Earnings Transcript for ENGIY - Q3 Fiscal Year 2021

Aarti Singhal: [Starts Abruptly] request, please if you could limit your questions to one or two only. And with that over to Catherine. Thank you.

Catherine MacGregor: Thank you, Aarti and good evening, everyone. I want to start today's presentation by highlighting the strong progress ENGIE has made on the execution of our strategic plan that we announced in May. This was a plan designed to build a strong foundation for long-term earnings growth and a sustainable dividend, while maintaining a strong balance sheet for the group. As a reminder, under this plan, we are exiting non-core activities to build a simpler ENGIE. The disposal program is proceeding at pace. And the recent EQUANS announcement is indeed a major milestone, enabling ENGIE to reallocate capital into core activities and capture the many investment opportunities we see particularly in renewables. We're also working to enhance the efficiency of the group through a rigorous performance plan. And very importantly, we are ensuring that all our actions are driven by ENGIE's climate ambition of Net Zero by 2045 across all three scopes. I am very pleased to say that we have made strong progress across each of these areas. And crucially, this has been achieved alongside a very strong nine months performance. In addition to executing on the strategic plan, we are taking actions to maximize operational availability of our generation assets to capture the commodity price tailwinds. We are optimizing performance across a mix of assets, all of which have exposure to the power price environment. And where possible, we have accelerated hedging for hydro power prediction for future years. And we will give you a full update on this at the year-end results when we provide a three year guidance to 2024. Turning now to the announcement that we made last week, where we entered into exclusive negotiations with Bouygues for the sale of 100% of EQUANS. Bouygues's proposal was indeed the most compelling offer taking into account all criteria including financial valuation. Thanks to the quality and strategic fit of the assets, Bouygues intend to create a world leader in multi technical services, anchored in France. And on the social front, Bouygues has agreed not to implement any force redundancy plans in France and Europe for five years, and to create 10,000 additional jobs over five years. We truly believe that this operation will offer strong development opportunities for all EQUANS employees. With an enterprise value at €7.1 billion, this is among the largest carve outs in Europe and a testament to our ability to deliver complex projects. The next steps include consultation with relevant employee representative bodies, and the transaction is subject to regulatory approvals and customary closing conditions. In line with the plan that we communicated, it is expected to close in the second half of next year. Alongside the other previously announced disposals such as four countries exit year-to-date, we have made significant progress towards exiting non-core activities. The speed of execution have been facilitated by the tireless work and commitment of our teams and whom I would like to sincerely thank for their contribution. Turning now to the nine months results, I am very pleased to report another strong quarter for ENGIE, continuing the trend of solid performance from the start of this year, EBIT increased to €4.1 billion, up 57% on an organic basis. This strong performance was supported by measures that we put in place, enabling us to rebound rapidly from COVID in line with a progressive recovery in economic activity levels and by strong operational performance with high level of asset availability. In particular in Belgium, where nuclear availability of 92% led to much higher levels of outputs. Our results benefited from temperature and price effects. Our performance plan continue to deliver results across the board underpinned by proactive management actions on not making entities procurement savings and operational excellence. As a result, we have upgraded the 2021 guidance. ENGIE now expects to deliver higher earnings in the full-year than previously communicated. This reflects the very strong performance in the nine months and the continued improvement in market conditions throughout the year for nuclear and French hydro production, as well as the positive volume effect from the Belgian nuclear assets. ENGIE now expects net recurring income group share in the range of €3.0 billion to €3.2 billion in 2021 based on indicative EBIT range of €6.1 billion to €6.5 billion. Moving to operational progress across the four global business units. In renewables, we have commissioned 3.7 gigawatts in the last 12 months and I will cover ENGIE's progress in renewables in more detail shortly. Energy Solutions benefited from a strong recovery from COVID and activity levels are in line with expectations. In our network, we started commercial operation at the 1000 kilometer Gralha Azul power line in Brazil. And in thermal, we progressed on coal exit with completion of the sale of Jorge Lacerda in Brazil. In supply, where the French government announced the tariff fees for regulated customers from the 1st of November until the end of June next year, the government has proposed an amendment to the 2022 budget law with a view to compensating ENGIE and other suppliers for loss in revenue due to the regulated gas tariff freeze. And this amendment when voted through is expected to keep energy economically neutral, while enabling the group to recognize revenue and margins. Tackling climate change is at the heart of our group strategy. ENGIE is committed to accelerating the transition to carbon neutrality with a target to be Net Zero by 2045 across all scopes. And in line with this strategy, I am proud to say that ENGIE is one of the founding members to join the First Movers Coalition, which was launched last week at COP 26.By joining this coalition, ENGIE commits to buying low carbon equipment to help develop decarbonized supply chain, which is crucial to reducing global emissions. In the last nine months, we have commissioned 1.8 gigawatts of renewables covering solar, onshore and offshore wind assets. And we are on track to commissioned three gigawatts in 2021. In France alone, we commissioned 27 projects in solar and wind totaling around 300 megawatts, reinforcing a leadership position in renewables with installed capacity of nearly 8 gigawatts. In addition, we signed Green corporate PPAs for total volume of 1.9 gigawatts in nine months, compared to 1.5 gigawatts for the full year 2020 to provide major industrial and technology companies with renewable power, supporting them on the path to decarbonize their own operations. So today, ENGIE has 33 gigawatts of renewables in operation with strong O&M capabilities underpinned by our expertise in commercializing renewables. We are accelerating investment in this area, while bringing our industrial and energy management approach. And in line with our strategy, we will continue to invest in our key markets, where we can develop complementary asset portfolios. In summary, our objective is to reach 50 gigawatts by 2025 and 80 gigawatts by 2030. And importantly, we intend to achieve this while maintaining consistently disciplined approach and a strong focus on returns. And now over to you, Judy.

Judith Hartmann: Thank you, Catherine. And good evening, everyone. It's great to be here with you. I would like to start by highlighting the importance of the EQUANS announcement from a financial perspective. We are very pleased with the €7.1 billion enterprise value. This now clearly reflects the value of this great business with opportunities for both growth and margin improvement. These activities were less aligned to our business model, but will greatly benefit from being part of the big group. On completion, this transaction will significantly simplify engine. It will enable us to focus our management time and capital to core activities notably to renewables to drive long-term earnings growth and shareholder returns. I would like to thank the teams for their tremendous work on this important step. Turning now to our very strong results for the last nine months. EBITDA and EBIT have increased by 23% and 50% respectively. I'm particularly pleased with an organic EBIT growth of 57%. The negative foreign exchange impact of minus €106 million was mostly due to the BRL and USD depreciation versus the euro. The scope effect was limited at negative €25 million. We delivered strong cash flow generation with CFFO increasing by €1 billion. Net financial debt increased primarily driven by growth investments. Given the increase in earnings to sit not affected our credit metrics, which remain in line with our targeted rating. Let's now take a closer look at the last nine months organic performance by activity except for thermal all activities grew organically. Before I discuss the operational drivers let me go through the following key favorable external effects. Firstly, COVID restrictions were less stringent compared to last year, and our teams have worked tirelessly to adapt to this new environment. This led to a very good rebound mainly in client solutions other and supply. Secondly, cold temperatures in 2021 supported the contribution of networks, supply and others. In France alone, the total temperature effect was €283 million positive year-on-year. And thirdly, the price environment had mixed effect. On the positive side higher power prices fueled higher contribution for nuclear and renewables. For example, outright power generation from nuclear and hydro in Belgium and France benefited from a price effect of over €300 million. On the flip side, thermal was impacted by negative timing effects due to market conditions for gas power plants in Europe, and by a drop in energy margins in Chile. In addition to these external effects on the next slide, you will see how operational progress and other effects contributed to this organic growth. Renewables benefited from further positive GFOM rulings in the third quarter 2021 in Brazil, which allow us to recover past energy costs. These resulted from constructive exchanges with the regulator by our teams, Wind and solar assets delivered a good performance with overall higher volumes. In particular thanks to the commissioning of new capacity. These positive effects were partially offset by the impact of the Texas extreme weather event in the first quarter of 2021. In networks, results increased with higher contribution from power lines and TAG in Brazil. This was partly offset by lower RAB remuneration rates in France. Client solutions showed strong commercial progress both for Energy Solutions and for EQUANS. But their EBIT contribution was also impacted by some loss making activities as well as innovation businesses with higher development costs. Thermal benefited from positive one-offs mainly in 2021, and from higher ancillaries. Our team's also reduced internal unplanned unavailability by around 10%, which is a noteworthy operational achievement. Supply was impacted by the reversal of 2020 positive one-off and by lower margins in Belgium. For nuclear, our Belgian assets reach an excellent availability of 92% reflecting substantial operational improvements as well as lower maintenance works. G&A was lower following the 2020 impairment. In line with existing profit sharing agreements in Belgium, nuclear contribution taxes increased. Activities reported in others were impacted by the reversal of 2020 positive one-offs for GEM and by the lower contribution of GTT after a particularly strong 2020. Finally, our performance plan continues to deliver results across the board, allowing us to confirm our 2021 full-year target of €100 million EBIT contribution. Turning now to investments, year-to-date we invested €2.9 billion in gross CapEx. This was focused investment in line with our net zero target by 2045. And with the framework we presented in May. 37% was allocated to renewables, 33% to networks, and 20% to Energy Solutions, more than 90% was invested organically. Turning to CFFO, which was €5.3 billion in the first nine months of 2021. CFFO was up €1 billion year-on-year, mainly driven by the following. First, operating cash flow was €1.2 billion higher reflecting the EBITDA increase. Second, the overall change in working capital requirements was flat. There was a positive change from energy management activities largely driven by rising gas prices, leading to a positive effect from margin calls. This was linked to gas net buyer positions and was partly offset by a negative impact from an increase in gas inventory. At the same time, the change in working capital requirements for other activities was negative. This was mainly because of margin calls in our French hydro affiliate CNR, due to power selling positions with increasing power prices. Moving to our balance sheet, net financial debt increase with growth CapEx and dividends exceeding CFFO and disposals for the period. On disposals, I should mention that we still expect the €1.1 billion proceeds from the partial disposal by the end of 2021, which are not included in this bridge. In addition, the reduction in net debt from EQUANS is expected at closing in the second half of 2022. Regarding credit metrics at the end of the third quarter, the net financial debt of EBITDA ratio was 2.4x stable since year end 2020. The economic net debt to EBITDA ratio stood at 3.6x lower than at year end 2020 and in line with our target ratio of below or equal to 4x. To conclude, let me take a step back and remind you of the value creation framework we presented in May. Over the first nine months of 2021, we continued driving simplification, notably, of course with the EQUANS announcement, improving our business mix with focused growth investment on our key priorities, enhancing performance. by confirming our €100 million net EBIT contribution target for 2021. We delivered a very strong nine months 2021 financial performance. Lastly, we're, of course very happy to upgrade our 2021 guidance. Given the very strong nine months results and the tailwinds we are operationally able to capture. Before handing over to Catherine for the conclusion. Again, I would like to take this opportunity to thank our teams for their tireless commitment in achieving this performance. Catherine, back over to you.

Catherine MacGregor: Thank you very much, Judith. Before taking your questions just a very brief summary of the key message indeed we have posted very strong nine months results. We have -- we are upgrading our full-year guidance we've made significantly a significant tiny progress towards the execution of our strategic plan. And maybe as a last comments just as to reaffirm my conviction that ENGIE's core capabilities, assets, integrated business models position the group very strongly to successfully navigate what is today unprecedented environments that the energy industry is facing, with a very sharp focus to execute and to create value. Thank you very much for your attention. And we can now open the lines for questions.

Operator: Thank you. [Operator Instructions]. We'll take the first question from Vincent Ayral at JPMorgan. Please go ahead.

Vincent Ayral: Yes, good evening here. And thank you for this presentation. Very strong results we're expected ENGIE to be very well on track to bid the guidance, but maybe not as an increase the guidance ahead of the election. So that shows a quite a bit of confidence. So two questions, as we need to referring ourselves here. One is very simple one, the asset rotation? It's a question that keeps coming. You had, I would say, a fantastic track record, whether looking at first year to gas and now EQUANS. So the disposal program that's been delegated extremely well, it's almost done a few extra bits. Now the question for market is their investment. So here, you should that you've done more than 90% of your CapEx organically. There are some useful, for example, that ENGIE is looking at earlier in the area in this thing. But could you confirm again, if I understood properly, that's larger than new transmission line that is not in the agenda. I believe that's an ultimate message for the market. And whether you consider large M&A, give us special if you can, that will be great. If I have to pick and choose a second question will be regarding nuclear. We're not talking taxonomy here. We're talking about the life extensions. So you said that, basically given the coalition position in Belgium last year, you decided that it was too late, actually to the investment for life extension. So you recognize a P&L, but their current situation is stressing to every government around that's an energy transition that can rise secured supply issues. So what is the situation there? Are they potentially changing their mind or not, would you stick to your guns? What is other than work and the key for ENGIE now is the capping of the liabilities on nuclear, I would call it German style. So you've been discussing them for a while, what is the best you can provide us on the Belgian nuclear, so that is question number two. Thank you.

Catherine MacGregor: All right, Vincent Ayral. Thank you for the question. So maybe I will start by commenting on your first question, which is both on our disposal program, as well as our reinvestment program. So you're right to say that we are progressing really well in our disposal program, we still have a few new themes that are still not complete. And here with highlights, our decarbonisation plan. So we have a coal exit plan, which is going to take a little bit more time, we have announced 2025 and 2027, for the Rest of the World 2025 for Europe. So we still have a bit of work to do. But you're right to say that we have moved that pace. And indeed, we are very pleased with what has been achieved so far. In terms of reinvestments, our plan has not changed. We are very focused on indeed, organic growth, we are very focused in investing in our global business you need namely renewables and also energy infrastructure, decentralized infrastructure. And that has not changed at all. We want to reaffirm reassert an increase the value we bring to this project by being an industrial and an operational actor in this particularly in the renewable arena. So that is some of the things we feel we have expertise, we have differentiation. And this is how we want to focus on bringing value as well. Of course, as you know, Vincent deploying our energy management capability, which is so important, as you know, the mix is diversifying and the energy systems are becoming more and more complex. Our ability to manage ENGIE is frankly very, very differentiator. So we are putting all this together, focusing our growth indeed on organic capability on key geographies, which obviously doesn't exclude us to look in a very opportunistic manner to bolt-on potential inorganic targets, sorry, which would completely fulfill the criteria that we have set, which is a complement to our strong geographical presence in a key market, which would help us build a complementary asset portfolio for which both our industrial and operating operational capabilities would add value as well as, again, the energy management capability would also add value, and that would be some of the criteria. And to that, of course, I would add return criteria, which is very, very important. And there is a lot of discussions around renewables targets, is it competitive, it's not competitive, but we would be looking at targets project by project in a very, very selective manner, to make sure that if we go for one, it fits all these criteria. So again, align with our strategy, we can fully play our role as an industrial and operational actor, it adds something to our portfolio, very important, energy management portfolios, and of course, meets our return criteria. And that will be some of the criteria that we would, the only criteria that we will go for, if we were to do inorganic growth, but again many organic grows very selective inorganic targets. And moving now to your second topic, so switching gears a little bit on Belgium. So a couple of things are obviously our position on nuclear is obviously unchanged. And we've always said that the time we need to go for a full fledged extension program is about five years. The law in Belgium today is calling for the end of nuclear activities by 2025. And as we are getting into 2022 soon, that window of five years has basically expired. Now, that doesn't mean indeed, and that the discussion around security of supply in Belgium is not going is not quite vivid. I'm sure that you have followed for example, the CRM auction results, which were very positive for ENGIE by the way, and because we secured two projects, new gas projects, the ability to construct two CCGTs which is very, very good news. But it is true that one of the two project is still pending the permits. So there is a bit of a question mark about the ability to go ahead with that project. So we're dealing with this situation now. And then we also secured some CRM scheme under existing capability. So overall the outcome of the CRM was very positive for ENGIE. But of course, the questions on permits is going to be very important to make sure that we can resolve that in order to move ahead with the project. Next question.

Operator: We will now take the next question from James Brand at Deutsche Bank. Please go ahead.

James Brand: Hello, good evening, and congrats on the very strong results. I'll start off that there might be three questions. I guess, I'll start off with one that might kind of stretch into two. Just following one from [indiscernible] questions on reinvestments. And I guess a lot of people are focusing on renewables at the moment. And I was wondering when you, I guess a couple of thoughts when you think about your renewable business, do you see your ambitions as being regional or global because you have very strong renewable business in some markets, you're strong in the U.S., you're strong in France, there are other markets that you're strong in as well. Are you content with just sticking to the few markets or do you want to really be very big in a global way on renewables? And secondly, if that is your ambition, do you feel like you can expand globally organically or do you think it is important to do some bolt-on acquisitions to gain a kind of presence in markets that you're not in already? So that's the first one on reinvestment and then I was wondering just in terms of the results if you could focus in segments, sometimes you can have some cash gains, I'm sure your gas business has done quite well in the current environment. So maybe you could just tell us come for us if there is some gains coming through that or not? Thank you.

Catherine MacGregor: You need to, sorry James. You need to repeat the second question, because we didn't -- we couldn't hear you well.

James Brand: The question on the gas, the gas side. So the question is, can you hear me okay now, the question on the gas side is, did you make any gains in Q3 in the gas trading business and if you could quantify those?

Catherine MacGregor: Okay, all right, thank you. So very clear answer. We are very focused for our renewable business in our key markets. We believe local presence is a level of differentiation and competitiveness. And we want to build on local presence, we think it's very, very difficult to be competitive in a market where you've not been before and to start developing one technology, we really believe in making sure that we have a diversified portfolio in our key markets. And that is very central to our renewable deployment strategy, if you like. So key markets, and you know, we've listed them. So in Western Europe, Latin America with strong focus on Brazil, a bit of Chile, Peru, and then U.S. are some of the key markets that we really focusing on renewables. Of course, offshore is a little bit different, offshore is a little bit more global. So, we all must consider offshore, as a region to a certain extent, but for the typical onshore wind and solar, you think very focused key markets, where we can really build on that presence, also our understanding of local constraints as you know renewables development is a lot about stakeholder management locally, permitting, environmental assessment, social acceptance, et cetera, all of these, which is very, very local. And then of course, managing constructions and activities of that kind also need to be I mean, largely do risk when you have a local presence. So yes, very, very much key markets, local presence. And at the same time, we are deploying, I'm very pleased with the way the GBU is doing this. We are an industrial machine. And so we want to be very global as far as expertise and relationship with procurement and industrial capability, very local in our approach to the project, stakeholder management, et cetera. So I hope that makes sense. Okay, I suspect that it makes sense. So I move to the second question, which was around trading gains in Q3. So, benefit from overall volatility okay. So in terms of CCGTs and the performance of our CCGTs, what has happened in this business is obviously ancillary services, which tend to be called upon in high volatility and also when renewables are big share of the production, actually called upon, so CCGTs in general did quite well in the first nine months of the year, obviously, in terms of power price, and when that power prices given to most of our assets CCGT gets a little bit less because obviously, the Queen's Park spread are the drivers for CCGT results and of course with the gas price being very high, there was a bit of pressure there in terms of overall margin, but I'd say in terms of ancillary services, they were called upon quite a lot and this overall is a positive CCGT results.

James Brand: Gas trading business in the other line, sometimes you can get some big swings there when you have commodity price volatility. Have you seen any, what did you see in Q3 in that business?

Catherine MacGregor: Obviously, volatilities you know, the talent we have in our energy commercialization business, volatility tends to be something that that is positive and so, yes we did some tailwinds from that as well.

James Brand: Great, thank you very much.

Operator: We will now take the next question from Ajay Patel at Goldman Sachs. Please go ahead.

Ajay Patel: Evening gets the presentation and congratulations on the numbers. Mine are a little bit -- my questions are a little bit more granular, but it just around one topic. So patient's slides were highlighted, and GFOM rolling in Brazil, also a reversal of a 2020 positive one-off. And can you just quantify those numbers of roughly? And then the second question is, what was the expectation for DBSO? Just so that I can get a better idea of just the moving parts?

Catherine MacGregor: Yes, I just make a comment right on the fact that, as you know, in Brazil, the regulation is very strong and there is a mechanism that allows to compensate the operator for extension of concessions, so we have a bit of a positive tailwind in this year, that should it will give you a bit more color on. And the second question was on DBSO. And DBSO expectation, so why we don't necessarily give the granularity of the number, you can expect it this year to be a little bit less than 2020. Just because, as we presented in May our model is shifting to a bit more DBO than the DBSO. And therefore, the margins of the DBSO will be a little bit less than 2020. And if I remember from the top of my head in 2020, I think we had said it was around 100 million in terms of DBSO margin, so expect that to be a little bit less in 2021. And, Judy, do you want to comment on GFOM?

Judith Hartmann: Yes, so on the TV shows, indeed, to expect about half of that, quite frankly, is a good assumption. As we start to consolidate much more of our renewals, as you know, as per our strategy that was laid out on GFOM. First of all, I just want to reiterate what great news is, because it really shows the constructive nature of the Brazilian regulator. And so this is to catch up on past costs and out of merit order basically production to save safe water. So we're looking at a number in the third quarter year-to-date of roughly €150 million. So it is quite a significant positive for us that we are that we're very happy that we were able to get this together with the other energy companies in Brazil.

Ajay Patel: Fantastic. Thank you.

Operator: And I will take the next question from Rob Pulleyn at Morgan Stanley. Please go ahead.

Rob Pulleyn: Okay, thank you. I think my key question was just answered in terms of explaining the other line. So let's try a different tack. It appears that the Belgium supply margins were negative. And that's why the supply business was certainly supply result was less than perhaps we had hoped for. I was just wondering what was driving that and whether that's going to be recurring or how sustainable that might be. And given everyone's having a couple of bites of the cherry, may I ask on the disposal planet, it seems now largely complete in terms of your quantum of proceeds you're seeking with, as you said, a few more assets still to go, is there scope to do more? And how would you think about the capital proceeds above the 9 billion to 10 billion targeted could be could be reallocated to thank you very much.

Catherine MacGregor: Okay. Yes, thank you, thanks for the question. So, in terms of Belgian supply, you have to remember that Belgium government has developed or deployed social service to cope with the COVID situation and to help households the most in need, and the social service is a vehicle that they have extended actually to help those same households to be coping with a Higher Power Price and energy price. So as supply margins were a little bit affected by the social interest extension during that period. In terms of disposal plan completed more proceeds, and what we're going to do with the proceeds to be, we obviously again very pleased with the way our disposal plan is going. As you know, we have put a plan together, announced in May of about €9 billion to €10 billion disposal with a €15 billion to €16 billion investment program. What will we do in February, we'll come back to you with obviously a new entity within horizon of 2024, and we'll update the numbers, obviously very pleased with the way the transaction is panning out, so we will update the numbers. But I think very importantly, the key principles that we presented to you are not going to be very different, they will not change that we are going to be investing to accelerate our investments particularly in renewable, particularly in energy distributed infrastructures business, about 40% to 45%, we had said for €15 billion to €16 billion huge investment. And as we update our investment program over the next period, you should not see much a huge departure from the type of percentage if you like. So yes, the absolute figure might vary, also will take into account obviously a new artwork for 2024. Obviously, a lot of change in terms of commodity price, etc. So we'll give you these new art to will update our disposal program. But more importantly, our investment program. However, the key principles will not change.

Rob Pulleyn: That's great. If I could just clarify maybe we would do that there's this other line. So at the half year, you were I think €122 million lower year-over-year than first half 2020. And now at nine months, you are €194 million better than nine months 2020. So there's about a 320 million delta, which has occurred in the third quarter. Could you just quantify and apologies if I didn't hear it before? How much of that 300 million delta is this Brazilian one off or whether there's any trading benefit in there as well? Thank you

Catherine MacGregor: So the thank you for that question. The Brazilian chief arm would be in the renewables line, because it's related to renewables mostly or 100%, quite frankly hydro. And so what you will see in other is indeed, an improvement trading has performed well in the third quarter. And you know, it was said earlier in time of volatility is when you have the best impact. And that's really is the bulk of that improvement.

Rob Pulleyn: Okay, that's pretty clear. Thank you. I will turn it over.

Operator: We'll now take the next question from Peter Crampton at Barclays. Please go ahead.

Peter Crampton: Good evening. And congratulations. I think one needs to go back many, many years to see to guidance upgrades in one year. Two questions if I may, because there's been so many kind of questions around the full year 2021 guidance? Can you maybe provide a bit more color what's within the second upgrade? How much of this is power prices, and Belgian nuclear related? How much are kind of two -- one off? That would be the first question. And then the second one relates to your kind of mid-term financial guidance, which obviously provided 18th of May we've had two upgrade since, can we expect for the full year results kind of an update of your kind of mid-term guidance, and what to speak based on kind of a mark-to-market of kind of end of the year power prices? Thank you.

Catherine MacGregor: Yes. And thank you for your question. So one of the key things you have to look at to understand, the second revision for us is you really have to look at the power price to 2021. And you will see an extremely sharp increase. Unprecedented, I think is the word that qualifies, actually. And that's all happened in H2. And that was towards the end of July, I think that was fairly end of July and then it really peak. So, that explains to you why we have had such indeed a dynamic -- very, very dynamic here indeed -- in a very specific timing situation that explains that In terms of guidance. Yes, we will come back in February, we will give you an updated outlook to 2024. So we'll go we stay on this three year rolling forecast type of type of approach. Obviously, we are already anticipating some tailwinds from the commodity price that we are seeing, we have given by the way as usual hedging volumes -- hedging percentages as well as captured price, which if you want to calculate using normalized volumes, you can and estimate that impact, but again that would be the isolated impact of commodity price on the hedge volume. And of course, you would also have to take into account that as you know that the nuclear volume next year will be less, given the fact that one of the nuclear trench will be shut down in October 2022. So, there are some -- but in general, yes, absolutely, tailwinds there. And so, yes, we will be redefining both 2022 view as well as horizon 2224 to take into account, both that commodity price new reality, as well as, of course, as we've mentioned in terms of investment program, the fact that we've done well on our disposal plan.

Peter Crampton: Okay, excellent. Thank you very much for the answers.

Operator: We will take the next question from Emmanuel Turpin of Societe Generale. Please go ahead.

Emmanuel Turpin: Hello, good evening. My first question is on EQUANS. And this is going to be to some extent a backward looking question. As you're very successful, you're in the process of setting it as a measure of the quality of your past investments. I was wondering if you could share with us the capital gain you're looking at booking on this transaction. We know the industrial capital employed at $3.8 billion, but we don't have the book value. That would be an interesting data point to showcase best investments. The second question is on the reorganization of your operations around the global business units you mentioned in your -- and I guess the new management teams are in place for these global business units and whether you use the GBU renewables, which is very dynamic or another, are you able to share with us any real life example of what makes this organization better? Almost on a day-to-day basis? An example would be putting any color on the new organization will be very helpful. Thank you very much.

Catherine MacGregor: Yes, of course, Emmanuel, butyou need to give me a lot of time, because I have actually a number of examples that actually confirmed us in the fact that this GBU reorganization is paying off and you quoted renewables I think it is where it probably is the most striking. But in energy solution is where we are -- for example, developing and defining very, very specific KPI for the different business, and making sure that these KPIs are harmonized, what are geographies, so we're able to have a much, much, much better granularity of the performance of each of the businesses, having benchmark and emulation and being able to compare similar businesses between each other, and therefore drive improvement, which as you know, Emmanuel, when you had the multi activity business unit, everything was mixed up and we didn't have this granularity. And now we know we're doing our quarterly business review with each of the GBU. And we are looking at their KPIs which are operational specific to their global business units. And that is now being standard for them. So I mean, huge difference. I would also add in one procurement, I know I talk a lot about procurement, but this is really where it's an area, where I'm the most excited about in terms of almost quick wins. We are aligning a procurement organization with a global business unit. And we're able to work with our suppliers for example on wind turbine on solar PV in an environment where there is a lot of talk about inflation and logistic et cetera. So this is very centralized high level engagement with suppliers is very, very important to GV scale operation and that's some of the examples and again, I could go on for ages. So but I'm respectful of everyone's time this evening. And then you ask a question on capital gains. We have not disclosed that that information. I'm sure we will in due time. We -- it's a bit early for us to do that. I mean, the thing that is most important about EQUANS is the value that the candidates have seen with EQUANS is high. And it is a testimony to the -- of the potential and the upsides that EQUANS has both in terms of market alignment, capabilities, and also performance improvement by having a very, very dedicated, granular approach to the service business, which, we've always said was very different and needed to have a very specific approach. So we've obviously very, very pleased with EQUANS and the potential that candidates are seeing in that business is indeed very promising.

Emmanuel Turpin: Thank you very much.

Operator: I'll take the next question from Louis Boujard at ODDO. Please go ahead.

Louis Boujard: Yes. Good evening, everyone. Thank you for taking my question. And congratulation, of course, increasing your guidance again. My first question would be maybe on earlier, because you are well to have one, but the new way it's sure that you have made an offer on it at the home key with a price, which is close to €2 billion. I would like to know how it fits with your strategy. Do you see in Spanish market as a co-business for you after the acquisition of [indiscernible] concession one year ago? And if you see ourselves on development here on the view is idle general, eventually supply business that could be developed in this specific market considering that it seems to be of interest to you. It seems to make a lot of sense with your general comments regarding unusual development, but more specifically in this market. What are the key points that you would like to highlight regarding these operations? My second question would be regarding with the terminal business and most specifically, it was a clean spark spread. We have touched a little bit this bit a few minutes ago, but maybe to have some ID on where we could go next year in 2022. Because currently, it's clear that the team's spark spread out a bit more under pressure because of the gas market situation. It is possible that this year your beneficiary -- will have benefited from COI services and one of the well in terms of business, which have had to little bit terminal. And even in spite of it, terminal was with under pressure. So what should we expect for next year? Should we expect that maybe your captured stock spread for the next few years might be a bit more of the pressure, meaning eventually some downward pressure on the terminals that could be expected? That's my second question. Thank you very much.

Catherine MacGregor: Okay, so let me start with the first one. Obviously, I won't comment down on any rumor or any specific deal. But what I would say, though, is that in terms of approach to our key markets. We will be always, as I've mentioned earlier, looking at developing renewable capability, as part of an integrated platform, where we can really leverage our skills and expertise in energy management and in Spain and if I look at the Iberian platform as actually quite an integrated platform. What we have done last year, in terms of hydro, which is the transaction that you mentioned is giving us these very nice baseload flexible assets that we can integrate to what we're doing already, in terms of renewable developments in that Iberian platform. So, that's a very interesting region for us. And whatever we do, we would always be looking at the integration of complementary assets, as well as obviously bringing an industrial and operational role, which is very, very important in the way we want to develop our projects, whether new project or inorganic opportunities. And then the second question was on the spark spread being under pressure. So look, we obviously will come back to you more precisely right in February 2022. Obviously, it is such a high volatility right now that it's very, very difficult to predict. So we'll give you a better visibility in 2022, when we come back. I mean, the key thing and very fundamentally, the role of the CCGT in Western Europe is almost only gaining an importance, right. You have to remember in Europe this winter in Germany alone, there will be three gigawatts of nuclear taking off taken off, and about one gigawatt of coal taken off the system. So there's going to be pressure on our CCGT, which are very flexible asset can be dispatched, et cetera. So we expect that CCGT, to continue to play a very, very important role as the whole European energy mix is being transformed.

Louis Boujard: Thank you very much.

Operator: We'll now take the next question from Peter Bisztyga at Bank of America. please go ahead.

Peter Bisztyga: Yes, hi, good evening. Two questions from me. So firstly, I was wondering if you could expand a little bit on, you know, you mentioned in passing supply chain and cost inflation issues, can you just talk a little bit more about that, what you're experiencing on the ground at the moment in your renewables business? And in particular, have you had to delay or cancel any solar projects? And then my second question, I guess, kind of relates to that a little bit is what trends in PPA prices? Who have you been seeing? And maybe if you can compare and contrast between regions that would be helpful?

Catherine MacGregor: Yes, okay. So, so, yes, a bit of logistic tension, I think, across the word, I think no sector is immune to that. Our organization, renewable organization is working through this logistical hurdle either very, very nice manner. A couple of projects are affected. We're seeing a couple of delays, but frankly, nothing meaningful, nothing that, make us think that our targets, targets that we've talked to you about are going to be put at risk, we managing the situation very well. And again, here the centralized organization is also able to make sure that we make the right trade-offs that we make, right, we take the right, we give the right priority to the right project, and this is happening in a very dynamic manner, and in a very professional manner. So, frankly, no, no meaningful impact. Obviously, we are strictly monitoring it. And I would leave it to that.

Judith Hartmann: And maybe if you allow me to add for now, I think what's important to know also is on the seven gigawatt of assets under construction. We have locked in the prices. And so that is obviously giving us a lot of confidence in the fact that at this stage no major impact from inflation on renewables.

Peter Bisztyga: My question on PPA prices?

Catherine MacGregor: There is obviously strong support in win PPA VA these days. For many different reasons, decarbonization commitment from all of our customers and energy supply is one of their main and fastest way to decarbonize their scope. So, obviously have very high demand in green PPA. And obviously PPAs is also enabling customers to give more predictability and more stability to the energy price. When today's volatility is for the people who didn't have the right protection is frankly putting some of their operations at risk. So, if you look at that, we see a positive trend good support, and some increase in general if I was to -- if we could generalize. We are seeing a bit of an upward trend in in PPA in PPA price. And, and just as a reminder, obviously, at ENGIE we are very, very active in green PPAs where we have signed this year 1.9 gigawatts for in the first nine months 1.9 gigawatt of green PPAs. And that is even versus last year for the full-year. So both demand and price is going in the right direction. And we are very pleased because we are so well positioned on that.

Peter Bisztyga: Okay, thanks very much.

Operator: The last question of the day will be from Juan Rodriguez from Kepler. Please go ahead.

Juan Rodriguez: Hi, thank you. Yes, our key questions have been answered, but I would like to come back again to the guys gas price freeze in France. Can you please walk us through ENGIE's neutral impact should respect negative working cap for 2021, maybe on 2022. And especially what is the camp compensation mechanism discussed for now, or regulated tariffs in France as normally they're expected to end on mid '23. But normally the catch up is passed during the summer period. So we'll be interesting to see this? Thank you.

Catherine MacGregor: Yes, so good to remind everyone and that the government took this major energy to freeze the gas story, in order to protect the -- obviously the heart flow from this high volatility in the market. And the government has been actually working very actively in defining the modality of how the suppliers in particularly MG would be compensated from the salary fees and mechanism has been defined, in fact, defined in great level of detail for now. Amendments, which is going through the whole approval process, it was voted at the assembly at the lower house, I think last Friday. So it's moving along, which is fantastic. And the terms of the amendments are such that we will not see, if voted on this, we needs to be voted, but we are very, at this stage, because of that first vote being positive. We are optimist and we are positive that it will get voted through. So when voted through, we'll be able to recognize revenue and therefore no P&L impact in 2021 in 2022. So that's very good. As far as working cap is concerned, in terms of cash reimbursement, the terms are actually still being worked out. So the modality of the cash impact is not quite completely clarified, work in progress. But obviously, this is something that what, at ENGIE, we definitely can manage and will manage. I don't know Judith if you wanted to add to my answer if I miss something on.

Judith Hartmann: No, I think it was very clear and just to give you a sense of our confidence on being held a hole here. We will be able to book a trade receivable on the French state and does have no P&L impact this year, that's how firm this is now becoming. And on the cash flow what Catherine said we're still working out the exact mechanism. Of course, like you said, some of the regulated customers will go away this is when the -- also the state will come in. So some of that is still being worked out. So I don't -- I think you need to assume there's some sort of spreading over the next couple of years, really. But on the whole were being capital, which is great news. That's really sort of very strong assumptions that we have at this stage. And of course if there was a working capital delay of sorts then we have a very strong liquidity to work this out and make sure that it happens. It is not an issue for the company.

Juan Rodriguez: Okay. Thank you.

Catherine MacGregor: Great.

Catherine MacGregor: Okay, I think that ends our call. I would like to thank everyone for participating despite the late timing and enjoy and have a very nice evening everyone. Thank you very much. Bye-bye.

Operator: Ladies and gentlemen, this concludes this conference call. And we thank you for your participation. You may now disconnect.