Ence Energia y Celulosa SA

MAD:ENC

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon, ladies and gentlemen. Welcome to the ENCE Third Quarter 2021 Results Presentation. I now hand over to Mr. Ignacio Colmenares, Executive Chairman; and Alfredo Avello, CFO. Gentlemen, please go ahead.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Good afternoon, ladies and gentlemen. Thank you for joining ENCE's Third Quarter 2021 Results Conference Call. Our CFO, Alfredo Avello; and our Head of IR, Alberto Valdes, are also connected. After the presentation, we will be pleased to answer any questions you may have. Let's start with Slide 3, where we summarize the business highlights in the first 9 months of the year. Pulp prices have recovered strongly. They are trading at $1,140 per tonne since July, boosting the Pulp business operating margin. At the same time, the reduction in conversion costs, coupled with savings in overhead expenses, have offset the impact of raw materials' inflation during the first 9 months. Pulp production increased by 2% in this period, while cash cost was maintained at EUR 377 per tonne. On the other hand, renewable energy sales increased by 6% on a like-for-like basis, fueled by the 2 new biomass plants commissioned last year, which have offset the shutdown of the Huelva 50-megawatt plant during the second and third quarters. As a result, group EBITDA before the impact of hedges rose to EUR 63 million in the third quarter and to EUR 134 million in the first 9 months of the year, more than doubling its comparable EBITDA in the same period of last year. Our underlying business would have shown a positive net income of EUR 40 million in the first 9 months, excluding one-off hedges signaled in 2020 during the pandemic and the impact of the ruling of the Pontevedra concession. Strong cash generation in the period allowed us to reduce our net debt position by EUR 16 million despite reducing the usage of factoring facilities by EUR 19 million and settling carryover payments for another EUR 49 million. Our liquidity position is very strong. We have a cash balance of EUR 375 million at the end of the period after the prepayment of EUR 115 million of bilateral loans and the successful refinancing of another 20 -- sorry, of another EUR 210 million in the Pulp business. Finally, it is important to highlight that we have been ranked as the leading sustainability player in the global pulp market, according to the most recent study by Sustainalytics. Let's move now to Slide 4, which shows the strong pulp price recovery this year. Gross fixed prices in Europe have been trading at $1,140 per tonne since July. Our net selling price improved by 60% year-on-year in the third quarter and by 27% in the first 9 months, boosting the Pulp business operating margin. We are witnessing a decoupling between European and Chinese markets due to the logistic constraints that could last for several more months. In the following slide, #5, we summarize our views on pulp demand and supply balance in the coming years. We expect pulp demand to outgrow supply during the next 4 years, supporting a relatively tight market. The Tissue and Hygiene Products segment already account for 55% of double pulp demand, and we expect it to continue growing at around 4% annually, driven by urban population growth and improving living standards in emerging countries, together with enhanced post-pandemic consumption habits. Packaging and Specialty segments account for 25% of global pulp demand, and we expect the growth to accelerate to around 3% on as a result of economic recovery, single-use plastic substitution and lower recycled fiber availability. On the other hand, the Printing and Writing segment now only accounts for the remaining 20% of global pulp demand. Consumption fell 16% in 2020 and should remain at this low level over the next 2 or 3 years. On the supply side, apart from Arauco and Bracell projects in 2022, there is only the UPM project in 2023 and no more until the Suzano, [ Metsa ] and CMPC projects. We have not yet started construction, planned to start by 2024. Note that Brazil has started -- has stated that its ramp-up will be very progressive during the next couple of years and that most of its pulp will be used internally to feed Royal Golden Eagle Group paper and viscose capacity expansions in Asia. Moreover, Arauco has delayed the start of its MAPA project until the second quarter of next year. Moving now to Slide #6. You can see the positive operating performance of the Pulp business during the first 9 months of the year. Pulp production increased by 19% compared to the third quarter of last year when both biomills were idled for maintenance work. In the first 9 months, pulp production increased by 2%, thanks to the capacity we added at the end of 2019. At the same time, the reduction in conversion costs, coupled with savings in overhead expenses, allowed us to offset the impact of raw material inflation during the first 9 months, maintaining our cash cost for the period at EUR 377 per tonne. Cash cost in the third quarter increased to $380 (sic) [ EUR 380 ] per tonne, mainly due to higher wood cost as anticipated in our latest results presentation. As you know, our wood cost is partially linked to the fixed price performance, which is trading at its annual maximum. Besides, we are bringing wood from our plantations in Southern Spain, and we will import 90,000 tonnes of wood to mitigate the temporary reduction in eucalyptus harvesting capacity due to the extraordinary demand for pinewood. Looking forward to the fourth quarter, you should expect a cash cost of around EUR 416 per tonne, mainly due to the higher inflation in raw material prices, mainly in wood, gas and chemicals. Let's now look at our pulp sales on Slide 7. Pulp sales in the first 9 months reached 757,000 tonnes in line with those of the same period last year. Over 90% of these sales went to the European market, where our customers benefited from ENCE's unique wide portfolio of sustainable products and shorter delivery times. Our differentiated products accounted for 15% of our pulp sales in the first 9 months compared to 9% in the same period of last year. These products are more sustainable and are well adapted to replace plastic and softwood pulp. They also provide higher margins. Turning to Slide #8, you can see the operating performance of our Renewable Energy business. The volume of our energy sales during the first 9 months increased by 6% on a like-for-like basis. Higher contributions from the 2 new plants commissioned during the first quarter of 2020 and from the Huelva 41-megawatt plant were partially offset by the Huelva 50 megawatts shutdown during the second and third quarters. This plant has been back online now since mid-October. In the other hand, the average sales price decreased by 10% year-on-year despite increasing energy prices. This was caused by the combined effect of the regulatory collar on energy prices together with the impact of fixed price contracts. However, note that from a cash flow perspective, the regulatory collar is a noncash provision, ensuring higher amount of operating cash flow in 2021. Finally, remuneration on investments decreased by 5% in the first 9 months on a like-for-like basis due to the shutdown of Huelva 50-megawatt plant. In the next slide, #9, you can see our renewable energy pipeline of 513 megawatts. All of them have the grid connection permits and locations secured, and the administrative processing is expected to be completed in the coming quarters. We are now considering rotating our portfolio of 373 megawatts of PV projects if its current market valuation offers a better opportunity to create value for our shareholders. Selling process is still at an early phase and no negotiations have yet begun with potential interest investors. On the other hand, we will participate in the next biomass auctions with our portfolio, and we will continue developing new projects, including PV to further expand our Renewable Energy business in the coming years. I will now invite Alfredo to review the financial figures in more detail.

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Thank you, Ignacio. As you can see in the following slide, #10, it has showed a very strong EBITDA recovery in the first 9 months of the year, fueled by the Pulp business. Our Pulp business EBITDA before hedging impacts improved from EUR 17 million up to EUR 100 million, driven by the strong recovery in pulp prices. Note that this figure already includes the noncash accounting provision of the regulatory cohort on the energy sales coming from our lignin cogenerations at each biomill. This regulatory collar adjusted down the EBITDA by EUR 11 million during the third quarter. Pulp hedges arranged last year in the very uncertain environment caused by the pandemic had a negative impact of EUR 31 million, which were partially offset by the positive impact of EUR 3 million coming from the ongoing FX hedging program. After hedges and including the regulatory collar adjustment, our Pulp business EBITDA increased up to EUR 71 million, 10x higher than in the same period of 2020. Focusing now in our Renewable Energy business. Its EBITDA before hedges also increased by 21% year-on-year on a like-for-like basis, excluding the Puertollano CSP plant sold last December. This improvement was driven by the higher energy volumes and sales prices. We should note that our energy sale prices are affected by 2 factors: on one hand, the regulatory collar, which shows a noncash downside adjustment of EUR 18 million in the period; and on the other hand, the fixed price selling contracts signed back in 2020, under the pandemic environment, which had a negative impact of EUR 20 million in the 9-month period. After taking into account all these factors, our Renewable Energy business EBITDA reached EUR 14 million. With such a strong EBITDA recovery would have shown a positive net income of EUR 40 million in the first 9 months of the year, excluding one-off hedges and accounting consequences of the court ruling on the Pontevedra concession, which amounted to EUR 196 million and that were registered in the previous quarter. As you can see in the following slide, #11, cash flow generation was strong in the first 9 months of the year. Free cash flow before growth CapEx doubled to EUR 38 million compared to the EUR 19 million of the same period in 2020, after a working capital increase of EUR 26 million and a reduction of another EUR 19 million in the usage of factoring facilities. Just remember that although the energy revenue figure registered in our accounts is adjusted up or down by the regulatory collar in both of our businesses, this is not the case with the cash inflow coming from those sales, which is received at its full market value with no regulatory adjustment. Growth and sustainability CapEx for the period amounted to EUR 49 million, basically related to carryover payments coming from the strategic plan investments made back in 2019. The remaining carryover payments, which amount to EUR 22 million in the Pulp business and to EUR 4 million in the Renewal Energy business, will be completed in the coming months. Only standard maintenance CapEx for both of our businesses should be expected for next year. Net debt was reduced down to EUR 162 million, including EUR 16 million related to lease contracts under IFRS 16. Let's have a closer look at our net debt position in each business in the following Slide #12. Net debt in the Pulp business was just EUR 18 million at the end of the period. This includes EUR 15 million related to lease contracts and a cash balance of EUR 310 million. We have prepaid EUR 115 million of bilateral loans in our Pulp business after the sale last year of a minority interest in our Renewable Energy business. In addition, during the third quarter, we successfully refinanced the business revolving credit facility, increasing its availability up to EUR 130 million as well as another EUR 80 million in bilateral loans, extending all their maturities until 2026. On the other hand, net debt in the Renewable Energy business amounted to EUR 144 million at the end of the period, also with long-term maturities and a cash imbalance of EUR 65 million. Turning to Slide 13. Let me remind you about our current hedging programs in both of our businesses. Regarding FX, our policy is to hedge up to 50% of our pulp sales for up to 12 months. We have secured an average cap of $1.23 and an average floor of $1.18 for almost 50% of our dollar exposure for the remainder of '21 as well as for the first semester of '22. This program had a positive impact of EUR 3 million in the first 9 months. On the other hand, it could have a negative impact of EUR 2 million during the fourth quarter if we assume an average exchange rate of $1.16 per euro. Also, as said during the third quarter of last year, under a very uncertain business horizon caused by the pandemic, we decided for the first time to secure better pulp and electricity prices for 2021. When the pulp price was at $680 per tonne, we secured an average price of $773 or 24% of our expected pulp sales in 2021. These hedges had a negative impact of EUR 31 million in the first 9 months, and we estimate another EUR 21 million for the fourth quarter, assuming an average price of $1,140. We also secured an average price of EUR 44 per megawatt hour for 50% of our expected renewal energy sales in 2021 compared with an average electricity price of EUR 34 in 2020. These hedges had a negative impact of EUR 20 million in the first 9 months, and we estimate another EUR 31 million for the fourth quarter, assuming an extraordinarily high average pool price of EUR 200 per megawatt hour. I will now return the lead of this presentation back to our Chairman for the final slides.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Thank you, Alfredo. Moving now to Slide #14. I would like to mention the highlights of our sustainability performance. As you know, I believe that companies that care for the environment, for the staff and for the communities and companies with a strong corporate governance are more competitive. 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 ranks ENCE as the most sustainable player in the global pulp market. I would like to highlight the following achievements in the first 9 months of 2021. Firstly, we have been pioneers in Europe in certifying the sustainability of the biomass we use as a fuel, those ensuring our compliance with the sustainability criteria set out in the RED II renewable directive. For our -- 4 of our plants have already been certified. Secondly, we have continued to improve all our safety indicators, which are already 10x better than the average for the industry in Spain. Thirdly, the rigorous application of ENCE's protocol against COVID-19 has enabled us to continue operating safely and to carry out the annual maintenance shutdowns of our main production centers without any COVID infections. Fourthly, we have continued to reduce the odor of both past biomills, which is already below 1 minute per day. And finally, in our Board of Directors, we have increased both the percentage of female representation, which is now up to almost 40%, and also the percentage of independent directors. To conclude this presentation, I would like to emphasize the following key messages. 2021 will be a positive year for ENCE in terms of cash flow generation, despite the pulp and energy price hedges closed exceptionally in 2020. We would have returned to net profits if it weren't for the accounting impact of the national court ruling on the Pontevedra concession. We have appealed to the Supreme Court against this resolution. We expect the court to decide whether or not to accept our appeal during the first half of 2022. In the meantime, we are focused on cost control, increasing the sales of our differentiated products and on developing our Renewable Energy business. As you know, we don't have any pulp or energy hedges for 2022. Thank you. I will be pleased to hear any questions you may have.

[Operator]

[Operator Instructions] The first question comes from Alberto Espelosín from JB Capital.

[Alberto Espelosín]

I have 3, if I might. I will do them one at a time. First, do you keep your volume target of [ 1,050,000 ] for the full year? And could you please repeat the cash cost target for 4Q '21?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Thank you very much, Alberto. Yes, we expect pulp sales in the fourth quarter of around 260,000 tonnes, and the total amount of 1,020,000 tonnes in 2021, above last year's sales and slightly below our initial forecast. The figure is slightly below our target for the year, mainly because of the temporary reduction in eucalyptus harvesting capacity. Regarding our cash cost guidance, I would like to give you a couple of figures. Well, as you know, our cash cost in third quarter has been EUR 380 per tonne. We expect, unfortunately, a cash cost of around EUR 416 for the fourth quarter. Wood, gas, chemicals due to the energy increase are affecting us, and we expect to finish the year with an average cash cost of EUR 388 per tonne.

[Alberto Espelosín]

Okay, perfect. And then some questions on the same topic first. What impact do you expect from the collar on 4Q 2021? And on this note, the Ecological Transition Minister opened the possibility of anticipating payments of regulatory liabilities. Given the evolution of pool prices above the upper limit of regulatory banding mechanism, you should be creating a regulatory liability. If you need to settle it in the end of the year, what would be the impact for you in terms of debt and cash flow?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Well, first of all, there was a meeting yesterday between the all the renewable associations and the Vice President of the Government, Minister of Ecological Transition. I would say that it was a friendly meeting, where the Vice President was asking the renewable sector to support the government in trying to reduce the energy for the poor people and for the industry intensive in energy. She asked us for ideas. The associations are working on that, and we will give ideas at the beginning of next week. But I have to point out one thing which is very important. What the Vice President said from the beginning was that -- she was not contemplating at all any receptive measure than 2021 is gone. And just as an idea, she was saying, why couldn't we, the renewable industry, sell in auctions at a price between EUR 50 and EUR 60 per megawatt hour to those 2 segments of population, the poor people and the intensive in energy industry. And we will get on top of that the Ro and the Ri we have. Then -- well, according to this first meeting, it's too soon to have any conclusion. But I think that we don't have -- we are not going to have any [ pulp ] products, not for 2021. You know that during 2021, it's very difficult to explain that by the phone, but the fact that the pool is very high, it's higher than the regulated price of the pool. It's affecting us positively because we are invoicing a higher amount of money, but we are not recognizing all this amount of money in our accounts. That's the provision of the collar. And the other effect on the future is that this money we had get in advance will be against the future distribution of the biomass power plant in the future. But it is -- well, it is a dream. We are getting money before we expect it, and we have the money in our cash. And we are on the accounts, but putting provision for this amount of money because the Ri on the future is going to be lower. But coming back to your question, while we think that what the associations will agree on the next weeks with the Minister, it's not going to affect our company nor the balance of the other renewables company. Maybe we are not going to have so high collar on the next year in 2022 because the price we are going to sell will be more adjusted to the regulatory price of the pool. That is the only effect. I don't know if Alfredo or Alberto, you want to say something else because it's a bit complicated to explain all that on the phone.

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Just to reinforce the 2 main topics that our Chairman has stated. Number one, it's not a retroactive measure. It will only be temporary; and number two, they assure the return on the investment for the future. Nothing else.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, let's say that today, we are all having -- it's a bit difficult to understand. We are having a higher return on the investments because we are invoicing and getting the money at the market pool price. We are adjusting in our accounts against the regulated pool price, but we have the money in our hands in advance. Well, I suppose they don't want that to happen again in 2022, but that is extraordinary and it's normal what they want. Let's say that for the fourth quarter 2021, with market price of the energy expected for the balance of the fourth quarter of EUR 200 per megawatt hour, which is extraordinary, but it is what it is. The additional turnover in the Energy business for us would be EUR 62 million on top of the regulated pool price. We will account and get in our pocket EUR 18 million. and we will, on top of that, get in our pocket EUR 44 million, but we will provision them as a regulatory collar. And in the Pulp business, the additional turnover on the fourth quarter at this price of EUR 200 per megawatt hour is going to be EUR 32 million, and we would provision EUR 12 million for the regulatory collar. Then it's a good thing. It's a good thing. It's an extraordinary thing. We are taking money this year. A lot of money in advance, roughly EUR 90 million. And that is the Ri of our biomass power plants for the next years. Well, that is extraordinary. It's very good, but it's not normal. And what the government wants is the renewable industry to support -- the industry to support the poor people and then to come back on an agreement to what is normal according to the regulation, 7.1% of IRR -- sorry, 7.4% of IRR.

[Alberto Espelosín]

Understood. And just on Pontevedra. Could you please give us some color on the proposal of extending the Port of Marin to include the land occupied by your pulp mill in Pontevedra. Is this a likely scenario?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Well, I think it's a difficult scenario because you need 2 approvals. You need the approval of the Ministry of Transport with the big boss of the Port of Marin. And you need the approval of the Ministry of Transición Ecológica, then the key of this authorization is on hand of the government, and we all know what the government thinks. And on top of that, if, at the end, the ruling of the Audiencia Nacional is firm, either because the Tribunal Supremo doesn't accept the appeal or because we lose the appeal, it is not possible that -- to do a thing against this rule by an administrative act, then we think it's quite difficult.

[Operator]

[Operator Instructions] The next question comes from Jaime Escribano from Banco Santander.

[Jaime Escribano, Equity Analyst]

So a few questions from my side. I will go one by one. And the first one regarding the solar portfolio that you are starting to sell. My question would be what is the strategic rationale behind this? And would it not be better for example, to win some auctions or to close all PPAs in this portfolio of solar PV, and then sell it for more money? Is this not more worthy for you? And I'm basically building on why you didn't attend to the last auction with these megawatts? Would they not be more valuable?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Well, we have launched, Jaime, a competitive process to evaluate possible bids for this portfolio, and nothing has been yet decided. This portfolio, as you know, comprises 5 projects located in excellent areas with the highest solar irradiation rates in Spain. And all of them have all the grid connection permits, the locations are secured and the administrative process is going on. Strategic fit. Well, today, there are not too many PV projects with connection permits with land in the good areas. This scarcity, as you know, is driving the price for these PV projects higher than a few months ago. We want to find out if the current market valuation for our PV pipeline is higher and the present value of developing it, what you were just asking, but we need to know at which price we could sell those assets. And taking into account that we are an industrial player with a higher required return and more conservative leverage policies than other kind of players. Then we want to see if there is higher value for our shareholders in selling those PV projects as they are now or to continue developing it. And we will take the decision on the following weeks. In any case, our strategy remains expanding our Renewable Energy business in Spain. With that aim, we will participate in the next biomass auctions, and we will continue developing new projects, including PV.

[Jaime Escribano, Equity Analyst]

Okay. My second question is regarding pulp outlook in China. There seem to be some developments in terms of Chinese paper prices going up because of downtimes. And I would like to understand what is your view if this could give some support to pulp prices in China? Or do you see them going further down? Yes, this would be my second question.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes. Thank you for your question, Jaime. Well, first of all, you know that we are not present in China. Then everything I will tell you is what I'm reading, and it's the same information you can read. Well, what we know is that there is a decoupling about -- between China and Europe because of the logistic constraints. What is happening in China has nothing to do with what is happening in Europe. In Europe, the supply of pulp is tight. And in Europe, the supply of paper is extremely tight. Two days ago, La Vanguardia, normal periodico from Barcelona, the second-most important news was that the scarcity of paper for printing and for books in Spain. Then today, our customers in Europe are securing the procurement of biomass. They are not talking about prices, they are not talking about contracts for next year, they are securing the volumes. Meanwhile, in China, with this energy crisis and these stoppages in many industries, while it's affecting the consumption, prices have been going down since July, and it seems, as you are saying, that prices have started to rebound from some paper grades today. We have to wait to see what happens. Normally -- normally, and following the rules of this industry, after these reductions in prices in China and reductions in consumption, normally, the price stabilize and the price goes up again, but we have to wait and see.

[Jaime Escribano, Equity Analyst]

Okay. And could you elaborate a little bit more on what's going on with -- you were talking about the eucalyptus scarcity in this year's harvest. And what does this relate with the pinewood, which I didn't get it, why the pine is important and why this is affecting the scarcity of eucalyptus?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, very important question. Yes, the wood -- the price of wood panels has doubled this year. Well, the main reason is that everybody after COVID is rebuilding the kitchens and the furniture at home, not in Spain, worldwide. And then the wood panels, one made with pine, has doubled the price this year. And the price of the pine has increased a lot all around the world, in Spain too. You have to understand how the industry is in Spain, in the northwest of Spain where you have pine and you have eucalyptus. The companies who are buying to the owners, the standing wood have a portfolio, and then they are managing the harvesting and they are selling the wood, either pine or eucalyptus. And today, as they bought pine at normal prices a few months ago, and they are able to sell this pine at extremely high prices. They are putting all the resources for harvesting on the pine. And today, we don't have any difficulties in buying eucalyptus. We have difficulties in harvesting all the eucalyptus we have bought. Because of that and to mitigate this temporary reduction in eucalyptus harvesting capacity; well, we are bringing wood from our own plantations in Southern Spain, and we are also importing in the second half of the year 90,000 tonnes from abroad. These extraordinary measures are temporary and are increasing our wood cost by EUR 26 per tonne, EUR 26 on the fourth quarter '21. And it's also affecting production. We prefer to temporarily lose some pulp production rather than tensioning further the eucalyptus price. If we further increase eucalyptus prices today, it will be difficult to lower them afterwards. As you know, the Iberian Peninsula, Spain and Portugal, have a deficit of eucalyptus. We normally don't import. But remember that our Portuguese competitors are forced to import huge quantities of eucalyptus from LatAm, which means that if we increase the price of eucalyptus in order to get eucalyptus harvested, it will be quite difficult to reduce this price in the future. That's why we have chosen to stabilize the price of the eucalyptus in the northwest of Spain. We are just increasing according to the contract the fixed price part of it. And we are moving from Huelva eucalyptus, which is more expensive because it has a lot of transport costs, and we have imported 90,000 tonnes from abroad, then the average cost of the wood in the cost of the pulp is increased. It will be increased in the fourth quarter by EUR 26 per tonne, but with 2 segments. The normal volume from the northwest is stable prices, and we have a huge increase on this extra volume coming from Huelva and coming from South Africa, which is extraordinary.

[Jaime Escribano, Equity Analyst]

Okay. And do you think that this is going to be temporary in Q4? Or could this also extend through the first half of next year or Q1 next year?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

No. No. We think it will -- well, it's all this effect on the raw materials worldwide. Who knows what is going to happen. Yes, the most probably is that at least only the first half of next year, it may continue. We are with our regular suppliers, we are supporting them in order to increase the capacity of harvesting, but it takes several months because they have to buy new machines. And as with any kind of equipment, it's difficult to buy any kind of equipment today -- new equipment. We are finding old equipment, we are repairing it. We are increasing the capacity of harvesting. Then we think that this scarcity will continue during the first half of next year because the high prices of the pine will continue. But month by month, we will be able to harvest more and more eucalyptus.

[Jaime Escribano, Equity Analyst]

Okay. And last question, sorry for this. Yes. My last question is regarding -- I don't know if you can provide some EBITDA guidance for 2021, given that there is only 1Q and with all the impacts that you have been talking about, hedges and so on. I mean I can -- I can throw a number or -- and maybe you can tell me if it's more or less correct, but would it make sense, with all the impacts you have mentioned, something in the range of EUR 90 million to EUR 95 million EBITDA for the full year makes sense?

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Sorry, Jaime, but we don't give EBITDA guidance. I can give you what I told you. We think that we are going to produce during the fourth quarter, where we are losing volume, as I told you, due to this wood scarcity, we think we are going to produce 265,000 tonnes, and we are going to sell them. We are going to produce them at a cash cost of EUR 416 per tonne. Well, you know the prices. You have to do your figures.

[Jaime Escribano, Equity Analyst]

Okay, okay, okay. Yes. And then you have provided all the hedges. Yes, that's fine.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes. The thing is the hedges, but I think it was a big surprise today for people. Do you have any questions regarding the hedges? Everything is clear?

[Jaime Escribano, Equity Analyst]

Yes. No, no. I think there was one slide where you quantified the impacts for Q4. So I think -- yes, no, that's why I was asking that maybe you have a figure in mind for the full year and maybe it's better to set up expectations and to -- because you know whether than us to make the numbers and so to guide us -- so to make sure that...

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes. We just gave operating guidance and we informed the effect of both the hedges and the collar. The collar has no effect on the cash, which is important. But the hedges, as you know -- well, we are still going to have impact for this year. Yes. Fortunately, it's finishing. 31st of December, it's finished forever.

[Jaime Escribano, Equity Analyst]

Okay. Yes. No, that's fine.

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Jaime, this is Alfredo. Just 2 things. I think that we have given you enough data as to reach a very, very narrow figure. But in any case, I think it's important to reinforce what Ignacio has just said. I mean hedges ended -- ends in December. There's no impact of hedging except for the FX hedging that you have in year 2022.

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Yes, and you have to take into account because it's difficult to understand, but -- well, a year like this year, the EBITDA is maybe not the good KPI. The operating cash flow is important because we have EUR 90 million of collar. We have collected. They are on our pocket and they are not on the EBITDA. We have in energy EUR 60 million of collar collected in our pockets, where we are going to have at the end of the year. And in pulp, it's just above EUR 30 million, and it's a lot of money.

[Operator]

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

[Ignacio de Colmenares y Brunet, Chairman, CEO & MD]

Well, thank you very much, ladies and gentlemen. We are in contact, and we have the next meeting in 3 months. Thank you.

[Alfredo Avello De La Peña, Chief Financial & Corporate Development Officer]

Thank you.