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 nine-month 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. Finally, we expect that today's event will not last more than one hour. 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 nine months, our reported net profit reached €5,471 million, up by 50%. We reported the BIDA reaching €13,269,000,000. In recurring terms, EBITDA increased by 11% to €11,551 million, driven by strong operating performance across all our businesses. We continue increasing our regulated profile and we network EBITDA up by 11%, thanks to a higher rate base and tariff increases, especially in the UK and the United States. Energy production and customer is also up 11% as a result of short new capacity in France and Germany and a better contribution from Iberia. Investment in US and UK have significantly increased our exposure to A-rate countries, which now accounts 82% of our recurring EBITDA. We also made substantial progress to reinforce our financial strength. with total cash flow of 13,821 million euros, up 16%, including the proceeds for NASA rotation during 2024. Recurrent FFO increased by 13% to 8,888 million euros, leading to an FFO to adjusted net debt ratio to 25.3%. and our current liquidity position remains solid, totalling over 22 billion euros, more than enough to cover 20 months of financial needs. Investments continue accelerating over the last quarter with a clear focus on long-term growth. By September, organic investments are up 12%, reaching 8.6 billion euros, more than half allocated to networks. And we have recently completed key transactions in the UK and the US to continue strengthening our profile based on regulated activities around 10 contracts with revenues secured for 15 to 20 years. Yesterday, we closed the acquisition of Electric Northwest, strategically expanding our presence in Britain. On top of that, the purchase of avant-garde minorities was approved by more than 99% of the shareholders of the company at the annual general meeting. And in renewables, we want two new offshore wind projects adding 1,000 megawatts in the UK and 100 megawatts in the US that will be operational between 2028 and 2029. All in all, hybrid dollar performance up to September and our outlook to the end of the year have led us to increase our interest shareholder remuneration by 14% to 0.23 euros per share. As mentioned, reported VINDA increased by 23%, reaching 13,269 million euros, with an 11% growth in recurring trends guided by strong performance across all businesses and geographies. Network recurring EBITDA also grew by 11% thanks to tariff increases mainly in US, UK, and Brazil in the high asset base. In renewables, we continue registering records of production. So far this year, we have already more than 2,300 of new capacity, mainly offshore wind, including the full commissioning of 500 megawatts in France and the installation of all turbines of Baltic Eagle in Germany, reaching total capacity of 436 megawatts as well. Our hydro reserves remain well above average levels, and our pump and storage facilities are showing an excellent performance of 23% year-on-year. Finally, we will continue to grow our long-term PPA portfolio with the industrial customer providing a predictable revenue stream. This growing operating result was driven by new investment mailing networks, with 4,194 million euros invested, 25% up year-on-year. Out of these, 40% was allocated to the United States, with around 25% invested in Brazil, a similar percentage in the UK, and the rest in Spain. Around 60% of NERGO's investment correspond to distribution, and the remaining 40% to transmission, after a 70% increase in this activity due to the additional investment in the NCEC project in the United States. As a result, our NERGO assets base grew by 7% up to September, reaching 47.6 billion euros after the closing of the ENWU transaction. With the UK and United States as main contributors, together both countries already represent 60% of our global network assets. Investment in new power generation reached 4 billion euros, well diversified by geographies and technologies. With more than 50% allocated to UK and United States, after a combined 35% increase in these two countries, mainly driven by offshore wind. We also made several moves to provide further growth over the second half of this decade, like the acquisition, as I mentioned, of electricity in the Northwest, located between our two current UK distribution licenses in Scotland and England and Wales, and seven relevant urban areas like Manchester. And the purchase of aborigines and minorities, which we expect to finalize in the next two, three months. On top of this, the UK and United States continue providing us additional investment opportunities in transmission. In Britain, next December, we will present our plan for Rio T3 from 2026 to 2031, which investment may triple the amount of the current regulatory period. In the United States, we have the transmission investment approved in New York that could reach $3 billion up to 2030. In offshore wind, we are on track to triple our installed capacity by 2030, reaching 6,500 megawatts just with the project we already have under construction, including the two new offshore wind projects of New England 1 and the Coastal Massachusetts and East Anglia 2 in the United Kingdom. We have also finalized two storage facilities in Santiago Jarez and Valparaiso in Spain, adding around 2 million kilowatt hours capacity. And we continue increasing our portfolio of long-term PPAs, having signed since January more than 5 TWh per annum with Tier 1 companies from different industries like technology for an average of 15 years. As of today, we have already supplied 10 TWh per annum to tech companies covering their energy needs related to data and artificial intelligence. Building on this long-term relationship with companies from the technology sector, we have a well-advanced conversation for the creation of a new venture to facilitate then additional data center capacity in Spain. A bedroller will contribute with land and network connection, participating also in the design and licensing processes, and guaranteeing a renewable energy supply 24-7 from our existing portfolio or new dedicated assets. The partner will hold the majority of GB, being responsible for the construction, the operation, the commercialization of the data center. In just a few months, we have already secured 650 megawatts of capacity in first-class locations around Madrid and the region of Aragon in the north-east of Spain. We have pipeline for more than another five guillabatagos. We expect to give you more details soon on this business, what we already analyze in other geographies, given its potential as well. Implementing all these new investments and projects requires strong access to supply chains, especially in today's market conditions. In this context, our procurement planning and processes have allowed us to secure already close to 90% of all our network and renewable supplies through 2026, including all contracts for our offshore wind projects, which cover logistics and installation. 85% of our onshore wind turbines and solar panels, and 95% of our procurement needs for transmission and distribution. Additionally, we have made a significant process for our procurement plan beyond 2026, with 90% of the key contracts for our new offshore wind project in Sanglia II and England I already secured. Also, in onshore renewables, where bottlenecks are less severe, we have a framework agreement that enables us to secure supply chains as we reach final investment decisions. And in networks, we have framework agreements, firm offers, and pre-contracts, allowing us to secure the relevant investment expected in atomic regulatory periods. which will increase more and more as electrification accelerates, particularly in our key geographies. As the Secretary-Director of the International Agency of the Residential State, we are entering in the age of electricity. Or as I have repeated for years, the 21st century will be the century of electricity, just like the 20th century was the century of oil and the 19th century was the century of coal. Growth potential is immense, with electricity moving from 20% of the total energy consumption today to 40% in just two decades. As a result, the World Energy Outlook, just published by International Energy Agency, predicts that energy investment will grow from $330 billion to at least $700 billion per annum by 2030, with renewable investment more than doubling as well. Beltman and regulators on both sides of the Atlantic are recognizing the potential of electrification to improve strategic autonomy and competitiveness and reduce emissions, leading them to implement new frameworks to attract the massive investment needed. That is the case in the United States. The National Transmission Plan recommends multiplying the size of the transmission system by at least 2.5 times by 2050. And the Federal Administration continues creating new incentives. So far, the RA and the bipartisan infrastructure bill have led to more than 200 billion euros of investment. In United Kingdom, the new government has said very clearly that the power sector will be a key driver in its strategy to grow and in re-industrialization. As a result, they are preparing new measures to accelerate planning processes, facilitating the massive investment required to reach net zero by 2030. In renewables, up to 60 gigawatts in the case of offshore wind, according to the government target. In transmission, we reutilize three approval processes on track, as mentioned, and in distribution. In the European Union, the recent Draghi report states that clean electrification can be a massive factor for European competitiveness, and in the coming months, the Commission will present its vision for a new clean industrial link. In parallel, the European Union continues to clarify which investment can and cannot be considered green, helping investors make informed decisions and avoiding greenwashing. In this sense, the European Security and Market Authority, ESMA, recently issued new more restrictive guidelines to label investment as ESG. As you can see in the annex to this presentation, Iberdrola meets all these guidelines. In Spain, the new energy and climate plan submitted to Brazil confirms ambitious targets for the new renewable deployment, based on significant increase in demand and electrification. For this reason, the plan also calls for additional network investment. We expect the new regulations underway in this business will create the right incentives to make this happen. Finally, in Brazil, the government is making positive progress on the renewal of distribution concessions and the draft terms for the new contracts published by consultation are in line with our expectations. The process will be completed by the second quarter of 2025. Moving to financial structure, total cash flow reached 13,121 million euros, up 16%. With recurring funds for an operation up 13%, to 8,188 million euros, after excluding the impact of asset rotation and the recovery of UK retail deficit in 2023. Cash generation has allowed us to improve adjusted net debt to 46.7 billion euros, and we have over 22 billion in liquidity, which is sufficient to cover our financial need for more than 20 months. Driven our excellent business performance and strong financial position, our board has approved a 14% increase in internship holder remuneration, reaching 0.23 euros per share, who will be paid by the end of January. As usual, on top of this figure, next summer we will pay a supplementary dividend that will be approved in the annual shareholder's meeting. I will now hand over to our CFO, who will present the group financial reasoning for the detail.

Thank you, Chairman. Good morning to everybody. In the first nine months of 2024, as the Chairman has said, versus last year, EBITDA reached €13.3 billion versus €10.8 billion. In the first nine months of 23 and net profit, 5,471 million euros versus 3,637 million euros, growing 23 and 50% respectively. FX evolution has had a minor negative effect on results as they are already mostly hedged. The real has depreciated 4.5% and the dollar 0.2%, partially compensated by a 2.2% appreciation of the pound. A 25% improvement in procurement costs, mainly energy production and client business, versus a much lower decrease in revenues, 11%, thanks to our fixed price sales, has driven a 5% increase in gross margin to 18 billion euros, improving the growth trend of the first semester, where gross margin was up 3%. Net operating expenses, excluding Mexico capital gain, rose 5.3%, and 3.7% excluding not only the Mexico transaction, but also reconciliation impacts in the US due to the storm costs that are recognized at the gross margin level, positive pension adjustments, and other Q3 impacts. Net personal expenses increased 1.9%, but excluding pension one-offs in the UK and the US, reconciliation impacts and other minor impacts, personal expenses grew 4.5%. External services increased 7.3%, excluding also reconciliation impacts in the US. Another Q3 impacts, external services grew 1.6%. Another operating income increased 2.5%. On a reported basis, net operating expenses improved 34%. Reported levies reached 1,924 million euros in the first nine months of 2024 versus 2,076 million last year, improving 7%. Positively affected by sentences in Spain, 79 million on the hydro-canon accounted for in Q1 and 183 million from the social bonus accounted in Q2. Excluding these court ruling levies grew 5% driven by the higher hydrocaron as we have been producing more hydro, the 7% tax on Spanish production and the windfall tax in the UK. Analyzing the results of the different businesses and starting by networks, its EBITDA grew 11% to 4,875 million euros, more than doubling the 5% growth in June, after improving in Q3 in all countries, but especially in the US and Brazil. Brazil accounts 32% of total EBITDA, followed by Spain, the UK and the US. But if we consider recent ENW transaction, the UK will increase its weight to 27%. In Spain, EBITDA fell 1.7% at September to 1,226 million euros, improving versus the 3.7% fall in June, thanks to a higher asset base and diluting the negative impact of the 27 million positive one-off recognized in the first quarter of 2023. In the UK, EBITDA increased 20.1% to £922 million, with higher contribution in distribution thanks to the new ED2 framework and almost 4% higher demand and better net operating expenses thanks to a £58 million impact of a recovery of a provision made in Q3-23. In Brazil, EBITDA grew 18%, improving the 3% rise in June to 8,810 million reais, with higher demand and higher tariffs in distribution and transmission, positively affected by a 983 million reais negative one-off accounted in Q3-23. In the U.S., U.S. GAAP EBITDA increased 18.5% to $1,491 million, driven by the contribution of the new rate cases, mainly in New York. IFRS EBITDA was 14% up to $1,088 million, with higher contribution from rate cases, more than compensating the negative timing effect due to IFRS accounting of costs, mainly commodities that are being recovered. There is also a $27 million positive one-off in pension expenses in Q3, only in IFRS. 24 nine-month energy production and customer business EBITDA reached 8.4 billion euros compared to 6.4 billion last year. As you can see in the slide, this has been a better recurring operating performance than last year. I want to point out that the business reached close to 85% production emission-free in the first nine months, advancing in our decarbonization targets. In Iberia, EBITDA was 3.7 billion euros, up 17.4%, with 5.7 terawatt-hours higher manageable renewable production, including pumping storage, lower procurement costs, and already mentioned positive impact of court rulings. More than compensating lower prices and a 10.5% lower nuclear production, driven by market conditions. 91% of the production in Iberia was non-emitting. In the UK, EBITDA fell 20% to 1,079 million pounds, affected by the already mentioned positive one-off related to tariff deficit recovery in 2023 and another negative one-off issue at our offshore wind farm east of Anglia 1 that is already solved, not showing the recurring positive evolution of the business with higher contribution in wind onshore and better prices, partially offset by the windfall tax. In the U.S., EBITDA increased 44% to $812 million, thanks to the positive performance of our flexible generation fleet and better prices that improved results despite the fact that renewable production was only slightly higher, around 1%. In addition, net operating expenses improved 16%, benefited from the negative non-recurring break-up costs at the U.S. offshore wind farms accounted in Q3 of 23. In the rest of the world, EBITDA grew 48% to 448 million euros, with 36% higher production due to the entry into operation of Zanbroek offshore wind farm at full capacity since May, and more onshore capacity installed in Poland, Greece, and Australia. In Brazil, EBITDA decreased 7.8% to R$ 1,240 million as the contribution of a hydro-asset following the swap with electrobus and higher wind resource after a good Q3 is not enough to offset the lower thermal contribution. Finally, in Mexico, EBITDA reached $2.2 billion. Excluding the transaction, EBITDA reached $306 million, affected by the consolidation of the assets sold on February 26. But the remaining assets still contribute around half to the previous contribution. EBIT grew 33% to 9.1 billion euros and 14% on a recurring basis. DNA grew 6%, driven by higher asset base in networks and higher provisions. Net financial expenses improved 514 million euros to 1,152 million euros. Debt-related costs improved 30 million euros as a consequence of a 69 million reduction due to a lower cost of debt. 14 basis points, 26 million linked to FX, mainly due to the Brazilian real depreciation, partially offset by a 65 million increase due to 0.5 billion higher average debt versus 23. And not debt-related results got better by 484 million, including 230 million linked to FX derivatives. I want to point out especially due to the Mexico peso that was hedged. due to the big transaction that we did, which is fully compensated at the tax item. So there is a big gain here at the Mexican peso, but it is fully compensated in the tax item. And a lesser strength due to the real. And another 254 million related to capitalized interest, driven by higher investments, especially east of Anglia. Three and one offs. During these first nine months of 24, Iberdrola has done very successful operations in the capital markets, which allow us to diversify the investor base as well as maintain the duration of debt. This is a trend that we expect to continue. And as the chairman has said, as we comply with the new ESMA requirements. In the annex, you have the details of how Iberdrola complies with the new ESMA requirements as a genuine green investment to be included in the ESG funds. Our reported credit metrics improved thanks to a 1.2 billion decrease in our adjusted net debt to 46.7 billion compared to September 23, together with the growth of our FFO, as the chairman has explained. As a consequence, FFO adjusted net debt reached 25.3% versus 23.2% one year ago. Our adjusted net debt to EBITDA improved to 3.1%. versus 3.3 times, and our adjusted leverage ratio also got better to 42.6% versus 44.4% at September 23. Our previous guidance for 24-year net debt was 47 billion. For year-end, non-organic growth will be increasing net debt with the ENW acquisition, 2.5 billion euros already paid yesterday. The acquisition of avant-garde minorities for 2.3 billion is expected to happen either at the end of this year or in the first quarter of 2025. But we are also expecting to finalize more asset rotation between December and the first quarter of 25 for around 25, sorry, for around 2 billion. That will be offsetting partially the impact of the non-organic growth acquisitions. We have different scenarios depending when average minority is finalized and when we will account for the asset rotation. But in any case, let me stress that in any case, we will remain with a comfortable rating of BBB plus BAA1 rating level. Also helped by the improvement of our business profile with more regulated assets in countries with better ratings. Net profit excluding 1.2 billion net Mexico transaction was 4,300 euros, increasing 18% versus the reported nine months of 23 net profit. On a recurring basis, net profit grew 22% from 3.5 billion in 23 to 4.3 billion in 24. In the annex, you have a slide also with the inter-individuum calendar. Now, the chairman will conclude the presentation. Thank you.