Endesa Sa Madrid

Hello, good morning to all the people connected. Welcome to the nine-month 2025 results presentation, which will be hosted by Endesa CEO, José Bogas, and the CFO, Marco Palermo. Before we start, let me remind you that after the presentation, we will have the usual Q&A session. Thank you, and now let me hand over to our CEO, José Bogas.

Okay, thank you, Mark, and welcome to everybody. Let me open this presentation by highlighting the strong economic and financial performance of the period, which, as we will see, suddenly resulted in a remarkable gas generation. This clearly proves the resilience of our business model, which enabled us to meet our commitments, maintaining predictable results and consistently creating value despite a complex and uncertain market context. Regarding shareholder remuneration policies, we are making steady progress in the implementation of our Share by Back program, as we will detail later on. And finally, When it comes to the distribution remuneration framework, the current proposal clearly does not provide adequate support and incentives for the investment effort required by the National Energy Plan. Let's now have a look at the key financial and operational highlight of the period. On slide number four, we can see the solid financial results achieved in these nine months of 2025. EBITDA reached 4.2 billion euros, marking a 9% increase year on year, while net income came in at 1.7 billion euros, up by a sound 22% versus last year. Cash generation remains strong. with an FFO rising to 3.4 billion euros, a 29% increase year-on-year. These results allow us to confirm that we are well on track to reach the upper range of our forecast, both in terms of EBITDA and net income. We continue to progress on our capital allocation strategy, as you can see on slide number five. We acquire the remaining 62.5% stake in CETASA, enabling full consolidation of this green asset portfolio. In September, we entered into a strategic agreement with Masorand to provide combined energy and telecom offers. As part of the deal, which will be completed in the coming month, we will acquire Energia Colectiva, bringing over 350,000 energy customers to our portfolio and gaining access to more than one million potential clients. This will reinforce our commercial strategy and opens new opportunities to foster customer loyalty through an integrated service offering. Furthermore, the strategic partnership with Mazda, which we announced last March, was successfully concluded in early October. And lastly... As already commented on, we are progressing on the implementation of our sell-back program. After completing the second tranche, we launch a third one with a target of up to 500 million to be executed no later than February 28th next year. Slide number six provides a brief overview of the progress achieved on the capital allocation strategy and the execution of main industrial KPIs. We invested around 1.4 billion euros during the period, with nearly half allocated to networks. As shown in the slide, industrial KPIs confirm our progress. Starting with grid, our efforts are reflected in the improvement of the interruption time index, while total losses remain stable at around 10%, still significantly impacted by non-manageable losses due to localized fraud. In renewables, the consolidation of new renewable capacity allowed us to achieve a 79% emission-free output. And lastly, in the customer segment, it is important to keep in mind that we are pursuing a strategy focused on higher-value customers, reshaping our customer mix profile with a focus on long-term loyalty. From a market perspective, on slide number 7, commodity prices show signs of normalization throughout the period, gradually stabilizing after the volatility in the early 2025. In the Spanish electricity market, final prices were mostly affected by the post-blackout measures to prevent future incident and the resulting notable rise in ancillary services costs, while daily electricity price averaged 63 euros per megawatt hour, that is 21% increase year on year. It remains unclear how long the system operator will maintain its special anti-blackout measures, which poses a significant cost to the system. Besides, we must consider the lesson learned from the incident. Our electrical system is secure, but we must update the system operation that has undergone structural changes, now dominated by renewable technologies. In this scenario, we believe it is critical to reconsider the nuclear phase-out schedule, starting with Almaraz. This facility has become key as its location helps to strengthen the grid security in an area with vast renewable generation. In addition to rolling out all the measures to boost electrification, there are other steps we must take to ensure system security of supply, such as implementing a flexible control model. Slide number eight shows how mainland demand continues to consolidate sustained growth, recording a 2.4% year-on-year increase, that is 1.8% adjusted. When it comes to Endesa's area, demand rose by 4.2% and 2.5% respectively. Deep diving into the analysis by segment, Residential consumption expanded significantly, largely influenced by the rise in temperatures. the rebound of industrial and services demand is part of a broader sector-wide increase in energy usage. This clearly aligns with the market rise in connection requests seen in recent years, which are now starting to materialize into actual consumptions. In this regard, it is worth highlighting the growth of the service sector demand particularly in the Aragon area, which has seen a 9% year-on-year demand increase, mainly associated with the incorporation of data center activity. The strong performance achieved since last year is a clear sign of turning point of trend, not only in terms of the consolidation of the recovery in demand, but more importantly, in the materialization of a new industrial demand. On the next slide, we review, that is slide number nine, we review the most significant highlight of the distribution regulatory framework. Although the new remuneration proposal introduced certain improvement, it still falls significantly short on meeting the ambitious and urgent to achieve Spanish decarbonization and electrification goals. In subcontract, the context evolves in a different direction and reflects very different dynamics and challenges. Reconnection requests continue to steadily rise and some demand growth scenarios such as one of those considered in the 2025 to 2030 transmission network development proposal even exceeds 2030 PNEIC assumption. Rate availability was only 17% at the beginning of September, being virtually zero in Endesa's area as of today. Due to these capacity constraints, we have been forced to reject most of the new demand connection requests for 2025. It is crystal clear that investment in distribution networks must be accelerated to meet electrification goals. The Ministry's proposal being a step forward in rising the strategic investment limit by 62% for the 2026 to 2030 period. However, a fair and forward-looking regulatory framework that incentivizes investment is essential. Moreover, the pending rate of return update must urgently be resolve existing asymmetric with other European countries, as well as addressing inconsistencies with other regulated sectors. In conclusion, we urge the CMC to recognize this reality and to respond accordingly by approving a remuneration framework that rises to the challenge. And let me now hand over to Marco for the financial results.

Thank you, Pepe, and good morning, everybody. Let's start with the analysis of the financial results. I'm now on slide 11. As we have just mentioned, EBITDA rose to around €4.2 billion, up 9% from the previous year. This solid performance was driven by several key factors. First, the removal of the 1.2% extraordinary levy, which negatively impacted last year's results by around 200 million euro. And second, the 8% increase in generation and supply BTDA more than offsets the lower contribution from distribution affected by one-off capital gains that we booked in 2024. Moving to slide 12 for a closer look at generation and supply segment. ABTDA expansion was primarily driven by the 8% gross margin increase, while fixed costs rose slightly, impacted by negative one-offs in the O&M. The moving parts of the margin evolution were as follows. Conventional generation delivered a 16% increase, driven by strong results in gas management, supported by positive prior hedging position. more than offsetting the lower results from shore position management with less opportunities in the current price context, and a nuclear margin decline mainly explained by higher variable costs due to taxes. basically the full and resa tax and the 7% tax on generation. Supply business also contributed positively, mostly due to stronger gas retail margin, while the power supply was stable year on year. Finally, the renewable business remained flat overall. Higher hydrovolumes were offset by lower wind and solar output and lower capture price. Moving to slide 13 now, the free power margin evolution reflects all these dynamics, normalizing compared to the record high attained last year. The integrated unitary margins stood at 53 euro megawatt hour, with a power supply margin of 18 euro megawatt hour. This supply margin remained nearly flat, underscoring the effectiveness of our strategy focused on customer value over volume, and mostly offsetting the impact of rising ancillary services and peak costs. For the full year, we expect the integrated unitary margin to remain at the current level of around €53 MWh. On slide 14 now, we analyze the gas business from an integrated perspective. The gas margin showed a strong improvement supported by favorable previous hedging positions and resilient pricing in the B2C segment. The unitary margin reached 10 euro megawatt hour with expectation of ending the year at around 9 euro megawatt hour. Moving now to slide 15 in the below EBITDA, DNA slightly increased compared to the previous year, mainly due to higher amortization from investment in distribution and increased depreciation in renewables. which included the consolidation of the hydro asset incorporated since February. Financial results showed a notable improvement driven by a reduction in average gross debt and lower cost of debt. Finally, the effective tax rate stood at approximately 24.5%, no longer impacted by the non-deductibility of the 1.2% temporary levy that penalized last year's results. Net income rose by a solid 22%, with net ordinary income to eBTDA conversion ratio reaching 41% in the period. Turning to the next slide, page 16. Cash generation continues to be strong, with an FFO standing at €3.4 billion, improving on the previous year's levels, mainly due to the robust EBITDA growth and the positive working capital evolution versus previous year, which was impacted, you probably remember, by the 530 million euro Qatar arbitration payment. On the other hand, the higher corporate income tax payment made in this third quarter reflects the exceptional results achieved in 2024 compared to 2023. On slide 17 now, Net financial debt came in at around 10 billion euro, with cash generated in the period more than covering the deployment of CAPEX, including 1 billion of inorganic CAPEX. In addition, the change in debt reflects dividend payments totaling €1.5 billion and the completion of the second tranche of the share-buy-back programme, which resulted in a cash outflow of approximately €450 million. Gross financial debt remains unchanged, with the average cost declining to 3.3%. And now I hand over to Pepe for the closing remarks.

Thank you, Marco. As we mentioned throughout the presentation, the solid delivery across all business areas reaffirmed our confidence in achieving the top M of the full year guidance. This confirms the successful execution of our strategy and the resilience of our integrated business model. The soundness of our results is reflected in our commitment to shareholders with a solid dividend policy further supported by the ShareSupply Back program that will drive sound and long-term returns to our investors. Lastly, we firmly believe that capital allocation must rely on fair and forward-looking regulation. A stable regulatory framework that incentivizes necessary investment is essential to unlock the full potential of our capacity to accelerate the energy transition. Thank you for your attention, and let's now move to the Q&A session.

The telephone Q&A session starts now. If you wish to ask a question, please press star 5 on your telephone keypad. If you change your mind, please press star 5 again on your telephone keypad. Please ensure your phone is not muted.

Okay, we start now with a round of different questions. And the first one comes from Peter Vistiga from Bank of America. Please, Peter, go ahead.

Hi. Thank you for taking my questions this morning. So three, if I may. First one just on numbers. Just looking at your strong nine-month performance, it looks like you need only $300 million of net income to hit your full year guidance at the top end of the range. That would be down quite a lot versus the sort of 600 million that you did in Q4 last year. So I was wondering if you could just explain what the year-on-year negative moving parts are going to be in the fourth quarter. Then the next question is on ancillary services. I was just wondering what was the positive impact of higher ancillary services charges on your generation business in the nine months. And despite your flat retail margin, do you think that you can pass on those higher ancillary services costs to your customers in 2026? Or should we expect your supply margins to actually increase above 18 next year on that basis? And then finally, you lost another 130,000 deregulated customers in Q3. I know you've said that you focus on highly valued customers, but just wondering what proportion of your remaining 6.3 million liberalized customers you see as low value and are willing to lose. So, you know, which points... you sort of have to start focusing on custom numbers rather than margins. Again, thank you.

Okay, thank you, Peter. I will try just to give some color to the first question and the last one, and then Marco will add whatever. With regard to the guidance, well, As we have said, we can confirm that we expect to reach the top end of the capital market day guidance for the full year 2025. That is clear, and we feel very, very, very comfortable. But we don't use to change our guidance. believe us, we feel very, very comfortable. Regarding the customer that we have lost in the last quarter, how much customer we are thinking that could be in a vulnerable, let's say, position. Well, it is clear for us that the competitiveness in the Spanish sector is a good thing and is improving the way in which we offer and supply services to our customers. But it is clear also that just because of the more than 25% share rate that we have at the level of the system and also at the level of Endesa, there are many switchers that it's very difficult just to obtain any profitability from this. As you could see, we have reduced our customers and that our margins in supply even with the increase in the ancillary costs, continue being the same as the last year, more or less. So that means that these customers that we have lost are not value customers. So as we have said, we are trying to put first the value over the number of customers that we have. On the other hand, I would like just to add that this movement that we have done with Mas Orange is trying just to really change a little bit our offer to our customer, trying to offer bundle services of telecoms and energy and give them a better service just to increase the fidelity of these customer. So, well, we will continue on that and we will see if this strategy really reduces the losses and even more increase the customer in our customer base. And now Marco at whatever and talk about the ancillary services.

Okay. Hi, Peter. Thank you for your questions. Again, let me add something also on question number one. Yes, guys, I mean, it's like there is no secret here. It's 0.3 as a net income for a fourth quarter. Generally, the fourth quarter is a strong quarter. So, I mean, that's why we're saying that we are very, very comfortably in the higher part of the range. Regarding question number two, ancillary services. So there were two questions, I guess, there. But basically, first one, just to give you a few numbers, in order to have an idea on quotas, for us, the penalization of the increase of ancillary services this year weights approximately as a gross penalization of 75 million per quarter. Okay, so basically in nine months is approximately 200 million. On the other side, This is the gross penalization because you have some recover this on the generation side. So around 25 million per quarters. So if you sum up, it's like basically the impact, the negative impact in nine months should be approximately 120 million, something like that. So that's why we say that we... I believe that for year-end will probably be around 150 net negative impact from ancillary services on our accounts. That, of course, if you see it grows, it's a higher number. And in terms of supply margin, I mean, the supply margin stays where it stays because we have done, you know, we have managed our portfolio. But all those, I would say that all those management was... we were thinking to do that. So, I mean, it's now what we have to do is working on absorbing somehow this higher cost on ancillaries. So that's why we have to continue to work this year, but also next year on recovering this cost. And on the loss of customers, I guess that the job that we're basically doing there, I would say, is almost done. And part of this is probably also related to the fact that on one side, we've been losing those clients that made no sense in terms of acquisition from the push channels. On the other side, I mean, we're somehow we decided just to go through with the acquisition of the clients, power clients from Masorange that somehow showed a different trend in terms of churn and so on that I guess is mostly related to the fact that they have a bundle, they buy bundled products and probably in these offers it's easier to see the value that you give to the customer. Thank you, Peter.

Thank you, Peter. And now we have Alberto Andolfi from Goldman Sachs.

Good morning and thank you for taking also three questions. I want to bypass the big questions of regulation. I'm sure you get some more later. But can I ask you, If you were to receive a decent outcome, it's quite binary here, right? Either returns are good or they are just not quite good. So if you have a decent outcome, how much RAB growth do you think Endesa can deliver over the coming five years? The second question is, Can you place a share buyback somewhere in your capital allocation priorities? Do you think this is going to be an ongoing, not just a tool, but an ongoing feature, meaning like a base case, until December 27? And could we see this continuing to 28? I'm thinking in case returns, for instance, are not particularly good in distribution. So should we... look at your share buyback almost as a safety net, as a silver lining here on capital allocation? Or is it more central? And the last question, you have been, I think we need to give you credit, you've been the first company to talk about an inflection in power demand. You've been the first company to talk about particularly for Iberia, for Spain. Can I ask you, it seems to me there's like 35 gigawatts of connection requests to the grid when it comes to data centers in Spain. Obviously, we cannot imagine that 35 gigawatts would come online because it's the entire demand of Spain. But can I ask you two points on this 35 gigawatts? How much is from hyperscalers, therefore third-party data data center specialized companies vis-a-vis entrepreneurs that are trying to make money out of this early stage development? And secondly, how much of the 35 gigawatts do you think it's realistic to assume will become operational by 2030 or 35 in Spain? Is it 5%, 10%, 20%? Just trying to gauge here what we should expect for this very important driver. Thank you so much.

OK, thank you. Thank you, Alberto. Let me say something in relation with the two first questions. Well, we are an under-leveraged company. That means that we have strong potential just to invest or just to, in general, just to give value to our shareholders. If we could give this value through investment in the system, we will do it. If we are not able yet because of the regulation or because anything, we will look for ways just to return this value to our shareholders as we have done with the survey back that we have launched. So it is very clear for us that we want to give value to our shareholders. If it is possible just to do it through investment in the system, we will do it through the investment in the system. If not, we will do things like the shareholder buyback that we have done or similar things. So that is clear absolutely for us. With regard to the decent outcome in the distribution regulation, Well, what I could tell you is that in our last plan, that is the plan from the year 2025 to the year 2027, we invest around 4 billion euros in gross investment in distribution. And we increase something around 0.7, 0.8 billion euros in the wrap in the year 2027. What we said in that context is that we have further firepower, let's say, that has to invest even more. So if we obtain a decent remuneration, we will try to increase this investment in the future. With regard to the power demand, you're right, the 35 gigawatt data center, well, we will see how many will be materialized up to the year 2030, because, well, it would depend in many things. Let me say you something. The government of Spain has increased the cap, the limit, from the 100 to the 162. That will give us an increase that don't reach the one previously forecasted in the PNIC. in the PNEIC, so we are short on that. So in that way, what I think is that we will be able, yes, to reach the increasing demand that it was forecasted in the PNEIC, and even perhaps a little bit more, and I'm talking around 3% each year. up to the year 2030, but all this demand increase will be beyond the year 2030. We will have a huge increase in this year up to the year 2030, as I have said, but unfortunately, the investment that we are going to do, like the Spanish sector in the distribution and transmission networks, is not going to be the total amount forecasted in the PANIEC.

So thank you, Alberto. And sorry if I go long on the question. I don't know why I feel that I would like to talk today. So on question number one on the rub increase, in the last plan that we presented, I mean, I remember that we had approximately 3 billion of net capex along the plan, and that we're giving as an increase in RAB that was, you know, lower than 1 billion. But it was a previous, the current plan, it's not the new one, and it was based on other kind of assumption. Now we have to see what is the regulation that comes out finally. also in terms of level of investment and what are the kind of investments that are allowed. But it looks like this figure can somehow improve. Second question, share by back. Is it a priority? Well, of course. I mean, I guess that the answer is basically in the number. If you look at our net debt and our gross debt now, I mean, despite the fact that we've been, of course, doing capex, we've been doing M&A, and despite the fact that we've been completing the first tranche of the share buyback, so 450 million, we are still at 1.8 net debt EBITDA. So, I mean, whatever we do, we are still there. So that's why we decided just to launch, to stop with the previous tranche and launch a new one. Because we do see that there is space here for a lot. Just to give you a few numbers, I always said that probably this company should run at an entire EBITDA that is between 2.5 and 3. So if you take the numbers of today, the 5.6 EBITDA, I mean, you multiply, there is space at least for another 5 billion. And of course, as you can see, probably you can understand that despite whatever we can assume on distribution, there is still ample ample margin for share buyback, and that's why we launched the third tranche. And on the third question, on the power demand, it's in the make, Alberto. The answer to this question is in the make in the sense that that's exactly what we are discussing right now for the new business plan. And what we can say is that in this request for data centers, in terms of numbers, of course, there are many little entrepreneurs. But those little entrepreneurs, generally speaking, they ask for small quantities of capacity, while the big guys, the one with the brand on top of the hat, they go for the big numbers. So, I mean, their presence is relevant when it comes to the proportion of big guys somehow requesting capacity for their data centers. Thank you.

Okay, we move now to Manuel Palomo from Exxon BNP.

Hello, good morning everyone. I will ask just a couple. I'm sorry to insist on the buyback and on the regulation, but I was wondering whether, well, continuing with the buyback at current share price levels, which the stock still being below 5% makes still a lot of sense, or whether it would make much more sense to invest as much as possible in electricity distribution business, even if the 6.46% return is not changed or is not improved that we expect it will be. So my question is whether you will do as much as you can, even if the regulation does not improve. My second question is on the margins. I'd like you to please help me to understand what will happen with the margins for the next year, because we've got one very positive driver, which is hopefully the pass-through of the ancillary services to final clients. But on the other side, I guess that we are all expecting some normalization in the hydro resource. So my question is whether you could help us to understand where you expect the integrated margin for electricity to land in 2026. Thank you.

Okay, thank you, Manuel. Let me try to say something about the first question. You are right, but let me say perhaps the Spanish regulation with regard to the distribution, is one of the more complex of Europe and could be all over the world. What I really think is that we need certainty and what we are obtaining is uncertainty just because of this very, very complex regulation. that really you need to or we need to understand when we will have the final and full picture of this. Then we will take our decision about this. But let me... say that it is a little bit confused. I would prefer a more clear, transparent, direct regulation. And if you allow me, I would tell you something about Paracelso. Paracelso was a 16th century alchemist that said that the difference between medicine and poison was the dose, this excess of regulation can become poison for the network. So I ask the regulator just to simplify and just to give more clear regulation. Having said that, we need to have the full picture, and we will evaluate what to do.

Okay, so given that also Pepe is very inspired today, I will try to make answer short because otherwise it will take too long here. So yes, CAPEX is a priority. Let's see the final results and then we will check. Regulation, sorry, on margins. What we do expect for 2026, integrated margin in line with this year. You were saying correctly maybe the hydro next year will not be exactly the one that we have this year. Not very sure about it. But if that is the case, I hope that also solar and wind will not be next year the one that has been this year because actually there was not so much. sunshine and even less wind until now in the year 2025. And I would say that's it. So, basically, integrated margin 2026 in line with the margin of 2025. Thank you, Manuel. Sorry, here they're saying buy back versus CapEx. So CapEx, of course, again, we will do, you know, we want to grow. So if there are other conditions, we will grow. Of course, they should be profitable. This should be profitable growth. And in terms of buyback, I guess that there is, as I said, there is space in the debt, basically, frankly, for both. Then, I mean, buyback, it's a way of giving back to our shareholders. There could be also... dividend policy. But all this stuff will be somehow managed and addressed in our capital market day end of February next year because they are all in the make. Thank you.

The next question comes from Pedro Alves from CaixaBank.

Hi, good morning. Just one question, please. Just understand how you frame your thoughts in terms of capital allocation besides the potential investments in distribution networks. So basically on potential M&A opportunities, because Given your balance sheet flexibility and the fact that valuations for renewables pipeline in Spain have sort of come down over the past year, do you see this perhaps as the moment to buy, for instance, a renewable developer being, for instance, a smart hedge given the uncertain fate of nuclear in Spain? I mean, if nuclear does close, you reduce your short position in infra-marginal generation and benefit from higher power prices without nuclear. And, well, if it's extended, you obviously still capture the upside from the nuclear fleet. Just to understand if you can really hit the pedal now on M&A. Thank you.

Thank you, Pedro. So on your question, do we have space for M&A in our balance sheet? Yes. And that's exactly what we have been doing with the acquisition of the assets of Axiona, with the majority of the wind assets in Setasa, with the acquisition of clients from Azorange. So, I mean, That's, you know, if we see an opportunity, of course, we do it. Now, does this bring us to buy renewable developers? I don't think so. Because, I mean, we have plenty of projects in wind, in solar, in bass. I mean, plenty of that. What we will love eventually is something that is up and running. So if there are things there that are up and running, but again, probably not on solar, but on the other technologies. And those kind of things are not easy to find or not cheap to buy. Thank you.

We have now Javier Garrido from JP Morgan.

Thank you for taking my questions. I think most of them have been addressed to Guinness, so I will focus on two results. Firstly, on your financial costs. Do you think that the Q3 numbers give a good outlook for the steady rate of financial costs going forward, given that your gross debt has now stabilized? And regardless of what decisions you make then on extension holder remuneration you plan to keep a similar structure of financing in terms of the balance between fixed and viable costs and short and long-term debt profile? And then the second question is on the regulation, I'm afraid. So if I understand correctly, your priority when you think about the potential improvements that might come in the final determinations of the regulator would be to get more visibility and predictability about the inclusion of assets into the RAF and lose the risk of having stranded assets. Is that correct, or is there any other top priority in your mind about what should improve in the regulation for you to be more aggressive in your distribution capex profile? Thank you. I agree.

Let me try to answer the last one in terms of regulation. Well, it is a whole, all the remuneration of the distribution. As I have said, it is complex, very complex. We need just to understand clear. But the most important thing for me is to have the guarantee that all the investment that we are going just to go ahead with will be remunerated that is something that in the last draft and we are waiting for the next draft really create some kind of uncertainties And there are many levers to improve the remuneration in this regulation that we should understand clearly to take the decision. But we prefer to go ahead with investment in the system, in the network, and to give enough profitability just to give value to our shareholders. That is what we want. That is why we are working now. If we don't have the opportunity, we will look for other ways just to give value to our shareholders.

Thank you, Javier. So let me answer the questions on the financial structure and financial costs. So can we assume that the financial costs that you're seeing right now are the stable financing costs? I would say yes in terms of price, so in terms of rate, even though I still expect that maybe we can do slightly better than that. And in terms of quantity, I mean, let's hope that we'll have the opportunity to increase our debt. So, I mean, on the proportion fixed versus variable, we are now approximately 60 fixed and 40 variable. And I guess that probably this is close to what we want to have vis-à-vis the future in terms of structure. Thank you.

The next analysis, Javier Suarez from Mediobanca.

Thank you, Mara, and good morning, all. Three questions from me as well. The first one is on the electricity demand dynamics in slide number eight. You have mentioned that there is a sharp increase on electricity demand. There has been a mention of some impact on new data centers in the area of Aragon. So could you be able to give us more granularity on the underlying dynamics for electricity demand increase affecting the industry services and residential activities? That would be very helpful. Then on the regulation, again, back to the need for a different proposal, can you help us to understand which would be, in your view, the implication run as an optimal regulatory outcome, and you see the necessity for the government to intervene, maybe calling a committee of collaboration between the sector, the regulator, and them as well? And then the third comment is on the supply activity and the decrease on number of clients by minus 6% year-to-date. So can you help us to understand why do you think that the client base is going to remain sticky in an environment that you have defined of a significantly higher competition? Thank you.

Okay, thank you, Javier. Trying to be short in the answer, I will pass the questions to, just not to repeat it, Marco.

I mean, here things are becoming hot, the climate here. So, I mean, on question number one, regarding electricity demand, I mean, here probably the nice, you know, the only comment that I would add, if you go back to page number six, I guess it was, sorry, yes, when we had the split of the... Only to comment that data centers are in the service cluster. So, on industry, you start to see a recovery of industry, and that's what was easy to see for us because we were seeing our clients somehow switching from gas to power. So, I mean, we were seeing this somehow, or asking for more capacity, so we were seeing this starting to happen. On services is where you find the chapter of data center that, I mean, here it looks like, you know, if you look at our area, strong increase. I mean, we believe that still much has to be seen here. And on residential, I mean, it's what has always been somehow sustaining the consumption for the time being, and it's even more related then to weather and this kind of things. On question number two on regulation and what could be the effect of a suboptimal regulation. Well, I mean, you know, on one side, if maintained, I mean, if there is really a decision on that, of course it means much longer time for developing the network that, you know, the country needs to have and that the country deserves. So basically it's somehow, unfortunately, losing an opportunity. Then does this mean that, you know... that in the process, you know, things can change. I mean, I don't know. I mean, for the time being, I still want to hope that, I mean, the fundamentals will somehow will somehow be there because it's a good opportunity for the country. On question number three, regarding the supply decrees, I mean, frankly, the churn level that we are seeing right now, we don't think it's a sustainable level for any market. for any country. I mean, it's over 25%, I mean, in that range. I mean, we believe that it's because of many things. There are a lot of components there. I'm not so sure that all the clients are so happy just to switch so much in some cases. I can tell you there is a level of fraud that is terrific. So we think that, you know... sooner or later, this will be somehow, this will decrease. And in a way of somehow, I mean, of course, you know, fighting the frauds and so on, and it's not only in our hands, but for what we can do, of course, it's in our hands just to give a compelling proposal to clients. So that's why we decided just to acquire the clients coming from Masorange, that somehow they come with the bundle proposal and on the other side also try to have an agreement with them in order to offer also to the other clients of our base, you know, other services and other, you know, offers that they can find somehow attractive. All of this in order to decrease the churn level that, as I said, is not sustainable. Thank you.

Okay, the next question comes from Fernando Lafuente from Alantra.

Hopefully the last one on regulation, just about the timings in which you expect the new drafts or new steps from the CNMC, both on the model and on the WAC. And also on networks, in this case, I would like to have your view on what would be a recurrent EBITDA for this year, and under the current circumstances, how do you see that EBITDA evolving ahead of 2026? And lastly, on the capital allocation, it's very good to hear you being more active on capital allocation, and especially this message regarding shareholders' returns. My question is on the dividend policy, Marco. You basically commented it a little bit, and I know you said the capital market stay, but My question is basically if under this strategy of increased value for shareholders, you could consider a new dividend policy with, let's say, more visibility or less volatility than what we've seen in the past, and obviously without wanting to give you a specific answer on what's going to be the new policy. But what are your views on that side? Muchas gracias.

Thank you, Fernando. Talking about the timing in the regulation of the CMC, Who knows? But let me say, having said who knows, it's going to be before the year end. The real thing is that we are waiting in the next days just to have another draft. That hopefully will take into account at least some of our comments on this regulation. And we hopefully think that it will improve the picture that we have today. It could be enough just to take a decision or not, I don't know. But we will see in a short period of time the first results and the movement. But the last draft or the last or the final picture would be before the end of the year.

Hi, Fernando. Thanks for the questions. Number two, on network, I guess that the recurrent TBTDA, the one that we were seeing for this 2025 is approximately 2 billion. In 2026, we were seeing this going up in the previous plan, 100 million in 2026. Then, I mean, let's see what happens, what is the final regulation and what are the decisions that we take on CAPEX. And on number three, dividend policy, I mean, that's another thing that is in the make. We are having this kind of discussion right now. And yes, I guess that there are two parts here. On one side, CFO claiming for having somehow some flexibility in order then to fix the dividend. And on the other side, somehow giving confidence to our investors about the profile for the future. So, I mean, those two things, I guess, that not necessarily are not compatible. That's the way we are starting to work. Having said that, your question was very elegant. I don't know if my answer was at your level. Sorry for that.

Next question comes from Rob Poulain from Morgan Stanley.

Hi, thank you. I appreciate the long call. So thanks for taking a couple of questions at the end. The first one, if I can just revisit something from earlier. Could you confirm for the network capex, what is the upside to your current guidance given the investment caps increased and appreciating its contingent on the regulatory side? I believe that the three-year guidance you've given to 27 is that the regulatory capex on networks would be 1.2 billion. It'd be interesting to hear what upside potential there could be for that if the stars align and the regulator gives you what you ask for. And secondly, apologies if this has been answered, but I hadn't heard it. Could you give us a steer as to how the repricing of your supply contracts is going to pass on this ancillary service cost you spoke to earlier and how that will look for 26 and 27 in terms of passing that through to your retail base? Thank you so much.

Thanks, Rob. So on network APEX level, again, you know, it's difficult to say without having the details, and it's difficult to say because we are in the make of the new business plan. What I can tell you is that, you know, if the outcome is positive, we believe that the current business plan that actually was envisaging approximately 3 billion of net capex along the three years could be substantially increased. don't want to give numbers on that. Regarding question number two on the supply, I mean, as I said, the supply margin you have seen, it's basically constant, is 18 euro, and it's because of the management of the portfolio that we did along the year. And that was what we thought doing before the increase of ancillary services came into the play. Now, in order to somehow digest this increase in ancillary services that I was estimating is approximately something in the region of 150 million, could be a bit more probably at the year end 2025, we need time. And part of it has been done. because there are contracts that somehow foresee that, but part of it cannot be done immediately. So it will be something that will take us busy along 2026, and maybe a bit longer than that. Thank you.

We move now to Fernando Garcia from RBC.

Hi, good morning. Thank you for taking my questions. I have just two left. So coming back to the data center topic, are you having any conversations to do PPAs with data centers? And second question, for the 5 billion potential leverage optionality that you commented before, specifically related to server-backed, Is there any financial limitation to do that, like, for example, EPS aggression? Many thanks.

So on data centers, are we having a conversation on PPAs? Yes, of course, and it's mostly related with the big guys, I would say. Question number two. that is on the leverage optionality. I guess that there, I mean, frankly, the only things we are checking and seeing in the share buyback use is not reducing structurally the liquidity of our shares. That is the only real limitation and the only thing that we are carefully looking carefully look for the use of the share-by-back mechanism for the time being. Thank you.

Okay, this was the last question from the conference call. And now I will read just one pending question that comes from Philip from Odo. And the question is regarding the Portuguese statement from the Rater of Return and if this could be a good proxy for Spain. He mentioned the increase of 170 basic points in the rate of return. Please, Pepe.

Thank you. Let me say that the increase of 170 basic points will give us something around 7.1, 7.2 percent. that is better than the one that we have today, I think it would have more sense. Also, if we take into account what the CMC are doing with over-regulated sector in Spain, that will give us something around 7.2. That is very close to the one in Portugal. The other thing is that the financial remuneration rate all over Europe is something between seven to eight, let's say that. So, well, it would be in the lower range that we see in other countries, but I think it would be better than the one that we have today, of course.

Okay, now, yes, this was the very last question of the conference call. Thank you for your participation. As always, our team will be available in case you need any further questions. Thank you very much.