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.

So let me start with the EDP's results. Recurring EBITDA reached $5.03 billion in 2025. It's up 1%. But if we exclude asset rotation gains and FX, the underlying growth was 7% year-on-year, driven by strong EDPR performance and resilient network space. So, looking at recurring figures by segments, renewables, clients, and energy management increased by 65 million year-on-year, reaching 3.4 billion, and now represents 69% of group EVTA. Within this segment, the hydro, clients, and energy management declined to 160 million year-on-year, mainly reflecting the normalization of gas sourcing conditions in Iberia versus the external environment that we had in 2024. This was more than offset by strong EDPR performance up to 190 million year-on-year, reflecting 2024 record additions translating into higher generation. On the network side, carrying EBITDA stood at 1.54 billion, now representing 31% of group EBITDA. While EBITDA decreased 68 million year-on-year, this is mainly explained by Brazil FX impact and the assets of capital gains. Again, excluding FX and asset rotation, the underlying networks EBITDA increased 3%, supported by a positive performance in Iberia, both from regulatory framework and reinforced operating discipline. So, finally, recurring OPEX decreased 2% year-on-year, or 5% in real terms, reinforcing also the operational discipline, which I will detail in the next slide. So if you look to the OPEX, this slide highlights an important enabler of our EBITDA performance, which is sustained cost discipline. Recurring OPEX decreased 1 to 1.88 billion, trending down year by year, a total reduction of around $160 million in 2025 versus 2023. Over the last 12 months, inflation was around 3%, and yet still delivered a 2% nominal reduction in recurring OPEX. Excluding FX, OPEX is slightly below, which means that we are effectively absorbing inflation through efficiency and productivity gains. This is translating into improved efficiency ratios. OPEX as a share of cross-profit improved from 28% in 2023 down to 26% in 2025. Key drivers for this, EDPR delivering efficient growth. We're reducing adjusted OPEX per megawatt by 12% year-on-year, 40,000 euros per megawatt. this while scaling capacity. A leaner, more focused workforce aligned with the company's growth priorities. Digital and AI-driven initiatives to improve O&M efficiency, decision-making, customer experience. So I think the message is very clear. We are growing and investing while structurally improving the cost base, and obviously this supports cash generation as we deliver the plan. So now let me move to FlexGen and client segments. EBITDA for 2025 stood at 1.46 million. This is down 13% year-on-year, and this reflects the normalization versus an extraordinary 2024, but also flexibility revenues structurally increasing. In Iberia, 2024, as you know, was impacted by extraordinary gas sourcing costs. 2025, base load hedging price normalized from 90 euros per megawatt-hour to 70 euros per megawatt-hour. However, this was partially offset by stronger flexible generation revenues, pumping generation increasing by 24%, pumping threads reaching 75% over base load prices, hydro premium improving to 21%, and CCGT generation increasing by approximately three terawatt hours, reflecting the system operator needs. In Brazil, EBITDA declined from 184 million to 156 million mainly due to forex impact. So overall, while the headline EBITDA reflects normalization, the structural uplift in flexibility was very solid with 0.3 billion contribution to overall group. So now we move to slide 15, turning to EDPR, which we also commented yesterday's call. Recurring underlying EBITDA X forex grew by 27% year-on-year. This growth, very robust growth, reflects a significant step up in the generation, following the record capacity additions in 24, offsetting worse renewable resources and also normalization of selling prices, primarily in Europe. Overall, EDPR continues to deliver strong operational momentum and translates capacity growth into earnings growth. Now looking at the network's EBITDA on slide 16. Recurring EBITDA reached 1.54 billion euros in 2025, representing a 4% decrease year-on-year, but this is primarily explained by devaluation of the Brazilian real, the access of asset rotation gains in Brazil, which amounted to 71 million in 2024, combination of deconsolidation of transmission assets, the decrease on the distribution company's residual value update, and on transmission inflation updates. But this is compensated overall by improving operating performance. Again, excluding FX and asset rotation, underlying EBITDA increased 3%. It has an important contribution of 56 million euros in EBITDA from Iberia, following inflation uptake in Portugal and RAB growth overall. So all in all, the network segment is showing a resilient operational performance with very supportive regulatory frameworks, as Miguel just described, going into the future. On financial costs, following slide. Next, net financial costs increased from $865 million to $989 million. There are two main diversities. The first one is that net interest costs, which adds about $54 million, they reflect higher average debt and a higher cost of debt in Brazilian reals, where the average cost rose from 11.7 to 14.1%, reflecting the macro conditions in the country. Excluding Brazil, the average cost of debt reduced to 3.3%. Second, lower capitalizations and our effects, contributing with an additional 69 million. This is largely explained by the 1.2 billion reduction in works in progress as projects entered operation, and therefore reducing capitalizing interests. If you look to the right-hand side, average nominal debt by currency remains broadly stable year-on-year, The portfolio continues to be predominantly Euro-denominated, with 64%, followed by U.S. dollar, 16%, and Brazilian real at 15%. Finally, in terms of recent financing activity, we issued a six-year senior bond, $650 million, in January, with a 3.25 coupon. So, this confirms the competitive access of GDP to funding in the debt market. Now let's move to the cash flow on the following slide. Organic cash flow reached $3.3 billion, up $0.5 billion year-on-year, driven by EBITDA improvement and working capital management. Net interest paid amounts to $0.8 billion, partially offsetting operating improvement. And on investments, gross investments totaled $3.9 billion, mainly $2.4 in EDPR and $1.1 billion in electricity networks. also $0.4 billion in FlexGen and clients. These gross investments were funded through $1.6 billion of asset rotation and $0.8 billion of tax equity proceeds. There are also $0.5 billion of other impacts, mainly related with payments to fixed asset suppliers. So as a result, a total of $1.7 billion of net cash investments, of which close to 50% in electricity networks and around 40% in EDPR. Now, on slide 19, net debt stood at 15.4 billion, down from 15.6 billion at the end of 2024, and outperforming the 16 billion guidance that we gave them to the market. The key drivers for the change in net debt include 3.3 billion of organic cash flow, obviously the 0.1 billion of dividend annual payment, and the 100 million share buyback throughout 25. the $1.7 billion of net cash investments that I just explained, also $0.8 billion of regulatory receivables, and about $0.3 from FX and other, mostly related to U.S. denominated debt. So as a result of cash flow management, balance sheet discipline, and obviously very strong operational cash flow, we do have solid credit metrics with 20.9% FFO net debt and 3.3 times net debt MTA. Now on the net profit. Net profit reached 1.28 billion euros. That's a reduction of 8% year-on-year, and this is mostly reflected or driven by the higher EBITDA, 74 million. Higher DNA and provisions, increasing 60 million year-on-year, reflecting the investment path. Higher net financial costs due to higher cost of debt and lower capitalizations. Slightly higher income taxes and non-controlling interest. including asset rotation gains and the Forex, the underlying net profit increased 3%, confirming a very solid operational performance as we just described. Reported terms, net profit reached 1.15 billion, including the negative impact of 130 million, mostly related with some non-recurring items in EDPR. Year-on-year reported net profit, therefore increased 44%, also driven by EDPR performance rebound compared to a negative 20-24%. This improvement in net profit supports our proposal to increase the dividend to $0.25 per share at 2.5% versus the guidance to be paid in 2026, obviously subject to the approval at the shareholders meeting. And now let me just address a topic which I think is relevant regarding the net income sensitivity to power prices versus what we presented at the CMD. So this slide, just again to Remind everybody. So our exposure to energy markets is well diversified. And as you know, we have a very active energy management. The portfolio is predominantly long-term contracted. This provides strong cash flow visibility and obviously reduces short-term impacts from price volatility. In Iberia and Brazil, we have a structural short position in generation, which is hedged through our supply business. So partially offsetting wholesale price movements. At the CMV, we disclosed that a simultaneous five-year per megawatt-hour movement in all markets would imply approximately 60 million impact on 2028 net income. Since then, Iberia 2028 forwards have declined around 10 euros per megawatt-hour. But on the other hand, U.S. and Brazil forward curves are moving upwards. So this portfolio diversification plus an active energy management have actually reduced the sensitivity. So today, the same 5 euros per hour movement across all markets in the same direction would imply approximately 45 million impact on net income 2028, again, versus the 60 million that we presented at the CMV, so a reduction on the sensitivity. Number 10, exposure. Split is about 65% Europe, 20% Brazil, and 15% North America. So with this, I would hand over to Miguel for final remarks. Thank you.

Thank you. As you say, I think this has shown the sensitivity to power prices is an important point to note because I know there are questions on that. Anyway, if we move forward to the final slide, just before we open it up for Q&A. So summarizing the 2025 results and how we're seeing 26 and beyond. First, in relation to 25, I think it's undeniable that it was very strong execution and delivery of what we promised across the group. We delivered ahead of guidance, and we're seeing a clear structural change in compliance with the value of flexibility coming through very strongly. At the same time, EDPR also improved its performance, has its continued focus on an A-rated market. It's got better visibility on the business plan execution. In networks, we have significantly improved visibility with the regulatory periods closed in Portugal and Spain, and we also advanced in Brazil with the extension of the concessions. And importantly, all of this was delivered with financial discipline and increased efficiency in Sweden. spoke about particularly on the cost side, but also on the debt side, supporting the maintenance of sound credit ratios. Second, looking at the 2026 guidance, we expect to recurring EBITDA of around 4.9 to 5 billion. And this is supported by the balance contribution across the portfolio. We have the networks around 1.5 to 1.6 billion. EDPR at around 2.1 billion, as mentioned yesterday. FlexGen and clients at around $1.3 to $1.4 billion. And we reaffirm our reoccurring net profit of $1.2 to $1.3 billion. On the 2028 targets, and over the course of the next couple of years, we continue to expect around $12 billion of gross investments. And I say this will be funded with discipline and supported by around $6 billion of asset rotations and disposals. We'll keep our balance sheet targets unchanged, so we're targeting the FFO over net debt of around 22%. And in terms of earnings delivery, we remain committed to the $5.2 billion of recurring IVETA and the $1.3 billion of recurring net profit by 2028. So overall, this is consistent. We executed strongly in 2025. We have very clear visibility for 2026, and we are reiterating our 2028 guidance. And with that, happy to turn it over to Q&A and back to you, Neil. Thanks.

Thank you so much. We will begin by addressing the questions submitted in writing. After that, we will move on to the last questions by phone. As a reminder, if you wish to ask a question by phone, please press star one one on your telephone keypad and wait for a name to be announced. Please ensure your line is unmuted when your name is announced. Alternatively, you can submit questions via the webcast. We'll now begin with the written questions.

Thank you. So we start with the written questions and we have a first question. from and other analysts, GB Capital, Deutsche Bank, CaixaBank, regarding the guidance for 2056 that we provide. So, we are guiding a stable EBTA versus what we present at CMD, while at GDPR, there was a slight division. If we can explain this in detail, this expected guidance. Sure.

So as I mentioned, I think 2026 were very comfortable with it. I mean, a couple of points that have improved since the capital market day last November. The regulated rate of return for the distribution in Portugal was better than the initial proposal. So that was an upside. The callback was suspended as of December. And previously, we were assuming that we would have that over the next couple of years. So that's also a positive. January and February, so obviously very strong hydro inflows. I showed you the numbers in terms of how the reservoirs are. They're sort of all-time highs. So full capacity there. So good visibility also the next couple of months in terms of hydro. On slightly negative, low wholesale prices in February and higher than normal ancillary services in terms of supply. Also some transmission grid restrictions due to the storms still being fixed. So that's on the negative side. We are expecting these to decline over the next couple of months, and also the wholesale prices in Iberia to normalize, again, also over the next couple of months. On Forex, on FX, we have a slightly lower dollar versus the euros, as we commented yesterday on the EDPR level. But on the other hand, we're seeing a positive rebound of the Brazilian real. So we're now seeing, you know, six reais per euro versus our business plan assumptions of 6.6 reais per euro for 2026. So You know, quite a few positives, a couple of negatives, but all in, quite frankly, we feel very confident with the 2026 guidance.

We have then a second question about net debt. So, what contributed to the positive deviation of our net debt figure in 2025? So, the 15.4 billion euros versus the 16 billion euros guidance that we have provided. and also collecting around a plate for net debt expected evolution over 2026.

Thank you, Miguel. So first of all, Q4 was very good in terms of operational cash flow, strong contribution from the integrated segment in Iberia. So that's the first one. Obviously, there is some impact from working capital that we'll see then reverting now in 2026. So, what I would say is that, first of all, 2026, you know, we are looking at around 16 billion of net debt towards the year end. Typically, as you know, we have during the first half a rise in net debt. coming either from this working capital, also bear in mind that we have the Greek transaction, but also dividend payments in the second quarter. And then as we start having also the cash in from asset rotation, tax equity proceeds towards the end of the year, it tends to go down again. So that's why we're looking at around the $16 billion by 2026.

We have then a question around the news of yesterday regarding random understanding with staff campus. What does it mean for EDP and this engagement? So questions from Alex from Bank of America, from CRBC.

It's an interesting step. I think it's one of many we've been taking. It's essentially just an interest of both parties to explore the synergies between their activities. We use experts on the energy side and them on the infrastructure side. I think there's three parts to the MOU. I think the first is for EDP to be considered the strategic energy partner to the Star Campus projects, whether it's through power supply as is or through additionality of projects to the Star Campus infrastructure to be built out. The second is just energy between the data campus center or project and the infrastructure that we already manage, for example, in the teenage power plants. So, for example, like on the water side, in terms of cooling. And the third is really potential collaboration for other data centers in Portugal that campus might want to develop, leveraging on EDP's assets and capabilities of land and generation assets that we own in Portugal, and so explore potential collaborations. I think, above all, it's opening up the possibility for creating additional value from our existing assets and operations, as well as getting additional visibility on future demand volumes, which could support the development of, you know, a sizable pipeline of renewable energy projects, as we've discussed in the past. So, overall, it's just, I think, a step, one of many that we expect to take in this area.

We have then also a question from the Bank regarding the effective tax rate evolution. from the 28% in 2025, and also explaining where we see, so explaining the 28% and how we see the evolution for 26.

Thank you. So 2025, 28% X rate was primarily driven by the fact that we had lower asset rotation gains. And some costs that are not deductible, that's deductible. And that was basically impacted the rate. But if you think about 2026, you know, you could consider sort of low 20s. And this because we expect, again, to increase the capital, the asset rotation, again, from the transactions. And also the declining tax rate in Portugal, which is, you know, will be dropping by 1% per point every year until 2028. So 2026 around the low 30s.

We have then a question from Pedro from CaixaBank regarding the, if we can explain a little bit better, the inflation update in terms of the impact in our EBITDA.

in brazilian networks in 2025 and how do we see it evolving for 26 28. so so 25 we have the extension of the concession which will be sent for another 30 years and we expect to have that extension as well for sao paulo you know it's been sort of approved by the regulator we're just pending the final signature um in the next couple of weeks so there's a positive impact from the inflation update of this residual value, which existed in 25, which becomes the material from 2026 onwards. To be specific, in 25, in the electricity networks in Brazil, we had around 70 million euros of EBITDA from inflation updates in both the distribution companies and the transmission companies. And we had around 20 million euros from EBITDA from the two transmission lines that we then sold in the fourth quarter of 2025. So the impact of inflation update in the networks has declined in 2025 already versus 24, but in 2026, it will be immaterial. I think it's important to note the following. We are under discussion with ANEL, which is the regulator in Brazil, we and the other distributors, but we are more advanced in this process because we're the first ones to have our concessions renewed. But to change the recognition of investments in the company's asset base. As I mentioned, I think in the capital market today, and I'll just reiterate, they're currently only recognized every five years with tariff provisions. So there's still no conclusion, but we see a positive sign that at least the regulator is willing to consider this, and that would allow us to have this inter-cycle recognition of investments rather than having to wait for the end of the regulatory period. So that's work in progress. We're certainly very committed to it, and we think others will be as well as soon as they start seeing their concessions being renewed as well.

We have a question from from Bernstein. Also regarding the current power pricing environment, how confident are we to maintain our 2028 guidance? And regarding the assumptions that we provided at TMD and current forwards, how do we see the guidance for 2028?

So, as I also briefly explained with that light on sensitivity, I mean, effectively, we do have, as you know, short positions in both, strictly short positions in generation in both Iberia and Brazil. This we had primarily through our clients' reasons. But we also have a very active energy management. And then on the rest of the markets, as you know, we have from an EVPR standpoint, 85% is actually long-term contracted. On this, basically what we have done since the CMD is obviously to increase the hedging. So we have been working actively on the hedging and the energy management. So for 2026, 85% of the volumes are hedged at the price which is north of 64 euros per megawatt hour. For 2027 and 2028, we have about 50% of base load volumes hedged above the current forward prices. So, obviously, this gives us, you know, stability and predictability versus the changes in the forward curves. But also on the other markets, U.S., the exposure is mostly concentrated in PGM and MISO. We are seeing forward prices going up by around $5 per megawatt hour. Also in Brazil, where we have lower exposure but still relevant, The PLD has been rising significantly since the CMD. So that's why, all in all, again, this portfolio diversification, the very active management is giving us confidence towards the 2028 guidance. So more importantly, as I said, we actually reduced the portfolio exposure to these price movements. So at the CMD in November, we were estimating around $60 million. and now we are looking at, you know, such an actually lower number.

We have now questions from Monopolo on BNP. What is your take about increasing concerns about affordability and approval of the energy decree to reduce price by the Italian government, and if we could expect any contagion effect?

Well, I think this is an important point, just taking it to take a step back. I think we are all was focused on competitiveness of the economy. And, you know, what's good for the overall economy is good for the companies. As I mentioned, most of our exposure is in Iberia. And, you know, we specifically put up a slide which shows that in Iberia, Portugal and Spain, we already have some of the lowest prices in Europe. And they are expected to even trend lower if some of the existing costs of the system come to an end, like the tariff deficit. payments, which are being amortized, like the feed-in tariffs, for example. So the trend is it's already much lower than the rest of Europe and trending lower. So the affordability and competitiveness, I think, in Iberia is actually a positive. And it means it can take additional investment. It can take some of the ancillary services without impacting the affordability. On the Italian case, I think it still has to go through the, let's say, finally promulgated, and I'm sure we'll have a lot of discussion at the European level, conceptually sort of understand but disagree with what it's doing. There's been a lot of discussion already two years ago about market design, about how to make things competitive, make the wholesale market work differently, and ultimately it always comes back to the marginal pricing system is the system that works best. CO2 has to be internalized, and that continues to be a key priority for Europe. And so It's something to watch, but we don't expect it to have any material impact in .

So, we move now to the questions on the phone, and we start for the first question that comes from the line of Fernando Garcia from Canada. Fernando, please go ahead.

Good morning. Thank you for the presentation and for taking my follow-up question. I'm curious because I am seeing a significant increase in CCGDs output in Portugal, and this despite the strong hydro and wind output so far in the year, particularly in February. So my question here is this is explained by the elimination of the Portuguese cloud lag. And if this could be a potential upside to your estimated positive impact, I think you mentioned 25 million for 2026. Thank you.

Excellent. So, you're right. CCT output has increased. It's more related to, so the utility services in the system operators wanted to keep these working sort of as a backup to the system. So, it's already this trend, as you know, following the blackout of last year. It then started to decrease. Now, it's increased significantly. because of some specific issues here in Portugal relating to all the storms that happened and sort of the disruption to the network. I wouldn't say it's an aside, probably it's a downside in the sense that higher ancillary costs would have a knock-on impact if they're not passed on to the suppliers. So it's something to watch. We expect this to normalize over the next couple of weeks, but it's basically the CGTs working overtime basically over the month of February.

Thank you, Fernando. And we have a final question from the line of Alberto Gandolfi from Goldman Sachs. Alberto, please go ahead.

Miguel, thank you, and good morning. So my first question is I wanted to ask you about Brazil. Is it a region where you think you might be growing exposure? There are potentially assets for sale. you're happy with the status quo or is it something that given the better returns in Portugal and the clarity in Spanish networks, you might think about the emphasizing a little bit. The second question is a clarification on slide 21. Am I right in saying that the 45 million impact on their income is therefore adjusted for 50% hedging? So in other words, without hedging, Do we just double the 45 million, or is it – so can you maybe help us on that a little bit? And last one, on this data center opportunity, it seems you're very active in this booming Portuguese market. Can I ask you if you are planning to build potential incremental capacity if you were to sign a PPA there, or would it be from existing, and would it be done at EDP or EDPR level if it were to happen? Thank you so much.

So good questions. I think in relation to Brazil, we have a long track record in Brazil over 30 years. I think we have a great business there. We continue to look at opportunities for growth there to the extent that it makes sense within the overall Brazilian exposure that we've always talked about. Obviously, we continue to see how best to allocate capital, and so We've sold assets in Brazil in the past. I mean, even recently, we did the asset rotation with transmission lines. We sold the hydro. So we will continue to adjust and fine-tune our exposure to Brazil and obviously reallocate capital to wherever we think is best at any particular time, whether it's Europe or the U.S. at the moment. But I'd say that we like having this diversification of optographies because it does allow us to allocate capital quite well, depending on the different cycles and the different geographies. On the third question, and then I'll hopefully take the second question. On the third question, so essentially what we're seeing is that there's a certain amount of power that can probably be supplied just as is, because there's sufficient reserve margin in the system to be able to supply these data centers without necessarily having to go and build new power plants and so that that's a positive i think for the system we just need to make sure the networks are there um you know but that's essentially the the key issue because as long as there's reserve margin you can feed it if if the demand then starts getting above a certain level and you know if you start having to start campus and merlin and others then then yes then we need to think about incremental capacity of different technologies um and then depending on what that incremental technology is know if it's renewables it will definitely be done through edp renewables which as you know has the exclusivity for renewable development well certainly in iberia but elsewhere in the world as well um if it's for example if it was to be like a thermal technology then obviously would be for example with the edp or if it was hydro for example would be through edp um but so there's a certain amount that can be done with existing capacity or you know supplied with existing capacity and then above that level, then you start getting into having to build incremental capacity. And we're obviously looking at that and thinking about when that would come down the pipeline. But it'll depend on also how the demand is resulting.

Great. Thank you, Miguel. So, on the second one, I mean, this is also the result of different diversification effects. So, looking at the portfolio as a whole, two different trends. Again, the active management that we run on every single market. This is, you know, how we are bringing down the sensitivity from the 60 to the 45 million. And again, just bearing in mind, this is if all the markets would move in the same direction for . So, you know, you cannot, sort of double the sensitivity if the hedging was coming down to zero. It's a bit more complex than that.

Thank you. So that's now back to our CFO for final remarks.

Okay. So final remarks. I just reiterate, again, 2025 was a great year for EDP. I think we delivered and delivered solidly on all of the different metrics, whether it was on EBITDA, net income, net debt, the credit ratios, improving the dividend. So, a really solid, solid year for 25. And I think we come into 2026 also on a good footing, you know, with record high hydro levels and reserves, you know, with improved regulation, improved, you know, perspectives in both and the other geographies we're in, like the US. So, really, I think we are very confident also on the guidance for 2026, and I think that's one of the messages that I really wanted to raise, Ray. Going forward, we continue to see, you know, great projects coming down the pipeline, certainly on the ATPR side, which makes us feel confident in relation to 2028. I mean, obviously, we'll go on monitoring decisions around the power prices, but as Jorge mentioned, we are relatively protected in relation to that. And we think that it's a discussion that will play out over the next couple of months in Europe. But at the end of the day, we're all aligned that competitiveness is important, but it's also important to keep the stability of the rules and make sure that, you know, there's space to invest or for investors to, you know, to the capital allocation, you know, and feel safe about their investments, whether it's on the network side or on the generation side. So, listen, good 25, possibly for 2026, and reiterating the guidance with confidence. and looking forward also to the next couple of years reiterating also our 2028 guidance. With that, thank you very much. Look forward to seeing you soon.