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 2024 first half 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. Thank you very much. We know that today is a complex day for all of you and with several presentations of results still to come. This is why our event will last about 45 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.

For joining today's conference call, In the first six months of 2024, our reported net profit is up by 64% to €4,134 million. And our reported EBITDA reached €9,714 million, a 27% increase versus the same period of 2023. As we are informed, in the first quarter, reported results are affected by extraordinary items both in 2024 and 2023. In 2024, we have included the capital gains from the Mexico transaction with a positive impact in 1.7 billion euros on EBITDA. At the net profit level, the impact is 1,117 million due to taxes and the provision already released last year. Half of the 2022 results also reflected the non-recurrent recovery of the previous year's retail deficit in the UK, with a positive impact of €337 million on EBITDA. Scrolling all these items, recurring EBITDA grows 9% to €7,897 million, driven by strong operating performance in all businesses. In renewables, production has already all-time highs thanks to the increasing offshore wind generation and record output in Iberia. And in networks, business maintains its positive performance thanks to the tariff increase in the U.S., the U.K., or Brazil, and a further 7% increase in our asset rate base year-on-year. We have continued delivering on our plan with record investment of $5,276 million, 16% more than the first half of 2023. And we are already looking beyond 2026 to capture additional growth opportunities for electrification. We will drive huge increase in investment needs in the transmission and distribution networks. making storage even more relevant to integrate the highest share of renewables in the system and increasing electricity demand very significantly in all industries, especially in data centers. We continue combining growth, financial solidity, and shareholder remuneration, with FFO digesting net debt at 25% and dividend up 11.4% year-on-year. As mentioned, the consolidation of the positive trends seen in the first quarter plus additional investment have driven a percent increase in our recurring EBITDA. In net worth, results reflect positive target adjustment in the UK, the US, Brazil, as well as a 7% year-on-year increase in our regularity base to 43.3 billion euros. In renewables, global energy production has reached a new record due to the additional installed capacity, including the full commissioning of our Sandbrick offshore wind farm in France. And more than half of the capacity of Altigigel in Germany, which will be fully commissioned between the third and the fourth quarters of this year. Iberia maintained its good performance with pumping storage assets, increasing its utilization rate to balance demand and production in the system, benefiting from price spread due to higher volatility. Retail market conditions continue to normalize gradually in Iberia and the United Kingdom, and we keep increasing our long-term PPI portfolio with industrial customers and environmental and increasing forward price as we see later. with a breakdown fully in line with the strategic priorities set in 2024-2026 plan. 56% of the investment were made in the United States, with an increase of 53%, and the United Kingdom, with an increase of 29%, driven by offshore wind and new transmission infrastructure. Iberia represents 90% of the total first half investment, followed by Latin America with 50% and France, Germany and Australia with only 10% together. By businesses, networks is already the first investment destination with 51% of the total. reaching 2.7 billion euros after 23% increase year-on-year driven by the new rate cases in distribution, and 63% rise in transmission investment milling the U.S. and U.K. to reach more than 1 billion euros in the last six months. As a result, 13% of our total network investment in the first half were made in transmission. All in all, network asset base grew by 7% year-on-year, with a significant diversification across our core geographies. Asset base in US reached 13.3 billion euros, followed by United Kingdom with 10.8, Brazil with 10.1, and finally Spain with 9.1 billion. Transmission already accounts for 23% of this total asset base. In renewables, investment grew by 10% to reach 2,167 million euros after adding 3,100 megawatts of new renewable capacity in the last 12 months. Offshore wind already represents 41% of the total renewable investment, driven by the construction of Vingert Wind 1 in the United States, Saint-Brick in France, Balti-Liget in Germany. with the remaining 59% focusing on shore renewables and storage in the U.S., continental Europe, U.K., and Australia. The construction of all our offshore wind projects included in the 2024-2023 plan remains on track, with 2,300 megawatts in operation after the full commission of St. Brick. Total capacity is expected to reach 4,100 in 2026. Baltic Kingdom in Germany, Benjarwin U.S. will be fully contributing to 2025 result, and Isangler III in the U.K. and Windacker in Germany will fill operation in 2026. This will drive a total EBITDA of 1.8 billion by that year, more than doubling the contribution we expect for full year 2024. On top of that, We continue working in growth opportunities beyond 2026 with 3.6 gigawatts of projects participating in ongoing auctions. It's Anglia 1 North and it's Anglia 2 taking part of DRCs in the UK with a total combined capacity of 1.7 gigawatts. And New England winning 1 and 2 in the multi-state auction in the United States winning 1.9 gigawatts in total. The permits already received for this project and the progress in securing the supply chains play us in a very competitive position in both actions. We are also securing future growth through CBET rights obtained at zero or close to zero cost. Today, we have more than 10 gigawatts of rights in countries like the United States, UK, Australia, or Japan, all obtained under our strict, prudent approach. with an average deployment cost of 50 to 100 kW, 5 to 10 times lower than the prices paid in recent auctions in Germany or the United States. Manable renewables continue showing strong performance for the total increase of 49% in hydro production in Liberia, reaching 12,500 GWh. Out of the total, more than 3,000 of them came from production from our pumping storage facilities, which continue to rise year after year, independently of the rainfall conditions, playing an increasingly relevant role to provide stability to the system and generating positive margins between pumping during peak periods and production at peak demand hours. In our commercial activity, we have continued reinforcing our PPL sales, with 3 TWh signed in the last 12 months, for a total multi-annual contract portfolio of 35 TWh per annum for the next years, with tier 1 customers from sectors with increased demand like technology, food, retail or automotive. After several years of market instability, we are now facing a more normalized environment with forward markets showing an increase in prices and in demand as well for 2025 and 2026, above the expectation included in our capital market day of last March. Electrification is driving demand increases we have not seen for the last 15 years. the international agency is expecting global demand to increase by more than 4% in 2024 and 2025, as I mentioned before. As a result, the need of more reliable grids than we anticipate is now materializing. Today, There is full consensus on the massive need of network investment. The international network investment will double globally already by 2030. And in Europe, the European Scientific Board, which, as you know, is an advisory body of the European Commission, has stated that the EU needs to double investment as well. In the UK, National Grid estimates the country must build by 2030 five times more transmission infrastructures than in the last 30 years. The initial conditions for the Rio T3 framework published last week by OVGEN shows that the regulator is aware of this need. As you know, we will send our plan by December with the final decision expected by the end of 2025. In the U.S., transmission and distribution investments are already increasing by almost 50% in the last five years. Avant-garde, in our particular case, investments have increased even more, almost doubling during this period. This institute expects a further 20% increase in the last two years, and the Department of Energy has recognized that the transmission grid must grow by at least 65% by 2035. All this is creating good growth opportunities for Everdola in all our core geographies. In Brazil, the Brazil Renewable Distribution Consent for the next 30 years with a very reasonable term has signed by the President Lula da Silva, and we expect the signature of the new contract in the first quarter of 2025. Finally, in Spain, a consultation is ongoing to modify and eliminate the current cap on distribution investment. Electrification together with a huge increase in clean energies to substitute fossil fuel plants is making power systems more volatile in terms of energy flows due to renewable intermittency. This is creating a recurring need for storage infrastructure to balance the system. If we look at the Iberian market, in the last five years, supply and demand dynamics have changed very significantly, resulting in increased intraday spread between central hours with high renewable factors and low demand, and morning and evening when there is no solar production and demand increases. We anticipated the recurring need for additional storage decades ago. As a result, today we have now pumped storage facilities in operation with more than 100 million kilowatt hours of storage capacity that provide from 300 to 150 million euros of recurring demand per annum. We have also 20 million kilowatt hours additional under construction in Iberia. There will be an operation between 2026 and 2030 and more than 150 million kilowatt hours of additional project. One of these projects, Alcantara 2, which has 16 million kilowatt hours of capacity, recently obtained 45 million euros EU funds. We are also making investment in batteries in the US and UK or Australia with plans to install at least 3,000 megawatts by 2030. Finally, we see growing demand prospect in sectors like data centers and electric mobility. Today, we have signed PPAs for more than eight terabyte hours per annum with major technology companies like Meta, Apple, Microsoft, Google, or Amazon to cover the demand of its data center in United Kingdom, Spain, Germany, United States, where demand from this industry is expected to multiply by three by 2030. This new opportunity has led us to create a company to facilitate the construction of new data centers for our customers. The prospects for electricity mobility are also very positive. The International Agency estimates that by 2030, one of every five cars will be electric, driving a very significant growth in electric demand of 1,100 terawatt hours. As you know, we are progressing in deployment of charging infrastructure, for instance, in Spain with a joint venture with BP. In the first six months, our cash flow reached 11,362 million euros, almost doubling last year's figures. Excluding the cash received as part of the Mexico transaction in 2024, cash flow was 5,125 million, 8% up in recurring terms. In our FAO, the debt ratio reached 25%. Last 17th of May, we held our annual general meeting in Bilbao with a quarter of 75%, an average favorable vote of 98%. Let me take this opportunity to thank again all of our shareholders for their involvement and support. BEM approved an increase of 11.4% in shareholder remuneration to €0.558 per share. Next July 29, we will pay a dividend complementary of €0.351. On top, the dividend already paid of €0.202 to complete this €0.558 I mentioned before. And against Mandibin, additional of €0.05 paid in June. I now hand over to the CFO, who will present the group financially in more detail. Pepe.

Thank you very much, Chairman. Good morning to everybody. As the Chairman has said, in June 24 versus June 23, EBITDA reached 9.6 billion versus 7.6 billion euros, and net profit 4,134 million versus 2,521 million euros, growing 27 and 64 percent respectively. FX evolution has had a minor effect on results. Pound rose against the euro by an average of 2.8 percent, the real 0.9 percent, and the dollar slightly depreciated. First half of 2024 EBITDA is affected positively by the sale of the Mexican assets for 1.7 billion euros, registered as a lower net operating expenses. And the impact is post-tax is 1,165 million euros. And negatively by the recovery of the retail tariff deficit, for $337 million in the first half of 2023. At the net profit, the impact is minus $558 million. In addition, in the second quarter of 2023, Iberdrola provisioned 140 million euros of deferred taxes originated by the Mexican sale. This is obviously below the EBITDA level. As a consequence, on a recurrent basis, EBITDA grows 9% and net profit 24% versus 2023, although net profit growth compared to the first half of 2023 reported net profit is 18%. Following the trend of the first quarter, a 28% improvement in procurement costs, mainly energy production and client business, versus a much lower decrease in revenues, 14%, thanks to our fixed price sales, has driven a 3% increase in gross margin to $12.5 billion, which is 4% if the $337 million UK tariff deficit recovery and reconciliation revenues in the US are excluded. As you can see in the slide, excluding Mexican capital gain, net operating expenses increased 7.7%, and 2.8% excluding not only the Mexican capital gain, but also reconciliation impacts in the U.S. due to storm costs that are recognized at the gross margin level. 34 million of positive pension adjustment accounted for in Q2 and other minor impacts. Net personal expenses increased 1.8%, but excluding... The second quarter pension went off in the UK and reconciliation impacts net personal expenses grew 3.5%. External services increased 11.4%, excluding expenses related to the Mexican transaction. Excluding also reconciliation impacts in the US and other minor impacts, external services grew 1.7%. Other operating income included the 1.7 billion Mexican capital gain. Excluding it, other operating income increased 3.7%. Levies reached 1,466 million in the first half of 2024 versus 1,658 million in the first half of 2023, positively affected by sentences in Spain, 79 million of the hydro-canon accounted for in Q1, and 183 million from the social bonus accounted for in Q2. As you can see in the slide, excluding court rulings, levies grew 4%. The recovery of levies cannot be considered as an extraordinary item, as it is a recovery of past expenses recorded as recurrent in our P&L. Iberdola has more co-ruling spending that can impact positively in the levies amount in the future. Analyzing the results of the different businesses and starting by networks, EBITDA grew 5% to 3,269 million euros, driven by a higher regulated asset base and tariffs. In Spain, EBITDA fell 3.7% at June to 814.5 million euros due to the 27 million positive regularization of the investments recognized in the first quarter of 2023. In the UK EBITDA increased 18% to £606 million with higher contribution in transmission thanks to higher tariffs and higher asset base and in distribution thanks to the new ED2 framework. In Brazil, EBITDA grew 3% to 6,161 million reais, with higher demand more than offsetting lower inflation and lower contribution of transmissions due to the consolidation of the assets as part of GIC agreement signed in the third quarter of 23. In the U.S., U.S. GAAP EBITDA increased 14% to $1,023 million, driven by the contribution of the new rate cases, mainly New York, thanks to higher tariffs. IFRS EBITDA was 1% up to $673 million, improving the 15% fall in March, with higher contribution from the rate cases more than compensated Negative timing effects due to IFRS accounting of costs, mainly commodities, that will be recovered in the next months and lower transmission revenues. Twenty-four first half results, or EBITDA, of energy production and customer business reached 6.3 billion euros compared to 4.5 billion last year, boosted by the already mentioned 1.7 billion Mexican capital gain. Better performance and also better performance, but partially compensated by a higher comparison base due to the 337 million UK tariff deficit recovered last year. As you can see in the slide, the first half of 2024 has had a better recurring operating performance than last year, 3% excluding the Mexican capital gain and 12% excluding also the impact of the UK tariff deficit. After the Mexican transaction, I want to point out that the business reached close to 90% emission-free generation in the first half, advancing in our decarbonization targets. In Iberia, EBITDA was 2,486 million euros, 20.7% up, after a good second quarter with lower procurement costs and higher manageable renewable production, more than compensating lower prices and lower nuclear output, and also held by the already mentioned core rulings. In Iberia, our non-emitting production reached 92%. In the UK, EBITDA fell 23% to 847 million pounds, affected by the already mentioned first half 23 positive one-off related to tariff deficit recovery, 297 million pounds or 337 million euros, and another negative one-off issues at our offshore wind farm east of Anglia 1. from 69 million euros accounted for mainly in Q2, offsetting the recurrent positive evolution of the business with higher contribution in wind onshore and better prices. In the U.S., EBITDA increased 22.6% to $482 million, thanks to the positive performance of our flexible generation fleet and better prices that improved results despite the 1% lower production. In the rest of the world, EBITDA grew 48.5% to 314 million euros, with a 34% higher production due to the gradual entry in operation of some offshore wind farm of around 500 megawatts and more onshore capacity installed in Poland and Australia. In Brazil, EBITDA decreased 1.7% to 825 million reais as a contribution of 261 megawatt hydro assets following the swap with Electrobras last year mostly offset the lower wind and thermal contribution. Finally, in Mexico, EBITDA reached 2.1 billion US dollars. Excluding the capital gain, EBITDA reached 239 million dollars affected by the deconsolidation of of the assets sold in February 26 that still contribute around half of what they did before the sale. EBIT grew 40% to 6.9 billion euros, including 1.7 billion Mexican capital gain, and 4.7% excluding it, compared to 4.9 billion reported in the first half of 23, and a 12.4% increase excluding the U.K. tariff deficit recovery in first half of 23. Depreciation and amortization grew 4% driven by higher asset base in networks and growth in renewables, partially compensated by an 11% lower provisions driven by a 16% lower bad debt provisions. Net financial expenses improved 25% to 848 million euros. Non-debt related results got better by 271 million. including 29 million related to the social bonus code ruling accrued interest, 115 million capitalized interest linked to work in progress that reaches 14 billion euros, and 118 million linked to FX derivatives compared to last year. And debt-related costs also improved 8 million euros as a consequence of 49 million reduction due to the lower cost of debt, minus 16 basis points to 4.89% despite the higher interest rates in the first half of 2024, partially offset by a 36 million increase due to the 1 billion high average net debt versus 23. During these first six months, Iberdola has done very successful operations in the capital markets in euros and Swiss francs, which allow us to diversify the investor base as well as maintain the duration of debt. Our reported credit metrics improved mainly thanks to a 2.7 billion decrease in our adjusted net debt to 45.2 billion compared to December 23. In the first half, strong capex, 5.6 billion, and dividend payments, 1.6 billion, have been more than offset by a strong FFO generation, 4.2 billion, and Mexican cash proceeds, 5.4 billion. As a consequence, FFO over adjusted net debt reached 25%. Our adjusted net debt to EBITDA improved to 3.06 times versus 3.32 times at December 23, and our adjusted leverage ratio decreased to 41.4% versus 44% at December 23. Net profit, excluding capital gain from Mexico, increased 18% versus reported first half of 23 net profit, and 24% on a recurrent basis. And now the chairman will conclude the presentation. Thank you very much.