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.

Thank you, Pepe. To conclude this third quarter result, confirm the resilience of Iberdrola business model and the current context of geographical uncertainty and reinforce our positive perspective for 2026. In the coming quarters, Network will continue to be our main growth driver. thanks to an ongoing increase in our regulatory debate, both in distribution and transmission, as well as the impact on new regulatory frameworks like Rio T3 in the UK, or Daniel Talley's adjustment in Brazil, where we will also benefit of higher contribution for energy at the full acquisition of minorities. As mentioned, this transaction will simplify our structure in the country, accelerate our study-focusing networks in line with acquisition of our main minorities, or the integration of electricity in the West in the UK last year. In power and customer, we will add 2.7 gigawatts before year-end, on top of the one gigawatt commission in the first quarter. And our hydro research continues at record levels, driving by strong hydro factors of January and February and the positive performance of pump storage. We'll also continue improving operational efficiency across our businesses. In terms of financial profile, our current debt levels and the ongoing cash flow generation will allow us to increase investment and preserve strong credit ratios. This positive operating and financial outlook is leading us to upgrade our guidance for 2026 to expect a growth of more than 8% in adjusted net profit, excluding capital gains from the asset rotation we have always done that we will apply for future efficiencies. and we expect to continue accelerating growth to the 2020 and beyond, benefiting from an increasing electricity demand outlook across the energy uses and geographies, driving by technology approaches and new energy policies, as governments try to capture all the positive impacts of electrification in terms of strategic autonomy and insufficient competitiveness. In this context, over the last month, we have continued securing new investment opportunities in all our key countries. United States, the consensus of the need of generation networks infrastructure is becoming unanimous, given the strong increase in demand. According to Standard & Poor's annual U.S. CAPEX, we'll grow by 11% per annum from 25 to 28. For Avangrid, this means additional investment in transmission and distribution and generation, including repowering and life extension of part of our current fleet of 11,000 megawatts. In the UK, after the increase in transmission investment already confirmed by Rio T3, we also expect significant growth in distribution in the next regulatory period starting in 2028. The government confirmed its support to offshore wind with an ER8 auction expected later this year. As you know, Scottish Power's Anglia One Nord project is ready to bid and has its supply chains totally secured. We also see increasing opportunities in continental Europe for offshore wind, for instance in France, and on shore technologies. as well as Iberian retail business where we keep leading leadership in customer numbers and quality. In Brazil, the renewal of distribution construction for 30 years, and with improved condition, we will bring more visibility in the context of increasing investment needs. Finally, in Australia, we are already designing our first transmission project in West Victoria, and we are working in new opportunities in this business for the coming years, as well as in additional growth in onshore wind, solar PV batteries. Artificial intelligence is also generating new opportunities on electricity demand growth, and it has potential to optimize business processes, increasing additional revenue and efficiency across our electricity value chains. All in all, you can be sure we will continue delivering strong, sustainable, predictable, and resilient growth in resulting dividends as we have done in the last decades. Thank you very much for your attention. We are now ready to answer your questions. Thank you.

The following financial professionals have raised the following questions. Philippe Orpatian, Odo, Pedro Alves, CaixaBank, Pablo Cuadrado, JV Capital Markets, Mayke Becker, HSBC, Manuel Palomo, BNP Paribas, Peter Vistiga, Bank of America, Rob Pulein, Morgan Stanley, James Brandt, Deutsche Bank, Jorge Alonso, Bernstein Societe Generale, Fernando Garcia, RBC, Javier Suarez, Mediabanca, and finally, Sky London Rothschilds. The first question is, could you align the key drivers of Iberdrola's Q1 2026 net profit and explain the main factors behind the year-on-year growth?

Thank you very much. And already, as I explained, in networks, we expect a strong performance in the U.K. and U.S. due to the consolidation of electricity in the West from March 2025, higher rates and contribution from NCC, interconnection between Canada and Massachusetts. and also higher RAP in all countries because of the investment we have been doing. In power, business affected by non-recurring impacts, the cost of auxiliary service in Iberia in 2026, and some timing effects in the U.S. that was affected this year. And as well, in positive, we have the higher production. Below EBITDA, a good evolution of our financial expenses, positive impacts of the 100% equation in January that we have already mentioned before. And that makes our net profit grows by 11%, even with a negative impact of almost 100 million euros to the FX. And so without this one, the net profit that Pepe mentioned was 70% increase on adjusted terms.

Next is, could you elaborate on the new 2026 net profit guidance and summarize the main operating and financial drivers you expect to support delivery over the remainder of the year?

So almost on the same line that I was commenting for 2026, we expect to continue the strong performance during the rest of the year in networks growing the regulatory asset base in all countries. New distribution framework with better rates. Rio T3 from April. New interconnection between Canada and Massachusetts. Better tariff in Brazil, which has been already adjusted in the last few days. Additional contribution for energy for the 100% ownership. And in power, we have installed one gigavolt in the last three months, and we expect to make another 2.7 additional before the year end. And we expect to continue to have a strong renewable output after last year, very bad, very low production, especially in the UK. Our hydro reserves are in record levels, which in a part of that one we have the very good performance and good spread of our pumping storage facilities, which I think only in the first quarter we have already produced 1.6 terawatt hours, so which I think is an important percentage of our total electricity generated with hydro. We have lower debt and better ratios. The interest rates mainly are fixed or hedged. We are not expecting a significant volatility to the geopolitical dynamics, as I mentioned before, because our regulated transmission distribution network business, and because our power, 86% of our production, is not linked to fossil fuels. 100% of 2026 is already sold. So that's why we are improving our guidance to unexpected growth for more than 8% in adjusted net debt, excluding capital gains, which always we use for future efficiencies.

Next is related to the fiscal tax rate at the end of the year. What is the expectation we have?

Pepe? Yeah, well, in this quarter, our taxes have been affected by a reversal of a provision thanks to that we have won a court case and also impacted by the fact that the countries with higher tax rates have been lower contribution to our profits. We are expecting that our tax rate will go towards around 20% along the fiscal year. So it will increase to reach these levels of around 20% at the end of the year.

Next is related to one slide that has been explained already, but is related to the impact of the Iran crisis in our operations, supply chains, and financial evolution.

As I mentioned, we don't expect significant in the short term, because 85 percent of our assets are in countries not exposed to the conflict. Our growth is focused on regulating networks, which is two-thirds of our investment is coming to this segment. And the U.S. and U.K. represent 65 percent of our total investment. 75% of the bid will come from regulated long-term contract activities in 2028, 2030. 85% of the production as well in 2020 is already secured through CFDs, PPAs, etc. And The supply chains are not affected by straight-to-form dynamics because we are focusing local supplies. We're not special to the area. The fact today, 93% of our strategic equipment for investment is already secure. We have a minimal exposure to commodities. We have not already long-term control of gas, so I think that is not affecting to ourselves and the negative 10 or whatever. I think it's, for me, as I mentioned, the current context proves, again, The electrification is the best route to energy security, strategic autonomy, and competitiveness. I think energy security is national security. And electricity, as is repeating now all European leaders, is the solution. It's not a threat. It's not a problem.

Next question is related to us, or the street is asking more details on the artificial intelligence initiative of the .

Pedro?

Thank you, Chairman.

I think we're approaching now almost 400 projects of initiatives in AI, and more than 70% are generative AI, and more than 10% of those are robotics. These projects cover all corporate functions, all businesses, and all geographies. They're linked to efficiency, but also very important to new business opportunities. Very important. This is a process transformation. More than 70% are in-house made. I think we will see positive impacts, as the chairman said, and we will be updating in the upcoming quarters.

Next question is related to the recent closing of the Mexico deal to Cox, including timing, expected capital gains, and intended use of proceeds.

So as we informed to you, the transaction was closed on Friday. That means we received the money on Friday. The figures were in line with what we announced last summer when we signed this agreement. We are calculating the capital gains in detail, but of course it's going to be several hundreds of millions of euros. And as usual, we will use this money, this capital gain, to achieve efficiencies in the future. And that will not impact our guidance, as I mentioned before. So now, if you allow me, I will pass to Spanish.

so that I can thank the workers of Eberrol in Mexico for their work over the last 25 years. And we have assisted them in the development of the country and we have supplied them with safe and competitive power, power for their citizens and their industry. And I would also like to thank the respective governments and the institutions and our customers and suppliers too, who over the years have supported us and have collaborated with us throughout all of this time to be able to provide this service. And as I said previously, on previous occasions that is, one of the main reasons behind this operation is our priority. Our priority is focused on investing in electrical grids. which is an activity that is in the hands of the National Electricity Commission. So we can't really do anything in that particular area. But I would like to say, however, that we are deeply satisfied because we are leaving top-level electrical infrastructures. And I know that now and in the future, all the Mexican citizens will benefit And as I also pointed out to the Mexican authorities, we want to invest more. We want to invest more money in Mexico in the future when the circumstances allow us to do so, once we have completed our investment cycle.

Next is, could you update us on the rationale and process for acquiring the remaining minority interest in the energía and the expected implication for Iberdrola results and financial structure?

Pepe, commentas tú?

Yes, well, since we bought the minority stake from PREVI, it made all the sense for us to complete the 100% of the capital. Obviously, the consequences of that is that it will improve our results, basically, through lower minorities. It will also help to simplify our financial structure and operations. We are now more and more exposed to the network business at the net profit level, as we did also the acquisition of the 100% of AvantGrid in the U.S. and the integration of VNW. in the United Kingdom. So clearly, these proofs are focused on networks. In addition to that, Brazil is a core geography for us with very good prospects, with a very regulatory situation and where we are investing heavily and we plan to continue to invest. I don't know... Chairman, if you want to complete this with your... Yeah, well, thank you, Pepe.

I think I was two weeks ago in Barcelona with President Lula. He was visiting Spain, and I have already very good meeting with himself, reaffirming our commitment with the country. We are the largest investor in the country last year, more than 30 billion reais, organic by the purchase of minority, as Pepe mentioned. And he invite to me for the concession, renewable signature ceremony on the, I think it's the 6th of next week, on the 6th of May. And I'll be there in Brasilia with himself already signing this one, which I will already participate in. As I mentioned as well to the President Lula, our expectation is to increase heavily our investment. in all our territories of distribution, but mainly in the area of the west part of Bahia, where there's a huge demand that has not been covered because of lack of infrastructure. But I think in general, our commitment with the country remains, and I think next week I'll be present there in Brasilia with President Lula for signing this ceremony of signature of the renewable concessions.

Next, could you comment on the current UK offshore wind environment, including Iberdrola's intention for the upcoming AR8 auction, and your perspective on the new Seabed Lease auction process?

So I think UK has a clear electrification strategy. I think electrification is, I think the work without use, energy security, national security, is a work we have not invented for myself. It was already invented by the British prime minister. I think that provides long-term energy autonomy, that provides competitiveness, and I think it's clear it's one of the key instruments to achieve its goal and to increase the investment in offshore is crucial for them. I think that is the reason why the government has recently brought forward the year 8 to this year. So it was planned for the future. I think for this project, we have already a project for this auction. We have a project of East Anglia 1 North, 900 megawatts, which is ready to participate, which we have all the supply chain secure. But I think we will follow, as always, our profitability criteria. Regarding the seabed lease, it has been recently announced. I think for us it's still too soon. We will review the details when they will be available. In any case, I would like to inform you that we have in this moment more than 5,000 megawatts of offshore seabed rights. 2,000 in Scotland fixed, another 3,000 floating. So I think we have plenty of seabed rights for continuing our expansion in this field in the UK in the future.

Next is related to the hedging position and expectation for prices and volumes sold in Spain and the UK in the period 2026-2028.

Pedro.

I think if you would expect in 26, we have already committed 100% of our available production. In December, it's already 80% plus. And in 28, we are in lines with the capital markets guidance. I think in general, this price is in line with the plan estimates that we gave to you before. As the chairman said before, we will benefit from additional capacity and from increasing pump storage margins.

Next is the audience is asking about the blackouts in Spain, the past year blackout, including key findings to date, Iberdrola position, related proceedings, customer claims, and any view on the evolution of ancillary service costs in the future.

I think we have always said, as engineers, it has been confirmed by all reports and investigations, and all the audios have been published, not only on the day of the blackout, but also on the previous day and week. So I think that's clear what is going on. This blackout, I insist on that one, was a result of inadequate planning. management and operation of the electricity system, and the lead to insufficient synchronous unit program despite the power was available. So I think if everything had been done properly by Red Electrica, I think we could ask Red Electrica why it has changed the operating model, adding more synchronous capacity now. So if all the thing was correct this day, why they change the operation system? So now we are paying billions of euros of additional costs, citizen and companies showing our accounts, just because they changed the operational system. putting more synchronous capacity, much more synchronous capacity, because the power was available. We have already a power, installed power in the country, which is three or four or five times more than the power needed on a day-to-day basis. So I think it's not a question of lack of power. So that's why I think it's something for me is important. We should distinguish between transmission network ownership, which is a business activity, And the system operation, which is not a profit business, is a public responsibility. And that is why in other countries, both activities are fully separated. System operator is taking, have to take care of keeping the lights on. Network activities are already a business, which is to maximize the profit. When you miss both things, it could conduct already situation, which can already make problems, those what we have already faced. In any case, Gerardo, you would like to add anything?

Yes, thank you, Chairman. Just to say that the CNMC in its report about the blackout has stated that on the day of the blackout, the system had enough regulatory, normative and technical tools to avoid the blackout in place to avoid the blackout. So I think that is very important because it's the only official report. because the ACNMC together with the ministry is the only institution competent in relation to the blackout. So regarding the proceedings initiated by the CNMC, therefore the CNMC has also stated that none of them, none of these proceedings are related to the events that led to the blackout. Regardless of that, I think that we have a very strong defense, very strong position to defend these cases because we have always acted according to law. and with full transparency to the system operator and the regulator. But as far as we know, the only very serious proceeding directly related with the blackout, according to those reports, the audios, the investigation, etc., is that it's open to Red Electrica de España. And regarding the customer claims, finally, we haven't received, the reality is we haven't received, you know, many claims compared to the size of our customer portfolio. And, of course, we have insurance policies, so I would say that our position is good, is strong.

As I mentioned, I think following the blackout, ResElectrica has doubled the use of combined cycle plants and nuclear for voltage control, what they call reinforced operation. This reinforced operation now is not becoming reinforced. It's becoming regular. It seems, I think, that is regular, should be recognized as regulated cost, as it's already in other countries, not affecting to the certain citizens and affecting to the companies, to the operators of the trading companies.

Next is how would you describe the current performance and outlook of your retail business in Spain given the increased competition?

Pedro?

The underlying business in retail is doing very well in Spain. We continue to be the market leader, both in numbers and quality of these customers. We have much lower churn rate than our competitors, especially for new entrants, with a very strong customer retention. There is a good evolution of our customer portfolio, including the second brand, Niva. So we are very comfortable now on that position as well. But we continue to add products and services as well.

Question 12 is, what is the Iberdrola's current view on the role of nuclear generation in Spain, and could you update us on the status of Almaraz extension process?

I think I've just repeated several times, nuclear is necessary, is safe, is efficient, and contributes to lower prices and to the security of the system. In fact, now, The European countries with no nuclear have a structural higher prices. That is the case of Germany and Italy, which is even 40 euros per megawatt hour more than France or Spain. I think a certain analyst is already fixing this number, Pricewaterhouse, in some of his report is talking about 47. But the reality today is 40, which I think they are not far from what we're predicting, this consulting company. Also, the European Commission, led by the president, Ursula von der Leyen, is urging member states to avoid premature retirement of existing nuclear assets. Even he mentioned about it was a mistake, European mistake, of closing and not investing in nuclear. They can provide, because she said, provide firm, low-carbon and low-cost electricity. I think, in other words, she's... talking about European critical infrastructure. So nuclear is more than national is becoming European critical infrastructures. I think that was confirmed again in the last week in the accelerated EU communication. And that's why I think we have already asked the extension of Almada to 2030. That is, the process is ongoing. I think the Nuclear Security Council, Spanish Security Council analysis, and I think as soon they will be, we provide information. In any case, all the nuclear need to have already sufficient and sustainable remuneration regime, as I know the countries did. So I think we have either to secure price, attractive level, or either to reduce taxation, whatever thing to make already to give by ability of that one. I think in the case of taxes, in the case of Spain, certain community, autonomous communities, Valencia and Extremadura, has already just reduced, or they are ready to reduce the local taxation. So, which I think that is in the mind of the people. And I think it's in my personal opinion, Our vision is that nuclear facilities in Spain and other countries will be extended for longer term. I think it's, in the case of Europe, an essential infrastructure to secure electricity supply. So I think it's, as European Commission is suggesting, it's becoming critical for keeping the lights on in the European competitiveness. just as a key tool for minimizing the external dependency, to increase the competitiveness, reduce volatility, and not to be already dependent on volatilities, which external factors, those ones we have suffered in those days, with the problems of the on-moot strike.

Next is, could you provide an update on the construction status and operational ramp-up of Banger Wind 1 offshore power plant?

Pedro?

In practical terms, the wind farm is completed. We finished the construction of all the positions. The levels of availability we expect to be in line with other offshore wind farms in operation. Very important. Many of the positions have been exporting power for many months. Also, the financing is advanced, both tax equity, tax credits, but also the debt financing. So we are moving forward very well with the asset.

So I think from the, if I'm not wrong, from the 24th of April is in commercial operation.

COD was declared.

So I think that is in commercial operation now.

Next, could you outline Iberdrola's growth opportunities in the U.S. power business given the increase in electricity demand?

Pedro?

As the Chairman highlighted, we have passed 11,000 megawatts in the U.S. What we see is a strong demand increasing in the U.S. More power is needed. That's clear. Avangrid is and continues to invest. We added almost 1,300 megawatts of capacity. We have 700 megawatts under construction. We have identified 3,000 megawatts of additional potential capacity, more than 1,000 of those very advanced status. And, of course, life extension of our power in the short term are a clear path. Therefore, clear interest of some of our existing customers for new PPAs. By the way, we're increasing also, you know, for the first time a new battery storage. You know, we just approved a project in Oregon, so we're starting now in that field.

Next is, could you explain the recent FERC decision to reduce allowed ROE for New England transmission owners and what the expected implication for Iberdrola?

Pedro?

This is a matter that affects all the transmission operators in New England. As you know, there is another case in MISO, which we expect the court ruling soon. And therefore, since it's a similar procedure, we will see what happens there. It's important that they allow no payment to be done for the next 12 months. And there is no impact in that case.

But in any case, I think you have to be aware that this is something which is coming from 2011. I think something 14 years ago is revising the decision they took 14 years ago to say that probably how they pay in this 14 years was not already whatever. So I think to talk about retroactive actions with 14 years. And we are quite confident that the courts will already take into consideration the comments which are making all the people affected, which are all across the United States. I think in 40 years has not revised the terms of the decision they took. And 40 years later, they are looking. Then whatever they pay, consider it is not already that will have to be paid. So it's something which... It's difficult to be understood by engineers like myself. I don't know a lawyer will understand this thing better than we engineers.

Next is how do you assess the current affordability debate in both in the U.S. and in Europe, and what measures do you believe would be the most effective in reducing electricity bills for customers?

So as you know, the tariff, the electricity tariff has three main concepts. One is the electricity cost, which is power and networks. Power, it depends of each country what is their mix of power generation. In networks, it depends how efficient are already this network. I can say that in general, European networks are more efficient than those which are on the other side of the Atlantic. Second parameter is taxes. So I think taxes, in the case of Europe, is four times higher than those which are in the United States or in China. And the last one is the industrial and energy policy costs. I think there's a lot of things included in the tariffs, but we are already, the consumers are paying, or the companies are paying. We have to see already with these energy policies in each country. So as I mentioned, in terms of taxation, I think this represents, in most cases in Europe, more than 40% of the bill, 40% of the bill, over 10% in the state. So, and I think so that way, I think the fastest way of that one is reducing taxation, to reduce the bill. That is being recommended by European authorities. So, we have to be on that one. If we would like to electrify, we cannot penalize. We have to incentivize, not penalize. I think the big threat that we have to affordability in the case of that one is to continue relying in fossil fuels. I think in my professional life, I mentioned before, I have already had six or seven different energy crises. In all this energy crisis, the solution is not to penalize electricity. It's to incentivize electrification. Now that is already on the communication of the European Union as the key driver for that one. So that is what they are saying, more electrification, more endogenous sources, renewables and nuclear base of the European energy means. more distribution and transmission grid, more interconnection between countries, and more access to consumers to electricity. I think there are already a demand which cannot be supplied because of lack of infrastructure of electricity. People is willing to electrify more their uses, but there are a lot in demand which cannot be supplied because of lack of infrastructure, because in some countries we've been suffering, and still we are suffering, certain caps of investment. So they are limiting the investment we have to make or reducing even the operational costs, as they did in Spain, which I think if we increase, if the money is increased and the infrastructure is not duly maintained because there are not enough budget money for recognize, I think that is not easy to be electrified, that one. And certainly lower taxes in the electricity bills, which will not be discrimination with gas. I think in some countries in Europe, so gas taxes is four times less than electricity. So I think we have to be clear. Who will I depend on, fuel, or who will I electrify? Who will I power, or who will I fossil? And that is, we have to be current. I mentioned in the case of UK, it's an energy crisis, and they revise the taxation of electricity. So we have to be just opposite. So even it's not affecting ourselves, this one. And I think something which is clear, those countries we have more penetration or renewables and nuclear have already lower structural prices. Italy and Germany has higher prices than France and Spain because they have less renewables, no nuclear. Talk about Spain or France where they have more nuclear and more renewables than other one. And I think that is a clear situation.

Next is totally linked with the answer you've recently given. What is your perspective on the proposed reform to the European electricity market, and how do you think policymakers should address the current price environment?

So I think, and I repeat again, I think the measure proposed in this crisis shows a clear change compared with 2022. Governments in Europe agree that electrification is their solution. So electricity is not a problem, but is the solution. So all the measures should be directed against not electricity, against fossil fuels. I think ETS, in my opinion, is a key tool to promote Europe energy independence. It has already proven it works well. It sends the right signals, and it has flexibility mechanism. So they have to reuse the funds already obtained by the carbon emission for electrifying, not for using for making another uses in the national budget. So that's why, for me, the structural solution, and that is what is proposed in the European Commission, is a solidified electrification with more renewables, with more grids, and with more storage and more interconnections.

Next is, could you comment on your net debt expectation for 2026, including the main drivers versus year-end 2025?

Yes, we are expecting to end the year with a level of debt of around 55 billion euros, basically driven by the strong investments that we are doing. We are As the chairman has said, another year in record of investment, and obviously dividend is also increasing the debt despite the FFO generation. But as we have mentioned, the asset rotation that we've done is almost finished. The other element that is affecting us a little bit is the FX impact, especially of the real, which is slightly higher than what we had expected. In any case... The 55 billion is absolutely in line with the CMD and the plan that we have and the capital market day ratios expected, so to be in a triple B plus ratio.

Next, is Iberdrola considering developing gas-fired power plant in the U.S., and how would this fit within the current growth priorities?

So as you know, our main business in the United States is net worth. It's more than 80% of our business is related to net worth. Net worth is already regulated by states, and I think we have a huge, let's say, prospect of investment in these states because of the needs of that one. Also, I think we see clearly is an increase in power demand, but this power demand as well is needed in Edwards for already for taking this electricity in the home, in the industries where they're required for attending this Latin demand. But I think, you know, as Pedro was mentioned, we have already, we are focused in solar, in onshore wind and in batteries. We have a huge pipeline and we have huge opportunities in repowering or extending life of the existing 11,000 megawatt in this moment operation. And we will concentrate on that one. Concentrating networks, first priority, and second, with our present pipeline and with our present portfolio of power in operation to increase our production using the existing assets or making already new asset with the pipeline we do have in hands in this moment.

Next, could you comment on recent market speculation regarding offshore wind agreements involving other developers and whether Iberdrola's approach to offshore contracting in the U.S. is changing?

I think we traditionally, we are not making comments based on rumors or even uncertainties, but about our competitors. So we have no details about that one. And with details, we will analyze what exactly they are doing. But I think for the time being, the only thing is comments, but we have not really any certainty about all those things.

Next is, can you provide an update on how is the data center industry evolving in Spain and in other markets? How is the pipeline of projects in terms of viability and connection requests progressing?

So as I mentioned several times, we have already our main customers worldwide are those which are already precisely working and using already data centers. We are already PPAs, more than 12,000 terawatt hours, 12,000 terawatt hours a year. And what we try always is to facilitate the expansion of these data centers to them. It is our customer who would like to use our capabilities, our knowledge, and our skills for helping them to make that one. Saying that, I think it's the fact that in the last few months, we have already signed more than an additional 100 kWh of new PPAs for these data center use. And that is certain is going to be an important driver of growth demand. But I think what we are insist facilitating. We have some project in Spain that we are already working on it. But I think the idea is to facilitate those one for our customers. I think we have already knowledge of the permit. We have land. We have connection. We have power. And that is what we are putting at the service of the customers. But that is not already, we are not making already any special business area on that one. It's something which is helping to that one. Our business is to sell to them as much electricity as they need in the best condition as possible for the longer period of time as possible. And for that, I think we are doing our best for helping them to build the infrastructures they need for making already these data centers.

Next and last question is what potential upside opportunities do you see versus your current plan 2026-2028 by geography and business area? upside opportunities?

So, I think we are seeing more opportunities across other countries, as I already mentioned in my presentation. I think the electrification is, the acceleration of electrification is a reality. We are seeing a racial demand for several uses, a part of artificial intelligence, another one as well. I think in the case of U.S., we have additional demand of investment in renewable infrastructures in all the states. So I think regulators are asking for this investment. Also, we are just making more investment in power. I think we have already had 1,300 new megawatts in U.S. in the last 12 months. We have 700 deconstruction. And as Pedro mentioned, we have 11,000 megawatts of capacity in which we have identified 3,000 or 4,000 for life extension or repowering in the short term. So, and also, we are increasing, we are seeing increased interest in our large customers for expanding and extending the PPAs. We are pressing for making new ones. Also, we are seeing opportunities in battery storage. We announced the first one in Oregon, but we'll follow another one in the near future. In the UK, I think we have already the Rio T3. The final determination is better than expected. It's higher totals. It's up to 14 billion euros. I think it's a slightly increase in the rate of return. It's faster. That is important because recovery. And I think also, as I mentioned as well, the new offshore wind auction year eight this year, we have already just one project which is ready with all the supply chains already agreed and closed. In continental Europe, additional onshore and offshore projects. I think France announced new auctions for offshore, which I think in the terms could be attractive. We will analyze more in detail. And in Brazil, as I mentioned as well, once we sign this concession extension renewables for more than 30 years, I think new additional investment will be needed. I think also we have already posted the things. All the investments are recognized on an annual basis, which will add already as much investment we are making a year. The following year will be recognized in our rate base and be paid. In Australia, the things are moving. I think we have already a project in this moment in the design of transmission, and we have another one in the portfolio for making as well something in the future. We are putting additional investment in generation in battery storage. I think we are We are adding almost 100 megawatts in the last 12 months. And also in battery storage, we are already now a project with large batteries, batteries just up to eight hours, which I think that is already just is going to be the record in battery storage. in our more than 600 megawatt portfolio, that is going to be the largest one. So I think those are the main thing. I think one thing is important is our pumping storage facilities, what we continue as well expanding. So in this moment, as you know, we have already In the short-term capacities, when I say short-term, 20 hours or 24 hours, it's something like 40,000 megawatt-hours capacity. And we have already another probably 100,000 megawatt-hours of longer periods of time. I think those ones we are pumping. to large dams that we use across the year. I think we avoided the water flows to the sea, and we are keeping these waters in our dams. And we are already almost every year putting two or three new pumping storage facilities in the country. I think in the last few months, we have already just put someone else in the Tahoe River, in the and another one in the Tamaga River. So we continue in the Tamaga River, we are expanding as well. So we continue making that one because we consider pumping facilities is the most efficient manner. But in batteries as well, we are already investing. So we have already, as I mentioned, probably in this moment, 2,000 or 3,000 MWh capacity. But I think we will expect to have more than double that one in the next two or three years. And those are given a good opportunity because... The spreads are good, and I think as much renewable we're introducing, as more storage will be needed. And same thing, as much demand is increasing, as much grid is needed, and that is what we are concentrating.

Okay, so now I hand the floor over to Mr. Gallant to close this event.

So thank you very much once again for taking part of this conference call. If there are any doubts, our investor relations lead by Ignacio will be available for any additional information you may require. Just to finish, you know our annual general meeting will be held in Bilbao on the 29th. And we invite all of you to join us, either in presence or just through the... Delegation. Delegation. No, or even connected by the web. So thank you and see you soon. Thank you.