Gas Natural's CEO Discusses Q1 2011 Results - Earnings Call Transcript

May. 6.11 | About: Gas Natural (GASNF)

Gas Natural Fenosa (OTCPK:GASNY) Q1 2011 Earnings Conference Call May 5, 2011 5:30 AM ET


Luis Calvo – IR

Rafael Villaseca – CEO


Javier Suarez – UniCredit

Luis Calvo

Good morning, welcome to the presentation of results of Gas Natural Fenosa for the first quarter of the year. Presentation will be done by CEO, Mr. Rafael Villaseca, who is accompanied by the Financial Officer, Carlos Álvarez, and Strategy and Development Manager, Mr. Antonio Basolas.

After the presentation, we will have questions and answers first in the room and then those who followed us on the phone or the internet by sending in a questionnaire that you will find on the internet.

I will pass the floor to Mr. Villaseca.

Rafael Villaseca

Good morning. Thank you for being here those of you who are here physically and those of you who are here remotely. We’re going to start to analyze and explain the results of our first quarter of this year. This is the order of the day, the agenda. We’re going to give you an idea of the magnitudes first. Then, we’re going to talk about – well, we’ll start with main issues, then we’ll look at the consolidated results, we’ll analyze the different operations, and then at the end we’ll have questions and answers.

So as regards to the main issues, if you look at this slide, well the magnitudes first, the net profit has grown by 0.3% up to EUR387 million, the EBITDA has grown up to EUR1,296 million, that is 0.2% increase, and this reflects the disinvestment activities of last year. If we hadn’t divested, our EBITDA would have grown 3%. Thirdly, investments. Investments have gone down by 6.4% in this quarter, down to $234 million. And our net debt as of the 31st of March was almost 14% less than the previous year.

If we go to the main issues, we see the following. We see a situation with the gas contracts and our conflict with Sonatrach actually, and then the development of the key variables of the business. Thirdly, what the situation is in terms of the electricity business in Spain, and then talk about the divestment plan, disinvestment plan that we’ve almost finalized, and the strengthening of the balance sheet of our financial structure, and then we’ll talk about shareholder remuneration as regards in the results 2010.

So if we start with the first topic update on gas contracts and the situation with Sonatrach, we have to say that there is no novelties in this area. And then we continued to think that there were – the thing we got to do is now open to negotiations that we’re working on and we hope to reach a reasonable agreement in the first half of this year. So maybe in about 60, 70, 80 days we think – well, there is possible to reach an agreement, it depends on both parties. But we have confidence that it could be done this half of the year. Situation was – what it was there is a suspension by the Swiss Federal Court to stay of execution, so based on these measures there is a stay of execution. And we started the process of revision of the contract with Algeria and we made a request for modifying prices which could in some cases be retroactive.

We’re also doing negotiations with Sonatrach which we hope – and we actually are confident that will help to resolve this positively. So the situation is similar to last year. The results are not yet definite, and therefore, there is a certain degree of uncertainty. Although, we must remember that all those effects are adequately provisioned in our balance based on audit analysis.

Other issues are, first of all, the impact of the crisis in the North of Africa and the Middle East on our situation basically in terms of procurement. The impact has been moderate, very moderate, and in fact it was limited to problems in the supply of Libya affecting three ships – cargo ships, and it’s very practical, tangible, in fact minor effect of the present crisis. And that is due to the fact that naturally we are at this time developing and applying all the flexibility that our contracts allow us to have maximum capacity to respond to the events.

Recent events in Japan clearly will influence NG markets and we think that they will have – they will significantly increase LNG activity in the world. And that can be very good for us, for Gas Natural – Fenosa Gas Natural, because of the very important position we have in terms of LNG. We have unique position in that market and this protects us very well in the phase of unexpected events like the ones in Japan and they’re very interesting platform to make use of new business opportunities that might come up.

If we look at the development of energy markets, well I’ll be brief in the review; there is a generalized and significant increase of Brent prices. Brent’s gone up tremendously, 38% in terms of average price, three-monthly price. Gas in Europe, if we look at the national – the MBP Index, based on that, there has been a greater increase, almost 63%, it exceeds $9 million per mBtu. In Spain, there has been a significant increase in the price of fuel. You’ve seen this in the other graphs that I’ve shown you. And there has been a poor price increase of 78% as regards to last year, although we should insist that that significant increase is referenced on the basis of last year’s prices which were very, very low. So in spite of this huge 78% increase we are clearly well below the values that are registered in other European countries.

As regards to the business of electricity in Spain, we have to say what we already said, higher pool prices, which however are still low as compared to any European reference that you want to use. Lower levels of production of hydraulic energy due to the weather, in our case, that's hydro, has gone down by 14% and we've made up for that with a higher combined cycle plant production which means obviously that the costs of production have been more expensive, because water – gas has been substituted for water.

So our ordinary regime market share has increased, although we have lower sales volumes to end customers within our higher pool price scenario, and a scenario of increasing pool prices brings our market share to rise in the wholesale market, but decrease in end sales. We continue to try to optimize or give priority to the optimization of the tariff of the market share through and we’re going to try and use variations in the prices of energy to our best advantage.

As regards our asset disposal plan, this is almost completed. Well it is complete. We’ve advanced a lot. We've already got – EUR4.4 billion have been collected from the combined cycle plant sale in Plana del Vent and other operations, and all other operations are going ahead with no problem. More than EUR4 billion have been collected as I say.

We’ve also signed – we haven’t collected yet, but we’ve signed asset sales that will account for EUR660 million more once we’ve got the authorization. These are definite operations pending administrative approval. 300,000 supply of gas distribution points in Madrid, worth about EUR435 million and the sale of the Arrúbal plant at a price of EUR313 million. And with those sales, our program of disinvestment will practically be concluded, especially those divestments that had to be done because of the rules and regulations of the National Board for the Defense of Competition.

Strengthening of the balance sheet has been one of our priorities. And one of the reasons that we want to do this is the securitization of tariff deficits which has begun and then we hope will resolve itself as the authorities have said throughout this year. We have already collected EUR671 million this year from the three stretches of securitization of the five-day program at the Ministry of Economy. And within the general situation of the market which we see on this chart, there is a pending – there are EUR13,000 million pending securitization which still have to be securitized and things are moving ahead as well we’ve also about three months ago.

As a result of that, naturally has a result of the sale of assets, and the generation of cash flow, our debt reduction program is moving ahead unrelentingly. We were more than EUR2 billion last year above our current level of debt, we have – the debt has gone down by 6.3% our debt. And we are on target as our strategic plan. We have to point out that Gas Natural Fenosa now has a sound profile, risk profile, and credit profile. It’s clear more than 70% of EBITDA is devoted to regulated and quasi-regulated activities. We have a limited exposure. It’s much more limited than our competitors, nuclear or take or pay risks.

In recent crisis of the gas market, we have – not had to resort to take or pay at any time. We have proven expertise in emerging markets with a very – with proven success. And our liquidity strong and that has been rated by the rating agencies with a very – almost nonexistent refinancing risk and that has led us to a very positive evolution in terms of debt with hedging ratio, our coverage ratios of about 21% and almost six times our financial costs, and all that leads us to believe that in order to standardize and to be in line with the ratings of our competitors things will have to get better, because – even better because all objective data that you know, the rations that we can give you and show very significant improvements which will contribute to recover rating which is one as you know of our most important objectives.

As regards to shareholder remuneration you also know this, but it’s important to remember that the General – AGM of the 14th of June last year approved the distribution of results and the payment of supplementary amount as a result of a scrip dividend. So remuneration is going to grow by 1% and that total shareholder remuneration will be EUR0.8 per share. The scrip dividend which is the dates of application of this have already been advised will be three choice of shareholders through really liberated capital increase and they will be able to choose between the rights on the market, have new shares or sell them to the company which will guarantee an equivalent amount in money up to EUR0.8 per share. The 2 million shareholders of the company Gliteria [ph] and Repsol, have said that they're going to opt for more shares of the company.

If we go to the results in the quarter, you know the fundamental, the main data I’ll go over them very quickly. But the gross margin grows about 3%, EBITDA 0.2%, so almost EUR1,300 million in spite of the disinvestment operation which have affected the EBITDA. As I said, EBITDA would have grown 3% had it not been for those divestment plans. Amortizations have gone up almost 8% and operating income is EUR120 million. Financial expenses are lower than last year and net income – total income is EUR387 million, which is an increase of 0.3% as regarded to last year.

As regards investments, we continued to have very strong financial discipline which is one of our main aims and we’ve had a successful implementation of synergies. This we’ve seen to be the case and this has been getting better every year, and we’re still working on it, but it’s improving all the time. So we have had a reduction of 6% down to 234 as regards investments. Why? Because of synergies, greater efficiency, the end of the electric power plant construction program in the two plants in Malaga and Barcelona in Spain and the one in Mexico. But we've continued to make effort in the businesses that require investment like distribution and that has meant 42% of our investment, that’s accounted for 42% followed by the electric sector with 21%.

As regards Latin American investment, the main one was – the main investment is in gas distribution. As a result of all that the net debt is 18.2%. If we took away the deficit because of the tariffs, not yet securitized but this was – although this will happen throughout the year, and disinvestments pending that are already on the way, we would have a EUR16.3 billion debt at the end of the year, that means a leverage of just above 55%, which really is very robust and needless to be able to say that our financial structure is robust. And we should remember the good quality about debt, because 71% of that debt is a fixed rate debt in excellent conditions.

Secondly we’ve got 81% of debt in Euros. And thirdly, because we’ve opened our financing sources to curb market capitals which cover just over a half of our activity in this area. Finally, our debt maturity schedule is comfortable, it’s easy to carry and gives us a good wide margin an ample margin for action. This is up to 2015. And what we’ve got the amounts over the next years are absolutely reasonable, average life of our debt is about five years. And we’ve got 6,000 – we’ve got EUR6.2 billion in liquidity, so we could cover this quite well without having to go to any financial market for money.

If you look at the operations, this is a break down of the EBITDA, and we see here that the business of distribution on electric and gas distribution in Europe has gone up by 12%. In Europe, basically as a result of Spain and the improvement of electric distribution finally achieved. The electric business has gone down by 13% mainly due to the Spanish market because of the reasons I explained, an increase in fuels and the pool prices, although not yet at the levels that it should be. However, provisioning, procurement, raw materials have gone up more than the pool prices. Gas activities including Gas Fenosa gas have 5% in terms of EBITDA or contribute 5% of the EBITDA as a result of sales on the world market.

The EBITDA in Latin America dropped by 1%. One of the main reasons is the impact – accounting impact of the application of the – sudden application of a tax that used to be spread over for years until recently in Colombia. But now they’ve changed the law in Colombia. And although we still have to continue to pay every six months, but this tax has to be paid all – in one go in the first year, and that has affected us very importantly. However, the final EBITDA was EUR1.96 billion which is an increase of 0.2% as regard to last year.

If we go to a level – further level of detail, electricity in Europe we could say that it has reached a EUR173 million basically, thanks to higher remuneration for 2011. Liberalization process in Spain has led a situation where the integral tariff in Spain has practically disappeared and we have grown in points of supply and we’ve continued to invest in quality and maintenance to bring the TIEPI in Spain to a new record low of 10 minutes. That’s 44.5% less than last year – the first quarter of last year.

Distribution in Europe EBITDA EUR261 million, that’s an increase of 1.2% in spite of the asset disposals in Madrid is that – if those assets haven’t been disposed off in Spain and Madrid, our EBITDA would have gone up by 6%. So all the figures this quarter you should remember that we’ve got to think about the assets we’ve disposed of. Sales have gone down 6% in gas. The weather has had a very – great influence to the quarter, the same quarter last year was much colder which made people use more gas. But the growth of the supply points, in spite of the recession in the construction market, has been almost 84,000 points more as a result of the lack of maturation of the gas market in Spain. In Italy, the EBITDA has gone up by 35% between – because of activity and increase of remuneration.

Electricity in Spain, as you know last year, the electric – the Spanish electric market went – last quarter, sorry decreased by 1%, but that’s not our case. We grew – we’ve grown by 11% and it has been in general a decrease in margin as the result of higher fuel prices and a different generation mix which has given more way to thermal technologies first of all, because of the royal decree on national coal first of all and because of the drop in hydraulic production as regards to last year.

So our product as I said has gone up by 11% in spite of the fact that the industry’s or the sector’s production has gone down by one. There has been a lower level of rainfall, also less wind, and that’s helped to generate this factor and the combined cycle plants have registered – our combined cycle plants have registered an increase of 19% as regards the same period last year. The ordinary regime we’ve grown by 12%, although in that regime, there was a 12% decrease of the country, and our load factor was almost 37%, our combined cycle plants.

As regards to the special regime, our generation with renewables went down 6%, because we didn’t have the same level of wind that the average – the Spain as a whole had than we have had less wind and then less wind production and also many hydraulic energy. But our EBITDA has been EUR40 million focused on the previous year. I have to say that we continue – we’re still committed to renewables which is basically wind power, so we have almost 1,000 megawatts. You know our portfolio, which we hope to develop over the next few years and other competitions and bids that we're putting in. And we should remember some of these, but we’ve successfully come forward in the last 18 months. And there's also the split of Eufer Investments with Enel Green Power to be completed in May and we hope that – as I said that that operation is completed in May.

As regards to the gas infrastructure businesses, the gas volumes, the Madrid pipeline has gone up by 4%, the use of it, the level of use. The fleet after the problems in Japan, the events in Japan, obviously there was tension on the market. And that will give us even further strength in the LNG market. We’ve maintained our operational parameters and the plant in Hito [ph] has actually worked 51% more in spite of the crisis. But the regasification plant in Sagunto has slowed down by 17%, but the EBITDA in any case remains stable at EUR66 million.

In terms of supply of gas, Spain, we have a growth – well in the world we have a growth, as you see here, more than 2% very much leveraged in terms of the growth of our international sales by almost 16%, not so on the Spanish market. The Spanish market had a drop of 1% very similar to the one we had. And all these in spite of the disinvestments, things would be different had we not disposed of those assets in basically Madrid. International customers have gone up by 16% sales to those customers basically in the South America, Canada, and the Far East.

Unión Fenosa Gas have grown their sales very much have grown as a result of plant of Damietta and there has been an increase 14% on the Spanish market. So the EBITDA is almost EUR200 million and it has grown 7.1% as regards to over the last year, the previous year.

In Latin America, the electric business decreased by 15% – the production of electricity went down by 15%. If we bear in mind disinvestments, it wouldn't have decreased, it would have grown 27%. But the sale of our branch in Colombia obviously has affected the situation. And the EBITDA was EUR63 million which is 7% more higher and without bearing in mind the assets we sold and disinvestments in Mexico. If we – if all these were taken into consideration, the EBITDA had it not been for that it would have gone up by 45%.

In Latin America, the gas distribution is going up. Over the time we got 7.5 million points of supply and the EBITDA is growing EUR141 million with a growth of 5%. And Brazil is very strong with EBITDA growth of 16%, Colombia which has increased to more than 153,000 customers, in Mexico where the EBITDA is growing by 7%, and we continue to develop the gasification, the Federal District of Mexico project, which is enormous.

And in terms of the Latin American electricity distribution, regulated distribution in Latin America continues to grow. We are very near 5 million points of supply and energy sales have gone by – up by 1%. We have to underline that there has been a drop in the energy sales in Colombia because the temperatures haven’t been as high as last year, and an increase of 3.5 in the Central American area. Customers have gone up by 5% and EBITDA has decreased by 18%, and that is the – as I’ve said the new tax regulation, the change in the way that the new tax has to be paid. So the EBITDA of the different distributors in the whole area has reached 45 million with an increase of more than 20%.

And now we go to conclusions. And we should say that we are satisfied if we bear in mind the situation of the international situation. If we bear in mind the assets we’ve disposed off and if we bear in mind the complexity of the international energy supplies, we think that our results are very good and that the growth of 0.2% of our EBITDA, plus the net income, plus the conclusion of the disinvestment program, plus the strengthening of our capital structure, allow us to conclude that we are complying with our strategic plan that we had, and obviously, all these bearing in mind the provisioning for risks associated with the Sonatrach conflict.

That’s all from me. We will answer your questions with pleasure. Thank you.

Question-and-Answer Session

Luis Calvo

We will first take questions from the floor. Please state your name and the institution that you come from. We’ll take questions from the floor first. Yes, please.

Unidentified Analyst

Thank you, thank you very much. I have a couple of questions. Starting with Sonatrach, where you said there aren’t too many news and the expectation is to close this chapter before the end of the first semester of the year. Lately there has been a lot of events in Northern Africa, also Japan, prices of commodities have increased dramatically. And I would like to ask you whether this will make negotiations more difficult whether these are factors that need to be taken into account or not?

Secondly, Switzerland; at the beginning of the year we expected for the best solution of the case to happen and we're still waiting. Is it a good thing that it hasn't been resolved yet or –?

And, lastly, about the dividends; that means you’re going to save a lot of dividends. Is this is going to be a recurrent thing, because I don’t know are going to be very cooperative in the future if this were to be a recurrent thing.

Rafael Villaseca

I will try to answer the three questions. Negotiations, while we’ll take into account all the factors, but things like Japan and Northern Africa, they affect more spot markets and less long-term contracts where the rules are less affected by this event. We have long-term contracts and therefore these events are not as important. But obviously they add complexity to our negotiations, but they are not factors that are really determining factors.

Now when it comes to our legal actions, we prefer negotiated solutions rather than legal solutions. So we would prefer for the negotiations which are underway to conclude before we go to court that way we would be happier, we don’t want to go into litigation. So we prefer to continue with the negotiations and not have to go to court and I hope that this will be possible.

As far as the dividends, we only done what we had already approved. The Board of Directors at the AGM has not decided whether this is going to be a recurrent thing. We’ve just decided to give a complementary and additional dividend for this year and that was all.


Anymore questions from the floor?

Unidentified Analyst

Hello, good morning. I’m Alejandro [ph] and I have two questions. After this order which could be considered quite positive, what are the – what is the outlook for the rest of the year in the different business lines and in terms of EBITDA in the Gas Natural account?

And the second question is once the Sonatrach issue is over, we will look at the strategy of the company, the areas where you want to continue to grow, et cetera. There are some packages of renewable on sale in the market, there's also an opportunity to expand in Latin America. What are you going to pursue in the future?

Rafael Villaseca

Well, obviously, we cannot tell you what is going to happen, but this is a complex and volatile year. Lots of things are going on in the markets. It’s always been difficult in world of energy, but now it’s almost mission impossible to really predict what is going to happen. But we do believe our company has the ability to adapt itself to all those problems and issues.

Our position in liquefy natural gas is very sound, very positive, and it allows us to react to events that can come out. We hope that the Spanish market will finally settle. We thought last year we had touched floor. We hope that this will be the case this year. We expect growth of about 1%. We hope this will be confirmed. And we also hope that once these major events are over, markets will become a lot less volatile. So we believe our company has a capacity as we have proven already in previous occasions to adapt ourselves to market changes.

And in the gas market, obviously we expect an increase in prices in line with Brent prices, because Brent prices are I referenced our benchmark. And we hope that we will also see other improvements associated to the improvement of the Spanish economy. In terms of packages of renewables that are on sale, we’re open to any opportunity. We haven’t made any decisions yet, but there is no doubt that our company has concluded its divestment plan, even though we might decide to do something with our portfolio in the future, but we don’t expect that to happen now. And, obviously, that means that we’ll be able to take high advantage of opportunities that come up.

Luis Calvo

Thank you. Any further questions from the floor. No more questions. Then, questions from outside this room. First question in Spanish. First question in Spanish please. Microphone.

Unidentified Analyst

Could you tell us what are your prospects for this year in Q1? Do you expect any increases –?

Rafael Villaseca

Sorry, Pablo [ph], it’s very hard to hear you, and even harder for the interpreter. I’m sorry but it’s impossible to hear what this gentleman is saying.

Taking into account the volatility we're immersed in, we do believe that our vision is the same one as the beginning of the year. So there is no doubt that the situation in the markets was already moderate enough. And our vision for the rest of the year is not really that different from what we’ve seen in the first quarter.

Luis Calvo

Next question, please. Questions by Mr. Silva [ph]. Sorry, but the sound is not good enough, it’s impossible to hear from the translation booth.

Unidentified Analyst

Without evolution of operating cost – operating expenses?

Luis Calvo

Interpreters are very sorry, but we cannot translate the sound. It’s too low and too far away.

Rafael Villaseca

As far as wholesale EBITDA – as the Managing Director it's very difficult to give you a forecast for the rest of the year. In the case of costs and personnel expenses, you have to take into account synergies. So part of that decrease in OpEx has to do with the synergy plan. Those are recurrent but more difficult to predict our – the other items that are more significant obviously. But the important thing is recurrence with margins. But the idea is to maintain this level for the rest of the year.

When it comes to question about Colombia, income tax that was improved at the end of last year, the draft with some additional changes well is in tax for the years 2011 and 2014 paid in eight installments, that is twice a year. But it isn’t the first year that we see the accrual. Everything is accounted for in the first year. The impact is something like EUR30 million or EUR40 million something like that, closer to EUR30 million and EUR40 million. And this impact will be reflected in the year 2011.

Luis Calvo

Now, next question, please.

Unidentified Analyst

Three questions. Could you say something about what is the spark spread that you have in the Spanish generation in the first quarter and how does it compare to the spark spread of 2010, and could you say something about the evolution of that business throughout 2011?

Secondly, could you say something – well, we've read that the Egyptian Minister for Energy spoke about his intention to increase the price of gas for export. Have you talked to the Egyptian authorities, do you know what’s going to be the impact on Gas Natural?

And, finally, let’s forget about Sonatrachs and Egypt, but thinking about this as usual, could you tell us what do you think is going to happen with the margins during the rest of the year and in 2012, because contracts will be renegotiated, et cetera. So could you tell us how you see the dynamics of this business?

Rafael Villaseca

The spark spread before used to be around 17, so that’s the difference that we’re talking about here.

When it comes to Egypt, I remind you that it’s a long-term contract which is subject to revisions every three years, revisions of prices every three years. And, now, it’s going to happen again. So we’re talking to the Egyptian company, we’re negotiating with them for the next period. This negotiations are happening as usual and it’s still too early to tell you what’s going to be the outcome of this negotiations. But I don’t think it’s going to be something that we’re going to know soon, because of the political situation in Egypt. Well, things are not easy, but we hope we’ll be able to reach an agreement. It’s an ordinary revision as is the case with other companies.

Now when it comes to the evolution of the Spanish market, we don’t believe there is going to be a relevant change. This is a gas volumes that we’re talking about which are not that substantial and that will substitute liquefy natural gas that reach the Spanish market, so we’re not going to be seeing huge volumes that we’ll have a huge impact on the Spanish market, and I don’t think it’s going to mean that more gas is going to come, but the substitution of a certain type of gas, another type of gas.

And the Spanish market is clear that there is going to be a price increase for two reasons. First, because cost of provisioning is associated to Brent oil, and since Brent oil is going to increase then prices will have a reflection on end-user prices. And also because in the Spanish market last year, we had a certain level of oversupply and this has been resolved to a certain extent, because suppliers have applied – have solved the possibilities. Some of them have probably even resorted to the take or pay mechanism.

So everything has been readjusted, supply and demand has been readjusted. And as a result of international events with increase in prices and because of the Brent prices, well we hope that – we expect things to be as I have explained. Supply will be more adjusted to the reality of the market and provisioning prices will clearly increase.

Luis Calvo

Next question, please. Javier Suarez from UniCredit.

Javier Suarez – UniCredit

Good morning and thank you for answering my question. The first question is about the dividend. Dividend this year grows 1%. I was wondering whether with debt reduction in the company as a result of securitization I wonder whether the company could give us an update on this dividend policy. I think until 2012 the dividend policy was significantly higher than 1%. But do you think we might go back to previous situation with a decrease in dividend or what?

Another question about the tax rate. In the first quarter, we saw it was 25%. This level of tax rate, do you think it's going to be sustainable to year-end or what do you think is going to happen with the tax rate, a realistic view for this year?

And finally, could you tell us what's been the positive effect of exchange rate when consolidating your activities in Latin America?

Rafael Villaseca

As far as the first one, we haven’t changed our dividend policy, the one we announced in the strategic plan. The policy was an annual growth of 10%. This is what's valid now. In the year 2010, that wasn't the figure. But the idea was until 2014. So we haven’t altered our strategic plan. This year the idea is to be around that level. This year has been 25%, so I think that’s going to be more or less the same levels for the rest of the year.

Now for the third question, I think in the recent reports you can read in gas distribution, EBITDA would be more or less flat, because of the impact of exchange rates. And in distribution of electricity slightly higher, 20%, 21% because of the exchange rate effect. So this quarter, as we explained in the presentation, Latin America exchange rate has been – the impact of this exchange rate has been positive.

Luis Calvo

Any further questions? Yes, could you confirm whether there are any further questions on the phone? There is an additional question in the room.

Unidentified Analyst

Yes, thank you very much. I will have another about Egypt. In general when this business was owned by Fenosa, there was a dual structure where apart from oil prices, there was the price gas for this and another one for that. Before Gas Natural bought it, there was a renegotiation and it’s not clear to me what's the structure of that contract in general with indexing, with basket of products, et cetera? I don’t know whether this is really that dual or not. Could you say something else?

And then I have a very stupid question. Talking about adjusted debt and disposal of assets, the amount that you’ve shown here is for the assets and maturities. Is this because the sale of Arrúbal did not reduce the debt?

Rafael Villaseca

When I come to the first question, this is a standard contract. Not all contracts have the same float. This is a good contract and you have to look at not only the contract but the whole value chain of gas. It's an integrated project in that sense. But it's a standard contract where – which is linked to oil indices, the bridge loan. But yes, there is no debt reduction. Maybe a little bit, but not much.

Luis Calvo

Very well then, any further questions on the floor? I’ve been told that there are no further questions. We don’t have any questions in the web, so we can conclude the session now, the Q&A session.

Now, I’d like to thank everyone for coming, and we will meet again next quarter. Thank you very much.

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