Repsol accelerates its energy transition

Repsol accelerates its energy transition

Repsol unveiled its strategic plan for the years 2021 to 2025, during which it will advance in its net zero emissions objective with a project that accelerates transformation while maintaining a strong cash flow to finance ambitious growth and attractive shareholder distribution.

The company will decarbonize its asset base and implement a new operating model that will extract value from its current strengths as well as add new pillars to support the company’s future such as the Customer and Low-Carbon Generation Businesses. By 2030, Repsol will be a company that is renewed, more sustainable, and more focused.

The new strategy will be highly flexible in relation to the macroeconomic environment. It is being set in motion at a time of historic difficulty to which Repsol already responded with its Resilience Plan 2020 that produced positive cash flow in every business in the first nine months of the year and estimated savings for the whole year of €2.4 billion.

In this highly uncertain environment, the company has established two differentiated periods in its Strate-gic Plan. In the first two years, it will focus on ensuring financial strength, extending the efficiency and competitivity programs which began in March of this year.

The Strategic Plan is self-financing at an average $50 per barrel of Brent and $2.5 per MBtu at the Henry Hub. At these prices, the company can maintain a high degree of financial flexibility and keep debt un-changed from current levels through 2025.

During the first period of the plan, efficiency, investment cuts, and optimization of capital will be prioritized together with projects to lead the energy transition, including those already announced for the Bilbao and Cartagena refineries and the numerous renewable energy projects that Repsol is currently building. From 2022, with recovery from the impact of Covid-19, the focus will shift to the acceleration of growth.

A total of €18.3 billion will be invested during the new five-year plan. Low-carbon spending will reach €5.5 billion between 2021 and 2025 – 30% of the total – which will be accompanied by a continued international expansion. Over the course of the period, Repsol aims to substantially increase EBITDA, to more than €8.2 billion in 2025.

In a scenario of continued higher prices, Repsol will accelerate the growth of low-carbon projects in its portfolio.

A new operating model

Repsol will evolve its organization by deploying four business areas (Upstream, Industrial, Customer, and Low-Carbon Generation), supported by more efficient corporate and service units to favor increased results and value crystallization.

The new business model contemplates the incorporation of partners or investors to the Low-Carbon Generation business, or even a possible listing on the stock exchange to decisively accelerate the achievement of objectives and guarantee a higher return from our operations.

Digitalization will play a key role in the new organization thanks to artificial intelligence, automation of op-erations, and cloud-based solutions. The company expects the plan to provide a positive impact of the digitalization projects that already in 2022 will surpass €800 million a year compared with the start of the digitalization program in 2018.

A customer-centric business to build a multi-energy offering
In the new business model, Repsol will create a Customer Unit to globally satisfy all energy and mobility needs of its customers, currently more than 24 million. The unit will bring together the existing Mobility, LPG, Electric Mobility, Power and Gas Commercialization, Energy Solutions, and Lubricants businesses.

This new branch will become the leading multi-energy supplier in the Iberian Peninsula, increasing the weighting of low-carbon energy and developing digital products and tools that will allow for more personalized offers and improved customer experience. The company has a unique value proposi-tion and competitive advantages to offer clients a differentiated global service. The new transversal loyalty program will grow from the existing two million digital customers to eight million by 2025.

The plan sets the objective to increase the EBITDA of this unit by 1.4 times, reaching €1.4 billion in 2025. The company also expects to increase the number of power and gas as well as electric mobility customers to two million.

A global low-carbon generation operator

The company is planning to continue the organic growth of this business through the development of a portfolio of projects in operation that will grow at an annual rate of more than 500 MW between 2020 and 2025. Among the initiatives that are under consideration is a 1 GW enlargement of the capacity of the pumped storage station at Aguayo (Spain). This will be the largest investment in the history of the region of Canta-bria (approximately €700 million). In addition, further acquisition of assets will boost the expansion outside of Spain.
Between 2025 and 2030, Repsol will accelerate the organic growth of its generation capacity with the de-velopment of projects that will add more than 1 GW of installed capacity every year.

The Low-Carbon Generation Business is one of the four pillars in the new organizational model. It will con-tinue to increase its asset portfolio, as well as the already launched international expansion. The objective is to become a global operator, with a generation capacity of 7.5 gigawatts (GW) by 2025 and 15 GW by 2030.

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