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 nine-month results presentation. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period. Everything given by the top executive team that is today with us. Mr. Ignacio Galán, Executive Chairman. Mr. Pedro Zagra, 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 web page, www.iberdrola.com. Finally, we expect that our event will not last more than 60 minutes. If any questions remain unanswered, we at IR Team 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, Eklem. Please, Mr. Galán.

Good morning, everyone, and thank you very much for joining today's conference call. In the first nine months of 2025, our reported net profit reached 5,307 million euros, leading up to a 17% increase in adjusted net profit, excluding capital gains from national rotation. This growth was driven by robust operating performance. We reported a bid that reached $12,538 million, mainly in our net worth business, where a bid that rose by 26%, thanks to a higher rate base driven by investment and improvement regulatory frameworks. A bid for renewables and customers was impacted by lower market price and higher ancillary service costs in Iberia due to changes in the system operation after the blackout, which we are gradually passing through, partially offset by the contribution from additional renewable capacity. Investment reached new record of 9 billion euros in just 9 months, reflecting the execution of our plan. Networks investment increased by 12% for a total regulatory base of close to 50 billion. And we have added 2,000 megawatts of new capacity in the last 12 months. Driven by additional investment, operating cash flow increased by 10% to 9,752 million euros. which, combined with €8 billion of new asset rotation and partnership and the capital increase of last July, has allowed us to reduce the consolidated debt by €3.2 billion to €48.5 billion, substantially improving our ratios in line with our BBB Plus rating. The strong operating performance and the ongoing improvement in our financial position have led us to increase international holder remuneration by 8.2% to €0.25 per share. Reported EBITDA reached 12,438 million euros driven by the strong performance of our network business up to 26% in the past nine months, supported by higher regulated assets in all countries, especially in the Kingdom of Brazil, and positive rate adjustment mainly in the United States and Brazil as well. As mentioned, a bit of renewable power in customers was affected by the one-off impact in the change of system operations applied by Roth Electric in recent months as more synchronous generation has been introduced, which is impacting our retail business in the short term until these costs are passed through. In addition, we saw a lower market price and a lower contribution from Mexico after the last year's transaction. All these impacts were partially offset by additional renewable capacity. Nervos is once again the main contributor of our EBITDA, driven by the continued growth in our US and UK, which increased their combined share by 12 points, reaching 43% of the total EBITDA. Reflecting the 13% increase in investment made in both countries, which together represents 60% of the group total of September. As a result, total investment reached a new record of 9 billion euros, up 4% year-on-year. By business area, 60% of investment were allocated to networks, where we invested 4,904 million euros with a 12% increase year-on-year. Networks investment increased by 45% United Kingdom to 1,524 million euros driven by the integration of ENW and 80% increased investment in the Scottish Power Transmission and Distribution. Investment in United States reached 1,739 million in line with the last year as the 9% increase in distribution was offset by the increase in transmission investment due to the gradual completion of NCEC. Additionally, we invested 1,215 million euros in Brazil, up 14%, and 426 million euros in distribution in Spain, 60% more than last year. As a result, our regulated asset base grew by 20% on year-on-year to 49.3 billion euros. Investment in renewables reached 3,442 million euros, well diversified across geographies and technologies. 60% was allocated to United Kingdom and United States, with UK investment increasing by more than 45%, mainly linked to our offshore wind farms, corals, and reconstruction. It's Anglia 3, with 1,400 megawatts of capacity, and it's Anglia 2 with 900 megawatts. Our offshore wind farms, under construction in other countries, are also making good progress, with more than 50% of binyard wind once 806 megawatts already in operation in the United States, and 315 of the Bin-Dakar wind farms in the German Baltic Sea advancing as scheduled. Investment in onshore renewables reached 1,104 million euros, with 62% in onshore wind. And we invested more than 300 million in storage, including both pump hydro in Iberia and batteries mainly in Australia. Moving to network business performance, regulatory framework continue to evolve positively across key geographies. In United Kingdom, the Rio ED3 methodology for distribution was published, representing a first step in a process that will lead to a new framework by April 2028. And in transmission, the Rio T3 draft determination was released, as you know, and we have expected final determination before the year end. In the United States, current rate cases have resulted in a 10% average increase in tariffs in New York and Maine compared to last year, and Avangrid is already in the process of new rate cases in both states that will be effective for May 2026. As mentioned, NCEC, our interconnection project between Canada and Massachusetts, is on track to reach full commercial operation before year-end. And we are already working on new projects that will continue delivering growth in transmission, mainly the port in New York, which will result in 1,750 million euros of planned investment in the coming years. In Brazil, following the annual update in Neonergia Brasilia, rates have increased an average of 8% compared with last year, and the renewal of distribution concessions continues to progress. The concession of Neonergia Pernambuco was redesigned, and we expect the other distribution companies to follow in the coming months. In transmission, Neon Energy is on track to complete the last four lots under construction by December 2025, increasing the annual remuneration in this business by R$ 600 million to more than R$ 2 billion per annum. Finally, in Spain, the process of the review of the remuneration methodology and the rate of return continue. Moving to renewables, in the last 12 months, we have installed over 2,000 megawatts, with significant progress in offshore wind. In United Kingdom, production of our offshore wind farms in operation, west of Dandongshan and Nishanglia 1, exceed 2,400 HWh in the first nine months of 2025. And we continue progressing the construction of Nishanglia 3, with 20 monopiles already installed, and Nishanglia 2, where preliminary works are underway, after having signed all major procurement contracts. On top of this, our Isanglia One Nord project with 900 megavolt was qualified for the upcoming IER7 auction, scheduled by mid-November. In United States, the construction of Binger Wing One is now above 50% completion, with 32 turbines fully installed and more than 200 gigawatt hours produced. Finally, in France, a brief project produced 1,150 gigawatt hours during this period. And the output of our offshore wind farm in operation in German Baltic Sea reached 1,594 kWh as well. As mentioned, in Germany we have another project of deconstruction, Windacker, which is moving ahead as planned for commercial operation in 2026. Over the last 12 months, we have also installed 1,350 MW of onshore technologies well spread across our geographies, one-third in the United States and UK, including 200 MW of repowering projects, around one-third in Spain and the remaining third in another European countries and Australia. Finally, in storage, we continue progressing with our pump hydro project and the construction in Iberia, including Torrejon Valdecañas, with 15 GWh capacity. In Australia, the Smithfield Battery project is already in operation. The Broad Sound project is progressing as planned for the total of 490 MWh of storage capacity. All in all, we have currently close to 5,500 megawatts under construction, of which more than half correspond to offshore wind project and 25% to onshore wind. And we are very well positioned to capture additional growth if demand accelerates due to the electrification, thanks to a strong pipeline of 4.5 gigawatts of advanced projects ready to start construction by 2028, including repowering projects mainly in the United States. Through September, we have also continued improving our financial strength, thanks to a 10% increase in our operating cash flow to 9,752 million euros, driven by higher cash generation in net worth, and the execution as well of our asset rotation and partnership plan. Since January, we have signed transactions worth 8 billion euros with a positive impact on 4.5 billion euros in our net debt as of September. On asset rotation, as you know, we have already received close to 1.1 billion euros from the sale of our smart meters business in United Kingdom. We have signed other transactions, like the sale of our renewable business in Hungary, which will allow us to collect 128 million before the year end. Finally, the regulatory approval required for the sale of our Mexican business continues on track. Regarding partnership, we have added 708 MW to our joint venture with Norges Bank for renewables in Iberia, reaching 900 MW in operation, fully on track to reach 2,300 by 2027, with a total co-investment of 2.4 billion euros. Our partnership with Gansai, in the Windacker of short wind farm in Germany, will represent a total co-investment of 1.3 billion. And our partnership with Masdar, of Ford of short wind in the UK and Germany, which will result in co-investment of 6.8 billion, is also progressing well. With the construction of Sangler III moving forward in line with our plan as explained, and the Baltic Eagle in Germany already energized. Increasing cash generation and the execution of our asset rotation and partnership plan, together with the capital increase executed last July, had led to a reduction of 3.2 billion euros in adjusted net debt, yet to date to 48.5 billion, driving even better stronger financial ratios, fully aligned with our 3B plus credit rating. FAO to adjusted net debt increased by 330 basic points to 26.2%, and net debt is already less than three times EBITDA. We also maintain a strong liquidity position of 23 billion euros, sufficient to cover 25 months of financial needs. Thanks to our strong business performance and improving financial strength, the Board has approved an 8.2% increase in interim dividend of 0.25% euros per year will be paid at the beginning of this year. As always, a supplementary dividend will be proposed for approval at the International Hall of Admitted Pay in July. I will now hand it over to our CFO, who will present the group financially starting for the detail. Thank you.

Thank you, Chairman. Good morning to everybody. Adjusted net income for the first nine months of the year, excluding the sale of the UK smart meters, accounted for in this quarter, which is the capital gain is 381 million euros gross, and the same number net, as we don't have a tax impact here, and including the cap allowance in 2025. which is 191 million euros, reached 5,116 million euros, representing a 16.6% increase compared to the adjusted net income for the first nine months of 2024, excluding the divestment of the thermal generation assets, which impact that the net profit was 1,165 million euros net, and including the UK cap allowance for 24, which is 81 million euros, as you can see in the slide. Excluding also the recognition of costs in the US for 389 million euros, as it is a non-CAS item, the first 9 months of 2025 growth is 8%, reaching 4727 million euros. The main perimeter change, as you know, is that ENW has been fully consolidated since March. The FX evolution has had a minor effect on results thanks of our hedging policy, with the dollar 2.5% lower and the real 10% lower. Reported net profit for the first nine months of 25 reached 5,307 million euros, decreasing by 3% year on year, affected by the asset rotation that I have just mentioned, that has been 784 million euros less in 25 than in 24. Revenues increased by 2.3% driven by the network business. Procurements rose 2.6% and gross margin grew 2% reaching 18.4 billion euros. Excluding the capital gains from the asset rotation, as I mentioned previously, which is referring to the smart meter divestment and the thermal generation assets, nine months net operating expenses improved 7% affected by lower storm costs and also lowers the gross margin. Net personal expenses rose 0.4% due to higher number of employees. External services declined 6.1% mainly due to the 330 million euros lower storm costs. Other operating income increased by 21% compared to the adjusted 9 months of 24 due to the indemnities of past year costs. The ENW consolidation partially offset by 121 million euros, negative impact of the East of Anglia III sale, 4 million more than in the first half results due to a negative impact accounted in Q3. As you will see later, this impact is more than offset at the financial expenses level. Excluding the mentioned storm-related impacts and other adjustments, net operating expenses improved by 0.8%. Analyzing the results of the different businesses and starting by networks, Ezebita grew 26% to €6,128 million, mainly driven by the strong performance of the UK and the US, linked to a higher asset base and past cost recognition. In the U.S., EBITDA reached $2,046 million, 88% more, with a 10% average higher rate in distribution and a better contribution from transmission. And positively affected since the first quarter by the decision of the New York regulator that allowed to register a regulatory asset on their IFRS regarding past costs, which have already been accrued and recorded on the U.S. GAAP, aligning both standards. It is worth highlighting, as the Chairman has mentioned, that NECEC finally is expected to start contributing from November of this year. In the UK, EBITDA increased 22.5%, reaching £1,129 million, including seven months' positive ENW contribution of £253 million, with growing results for transmissions driven by a higher RAB. In Brazil, EBITDA was up 12.6% to R$ 10,000 million, thanks to the higher revenue in distribution linked to higher inflation and an average 8% increase in rate reviews over a higher asset base. In addition, transmission contributed positively with R$ 1.3 billion gross margin as construction progresses. And as the Chairman has said, it is expected to finalize all the construction of the transmission lines this quarter and will contribute €2 billion in 2026, already fully completed. In Spain EBITDA increased by 9.3%, reaching €1,340 million, positively affected by the CNC draft retribution rate of 6.46% versus the previous 5.58% and by positive adjustments to past year's remuneration. In these first nine months, energy production and customer business EBITDA reached 5.9 billion euros versus the 6.7 billion in last year, excluding capital gains from asset rotation. The business reached 86% emission-free generation. In Iberia, EBITDA was 3,052 million euros, 17.5% down, with higher production, more than compensated by lower margin and sales, explaining 30% of the year-on-year variation. and higher ancillary services, higher levies, and positive court rulings in 24, despite 1.2% revenue tax termination, explain the remaining 70% of the decrease. Hydro reserves remain above the 10-year average. In the US, EBITDA remained flat, reaching $813 million, supported by improved wind and solar performance, despite the fact that 24 was positively impacted by an Arctic blast storm one-off of $34 million. In the UK EBITDA grew 5.3% to £1,136 million, driven by the £324 million capital gain from the UK smart meters divestment in this quarter. Excluding them, the business decreased 24.8%, with lower wind resources and prices, and weaker supply business, also driven by lower prices. Net operating expenses including £103 million negative one-off impact linked to the East of Anglia 3 sale, more than compensated at the net financial result as I have mentioned. In the rest of the world EBITDA grew 31.5% to 588 million euros with 61% higher offshore production due to higher contribution from wind farms, St. Brooks in France and Baltic Eagle in Germany with lower supply results due to the 30 million negative impact in Portugal due to the ancillary services cost as in Spain as a consequence of the blackout. In Brazil EBITDA fell 23.6% to 947 million reais with lower renewable and thermal production compared to last year. Finally in Mexico EBITDA reached 467 million dollars decreasing 78.5% with lower reported contribution compared to last year that included the thermal asset capital gain. Depreciation and amortization and provisions were up 2% to 4,272 million euros, driven by higher asset base despite the full year 24 adjustments impact and lower bad debt provisions, mainly in Spain. EBIT reached 8.2 billion euros and grew 6%, excluding capital gains. Net financial results worsened 93 million to 1,445 million euros, driven by 208 million higher debt-related costs, due to 7 billion higher average net debt in the first nine months of the year. While interest rate... related costs and effects improved by 85 million euros due to the effects depreciation especially of the real and derivatives had a positive contribution of 244 million of 34 million euros due to the east of anglia three derivatives as i mentioned compensate the lower the lower net operating expenses while the rest has had a negative impact, mainly due to the Mexico hedges, mainly linked to the positive impact of the Mexico transaction last year, compensated at the net profit level in the tax line. Cost of the debt improved 12 basis points, mainly thanks to lower short-term interest rates in euros and British pounds, and to the depreciation, especially of the real, despite higher interest rates in Brazil. At the end of September, net debt is 3.2 billion lower than the 51.7 billion reported in the 24-year end, reaching 48.5 billion. This positive evolution was driven by 9.8 billion FFO generation, plus 4.5 billion asset rotation and debt consolidation, and a 5 billion capital increase. more than covering the 9 billion CAPEX and the 4.1 billion dividend, as well as 2.2 billion ENW net debt consolidation. As a consequence, our K ratios are at a very strong level in the BBB plus band. Our adjusted net debt to EBITDA is below three times. The FFO adjusted net debt reached 26.2% and our adjusted leverage ratio is 43.3%, two percentage points lower than at the end of 24%. Nine months, 25 adjusted net profit grew 17% to $5,116 million, taking away also U.S. cost recognition, which is a non-cash item. As I commented, the growth is 8%. And now the chairman will conclude the presentation. Thank you.

Thank you, Pepe. This result reflects the foundation of the plan presented a few weeks ago, a transformational plan based on a specific project capable of delivering double-digit growth in profit in the first nine months of the year. thanks to the rise in network investment up to 12% through September, with attractive regulatory framework that are driving increases in tariff of 10% in the US and 8% in Brazil, as well as the expansion of our generation capacity of 2,000 megawatts just in the last 12 months, with 5,500 more under construction and 8,500 of additional by-land ready to cover any potential acceleration of demand growth. The implementation of our plan also reinforces our strong financial position, fully compatible with our AAA Plus rating, supported by 10% increase in operating cash flow in our asset rotation and partnership plan. And it's also delivering a growth shareholder return with an interest dividend of 8.2% to 0.25 euros per share. Driving by this consistent trend of improvement results and financial performance, today we are improving our guidance for 2025 to a double-digit growth in adjusted net profit reaching 6.6 billion euros or more, the 6.2 even excluding 399 million of net worth score recognition in the United States. This net profit guidance is already 1 billion euros above the net profit target set for 2026 in our previous plan. Proving once again that our strategy focused on networks in array countries with attractive remuneration for awards and selective growth in renewables is allowing us to grow and beat our estimate consistently. You can be sure that we will continue working toward that objective. Thank you very much for your attention. Now we can begin with the Q&A session. Thank you.

The following financial professionals have Javier Suarez, Mediobanca, Dominic Nash, Barclays, Javier Garrido, JP Morgan, and finally James Brand, Deutsche Bank. The first one is, can you provide more details on the main factors driving the expected double-digit growth in net profit for 2025 and clarify how the exclusion of capital gains from asset rotations and the inclusion of cap allowances in the UK impact this guidance?

So, as I mentioned, we expect double-digit growth on adjusted net profit to more than 6.2 billion euros, even excluding past cost recognition in New York, which is 389 million euros. A lot together close to 6.6 billion euros. Pepe, I don't know if you would like to clarify a bit more details.

Yeah, well, thank you, Chairman. Well, as I commented, these numbers exclude specifically the capital gains from basically Mexico with an impact of 1,165 million euros and the smart meters in the UK with 381 million euros, both at the net profit level. And it includes, as we presented in the Capital Markets Day, the CAP allowances in the UK. As you can see in the slide, 190 million for 25 and 81 million in 24. Obviously, for the end of the year, that will add a little bit more.

Okay, second question. Can you please provide guidance for net debt at 12 months 2025?

Yes, we are expecting the net debt by the year end to be around 51 billion euros. This is excluding the potential collection of the Mexico divestment. We are not including that. in this guidance, but we are including the acquisition of the previous sale of the NEO stake in this 51 billion guidance. This will be, even with all these things, below the 24 close of over 51 billion euros at the end of 24.

Next is regarding the use of capital gains. How will the capital gains from recent asset transaction be used in the future?

So capital gain, as you know, from asset transaction will be applied as always to future efficiencies just to improve the future results.

Next is regarding the battery storage, our view of this success or this upcoming business for the sector.

Well, I think now we talk about batteries, we will start talking about storage 25 years ago. I think, as you remember, my first presentation, we were talking about renewables, we were talking about networks, and we were talking about storage. I think we've been making renewables, we have been making networks, and we have been making storage. So I think what we've been doing in storage during these 25 years is we've been upgrading our hydrating facilities, making most of our turbines reversible to become all those one bidirectional, making already pumping storage plant. We have in this moment a capacity of 120,000 megawatt hours of capacity. I think it's a huge capacity for the storage. But also we are investing in batteries, especially where we don't have hydro facilities in our, or we have no project. I think the main places is Australia. I think they have attractive spread of support mechanism. And I think we have in this moment there more than 550 megawatt under construction. But as well we have another countries. I think we have 200 megawatt in construction in Spain and the UK. And we have already more than a thousand megawatts of projects in our pipeline that will be built up depending on the capacity payment of grants that can be provided.

Next question is regarding the data center. What is the company's strategy regarding the growing demand from data centers and what recent agreements have been signed with technological companies to supply energy?

So, as you know, data centers will be an important driver of human growth. And I think that is not new for us. We have already, for many years, we've been signing PPAs with tech companies. In this moment, we have more than 12 terabytes a year so far of contracts of PPAs already signed with tech companies, mainly United States. But I think because we consider that that is an important element of demand growth is why we are facilitating the expansion of data centers in those countries where it already means for helping the companies to invest and to stand. I think in this particular moment we have an agreement in Spain with Echelon and the first project which is going to make a demand, an energy demand of more than one terabyte a year is already ongoing and we have another four projects progressing. So we are active on those ones because we consider then that is a driver for increase of the electricity demand, and that's why we would like to help these companies to do the necessary for making that happen.

The next one is regarding the market situation of the United States. Given the recent increase in demand from data centers and industry and the rising energy prices in certain U.S. states, is the company considering increasing its renewable ambition or pipeline? And the second question regarding to this is how will these market trends impact your PPA strategy and asset development plans?

so i think you will respond pedro but i think just to give you it's true then in this moment united states the prices are rising and our expectation is the prices will rise even more i think it's uh the fact that the new cgts are built this new city's bill is going to make then the prices will will increase because they are already is New power plants have to be already amortized toward those ones which are already fully amortized. And I think those ones are pushing the prices up, independent of the cost of the gas. But I think that is a good opportunity for us. I think it's a good opportunity. Because we have almost 40%, 30% of our fleet is in merchant. And I think the contract we have already with the long-term PPA sign is already ending during a certain period. And I think that makes the renovation of this contract probably that is going to increase the prices. We are already making that. All in all, that is certain a great opportunity of increase of value for our assets, renewable assets in the United States. And that is why the United States is there a tremendous, let's say, demand of buying existing renewable assets in operation. So, which I think, Pedro, you can already complete this comment.

Okay, thank you, Chairman. I think the example, a couple of examples, Texas and Oregon, where the prices are already rising. And, you know, we operate already 3,400 megawatts in those states. In the short term, this benefits our merchant assets. And then it will be translated, as the Chairman said, to the PPAs. And, for example, in those states, we have more than 4,000 megawatts of potential pipeline, you know, to come. In the U.S. overall, we have 10,000 megawatts right now in operation. Thirty percent of that is merchant, and 70 percent is PPAs. The average PPA life is 10.7 years. I think there is an opportunity for life extension and repowering. Around 360 megawatts under construction in the US, 432 globally, and more than 800 megawatts of additional pipeline, 1,500 globally. So I think this is, you know, good signs of what we can do right now to benefit from the demand increase.

Next is related to Spain. Can you provide an update on the blackout investigation and the causes that triggered the event?

I think during the last weeks has already had a lot of public reports, a lot of investigation, even in the Senate and in the different conference. And I think this public report said clearly that this was a result of lack of synchronous energy to provide energy in the system. They say also that as more renewable enters into the system, supply becomes also variable. And I think that requires more synchronous energy. So the fact now the system operator has changed operation and is operating with more synchronous energy. So I think what they say in the public report and the public information is precisely what now is the system operator is already just doing. Certain that has an effect that is increasing the cost of ancillary services which in our case that we have most of our sales are under multi-annual contracts is affecting to our results because we have not passed this extraordinary extra cost for our customers and all those ones we have a multi-year contract. As Pepe mentioned that is in our case is close to 180 million euros effect in our accounts up to September.

Next is related to Spain as well. What is needed to extend the operation of the Almaraz nuclear plant? Is the 50% reduction in the Extremadura ecotasa sufficient to ensure its continued operations?

Well, you were listening to me for a long time. The nuclear power plants are safe and are needed. So I think they are needing more than ever in this moment for avoiding potential blackouts or potential problems in the service. Also, this power plant that you are talking about, they have a national, international license, which I think they allow them to operate at least up to 2030 without being forced to ask for any additional national, international license of operation. But there's something very, very important. It's a social, national social demanding the country to maintain then operating. I think every week there are demonstrations, there are people writing of different tendencies, different ideas, different political parties, and the civil society are asking to maintain then operating. So for two reasons, because of this social responsibility and because the need of this power for keeping the lights on in the country and providing a safe, cheap service is why we three, the owners of the power plant, we have asked the government the continuity of the Almada power plant. So that means, in this moment, only depends on the decision of the central government the continuity of this power plan. There are not any other limitations. Technically, they are allowed to cooperate. Social is in demand. Economically, it's the best solution. And in terms of the operation, the system is needed for keeping already the service operating. So I think the energy policy is made by the government. The government has to take the decision, and they will explain the consequences, whatever decision they will take about it.

Another trendy topic in Spain. Can you provide an update on the latest developments regarding the regulatory framework for networks in Spain and how would the remuneration rate below 7% affect your investment plans?

You are talking about networks. Networks in Spain. I think that, you know, networks in Spain for us is quite small compared with the networks you have in other countries. I think it's the fourth in terms, as you saw in our presentation, is the fourth of all our networks. RAP in the different countries. The first one, largest RAP is in the States, the second largest RAP is in the UK, the third largest RAP is in Brazil, and the fourth is in Spain. So I think it's small compared with the rest. Saying that, I think as far as I know, there's still that is in process. There are no new news. I think which... I had already heard is they are already make a public consult about the terms with everything proposed, but we have no more details of that one. I think something which is clear is either the government, the central government, either the different government of the region are asking for the need of more, more investment in networks. I think if that is not the proper framework, I doubt in this extraordinary investment which is needed, so it's going to be made as fast as it will require.

Next, how are the increasing costs of ancillary services being managed, and to what extent are these costs being passed through to the customer as contracts are renewed? Pedro?

I think as of September, yes, we have a negative impact because of our multi-year contracts. But of course, these costs are being passed through as contracts are renewed. We expect, you know, by 26, 70% of these already through customers and almost 90% by 27.

Next is regarding the UK. What is the company's perspective on the current regulatory environment in the UK, particularly regarding the Rio T3 framework?

I think we have very fluent dialogue with the regulator. I think recently I met personally the chairman, the chair of OBJEM. I think they are aware about the need of sufficient profitability remuneration and financiability for already to attract the investment needed. I think it's certain they make already a draft determination, which is the base of our rate case plan. I think our business plan is already just based in this draft determination, but I think I'm sure that the The sensibility of them is such that I hope there is a potential improvement during the negotiation to make certain upside. But we will know the final determination by December. So I think now we are in the process of that one. But I think we are very open dialogue with the regulator, I think ourselves and another two players on this one. And I think they are, my feeling is that they are already very, sensible about the need of making orderly zone adjustment to facilitate to make the huge investment which are needed.

Next is, can you provide details and expectation on your strategy for the AR7 auction in the UK?

So as you know, we have already, it's Anglia One Nord ready to participate at one. So I think we have a competitive project. We have all the security, all the supply chain secure. We, but I think we, you know, we are very disciplined in terms of profitability criteria. I think yesterday I heard the final budget has been published, which I think only 900 million allocated to offshore, but I think the flexibility to the Secretary of Energy to increase this amount depending on the numbers of bidders. I think this number, if it remains like it is, in my feeling, my opinion, is not sufficient to achieve the country's objective in terms of power, in terms of decarbonisation. I think there are other changes in this ER7. They increased the life of the CFDs from 15 to 20 years and I think they already make a reference price which is 11% higher than the than the previous one. So, which I think that would sense, but I think the budget, in my opinion, is absolutely insufficient. And I think if the Secretary of Energy has already the power to modify the numbers after the auction, if that is not modified, my feeling is it should be difficult to achieve the target, because they are already thinking in terms of power, new power, and in terms of

decarbonization when they are already looking but new power in my opinion they will not really achieve the numbers they were thinking about next what is the current status of the mexico operation and when do you expect regulatory approvals to be finalized

I think in Mexico, you mentioned.

Yeah, the deal in Mexico, the pending deal in Mexico.

Well, I think, you know, the agreement is signed. As far as I know, the buyer has already secured the financing, almost secured. And I think now we are depending on the approvals of the different authorities. But as far as I know, the things are ongoing. I think this week our Mesonero, which is our M&A guy, I think is in Mexico, and I think he will take fresh news already next week. But I think we are not already, let's say, we have not any negative input about that one, and I think they are going already according with schedule.

Two last questions. The first one is probably for Pepe. Effective tax rate is below historical average. Should we expect this effective tax rate to be kept at similar level at the year end?

I think that we will have an effective tax rate at the year end to be around 20%. Let me explain that this is below, basically, for several reasons. First of all, because right now the contribution of countries with a lower tax rate is higher than in previous years, so the UK and the US versus Mexico and Brazil. An impact that it is reducing the tax rate this year is, as I mentioned, the UK smart meters capital gain in the first nine months is at the gross and net, so there is no tax impact here. Last year, the thermal capital gain was affected by the Mexican corporate tax rate. And finally, as I mentioned, last year we had a... negative impact in the taxes due to hedges that we had and had a positive impact in our financial expenses and this year is the opposite. We are having a negative impact due to the last year transaction, a negative impact in our financial expenses due to the Mexican FX hedges that is compensated at the net, at the tax level. So all in all, that is the explanation why this year, in the first nine months, the tax rate is below 20%. And the expectation is that by the end of the year, the tax rate will be around this 20%, as I mentioned.

And last question is related to Spain and the contribution of the hydro production in terawatt-hour in 2025. which is our expectation related to the traditional average year.

So just looking here at the numbers, I think up to today, I think our production of hydroelectric is around 18 terawatt hours, which I think is an increase on around 3% to 4% over previous year. Approximately two-thirds is traditional, conventional, and one-third is pumping storage. So we see pumping storage taking their important role on this one. And I think now the reserves is on the range of six terawatt hours. And I think that now is again starting raining, which I think heavily. So which I think in a few days, we hope the numbers will increase. I think that is, I think in terms of the year, I think it's important, but it is 3% more. But that is not the key of our result. As you know, our result is coming from other sources. Even in Spain, the result is not as good as last year because of the prices and the IGL service, etc. But I think it's good news in terms that our results are high, and probably with this range which is now coming and expected, I think this result can be really maintained, which should be a good result. thing for next year as well, contribution to the next year profits or next year results. So I think that's good. But I think the news is 3%, 3% to 4% more than previous year. The pumping is one-third, two-thirds is traditional. And the results are in good shape, very high. But I think that is already there, room for increasing those one. If the rainfall is continuing as the range, as the expectation we have in this moment, with that gave already certain possible, let's say, extra results for 2026.

We have received as well a final question regarding the guidance for 2026, but probably this is something that we will be delivering next February. So we anticipate something on the Capital Markets Day, but I mean, for those that have asked this question, February will be the deadline. So just to finish this event, please let me know the floor to Mr. Gallant to conclude the presentation.

So thank you very much, as always, for your very clever, intelligent and very good questions. And thank you very much for participating in part of this conference. And if there are any new questions that you consider, I think our investor relation will be ready, as always, to give you additional information you may require. Thank you very much and see you soon. Thank you.