Endesa Sa Madrid

Good morning, everyone, and thank you for joining us today for our first half 2026 results presentation. With me today are our CEO, Gianni Armani, and our new CFO, Daniele Caprini. Before we start, let me remind you that after the presentation, we will move to the Q&A session. And starting from today, we will only take questions submitted in advance by email or through our website. In addition, given the busy earnings calendar with a large number of companies releasing results today, we aim to limit the duration of the call to one hour. Thank you once again and now I would like to hand over to Mr. Armani.

Thank you very much, Mar. The first half of the year delivered solid financial results. BDA increasing by 20% and net income growing by 41%. This performance reflects growth across all businesses supported by higher contribution from regulated activities including both distribution and non-mainland generation. These results highlight the resilience of all our businesses and the disciplined execution of our strategy. Growth has been supported by continued efficiency efforts, allowing us to improve profitability and maintaining solid financial ratios. At the same time, we continued to accelerate the execution of our investment plan with network remaining the main focus. Overall, the robust operational and financial performance delivered with more than 60% of full-year EPS target already achieved together with the strong visibility that we have for the remainder of the year In the first half of 2026, EBDA increased to 3.2 billion. More importantly, the contribution of our regulated businesses increased from around 40% to approximately 50% of total EBDA. This reflects the weight of networks and other regulated activity within our portfolio, further strengthening the quality and resilience of our earnings. This stronger earnings profile translated efficiently into solid bottom line results. Net income reached 1.5 billion euros, implying 45% EBDA to net income conversion, while EPS increased 46% to 1.44 euro per share. Lastly, cash generation remained strong with ABDA to FFO standing at 70% and FFO to net financial debt reaching 38%, supporting a strong financial position. Turning to market conditions, on slide 5, Power prices fell almost 20% despite the energy market being clouded by uncertainty and volatility stemming from the ongoing geopolitical tensions This decline has partially offset by the significant increase in ancillary services costs since one year after the blackout event the TSO Thank you very much. against this backdrop electricity demand showed a modest growth with largest increase on the residential segment mainly due to temperature effects followed by services and industrial demand still affected by the uncertainty of geopolitical scenario. This reinforced our view that further investments in the grids will play a critical role in enabling economic growth, supporting electrification and unlocking future demand. In this sense, the Royal Decree approved yesterday, of which we don't have yet the final text, significantly raised distribution investments CAP, providing additional headroom to accelerate CAPEX deployment in the coming years. As we can see in slide 6, we continue to accelerate our investment plan with gross CAPEX increasing by 14% year-on-year to 1.1 billion. Networks remained our main investment area representing more than half of total CAPEX. This increased investment effort has already delivered operational improvements with lower network losses and TAP remaining or even improving when exceptional weather related events are excluded. In renewables, the output reached 11 TWh, with 86% of mainland output coming from emission-free technologies. In supply businesses, the total customer base stood at 11.3 million, while free power customers increased to 6.3%. Spanish retail market remains highly competitive although we expect a more rational environment going forward as regulation tightens and market conditions evolve Thank you very much. We continue to reinforce our physical presence through the expansion of our directly managed commercial footprint enhancing customer relations and strengthening control over customer experience. At the same time, we continue to drive customer growth and loyalty through our digital initiatives while leveraging on Mass Orange partnership, exploring new opportunities for customer acquisitions and enforcing loyalty and enhancing commercial offering. Let me now hand over to Daniele for the financial results. Thank you, Daniele.

Thank you, Gianni. Before we begin, let me say that I am very pleased to be joining this call in my new role as CFO of Endesa. Turning to slide 8, let me briefly highlight once more the outstanding economic and financial performance delivered in the first half of 2026. EBITDA increased by 20% year-on-year, Thank you very much. Looking at the main drivers behind the strong financial performance, first, network EBITDA increased by 24%, mainly supported by the new regulatory framework in force since the 1st January of this year, and the effect of positive previous year resettlement resulting from the update of certain remuneration parameters booked in 1st January. Generation Supply EBITDA increased by 16%, driven by, first, higher customer EBITDA with the resilience both in gas and power margins, despite ancillary services cost increase, together with an improvement in fixed cost. Second, stable renewable EBITDA as the negative price effect from lower references was offset by better volumes and lower fixed costs. Then, in conventional generation, EBITDA also rose by 18%, supported by both margin expansion and cost containment. was driven by 0.2 euro billion improvement in non-mainland generation margin supported by the favorable regulatory framework which enabled future greenfield investments in this business as well as by prior years resettlements. This was partially offset by the normalization of the gas management margin. Operating costs decreased by 45 million euros, further contributing to EBDA growth. Turning now to our network business and I'm now on slide 11. As mentioned before, the new regulatory framework drove an improvement in earnings with the network's EBDA rising 24% to 1.2 euro billion. Representing 36% of total EBITDA, Networks continues to increase its contribution to earnings, further enhancing the visibility, resilience and the quality of our results. At the same time, we significantly accelerated investment, with the Network CapEx rising to 38% year-on-year to €0.6 billion, This reflects the increasing needs for grid reinforcement and expansion to support the energy transition and growing electrification trends. This investment effort is translating into continued growth of our regulated asset base, which reached 11.4 euro billion, providing additional visibility on future regulated remuneration and reinforcing the long-term growth profile of the business. Focusing on the retail business on slide 12, our retail action plan continues to deliver visible benefits, improving both the efficiency of our commercial model and the quality of our customer portfolio. We are seeing the benefits of a higher share of pool-driven acquisition and a lower cost to serve, reflecting a more efficient and disciplined customer acquisition approach. These improvements are also supporting stronger customer quality indicators, in particular, early churn decreased by 5%, while bad debt levels also continue to improve. Together, These trends are enhancing the quality, profitability and sustainability of our retail earnings. Now I'm on slide 13 and turning to our integrated power and gas unitary price margin. The free power margin remained broadly flat in absolute terms, absorbing the impact of higher ancillary services costs. Combined with the lower liberalized sales volume, this drove the unitary margin up by 6% year-on-year to €56 per MWh. We also reshaped our hedging approach to achieve a more flexible alignment between generation and supply profiles. This enhanced matching capability allows us to optimize the management of our energy position, strengthening the value of our integrated business model. Looking ahead, we expect the free power margin to remain in line with our full year 2026 guidance. Meanwhile, the gas margin remained broadly flat. Lower sales volumes dropped the unitary margin to €11 per MWh, up 7% year-on-year. Our high hedging levels in both power and gas continue to provide strong visibility with limited exposure to market volatility. Moving to slide 14, efficiencies continue to translate into tangible savings with fixed costs decreasing by 8% year on year. Efficiency gains more than offset inflationary pressures and the costs associated with business growth, supporting a continued reduction in the cost base. This performance reflects the ongoing execution of our transformation program, with more than 500 initiatives focused on simplifying the way we work, streamlining processes, optimizing assets, and accelerating digitalization. Across areas Such as workforce optimization, operational simplification, IT and software license optimization, asset management, procurement and commercial activities these initiatives are already delivering tangible productivity gains. We expect them to progressively materialize throughout the year. Moving now to slide 15, net ordinary income reached 1.5 euro billion, up 42% compared to the first half of 2025, reflecting the strength of underlying operating performance and positive, no recurrent effects. This resulted in an improvement in the net ordinary income to be the conversion ratio to 46% from 38% a year ago. DNA and provision remained broadly stable at 1.1 euro billion, as lower bad debt partially offset the increased amortization linked to higher investment. Financial results improved by 0.1 euro billion year on year, mainly driven by late payment interest income recognized following several favorable administrative and judicial rulings. Finally, the FTC Tax rate stood at around 24%. Turning to next slide, cash generation continued to be robust with the FFO reaching 2.3 euro billion implying a remarkable 70% cash conversion in spite of a transitory negative effect in working capital. Net financial debt remains quite stable as the strong cash flow generation was almost enough to fund investment needs as well as 1.2 euro billion of shareholder remuneration including both the interim dividend paid in January and the share buyback program which represented the cash flow outflow of approximately 550 million euro. It's worth highlighting the remarkable Thank you very much Daniele.