Edp Sa S/Adr

Good morning. We welcome you to EDP's 2025 Final Year Results presentation conference call. During the presentation, all participants will be on listen-only mode. There will be opportunity to ask questions after the presentation. If you wish to ask a question during the Q&A session, you will need to press star 1 1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star 1 1 again. Alternatively, if you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during live events. If you're experiencing any difficulty in listening to the conference at any time, please make sure you have your headset fully charged and plugged in. Alternatively, please try calling from a different device. I'll now hand the conference over to Mr. Miguel Viana, Head of IA and ESG. Please go ahead.

Good morning. Thanks for attending EDP's 2035 results conference call. We have today with us our CEO, Miguel Cruz-Andrade, and our CFO, Vic Teixeira, which will present you the main highlights of our strategy discussion and 2035 financial performance. We'll then move to the Q&A session, in which we'll be taking your questions, starting with written questions that you can insert from now onwards at our webcast platform, and then by phone. I'll give now the floor to our CEO, Miguel Cruz-Andrade.

Thank you, Miguel. Good morning, everyone, and welcome to the 2025 results conference call. Just before presenting our results yesterday, I just wanted to address the extreme weather event that impacted Portugal. And as you know, Portugal was hit by a series of devastating storms starting at the end of January and then well into February to a certain point had winds over 200 kilometers an hour. which really caused unprecedented physical damage to infrastructure in the country, including our own network infrastructure and also customers. I think the first thing to say is that we immediately responded with a very coordinated and large-scale support from all the internal and external teams. I mean, we had people coming in from Spain, Brazil, France, and Ireland, and I just wanted to thank also all those teams. The networks and the hydropower teams worked around the clock to limit the damage caused by the storm. and to restore power to all consumers. Naturally, the first thing is our thoughts are with the people in the communities affected. We understand the damage that this has caused, the frustration from people that had no power over those weeks. And from the beginning, our first priority was to reestablish power in the quickest, safest, and the most effective way possible. We have now recovered 100% of the customers, only very few specific situations outstanding. That will be resolved very shortly, but I think the worst is definitely over. I also wanted to extend a really sincere word of appreciation for the absolutely extraordinary professionalism and dedication demonstrated by the teams, both internal and external, across all the country. I mean, their response from grid repair to the hydropower management, the community support, emergency logistics, I mean, it was absolutely exemplary. And I think it really showed the best of EDP in terms of the commitment to stand with our customers and with the communities that we serve, especially in the moments where they need us most. So I will come back to this later in the presentation, just to talk a little bit about the impact on us in more detail. But I would move now into the bulk of the presentation and onto slide three, which essentially shows an overview of our results for 2025. And I start off by saying, EDP had a very strong set of results for 2025. The recurring EBITDA reached 5 billion euros, so outperformed the 4.9 billion guidance. It's mostly on the back of a better-than-expected fourth quarter in the integrated segment in Iberia from above-average hydro resources in the fourth quarter. If we compare that with 2024, EBITDA was up 1% year-on-year, so it reflected a rebound in EDPR's performance. which, as you know, had record capacity additions towards the end of last year. Recurring net profit came in at 1.3 billion, so also above the guidance, although it's down 8% versus 2024, and that's mostly explained by higher financial expenses. Net debt ended the year very well, so at 15.4 billion, better than the 16 billion guidance, and that led us to have a great FFO over net debt of 21% compared with the 19% guidance. So the upside versus guidance at all levels allow us to then increase the shareholder return. So we're proposing a dividend of 20 and a half cents per share. So that's a small increase, which will be paid this year already in 2026, obviously subject to the general shareholders meeting approval. If we move forward into the next slide to talk a little bit more detailed about the FlexGen and customers. So here we see a structural uplift in the value of flexibility. And I really wanted to highlight, if you see here on the left-hand side, there's a chart from the International Energy Agency recently. And it shows the capture rates in Spain by technology. And it shows how the market's increasingly rewarding assets that can respond to price volatility and the system needs. And you can see natural gas capture prices obviously rising in 2024 and 2025. Hydro with reservoir also trending upwards. more intermittent and less flexible technologies, particularly solar, you see obviously decline in capture rates in 2025. The takeaway here is that flexibility is being structurally priced in and that we expect that to remain a long-term feature of the market. And you can see that in the figures for EDP for 2025. The hydro net generation was almost 10 terawatt hours. It's down 2% year on year, but still very strong year for that. Hydro premium versus base load increased to 21%. sort of reinforcing the value of the flexible output. And on pumped hydro, the pumping volumes increased to 2.3 terawatt hours on the year, so up 24% year-on-year, with the pumping spread versus base load reaching 75%. So look at the right-hand side of the slide, and we give there an update on the reservoir levels in 2026. So given the heavy rainfall, reservoir levels are at historically all-time highs. They've reached around 96% in February 2026. up from roughly 76% in January. And that's consistent also with the hydro production index in Portugal, which has doubled its historical average year to date. So obviously that's following the heavy storms, which I just talked about in Portugal in January and February. One important thing to note is that the market consequence of these extreme weather conditions is that we also had abnormally depressed pool prices, which together with higher ancillary services costs in February, You know, it's shown by the Portuguese pool prices going from around 71 euros per megawatt hour in January to roughly 8 euros per megawatt hour until mid-February. So, more depressed pool prices in February and higher ancillary service costs. We move forward to the next slide, and just in a little bit more detail on the storms here in Portugal, the first half of February, essentially. First, as I mentioned, I'm just highlighting the efforts made by the team. So huge effort done to restore power and to make sure that the dams and that the flooding was limited. The storms impacted around 6,000 kilometers of grid, damaged around 5,800 towers. We had more than 2,000 people mobilized on the ground, around 2,400 people. And as I said, we were able to restore 100% of the customers already by this week. On hydro, we continuously monitor the rainfall, and I think here it was great to see using advanced hydrological models, so we were able to proactively sort of anticipate what was coming down the road and to be able to also anticipate some of the discharges and coordinate that with the environmental authorities. So I think there was a meaningful role in flood control. Then on the more practical side with customers and communities, you know, We have put in place schemes to ensure the payments and inviting support for the customers impacted, as well as assistance with the SolarDG reinstallation. On a more social level, we also delivered over 90 tons of essential materials, including sands, roofing tiles, tarpaulins, you know, basically to help people protect their homes. And obviously, we also helped, you know, people in more isolated areas get access to communications, including Starlink devices and power banks. In terms of financial impacts, we're expecting that this will result in around $80 million in capex of infrastructure to rebuild. It will be partially supported by insurance. We're still evaluating additional costs and impacts, and we'll update that in the first quarter results. But it clearly shows increasing vulnerability that climate change is causing and the importance above all of resilient, flexible systems and long-term investment in networks. And that takes me to the next slide, where I wanted to just stress that Already before this event, so as of last year, we're already significantly ramping up the investment to respond to the growing needs of the system. You know, the electrification, the renewables integration, the grid resilience. Gross investments for the period 26 to 2030 will reach 4.1 billion euros, compared to the 2.6 billion in the 21 to 25 period. So that's a 58% increase overall in Iberia. That's probably more in Portugal than in Spain. although both geographies are contributing significantly to this. In Portugal, it's around 66%, so almost 70% increase. A big part of this is strengthening grid resilience. We're assuming around or more than 500 million euros for grid resilience to ensure that the network is prepared for higher loads, more distributed generation, and greater system complexity. And fortunately, this greater investment is underpinned by much stronger regulatory visibility, as we showed here on the right-hand side. So, as you know, the new regulatory framework sets out the 6.7 nominal pre-tax return for this period until 2029 in Portugal. And in Spain, the framework establishes a 6.58% return for the period out until 2031. So, importantly, both frameworks closed at the end of last year, giving us clarity and stability for the upcoming investment cycle. I think it's also important to note that in Portugal, the 2026 state budget clarifies and clarifies the conditions under which new investments in the networks are exempted from the extraordinary tax. So that supports really this incremental investment that we're doing in the networks. Still on networks, if we move forward to the next slide, you can see that the new regulatory terms and approval plans will allow an EBITDA growth in Iberia for networks. So it grows to around over a billion over this period. We have to consider that in this There are legacy revenues that end in 2026 worth around 40 million euros. Removing that means that we'd have a normalized 2025 EBITDA of around 0.89 billion, and that then reaches the 1.05 billion in 2028. So that's an 18% EBITDA growth for 25 to 28, updated already with the new terms. So this isn't just a one-off step to 2028. This then continues to grow beyond 2028, and that's supported by the approved returns and also the investment plans that we discussed on the previous slide. So all of this gives us confidence in the continued momentum well beyond 2028 to 2030 and beyond that. If we move on to the next slide and just talking quickly about Iberia, I think what I'd say here is that Iberia is entering a period of much stronger electricity demand growth and driven by electrification. On the left, you can see the power demand growth in 2025 versus 24. Portugal leads at 3.6%, Spain at 2.8%, which means Iberia clearly outperforming several of the European markets. And it's not just a one-year effect. I mean, obviously, we're seeing strong momentum into 2026. So just in January, the demand was 7.9% in Portugal and 4.8% in Spain, already adjusted for temperature. And going forward, we see or estimated 2% CAGR in the Iberian electricity demand over the period leading up to 2030. So, demand growth should be supported overall, not just by the economy doing well, but by more than 18 gigawatts of data center projects pipeline that have been announced or that are, you know, publicly available. I'd have to highlight here that EDP is obviously engaging with a lot of these projects, two of the more advanced ones that's certainly here in Portugal. are the Merlin Data Center north of Lisbon at 180 megawatts. We had an MOU signed with them back in July of 2025, and also the Star Campus project in Siena with an MOU that we signed yesterday. And the Siena project, as you know, is expected to reach 1.2 gigawatts over the next couple of years. I can detail a little bit more of what that means in the Q&A if you think that's appropriate. If we move forward to still to talking about Iberia. And this is a slide which I think is also extremely important because it's not just about demand growth. It's also that Iberia combines this demand growth with structurally affordable power prices. And that's supported by improving system fundamentals. And that's really an important advantage for customers, for electrification, for the broader competitiveness of the economy. So when there's so much talk in Europe and elsewhere about affordability and about competitiveness, Iberia has a really distinctive advantage here. in Europe, and I think we will benefit from that sort of on the electric efficient fund. On the left-hand side, you can see the evolution of the B2C electricity prices. And the key takeaway is that Portugal and Spain fit among the most affordable markets in Europe, around 17% below the European average. Going forward at the European level, Northern Europe faces higher expected network investments that typically puts upward pressure on then user prices over time. But by contrast, in Portugal and Spain, we have several structural elements that we think will support affordability. One is that the historical electricity system debt is expected to be fully paid by 2028. That means that there'll be significant cost reductions in the tariff structure going forward. Second, there's a gradual phase-out of legacy support schemes like the feed-in tariffs in Portugal and the RECOR scheme in Spain. That also reduces access tariff costs. And so in Portugal specifically, the regulator ERS has simulated annualized reductions in the B2C reference end-user tariffs from 2026 to 2030. So that helps create room to accommodate new system needs like ancillary services, capacity mechanisms, additional investments in networks without compromising competitiveness. So I think we are able to get the best of both worlds, which is more investment, more utility services, more capacity mechanisms to make sure that we have a stronger, more resilient system and still have sort of annualized reductions in the end user tariffs. Moving on to EDPR. Again, you had more detail on that yesterday, so just a quick note here. We are seeing really strong execution momentum and better visibility on the business plan delivery. Over the last six months, EDPR secured 1.3 gigawatts of capacity. And on the left-hand side, you can see the main project secured during this period. It's a combination of PPAs with utilities, global tech companies. We also have build and transfer agreements in the U.S., so it's really a diversified set of off-takers and structures. And across the 26 to 28 period, we already have 2.8 gigawatts secured, and we expect to continue on securing more projects over the coming weeks and months. If we break it down year by year, 2026 is already 100% secure, so... almost all of that under construction, a couple of projects coming under into construction in the very short term. So that gives us very good confidence on the 2026. 2027 is already 65% secured, and 2028 is at 10% secured. So that gives us roughly already 55% secured for 2026 to 2028. As I say, we have good visibility on additional projects that are coming down the pipeline to help us meet the rest of this project. And with that, I'll stop here. I'll pass it over to Rui to go through the 25 results in more detail, and I'll come back for closing remarks. Thank you. Thank you, Miguel, and good morning to all.