Q1 2016 Gas Natural SDG SA Earnings and Strategic Vision 2016-2020 Call

May 11, 2016 AM CEST
GAS.MC - Gas Natural SDG SA
Q1 2016 Gas Natural SDG SA Earnings and Strategic Vision 2016-2020 Call
May 11, 2016 / 07:00AM GMT 

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Corporate Participants
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   *  Luis Calvo
      Gas Natural SDG SA - Head of IR
   *  Rafael Villaseca
      Gas Natural SDG SA - CEO
   *  Carlos Alvarez
      Gas Natural SDG SA - CFO
   *  Antonio Basolas
      Gas Natural SDG SA - General Director, Strategy & Development

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Conference Call Participants
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   *  Daniel Rodriguez
      Fidentiis - Analyst
   *  Pablo Cuadrado
      HSBC - Analyst
   *  Isidoro del Alamo
      BBVA - Analyst
   *  Manuel Palomo
      Exane - Analyst
   *  Jorge Alonso
      Societe Generale - Analyst
   *  Fernando Lafuente
      N+1 - Analyst
   *  Alejandro Gil
      - Analyst
   *  Miguel Medina
      JB Capital - Analyst
   *  Sonia Ruiz de Garibay
      BEKA Finance - Analyst

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Presentation
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Operator   [1]
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 Good morning to the presentation event, presentation of results of Gas Natural Fenosa for the first year and the strategic vision for 2016-2020. These presentations will be done by our CEO, Mr. Rafael Villaseca, together with the CFO, Mr. Carlos Alvarez, and the General Director for Strategy and Development, Mr. Antonio Basolas.

 In order to make this -- allow it to flow better, there will be no pauses between presentations. And after that we'll have the Q&A, during which there will not be questions on the telephone. We'll begin with questions in the room and then questions that have been sent in through the -- on the Internet. We would like you if you use the Internet for your questions to send in the questions during the presentation, because once we've begun the Q&A session we will no longer take any more questions.

 So without any further ado I'll pass the floor to our CEO, Mr. Rafael Villaseca.

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 Rafael Villaseca,  Gas Natural SDG SA - CEO   [2]
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 Good morning. Thank you for being here, physically and remotely. I'm going to begin both presentations as Mr. Luis Calvo has just announced. The first one is results for the first quarter and then the strategic vision.

 Begin with the first quarter results. We will start with this. We're going to do the main figures, then we're going to look at the results, and finally conclusions, and then we'll begin with presenting the strategic vision for 2016-2020.

 If we look at the main data of this first quarter, we see that the net income after taxes is EUR329m, that's 18.6% less than last year, if we take into consideration the global figure -- the overall figure. If it's adjusted it would be 8.7% less. We'll look at that adjustment later. Basically it's the non-recurrent effects of the previous year and the translation, the exchange rates into -- that have been put into consolidated balance.

 The EBITDA is EUR1.2b, 9.9% less than last year. So adjusted EBITDA would be 3.4% less. Net investments EUR257m, and the net debt has dropped by 8.7% as compared to the same quarter of last year.

 Now in terms of results for this quarter, I'll give you some comments. The breakdown, EBITDA breakdown into businesses is as follows. 52% is gas, 48% electricity -- less gas, more electricity due to the worse results, worse EBITDA in gas in our business portfolio.

 In terms of profile regulated/non-regulated, 69% of the EBITDA is regulated or quasi-regulated activities including, for instance, gas transmission and renewables, which are regulated, as you know. And they come under regulated activities. And then as regards the 31% -- the remaining 31%, it's non-regulated activities.

 And it's important to point out that if you put the Latin American business into euros, well, the EBITDA goes down outside of Spain, and that you can see on the right. You can see that the EBITDA for Spain is 57% -- accounts for 57%, and outside of Spain 43%. Exchange rates account for that to a great degree.

 We have to highlight that the EBITDA in Spain is -- has not gone down, but the international EBITDA has gone down by 20% as compared to the same quarter for last year.

 Now if we look at the EBITDA, and we look at quarter-on-quarter comparisons, if we analyze the validation of EBITDA and we look at the impact, 63 -- EUR36m in the first quarter of non-recurring items as compared to 2015 should be discounted. Then after the adjustment of EUR1.3b, the EBITDA, the gas business has produced EUR86m less than the previous year and the rest, the other, EUR41m more. So the adjusted EBITDA, we're talking about a drop of 3.4%.

 And to that we must add EUR52m, which is the translation effect from the currencies in investments outside Spain after putting them into the consolidated balance, EUR52m. Now apart from those effects and non-recurring items, that's a drop of 3.4% in EBITDA, adjusted EBITDA. And I would like to say, there's no doubt that the energy industry is in a situation of crisis all over the world, and a lot is going on. But the company is very resilient, because it has stood up to all these negative impacts.

 Now, if we look into the EUR52m more in detail, which is the translation of the currency effects, these come from practically all the currencies except for the dollar. But we have to point out that in contrast with what used to happen in the last -- most recent decades, the dollar's behavior is not the same. It's not negatively correlated to Brent. So these figures would have been much better in previous years.

 The collapse of the Latin American currencies can be seen. They bottomed out, and we are confident that they've really bottomed out and they're not going to drop any more. Especially the real in Brazil and the peso in Colombia, which have really bottomed out. They've never been lower. And there's an imbalance between inflation and exchange rate which should stabilize and rebound soon.

 In the mid-term it's very important to underline the very strong interaction between the exchange rates and inflation rates, because our tariffs in regulated businesses in South America have review -- automatic review mechanisms that are inflation-linked, and are associated to the exchange rate. That naturally produces delays and effects, it's not automatic. There will be more effects which will make up for the situation in the future.

 As regards the gas business, gas supply business, which is the business that has suffered more, and this has happened in the past two quarters, it's suffering the crisis of the commodity industry and also the problem of the international market situation. We have to point out and highlight the drop in the EBITDA per megawatt, 34.6% drop as regards the same quarter of the previous year. You see that on the right of the graph, EUR1.68/megawatt hour versus 2 -- well, it's a 34.8% drop. So that means a drop of EUR86m in the EBITDA.

 The reason has to do with a drop in fuel prices, the relationship between Brent or the Brent factor in the agreements and the very mild temperatures and weather we've had in the Northern Hemisphere in the last autumn and winter. We don't think there's going to be any other significant effect. We'll talk about this more in detail. And we think that there is not necessarily going to be an improvement, but the situation will stabilize and then gradually get better as the commodities and exchange rates and the situation of the dollar in this specific case get better. We'll talk about this more.

 Regards the networks, which is what accounts for most of the EBITDA -- I forgot to explain to you that the supply only comes to 19% of our EBITDA; we'll continue to talk about that -- 58% of this is networks. And 52% of that 58% was generated in Spain and 48% on the international markets.

 Now as you can see, the impact of devaluation's translation of currencies, is EUR54m less, fundamentally in Brazil and Colombia. And I repeat what I said before, as regards our idea that we're -- they've probably bottomed out these problems. But the activity hasn't been less.

 All countries except Brazil have had positive results in local currencies. And Brazil, basically the result is due to the climate -- the change, the Nino, the end of the Nino and the arrival of the Nina and the change in the rainfall and the weather which affects the combined cycle plants and our remuneration. That is a greater factor than the economic and political situation in Brazil.

 As regards the networks, the biggest element is gas, 55% of the EBITDA. In spite of the crisis of currencies in South America, all countries have not just continued to have a high rate of growth except for Brazil, because of the issue with -- that I've mentioned, but they -- not only that, but they still have a big potential for growth, as we will see over the next few quarters.

 As regards the power generation, electric power generation, it accounts for 22% of the EBITDA, and 67% of that 22% is Spain and 23% are international utilities through GPG in Spain, the data basically it's merchants except for renewables and the GPG businesses basically are associated with PPA contracts, a lot of them in dollars.

 The international activities have a very high growth potential, national activities we'll see in the strategic plan are very much linked to the program of renewable energies that the government launches. The drop in EBITDA is due to the impact of the non-recurring items in the first quarter of 2015. There haven't been the same effects this year, certain effects of global power generation, stoppages that were programmed in Mexico, and we hope to improve that over the year. And in Spain also a lower demand for electricity the first quarter was negative, as compared to last year. And also the weather.

 All this was made up for through an increase in the profitability of the trading business whose profitability has led to a situation where there's been an activity growth of 6.6%.

 As regards gas, it's 19% -- it accounts for 19% of the EBITDA. The gas business has two areas. One continues to go very well, do very well, infrastructures, which you see here, has given us an EBITDA of EUR75m. And the other one is supply, which is suffering a crisis and that's 12%. So the supply business we're going through a very big crisis, accounts for 12% of our EBITDA.

 53% of all this business of supply were generated in Spain, 27% abroad, and trading is the most important part, 67%. The drop is explained mainly -- there's EUR14m of non-recurring costs the previous year, but it has to do with the changes in the environment and prices of commodities.

 As regards cash flow, we have to say that we've gone from -- we closed the year with a debt of EUR15.6b, and this quarter we've got a debt of EUR15.8b. There is a slight increase of the debt, a reduction of almost 9% as regards the debt in the same quarter of last year. But in this quarter, this quarter is a bit atypical, because there's the dividend that's been paid out at the beginning of the year, EUR410m, which affects the situation.

 But we have to highlight strong generation of income, EUR677m in this quarter, and once again, I have to say that we're very resilient and these figures show that.

 As regards net investments, 92% are in the regulated business networks, and 8% non-regulated businesses. 53% took place outside of Spain and 47% took place in Spain. Investments, material and immaterial investments in Europe have increased by almost 37% as compared to last year, and they're practically all organic investments.

 As regards our financial situation, we've got sound profile, regulated and quasi-regulated activities have reinforced as main sources of cash flow. We've got very strong availability of lending and money and credit, and we'll cover the debt for 2018 and beyond.

 We continue with financial optimization. Our average and stable cost of debt is 4.3% with 77% of debt at fixed rates. In April there was an issuance of EUR600m, a 10-year EUR600m bond with the lowest coupon in GNF's history for that maturity, 1.25%. And then a private five-year, EUR300m debt issuance in April with a coupon of 0.515%. So we are very strong in that area.

 As regards the shareholder remuneration, getting ahead of the strategic plan which I'll explain later, the Board of the Company agreed to have a new policy for 2016/2018 which means first of all that this will be applied this year with a dividend of EUR0.4078 per share which was paid out on January 8. And then another complementary dividend of EUR0.5922 which will be paid out probably on June 30 after approval by the GSM.

 And the dividend went up -- will grow by EUR1.1b, and that's a 10% increase versus the previous year, and a profitability of 5.3% as regards -- as compared to the end of last year.

 As regards our vision, outlook for 2016 -- we'll look at this more in the strategic plan -- we hope -- we think that this year, the second half will be better than the first. And also in the first half of 2015, in contrast with what happened then, we haven't been able to optimize our supplier portfolio because of lower demand in the whole Northern Hemisphere and especially in Spain. And also the fuel price convergence situation, they've all dropped.

 And in 2015 also there were a series of non-recurring effects which have biased the comparison. But we hope that the negative impact is greater in this first half than the second half of the year, where things will begin to get better. And also that the price of oil, although we don't think that it will improve, we hope it will stabilize, become stable in the second half of the year, or more stable. It's very volatile, anyway.

 And we have new tariffs for gas distribution in Argentina, very significant increases of the tariffs of the company. And we've had new tariffs, positively reviewed tariffs in Mexico.

 In conclusion, we can say that the situation is very complicated, due basically to the price of commodities in our case and also exchange rates, which have caused the drops in EBITDA and profits. But in spite of this, we are very resilient, very sound in our performance, stable results, high results, basically as a result of the support of regulated activities and their stability in Europe and Latin America.

 Latin America, in spite of the devaluation of the currencies and their effects, continues to be a clear platform for growth. We've improved our dividend with that new payout policy that you know about and we'll repeat and describe again, and our expectations for an improved currency and energy price environment in the second half of the year will make things better.

 Next you have -- I'm not going to go through them all -- the details, all the specific figures for this quarter. I can clarify whatever you wish to know during the Q&A session.

 Good. Without further ado, we're going to go into the strategic vision, strategic plan until 20 -- up until 2020.

 We have aims for 2018 and expectations for 2020. I'm going to give the presentation divided into four areas. I'm going to start with the -- I'll try to summarize our strategic vision for 2016 to 2020, then I will describe the main trends in the energy industry. And then I will explain how our business model adjusts to all that, and then how we're getting ready. I will summarize the main things that we're going to -- the main operations we're involved in, and then what our financial targets will be for 2018 and 2020.

 Then Antonio Basolas, our strategic -- Strategy and Development Director, will present the perspectives of the different business units. Then the CFO, Mr. Carlos Alvarez, will give us the financial outlook. And finally I will give you some closing remarks and we'll have the Q&A.

 Now, to begin with, we start with the global macro and energy scenario. We see three macro trends in the industry which will transform the industry. First is the growth, which is going to focus on emerging countries, also developed markets will have activity. But net growth will take place in emerging markets.

 The energy mix, especially electricity, will move towards renewables and gas. And finally, the emergence of new technologies and digitization, massive digitization, will produce new models, business models, which will transform the sector, especially in what has to do with customers.

 First, a very quick overview. I would like to remind you that in accordance with the expectations for growth in the world, emerging markets will have a growth of almost 5%, whereas in developed countries, growth will be less than half of that because of things we all know about that -- the situation where emerging markets have a greater growth potential.

 Now if we go to energy demand, primary energy demand, people are more or less agreed, you see on the left, that between -- the growth will be 1.2%, 1.3% for the immediate future as regards the energy demand in accordance with different estimates from different analysts. So there will be growth.

 A slight slowdown, but as you see on the right, there will be a tremendous difference between developed countries and emerging countries. In developed countries we expect to have a flat situation or slightly negative even, due to energy issues, demographics, growth of the economy, and sectors that are less intensive in energy use.

 But emerging countries are going to have a growth, annual -- a cumulative growth of about 2% because of the high demand for energy, the growth in population and the fact that their industries have a greater need of energy. So there's consensus about that.

 And also about the following. You see in this graph, primary demand -- the demand for primary energy will behave as follows. The figures vary from one analyst to another, but the conclusions are always the same. There's going to be a slowdown in consumption of oil and coal, an increase in renewables and gas, and there is consensus that there will be a lot of opportunities associated with renewables and gas. These will be our basic pillars.

 On the right you see different analysts give very different figures, but they all coincide when they say that gas and renewables are going to be the energy of the future over the next 20 years. So we have focused our strategic plan on that.

 Now, to continue with this vision, we believe that within gas -- LNG is going to have greater business opportunities, will contribute to supplies and has the lower need of time to market to cover the demands of many different countries. So LNG will have a greater and greater significance. And we see that it will probably -- the amount that's marketed through LNG marketing, LNG will be even greater.

 So liquid natural gas will be focused on two main markets. Firstly the Asian market, where the countries where they don't have their own production, [reach] ones with high consumption and high demographics. And also the second area is in Europe, because there's decline in their own production which will be replaced by more imports of LNG. So expect an increase of demand of 8% per year between 2015 and 2020. But this is mainly supported by the increasing demand in Europe and in the Asian emerging markets.

 With regard to our investment in the networks related to gas, there's going to be great opportunities, especially in distribution. The IEA has forecast an incremental demand of 350 bcm a year for industrial, residential and commercial customers in emerging countries. This is an enormous figure and to be able to attend this demand or any figure that is similar to that, it will be necessary to have a very big investment in the gas networks. This is what we have been observing in the emerging markets where we're recurrently working.

 These emerging markets are going to need important generation investment. So here on this slide you can see in line with the IEA, and we're changing the figures somewhat, because they have been generalized by lots of different analysts. So we can see the generation demand, how it will be throughout the world. And it's classified by conventional and renewables.

 Here you can see the emerging markets are going to have important investments required, and also in the developed markets too. Mainly in these developed markets they will be related to the fact that we're going to renew our fleet, sometimes due to their age, etc. That would be the UK situation because they're nuclear power plants, but also taking into account the need to adapt to the new initiatives which at the end of the day will be to fight against climate change. So this will need investment too, this fight against the climate change.

 So in general the electric, electric generation or the power generation offers an opportunity of investment of $11 trillion over the next 25 years of which over half will correspond to renewables.

 But also I would like to mention that two-thirds of this new capacity will be concentrated on the facilities outside the OECD. So this two-thirds of the market, 40% will correspond to renewables. So they have a very important role using combined cycle gas plants.

 So as we say, a lot of investments will be for renewables, 40%, as we said, of these two-thirds apart in the emerging markets, but basically in solar energy but also in hydraulic and combined cycle gas plants. So gas, as we have said earlier, is going to be our colleague or is going to accompany this through all these investments and especially in the emerging markets.

 When we're talking about investments in electricity networks, the new generating capacity which you've just seen, will promote with that any doubt whatsoever the need for new investments in electricity networks. Apart from that they will also be pressured and they will have to go up because of the new technologies involved, the smart grids. And also there will be greater penetration of renewable energies that means that we will need more investment in transmission and investment.

 So the distributed generation are depending on what we do. It will have some sort of development which will need will be more investment in the network. So all this together in our opinion, which is shared, as we said, by the IEA, it means there will be opportunities for investment worldwide which will be around $5 trillion in the electrical networks worldwide.

 Also it's important to highlight that the third line of business that we are seeing currently in the energy sector is the new business models that will be based on innovation and digitalization. These will be complementary models to the gas and electricity trading and they will represent without any doubt an opportunity to get better relationships with our clients and to get better business models.

 Obviously distributed energy will open up new opportunities and we're getting prepared for that in developing the networks and the smart applications. It's true to say that today up until the year 2018, we've got a commitment to this. It doesn't have a lot of weight in our EBITDA. We are working on all these different areas, i.e., in innovation and digitalization, because we truly believe that in a future that is where there's going to be important opportunities for development.

 So to summarize, the three trends. Growth driven by the energy demand in emerging countries. Secondly, the energy mix which has got more weight from renewables and gas, and also as a result of this, the electricity and gas networks based on combined cycles, especially in LNG, which in the global gas market will have or will show growth.

 Also there's going to be new business models, taking into account the new technologies and digitalization of this industry which will give us new opportunities for growth. And many of these will be very, very embryonic.

 So now the issue is how will the gasNatural Fenosa's business model adapt to this new situation? Well, the current business model for gasNatural Fenosa has three main characteristics that we think position us very positively for this new phase. So we've got proven experience and track record in developing new markets and opportunities in the energy field.

 Secondly, we have the leadership and success, because we've got this leadership position that I said. And third of all will be the ability to develop attractive growth platforms, and they will also be very effective.

 So therefore we've got a business model that is very clearly differentiated which will allow us to gain the main growth axis which has been very important to date. So, for example, now taking into account the statistics of the International Energy Institute, so we look from 1990 to 2013, which is on the screen, there have been two waves of growth during this period in the energy world, which are, for example, the Latin American growth and the growth in renewables.

 There is no doubt whatsoever, when we look at the Latin American growth, in absolute terms this is comparable to the growth in renewables which has been 3.2% on an annual basis. And also this has been one of the key issues of our -- that we based our development -- the development on. We've seen it, at the beginning of the decade we've supported this, and since then, since 1992, it has grown more than we expected. And now it represents 30% of our EBITDA.

 And not just that. We can also see that we started in these countries by capturing growth, especially networks, in a very successful manner. Therefore we are now leaders in five of the six countries where we have our footprint. So we're now gas networks, and in our electricity distribution networks which, as you can see on the screen, we are now gaining business that corresponds to over 13m customers, which means that now we are the main company in the largest metropolitan areas in the region.

 This also allows us to growth with -- in a stable manner. Therefore, as you can see here, the dates when we started in -- we entered these countries, so in a very short period of time, we have managed to gain leadership position with a relevant market share. We identified these countries, we did it, and we have achieved what we proposed.

 So now what you can see is that where we are present to date in almost the main Latin American metropolitan areas, as you see. And in these areas you can see here on the right-hand side, they've got great growth potential. And therefore we have achieved a leadership position and we are growing, and we've got great potential for growth in the areas where -- as you can clearly see on the right-hand side graph.

 Now, if we're talking about networks, and we're talking about gas in this particular moment, we can see the capacity that we have to continue to improve. In Spain, you can see here, Spain is not -- the penetration of gas is not that high, and it's way behind many other European countries, especially whose climates are very similar. So currently we have 7.5m connection points in Spain and the capacity to continue to grow with an important generation of cash, so with more penetration and more investment.

 So likewise we've been able to start the electricity generation where in 2001 we had zero. You can see -- we recognize this, until that year we were mainly concentrated on the gas market especially on the networks, and after that we went from zero in 2001 to 15,465 megawatts in the year 2015. So therefore we have been able over this period of time to develop a business that's over 15 gigawatts of installed capacity for electricity generation. And we've gone from being a purely gas company to a company where half our business now represents electricity, both generation and distribution.

 So we really believe that in generation there is still important growth possibility in Spain and in other countries too in Europe. And in emerging countries, due to the fact that we are promoting renewables and we want to fulfill the 2020-2030 objectives, and we're sure we're going to fulfill this.

 So it's possible that in Spain we'll need to install eight additional gigawatts to fulfil these objectives in the short term. And for years we've been working on an attractive portfolio to make the most of these growth potentials in renewables.

 If we now look at this on an international perspective, what is the situation of GNF in the international markets? Well, we can see not only are we well-positioned in Spain, because we're number three in generation in Spain, but also we are well positioned in other countries to make the most of the investment possibilities for generation in Latin America.

 We are currently studying all the different countries, which -- well, you can see them here -- but these are the most important ones on the screen, for investments in generation. And as you can see, we have now said where we are currently present in the majority of countries we are in Latin America where we have a very important presence. And the potential for the countries where we are, and the ones that we're studying to enter, now have a capacity for investment of 280 gigawatts.

 And we have been studying this for a while now, we're working on the possibility of some specific projects, i.e. we have a portfolio to make the most of the growth that has been indicated in the countries that you can see on the screen.

 With regard to our position in the liquid natural gas market, we've been very successful to date, because since our EBITDA went down in the sector, compared -- because the crisis. But it's true to say that it's still important, and it is still clearly positive. Our business, our integrated business between procurement, infrastructures and market, continues to be an integrated business and we are leaders and we've got a very unique position. And we've got a very diversified portfolio in origin and destinations.

 We are also flexible in volume with high degrees of options, low exposure to the spot market. And also this allows us to manage them, taking into account our transport infrastructures in some cases for storage. So we're very flexible in this respect. So we will be continuing to develop these businesses as we go along.

 Now there is a new scenario where the opportunities for LNG are going -- are on the increase, especially in emerging countries where we can see this is taking place but also there is a notable increase in the countries who want to import LNG, so that now currently they are -- there is, as we say, there's more people who import than import. So our LNG business is on the increase.

 We're in a very privileged position due to the contracts, and we aspire to have more opportunities in this business. Also we have great flexibility to adapt ourselves to these LNG markets. We have here these four areas where we develop our boxes. One -- the positions that we like, or would like, they are positions that are very integrated in different aspects along the value chain. For example, downstream the networks, the generation of electricity and the others. So this is where we are developing this in Spain, Italy, Mexico. So you can see now we are integrated in nearly all parts of the chain.

 Another model is one where we've got less integration, it's moderate integration, shall we say, that would be Portugal or France, or even the Northern European countries. We've got some sort of integration and we are trading and in marketing, but we're not as highly integrated as we are in the top level countries.

 But we have no downstream integration in some countries, but we do have a special position. And then at the end you can see the other positions, which is where we are basically a trader. Our strategy is to go up to the top there, because this integration with the downstream and the power generation means that there is important synergies to increase our added value.

 And finally, when we're talking about the value creation in services and customer contacts, and today we have got a portfolio of 25m contracts with end consumers, and we think that there will be important changes with our end consumers. We're in a privileged position, because the smart meters and the digitization of our homes and also distribution generation increase. And these are opportunities we have to make the most of, because in Spain we are leaders in a lot of these subsectors.

 Also I would like to say that this capacity we have to change ourselves and to work closer with our end customers, is nothing new, because we've done this in the past. If see here the year 2003 in gas, we hardly had -- well, we only had 200,000 customers in the liberalized market. We're talking about Spain and Italy. So we would have had a very little amount, we didn't have any commercial relationship with our end customers.

 But last year we had over 3.4m customers. So it's a very successful, so it's very -- also we have our new competitive business. And when we're talking about electricity, we had no customers in the liberalized markets, and we now have 2.2m. And what is more important that is the effect that we will talk about, the services and others, these are added value contracts for clients. We've gone from 1.3 in 2003, as I said to 2.9 in 2015.

 So our capacity is clear to work closer with our customers and also we're going to export our experience and this model to Latin America in the future.

 So now it's very interesting to compare with what our situation is in 2015 compared to our competitors. We have 70% of regulated business compared to 60% of our European competitors. We have 52% of our -- in gas market and our European competitors only have 14%. And our activity in the national market, this Spanish market here, is 52%, which is very similar to our competitors.

 However, our competitors have 32% of their EBITDA in the rest of Europe and we only have 2%. And 46% we have in emerging markets. So you have to remember to take into account obviously the stability is changing, this growth is completely different here because this has been due to different crises that have been -- have taken place.

 So now if we analyze our portfolio for where the risks are, and where our position is, we can now observe, which we will see on the left-hand side, when in the year 2015 again we think that our networks represented 32% of EBITDA and 25% of electricity networks and gas 18%. And this includes infrastructure.

 So if we take away the infrastructure, gas would represens 12% or 13%. But probably what is more important here is on the right-hand side, where you can see the EBITDA for 2015, 83% took place in countries who have a rating in the country that is higher or above the Spanish.

 So 67% took place in Spain or in countries with a rating that's the same as in Spain and 16% in countries where the rating is higher. So 83% is generating the same or above Spain, and 17% in countries where they have a worse rating. Here we are including Brazil, which despite being a country with new opportunities, they're currently suffering from a crisis which has affected their rating.

 Well, all this, apart from what I've said since 2009 we've been able to do this, maintaining a very clear financial discipline policy. Our growth as from 2009, which is when we merged with Union Fenosa has not just been with increases of our debt level. No, it's totally the opposite. This is due to the fact that our investments and our operations have given us a great ability to generate cash flow.

 And so we've been able to invest EUR11,000m which is 5% annual growth EBITDA and with net profit because we've had a very strict financial policy. So we've been able to reduce our debt levels by over EUR350m. And as you see, you do all currently know our average leverage.

 So we've looked at the markets and we look at the trends; you've seen our position. So now what we're going to look at, what are going to be our main initiatives for the next few years?

 Well, one way of looking at it is where we're going to put our CapEx. Well, you can see this now here. You can see between 2016-2018 and then you can see the period 2019-2020 and then the accumulated. In short, the main investment will be on networks and renewables. The objective is our net CapEx for the period 2016-2018 will reach EUR4.8b in networks and EUR1.7b in generation. So in short, EUR8m investment in this period of time for investment, as I've said.

 So with regard to the period 2019-2020, we will continue investing in generation with a net CapEx of EUR2.7b and EUR2.5b in networks. So therefore the investment which will be accumulated in these periods will be EUR14b, of which 80% will be unregulated assets. And as I previously said, we're going to be especially focusing on the networks and on renewables.

 So what will be specifically the key investment initiatives? Well, you can see them here. Here you can see that the keys for our investment for the period 2016-2020. The generation here represents 32% of the total and it can be 3.5 megawatts of new generation capacity of which 2.5 megawatts will be in renewables and between 500 and 1,000 megawatts of the CCGT.

 And in networks we are still going to get growth in gas in Spain and Latin America. And in electricity mainly in Latin America, although we're not ruling out growth in Spain. The gas business, as we've said, it will be investments in our fleet which have already been contracted. And as you know, this will be very important for the rating companies. So as we say, this will offer us competitiveness and flexibility in our gas offering.

 Now if we still have good conditions for growth in the market, so if it continues like that, we will support all new types of technologies, and taking into account the consequences of the digitalization of our activities.

 With regard to the mentioned investments, at the end of the day in the year 2018 we should get an EBITDA of EUR5.4b which are based mainly on the growth of the network and services business. We hope -- well, we expect there's going to be a slowdown in the gas business, taking into account the evolution that we've already mentioned related to the commodities. And we've said this on several occasions.

 And in 2020 our ambition will be to reach an EBITDA which is above EUR6b and we will be leveraging on the continued growth of networks and also in our international renewable business. And we'll also start in this second period of time, 2019/2020 for the recovery of the gas business because we don't expect it before that period. And we also will now see that there will be new specific businesses related to services and getting a better, closer relationship with our end customers.

 So now to be more specific about the initiatives that we'll be carrying out in these different business units, well, we can see if we're looking at the objectives for this period we can see that in the generation business we're going to collaborate in the regulation which will give the correct remuneration for the supply, diversification and energy efficiency and sustainability -- as you know, these are all subject to debate here in Spain and Europe -- and to see how we can deal with these generation markets, because it's very important. And we expect to collaborate in this and we hope that there will be sufficient room so that we'll be able to invest important amounts in Europe so that we can fulfill the goal related to climate change.

 Also we will implement an important efficiency program here in Spain which I will talk about later on and also of course we will adjust the capacity of our investments in line with these new emissions regulations that come up.

 Now we're going to be talking about growth and development of the global power generation. With regard to the network business, we will concentrate our activity on all regulatory reviews in order to have the best rules when we're talking about the public interest and our own which allows developed networks in almost all the countries where we are, which is the actual objectives of these countries. So mainly we want to expand mainly on the areas where we get more return on our investments and the ones that are more profitable. We're also going to implement cost-cutting strategies in the mature markets, in Spain especially, and also we will have our portfolio of business to create synergies and value for our shareholders.

 Well, with regard to the gas business, we will continue to reorganize our current supply portfolio and also extraordinary [and extraordinary] activities. We will continue to optimize the sales in all our global markets at all times when this could be effective. We will also be developing downstream markets to become linked to our end customers which we think is an essential part of our strategy in this business. We will optimize our fleet with these new tankers that will be coming into service and they will offer us a lot more flexibility. We're also working in this period to solve the conflict we have with UFG in Egypt and also we're going to try and manage the different commodity risks in procurement and sales which I think is a situation that you're all fully aware of. So we do expect stability in these markets until the year 2018.

 With regard to services and other businesses, we will develop new products which fit in better with our end customers. We will continue with our digitalization program for services and procedures. We are investing important amounts here and we have been doing for many years now. And just we will study the success that we've had in Spain; we will export that to Latin America markets and we will create a platform for all the businesses that will come up related to distributed energy and related services.

 With regard to all this, well, what are our financial targets going to be. Well, you can see here on this chart, on the left-hand side you can see the EBITDA and the net income. We expect EUR5.3m (sic - see slide 40 "EUR5.3b") in 2018 and over EUR6m (sic - see slide 40 "EUR6b") in 2020. We expect net income for EUR1.6m (sic - see slide 40 "EUR 1.6b") in 2018 and EUR1.8b in 2020 and to a certain extent until 2018 we don't expect an important change in the development of the commodities and the exchange rate. It's true to say we don't expect the solution to continue to be negative, which it has been up until now, but we're not contemplating considerable improvements in these two areas. So therefore we will have an impact in the years 2016, 2017 as I will now talk about the effects.

 So now it's probable that at the moment we're at the bottom level of the situation for certain exchange rates but also for certain macroeconomic variables and energy variables. The volatility of the commodities and exchange rate I think make our situation a lot more complicated for 2016 and 2016 (sic). And for all these reasons we think that our net income and our EBITDA will be affected.

 So for the next two years, so 2016, 2017, EBITDA will be around EUR5b and our net income will be between EUR1.3b and EUR1.4b.

 We've started our activities initiatives to improve all these circumstances and their impact in the second half of 2017 but we want to be prudent about our progress in the immediate future. One of the things that is being developed is the productivity plan. It's not the first time that we started this; we started in 2009 when we bought Union Fenosa and since then we've had different efficiency plans, successful by the way. And we now have -- we're going to try to have a cost optimization of EUR220m until 2018. In 2016 and 2017 we'll work towards that goal. We're going to reduce corporate costs, optimize our commercial activity, decrease discretionary expenses, reduction in O&M costs and also process digitalization and management of IT systems. The goals are for 2018 and we might get there even before that.

 So we're going to have a good cash flow generation in spite of these times where the whole industry is not doing too well or it's a complicated situation. We think our Company is very resilient. If you compare our result, our volatility, with our competitors, we're very resilient and our business model is resilient, but obviously we cannot avoid the impact of the macro figures that I was telling you about before.

 But in this period the net debt we think will be constant, although its multiplier in terms of the EBITDA will go down significantly. In spite of paying out the dividend and the CapEx that I've spoken about, we will -- our debt will be about EUR15.6b. That's about the ratio between net debt and EBITDA will go down to 2.5 times in [2023] to 2.9 times in 2018 and then 2.5 in 2020.

 In terms of shareholder remuneration, in the last Board we approved the new policy for 2016-2018 which you know perfectly well, a payout of 70%, minimum dividend of EUR1 per share and payment of interim dividend advanced to the month of September of the ongoing year, representing approximately one-third of total dividend and possibility of scrip dividend.

 Now I'll pass the floor to my colleague Antonio Basolas who will explain the perspectives of the business units.

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 Antonio Basolas,  Gas Natural SDG SA - General Director, Strategy & Development   [3]
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 Thank you. Good morning. Thank you, Rafael. If you agree I wanted to start by explaining the macroeconomic hypotheses of the energy industry that are included in what we're going to say and also analyze the evolution that we think we'll have for each business unit and then each section describe what the characteristics and importance, relative importance of the businesses within the portfolio of Gas Natural Fenosa in terms of growth.

 We are carrying the hypothesis of the Ministry, 2% growth for Spain, and obviously we're out of the crisis that we've been through in the last five years and the crisis of 2012. In terms of Latin America, what we see, these are the data of the IMF, recovery of Brazil probably after 2018. We continue to see slowdown in Brazil in 2016 and 2017 with negative growth rates. And in the rest of the relevant countries for us, which are Colombia, Mexico, Chile, we see growth rates slightly lower than what we've had -- they've had in recent years. But we will continue to have growth and that's what we foresee for the business too.

 In terms of inflation, this is also relevant -- will be relevant because our tariffs, we can translate our inflation rate -- the inflation to our tariffs but we do that gradually year on year.

 Now exchange rates, we don't see that there's going to be significant changes as regards the recent devaluations in Latin American currencies and the euro/dollar correlation will be stable at about 1.1. Now, as I said, we hope that the tariff regulations and possibilities can absorb the devaluation and inflation impact in Latin America.

 In terms of commodity prices, we see a certain recovery in the price of Brent of about -- up to about $65 per barrel in 2018, a recovery also, significant recovery of Henry Hub in absolute terms from $2 per million Btu to $3. And it's important in relative and absolute terms but will not go back to previous levels. And we also see a certain level of recovery of NBP.

 With these Henry Hub levels that we're seeing now, $2, there are different analysts and reports that say that if the price of oil is at $50 in markets, reference gas markets that are Brent linked, the American contracts would be profitable in those markets.

 In terms of demand growth, we see growth of about [4%] mainly in Latin American countries, although with slightly lower growth rates than we've had traditionally in those countries.

 If we look at the different perspectives for each of the business units, and then we'll finally do a summary of all the different metrics and measurements. As the CEO has said, 71% of our business is regulated or almost regulated, quasi-regulated, and as regards the perspectives and expectations for our different business units, that will be the case -- continue to be the case.

 Our business is basically anchored in five countries, Spain, Mexico, Chile, Colombia, Brazil and, as I've already said, Mexico. In the network business, which is more than 50% of our business, in Europe they account for about EUR1.5b in EBITDA of the Company, just over 30%, and of this business in Europe, almost 90% is in Spain in terms of gas distribution and electricity distribution. We're the leaders in distribution of gas and third -- we come third in terms of electric distribution.

 In Latin America the EBITDA of the network business in Latin America is about EUR1.35b -- EUR1.5b and we're present in the large big capitals and cities in Latin America. And our position in networks for gas distribution, we're absolute leaders in South America and our business model is probably better than anybody else's.

 What's relevant -- important here is not just our position but also that where we are there is still a big growth potential. As we saw before, the penetration of gas distribution in Spain is about 30%, still far from the levels achieved in other European countries. And when we analyze different geographic regions, we see that there is potential for growth in different geographical areas of Spain where there is still quite a lot of potential for gasification.

 In Latin America, and we've seen this too, we see that there is growth of electric demand, specifically in Chile for instance where efficiencies in the regulatory system are very similar to Europe. But the growth is very significant; it's an emerging market growth in contrast with European countries where the growth of demand of electricity will be about 0% over the next few years.

 But we have to also underline here that in those areas where we do have gas distribution, in Latin America, our concession areas, there's still a significant growth potential that we must harness and use, mainly in Brazil in the medium and long term after they come out of the crisis, the recession, and they recover. But there's a gas potential, very significant gasification potential in Mexico with Henry Hub Index market where competitiveness of gas is very important and also in Chile where the development of natural gas came late. So it's an immature market so there's a great potential for growth over the next few years.

 In terms of the electric networks, electricity networks -- and we focus more on Spain here -- what we see here is that we have a goal. We want to go from 2m smart meters to 3.6m smart meters as from 2018. This will allow improving our productivity, internal procedures and probably to develop new businesses associated with customers.

 Now in terms of key regulatory issues, I would underline on the one hand that there is regulatory stability in the different countries where we have business. There's going to be -- tariffs are going to be reviewed but they're the normal reviews as published and that allows us predictable cash flow levels. As regards tariffs, they include the investment plans and we know what the CapEx is going to be and what CapEx we're going to devote to each business, and therefore we don't, in any of the regulatory scenarios, see any significant transformation.

 Also here we have indicated what the returns will be in each of the geographies and concessions using current methodologies. And as you can see, in many cases the regulatory returns are real, are actual, and therefore we're protected from the inflation that might be -- that might happen in those countries. And since devaluation processes lead to inflation in the long run, that will allow us to recover from the effects of devaluations over the last 24 months.

 In terms of networks, what are the main actions that we want to initiate over the next few years? Well we want to continue with gasification in Europe of Spain and then we're going to also leverage the purchase of customers propane -- channel propane customers that we've agreed with different operators whose potential for growth and gasification in those areas is quite high, and continue with development of new concessions that we have requested. And within the regulatory framework that we currently have where new populations are given preference and favored, we think our growth potential is very significant.

 In Latin America, we continue to have a great organic growth potential, very significant, and we're also requesting new concessions, asking for new concessions in Chile, some areas of Chile, some areas of Mexico, and we have to grow -- make these concessions grow. We've got a small project but very interesting project to initiate sales of gas through tanks in Puerto Rico. We've got to develop the Arequipa area in Peru; we've been given the concession there. And the two big greenfields for growth at this time are gasification of Mexico in industrial areas and large cities and towns and continue with the gasification of Chile in Santiago into Chile. In terms of penetration with the gas, natural gas heating systems, we think there's a great opportunity there and continue to gasify different towns in Chile where we've asked for the concession or we have the concession and we've got room for growth.

 In terms of electric networks, we've got a focus in Europe in addition to continue to struggle -- to continue to have the same models, regulatory models, but also increase efficiency of networks so that returns, regulatory returns are maintained, and we can have as much as we are allowed to.

 In Latin America, electric demand growth is present in Chile, in Colombia and in Panama. There's growth there. We've got to continue to play with regulation. In Panama, we're going to see how we can optimize our operations, our investment within a framework of regulatory stability that allows better returns than we've had to date. And we expect, we hope, together with the authorities, we will be able to make the situation grow and Electricaribe we hope will get better returns than it's had to date, the company Electricaribe.

 We see in terms of figures, in terms of number of customers, our growth, 1.4m new points of supply between 2015 and 2018 and our goal is to try and grow by 1.2m customers more in 2018 to 2020. In terms of electric distribution, electricity distribution, we also see a growth of points of supply. There's a greater -- the demand will grow more than the points of supply and this gives us an opportunity because the countries where we are in Latin America, the electric demand is growing much more than the demand in European countries.

 In terms of financial -- in financial terms, here you see the share. Spain continues to be the main country for networks business in terms of CapEx and investment with an investment expected -- between 2016 and 2020 of about EUR7. -- well, EUR7b in networks. Almost 50% of our investment, net investment plan between 2016 and 2020 will focus on networks.

 And in terms of the EBITDA, well, you see the distribution doesn't change significantly, although Chile and Mexico with the gasification plan we have in both countries will gain a little bit of ground in terms of share. And the EBITDA by 2018 for networks we expect will produce EUR3.2b and we get more than -- and will increase up to EUR3.4b by 2020.

 If we look at the portfolio and look at the returns, profitability, regulatory profitability we're allowed, we see that those returns are being achieved with a capital cost that we give to each business in terms of it or based on its risk and also based on business risk and country risk and currency risk we see that we're investing above the capital cost that we have assigned to us.

 As the CEO said, we have an ambitious efficiency plan that includes a lot of ongoing initiatives which will contribute to our EBITDA goals for 2018 with productivity improvements through points of supply, investments in points of supply, capture of points of supply and also maintenance, both in gas networks and electricity distribution networks. And there are specific aims for each geography, each concession and each country that must be reached by 2018.

 I will now go to the business of international generation. Electricity we've broken down into international generation, which is a completely regulated business, and then we'll talk about the electricity industry in Spain which is not so regulated, there's a lot of merchant activity. But internationally it's practically completely regulated with PPAs or bilateral long-term contracts.

 As you can see, fundamentally the generation business internationally has an EBITDA of about EUR300m, just under EUR300m, which accounts for 5% of the EBITDA of the Group. And we have about 2.5 -- 2,500, 2,800 megawatts in operation combined cycle plants, mainly in Mexico. So we have a very high thermal percentage and one of our ideas within this strategic plan is to change the mix of the portfolio of global power generation and have a greater amount of renewable energies.

 Why? Well, because what we see is that renewable energies, mainly sun and wind, have dropped dramatically their costs. Generation -- full cost of generation has dropped dramatically as a result of technological improvements but also because of the lower interest rates performance and the financial costs of these technologies are cheaper, much more attractive versus variable costs -- total variable costs of different technologies that are more conventional.

 But obviously renewable technologies have a problem which is that they're -- they depend on the sun and the wind and therefore they're not constant and therefore -- and in that regard we think that combined cycle plants will continue to be very important in terms of combining them with renewable energy in order to guarantee supply of electricity, even in countries like Chile and Mexico where there can a high degree -- there is a lot of sun, for instance in Mexico, with a lot. In our wind park in Bii Hioxo we've got a lot of hours of wind but there will always be a need for back-up energy and we think that that back-up energy will be supplied by combined cycle plants.

 As you can see here, different technologies that we're interested in investing in over the next few years, combined cycles, mini hydraulic plants, average -- medium-size hydraulic plants, wind and sun. There are almost 40 gigawatts in projects that must be developed from now until 2020 and have not yet been granted. There is a greater growth but projects that haven't been yet granted in the world, there's about 40 gigawatts that must be built and started up over the next few years in technologies where Gas Natural Fenosa has expertise and technologies where we want to invest for the future.

 Another important element is the horizon for this plan. So we have been looking out into the period 2020, so here between now and 2018 we haven't envisaged a lot more power into production. As we said, between now and 2018 take into account because we have the periods for construction and also the different projects involved.

 This is the second part of the plan in 2019/2020 when we will have within the different portfolios of projects, greenfield projects. Then we will be able to have more installed power into operation. As I've said, a combined cycle project can take between five and seven years to come to fruition between when you identify it and it's commissioned and renewables are even longer. But for solar periods have maturity times which can be between 9 and 18 months and a wind project can be around two or three years from the time you start with a project and then you have finished the building.

 So we think that on a risk level and a time to market that the renewables today are more important -- well, the most important (technical difficulty) of our project.

 So what is the mix that we are seeing for this new generation capacity that we want to build on an international level? Well, as I've already said, 30%, 40% we think should be wind, between 30%, 40% solar energy, hydro between 5% and 10% and even within our strategic plan period, depending on the projects and if they don't mature maybe that will be somewhat delayed to after 2020, taking into account all the projects we've got. But the CCGTs, they could be between 10% and 30%.

 And which geographical areas of the world? Well, as we've already said, in those countries in Latin America where we think there's a growth opportunity on the one hand and on the other hand where we're already present so therefore we know the energy sector well. And also in those Asian countries where we think that there's going to be growth and there could be reasonable returns and we want to position ourselves also in what we call the entire chain value for energy projects. And there it's important that the country itself has liquid natural gas, as we say a way to get new projects and also the projects that we call gas to power.

 There are different countries that at the moment are currently analyzing going into the liquid natural gas with gasification plants and new combined cycle plants and these projects we think we offer a lot of expertise. And as a Group this is something that we have developed in Puerto Rico since the year 2003 when we acquired a stake, an important stake in different countries. There are different projects and different parts of the world where we think this business model will allow us to be part of, as we said, in LNG, in gasification, structure and also afterwards be able to do CCGTs and also to generate electricity on the long term. But also the gasification of countries in different areas and to actually get up to the end customer by trading with gas.

 As far as risk is concerned, the objective is also that 50% of this new power should be done in dollars and if it's done in local currencies they should have some sort of inflation protection. We will see if it's possible to have some sort of protection. When we're talking about devaluations today I would say that 99% or over 90% of the global power generation portfolio is currently in dollars taking into account the PPAs we have in Mexico because they are currently denominated in dollars which protects us from the local currencies. But in the Mexico CCGTs it's currently a protected dollar business.

 And as far as risk is concerned, also we hope that 80% will be in countries who have got investment grades. And with regard to merchant and long-term contracts, we want or our objective is to have over 80%, 85% in -- that should be taken out. The majority should have [minimum part] at market rate. So this is a business model in which we are currently working in Mexico so we've got a PPA in a series of surpluses that could be sold to different markets and especially the wind plant that we have in Mexico. So there we have certain long-term contracts and others that are contracts that have merchant risks.

 We have around today identified and we're working on projects that have specific names, worldwide over 4,000 megawatts in different technologies. We've already seen this in different countries, they've got different profiles. Some are more mature projects, others are less mature, but with these 4 gigawatts that we can see here on this slide, these are projects that have been detected. They've got a name and they are gas to power, they're combined cycle, they're solar projects, they're wind projects, and the odd project which is a medium or small hydro project.

 With regard to our objectives, as I've already mentioned, we are only envisaging in these figures that you can see here an increase of 100 megawatts for the year 2015 to 2018 and then what we are envisaging is that the projects will be able to mature and therefore we will have them operational or almost operational in the year 2020 with 2,700 additional megawatts within our entire portfolio that we currently have.

 For this very reason the average CapEx goes up. It goes up especially in the second part of our strategic plan taking into account because the first construction phase and, as I said, we're currently in a development phase of the projects that we have or had.

 The EBITDA is pretty stable between 2015 and 2018 and our objective is to double the EBITDA because at the end of the day we are doubling the installed capacity for international generation by the year 2020 going for 2,700 megawatts at the moment to almost 5,400 megawatts in the year 2020.

 Well, as you can see here, we're also trying to reduce our exposure to combined cycles and the thermal exposure which we have at the moment to 80% to have a better balance of 60% combined cycles and others and 40% renewable. This plan is now concentrating on developing renewable projects, especially, as I've already said, it will be solar and wind power.

 And again in order to achieve our objective for the EBITDA for the year 2018 there is also a productivity plan which has initiatives within the Company, which means we will be able to have reductions of 10%, 15% when we're talking about personnel and also operating costs when we're talking about megawatt hours that we are producing.

 Now what we will talk about is the business for electricity generation in Spain and the electricity supply in the wholesale market where, as you already know, we have a very important position with a market share of combined cycle. However, we have a part that is less important with regard to renewables.

 So what are we envisaging for this scenario? Well, we're taking into account that this year there's going to be a reduction in the pool price, which we've already taken into account, the situation that has taken place in the first quarter this year. And we think that there will be a normalization to 2016/2017 which will position us at the pool price of around EUR50 megawatt hour.

 As you can see, this isn't -- we are estimating not much growth in the price, in fact quite the contrary. When we're talking about the wind and hydro we're taking that into account in an average year. But we do believe that combined cycles will continue to play an important role within the security of the electricity system here in Spain.

 As we said, we have competitive gas and we've got flexibility in the gas market and also the position of our combined cycle plants. We think this is a very important issue to be able to have an important market share in the generation market or within this, as I say, this area.

 Within our environmental objectives what we're envisaging is that in Spain we still have 8 gigawatts of new renewables which should -- there should be new tenders or new mechanisms launched to incentivize the building of these generation plants over the next five years so that we can fulfill the triple objectives of 20/20/20.

 We think there's an opportunity here for this. Why? Well, because within our energy mix less than 10% of our mix is from renewables when the industry in general has 40% in renewables. And again, as you can see, we have approximately 800 megawatts of projects for wind and solar power. As we said, they've got specific names and we have got specific measurements for them and some of them are or will be ready to take part in any procedure which would allow us to build up this new capacity which is the objective to commission more megawatts in the period 2016 to 2020.

 So what are the actions or the initiatives which are going to be fundamental that we're going to put all our effort into for the next few years? Well, on the one hand we believe that we should maintain or take into account what the regulatory situation will be so that electricity market will be transparent and competitive and therefore we believe that that is good and we will have to continue to defend this. On the other hand, we're going to develop shall we say the projects that we have for the Canary Islands and we will have to commission them before the year 2018.

 We'll also be prepared for the new tenders that will come up for wind and solar energy in Spain. We are also going to invest in adapting the Meirama coal plant and adapt that and build a renewable platform mainly in Spain but we're not ruling out the fact that there could be some megawatts on a European level, taking into account the incentives that currently exist. And we will have to have shall we say a broader view of the renewable industry and not just concentrate on Spain. We should look at this on a European level with the objective of including 200 megawatts in 2018 and also an additional 550 megawatts in the year 2020, which means that the 2020 objective which we have, 750 additional megawatts in renewables, which is part of the Spanish portfolio for generation, well, mainly Spain and maybe select European countries.

 Here you can see the development of our capacity. All I wanted to say here that in terms of EBITDA we are expecting a downsizing in the year 2018 compared to 2016 and this is due to there's going to be more competitive pressure and also we're seeing there's more competition taking into account the current commodities scenario. And as you've seen, we are not envisaging a recovery or an important recovery of the price of the commodities. And part of our generation is thermal generation and that will be affected by this scenario.

 By the year 2016 what we have seen in the first quarter is that there hasn't been -- well, we haven't seen this decline, mainly due to the fact that the hedging between the generation and the pool price has allowed us to see that the wholesale trading will recover some of the margin which we could have been losing in the generation part on the traditional level.

 For the year 2018 we're not expecting as much volatility as there is today. We're envisaging that in 2017 the price is recovered and it will be maintained at a stable level between 2017 and 2018 and we don't think there will be an improvement in our commercial margins which we could currently be expecting. So by the year 2020 there could be some sort of improvement but also the EBITDA will mainly take place later on because we will have 750 additional wind power -- megawatts of wind power, which as I said we didn't have in the year 2015.

 So to be able to fulfill our objectives for 2018 we've got different productivity indicators to allow us to achieve the different ratio objectives due to different initiatives based on renewable generation and convention regeneration.

 Now the gas business. As our CEO has explained, we have a pretty diversified business and the position at the moment is 25, 27 Bcms of sales. So what is our mix objective for sales over the next few years because we -- well, we can see total sales. 10% will be retail, 40%, 45% will be industrial in Spain but also what we're selling in end markets in Europe and also combined cycles will be between 5% and 10% and the LNG business could represent between 35% and 40%, taking into account the new volumes that will be coming from the US.

 Also, as the CEO has explained, we are continue to envisage as well as the main analysis a moderate demand of gas but it will still continue to grow. But there will also be an accelerated growth of LNG and for this the Group is well positioned.

 So we are reviewing key contracts. The ones that have already been negotiated, they are included in the strategic plan figures. And here you can see again there's going to be important reviews of the contracts that we've got. We're talking about the normal ones. They're not extraordinary reviews; these are just the reviews that take place every three or four years as part of what we call ordinary reviews in the year 2018.

 Here they should adapt to the prices, taking into account the current market conditions, and we think there could be an upside to this which hasn't been included in the figures for 2018 or 2020 as part of our plan. But we do expect that with the current environment, if it's maintained in these price reviews the contract should be adapted to the new market conditions.

 So anyway we have new volumes that will come into operation between now and 2020, especially the 5 Bcms of Cheniere. But also what is important is the increase we're going to experience for our fleet of tankers which means it will be doubling our transport possibilities. So it means we will allow to be more competitive and more flexible within what our business model currently is and we'll be sending and selling gas in all around the world.

 So what are the different initiatives that we have for this period? Well, to optimize the global gas portfolio, also to increase the fleet flexibility with these new tankers, be able to develop end user markets for LNG, and we think that we will have regasifying tankers in certain markets where we're seeing that this is possible. And we think there will be a competitive edge here. We want to continue to expand in Europe. We want to renegotiate or adapt our contracts to the current market conditions and also what we're expecting to see is that towards the end of the year 2019, 2020 that we will be very clear to see what solution there will be for Union Fenosa gas with the Egypt situation, as we said.

 As far as volumes are concerned, we think we're going to for 27 bcms to 32 in the year 2018 and 2020. We're envisaging too that there will be a contraction of our supply business also, for trading in the year 2018 compared to the year 2015, but an improvement for the infrastructure business, taking into account that we will be commissioning new infrastructures related to the midstream business.

 With regard to services business, it's true to say that as far as total financial magnitude, this business isn't that relevant, but it is significant in terms of the fact that between now and 2020 the magnitudes as far as results we believe will double. As we've already mentioned, we've got over 25m in contract. And we've got great experience as a gas company to be able to move back other fuels.

 So we really think that part of the Group's DNA has competitive advantages of the new environment that we will have, especially related to relationships with customers. And we want to export this model that has existed in Europe. And we want to export this, as I've said, to Latin America, where the energy reform in Mexico and the liberalization of the market that we're seeing in Colombia, and the possible opening we think there may be in the Brazilian market. So we want to export this business model to these Latin American markets where we are now starting.

 So now we have the metrics and the business. Has the metrics of how we will be able to increase, on one hand, the penetration of the different services as well as being more efficient in getting new customers and also the cost to serve and to optimize the service cost for our customers? Well, there are new businesses within the mobility world, whether it be with electric cars or big data or distributed generation. And we're envisaging to launch new products and services over the next few years, which will not have an important financial impact. But we do believe that they will be setting the foundations for future years after 2020. And we want to be in a good position then for the energy transformation that we think will take place.

 So therefore, the initiatives in general that we have in this area of business is to grow, as we have said in the gas and electricity portfolio. We also want to improve the gas margin and we're working on the regulatory management of this so that we recognize all the costs that these services have. We also want to continue to provide solutions for energy in line with our different customers. And we want to do a correct segmentation of this.

 We want to transfer this business model to start in Latin America as the different markets are being liberalized. We want to continue with the digitization project, which should allow improvements in the process cost, but also it should also allow us to launch new products and services and better relationship with customers. And it means that we will be ready for this new technological transformation that will take place in the future.

 We have a new increase in the number of contracts for the year 2020, as I've already said. We want to double the EBITDA between 2015 and 2020. Even we want to go from EUR200m to EUR400m. And the CapEx, if it goes up, as I say it's not really a CapEx business, but this is related to the systems. But we're talking about this is really a service business that is related to that.

 Well, just to summarize a little bit the consolidated view of what the different businesses we have seen have done. On the one hand, we can see that the average CapEx in our last strategic plan, the yearly one, was for EUR1,400m. And we're going to go to an average CapEx of EUR2.7b. But that has an explanation behind it. Why? Because, on the one hand, there is the scope of the Company because we've included Chile, which was in the last phase of the previous plan but not in the entire plan. And so that represents an increase of investments per year of around EUR300m per year.

 Also, on the other hand, as far as generation in Spain, to position us, shall we say, in the renewable business, there is an increase in CapEx. But it's CapEx for growth in renewables. And the CapEx for maintenance is still being contained and in line with what we previously had. And we hae generation on an international level. We have increase in CapEx is due to the development that we want to have in these international markets. The CapEx for maintenance are still maintained at similar levels to the ones we currently have.

 And as far as networks are concerned, apart from Chile, we have the acceleration in Mexico, plus the acceleration we will have in Spain, which includes here the acquisition of the propane gas customers, which hasn't taken place yet. But it will take place within this plan, plus the growth that has been envisaged.

 When we talk about the gas business, well, there's EUR0.4b per year. This includes these new tankers, which we didn't have in the last strategic plan. And in this one we have taken into account four new tankers and also a regasification ship. So therefore, as we said, basically what we want to do as far as services and others is continue with our digitalization program.

 As far as EBITDA between now and 2018, what happens? We've got two growth engines. One is based on the networks which you've already seen. And in Spain there will be additional growth due to the piped gas. And on the other hand, when we talk about Mexico and Chile, due to the growth that we have and this, they have to be able to absorb the devaluations. Here we have to take into account that taking -- compared to the year 2015 there's over EUR100m impact in the translation of the Latin American currency which are affecting our EBITDA. And so therefore, the growth that we're experiencing in the business in the local currencies in Latin America are between 12% and 9% on average between gas and electricity.

 So in generation, as we've already said, we're suffering through the commodity situation, which means that our margins are very low. And there we expect the services will help us to compensate or offset some of these reductions that we have in other businesses.

 Well, with the ambition -- well, sorry, we have a relevant important is the inclusion of what our productivity plan is, with EUR220m a year, and the capture costs, which are quite low. And this is also part of how we will be able to achieve our objectives for EBITDA in the year 2018.

 In the year 2020, we will now be at a mature level of our investments in electricity generation, in renewables here in Spain as well as on an international level. There will be a certain improvement of the scenario with regard to the gas business and also the electricity business. So therefore this will allow us to face this, shall we say, this issue we've had recently. And so it means that we will be able to face the future with a more positive manner.

 So now I would like to give the floor to Carlos Alvarez, who is now going to give you his view.

------------------------------
 Carlos Alvarez,  Gas Natural SDG SA - CFO   [4]
------------------------------
 Thank you, Antonio. Thank you. After looking at the business line perspectives and the consolidated summary with Antonio, we're going to detail the financial outlook for 2016/2020.

 First, we'll talk about what we've done. We can say without any doubt that the history, recent history of the Company has been a history of growth. This growth has been developed hand in hand with the high level of financial discipline, and we're still committed to that -- firmly committed to that financial discipline over the next few years. This strict financial discipline has allowed us to comply with -- by the end of 2015 with the -- comply with the leveraging -- leverage level of the 2013/2015 strategic plan, 3 times the EBITDA/net debt. And then we bought the Chilean group CGE, which was EUR4.6b. And the Company has cash flow generation which historically has been structurally positive, which has allowed us to reduce debt and finance the dividend policy and invest in growth of businesses.

 And also Gas Natural Fenosa has a sound financial track record which has developed in scenarios that have been difficult. And we've always shown to be strong and sound in our business model. Gas Natural Fenosa could refinance the EUR19b loan for buying UNF in a context of an international crisis. And we also deleveraged and increased the average life of our debt in a very brief period of time.

 The Company's also able to have continuous access to capital markets in different geographies at a very competitive cost. And we cannot forget the continued support and reliable support of our banks irrespective of the economic situation. And that included different crises, the euro crisis, the sovereign debt crisis or energy price crisis.

 And finally, we have to point out that the Company issued hybrid bonds up to a total of EUR1.5b, with a competitive coupon at an average of 3.875%.

 The plan for this period 2016/2020 is based on four pillars. First of all, cash generation support, which will support the future dividend in this immediate future. And then secondly, we are going to continue to have very strict financial discipline. And we're going to implement an efficiency plan, that's the third pillar. And then finally, we're going to continue to proactively manage our portfolio in order to make it better all the time.

 We start with the cash flow generation. We calculate that over the next few -- five years it'll be EUR20b. Of those EUR20b, 70% will come from regulated businesses or contracted or under-contract businesses. This cash flow will allow us to sustain the dividend policy and invest and contribute very significantly to reducing the leveraging ratios.

 Now if we bear in mind the first chapter, which is investments, investments in cash would be -- total investments would be EUR14b, EUR13b in cash. So of those EUR13.3b, 80% is going to go to investment in regulated or under-contract businesses. The other EUR7b will go to the new dividend policy. And that EUR7b includes the dividends paid out by the subsidiary companies. So EUR13b cash and EUR7b to dividend and subsidiary dividend payouts.

 Now, that strict financial discipline, as the second pillar, will be based on our solid, sound capital structure which supports our cash flow and leverage figures that we've already described. Here you see the net-debt-to-EBITDA ratio and also the rating agency ratings. So a look at what we have on the left, net debt/EBITDA, and you have the accounting figures and at the bottom the adjusted figures, adjusted by the rating agencies, which consider 50% of the hybrid debt and the ships.

 As you see, we go from 3 times net debt to EBITDA in 2015 to 2.9 in 2018 and about 2.5 by 2020.

 But in addition to that, the Company has a comfortable debt maturity profile. Of the EUR15.8b of our net debt by March 2016, 84% of that matures beyond 2018 and only 16% matures between 2016 and 2017. And also we must point out that in April 2016 we have had two issuances, a 10-year issuance of EUR600m at a 1.25 coupon and then a private issuance, five-year issuance, EUR300m and coupon of 0.5. The 10-year issuance has been the most -- the cheapest issuance of the Company to date. So we continue to envisage the same structure for debt, fixed and variable conditions and also the currencies of our debt.

 But the Company also has a strong liquidity position that allows us to cover all our financial needs for more than 24 months, with more than EUR7.5b in loans that we still haven't made use of. And our total liquidity, EUR1.3b (sic - see slide 109 "10,291m"), includes EUR2b in cash. And we must point out that we have additional capacity to get money on the international markets in the euro programs and Latin America, and up to EUR5.6b on Latin American markets.

 In this slide we see the financial policy targets. First of all in terms of liquidity, we're going to preserve the liquidity at comfortable levels, especially to face up to possible stress scenarios. And our aim is to have a rating of -- to be rated strong by S&P current criteria and coverage of 24 months of our financial needs.

 In terms of the debt average life and maturity, this will be diversified based on the nature of the assets and businesses, with an average life of -- debt life of more than five years and maximum debt maturing per year of between EUR2.5b and EUR3b.

 In terms of the sources of funding, there will be diversification between products and markets, but preferably international markets and institutional financing, with long terms, 10 years or more.

 In terms of interest rates, we will continue to have a stable and predictable cost in the long term in order to reduce the gross debt by 4.3% by 2020 and maintaining a minimum of 70% of fixed rate debt.

 And as regards exchange rates, we will not have exchange rate risk because activities will be financed in local currency in each country and we won't have structural subordination. The subsidiaries will finance themselves up to 25% of the total debt.

 In terms of the third pillar, the efficiency plan has been described by the CEO and by Mr. Basolas. I would say that our credibility is supported by the fact that we have complied strictly in previous plans. This new plan contemplates optimization of operational costs up to EUR220m. And the idea is to adapt the cost structure of the Company to the new macroeconomic and energy environment and capture efficiencies from after the acquisition and reorganization of CGE.

 As you see on the table, we hope the plan to become fully material by 2018. And 60% of that will be achieved by 2017. And the implementation costs we calculate will be a maximum EUR100m. About 80%, 90% of that will be paid out between 2017 and 2018 -- 2016 and 2017. We're also working on new savings for 2019 and 2020. And we'll try to give you information about that as -- in advance.

 In terms of portfolio management, we've defined our strategy to respond to the challenges in the energy sector in the medium and the long term. In the past the Company carried out -- successfully carried out different optimization processes with investments and acquisitions that were perfectly in line with our strategy and increased our exposure to network businesses, investment in renewables and also added-value assets, CPG, etc. We will continue to make an effort to analyze our strategy and be proactive in our portfolio management in order to maximize profitability for our shareholders.

 Finally, on this slide you see a summary of the financial targets and ambitions for about 2018 and 2020. I'm not going to go into details, but just to remind you that during 2016 and 2017 we're talking about, in terms of results, we'll have a reduction of EUR1.3b to EUR1.4b. We'll reach EUR15.6b net income -- EUR1.8b -- sorry, net income by 2020.

 What's the sensitivity? Well, we've got to put this into context. So this result is a big part of it that is subject to commodity problems and exchange rate problems. About 70% of our activities are subject to those risks. So of our EBITDA by 2018, EUR3.8b would be subject to commodity and exchange rate variability and EUR4b -- and that would leave EUR4b in 2020.

 Here you see the range of maximum variability, a probability, worst case scenario and best case scenario. And if you look at commodity risks and exchange rate risks, for 2018 the EBITDA would be EUR500m below -- from EUR500m below to EUR600m above and in terms of our objective targets for the next few years.

 The EBITDA -- none of the commodities or risks represents more than 8 -- 11% of that variability. The contribution of risks and of commodity and exchange rate is very similar, although the commodity risk is slightly higher than the exchange rate risk. In terms of exchange rate variability, it's very diversified between the dollar and the behavior of the Latin American currencies.

 And to conclude, I can say that we have -- once again we must say that we have a sound financial business profile. This plan has to reinforce the predictability of our business model based on the parameters that I've described.

 And that's all from me. I'll pass the floor to Mr. Villaseca once again.

------------------------------
 Rafael Villaseca,  Gas Natural SDG SA - CEO   [5]
------------------------------
 Good. Thank you very much. To conclude, some closing remarks. Our strategy is going to be -- have two main objectives. One is to protect the current businesses and set the foundations -- lay the foundations for growth. This must produce a strong cash flow generation increase that allows us to pay out -- increase the dividend and accelerate the investment plan while keeping our net debt level.

 First objective, to protect our current business. We want to do it by active regulatory management to secure the diversified supply and cost efficiency and the energy sustainability. We also want to do an indexation -- introduce indexation mechanisms for emerging countries, with dollarized tariffs or inflation/devaluation adjustments, as recognized in regulatory models. We want to review the key gas procurement contracts to adapt them to evolving conditions of the reference markets.

 We want to introduce and implement the new efficiency plan to save up to EUR220m by 2018. And finally, actively manage our portfolio to improve risk and return levels.

 At that must carry us to a situation where we can mitigate the impact of the macro and energy scenario in the short term and continue to invest. And all that should allow us to arrive -- to achieve the EBITDA and net income objectives that we have, which are on the graph that you see on the slide right now.

 Now in terms of growth, there are different areas that have been described. I'd like to summarize. We want to make our distribution in gas and electricity businesses grow. And we're going to approximately add 3.6m new supply points by 2020. We want to generate -- increase our growth in renewables and internationally, with 3,500 new megawatts by 2020. We want to adjust and adapt the gas business to the new market conditions by developing, on the one hand, negotiate contracts better and integrate gas-to-power projects in the LNG chain, and grow our energy solutions and services by adding 2.4m new contracts by 2020. This should allow us to have an annual growth of 6% between 2018 and 2020.

 This leads us to the final summary, which is on this chart for growth. We want to have by 2020 28m supply points in networks, double our installed capacity internationally, up to 5.4 gigawatts, and almost double our capacity in renewables up to almost 3 gigawatts. Increase our gas sales by 5 bcms and increase our contracts in the different areas of business.

 And all this by maintaining a steady and strong cash flow generation. This continues to be significant. And in the period between 2016 and 2020 we will reach EUR20b accumulated cash flow. EUR7b will go to dividend and EUR13b will go to investment, with a constant debt level of about EUR15.6b.

 That's the summary of our strategic vision over the next few years. Thank you very much. Now we'll go to the Q&A.

==============================
Questions and Answers
------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [1]
------------------------------
 Good. We will start with the Q&A session. And we'll have, first of all, the people in the room. I want to remind you that we ask you to please identify yourselves, say who you are and who you represent when asking questions.

 First question, please. Daniel?

------------------------------
 Daniel Rodriguez,  Fidentiis - Analyst   [2]
------------------------------
 Hello. Good morning. My name is Daniel Rodriguez from Fidentiis. I've seen that the dividend, you're going to advance the payout to September. So what will the final dividend be, the date? When will it be paid out finally? Is it going to be the same date or are you going to change it?

 And as regards the dividend, you've talked about the scrip dividend. If you look at the figures of financing and debt, it doesn't seem to be too difficult. You don't have a cash flow problem. Why the scrip dividend? What justifies that? You've left that issue or topic open, so I'd like to ask about it.

 And in infrastructure, gas infrastructures, this is a minor point but you go from 300m to 400m. Where would that 30% increase come from? Is it through the methane ships or is there something else that we don't know about?

 And also -- I think that's all. Thank you.

------------------------------
 Rafael Villaseca,  Gas Natural SDG SA - CEO   [3]
------------------------------
 As regards the dividend policy, the final dividend, I presume it will be -- well, we haven't made a decision. It's naturally a decision of the [GSM], but the dividend will be the usual dividend after it's approved by the GSM. The next -- June 1 -- June 30 will be the day approximately.

 As regards the scrip dividend, yes, it's a question of need. But we haven't really made a decision yet about this. We have to highlight that. But it is true that we've had people that have demanded this because of the tax advantages. So the door is open, but we haven't made any decision.

 As regards to the gas -- question of gas infrastructures, Antonio will answer you.

------------------------------
 Antonio Basolas,  Gas Natural SDG SA - General Director, Strategy & Development   [4]
------------------------------
 The increase of that 100m in gas infrastructure is -- comes from, on the one hand, the LNG tariff increases every year depending on the contract. Then we are developing the underground storage facilities in the South of Spain. And in 2018 there will be -- they will go into operation. And that's included as infrastructure.

 We're also developing a port facility in Puerto Rico for supply of gas in Puerto Rico. And we've also -- we've got the regasification ship for 2018. That accounts for the increase of 100m in infrastructure. The new fleet, the impact is on the supply side, not on the infrastructure side.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [5]
------------------------------
 Next question? Microphone?

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 Pablo Cuadrado,  HSBC - Analyst   [6]
------------------------------
 Hello. Good morning. My name is Pablo from HSBC. I have a question about the scrip dividend. This is the same question that Daniel asked. If there's no decision, can you tell us whether you'd consider, if you finally apply the scrip dividend, would you repurchase shares to mitigate dilution of the value?

 And then as regards CapEx, the new outlook you've given us, could you detail what part of that CapEx is committed, fully committed? And what part of the CapEx is growth and what part is maintenance. And also as regards investments, I presume that figure of EUR2.7b, EUR2.8b per year of CapEx is just organic figures. It's not -- it doesn't include purchases, acquisitions and purchases.

 The second question is about the business -- the gas supply business. We've seen in the first quarter weak figures. You've explained the perspectives. In principle the perspectives, well, we might presume that you think that there's going to be a greater pressure on the margin if the EBITDA is lower. I'd like to know of that EUR1.7 per megawatt of the first quarter in gas supply margin, what is the average level that you will have for 2018/2020 in terms of margin? And how does that margin compare with your historical average? Would it still be above the historical average or is it in line with the historical margin average?

 And the final question about generation business -- the generation business in Spain. It surprises me to see that in spite of the fact that you're more or less in line with your competitors and there's an increase of pool price, up to EUR50 per megawatt. But most of your competitors in Spain have told us that the supply business, that this drop in the pool price is doing them good. It's having a good effect. But over the next few years there's going to be very great competitive pressure on the supply side and the EBITDA will go down by about EUR200m, if I'm not mistaken. Could you explain this?

------------------------------
 Rafael Villaseca,  Gas Natural SDG SA - CEO   [7]
------------------------------
 Okay. I'll start with the first and last question related to the scrip [division]. This is an open option. We haven't made any decisions on these issues yet.

 With regard to the last question, one of my colleagues may add to this, it's true to say that in the situation we think there is an increase in the pool price, which means there will be an increase in the margin, but we'll have to see what happens to the supplies. This is an unknown factor, but should it increase, this should cause some sort of pressure or problems in the pool price. And this will be affecting the supply. There's no doubt whatsoever that the fall, this important fall that's taking place in these pool pricings will mean that the margins for the trading will go down and this will affect, without a doubt, our -- the business in general.

 So as we say, this will have an effect on the electricity building. So these are two unknown factors relating to this margin. One is the relation between the pool price and the improvement due to supply. So we'll have to wait and see.

 And the second one is what will happen to this commercial margin taking into account the generation margins this year. I think there was a 30% drop in the pool price. We're not -- as I say, the contracts we have have the old figures. But what we have done, we have put this into the future, into our forecasts. But we are taking all these issues into account.

------------------------------
 Carlos Alvarez,  Gas Natural SDG SA - CFO   [8]
------------------------------
 With regard to CapEx, i.e. we haven't contemplated any -- between these -- of EUR14b of net CapEx. There could be a timely acquisition of a project, of a greenfield plant which will be set up. But we haven't -- this is all CapEx, as you said, that will be organic.

 With regard to investments in the period 2016/2018, what is already committed is 80%. 20% is not yet committed. And if we take the period between 2016/2020, it will be 70% committed and 30% non-committed. So therefore the later part of the plan is less committed than it is at the moment. It will depend on how we are able to carry out the different greenfield development projects that we are currently studying.

 With regard to maintenance CapEx and growth CapEx, there are percentages that have been calculated. And in the period 2016/2018, 70% is CapEx for growth, 30% is for CapEx for maintenance. And 2016/2020, it's 75% growth CapEx and 25% maintenance CapEx.

 When you're talking about the EBITDA per megawatt, obviously the figures are in the presentation, but I can repeat them so that you can take note. I would like to make a -- what we've done is we have got the retail business, which is in the appendix at the back. So when we're talking about supply, we don't include this. But in the quarter it's not included. It's not an important figure. But the fact -- the figures I'm going to give you is not now including the wholesale.

 For the first quarter 2016, EUR1.7 that you mentioned, without the wholesale market the EBITDA is 1.47. Okay? So that is the starting point. So the EBITDA/megawatt for the first quarter 2016 is EUR1.47, which compares with [EUR2.70] from the previous year. So megawatt without wholesale last year was [EUR2.17] and we've dropped to EUR1.47 this year without the wholesale. In 2018 we go to EUR1.50. And to 2020 it's EUR1.37.

 This is very important because in this development, this includes what we've already said, which will be making the most of our new fleet of tankers. So therefore the margin per molecule goes down but the rest goes up because we've got a larger fleet. And this allows us to maintain this growth of the unit margin until the year 2020.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [9]
------------------------------
 The next question, please.

------------------------------
 Isidoro del Alamo,  BBVA - Analyst   [10]
------------------------------
 Hi. Good morning. Thank you very much. I'm Isidoro from BBVA. I've got just another question, and I'm sorry it's on the scrip dividend again. But I want to put things into perspective. If you've got a net profit of EUR1.3b or EUR1.4b in the years 2016 and 2017, would you actually apply a scrip dividend or would you be flexible about that because if the market changed?

 The second question, and you were talking about the liberalized gas markets, could you give us more detail about the Cheniere amounts, because previously you say you've already sold 75%. Could you explain a bit the conditions if that is also linked to Henry Hub, because you're talking about a short-term contract which gives you a negative contribution. What do you think about this?

 Also could you give us some sort of idea about these contracts that are going to be renegotiated. What -- if it's a very sensitive issue related to your mid-term EBITDA figures, could you just give us information on that?

 And just about the sensitivity on slide 114 of a depressed scenario. Could you give us another hypothesis that you've taken into a case -- into account?

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 Rafael Villaseca,  Gas Natural SDG SA - CEO   [11]
------------------------------
 I will answer some and I'm sure my colleagues will [add]. The scrip dividend is not a finance issue, first of all. And I would like to repeat again, no decisions have been made. And secondly, if it's taken today, we are not thinking at all about financial flexibility. We're talking about if it's suitable for our shareholder and the tax position at each point in time. But I don't think it's worth talking about it now.

 When we're talking about renegotiating contracts, that was a comment we've said. We have already considered the improvement in renegotiating our contracts. So they've been included if they've been carried out. The ones that are pending haven't been considered. Obviously the pending renegotiations, we hope that there will be improvements for us, not -- so it won't be worse obviously. But the renegotiated contracts, as said, the word renegotiation is probably not the right word. Obviously they're ordinary renegotiations, i.e. every three years you have to renew the contracts. You have to re-hope. And we will be working on the fact that these new contracts have improved conditions.

 As we said when we were talking about the tankers, we don't expect negative figures that make [us different]. Also our contract with the US is the first one which has better margins. And the second one, our commercial activities to actually get our contracts related to Henry Hub and end customers, and that will be in the long-term future. So obviously we will have less profit than we had expected. But we will not be expecting losses either.

 Yes. When this 5 times -- when we're talking about the Cheniere, within the global portfolio for Gas Natural Fenosa, we today have 3 bcms that have been sold, which are indexed to Henry Hub within our portfolio. So therefore what we don't do is sell a specific contract. So this is within the management of the portfolio. There's 3 bcms which are bought at Henry Hub. And then we have another 3 bcms in the portfolio with Henry Hub. So there was a potential risk for 2 bcms.

 But now we're continuing to work, especially because this year there will be certain contracts. But the contract comes into effect in 2017. We will continue to work to have negotiations with different markets in which we will be able to sell index to Henry Hub. And even there are people, and this week there's been a report published that said that if Henry Hub is at $2 and the oil price is at $50 or $60 a barrel, somebody who wants to buy gas on the long term, indexed to Brent or a Henry Hub contract at $2, then it means that today the figures would make sense. But the other thing is what the spot markets sell like.

 But I would like to repeat, this will depend a lot on whether the Brent goes up and the gas markets are indexed to the Brent or if the Henry Hub is stabilized at 2 and the contract will be competitive, even when we're taking into account the Brent prices. But we're working to sell it with a mixed combination of formulas, mainly based in the Henry Hub.

 As regards sensitivity hypotheses, worst-case scenario, we've been talking about a relation equivalency between dollar, euro and Brent, $30 and $1.17/EUR1 ratio. More or less that would be the ratio for 2018 and 2020. If you want to know the -- and the positive thing is, well, $100 for a barrel of -- and $1. $100 for a barrel and $1.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [12]
------------------------------
 Next question.

------------------------------
 Manuel Palomo,  Exane - Analyst   [13]
------------------------------
 Good morning. Manuel Palomo from Exane. I have a couple of questions. As regards generation, I've got more than one, electricity generation. Judging from the presentation where you foresee the gas continues to evolve positively, I'm talking about the combined cycle plants and renewables, I'd like to know whether, one -- number one, you're considering a load factor increases in the combined cycle plants in Spain up until 2018 or after 2018, bearing in mind that some of the coal plants might close down. If that is the case, if you're going to have more generation capacity, have you foreseen or do you plan to increase the portfolio of customers, electricity supply customers? Because it seems that you might be a bit short in that area right now.

 And thirdly, I think Pablo has mentioned this, that drop in the generation EBITDA, I can't see very clearly. Do you think there are better load factors in combined-cycle plants that permit better margins in renewables? Why does that generation EBITDA drop? Would it have to do with a higher level of costs, fuel costs, gas specifically?

 And the second question is about the LNG business. Could you give us a little bit more color on that? Carlos, you've just told us the comparison between quarters in terms of the global margin, the overall margin. But could you tell us whether you differentiate between international margins and Spanish margins? Thank you.

------------------------------
 Rafael Villaseca,  Gas Natural SDG SA - CEO   [14]
------------------------------
 Well, I'll start with some of these questions. Load factors for combined cycle plants, well, I haven't got the figure here off the top of my head, but it's going to be an extreme volatility. It's true that, on the one hand, the trend is for these levels to go up. But it will depend on the weather. In Europe we had a huge level of volatility. The back-up energy has its volatility and then the renewables are very volatile within the system. It's a classic problem. It's very difficult to know what will happen and how much back-up will be needed. But we either solve the problem or there won't be back-up in the short term in some European countries.

 There's a debate in Europe about this. And the debate will take place in Spain this year. And [MV] is looking at it. The European Union is looking at it. We'll see what happens. Without a doubt, the plan, they're going to close coal plants. The plan of coal plant closure will obviously affect the situation. In this case it would be positive. But if you bear that in mind then you bear in mind the hydraulic levels and wind levels, well that will all have to be borne in mind.

 As regards the improvement you've -- whether the situation will improve as a result of renewables, we don't know. But the renewable maturity dates are going to be longer. It will take longer. The decisions we make now will probably have no effect in the first few years of the plan.

 Secondly, we don't foresee an increase in gas prices. Quite the opposite actually. We don't think that that will be the problem. But I have to insist, what's happening is that the pool price is coming down as a result of several issues. One is the renewable effect we don't talk about. And then the generation markets, the situation of generation markets is not fair. 40% of the offer on pool market is associated with renewable energies, which are subsidized at source. So they have 7.5 guaranteed profitability rate. So it doesn't really -- it means that they don't mind about the pool price. They're going to make 7.5%. If they make more, they'll lose subsidies; if they don't make that amount, they'll get more subsidies. But when renewables are increased, the pool goes down. This always happen. It didn't happen last year because there wasn't a lot of wind production, wind energy production, so there was less of an offer.

 But we believe this is an important problem. The European Union will have to look into this, and the countries, because competition between the two types of energy are completely outside of any market logic. That will have to be sorted out. But this is going to continue to be a problem.

 What's the consequence of this situation? Well, naturally, the marketing prices feel the impact after a period of time. The phenomenon of renewable energies, depending on the wind energy production and solar production and hydraulic production, will have a clear effect. And the new prices, market prices, when contracts are renewed, won't be -- the old prices won't -- will have to change. And after 2018, with the new investments and the situation of the commodity markets, there'll be changes. But in 2016 and 2017 we don't think there'll be significant changes in either area.

 If you want to round this off?

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Unidentified Company Representative   [15]
------------------------------
 When we talked about the margin in the quarter, well, I can't give you the breakdown, but I've got certain figures that I can give you. First of all, the margin fall is general. There's no market where this hasn't happened. It's not -- as we said, I would say that maybe, logically, when we're renewing some of the global LNG, which is the international sales which [are 25%], I think in some of these renewals we've had less margins, or lower margins. And maybe the most important one's in the whole set of all the contracts renewing at the moment.

 I would think what's more important than that would be the change in the mix, when you compare one quarter to another one. What's important is take by the different mixes per quarter. For example, industrial demand in Spain compared to last -- the last quarter and the previous quarter, it's fallen, so therefore those margins. So, obviously if these go down, it means, when you've got a mix, well, then the margin in that particular market goes down.

 But on the other hand, is the only market that's increased sales has been the European sales. And there the margin's probably more adjusted. So therefore the change in the sales mix has had an influence probably more than the actual drop in the margins. But I'm saying this is general in all markets.

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 Luis Calvo,  Gas Natural SDG SA - Head of IR   [16]
------------------------------
 Okay, thank you. Any more questions from the room? Jorge and then Fernando.

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 Jorge Alonso,  Societe Generale - Analyst   [17]
------------------------------
 Good morning. I'm Jorge Alonso from Societe Generale. I've got three questions. One, if you could say which part of the cost cutting will be assigned to the structuring of the CGE or the efficiency levels within the CGE.

 And also, when you're renegotiating the gas contracts, do you have a particular interest or a lot of interest to get more spot, unless that is related to the oil, and why?

 And the third question is, in generation, your suppositions on the revenues or the returns on the auxiliary businesses in this fall or in this evolution, do you expect there to be some sort of contraction or expansion, or do you think you're going to gain or get the same level of income and margins in this part of the generation market compared to what you got last year?

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 Rafael Villaseca,  Gas Natural SDG SA - CEO   [18]
------------------------------
 Well, I'm going to try and answer the second one and then I'll give the floor to my colleagues. Spot markets, gas contracts. Well, it's true to say that today the markets that exist, well, the primary ones, we have the Henry Hub, maybe there's another one, but the other markets that -- secondary markets, which is one that starts in Spain, the others operate in Europe. So, producer countries who have gas in general terms, with the odd exception, don't want to sell their gas in the spot market. This has been a constant fact up to now, we don't know what's going to happen in the future, but they don't, they don't sell it on long-term bilateral contracts. And the trend to relate them to the spot market is not that strong at the market. In some unique case it's happened, but in general that's not how things go.

 So, for any company or utility like ours, it's very difficult or almost impossible to get midterm contracts related to the spot market because there's not a seller. But also to trust the supply of all our customers to spot markets when there isn't a long-term contract, this should be very, very risky, and you'll be very subject to the high levels of volatility, because mainly these are transactions in the secondary market.

 It doesn't mean we're not in the spot markets, but we limit to the margin (inaudible) because the others have high volatility.

 And on the short term we haven't seen an important change in this situation. I would like to say it would be very difficult for our bilateral contract supplies to sell to spot markets in the conditions that are same or less, because the transaction makes no sense to them. So we think that the situation's relatively stable. In the future, the rules of the play change, well, we just have to look at that. But it's not an issue that today we don't consider to be that relevant.

 But obviously we do say that specific times the spot markets could have higher or lower prices than the contract prices we have. But it is also true to say that the depth of these markets and the volatility today means that we have to be very careful when we're using the spot markets.

 And when we're talking about cost cutting, in the CGE in Chile, I think it's EUR34m a year, and up into the year 2018.

 When you're talking about complementary services, we think that the competition plus the commodity situation affects the margins of the electricity pool and all the other different markets that exist. So therefore the complementary services too.

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 Luis Calvo,  Gas Natural SDG SA - Head of IR   [19]
------------------------------
 Next question please.

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 Fernando Lafuente,  N+1 - Analyst   [20]
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 Fernando Lafuente, N+1. I have got three clarifications. The first one is on liquid natural gas, Carlos. Could you please say the increase of the contribution from the fleet, do you know how much this is going to be during the period?

 And continuing on the efficiency question, I would like to know if you have some sort of information on the breakdown of these efficiencies, taking into account the other businesses?

 And the third one is related to the gas portfolio. The CEO said that there is certain flexibility to use the spot markets at certain moments. I would like to know how flexible you are in percentage terms or some information on that. Thank you.

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 Rafael Villaseca,  Gas Natural SDG SA - CEO   [21]
------------------------------
 Well, I'll start with the last one. I can't give you a reference, I'm afraid. I don't know if anybody else has got a figure in mind. But anyway, the contracts currently have -- they have -- they're not -- they have flexibility in the volumes, but this will depend how our demand changes. So it says our offer will be closed or not. But as I said, I'm afraid I do not have a figure in my mind.

 But I'm realizing that's an important issue. It would be really bad if we had to fit in to results taking to account the spot markets, because we will be pending risks and volatilities that as a company initially don't want to assume, and we do some very minimal terms. Obviously we make the most of opportunity. But for the buying and the selling, we do not want to be traders. We want to have medium and long-term positions for our purchasing. And the markets, the buy and selling markets, they tend to remain stable.

 But I'm not talking -- as I say, we do timely one-off transactions, but we don't focus on that mainly.

 The fleet, who's going to talk about the fleet?

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Unidentified Company Representative   [22]
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 When we're talking about the fleet, what I included in the supply is to increment around EUR100m a year in the year 2018. With regard -- if I understand what we're talking about, these savings are cost cutting per business, approximately, I'm trying to do a few -- add up a few figures here. In generation, in Spain, international, and the wholesale business, we're talking about EUR40m a year. And with regard to the business or the regulated or the networks, including the part related to Chile, we're talking about EUR115m, EUR120m a year. And when we're talking about the corporation, we've got EUR65m and EUR70m per year.

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 Luis Calvo,  Gas Natural SDG SA - Head of IR   [23]
------------------------------
 Okay. I think there's a couple of more questions. Yes?

------------------------------
 Alejandro Gil,  - Analyst   [24]
------------------------------
 Good morning. [Alejandro Gil]. I have a couple of questions. One is related to the evolution of the midterm debt. It doesn't seem that the net debt from 2015 to 2020 is that stable, but during the 2016 or 2017 you will probably have an increase of debt or because there'd be more investments, or maybe you'll have less customer in that period. So for the year 2016 and 2017, how do you think your debt levels are going to change?

 And also the question is on the -- you've got ambitions to grow in international generation, and we're talking about M&As, so there's going to be a lot of opportunities, especially in renewable business. So, are you currently in certain processes? What [are the objectives] related to these?

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Unidentified Company Representative   [25]
------------------------------
 Well, in regard to the 2016 and 2017, we don't expect to get our debt levels to go up. There might be a multiplying factor that affects the EBITDA but as I say.

 With regard to M&As, that's not the basis of what we want to do. We've already explained our objectives both in generation and networks (inaudible). Naturally all opportunities that come up will be studied, but initially that isn't really an important plan for our strategic plan, taking into account our current portfolio for generation that could be developed. Obviously if the opportunities came up, we would obviously study them in great detail.

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 Luis Calvo,  Gas Natural SDG SA - Head of IR   [26]
------------------------------
 Thank you. Next question, Miguel?

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 Miguel Medina,  JB Capital - Analyst   [27]
------------------------------
 Hi. I'm Miguel Medina from JB Capital. The first one is a continuation of Alejandro's question. In international generation, if I remember correctly, there was a net income from 2018 of 2.7 gigawatts. And then you mentioned a pool of opportunities for 4 gigas. So that's 60% success in this pool to get this 2.7, that's my first question.

 And then my second question is related to the gas supply contract. Just a clarification. Obviously you already had certain renewals. Are they included? And so the three that appear in the -- that will be reviewed in 2016, have they been reviewed or are they undergoing current review process?

 And the third question is for the CFO. Could you quantify the possible rotation of assets? And will this cover the difference between the gross and net CapEx that you mentioned in your presentation for this period? Also the tax rates that you have included for your projections.

 Also going back to the dividend, because everyone's talking about that, so the split dividend possibility, if I remember correctly, the tax attraction will be disappearing in January 2017. So therefore if there's a script, people have talked about that, so that will be exclusively for the interim dividend for 2016, because these tax advantages will be disappearing.

------------------------------
Unidentified Company Representative   [28]
------------------------------
 If the tax advantage disappears, well, then there will be not be really any point in doing script dividends.

 When we're talking about the success ratio, we have got 4 gigas today in projects and we're saying that we think the success ratio between 20% or 30%, no more. We are continuing to consolidate our portfolio and we think between now and halfway through 2017 or the end of 2017 we will still have more projects. And we are taking part in different conversations with different (inaudible) which means we could increase our portfolio, which is another one of our objectives that we currently have. For the wind farms and the solar farms, well, in a period of time, that will be within the 2020 period of time.

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Unidentified Company Representative   [29]
------------------------------
 As regards the reviews of -- of all the reviews in 2018 onwards, there's nothing contemplated within the plan.

 What are the ones for 2016? That's not foreseen. Those negotiations are not -- don't go so quickly, they start now. But no, it's not considered.

 Positive type, the first quarter, you know that when we do the quarters, we foresee what we have throughout the year. In the first quarter, 23.5, which is the forecast for the end of the year, today. That's the ordinary forecast, for 23.5. I don't see that there'll -- I don't think there'll be big variations to 2018. It'll be the ordinary rate, we would have value. And there'll be a slight increase by 2020 to 24.5, something like that.

 And as regards the concept of net investment, it has to do first to the concept that we also use in the presentation of results, our investments, especially regulated businesses and some others, there are some components that are paid for by the customers, subsidies, and that's where we put a part of net. If you look at the quarter, when we talk about investments, there's a series of items, small items in there; when there's a disinvestment, also goes in there.

 And as regards disinvestment, under disinvestment, arguably the example of what we did last year, the gas that we sold didn't provide us with the EBITDA and we (inaudible) EUR100m disinvested and then we invested. That's the kind of turnover we'd be talking about, replacement of things that financially -- disinvestment, reinvest in things that are interesting to us.

 And I would also like to add to what Carlos has said, in 2016, and this has started up already, we're going to disinvest in the GLP business -- LNG business in Chile, and then we're going to go for -- to put in a bid for what is left in -- of gas in Chile. So that disinvestment, investment operation is included.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [30]
------------------------------
 Good. Any more questions in the room? Sonia?

------------------------------
 Sonia Ruiz de Garibay,  BEKA Finance - Analyst   [31]
------------------------------
 Excuse me. Sonia Ruiz de Garibay. Four things. As regards the CapEx, the EUR2.7b figure per year average that you've given us, to calculate the cash CapEx, the outflow of cash, because the ships are on lease, do we take the EUR0.4b off yet?

 And then the EUR1.6b for networks, we know EUR0.3b is Chile. But specifically Spain, Repsol, the portfolio of propane customers, I presume investment will have to increase on that side.

 And then working capital, to arrive at a free cash flow of EUR20b that you've mentioned within the strategic plan, what working capital are you considering? Because you think there's going to be improvements, and in the first quarter has been particularly negative as compared to the first Q of last year.

 The other thing, the average cost of debt, we talked about 4.3% on average, I'd like to know, because you got a lot of bonds maturing now, practically one a year, and you're refinancing at very competitive levels, don't you think that that cost should improve additionally a little bit more? And also the Chilean debt, what Repsol has done with [Talis], repurchase of bonds, are you looking at things like that?

 And then the Egyptian situation, until 2018, I understand we -- there'll be no improvements in Egypt. Are you -- will there still be losses or by 2018 do you think there will be profits? That's all. Thank you.

------------------------------
Unidentified Company Representative   [32]
------------------------------
 Well, I can begin with investments. Yes, that EUR0.4b that you mentioned can be taken away from the methane ships because that's not -- of the EUR8b net CapEx, 2016-2018, EUR1b is not cash, what's really cash is [EUR7m].

 As regards the regulated business within Spain, within this average, this includes acquisition and development costs in the short term of propane gas that we're buying of about EUR500m in the period. If you divide that into three, well, in the regulated business in Spain there'll be an acceleration of EUR150m to EUR100m as a result of the purchase of that business.

 It's true that in the first quarter the drop -- if you compare quarters, it's seasonal. It's not really significant. There are two things that have happened when you look at the cash flow and compare 2016 to 2015. In 2015 we had EUR160m back in taxes that improved the cash flow of the first quarter of last year. We haven't had that rebate this year. We haven't got that money back. So anyway, that's one of the reasons. And we also have a temporary increase of EUR17m in the recurrent fund, but that won't happen throughout the rest of the year.

 So for this year, I don't think there'll be changes in terms of the funds that we have to maneuver. And we don't foresee any significant improvement within the five years of the strategic plan. We're working on it. If there are improvements, we'll welcome. But anyway.

 In terms of cost of the debt, you're right. And I'm conservative and we might improve. But I would say that we are looking at refinancing operations that will be slightly more expensive than the most recent ones, the 10-year operations, but they'll be a bit more expensive. But it's not the most important thing because we are looking at an average. In terms of euro financing, we will drop below 3% corporate financing, or funding, but the Latin American financing won't increase.

 So, based on the exchange rate and spread estimates in Latin America, there'll be an increase of almost 2 points. The financing in Latin America will also increase over the years, and that more or less leads to a rate of 4.3% approximately. But that is because of the reduction of the corporate levels and the increase of the Latin American levels.

 As regards another thing, it's true that in addition, there, if the debt is maintained, financial expense -- pure financial expense would go down. But when you see financial results over the next few years, you'll see that they'll increase a little bit because that includes the methane ships, the leasing that we have to spend on -- the leasing expenses. So the financial results will break it down, but you'll see in cost of debt ratio there'll be an improvement. But there'll be a section of other expenses that include the methane ships and what have you.

 As regards Egypt, in 2018 or 2020, we don't think the situation will improve, but we hope, and expect and hope that by the end of 2018 we have a scenario that allows to see things more clearly. Problems with Egypt are twofold. On the one hand there's the coal cases, the litigation that's going on, which will follow their course, these cases. And on the other hand we're negotiating with the Egyptian government to try and get it to honor its commitments. We still have had no response from them. So we don't contemplate -- we don't foresee any improvements.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [33]
------------------------------
 Any questions in the room? Any more questions? No questions?

 Well, we'll go to -- we'll read out the questions we've received through net. Of the questions that have been sent, practically everything has been replied to, there's only four that are the briefest ones which I'm going to read.

 The first one is from Credit Suisse. The question, are we going to -- rating, are we going to go back to an A rating or are we happy with our BBB, Aa2 rating?

------------------------------
Unidentified Company Representative   [34]
------------------------------
 Well, I don't know whether I can say I'm happy with that rating. But by 2018 I don't think there's going to be a change in the rating of the Company. Well, I mean, if you're talking about things that we might wish for, well, we would always -- you always wish for an improvement. But in the near future, I don't think there's going to be a change in the rating of the Company.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [35]
------------------------------
 The second question comes from Javier Garrido from JPMorgan. It's very specific, in relation to the gas market. The question is as follows. You're waiting for an increase in the year 2018 and it's also in line with the Brent prices, so this is higher than expected for Henry Hub. Do you expect the prices bcm are going to be related to the Henry Hub prices?

------------------------------
 Rafael Villaseca,  Gas Natural SDG SA - CEO   [36]
------------------------------
 Well, no, because the two markets are not interconnected at all. Next year they will start to be amounts, but the amounts, if I -- will be 10 bcms or 5 bcms (inaudible) 5 bcms. So this can't affect the market a lot because there's a lot more in the market than just that. So the inequality is historic and it will take a lot of time for them to be at total confluence but it will not be within the time period of our strategic plan.

------------------------------
Unidentified Company Representative   [37]
------------------------------
 Rafael, would you allow me just to add that you have to take into account that the great producers that sell in the [LPP] have got bilateral contracts worldwide, which are indexed to Brent, not to Henry Hub, which is the largest volume that exists today. So the easiest thing would be it's better to be indexed to Brent rather than the Henry Hub. This will affect it. But obviously, if not, they would be working against their own advantages.

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 Luis Calvo,  Gas Natural SDG SA - Head of IR   [38]
------------------------------
 The third question is from Martin Young from the Bank of Canada. The question is as follows, In a renewable market which is increasingly more competitive, what is the competitive edge of gasNatural compared to its competitors? Because many of the competitors have economies of scale and they have got a longer history in this market.

------------------------------
Unidentified Company Representative   [39]
------------------------------
 Well, there are several things to say. Economies of scales come when you buy a ton of purchase. There's not great operators -- well, there are -- but not many that are in part of the fabrication. So this is just a phenomenon that has been repeated in the entire generation, all the generation plants, whatever technology, the economies of scale are related to the number of plants that renegotiate with the suppliers.

 To now that it hasn't been a problem to carry out our activity. We have to recognize our activity we started late historically. Last year we've done things similar, we started late in other technologies, compared with our suppliers. But we ended -- we did end up getting there.

 When we're talking about the renewables market, probably the panorama could get more complicated, there'll be more competition, so it will probably be more of an advantage to be part of the chain.

 It is quite simple, I don't want to simplify this too much, to build a solar or wind farm when it is subject to priority regime when it has a minimum guaranteed return, when really there is no market risk. However, what we've seen in a lot of different emerging countries, and here in Spain, that when you -- when it starts to disappear and when, for example, the last auction in Spain, when you're talking about subsidies, it goes into the pool price, so that means that there is a price in the market. So it means you've got to increase the return on the investment. And there's going to be more -- this has to be part of the value chain of electricity market. So when the PPAs go up or down, Mexican or maybe Chile situation, and then they start in the trading or they're part of the added value chain, more things change.

 So if you take into account the situation that would have been easy to nigh, there have been an avalanche of operators, everything would seem to be very simple and very profitable, we think things are going to become more complicated. And the knowledge of the entire value chain, the possibility of integrating that into trading and to value-added lines, we think there'll be a specific wait, which would be increasingly bigger.

 But I would like to say again, it's still not a technology -- well, we're not that new in it. We've been working in the wind business, working now on an installed capacity higher. And we would like to replicate this in markets where we are and markets where we know the situation. And these are the markets where we really believe that we should be building up in the future.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [40]
------------------------------
 The last question, from Stefano Bezzato from Credit Suisse, and the question is as follows. You've got a minimum return for the -- that you want from the projects, the part of your investment plan, i.e., do you have a minimum return that you calculate for these new projects?

------------------------------
Unidentified Company Representative   [41]
------------------------------
 We have a minimum return for each business, for each -- well, taking into account or increasing it, taking in the risk per country. And this is one of the debates that we always have with our businesses. We assign them a capital cost, a premium to create value, and also to that rate, that is the minimum one, we request the -- well, we insist that the businesses have to be done in order for there to be any type of investment.

------------------------------
 Luis Calvo,  Gas Natural SDG SA - Head of IR   [42]
------------------------------
 Well, thank you very much. And with that, we are ending our Q&A session. And so this is the end of this event, so I'd now like to give the floor to our CEO to say goodbye.

------------------------------
 Rafael Villaseca,  Gas Natural SDG SA - CEO   [43]
------------------------------
 Well, that's all I wanted to say. Thank you very much for having been to this very long session this morning. We are available to you any time. So we'll see you next time. Thank you very much.

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Editor   [44]
------------------------------
 Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.




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