Ence Energia y Celulosa SA

MAD:ENC

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the ENCE First Quarter 2022 Results Presentation.

I now hand over to Mr. Ignacio de Colmenares, Executive Chairman; and Alfredo Avello, CFO. Gentlemen, please go ahead.

[Ignacio de Colmenares, executive]

Good afternoon, ladies and gentlemen, thank you for joining ENCE's First Quarter 2022 Results Conference Call. Our CFO, Alfredo Avello, and our Head of IR, Alberto Valdes, are also here with me. After the presentation, we will be pleased to answer any questions you may have.

Let's start with Slide 3, where we summarize the highlights of yet another quarter with strong free cash flow generation and net debt reduction. Operating cash increased to EUR 87 million and free cash amounted to EUR 58 million, allowing for a54% net debt reduction in the quarter, down to EUR 47 million. We have started '22 with a net income of EUR 13 million in the first quarter, and we will distribute a first interim dividend for the same amount on May 11th. Pulp prices continued improving during the first quarter to $1,200 and main pulp producers have announced further price hikes up to $1,250 from April.

These strong pulp prices have more than offset the inflation in raw materials and logistics, boosting the operating margin of the pulp business up to EUR 137 per ton, despite the 3 weeks' transport strike in March. Our differentiated and higher value-added products accounted for 18% of pulp sales compared to 12% in the first quarter, 2021. In all, the Group EBITDA improved by 3X compared to the same period last year, up to EUR 47 million.

It is important to highlight that these results already include the estimated change in the remuneration parameters applicable to renewables in 2022 as well as the limited consequences of the transport strike in our expected annual pulp sales, with a net positive comparison with the cash flow guidance given in the Capital Markets Day.

The Supreme Court has admitted 2 of the appeals we filed against the National Court rulings, allowing the extension of the Pontevedra concession. These allow us to be more optimistic.

Remember, we have launched the Navia Excelente project, which will give us the same EBITDA as Pontevedra. In any case, we have a very strong balance sheet with a net debt of just EUR 47 million and EUR 430 million cash in balance, which provides full flexibility in any scenario.

Let's move now to Slide 4, which shows our consolidated cash flow statement for the quarter. As you can see, EBITDA reached EUR 47 million as a result of strong pulp and energy prices. On top of that, the regulatory collar, which is the difference between the energy market price and its regulator price, which we collect, but is not included in EBITDA, implied an extra cash inflow of EUR 40 million, lifting the consolidated operating cash flow to EUR 87 million. As a result, consolidated free cash flow reached EUR 58 million in the first quarter, despite a 24% reduction in the use of factoring lines and EUR 11 million growth and efficiency CapEx.

As you can see in the following slide, #5, pulp prices have continued improving in 2022. Gross peaks prices in Europe have reached $1,200 per ton, and the main pulp producers have announced further price hikes in Europe up to $1,250 per ton. Industry specialists are not forecasting an average price of close to $1,200 per ton for the full year.

Let's move now to [ Slide 4 ], where you can see how these strong pulp prices have more than offset the inflation in raw materials and logistics, boosting the operating margin of the pulp business up to EUR 137 per ton despite the effect of the 3 weeks' transport strike in March.

The cash cost of EUR 484 per ton is in line with the guidance given in the previous quarter. The 24% increase year-on-year is mainly due to non-recurrent wood imports and the rising chemical and logistics cost, together with a lower fixed cost dilution in this quarter due to the annual shutdowns and the 3 weeks' transport strike in March.

Note that the pulp volume unsold due the first quarter due to the transport strike will be partially recovered in the second quarter without any negative impact on the cash flow guidance given in our Capital Markets Day. The change in the remuneration parameters applicable to renewables in 2022 implied a EUR 30 per ton cash cost increase in the quarter on top of the previous EUR 484 per ton, which is offset at the EBITDA level by a lower regulatory [ current ] provision. This change has no negative cash impact on the guidance given in the Capital Markets Day, which already anticipated a similar change, assuming a market electricity price of EUR 48 megawatt hour as from April without any additional cash flow from the regulatory collar.

Let us look now at our pulp sales on Slide 7. Our pulp sales in the quarter amounted to almost 200,000 tons, 19% less than in the same period last year, mainly due to the 3-week transport strike in March. As I have said, part of this volume will be recovered in the second quarter.

Over 90% of these sales went to the European market where our customers benefit from ENCE unique wide portfolio of sustainable products and shorter delivery times. Our differentiated products accounted for 18% of our pulp sales compared to 12% in the same quarter last year. These higher value added products are more sustainable and are well adapted to replace plastic and softwood pulp. They also give higher margins.

Moving on to Slide #8. I wish to make clear that ENCE has no direct exposure to the war in Ukraine. Firstly, all our facilities are located in Spain and our commercial activities are mainly located in the Atlantic region. Secondly, the wood and biomass that we are -- that we use are locally sourced. Chemicals are also locally sourced or imported from Western Europe. And thirdly, our pulp bio-mills are energy self-sufficient. They generate all the renewable energy required for the pulp production process and they have no gas dependence.

Turning now to Slide #9. Let me give you an update about our Pontevedra concession. The admission of our appeals to the Supreme Court allows us to be more optimistic, although we must [ patiently ] wait for the final resolution, which is expected by year end. In any case, the potential closure of the bio-mill was already provisioned in our accounts last year.

It is important to highlight that the annual free cash flow contribution from Pontevedra will be more than offset by the Navia Excelente project and by either of the 2 alternatives available to expand Navia production.

I will now in by Alfredo to review the financial figures in more detail.

[Alfredo Avello, executive]

Thank you, Ignacio. As you can see in the following slide, #10, ENCE shows another quarter with very strong operating results. Our pulp business EBITDA improved by 2.5X year-on-year, up to EUR 21 million, driven by the strong recovery in pulp prices, which has more than offset the lower sales volume due to the transport strike in March and the inflation in raw materials and logistics. Our renewable energy business EBITDA increased by 3X times year-on-year, driven by a 35% increase in energy sales and higher prices. On top of the consolidated EBITDA figure of EUR 47 million and not included in it, we had a EUR 40 million cash inflow coming from the regulatory collar, which is fully free to be used without any restriction.

As a result, the operating cash flow in the quarter increased up to EUR 87 million.

With such strong operating results, our attributable net income reached EUR 13 million. Our first interim dividend for the same amount, equivalent to 5.40 cents per share, will be paid on May 11th. Let me remind you that we have a new dividend policy based on cash flow available for distribution and subject to prudent leverage ratios per business. As a reference, we use 2.5X EBITDA in the pulp business and 5X in the energy business, using mid-cycle prices and considering existing commitments and investment plans.

As you can see in the following slide, #11, we closed the first quarter with a very strong financial position. Net debt was reduced by 54%, down to EUR 47 million, and we finished the quarter with EUR 430 million cash in balance. Our pulp business ended with a net cash position of [ 14 ], including EUR 17 million related to lease contracts and a cash balance of EUR 297 million.

During this quarter, we also prepaid EUR 24 million of several financial facilities. On the other hand, net debt in the renewable energy business amounted to EUR 61 million at the end of the quarter, with long-term maturities and a cash in balance of EUR 134 million.

Turning now Slide #12, let me summarize the main changes in the remuneration parameters applicable to renewals in 2022. These changes will further develop by means of a ministerial order and will be applicable as from January 1, 2022. Our first quarter results already include them. Then, [ many ] impacts of the new regulation in the cash flow are 3. Firstly, the new regulated electricity price for 2022 will be approximately EUR 122 megawatt hour compare with the previous EUR 48. Since the new regulated price is higher than the operating cost of a standard plant, the complementary remuneration related to the operation, what we call the Ro, will not apply for this year. This cash flow adjustment amounts to EUR 108 million for both pulp and energy business.

Secondly, the complementary remuneration related to the investment, what we call the Ri, will be adjusted in advance in 2022 rather than in 2023. These adjustments amounts to EUR 15 million.

And thirdly, the government has announced that they will cut the gas price at EUR 50 megawatt hour, starting May this year, which implies a market [ pool ] price of approximately an EUR 140 to EUR 150 megawatt hour from that date. Since the average market price until April has been EUR 220, assuming that such cash price is successfully implemented as from May, the resulting average market pool price for the year should be around EUR 170 megawatt hour.

In the information given our Capital Market Day, we were -- already anticipated a change in regulation. We were assuming no cash inflows above EUR 48 megawatt hour, which was the previous regulatory price. Therefore, the implementation of the new regulation with a pool price of EUR 170 million will improve our cash flow by EUR 189 million. All in all, the estimated net positive impact of the new regulation, when comparing with the cash flow guidance given in our Capital Market Day, will amount up to EUR 66 million.

Let me please now return the lead of this presentation back to our Chairman for the final slides.

[Ignacio de Colmenares, executive]

Thank you, Alfredo. Moving now to Slide #13, I would like to mention the highlights of our sustainability performance in the quarter. ENCE is already at the forefront in sustainable forestry, in the circular economy, in social commitment, in gender equality and in corporate governance. Our best practices have been recognized by independent agencies, such as MSCI, FTSE4Good, or Sustainalytics, which in its latest study, ranked ENCE the most sustainable player in the global pulp market.

I would like to highlight the following achievements in the first quarter. Firstly, we have accomplished our zero accident goal after one year without any accidents in our pulp business. Remember that we had zero accidents in the energy business in 2021. Those are major achievements in our industry and demonstrate a strong commitment to the safety of our operations.

Secondly, we have continued to reduce the odor of both pulp [ bio-mills ], which is already below one minute per day, having reached the lowest level in Navia's history during the first quarter. These results demonstrate our strong commitment to the communities and our environment.

And finally, I would like to highlight the continuous reduction of our greenhouse gas emissions in 2021 in line with the targets of our sustainability plan, showing our strong commitment to mitigate climate change.

To conclude this presentation, I would like to emphasize the following key messages. Strong pulp and energy prices are boosting the operating margin and cash flow of our businesses. I expect a strong pulp- market in 2022. 2022 will be a year of strong operating results and even better free cash flow generation. The first interim dividend of EUR 13 million will be distributed in May, and 2 more will be announced at the end of July and October. The admission of our appeals by the Supreme Court allows us to be more optimistic about the continuity of Pontevedra. We have already launched the Navia Excelente project, which is independent of the Pontevedra outcome and will offset the impact of a potential closure of the bio-mill. Our strong balance sheet provides full flexibility in any scenario. Thank you.

We will be pleased to hear any questions you may have.

[Operator]

[Operator Instructions] The first question comes from Gonzalo de Cueto from BNP Exane.

[Gonzalo De Cueto Moreno, analyst]

So just 2 questions from my side. And the first one would be regarding the lack of selling capacity and the [ Calypto ] situation in Galicia. Have you seen any improvement at all in recent weeks and months? I mean, I've seen in your accounts that you have invested in new equipment during the quarter. I mean, could you give us any color on this, please?

[Ignacio de Colmenares, executive]

Yes. Thank you for your question. Mr. Cueto. Well, the [ good ] market continue to be very tight in Europe and in Spain as well, in Iberia as well. The main reasons were the huge demand of furniture for housing due to the COVID in all Europe and strong demand of pine wood for producing this furniture. As I have explained to you different times, the capacity of harvesting is limited in the northwest of Spain and then with extremely high prices of pine wood, where this capacity is switching from eucalyptus to pine, and then we have difficulties to harvest all the eucalyptus available to be harvested.

There is a second factor increasing these strong demand of time, is the invasion of Russia in Ukraine. The flow of chips from Russia to Scandinavia and the flow of timber products from Russia to Europe has been canceled. And then there is an increased demand of chips all around Europe and strong demand of timber products all around Europe. And then the prices of the pine are rocketing again in Spain.

What are we doing in such circumstances? Well, we are increasing our capacities of retailing. You know that we have -- we are buying 6 million cubic meters per year and out of these 6 million cubic meters -- sorry, we are buying 3 million -- sorry, 3 million cubic meters per year. And out of these 3 million cubic meters per year, we are buying directly to the owners, to the small forest owners, 1 million; we are buying 1 million to through small harvesting companies; and we are buying 1 million through big traders. Then the market who is in risk, the segment who is in risk is these third one, the one controlled by the traders because the traders will -- they can sell to us or to third parts. Then we are increasing the volume. We are buying directly and we are investing in harvesting machinery, financing small companies to harvest more for us.

We imported wood at the end of last year. We haven't imported wood till now this year, which is good. And we will be forced to buy again from third countries, but due to the strike in transport. The strike in March has been 3 terrible weeks, where we haven't been able to get any single cubic meter of wood on the 3 weeks. The Pontevedra pulp mill has been operating at 100%/ The Pontevedra -- sorry, the Navia mill, because of this lack of wood, we've been operating at 50% to 60% only. And we have low stocks of wood now.

And then we are operating well on the Spanish market. We are recovering the stocks. We will send a bit more wood than expected from [ Wolma ] and we probably will buy one or 2 more chip [ carriers ] in order to solve this problem.

What I would like to -- everybody to understand, that's an extraordinary situation. We are not going to have a war in Ukraine every year, and we are not going to have 3 weeks strike every year. Then, we are a company very proud to say that 100% of the wood we are using came from [ rare use ] of 80 kilometers of our pulp mills. It is one of our most competitive advantage. Well, and maybe this year, we are going to be forced to buy something between 100,000 and 200,000 cubic meters from Wolma and from [ elsewhere ] in order to recover what we have lost on the strike.

It is important to notice that the volume lost on the strike was also lost in the harvesting. Then as the bottom neck is harvesting, it is impossible to recover this volume. Then as a resume, the situation is tougher than 3 weeks -- 3 months ago because the war in Ukraine, because the 3 weeks strike and we are increasing the capacity of harvesting in northwestern, financing harvesting machines. And we are sending a bit more wood than expected from Wolma. And all that is extraordinary. And we think that in 2023, we will come to a normal situation. Thank you.

[Gonzalo De Cueto Moreno, analyst]

Okay. Very useful, Ignacio. And the second one, I mean, it's kind of a follow-up on this -- on the first one regarding the cash cost that you respect for this year. I mean, the latest number that I had -- that I have in mind was EUR 450 per ton. I mean, do you still comfortable with -- feel comfortable with this number?

[Ignacio de Colmenares, executive]

Well, no, no. Today we are thinking more on a cash cost, an average cash cost for the full year of EUR 485 per ton. It is very in line with what we said on the on the Capital Market Day, EUR 485. And you have to take into account that inside this number we have the effect of the renewables remuneration, and only that has an effect of EUR 30 per ton, and it is already included there. Okay? It is [ neutral ] from EBITDA point of view because we have an accountable higher cash cost. But on the other side, we have a better EBITDA. But the fact is that today we expect an average cash cost of EUR 485. We expect cash cost to be below EUR 500 in second quarter, to be around EUR 490. And then we expect cash cost on third and fourth quarter to be already EUR 470. I know that gives us EUR 485.

[Operator]

The next question comes from Alvaro Lenze from Alantra Equities.

[Alvaro Lenze Julia, analyst]

The first one would be on your dividend -- new dividend policy. I understand that it is now dependent on cash flow, but I don't know if you can provide us with some kind of KPI or formula or calculation to estimate what the dividend would look like in different scenarios. I don't know if you're just taking the ceiling in terms of leverage and distributing everything that exceeds that ceiling, or is it based on 100% cash flow -- sorry, pay out on the cash flow if the leverage allows for it. If you could provide more detail on the calculation.

[Ignacio de Colmenares, executive]

Yes, Alvaro, yes, there is 2 limits. There is the limit of our dividend policy. And I repeat that what we have as a policy that when we want to have a maximum debt on the pulp business of 2.5X, the normal EBITDA and the normal -- the recurring EBITDA of our pulp business is EUR 140 million. Then we are talking roughly. We could have a maximum net debt of EUR 350 million in the pulp business. We have decided not to have a net of more than 5X EBITDA in the energy business. We have a recurring EBITDA of something between EUR 60 million and EUR 80 million, that is EUR 300 million. What means that we could have at ENCE level, a maximum debt of EUR 650 million. Today we have only -- we have below EUR 50 million.

Then, we could give, we could give, according to this policy, up to EUR 600 million EBITDA, but we also say on this policy that, well, we have to take into account the commitments we have in terms of investments. Well, we don't know what is going to happen with Pontevedra. We are very much optimistic today if you compare that with 6 months ago, but we will know that at the end of the year. We have a good plan in Navia Excelente to compensate the loss of the EBITDA from Pontevedra if we are obliged to shut down. But we want to have full flexibility to do whatever we think we have to do once we will know what happens with Pontevedra. Then we will not give EUR 600 million of dividend this year.

And there is another limit with a legal limit. The legal limit in Spain is that on the interim dividends, you cannot pay more than your net profit. Then I would say that on the second quarter and on the third quarter, we will distribute, as a maximum, the net profit of the quarter.

[Alvaro Lenze Julia, analyst]

Okay. Okay, understood. A second question will be on maybe on the industry in Iberia. [ Altri ] has announced to be exploring an investment in the soybean pulp in Galicia. How do you see potential competition both on your future plans of entering the soybean pulp and also whether this would imply any incremental competition for wood sourcing? How do you see the potential impact?

[Ignacio de Colmenares, executive]

Well, I have to say several things to answer to your question. First, this project is on -- of Altri is on very early stage. The CEO of Altri was saying one month ago that they will disclose the location of the mill soon. They did that yesterday, but the decision was not going to be taken before the end of the year. And they need one, to confirm that the project is profitable and they're going to have the yield they expect. And Altri is a very serious company. Then I'm pretty sure they will not go on this project if everything is not clear and wood maybe a problem. 2, they require next generation funds for this project. Well, and you know that we are talking a lot about next generation finds in this country, but we don't know anything yet. Then I think that this project is an early state.

Regarding our [ dissolving ] pulp project in Navia, well, as we said on the Capital Markets Day, in case we lose on the Pontevedra, on the tribunals, we have 2 possibilities. One possibility is to expand Navia by only 100,000 tons with a limited investment of 100,000 -- sorry, of EUR 100 million. And the other possibility is to go on, on these 350,000 tons project with a [ swing ] mill, BHKP and dissolving pulp with fully permitted. We have already all the permits and all the land to do that in Navia, and the support of the local government and the local city of Navia. And we will decide that, well, once we will know something about Pontevedra. Well, it will depend of the amount of cash we have on the company at this time. And it will also depend if we have next generation funds or not.

Then I would say, as a resume, that we still don't know what we are going to do in Navia. And I think that Altri still don't know what they are going to do in Galicia. We have all projects and we have to wait to take the decision.

[Alvaro Lenze Julia, analyst]

Okay. And last question on my side would be, if you could give us some indication on the progress on the Navia Excelente plan, and when should we see the first EUR 25 million investment you expected for this year and how things should ramp up over the coming years?

[Ignacio de Colmenares, executive]

Yes, well, nothing has changed since we explained that on the Capital Market Day. We are going to approve probably the investment before summer. We are finishing all the contracts with the EPC contractors and today almost -- is almost finished, but, well, we are finishing all the detailed engineering for the civil works and well, we are going to approve that in June or July. And we are start. We see in fluff -- if you remember, we see the EBITDA already starting to improve in 2024. Then we think that in 2024, we can already produce fluff in Navia. We are extremely optimistic because there is a very high demand and very high interest in all our customers.

You know that the market of fluff in Europe is 1.6 million tons. And out of these 1.6 million tons, 1.2 million tons are coming from the States. Then the customers, they want to buy the pulp locally and they are waiting our project.

The second project is the decarbonization of Navia. At the same time, we substitute gas by lignin and we save a lot of money. We de-bottleneck the recovery boiler, and we are able to produce 30,000 tons more at Navia while we are on the engineering. And as we said on the Capital Market Day, we would like to sign the contract before summer next year. And then we expect to have EBITDA from this project also in 2024, on the second half of the year.

And regarding the investments we are doing for increasing the differentiated products, products more sustainable and with higher margins in Navia, well, we are on the engineering. And as I said, this EBITDA will start to increase already from next year, because we can already increase some parts of these differentiated products without any investments, because the investments are going to occur during 2023 and 2024. Then nothing new and everything is going on. And what is extremely important, is that with all these new projects in Navia where we compensate almost all the EBITDA, the normal EBITDA of Pontevedra with a more competitive situation. Then we are optimistic regarding the Supreme Court and we are optimistic regarding Navia Excelente.

[Operator]

Your next question comes from Edward Bottomley from Berenberg.

[Edward Bottomley, analyst]

The first one from me would be around your tax rate in the pulp business. So it seems like you paid the tax rate of roughly 0% which in the release, you attribute to the write down of Pontevedra. So how should we expect your tax rate through the year to develop, and should we be expecting you to pay no taxes in the pulp business through all of 2022?

[Ignacio de Colmenares, executive]

So yes, there are 2 impacts here. Number one, at the end of the year, there will be no tax payment, but the law in Spain is structure that you have to make advanced payments. So you will need to see some tax advance payments during these that will be recouped within next year. So the end is yes. We're talking about -- I mean you will have a cash out in tax this year '22 of around EUR 25 million. That will be recouped, will be given back by the Inland Revenue next year. [ This is in part ]…

[Edward Bottomley, analyst]

And then your P&L taxes would be 0, am I correct in thinking that? Sorry, if I might misunderstood.

[Ignacio de Colmenares, executive]

No, [ account ] speaking, you need to show the 25%. A different thing is cash flow. In your accounts -- in our accounts, we will register the 25% tax. Regarding cash, we will make the advanced payment of this [ 25% ] and they will be recouped next year. But in the net income, we will have the tax. I mean, those are the account rules, I mean, I'm not inventing anything.

[Edward Bottomley, analyst]

Yes. Okay. Thank you. And then my second question would be on FX. So at the time of the CMD, you assumed an FX rate of 1.16, if I'm correct. And FX has moved quite favorably for you since then. So how would updating your expectation here change the free cash flow estimates you shared at the CMD for 2022?

[Ignacio de Colmenares, executive]

Well, right now, what we are reviewing is all our hedging policy, and I will say that at this moment, there will not be very significant impacts differing from what we say in the CMD. I mean, everything in this year is almost done. I mean, we're now looking at 2023 for hedges.

[Alfredo Avello, executive]

But I think that Edward is asking the free cash flow of the dollar being below 1.06 now, instead of 1.11 at the capital market day.

[Ignacio de Colmenares, executive]

Then, well, it has a significant impact of these 5% on the revenues. But I think, Edward, we have to wait a bit to understand why the dollar is so strong today, because we don't know if the dollar is so strong today just because the war, or it is because the -- no increase of the interest rates in Europe, I think that -- well, this money is not yet in our box. We have to wait a bit.

[Operator]

Your next question comes from Jaime Escribano from Banco Santander.

[Jaime Escribano, analyst]

So 3 brief questions for my side. The first one, just to understand the commercial discount that has raised to 37% versus around 36% in Q4. And just to confirm, this is because of the lag effect of the prices increasing, or if there is anything else there. This would be my first question.

[Ignacio de Colmenares, executive]

Yes, no, it's you know that the way we have the contracts with ourselves and all the players in the industry. You know that we are invoicing our customers. We have almost 50% of the customers are against the [ picks ] and most of them, we charge the new price 30 days later. And then when the prices are going up, it appears that you have a higher discount than the contract discount, but the contract discount is 36 and we are in 36 and it's stable. Yes.

[Jaime Escribano, analyst]

Okay. Okay. Yes, no, that's what I was suspecting. Okay. The second question would be regarding Pontevedra. So you have announced that the Supreme Court has accepted 2 of the appeals. There is 1 left. One investor was asking me, what's the difference between this appeals and, for example, what happened if they don't accept the third one. Would that be an issue or [ one ] if they have accepted the 2 first ones, there is no much difference with -- just to understand a little bit more how these 3 appeals work or what do they have to have in common?

[Ignacio de Colmenares, executive]

Yes, yes, it is very technical. The Supreme Court said already 3 weeks ago, 4 weeks ago, regarding the third appeal, they said that they want to decide quickly. They have no time to have a look to this third appeal. They will decide on the first and second appeal. And this [ jurisprudence ] will be valid also for the third appeal, which was good for us because, well, it was showing an interest of the Supreme Court to decide quickly. And apparently, their opinion was the same. Okay?

The pursuant called [ Aparere ], they have appeal against this decision of the Supreme Court. And the Supreme Court has say, well, okay, we are going to decide on this appeal. And well, I am -- I don't have the resolution, but normally they will say the same that they have said on the first and on the second appeal, because from a legal point of view, what is discussed on the first and the second and the third judgment are the same things.

[Jaime Escribano, analyst]

Okay. Okay. And when -- I know this is difficult, but when you speak with your lawyers, when could we expect to have a solution from the Supreme Court. Is something that happen this year, or is it more for 2020?

[Ignacio de Colmenares, executive]

We think anytime between fall and winter.

[Jaime Escribano, analyst]

Fall and winter. Okay.

[Ignacio de Colmenares, executive]

Yes. Between September and December. That's what we think.

[Jaime Escribano, analyst]

Okay. Okay. Perfect. Perfect. And then a final question regarding the biomass auctions, any news on that? Any visibility on when could this take place?

[Ignacio de Colmenares, executive]

Yes, sorry to come back to the previous question. If the Supreme Court takes the same time that they took for these other case very similar to us in [ Morphea ], it will be by November, by November.

And then, going to your last question, well, we think that the auctions would be just before summer holidays or just after summer holidays. Well, we will have more auctions again next year, as you know, by law. We want to be extremely prudent. Today with all these inflation of raw materials, it is very difficult to get an offer from an EPC contractor who, one, is not putting 20% higher price in order to, one, he doesn't have any problem. And secondly, if he may have problems, I don't know he will respect the prices. Then today, we are going to be very prudent regarding these auctions this year. And most probably we will wait for the auctions next year. And on the meanwhile, we are working on increasing the EBITDA from the energy management and we are very optimistic on that. It's going pretty well. And it is not a big difference on bidding, let's say, in September or bidding in March next year. And I think that the world will be a bit more quiet next year and it will be easier.

[Operator]

Ladies and gentlemen, there are no further questions in the conference call. I give back the floor to Mr. Ignacio de Colmenares and Mr. Alfredo Avello. Thank you.

[Ignacio de Colmenares, executive]

Well, thank you very much, ladies and gentlemen, for your interest, and we look forward to meeting you again in July. Thank you. Bye-bye.

[Alfredo Avello, executive]

Thank you.