Iberdrola Sa S/Adr

Buenos dias, señoras y señores. 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 fiscal year results presentation. As usual, we will follow the traditional format given in our events. 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 Martínez, 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. As well, and given that we will be holding our Capital Markets Day in London on March 21st, any question you may have related to the medium and long term, please save them for that day. In this way, we will be able to adequately answer today the question related to the legacy of the 2023 results and also the ones about the expectation for 2024 and not take up too much of your valuable time. We know that many of you also have the results of other utilities today. Thank you very much for this. Finally, we expect today's event to last no more than one hour or one hour and quarter. 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.

Thank you, Ignacio. Good morning, everyone, and thank you very much for joining the result presentation. In 2023, net profit increased by 11% to 4,103 million euros, driven by investment of 11,392 million, with an increase of 6%. This new record of investment reflects the huge activity carried out by the group in 2023. with 18,100 million euros of purchases to several thousands of suppliers, which already employ close to half a million people worldwide. Also, with 4,700 new hires to reach a workforce of almost 42,300 employees. and a tax contribution of 9.3 billion euros globally, up 24%, with 3.5 billion only in Spain after an increase of 35% year on year. EBITDA increased 9% to 14,417 million, even after 117 million euros recorded in last quarter for future efficiencies. Without that one, the increase will be higher. This growth in operating result was driven by a percent increase in net worth as a base to reach 42.2 billion euros and 3,250 megawatts of renewable capacity installed during the year, reaching 42,200 megawatts worldwide. In 2023, we complete the installation of turbines at Saint-Brick offshore wind farm in France with 100 megawatts, and we start the production of Vinyard Wind 1, the first large-scale offshore project in US. I think today something like 62 megawatts already in operation. On top of that, we continue reinforcing our portfolio route to market. We linked the PPM market in Europe in 2023 with close 1,000 megawatts of new megawatts, and we increased our retail market share in Iberia. In addition, in just 12 months, we have completed our three-year asset rotation and partnership plan. A few years ago, we received the final regulatory approval for the sale of 55% of our business in Mexico, and we expect to collect around $6 billion in February 26. Also, our co-investment alliance with Tier 1 partners like Norges Bank and Mazda EAC are allowing us to maximize investment opportunities and continue improving, at the same time, our financial strength. In 2023, our operating cash flow increased by 8% to 11.1 billion euros, and the FFO to adjustment debt ratio reached 25.8, including the Mexico transaction. So as you can see, in 2023, we have maintained one more year our long track record of execution, allowing us to reach or exceed our outlook once again. As mentioned, investment grew by 6% to set the new record of 11,382 million. Around half of total investment were allocated to networks after an 11% increase, and the other half to renewables. Our co-investment partner contributed with 1.1 billion euros to these investment figures. By geography, the United States was once again our first destination with more than 3 billion euros, followed by Spain and UK with 2.2 billion, 53% up versus 2022. We also invested 1.8 billion euros in Latin America, mainly in Brazil, and 2 billion in other countries like Germany, Italy, France, Portugal, Australia, Greece or Poland, among others. Driven by investment, the bidder increased 9% to 14,470 million after the 170 million euros for future deficiencies registered in about four quarters mentioned earlier. And the CFO is going to explain in more detail. Network results increased thanks to new rate cases, used mainly in New York, in UK, Rio, ED2, and in Brazil where they have tariff reviews in three of our five distribution companies. Results from production and customer reflect an improvement of market condition in the UK, where Scottish Power recorded the retail deficit accumulated over the last years, and the normalization of production in Spain after very low renewable and nuclear output in 2022, which has, as you remember, obliged us to purchase energy at very high prices to supply to our customers. Our network asset base reached 42,210 million euros, up 8%, driven by growth in the United States, UK, and Brazil. Avangrid contributed one-third of our total wrap, 13 billion euros, with a rate in cases secured for around 80% of our asset base included. Our New York utilities would represent 60% until April 2026, and central main power until June 2025. The New York Kingdom regulated taxes increased by 8% to 10.3 billion euros, mainly driven by Rio T2 and Rio T2. And we are already starting the approval process of Rio T3 with investment that could exceed 5 billion pounds between 26 and 31. On top of the 1.1 billion of the Easterlin Interconnection Project, which was already approved. In Brazil, our total asset base reached 9.5 billion euros, an 80% increase year-on-year, and we have continued progressing our co-investment alliance with GIC in transmission. Finally, regulatory standards were flat at 9.3 billion euros, affected by the existing regulatory cap of investment in the country. However, in the last weeks in Spain, we have seen a few positive signs. The government has said it may reconsider this limit and the regulator has started to review the rate of return, which today is, as you know, as low level compared to other countries for the next regulatory period. In renewables, we added 3,250 megawatts of capacity that will continue balancing our generation supply position. This asset implies total investment of around 5 billion euros in the last year, with 60% corresponding to offshore wind and hydroelectric. And the first group of turbines, 62 megawatt of vineyard wind, one, started production in the last days of 2023. On top of that, 700 megawatt correspond to onshore wind farms in Brazil, Spain, and other European countries. And 1,150 to solar PV in United States, Spain, Portugal, and Australia. And the rest is hydroelectric capacity in Brazil and Portugal, mostly pump storage. In Iberia, we increased our co-investment alliance with Norges Bank to more than 2 billion euros and finished the installation of Alto Tamega in Portugal with the third dam of the Tamega hydroelectric complex with the last 160 megawatts additional capacity to reach 1,200 altogether. On top of that, we have reached 45,000 charging points, 6,000 of them public, with further acceleration expected through our 1 billion euro partnership with BP, especially ultra-high rapid speed charges. In the United States, the Binger Wing 1 offshore wind farm has achieved first power to the grid. And in Europe, we are also progressing in our second offshore wind farm in Germany, but the GIGL with 476 megawatt, which will be fully operating in four quarters of this year. And we have installed as well 91 megawatt in Poland and Greece. And finally, in Australia, we are commissioned 245 megawatts of solar PV, and we are progressing on 145 for wind. Moving to routes to market, in 2023, we continue reinforcing our integrated profile, providing us with high visibility for the coming years. We lead the European PPA market with almost 1,000 new megawatts signed, 7% of the total in the European Union. Reaching alliance with top-tier customers like Amazon, Vodafone and Meta, we are significantly standing the demand of clean energy. And we continue reinforcing our position in retail market. In Spain, our market increased to 27.3%. Today, we have 8.3 million customers in every area, with an average around three contracts per customer. Also in the UK, where the retail market is still strong conditioned by the tariff cap, we have continued improving our customer service, reaching the first position among all suppliers according to citizen advice. This places us in the best situation to compete as soon as the market reactivates. As of today, we have around 3 million customers in the UK with 2.5 contracts per customer. Last week, we received a final regulatory approval for the sale of the 55% of our business activities in Mexico to the equity fund Mexican Infrastructure Partners, and we expect to collect around $6 million of the transaction on the 26th of February. As you know, the business we have divested includes all combined cycle gas generation plants that currently supply electricity to CFE. This transaction also ends previous litigation in all power plants that were stopped for regulatory administrative reasons are now back in operation. As a result, we will maintain the remaining 45% of our business, continuing to supply electricity, mostly produced renewable, to our industrial customers. We also keep more than 6,000 megawatts of renewable pipeline in over 30 projects in 14 states, with 2,000 on tracks for the next few years. This will allow us to continue growing and increasing and creating wealth and jobs in a core country for us after more than 20 years of presence in Mexico. Yesterday, Avangrid de Núñez presented their full year result, showing a strong performance in both cases. avant-garde registered record investment of more than $3 billion, a bid increase 10% to $2.7 billion, and a net profit reach $808 million. Driven by new rate cases, they will drive $9 billion of total capital until 2026, including transmission and distribution. In renewables, as I mentioned, our Vineyard Wind 1 offshore wind farm achieved first power export, and the company has 1,000 megawatts of offshore wind and solar under construction. Also, the company's first repowering project of around 100 megawatts is already underway. In the case of Energia, investment reached close to 9 billion reais, a big increase by 7% to 13,359 million reais, and net profit reached close to 4.5 billion reais. In 2023, new tariff reviews were approved, covering 75% of the Energia distribution asset base, driving several billion reais in investment over the next five years. In transmission, Energia has continued progressing in the construction of the project already awarded, which will imply more than 10 billion rights of investment. The co-investment alliance signed with GIC will maximize Energia's investment capabilities and preserve its financial strength. Finally, in renewables, over the last 12 months, Neonegia has put in service 700 new megawatts and closed an asset swap with Electrobras related to hydro facilities, as you know. At the group level, all this activity has driven an 8% increase in operating cash flow to 11.1 billion euros, allowing us to maintain our adjusted net debt below 48 billion This figure will be reduced in the coming days to around 42 to 42.5 billion once the cash from the Mexico transaction is collected. As a result, our financial ratio remains strong. FFO to ADAS net debt ratio reached 23.2 and will increase to 25.8 considering the Mexico transaction. This will mean an improvement of 250 basic points compared to 2022 figures. This set of results will allow the Board of Directors to propose to the General Shareholder's Meeting a total shareholder remuneration of €0.55 per share, up 10.8%. Once approved, a supplementary dividend of €0.348 per share will be paid in July, on top of the €0.202 per share already paid in January. Additionally, we plan to maintain the engagement dividend related to our annual general meeting, as you know, last year amount 0.005 euros per share. Following our commitment with social dividend, this huge increase in our business activities has driven positive environmental, social and government impacts for all our stakeholders. Our CO2 emissions reached only 55 grams per kilowatt hour in Europe, 80% below our peers. We made 4,700 new hires in 2023, reaching a total workforce of almost 22,300. and our purchase reached 18.1 billion euros to thousands of suppliers worldwide with employing more than half a million people. We also invested 385 million euros in research and development, becoming the private utility that invests most in innovation, according to the European Commission. and our global tax contribution reached 9.3 billion euros, 24% more than last year. Out of this, 3.5 billion correspond to Spain after 35% increase year-on-year. Just in detail, in 2023, levies in Spain were as high as salaries, all operating and maintenance expenses, external services and financial costs combined. Thanks to all these social contributions, in 2013, we received several recognitions. To our leadership in ESG by the Foreign Policy Association of the United States, by Standard & Poor's, we included Iberdrola in the top 5% of the companies with the best ESG score worldwide. Also to our corporate governance by World Finance, or to our climate action like A rating awarded by the Carbon Disclosure Project. So now I will hand over to Pepe Seif to complete the presentation.

Thank you, Chairman. Good morning to everybody. As the Chairman has explained, EBITDA was 9 percent up to 14.4 billion euros, and reported net profit grew 10.7 percent to 4.8 billion euros. including in Q4 two one-offs for 141 million euros net of taxes. One related to efficiency plans, as the chairman has commented, 90 million after taxes, and the other to a provision in the UK, 51 million euros after taxes, that we are expecting to be recovered in 24. Net profit would have grown 14%, excluding the one-offs in Q4 that I have just mentioned. FX evolution had a negative effect on our EBITDA results, but it's recovered at the net profit. The pound and the dollar depreciated against the euro by an average of 2% and 2.6% each one, while the real slightly appreciated, 0.6%. Revenues decreased 4.6 billion or 8.6% to 49.3 billion euros, mainly due to the energy production and clients in Spain, but procurements fell more, 23% or 7.7 billion euros to 26 billion. As in 22, Iberdrola had to buy electricity due to renewables and nuclear shortfall in Spain at very high prices. In 23, the situation has been reverted due to a normalized production and lower prices. As a consequence, gross margin rose by 15% to 23.3 billion euros. Reported net operating expenses increased 17.8% to 6.1 billion, but excluding extraordinaries and reconciliation impacts in the U.S., net operating expenses increased 8.2%. Reported net personal expenses grew 17.6%. but 7.4% excluding the already mentioned efficiency plan of 117 million in Q4, excluding also reconciliation impacts in the US and other minor extraordinaries. Reported external services increased 11.1% and 4.8%, excluding the reconciliation impacts in the U.S., and other negatives, extraordinaries, mainly in the U.S., where we have the cost of the cancellation of the offshore projects, in the U.K., and in Spain. as the chairman has pointed out, grew 56%, or 986 million euros, to 2,748 million, of which 847 million are due to Spain. As a consequence, levies over net operating expenses ratio in Spain reached 123%, meaning that we are paying In Spain, levies more than our total cost of net operating expenses, while in the rest of the group, levies only account for 22% of our net operating expenses. As you can see in the slide, Spanish levies doubled in 23, representing 86% of total group increase. Let me highlight the most relevant ones. The social bonus, the 67 euros clawback, the 1.2% revenue tax, the nuclear tax, the hydro cannon, the local land use tax, the eco tax, the nuclear waste tax, and other 37 taxes. Clawback and revenue tax are imposed as temporary levies, and we expect that will disappear. Actually, clawback is actually gone in 24, but thanks to the European legislation, and we expect that the 1.2% revenue tax will also disappear or fall significantly. Nevertheless, excluding these two taxes, the rest of taxes will continue to be in a disproportionate amount that reaches 90% of our net operating expenses, much higher than in other geographies as commented in the previous slide. Analyzing the results of the different businesses and starting by networks, it's a bid that reached 6,011 million euros, 7.9% down, but grew 9% on a recurrent basis, excluding 1 billion of one-offs with negative impact in 23, mainly in Brazil and the US, as I will explain now. In Spain, EBITDA fell 3.4% to 1,553 million euros affected by the efficiency plans in Q4. Operating performance in the business was in line with 22. In the UK, EBITDA was up 15% to 1,072 million pounds thanks to the ED2 new regulation from April onwards and higher asset base, especially in transmission. In Brazil, EBITDA fell 6.2% to 9,867 million reais due to lower contribution from the transmission business that includes two one-offs for a total of 2.4 billion reais. The first one related to GIC deal minus 290 million reales, and the other related to the overrun cost in transmissions due to COVID, 2.1 billion reales that we have already claimed to annul, expecting to recover them. The negative impacts in transmission are partially compensated by an improvement in distribution as the tariff reviews had positive impacts, around 700 million reales positive. Finally, in the U.S., EBITDA was 24% down to 1.5 billion U.S. dollars, improving versus 40% down as of September after including in Q4 $150 million of recovery following the New Year rate case approval, as its effects are recognized from May 1, 2023. Year-on-year IFRS evolution is still affected by the negative impact of $550 million positive one-off booked in the second quarter of 22, linked to the recognition in IFRS of regulatory assets, and $87 million from pension provisions, both accounted in IFRS but not in US GAAP. U.S. GAAP EBITDA grew 12.6% to $1,150 million, also including the recovery of $195 million in Q4 from the New York rate case approval. Energy production and customer business EBITDA grew 28% to €8,600 million. Beginning in Mexico, after the recent transaction, EBITDA of the retained assets was $412 million, with higher results from thermal assets, despite lower contribution from renewables, resulting in $89 million more than in 2022. while EBITDA of the disposed assets was $437 million, with lower contribution from contracted plants with CFE due to lower availability. Mexico total EBITDA fell 5.6% to $849 million. In the U.K., EBITDA increased 155% to 1,815 million pounds, thanks to the collection of 341 million pounds of 22 deficit in a context of margin normalization this year in our retail business. Higher offshore results, more than compensated, lower onshore results due to wind load factor and the windfall tax. In Spain, EBITDA was 4,277 million euros, 24% up, driven by production reaching normal levels, with 6 terawatt hours higher hydro production, compensating minus 1 terawatt hour of lower wind production, and also higher sales, as the chairman has mentioned, due to almost 2 percentage points increase in market share to 27.3%. Also, contributing to these results were energy purchases at lower prices than last year. Positives on the operating performance evolution has been partially compensated by more than a double increase in levies, as explained before, and higher net operating expenses due to the Q4 efficiency plan also mentioned previously. In the U.S., EBITDA reached $741 million, flat excluding the offshore break cost that drove EBITDA down 2.4%. In Brazil, EBITDA fell 13.9% to 1,880 million reais due to lower contribution from thermal business as last year was exceptionally strong, partially offset by contribution from new renewable capacity in operation, around 500 new megawatts in Brazil. Finally, in the rest of the world, EBITDA fell 1.7% to 420 million euros, with 1 terabyte hour higher production due to new capacity in operation that is more than offset by higher net operating expenses linked to the business expansion. EBIT was up 12% to €9 billion. DNA plus provisions grew 3.8% to €5.4 billion, mainly due to the business growth with higher asset base and activity, and bad debt evolution due to increased customer billing. There is also, as I have mentioned, some non-recurrent provisions in Q4, including €67 million in the UK, linked to the regulator code of practice that we expect to recover in 2024. Net financial expenses rose 349 million to 2,197 million euros. Debt-related costs grew 477 million, 149 due to the higher average net debt, and 303 million due to higher cost of debt, 70 basis points up to 4.97%, that nevertheless is below the 5.05% peak at June. Excluding Brazil, the cost of debt was 3.76%. Cost of debt is in line with the one expected in our capital markets day of 22. The higher financial expenses have been partially offset by 128 million positive non-debt-related results mainly linked to FX hedges and capitalized interest. Our reported credit metrics remain solid. 12 months FFO was flat at 11.1 billion and up 8% if we exclude the hydro-cannon payment in 22. Adjusted net debt was 47.8 billion and pro forma net debt, including the Mexico Proceeds decreased to a range of 42 to 45.5 billion due to some cash adjustment pending, but clearly below the December 22 debt of 43.7 billion. Reported FFO adjusted net debt stands at 23.2%, maintaining the September levels. And pro forma ratio, including Mexico, proceeds grew to 25.8%. Our adjusted net debt to EBITDA is 3.3 times, 3.03 times pro forma, including the Mexico proceeds. And our adjusted leverage ratio was 44% and decreased to 40.8% pro forma, including the Mexico transaction. Our diversified portfolio provides flexibility to target different markets and the right timing, achieving very favorable conditions. In 2023, we have signed deals for 14.7 billion euros, 91% ESG transactions refinement Iberdrola's commitment. Iberdrola continues to be the world-leading private group in green bonds issued that provide high quality and strong ESG investor demand, driving lower spread than other bonds. Liquidity is at 27 months or 21 months at risk. Reported net profit grew 10.7% to 4,803 million. But if we add the 140 million, as I mentioned, the growth would have been 14%. Equity method results increased 143 million euros thanks to Brazil renewable asset swap that offset the already mentioned Brazilian transmission one-off at EBITDA level. In CONTAMS, tax is negatively affected by the positive one-off accounted in 22 in Brazil and by the negative one-off in Mexico to be reversed in 24. As you can see in the slide, stripping out the effect from the asset rotation from our Mexican transaction, 98 million negative, mainly linked to deferred taxes partially compensated by lower amortization, and the Brazil 91 million positive, mainly at the equity level as advanced before, net income reached 4,809 million, 10.8% more, in line with the reported net profit and achieving double-digit guiding, reaffirming Iberdrola's high-quality results underpinned by the four-quarter 141 million euros of negative one-offs that will help 24 and subsequent year-end results. Thank you very much. And now the chairman will conclude the presentation.