maybe let me go through the different key countries where we're going to invest. So, let's start with France. France, as you know, we are talking off feed in tariffs that are awarded through an auction, using more words, the government kind of contract or PPA. And we have the United States. In the United States, you have a mix of corporate PPAs and merchant positions. What we see there is in fact, a huge appetite for corporate PPAs; different companies that want to secure green power, not only because they want to show that they are now consuming clean energy, but because it's cheaper than the fossil power. So, that's for the U.S. And there we make a combination of the corporate PPAs with a multitude of different instruments to cover our risk on the part that is open that is not secured on the corporate PPAs. Then we have Brazil and in Brazil, we have the two cases, we have auctions, which are awarded from time-to-time and we beat into that auctions. But we also have a very significant B2B supply portfolio. And there we can do short-term contracts, three years, five years, seven years, which also complement sometimes the volumes that we take from the auction, sometimes they are sufficient to develop the project. Then we have Chile as Catherine mentioned before and in Chile, we are transforming existing PPAs attached to thermal assets, which will be attached to our renewables development. All this combination, I can give you a figure around 50% will be around corporate PPAs. But more importantly, for us, we have a very disciplined investment process. We lock-in a significant part of the NPV after the FID. So, after the financial investment decision, we make a clear call on what is the level of NPV for this project, and then we decide to go or not depending if that threshold is achieved.
James Brand: Great. Thank you very much.
Aarti Singhal: We will take our next question from Meike Becker with Bernstein. Please go ahead.
Meike Becker: Thank you. Thank you very much for taking my questions and good morning, everyone. I think I have three left on my side. I wanted a brief clarification, if you don't mind on the renewables, your target of 200 basis points over the WACC is that including or excluding the farm onshore. So, should I actually think you're targeting organically 200 basis points over WACC? And then the farm down proceeds on top of that, or is that included? The second question is on the energy solutions business and the distributed solar, and we have discussed sort of like a lot the networks business and the long-term footprint of that business, how should we think about the additional capacity in distributed solar? Is that -- does that also have the long-term contracts attached to it or is it more sort of like a building -- the building part, is it so integrated, as you just described in the sort of like overall service provided to the customer that it's actually difficult to pick apart, but just sort of like, interesting if you could contrast it a little bit relative to the networks business? And the last question was on the performance part of the business plan. I guess one way to look at the EBIT waterfall between 2021 and 2023 is that the asset rotation, the investments and other kinds of nets off, and then there is the €500 million growth from a performance. Do you mind sort of like just going a little bit deeper? Is that -- I mean, how much of that is employee-related? Are they captured costs? Or is it really the performance improvement as you described in renewables, the underlying sort of like, improvement, the size, the growing? Thank you very much.
Catherine MacGregor: Okay. Thank you. Thank you for the question. So, on distributed solar, indeed we have an ambition to grow this business quite a bit, but very, very focused in a distributed solar, on B2B type of activity, and often trying to bring integrated solution to our clients, where distributed solar contribute and is part of the solution. So, it's really very much in line with our view that we are going to be partner with our customers. And over the long-term, being able to help them decarbonize, distributing solar, bringing a very good solution as among others, if you like, but definitely distributed solar we have an ambition. And we'll share that with you obviously, in the coming -- when time comes and when we ready to disclose that. We obviously don't have that those gigawatts of distributed solar, obviously, are not included in centralized renewable generation capability. This is accounted separately for sure. So, I think you asked about the debt growth, the performance plan. So, let me talk a little bit about that. Several buckets on the performance plan, I think you mentioned €500 million. So, just to clarify, we're seeing a €600 million EBIT over the three-year period. Really three -- broadly three main categories, efficiency related to the full deployment of digital and data tool. I insist on these because I wanted to really contrast the richness of our offering in digital and IT as shown by the number of talent we have in that domain, with the deployment opportunity that we have. So, we have deployed a lot of these tools, but with the GBU, we really looking forward to an at-scale deployment. And this will contribute to the performance plan quite significantly. Second bucket, if you like, it is indeed operational improvement. I think Paulo gave you a really good example and this is really about every GBU having very granular operational KPIs linked to financial results, driving their operational performance to show financial improvement. And today we feel that by the sheer better visibility that each of our EVPs will have on their business with very specific and adapted KPIs to their operation, we will drive improvement. Merchant activity be us it was very difficult to have this level of granularity to drive these operational improvements. So, this is well-identified and we have a roadmap each EVPs is accountable for delivering on that. So, that's the second category. And the third, which is around the support function and here again, we feel that by having a bit more centralized approach to how we manage our support functions, as well as our shared services and increasing the deployment of our shared services, ensure that they are best-in-class, et cetera, this also contributes to a third bucket to that performance plan. And maybe I will add very modestly that we also have a few activities that are in the underperforming buckets. And each of the EVP has some of these underperforming units, well-identified and has a plan to improve the performance of those units. We don't have that many, but we have -- and so there is also very high attention to make sure that these underperformance gets fixed. So, I think Meike that's really the key points on performance that I would like to comment. And then there is a question around the WACC over 200 bps, and I think one can say that indeed, it includes the DBSO sales and margins. Okay
Meike Becker: Thank you so much. Very clear.
Aarti Singhal: And we will take our next question from Louis Boujard with ODDO. Please go ahead.
Louis Boujard: Yes. Hi. Good morning. Thank you for taking my question. And thank you for your good presentation today. Regarding the question, it's going to focus mostly on the renewable, even if there is alternative aspect to look at as well. But maybe, [Indiscernible]. The first one is regarding the cover ratio of two-time from 2022 to 2025 considering your cure on the pipeline and advance development project, in the end, it appears to be pretty value remain at four gigawatts. It seems that we started two gigawatt blended in terms of advanced development, it's hard to try to develop organically on the 16 gigawatt could eventually have been a bit higher than that. So, what has prevented you from eventually being more aggressive on the short-term target in terms of renewables? My second question is on the LCOE, you mentioned 2% to 4% of reduction on the LCOE going forward. I'm not certain if you're talking about LCOE reduction, including CapEx and O&M? And if you're talking only for the future project development or if we are talking -- they're only -- the one that you expect to achieve on your current assets, and then mostly on the O&M, for instance. So, could you eventually clarify a little bit what do you mean with these 2% to 4% in terms of prospects and what we're talking about in terms of assets? And then my last question is on the 150 to 250 basis point, returns with the average of 200 basis points. I was a bit curious to understand what would make you as a prefer 150 basis points above WACC development project? Is it considering the geographies, considering maybe as a hub effect that you could have in the future project? What would make you accepting going below 200 basis points and eventually take 150 basis points for WACC development project?
Catherine MacGregor: Okay, very good. Let me just start by saying that, obviously, disciplines in return WACC+ 200 is really our comfort [ph] and loss. I think in renewables, giving the variety of projects and opportunities that come our way indeed, we will be looking at giving ourselves a bit of a range from 150 bps to 200 bps aiming to be on average, at the 200. And I think you've actually quoted and listed some of the indeed key factors where we would give ourselves a bit of flexibility to go towards the 150. And it's really, indeed geographies, it's in a place where we have already a platform and we're just building incrementally on this platform. Do we know their location? Are we super entrenched with the local ecosystem, the hub effect and potential synergies with the other GBUs? And I think we've shown you in Chile how very nicely other GBUs can provide values together to our customers. So, that's really important. The system play for sure. And in general, our comfort factors for the risk of the project would be all criterias that we would consider, but I think it's really important to reiterate that our commitment to the discipline, strict return expectations and centered around 200 with a bit of flexibility in very, very specific cases. So, I think that's the point on profitability. I think you ask the question on cover ratio and I'm going to let Paulo comment a little bit, but I just think one thing that we really trying to recall today as a key principle is that we want to show you our ambition and also we want to recall the fact that we want to set them at a credible level. So, we really want to build credibility. We've delivered credible track record in renewables over time. We are very focused to the 3-4-6, we've shown you our 56 gigawatts pipeline, it's a very solid pipeline and I make a bit of a side comment here, because sometimes when you see how pipelines are accounted for, it differs right from one peer to another. So, I think you'll see that we've been very rigorous in the way recounting that pipeline. And so now I accept the floor for Paulo to comment about how these four gigawatts is cautious or not.
Paulo Almirante: Thank you, Catherine and thank you for your questions. Let me start with that. I think we are not in the race of announcing capacity. This is not what we are doing. We wanted to present realistic and credible targets. Maybe there's not a clear view on this, when we say that we're going to deliver four gigawatts, it means that in every single year, we have to have at least six gigawatts under construction. So, jumping from three, directly to five, six or more, it's not feasible. To do it correctly, to create the value, to be selective on the project is not feasible. So, we are jumping from three to four, and then to six. And this trajectory is also an average, for example, we expect that in 2022, it will be the start of the ramp up; 2023 and 2024, we will be on the average; and 2025, it will go above that average with the contribution of offshore. So, that's I think a well-planned, well thought of way of delivering on these targets, because we also are delivering on previous years. And I think that sets up our track record and we want to continue on that same path. Regarding LCOR, absolutely right. So, part of it will be value creation, the part that is on O&M. The data that we have now -- that we are starting to do data analytics, because you need some time for these assets to be in operation before you can look at data and in many cases, they were contracted with the original supplier. So, now we have the opportunity to start improving the performance of these assets and that will generate additional value. On the other side, we want to reduce our CapEx to lower our CapEx and that will go through discussions, volumes with suppliers, and that will impact on the new fleet. But this is more likely to improve our competitiveness than to generate additional value. And I think on the on the returns, Catherine already commented I just add one element. We see clients now wanting to do corporate PPAs in multi-locations. So, several of our corporate PPA clients, I mentioned some during the presentation, they are not going for a specific market. They want assets in different markets and it's not necessarily the same risk profile and thus with the volume that we can lock-in, allow us to if a client is looking for an asset on a specific market to maybe accept a lower return on that specific asset because on the overall contract, we are at the average of four plus two or even above if that is possible.
Louis Boujard: Thank you very much.
Aarti Singhal: And we will set the next question from Sofia Savvantidou with Exane. Please go ahead.
Sofia Savvantidou: Yes. Good morning. Thank you for taking my question and a very good transition and I like how the focus really is on the future and how ENGIE will look like going forward. However, in recent months, we have all heard the questions about what is different this time than before. So, Catherine, I would love for you to tell us a little bit of some of the things you have changed since you came with ENGIE, especially on the capital allocation process and if there are any examples you could give? And then my second question probably for Paulo, on renewables, I hear everything that you say and it's clear, you're emphasizing specific geographies and the one -- in the areas that you're strong at. But is there an ambition in the future to expand that geographic list? And are there any particular markets that maybe you're monitoring for an opportunity to enter? Thank you.
Catherine MacGregor: Okay. So, thank you, Sofia, for your question. So, I have now been five months, at ENGIE and actually, it feels much more because I do believe that we have done a lot. And it all started with the establishment of the new organization and the new team. And I have picked the team myself, handpicked the team, because I really believed in their ability to deliver what we want to do here with this roadmap. And, in fact, today, Pablo is presenting renewables and next time you see other of our EVPs and you will I hope notice that they are as aligned as we are, the three of us here to really adjust that more industrial approach that we want to drive at ENGIE and sharpen our focus on performance. On the capital allocation question that you're asking very, very specifically. So, I've mentioned the fact that we -- ENGIE is a development machine, an ENGIE, naturally will bring to the connects table, a lot of opportunities, a lot of opportunities. And the shift that I am trying to drive is to say, we are going to continue to have this development machine working. But we are going to align it with where we want to go. And what that means is that we're going to stop trying and develop projects that are not in line with what we're trying to do. So, the growth in renewables and infrastructures, obviously, carbon trajectory, really important returns for sure. And then what do we bring? What is ENGIE's differentiation? And it cannot just be ENGIE is able to financially engineer is superb SPV, which ENGIE is really good at doing, and that's good. But we also want to bring value as an industry. We have to have a tangible competitive advantage. And so, again, in practical terms, and you're the team if you were with them, you could test that. But I have said no to many projects and I have pushed back and I have asked again show me how we are bringing value. Another aspect of the capital allocation is around M&A. Obviously, ENGIE is very well-run company, we have thresholds, M&A thresholds, this is something that we have changed. We want to have a better oversight of the M&A activities because M&A can be quite cheap, but you're stuck with a new company for a long time. And if you don't have industrial synergies, if you don't have a good integration plan, if you don't really understand how it's going to bring value and how you will bring value to this M&A, you're going to have an issue. So, we are very disciplined together with a team to make sure that we are overseeing the M&A activities with a great, great level of detail. So, that's some of the things practically Sofia that I think we had -- I know we are doing differently at ENGIE since I joined and since I formed this new team. I think there was a question around geographies, Paulo, you want to comment? You want to take this question?
Paulo Almirante: Yes, I can take the question and thank you for it. So ENGIE is a very large group with a large footprint. We were in 43 countries doing renewables. And we felt these were too many countries. We have decided to exit 20 of these countries and we are in the process of implementing that. Still we will be present in 23 countries. But our focus will be in five priorities, four countries that I have mentioned, France, U.S., Brazil, and Chile and offshore wind. I think for the next five, six, seven years, I think we have enough to do in that priorities and of course, maintaining a presence and development opportunities in the other countries that are still part of the footprint of ENGIE.
Sofia Savvantidou: Very clear. Thank you very much.
Aarti Singhal: And we will take our next question from Peter Bisztyga with Bank of America Securities. Please go ahead.
Peter Bisztyga: Yes, just a follow-up from me. So, national grid is paying a big strategic M&A premium to pivot out of gas networks and into electricity distribution because they see more visible growth in the latter. You were talking earlier about sort of a slower rebalancing. So, I've got two questions about that one. Firstly, does national grid's sort of strategic decision leave you concern that you may be are not moving fast enough to get out of gas, particularly that your incentive packages benchmarking against electricity focus appears like Enel and Iberdrola? And then secondly, just wondering as to why national grid is not in your benchmark given that Snam is, so are you actually giving yourself a sort of slightly easier target by including Snam?
Catherine MacGregor: Okay. Thank you for the question. So, maybe just to reiterate that, obviously, we are very committed and we are very convinced that assets -- gas assets in France have a lot of value, and will serve the energy transition for decades to come. Gas is a key energy transition fuel. France has a very credible plan to develop the biomethane. So, gas will be to 2050 pretty much all green in France. And so gas assets, with this scenario panning out, have a long future ahead of them. And that's without even starting on the hydrogen topic, which I mentioned, but pass biomethane; we do feel that having gas assets is a benefit to the hydrogen economy that we anticipate, obviously, not tomorrow. But as I think I've explained this whole story about hydrogen backbone, the fact that green hydrogen, at some point, when huge volumes are rich, you will need to produce this cheap green hydrogen, where the affordable renewable energy is available. And in Western Europe, you're going to get some constraints in terms of how many new projects you can bring. So, there will be places where green energy will be produced -- that when green hydrogen will be produced, not necessarily where the consumption will take place. So, this whole view that at some point, we're going to have to transport our hydrogen -- a proxy for hydrogen in a gas manner, we very convinced off. So, long-term future for gas assets in France, we feel strongly of that and obviously, I'm not going to comment about national grid's own strategy. We have all our different view. Now, having said that who we are, obviously, we love electricity, we're strong in renewables and so what we've said is that, yes, we would be looking at rebalancing our network positioning, and this is why I showed you a little bit with our Latin America specifically presence, where we do have an exposure to power transmission lines, where we have an industrial role there. And this is something that in terms of rebalancing, we could consider exploring, but you know, very selectively and always when we can have that industrial role. So, obviously, every company is different and national grids, I respect them, but I think we don't we feel we have this very nice specificity -- it's -- we feel we differentiate it bad way to have this power and gas and when I think hydrogen, I feel power means gas. So, I think we are actually in a good place with these two elements, which are going to be so important for the affordability and sustainability of the energy transition. And yes, we didn't have national grid in our peer groups; obviously, we had to make some choices and we looked at, obviously, portfolio mix, geographical presence, in order to select this peer group and national grid didn't fit in our criteria. But we have some really well performing peers in our peer group. So, I don't think we are being shy.
Peter Bisztyga: Sure. Okay. Thanks very much. That's helpful.
Aarti Singhal: And we will take our next question from Emmanuel Turpin with Societe Generale. Please go ahead.
Emmanuel Turpin: Thank you. My first follow-up question is about CapEx in networks, please. For growth CapEx, you mentioned €5 billion to €5.5 billion and in some of the slides, you mentioned some CapEx for the French business in infrastructure, I wanted to know if you had qualified some of the French infrastructure CapEx as growth CapEx essentially as peak of your growth CapEx by geography? My second question is about the geographical footprint on Paulo started to address this point on renewables, but you have a target of being exposed to less than 30 countries by 2023. How many countries are you operating in as of 1st of January this year? I guess that your disposal plan may naturally help reducing the geographical exposure, but I'm not sure. And therefore, for what is not related to disposals, could you give us the revenues and COE that you generated in 2020 in the geographies that you will seek to exit from? I expect it’s a small number, but it'd be good to know? My last question is on management incentives, I may have missed your comment and I'm sorry about, but how many top managers will be linked to this incentive plan? And looking at the slide which described the plan, I couldn't help noticed that amongst your financial KPI, you have net earnings and not EPS; you also have economic net debt. And it's super helpful that you made clear that big M&A is not part of your plan. Because easiest way to achieve those financial targets would be to issue capital and make acquisitions. I would like to know if your remuneration committee discussed whether -- why net earnings or not EPS and what's your view on that? Thank you.
Catherine MacGregor: Okay, so let me -- thank you Emmanuel for your questions. So, I think you -- maybe I'll start with a geographical question. So, you're right to point out we're going from 70 to less than 30 countries by 2023. And you're right to say that the €9 billion to €10 billion includes some of these geographical exit plan that that we have. Now, in terms of impact on our EBIT, you think quite small, because typically those countries where we decide to pull out or to stop developments, typically don't contribute large amount of earnings. So, I don't think that as a material impact. And then you asked how many countries were we in? I'd say without disclosing the exact numbers, but between 70 and 30, we are in -- that journey that we've started and I think it was -- well, it was back in 2018, we are well-advanced and we are more than halfway. That will be number two to give you do qualitatively how many countries we are in today. You asked me about the management incentives? Yes, I did mention in my commentary prepared remarks that these indeed management plan is related to top 500 -- it's the 500 top leaders of the company, Emmanuel that are going to be aligned with this incentive plan. And obviously that's really important, because I do believe that alignment is behind those targets is absolutely key in terms of performance, and getting to the result and the outcome that we're looking for, so absolutely. And then you had a question about our incentive plan, obviously, it's really around a remuneration committee discussion. And we feel that these metrics were the best one to drive the performance of ENGIE in the years to come. With the ability, of course, really important to align the 500 leaders across these KPIs and obviously, it's part of the criteria when we decide of a performance plan, we want to make sure that we can operationalize it, which is the case with a plan that we have proposing this year. I think you ask a question around network gross CapEx. So, yes, we do have gross CapEx in France and the smart meter rollout has completed and continues to continue to boost CapEx. And we also have biomethane development because you have to make some adjustments to our network that falls into the gross CapEx category indeed Emmanuel. And then there was a last question, did I miss -- no, I think I covered all the questions. Emmanuel?
Emmanuel Turpin: Yes. Thank you very much.
Catherine MacGregor: All right. So, I think we are at the end of our Q&A session. So, I wanted to once again thank you all for attending, participating, and asking us these interesting questions. So, just a few points, really for us, it's a simpler, more industrial ENGIE, very focused our renewable energy and infrastructure, committed to Net Zero by 2045, and returning to growth in the years to come. So, thank you very, very much everyone and looking forward to interacting in the near future. Thank you.