Q3 2016 Enagas SA Earnings Call

ENG.MC - Enagas SA
Q3 2016 Enagas SA Earnings Call
Oct 18, 2016 / 07:00AM GMT 

==============================
Corporate Participants
==============================
   *  Antonio Llarden Carratala
      Enagas SA - Chairman
   *  Borja Altamirano
      Enagas SA - CFO
   *  Marcelino Arburua
      Enagas SA - CEO

==============================
Conference Call Participants
==============================
   *  Javier Suarez
      Mediobanca - Analyst
   *  Fernando Lafuente
      N + 1 Equities - Analyst
   *  Carolina Dores
      JP Morgan - Analyst
   *  Jose Ruiz
      Macquarie - Analyst
   *  Jorge Alonso
      Societe Generale - Analyst
   *  Virginia Sanz
      Deutsche Bank - Analyst
   *  Olivier Van Doosselaere
      Exane BNP Paribas - Analyst

==============================
Presentation
------------------------------
Unidentified Company Representative   [1]
------------------------------
 (Interpreted).Good morning, ladies and gentlemen. I'd like to welcome you to the presentation of the results of Enagas for the third quarter 2016. The results were published this morning before the market opened and are available in our website www.enagas.es.

 Mr. Antonio Llarden, Chief of Enagas, will host the presentation. We expect the call to last around 20 minutes. Afterwards there will be a Q&A session during which we will try to answer as fully as possible. Thank you for your attention. And I will now give the floor to Mr. Llarden.

------------------------------
 Antonio Llarden Carratala,  Enagas SA - Chairman   [2]
------------------------------
 (Interpreted). Good morning ladies and gentlemen. Thank you for joining us in this presentation of Enagas results for the third quarter of 2016. The results were presented today before the market opening, and are available in our website,

 www.enagas.es.

 Mr. Antonio Llarden, which is myself, I will try to mention how things have gone in the third quarter. First of all, within them, the good performance of Enagas, we are going to meet the commitments we have for this exercise for this year and, in fact, we will be able to improve the most important results.

 These results, in our opinion, ratify the flexibility, the strength and the ability to adapt in times of high volatility and uncertainty. The good performance of Enagas this year is reflected in the positive financial results and also in three important events that took place in the third quarter.

 First, the confirmation of our A minus rating with stable outlook by Standard & Poor's in July. Second, our inclusion or our presence in the Dow Jones Sustainability Index that recognized Enagas in 2016 as a world leader in the gas-utilities sector.

 And, third, the recognition from the Council of European Energy Regulators, which has included Enagas as one of the most efficient European TSOs in the management and maintenance of gas infrastructures with an efficiency rating of 100%. This confirms, in our opinion, the high levels of efficiency in our Company's operations.

 I will now briefly mention the most important figures that you can take a look in the presentation that accompanies the conference call.

 Our funds from operations at the end of September total EUR611.5 million, which is 1.5% higher than in the same period last year. This has led us to reach a leverage ratio, funds from operations on a net debt of 15.9%, which is higher than what is needed to maintain our standalone credit ratings.

 This trend of our funds from operations [also in part] the dividends received from our subsidiaries in the first nine months the year. These dividends accounted for EUR53 million compared to EUR22.2 million on the same date last year. The evolution of this figure is very important, as it clearly offsets the slowdown of cash flows from the businesses, our domestic businesses, that we have since regulations were changed two years -- two and a half years ago.

 It's very important to highlight the strength and security of these dividend flows from our subsidiaries due to several reasons. First, the quality and solvency of the [off-takers]. We have signed a long-term [take or pay] contract with, with no exposure to community prices or volumes.

 Second, we are talking about the subsidiaries in Peru, Mexico and Chile that are indexed to US industrial prices and the operating dollars. And, third, we have a long-term debt financing taken out at optimal cost and also maturity. The increase and strength of our cash flow is key to understanding the Company's business performance because, as you know, our EBITDA does not include the contribution from the international business.

 However, the efforts we are making, to adapt the Company's resources to the requirements of international expansion are reflected in our costs. On the other hand, net profit was EUR317.4 million, up 1.5%, to the net profit we got last year. So, 1.5% above the same period we had last year. This increase was mainly due to the higher contribution from our investees, as we mentioned, especially the brown fields acquired throughout 2015 and 2016.

 I would like to highlight the fact that the contribution to net profit made by our investees was close to 15% compared to 9% at September 30, 2015.

 During the first nine months of 2016 Enagas invested total of EUR598 million, out of which 29% of it corresponds to investments made in Spain and 71% to international investments.

 This investment volume includes three national or international investments, include three operations that have already been closed, that have allowed us to increase our stakes in assets in which Enagas was already present and which fit with the Company's core business. And also with the profitability targets [and our debt] levels.

 Taking in a look back, in April we completed the acquisition of an additional 1.64% of the Peruvian company TGP. This transaction gives Enagas control of 25.19% -- 25.98% of its share capital. Second, in August, we closed the purchase of an additional 42.5% stake in Saggas in Spain. So, we are now the owners of 72.5% of the company.

 And, last, and after our agreement with Endesa Chile in September, we closed the acquisition of 20% of GNL Quintero. And, besides that, although they are not included in the investment figures I just mentioned because they were closed before September 30, we are now working on the closing of two other significant transactions that you already know. The acquisition of an additional 20% in Chilean plant of GNL Quintero and the purchase to entry of 2.96% of Transportadora de gas del Peru, TgP, that we announced last week.

 These acquisitions are subject to the terms of -- applicable in these types of transactions, such as the possible exercise of pre-emptive subscription rights by other shareholders. Our financial position is sound and solid and one of our main strengths.

 And I will now mention the key figures. Net financial debt at September 30 of EUR431 billion with more than 90% of the debt at fixed rates. At the end of the third quarter the average net cost of debt was still 2.5% compared to 2.8% on the same date in 2015.

 On the other hand, the liquidity of Enagas by the end of third quarter was at EUR2.6 billion, which allows us to maintain the high solvency levels. And comfortably meet our upcoming debt maturities which, as you can see from the presentation, do not become significant until 2022.

 Enagas has diversified funding sources. You very well know about it; 64% of our debt has been arranged on the capital markets and 30% is financed with institutional loans, mainly through the ICO, the Spanish state finance agency of the European Investment Bank.

 As I have already mentioned, we have a leverage ratio that spans from operations to net debt of 15.9%. That's higher than necessary to maintain our current (technical difficulty) standalone credit ratings.

 In terms of our ratings, well, it's great news. So, as we mentioned in the beginning of the presentation, to -- well, the confirmation by Standard & Poor's of our A minus credit rating with stable outlook. And this places us at the highest level, which is excellent, given the methodology used by Standard & Poor's to analyze companies' business-risk profiles.

 In terms of our dividend policy we increased -- it is increasing our dividend in a sustainable and sustained ways is one of our priorities. Therefore, we reiterate our target to achieve a growth of 5% each year until the 2020. As proof of this commitment in July, within the third quarter we are analyzing right now, the final dividend was paid out against 2015. It was, sorry, for the amount of EUR0.792 per share, which implies a total dividend of EUR1.32 per share.

 Before taking a look at the objectives for the year I would like to summarize, as we normally do, the evolution of gas demand in Spain. Industrial demand, which is the one that best reflects the evolution of economy and is very important and interesting, well, in this particular uncertainty moments in Europe also (inaudible) still strong, and it has increased until September 30 by 2.2% compared to the previous year, which is in line with Spanish economic growth and the official or the forecast of most financial institutions, in terms of Spanish GDP.

 This performance slightly outstrips the trend [marked] by this segment of demand, which in June rose by 2%. In fact, in September and October this growth has been even a bit higher. And so we are feeling quite optimistic until the end -- of the evolution of industrial gas demand until the end of the year. And so, in a certain measure, also the Spanish economy.

 And, in fact, a bit of interesting information last week. On September 30, the last [survey], we reached a peak of industrial demand out of winter market in the past three years. We reached maximum natural-gas production for 2016, which means that the demand figures in the third quarter [occurred]. And if we were only to take a look to the past 50 days, so end of August, early September and month of October, the evolution of gas demand has been extremely positive.

 We will now take a look at a very important element, which might not be financial, but it is important for us which is our commitment with sustainability that has been integrated in the Company's strategy and operations.

 In September, as I mentioned earlier and for ninth year in a row, we are part of the Dow Jones Sustainability Index, which is a global benchmark for sustainability. We are the leader in the gas utilities sector with 91 points out of 100.

 And we have the best-possible score in several aspects, like climate-change policy, environmental management and stakeholder management. We are also leaders in some other areas such as health and safety, corporate governance, and development of human capital.

 These results acknowledge, in our opinion, the Company's pledge to sustainability as one of the drivers of its strategic plan. And, as you can see, it's not just a formal declaration on paper but it has been systematically confirmed by international entities that measure these areas.

 So, at last, talking about our targets, the results we are offering today show that we are on track to meet (inaudible) we said in early 2016. In terms of our investment volumes the figures we are presenting are above our annual investment target, as I explained in the last conference in July.

 In 2016 we have had a lot of good opportunities and we have reinforced our position in assets that Enagas knows extremely well and which -- and in which we play a key role as an industrial partner. These acquisitions will allow us to improve results (inaudible) accounted and investees, as well as raise the dividends received from our subsidiaries, in 2016 and future years.

 Nonetheless, as I mentioned in July, we would like to reiterate that as a Company we have very clear objectives such as paying the dividend we have promised to pay. And to maintain our standalone ratings. And also, achieve -- well, achieving on a specific investment figure. It's not a target itself.

 We have invested and will continue to invest in projects that fit with our strategic criteria, that contribute with suitable returns and that create value for our shareholders. And, by the way, that's quite hard in the present market conditions. This is a fundamental goal for Enagas and its management team.

 At the start of the year we included in our budget and our objectives an average net cost of 7.7% -- 2.7% the financial transactions made during 2016. And, only three months left to run and to finish 2016, will allow us to close the year with a lower than expected average net cost of debt that is more in line with 2.4% that we ended the third quarter with.

 Therefore, and despite the complicated and volatile macroeconomic environment, we think that the net-profit growth by the end of 2016 could be around 1.5% which is, therefore, higher than the target of 0.5% we set at the start of the year.

 And last, and to wrap up my presentation, in conclusion I'd like to add three different aspects for the whole Company and for the management team at Enagas. The commitment we have made to investors, analysts and rating agencies are our priority and we never lose sight of the fact that our Company has 95% free float.

 Our international activities have enabled us to increase our earnings and dividends. And, lastly, we have a very strong financial position with well-diversified funding sources and a high level of liquidity. We are committed to maintaining our current standalone credit ratings.

 In this context in which analysts and financial experts agreed that the volatility of global markets is going to remain as it is for a certain time, we believe that Enagas will have been able to, first, increase our operating efficiency to become a leader in efficiency compared to our peers.

 We have been able to reduce our funding costs to even below our forecast levels. As you have seen, our long -- we have long-term debt maturities. We still have solid financial operations. With an annual average until 2020 of around EUR700 million growth is sustainable. And with a regular performance of our -- of dividends which enables us to face future challenges from a much stronger position.

 Thank you for your attention. And if you have any questions feel free to ask them now and we will try to answer them as -- well, the whole team will try to answer them as fully as we can. Thank you very much indeed.

==============================
Questions and Answers
------------------------------
Operator   [1]
------------------------------
 (Interpreted). Good morning everyone. The Q&A session starts now. (Operator Instructions). Javier Suarez, Mediobanca.

------------------------------
 Javier Suarez,  Mediobanca - Analyst   [2]
------------------------------
 Good morning everyone. I have three questions. The first one refers to the [IPS] guidance. The Chairman has explained that the goal has gone up 0.5% -- from 0.5% to a 1.5%. I'd like to know the reasons for this growth and why you have made these decisions to raise this guidance.

 Also in the last conference calls we heard an EBITDA guidance between EUR890 million, EUR895 million. I'd like to know the figures behind that. And also, as for the midterm, we have seen that the French regulator have made some comments different to the ones of the European Commission on the relevance of [MERCAP]. And I'd like to know how important EBITDA is in Europe and how relevant is it that we complete this project.

 Also I -- it is very interesting the industrial-demand growth. Actually, the demand is weak now. And I'd like to know the effect of this on the working capital of the Company or on the final capitalization of the EBITDA and other figures. I'd like to know this. It would be very helpful.

------------------------------
Unidentified Company Representative   [3]
------------------------------
 Muchas gracias, Don Javier Suarez. Thank you for the first question. These details will be explained by Borja Garcia-Alarcon, the CFO.

------------------------------
 Borja Altamirano,  Enagas SA - CFO   [4]
------------------------------
 Good morning. For the whole year the growth, the difference to the guidance of the first quarter, is due to Saggas mainly, the forecast of EUR4.8 million. And, as for the EBITDA figure, related to this growth, is EUR5 million less associated to the evolution of the [TRS].

 As for the second question, the relevance of the MIDCAT for Europe is due to two reasons. One is to secure the supply; having more capacity to move gas flows from north to south or the other way round whenever there is a problem in Europe. And the second effect, which is not so well known, but it will help to have a real European natural-gas market fixing prices which are similar in most of Central Europe, European countries.

 This difference of physical flows between north and south, south and north, impact the prices in different areas, regions, of the country, which are not so good practice as it is happening in France where the prices of the northern region are different to the prices on the south, which are higher. And this is within the same country.

 So, from the point of view of the European Union and the European Commission, it had to say that the MIDCAT is one of the main targets. And we -- but we also -- we know that these international agreements need time and patience. We think we will be able to complete this within this time, this deadline, 2020.

 And as for the third question, I remind you of the growth of industrial demand is very important, not only because it gives you an idea of the evolution of the Spanish economy. But also because it represents between two-thirds and 70% of the gas demand in Spain is different to other European countries, where the weight of the commercial and domestic demand is higher. And this is geared to the cold weather and to the use of the heating systems in homes.

 The situation is different in Spain. And, therefore, this is why the industrial demand is most -- more significant.

 And with the figures that we have and that we have recently shared with the regulator we believe that the calculations made in 2014 to absorb the gas-tariff deficit until 2020 are perfectly in line. But we have seen that there is no structural tariff deficit, no serious one.

 So, in this regard we are optimistic. And we confirm that the evolution of the market that in -- by the year 2020 we will have perfectly controlled the targets set by the regulator, which is eliminating the tariff deficit. Taking into account that it was forecasted in the year 2016 and 2017, it will include some costs.

 So, we have planned this and we (inaudible) that we will be able to do this.

------------------------------
Operator   [5]
------------------------------
 Fernando Lafuente, N + 1.

------------------------------
 Fernando Lafuente,  N + 1 Equities - Analyst   [6]
------------------------------
 Good morning. I am Fernando Lafuente. Two questions. The first one referring to the [GSP]. Has the situation there; the investment of (inaudible) as partner? So, an overview of the project.

 And the second question is about the investment in international markets. I think it's interesting what the Chairman has said that investment is not our goal. So, I'd like to know which are the other options. And which other options are not contemplated.

 And also I'd like to know what are you expecting in Spain for the upcoming years? Is there something that we can (inaudible) something else?

 Thanks.

------------------------------
Unidentified Company Representative   [7]
------------------------------
 Thanks for the question. As for the ESP, I'll give the floor to the CEO, Marcelino Arburua.

------------------------------
 Marcelino Arburua,  Enagas SA - CEO   [8]
------------------------------
 Good morning. As you know, the project is going on. The investments is we are selling, there is a buyer. Already they are negotiating with the consortium led by [Semla] and (inaudible). So, in the following days probably we will complete this acquisition. That will be related to the financial closing in November.

 At the same time, we are working with the government to sign a bank debt that will be signed the following week. So, I think that in November we will see the funding and the agreement is attained and the project has also started. So, the management has already been met by Enagas and the manager has been designated by Enagas (inaudible).

------------------------------
Unidentified Company Representative   [9]
------------------------------
 Thanks, Marcelino. As for the second question, as for the international investment, we follow with our criteria of (inaudible) to make (inaudible). We have observed over the last year that there are very low or negative types and also very low-value performances that can turn into bonds of financial products that usually have high amounts to be invested.

 So, probably some of them, not all of them, are eager to invest with a return of investment that in our view, and this is not only my opinion, other companies think as we do, they are not sustainable in the mid and long term.

 So, I can give you -- I can tell you that Enagas will try to make no mistakes in these decisions. We only invest if some criteria are met. One of them is that the return of investment, the final return on investment, is proportional to the type and to the risk. And this is not because [returns] are low for investments with a lifecycle from 20 to 40 years. We don't accept very low returns of investments that cannot be justified in the long -- in the mid and long term.

 In the international field, in Europe -- answering your question, we are involved in two basic issues. One is a greenfield, by [Glen], as you know when this is of the project pipeline, which is high scale ongoing project in Europe. And today in Spain there are some meeting of the Board of Trans Adriatic and we are one of the partners -- the hosting partner -- and this morning we are having here this meeting here. This is the most important project in Europe now, where Enagas is one of the main partners -- not only a financial partner but also with very active penetration in all the technical and financial aspects of the project.

 The other project has also been mentioned, which is the MIDCAT, which is the third connection between Spain and France. And we expect that until 2020 we will be able to finish this project.

 And for Spain maybe the most important thing that we have for the next year is organic investment. But not at the level that we used to have like five years ago but we have the project of regasification of the gas plant of Tenerife. And I can give you a figure now about this that after the summer it has been confirmed by the Ministry of Industries that they already have the recommendation of the environmental impact analysis performed by the Environment Ministry. And at this point we know that the Ministry of Industries is drafting the ministerial order to authorize the beginning of these works.

 Due to some administrative reasons maybe this order will only -- can only be in effect when we have a new government that we don't have now in Spain. So probably by the end of the year we will already have the official authorization to start the investment of EUR300 million for the financial years 2017, 2018 and 2019. So we'll finish within the deadline 2020. That will be the most important investment that we contemplate in Spain, in the Iberian Peninsula.

------------------------------
Operator   [10]
------------------------------
 (Interpreted) The next question will be by Carolina [Morris] of Morgan's.

------------------------------
 Carolina Dores,  JP Morgan - Analyst   [11]
------------------------------
 (Interpreted) Good morning. I have two questions. The first one is on the regulated returns, which is about 2% year-after-year, which is a little bit lower than normal volume. Is this due to the gas demand or are there any other reasons? And how do you plan to recover this in 2017? The second question is for the guidance for 2016 and the lower tax. How do you see the guidance at 2020? Can you give us some -- can you explain a little bit about this?

 (Technical difficulty)

------------------------------
Unidentified Speaker   [12]
------------------------------
 Sorry, they are not using the microphone so we cannot provide a translation.

------------------------------
Unidentified Company Representative   [13]
------------------------------
 (Interpreted) Thank you Carolina. Well, regulated earnings after the regulation change in [May] in 2014, not due to the variable gas demand but mainly, because there are - there's no new investment in that volume that balance out this asset amortization. You should remember that in that regulation change we had around EUR120 million less a year, which is balanced out and due to the increase of life expectancy of this use of assets. And of course, due to the international activity that allows us to recover it.

 But in terms of the drop of regulated earnings, it's not a piece of news we give every quarter. We have a forecast until 2020 and I believe we won't be wrong by over five - plus or less EUR5 million. This is more factor which is our CS. That, well, makes it a bit more variable depending on demand, but that's more variable. It's actually very limited so the demand's part of it. We might have an increase of earnings of between EUR5 million and EUR10 million a year. And if the demand drops we might have about EUR5 million to EUR10 million less a year.

 But that change -- the main changes are due to our basic piece of information which is the existence of a strong asset, which is very big, and it depreciates slowly. That's why we have an activity out of the Iberian Peninsula to be able to balance it out.

 And in terms of the second question, well, debts in euros, which is most of the debt we've got. We do believe that with the present rates -- interest rates the kind of debt we've got till 2020, but I'm saying it out loud -- I haven't got -- well, I haven't got the detail, but we could keep the cost of 2.4%, which we believe is quite good in terms of average rate -- average debt rate.

 As you know, some of debt is in dollars. Well, that case, well the exchange rate of dollars are a bit less. Given that well, till -- probably from now till 2020 the proportion of dollars is going to be a bit higher, than when we've got now -- not necessarily much higher. But in that case the mix of the average debt rate is a bit higher, but we believe that we have limited the costs in both currencies. Thank you.

------------------------------
Operator   [14]
------------------------------
 (Interpreted) Next question will be asked by Jose Ruiz from Macquarie. Thank you.

------------------------------
 Jose Ruiz,  Macquarie - Analyst   [15]
------------------------------
 (Interpreted) Good morning. Just two questions, first of which is if you could clarify something in your -- in the results you're saying that the Greenfields projects companies GSP and [Enagas gas] have a good contribution and have a good positive contribution of EUR9.5 million. I'd like to mention, given those are projects on flight, how can they have a positive contribution?

 The second question is about the sale -- the sales of perhaps of (inaudible) and of [Met Gas]. What's going to be your position? It seems that you've been interested on that company. Thank you.

 (Technical difficulty)

------------------------------
 Antonio Llarden Carratala,  Enagas SA - Chairman   [16]
------------------------------
 (Interpreted) Thank you, Jose Ruiz. The first question my Financial Director's saying that he can explain it in detail. Please.

------------------------------
 Borja Altamirano,  Enagas SA - CFO   [17]
------------------------------
 (Interpreted) When Greenfield projects -- most of them -- or for most of them companies have a margin per construction that can generate earnings and cost can be capitalized. That's why we have a benefit.

------------------------------
 Antonio Llarden Carratala,  Enagas SA - Chairman   [18]
------------------------------
 (Interpreted) Thank you. And on the second question you are asking more within the team that aren't really questions we've got that there are [purchase of new] businesses and all the projects. Projects or operations in the world of our core business could be -- there might be 20, 25 projects that are live and we thought, well, we always have them also, this operation and we do follow the operation of what could happen. Given the information we've got I must say we don't think they have made a final decision to sell. There's just a process in which they're going to do some research and we of course follow this just as we follow some other projects. And of course, this is an interesting asset.

 But, one, having said that, we do follow this operation as we follow many others. I won't bore you with the number of projects and operations we do study. And I'd also like to remind you what we always say when we analyze these topics, the director-general's new business know they have to go through some filters of some profitability risk analysis without which the Company will not make an investment. That's why throughout the year we have got some operations, but I mean Jose we'd - I can assure you that we do study 20, 25, 30 operations a year, but we don't carry them all out. Thank you.

------------------------------
Operator   [19]
------------------------------
 (Interpreted) Next question will be asked by Jorge Alonso from Societe Generale.

------------------------------
 Jorge Alonso,  Societe Generale - Analyst   [20]
------------------------------
 (Interpreted) Good morning. My question is linked in to international projects. In this environment, there's been a lot of noise about the yield increase in the United States. Could you please tell us how those projects have been covered for in case of yields were to rise, especially for the most important projects. I'd like to know that you are updated according to the American inflation and the debt of those projects to know the -- or for how long you've got and close to funding and which is the impact or how covered you are. If eventually yields were to increase. Thank you.

------------------------------
 Antonio Llarden Carratala,  Enagas SA - Chairman   [21]
------------------------------
 (Interpreted) Yes, thank you Mr. Jorge Alonso. All the projects we've got now have these guarantees and I'd like to ask the Financial Director to review all the answers.

------------------------------
 Borja Altamirano,  Enagas SA - CFO   [22]
------------------------------
 (Interpreted) Thanks for the questions. Yes, these projects, most of them are funded through a project finance. Well they have to be long term funding or the short term. And we do a swap with the lifetime of the asset, of the TgP at 15-year -- has a 15-year maturity and GDP we have long-term maturity in GSP the funding will be a mini bond -- but that's a swap for the lifecycle of the asset. So the protection for the yield is complete both in the LIBOR and all the other assets. And in fact, they are [USABI] indexed, so one.

 Then we are talking about exchange rate risk. And well, the investment and the debt is in the same currency and it has been pre-set in that currency. So coverage in terms of those risks is complete. Thank you.

------------------------------
Operator   [23]
------------------------------
 (Interpreted) Next question will be asked by Virginia Sanz from Deutsche Bank. Thank you.

------------------------------
 Virginia Sanz,  Deutsche Bank - Analyst   [24]
------------------------------
 (Interpreted) Yes, good morning. I have some questions about the comment you made on the fact that international investments are being done through an equivalent ratio, but we also see an increase of funds. I like to know if you have already captured all the increase in the past few months or if we are still going to have more pressure?

 And about CapEx for next year, out of the investments you haven't yet reflected but you have announced, which are the -- which is going to be the increase for this year, still.

 (Technical difficulty)

------------------------------
 Antonio Llarden Carratala,  Enagas SA - Chairman   [25]
------------------------------
 (Interpreted) Thank you, Virginia. Well, in terms of the costs linked to new investments, we have captured all the costs because it isn't just staff costs or overhead costs. By this kind of operation, we have external services, lawyers and so on and they are all in -- I mean they are one-time costs really, so once it's been done they won't appear again. So we believe that we are going to follow the costs we've had. And we're not increasing in the next quarter.

 In terms of the investments left for 2016 they are basically the ones we have already announced. We have to close the purchase of around 3% of TPG, which is -- will be about $65 million. We are doing it jointly with the other big shareholder of their company, which is Canadian Pension Fund Investment Board, from Canada. And we -- well, we are going to -- well, we've -- this 8% of the company has been sold -- well we have divided up on both companies.

 And the other one is about - is around $200 million from Quintero GNL. And that's the second operation we are closing now. And we expect to be able to have it done by late November early December.

 These operations are the ones that we've mentioned previously and are going to give us for 2016 -- 2017 and following years an increase of our benefits and accounts in general that have not been included in the figures that we explained in the beginning of the year. That's why when we close the year in January or February we will have a presentation with an update of all the data for 2017 to 2020 or 2017 to 2021. We'll see the time frame afterwards. Thank you.

------------------------------
Operator   [26]
------------------------------
 (Interpreted) Ladies and gentlemen there are no more questions in Spanish. We will now give the floor to English questions. Thank you.

 The first one comes from Olivier Van Doosselaere of Exane. Please go ahead.

------------------------------
 Olivier Van Doosselaere,  Exane BNP Paribas - Analyst   [27]
------------------------------
 Yes, good morning everyone and thanks a lot for taking my questions. I have three remaining. The first one would be again coming back to the international acquisitions. Once you finalize and you get approval for the last two deals that you've announced you will probably have invested already about half of the EUR925 million of leeway that you flagged you would have for international M&A over 2016 until 2020, so I was wondering if you think that potentially you would have an option to exceed that amount in terms of potential international investments over that period?

 Second one is to ask if you could please confirm how Saggas and [Energy] Quintero will be consolidated going forward after you will have the majority stakes in those businesses?

 And then a final one -- apologies if you have confirmed this already -- but you had given a guidance of 2% compounded earnings growth expected between 2015 and 2020. You have now implicitly well raised the guidance for 2016 a little bit. I was wondering what your thoughts were for this longer term guidance of 2% growth as well. Thank you.

 (Technical difficulty)

------------------------------
 Antonio Llarden Carratala,  Enagas SA - Chairman   [28]
------------------------------
 (Interpreted) Yes, thanks Olivier. First of all, I'd like to confirm what I have said in other conference calls that the period until 2020 and the investment figure is total for the whole period. And now we are going faster now, so in the future we will go slower, but this figure will not be raised. So we keep our investment goal for the period 2016 to 2020 as we said in the presentation one year ago.

 As for Saggas we do have a very relevant investment there but in order to consolidate, as you know it's not only a percentage of participation but also the different agreements of investors and we have proposed the other investors to restructure during 2017 all the participations and societies in order to be able to consolidate. So we will do this but it won't be immediate, as we need to change some agreements between historic investors that represent different societies there. So in 2017 we think that we will be able to do this in agreement with the other partners.

 And last, as I've said before, with acquisition that we have made this year that are included in the acquisition volume for the period 2020, it is true that we have accelerated the investment average of each year. That means that our growth forecasts for this period will be improved. We will explain this into detail at the beginning of 2017 when we have finished the entire process of, let's say, taking in all these acquisitions that we've made during 2016.

 As I said there are still two operations that we expect to close before the end of this year, so when we have all the figures and all figures are audited, we will make a new review of the growth for the period 2017 to 2020. That obviously would be better than our initial (technical difficulty).

------------------------------
Operator   [29]
------------------------------
 Ladies and gentlemen there are no further questions in the conference call. Thank you.

------------------------------
Unidentified Company Representative   [30]
------------------------------
 (Interpreted) Thanks for your attention and we will be glad to answer any more questions you might have. And thanks for attending.

------------------------------
Editor   [31]
------------------------------
 Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.




------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the 
Transcript has been published in near real-time by an experienced 
professional transcriber.  While the Preliminary Transcript is highly 
accurate, it has not been edited to ensure the entire transcription 
represents a verbatim report of the call.

EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional 
editors have listened to the event a second time to confirm that the 
content of the call has been transcribed accurately and in full.

------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other 
information on this web site without obligation to notify any person of 
such changes.

In the conference calls upon which Event Transcripts are based, companies 
may make projections or other forward-looking statements regarding a variety 
of items. Such forward-looking statements are based upon current 
expectations and involve risks and uncertainties. Actual results may differ 
materially from those stated in any forward-looking statement based on a 
number of important factors and risks, which are more specifically 
identified in the companies' most recent SEC filings. Although the companies 
may indicate and believe that the assumptions underlying the forward-looking 
statements are reasonable, any of the assumptions could prove inaccurate or 
incorrect and, therefore, there can be no assurance that the results 
contemplated in the forward-looking statements will be realized.

THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2018 Thomson Reuters. All Rights Reserved.
------------------------------