Edp Sa S/Adr

Good morning. We welcome you to the EDP first quarter 2025 results presentation conference call. During the presentation, all participants will be on a listen-only mode. There will be an opportunity to ask questions after the presentation. If you wish to ask a question during the Q&A session, You may do so by pressing the star key followed by 5 on your telephone keypad. If you're experiencing any difficulty in listening to the conference at any time, please make sure you have your headset fully plugged in, or alternatively, please try calling from a different device. And now, hand the conference over to Mr. Miguel Piena, Head of IR and ESG. Please go ahead, sir.

Good morning, ladies and gentlemen. Thanks for attending EDP's first quarter 2025 results conference call. We have today with us our CEO, Miguel Struel de Andrade, and our CFO, Rui Teixeira, which will present you the main highlights of our strategy execution and the first quarter 25 financial performance. We'll then move to the Q&A session in which we'll be taking your questions both by phone or written questions that you can insert from now onwards at our webcast platform. I'll give now the floor to our CEO, Miguel Struel de Andrade.

Thank you, Miguel. Hello, everyone. Thank you for attending our first quarter results conference call. So I'd like to start, for those of you that weren't able to listen to yesterday's call from EDP Renewables, just start with a brief remark on the unprecedented blackout of last week in Iberia. I think the first thing to note is, while it's yet to be fully explained and we don't know the root cause, it's really important to recognize how both countries were able to fully restore power and safety to the population. And I want in particular to thank the people at EDP and ERED, the distribution company in both Portugal and Spain, for all the hard work and the dedication and sort of all the hours they put into to get this, you know, the power back online. So I think great work done by the team. On the other hand, I think the event also really underlines the need for continued investment in the grid infrastructure and interconnections. In particular, interconnections between Spain and France. It's been clear for many, many, many years that this is absolutely critical and it would have certainly helped also in this context. But also the need for investment in energy storage, and also complementary solutions, for example, the ancillary services. So together with renewables, I think these are the elements that are key to ensure an electricity system that provides clean, reliable, and affordable energy to all. So I think that's just the note I'd like to make on last week's blackout event. Now, turning to this quarter's results. If we go to slide three, just starting with a quick recap on the first quarter numbers, EBITDA increased 6% year on year, So it reaches 1.4 billion in the first quarter. This is clearly a very good quarter, particularly for the integrated generation and supply business in Iberia. We had a lot of rain. We had higher power prices, certainly versus last year. And we also benefited from a strong demand for flexible generation and facility services. So that was good. On the electricity network side, we also saw good resilient performance. It actually increased 7% if we exclude the asset rotation gains in FX. last year bear in mind that last year we recorded 134 million euros in asset rotation gains split between the transmission and edpr transactions and this year we're not recording any gain and yet we had this underlying growth wind and solar underlying performance was also up 20 year-on-year excluding gains as we talked about yesterday supported by an increase in installed capacity after the record additions executed in the fourth quarter of last year and also improved renewable resources So overall net profit increasing 19% year on year, reaching 439 million euros and reflecting this very strong top line performance. If we go to slide four, and I think this is a particularly interesting slide because it shows there was a quarter with really strong hydro resources, 42% above average. So even better when compared to last year's resources, which were already 38% above average. However, hydro generation decreased year on year since the strong rainfall was crucial to strengthening the reservoir level. So we took the advantage to really fill up the reservoirs. They were at 60% at the beginning of the year. They're now, well, versus 80% in early 2024. So if you look at the left-hand side graph, you can see that the delta on the production year-on-year was mostly stored in the form of reservoirs. So we go into this, let's say, second and third quarter with strong reservoir levels. Despite being lower year-on-year, hydro generation was still above average, so about half a terawatt hour above average. And those uncontracted volumes were sold at much higher prices when compared to the first quarter of 2024. So the electricity pool price in Iberia was almost double the first quarter of last year of 2024. And it was 85 euros per megawatt hour in the first quarter of this year. So all in all, reservoir levels are standing at roughly 93 percent in early May. So maximum highs of the last 10 years. April was also a very good month in terms of hydro resources. So 52 percent above average. which leaves us confident for the remaining part of the year. Obviously, the fourth quarter is also an important quarter for us, and so we'll have to see how that goes in relation to hydro. If we move on to slide five. So five, I think what we wanted to talk about on the slide was really stress the value of our flexible generation fleet. You can definitely extract additional value from price volatility in the market, and this is key to complementing intermittent technologies. We're seeing a clear trend of more value being attributed to this type of assets. So if you look at the final price of electricity in Spain, you can see that the component of it that's attributable to ancillary services and restrictions is constantly increasing. And this is due to a combination of factors. On one hand, increasing electrification, so grid management complexity, higher penetration of intermittent resources. And so all of this increases the demand for balancing services that can be provided by flexible generation assets, hydro, gas. Those are really the key assets for us, obviously pumping. On the other side, this higher penetration of renewables leads to expanded intraday spreads. You can see that on the right hand of the slide, which leads also to improved hydro premiums. And so talking about EDP figures, hydro pump spreads as a percentage of baseload prices stood at more than 50 percent in the first quarter of 2025. and are showing a clear growth trend when compared to past years as a result of this new market profile, which we expect will continue to be like this going forward. And so it's more of a structural issue. If we move on to slide six. So looking at the overall integrated business. This improved market context together with a good first quarter in April as well. means that we are updating the guidance for this segment in 2025. So previously we pointed to an integrated Iberian EBITDA of around 1 to 1.1 billion. We're now targeting 1.1 to 1.2. Most of that has already been locked in. So we have about half a billion EBITDA already recorded this quarter. 0.4 margin locked in already for the remainder of the year. That leaves us with 0.3 still not locked in. We expect that to come mostly from flexible generation, hydro pump storage, gas. These have lower risk, namely hydro, which, as I say, has very healthy reservoirs as of May. So key drivers for this guidance are strong first quarter and also good numbers for April. Reservoir levels at 93% in early May. High weight of locked-in margin, assuming normalized volumes. Positive prospects for flexible generation with increasing demand for flexibility services. and also obviously a very resilient client base to provide stability. And that continues to show us an increase on services penetration. So positive outlook for this integrated business. Talk about networks. So on slide seven, as you know, by the end of 2024, we proposed a 50% increase in investments for the next regulatory period, 2026 to 2030, in the medium and high voltage electricity networks in Portugal. There's typically a multi-annual investment program that we have to present every couple of years. We did that with this proposed 50% increase. This proposal has now received a favorable opinion by the regulator. It was the first ever regulatory opinion without any cuts proposed. So I think there's a general consensus in the sector that there is a need for additional investment in the networks. And I think this is obviously good news for the investment in our networks business. I think we all recognize that it's absolutely critical for ensuring the energy transition. I'd also like to highlight here that according to the regulator, the impact on tariffs is immaterial. We're talking about the 0.7 accumulated increase in the 2030 tariffs versus 2025 in nominal terms. So this is not a CAGR. This is accumulated increase of 0.7, which is absolutely immaterial in the context of the cost of the systems. And we want to invest in several fronts here in the networks. Around 45% of the investment in our plan will be allocated to modernization of the grid, around 15% to digitalization, and around 20% to electrification and decarbonization. Finally, and this topic has grown in importance over the last two weeks, 20% of the investment will be allocated to making our networks more reliable and ensuring a continuous robust service as the renewal penetration in the grid grows. I think it's consensual in the system or in the sector that we need to ensure adequate returns for the electricity networks to support these higher investments and to enhance the assets modernization. On the right-hand side of the slide, just a quick wrap-up of the key regulatory milestones we'll have this year. So we have the new regulatory period starting in 2026, as I mentioned. We will be expecting to get a proposal from the regulator on the 15th of October. relation so that's a draft proposal for the next regulatory period so we have more information then and then as you know typically on the december 15th is when we get the final um decision from the regulator on the on the next regulatory period so two key milestones 15th of october and then the 15th of december to get first the draft and then the final opinion so i think we'll we'll be hopefully having public hearings and discussions over the next couple of months but At least on the investment side, we already have a positive regulatory opinion on this. It's still dependent on the government approval. And then we also have to have that discussion around the returns of this additional investment. Talking about networks in Spain. So moving on to slide eight. Here, as you know, we've been reinforcing the weight of electricity networks in our portfolio over the last couple of years. So we did the Viesco acquisition back in late 2020. We basically doubled our networks in Spain. We already had the Idre Contabrico networks up in the north in Asturias with the Viesgra acquisition, mostly networks in Cantabria and also part of Asturias. So contiguous networks. We got a lot of synergies out of that. I think we were able to really show the value that came out of that and deliver on the assumptions or over-deliver on the assumptions that were underlying that acquisition. This is an area in the north of Spain which has quite a good growth potential due to high industrial demand per capita and also increasing renewables generation. However, and this is something that we've stressed before and many other players in the sector, we think that the investment conditions in Spain have room for improvement. The return on RAB is currently 5.6% and there's no inflation update. On top of that, there's an investment cap of 0.13% of GDP, so you can't invest The sector as a whole can't invest more than 0.13 of GDP. We've seen that the Spanish government acknowledges this and recognizes that this needs to be changed. We believe that the regulator agrees that this is urgent and that the current rate should be increased. The Spanish regulatory period, there'll be a new regulatory period also starting in 2026. The current investment plan for the 26-28 period is under discussion with the regulator. It was submitted to the regulators on April the 30th. after a favorable opinion from the regional governments. But this plan is still respecting the current investment caps. So we've also proposed another plan with a significant increase for the 26 to 28 period beyond the current cap. So if there's an increase in the cap, we already have an alternative plan already prepared. By the end of the year, we expect that the regulators should improve the new investment limits. This is our estimate on the deadline. Could be that we have further visibility either in the second or third quarter of 2025. And regarding the new remuneration framework and regulatory assumptions, we should have a public hearing soon, either in the second quarter, and then the regulator should approve this by year end. So all in all, for this regulatory period, the key message is that improvement of returns is critical to attract private investment in the networks and critical to support the energy transition. So we'll see how this evolves over the next couple of quarters. Move on to slide nine and talk about electricity distribution in Brazil. So here we continue to see a continuous increase in electricity demand. And as you know, this is extremely important for the returns for the networks in Brazil. This has been supported by demographics, by economic growth, by electrification trends. The electricity distributed increased 7% in our areas as of the first quarter of 2025. It's after a similar increase in 2024. and an increase of 5% in 2023. So definitely this reinforces the need for additional investment in the electricity networks in Brazil. It's worth highlighting that our two distribution companies in Brazil continue to be a reference in the country in terms of quality of service indicators. EDP São Paulo has registered its best historical record in the duration of interruptions in the electricity distribution in 2024. And now EDP Spiti Cent has also achieved this landmark. So both of our distribution companies are committed to delivering best quality of service and capitalizing on this market growth. On the right-hand side of the slide, a recap in terms of the distribution companies. So this is obviously a very important year for EDP Spiti Cent. The new regulatory period starts in August of this year. The regulator has released the regulatory WAC for 2025 at 8.06% versus 7.15% currently. The distribution concession process is ongoing. The regulators recommended that the concession be extended for 30 years at the ministry on the 29th of April. And we expect that there will be the signature of the new concession contract still in the month of May. And so Schpiedig Cent will have this additional 30-year concession. And as I say, we expect to hopefully announce that in the coming weeks. We move on to slide 10. just a quick overview on our transmission business in Brazil. So over the last nine years, we've delivered more than 12 transmission projects, and we've been unlocking value both through operating those lines as well as through asset rotation. We've sold six lines since 2021, amounting to around 0.7 billion Brazilian reais of gains and 6 billion reais in asset rotation proceeds, including the asset rotation deal concluded last week on Lock21. Currently, we hold seven transmission projects. Of these, three are under construction. They're the lines that we won in March of 2024. And the investment associated with this is 2.6 billion Brazilian reais, so around 0.5 billion euros. The regulator expects these projects to enter operation between 2027 and 2028, and we expect to reach double-digit equity IRs with these projects. On the right-hand side of the slide, regarding our asset base, we expect it to continue growing through the period of 2025 to 2027, reaching 6.7 billion Riyals in 2027. Regarding wind and solar on slide 11, so as I mentioned, I've mentioned already previously, two gigawatts of new capacity to be added in 2025 on track, all projects under construction, around 70% of the targeted additions with expected commissioning by year end. Just giving you a little bit more color on these additions in terms of geography, the U.S. and Europe representing 80 percent in terms of technology makes approximately two thirds of new capacity coming from solar and storage. I wanted to take an opportunity to talk about supply chain strategy because this is something that we get a lot of questions on. So we adjusted our supply chain strategy over the last two or three years since we had an incident back in 2022 and 23. Since then, we've prioritized the use of domestically manufactured equipment and established partnerships with U.S.-based suppliers. This allows us to mitigate the risks associated with the import tariffs. For 25 and 26 secured capacity, we've already ensured the necessary infrastructure to keep the projects on track. Most of the equipment is already in the U.S. We're not subject to tariff because it's either domestically made or they're specifically exempt. And so we estimate tariffs will have a limited impact in our revenue's or secured capacity, totaling less than $25 million for around 1% of these projects' capex. I also wanted to just highlight here our multi-year agreement with First Solar. We announced that back in March of 2023, and that ensures access to the US manufacturer's solar modules, and it gives a lot more visibility and comfort surrounding our project pipeline for 2026 and 2027. On the PPAs, we continue to see strong, resilient demand, mostly backed by regulated utilities and corporate entities. And on PPA pricing, it will likely be adjusted depending on market changes. At the same time, the Inflation Reduction Act tax credits framework remains a key pillar for our investment strategy. Even yesterday, we've had several Republicans signing a letter defending the maintenance of these tax credits. We have around 1.5 gigawatts of projects secured under safe harbor agreements, and we've protected our developments from potential legislative adjustments. So all in all, confidence in our efforts in the supply chain management that will pay off and that we can continue to grow in the U.S. in a sustainable and value-enhancing way. Just another two slides before I pass it over to Hui. One, talking about efficiency on Site 12. I wanted to just highlight here that we think this continues to be a key competitive advantage. We've been spending a lot of time focusing on this, and this has been reflected also in our numbers. As of the first quarter of 2025, OPEX decreased 2% nominal year-on-year. If you look at the 23 numbers, you can see a continuous decrease, so minus 3% versus the first quarter of 23 in nominal terms, meaning a decrease of 8%. versus the first quarter of 2023 in real terms. Because over this period, we had around 5% of inflation, 3% nominal decrease, so around 8% real decrease. I think this is really impressive when you think that over this period, we grew our installed capacity by 11%. We grew our distribution network. We grew our transmission business. So this is the result of several measures. I mean, these efficiencies, we've obviously simplified our corporate structure. We've resized and restructured some of our platforms. We've increased the digitalization and automation as a way to optimize the workflows and resources. And these are having an impact on EDP financials, and they will continue to do so in the coming years. So growth and decreasing costs. I think that's a fantastic equation to keep. So tight control over OPEX. really prioritizing cash flow generation and shareholder value. And with that, that brings me to guidance for the year. I think we're looking at sort of strong integrated generation supply business, helping us feel very comfortable about our EBITDA at 4.8 billion, net profit 1.2 billion, and net debt around 16 billion for the end of the year. Let's say structural improvements, From the flexible generation activity, obviously had a very good first quarter and sort of strong start to the year. We have hydro generation above average in the first quarter and in April and sort of high reservoirs in May so we can manage over the next couple of months. Resilient electricity networks and the underlying business is positively impacted by this growing electricity demand and the inflation update on the revenues. Wind and solar is having an increased contribution from new capacity added in the fourth quarter of last year. But on the other hand, we have and are expecting lower asset rotation gains this year versus 2024. On the negative side, we are facing weaker dollar and Brazilian real versus the euro. And so putting all of that together means that we are confident in delivering this guidance for 2025. Net debt guidance at $16 billion for the year, we're assuming around $2 billion of asset rotation proceeds, mainly from EDPR, and also assuming around $1 billion of tax equity proceeds. And then looking forward, we're working on a new strategic update for 2026 onwards. That will take into consideration the new regulatory frameworks for the electricity networks in Spain and Portugal. And hopefully we'll also have more visibility on the outlook regarding the energy policies in the US. So we expect that we'll have more visibility on the Inflation Reduction Act, how that sort of settles down over the next couple of months. And so all of this will feed through into the new strategic update from 2026 onwards. And with that, I pass it over to Hui for the financials. Thank you.