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 fiscal year results presentation. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period given by the top executive team that usually is with us. Mr. Ignacio Galán, Executive Chairman, Mr. Armando Martínez, CEO, and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web, so please ask your question only through our webpage, www.iberdrola.com. Finally, as today is a very busy day for all of you, given the many companies reporting results this morning, we expect that our event will not last more than 60 to 70 minutes. If any questions remain unanswered, we at IR are, as always, fully at your disposal. Hoping that this presentation will be useful and informative for all of you, now, with further ado, I would like to give the floor to Mr. Ignacio Galán. Thank you very much again. Please, Mr. Galán.

Thank you very much, Ignacio, and good morning, everyone, and thank you, everyone, for joining us today. We are today presenting the result of an extraordinary year. Driven by our ordinary operations with a strong performance across all our business and geographies, but also due to the extraordinary factors in 2024, we took a huge step in the execution of our strategy using the proceeds from the investment of thermal generation. to accelerate with these resources growth in networks in the U.K. with the electricity in the U.S. transaction and the U.S. where we acquire our green minorities. In addition, as a result of our customer-prudent accounting practices, we made 1.1 billion euros on non-cash adjustment and efficiency measures which offset the capital gains from the investment made and will enhance our future earnings. As a result, our reported net profit reached 5,712 million euros, up 17%. Reported EBITDA also increased by 70%, up to 16,148 million euros, driven by a new record in investment up to 17 billion euros of this total 12 billion euro organic investment. and 5 billion were the result of the two corporate transactions already mentioned in the U.S. and U.K. Operating cash flow reached 11,136 million euros, up 10% in recurring terms, allowing us to combine growth and financial strength with FAO-autoyasted net debt close to 23%. To secure this growth, last year we also made record purchase total in 7,153 million euros, more related to the investment that will mature in 2026, probably fewer than in 2027. All in all, this strong performance is leading the board to propose to the General Shareholders' Meeting a total dividend of 0.635 euros per share, up 15%. Moving to operating results, the 70% increase in EBITDA reflects our growth in all our business and geographies. Electricity production and custom benefit from 2,600 of additional renewable capacity, including more than 700 of offshore wind sold through a diversified portfolio or route to market, mainly CFDs and long-term PPAs with tier one companies like Meta, Microsoft, or Amazon. As well as the excellent performance of our pumping storage facilities, we generate almost six terabyte hours in market with growing intraday price spreads, as we predicated in our last Capital Market Day. Networks operating results reflect rate increases across all geographies. In a higher asset base, mostly in the U.S. and U.K., after 11 billion invested in the last 12 months, almost doubling last year's figures. Networks organic investment increased by 21% to 62 billion euros, of which almost 60% was allocated to distribution. Mainly in the U.S. were invested 1.5 billion, driven by New York rate case, and U.K. were invested 700 million. The remaining 40% correspond to transmission investment also due to the growth in the U.S. with more than $1 billion invested in New York and in ESC interconnection between Massachusetts and Canada. In the U.K., where investment reached $100 million mainly in Rio Chichu project and the Eastern Green Link subsea cable. Additionally, we allocated $5 billion to electricity in the West in avant-garde transactions as mentioned. All in all, our network-regulated asset base increased by 60 percent to 49 billion euros, with two-thirds in the U.K. and the U.S. U.K. RAP reached 15 billion, up 45 percent, given by the electricity and waste transaction and organic investment, followed by U.S. with 14 billion euros, Brazil with 10 billion, and Spain finally with 9 billion. Growth in the U.S. and the U.K. was also the main driver of renewable investment, which reached $5.4 billion with almost $2 billion allocated to offshore wind. U.S. investment increased by 37% to $1.5 billion, mainly in our binyard wind offshore wind farm, which is on track to be fully operational in 2025. Also in the U.S., we completed more than 750 megawatts of solar PV and made significant progress on the construction of 1,500 wind and solar megawatts, all of them with supply chains, tax credit, and PPS secures. Following this increased investment in 2024, we do not expect to start new renewable projects in the U.S. in 2025. In the UK, investment reached 1.2 billion, mainly in this Anglia II, and three offshore wind farms, which, as you know, obtained CFDs in last auction. We also invested 1.4 billion in Iberia, putting in service 1,000 new megawatts with 500 more under construction, mostly with partners and PPA secure. In addition, we completed 2 million kilowatt hours of pumping storage capacity at Santiago Jarez and Valparaiso projects. In Germany, we completed the Baltic Eagle offshore wind farm with 476 megawatt of installed capacity, and we continue investing in Windacker, which will add 350 megawatt to our portfolio next year. Finally, in Australia, we commissioned 145 megawatt wind capacity, and we have 375 more under construction. In total, as December, our balance sheet includes 9 billion euros in renewable projects and construction that will begin contributing to results in 2025 and 2026. To guarantee the delivery of this ongoing project and the access of supply chains for new investment in 2024, we made purchases worth 18 billion euros. More than 14 billion of these purchases relate to investment that will be made in 2025 and beyond, allowing us to secure 100% of strategic contracts for all our projects under construction in networks and renewables. mainly through framework agreements that give us full certainty on availability and prices with minimal financial commitments. In addition, 88% of the companies in our supply chains comply with all our sustainability criteria. We will continue increasing the share of local suppliers, covering now 82% of the total purchase. As a result, we expect virtually no impact for new tariffs in the U.S., given our focus on American supply chains and the protection clause included in our contracts. Finally, we are already working to secure supply chains for protects after 2036, given the strong demand in global markets, especially for networks in the U.S. and the U.K., In particular, in Britain, we have guaranteed access to purchase worth 6 billion euros monthly for transmission investment in the next regulated period we will start in 2026. As mentioned, the corporate transaction completed in 2024 had accelerated the delivery of our strategy. Expanding our present network business in the U.S. and the U.K., we thanks obtain from the investment our thermal generation assets and preserving our financial strength. After the acquisition of electricity in the West and avant-garde minorities, our combined net worth asset base in these two countries reached 30 billion euros, or 60% of our total regulated asset base. Enhancing our position ahead of a huge investment opportunities in transmission and distribution in the US and the UK that will exceed 41 billion euros by 2030 with around 52% in distribution and remaining 48% in transmission. In the U.S., the total network investment will reach €19 billion both in distribution in your main and Connecticut and in transmission mainly in the NCEC interconnection, a new project in Europe. On top of our ongoing investment, network investment in the U.K. will reach €22 billion by 2030, mainly in transmission multiplied last year's triggers by two times, by four times due to the Rio T3 and major projects like Eastern Green Link. Investments are also expected to grow significantly in distribution driven by Rio ED2 and ED3 frameworks. In addition, we will continue increasing our footprint in the U.S. and the U.K. through renewable projects already under construction, which will imply a total investment of €10 billion. Our sustained increase in cash flow generation will allow us to finance all this growth and preserve our financial strength. Even in the year record of investment in 2024, our FFO over net debt ratio remained in 23% thanks to a 51% rise in operating cash flow to 60.7 billion euros. Recurrent cash flow increased by 10% to €11,836 million, and we have €20 million of liquidity enough to cover 22 months of financial needs. The combination of sustainable growth and financial strength is leading the Board to propose a 15% increase in the dividend corresponding to the full year 2024 result, up to €0.635 per share. 50% above our dividend flow for the period and reaching 2026 estimated two years ahead of schedule. The proposed supplementary dividend to be paid in July will reach 0.404 euros per share on the top of 0.231 euros already paid three weeks ago. Also, in line with previous year, we expect to maintain our engagement dividend linked to attendance to AGM, which in 2024 amounted five euros per every thousand shares. And we continue to combine shareholder rumination with growing social dividend, creating industry and jobs, contributing to public finance, and promoting innovation and sustainability across the communities. In 2024, we incorporated 6,000 people in our workforce, including more than 2,100 from electricity to the Northwest. And we made 18 billion euros of purchases mentioned to 1,000 suppliers that employ 500,000 people. We also made a record tax contribution exceeding 10 billion euros for the first time in our history, driven by a 16% increase in taxes charged to our income statement. And our commitment to equal opportunities was recognized by the top employers and the H certificates. Regarding innovation, Iberdrola was nominated by the European Commission as a private utility with the highest investment research and development worldwide for the third consecutive year after dedicating more than 500 million euros for this effort in 2024. Finally, we continue minimizing our carbon footprint, reaching levels close to net zero. In Europe, our CO emission decreased once again to only 38 grams per kilowatt hour, which is five times less than European Union average. This commitment to social responsibility is being recognized by the most prestigious institutions. Recently, Standard & Poor's ranked Iberdrola as the top utility worldwide in its Dow Jones Basin Class Index, based on a wide range of social, environmental, governance, and ethics criteria. I will now hand over to our CFO, who will present the good financial results. Thank you.

Thank you, Chairman. Good morning to everybody. As the Chairman has outlined, 2024 results were strong, both in reported and adjusted terms, underpinning the underlying growth of the business. In reported terms, 2024 net profit reached 5.6 billion, growing 16%, and adjusted net profit was 82 million lower and grew 15.1% to 5,530 million. Net operating expenses, net positive adjustment, mainly capital gains from our thermal generation asset divestment, has been mostly compensated by other negative adjustments and efficiencies below the EBITDA level, mainly in onshore renewables in the U.S. Given the delay in developing the onshore pipeline, as we will have less renewable growth as we prioritize especially investments in networks and in repowering. As a consequence, both EBIT and net profit are slightly lower in adjusted terms versus reported terms. This is not new in Iberdrola's strategy, as we try to compensate for extraordinary positive results with efficiencies and adjustments that help the group continue growing on a recurrent basis in the following years. For example, last year, and to a lesser extent, we compensated in Brazil capital gains due to an exchange of assets with a cleanup of higher costs and delays in transmissions due to COVID that we are trying to recover in the future. For transparency purposes, you can see in the slide the reconciliation between reported and adjusted 24 figures in our P&L. Main difference between reported and adjusted figures at the BIDDA level is 1.6 billion euros, as net operating expenses include 1,745 million net capital gain, mainly as commented in thermal generation asset divestment, and other ones related to other minor transactions. In the U.S., gains of €77 million. In Brazil, losses of €51 million, as well as minus €111 million related efficiencies in Spain. This 1.6 billion difference is almost compensated at EBIT level, as DNA includes 1.5 billion negative adjustments and efficiencies mainly related to the U.S. onshore business and other renewables out of the U.S. due to the greater focus and networks and the expected delay in developing the pipeline mainly in the U.S. As a consequence, the difference between reported and adjusted EBIT is reduced to 132 million. At net profit level, the difference is just 82 million. Consider tax and other minorities' impact of adjustments. As a consequence, 24 adjusted net profit grew 15.1% to 5,530 million, slightly over our 5.5 billion euros last guidance update. In the annex, you will find an even more detailed reconciliation between reported and adjusted income statements. And now starting to go into the P&L analysis, a 20% improvement in procurement costs, mainly in energy production and client business, versus a much lower decrease in revenues, 9% only, thanks to our fixed price sales and the growth that comes from our network business, has driven a 2.5% increase in gross margin to 24 billion euros. As you can see in the slide, on reported basis, net operating expenses improved 27%. Net operating expenses, excluding capital gain impact, as explained in the previous slide, as well as other adjustments and efficiencies, improved 27%. 0.7%. Adjusted net personal expenses improved 2.6%, excluding Q4 efficiencies impact. Adjusted external services increased 3.5%, excluding expenses linked to the thermal generation asset divestments. Adjusted other operating income increased 12.8%, excluding the positive 1.7 billion impact from thermal generation asset divestment driven by recoveries and indemnities. Reported levies reached 2,567 million in 2024 versus 2,748 million in 2023, improving 7%, positively affected by sentences in Spain already accounted in our nine-month result, 79 million positive of the hydrocanon and 193 million for the social bonus. Excluding these court rulings, levies grew 3%, driven by the higher hydrocarbon, the 7% tax on Spanish production, and the nuclear waste tax and the windfall tax in the U.K. As you can see in this slide, Spain is by far the country where we pay the highest levies, 57% of the levies paid by the group worldwide. This, as mentioned previously, is the main reason why electricity in Spain is more costly than in other geographies. Analyzing the results of the different businesses and starting by networks, its EBITDA grew 7% to 6,423 million euros, driven by higher regulated asset base and tariffs. Brazil accounts for 33% of total EBITDA, followed by Spain, the UK and the US. But if we consider recent E&W transactions, the UK would have increased its weight to 28%. In Spain, EBITDA was 1,542 million euros, minus 0.7%, as our operating performance was in line with the three, but affected by negative impact of the regularization of past investments. In the UK, EBITDA increased 5.6% to 1,239 million pounds, with higher contribution in distribution thanks to the new ED2 framework and growing demand. There is also a partial recovery of a provision made in the Q3 of 23, a net operating level. 2024 does not include EBITDA contribution. In Spain, EBITDA grew 23%, improving the 18% rise in September to R12,157 million, with higher demand and higher tariffs in distribution and transmission, positively affected by a R2,148 million negative one-off in 2023 related to transmission. In the U.S., U.S. GAAP EBITDA increased 2% to $1,191 million, as there is an improvement in contribution from the new rate cases, mainly in New York, thanks to higher tariffs. IFRS EBITDA was 5% lower to $1,439 million. With higher contribution from rate cases, partially compensated a negative timing effect due to IFRS account and higher costs. The variation versus Q3 is due to a positive Q4 in 2023 due to the recognition in that quarter of higher tariffs in New York since May 23. Energy production and customers' business EBITDA reached €10,000.5 billion compared to the €8.6 billion last year, driven by divestments of thermal generation assets and better business performance. In adjusted terms, there is a 2% growth, despite the fact that there was a £341 million positive one-off in the UK last year. I want to point out that the business reached close to 84% emission-free generation in 24. In Iberia, EBITDA was 4.6 billion euros, 8% more due to the 4.7 terawatt hours higher manageable renewable production in 24, including pumping storage and lower procurement costs compensating lower prices. 90% of our production in Iberia was non-emitting. In the UK, EBITDA fell 15.7% to £1,530 million, affected by the £341 million positive one-off related to tariff deficit recovery in 2023, as I mentioned in the previous slide. Excluding that, EBITDA increased 3.8%, thanks to higher production and wind onshore and better prices. partially offset by higher windfall tax and £150 million negative operating issues in offshore already fixed. In the U.S., EBITDA increased 43% to $1,059 million, thanks to the positive performance of our flexible generation fleet and better prices that improved results with our renewable production increasing 3%. In addition, in Q4, there is a positive 92 million capital gain from the partial sale of Kitty Hawk, an offshore seabed. In the rest of the world, EBITDA grew 72% to 721 million euros, with 31% higher production due to the entry into operation of Sandbrook Wind Farm, at full capacity since May, and more onshore capacity installed in Poland, Greece and Australia. In Brazil, EBITDA decreased 30% to 1,318 million reais due to the capital loss of Baixo Iguazu's sale and lower thermal contribution. Finally, in Mexico, EBITDA reached 2.3 billion U.S. dollars, excluding the divestment. EBITDA reached 459 million dollars affected by the sale, and the consolidation of the assets sold from February 26th, but the remaining assets still contribute around half of what they did previously. Mexican business continued to use dollar as a functional currency. Reported DNA and provisions grew 31% to 7.1 billion euros, mainly due to already mentioned 1.5 billion provisions related to onshore renewable assets, mainly in the U.S. Excluding 1.5 billion adjustments, DNA provisions grew 3% to 5.6 billion euros. as adjusted provisions include $141 million, mainly due to lower bad debt provisions, while depreciation and amortizations grew 6.8% in line with our higher asset base in networks and renewables. EBIT reached 9,729 million euros and grew 8%. As you can see in the slide, 1.7 billion net capital gain, mainly thermal generation asset sale, has been almost compensated by 1.6 billion euros different adjustments mainly in the U.S. on shores and inefficiencies. As a consequence, adjusted EBIT grew 7% to 9.6 billion euros, 132 million below the reported EBIT. Net financial expenses improved €612 million to €1,575 million. Debt-related costs improved €60 million as a consequence of €55 million reduction due to lower cost of debt. Sixteen basis points. 57 million linked to FX, mainly the Brazil depreciation that compensates lower EBITDA in euros. Partially offset by a 52 million increase due to 0.2 billion higher average net debt. and non-debt-related results got better by 552 million, including 280 million linked to FX derivatives, that in 2024 are 90 million positive versus 120 million negative in 2023, mainly due to the divestment of thermal generation assets in Mexico compensated at tax level. It is important to point out that the thermal generation asset divestments was in dollars, but for tax purposes it was in pesos, so hedges were needed. And there is another 272 million positive due to capitalized interest, 163 million euros and one-offs, 67 million mainly due to court rulings. Our reported credit metrics remain strong, driven by higher FFO, compensated higher debt. Iberdola rating remains in the BBB plus BWA1 rating. Level also held by the improvement of our business profile with more regulated assets in countries with better ratings. 24 credit metrics were as follows. FFO adjusted net debt reached 22.9%. Our adjusted net debt to EBITDA remained in line with last year at 3.4 times, and our adjusted leverage ratio increased slightly to 41.4%. Our net debt has evolved from 47.8 billion at the end of 23 to 51.7 billion at the end of 24. As you can see in the slide, our 11.8 billion cash flow generation compensated gross investments and our 6 billion asset rotation funded non-organic investments. Let me also highlight that 24 net debt includes 15 billion of work in progress that it is not still contributing to cash flow generation in the plant, but it is the source of future growth. 24 reported net profit grew 17% to 5.6 billion euros compared to 4.8 billion reported net profit. In this slide, you can see net of taxes, how the net capital gains 1.1%. 1,184 million mainly thermal generation asset sale that was already in an account since September results has been almost compensated in the fourth quarter by 1.1 billion of efficiencies and adjustments already explained. As consequence, 24 adjusted net profit grew 15% to 5,530 million, only 82 million below reported net profit. Adjusted net profit in 24 is the base for 25 guidance, and is reported net profit excluding capital gains from asset rotation, adjustments, and efficiencies. Now the chairman will conclude the presentation. Thank you very much.