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.

Thank you, Pepe. As you have seen, our first results show a strong operating performance that we expect to improve even further over the rest of the year. with networks as the key growth driver, thanks to a double-digit increase in our regulated address base, mainly in the US and UK, reaching more than 51 billion euros altogether. And on top of this, we will benefit from the new rate cases closed in the first half, mainly in the United States and Brazil, and the positive impact in the full integration of electricity in the West. In production and customer, we expect higher production in the second half of the year, driven by the 2,000 megawatts added in the last 12 months, plus 1,400 megawatts more than we expect to put in operation before the year end, as well as by higher wind resource expected in the UK, where wind conditions in the first quarter were one of the worst in the last 25 years. We have also signed a new PPA for almost 5,000 avatars per annum in the last 12 months. They will deliver revenue certain at the attractive prices for the future. and our hydro reserves remain at record levels of around 9,000 hours, allowing us to stake even new records in hydro palm storage at the moment with strong spreads. This positive business outlook, together with our ongoing financial strength, leads us to reaffirm today our 20-25 net profit guidance of double-digit growth, or mid-to-high single-digit growth, excluding the recognition of the past costs of the net worth business in the United States. To conclude, the equity rise launched today provides us further visibility and security in our long-term growth outlook and gives us a unique opportunity to accelerate our growth fully aligned with our strategy focus on net worth in the US and the UK, reinforcing our value proposition based on strong growth, sustainability increases and financial strength. We will give you more information about our future outlook for the coming years and our Capital Market Day will be held in London September 24. I hope to see you all there this day. Thank you very much for attending this call and for the trust you always place in us. Now we will answer all the questions you may have. Thank you.

Okay, starting with the Q&A session, the following financial professionals are asking us questions today. Fernando Lafuente, Alantra, Gonzalo Sánchez Bordona, UES, Ahmed Farfan, Jefferies, Pedro Alves, CaixaBank, Rob Poulain, Morgan Stanley, Fernando García, Royal Bank of Canada, Jorge Guimaraes, JV Capital Markets, Daniel Rodríguez, Bestinberg, James Brandt, Deutsche Bank, Javier Suarez, Mediobanca, Andrew Mulder, Credit Sites, and Jorge Alonso, Societe General. The first question, the first group of questions are related to the capital rise deal. First one is the main question analysts are asking is related to the rationale of the equity rise. Why do you think the equity rise is a preferred option versus other means of financing?

Well, I think we have an extraordinary and impressive opportunity to invest in networks. I think it's no new for us that we said already in our CMA that our priority is investment in networks, and we will prioritize networks, and we'll be selective in renewables. And I think we were expecting that in the network business, the network demand increases in most countries, But we are not expecting to increase as soon as it's increasing in the size which is already being produced. I think once we got already the confirmation of the numbers from the UK regulator, and once we have already started conversation with the American regulator, so we saw that what is the size of the investment we have to afford in the next few years. And we feel that that is the best solution. Why? Because I think it's a sector which is clear, stable, and attractive frameworks. We are investing in A-rate countries. They need this huge investment. But I think that is regulated. And regulated means they require a minimum equity requirements. I think there are limitations to finance liquid debt if we would like to maximize the return. I think the debt is paid by the regulator and the equity is paid in different terms. So that's why I think we feel it's better to make equity instead of to put already debt because I think that's really not good for the shareholders. Apart from this one, for the rest of our investment, we will continue to be financed with our operating cash flow. You saw the increase by 15% in the first half. With our liquidity, we have more than $20 billion. And with the asset rotation and partnership, we will continue. I think we have already signed very many during the first half of the year. You saw already, I presented already. But I think what is clear is with this opportunity, we are going to accelerate our growth It's absolutely in line with our study. I insist that our priority was network in every country. We have 30 frameworks. And with this increase in share capital, we are preserving our triple B economy. plus rating and we are keeping and maintaining our dividend policy which as we have already done in the last 25 years in the company so we feel that is the best opportunity for shareholders making that one in this manner instead of making the form of debt which I think a form of debt will not generate the positive returns that can already be obtained if we inject equity in these opportunities Well, it's clearly, I think, has no sense. If we have priority in networks, it's no sense to sell networks to invest in networks. So I think it's clear that our priority is networks, and we would like to give networks, not to sell networks to invest in networks. So it's no sense. So I think we would like to be coherent with our strategy. Priority is networks, and we would like to increase our networks. I think to give you some numbers, I think in 2020, we have 30 billion euros wrapped. today is around 50-51 billion. In 2030, it will be 90 billion. If you have an average of equity debt ratio in this RAP, that means we will be paying on the range of 45 to 50 billion equity. At 9.5%, That generates already just a net profit of the company in these regulated activities on the rates of close to 5 billion euros per annum. That is the size of the company we are in this moment creating. And that is a unique opportunity. And that's why I think there has been such a huge demand of investors that they would like to participate in that one. We are very pleased. Because we are working for investors, and I think it will make investors happy, and that is an opportunity for investors to be even more happy.

Okay, following with question number two, we have two more analysts, Dominic Nash from Barclays, and Filippo Patian from Nodo, and obviously, I'm sorry for that, Jorge Alonso belongs to the same NOSOC gen, as I said. Second question, how much buffer financial flexibility are you trying to obtain with this capital increase? Can you give guidance about what do you expect in terms of leverage metrics over the next five years?

So... We are fully confident that this transaction is more than sufficient to fund our extraordinary investment opportunities in the UK and US. I think it's, as I was saying, it's 75% more investment in this six year forward than the previous six years. But I think this transaction will come together with another source of financing. I think we are generating additional cash flow. So I think we are seeing that our cash flow in the first half is increasing by 50%. So I also will increase more things of the new investment, which I think the regulator is already generating cash flow from the very beginning. liquidity as well we have more than 20 billion liquidity recently we signed another lines of liquidity of 25 billion Pepe no? yeah 2.5 billion and we have more than 20 billion liquidity and I think we have plenty access to the debt so I think I know the bank is knocking on our door all the time for giving more money and we have easy access to the bond market and I think we are Pepe will explain has already explained clearly And also we'll continue with our resultation. And those things we consider are not already strategic for us, or we continue making partnerships. I think only with Masdar we have partnerships for 7 billion euros, with Norges it's 2.4 billion euros, and with others, I think with Kansai we have 1.2, and others, and others, and we'll continue on this. And I think with all those things, we consider we have money enough to cover and to fully invest in this opportunity and preserve our ratios and preserve our dividend policy. It's very important, that one. I think for the 25 years in the company, I was already maintaining a very consistent and coherent dividend policy for our shareholders. I think we start already, we committed with our holders, the dividend is a must, and we are already just following these criteria in the 25 years. So that means we will keep already our financial solidity, we may increase our growth or speed up our growth, and we keep our dividend policy. But nevertheless, I think that is the basis of our capital market day on the 24th of September that we can already present with more detail. But I insist on that one. I think we are, it's a unique opportunity. And that is what today the shareholders or the investors are already asking for more and more oversubscribing this opportunity.

Next is, given the recent changes in our management team, if this equity rise related to, in any form, to the naming of the new CEO, and given his past as M&A officer in Iberdrola, should we expect these proceeds to be allocated in a big M&A transaction?

So, absolutely is not related. Pedro is a good guy. He has a lot of things to do for already looking for improvement of the business. He's fully committed with the company. He knows the company very well. And in a few days, he's in the company fully taking care of all those things which are related with the business. I think this rational transaction is nothing to see with himself. It's something which is rational, which is an opportunity. It appears, and I think that this transaction, this opportunity of increasing the investment plan networks in UK is just because the Rio T3 has been published. So it's as simple as that one. So it's not Pepe, it's not Pedro, it's not Juan, it's not Lope. It's just an object that has already been published, the Rio T3, which is a £14 billion investment. which I think is absolutely confirming our expectation, and that's why, for confirming this expectation, we are already just looking for this money. Same thing with the United States. I think the New York case has been presented, negotiated with the regulator. Now it takes time, but I think it's aware they have not already, they have already accepted our proposal, and now we are in the negotiation how that can evolve. But I think certain, those are the reasons, nothing to see with Pedro, which I'm delighted what he's doing and what he has to do. So, but that is nothing to see with himself for the moment.

Next, is related to the asset rotation plan. Shall we conclude from your messages that you are not going, not going to do any meaningful asset disposal?

So, I think it's absolutely not. I think we will continue with our laser rotation. We will continue with our partnership strategy. Last year, I think, it's business as usual plus this extraordinary opportunity. That is the approach. I think this destination of this equator is for organic growth. Organic growth, organic growth. Which means... Investment in transmission and distribution, mainly in UK and United States for already providing and delivering the commitment we can take with the regulators. This equity rise is linked, I insist, in this extraordinary investment. And I think, I insist, we hope it is sufficient to fully fund our plans together with another success for ordinary investment, which I insist is the cash flow generated, the liquidity we have, the access of the market, and the asset rotation and partnerships that we will continue as we've been doing during the last few years. This transaction is not triggering additional asset rotation and partnership on top of what we are expecting. I think it's business as well plus this extraordinary opportunity. So I think if... Any potential opportunity for investment arise, we will not expect the moment at all that additional asset, any rise equity again. We will make already with as rotation as we did. I think tomorrow we have to make any, let's say, small opportunity. I think we make, as we have already done, another one. I think we divest something for investing in another thing. But I think we are not going to use this money for making already a new, let's say, acquisition. No, it's for that. It's for extraordinary investment in networks, mainly UK, United States, in the lines defined by Rio T3 and defined by the new rate case which we are underway in New York and Maine.

Next, you have publicly stated that you now do not expect to need to come back to the market until at least 2030. Under which circumstances could this situation change?

So, please, I think we can foresee what we can foresee, and we have the picture of today, and with the picture of today, and with the situation of today, that is what we are foreseeing in our commitment. We are committed, and we deliver what we committed. So, we are committed that today, with today's picture, knowing what we have today, we need money for an extraordinary thing. We've been for many years what we've been already. Maintaining our dividend policy, maintaining our investment policy, delivering our commitments, always ahead of our outlooks, that is our style. And I think now, with the visibility we have already for the next five years, with this visibility, we don't need any other increase in share capital. So with our cash flow generation, with our liquidity, with our asset to the market, we are able to invest the visibility. We are going to present to you all these numbers on the 23rd of September. Enough resources for affording the visibility of the investment we have to afford in the next few years. Keeping and maintaining our dividend policy, keeping and maintaining our financial solidity as we did. And using our asset rotation if needed and continue with our partnership as we have already done in the last months.

Next query is about other means of financing the plan. How much debt hybrid do you expect to raise over the next five years? Yes.

I don't know the numbers, but I think for us it's very clear that our FFO net debt will be in line with our AAA plus rating, and that has increased in the size of the company. Also, if the size of them grows, the debt will grow. But I think we will preserve our strong ratio and we will maintain our dividend policy. In any case, I think we'll give more details on CMD. But I think you, Pepe, would like to add anything. But I think the data, we will share with everybody on the 24th of September.

Yeah, absolutely right. I think the idea is to maintain this capital raise has been done to be under the BBB plus rating, which is where there is the cost of capital lowest for us, and that is the idea. So obviously we have the numbers here, but the message is that we will be in the BBB plus rating range, well into this range, and that is what we are expecting. Obviously, we will raise a little bit the debt, but as the chairman was saying, we will also expect to raise the FFO, so the ratios will be comfortable between the BBB plus rating.

Next question is about dividend policy. I understand you are maintaining the dividend policy, but could you explain if your decision of issuing equity has been driven by the need to continue to pay an attractive dividend, by how much should you have cut your dividend to avoid a capital increase? Just in case.

So I think I would like to insist again That is an extraordinary opportunity. We can already increase our RAP at nominal value instead of paying a premium of 40-50%, which is the normal transaction which is made in all transaction-regulated activities. For that, we would like to see a whole benefit of this opportunity in value increase of the company. So I think nothing to see with the dividend and nothing to see with the debt. The debt is increasing, the dividend is increasing, and we would like to finance that one, maximizing the return for shareholders. If we increase the debt, that should be bad for shareholders because the debt will not be remunerated. It will be a pass-through. So the equity is going to be remunerated. The debt is a pass-through. So if we put more debt in a regulated activity, it's good for banks. It's not good for shareholders.

Next, why is this capital increase accretive for Iberdrola shareholders?

You may, because you are greedy. I would like to insist. I think it depends with the 9.5. And the money is costing to us a 4% between 9 and 4, so you see how much, what is the return. It's very simple. But I think, Pepe, you can make the number. For me, it's very clear. The equities pay at 9.5, and the money is costing at 4.5. So the difference is accretive.

Yeah, well, that is what the chairman says. This allows us to invest an additional 5 billion in networks, as the chairman was saying, with an average return equity of 9.5%. And obviously that is accretive both in terms of net profit and in terms of EPS. Okay?

Last question related to capital rise. Although I think it has been already explained in the previous answer. Why do you think now is the right moment to raise equity? Why not wait until your next capital market day on September 24th?

So, I think we would like then the capital market day we talk about business. We don't know how to finance the business. I think making that one, we can already just confirm then the way how we will finance is already fully solved. Also, it's because I think it's the object I mentioned before. The object of determination was public a few days ago. And I think it's the time for saying, okay, how to make that one and to give already to our regulator the certainty that we have financial resources for affording the investment required. Same thing in the U.S. I think we just filing the new rate case and I think the amount of money we are already presenting is such a huge and the obvious question for regulator is do you have money enough for funding this investment? And I think we can say now, yes, we have money enough, we have equity enough for funding either of yen and either either UK or United States so and I think that is already is I insist on that one is an unprecedented opportunity for accelerating our growth and delivering our strategy in networks, which is our priority, in two countries, which is clear, stable, well-known for us. I think we are almost 20 years in both countries. Attractive with predictable frameworks. I was recently with a the British Prime Minister and I think he was already explaining the policy related electrification of the country and the measure they would like to make for making this country more attractive for rising for attracting investment and that is what we would like to already benefit of this opportunity

Moving forward to the question related to the results, the first one is, could you please provide your view on the extension of the nuclear facilities, possible extension of the nuclear facilities in Spain?

So, I think nuclear plants, I think this, I said as engineer many times, I will repeat this for many times, are efficient, are safe, I think they provide autonomy and stability to the national energy system. And I insist it's the most efficient solution to keep the lights on. And that's why I think all European countries are already extending the life of this nuclear power plant. However, in the case of Spain, with the current taxation, with around 30 euros per megawatt hour, which is compared with 15, is half with Spain and France, made then not viable with the forward prices we are expecting in the future. We was already what happened between 2010 and 2020. We were in a loss in our nuclear power plant. Why? Because nuclear power plants are not already manageable. It's a price takers. So whatever price is set daily, I think we have to pay on these stamps. So that's why I think we cannot, as another, I think we can offer, make an offer at a price another one, but in those ones we cannot stop and put in service. I think it's already working 34 hours a day. So that's why I think this baseload system, which you cannot manage in the sense of others, like hydroelectric or like CCGTs of gas, that's why we are asking if that is the most efficient solution to keep the lights on, I think it's not at our cost. It has to be already in a manner that we can already not be in a loss. And that's why we ask for redaction of this class burden. But I think even if this tax burden is already, let's say, flexibilized, I think some regions, Valencia is already flexibilized, and Anduan is already announcing the region to reduce this taxation, but I think even though, I think the existing legislation, if there are no changes, they don't allow us to ask for this extension. I think it's needed. It changes in the actual legislation to allow us for asking for extension. We are not allowed to ask. But I think that I'm sure that can be solved. But I think the point is the first and the second. First one, taxation. The second one, the government has to allow us to ask for the extension even after reduction of this taxation. I think in any case, what I can say for the Spanish citizens, So we are power enough in CGETs in gas, more than double than that power we have already in nuclear, to provide the service. But they have to pay an extra price, as is already made already by the analysis of Brightwater House when we disclosed last time. We are expecting an increase of 35% extra cost for consumers if the nuclear power plant are closed. That is analysis made by PricewaterhouseCoopers, but which is confirmed as well by PricewaterhouseCoopers what is happening in Germany since they closed the nuclear power plant. The German consumers are paying more than those countries that are keeping the nuclear power plant in operation. So, but I think that is our proposal, very clear. With the present taxation makes this power plant not economically, not viable, Even if they are absolutely the best, most efficient economical solution for keeping the light on, but I think the light on will be made with combined cycle of gas, then we have double power, the nuclear, so I think... the Spanish citizens can be sure, then we can provide that one, but the cost will be much more expensive than keeping those ones open. And that is the point we have to be taking a decision. We are not making the energy policy. The energy policy is made by the governments, and the government has to decide. So we are already, if they like to close, we close. If they would like to keep open, we keep open, and we have the solution. But nevertheless, I think we are in a continued dialogue with them. But the thing is, the decision is not in our hands. It's in the hands of those ones who are making the energy policy, which is the government.

Next is related to the CNMC proposal for the next regulatory period in networks in Spain. Our opinions.

I come to the same point. I start with the same comment. Any policy is made by regulators and the government. So I think we have to adapt to these policies. I think it's clear the European Commission has provided very clear guidance how to incentivize the network investment. And they said clearly the first thing they are talking is elimination of the investment caps. We have investment caps in Spain still. We need, as the European Commission said, anticipatory investment to meet the National Integrated Intergrammatic Plan change. It means they need to incentivize investment now in that front if we would like to electrify it. So they talk about the elimination of delays of recognition of investment. We are having problems with the fact that we have in the court several demands or several litigation because of no recognition of certain investment already done in the past. That is recommended not to happen. And last one, they are talking about rate. We have already to cover full cost recovery to be attractive for attract this hundreds of billion euro the Europe need already in investment in the grid. However, this draft proposal, I think, in my opinion, is providing a clear negative signal to the market, signaling the side of reducing the maintenance cost, so the recognition of the cost of maintenance of the current network infrastructure and not incentivating the investment in new assets. I think that is my reading of what they have already done. And I think we will make our answer and our response to the consultation in August. And I think we expect that things will move in the right direction. Nevertheless, as you saw, the size of our regulated business in Spain is quite small compared with the rest of other countries. By 2030, it's less than 10% of our total regulatory base, which I think is important, but I think it's not crucial for us.

Next is, what's your take on the draft proposal, the determination on the Rio T3 framework elaborated by Ofgem?

So I think opposed to the Spanish one, I think our view on that one is positive. It recognizes the need of significant more investment in electricity infrastructure. It's aligned with the UK government energy and industrial strategy. which positioned electrification as the key driver of the economic growth, which was reflected in the industrial strategy of the government. The government also underlined the relevance of creating a stable and active framework to enable private investment, and that is what is reflected. And I think it's that way. I think the drug determination, including our case, this $14 billion new investment in transmission up to 2031, on top of the $8 to $10 billion that will be invested in the distribution in the next five years, so which part of them correspond to ED2, and another one we expect already will be in ED3 once ED2 is finished in 2028. The drug also introduced improvement in the financial parameters to make that more financeable But I think we are now in talks with OJEM because looking for some details and to prove some of those parameters. I think globally we are positive, but I think there are things that we are already negotiating to improve certain things. Also, I have to say about the British government, the coherence of the British government, the British regulation. I mentioned to you as one of your questions in the last conference, you asked about the solar pricing. I will say that that is going to happen. I can confirm that the government has already confirmed my advice that that is going not to happen and is not to proceed with the solar pricing.

Next is related to the East Anglia III. Can you please outline what is the impact booked in the different lines in the P&L of the sale of East Anglia III?

Pepe, you can explain that one.

Yeah, well, as I have mentioned, in other income, which is in the expense part, so over the bit that we have a minus 81 million euros negative impact, and we have around 250 million positive impact on the derivatives part. So in this first half, the impact is plus 170 million. The only thing is that in the third quarter, we will have to book another negative impact, precisely in net operating expenses of around... 60 million euros you know that will reduce at the end of the third quarter the total positive impact to around 100 million before taxes which is around 75 million after taxes so as of the first half we are booking 170 million before taxes and on the third quarter we will add a negative impact of around 60 million, and that will give us a net profit for the whole transaction of slightly over 100 million before taxes and around 75 million after taxes by the end of the third quarter.

Next is related to the effects or possible effects of yesterday's rejection of the Spanish Parliament of the anti-blackout decree.

So, as when we say... We respect the decision of the Parliament, so I'm going to enter into the local debate. If there are no debates, we are going to continue the debate. I think, as far as I know, some of the measures included have already a sense. A sense in the area of increasing security of supply of the system, reduction of the bottlenecks that are creating Latin demand, which is not covered. especially for industry, and we've been already for years already claiming for that one, and promoting the new electricity demand, so with Levin Plainfield. But I think it's, I'm sure that the, I heard as well that another position is thinking to present just a law for covering all these things, which I think, I don't know if it has to be a royal decree of a law. Sorry, it was off. I will come back again. So I said that I respect already the decision of the Parliament, and I don't like to enter into the local debate. So I was saying that there are some measures included we have already sent, such as security of supply and assistance, reduction of the potential bottlenecks, covering the latent demand which cannot be covered today, especially in the industry. And one thing which is very important is promoting the growth in electricity demand with a level playing field but I think what I heard is that the position is presenting or preparing just a law covering all these things and others I don't know which ones and I think we will see what is the point but I don't like to come into the parliamentary debate I don't know the reason for that one and I think the important thing is to solve the problem that we have in the system and I think those ones they have to look what is the best way for solving those things

Last question received is one related to the press news of today about the plan, the possible plan of Iberdrola to sell the remaining assets in Mexico. Can you comment on this?

I don't comment on rumors. No idea.

We have several questions about the next Capital Markets Day to be held on September 24th, so obviously we will drive all these questions to these Capital Markets Days. So... Now, please, let me now give the floor to Mr. Gallant to conclude this event.

So, thank you very much for the participation in this call. So, as always, investor relations team will be available for making whatever, answer whatever questions you would like to pass. So, I think I would like as well to use this opportunity to thanks to the teams who is already working the transaction. which I think is becoming already a success and Pepe and your team thank you very much because you have already done a great great job in a few hours we'll be prepared all those things thank you very much all of you and I hope you enjoy already with this new opportunity that we have already in this moment thank you very much for your attention and if you have not seen the opportunity I wish you a very good summer holidays rest of it and see you in September thank you