Repsol S A : 1Q24 Webcast transcript

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EDITED TRANSCRIPT

REP.MC - Q1 2024 Repsol SA Earnings Call

EVENT DATE/TIME: APRIL 25, 2024 / 10:30AM GMT

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

C O R P O R A T E P A R T I C I P A N T S

Josu Jon Imaz San Miguel Repsol, S.A. - CEO & Executive Director

Ramón Álvarez-Pedrosa Repsol, S.A. - Head of IR

C O N F E R E N C E C A L L P A R T I C I P A N T S

Alastair Roderick Syme Citigroup Inc., Research Division - MD & Global Head of Oil and Gas Research

Alejandro Vigil Banco Santander, S.A., Research Division - European Equity Analyst

Alessandro Pozzi Mediobanca - Banca di credito finanziario S.p.A., Research Division - Equity Analyst

Anish Kapadia Palissy Advisors Limited - Director & Head of Energy

Biraj Borkhataria RBC Capital Markets, Research Division - Director, Co-Head of European Energy Research Team & Lead Analyst Henri Jerome Dieudonne Marie Patricot UBS Investment Bank, Research Division - Associate Director and Equity Research Analyst Kim Anne-LaureFustier HSBC, Research Division - Head of European Oil & Gas Research

Matthew Smith BofA Securities, Research Division - Research Analyst

Matthew Peter Charles Lofting JPMorgan Chase & Co, Research Division - VP

Michele Della Vigna Goldman Sachs Group, Inc., Research Division - Head of Natural Resources Research & MD Pedro António Alves Banco BPI, S.A., Research Division - Research Analyst

Sasikanth Chilukuru Morgan Stanley, Research Division - Equity Analyst

P R E S E N T A T I O N

Operator

Hello, and welcome to the Repsol's First Quarter 2024 Results Conference Call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO; and a brief introduction will be given by Mr. Ramon Alvarez-Pedrosa, Head of Investor Relations. I would now like to hand the call over to Mr. Alvarez Pedrosa, Sir, you may begin.

Ramón Álvarez-Pedrosa - Repsol, S.A. - Head of IR

Thank you, operator. Good afternoon, and welcome to Repsol First Quarter 2024 Results Conference Call. Today's call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well.

Before we start, let me draw your attention to our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in the disclaimer.

I will now hand the call over to Josu Jon.

Josu Jon Imaz San Miguel - Repsol, S.A. - CEO & Executive Director

Thank you, Ramon. Hello, good afternoon to everybody, and thank you for joining us today. I'll begin this presentation with a review of the main (inaudible) followed by our business performance and results. After the presentation, we will be available, of course, to answer your questions.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

To begin with, last February, Repsol released its strategic update for the period 2024 to 2025, a story of value growth built on our strengths. This updated road map preserves the foundation of our previous strategic plan, adapting them to the new energy context and a better positioning of Repsol.

Our longer-term vision remains doubly unchanged: being committed to our decarbonization targets and the profitable business opportunities identified in the energy transition. The new plan prioritizes shareholder distributions in order to provide certainty, predictability and upside to our dividend. In the next 4 years, our commitment is to allocate between 25% to 35% of the cash flow from operations to remunerate our shareholders, including dividends and share buybacks.

We'll distribute EUR 4.6 billion in cash dividends guaranteed regardless of the scenario. This year, we will increase the dividend by around 30% to EUR 0.9 per share. And from 2025 to 2027, we'll increase the funds distributed as dividends by 3% per year.

On top of this, in our central case, remember that we talked about a central case 8 weeks ago, we will devote up to EUR 5.4 billion to buybacks for a total of EUR 10 billion in shareholder distributions in the 4 years of the plan. Hence, DPS or distribution per share will grow well above the 3% baseline, reaching in the best scenario up to a 12% annual growth from 2025 to 2027.

Our second priority is to maintain our current rating and have strong balance sheet, ensuring the delivery of our remuneration objectives and investment plans.

And thirdly, we have our investment plan. We'll target a net CapEx figure after disposals and asset rotation of EUR 16 billion to EUR 19 billion, with around 35% deployed in low carbon. The total net CapEx, and this net CapEx is going to be delivered and fulfilled over the period, in the horizon of the plan won't surpass this EUR 16 billion to EUR 19 billion threshold. So in the case of slower portfolio rotations or lower level of divestment, so you don't have -- I don't have any doubt, we will slow investment plans to maintain ourselves within our capital framework. So we are going to fulfill this net CapEx concept in any case.

Continuing now with our performance in the first quarter. The adjusted income reached EUR 1.3 billion, 6% higher than in the previous quarter and 33% below the same period a year ago. Persistent volatility, derived from geopolitical tensions and inflation concerns, continue to affect commodity prices. And in this scenario, oil prices remain well supported at around $80, while the price of natural gas show further signs of decline.

Refining margins remained solid, having improved strongly over the last quarter of 2023. And in chemicals, margins displayed a modest recovery.

Cash flow from operations was EUR 1.4 billion, 26% lower year-over-year. Cash generation was negatively impacted by a EUR 0.9 billion working capital buildup, mostly associated to seasonally higher inventory levels. And remember that we have a plant turnaround in Puertollano, and because it's a landlocked, an inland refinery, well, that requires a higher level of stocks. And also from La Pampilla, I mean assuming the same level of prices as at the end of 2023, this working capital effect will be fully reversed as we advance towards the end of the year.

Net debt stood at EUR 3.9 billion by the end of March, a EUR 1.8 billion increase compared to December. This increase was mostly driven by the closing of the ConnectGen acquisition, the above mentioned investment in working capital, the payment of the January dividend, and new leases associated to our trading fleet.

Net CapEx was EUR 2.1 billion in the quarter, of which EUR 0.7 billion corresponds to ConnectGen. And the contribution of divestment and asset rotation was EUR 0.1 billion in the quarter.

The investment level of the first quarter is aligned -- fully aligned with our objective of achieving a net CapEx of EUR 5 billion in the year. So we have a net CapEx of EUR 5 billion in the year after disposals and rotations. We don't expect CapEx to be backlogged towards the end of the year, and we plan further proceeds from divestment and rotation to materialize as we progress in 2024. We have launched all the processes and we have taken all the measures to materialize these divestments and rotations as we progress in 2024.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

With regards to shareholder remuneration, last month, we started the 35 million share buyback program approved in February. Remember that we have the objective of canceling 40 million shares before the end of July. This will be complemented with additional buybacks later in the year to comply with our 30% to 35% of cash flow from operations distribution commitment for 2024.

On the operational side, we managed some progress towards the development of our leading renewable fuel platform in Iberia, thanks to the strategic partnership with Bunge, the acquisition of a 40% stake in renewable gas producer, Genia Bionergy, and the start of operations of our advanced biofuels plant in Cartagena.

In low carbon generation, the acquisition of ConnectGen adds a material onshore wind platform in the U.S. that also includes solar and energy storage projects. Also in the U.S., we completed the construction of a Frye project, our largest solar facility to date, with almost 1 million panels. And we are working on closing our first renewable asset rotation in this country.

Looking briefly to the main macroeconomic indicators of the quarter, Brent oil averaged $83 in the period, 1.3% below previous quarter and 2.5% above the same quarter a year ago. The geopolitical tensions that drove the oil price in the first quarter have persisted in April. The Henry Hub averaged $2.3 per million BTU, a 20% reduction over the previous quarter and 32% lower than a year ago. The downward trend in gas prices has continued so far in the second quarter driven by high production levels and technical restrictions limiting U.S. exports.

Repsol's refining margin indicator averaged $11.4 per barrel in the quarter, 27% above the previous quarter and 27% below the same period last year. Market dynamics reflected the threat of supply disruptions, intensifying geopolitical conflicts, and heavy global refinery maintenance.

The euro-dollar exchange rate averaged [$1.09], in line with previous quarters.

Moving on now to the performance of our businesses, starting with the upstream. Our focus remains on the efficient delivery of the next batch of projects that will contribute to the upgrades of our portfolio through new production and higher margins. In the U.S., we are closely monitoring the gas price situation, to limit our exposure to the depressed Henry Hub. First quarter adjusted income was EUR 442 million, 20% lower compared to the previous quarter and 7% lower than a year ago, mostly due to the -- sorry -- mostly due to the lower gas price realization and lower volumes.

Production averaged 590,000 net barrels of oil equivalent per day, 1% below the previous quarter and 3% lower year-over-year. Compared to the same period in 2023, quarterly volumes were impacted by the sale last year of our Canadian position, and a lower working interest in Corridor in Indonesia following the extension of the PSC. These effects were partially offset by the full consolidation of U.K. and the contribution of new wells in the Marcellus.

In Libya, production in El Sharara was temporarily shut down some days due to force majeure in January, with an impact of around 4,000 or 5,000 barrels per day, compared to the first quarter of 2023.

In unconventional production, we are currently running 1 rig in Eagle Ford and 1 rig in Marcellus. In the current gas price environment, the rig in Marcellus will be released in June.

Our exposure to Henry Hub has been mitigated through the hedging of approximately 20% of our North American gas production in 2024, 50% in 2025 and 50% in 2026. On average, around 40% of our North American production in 2024-2026 has been hedged through derivatives.

In Alaska, in the Pikka project, we are approaching almost 50% of the development of scope in order to reach first oil, including 7 wells already drilled.

Finally, in Mexico, we have reached an agreement for the preservation of an offshore production facility, which will substantially contribute to reach (inaudible) in 2025.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

Continuing with Industrial, our strategy in this division is twofold. On the one hand, we aim to maximize the value capture in this cycle on the conventional side of the business. And on the other hand, we are developing new low-carbon platforms to generate a leading renewable fuels and materials platform in Iberia.

Looking at the first quarter performance, the adjusted income was EUR 731 million, 30% higher quarter-over-quarter and 43% below the same quarter a year ago. Year-over-year results were negatively impacted by a lower contribution of our refining business, trading and wholesale, and gas trading.

In refining, the average margin indicator stood at $11.4 per barrel, 27% above fourth quarter 2023, thanks to strengthening of gasoline and naphtha differentials and lower energy costs, partially compensated by narrower middle distillates spreads. The margin premium over the indicator was $2.4, mostly due to program optimization, the contribution of buyers and the availability of heavy crudes.

Our refineries continue to receive crude from Venezuela for around 2 million barrels processed in the first quarter. The average utilization of our distillation capacity was 89%, while the run rate of the conversion units reached 99%. Maintenance activity included the multichannel turnaround of Puertollano that is going to be finished next week, next Monday or next Thursday, more or less.

Refining margins have been softening over recent weeks as a steady inflow of imports into Europe has strengthened inventories ahead of maintenance season. In April, the indicator has averaged around $7 a barrel, impacted by weaker middle distillate and naphtha spreads.

In chemicals, demand in Western Europe improved over the previous quarter due to lower imports and unplanned downtimes in some facilities. In this scenario, petrochemical margins recover from the historical loss achieved in the second half of 2023, mostly due to a strengthening of intermediate products and lower energy cost.

Repsol's petrochemical margin indicator averaged EUR 205 per ton, 24% over the previous quarter and 3% over the same period last year. Still, the EBITDA contribution of the Chemical business remained negative at minus EUR 32 million. The margin improvement has continued in April with the margin indicator surpassing EUR 300 per ton month to date.

Let me now review the progress of our industrial transformation projects. Starting with Cartagena. The C43 project was complete, and the new advanced biofuels plant reached large-scale production in April. In Puertollano, the project to retrofit an existing gas oil hydrotreater to produce HBO continues progressing as planned.

Establishing strategic partnerships with key players to ensure feedstock availability will be critical for our plants in renewable fuels. In this sense, the agreement reached last quarter with Bunge that increases our access to a portfolio of low-carbon intensity feedstocks will support our transition from first generation vegetable oils to other lipidic feedstocks. That remaining 3 plants operated by Bunge in Spain located near Repsol's industrial sites.

Finally, in the biomethane route, we reached an agreement to purchase a 40% stake in Genia Bionergy, Spanish company integrating the entire biogas and biomethane value chain. The gas producer will be used both for Repsol's internal consumption and for marketing to customers. This agreement creates a growth platform in the emerging renewable gas industry, consider strategic buy in the European Union.

Continuing now with the Customer division. First quarter performance benefited from the resilience of the commercial businesses and the development of our multi-energy proposition despite a less favorable market situation. First quarter adjusted income was EUR 156 million, 53% higher over the previous quarter and 10% lower than in the same period a year ago. Year-over-year, the lower results in mobility and LPG could then be fully offset by the higher contribution of retail power and gas, and from lubricants and aviation.

In mobility, sales and service stations and wholesales were partially affected by alleged fraud practices of some operators aiming to increase their market share. As control measures on fraud are effectively implemented by Spanish administration, market condition should go back to normal during 2024.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

The number of digital clients, which includes the users of Waylet, grew to 8.3 million by the end of the quarter. In electricity market in Spain, the average power price was EUR 45 per megawatt hour, 40% lower quarter-over-quarter and 55% -- 54%, sorry, below the same period last year due to the increase of the contribution of renewable energy.

In retail power and gas, Repsol continue increasing its client base, reaching 2.3 million customers as of the end of March. The EBITDA contribution of this business remained solid in the quarter at EUR 49 million despite the lower demand.

Finally, in low-carbon generation as part of our strategy to achieve double-digit return and to limit our financial exposure, we are currently working on our first asset rotation in the U.S. First quarter adjusted income was minus EUR 6 million, which compares to a positive result of EUR 34 million a year ago, driven by a lower full price in Spain, a lower contribution of combined cycles, and overall, the integration costs, I mean, they are one-off costs associated to the purchase of ConnectGen. The acquisition of ConnectGen adds a material onshore wind platform to our U.S. portfolio with a deep project pipeline that also includes solar and energy storage projects.

In the U.S., we expect to achieve between 3 and 4 gigawatts of installed capacity by 2027. A major milestone in our growth plans in this country has been the completion last quarter of the Frye Solar project in Texas with a total installed capacity of 637 megawatts, of which more than 600 already under operation. As part of our strategy to lock in returns, we have agreed a long-term PPA for 89% of the output from the project.

We have 2 other major solar projects under construction in Texas, the 629 megawatts Outpost with expected commercial date between 2024 and 2025; and the 825 megawatts Pinnington facility with planned start-up between 2025 and 2026.

In global terms, in 2024, we expect to add 1.3 gigawatts of the new renewable operating capacity, thanks to new additions in Spain, the ramp-up of Frye, and the start of production in Outpost, reaching around 4 gigawatts of total installed capacity by year-end.

Moving now briefly to the financial results. In this slide you will find a summary of the figures that we have discussed when reviewing the performance of our businesses. And of course, as usual, for further details, I encourage you to refer to the complete set of documents that were released this morning.

Moving now to our outlook for the year. I mean let me say that the full guidance provided in February remains unchanged. In terms of cash generation, we are expecting a cash flow from operation in the EUR 6.5 billion to EUR 7 billion range. We are comfortable with this figure.

Net CapEx after disposals and asset rotation is forecast, as we did in February, at EUR 5 billion this year, 2024. In refining, year-to-date, the indicator has hovered on average around $11 per barrel, and this is well above the assumption of $8 in our full year budget. That is the guideline we have for the whole year, $8 a barrel.

Our shareholder remuneration objectives are also maintained, with the commitment to distribute this year 30% to 35% of our cash flow operations in the higher end of our distribution range for 2024 to 2027.

To conclude, we are positive that our updated Strategic Plan for 2024 to 2027 will translate into an attractive story of value with a clear and committed growing dividend proposal. During the next 4 years, we will lever on capital discipline and our integration advantage to evolve our portfolio, developing new business platforms that will contribute, no doubt about that, to the increase of cash flows and returns to our shareholders.

We will remain committed to our decarbonization ambitions and clean energy transition, ensuring the efficient delivery of energy products and providing affordable, reliable and decarbonized energy to society.

In 2024, we have started the year with a solid set of results working along the guidance of our updated strategy to maximize value in the current environment, helped by a robust operational performance across all divisions. These strategic partnerships agreed last month to boost our supply of renewable fuels and biogas are significant milestones towards the development of new industrial low-carbon platforms in Spain.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

And following the ramp-up of the C43 project, we have become the only player in Iberia with a plant fully dedicated to the production of renewable fuels for nonindustrial scale.

Finally, in renewables, we are ramping up the development of our use platform, incorporating a higher share of wind to our portfolio, and deploying a new operating model.

With this, I think we can move on to the Q&A session. Thank you.

Q U E S T I O N S A N D A N S W E R S

Operator

(Operator Instructions)

Ramón Álvarez-Pedrosa - Repsol, S.A. - Head of IR

Thank you, operator. We will move now to the Q&A session. Our first question comes from Sasikanth Chilukuru at Morgan Stanley.

Sasikanth Chilukuru - Morgan Stanley, Research Division - Equity Analyst

I had 2, please. The first was on refining. I was wondering if you could provide the margin levels that you're currently seeing, you'd highlighted the April average to be around $7 per barrel. If you could comment on the current European environment -- refining environment, the changes that you have witnessed over the past 2 weeks and your expectations on how this would likely change over the next 2 to 3 months, that would be quite useful.

The second one was on CapEx. You've expressed confidence in meeting your full year guidance through disposals and asset rotation. From an acquisitions perspective, you still have the $300 million payments out of stake in the Bunge partnership. I was just wondering if you could -- if it was possible to expand more on the bridge between the 1Q and the full year guidance. Any color on the organic CapEx levels or the assets that could potentially be sold, that would be useful.

Josu Jon Imaz San Miguel - Repsol, S.A. - CEO & Executive Director

Thank you, Sasi. I mean, going to your first point, the current refining margins averaged $7 a barrel over the whole April, at around $6 a barrel this week.

And we are firmly comfortable about the guidance of $8 a barrel in average for the whole year. But let me say, I still think that it's a prudent assumption for the whole year.

What is behind -- first of all, we have in April, I mean you know that there is a seasonality in refining margins. If you check Repsol's refining margins last April, 1 year ago, we were at $4.7, $4.9 a barrel and the average of the whole year was $11 a barrel.

What is the rationale about all that? I mean, first, the turnaround of the U.S. refineries from the Gulf of Mexico is over. So that means that the products are on track of being produced. The driving season is not yet there.

And there is a flow of products towards Europe and the inventories in Europe are higher. So the diesel, gas, oil and so on consumption in winter also in Europe is over, and we are not still entering in the driving season.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

So I think that there is a clear temporary effect. We don't see, let me say, structural threats to this refining margin. Saying more, what I see are some threats on the supply side because, I mean, when we check the attacks to Russian refineries and so on, 1.3 million barrels more or less have been attacked over the last months, I mean, Russia is a black box, but today we have some crude at probably -- a figure close to 1 million barrels a day are out of running today in Russia. So the threat is still there.

The potential conflict in the Red Sea, I mean you know that there is an addition of margins because the travel along the African Coast for products coming from India, Middle East and so on towards Europe.

And when we look at next year, 2 years ago, 3 years -- even 3 -- to 1 year, 2 years or to 3 years from now, what we are seeing, taking the potential new capacity that is going to enter in the system, the potential closing processes of refineries in Europe and in the world and increase of demand, I mean, we are closer to see a tight supply demand balance than the framework of low refining margins.

So we are comfortable with the figure. I think that $8 a barrel for the whole year is a prudent assumption, taking into account the best approach we have for our system. And seeing the performance of the business over the first quarter, let me say that I'm also quite comfortable with the assumption of $2 a barrel as a premium for the whole year. So that means that $10 a barrel is today the best approach we have for the whole refining margin figure for the whole year. And I'm quite comfortable with this figure, let me say, in the lack of, I don't know, some kind of macroeconomic disruption in the world that we are not seeing now.

Going to the CapEx, I mean the full year guidance today, I mean, EUR 5 billion of net CapEx this year. I mean that is going to be written on a stone. So it's true that we have EUR 2.1 billion of CapEx, this net CapEx this quarter, and that could be a bit surprising for you. But it's fully aligned with the guidance we have for the whole year.

Why? Because we have seen -- well, first of all, going to your question about Bunge, I mean, there is not going to -- we are not going to have a cash out of Bunge this year. That is going to happen in 2025, this EUR 300 million approach of this transaction. And I mean, we are seeing an asset rotation process this year that is going to be above EUR 1 billion, including U.S. and Spain.

Divestment, all in all, are going to be at around EUR 0.5 billion, EUR 0.6 billion. I mean we have -- I mean that is not a big figure, but even this quarter, we were above EUR 100 million of divestment. I mean that is going to happen.

And the gross CapEx is going to be, in any case, below EUR 6.4 billion, EUR 6.5 billion including the inorganic transaction of ConnectGen we mentioned before.

So I'm fully comfortable with the EUR 5 billion CapEx. And again, and I said 8 weeks ago, and of course, I'm more committed to that even than 8 weeks ago. I mean I can't control things that are not in our hands, but I can control CapEx.

And over this strategic period, the net CapEx figure is going to be, in any case, in the range from EUR 16 billion to EUR 19 billion. And that is going to happen.

And let me say, in any potential situation that I don't see today that, I mean, that could hypothetically happen, of having any kind of difficulty to divest or to rotate the asset, we will cut in a dramatic way the gross CapEx.

So the net CapEx figure, in terms of the strategic plan we defined 8 weeks ago, is going to happen. That is in our hands.

I mean, let me say, Sasi, that I was talking about refining margin. That is my view, but that is not in my hands.

I mean I can't commit what I'm saying our refining margins because things could be in environment -- the business environment different. But CapEx is in my hands. And again, that is going to happen. Thank you, Sasi.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

Ramón Álvarez-Pedrosa - Repsol, S.A. - Head of IR

Next question comes from Biraj Borkhataria at RBC.

Biraj Borkhataria - RBC Capital Markets, Research Division - Director, Co-Head of European Energy Research Team & Lead Analyst

Just a couple of follow-ups actually on the similar topics. So on refining, it's obviously been incredibly volatile. Over the last couple of years, we've seen a big tilt to diesel in terms of output from refiners as the market is tight. How are you thinking about -- and in your refineries, have you tilted your product now towards gasoline? Because you do see a big split in the cracks between diesel and gasoline. Just wondering, and maybe some broader perspectives on how you're seeing the 2 end products.

And then just on the divestment front again, you threw out some numbers there, so that you're planning on or have launched processes of EUR 1 billion in terms of asset rotation and the divestments -- on the divestments for EUR 500 million, EUR 600 million, was that related to the upstream?

Just could you help me understand the breakdown how you're thinking about rotation within res and then the divestments? Or is that primarily the upstream or are they all mixed together?

Josu Jon Imaz San Miguel - Repsol, S.A. - CEO & Executive Director

Thank you, Biraj. I mean going to the refining, it's true that, I mean, when we compare in historical terms, perhaps gasoline cracks are performing in a better way than, in historical terms, comparing with diesel cracks at this moment. I mean that is happening.

But my point is, I mean, we have flexibility to cope with this potential, let me say, focus on diesel or gasoline. More or less 4%, 5% of our total production in the refineries, and that is a big figure, could be shifted from the current maximization of middle distillates towards gasolines. And I mean, this 5%, when you compare this figure with the current gasoline production, that could be 18% more or less of the total system, that means that we have the capacity to increase in that 25%, 30% the volumes of gasoline that we could put in the market in case of seeing a higher gasoline cracks.

I don't know what is going to happen. Seeing that we are not in the American driving season, hypothetically, that will happen. In that case, we have, Biraj, the flexibility to shift from the current middle distillates production to more gas volumes.

And I mean, with no investment, we are talking about operational conditions. And I mean, in our programming, we are, in some way, day after day, optimizing this system to optimize also the yields in economic terms of the production we have.

When we go to -- I mean, roughly speaking, Biraj, because, I mean, things could be a bit different. But I will say, if we take the year more or less EUR

1.5 billion as a whole in terms of disposals, rotations and so on, more or less the figure related to low-carbon generation rotations, including U.S. and Spain, will be close to EUR 1 billion.

And in the case of the disposals of the E&P, the total of disposals will be $0.5 billion and let me say that probably an 80% of this figure is going to be related to E&P.

What you could see in this quarter, the first quarter, a figure that I think the total amount is at around EUR 120 million or something like that, is mainly -- the main part is related to the E&P and the main part is related to the disposals of part of Eagle Ford in terms of optimizing the land we have in the area.

So again, $1.5 billion all in all at around EUR 1 billion asset rotation, and $0.5 billion disposals, and probably an 80% of the disposals coming from E&P. But again, we could have higher opportunities in the way and be sure that we are going to do our best to take advantage of higher disposals of rotation opportunities. Thank you, Biraj.

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APRIL 25, 2024 / 10:30AM, REP.MC - Q1 2024 Repsol SA Earnings Call

Ramón Álvarez-Pedrosa - Repsol, S.A. - Head of IR

Thank you, Biraj. Our next question comes from Michele Della Vigna at Goldman Sachs.

Michele Della Vigna - Goldman Sachs Group, Inc., Research Division - Head of Natural Resources Research & MD

It's Michele Della Vigna from Goldman. I wanted to ask you a couple of things. First of all, I've seen you've taken a charge because of the Spanish temporary energy levy, which is proving to be less temporary than what it was supposed to be. I was wondering, what should we assume in terms of cost this year and next year because of it? And are you benefiting from some of this green CapEx offset that the government was talking about it?

And then my second question is on biofuels. You are clearly the leader in Spain. You are accelerating that investment with an integrated strategy. There's also the RED III directive in Europe, which was approved last year, which now each country needs to put into place within 18 months. And I believe that should provide substantial upside to the renewable diesel blending in a variety of European countries. Do you see that potentially as a tailwind for your market in Spain? Thank you very much.

Josu Jon Imaz San Miguel - Repsol, S.A. - CEO & Executive Director

Thank you. I mean, Michele, going to your first question, I mean I was sorry because I was thinking about what to answer to you today, Michele, because, I mean, I don't know if that is today is the best day to forecast political issues in Spain. But I mean saying that, trying to go rightly to your question. First of all, this year, the whole figure that is fully included in the P&L already in the first quarter, and even the EBITDA, has been reduced in this figure, the first quarter, because this effect -- the total effect is EUR 335 million, our forecast for this year.

Saying that, you know that over the last weeks we have seen quite new moves from the political side. The first one coming from the European Commission at the end of November. Remember that in that report, European Commission said that there was no reason now for this kind of taxes, and the priority has to be to guarantee the security of supply and the investment in the energy sector.

I mean 3 -- 2, 3 weeks ago in a Spanish newspaper, I remember in an interview to the Spanish economy minister, Mr. Cuerpo, minister said that when we talk about this Windfall tax, thinking about the needs of investments in the energy sector has to be taken into account.

So I think, first of all, that this task -- tax, sorry, is going to have an end. I think that even from a legal point of view, I think that we will consider that there is no room in 2025 to have any kind of temporary levy even from a legal point of view. And talking about 2024 and seeing and listening to the statements from the political representatives either in European Commission or in Spanish government, I think that there is room to have our framework, or the investment is going to be prioritized on the payment of the levy.

Saying that, we prefer to be prudent. And for that reason, we have included this quarter the whole figure in the P&L.

And in terms of cash, you know that a half has been paid in February, I think, EUR 167 million, more or less. And the whole figure for the whole year has been deducted from the EBITDA of the year in this first quarter.

Going to your second question, that I mean, let me say that is, you see, an interesting question because, I mean, I like a lot what we are doing in terms of spreading the renewable fuel concept in the Spanish market because let me say that we have to decarbonize the whole economy in the world. And electrifying is important, no doubt about that, but when we see the Spanish economy, only 23% -- European economy, sorry, a 23% of the total -- the final use of energy is electrified. That's important. And electrification is, let me say, doing pretty well in terms of decarbonizing this part of the economy. But we have to decarbonizing the whole European and world economy. And we have to put our eyes on the 77% of this economy that is not electrified, and let me say that many of that is not going to be electrified in coming years.

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