La Visión de los CFOs #8 | Alfredo Avello de la Peña, CFO de ENCE

Well, thank you first. Who am I? That's a good question. I would say 'we are' because we are a team with a clear service vocation. I believe that a financial function, a corporate function, a cross-cutting function, is there to serve. That's the first thing. And the second thing is what I am not: I am not a cost center. I think we are here to generate value. I believe there are always solutions to any circumstance that may arise. 'Impossible' is just a word, it's an opinion. You can always find a way, and that's what we have to do: be there to provide support, number one, better and easier work and processes for each of the operational lines, and give solutions, supporting the decisions of our president and board of directors.

For me, it is one of the most dynamic, most exciting, and most fun companies in the Spanish business landscape. It all started from a vision of our honorary president, Juan Luis Arregui, about the tree, the use of the tree, the circularity of our operations, the possibility not only of generating or producing paper pulp for our clients, but also discovering the knowledge in the generation of renewable energy that existed with biomass boilers, and how to multiply all that in different opportunities throughout Spain. Really, the ENCE I entered in 2013 has nothing to do with the ENCE of today. It has a great team, an absolutely top-level, passionate, dynamic team, eager to do new things and generate problems for the CFO so he can solve them. Great. So, in the end, how have you been growing, adding value? Explain to those who are listening how that is achieved, because in the end we would all be intrigued about how that value is built.

The old National Cellulose Company of Spain was dedicated to making cellulose. What Juan Luis Arregui saw, and then our president Ignacio Colmenares put into practice, was that vision: 'Hey, when you make cellulose, if you break down each of the operations, you have a huge energy part.' We select the eucalyptus trunk; all the bark, all the roots, all the leaves go to biomass boilers to generate renewable energy. The trunk is chipped, cooked, and releases the components of the wood: the water evaporates, the fiber continues along the fiber line, and the lignin, which is the glue that binds everything, is also burned in recovery boilers, generating as much electricity as the entire process needs. What Juan Luis saw was: 'This is not just about making cellulose; these guys know about energy generation with biomass. What if I develop this business as a separate business? And what if, instead of wood, which we use for cellulose, I use agricultural residues that are in the south of Spain? Rice straw, wheat straw, oat straw; all that we see along Spanish roads being burned. What if instead of burning all that, you burned it in boilers and generated renewable energy?'

What knowledge do you need? The supply of biomass, which is different from wood, and then the stretched sale because you don't do it directly. Well, it started in 2012 with the first plants in this sense, and now we already have eight plants. 70% of the residues, or rather by-products, we use are agricultural, so it's a way to take advantage of everything that is... that word so fashionable: sustainability, bioeconomy, and so on. And I challenge many to tell me what industry is more circular than this one. It's like the pig: you use absolutely everything from the tree. Now, look, we have an exciting project. We had a drought at our Pontevedra factory and we couldn't use water from the river. Well, the team, through the innovation process, managed to devise a system by which we recirculate the residual water from the Pontevedra plant, clean it, and use it to produce the same cellulose.

It's like the pig: you use absolutely everything from the tree. Now, look, we have an exciting project. We had a drought at our Pontevedra factory and we couldn't use water from the river. Well, the team, through the innovation process, managed to devise a system by which we recirculate the residual water from the Pontevedra plant, clean it, and use it to produce the same cellulose.

I would say, from the energy point of view, when I started in 2013 with biomass, biomass was the ugly duckling of renewables. Because there had been problems at the corporate level before, companies that hadn't done it well, banks were more on edge than giving us affection. It was a matter of gaining trust: 'Hey, let's put a plant for you, let's do it this way, we'll manage it so you're calm,' and as you learn with us, we improve the process. That was a huge challenge. The other challenge I would say is the cellulose point: moving towards what we were developing, which is special products, not standard. Our main competitor is Brazil or Chile. They are at least 60 days by sea transport to Europe. When they arrive, do you think they know 60 days in advance which client they were going to sell to, how many tons of pulp? No idea. We have two factories barely a week from our clients, so we can run campaigns. So how do you convince people: 'Hey, instead of making the typical standard pulp, let's see if my client would be better off with a higher degree of brightness, or opacity, or more resistance,' and so on. That's what we've been doing, innovating and generating new products that differentiate us from the Brazilians, who do a great job too. But we have taken a step further and changed the paradigm. That's one. And two, the supply of wood is brutal. I think we are the only cellulose company on the Peninsula that is self-sufficient locally, and that is an incredible competitive advantage. It has been hard to maintain that pace of growth, so fast and challenging. It has been hard.

To overcome those challenges or to enjoy that path, first, you have to be close to the operations. You have to understand the operations. You don't have to sit in the office; you have to go to the plants, to the places where operations are being generated, to understand the processes, what the people's problems are, and what problems you can find in each phase of the value chain. With that, you can start thinking and generating solutions. That's one. And two, there is always a solution for everything. There is never a 'no.' You just have to look for it. It may be optimal or not optimal, but that's possible. But above all, get up from the desk and go to the operations. So, those of you who are stuck in the office day to day and don't go out, and feel like you're imprisoned, you have to go out because you have to understand the business and the processes. And it will also help you explain much better how your business evolves. Look, even the administrative function of accounting: go to the operations, look at the processes, and it will help you understand what you are recording. And in that way, you will be able to reflect much better the real situation of the company and how to do things truthfully, as demanded, because in the end it has to be a faithful reflection of reality. Yes, it's in line with the new role of the financial officer, which is more of a strategic role, not so much a desk role, having to collaborate with the operations.

Thank you very much, and to the operations. Thank you very much. God bless.