Endesa Sa Madrid

Good morning to all the people connected. Welcome to the first half 2025 results presentation, which will be hosted, as always, by Endesa CEO, Jose Bogas, and the CFO, Marco Palermo. Following the presentation, we will have the usual Q&A session open to those connected on the call and on the web. Thank you, and now let me hand over to Jose Bogas.

Thank you, Mar, and good morning, everybody. I would like to open this presentation by highlighting the solid performance delivered across all our businesses during the first half of 2025. This has led to a strong cash generation and operating results, confirming the strength and resilience of our business model. The energy framework during this period was marked by the April 28th blackout, and the implementation of the subsequent measures mainly aims at reinforcing security of supply, as well as we will elaborate on later during the presentation. Today, more than ever, Spain needs to bring its network investment up to the level required to ensure a modern, efficient and reliable distribution network, as set out in the PENIEC and also endorsed by the European Union, who recently upgraded 2040 climate targets. To this end, it is essential to define a remuneration framework that is fair and sufficient to address the huge increase in investment foreseen at country level. The proposal currently under discussion endangers this investment and clearly goes against government policies to achieve the energy transition. Finally, I would like to highlight that as of end June, we executed approximately 40% of our 500 million share-by-back program planned for the year, and close to 70% according to the last CMB filing. These reflect our commitment to delivering value to our shareholders while preserving flexibility in order to increase our investment in the regulation if the regulation is finally favorable. Let's now turn to the key financial and operational highlights of the period. On slide number four, we continue to make solid progress on the strategic pillars outlined at our last capital market day. Our determined and disciplined approach is driving solid and predictable results across all business lines. Profitability remains strong, with EBITDA increasing by 12% year-on-year to 2.7 billion euros, and net income rising by 30% to 1 billion euros. Importantly, this positive outcome resulted in outstanding cash generation FFO grew significantly, doubling the cash generated compared to the same period last year, and confirming the quality of our earnings and our capacity to sell finance investment and shareholders remuneration. On slide number five, a brief details of the progress made on our main operational KPIs and on the execution of our capital allocation strategy. More than 900 million euros have been invested to strengthen the company's core businesses with particular focus on energy transition. A key pillar of this strategy is the reinforcements of our non-emitting generation base. During the period, we added 0.7 gigawatts of new renewable capacity, bringing our total to nearly 11 gigawatts. As a result, 79% of our mainland generation mix is now emission-free, further consolidating our decarbonization goals. Regarding customers, we continue to improve the quality of our client base by focusing on the most valuable segments, enhancing the resilience of our supply margins. And finally, our commitment to high standards of service quality and network reliability is reflected in the improvement of the time of interruption index. Furthermore, total losses remain flat at around 10%, still heavily impacted by non-manageable losses associated with localized fraudulent hotspots. Now let's look at the market context on slide number six. The first half of 2025 was marked by significant volatility in energy market, driven in part by external commodity trends and also by the operational consequences of the post-blackout system management. Commodity prices remain at higher levels year and year, TTF gas spot price rose by 47% to 41 euros per megawatt hour on average, while CO2 significantly closed the gap compared with the last year during the second quarter, but still remained 11% higher on average. As a result, the Iberian power pool price surged by 58%, rising from 39 to 62 euros per megawatt hour. Furthermore, May 2025, stands out as a period of particular stress where the TXO post-blackout extremely cautious management led to a spike in ancillary services costs reaching levels of 26 euros per megawatt hour. While we understand that the security supply must take priority, we cannot predict how long this conservative approach will remain in effect. Based on our forecast, we estimate that ancillary services will average around 16 euros per megawatt hour for the whole year, on top of an estimated pool price of something around 70 euros per megawatt hour. On slide number seven, and in connection with the blackout, let me underscore the following. No final report has yet been issued to clearly establish the causes. Our analysis revealed that the blackout was the result of operational planning that did not provide sufficient backup capacity for voltage control, followed by operational decisions that further weakened the Iberian system It is important to recall that the responsibility for maintaining system stability, including voltage control, lies with the transmission system operator, the TSO. From our side, we can confirm that we fully complied with all instructions issued by the TSO. All our generation facilities connected at the time of the incident were operating in accordance with the requirements established by the TSO in the technical restriction dispatch. Furthermore, all planned disconnection occurred above the established technical safety threshold in line with the regulatory protocol. However, We should learn a constructive lesson and not let this then undermine the country's broader decarbonization goals. Spain has made substantial progress in its transition to a low-carbon economy, achieving one of the highest levels of renewable energy penetration in Europe. While the blackout highlights several vulnerabilities, vulnerabilities in system stability, it also reaffirms the importance of accelerating investment to reinforce Greece's resilience and foster demand electrification. On slide number eight, we focus on demand evolution, which has performed very well so far this year, showing a clear upward trend that seems to confirm a turning point and a return to pre-energy crisis baselines. Mainland electricity demand showed a steady recovery, leading to a 2.7% growth year-on-year, or a 2.2% adjusted, while Endesa's figure climbed to 4.7% and 2.9% respectively. When looking at the different segment figures, we can conclude that first, residential consumption grew significantly with the year-on-year temperature increase, particularly in June, having a meaningful impact. Second, industrial service demand recovery is not isolated, but part of the wider trend of increased energy consumption across the sector. This is consistent with the substantial increase in connection requests received over the past few years, which seem to be starting to resolve into actual demand. In this regard, it is worth highlighting the growth of the service sector, particularly in the Aragon area, which has seen a 15% increase in demand, mainly in the second quarter, associated with the incorporation of data center activity. In fact, as we can see on slide number nine, The exponential growth in access and connection requests since from 2021 to date underscores the scale of new demands seeking to integrate into the grid, particularly from large-scale consumer and electrification-driven sectors. This search reflects the country's increasing attractiveness for industrial and commercial investment, driven by strategic location and competitive energy costs achieved through a decarbonization energy mix. However, despite this opportunity, our ability to connect new demand has been significantly constrained by existing network limitations. As a result, around 80% of Dendesa's medium and high voltage connection requests received in 2024 had to be rejected, while year-to-date only 10% had been granted. And this is primarily due to just 12% of our total network capacity is currently available. In fact, the number of access and connection requests received by Endesa in 2024 alone is already equal to the total million high voltage contracted power in Spain as of year end. Such statistics underline the urgent need for grid re-informance and regulatory support to unlock the full potential of the transformation being at risk of missing a unique opportunity for re-industrialization and economic growth. Now, in slide number 10, demand electrification is essential, and to do so, we must have a fair and attractive regulatory framework that facilitates the massive investment required for decarbonization. As you are all aware, at the beginning of July 2025, the CMNC launched the public consultation process to establish negative remuneration for next regulatory period. Going into details, the proposal considers a new methodology that we think introduces structural limitations that could hinder the sector capacity to deliver on electrification and grid modernization objectives. In particular, the investment framework shows bias against capital expenditure targets. which limit the investment needed to support network upgrade. Efficiencies are subject to an excessive capture rate, while benchmarks are based on outdated data, which are still pending final settlement. Although the new incentive model represents and evolution over the previous one, there is still room for improvement. Regarding rate of return, the rich premium methodology employed to set the 6.46% proposal is both discriminatory and asymmetric when compared to other regulated sectors in Spain and most European countries. Likewise, the beta coefficient and cost of debt considered are both unrealistically low. While both circulars fell short in expectation, we believe the most critical aspect is that those proposals greatly endanger the level of investment required to meet Spain's decarbonization target. Demand electrification and grid investment as outlined in the PENIEC and certainly in misaligned with the government's energy policy guidelines. Nevertheless, we are confident that the final version after the consultation process will provide the necessary economic signals to address the challenges of the energy policy in Spain. Let me now hand over to Marco for the final financial results.

Thank you, Pepe, and good morning, everybody. Turning to the analysis of the economic performance, I'm now on slide 12. EBTDA reached around 2.7 billion euro, showing a 12% increase versus previous year. This strong performance was driven by several key factors. First, the elimination of the 1.2% extraordinary levy, which had a negative impact of around 200 million in the same period of last year. Second, the 6% increase in generation and supply EBTDA, the main drivers of which will be detailed later on. And finally, the distribution business, which remained stable and aligned with our full year guidelines. Moving now to slide 13 for a more detailed analysis of the generation and supply businesses. The eBTDA improvement was driven by the positive evolution of gross margin, which grew 6%, and the stability of fixed costs. The main moving parts of the margin performance were as follows. Conventional generation margin grew by 10%, triggered by a strong margin from gas management, thanks to favorable prior hedging positions, and a good performance of the non-mainland. All of this partially offset by lower margin from short position management as a consequence of the sharp rise in bull prices in the period, and nuclear margin decline following the increase of EREZA tax since July 2024 and the full impact of the 7% tax on generation. Likewise, good performance in customers, mainly thanks to the higher gas return margin. Finally, the contribution from the renewable business decreased by 7%, mainly explained by lower wind and solar output and lower capture price, which offset the positive impact of higher hydro volumes. Moving to slide 14 now, these dynamics are reflected in the free power margin, which, as expected, is normalizing compared to last year's levels. Integrated margin amounted to 53 euro megawatt hour with a stable power supply margin of 18 euro megawatt hour. The supply margin remained nearly flat, highlighting the success of our strategy based on customer value rather than volume, which has been able to offset the surge in ancillary services and peak costs following the blackout. Analyzing the gas business from an integrated approach, now on slide 15, strong improvement of gas margin driven by favorable previous hedging position and price resilience in the B2C segment. This solid performance is expected to normalize over the course of the year in line with the target announced at the Capital Market Day last November. Moving now to the analysis below eBTDA, I'm on slide 16. DNA slightly increased versus previous year, driven by higher amortization on the expansion of CAPEX deployed over the last years. Financial results improved on the back of lower average gross debt in a context of lower interest rates. Finally, the effective tax rate stood at approximately 25%, no longer impacted by the non-deductibility of the 1.2% temporary energy tax that penalized last year's results. Overall, report and net income increased by a solid 30%. This improvement is clearly reflected in the net ordinary income to EBTDA conversion ratio which reached 38% in the first half. Turning to the next slide, cash generation remains strong, with NFFO standing at 2.4 billion euro, doubling the figure recorded in the same period of last year. This strong performance was mainly due to the robust EBITDA growth, and the positive working capital contribution of around €0.7 billion in the absence of the Qatar arbitration payment booked in the first quarter of 2024. On slide 18 now, net financial debt came in at around €10 billion, with cash generated in the period more than covering the deployment of organic capex, as well as the acquisition of the hydroassets. In addition, we paid the interim dividend in January and executed around 40% of the €500 million show-by-back program planned for the year. Gross financial debt remained stable, while its average cost declined to 3.4%. All these allow us to maintain strong credit metrics and a significant financial flexibility. And now, let me hand over to Pepe for the closing remarks.