Iberdrola Sa S/Adr

Buenos dias, señoras y señores. Buenos dias. Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2023 first quarter results presentation. As usual, we will follow the traditional format given in our presentations. We are going to begin with an overview of the results and the main developments during the period given by the top executive team that usually is with us. Mr. Ignacio Galán, Executive Chairman, Mr. Armando Martinez, CEO, and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web, so please ask your question only through our webpage www.iberdrola.com. Finally, And in order to be helpful for you, we expect that today's event will not last more than 60 minutes. Hoping that this presentation will be useful and informative for all of you, now, without further ado, I would like to give the floor to Mr. Ignacio Galán. Thank you very much again. Please, Mr. Galán.

Good morning, everyone, and thank you very much for joining today's conference call. On the first quarter of 2023, net profit reached 1,485 million euros, thanks to a strong operation performance. A big increase by 30% to 4,064 million euros, driven by the recovery of the retail deficit accumulated the previous years in the UK, A better operating performance in Europe, mainly due to the normalization of production after low hydro and wind factors registered last year, which oblige us to purchase energy in the wholesale market at very high prices. And growth related to new investment in networks and renewables, which in the last three months reached 10,400 million. Of that amount, 4,800 million were invested in networks, increasing and diversifying our asset base even more. and 4,600 in renewables. Fully in line with our strategic guidelines, we have combined this growth with an additional improvement in our financial strength. Our ratio FFO and adjusted net debt increased by 130 basic points to 25.3%. Driven by our strong cash flow generation, we exceed 3 billion euros in just three months. As you know, a few weeks ago, we reached an agreement to sell 60% of our business in Mexico, mostly gas generation assets that have CFP as sole customers, for 6 billion dollars. This will allow us to focus on renewables in our thousands of industrial and commercial customers in the country. In addition, we have continued to close new partnerships with world-leading investment funds. Yesterday, We announced a new deal with GIC, the serving fund of Singapore, to co-invest in transmission in Brazil in a similar transaction to one we announced with Norges Bank some months ago for renewables in Europe. Thanks to all this agreement in just three months, we have already reached our asset rotation target for 2025. Joining forces with Tier 1 partners, they will reinforce even more our investment capacity. Now that we need to accelerate decarbonization and self-sufficiency through investment in electrification is more evident than ever. The latest policies announced in Europe, United States, UK and Australia are fully aligned with these goals. All in all, these results show very significant process in our 2023-2025 plan after just three months of implementation in terms of profit, cash flow generation, asset rotation partnership and financial strength. Moving to operating results, EBITDA reached €4 billion up to 30%. The net worth business has benefited from higher asset bases in all geographies and higher revenues to the new tariff in the US and Brazil in accordance with the current regulatory frameworks, which also include clothes that protect our results from higher inflation. Earnings progression in customers reached an operating result of 2.5 billion euros, increasing its contribution to more than 60% to total EBITDA slightly above normal due to some non-recurring impact both in 2022 and 2023. In the UK, Scottish Power recovered the deficit accumulated along the last quarters in its retail business, and market conditions improved slightly thanks to increases in the tariff cap. Renewable production has increased due to higher resources and the contribution of new projects that began operation around 2022, mainly in the United States and the EU. A nuclear output has normalized in Spain after the unplanned outage of our cofrentes plant during the first quarter of last year. Both effects have resulted in much lower energy purchases to third parties this year compared to 2022 when prices were exceptionally high, as you know. Biographies, 80% of EBITDA comes from a rated countries with 42% correspond to EU and 36% to UK and United States combined. As mentioned, investment reached 10,400 million euros in the last 12 months with more than 90% allocated to networks and renewables. Network investment reached 4.8 billion, up to 22%. As a result, our asset base reached 39 billion euros as of March 2023, with an increase of 11% from previous year. Renewables account for 45% of the total investment, or more than 4.6 billion euros. As of today, we have already in operation our construction, 60% of our total capacity additions planned for 2025. We expect investment to accelerate in the coming quarters, reaching a total of 3 billion euros by the year end. This acceleration will be driven by our offshore wind project under construction in France, US, Germany, and UK, which will add 3,500 megawatts with a total investment of about 11 billion euros. All projects are progressing on schedule and on budget, with the first export of Saint-Bruyc in France and Billiard Wind US expected this quarter and the last quarter of the year, respectively. These two projects will double our current offshore wind capacity, reaching 2,600 megawatts. On top of this, we stepped back to EGIGEN in Germany to be operational in 2024, and Sangria III in the UK, and Bindaken in Germany starting production in 2026. We have already secured the supply chain in all these projects and the route to market for the period of 15 to 20 years through feed-in tariffs in Baltic Sandbrick or contracts for difference in East Anglia III and PPAs in our US and German projects. Let me highlight that in a few months we have sold 100% of the output of Indakker in Baltic Eagle, in Germany, through PPAs to commercial and industrial customers, showing that markets are moving in the same direction as the European Commission is in its proposal for the electricity market reform. As a result today, we can affirm that our offshore wind expansion plan is already secured to 2020 final front. We have secured supply chains for the construction period. We have also secured the resources required to build them on time and budget and to operate them efficiently. And we have secured revenues for at least 50 years at attractive prices, providing our access to all routes of market. As a result, we expect an average spread on WAC between 150 and 200 basic points in all those projects. Funds from operations have continued to show a strong evolution, exceeding 3 billion euros in the first quarter, driving a forging improvement in our financial ratios, with FFO auto-adjusted net debt increasing by 130 basis points to 25.3%. As Pepe will explain later on, net debt has remained flat over the quarter at 43.7 billion, with an average maturity close to six years. And around 75% of the debt is at fixed prices, or 87% if we exclude Brazil, securing a significant stability in our financial expenses in the current macroeconomic scenario. In addition, our liquidity position of $21 billion covers 22 months of financial needs. As we announced three weeks ago, we reached an agreement with Mexican infrastructure partners for the sale of 60% of our business in Mexico, a transaction fully supported by Mexican authorities and in compliance with the country's energy policy. The deal involved the sale of 13 plants that helped CFP as customer, almost 100% gas combined cycles. for a total price of $6 billion to be collected at the closing expected in four quarters of this year. The transaction will allow Iberdrola Mexico to remain fully committed to the country. Maintaining a business platform that generates in a bid around $400 million per annum, including 15 operational plans, nine of them renewables, and our commercial capabilities with thousands of Mexican industrial and commercial customers, and they can be sure that our commitment will then continue in the future. Even accelerating our growth thanks to our pipeline of more than 6,000 megawatts of renewable projects. So let me thanks again to all parties involved in this deal for their openness and attitude base of mutual dialogue. On top of this, just yesterday, Energy announced another very relevant co-investment partnership with GIC, the serving fund of Singapore, for co-investing in transmission in Brazil. The deal, based on a 50-50 co-ownership, will include our all eight operating assets, and the asset currency and the construction are their rich commercial operations. It also covered the option for GIC to co-invest in any new project, giving our Brazilian subsidiary even more access to new opportunities in the booming transmission sector in Brazil, which, as you know, will hold new tenders worth 51 billion Reais only in 2023, improving at the same time the energy financial position as well. And globally, this transaction adds an additional world leading fund to the group of partners that have decided to co-invest with us over the last months, including, of course, Norges Bank, Maffrey in Spain, or BP for charging infrastructure and green hydrogen, or joining another one like Shell. In addition, Two deals mentioned implied reaching in just three months, the 7.5 billion euros financial target, including our also rotation and partnership plan for 2023, 2025 plan. Providing Iberdrola even more access to new investment opportunities under profitable terms. This also shows our ability to reach agreement with tier one global companies who want to co-invest with Iberdrola. Over the last three months, we have continued to sign new PPAs with leading corporates providing them competitive electricity and helping them to meet their climate goals. Like Mercedes-Benz with a PPA linking to our offshore wind project in the Baltic Sea, Meta for Solar Energy in the United States, or Amazon Web Services has signed with us a PPA linking to our offshore facilities in the Baltic Sea as part of a global agreement that will be extended to other geographies. The ability to sign multi-country deals with global corporate customers is one of our key competitive advantages with the PPA market, which is booming, driven by the strategic decision of leading companies to secure competitive and stable prices and access to the most efficient decarbonization solutions. We already have multi-country agreements with companies from different industries like ABE, BIMBET, Telefonica, Holcim, Amazon, Web Services, Vodafone, or Heineken, apart from relevant agreements focused in a single country. We're talking about PPAs in more than 10 countries with an average duration of 10 years. which together with our feed-in tariffs and contract for differences linking mainly to offshore wind with an average tenure of 15 years and our access to retail SME market basically in UK and Spain with an average contract duration of three years have allowed us to hedge 95% of our current production for multi-annual period providing us visibility and stability at our traffic prices. I'm sure that the share of PPS in our portfolio route of market will continue to increase in the coming years, driven by regulatory incentives provided in all geographies from the U.S. to Europe. In the last days, our listed subsidiaries, Avangreta and Ionegia, had presented their first quarter result, showing a robust performance in both cases. In the U.S., a bank created a bid that reached $633 million US GAAP, with net profit $245 million. The company continues to accelerate growth in networks and renewables, with $2.7 billion invested over the last three months. And in progressing the new rate cases for its New York, Maine, and Connecticut subsidiaries, we will feel confident we'll be close in the coming months in terms in line with our assumptions. In addition, Avangrid and PNM Resources announced the extension of the merger agreement until July, allowing sufficient time for the New Mexico Regulatory Commission to assess the deal. And just last week, Avangrid received a positive unanimous decision from the main court to go ahead with the NCEC project of termination. In renewables, Avangrid continues to progress in its installed capacity expansion plan with 1,700 megawatts under construction. Half of short wind with wind construction progressing according to as mentioned. And half in all short wind. In Brazil, the energy EBITDA increased by 14% to 3,620 million reais. The net profit reached 1,215 million. driven by new investment of close of 10 billion reais in the last four months. Just last week, new multi-annual tariff reviews were approved for Bahia and Rio Grande do Norte, covering almost 60% of our Brazilian asset base in terms better than planned. And we have commission for new transmission assets. In renewable, we have reached 4,600 megawatts of installed capacity, including the Paraíba complex, which I had the opportunity to integrate with President Lula da Silva one month ago. Now, moving to the coronary context, after two years of crisis caused by gas prices, we see signs of a gradual normalization driven by a soft winter and the efficiency measures introduced in Europe. we have helped to reduce impact on industry and residential customers. As a result of these higher energy prices, we see record high storage levels and more normalized prices. However, the crisis is showing with all clarity that Europe's dependence on imported fossil fuels needs to be reduced quickly. For that reason, new energy policies in Europe, in all our key markets, are aiming to boost electrification through the acceleration of renewables and net-goals investment. In the EU, the European Commission has published its proposal for the Electricity Market Design Reform and Energy Zero Industry Act, based on explicit recognition of the proper functioning of the current electricity market over the last decades. The Commission proposed an evolution based on more single market and incentive to PPAs. This position goes back by 85% of the European stakeholders in the consultation made. The document does not allow any retroactive measures with voluntary CFD auctions only for new renewables investment. As regards any potential new stress situation, the text is again seeking for more unity. In this case, an emergency statement issued by the European Commission will be required based on a fixed criteria before any new measures is decided by Member States. In addition, the proposal includes new support mechanisms to storage and grid to incentivize flexibility services, recognizing the key role of these technologies for the sustainability of renewable-based electricity systems. As you know, following the standard process for the approval of legislation, the reform will require proposal both from the Council and the Parliament, followed by negotiation among these three institutions on the so-called trade logs, publication of the final legislation, and finally, implementation by each member state. This process, which usually takes around two to three years, is trying to be accelerated on this occasion. Iberdrola stands ready to continue collaborating with all the institution stakeholders to reach a balanced solution that maximizes energy security, strategic autonomy, decarbonization, competitiveness and affordability for all Europeans. The Commission also unveiled recently its proposal for Net Zero Industry Act, with the goals of building stronger supply chains in the EU, setting specific targets of European production and new measures to provide more regulatory flexibility and easier access to EU funds. The Act signals eight key net-zero technologies, including onshore and offshore wind, solar PV, storage, heat pumps, and smart grids. and sets targets for local production in each of them, from 40% of solar PV components to 85% for wind turbines of heat pumps. This regulation also calls for an improvement of the current approval procedures for electricity projects, including faster permitting and easier access to financing. Once approved, this new regulation will join the recent agreed renewable energy directive with increased renewable targets from the previous 32% to 42.5% share of the total energy consumption by 2030, which would mean more than 1,000 terawatt hours of additional renewable electricity. On the other side of the Atlantic, new relevant regulations have also been introduced, like the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. The Inflation Reduction Act of the IRA has the clear goal of promoting electrification through more renewable networks. To that end, it increases the feasibility to tax credit for wind and solar PV, securing financial leverage for 10 years. and introduced clear and simple incentives to green hydrogen, promoting also local supply chains through PTCs and ITCs. The Infrastructure Investment Act, JOBS, and ACT introduced additional measures with similar goals, focusing on great infrastructure improvement to increase resilience and digitalization, specific support for EV charges, and easier financial and permitting for transmission projects. In the UK, the recent Powering Up Britain package reaffirms the target of full decarbonisation for the power sector by 2035, with an acceleration plan for renewables and networks investment, and increase decarbonisation ambition for transport, industry and heat, including new targets like the replacement of all natural gas boilers by 2035, By the way, very recently, Germany went further and advanced this target to 2025. In Australia, following the new legislation introduced by Prime Minister Van Ness, the country's emission reduction target is now set at 43% by 2030. This will require installing around 60 gigawatts of renewable capacity and huge increase in transmission and distribution networks. Before passing the floor to Pepe, let me now share some highlights of our progress in ESG issues following our commitment to social dividend. The transaction announced in Mexico means an additional step forward in our decarbonization effort, reinforcing our target to reach net zero scope one and two by 2030, and in all three scope by 2040. In terms of circular economy, we have announced new batteries and blades recycling plant. and the cross-sectional two phototype models manufacturing facilities, showing our focus on industrialization and local supply chains. We have also presented several innovation projects related to the funds, mostly focused on green hydrogen and green products. We hope the approval process will allow us to start investing as soon as possible and contribute to Europe's leadership ambition in this technologies who will be key to decarbonize our economy, increase our self-sufficiency, and create new jobs. In terms of governance, as you know, we will hold our general shareholders meeting in just two days. Glass-Lewis and ISS, two of the most relevant project advisors, have recommended a positive vote for all items in our agenda. We also continue to receive different awards in this case from the World Jurists Association in New York for making climate change one of the pillars of our governance sustainability system and for our defense of the rule of law. I will now hand over to the CFO who will present the group financially starting for the detail. Thank you.

Thank you very much Chairman. Good morning to To everybody, as the chairman has explained, a bid that was up 38% to 4.1 billion euros and net profit grew 40% to 1,485 million euros. FX evolution has had a positive effect on results. The dollar rose against the euro by an average of 5.4%, the real by 8.7%, more than compensating the pound depreciation of 5.4%. This will change in the following quarters, but we have already hedged our FX risk for the year. Let me highlight that the strong growth in Q1 is driven by higher production and higher sales, much lower energy purchases, and much lower prices than in the first quarter of 22. We had in this quarter a one-off effect, which is that the UK retail deficit was fully or almost fully recovered in this quarter versus our expectation to recover it during the year. And we had also a positive effect on gas management versus last year's first quarter. These results, as the chairman has said, will moderate through the year as next quarters will not be as strong, together with some additional one-off results in 2022 that will lower the difference. Let me point out that the big driver of the growth in profits this year is basically going to be our UK business. Revenues increased 27.2% to 15.5 billion euros and procurements 10 percentage points lower, 17% reaching 8.8 billion euros with less energy purchases at lower prices as I have just explained. In addition, gross margin is higher due to the increasing recognition on our IFRS accounts of higher than previous years reconciliation impacts in the U.S. As a consequence, gross margin rose by 43% to 6.7 billion euros, and 40% excluding FX and the above-mentioned reconciliation impacts, which have also an important effect in our net operating expenses. That increased 27% to 1.5 billion euros, but excluding the negative FX impact, 88 million US dollars for a pension one-off in the U.S. and 110 million euros linked to the above-mentioned reconciliation effects that are also recognized at gross margin level, net operating expenses increased 70%. So excluding these impacts, net personal expenses that on a reported basis increased 30%, grew 8.1%. Reported external services, that increased 22%, grew 7.4%, excluding the FX, 101 million euros of reconciliation impacts in the US, as I explained before. Reported operating income, other operating income, grew 15%. Analyzing the results of the different businesses and starting by networks, its EBITDA grew 4.5% to 1,659 million euros. In Spain, EBITDA increased 6.1% to 434 million euros due to the regularization on revenues linked to investments made in previous years. In Brazil EBITDA grew 18.7% to 3.3 billion reais driven by positive impacts in distribution from tariff adjustments and higher contribution from transmission assets. As the chairman has explained, tariff reviews for the next four years have been better than expected and those will continue to incentivize investments in Brazil. In the US, IFRS EBITDA was 14% down to $408 million due to a negative impact corresponding to the reversal of $99 million from pension provisions accounted only in IFRS in Q122, partially compensated by the recognition of bad debt costs associated to customer protection measures during the COVID called arrearages. US GAAP EBITDA increased 7.9% to $535 million. Finally, in the UK, EBITDA decreased 10.1% to £225 million with lower contribution from transmission assets affected by temporary remuneration effects to be recovered from Q2 onwards. Energy production and customer business EBITDA increased 77% to 2.4 billion euros. This growth, as mentioned, is influenced by several factors and will moderate through the year as next quarters will not be as strong. In Spain, EBITDA was 1,190 million euros with higher production thanks to higher output, especially in hydro and nuclear, with 3.1 additional terawatt-hours produced that have driven higher sales and low energy purchases at lower prices. In addition, there is a positive effect in gas management versus Q122 that will not repeat. during the next quarters. In the UK EBITDA increased 144% to 580 million pounds thanks to the collection of 275 million pounds past tariff deficit in Q1, which had a negative impact in 22, together with margin recovery partially compensated by lower onshore wind output. The exceptionally strong results of this quarter will come down through the year as we have collected in Q1 most of our 2022 deficit. In the US EBITDA increased 13% to $167 million thanks to 4.7% higher output due to new installed capacity and better prices. In Mexico EBITDA grew 3.7% to $223 million thanks to a new capacity in operation since May 2022. partially compensated by a lower wind load factor. In Brazil, EBITDA fell 2% to 412 million reais as contribution from renewable installed capacity is offset by lower contribution from thermal business. Finally, in the rest of the world, EBITDA grew 1.5% to 131 million euros with higher capacity in operation compensated by higher costs associated with international expansion. EBIT was 57% up to 2.7 billion euros. DNA plus provisions grew 10% to 1.3 billion euros, mainly due to the higher asset base and activity, and bad debt evolution due to the increased customer billing. Net financial expenses grew 111 million to 510 million euros. Debt-related costs grew 164 million. 74 million increase is due to higher average net debt, mainly due to growth in CAPEX, 68 million due to the higher cost of debt, 96 basis points to 5.08%, and 78 basis points, including Brazil, to 3.63%, despite interest rate increases of over 220 basis points. Brazil's cost increase is compensated at EBITDA level by revenues indexed to inflation. This has been partially offset by 53 million positive non-debt-related results, mainly linked to the FX hedges. Our reported credit metrics remain solid as for the last four quarters, average FFO increased 14% versus an 8% average adjusted net debt growth. As a consequence, FFO adjusted net debt rose to 25.3%, retained cash flow adjusted net debt remained stable at 21.2%, and our adjusted net debt to EBITDA improved to 3.1 times. Our adjusted leverage ratio was 42.2%. Adjusted net debt remained below 44 billion euros, similar to the levels of the end of 22 driven by our sustained cash flow generation. Given recent transactions in Mexico and Brazil, debt will improve versus guidance when we close these deals. Net profit grew 40% to $1,485 million, with lower equity method coming from Avangrid due to the offshore CIP reorganization in 2022 that increases tax rate but reduces minority interest this quarter. Taxes in 2023 are affected by the non-deductibility of the 1.2% tax in Spain. Now, the Chairman will conclude the presentation. Thank you.

Thank you, Pepe. As you have seen, this set of results shows a strong operational performance in the first three months of 2023. We expect this trend will continue over the rest of the year, driven by an acceleration of organic investment in the coming three quarters to reach 12 billion euros in the full years due to new permits, progression of our foreshore wind project with first export, as I mentioned, for St. Brick in France planned in just a few weeks, a full commission in December, and vineyard wind in the U.S. having also its first export before the year end. In addition, the new rate cases in the U.S. and Brazil, the U.S. already, I think, is starting for May, and Brazil has just been approved, will also drive increasing investment. On top of that, business conditions continue improving. We have reserved now at average levels and renewable to normalize. Additional revenues from new tariffs in our network business in the U.S. and U.K. and Brazil, the recovery of the retail deficit in U.K., and the ongoing improvement of operating efficiency. We've also increased even more our financial strength, a key pillar of our strategy. We've already implemented 100% of our asset rotation plans targets with proceed cash before the year end. Our operating gas flow continues growing, allowing us to maintain our debt flagged and reinforce our ratios. 75% of the total deficit rate, up 87% including Brazil, in minimizing our exposure to any volatility. Our liquidity needs are covered for 22 months, and our business profile continues to offer protection against inflation and interest rate. Finally, following our wholesale policy, we have closed hedge to secure the value of our net profit in euros. We also expect a normalization of the quarterly distribution of net profit after the unusually low evolution in the first quarter of 2022, driving to increase our net profit outlook to meet to high single-digit growth, excluding additional extraordinary items. showing that we are already progressing in our plan 2023 to 2025, ahead of schedule, on result, on national rotation, on investment, with around 60% of our plan capacity addition are already in operation and construction, and our net gross investment fully backed by rate cases approved under advanced negotiation. and our strategic investment partnership with the world-leading funds like Norges Bank, GIC, in addition to our 11-year strategic alliance with Qatar Investment Authority and with key industrial partners. All these make us optimistic about reaching the financial, industrial, and social target included in our plan. Thank you very much, and now we will be more than happy to answer your question. Thank you.

The following financial analysis professionals have asked the question that I will now submit to the managers which are driving this event. The first one is Gonzalo Sánchez-Bordona, UBS, Manuel Polomo, Exxon BNP, Javier Garrido, JP Morgan, Rob Poulain, Morgan Stanley, James Brandt, Deutsche Bank, Mark Fresney, Credit Suisse, Ahmed Farman, Jefferies, Jose Ruiz, Barclays, Fernando Garcia, Royal Bank of Canada, Fernando Lafuente, Alantra, Jorge Alonso, Societe General, Javier Suarez, Mediobanca, Philippe Orpatien, Odo, Jorge Guimaraes, JV Capital. And finally, Andrew Mulder from Credit Sites. We have a set of first question related to the guidance given. The first one is, have you increased full year 23 guidance from mid-single digit growth on Euro 4.3 billion net profit for full year 22 to mid to high single digit? What are the drivers of this profit increase?

So, on some issues, yes. I think the drivers are simple.

I think we are planning 3,000 new megawatts of additional capacity, which 500 of those will be offshore. A higher high-growing wind output due to the higher reserves and normalized wind factor. In Edwards, the rate case is in Brazil, I just mentioned, has been approved, Pepe mentioned already. In the U.S., which we expect, we will start already New York, especially from May. The recovery, to continue recovery, even in a smaller scale, the previous year deficit accumulated in U.K., in the UK after new regulatory measures, as well as adjustment of the price cap from April. And I think it's the optimization as well of the financial profile, thanks to the decision of the capital instruments. So, but I think I would like to insist, yes, we are already increasing our outlook from mid to mid to high single digit for duration I have already explained.

second one is does the guidance includes any potential capital gains from mexico and brazil transaction can you please clarify if the guidance for 2023 for mid to high single digit net income growth includes the impact of the spanish special energy tax so our the guidance does not as i mentioned before does not consider any additional extraordinary result

And I think that is our case. It's not already considering any result for transaction already closed. When we make our estimate, we always are considering, we are not considering capital gains for a rotation transaction. Of course, in terms of the taxation, it's included. It's already included in the first quarter. This 1.2% is already in our accounts of the first quarter of the year, as Pepe has already mentioned, has partially already compensated by another positive thing we had already did. Mainly the fact that we've been not forced to buy a huge amount of electricity because of the problem we faced last year with electricity. Cofrentes and because of the low hydro and wind resource we had already during the first quarter last year. Then this year, fortunately, last year, very high prices. This year, fortunately, all these things have been normalized. Cofrentes is working as a normal and the hydro is already in average reserve. We have already a reasonable situation during the first months of the year in our total reserve of our dams are already at the normalized, fully normalized.

next question is related to the weather condition in spain could you could you please update the situation of the hydro reserves in those areas where you are exposed to and how it compares with historical average if possible armando can you hello every good morning to everybody as the chairman has just said our reserves now it's normalized based on the rain that we have on december and january that was mainly on the northwest

of the country, and also for our pumping storage capability. So I think in the Duero and Tahoe River, we are increased a lot compared with last year. And also in Minho, I think our reserve now is around 60%. It's not the same case in the Ebro River that is decreased because now the situation is much better in the northwest.

Next question is, considering the asset rotation done, new guidance for net debt by year end? And also on the dividend per share?

Yes, including the PNM deal. So our guidance will go below the 50 billion euros. Remember that more or less our budget was that we were going to be around 54 billion, including... including PNM deal, and now we are expecting below 50 billion. And on the dividend per share, I don't know if you want Chairman to... to comment on the dividend per share. They are asking also the dividend per share.

How much will it increase?

Yes.

I think, as always, in line with the increase of the net profit as well. So I think we will continue our policy always on the payout, on 65% to 75% payout, and that makes the increase in dividend will be in line with the increase of net profit. So that is the idea.

Next question is a kind of crystal ball question. When do you think the clawback in Spain and windfall taxes in Europe will be removed?

Well, I think we are seeing that the gas market is becoming normalized, and our guidance considers that it will be extended for the whole year. Although we are seeing that this normalization of gas prices we have not seen any reason to stand beyond the summit. So I think the fact we have seen, then the Spanish exception is not being applied at all in this moment because the prices are lower than those has been already intervened. I think my point is that we need already, we need huge investment required. If we would like to become more self-sufficient, in energy, if we would like to avoid already situation like we passed last year. And for that, we need huge, huge, huge investment. And for making this huge investment require stable, predictable frameworks. I think it's the way of continuous intervention. I think last year was already, if I don't remember, but I think 12 different changes in legislation in Spain in electricity when the problem was gas. So, and I think we need already this stability, predictability, a good light, and this decarbonization efficiency will be done. I think my work, and I'm using the word with some of my colleagues, I'm using systematically. We need in Europe more carbon. carrots and less sticks. So I think we need already to provide more like Americans are doing, providing more carrots. I think we need already facilitating, facilitating, facilitating, incentivating, incentivating, incentivating, not penalizing, penalizing, penalizing. Because the investment will be not already flowing in the amount which is going to be required.

This question is related to the European regulation. When do you expect firm details from European Power Market Reform, NEET-CEDAW Act and NEET-CEDAW Green Deal industrial plan? What are market expectations for the European Union Renewables Directive and whether permitting can be accelerated?

Well, many things in Europe have been done. I think we are talking too much about the IRA, American IRA, which I think is great to recognize, but mainly the American IRA is really providing this stability and predictability. I think the ITCs and PTCs were already in the system since Obama's administration, so that is three years ago, 13 years ago, but I think now they are providing visibility 14 years. they're already facilitating the access to DITAS credit through much large number of potential providers. So, and they have already single simple system for accessing to this support. So either for the ITCs and PTCs related to the investment in renewables or for the green hydrogen or for already any industries related with the decarbonization. So in Europe we've been already, we had already these fans and we have already this thing many years ago. The next generation was precisely the fans where 40% of these fans were for allowing and permitting and accelerating the energy transition. So I think that's there. The point is that we are sometimes, we need to accelerate the implementation, for instance. I think in the green hydrogen there are very many projects. We have many projects in Spain for that one and other countries. Still we don't know what is going to be the support we are going to have for those projects. So I think we need to already accelerate it. Brazil already approved but still is pending of the Spanish approvals. So, in terms of the energy market reform, I think all improvements are fine, but I think something which is important has been said by the European Commission, as I mentioned. It's the first thing the market has already performed well. I think we have not had blackouts in Europe. I think it means the investment has been flowing in time. For such, the Europeans were enjoying a very good electricity system in the continent. so that's why I think they are saying what they are trying to improve so they are trying to promote long-term contracting so this promote these PPAs they are already trying to promote already even a secondary market if needed they are given already the voluntary CFDs in some situations we are having CFDs in this moment in some countries but CFD auctions so but voluntary ones So, and they are already trying to make the things in a manner that incentivize, incentivize, incentivize the flow of money, the flow of investment into the continent for diminishing our dependency, external dependency of fossil fuels and increasing our self-sufficiency.

Next question is related to the PNM deal. Can you give us the latest update on the situation for the approval of the PNM deal?

So, as I mentioned, we have already signed with PNM an agreement extension for three extra months, which we consider is time enough for being revised all the deal by the new regulatory commission. So we continue committing with the transaction. I think that fits with our great strategy and is very positive for New Mexico customers. So the fact, I think there are big social support to the transaction in New Mexico. So that demonstrate that the 24, 23 of the 24 parts, we has been parties, that's already been presented in the, in the, in the deal. So I think they are already supportive. So in all the permits related to the rest of federal authorities, et cetera, et cetera, all are out of time. So I think we are confident and we are fully committed. And I think we expect in these three months agreement extension will be enough for already obtaining all the permits to continue and to complete the transaction.

Question number 8. Does Iberdrola plan to bid in the UK offshore CFD auction round 5 this year? Sir, can you repeat please? Does Iberdrola plan to bid in the UK offshore CFD auction round 5 this year?

Well, I think we are selective. I think, as I mentioned before, I think auction is one of the routes to the market. I think we are countries and we are already having these CFDs, auctions. In Britain, we have already. It's Anglia III is in that one. In Germany, we are already through PPAs. In the States, we are through PPAs. It depends. So I think in that case, I think we are already, we will analyze and we will decide what should be the route of market we are going to take for this project. But our intention certainly is to go ahead with the project if the terms and the conditions are attractive enough.

The supply chains is the next question. Do you see any risk in the U.S. regarding the supply of PV panels from Asia? Initiative to revert the exception granted by President Biden of the fees for two years.

Well, I think that is a question that you have already passed to me previously. I think if I don't remember that, I think we had only one project that has been affected for the restriction in the state, the solar panel, which now is solved. So, I think the restriction that we had already removed. But I think that our plan is in this moment, as I mentioned, 1,700 megawatts under construction. offshore is accounted for 50% and the rest is already just fully covered by all the agreement with the supplier. So, as I remember, only we have already problem with what we now is fully remove the restriction we had already.

This question is related to the U.S. offshore wind activity. May we ask the latest on U.S. offshore wind? Is Commonwealth wind canceled? What's the latest of Park City negotiation? And does Iberdrola still see U.S. offshore wind as an attractive market for the capital allocation?

Well, I think the system in the United States, the options in the United States is based on a fixed price with no revision during long periods. So, I think that that has already been working for the few years. Once you can already fix your CAPEX with suppliers, we can already give it to you fixed terms for making already the complete construction of the project. Unfortunately, and I think those were the times in which not ourselves, everybody at another project, we were already bidding in this context. The fact, I think, in the terms of the agreement, the contract, as a clause, that you are allowed to leave this project if you are, in whatever circumstances, you feel that you are not already ready to bill on the terms you have already committed. So I think that's already is in the contract. It's already a penalty, if I remember that, on the range of $20 million, something else. But I think it's already that one. And what has already happened? Since the moment we went to the bid and we made the offer, so the thing, the world has already changed. So I think now the prices are not any longer the level they had already a few years ago, are much, much higher, the prices we've been offered by the vendors. Even if they are not ready to keep already these prices fixed for a period of four or five years, we take the construction of those assets. And I think we've been forced to say, sorry, we apply the closed number, whatever, which is in the contract, and we will not... proceed with the project in these terms. And that's it. So I think, and what that means, that means then they probably they're going to make a new auction. And I think we will revise the terms of the new auction. If the new auction in the terms are already attractive, we will go ahead with it. If not, we will look for another good to market. So it's the same thing. But it's not, our commitment in the state continues. I think the fact we are the only one which really we are already building and constructing an offshore wind farm, which is Pincher Wind, with the first export is going to be held during this quarter. So, and I think our commitment there is continued, but I think we are not ready when we have the certainty that the Thames in which we have already gained the bid are not any longer sustainable. We have to denounce that one and to move back to better condition and to apply the clause in which we have the right to leave the project if that is not already convenient. But this is everybody in the state has already done the same thing. So it's not our self, everybody, we are in the same position.

Next question is, could you update us about the US IRA short-term impact already secured? Question number of the IRA, US IRA, the impact.

Well, yeah, yeah. Well, I think, as I mentioned, I think it's good news. So, I think that gives already visibility for 10 years. So, in terms of the ITC and PTCs, we can already head. The second thing is we have access to much more potential providers or the funds for the ITC and PTCs. So, I think we can diminish the cost of financing on these terms. And the third one, I think there are certain, another kind of support related to the grid, they are going to make, providing certain extra funds for electrifying, increase the transmission, electrifying certain services. They are giving us some money for providing a power for charges, et cetera, et cetera. And finally, we have a good thing, which is the access of our repowering. We are unique. We have almost 10,000 megawatts of ready wind installed in the United States. They are allowed probably 30, 40 percent or 50 percent, I don't know how much, but a very huge amount of these are allowed to be repowered. This repowering has access as well to these ITCs, PTCs. And we have already, for those customers, we have as well the PPA sign, which I think we can extend the PPAs. And we can already stand for longer, even for better condition with more powerful wind farms that with much lower capex than those if we have been forced to make already a greenfield. So, which I think that is a great opportunity for us, all this real power, that probably a thing I imagine my colleague Pedro Azaga will explain to you in due time about all this thing in more detail.

Next question is regarding asset disposals. Once the target has been completed, could you consider selling additional assets? Is still the sale of renewable assets in the US on the table?

Well, I think we are always revising our asset base. And I think we make already a target. The target is completed. That doesn't mean that we are going to go to bed. We will continue alive and we will continue analyzing and seeing the opportunities. If there are any opportunities to rise, sure, then we will be ready to look at it. But now our plan for 2025 is important to say that it is completed. So, but I think always we are ready to look and to revise, but now there are not any new plans to make any other thing, unless those will be needed in some particular places.

Next question, can you explain the rationale for the deal with GAC to promote electricity transmission in Brazil? With this agreement, is your asset rotation plan finalized or more to come?

Well, I think for me the most important thing with JSC is that the largest sovereign funds of the world would like to be our partners and to co-invest with ourselves. I think for ourselves and for our team it's very good news. means we are a reliable company which people like to do things together. So I think that means our reputation in this large financial institution means it's very good. The second thing, I think that for me is important. to have as partners NCIS, NORGES, to have as partners GIC, Raspanik, IKEA, to have as partners Shell. So I think that that offer to us already, it's offered a very good sign that we are serious in our approach to doing things. In the case of Brazil, I mentioned the opportunities of transmission are huge. So I think only this year the plan is presented by the government is 50 billion riyals investment in transmission. So I think we are in this moment making a thousand kilometers of high-voltage transmission lines in something like 30-35 substations, which I think is a huge investment. So that offers the opportunity, the possibility to accelerate our presence and our expansion in Brazil without sacrificing the financial solidity of our subsidiary. So that will allow Neonergia to diminish, to deconsolidate a huge amount of their own debt and to have the opportunity of participating in another transmission which we are demonstrating that has already generated a lot of value. So I think when we warned three years ago these auctions, some people were criticizing that those have not already added value. So I think the fact that these large sovereign funds are already ready to buy and ready to participate with ourselves means that for them that is already a business that adds real value. And I think it's adding real value if we analyze already the transaction and the opportunities which are generated. we have already accumulated huge experience in that one which i think allow us not only to make this thing in Brazil or in the United States also we are looking opportunities in Australia because as we had already these opportunities in Britain in Britain you know we have already been awarded with another submarine transmission line to connect the it called easter link similar to the one we make the western link connecting scotland with whale the western and connecting scotland with england the easter link so i think that is one of our let's say, areas of special skill, special know-how that we are already developing, and that is already why certain largest sovereign funds of the world would like to share with us and to co-invest with ourselves in this project, because I insist, they are generating value, they consider generating value, we are convinced they are generating value.

This question has been already answered, but I would like just to point it out that it is interesting to repeat. Can you explain the 400-bit versus consensus of Q1? And the second part, can these results be considered as the quarterly underlying performance for the rest of the year? Yes.

Well, as we have mentioned, obviously this has to do with, especially I would say there is a £275 million improvement in the UK business and also In Spain we have had higher production, a normalized hydro situation, as Armando has explained. Also that we don't have the problems of the nuclear plant. So we have a better performance in our gas business. I think these numbers are, we cannot consider that this could be repeated, and I think that in the next quarters we will see that although we will have a relatively good performance, we will not be repeating these numbers.

We are now reaching the last question, number 17. And the rest, if there is another one question that we are going to receive, we will answer it from the investor relations department. Number 17 said, Iberdrola is promoting the largest green hydrogen hub in Huelva. Can you update us in our view on the role that hydrogen is likely to play in the European energy mix?

So I think this project, as you know, is already our plan. We have already built a solar power plant in the area, also which can be combined as well with another source of renewables we have as well in the area, wind. So we have already the mix of wind and solar in the area. We had already the land and all those things for making that one. We have already presented that one to the European funds. Has been approved, the IPCI funds in Europe. The project has been considered as a project to be already funded. And I think we are, it's a total capex involved on the range of 2.5 billion, something like that. The plan is not only to produce hydrogen, it's to produce ammonia. ammonia which can be used already locally, it can be exported. So that is a conglomerate on that one. And now we are expecting just the decision from the Spanish authorities. So I think Europe has already approved. We have already all the premises, the land, the connection, the power, everything is ready. And we are spending to know what is going to be the level of support of this project. So we have a similar project as well in Sines, in Portugal. which as well has been presented to the European funding projects, and I think is to make that one. So I think there are two similar ones as well in Siena, we have the land, we have all the project approved for making 1,200 megawatt already in the near area of solar. So, and also the similar one. I think in both cases are identical in the sense of producing electricity, renewable electricity, green and solar. plus to make hydrogen and this hydrogen to be transformed in ammonia. So ammonia to be used locally or to be exported. And we have already even shown a MOU sign with some takers of that one in the Netherlands. So I think the projects are very advanced.

Okay, now please let me give the floor to Mr. Galan again to conclude this event.

So thank you very much for taking part of this conference call. I would like to remind you that on Friday we will hold our AGM, which, as you know, can be attended through different digital channels. In any case, for today's presentation, our investor relations team will be available for any additional information you may require. Thank you very much, and I'll be delighted you attend already this AGM. Thank you very much.