Iberdrola Sa S/Adr

Buenos dias, señoras y señores. Good morning, ladies and gentlemen. First, we would like to extend a warm welcome to all of you who have joined us today for our 2026 first quarter results presentation. As is customary, we will follow the traditional structure of our events. We are going to begin with an overview of the results and the key developments during the period. The presentation and the Q&A will be delivered by the top executive team joining us today, Mr. Ignacio Galán, Executive Chairman, Mr. Pedro Zagra, CEO, and finally, Mr. Pepe Sainz, CFO. After the presentation, we'll move on to the Q&A session. I would like to remind you that we will only be taking questions submitted through our website. Please send your question exclusively via www.iberdola.com. Finally, we expect that today's event to last no more than 60 minutes. Should any question remain unanswered, the IR team will, as always, remain fully at your disposal. We hope that this presentation will be useful and informative for all of you. Now, without further ado, I would like to hand the floor over to Mr. Ignacio Galán. Thank you once again. Please, Mr. Galán.

Thank you, Ignacio. Good morning, everyone, and thank you very much for joining today's conference call. In the first quarter of 2026, adjusted net profit increased by 11% to €1,865 million. Adjusted EBITDA reached €4.1 billion, up to 2.4%, mainly driven by 9% increase in net worth. more than offsetting the lower contribution of power and customers due to non-recurring impacts in Iberia in the first quarter of 2026 and in its previous year in the U.S., which were partially compensated by strong production in the U.K. and continental Europe. Investment reached $2.7 billion in the quarter for a total of $14.5 billion in the last 12 months, fully aligned with our strategic priorities. More than half in our QE1 investment were allocated in UK and US, and 15% to networks, increasing our rate as of today to $53 billion. We also invested more than $1 billion in new renewable capacity. As you know, last week we announced the closing of the Mexico transaction, which completes our asset rotation target for 2028, reinforcing our financial profile and securing additional funds to invest in regulated networks business in the UK and the US. And Brazil, where we have also acquired shares of an area we do not control. This transaction will follow other recent deals also related to networks like the purchase of our grid minorities or the integration of electricity in the West and the UK. That will simplify our structure and have a positive impact on the profit from year one, increasing our exposure to a country with high growth prospects and a strong regulatory outlook like Brazil. Driven by additional cash flow generation up to 7% and the positive impact of the Mexico transaction, our performance net debt reached 50.3 billion euros, enforcing credit metrics in line with our BBB Plus rating. In terms of efficiency, our recurring net operating expenses rose just 1% up to March, excluding the incremental effect on electricity networks in the UK. In the coming quarters, we expect to benefit from the use of capital gains for national rotation like with previous year. On top of this, we are implementing a field review of our processes to integrate artificial intelligence solutions across our activities and corporate areas with more than 300 initiatives already identified. That will drive for the efficiency and new business opportunities in the next years. All in all, these results reflect the benefit of our business model based on regulated business in ARA countries, and they provide stability and sustained growth in all scenarios. Even in the current energy crisis, probably in the six or the seven linked to fossil fuels since I started my career, we don't expect in Iberdrola any significant financial impact from this scenario. Given our minimal exposure to commodities, our zero exposure to supplies affected by the threat of a move with 93% also of our state projects fully secured, our geographical footprint based in the SRA countries, and our structural protection against potential microeconomic shocks. As you know, most of our remuneration records are linked to inflation. We have foreign exchange risk fully covered by our 2013 profit estimate, 75% of our debt is fixed rates, and our current liquidity stands at 21.4 billion euros, enough to cover 23 months of financial needs. The resiliency against crisis will be reinforced in the coming years thanks to our focus on regulated electricity networks, mainly in the U.S. and the U.K., and our generation technology is not linked to fossil fuel volatility. 100% of our production is already sold for 26%, 80% for 27%, and 75% for 28%. As a result, by the end of the decade, 75% of our EBITDA will come from regulated networks and long-term contract degeneration. But apart from increasing our own resiliency, our performance in the last quarter shows that the Barula business model is also improving energy security to state autonomy and competitiveness in each of the countries where we operate. Given these benefits, more and more governments are putting electrification at the center of their energy industrial policies. In the last week, the European Commission and the European Council have published different communication documents and statements with a clear message. Accelerating electrification with indigenous sources, including nuclear, is the most effective way to promote Europe's strategic autonomy and competitiveness. In other countries, like the UK, are following the same strategy. We could listen to many European policymakers reaffirming this approach last week at WinEurope annual event held in Madrid. Moving on to business highlights, over the first quarter, networks have continued to deliver predictable and sustainable growth. In the U.K., the Rio T3 final determination was increased our transmission investment to 14 billion euros up to 2031, improving rates of return and accelerating cash recovery. In the U.S., avant-garde results reflect the additional contribution of new interconnection line between Canada and Massachusetts was commissioned in the last days of 2025, as well as the impact of rate increases in Connecticut and New York. In Brazil, the renewal of distribution concessions for an additional 30 years was published in the Union Official Bulletin, and the formal signature ceremony is expected in the next few days. This will provide us visibility up to 2060 with no upfront costs and with relevant regulatory improvement, like recognition investment on an annual basis. Operating performance was also positive in power and customers in a context of increasing demand in all our countries, mainly U.S. and Brazil. In Iberia, hydro reserves continue at record levels, and the U.K. wind production is 40 percent higher than in the same period of 2025. Finally, offshore wind production has increased significantly in our international business due to the completion of Baltic Eagle in Germany and Hyala by Lavite across the fleet in Germany and France. As mentioned, adjusted EBITDA reached 4.1 billion euros, driven by positive net worth operating performance in all geographies, higher rates, and 8% increase in regulated assets base to the strong investment in UK special interest mission. In power and customers, the evolution of EBITDA reflects negative non-recurring impact, mainly regulatory and in Iberia, as a result of the reinforced operation applied by ResElectrica España to include more synchronous generation. As you know, system operator is responsible for keeping the lights on, and since the blackout, he has changed the operation of the system, now called reinforced operation, but in reality is more a regular operation system. In my opinion, as an electrical engineer, as I mentioned to you several times, it was a lack of proper planning in the due execution on the day of the blackout. as we had in the system around four times the power needed when it happened that was not used. The comparison against the first quarter 2025 is also affected in the business by non-recurring positive results registered last year in the U.S. that will normalize over the coming months. These effects were partially offset by higher production, particularly in offshore wind, which is the 42% increase in output. By geographies, the UK and the US accounted for almost 50% of the BINDA, and eight rate countries contribute 84% to operating results once we had the European countries at European countries and Australia. Investment reached 2,705 million euros in the first quarter for a total of 14.5 billion in the last 12 months, more directly to networks. Focusing on the first quarter, more than 900 million were allocated to the UK, reflecting an increase in transmission investment. They will accelerate a bit more under the Rio T3 framework. Investment in the U.S. reached €450 million, mainly in distribution. However, the comparison between last year is affected by the completion of different renewable projects in the interconnection line between Massachusetts and Canada. Investment in continental Europe and Australia reached €400 million, more related to the Windacker Offshore Wind Fund in Germany, a new offshore and battery storage project in different states of Australia. Investment reached €309 million in Brazil, with an increase of 30% in distribution, and more than €500 million in Iberia. Thanks to the €1.5 billion invested in networks, up to March, our regulated base reached €53 billion, up 8% year-on-year. One-third of the total investment were located to transmission. driving a 29% increase in regulated asset base up to 14 billion in this concept transmission. Distribution investment also exceed one billion up to 16%, mainly driven by a strong increase in around 30% in the UK and Brazil. Biographies, 46% of investment were made in UK, 36% US, 20% in Brazil, and slightly less than 10% in Spain. In power, we invested 1,070 million euros, mainly in wind. Almost half of this investment, around 500 million, were located in offshore wind across Australia and the US, UK, and Iberia, followed by offshore wind with 300 million. Solar PV investment reached 162 million, spread across Iberia, other EU countries, and Australia, as well as the US. And we invested $115 million in storage, mainly in Australia and EU. This has allowed us to increase our capacity by 3,300 megawatts over the last 12 months, including 2 new gigawatts of wind, 1 gigawatt of solar, and more than 300 megawatts of storage. Regarding financial strength, the 7% increase registered in FFO on the positive impact of our social protection partnership, mainly due to Mexico transaction that had led to us to perform on a debt of 50.3 billion euros, even after an increase in organic investment and acquisition on energy and minorities. As a result, our FFO on adjusted net debt ratio has reached almost 25%, comfortably with a range of triple B plus rating. On top of that, liquidity stands at 21.4 billion euros, enough to cover 23 months of financial needs. Finally, in the last month, we have accelerated the implementation of artificial intelligence initiatives with an internal team fully dedicated to end transformation of our processes, taking advantage of our own talent and resources, as well as our understanding of our asset portfolio. In just a few months, this team has launched more than 300 AI projects, 70% fully developed in-house, to increase revenues and maximize operational efficiency across our business and corporate area, mainly based on generative AI, but also on advanced machine learning and robotics. We'll inform you about the financial impact of these initiatives as soon as they begin to materialize. But for the moment, I can tell you that our initial findings show a considerable value potential. I will now hand over our CFO, which will present the group financially standing for detail. Pepe.

Thank you very much, Chairman. Good morning to everybody. As the Chairman has mentioned, these first quarter results confirm the strength of our business model. The first quarter EBITDA was 2.4% up to €4 billion, while adjusted net profit grew 11% to €1,865 million. Since last year, the dollar has depreciated 11.4% against the euro. the pound 4.2% and the real 1%. As a consequence, FX has reduced our profit and loss figures. If you exclude FX, growth would have reached 6% at the EBITDA level and 17% at the net profit level. ENW is fully consolidated all the quarter versus last year where it was only one month. For clarity and comparability, we have applied a limited number of well-defined adjustments aligned with IFRS and our guidance definitions, thereby keeping differences between reported and adjusted results to a minimum. Mexico contribution is excluded at the EBITDA level in both reported and adjusted results following the IFRS 5 recommendations. Mexico is classified as discontinued operations in both cases. In the reported accounts, Mexico is presented directly under the discontinued operations line. And in the adjusted accounts for visibility purposes, Mexico is recognized under the equity line. In addition, there is a negative adjustment accounted in this quarter related to the year 24 divestment of our thermal assets in Mexico, which is excluded from the adjusted 26 results. Second, as usual, UK capital allowances are adjusted at net profit level in both years. And finally, US pass recognition is excluded from the adjusted net profit in 25, in line with the definition applied in our 25 guidance. You can find all this explained in more detail in the annex, specifically in slides 36 and 37. Regarding our gross margin, a 0.3% decrease in adjusted revenues combined with a 0.5% increase in procurements resulted in a 1% adjusted gross margin decrease. Excluding the FX impact at this level, which is €267 million, adjusted gross margin would have grown by 3%. In the first quarter, net operating expenses decreased by 6% year-on-year and by 0.7%, excluding the FX impact. First quarter net personal expenses fell 0.8%, external services were down 2%, and operating income grew 24%. On a recurring basis and excluding the FX impact, net operating expenses would have grown by 8.1%, mainly due to the EMW contribution. Analyzing the results of the different businesses and starting by networks, it's adjusted EBITDA grew 9% to 2,048 million euros, driven by the strong performance in the UK and in the US. Excluding here also 94 million on FX impact, adjusted EBITDA grew 14%. In the U.S., IFRS adjusted EBITDA increased 22%, reaching $612 million. Due to higher rates in distribution, a better contribution from transmission, including the positive contribution from NEC-EC line following the 16th of January COD. In the UK EBITDA was up 32% to £447 million with higher contribution from ENW versus last year as consolidation started in March of 25. And also an increasing contribution from our transmission business thanks to the higher RAF. In Brazil, EBITDA fell 0.7% to 3.6 billion reais, with higher revenues due to yearly rate reviews offset by lower inflation and lower demand growth versus last year. In Spain, EBITDA increased 6.2% to 426 million euros, driven by the 658% new regulated return and also with a 15 million net impact positive net impact from adjustments due to past year's remunerations. Q126 power and customer business EBITDA was €2 billion, 3% lower than last year. During the quarter, Iberdola produced 33,000 GWh of electricity, with 86% sourced locally and being emission-free, which is a reference of the EU targets regarding power production. In Iberia EBITDA was 1,002 million euros, 3.2% down, affected by ancillary costs, regulated gas rate and lower prices, despite higher electricity sales. As of today, Iberdola has record hydro reserves, as mentioned by the chairman, which will help the performance of the group in the second half of the year. In the U.S., EBITDA decreased 32% to $196 million, with lower contribution from wind, thermal assets, and a negative timing effect that will normalize during the year, and despite better prices. In the UK EBITDA increased 16% to 493 million pounds thanks to higher wind resource both in onshore and offshore, more than compensating lower prices and better contribution from the supply division driven by better margins. In the rest of the world EBITDA decreased 7.6% to 212 million euros despite the 37% higher offshore production. due to lower contribution from our onshore wind assets affected also by the sale of some geographies like Hungary and France, and a negative impact from higher ancillary costs in Portugal. In Brazil EBITDA increased to R$ 500 million. Depreciation amortizations and provisions grew 9% to 1,476 million euros, driven by a higher asset base and a normalization of provisions versus exceptional recoveries in Q1 of 2025. Adjusted EBITDA decreased 1% and reached 2,591 million euros. Excluding 80 million euros of negative FX impact, it grew 2%. Net financial results improved slightly to €497 million due to a €4 billion lower average debt and helped by the currency depreciation despite €56 million worse derivative results. Regarding debt structure, fixed debt, excluding NEO, amounts to 77% at March's end, 12 percentage points above our fixed EBITDA, reducing our risk of negative impact due to a possible interest rate increase as a consequence of the Iran conflict. New debt increased 1.7 billion euros. Sorry, new debt. Net debt increased by 1.7 billion euros versus full year 25 to 51.9 billion, mainly due to the currency appreciation, capex and dividend payment in the quarter. partially offset by the FFO generation, including the net €1.6 billion collected from the Mexico sale to Cox and payment linked to Brazilian minorities' acquisitions, both executed in April, that would have been €50.3 billion in line with year-end levels. So better debt levels compared to Q125 and a 7% higher adjusted FFO that reaches 12% in excluding FX delivered solid credit ratios for our BBB plus BAA1 rating. These metrics clearly support our rating and underlines the group capacity to grow while having a strong balance sheet. Our adjusted net debt to EBITDA was 3.4 times, below 3.7 times in Q125. The adjusted FFO adjusted net debt reached 24%, well over the 21.2% in Q125. And our adjusted leverage ratio was 44%, three percentage points better than the 47% in Q125. On a pro forma basis ratios improved even more, as you can see in the slide. Q1 26 adjusted net profit grew by 11% to 1,865 million euros compared to the 1,674 million adjusted net profit in Q1 25. Excluding the euros 99 million FX impact, adjusted net profit would have grown by 17%. The energy and minority shareholders' acquisition, although does not contribute to a higher EBITDA, reduces the dilution at the net profit level and in this quarter adds 57 million to the net profit. In addition, it simplifies Iberdrola's financial structure and increases the weight of networks in our net profit. The slide presents the reconciliation between reported and adjusted net profit. This is shown in more detail, as I mentioned before, in the annex. As well, we are showing in the annex the calendar for the final dividend. Thank you very much, and now the chairman will conclude the presentation.