Iberdrola Sa S/Adr

Buenos días, señoras y señores. Buenos días. 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 2024 first quarter results presentations. 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. Finally, we expect that today's event to last no more than 50 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.

Thank you, Ignacio. Good morning, everyone, and thank you very much for joining today's conference call. In the first three months, 2024, our strong predictive performance has led to a report net profit of 2,760 million euros, with recurring net profit up 20% compared to the first quarter of 2023. As you can see, reported results in the first quarter are affected by extraordinary ratings both in 2024 and 2023. In 2024, we have included the capital gain from the 5,437 million euro transaction with Mexican infrastructure partners, which has completed in the last days of February with a positive impact of 1.7 billion euros at EBITDA and 1.2 billion at net profit level. In the first quarter, 2023 will register the non-recurrent recovery of previous year retail deficit in UK, with a positive impact of 311 million euros on EBITDA and 238 million euros at net profit. Report to EBITDA reached 5,157 million, with a 10% increase in recurrent terms driven by the higher contribution of all businesses. mainly due to the new rate cases in the US, the UK and Brazil, and the new production and customers will register better performance thanks to the record renewable production in Iberia of the last decade and the new capacity mostly offshore wind. We also record investment of 2.4 billion euros in just three months, a 30% increase versus previous year. Network investment grew by 27% to 1.1 billion, driven by new rate cases in the US, UK and Brazil, with an increase of 85% in transmission, which already represents 40% of the total investment in this business. In renewables, investments are up 50% to almost 1 billion, driven by offshore wind, which represents close to 40% of the total after a 70% increase year on year. We have been able to combine this record level of investment with a further increase in financial strength, thanks to a 40% increase in recurring cash flow reaching 3,145 million euros. And 5,437 million euros proceeds from, as I mentioned, from Mexico transactions collected during this quarter. All in all, FFO to adjust in the debt is already above 25%, as Pepe will mention later on. As you can see, we are delivering in our 2024-2023 plans ahead of schedule in terms of result, investment, cash flow generation, and financial strength. As mentioned, recurring net profits is up 20% year-on-year. Once, we include the positive impact of the Mexico transaction reporting net profit reached 2.7 billion in just a quarter. This was possible thanks to a very strong operating performance across our business and geographies, leading to a 10% increase in recurring EBITDA. The network business has benefited from new tariffs in the US, UK and Brazil and an increase in regulated assets based both in distribution and transmission, partially offset by temporary EFRS adjustment. Energy production and customers increased its contribution as well thanks to 10 years record renewable production in Iberia with higher production from renewable technologies. An additional offshore wind capacity from Saint-Bruyck in France, with all turbines already installed, being gradually commissioned in a process that will be completed in the next three months. And the first turbine from BGR Wind 1 in the United States already sporting energy as well. Finally, retail performance is better than expected thanks to our manageable renewable generation in an environment lower prices. A significant part of our growth was driven by new investment. In the first three months of 2024, we have reached a new record of 2.4 billion euros, up 36% from previous year, with more than 90% allocated to networks and renewables. As anticipated, we presented our planned network business. It's already our first investment destination, after a 27% increase, reaching 1.2 billion euros in the period. 40% of this, of network investment, were allocated to transmission, with an increase of 85% from 2023, and 60% to distribution, with 6% increase, driven by new tariff frameworks in most of our key geographies. By countries, 40% of total networks investment were directed to the United States, mainly New York, due to the increase in transmission and distribution investment included in the new rate case, as well as in Maine, both in distribution of our interconnection line with Canada. Brazil represents 29% of the total investment, UK the 21%, and remaining 10% was invested in Spain. While we continue to have a limit on a lower investment related to GDP growth, that we understand is not compatible with an urgent need of new connections, and therefore we expect it will be removed by the government soon. Driven additional economic growth with a very limited impact on tariff. As a result, all this investment, our asset base, reached $43 billion, up 9% year-on-year. In renewables, investment reached $944 million in the first quarter, 50% up from 2023. Driven by increases of 70% in offshore wind, which contributed 40% of the total investment. And an investment in onshore technology was also up by 43%. And storage investment rose by 70%. Biographies, 36% was allocated to the United States, mainly driven by offshore wind, as we keep progressing in the construction of India Wind 1 in Massachusetts. 24% of the total investment correspond to solar PV, storage, and onshore wind in Spain, followed by 22% allocated to Australia, offshore wind in France and Germany, and onshore in Portugal and Italy. Finally, 80% of renewable investments were directed to the UK, mostly to its Anglia III offshore wind farming construction. These forecasts reflect a very strong renewable performance in the Iberian Peninsula, with an increase in production by 90% to reach a 10-year record of 10,600 GWh. Currently, pricing and environment allow us to maximize pumping storage, dreaming 80% increase in any store up to 2,240 HWh in this quarter. As a result, as today, our reserve is at record levels of 9,500 HWh. The buildup of new offshore wind capacity is also progressing on schedule, with 1.6 gigawatts already contributing to results, including the first megawatt of two of the three offshore wind farms that we are already under construction. Saint-Brieuc in France, 60% of its 500 megawatts are already producing, and the remaining 200 we are expecting in the next three months. In Bingerwind, in the coast of Massachusetts, 130 MW are already supporting energy and the remaining 370 MW are progressing construction. On top of this, Baltic Eagle in Germany has its first turbines already installed and its 475 MW will be fully operational also before the year end. This means that in 2024 we will install 1,100 megawatts more than doubling our offshore wind capacity in just one year. Additionally, we have under construction the offshore wind farms of Windacker, also in German Baltic Sea, with 350 megawatts, and Isangle 3 in UK with 1,400 megawatts of capacity. Both of track to be in full operation by 2026, and with secure route to market. In the last month, we have also continued to secure additional opportunities in this technology for the coming years, like the 375 megawatt HAPO-Noshiro project recently awarded in Japan to Enconstruction with which Iberdrola holds 13% stake. We are currently working with our partners in the supply chains and the route to market for this project with an expected final investment decision no later than 2026. We also have two projects participating in the Round 6 auction in the United Kingdom, East Anglia 2 and East Anglia 1 North, with a combined capacity of 1.8 gigawatts. And the United States, who recently presented bids for the New England multi-state auction, with two projects, New England 1 and New England 2, totaling almost 1,100 megawatts. We expect the result of this auction before the year end. Lastly, we continue securing seabed rights for additional projects for 2030 and beyond, such as Scott Wind in the UK, where we have two gigawatts plus a joint venture with Shell for the development of another 5 gigawatt of floating offshore wind, or Kitty Hawk with 3.5 gigawatts in the coast of Virginia and North Carolina in the United States. As you know, in Australia also, we are expecting a positive result of the auction for Seabed Right in Victoria, where we presented our three-gallon yeast land project. In the last few months, operating gas flow reached 3,145 million euros, a 14th increase in recurring terms. and we continue delivering on our asset rotation and partnership plan. As mentioned, we collected 5,437 million euros from Mexico transaction, and we expect to continue announcing soon additional progress in our co-investment agreement with a Tier 1 partner. All this is driving an ongoing increase in our FFO over net debt ratio, which is now improved by 180 basic points to reach 25%. We now hand over to CFO Pepe Sainz, who will present the group financially standing for the detail.

Thank you very much, Chairman. Good morning to everybody. In the first quarter of 24, EBITDA reached 5,857 million euros versus 4,065 million in Q1 of last year, and net profit 2,760 million versus 1,485 million euros last year. FX evolution has had a minor effect on results. The pound rose against the euro by an average of 3%, the real 4%, while the dollar depreciated 1.1%. There are two one-offs impact affecting the evolution, both in the energy production and customer business. As the Chairman has explained, Q124 has been positively impacted by the sale of Mexico assets cashed in on February 26th. The 1.7 billion euros gross capital gain has been registered at the net operating expenses level, with a 1.1 billion euros post-tax impact. And in Q123, was positively affected by a €311 million retail tariff deficit recovery from 2022 in the UK, accounted as higher revenues, negatively affecting the evolution this year. At net profit, the impact is €238 million, excluding the Mexico 1.7 billion capital gain, a bid that was up 2% to 4%. And net profit grew 7% to 1.6 billion euros. And excluding also the 311 million euros of UK tariff deficit recovery in Q1 23, EBITDA was up 10% and net profit grew 28% as the chairman has presented. A 33% improvement in procurement costs versus an 18% decrease in revenues has driven a 2% increase in gross margin to 6.8 billion euros. And excluding the 311 million UK retail tariff deficit recovery in Q1-23, gross margin grew 7%. As I mentioned at the beginning of my part of the presentation, the 1.7 billion Mexico capital gain positively impacted reported net operating expenses, making them to be 78.5 million positive, as you can see in the slide. Excluding this Mexico capital gain, net operating expenses increased 12% and 8.1%, excluding not only Mexico capital gain, but also mainly the reconciliation impacts in the U.S. due to storm costs that are recognized at the gross margin level also. Analyzing the results of the different businesses and starting by the networks business, it's a bid that grew 2% to 1,692 million euros, driven by a higher regulated asset base and tariffs. In Spain, EBITDA fell 6.8% to 404 million euros, negatively impacted by a 27 million positive regularization of investments recognized in Q123 and higher net operating expenses on this quarter. In the UK EBITDA increased 35.8% to £305 million with higher contribution in transmission thanks to higher tariffs and higher asset base and in distribution thanks to the new framework ED2. In Brazil, EBITDA decreased 0.5% to R$ 3,272 million, with higher tariffs and demand partially offset by lower inflation and lower contribution of transmission due to the deconsolidation of the assets as part of the GIC agreement signed in Q3 of 23. In the US, US GAAP EBITDA increased 8.1% to $578 million, showing the contribution of the new rate cases mainly in New York. IFRS EBITDA was down to $346 million due to a 90 million negative timing effect due to IFRS accounting of higher commodity costs that will recover through 2024. despite higher contribution from the rate cases, especially in New York, as I have commented. Q124 energy production and customer business EBITDA reached 4.1 billion euros compared to the 2.4 billion last year, boosted by the already mentioned Mexico capital gain, partially compensated by a higher comparison base due to the 311 million UK tariff deficit recovery last year. As you can see in the slide, Q124 has had a better recurring operating performance than last year, 1% excluding the Mexico capital gain and 16% excluding also the impact of the UK tariff deficit. In Spain, EBITDA was 1,222 million euros, 2.7% up, driven by higher output, along with lower procurement costs and lower levies. Those positives more than compensate lower prices and a positive effect in gas management in Q1 of last year. In the UK EBITDA fell 11.3% to £514 million, affected by the above-mentioned Q123 positive one-off. Nevertheless, the recurrent evolution of the business with higher contribution in wind onshore and offshore, thanks to better prices and volumes, mostly absorbs the one-off. In Brazil, EBITDA increased 3.2% to R$ 425 million as the global consolidation of 261 MW hydro assets following the swap with Electrobras last year more than offsets the lower wind output. In the US, EBITDA increased 27% to $211 million, thanks to the positive performance of our flexible generation fleet that improved results despite a 9% lower wind production. In the rest of the world, EBITDA grew almost 40% to €282 million, with a 29% higher production due to the gradual entry into operation of Saint-Brieuc, offshore wind farm and more onshore capacity installed. Finally, in Mexico EBITDA reached $2,037 million. Excluding the capital gain, EBITDA reached $176 million affected by the deconsolidation of the assets sold from February 26. Nevertheless, let me point out that the business from the retained assets evolved positively with better prices and volumes. up 30% to 97 million US dollars. EBITDA grew to 4.5 billion euros, compared to 2.7 billion reported in Q1 23. DNA grew 2%, driven by a higher asset base, partially compensated by 14% lower bad debt provisions, mainly in Spain. As you can see in the slide, EBIT excluding Mexico capital gain grew 2% and 15% excluding also UK tariff deficit recovery in Q1-23. Net financial expenses were up only 14 million euros to 524 million. Debt-related costs grew 18 million euros. 23 million increase is due to the 2 billion higher average net debt in the quarter, as the 5.4 billion euros cash proceeds from Mexican transactions were received at the end of February. This was partially compensated by 13 million reduction due to the lower cost of debt, 10 basis points falling from 5.08 to 4.98%, and 8 million of negative FX impact. There is a 4 million increase in not debt-related results. Our reported credit metrics improved versus the end of 23, mainly thanks to a 2.9 billion decrease in our adjusted net debt to 44.9 billion, compared to December 23 debt of 47.8 billion. Mexico cash proceeds have been partially offset by a record capex quarter, as the chairman has commented, dividend payments plus an FX impact. As a consequence, FFO adjusted net debt rose to 25%, improving to 23.2% at the end of 2023. Our adjusted net debt to EBITDA improved to 3.10 times versus 3.32 times at December of last year. Our adjusted leverage ratio was 41.8% versus 44.2% at year-end. Net profit grew 85% to 2,759.7 million and 7% to 1,595 million, excluding the 1,165 million net Mexico capital gain. Excluding also the 232 million net tariff deficit recovery in the UK in Q1-23, recurring net profit grew 20%. Now the chairman will conclude the presentation. Thank you very much.