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 2025 first half result presentations. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period, and additionally, and on this occasion only, we will provide details of the equity rise currently underway. Everything done by our top executive team that is today with us. Mr. Ignacio Galán, Executive Chairman. Mr. Pedro Azagra, 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.iberdola.com. As mentioned previously, in today's event, we will be discussing, in addition to the H2025 result, certain information regarding a proposed capital market transaction, access to which is restricted for persons located in the United States of America. Accordingly, persons located in the U.S. will be unable to log in at this time, and if any such persons have logged in here, we would kindly ask them to please log out. Finally, we expect that our event will not last more than 75 minutes. If any questions remain unanswered, we at IR department are, as always, fully at your disposal. 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. Buenos dias, everyone. And thank you very much for joining this call. Today, as usual, we'll present our result and we will give you also all details of the equity rights announced this morning. which I can already inform to you that now is fully oversubscribed in this particular moment. In the first half of 2025, net profit reached 3,562 million euros, up 20% year-on-year, excluding the capital gains from the last year's investment of thermal generation assets. And the reported EBITDA was 8,287 million, driven by its strong performance in our network business, with a 31% increase in EBITDA in the first half of 2025. A bid up from production and customers was impacted by lower prices and one-off system costs in Iberia, particularly offset by the contribution from new assets in operation and the recovery of production in the second quarter compared with the first three months of the year. Investment rose by 7%, reaching 5,762 million in six months, driven by a 14% increase in net worth investment to 3,082 million. Also, we expect this outright trend to accelerate in the coming quarters thanks to the new regulatory frameworks and the negotiations that show significant increases in investment. Up, in the case of UK, 14 billion euros following the Rio T3 draft determination. and $15 billion additional in transmission and distribution according to the rate filings made by Avant Grip subsidiaries in New York and expected increase in the coming rate case in Maine. Renewable investment reached $2,152 million in line with the first half of the last year with 40% of the total invested in our offshore wind project under construction. All of them, I can already confirm, are progressing under schedule and budget. We have also continued making progress in our asset rotation and partnership plan. In last weeks, we expanded our partnership with Mazda, with an agreement to co-invest in the SunGrid III offshore wind farm in the UK, which combined with Baltic Eagle takes a total co-investment of almost 7 billion euros. And we have also closed other asset rotation transactions worth 1.5 billion euros, of which 1.3 billion will be cashed during the second half of the year. This, together with our strong cash flow generation up to 15%, has led to a reduction of 3 billion euros in our consolidated net debt in the second quarter, which now stands at 52.7 billion euros, and to a strong improvement in our FFO to net debt ratio, already above 24%. Now, moving to the 5 billion euro security rights announced earlier today, the recent progress in our regulatory framework in the US and UK has materialized an unprecedented investment opportunity to accelerate our growth that is fully coordinated with our strategic focus in regulating networks in every country with stable and attractive regulatory frameworks. The draft determination published by Objenrio T3 and the rate case filed by Avangrid subsidiaries in New York will imply investment of around 30 billion euros, leading of total net worth investment of 55 billion euros up to 2031, 75 more than the previous six years. And the group's total gross investment, including power, will increase to around 15 billion euros per annum compared to the 11 or 12 in the last years. This new long-term stable framework in the UK and US also offers attractive returns, driving an expected average regulatory return on equity of 9.5% up to 2031, and making the transaction accretive on EPS thanks to the contribution of those additional profitable investments. Equity rights, together with our ongoing financial sources, operating cash flow, access to the market, liquidity, and our asset rotation partnership plan, will be sufficient to fully fund our investment plan with no expected additional equity needs, at least until 2030. All in all, this transaction allows us to take advantage of unique investment opportunity to grow faster and take a major step in our strategy focus on networks in the US and the UK. Moving back to our first half result, as mentioned, EBITDA reached $8,297 million, driven by 31% growth in networks, thanks to the positive impact of the investment on our regulators and debate in all countries. The full integration of electricity in the West and the strong result in the United States, which includes the recognition of past costs as explained last quarter. This positive performance in the West more than offset the evolution of production and customers. We have a 13% decrease in EBITDA. Due to lower prices, a non-recurring impact of one-off cost of more than 135 million euros in the Iberian Peninsula related to higher auxiliary service requested by the existing operator to reinforce the power system after blackouts suffered in May. We expect this impact to reduce in the second half as contact with our customers and rollover reflecting this cost. These two effects were partially offset by additional production from the 2,000 megawatt put in service in the last four months, and the recovery of production in the second quarter after a very low beginning of the year, especially in the United Kingdom. By region, 82% of our bid accounts from very great countries, with United Kingdom and U.S. accounting for close to 50% of the total. Investment grew by 7% year-on-year to €5,662 million, mainly due to the strong expansion in networks up to 14%, reaching close to €3.5 billion, 65% in distribution, 35% in transmission. By region, the United States and the United Kingdom represent two-thirds of the total. Transmission and distribution investment in the United States exceeds €1 billion, with two-thirds in distribution, mostly in New York. And the investment in Yonekindon also reached 1 billion, with 60% in distribution, including electricity in the West, and 40% in transmission, driven by Rio EG2 and Rio EG2 frameworks. This investment has resulted in a total regulated asset base of close to 50 billion euros, 70% more than just five years ago. And we expect to continue accelerating growth until the end of the decade to reach more than 90 billion euros by 2031, multiplying our net worth set by three times in just one decade. With around 35 billion euros in the UK and 30 billion euros in the US for a total combined contribution of these two countries of 75% of our total RAP. This unprecedented increase is driven by energy policies across our regions that are reinforcing and expanding power networks, with the objective of increasing energy security and autonomy and improving competitiveness. Like the National Policy Statement for Electricity, Networks and Infrastructure in the UK, recently published, which has improved clarity and efficiency in planning processes. In the US, a national transmission planning process has been designed by the Department of Energy to modernize and expand the electricity transmission system. And in Brazil, the renewal of distribution concessions will provide long-term visibility to investment. And finally, the European Commission recently published its Guidance on Electricity Grids Feeds for the Future, urging Member States to develop policies to attract to attract 730 billion euros of investment than will be required just for distribution by 2040. Like the elimination of investment caps or delays in the recognition of investment made and the implementation of a system capable of attracting those massive new investments. Following these policies, most regulators are approving a stable and predictable framework with a strong increase in investment and the right incentives. In United Kingdom, we expect our investment to reach 26 billion euros from 2026 to 2031, four times more than the last six years, following the draft determination published by Jovian for Rio T3 in transmission and the strong increase in distribution expected until 2028 under Rio T2, already approved in Rio T3 from 2028 onwards. In transmission, the real T3 draft determination recently published shows that Objen is moving in the direction to promote investment by increasing cash generation, improving returns on equity, and introducing inflation protection measures. We expect final determination by year-end once we finalize the ongoing negotiation. Our investment in the United States are expected to almost double in the next six years, reaching 20 billion euros, mainly driven by a large increase in New York, where our rate case negotiations are also making positive progress. In the case of Brazil, we expect the renewal of distribution concessions for 30 years will be completed in Q3, creating the right framework to increase investment in these businesses. While in transmission, we do not anticipate new investment once the project already and the construction are finished. Finally, in Spain, we are expecting investment are clearly lower than in the other three regions. We expect the initial terms proposed by the regulator will be improved along the process. Moving to renewables, investment remained flat in the first half, 2,155 million euros. As high investment in offshore wind offset, the decrease in onshore especially solar PV in Spain. By region, 60% of the total investments were made in the United Kingdom and the United States, where we expect no impact from the new federal budget legislation. As it does not affect the 1,100 megawatts we have under construction or the additional pipeline on shore and solar PV that are ready to be operational before 2029, they could qualify for tax credit under current guidance. Also in New England, one offshore wind farm will continue to qualify for tax credit if it is in operation before 2023, if we decide to go ahead with the construction. Offshore wind investment reached 150 million euros in the first half, and all our projects under construction are progressing as planned, with their revenues and supply chains already secured. In the U.S., more than one-third of Vineyard Wind 1 turbines are already installed, with more than 25% of them already exporting energy. In the U.K., our two offshore wind projects under construction, with a total capacity of almost 2,400 megawatts, continue advancing as scheduled. Isanglia 3 is expected to be fully operational by 2020 CGRN, and the works of Isanglia 2 are progressing. Additionally, it is only one North project with 900 MW of capacity, has already secured its permits and could participate in the coming ER7 option. As you know, the EU government recently announced an extension of contracts for difference from 15 to 20 years for this new option. Finally, in Germany, the construction of Windacker of 350 MW is ongoing with the COD expected by 2026. And we recently commissioned Baltic Eagle with 476 megawatts, the first investment included in our strategic alliance with Masdar. As was recently expanded to co-invest in the Isanglia III wind farm in the UK with 1,100 megawatt capacity in a deal value of 5.2 billion euros, driving our total co-investment with Masdar to almost 7 billion between these two projects. This Anglia III transaction allows us to reduce our consolidated net debt by 2.5 billion euros as well. In the last several months, we also signed a co-investment agreement with CanSci for the mid-decade offshore wind fund in Germany, with a total investment of 1.3 billion euros. In addition, our 2.4 billion euros partnership with Norges Bank for renewables in Iberia is also progressing as scheduled, with 1,200 megawatts under construction. And finally, Brazil, our agreement with EIC for transmission assets, has already delivered 150 million euros in co-investment. Over the first half of the year, we also closed asset rotation deals worth €1.5 billion, such as the investment in Baixo Iguazu hydro project in Brazil, with €100 million already cashed in, and other transactions like smart metering business in the UK and United Kingdom, and avant-garde grant distribution assets in Maine, that all in all will allow us to receive €1.3 billion in the second half of 2025. Moving to operational cash flow, our FFO increased by 15%, reaching 6,796 million euros, driven by higher cash flow in our network business in the US and the UK. This strong cash generation, together with the asset rotation and partnership, has led to a reduction of 3 billion euros in our consolidated net debt to 52.7 billion, and to stronger financial ratios with FAO for consolidated net debt improving by 190 basis points up to 24.2%, even after the full consolidation of 2.2 billion euros of debt from electricity in the West. Finally, as you know, following the approval of our total dividend of €0.645 per share in our AGM, tomorrow we will pay a supplementary dividend of €0.409 on top of the dividend paid in February of €0.231. And the engagement dividend of €0.05 per share paid in June. Now, let me give you some more detail of the transaction amounts today. The unprecedented investment in network infrastructure in the UK and the US, explained earlier, constitutes a unique opportunity to accelerate our growth. This 75% increase in investment, expected in the next five years, will allow us to reach a regulated assets base of €90 billion by 2031, multiplying its size by three times in one decade. and increasing the combined weight of our U.S. and U.K. up to 75% of the ROC, with clear and stable framework delivering average expected return on equity of 9.5%. As a result of this increase in net worth investment, total growth investment, including power and others, will reach around 15 billion euros per annum in the coming years compared to the current 11 to 12 billion. Taking a major step in our strategy to increase our focus on networks in the US and UK, improving our profitability and our risk profile. Financially, the transaction will have a positive impact on EPS, reinforcing our long-term outlook of mid-to-high single-digit growth in net profit. In addition, the amount of this equity rise together with our other ordinary financial sources, including operational cash flow generation, avoiding access to debt market and liquidity, and our asset rotation and partnership strategy, will allow us to fully fund our plan without any further need to increase share capital, especially until 2030. Preserving our rating and our current dividend policy, and therefore strengthening our value proposition of growth dividend and financial strength. I will now hand over our CFO, Pepe Said, who will present the group financially in detail. Thank you.

Thank you, Chairman, and good morning to everybody. So let's go through the results. The first half net income reached 3.5 billion euros and grew 20% once compared with the first half of last year adjusted net income. underpinning, as the chairman has said, the underlying growth of the business. As main change of perimeter, let me remind you that EMW is fully consolidated since March of this year. FX evolution has had a minor effect on results thanks to our FX hedging policy, with the dollar being 0.5% lower, the pound 1.8% higher, and the real 13% lower. A 0.5% increase in revenues due to the network business combined to a 1% decrease in procurements drove a rise in gross margin of 1.6% to 12.7 billion euros. Excluding the 1.7 billion thermal generation asset divestment in the first quarter of 2024, The first half results net operating expenses improved 9.8%, mainly due to 300 million lower storm costs that are also diminished at gross margin. Net personal expenses fell 2.3%, including a net positive 24 million pension adjustment, and external services fell 8% due to lower storm costs. Other operating income grew 29% versus the first half of 2024, as I mentioned before. Due to the indemnities of past year costs, EMW consolidation, all of them partially upset by an 81 million negative impact of the East of Anglia III deconsolidation. Excluding also the mentioned storm reconsolidation impacts and other impacts, net operating expenses improved 0.5%. Analyzing the results of the different businesses and starting by networks, Ecebida grew 31% to 4.3 billion euros, mainly driven by better performance in the UK and in the US. In the U.S., EBITDA reached $1,547 million, or 129% up, with higher rates in distribution and better contribution in transmission, and positively impacted by the decision from the New York regulator that allowed us to register under IFRS regulatory assets regarding past costs already accrued and registered under U.S. GAAP, aligning both standards. In the UK, EBITDA increased 23%, reaching £745 million, including four months' positive ENW contribution up to £150 million, and better contribution both in distribution and transmission. In Brazil, thanks to higher inflation over a higher asset base and a positive contribution from transmission lines as construction progresses. From April onwards, rate increases in Coelva, Pernambuco and Corsair improved second quarter EBITDA and will continue to do so during the second half. In Spain, EBITDA increased 9.5%, reaching 892 million euros, positively affected by adjustments to past year's remuneration following core decisions. The first half energy production and customer business EBITDA reached 4 billion euros compared to 4.6 billion in 2024, excluding the already mentioned 1.7 billion thermal divestment capital gain. The business reached 88% emission-free generation. In Iberia... The EBITDA was 1,960 million euros, 21% down, with higher production, partially offsetting margin normalization. There are 110 million higher ancillary services costs, mainly linked to the reinforced operation of the transmission system operator Red Electrica, and 136 million higher levies despite 1.2% revenue tax termination. Record hydro reserves, 9 terabit, will help the performance in the second half of the year. In the U.S., EBITDA increased 5.4% to $508 million, with better wind and solar performance, and despite the fact that the first half of 2024 was positively impacted by the Arctic blast storm, one-off, and there has been, during the last quarter, lower thermal generation due to maintenance. In the UK, EBITDA fell 18% to £691 million due to lower EBITDA from the supply business driven by prices and volumes. Also, an 11% lower wind resource and lower prices, partially compensated by the recovery from last year's offshore operating problems and lower wind tax contributed to this fall. Net operating expenses including 68 million pounds, equivalent to the 81 million euros I commented previously. Negative one-off impact linked to the East of Anglia III reclassification as held for sale. more than compensated these 81 million or 68 million pounds, more than compensated at the net financial result accounts. In the rest of the world, EBITDA grew 31% to 411 million euros, with 68% higher offshore production due to the full entry in operation of Sandbrook in France and Baltic Eagle in Germany offshore wind farms, while the supply business lowered its contribution mainly due to the 25 million negative impact in Portugal due to the again ancillary services costs, mainly as a consequence of the blackout. In Brazil, EBITDA decreased 31% to 564 million reais, with lower thermal contribution compared to a strong first half of last year. Finally, in Mexico, EBITDA reached 278 million US dollars, 87 lower contribution compared with the first half of 2024, that included a thermal assets capital gain in the first quarter, and 42% excluding it, as the remaining business had a higher availability and a better balance in revenues. Depreciation and amortization and provisions are up 2% to 2,820 million euros, driven by higher asset base, partially compensated by lower depreciation, thanks to the full year 24 adjustments, mainly in the US onshore, and also due to lower bad debt provisions in all geographies, but especially in Spain and the UK. EBIT reached 5.5 billion euros and grew 6% on unadjusted terms. The net financial result improved 183 million from 848 million to 665 million euros, thanks to a 292 million positive impact from the Istofan-Gratriz derivatives as a consequence of the consolidation of the asset. Other derivatives, mainly linked to the P&L hedges, had a 69 million positive impact. Debt-related costs grew 157 million due to the higher average net debt, while interest-related costs improved by 48 million due to a better cost of debt, as you can see in the slide that decreases 19 basis points, mainly thanks to lower short-term interest rates, especially with the euro and the pound, and to the depreciation, especially of the real, despite higher interest rates in Brazil. Net debt reached 52.7 billion euros, improving from the 55.7 billion peak at the end of March and increasing only 1 billion from December 24 closing. This positive evolution was driven by a 6.8 billion FFO plus 3 billion asset rotation and debt consolidation that covered the 5.7 billion CAPEX, 2.3 billion dividend and ENW net debt consolidation. Net devolution, together with a 15% growth in FFO, drove credit metrics to be comfortable within rating agencies' thresholds for BBBAA1. FFO adjusted net debt reached 24.2%, improving versus 22.9% December closing, and our adjusted net debt to EBITDA reached 3.3 times. Our adjusted leverage ratio was 46.8%. In the first six months of Over the year, Iberdrola has signed 11.4 billion of new financing, completing some very important transactions like the East of Anglia 3 project finance for 3.6 billion pounds, the recently signed sustainable 2.5 billion credit line, the first green senior bond fulfilling EU GBS and IGMA standards, and being the first European company to be financed by the National Wealth Bank. We have also get financed from the European investment banks based on the next generation funds, where we have obtained, in all of these transactions, benchmark conditions, and we continue leading the green and sustainable financial markets. Net profit grew 20% to 3,562 million on unadjusted terms compared to the 2,969 million adjusted first half 24 net profit. And now the chairman will conclude the presentation. Thank you very much.