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.

Thank you very much, Pepe. This result places Iberdrola in the best position to accelerate growth in the coming years. In 2024, we expect 5% to 7% increase in net profit, including capital gains for national rotation, clearly exceeding 5 billion euros for the first time in the 120 years company history. With dividend growing in line with results, we will reach a new record of investment of 12 billion euros, mostly in networks, with focus in United States, even mainly by the new rate cases of New York and Maine, in the UK through the Rio T2 and ED2, and in Brazil, thanks to the new rate cases in Energia. Renewables will continue growing thanks to the contribution of offshore wind, with the 600 MW installed in the 2023 Saint-Bruyc, plus the additional results from our other offshore wind panel construction. On top of this, we will commission 2,000 MW of new onshore capacity. In addition, we have already sold 100% of our energy for 2024 with prices secured. And we expect to benefit from lower financial expenses due to the positive impact of Mexico transaction and the co-investment with our partners in other geographies. All this, the result of an integrated business model that maximize growth and predictability. with a recognized track record of optimal execution. In the coming years, networks will continue representing 45% to 50% of our EBITDA, 10 points above our European peers, focused in high-rating countries with a stable framework. We have already closed rate cases for almost 100% of our asset base until 2025. This model allows us to secure growth in predictable margin in the network business as we have done in the last three years when our EBITDA increased by 8% on average. And we expect the growth trends with increase in the future driven by the huge investment needs transmission and distribution in all our geographies, following the analysis recommendation of the COP28, the European Union, the European Commission, or the International Energy Agency, among others. In production and customers, we'll continue balancing our generation and supply position with optimal means to routes to market. We have already 100% sold to our output for 2024 and are running at 85 for 2025. With stable margins, thanks to our portfolio, we does not depend on the volatility of fossil fuels. On top of that, we have around 5,000 megawatt of storage capacity with 20-hour duration of every area. That means 100 million kilowatt hours of storage capacity, providing us with 100 million, this megawatt, which will become more and more relevant in the market with higher price volatility driven by renewable penetration. Already in 2023, this storage capacity allowed us to produce 5,000 gigawatt hours, 58% more than in 2022. And we have 1,000 megawatts of more than 20 hours of additional pump storage capacity under construction. We also expect continued benefiting for our global PPF portfolio of 12 million retail customers to which we have provided the best service through clean energy and other value product at competitive prices. On top of this, our diversified geographical footprint in high-rating countries will allow us to minimize regulatory risk. We are convinced that all these competitive advantages make Iberdrola a different company in the utility universe and that the upcoming changes in the industry driven by electrification and the penetration of renewables. That will maximize our opportunities to invest and create more value for shareholders and the whole society in the coming years. As you know, we will hold our Capital Market Day in London on March 21st with more details of our outlook. I hope to see all of you there. Thank you very much. Now we will answer any questions you may have. Thank you.

The following financial professionals have asked the question that I will now put to the senior manager present at this event. Gonzalo Sánchez-Bordona, UBS, Peter Vistiga, Bank of America, Daniel Rodríguez, Pestinber, Philippe Urpatian, Odo, Manuel Palomo, Exxon BNP, Tomas Reis, CaixaBank, Fernando Lafuente, Alantra, Rob Pulein, Morgan Stanley, Javier Garrido, JP Morgan, Ahmed Farman, Jefferies, Alberto Gandolfi, Goldman Sachs, James Brand, Deutsche Bank, Fernando Garcia, Royal Bank of Canada, Ahmed Farman, Jefferies, Jorge Guimaraes, GB Capital Markets, Javier Suarez, Mediobanca, and finally, Markit Tapkuwen from Berenberg. The first question is related to the net income 2023 and the main drivers that has driven to these results.

So, well, I think the first one is our increase is 11% due to the higher investment in renewables. I think this 11% is even after 170 million of provision for the future efficiencies, where that means there should be, instead of 11, should be, as Pepe was mentioning, around 14%. So I think we have higher renewable production. We recovery the hydro resources resulting with higher production. And I think something I mentioned is the pumping storage volume. That is avoid volatility. I think it's the average production tradition in Spain in hydro is around 12 terawatt hours, and I think this year only in Pan-Ministerio we produce five. So what that means with dry or no dry year, we are able to produce and generate more and more, minimizing the volatility that is already with these new times, I think, so the increase of renewable in the mix is generating. So I think it's... IN TERMS OF ENERGY PURCHASES AS WELL, WE DIMINISHED THE BUY-IN OF ELECTRICITY AND IN 2022 WE BOUGHT ON THE RANGE OF 200. Also, the retail deficit in the UK, I think, is almost 300 million, which we had already recovered during the year. So all these are making that one. I think more production, lower purchase, recovery of the deficit of... of UK and more contribution to our networks as consequence of the increase of our investment in these regulated activities, which as you know is amount close to 50% of our total EBITDA in this moment.

Next question is related to Mexico. Could you give us an indication of how much the cash in after tax of the asset rotation in Mexico should be, and how much certain are you on receiving the funds on February 26th?

So, I think we are expecting to receive this on the 26th of February, as I mentioned in the presentation. So, and I think that is consequence that the last approval we remind was the competition authorities, which is COFESE. We got the approval a few days ago. We are expecting that the one received this amount, the Board of Directors of Mexico, our subsidiary in Mexico, will met and I think we will know already the conclusion about the terms of the whatever capital gain they can already achieve. And I think in any case, I think all the details about that one will be already, we will provide you as soon as we have all the detailed one that is finally cash. But certain, before the 21st of March, you will have all the detail, and we will leave you all the detail by the 21st of March in the capital market day.

This question related to the 2024 guidance in net income. Can you please give us a bridge from full year 23 to full year 24 net income? What are the main variables that could lead this growth to be in the higher part of the range, plus 7%?

so uh i think the first thing in 2024 i think the first one is the new investment i think we are going to invest 12 billion which i think is in networks we have already commitments on the new rate cases i think as i mentioned in brazil we have already 74 percent of all our rap It's already signed the new rate cases with increase of commitment of investment. And United States, the same thing. With new rate cases, we cover 80% of the asset base, New York and Maine as well. We have new rate cases and with new commitment of investment and new remuneration. In the case of UK, I think it's a new investment on the Rio T2. I think I have to say in the Rio T2, the awarded amount for investment is going to be overpassed in a significant manner. So I think it's probably the amount, if I don't remember that correctly, was on the range of 1.3, 1.4 billion, awarded amount for CAPEX, probably are going to surpass the 2 billion, and I think we are paying according with the extra investment we are making. And in production and customer, so I think our production has been normalized in the case of wind factor. Hydro reserves are already in line with historical average, even more than historical average. I think we are, most of our dams are on the range of 70 to 80% capacity cover. The increase in role of pumping storage, as I mentioned, I think later we may find that was probably the year we're going to move. In offshore, as I mentioned as well, the is already just completely in production. Just to give you an idea, the amount of the contribution of this offshore wind farm of France is similar to the reduction of EBITDA we are going to have in Mexico as consequence of the transaction. So it really is a huge operation. And onshore, we expect to put in service 2,000 new megawatts. And I think something very important is 100% of all our electricity is sold as price which are secure, which I think we are not being affected by the volatility of today's prices. The case of the cash in this $6 billion in the partnership with others, so as well, is going to help already to diminish our financial expenses. And as consequence, that is what we are expecting, this growth between 5% and 7%, with reaching, for the first time in the company history, this $5 billion net profit by the year end.

Next question is related to the guidance of net debt. Can you also provide the guidance for the 2024 net debt? Pepe?

Yeah, we are expecting to end the year 2024 with a net debt of around 47 billion, more or less.

Related to the hydro in 2024 included in the guidance, in 2024 guidance, what is the extra contribution for hydro versus a normal year? Can you quantify in million euros? Armando?

You know, as always, our budget is based on average hydro year, as always. But I want to highlight what the chairman said, three very positive from this year, 2024. First of all, we will full commission the Tamega facilities. We will increase our capacity. The second is the good levels of the reservoirs that we have now. The most important things, we are taking advantage of the market volatility. It's very important, increasing our pump hydro production during the year.

Next question is related to taxes in Spain, the 1.2 revenue tax. What is your expectation for 1.2 revenue tax impact in full year 24? Any visibility about how energy transition capex deduction to 1.2 percent revenue tax in Spain will be defined?

Well, I think as we explained, I was shocked when I was seeing the numbers when we closed accounts that seemed that our taxes, a part of the corporate tax, the levies, are more than our personal expenses, more than our external services, more the operation and maintenance, and more the financial cost. together. So, which I think is, I think that Pepe has already mentioned that the average in other countries is 20% of the operational cost, and here is 120% of the operational cost, which I think is something which some of these taxes are already temporary based. I think one has already disappeared, which is the the price cap, which has been after the approval of the measure, the new regulation for European Union, the reform of the market. But I think another one, which I think they are still maintain, even was a temporary, So I think the case of 1.2, part of the needs already is in the court, a challenge in the court. But I think what I heard from the government is that they would like to modify that one in a manner that can be already minimized or transformed according with the investment you can make. In any case, I think it's... is something which has not a logic. It's the only country where still we are keeping these taxes based in revenues, so which has no sense. And I think it's making already the country, which is, I already hear the list, with 38 different taxes or levies in the country, which I think 18 are from the central government and another 18 Well, now it's 22, because there are another two regions we have already increased our region now. So I think it's no sense. I think that is making the things in a manner which is not precisely making the things as they have to be. And as you are in the transitory measures, We can already live, but I think in a stable base, I think it's something which is out of whatever is in the rest of the world. So Spain has not to be different as well in that one. We have to align with the rest of the Europeans and align with the rest of the countries because I think it would like in this country would be as attractive as all we like it will be.

Next question has in some way a relation with the one – with the recent answer from you, Mr. Chairman. Networks investment in Spain. We are seeing continued investment upgrades across several countries in power grids, but not as much in Spain distribution. In which way would you like to be incentivized to invest more, and what is the status of conversation with the government and regulators?

Well, I think what we are facing is a law which was made in 2012. I don't remember that, during the previous government. It was for trying to... cover the electricity deficit they have already irritated. I think the country we have already a huge deficit and at that time the government they took certain measures to try to minimize. One of them is that one which I think is not much sense in because a link between The GDP with the investment in grids, I don't know what is the relation. It's something we have not, in my view as engineer, I don't know if for the economies is different. But GDP and the electricity grid, I don't think what is the connection. But that remains. That is the typical thing which is made. And the following government has not already modified that one. So now it's already a global demand internationally. that if we would like to electrify the economy, if we would like to reach the carbonization target, if we would like to diminish the external dependence, the grids are crucial. It has been said in the COP28, the European Union is saying the same thing, the international agency is saying the same thing, and Spain as well. The plan of... the national plan of... for renewables and electrification as well is included. So I think that is something with one time to another one have to be changed. And I think that is what the Minister of Energy, by President, the government is already just mentioned that she is open to change those one. But for that is not enough to take the cap. I think they have to make something attractive. With today's rules, if they are not changed, the attractiveness of the investment in renewables are very low. I think it's the return expected. The expectation of returns for the next few years, if that is not modified, is much lower than what we have in the rest of geographies. So I think if all countries, leading by the United States, which is the highest returns, followed by Brazil or followed by Britain or whatever countries we have present, I think they have to align with those ones. And that is what now we are in process. I think it's very open discussion. I think it's what we are perceiving by the regulators and government is the interest of modifying this rule and reaching some level of agreement which makes attractive to make the necessary investment that the country require. And that is what I can tell you about that month.

Next question related to power price in Spain and the UK. Can you share a chief power price for 23 and 24 in Iberia and the UK?

Armando?

Okay, so for this year, 2024, in Spain, we have for our generation for this year already sold on around 100 euros per megawatt hour. In the UK, the price would be something around 150 pounds per megawatt hour.

Next, related to PPAs, could you position the average PPA price in euro megawatt hour you reached with your new corporate off-taker in 2003 and by geographies?

Romando?

Okay, signing PPAs for us is not new. We haven't signed PPAs for many years, but we are continuing accelerating, and we have new PPAs signed worldwide. for in 2023 for around 5.3 terawatt hour per year in the whole, all the regions. As you know, we are the leader in the European market PPA. We are selling more than almost 1,000 megawatts of contracted supply. That is something around 3.5 terawatt hour per annum that we are selling only in Europe. And for prices, we have been saying just the last time PPA was signed, for instance, in Germany, something in the range of 70, 80 euros per megawatt hour.

Next question is related to the offshore wind. Can you talk about offshore wind plans for this year? Which auctions do you intend to participate in? How are you seeing offtake prices developing?

Well, I think, as you know, we have already two projects in New England, which I think we are analyzing to participate in the joint Connecticut, Massachusetts, and Rhode Island auction. I think, you know, we are committed, but we will be very selective. It depends very much of the terms of this one. We have already, after the participation of the one, we have a period of negotiation which I think is six or seven months. So I think nothing is going to be the final up to the middle of this year or after summer. In UK, we have as well, I think it's a good news, the government after our conversation with them has already modified the terms and the condition of the new auction. So I think the strike prices for the AR6 auction is 66% higher than it was for AR5. As well, we are analyzing this one. We have, as well, a couple of projects to participate with around 2,000 megawatts. And I think we will see what is going to be our final position on that one. But we are positive in the view. In the – in the other ones, I think there are very many auction in the – announced in Germany, France, Portugal, Spain, whatever, but in most of them are still in a very – in a draft phase. So when we have more details, we will be ready to take a decision if to participate or not. But I think we are, I would like to summarize, we are positive in offshore, we are committed, we have a good team, but we will be, as we've been in the past, selective, going to those ones which are not attractive and not going to those ones we feel are not attractive enough.

Next question is related to U.S. offshore business. Could you elaborate about U.S. offshore current market condition regarding CAPEX and priced trend?

Well, I think once again, we are the first mover. I think we won four years ago, three years ago, two auctions for Connecticut, for Massachusetts. We saw that the terms in which we have already made the bid, had already changed drastically before deciding to make the FID. And so that's why we went to the authorities of all the states first to renegotiate the terms. And when we saw that that is impossible, we forced ourselves to renounce. Many of our colleagues and competitors were not enough, let's say, agile, as we did. And they not only has not already took the decision we took at the right time, but I think they've been forced to take the decision later on after making a huge expenditure and committed a lot of money. We forced themselves to make a huge write-off. I think the cost of renouncing to this project in our case was $40 million, which I think Pepe has already mentioned as an extraordinary result. expenses we have already in year 2000, in year 2023, but another one they've been forced to make billions of dollars of write-offs on that one. So now the terms, it looks, then it's changing. I think the recent auction in New York shows that they are already accepting certain of the rules that we've been already discussing to give, already taking the time between the moment we made the bid for the auction up to the moment that you made the FID. We can't take years because the period of permits and et cetera, et cetera, is long in the state. So I think they gave the opportunity of revising this price option according with certain parameters. And second is as well to adjust the final price with certain parameters, inflation or whatever, for the period of the duration of the PPA. So I think those are positive. I think now in another state that's New York, another state, something is like, but still is not completed. But they gave already an opportunity, as I mentioned before, to negotiate. since the moment you participate to negotiate during a certain number of months with the different regulators of the state, the terms of your offer. So which I think probably all these things will be included on that one. If the things goes in the right direction, We will proceed. If not, we will renounce to those ones. So it's simple. I think there's plenty of opportunities in this moment of different countries for auctioning offshore. There are not very many players, but we'll be ready. We have the capabilities. the technology and the knowledge for making those ones and i think we would like to be on this one but as i insist on that one committed but selective as we are in all the things related to renewable particularly offshore with the investment are huge next is related to solar pv in the conclusion slide you comment on wind on shore and offshore addition have you changed your mind regarding solar pv No, I think it's – I always say the same thing. I think it's that all technologies are needed for achieving the target of autonomy, decarbonization, self-sufficiency, et cetera, et cetera. It depends. I think it depends on the countries. It depends on the region. It depends on the moment. I think solar PV is good in certain countries, in certain areas of the countries. Wind is good in certain countries, in certain parts of the countries. And so I think we are not in favor of one another one. I think it depends. Saying that. They are already, we have to analyze carefully in this country what is the curve of production and the curve of demand, as I showed you in the last presentation. And I think it's clear if everybody makes only solar, So probably at the middle of the day, it will be an overproduction of electricity, which I think in some countries like Spain, for us it's good because we can already use this overproduction for pumping water. We can already generate electricity in the hours where the sun is not shining. So that's why I think we are not in favor of it. It depends. But I think in the particular case of Spain, we feel that large-scale production of solar can already give us an opportunity of gaining and making an extraordinary contribution of all our large-scale pumping storage facilities. We are unique in the country on this one and we continue already investing. We've been first movers on that one for the last 20 years. We continue being on this one. I think we just completed the pumping storage facilities of Tamega in Portugal, which is fully connected with Spain as well in Portugal. And we are in this moment, as I mentioned before, already building new pumping storage facilities for almost 1,000 megawatts. We gave already 20 million of kilowatt hours of pumping storage capacities. So last year we made $5 trillion of pumping storage production in Spain, and probably this year, if the volatility continues, not only we can help the system thanks to our pumping storage facility, because this volatility is very difficult to manage in the system, but as well, at the same time, if we help the system to keep the lights on, we expect to have already some extra contribution to our accounts.

Next question is related to M&A. At the beginning of the year, you ended the merger agreement with PNM, and you will soon receive the casin for the Mexican generation assets. How do you intend to invest these additional resources?

Well... I think we have the meeting on the 21st of March, the Capital Market Day, and we'll give you more detail. But I think I would like to tell you something clearly. I think I mentioned that in this moment in networks, we have huge opportunities. So, United States, I think only in the case of New York, our case commitment is $7 billion of investment of up to 2026 in transmission and distribution, plus another probably $3 billion in transmission and up to 2030. We have already – UK transmission, as I mentioned, huge demand. Only I think in the recent days we have launched an auction for 5.4 billion pounds of purchase of equipment expecting to secure the supply chains for the future investment requiring the country. And I think in Brazil, the situation as well is huge on that one. So I think we have plenty of opportunities either in the state, in networks, either in Brazil in networks, either UK in networks. So I think only that one. Plus, I think what I mentioned, the auctions that we can participate in renewables in different countries. But in certain networks, which is already our core business, or more core business, we represent 50% almost of our EBITDA, is already an area in which we have plenty of opportunities to grow with existing commitments we have already taken in different countries.

Last question is related to hybrid issues. We saw Iberdrola recently issued a hybrid bond with coupon around 4.7%. Does this indicate that the company could undertake more hybrids? And if so, how much more hybrid capacity the company has? Pepe?

Well, as we mentioned in the last Capital Markets Day, the strategy of the group is to maintain more or less the same hybrids that we have right now. We issued 700 million hybrids because we had to roll it over. We don't have more hybrids to roll over in the next month, so we are comfortable there. But the idea is not to increase the amount of hybrids issued by the group. Although, as you know, the group could issue much more, has a much higher hybrid capacity. But in principle, the strategy is to maintain the same hybrids issued as we have up to now.

With these 14 questions, we are finishing the Q&A session. And now, please, let me now give the floor to Mr. Galan to conclude this event.

Well, perhaps I will conclude with certain message of optimism. I think we are already certain opportunities. It has already been a problem, but I think it's an opportunity. Taxes cannot be worked, levies, so I think it can improve. The investment of Mexico is a clear opportunity. Co-investment with others is as well a good opportunity for diminishing our financial cost. 50% of our business is regulated. Regulated means we are protected against financial cost, which is a pass-through, and is protected against inflection. So we are already a lot of opportunities in the regulated business to grow. And as well, we have already a lot of opportunities in renewables being already selected. So that's why I think it's those things and make ourselves a bit different. And I think that will be the basis of our capital market day on 21st of March. So up to this day, thank you very much for attending this presentation. And I think if you have any questions, I think our investment research team can already give you additional information that you may require. Thank you very much. See you in London on the 21st of March. Thank you.