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.

Thank you, Pepe. The result we are presenting today reflects the positive signals of the last few quarters and consolidates a strong double-digit growth trend across the key financial indicators, including operating profit, net profit, and cash flow. This has allowed us to expand our business, enhance profitability, and preserve our finance strength, while increasing our insurance shareholder remuneration by 14% to 0.23 euros per share. As a result of this positive momentum, today we are rising our net profit outlook for the full year to around 5.5 billion euros without capital gains from asset rotation, growing in line with the interning dividend just announced. In the last quarters, we have expected to continue benefiting from higher net worth tariff, particularly in the US and UK, and a higher asset base thanks to accelerated investment in transmission and distribution, as well as the contribution of 2,300 of new capacity, megawatt new capacity, including 1,000 megawatt from our new offshore wind farm in France and Germany, while we continue securing long-term revenue through PPAs. To conclude, I'd like to announce that we will host our next Capital Market Day in autumn 2025. By that time, we will be able to provide you with updated growth targets once we have the full integration of electricity in the Northwest The initial determination of the new transmission framework from 26 to 31, also in the UK, and the avant-garde transaction completed. In addition, after summer, we will be able to report on further progress of the construction of our key project in different countries. However, let me advance that we expect to follow our trend of the last two decades, with more investment, higher results, and higher dividends, always preserving our strong financial position. In any case, in the coming quarters, we will continue updating you as usual. Now, thank you very much, and we can start now the Q&A session. Thank you.

Now in the Q&A session, the following financial professionals have asked the following questions. Alberto Gandolfi, Goldman Sachs, Arthur Sidbon, Morgan Stanley, Fernando Lafuente, Alantra, Fernando Garcia, Royal Bank of Canada, Philippe Orpatian, Odo, Pedro Alves, CaixaBank, Daniel Rodríguez, Westinberg, Peter Vistiga, Bank of America, Manuel Palomo, BNP Paribas, Javier Garrido, JP Morgan, Victor Peyro, GFDC Gaesco, Javier Suarez, Mediobanca, Jorge Guimaraes, JB Capital, James Brand, Deutsche Bank, and finally, Jorge Alonso, Bernstein. The first question is related to the guidance 2024, drivers and concepts included in this given guidance for the year 2024.

As explained, our guidance for the full 2024 is Excluding capital gains from asset rotation. The basis of comparison of this result is net profit 4,103 million euros last year. So this growth we are expecting is in line, as I mentioned, with our interim dividend, 14-15%. And that is driven by the positive business trend of sales during the year, plus the new investment. I think we have already made $9.6 billion, as you saw in the first nine months of 2024. So, in other words, new rate cases and higher rate basis. In production and customers, additional capacity. So I mentioned already a couple of shop we found, which you know they are contributing in a very important manner to our result. And as well, they found hydro contribution as a recurring business.

The next question is related to the guidance 2025, given that in 2024 Iberdola is growing at double digit. The audience is wondering how sustainable this double digit growth is. Also, what growth prospect does Iberdola have for next year and which businesses are going to drive this growth?

So, well, we are still in this moment working in the budget. So I think we will give you details of the guidance in February. But when we will complete all this one, let's say you will have very clear details of all those things. Nevertheless, I think we can say that now we are a year ahead of our estimate, our CMD in March. So our update guidance for 2024 is higher than that one we fixed for 2025 in our CMD. And our expectation is that we will continue growing in 2025. Clearly, above the numbers we provided in March, we were on the range of 5.3, 5.4, which is today. We are announcing more for 2024. And I think that we are going to have more investment in networks and with higher tariffs. We will have more capacity fully in operation during the whole year, Sambri, Cavalti-Gigel, 12 months. Higher prices than expected, those ones we were planning. Lower interest rates. And I think overall, I think we are, let's say, optimistic that the numbers is going to be substantially higher than those we are announcing for 2024.

Another question about targets, but in this case about the plan 2024-2026 still in place. The targets for this period were presented last March. However, since March, there have been several news and updates, ENW, energy prices, etc. And we have received some questions on how these targets may change in the future.

Well, as I mentioned, we are progressing while ahead of our plan. So we are ahead of our 2025 outlook. I think in 2024 we are reaching the numbers, over the numbers for 2025. Also, we are increasing the dividend ahead of that which was planned. Also, we make all our asset rotation which was planned for It's already done. And also we have already closed relevant transactions. I think this summer was very busy. We made the ENW, we made the offshore in UK, United States. Many of those will be materialized after 2027. But I think it's already some good inputs. We will update all the numbers for the plan of after 2025 in autumn, for 2026 and beyond. And once we have already, as I mentioned, completed ENW integration, and we will have more detail of Rio T3 total investment requiring the period. But I was saying for 2025, we have positive feelings on the direction of the new targets. I think we are, let's say, optimistic about the numbers we will present to you in the next CMD.

Next is related to the guidance given about the net debt at the end of this year. There are some cash inflows in the last quarter of the year that will play an important role, but do you have in mind a range where the net debt may end at the end of 2024, Pepe?

As I was mentioning, it will depend a lot when we finish, when we complete the avant-garde transaction. If we have completed the avant-garde transaction together with the asset rotation, the debt will end up somewhere around 51 billion, more or less, if you add the avant-garde and you deduct the... The asset rotation. The only thing is that we don't have a date for that. So this will depend a little bit on when this is approved. But assuming, you know, that we have approved the avant-garde transaction before the year end and we have the asset rotation, then the debt will end up somewhere around 50, 51 billion euros.

Next is related to the acquisition of ENW. Could you please update us on the calendar to close the transaction? If there are any approvals pending, how it will contribute to results in 2024 and from 2025 onwards, how will the company be consolidated?

So I think everything is progressing as expected. CMA has already published its standard limitation for this kind of deals, but I think this standard has already admitted some exceptions, and we know this exception. which has been already agreed, important derogation of this standard limitation, including the appointment of two independent directors of the company, who we will nominate in the next few days. The only companies affected for this restriction are Scottish Power Networks, and in other words, we have no restriction to the rest of Iberdrola businesses. We are going to continue collaborating with CMA during this process, and we expect by the end of this quarter to have already all this clearance for that one. In our estimate, it's not considered in 2024 any contribution of of NWU. In any case, I think since that period of time, it will be very, very small. I think that one of the reasons we would like for making already this CMD in autumn next year is precisely once we will have inside of the company, we can already make more detail about how much this can already contribute to the group because the numbers we have already, as you can imagine, is already not as accurate as it will be when we will be inside. But I think we will keep you updated in the moment. We can already continue having more details of that one.

Next question is related to politics. What's your view on the potential outcome in the United States election and how do you think it could affect Iberdrola's plans if the Republican Party wins?

So we have a long track record in the United States. We are for many years, we've been with different administration from both parties. I think we've been in times of President Obama, in times of President Trump, in times of President Biden. So I think we've been with both political parties. But I think you have to be aware that our main business in the United States is networks. And networks is regulated by a state. We have already rate cases, already secures for 2025-2026 in distribution and transmission, which is depending on those states. And already, I think we are already working in some transmission investment for the second half of the decade, especially in New York for close to $3 billion, and $1.5 billion in New England, which is NCEC. In renewables, I think the assets are under construction. It's awarded. We have already secured for those ones the ITCs and the PTCs and the current legislation. So I think it's not new for us, whatever scenario can be produced. In any case, we will respect what the Americans will decide, as always. So we will work with the administration, and we have already done for many years.

Next is related to networks regulation, concretely in Spain. A few days ago, some news came out on the return on investment to be below that companies currently are demanding. Do you think the new regulatory framework in Spain will make the investment attractive?

Well, we are, I think, all the inputs in all the organizations from the international agency, from the American administration, from the British administration. I was last week already in an investment summit organized by the Prime Minister of Britain and the European Union. Everybody is already, yes, transmit and we are receiving a strong appetite for increasing the investment in this sector. So I think there is a huge appetite for the technology companies to sign contracts for longer periods of time with prices for work, prices above the actual one, for securing the more amount of energy. And also, I think we are receiving a good appetite for a repowering project, but we have already a positive situation with a portfolio of more than 5 gigawatts to be already repowered. So I think we are already receiving positive trends, and what we have seen is Big appetite everywhere. So I think that the money will move, whatever they will make already, more clear, stable, predictable, and attractive frameworks, which I think another day in the meeting in London with this investment summit, it was this word we're repeating repeatedly. several times for all the participants. Stability, predictability, rule of law. And that is what is making already the attractiveness to move the investment from one sector to another one, knowing that the demand of more electricity in this moment worldwide is huge, especially for new demand like data centers.

Next is again related to Spain and it's press noise about the government's intention to extend and make permanent the 1.2% revenue tax. What is your opinion on the subject and what would be the impact for Iberdola? Have you included this tax in your projection for the years 2025 and 2026?

So I think, I insist, still we are not on 2035, 2036. So I think that should be a minor, very minor thing in our estimate compared with the whole business of the group. Well, I think so far, as far as I know, nothing is approved. I think that has to pass a very long process, an uncertain process as well in the chambers, which we will see what is the result. And of course our projection for next year will be based in whatever should be real at that time. So now for the time being it's not real. It's nothing in hand. It's just rumors and noises, but nothing is concrete. In the moment, we'll be completed with introducing our expectation in our projection. But now we have much more things to include in our projection than this tax itself. But it's still uncertain that that will happen or will happen in the same manner it happened. So it's a long, long process. We have to be passed to the chambers still.

Demand is currently one of the topics that has more market focus. The audience is sending questions about whether the demand is recovering and which are the key drivers for a future demand increase in Spain and in other markets. Are data centers a game changer in the electricity demand? What would be the role of Iberdrola in this field?

So I think we are seeing that they are increasing the demand in all markets. I think we show in our numbers of distribution electricity in all countries is growing 2%, 3%. Traditionally, we are growing. in Brazil and not growing so much in the rest of the countries. Now it's growing almost in all of them. So mostly it's things of electrification of residential industrial uses, in which industrial uses, certain data, center is an important driver in some countries. But there are other drivers as well, which is electric vehicles, which is as well transforming. The massive use of heat pumps for cooling and heating homes. And I think in another one, I think very many digital processes, now we are electrified. So I think they are certain of their data centers, a huge consumption because it's 24-7. So which I think, by the way, Iberdrola is very well positioned because we can already provide this 24-7 supply to the data centers thanks of our pumping facilities, our hydro, our wind, solar, et cetera, et cetera. So the... Our point on this one is, on the case of data center, that is one of the reasons we would like to facilitate. I think we would like to help to our main customers, which now are already these technological companies, but we would like to help because we would like to facilitate and to increase the demand with that represent. That's why we are already in this business, not because we are discovering now this benzene cell, but I think it's part of one of our drivers for helping to increase the electricity demand as we are doing with the charges, with the agreement we have already with BP for expanding charges in different geographies because then it's facilitating the electrification. But all the trends makes the electrification is the word which is being used by the the director of international agency, we are coming to the century of the electrification, which we have seen that that is becoming a reality.

Next is on fashion again. Also on data centers, what is your opinion of the use of nuclear facilities, including SMRs, to supply these data centers?

So I think data centers I mentioned is 24-7. I think you need already to work 24 hours, 7 days a week, 360 days a year. So I think you need already to have very, very strong redundancies. So I think it's not a question only to have a power plant which is already providing a few hours per annum, which can be the solar, a few hours per annum or some more, which is on show, or much more hours per annum, which can be off show. But I think you need already to provide this in a continuous basis and to have already an alternative redundant system. Nuclear is providing 6,000, 7,000 a year, which I think they provide this one, not 24-7, but close to 24-7. But I think offshore is as well providing close to this 24-7, which is 5,000 hours or something like that. But I think nuclear clearly can be a solution, no doubt. where the energy policy allows us to do so. So in terms of technically, I think it's possible in Europe to extend the life of the existing nuclear power plant. I think it's another ones are making other countries to extend life up to 80 years, so I think there's not any reason why the European ones cannot be extended as well as have been extended the United States ones. But I think that requires economic analysis and as well to effort the energy policy which allow us to make that one and to make attractive to make this extension of life. But I think I insist, in the case of Iberdrola with the alternative 24-7 as well, if the policy allow us to extend, we will be ready if the economics is already make attractive this extension. Technically it's possible, and I think I understand perfectly why certain countries are already allowing to do so, because I think that is a source of energy, of electricity. In a moment the demand of electricity is growing in all the markets and expected to grow even more. I think related to small modular reactors, We know the system of those ones for a few years. I still, I think most of them are in the phase of demonstration project. And I think my opinion, I think many years ago in a study, engineering, nuclear engineering, so probably not very much updated. But as far as I know, steel is not in solution at great scale, but I think they are going to be probably by the end of the decade. So I think what I read already is certainly a thing which has been sign and agree is reactors will be in service by 2035, something else. So everything is by the middle of the next century. But certain will be a solution as another one is as well. Then it's a question of cost efficiency. So if this is more efficient, another alternative that will be used. If it's less efficient, then it will be used. So... And I think that my positive thing on that one is that the long lights of the technology companies which are already trying to secure their electricity needs for a longer and longer period. We have seen the appetite of those companies for signing PPAs, and they would like to secure electricity. then all our efforts in the digitalization and the opportunities they are seeing in the artificial intelligence in all this world are such that they would like to secure the energy sources for the next 15, 20, or 30 years. And I think they are signing with us offshore, they are signing with us onshore, they are signing with us pumping storage, and they are signing already nuclear in the countries where there are not another facilities.

Next is prices and energy sales in Spain and UK. Could you comment on what percentage of production you have locked in for 2025 and 2026 for Spain and UK, and at what level of prices? Armando?

Good morning. In Spain, the entire production to be sold this year, 2025, is already committed. For 25, it's committed 85% and 75% for 2026. Prices are slightly better than 2024 this year and also slightly better than our expectations. In the UK, we have committed all our production this year and around 80% from the years 25, 26. And prices, again, are similar to 2024, similar as our expectation.

Next is regarding the supply chains. The presentation highlights the investment in the offshore business. Are you seeing any bottleneck in the suppliers' materials, especially from the vessels? Are Chinese suppliers a reality today? Can they compete with European manufacturers?

So we are aware of the limitation of the availability of vessels to install some specific component, not for all, but especially for foundation. I think every foundation are much bigger, and I think the availability of vessel we can deal with such a huge foundation, we are having some restriction. for offshore. We have already, as I mentioned, the availability of the vessels for the three projects we have under construction, and we are closing the contract for the new projects in UK and US, which we expect to have already all those ones fully signed by the this quarter, so the last quarter of 2024. I think we are in advance. But I think for those within construction, we are fully secured as one in this one. I have to say that we are already being one of our, let's say, key competitive advantage. We have been planning in advance with anticipation. All our supply chain, we have standardized very many of our components, and that is already facilitating and securing our supply. Related to Chinese manufacturers, we have not component with Chinese manufacturers. I think we are satisfied with existing one, with those one has been our traditional one, Siemens, Vesta, et cetera. But we've been working together for more than 20 years. As you know, the procurement of turbines is not an easy thing. It's a complex process with not only the turbine itself. It includes logistics, grantees, maintenance. That is very different from solar panels. You go to the warehouse and you buy a panel that you install for your own. I think that is much more complex. Real engineering work will require tremendous skill and expertise. We have hundreds of engineers dedicated to that one. So I think it's not easy for a new vendor to come into the supply chains without passing through all these approvals, all the tests, and to give the security and the certainty. Then all this related, not only the product itself, but the logistic, the guarantee, the maintenance, the support, et cetera, works properly.

Next is a traditional one. Are you planning another M&A transaction in the horizon?

So I think we have enough with the implementation and the integration of NWU in this moment to build already all these new projects we have already won in the last few months. So I think for the time being we are focused on that one and we are working hard in this integration. We are not already in this moment in another one.

A couple of questions to Pepe. First is, could you give some more color of the non-recurring items, 254 million in the financial results, and which is the level of FFO net debt or net debt EBDA you feel comfortable in 2025 and 2026?

Okay, so let me try to explain. First, the first part is the, I would say, the $484 million, which is linked to FX and to other things. $230 million is linked to FX derivatives. A lot of that, as I have mentioned, has to do with the Mexican transaction. So the positive impact at the financial level is fully compensated at the tax level, taking into account that we have to pay taxes for this transaction in Mexico. So our tax item is growing $740 million. A lot of that has to do with Mexico. More than 200 million of the growth of this tax has to do with the FX impact in the taxes that we have to pay. So all in all, I have to say that despite that you see 230 million linked to FX derivatives, the contribution, the FX contribution in 2024 is 50 million lower than the FX contribution that we had in 2023. So, despite what you see, the FX contribution this year is lower than what we had last year. And then we have 254 million that is linked to capitalized interest and one-offs. Of these 254, 150 are capitalized interest. Take into account that this group is every year investing more and more, and as we invest more and more, part of this cost, financial cost, is capitalized. So that is one of the reasons, and the other is that we've seen higher interest rates, and the tax of the interest of what we capitalize, this interest, is slightly higher than in previous years. So that explains 150 million out of the 254 million. Then we'll have another 50 million. that is linked to regulatory assets. A lot of it related to debt collections. When you are not collecting debt, especially networks, you get paid by the regulator. So that is a part of the 50 million, an important part of the 50 million of regulatory assets. And then there is some 50 million that are miscellaneous and some positive financial impact given the crisis court sentences that we have been receiving that we have to account part at the levied levels and part at the financial cost of delay of the payment is linked to the financial income. But I would say at least 150, at least 250 million is linked to either capitalized interest and regulatory assets, especially debt collections delays. And regarding the, well, I think that we are comfortable at levels of somewhere 22, 23%. And this is how we are expecting to end the year. That gives us a very comfortable triple B plus ratio given the profile of the group, no?

I'm trying to be on time. Last question is related to the Draghi plan. Have you gone through the Draghi plan and what do you believe is the role of the electrification in it? How much of it do you believe could be implemented?

So I think the energy transition he mentioned already clearly is an opportunity for Europe. so I think that we need in Europe more electricity, more energy security, more independence in our supply of electricity after the shocks. We have already the crisis we have suffered the last few years. I think this needs, that can help to increase the competitiveness of Europe. I think he's mentioned already better prices, and better prices mean less taxes, less charges, a better mix of power generation, so less fossil dependence to avoid volatility. And I think that gave us, well, another thing is the opportunity for industrial deal in Europe. So transforming the economy into an economy more, let's say, clean is opportunities for new industries, opportunities for new jobs. And that is what the European Union is working on with this industrial deal we would like to present in a hurry. And the consequence of that one is the carbonization. I think it's the dragging, what he's saying. And I think another day on the investment summit of UK was a similar thing. I think it's a clear opportunity. through the electrification and to use the energy transition for improving the European innovation, to improve the European competitiveness, to improve the European autonomy, And the consequence is that they decarbonize also our economy. I think new jobs, new industrial, new industries, and I think that is what the report of drug is mentioned, and the British is already looking for as well in the same direction. And that is what the International Agency has mentioned already in the last report. So more demand of electricity than expected and more opportunities for those countries which are moving fast and they are moving in the right direction.

Okay, still there are a few pending questions that will be answered by us, the IR team. Now please let me now give the floor to Mr. Galan again to conclude this event.

So thank you very much again for taking part in this conference call. I hope that we have further replied to all your questions. And in any case, our investor relations team will be available for clarifying whatever additional information you may require. Thank you very much and see you soon. Thank you.