Enagas Sa Unsp/Adr

Good morning, ladies and gentlemen, and welcome to Enagase's earnings presentation for 2025. We will also be sharing 2026 targets with you. The documents have been filed with the stock exchange authorities at 7.36 this morning and are also available on our website at www.enagas.es. Arturo Gonzalo, our Chief Executive Officer of Enagas, will be running this call, which we expect should take about 20 minutes. And after that, we will open a Q&A session in which we will try and answer your questions in as much detail as possible. Thank you very much for your attention. I'm going to hand it over to Arturo Gonzales. Good morning, ladies and gentlemen. Thanks very much for your attention. I'd like to welcome you to this earnings presentation, in which I am joined by our CFO, Luis Romero, our Board Secretary and CLO, Diego Trillo, our Chief Officer for Institutional and Investor Relations and Communications, Felisa Martin, our Head of Investor Relations, Cesar Garcia, on our Head of Management Control and Business Analysis, Natalia Moragil. I'll start my presentation covering the main milestones in the implementation of our strategic plan this year and then I will speak about the main highlights of our financial results which, as you will have noticed, have outperformed the year's budget targets. And finally, I will go over the progress made in our ESG commitments and I will present the company targets for 2026. It's been a year since we disclosed our strategy update, and 2025 has been a year of consolidation for NRAS, in which we have made rapid progress along the three main lines of our strategy, which you may recall are supply security for Spain and Europe, financial and operating expense control under our efficiency plan, and the development of green hydrogen infrastructures. Today we are sharing yearly performance exceeding the targets we had set, demonstrating our ability and the speed at which we can execute our strategy. As you can see, 2025 was a year full of key milestones in which we have proven more than ever what a key role we play in supply security and decarbonization for Spain and Europe. The gas system had a 100% supply guarantee and availability and made a decisive contribution to getting the electricity grid back up in operation after the blackout here in Spain. The critical role of natural gas and gas infrastructures in ensuring security The security of the energy system overall has remained evident throughout the year within a robust operational framework which will continue to apply in 2026. The total demand transported by the Spanish gas system, that's domestic demand plus exports, increased by 7.4% in 2025. This figure includes 33.4% increase in gas demand for electricity generation. According to the grid operator, combined cycle plans have increased their contribution to average daily cover of the Spanish electricity system from 10 to 20% since March 2025. There has been a 2.2% fall in conventional demand mainly due to the lower use of cogeneration. An increase in total gas exports of 17.3%, especially to France, which increased 58.9%. And these figures clearly show that gas infrastructures are critical, not just for supply security in Spain, but also for the rest of Europe. Spain is increasingly consolidating its strategic role as an entry port for gas into Europe, and the Spanish gas system continues to stand out for its enormous flexibility. In 2025, we received natural gas and LNG from 16 different points of origin. In January 2026, total demand transported also went up 11.9%. Also, the gas system has showed enormous resilience in the face of extreme weather phenomena which have taken place both in 2025 and in 2026 so far. And gas supply has not failed under any of these adverse circumstances. There's also tremendous interest in the long-term outlook for the Spanish gas system. Currently, there's 2,100... of loading slots for LNG in Spanish regasification plants and about 1,000 loading slots between now and 2040. All of these numbers reflect just how sound the Spanish gas system is, generating an €800 million surplus between 2022 and 2024. This robust financial health has had a knock-on effect, bringing tolls down by 42% for domestic consumers and 70% for industry between 2021 and 2024, according to Eurostat figures. All in all, our gas system is an outperformer in Europe. Spain is one of the EU countries with the most competitive TOLs, and NRAS, according to the European Council of Energy Regulators, is the most efficient TSO in Europe. As you know, the CNMC is shortly going to announce the 2027-2032 regulatory framework for the gas system. Both the standards laid down by the regulator and the government's energy policy guidelines explicitly highlight the need for the Spanish gas system to be properly remunerated so that it can go on playing its crucial role in guaranteeing supply security in Spain and supporting the energy transition, whilst also facilitating the incorporation of renewable gases into the system. Enagasa's regulatory vision is completely aligned with the guidance provided by both the CNMC and the government. We need a remuneration framework similar to that of our European peers with an after-tax IRR of between 6.5% and 7% approximately. And for this, the following parameters must be applied. A financial rate of return of approximately 6.5% are identical to that of the electricity system. Sufficient return to cover the maintenance and operation expenses of gas assets calculated prospectively to cover the expected OPEX of future years plus a suitable margin. The costs of the current regulatory period for gas were set using real numbers for 2018 and 2019 and they have not been updated since, despite of an accumulative inflation of over 20%. An incentive promoting the extension of the useful life of assets so that facility owners will maintain these assets available to the system in spite of the regulatory useful life being over without needing to carry out replacement or substitution investments. A mechanism to allow the gas system to contribute to the overall security of the energy system focusing especially on the role of gas in providing continuity and backup for the electricity grid, taking into account the growing impact and maintenance of infrastructures of extreme weather events. Having a reasonable remuneration framework is crucial for the sustainability of gas infrastructures, industrial competitiveness, the security of the energy system as a whole, and the development of renewable gases such as biomethane and green hydrogen. In 2025, green hydrogen has also achieved crucial milestones, and its deployment continues to move forward at speed, as showcased in the fourth Energas Hydrogen Day, where we could see the enormous political, regulatory, and industrial backing for hydrogen. The third vice president of the Spanish government and minister for environmental transition and demographic challenge, Sara Acheson, announced the presentation of a draft bill to establish a national Spanish hydrogen system, a new regulated market, and the tools needed to develop the infrastructure required, as well as to boost hydrogen demand. Teresa Rivera, Executive Vice President of the European Commission for a Clean, Just and Competitive Transition, stressed the full commitment of the European Commission towards 82 men and to green hydrogen development. And Cani Fernandez, Chair of the National Committee for Markets and Competition, explained that the CNMC is already working to align the Spanish framework with European targets. Spain and Europe are showing unprecedented financial support as well. The Spanish government has already awarded around 3.2 billion euros to projects representing a total of 4.1 GW of electrolysis capacity in Spain. Spain is set to produce the most competitive green hydrogen in Europe, as confirmed by the first two European hydrogen bank options. In the next funding round, Spanish projects will receive an additional €415 million, approved by the Ministry for Environmental Transition and the Demographic Challenge under the Auction as a Service mechanism. For these projects to materialize, infrastructures are crucial. 64% of the projects presented to the latest European Hydrogen Bank auction require hydrogen pipelines, that is, a European hydrogen network to connect them up. Green hydrogen is an essential pillar of the European project, as the European Commission has demonstrated with each of its major initiatives in 2025. In its roadmaps, such as the Competitiveness Compass and the Clean Industrial Deal, as in the 2028-2034 multi-annual financial framework to be agreed by the Member States this year, in which the Commission proposes to increase funding for cross-border energy infrastructure fivefold to €30 billion, with hydrogen infrastructures playing a prominent role. also in the European Grids package and in the eight top priority major energy infrastructures, the so-called energy highways, with a dedicated fast-track procedure to speed up their delivery. One of these energy highways is the H2MEN, which, together with the Spanish hydrogen backbone, forms part of the southwestern hydrogen corridor. These infrastructures, both developed by NIRs, in 2025 secured the Connected Europe facility funds requested from CINEA for studies and engineering for a total of 75.8 million euros. A connected Europe is crucial for a truly decarbonised, competitive European Union with full energy sovereignty. And it's something that cannot wait. because nowadays there's already industries that need these infrastructures and that are already incorporating hydrogen into their investment decisions and strategic plans. According to the Hydrogen Council's Global Hydrogen Compass 2025 report, the hydrogen industry globally has already committed... 110 billion US dollars in investments, with over 500 hydrogen projects at an advanced stage of maturity. In 2025, Europe led in global hydrogen investments, with 12 billion dollars committed. But this is just the beginning. has embarked on a major investment cycle that will continue to build momentum. According to ACER, it will increase operational production capacity sevenfold over the next 12 months, up to 2.7 gigawatts. And in the last two years, final investment decisions have been taken for 2.6 gigawatts of electrolyzer capacity. And a further 7 gigawatts are expected to reach financial... close or enter construction in 2026. Spain has a great deal to contribute in the construction of a European hydrogen economy, with highly significant investments that have been announced in recent weeks and are scheduled for this year. One of the most recent and most notable transactions was the Repsol Petronor FID to install a second 100 megawatt electrolyzer in Bilbao. We roll out hydrogen infrastructures in line with our calendar. 2025 was a pivotal year for the H2Med corridor. No other pan-European hydrogen infrastructure is showing progress on this scale, with four decisive milestones hit in 2025. Strong backing from Europe and the member states. As well as receiving CEF funding and being included amongst the energy highways, H2Med has been recognized by France and Germany as a flagship project as part of the southwestern corridor. Recently, the French Minister for Environmental Transition and Sustainable Development stressed that H2Med, and I quote, is much more than a simple transport infrastructure. It is one of the keystones in France's strategic planning. Sound interest from Europe's industrial ecosystem, as demonstrated in the launch in Berlin of the H2Med Alliance, bringing together 50 leading partners from across the European value chain. Thirdly, H2Med has now become a business reality and together with our partners we have established a clear corporate structure through the Barmar SPV and the appointment of the CEO and the executive team. And fourthly, in the technical level, progress has been truly remarkable. We have successfully completed the geophysical studies for Barmar and confirmed that the sub-sea route is technically viable. and we are carrying out pre-feed engineering, working with leading European engineering firms. We've also deployed the public participation plan for the CELSA interconnection in Spain. In short, we continue to take all necessary steps to ensure that H2Med can connect the immense renewable energy potential of the Iberian Peninsula with Europe's major industrial centers. To this end, Spain will have fully operational domestic infrastructure, the Spanish hydrogen backbone, which continues to grow on schedule. We have already completed the conceptual engineering and awarded the basic and detailed engineering contracts for the network and for the three compression stations. We are working with six Spanish engineering firms to develop the backbone network. We have launched the public participation plan, the largest such process ever undertaken in Spain, It has already been set in motion across nine autonomous communities and over 300 municipalities, with institutional backing at the highest level from regional presidents and the government of Spain, underscoring that it is a truly strategic nationwide project, and with strong support from industry and civil society. In 2026, we will complete this public consultation participation plan. We will finalize the extended basic engineering for the compression stations and develop the detailed engineering for all the pipeline sections. And moreover, Enagas has proposed the inclusion of a further four additional sections in the network. These were submitted last October to the 10-year network development plan. or TYNDP, with a view to their inclusion in the third PCI list. And as for H2Med, in 2026 we will launch the feed phase for Barmar, complete the environmental studies and the conceptual engineering for the Barcelona compression station, and complete the detailed engineering and the environmental impact assessment for SELSA. This progress in the infrastructure will be accompanied by further progress on the political investment, regulatory and technical fronts. Just to mention a few, this week we have the deadline for the third European hydrogen bank auction with 1.3 billion euros in funding. to which we will add, apart from the €415 million I've already mentioned provided by Spain, another €1.3 billion provided by Germany. And the results will be announced between May and June. In the second quarter of 2026, the European Commission will publish the final second PCI list, And it will also be the year in which the third renewable energy directive, REDD3, will be transposed, as well as the hydrogen and decarbonized gases package, into the legislation of the member states, a crucial step for the European Hydrogen Network. All of this goes to show that 2026... will be a crucial turning point for the takeoff of hydrogen. Before going into the detailed results of our earnings, let me speak to what's going on with our arbitration cases in Peru. As you know, on May 23rd, C80 once again found in our favor in the arbitration on the gas pipeline in southern Peru, or GSP, and in fact increased the amount of the award to US$303 million. In this way, they updated the fair value of the claim, generating an immediate net capital gain in our books at that time of 41.2 million euros. Subsequently, on June 2nd, the CAD, as predicted, lodged a request for annulment of the award filed by the Republic of Peru, which meant enforcement was automatically suspended on a provisional basis. The Ad Hoc Committee and the schedule for the court's annulment proceedings have already been defined, and the hearings have been set for the end of June 2026. So this year we also expect C80 to notify us of its ruling on the TGP award. Let me now go over the most relevant figures of our 2025 financial performance. Our core after-tax profit was €266.3 million, and our EBITDA, €675.7 million. both above our budget targets. If we consider one-offs, 2025's net profit was €339.1 million. There are four factors underlying this excellent 2025 performance. First, the effectiveness of NRS's efficiency plan, which has brought down core operating expenses by 0.6% versus 2024 levels. Second, improved financial revenues, with financial expenses down 20.5%. We ended the year with our net debt at 2.47 billion euros, well within our annual budget forecast. Over 80% of this debt is at fixed rate. As for the financial cost of our gross debt, it is 2.1%, lower than 2%. 2.24 was 2.6%. Rating agencies, Standard & Poor's and Fitch, have rated panagasis. triple B plus with a stable outlook. Our FFO to net debt ratio is 25.7% and we maintain an extraordinary solid liquidity position of over 2.51 billion euros. Thirdly, our subsidiaries have contributed 155.3 million euros to our EBITDA, which shows excellent performance in the year. The trans-Adriatic pipeline continues to be vital for supply security, and since it went into commercial operation, it has transported over 52 BCMs of natural gas to Europe. The company has completed... expansion in Greece, adding an additional 1.2 BCM in capacity since January 2026. DESFA was awarded a tender for €174.4 million in grants for its projects of common interest, or PCIs, and last year we set up Scale Green Energy to develop infrastructures that will contribute to the decarbonisation of shipping and overland transport, and to the rollout of logistic chains around CO2 and ammonia. Scale Green Energy has signed a grant agreement with CINEA, the European Climate Infrastructure and Environment Executive Agency, to develop six hydrogen refueling stations within the EcoHiNet project. In addition, in the LNG bunkering business, construction on the Alicia's carrier has been completed, and a final investment decision has been made to develop the Mistral tanker, which will start operating in 2028. And fourthly, our asset rotation. Operations have had a very positive impact on our earnings. The sale of our stake in the Soto La Marina compression station in Mexico for 15.2 million euros has brought in net capital gains of 5.1 million euros. The acquisition of 51% of Accent's share capital for 37.8 million euros, bringing our stake to 100%, has triggered a positive impact on after-tax profit of approximately 17 million euros, due to a re-evaluation of our previously held stake on our books, and the sale of Circom Gas has brought in a net capital gain of 9.6 million euros. In 2025, we have continued to meet our ESG commitments, environment, social and corporate governance. Thanks to this, as you can see in the presentation, We continue to hold leadership positions in the key sustainability indexes worldwide. Just to mention two recent examples, in the latest assessment by the Dow Jones Best in Class Index, we were given a score of 91 out of 100, that's four points higher than the previous year. And the company has also been recognized as the best company in the world in our sector in gender equality by Equileap. We also took significant steps forward in 2025 to become a net zero company by 2040. And this year we will continue to move towards achieving this goal. On the basis of these figures, today we are announcing our targets for 2026. A core after-tax profit of approximately €235 million and to close the year with net debt at a similar level to that of 2025 of around €2.4 billion and an EBITDA of €620 million. we will keep our FFO over net debt ratio above 15%, and therefore in line with our BBB plus rating. We expect to carry out net investments of 225 million euros. And we reiterate our commitment to continue to remunerate our shareholders with a €1 per share dividend. Now we'll finish with a few conclusions. This has been a year of consolidation for Enagas, in which we have enhanced our risk profile, both for our financial and business positions, maintaining a robust balance sheet compatible with paying out a sustainable dividend. We are posting annual results above our targets, where we've achieved a high degree of execution with regards to our 2025-2030 strategic update. And our investee companies have had an outstanding performance. The gas system and gas infrastructures have demonstrated more than ever that they play a decisive role in guaranteeing Spain and Europe's energy security under critical circumstances and consistently throughout the year. In line with what the CNMC has already published and the government's energy policy guidance, we expect a regulatory framework for 2027-2032 that will establish a reasonable return comparable to that of our European peers, which will support the long-term sustainability of gas infrastructures. Europe and Spain are intensifying their commitment to green hydrogen, with the designation of hydrogen corridors as energy highways, and the announcement of the creation of a regulated national hydrogen system. Whatever harbingers of a hypothetical slowdown in hydrogen may say, in the transformation of this scale, It is to be expected that as projects mature, timelines become clearer and need to be adjusted. But what is beyond a doubt is that we are currently witnessing a growth phase in investments and the consolidation of infrastructure deployment, which will continue. form the European Hydrogen Network. Hydrogen is essential for Europe's competitive decarbonisation and Europe's strategic autonomy, and it's already growing strongly in other parts of the world. The European Union is deploying new mechanisms to avoid falling behind and to reinforce this investment cycle. From Energas, we've already begun developing our own infrastructure, achieving significant technical, business and commercial progress. Hydrogen is a strategic project as recognized by European and national institutions, regional administrations, and major industrial players. Enagas will continue to do its utmost so that this project, crucial for Spain and for Europe, will become a reality as soon as possible. Thank you very much. And now we are, of course, at your disposal to answer your questions.

We're opening the Q&A session. Please go ahead. Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to participate, please press star 1 in your keyboard. Thank you.

first question from Ignacio from Chevy Capital Ignacio please go ahead yes hello good morning and thank you for taking my questions I have several questions about the regulation review and part of your earnings call as part of the regulation review I would like to understand Which elements and regeneration risk not growing for the 2732 period? That's my first question. The second one. deals with provisions. I have seen a shift of approximately 70 million. I would like to understand where that shift comes from. And third, about hydrogen. My question is, do you expect any additional delays in the backbone network FID? And would this allow for a broader or more interesting dividend payout policy?