WEBVTT 1 00:00:07.500 --> 00:00:10.900 Hello on welcome to this educational film which 2 00:00:10.900 --> 00:00:14.700 is devoted to a company which combines environmental 3 00:00:13.700 --> 00:00:16.900 excellence and financial 4 00:00:16.900 --> 00:00:17.300 performance. 5 00:00:18.300 --> 00:00:21.300 So there was a company is ebadiola. It's not 6 00:00:21.300 --> 00:00:24.500 the first film which we devote to energy and 7 00:00:24.500 --> 00:00:27.400 transition in energy. The first one was about 8 00:00:27.400 --> 00:00:30.700 the partnership of nowhere and Tesla in 9 00:00:30.700 --> 00:00:34.100 Australia in order to support the electricity grid 10 00:00:33.100 --> 00:00:36.900 locally, which is showing some deficiencies. 11 00:00:36.900 --> 00:00:39.900 The second one was devoted to orstead 12 00:00:39.900 --> 00:00:42.900 the Danish company in Scandinavia. Number 13 00:00:42.900 --> 00:00:45.900 one in windmills, by the way, birdola is 14 00:00:45.900 --> 00:00:48.500 number two in the windmill business, but it 15 00:00:48.500 --> 00:00:51.600 is more than that. It is a very successful bet 16 00:00:51.600 --> 00:00:54.100 in what is his name clean energy. 17 00:00:54.900 --> 00:00:57.300 At the very beginning of the story there is 18 00:00:57.300 --> 00:01:00.700 a gentleman a charismatic leader whose name is in. Yes, your 19 00:01:00.700 --> 00:01:04.400 Ghana the person was born in 1950. He 20 00:01:03.400 --> 00:01:06.600 received iron engineering education 21 00:01:06.600 --> 00:01:09.600 started business in an excellent 22 00:01:09.600 --> 00:01:12.600 institution whose name is ikady in Spain, and he 23 00:01:12.600 --> 00:01:16.000 also studied international business international trade. 24 00:01:16.700 --> 00:01:19.100 During five years when he was the CEO of 25 00:01:19.100 --> 00:01:22.400 Airtel Mobile in Spain. He became 26 00:01:22.400 --> 00:01:25.500 very aggressive number two against the 27 00:01:25.500 --> 00:01:28.300 number one who's name is a telephonica as a 28 00:01:28.300 --> 00:01:32.300 telecommunication operator history when Airtel 29 00:01:31.300 --> 00:01:34.100 mobile was sold. It was 30 00:01:34.100 --> 00:01:38.000 proposed to become the number one at iberto. He's been 31 00:01:37.400 --> 00:01:40.400 leading this position see you on chairman 32 00:01:40.400 --> 00:01:43.500 of the board since 2001 and the 33 00:01:43.500 --> 00:01:46.700 objective was now to confront the number one in Spain 34 00:01:46.700 --> 00:01:50.000 not in telecommunication operators, but 35 00:01:49.400 --> 00:01:52.500 in the electricity business the no one 36 00:01:52.500 --> 00:01:54.000 Spain walls and Desa. 37 00:01:54.600 --> 00:01:57.300 This person has a conviction and this 38 00:01:57.300 --> 00:02:00.600 conviction leads to a strategy there's a conviction and the 39 00:02:00.600 --> 00:02:03.700 vision is we have to ditch we have to get 40 00:02:03.700 --> 00:02:06.200 rid of fossil fuels and we have to 41 00:02:06.200 --> 00:02:09.300 completely focus on clean energy. 42 00:02:10.500 --> 00:02:13.800 Now this strategic Vision Wars absolutely implemented 43 00:02:13.800 --> 00:02:17.500 if you look a little bit at the past of ibadwala, 44 00:02:16.500 --> 00:02:19.400 the company is created in 45 00:02:19.400 --> 00:02:22.300 1992. It's a 46 00:02:22.300 --> 00:02:25.400 merger between two historical energy operators in 47 00:02:25.400 --> 00:02:28.600 Spain. Of course, the roots are much older 48 00:02:28.600 --> 00:02:31.200 than that, but in 1992, it is 49 00:02:31.200 --> 00:02:33.200 starting as hebertola. 50 00:02:33.900 --> 00:02:36.700 The company is based in Bilbao. It's 51 00:02:36.700 --> 00:02:40.300 a Basque country in Spain and he's 52 00:02:39.300 --> 00:02:42.400 ridiculous country always had 53 00:02:42.400 --> 00:02:45.600 very difficult relationship with a central 54 00:02:45.600 --> 00:02:48.200 government in Madrid will have 55 00:02:48.200 --> 00:02:51.300 discussion later on about that now and yes, your 56 00:02:51.300 --> 00:02:54.300 Kalan is appointed in 2001. And what is 57 00:02:54.300 --> 00:02:57.400 he going to do? He's going to transform the companies through Acquisitions 58 00:02:57.400 --> 00:03:01.000 external grows and capex internal 59 00:03:00.200 --> 00:03:04.000 Rose. So he's going to purchase by 60 00:03:03.100 --> 00:03:07.100 a number of companies complimenting that by 100 61 00:03:06.100 --> 00:03:10.000 30 billion euros invested in 62 00:03:09.400 --> 00:03:12.600 renewable energy acquisition started 63 00:03:12.600 --> 00:03:15.400 in 2001 a little bit in North 64 00:03:15.400 --> 00:03:18.100 America United States and also in Latin America, 65 00:03:18.100 --> 00:03:22.500 which is a normal development for companies originated in 66 00:03:22.500 --> 00:03:26.100 Spain. The very critical turning point of the company is 67 00:03:25.100 --> 00:03:28.700 the acquisition in 2006 for 68 00:03:28.700 --> 00:03:31.900 17.2 billion euros of Scottish 69 00:03:31.900 --> 00:03:33.200 Power Scottish Power. 70 00:03:33.800 --> 00:03:37.000 Very much space in the UK. That's quite normal as 71 00:03:36.500 --> 00:03:39.400 a very important footprint in North America 72 00:03:39.400 --> 00:03:42.800 and is very well known for his Excellence is technical 73 00:03:42.800 --> 00:03:46.500 excellence in wind farm management. That's 74 00:03:45.500 --> 00:03:48.100 absolutely phenomenal for 75 00:03:48.100 --> 00:03:51.900 the company because they acquires his knowledge the 76 00:03:51.900 --> 00:03:54.200 acquire footprint in the United States, which is quite 77 00:03:54.200 --> 00:03:57.500 significant much more than the first one which had been developed in 78 00:03:57.500 --> 00:04:00.400 2001 and they are going to extend in North 79 00:04:00.400 --> 00:04:04.300 America with the acquisition of energy East in 2008 for 80 00:04:03.300 --> 00:04:07.100 all most five billion dollars, then 81 00:04:06.100 --> 00:04:09.200 it's going to be complemented by an older 82 00:04:09.200 --> 00:04:12.100 acquisition and merger with uel all day in 83 00:04:12.100 --> 00:04:15.700 2015 creation and immediately sting 84 00:04:15.700 --> 00:04:18.400 of Alvin greed. Avon greed is now a company which 85 00:04:18.400 --> 00:04:21.400 is listed on a New York Stock Exchange the value of 86 00:04:21.400 --> 00:04:24.600 the companies about 16.5 billion dollars and 87 00:04:24.600 --> 00:04:27.300 still control by ibadoura. There will 88 00:04:27.300 --> 00:04:30.300 be further Acquisitions in Australia for example in 89 00:04:30.300 --> 00:04:33.100 2020 in fijen, but there's very interesting 90 00:04:33.100 --> 00:04:33.600 point. 91 00:04:33.800 --> 00:04:36.500 Which is in 2020 the company also 92 00:04:36.500 --> 00:04:38.800 wants to acquire P&M. 93 00:04:39.300 --> 00:04:42.500 Everything is okay, but it's going to be rejected by 94 00:04:42.500 --> 00:04:45.800 the US regulatory authorities because 95 00:04:45.800 --> 00:04:48.500 they say are you know, what among other problems 96 00:04:48.500 --> 00:04:52.100 there are some legal problems involving a bedroller 97 00:04:51.100 --> 00:04:54.500 and its top manager Mr. 98 00:04:54.500 --> 00:04:57.600 Kalan and it's true that ebirtual I 99 00:04:57.600 --> 00:05:01.700 had some business relation with a consulting firm whose 100 00:05:00.700 --> 00:05:03.600 ethical values. We're absolutely not 101 00:05:03.600 --> 00:05:05.400 guaranteed to say the least. 102 00:05:06.300 --> 00:05:09.500 Now where does a bird roller stand today? 103 00:05:09.500 --> 00:05:12.900 If you look at the S&P Global Energy company 104 00:05:12.900 --> 00:05:15.300 ranking, the company is number 105 00:05:15.300 --> 00:05:18.700 eight worldwide, which is absolutely outstanding development. 106 00:05:18.700 --> 00:05:22.100 Number two in wind farms behind orstead. 107 00:05:21.100 --> 00:05:25.600 You're remember I already mentioned that in 2021 108 00:05:24.600 --> 00:05:27.300 revenues are 38 billion 109 00:05:27.300 --> 00:05:31.200 euros a bit da represents 30% 110 00:05:30.200 --> 00:05:33.600 of revenues about 12 billion. 111 00:05:34.500 --> 00:05:38.000 the total assets for the companies were 40 billion 112 00:05:37.600 --> 00:05:40.900 euros, which is a consequence of huge 113 00:05:40.900 --> 00:05:43.200 investment and you understand immediately that 114 00:05:43.200 --> 00:05:46.800 the business is very Capital intensive if you confront assets 115 00:05:46.800 --> 00:05:47.500 and revenues 116 00:05:48.300 --> 00:05:51.500 Capex in 2021 more than 117 00:05:51.500 --> 00:05:54.500 six billion euros and bottom line 118 00:05:54.500 --> 00:05:57.100 their earnings 4 billion. So the big question 119 00:05:57.100 --> 00:06:00.200 is Which percentage of this 4 billion is reinvested is 120 00:06:00.200 --> 00:06:03.700 retaining the company so that you can find on drugs. The 121 00:06:03.700 --> 00:06:06.700 dividend Powers ratio is 70% So your 122 00:06:06.700 --> 00:06:09.300 retain 30% 30% of 4 billion 123 00:06:09.300 --> 00:06:12.800 is 1.2. It's far from financing the 124 00:06:12.800 --> 00:06:15.500 six billion plus of capital expenditures. 125 00:06:16.200 --> 00:06:18.800 Of course, it would be a question about financial structure. 126 00:06:19.400 --> 00:06:22.300 Of course, it will be a question about the level of in-deptness of the 127 00:06:22.300 --> 00:06:24.700 company will discuss that towards the end of the film. 128 00:06:25.600 --> 00:06:28.400 Now that's about financial metrics. If 129 00:06:28.400 --> 00:06:31.700 you look at ESG performance, it's absolutely great 130 00:06:31.700 --> 00:06:35.000 widely recognized absolutely fantastic 131 00:06:34.500 --> 00:06:37.000 performance on the environment point of view 132 00:06:37.300 --> 00:06:40.600 distinctions ratings and so on so forth. Absolutely, 133 00:06:40.600 --> 00:06:43.700 no doubt about that Net Zero Target for 134 00:06:43.700 --> 00:06:46.500 Europe 20 30 Net Zero 135 00:06:46.500 --> 00:06:49.600 Target for the world 2050 in order to raise 136 00:06:49.600 --> 00:06:52.700 his targets a company has a communicated subjectives which 137 00:06:52.700 --> 00:06:55.400 have been approved by the sbti consistent with 138 00:06:55.400 --> 00:06:59.000 an increase in temperature by 1.5 degrees. 139 00:06:58.600 --> 00:07:02.000 I Belize in nuclear. He's 140 00:07:01.100 --> 00:07:04.400 in wind farms. I already mentioned but also called 141 00:07:04.400 --> 00:07:07.700 generation Sora hydroelectric growing very 142 00:07:07.700 --> 00:07:10.300 much in hydrogen. What is very interesting in 143 00:07:10.300 --> 00:07:13.900 their communication is that we are ASG plus f 144 00:07:14.600 --> 00:07:17.300 So we are not F. We are not ESG. We are 145 00:07:17.300 --> 00:07:21.200 both we are combination ESG means environment and 146 00:07:20.200 --> 00:07:24.500 f means financial robustness Financial 147 00:07:23.500 --> 00:07:26.300 strengths. So it's 148 00:07:26.300 --> 00:07:29.900 not environment that the expense of financial metrics. It's 149 00:07:29.900 --> 00:07:32.600 not Finance whatever the consequences on 150 00:07:32.600 --> 00:07:35.500 ESG now, it's both together, which is 151 00:07:35.500 --> 00:07:36.400 absolutely great. 152 00:07:37.200 --> 00:07:40.600 Now the company says we are Global energy leader. No, 153 00:07:40.600 --> 00:07:43.100 there are international. They are 154 00:07:43.100 --> 00:07:46.800 not completely Global if you look at the map you understand 155 00:07:46.800 --> 00:07:49.400 that 400,000 people are 156 00:07:49.400 --> 00:07:52.400 directly or indirectly working for Allah. 157 00:07:53.100 --> 00:07:56.600 But they are mostly in Spain normal. UK Scottish 158 00:07:56.600 --> 00:07:59.700 Power a little bit in Australia and very much 159 00:07:59.700 --> 00:08:02.000 in North America and in Brazil. 160 00:08:02.700 --> 00:08:05.500 So they are not completely Global even though 161 00:08:05.500 --> 00:08:08.300 the company has very much developed throughout the years. 162 00:08:08.300 --> 00:08:12.600 Now. Let's have a look at some traditional Financial metrics revenues 163 00:08:11.600 --> 00:08:14.600 browse revenues are 164 00:08:14.600 --> 00:08:18.000 up over about 10 years from 30 165 00:08:17.200 --> 00:08:20.800 billion to 40 billion euros. It's 166 00:08:20.800 --> 00:08:23.900 an average of about three four five percent Grows Right. 167 00:08:23.900 --> 00:08:26.200 There's a little bit of volatility in a 168 00:08:26.200 --> 00:08:29.500 growth rate, which is due to Energy prices. Nothing wrong 169 00:08:29.500 --> 00:08:32.500 with that the companies operating in three segments 170 00:08:32.500 --> 00:08:36.400 one is named liberalized you produce energy you 171 00:08:35.400 --> 00:08:38.200 produce electricity in a library 172 00:08:38.200 --> 00:08:42.100 ice Market producing also energy through Renewables and 173 00:08:41.100 --> 00:08:44.800 renewable segment is absolutely fundamental it 174 00:08:44.800 --> 00:08:47.300 consume plenty of capex. So segment is 175 00:08:47.300 --> 00:08:50.300 about Distributing electricity through its own network and you 176 00:08:50.300 --> 00:08:52.600 all remember this concept or smart great. 177 00:08:53.300 --> 00:08:56.200 Now if you want to have a look at the relative weight of 178 00:08:56.200 --> 00:08:59.300 one segment against each other you understand 179 00:08:59.300 --> 00:09:02.600 that the one which is 50% of the revenues 180 00:09:02.600 --> 00:09:05.100 is laboralized or it was 181 00:09:05.100 --> 00:09:08.900 60. It's down to 50 but it's still quite strong in 182 00:09:08.900 --> 00:09:11.300 in the country. If you look at 183 00:09:11.300 --> 00:09:14.500 Renewables, it's growing little by little and network is 184 00:09:14.500 --> 00:09:17.400 growing more or less. Right? But what 185 00:09:17.400 --> 00:09:20.100 is still dominant is liberalized and what is 186 00:09:20.100 --> 00:09:23.700 growing is renewable and renewable is in the middle of the picture. 187 00:09:24.900 --> 00:09:27.400 Now you understand that the company sales are 188 00:09:27.400 --> 00:09:30.300 growing but the level of return on sales also 189 00:09:30.300 --> 00:09:33.800 is growing in parallel with the revenues EPT on 190 00:09:33.800 --> 00:09:36.600 sales is up. So it's not only BDA which 191 00:09:36.600 --> 00:09:39.300 is up but as a percentage to revenues it's 192 00:09:39.300 --> 00:09:42.600 up and revenues are up. There's a company is very successful 193 00:09:42.600 --> 00:09:44.100 in terms of return on sales. 194 00:09:45.200 --> 00:09:48.300 Look at the evolution of the operating expenses. You understand that 195 00:09:48.300 --> 00:09:51.800 they are reasonably stable. Sometimes a 196 00:09:51.800 --> 00:09:54.900 little bit sometimes a little bit down except supplies 197 00:09:54.900 --> 00:09:57.300 for the cost of sales, which is of course a bit 198 00:09:57.300 --> 00:10:00.500 more volatile because it's about energy which 199 00:10:00.500 --> 00:10:03.600 itself is not very stable in terms of prices. 200 00:10:04.600 --> 00:10:07.300 Now you remember that it be that 201 00:10:07.300 --> 00:10:10.600 is up. So the difference is depreciating an amortizing 202 00:10:10.600 --> 00:10:11.900 the capital expenditures. 203 00:10:12.500 --> 00:10:15.400 Of course, they move in parallel directions, but what 204 00:10:15.400 --> 00:10:18.300 is quite interesting is to observe that a bit versus 205 00:10:18.300 --> 00:10:19.600 a bit. That's about 10% 206 00:10:20.400 --> 00:10:23.500 And the Precision amortizations about 10% to 207 00:10:23.500 --> 00:10:26.300 revenues so the company is spending a 208 00:10:26.300 --> 00:10:29.500 lot in depreciation amortization as a consequence of investment. 209 00:10:29.500 --> 00:10:32.300 It's also quite interesting to observe the evolution 210 00:10:32.300 --> 00:10:35.200 of industrial investment at the company if you 211 00:10:35.200 --> 00:10:38.400 calculate capex as a percentage of revenues 212 00:10:38.400 --> 00:10:40.700 historically, it's about 16% 213 00:10:41.500 --> 00:10:44.400 There is a ratio which I always enjoy very 214 00:10:44.400 --> 00:10:48.800 much calculating and observing. It's intensity Capital 215 00:10:48.800 --> 00:10:52.000 expenditures today divided by depreciation, which 216 00:10:51.100 --> 00:10:54.500 is a consequence of capital expenditures yesterday. 217 00:10:54.500 --> 00:10:57.900 Now, if You observe the ratio, you understand that Karen 218 00:10:57.900 --> 00:11:01.100 capex is 15% more than 219 00:11:00.100 --> 00:11:03.700 depreciation, which is past capex. 220 00:11:03.700 --> 00:11:06.500 The capital is investing and investing and investing 221 00:11:06.500 --> 00:11:09.500 consequence Capital intensity. You remember 222 00:11:09.500 --> 00:11:13.000 that in a capital employed you have non-current assets 223 00:11:12.300 --> 00:11:15.700 and you have your model Monet, which is invested in 224 00:11:15.700 --> 00:11:19.300 the cash conversion cycle inventory is 225 00:11:19.300 --> 00:11:22.300 plus receivables minus payables. And if 226 00:11:22.300 --> 00:11:25.400 You observe what happened your rings the last almost 10 years 227 00:11:25.400 --> 00:11:28.400 right You observe that the cash conversion cycle 228 00:11:28.400 --> 00:11:31.100 walls up inventory is quite 229 00:11:31.100 --> 00:11:35.500 stable but accounts receivable accounts payable 230 00:11:35.500 --> 00:11:38.200 a little bit down and then stabilizing. So you 231 00:11:38.200 --> 00:11:41.200 understand that today you have about 40 days of cash conversion cycle. 232 00:11:41.500 --> 00:11:45.400 When it was on layer 20 days sometime ago. The consequence 233 00:11:44.400 --> 00:11:47.800 is quite a lot of billion 234 00:11:47.800 --> 00:11:50.600 euros in a working capital requirement. We'll see 235 00:11:50.600 --> 00:11:53.500 that later on. Now if you combine non-current assets 236 00:11:53.500 --> 00:11:57.500 and working capital requirement, you have the capital employed traditionally 237 00:11:56.500 --> 00:11:59.200 we divide revenues by 238 00:11:59.200 --> 00:12:02.500 Capital employed to get the assets turnover, which is 239 00:12:02.500 --> 00:12:06.000 a metric which measures the assets productivity 240 00:12:05.100 --> 00:12:06.600 of the company. 241 00:12:07.400 --> 00:12:10.700 If you look at the past it was 0.5. And now 242 00:12:10.700 --> 00:12:13.600 it's 0.4 as a consequence of 243 00:12:13.600 --> 00:12:16.300 huge investment and a little bit of deterioration of the cash 244 00:12:16.300 --> 00:12:17.300 conversion cycle. 245 00:12:18.200 --> 00:12:22.400 But if you look at the revenues generated by one Euro 246 00:12:21.400 --> 00:12:24.300 invested in property plant and Equipment, 247 00:12:24.300 --> 00:12:25.200 but it's quite stable. 248 00:12:26.100 --> 00:12:29.500 So all in all it's about investing in capex, but 249 00:12:29.500 --> 00:12:32.500 it is also investing quote in the cash 250 00:12:32.500 --> 00:12:35.300 conversion cycle. We'll discuss that a little bit later on. 251 00:12:36.300 --> 00:12:39.800 not return on capital is the return on sales 20% 252 00:12:39.800 --> 00:12:42.400 but multiplied by an assets 253 00:12:42.400 --> 00:12:43.300 turnover, which is 254 00:12:44.100 --> 00:12:47.700 0.4. If you multiply 20% by 0.4 255 00:12:47.700 --> 00:12:50.400 you get a percent which is a return on 256 00:12:50.400 --> 00:12:53.000 Capital employed generated by the company today. 257 00:12:53.700 --> 00:12:56.700 So, of course when you sell for one 258 00:12:56.700 --> 00:12:59.800 year row you make 20 cents of operating profit, 259 00:12:59.800 --> 00:13:02.300 but if you invest one Euro in capital 260 00:13:02.300 --> 00:13:05.700 employed in business operations, you generate only 40 261 00:13:05.700 --> 00:13:08.100 cents of revenues. So if you 262 00:13:08.100 --> 00:13:11.700 make 20% of 40 cents, you generate eight 263 00:13:11.700 --> 00:13:14.800 cents out of the one Euro invested 264 00:13:14.800 --> 00:13:17.400 in business operations, there is 265 00:13:17.400 --> 00:13:20.400 eight percent. That's fine. And that's fine 266 00:13:20.400 --> 00:13:23.400 because it's quite stable because the 267 00:13:23.400 --> 00:13:26.600 beta the capital is low because it's cost 268 00:13:26.600 --> 00:13:29.000 of capital is relatively lower will discuss that a little 269 00:13:29.100 --> 00:13:32.600 bit later and so the company's performing but it 270 00:13:32.600 --> 00:13:35.600 is not as performing as what could be suggested by 271 00:13:35.600 --> 00:13:38.800 high return on sales. It's very traditional for 272 00:13:38.800 --> 00:13:41.700 Capital intensive businesses. You remember strong 273 00:13:41.700 --> 00:13:44.600 statement Corporate Finance what creates value is 274 00:13:44.600 --> 00:13:48.300 performance? So how do we calculate relative 275 00:13:47.300 --> 00:13:50.300 value creation to price value 276 00:13:50.300 --> 00:13:52.700 divided by Capital employed Market to book? 277 00:13:53.400 --> 00:13:56.500 And to price value is market cap number of 278 00:13:56.500 --> 00:13:59.200 shares multiplied by stock price. It's a value of 279 00:13:59.200 --> 00:14:02.400 equity. We add the value of that. We divide that 280 00:14:02.400 --> 00:14:05.400 by Capital employed which was financed by equity and 281 00:14:05.400 --> 00:14:05.500 debt. 282 00:14:06.100 --> 00:14:09.400 Basically, if it's more than one it means that there is value creation 283 00:14:09.400 --> 00:14:12.500 less than one value distraction. And what do 284 00:14:12.500 --> 00:14:15.500 we observe for a virtual the same as for every company? 285 00:14:15.500 --> 00:14:18.700 I showed you in different videos a strong 286 00:14:18.700 --> 00:14:21.400 correlation between Market to book which is relative value 287 00:14:21.400 --> 00:14:24.800 creation and economic performance, which is returned Capital 288 00:14:24.800 --> 00:14:25.300 employee. 289 00:14:25.900 --> 00:14:28.800 But it's not enough to observe this correlation. We 290 00:14:28.800 --> 00:14:31.600 also have to try to find out what should be 291 00:14:31.600 --> 00:14:34.400 the market to book assuming that the company is 292 00:14:34.400 --> 00:14:37.700 stable not growing G is 0 cash 293 00:14:37.700 --> 00:14:40.500 flows are stable. What should be the market 294 00:14:40.500 --> 00:14:43.300 to book the market to book should be if you remember 295 00:14:43.300 --> 00:14:46.500 the formula as a return on Capital after that we've added 296 00:14:46.500 --> 00:14:48.700 bad or what then we have to calculate the walk. 297 00:14:49.500 --> 00:14:52.300 To calculate the work. We observe the evolution of the 298 00:14:52.300 --> 00:14:55.800 stock price against the evolution stock market index 299 00:14:55.800 --> 00:14:58.700 Madrid Stock Exchange ibex35 300 00:14:59.400 --> 00:15:02.500 And you understand that there are two periods one period 301 00:15:02.500 --> 00:15:07.600 with a good correlation up to 2016-2017 and 302 00:15:06.600 --> 00:15:09.900 a kind of decoration starting 303 00:15:09.900 --> 00:15:12.700 in 2017. Now when you 304 00:15:12.700 --> 00:15:16.000 calculate the beta econometrically You 305 00:15:15.300 --> 00:15:18.600 observe exactly the same story the beta was 306 00:15:18.600 --> 00:15:22.000 one up to a certain moment. It went downstairs but 307 00:15:21.200 --> 00:15:24.900 0.5 then you 308 00:15:24.900 --> 00:15:27.700 calculate the way the average cost of capital you take 309 00:15:27.700 --> 00:15:30.800 Market weddings for equity and that you calculate 310 00:15:30.800 --> 00:15:33.400 the apparent interest rate, which you multiply by one 311 00:15:33.400 --> 00:15:36.400 minus the apprent tax rate cost of that after 312 00:15:36.400 --> 00:15:39.500 tax cost of equity government bone, right 313 00:15:39.500 --> 00:15:42.300 Plus Market risk premium 6 point something 314 00:15:42.300 --> 00:15:45.300 for Spain multiplied by a beta which starts at 315 00:15:45.300 --> 00:15:48.100 the level of one and then goes down to 0.5. 316 00:15:49.600 --> 00:15:53.000 And I calculated a walk which before tax 317 00:15:52.400 --> 00:15:55.500 is about four to four point 318 00:15:55.500 --> 00:15:56.000 five percent. 319 00:15:57.100 --> 00:16:00.300 That's quite interesting because the company's communicating on 320 00:16:00.300 --> 00:16:03.900 its work before tax as well for the impairment test. 321 00:16:03.900 --> 00:16:06.700 And if you look at the list, it's a 322 00:16:06.700 --> 00:16:09.700 bit more. It's a bit less than 4% But 323 00:16:09.700 --> 00:16:12.800 basically we are in same range of magnitude. That's 324 00:16:12.800 --> 00:16:15.400 fine. So basically if the 325 00:16:15.400 --> 00:16:18.700 rose say is eight percent and it's a walk 326 00:16:18.700 --> 00:16:21.800 is 4% before tax. The market 327 00:16:21.800 --> 00:16:24.400 to book should be two which is 328 00:16:24.400 --> 00:16:27.300 what we observe here on the graph and it should 329 00:16:27.300 --> 00:16:30.700 be up as a consequence of the rosie which is doing well and 330 00:16:30.700 --> 00:16:33.400 so on so forth, but at the end of the day the market 331 00:16:33.400 --> 00:16:37.000 to book is just a little bit of one when there 332 00:16:36.100 --> 00:16:39.500 is a difference between the market to book no 333 00:16:39.500 --> 00:16:42.800 growth and the market to book act wall. What 334 00:16:42.800 --> 00:16:45.400 does it mean it means that either the market 335 00:16:45.400 --> 00:16:49.600 is stupid and has not yet understood that it should be higher or 336 00:16:48.600 --> 00:16:52.100 because the market does not trust the 337 00:16:51.100 --> 00:16:54.500 ability of the Rose day of the company to 338 00:16:54.500 --> 00:16:56.900 be sustainable. So the market 339 00:16:57.100 --> 00:17:00.700 some doubts about the sustainability of the financial performance 340 00:17:00.700 --> 00:17:01.500 of The Firm. 341 00:17:02.500 --> 00:17:05.600 In order to have a look at that we need to go through two 342 00:17:05.600 --> 00:17:08.400 very relevant subjects first. We are going to make a 343 00:17:08.400 --> 00:17:11.700 deep dive into the segments segment by 344 00:17:11.700 --> 00:17:14.100 segment. And then we are going to have a 345 00:17:14.100 --> 00:17:17.300 look at the financial strategy of the company not only the level 346 00:17:17.300 --> 00:17:20.700 of adaptedness but also the nature of financing 347 00:17:20.700 --> 00:17:24.200 you remember there are three segments one is liberalized. 348 00:17:23.200 --> 00:17:26.700 The second line is about to Renewables. And 349 00:17:26.700 --> 00:17:30.100 the third one is about Network and distribution. What is 350 00:17:29.100 --> 00:17:33.000 very interesting is to look at the ebida to 351 00:17:32.600 --> 00:17:36.000 sales and revenues per segment. 352 00:17:35.700 --> 00:17:38.700 You remember the long term stable 353 00:17:38.700 --> 00:17:41.400 evolution of the ebda to revenues 354 00:17:41.400 --> 00:17:44.500 but there are huge differences from one segment to 355 00:17:44.500 --> 00:17:47.800 the other if you look at the liberalized business, it's not 356 00:17:47.800 --> 00:17:50.100 very profitable. If you 357 00:17:50.100 --> 00:17:53.900 look at Renewables, it's outstanding profitability traditionally 358 00:17:53.900 --> 00:17:56.800 quotes. It's about 60% which 359 00:17:56.800 --> 00:18:00.200 is quite big in 2021. It's skyrocketed 360 00:17:59.200 --> 00:18:01.200 to 90% Plus. 361 00:18:02.700 --> 00:18:05.400 consequence of the evolution of selling prices for renewable energy 362 00:18:06.600 --> 00:18:09.600 So you understand that there are huge discrepancies from 363 00:18:09.600 --> 00:18:11.200 one segment to the other. 364 00:18:11.900 --> 00:18:14.300 The consequence of the high return on 365 00:18:14.300 --> 00:18:18.400 sales is a conflict with a Spanish government Madrid 366 00:18:17.400 --> 00:18:20.600 government says some companies are 367 00:18:20.600 --> 00:18:23.800 taking advantage of the situation energy crisis 368 00:18:23.800 --> 00:18:26.400 on the imposing excess profits 369 00:18:26.400 --> 00:18:29.100 on the poorest and etc. Etc. 370 00:18:29.100 --> 00:18:32.400 So we are going to create tax. That's a normal reaction. 371 00:18:32.400 --> 00:18:34.600 We create tax whenever it's possible. 372 00:18:35.700 --> 00:18:39.100 There will be a strong quote response 373 00:18:38.100 --> 00:18:39.800 from the CEO. 374 00:18:40.400 --> 00:18:44.700 So Co has a very very strong personality 375 00:18:43.700 --> 00:18:46.700 okay is very 376 00:18:46.700 --> 00:18:49.600 charismatic leader and here whether you 377 00:18:49.600 --> 00:18:52.800 see on the picture it's annual report 2021 378 00:18:52.800 --> 00:18:56.100 cop 26 in Glasgow the 379 00:18:55.100 --> 00:18:59.400 prime minister of Scotland Madam Nicolas 380 00:18:58.400 --> 00:19:01.400 sturgeon and the CEO 381 00:19:01.400 --> 00:19:04.600 of ibadwala in yashokalan, so 382 00:19:04.600 --> 00:19:07.800 they are together in on the picture and what 383 00:19:07.800 --> 00:19:10.700 is mentioned is first CEO sagonda prime 384 00:19:10.700 --> 00:19:10.800 minister. 385 00:19:12.300 --> 00:19:15.500 And the pictures whether you have all you have all your 386 00:19:15.500 --> 00:19:18.200 words and recognitions that are out for the 387 00:19:18.200 --> 00:19:21.800 company column on the left column on the right all 388 00:19:21.800 --> 00:19:24.700 the walls and recognitions, which we attributed 389 00:19:24.700 --> 00:19:25.400 to the chairman. 390 00:19:26.500 --> 00:19:29.900 So you understand that the person is very happy of 391 00:19:29.900 --> 00:19:32.500 himself. And there is a little 392 00:19:32.500 --> 00:19:36.700 bit the beginning of the cult of the personality probably. 393 00:19:38.300 --> 00:19:42.100 Now let's go back to the segments of course renewable 394 00:19:41.100 --> 00:19:44.700 is very profitable but renewable 395 00:19:44.700 --> 00:19:47.300 is consuming tons of cash for Capital 396 00:19:47.300 --> 00:19:51.300 expenditures. You remember 130 billion that represents 397 00:19:50.300 --> 00:19:53.700 capex divided by revenues of 398 00:19:53.700 --> 00:19:56.600 60 80 sometimes more. So, of 399 00:19:56.600 --> 00:19:59.800 course, you have to generate huge EBT in order 400 00:19:59.800 --> 00:20:02.800 to finance huge capex. Now the 401 00:20:02.800 --> 00:20:06.200 consequence of low capex for liberalized a 402 00:20:05.200 --> 00:20:08.400 big capex for Renewables is yeah says 403 00:20:08.400 --> 00:20:10.500 turnover is exactly the other way around 404 00:20:11.600 --> 00:20:14.400 of course liberalized is capital intensive, but 405 00:20:14.400 --> 00:20:17.800 Euro invested in business is generating a 406 00:20:17.800 --> 00:20:18.700 Europe revenues. 407 00:20:19.600 --> 00:20:22.700 Now a Euro invested in Renewables is generating 408 00:20:22.700 --> 00:20:25.200 revenues of 15 cents. So it's 409 00:20:25.200 --> 00:20:28.400 extremely Capital intensive the assets turnover is 410 00:20:28.400 --> 00:20:31.300 dramatically low, then we can calculate a 411 00:20:31.300 --> 00:20:34.700 kind of return on asset for each and every segment. Of course, 412 00:20:34.700 --> 00:20:37.300 we should calculate Rosé a bit divided by 413 00:20:37.300 --> 00:20:40.200 Capital employed we have the bit but we 414 00:20:40.200 --> 00:20:43.300 don't have the capital employed for each segment. We have 415 00:20:43.300 --> 00:20:46.000 a segment asset which is much bigger. So instead of 416 00:20:46.300 --> 00:20:49.600 taking the ability, let's take a bit up and we can calculate the 417 00:20:49.600 --> 00:20:52.600 kind of return I said, it'd be divided by 418 00:20:52.600 --> 00:20:53.800 segment assets. 419 00:20:54.400 --> 00:20:57.500 And then why do we get we get something which is 420 00:20:57.500 --> 00:21:01.100 quite interesting up to 2020. What 421 00:21:00.100 --> 00:21:04.200 was more profitable? Well liberalized 422 00:21:03.200 --> 00:21:06.900 and the less profitable was Renewables, 423 00:21:06.900 --> 00:21:09.300 even though they beta was 424 00:21:09.300 --> 00:21:10.700 60% of revenues. 425 00:21:11.300 --> 00:21:14.300 Then it crossed and in 2021 because 426 00:21:14.300 --> 00:21:18.200 it's a huge increase in saying price for Renewables. Then 427 00:21:17.200 --> 00:21:21.000 renewable is the largest return 428 00:21:20.700 --> 00:21:23.500 asset contributor and liberalize is 429 00:21:23.500 --> 00:21:26.200 a lowest but you understand 430 00:21:26.200 --> 00:21:29.600 that we are in a very traditional situation which is 431 00:21:29.600 --> 00:21:32.800 named the DuPont. No more formula. The rose 432 00:21:32.800 --> 00:21:35.500 is not a return on sales. It's a 433 00:21:35.500 --> 00:21:38.200 return system multiplied by the assets to an over 434 00:21:38.200 --> 00:21:40.000 which is about the assets productivity. 435 00:21:40.800 --> 00:21:44.800 So when you are operating in a very capital-intensive 436 00:21:43.800 --> 00:21:48.000 business energy utilities 437 00:21:47.900 --> 00:21:51.200 telecommunication operators infrastructure of 438 00:21:51.200 --> 00:21:54.500 any kind, then you must generate a very 439 00:21:54.500 --> 00:21:56.400 significant operating margin. 440 00:21:57.300 --> 00:22:00.600 In order to compensate very low assets turnover. 441 00:22:01.300 --> 00:22:04.800 And what is quite interesting to observe in terms of communication is 442 00:22:04.800 --> 00:22:07.700 that you are going to be criticized for the high level 443 00:22:07.700 --> 00:22:10.400 of commercial profitability. Why is 444 00:22:10.400 --> 00:22:13.400 it so because a number of people don't know the difference 445 00:22:13.400 --> 00:22:16.600 between return sets and return Capital, but the number 446 00:22:16.600 --> 00:22:19.700 of people they know that but politically speaking 447 00:22:19.700 --> 00:22:22.200 it's absolutely dramatic to say look at 448 00:22:22.200 --> 00:22:25.300 these people. They make a 60% operating margin. 449 00:22:26.200 --> 00:22:29.300 At the end of the day this economically wrong, but it works on 450 00:22:29.300 --> 00:22:30.700 a communication point of view. 451 00:22:31.800 --> 00:22:34.200 It is the other way around when you are in a light 452 00:22:34.200 --> 00:22:38.200 business such as distribution in which you don't need huge manufacturing 453 00:22:37.200 --> 00:22:40.400 footprint. Then you understand 454 00:22:40.400 --> 00:22:43.600 that you can afford reasonably low operating 455 00:22:43.600 --> 00:22:46.400 margin and still be very profitable because 456 00:22:46.400 --> 00:22:47.900 the assets turnover is very high. 457 00:22:49.100 --> 00:22:52.300 If you take a company like Walmart, the operating income is 458 00:22:52.300 --> 00:22:55.700 4% but the assets turnover is five and five 459 00:22:55.700 --> 00:22:58.100 multiplied by 4 is 20% in terms of 460 00:22:58.100 --> 00:23:01.500 rosay, and it's very profitable and then 461 00:23:01.500 --> 00:23:04.400 you can communicate the other way around. Oh, you 462 00:23:04.400 --> 00:23:07.200 know, we generate low operating margins. We don't 463 00:23:07.200 --> 00:23:10.000 take much more from our customers and so on 464 00:23:10.300 --> 00:23:13.400 and so forth and it works now you remember I wanted 465 00:23:13.400 --> 00:23:16.100 to discuss two subjects which in my opinion are quite 466 00:23:16.100 --> 00:23:19.600 relevant the segments but also the financing first, what 467 00:23:19.600 --> 00:23:21.700 about the level of in depth in this? 468 00:23:22.300 --> 00:23:25.700 If you look at the gearing traditional figure structure 469 00:23:25.700 --> 00:23:28.500 that divided by Equity Equity market 470 00:23:28.500 --> 00:23:31.300 cap or Equity book. So a book gearing 471 00:23:31.300 --> 00:23:33.600 or Market gearing is less than one. 472 00:23:34.300 --> 00:23:37.300 So basically, it means that shareholders involve Mont is greater 473 00:23:37.300 --> 00:23:40.600 and bankers and bondholders involvement contribution. 474 00:23:40.600 --> 00:23:43.300 That's okay. Now how many years of a 475 00:23:43.300 --> 00:23:46.600 big does it take to repair that leverage net that 476 00:23:46.600 --> 00:23:48.100 divided by that? It's about four. 477 00:23:49.300 --> 00:23:52.200 Is it's acceptable or not? You know, it's a 478 00:23:52.200 --> 00:23:55.400 bit an illusion to say that four years of a bit are going 479 00:23:55.400 --> 00:23:58.300 to repetit because from there be die. 480 00:23:58.300 --> 00:24:01.500 You have to deduct interest taxes. He maintenance capex 481 00:24:01.500 --> 00:24:04.600 and so on so forth. So it's far from being available to repair the 482 00:24:04.600 --> 00:24:07.700 debt, but is it acceptable maybe because 483 00:24:07.700 --> 00:24:10.900 we are in a business, which is absolutely phenomenal and 484 00:24:10.900 --> 00:24:12.000 the beta is low. 485 00:24:13.100 --> 00:24:16.400 But what is very interesting is to consolidate the cash 486 00:24:16.400 --> 00:24:18.500 flow statements over a few years? 487 00:24:19.400 --> 00:24:22.500 The calculation I made is from 2016 to 488 00:24:22.500 --> 00:24:23.900 2021 six years. 489 00:24:24.500 --> 00:24:27.800 And then in billion euros, what does it say the cash 490 00:24:27.800 --> 00:24:30.800 flow statement starts with a bidder accumulated a 491 00:24:30.800 --> 00:24:33.400 bit 56 57 billion. 492 00:24:34.100 --> 00:24:37.400 Working capital requirement increase from 20 493 00:24:37.400 --> 00:24:40.200 to 40 days. It caught the company 494 00:24:40.200 --> 00:24:43.500 something like 8 billion how much money is 495 00:24:43.500 --> 00:24:46.500 available funds from operations to actually pay the 496 00:24:46.500 --> 00:24:50.100 interest in contractile and the taxes legal. Well 497 00:24:49.100 --> 00:24:52.200 48 now if you take 498 00:24:52.200 --> 00:24:55.200 interest in taxes, it's a bit more than 10 how much 499 00:24:55.200 --> 00:24:58.100 is available to invest 37.5. 500 00:24:59.100 --> 00:25:02.900 We decided 7.5 billion. What do you do do you 501 00:25:02.900 --> 00:25:06.200 invest? Yes, Capital expenditures 34 502 00:25:05.200 --> 00:25:08.300 billion over the period and that's great 503 00:25:08.300 --> 00:25:11.300 because the cash flow which is generated by the company from its business 504 00:25:11.300 --> 00:25:14.300 operations. Exceeds what the company's investing in 505 00:25:14.300 --> 00:25:17.500 its capital expenditures. And how much is left about 3 506 00:25:17.500 --> 00:25:20.200 billion to do what to do. What is consistent with 507 00:25:20.200 --> 00:25:23.300 your financial strategy returning cash to share orders and 508 00:25:23.300 --> 00:25:26.400 managing your balancing how much cash is returned 509 00:25:26.400 --> 00:25:30.000 to shareholders more than 23 billion 510 00:25:29.400 --> 00:25:33.300 dividends. You remember 70% 511 00:25:32.300 --> 00:25:35.400 dividend payout ratio, and in 512 00:25:35.400 --> 00:25:38.800 addition to that almost each and every year the company's buying 513 00:25:38.800 --> 00:25:41.200 back its shares for 10 514 00:25:41.200 --> 00:25:44.300 billion euros over the last six years. So you 515 00:25:44.300 --> 00:25:47.700 understand that with your three billion of free cash flow. It doesn't 516 00:25:47.700 --> 00:25:50.500 close the final thing. Why do you need you need external 517 00:25:50.500 --> 00:25:51.900 financing of 20 billion? 518 00:25:52.700 --> 00:25:55.700 Of course, it does not come from Equity. It comes 519 00:25:55.700 --> 00:25:58.400 from debt and bankers who do 50% of the 520 00:25:58.400 --> 00:26:00.300 job 10 billion. How much is left 10? 521 00:26:01.200 --> 00:26:04.600 And where does it come from how it does not come from Equity. It 522 00:26:04.600 --> 00:26:08.200 does not come from that. It comes from something which is in between hybrid, 523 00:26:07.200 --> 00:26:11.700 which is named preferred subordinated bonds. 524 00:26:12.600 --> 00:26:15.400 Almost each and every years is last years and now 525 00:26:15.400 --> 00:26:18.700 it's more than 8 billion accumulated. The company 526 00:26:18.700 --> 00:26:22.000 is to Preferred subordinated bones. 527 00:26:21.800 --> 00:26:24.300 So it's a dad which looks 528 00:26:24.300 --> 00:26:28.300 like Equity. Let's take an example of 2021 three 529 00:26:27.300 --> 00:26:29.500 tranches during the year. 530 00:26:30.500 --> 00:26:33.600 Of about 2.7 2.8 billion 531 00:26:33.600 --> 00:26:36.300 dollars the coupons for the first five 532 00:26:36.300 --> 00:26:41.100 years depend on the transfer some reasons from 1.45% 533 00:26:39.100 --> 00:26:43.700 to 1.8 25% 534 00:26:42.700 --> 00:26:45.700 after this first period 535 00:26:45.700 --> 00:26:48.400 of five years, it's written in a bone. It's returned a 536 00:26:48.400 --> 00:26:51.200 contract. There will be an upside adjustment of the cost of 537 00:26:51.200 --> 00:26:51.500 that. 538 00:26:52.400 --> 00:26:55.800 Of course the company as a possibilities, he's 539 00:26:55.800 --> 00:26:58.200 sure as a possibility not to pay the coupon. 540 00:26:58.900 --> 00:27:01.100 But then the coupon is going to be capitalized. 541 00:27:02.100 --> 00:27:05.300 And if you want to pay a dividend you have to pay the coupon first. 542 00:27:06.100 --> 00:27:09.200 So you understand that there is quite a motivation to pay the coupon 543 00:27:09.200 --> 00:27:11.400 because you want to pay dividend to your shareholders. 544 00:27:12.100 --> 00:27:15.700 There is no contract or Redemption commitment Etc. 545 00:27:15.700 --> 00:27:18.800 Even though there is a kind of motivation to repay the 546 00:27:18.800 --> 00:27:22.000 bonds reasonably shortly because of 547 00:27:21.300 --> 00:27:23.300 the increase in the coupon. 548 00:27:24.500 --> 00:27:27.200 But you understand that it's a kind of hybrid instrument. It's 549 00:27:27.200 --> 00:27:30.400 not exactly Equity. It's not exactly that. It's 550 00:27:30.400 --> 00:27:34.200 regarded as quasi Equity the 551 00:27:33.200 --> 00:27:37.000 good news. As far as a rating is concerned. It's 552 00:27:36.800 --> 00:27:39.200 excluded from the gearing so the 553 00:27:39.200 --> 00:27:42.400 dead valid by Equity now, it's not in the 554 00:27:42.400 --> 00:27:45.600 dead. It is in the equity because it's cause 555 00:27:45.600 --> 00:27:48.600 I equity and what is in my opinion quite 556 00:27:48.600 --> 00:27:52.600 strange in terms of accounting communication is 557 00:27:51.600 --> 00:27:54.500 that the company does not devote a 558 00:27:54.500 --> 00:27:57.600 specific line in the balance sheet for these preferred support in 559 00:27:57.600 --> 00:28:00.800 the bones this simply include they preferred 560 00:28:00.800 --> 00:28:03.800 support in it Bonds in a non-controlling interest 561 00:28:03.800 --> 00:28:06.500 in a minority change, right speaking. What 562 00:28:06.500 --> 00:28:09.900 do you put in a minority interest imagine that you acquire 90% 563 00:28:09.900 --> 00:28:13.300 of the shares of a company you consolidate 100% 564 00:28:12.300 --> 00:28:15.600 but you own only 19% So 565 00:28:15.600 --> 00:28:18.500 what are you going to do? You're going to put 10% of the equity 566 00:28:18.500 --> 00:28:21.700 somewhere between the long term life liability on 567 00:28:21.700 --> 00:28:23.800 the equity of your company is known controlling interest. 568 00:28:24.300 --> 00:28:27.300 Here it is in the minor which interests it 569 00:28:27.300 --> 00:28:30.000 is in a non-controlling interest, which is quite strange in terms of 570 00:28:30.600 --> 00:28:31.300 accounting communication. 571 00:28:32.200 --> 00:28:35.300 That's it. Now, what about the use of fonts? If you 572 00:28:35.300 --> 00:28:38.400 look at the cash flow statements, you have the answer, of course the company 573 00:28:38.400 --> 00:28:41.500 in the past has generated enough cash flows from operations 574 00:28:41.500 --> 00:28:44.200 to finance Capital expenditures, but the company 575 00:28:44.200 --> 00:28:47.700 wants to accelerate investment in Renewables. So the 576 00:28:47.700 --> 00:28:50.400 use of phones could be to prepare the 577 00:28:50.400 --> 00:28:53.500 accelerated investment now it's to 578 00:28:53.500 --> 00:28:54.700 return cash to shareholders. 579 00:28:55.500 --> 00:28:58.300 So in fact, it's a debt. It's a dead 580 00:28:58.300 --> 00:29:01.300 because there is some interest and it is an 581 00:29:01.300 --> 00:29:04.900 interest which has to be paid if you want to distribute some dividend 582 00:29:04.900 --> 00:29:08.000 to your shareholders, so it's not exactly contractual interest, 583 00:29:07.300 --> 00:29:10.700 but there is a strong commitment to pay that so in 584 00:29:10.700 --> 00:29:11.800 my opinion it's that 585 00:29:12.300 --> 00:29:15.700 so it's about increasing debt without deteriorating the 586 00:29:15.700 --> 00:29:18.500 gearing so you increase that without increasing 587 00:29:18.500 --> 00:29:20.200 debts in the calculation of the ratios. 588 00:29:21.300 --> 00:29:24.200 I have a mixed feeling about that now. What is a role of 589 00:29:24.200 --> 00:29:24.600 the board? 590 00:29:25.300 --> 00:29:28.400 It's written somewhere in the annual report main activities 591 00:29:28.400 --> 00:29:31.300 of the board of directors key topics in 592 00:29:31.300 --> 00:29:34.100 2021 about financial stretch. You remember 593 00:29:34.100 --> 00:29:37.800 ESG plus F. This is the F. What were 594 00:29:37.800 --> 00:29:40.100 the keys three topics as they looked at 595 00:29:40.100 --> 00:29:44.200 in 2021? Oh itsuance of a green hybrid Bond 596 00:29:43.200 --> 00:29:46.600 great. You are green company. You're issuing 597 00:29:46.600 --> 00:29:50.000 green bonds. Number three monitoring the key financial indicators. 598 00:29:49.300 --> 00:29:52.700 Why is this quite normal for board of directors? You 599 00:29:52.700 --> 00:29:55.200 look at the return Capital Revenue the cash 600 00:29:55.200 --> 00:29:58.500 flow and so on so forth kpis and what is interesting is 601 00:29:58.500 --> 00:30:01.800 a circle one reduction in share 602 00:30:01.800 --> 00:30:04.300 Capital reducing. The share capital 603 00:30:04.300 --> 00:30:07.400 is not increase a robustness of the company. It's 604 00:30:07.400 --> 00:30:10.600 not increase the final so strength of the company. It is 605 00:30:10.600 --> 00:30:13.600 maximizing things or shareholders return for the shareholders 606 00:30:13.600 --> 00:30:16.200 because when you return the cash to 607 00:30:16.200 --> 00:30:19.500 shareholders you reduce their involvement and as 608 00:30:19.500 --> 00:30:22.400 a consequence, it's a return capital is more 609 00:30:22.400 --> 00:30:24.800 than the interest rate your profit from a 610 00:30:25.300 --> 00:30:28.300 returning which is his name The Leverage effect. 611 00:30:29.100 --> 00:30:32.400 So the financial strength of the Japanese forget it is 612 00:30:32.400 --> 00:30:35.700 a total shareholders return for the investors. 613 00:30:36.500 --> 00:30:39.200 That's a little bit curious. Let me propose you 614 00:30:39.200 --> 00:30:40.500 now a few conclusions. 615 00:30:41.300 --> 00:30:44.600 20 years ago there was a strategic conviction and 616 00:30:44.600 --> 00:30:48.300 vision which is ESG renewable energy 617 00:30:47.300 --> 00:30:50.800 and so on. It was absolutely great 618 00:30:50.800 --> 00:30:53.600 because not everybody was absolutely 619 00:30:53.600 --> 00:30:56.200 convinced at that time far from 620 00:30:56.200 --> 00:30:59.500 that they won the bet. It's an extremely 621 00:30:59.500 --> 00:31:03.000 outstanding success on a ESG 622 00:31:02.100 --> 00:31:05.100 point of view on a financial point of view 623 00:31:05.100 --> 00:31:06.500 because the company is performing. 624 00:31:07.700 --> 00:31:10.800 Now today is a strong charismatic leader. 625 00:31:11.500 --> 00:31:14.200 Very strong personality 72 years 626 00:31:14.200 --> 00:31:18.100 old when a person is so representative 627 00:31:17.100 --> 00:31:20.300 of the company and of its 628 00:31:20.300 --> 00:31:23.500 Evolution. You understand that sometimes there might 629 00:31:23.500 --> 00:31:26.000 be a problem which is who he's going to 630 00:31:26.100 --> 00:31:29.500 be as a successor. And remember is 72 years 631 00:31:29.500 --> 00:31:32.500 old. The second point is about the financial strategy. 632 00:31:33.100 --> 00:31:36.600 It looks a little bit more like private Equity 633 00:31:36.600 --> 00:31:39.500 than financial robustness for the long 634 00:31:39.500 --> 00:31:43.300 term in my opinion. So ESG plus 635 00:31:43.300 --> 00:31:47.000 F. ESG great. Absolutely. No 636 00:31:46.200 --> 00:31:50.200 doubt F so far. Absolutely. Yes 637 00:31:49.200 --> 00:31:52.400 tomorrow. That might 638 00:31:52.400 --> 00:31:53.100 be a question mark 639 00:31:54.400 --> 00:31:55.100 Thank you very much.