Repsol Sa Sp/Adr

Good morning to all. Welcome to RAPSO's second quarter 2025 results presentation. Today's conference call will be hosted by Joshua Yonimath, our chief executive officer, with other members of the executive team joining us as well. At the end of the presentation, we will be available for the Q&A session. Before we start, let me draw your attention to our disclaimer during this presentation. We may make forward-looking statements based on estimates. actual results may differ materially depending on a number of factors as indicated in the disclaimer. I will now hand the conference call over to Joseon.

Thank you, Pablo. Good morning to everyone, and thank you for joining us today. During the second quarter of 2025, our industry operated in a complex environment shaped by geopolitical uncertainty, tariff announcements, and the OPEC Plus decision to return production at a faster rate. Average oil and gas prices declined compared to the first quarter, along with a weaker dollar. In refining, despite initial fears of potential demand destruction due to tariffs, the emerging environment remains solid, consolidating the recovery trend initiated in the second half of 2024. In Iberia, activity in our key industrial facilities was negatively impacted by the power outage that affected the entire peninsula in April, reducing utilization rates and preventing us from capturing the positive refining momentum. Against this broader context, Repsol delivered a solid set of results, driven by the recovery of upstream volumes and the continued robustness of its commercial businesses, highlighting once again the resilience of our business model. Second quarter adjusted income was €702 million, 8% above the first quarter of the year. Cash flow from operations amounted to €1.7 billion, a 50% improvement compared to the first quarter, benefiting by just €0.6 billion working capital inflow, mostly related to inventories and optimization messages. The accumulated operating cash flow until June was 2.9 billion euros, 25% higher than in the same period a year ago. That includes a settlement with Sinopec with a neutral contribution from working capital movements in the first half of the year. CapEx amounted to 1.3 billion euros in the quarter and 2.7 billion in the first six months. Regarding our divestment target, out of the 2 billion euros objective for 2025, we have announced disposals and asset rotation for a total of 1.2 billion, of which 0.5 billion were cashed in in the first semester. Net cap existed at 1.2 billion euros in the quarter and 2.2 billion accumulated until June. If we had cashed in all the divestments announced this year, Net capex until June will stand at 1.5 billion euros. Net debt closed at 5.7 billion euros, a 2% reduction compared to March. Dealing, including leases, was 17.9% by quarter end. Looking ahead, we remain on track to deliver on our main strategic objectives for 2025, according to the priorities defined at the beginning of the year. If back in April we discussed the possibility of an ACID scenario for the rest of the year, the evolution of the main indicators has brought us back to our base case. Regarding our shareholder remuneration objectives, we will distribute 30% to 35% of the cash flow from operations generated in 2025 through a combination of cash dividends and share buybacks. We have increased the funds dedicated to dividends by 3% as committed in our strategic plan. In July, we paid the second dividend of the year for a total DPS of 0.975 euros, equivalent to an 8.3% increase compared to 2024 after factoring for the lower number of shares after the capital reductions executed last year. For 2026, our AGM held in May approved to distribute a first dividend of 0.5 euros to be paid next January. 2025 dividend in cash will be complemented by share buybacks for the equivalent of 700 million euros to reduce capital. Yesterday, we announced a first capital reduction through the redemption of 29 million shares acquired by an equivalent amount of 350 million euros. A second capital reduction of shares to be acquired for the equivalent of another €350 million will be executed before year-end. For this purpose, €300 million will be acquired through a new share-back program to be launched in coming days' weeks, and the remainder €50 million through the settlement of existing derivatives. Looking at the evolution of the main macroeconomic indicators over the last quarter, Brent averaged $68 per barrel, 10% lower compared to the first quarter, and 20% below the same quarter last year. The oil price experienced significant volatility fluctuating within a $20 range over the course of the period. The Hermit Hub averaged $3.4 per million BTU, 8% lower quarter over quarter, but significantly, I mean, 79% of all the same period in 2024, with market consensus pointing to a rise of U.S. gas price, I mean, towards the end of the year. In refining, Repsol's margin indicator averaged $5.9, 11% higher than in the previous quarter, primarily driven by stronger gasoline spreads. After declining to around $4 in April, the indicator recovered in May and June supported by solid demand, low inventories, capacity closures, and delays in some of the new projects coming on stream. Finally, the dollar weakened significantly against the euro to an average of 1.13 in the quarter, And this trend has continued in July with the euro-dollar trading in the 2016-2017 range. Turning to the highlights of the upstream division, our focus remains firmly on value generation and portfolio optimization, supported by the upcoming startup of new strategic projects. Second quarter adjusted income was 439 million euros, 4% below the previous quarter, and 3% higher than in the same period last year. Year over year, the higher gas realization prices, lower production costs, and lower taxes were partially compensated by lower oil prices, lower volumes, and the depreciation of the dollar. Production averaged 557,000 barrels per day, a 3% increase over the first quarter thanks to the higher contribution in UK, Trinidad and Tobago, Eagle 4, and Libya that compensated the impact of divestments and natural decline. July's production has stayed at second quarter levels, putting year-to-date average at around 550,000 barrels per day at the higher end of our full year guidance. In Indonesia, as part of our objective to concentrate operations in countries where we have to grow competitive advantages, we reached an agreement to divest our 24% stake in Corridor for $425 million. This non-operated position contributed around 17,000 barrels per day to our production in the first half of 2025. In Trinidad and Tobago, the Cyper and Minto projects reached first gas in April and May respectively, expecting an average 28,000 barrels per day, barrels equivalent, I mean, contribution over the 2026-2028 period. In the UK, the closing of the agreement with Neo Energy is expected in coming days, before probably the end of this month, after receiving the approval from the NSTA. The resulting joint venture will become one of the largest independent producers in the UK continental shelf, with a projected production of 130,000 barrels per day in 2025, of which 68% is oil. Post-closing, Rexall UK production, so from the end of this month on, will increase to around 59,000 barrels equivalent per day, which compares to a production of around 30,000 barrels a day in the first half of 2025, in this legacy position. In unconventionals, we resume drilling activity in the Marcellus with one operated rig from April to June. In response to the better gas price outlook, we are preparing the campaign for 2026, expecting to have one rig in Marcellus and one rig in Eagle 4. And around 55% of our 2025 and 2026 North American gas volumes are covered through a zero-cost collar between $3 and $5.5 to $6 per million BQ. In the Gulf, the development of Leon Castile is reaching its final stages with the start of production planned for this third port. In Alaska, the development of the first phase of PICA progresses towards an early startup between December 2025 and January 2026. We expect full ramp-up of production during 2026, reaching a gross capacity of 80,000 barrels per day within the year. Finally, in Venezuela, on the 27th of May, the United States administration revoked the oil license of several international companies, including Repsol. Cardone 4 continues producing gas, and the management of Petro-Kirikiri operation has been returned to PDVSA. In industrial, second quarter adjusted income was 99 million euros, 189 million euros below the same quarter in 2024, mainly due to the lower results in refining, chemicals and trading, partially compensated by a higher contribution of Peru on wholesale and gas trading. Let me underline this point. The quarter was defined by the consequences of the power blackout that affected the Iberian Peninsula on the 28th of April. Due to un-networked stability, ABLACAL disconnected all generation facilities in Spain and Portugal from the grid. This led to the shutdown of all our refineries and petrochemical plants, which had to be restored progressively. Our teams act swiftly to restore operations and ensure continuity in supply. In refining this blackout, the outage along with the electricity supply disruptions in Cartagena and Puerto Llano had an estimated impact of around 130 million euros at EBIT level. All these challenges coincide with planned maintenance across several sites. And as a result, utilization of distillation capacity declined to 74% while conversion units reached 86% of nameplate capacity. The current refining margin, or the actual refining margin over the period was, better said, $0.3 below the indicator, reflecting a negative premium due to the issues that affected our operations. Excluding the impact of the blackout and subsequent incidents, the margin premium would have reached $2.1 positive in the quarter. Activity in our refining complexes has normalized in the third quarter. The margin indicator has averaged $9.6 in this quarter, so in July, for an average of $6.1 year-to-date, benefiting from very healthy product spreads, in particular diesel cracks. The utilization of distillation has reached 93-94% this month, and conversion units have run in July at 102%. In addition, margins for renewable diesel have reached levels above $900 per ton, as supportive policy developments have stimulated demand and domestic production. Going to the chemical business, Repsol's margin indicator increased by 76% over the first quarter, driven by cheaper NAFTA and LPG stocks. However, this better margin, again, this better margin environment couldn't be captured due to the lower utilizations and soft demand. The blackout had a negative impact of around 45 million euros in the operating result. We have to take into account that we are talking about three petrochemical complexes, Tarragona, Porto Llano, and Sines in Portugal. Without the impact of the outage, the business wouldn't reach breakeven in EBIT terms. The total estimated impact of the incidents that occur in our industrial business in the Iberian Peninsula during the second quarter amounts to approximately 175 million euros. And the company is currently assessing legal actions and awaiting the official determination of responsibilities related to the power outage, to the blackout. Finally, in wholesale and gas trading, we have received five LNG cargoes from Calcassier Pass after the plan to start commercial operations in April ahead of date assumed in our budget. And this factor increases the total number of gas cargos to be lifted by Rapsol in 2025 from 7 to 11, contributing an additional 100 million euros to the operating result over the whole year. Moving to customers, this division continues to demonstrate a sustained track record of solid quarterly results built around a competitive multi-energy offering recently enhanced by a new identity and brand evolution. Second quarter adjusted income was 198 million euros, a 25% increase over the same period in 2024, thanks to a higher contribution in all the business segments. The accumulated EBITDA until June was 0.7 billion euros, putting us on track to meet the 1.4 billion. Remember that that was the target originally set for 2027. and is going to be captured as early as in 2025, shortly here, anticipating two years, the target we have in our strategic plan. In mobility, sales of road transportation fuels grew by 16% year over year, mostly due to the anti-fraud measures and control mechanisms adopted in Spain. The solid evolution of sales now in pre-pandemic levels challenges, projections that anticipated a significant destruction of demand. The number of service stations offering 100% renewable fuels reached more than 1,200 as of the end of June, and we expect to reach 1,500 by the end of the year. In Spain, 53% of our network already offers multi-energy solutions. The number of digital clients, including Waylet users, reached 10.1 million, a 17% increase over the same period in 2024. Finally, in power and gas retail, last quarter we had 142,000 new net customers, reaching 2.8 million clients by the end of June, consolidating Repsol as the fourth largest operator in the Spanish electricity market. In low carbon generation, the adjusted income was 7 million euros, 6 billion higher than a year ago, thanks to the higher result in combined cycles and in renewable generation. The average full price in Spain was 39 euros per megawatt hour, five euros higher than in the same quarter last year, due to a lower share of renewables in the generation mix. The power generated by Rapsol reached 2.8 terawatt hour, 58% higher year over year. The execution last quarter of our first asset rotation in the U.S. confirmed the strength and appeal of our portfolio for leading investors. We agreed to divest a 56% stake in a 777-megawatt portfolio for $340 million, including the Fry Solar project in Texas and the Jicarilla Solar and Storage Complex in New Mexico. The portfolio was valued at $795 million, including 60 million in tax equity proceeds. Finally, we reached an agreement to settle the litigation process with Hecate. Under the terms of the settlement, Repsol will divest its 40% stake in the company, resulting in a negative impact of around 100 million euros registered against second quarter results under special items. Looking ahead, our growth in the U.S. will be driven by the platform acquired through ConnectGen, mainly focused on onshore wind. Now, regarding our updated outlook to the end of 2025, the guidance for the year remains broadly unchanged. Under a $70 trend, $4.50 and a $6 refining margin indicator scenario, We expect to generate around 6 billion euros of cash flow from operations after factoring the impact of the Iberian blackout. Investment will remain concentrated on the efficient development of our growth projects in the upstream. The transformation of our industrial assets and, let me say, optimization of them, growing our power and gas retail business, enhancing the multi-energy offering to our clients, and expanding our low-carbon generation portfolio. In renewable fuels, the construction in Porto Llano of our second advanced biofuels plant in Spain progresses toward starting up in the first quarter of 2026. Net capex is estimated for the year 2025 at around 3.5 billion euros, subject to the timing of the investment processes and the execution, but that is the target and the guidance we have now with the best information we have in our hands. In renewables, we are currently working on two new asset rotations expected to be closed before year-end. One is in Spain for a 700-megawatt wind and solar portfolio, and the other involves the Outpost project in Texas. As discussed before, we maintain our shareholder remuneration commitment for the year. The dividends paid in cash together with share buybacks for the equivalent of 700 million euros will put total distributions of 30 to 35% of the cash flow from operations at the higher end of our strategic range. To conclude, despite the material impact of the blackout affecting the Iberian Peninsula, Repsol delivered a resilient performance in the first half of 2025, supported by the recovery of our action volumes in the second quarter and the continuous strength of the commercial business. We remain confident on delivering our strategic objectives for 2025, growing value for our shareholders in a sustainable way, firmly committed to a profitable transformation and the achievement of our decarbonization goals. The strength of our business model, built on a sound financial position and a disciplined capital allocation approach, position us well to manage the uncertainties of the current volatile environment. In industrial, following the normalization of operations in July, we expect to capture in coming quarters the ongoing positive momentum of the refining business. In the upstream, the completion of Leon Castile and Alaska will enhance future cash flow generation and enable us to normalize capex levels from 2026 onward after the significant investments made in 2024 and the first half of 2025. In addition, our exposure to North America could benefit from the relative strength of the Henry Hub, driven by new LNG infrastructure, increasing demand, and the potential deregulation of the U.S. energy sector. With this, I will turn it over to Pablo as we move on to the Q&A session. Thank you very much.

Thank you, Josillon. Before opening the Q&A, I would like to ask participants to leave yourself to a maximum of two questions. If time permits, we will try to cover more in a second round. Of course, the IR team will be happy to assist for any follow-ups afterwards. As usual, I would like the operator to remind us of the process of to ask a question. Please go ahead, operator.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 1 again.

Thank you, operator. Let's get started. Our first question comes from Michele de la Viña at Goldman Sachs.

Thank you very much and congratulations on the strong results. Two questions, if I may. The first one is on US gas, the outlook for 2026 looks really good, possibly the best in a decade. I'm just wondering what would lead you to put more capital there and maybe take on one or two more rigs and increase production into the 2026 timeframe? And then secondly, I was wondering, on your U.S. renewables portfolio, with the changes to the IRA, it looks like there is a big benefit in starting construction early and still getting the full incentives there. Does that mean that effectively capex there needs to be brought forward, especially towards 26 and 27? Thank you very much.

Grazie mille, Michele. Going to your first question, you are right. For this reason, I mean, you know our point of view. We try to maximize cash. And knowing the experience of the sector in the U.S., you know that sometimes when prices are okay, some additional topics are forged. they could have also some impact in the unconventional, in the local level, in terms of inflation and so on. So we have to combine both views. And because we have this pattern view, I mean, we are increasing our investment approach, our investment effort in the unconventional, mainly for gas production. For that reason, we are going to have one rig in the Marcellus and another one that is going to put in operation at the end of the year in the Eagle Ford, And at the same time, as I mentioned before, we are covering, at the moment we have covered through this call, 55% of our production for coming two years, 2026, 2027. And that is positive in terms of guaranteeing, let me say, some break-even for this operation. But again, we are following in a very... close and accurate way. What is happening in the market, we are covering positions, we are increasing our effort, but always under the principle of maximizing the cash of the operation. Free cash flow, let me say, is the king and has to be the king in the unconventional. And I think that unfortunately, and let me say, I'm not blaming some others because sometimes, I mean, over the last years, we also, we've made these mistakes on that. Probably, maximizing the concept of net present value and investing hard in these unconventional assets, and sometimes not maximizing the cash concept. Now, I mean, I think that we are quite close to have a right balance in this effort. Going to your second question, I think that one of the large advantages we have is that the IRA changes in the American Congress at the end of the road were quite reasonable. I mean, it was, I think, quite right balance in terms of the decision that the American legislators, they took, they did. And in this sense, I mean, we have five gigawatts of our pipeline that are let me say, secure to benefit from the tax framework that is supported either through ITCs or PTCs in the framework of the IRA. So we were quite comfortable and quite happy seeing the result of the American Congress that is supporting the growth we have for coming years in the American renewable arena. And that is important because what we are seeing in the market is that the appetite for this renewable power is growing. Demand is growing in the US. The appetite for PPAs is also growing. Prices of PPAs are growing. Everything related to AI and data center on top of more industrial activity in some places like Texas, also the increase of population in the area is increasing the energy needs. And today, I mean, in practical terms, the only source able to cover this demand growth in the American economy is renewable energy because, you know, the bottleneck, the crunch that they have in terms of providing some other facilities like CCGTs and so on because the difficulties that providers of these capital goods they have to increase their production and to put in operation these facilities in coming two, three, four years. So, I think that there is a good momentum in the American market for debt. There is a clear policy from the administration in the U.S. very supportive about producing all kinds of energies for covering the American demand. That is positive, and we are there in the U.S. offering all kinds of energies, oil, gas, and power. And we think that under the regulation that was established approved by the American Congress and that we see in a positive way, we have the supportive framework to maintain our bet to go on investing in the U.S.

Thank you.

Thank you very much, Michele. Our next questions come from Alistair Syme at Citi.

Hello. Hello, Alistair. Oh, sorry. Hello, Alistair. Hello. Just one question, actually. Justin, you look to have made huge progress in the transformation of the upstream business, so congratulations on that. What more do you think you have to do to prepare the business for the 2026 liquidity event, and has there been any evolution in your thinking of what that liquidity event might look like? Thank you.

So, Alistair, you know, because we have asking to your questions, we have talked sometimes about that. I believe in the end of the road, so in the liquidity event, so we are preparing the company to be fully prepared by the end of the first half of 2026 to be prepared for that. But I also am a believer in the journey, as you mentioned earlier. in some, let me say, implicit way in your question. Because what we are doing in the way is improving the quality of barrels, disposing and divesting from areas where the capacity we could have to create value is more limited, investing hard as we are doing in areas where cash flow from operations per barrel growth in projects is more evident, and at the same time, increasing the quality in terms of cash flow of the barrels we produce. I think that, I mean, when you are on a journey like that, you are investing hard, the fruits, they arrive later, but now we are in a moment where things are starting to be more balanced. I mean, this summer, we will start producing Leon Castile assets from... from the end of this month on. We will have a new picture in the UK with more borrowers, more cash flow from operations coming from the UK, better quality of borrowers. Alaska is going to be happen in the way we announced in the framework of a strategic plan. So we are closer in terms of having, let me say, a good approach of this equity event, not only because we are, let me say, preparing all the control mechanism of the company adapted to the American market, not only because we are advancing in terms of preparing the reporting and so on, we are preparing the company for all that, but also because we have an upstream business that could be better understood by an American investor. On top of that, of course, we are analyzing alternatives. I mean, you know that when we are talking about liquidity events, that is a very broad concept. It could be a direct IPO. That probably is not the our favorite option that is there, we could talk about the possibility to have a reverse takeover process with an American listed company or it could be, let me say, a private investor entering in our business to go on in this transformation pathway. I mean, we are there. We are not in a hurry to do that. We are In the meantime, in the midst, we are improving the business, so that means that things could be easier if we go on improving this business. We are fully aligned in this approach with our partner, EIG, and that is the way to prepare the company. Thank you, Alistair.

Thank you very much. Thank you very much, Alistair. Our next question comes from Viraz Borcaiparia at AirBC.

Hi, thanks for taking my question. Two, please. This first one is just on PICA. There were some contradicting comments on the startup timing, and I think it was related to a weather window or a view on the weather window. Could you just confirm when you expect that to start up and any thoughts on the ramp-up, whether it's late 25 or mid-26? And then the second question, just on the gross capex as we're thinking about this year and into next year, you've got a number of projects in the upstream that are rolling off, some kind of M&A activity as well. And then I guess any comments on the carbon? I'm just trying to get a sense of what we should expect for gross capex in 2026. Thank you.

Thank you, Biryak. I mean, going to pick up first, we have a full alignment in terms of the operational approach, in terms of dialogue with our Santos partner, that is the operator. So, in case of doubt, I mean, I underline that Santos has always the last word on the approach because, I mean, they are good operators in the area. I had the opportunity even in physical terms last month to visit our offices and Santos team operating the asset in Alaska. It was at the beginning of June. At that time, we still had and they had some kind of concerns related to the level of the Mackenzie River that you know that it was needed to transport all of some parts of the modules from the area of Alberta towards the north slope by the river. I mean, in case of not having the adequate levels, the alternative was more complex through the Canadian western coast, delaying three months the project. So I think today, I mean, that is not, let me say, rocket science, but I think that we are in the mainstream scenario and the mainstream scenario could be, I mean, the startup, something in between the end of December and the end of January. I mean, in those weeks. I mean, of course, in a project that is complex like that, you could always have some days, let me say, of delays and so on. But, I mean, for me, the mainstream scenario is that in the call of the full year results in February, I mean, we were probably be talking that Alaska is producing oil. So that's going to the ramp up. It's the best approach in a direct way. I mean, in terms of connecting, we will start producing in gross terms 25,000, 27,000 barrels a day. And probably towards in summer 2026, we will be close to the 80,000 barrels a day of production. We have, and there is a plan to go on connecting wells to sustain, to maintain this production. And what is more important, probably it's too early to talk about that, but I mean, there are plenty of resources in the area to be developed. And there is a PICA tool that, I mean, Of course, we are not going to enter in developing the full engineering or thinking about FIDs of PICA-2 before, knowing in an accurate way how the wells are performing in PICA-1 and so on. There are more areas, and the perception I have is that Alaska is going to push hard in positive terms in the process of transforming the EMP of rapsoil. Going to the gross capex, the better figures we could have today is that in 2026, the E&P business is going to reduce in a figure equivalent to 500 million euros a year. The capex effort because, I mean, due to the projects coming on the stream in 2025, Lapa, Leon Castile, I'm taking into account that probably because this ramp up, because these new connections of Wells and so on, PICA is going to require some capex support in 2026, but I think that the best approach we could have today is a reduction of 500 million euros of the gross capex in this business, in the capex, sorry, in this business in 2026. Going to the net capex of the company, remember, when we presented the strategic plan in February last year, in 2024, the range for the net capex was something between 16 to 19 billion euros. I mean, today, my best estimation is that we are going to be in the strategic plan period in the range 16-17. That is going to be the range we are going to be there. If you take into account that combining the figures of last year with the figures of this year in net capex terms with indication of 3.5, I mentioned before, we will be at around 9.2, 9.3 billion euros of net capex, combining 2024, 2025. I mean, you could approach the figure of 7 billion euros of net capex, roughly speaking, for the period 2026, 2027. So, all in all, the today estimation is a net capex of 16 to 17 billion euros for the period. What is behind this figure? I mean, mainly there is, as I mentioned in the last call, some confirmation that we are going to delay a bit and reduce the intensity of investment in terms of hydrogen megawatts in our refineries to a figure that is going to be important, that is going to be close to 600, 700 megawatts by 2030, combining electrolyzers and 200, 250 coming from biogas that is going to be transforming the reformers of our refineries. On top of that, you know that we also reduced the effort in the renewable fuel side outside the Iberian Peninsula concentrated our efforts in Spain and Portugal. And you know that we also, I mean, the most accurate figure in terms of gigawatts in operation by 2027 was also reduced. That is behind this reduction of net capex and the best estimation we have is 16 to 17 billion euros

the period 24 27. thank you thank you very much our next question comes from alejandro vigil at banco santander yes hello thank you for taking my questions the first question is about the the very strong performance of the customers business if you can give us an indication what should we expect in the future after almost delivering the 27 target this year and the underlying, you know, drivers of this very, very strong performance. And the second reason is about the European diesel market. What do you think about what's driving this very strong momentum and if you think could continue during the coming months? Thank you.

Thank you, Alejandro, and good morning. I mean, let me start with, I mean, I thought I had those days. You know the Spanish flight space operator, NIE, published last year a figure showing that in 2024 in Spain was a record year and for the aviation sector. I mean, They control or manage 2.35 million flight operations in Spain in 2024. When you analyze the figures of this organism in Aire, at the end of June, we are overcoming in 5.9% the record of 2024. That means that, I mean, we are experiencing in this part of Europe, in Spain and Portugal, I mean, an extraordinary growth of services, tourism, and so on. Spain is going to receive 100 million tourists this year, only overcome by France in global terms, in terms of number of visitors, and by the U.S., I mean, as a second country, Spain, in terms of revenues. So that means that for instance, the jet middle distillate consumption is growing. That is supporting our operation. When you analyze and you see our roads, the activity related to services, tourism, economy, the changes in economy after the pandemic with more online sales, that means more trucks, more vans. I mean, all that is explaining Let me say in the fundamentals, what is happening in Spain and in Portugal and in the fuel business. So, on top of that, if you analyze our sales, comparing with 2024, the growth has been at around 16% year, comparing year to year, in terms of volumes. I mean, that is not only economic activity. is also related to the anti-fraud measures. I mean, the figures of the last two, three years were highly contaminated by this illegal activity. And let me say that, of course, that is not fully over, but the Spanish authorities are fully committed to cope with this problem, and they are taking real measures to combat, to attack this fraud. On top of that, you have, I mean, gasoline market in Europe is booming. It's okay. Margins are okay. Diesel, because a middle distance is because the mention, the reasons I mentioned before, Alejandro, they are also okay. On top of that, we are... Supported by these 24 million customers we have in the Iberian Peninsula, we are entering in a successful way in new businesses. For instance, the power and gas retail business. We are approaching the figure of 3 million customers. This year, we are going to achieve 3 million customers in this business. That is, let me say, a material figure. and with a positive high EBITDA, positive free cash flow. So we are growing, making cash for the company. The non-oil business, and you are a Spanish person, you could visit our service station, you could see that more and more this premium approach in terms of position in the market of Repsol has improved a lot over these years. So all that is explaining in fundamental terms the results. Of course, we could see, as always in business, ups and downs in coming quarters, but there are fundamental reasons for that. So no doubt that taking into account that we will increase the targets of our customer business for coming years because we have to go on growing And improving, remember that, I mean, the figure I have in mind, I'm probably wrong, but in 2016, this business had an EBITDA at around 750 million euros a year. Roughly speaking, and the perception of the market was that this business was declining. So this year, we are going to have 1.4 billion euros in terms of EBITDA and growing. So let me say that it's a hidden business because we always talk about... Oil, Brent, Henry Hub, Refining Margin, and it's okay because they are drivers of our business. But we have some kind of hidden beauty here in Repsol that is growing and has already an EBITDA of 1.4 billion euros. Thank you, Alejandro. Gracias. Thank you. Yeah, and let me say, going to the DSL, what is happening also in Europe, excuse me, because I was fully excited, let me joke, talking about what is happening in the Spanish market. First, as I mentioned before, there is a fundamental in terms of consumption in the market. On top of that, you have low inventories in Europe. You have the new maritime regulation coming from IMO from the ECA zones impacting in the Mediterranean that is shifting volume from fuel oil to diesel, so it's increasing demand. And on top of that, you also have the momentum in the market in terms of fleet costs and so on that is giving a more competitive position to European producers for the European market, reducing the competitiveness of some other areas of the world, I don't know, India, Middle East, and so on. And my perception, Alejandro, is also that all this sound around sanctions on Russia is also starting to be discounted and to impact European digital market and probably is going to have a higher effect in coming months. Thank you. Gracias.

Thank you, Alejandro. Next question comes from Irene Gimona from Bestein Societe Generale.

Thank you very much and congratulations on the quarter. My first question is on trading within the industrial division. It remains very strong. It certainly increased sequentially. It's the second largest contributor to division Libida. Some of your peers have mentioned reducing trading positions due to unpredictable geopolitical volatility. I wanted to ask if you can talk a little bit around your trading strategies in this period of, let's say, enhanced uncertainty. And then the second question, on your 2026 planned EMP listing, Can you please give us a sense of the percent interest which you expect Repsol will retain in the listed entity, please? Thank you.

Thank you, Irene. I mean, in structural terms, our trading is growing. Why is it growing? Because you know, because you are following and you have followed Repsol over these last years, And you know that at the very beginning, our trading was the supplier of our refining business, not more. And more and more, these businesses start to work taking some other positions, start working with the biofuels and these new fuels, enter in providing, let me say, service to the E&P business of Repsol, taking volumes, taking global positions in Singapore, Houston, and Europe, and so on. So there is a natural growth in this trading. And let me also include, in some way, the gas trading in this equation, because you know that because the long positions we have, mainly in the Gulf of Mexico, in America, in terms of LNG, Calcasieu, Sabine Pass, Cameroon, and so on, we are increasing our exposure. We have strong short positions in the Iberian Peninsula, and this business is also growing. All in all, our EBITDA is going to be close to, I mean, last year, this year, to around, I figure I have in mind, around 1 billion, close to 1 billion euros. I mean, saying that, we have a very risk limited appetite in our liquid trading business. That means that if, I mean, we try to avoid volatility. If we, let me say, took positions in a part of the world and we have to supply a different quality in other parts of the world, we try to reduce to zero our exposure to main figures like Brent, like general marketers of this product. And we try to go to the delta in terms of qualities of products, in terms of geographies, in terms of playing with the time that could be in some way opening an arbitrage opportunity for a trading business. So we have a very limited trading activity. And because this approach we have, I think that this uncertain period is not closing any opportunity to the trading activities we have in our hands. So for that reason, we could expect a trading activity that could be in some way similar to some other periods. And as I said before, with that asset base that is growing. going to the plans for the upstream listing. I mean, today, a clear approach we have is that we want to retain a minimum of 51% in this upstream business and maintaining the control of the company. That are today the framework, or that is better said, the framework we have in this liquidity event approach we have. Thank you, Irene. Thank you.

Thank you very much, Irene. Our next question comes from Pedro Alves from CaixaBank.

Hi. Good afternoon. Thank you for taking my questions. The first one on the asset rotations plan for the remaining of the year. I think you have assets to be sold in Spain and U.S., as you explained. So perhaps you can give us some outlook on how do you see the asset rotation market not only from the project you have already launched to be sold, but also looking ahead for the remaining years, because we have seen some more cautious comments from some of the utility names, but also other players already try to sell assets, and particularly in the US. So can you give us some comfort here, or at least what's your confidence in keeping these asset rotation plans in renewables for the remaining years to keep your total net capex, as you said, in the 16 to 17 billion over the plan, and therefore keep sustaining your distributions to shareholders. And the second question is on refining margins, if you can give us an update on the latest level that you are seeing, particularly in this month of July, and given the current balances in Europe, what's your outlook for the remainder of the driving season? Thank you.

Thank you very much, Pedro. I mean, going to your first question, well, first, going to the cash-in, yesterday we had the cash-in coming from Fry and Jicarilla. But as I mentioned before, that was announced in the second quarter, but the cash-in arrived yesterday, so that is going to be in the third quarter. Going to the projects that are now on track, I'm going to start, theoretically, by the most difficult part of the equation that is the U.S. because you perfectly know, Pedro, the interest rates in the U.S. that are making things more difficult than they were two, three years ago. So good news is that we are in the process of disposing the outpost project. The torques are quite advanced for that. As I mentioned in the last call, the transaction of what we call PECOS, that was the addition of Fry and Jicarillas, was not an easy game. The advantage of Outposts is that the PPA is better than the PPA we had in Fry. And Fry was lower because our first project was developed after the pandemic, in a period where the PPAs were lower, and Outpost has a PPA higher than Frye, and Pennington, that is the next one, is going to have a PPA significantly higher than Outpost. So, things are improving the American market. For that reason, and because we are also in talks, we have the perception that things are going to go in the right direction in terms of the asset rotation of outposts. On top of that, because the fiscal framework of this project, we are going to have a cash-in in this year with the asset rotation of outposts that is going to be at around $200 million dollars. as an equivalent of ITC, or let me say, the tax direct impact supporting the investment. So we expect to have the cash coming from the rotation of outposts plus $200 million coming from the fiscal support to this project. And things, I mean, are not ever easy, but... I think that it's going to be better than the expectation we had for Friday that was closed on April 28th. I mean, we closed that transaction the blackout day. Going to Spain, I think that, again, market is not easy, but... is significantly better than the position the American market has. We have had our last experience, GAIO, happen at the beginning of this year, 2025, was okay in terms of the multiples paid by the investor. You know that, I mean, the solar projects they could have a bit more difficulties in Spain. The large advantage, the great advantage of this new basket of assets, 700 megawatts, is that a figure close to 500 are wind. So, you know that new wind projects in Spain are quite a scarce resource. The great advantage of wind is that the production and the capacity to capture prices is more extended or more flat, not slightly flat, but, I mean, with a bigger distribution over the whole day. So, taking into account the structure of the Spanish pool price and wholesale market, the capacity to have returns is clear in this kind of project. So, I mean, we'll have to work in this direction, but today we are quite comfortable about the possibility to go on with these two rotations. Going to the refining margins, I mean, you know, and let me say that it's not important only to have high margins, but it's also important to be producing, because in the second quarter, the problem we have, unfortunately, because this outage, this blackout, is that our capacity to produce was reduced. I mean, going to the most important thing, what is happening in operational terms. First, the program turnarounds of the refineries, most of them were done in the first half of the year. We still have to maintain for some days the Isomax unit in Tarragona, the second half of the year. And we also have an turnaround in Cartagena that is going to impact one of the three distillation towers, some hydro-descrupulation units, and probably some days the hydrocracker because the supply could be a bit reduced because the maintenance are impacting in these units. But, I mean, taking into account our whole system, the best news is that, I mean, the system is going to be working a high level of distillation over the years. If we go to the current figures, this quarter, as I mentioned before, we have a distillation utilization rate of 93% over the whole month and 102% the conversion unit. So we are capturing these margins. And going to what is happening in this third quarter, the average as of today in our system is $9.6 a barrel. So the forecast for the next months is initially for healthy refining margins. I mentioned some reasons for that, talking about demand, jet, gasoline, diesel, the potential impact of Russian sanctions and so on. Let me say that on the supply side, the new refining projects in the Atlantic Basin continue to face delays. Dangote in Nigeria or Mecca in Mexico And on top of that, I mean, closures in Europe this year are taking place. Wessel in Germany, Grange Mouth in the UK, going to the US, Houston. And, I mean, additionally, there are some concerns in the market affecting the Lindsay refinery in the UK. So geopolitical tensions are also there that in some way from time to time they could impact the middle distillate market. So for that reason, I mean, markets are good, and we have a good perception of markets for coming months. Thank you. Obrigado, Pedro.

Thank you.

Thank you very much, Pedro. Our next question comes from Enric Patricot at UES.

Yes, everyone. Thank you for the update. Two questions, please. The first one, on the chemical side, we also saw quite a nice improvement in the indicator in the second quarter that you can catch that. So I wanted to check whether you continue to see these improvements in the third quarter and whether we could expect to see the chemicals back into your positive territory in the second half. Then, secondly, on the upstream side, there was a nice increase in production in the second quarter, Europe, Africa, and you mentioned Libya and New Wales there. Can you give us an update on what you see in terms of production potential in Libya? You've previously talked about maybe some growth, so I just want to get an update on the developments in that country. Thank you.

Merci, Henri. Going to your first question, I mean, I'm going to be clear about that. I mean, the crisis in the chemical business is not over. I mean, that is my first, let me say, highlight. It's true that things are improving in the right direction. And as you said and as I mentioned before, without the outage effect, we will be close to the break-even in EBIT terms this quarter. But there are still some fundamental concerns in this chemical business. I mean, flat demand is there, high energy cost in Europe, and what we are doing is, I mean, and the results of this quarter are a good example of that, is now focusing on reducing costs, pushing break-evens down, and increasing the margin through a higher differentiation for products. We are implementing technical upgrades that are improving the competitiveness in our operations. We are, I mean, taking a lot of measures that I could explain, but I don't want to bore you. in terms of reducing the break-even. And these measures are going to have, by the end of this year, combining the old effect over the year, an impact of 68 million euros in terms of costs, generally speaking. And what is important is that new margins are going to come next year. And new margins are going to come from CNES. CNES in the second quarter of 2026 is going to add, in an ACID scenario, 80-85 million euros of new EBITDA. In, let me say, average scenario, a figure of 130-135 million euros of EBITDA. That is positive. On top of that, we are going to have next year also a high molecular weight polyethylene plant in Porto Llano focused on producing polyethylene for very specialized applications, defense and so on included. that that is going to add new margins to the business. So we are not, let me say, waiting for a margins improvement. It's true that margins are improving a bit, but that is not going to change dramatically from suddenly. And in the midst, we are reducing costs and we are improving margins. And I'm sure that quarter after quarter, this effect is going to be seen. If we go to Libya, I mean, again, I think that the country is improving in social, political, security terms. The position of the country year after year is important. I think that, I mean, we have to underline the effort that the country is doing, the effort that, I mean, for instance, in terms of security, we have seen over the last years that the army of Libya led by Mr. Hafter has had a crucial role in combating terrorism in the country, in increasing the security in the country, improving the position and the stability of the country. So all that has a clear reflect on the ground. And going to the production, again, production in this quarter reached a maximum of 307,000 barrels a day. When we took the Repsol state of this production. We have been in 43,000 barrels a day net. That is the fruit of what happened last year in terms of increasing production with new wells. During this drilling campaign in progress in 2025, 12 new wells were restored in the first quarter and in the second quarter. And we are going to see new wells connected in coming months. So all in all, the production is going to be increasing cross-terms in 12,000 barrels a day. That could increase the production in 1.5, 2,000 barrels a day. But we are going more things in Libya. I mean, the exploration campaign In Libya, it started in December. We had the Nasser well that was a dry well, but now we are fully focused in a second well that has been spotted in June. And on top of that, we are increasing our beds in this country, and a second rig has been contracted to fulfill the remaining exploration commitments, including potential early development in the Oaxaca area. So we rely on the country. We rely on the increase of our security in the country. We are increasing our production there, and we are betting for future projects in Libya. Thank you, Henri. Thank you.

Thank you very much, Henri. Our next question comes from Libya Red for Alper Arclays.

Thank you, and good afternoon. Two questions, if I could. The first one, just on refining margins and the guidance, just given everything you said about the refining margins, where they are at the moment, can you just ask why not take the guidance higher for those refining margins and just that impact on cash flow from operations? And I think probably a little bit linked to that, if we could talk about the buyback receipt, your share price has been incredibly strong this year. You're one of the best performing European stocks. Does that play into how you start to think about the buyback going forward as well? Thanks.

Thank you, Linda. I understand your point. But let me say that a part of my duty is to be always present. And I prefer to stay there because, I mean, you perfectly know that three months ago, we were in this, I mean, you were in your analyst in the micro, and I was in this room with my team, and we were talking about an AC scenario, the possibility to have $4 a barrel in terms of refining margin, a drop in the Brent prices, an AC scenario in terms of, and we are taking, I mean, taking advantage of that opportunity. We are increasing the efficiency of many of our businesses and so on because, I mean, these kind of levers are positive to do this kind of cleaning in some way of more efficiency in our operations. But I can't change in a dramatic way 180 degrees in three months. I think that volatility is still there. The clouds in the world economy are not over. It's true that we have a better expectation related to refining margins. The average as of today is $6.1 a barrel over the whole year, so we have already evolved this guidance we have for the whole year, probably taking into account what is happening now in the market, we are going to be in a higher refining margin than expected over the whole year. I mean, the dollar-euro exchange rate is there. Potential change in the global economy are there. So let me say I have, and that is crystal clear, a more positive approach that I had in April. I am quite confident about the 6 billion euros of guidance for the cash flow for operation of the year. I don't know if we are going to have potential upsides there, but taking into account all the volatility we are seeing in the market, I prefer to be proud of Lydia, and I'm sure that in case of seeing that what you are saying is true, and probably could be, I mean, I'm not, let me say, challenging your point. I take your point. Probably you are right. But I prefer to wait a bit, and I'm sure that we'll have the opportunity to talk about that in coming course. Thank you, Lydia.

Thank you very much, Lydia. And nowadays, now our next question comes from Peter Lowe at Red Bull Atlantic.

Hi. Thanks. Just one question. You said in the presentation you expected to take your first hydrogen FIDs in the second half of the year. I was wondering if you could give some color as to what sort of returns you expect on those projects. And perhaps more importantly, what's the mechanism through which you make that return? Is there some form of direct government subsidy or how does it work? Any color on that would be helpful. Thanks.

Thank you, Peter. So we are going to have probably in the third or fourth quarter, two FIDs. One of them related to 100 megawatts of an electrolyzer in Cartagena. 100 percent, or sorry, 100 megawatts of installed capacity of electrolyzer in Petro-Nord Bilbao. And in the first half of 2026, The third one in Tarragona, probably 100, 150 megawatts of electrolyzer. So with these three electrolyzers plus the biogas produced using, I mean, biomethane, biogas and biomethane is the same. I mean, this biogas reformed in our refineries and producing hydrogen, we will be in this figure of 600 megawatts, broadly speaking, I mentioned before. So what is this green hydrogen producing an electrolyzer competing in price with the hydrogen we produce today using gas, mineral gas, in our refineries? Not at all. I mean, that is going to be more expensive. So the competitiveness of this hydrogen is not based in this competition with the Greek hydrogen. It's based on regulation. And regulations said today that the 1% of the sales we have in the Spanish market, on the European market, but in this case in the Spanish market, by 2030, they have to contain 1% of renewable fuels with no biological origins. And the most competitive way today existing in terms to produce this renewable fuel with non-biological fuel is this hydrogen. So based on this, let me say market, not appetite, market needs to fulfill this regulatory mandate, we are seeing the economics, the returns of these electrolyzers the 10% of return. So in a double digit. And that is, let me say, the pillar, the fundamentals of these economic returns. You also have to take into account, I mean, that is, I mean, additional, more and more, that for these three electrolyzers, we are going to have a strong support coming from European innovation funds, in the case of Tarragon, all by the subsidy approved to accelerate new technologies in terms of the carbonization by the Spanish Ecological Transition Ministry. So these three electrolyzers, they have the support that in CapEx terms could be, broadly speaking, 1.3, 1.4 million euros per megawatt of electrolyzer. I mean, all in all, that is going to support the economics of these projects. I mean, it's not only subsidies, because let me say, even, I mean, subsidies are helping, of course, but the main driver is not subsidy, because when you take, I mean, I'm not going to enter too much time on that, but when you take this hydrogen and the cost structure, 75% of the cost is OPEX in terms of energy, I mean, power, 20 is CAPEX and 5% are additional OPEX. I mean, with many subsidies over the 20%, you can have a competitive installation if you don't have something additional. And the main driver is the regulatory mandate that is supporting this return.

Thank you, Peter. Thanks. Thank you very much, Peter. Our next question comes from Ignacio Domenech at GB Capital.

Hello, thank you for the presentation and for taking my questions. The first one is on the evolution of net debt. I wanted to get your view on particularly after the closing in the third quarter of the transaction in the UK, what are the moving parts there and what's your best guess we should end up And my second question is related to or a follow-up on hydrogen. We are seeing no other peers here in Spain that are also planning to with their in hydrogen. So I wanted to get their view on hydrogen. on the deployment of this technology in Spain and in the medium or long term, if you think you could actually be exporting the molecule. That's my question. Thank you.

Gracias, Ignacio. Vamos a ver. Oh, sorry. So, going to your question about net debt, what we have seen in general terms is unstable net debt over the year, but, as you mentioned, there is a perimeter change, and this perimeter change is going to come because of the integration of the UK. There is no change in terms of commitments in our balance sheet, but due to to the specificity of this transaction, what we are going to see is that a part of the commitment that is already reflected in our balance sheet related to the commissioning commitments for the future is going to be, from now on, a financial commitment instead of a commissioning commitment. So the commitment is there, but being a financial commitment is going to be part of the net debt. This figure today, the best approach we have is that it's going to be close to 1.2 billion euros, broadly speaking. 1.25, broadly speaking. So, and that is going to be consequence of the change of the perimeter. So, there is no any additional, let me say, financial commitment. It is there, let me say, rewriting some way. We are changing the... in the balance sheet, the commissioning commitment via financial commitment. On top of that, we also have to say that because this transaction, we are going to have a delta, an increase of a big debt of $700 million, broadly speaking, coming from the UK. We are going to have an increase in terms of free cash flow also coming from the, in annual terms. I mean, because you know that the closing is going to be done next week. So I'm talking in annual terms, we are going to have 740 new million dollars of EBITDA and we are going to have 320 million new dollars of free cash flow. So that is going to be, let me say, the consequence in terms of perimeter of the financial commitments in one side, not increasing the bet, but changing the figure in the balance sheet. And on top of that, we are going to have annual EBITDA that is going to be higher than $700 million, and this free cash flow that probably is going to be higher than $320 million in yearly terms. Going to your second question, Ignacio, I mean, that is a very, let me say, subjective question. discussion, almost an academic discussion. I have my personal point of view on that. But I'm not saying that I'm right. But when you have, I mean, today in Spain, we have, roughly speaking, 600,000 tons a year of hydrogen consumption in the whole Spanish economy. Mainly in the refining business, plus fertilizers, a tiny part. And Repsol is consuming 360,000 tons a year of hydrogen today. So with these 600 megawatts, probably speaking, I mean, we will be able to produce from our 360,000 tons a year, perhaps, 80,000, 85,000 tons a year. So, one-fourth of the total consumption that Rexol has. I mean, it seems to me, but that is common sense, that when you have a potential consumer in your own industrial plant, in your own country, I mean, probably the most efficient way to treat this hydrogen. Now, I'm not talking about the future, of course. Probably things are going to evolve. But today, it's not going to be from our side. Perhaps some others, they have some other strategies, and it could be nice. But in our case, exporting molecules is not probably our best business. I mean, because you could understand that if we have a consumption there, it will be easier and cheaper. Decarbonizing. what we have in industrial terms in Spain than exporting molecules, I don't know, to Germany, for instance. That could happen in the future, of course, but our effort is going to be fully focused on that. Gracias, Ignacio. Gracias.

Thank you very much, Ignacio. Our next question comes from Matt Loftin at GP Morgan.

Hi. Thanks all for the update. I appreciate it. Two quick ones, if I could. Some of my questions have been asked already. I wanted to just first see if you could share how you see the business implications from here of the situation with Venezuela upstream, also the materiality of the impact on the refining margin premium through light heavies boats, et cetera, as you look forward at an Otis Repsol project. referred to having taken the credit risk provision with the Q2 results. And then second, I just wanted to come back to the full year cash flow guidance. I noticed that you marked a market, not refining, but oil and Henry Hub, which looked like the changes were somewhat offset there. So can you just expand on the factors that caused you to move to the low end of the prior range in terms of the $6 billion, how much of that perhaps related to the Iberian blackout during the second quarter and also maybe euro-dollar remarks versus underlying factors. Thanks.

Solve. Thank you, Matt. Going to your first question, I mean, you know, RAPSOL always complies and will comply with all laws and regulations, national and international, applicable to our operations in Venezuela. You know that We had the winding down process in May of our license, but we maintain our presence in Venezuela. At the same time, we are maintaining a very constructive and transparent dialogue with the U.S. administration in a very open way to ensure some kind of a stable framework for our activities. And that includes a viable mechanism for monetizing the production we maintain in Venezuela because we are producing gas there in Cardon. And we have, of course, the stake that is now, as I mentioned before, operated by PDVSA of the JV in Petro. So, and at the same time, of course, we maintain a very transparent dialogue also in the country because we are supplying gas for the domestic market. All in all, taking into account that now we are not monetizing this production, but we have an open way and an open hope to find some kind of a framework in this open dialogue we have with the American administration to monetize this production we prefer in accounting terms to be private. And for that reason, we have reduced the total exposure of Venezuela to $360, $370 million, probably speaking in our books. About the refining margin premium impact, negligible. I mean, because the situation we are seeing in the market now is that the supply of heavy oil products is quite guaranteed in the Atlantic Basin. And because that reason, I mean, we have been able, as I mentioned before, with any cargo coming from Venezuela in the second quarter and decoupling the fact of the outage in Spain, we have a premium of $2.1 a barrel in our refining system. So that is the best proof that there is no visible impact on our refining system. There is, of course, an impact in the upstream business. And the impact in the upstream business is that, I mean, the cash flow from operation coming from Venezuela that we had last year is not going to be this year from, better said, from June on in our accounts. But when I mentioned these 6 billion euros of guidance, of course, I'm taking into account this figure. And for that reason, we have this credit risk provision in the second quarter of the year. Going to the cash flow full year guidance, I mean, remember that in April, we had a different situation. In April, March, April, we have a negative impact in terms of our guidance of revenue margin, crude oil and so on that were lower than expected. So the whole year is reflecting also this experience we had in March and April. On top of that, we have the power outage effect close to 0.2 billion euros that of course is going to be and is included in the guidance for the whole year. We have this working capital increase effect of Venezuela, you mentioned in your first question. It's also included in this $6 billion target for the whole year. There are, of course, potential upsides, yes. I mean, I mentioned, and as Lydia was pointing out before, and I support in some way her approach, we could have an upside coming from the refining margin from the heavy half, And for that reason, I mean, all in all, we are quite comfortable with this $6 billion of cash flow from operations for the whole year. Thank you, Matt.

Thank you, Matt. Our next question comes from Fernando Abril at Alantra.

Hello. Hello, Joseon and Tim. Thank you very much. Only one question on renewables. I've seen pool prices have gone up double digit. Your electricity generation also jumped, I don't know, 50% plus. Yet EVDA in the low carbon segment didn't grow in the quarter. I don't know if you could please elaborate on the drivers behind this. And more broadly, what EVDA contributions should we expect from this business in the near term? I recall you previously had a had a target in mind. I don't know if you have any target also for the next few years. Thank you.

So, thank you. Gracias, Fernando. I mean, we are growing and we are scaling up in our renewable power business. And I think, let me say, probably the best good news coming from this business this year is going to B, from the financial side, probably this year I'm targeting, I'm not committing this what I'm going to say now, but I'm targeting this objective. And I think that we are going to be close to this target. This year, this business is going to be close to cash neutrality 2025. That is important. That means that this business is going and it's growing and it's going to be close to cash neutrality in 2025. Combining cash flow from operations plus investments plus rotation. So I know that this figure is going to be probably favorized by the lag effect of some rotations coming from 2024 investments. I know that. So what I'm saying is in some way tricky. Let me use the term. But That is very clear and that is a clear trend. And probably this business with strong growth is going to be self-financed in two, three years in a recurring way. So that is the first good financial news coming from the low-carbon business. Saying that, I mean, in 2025, we are going to have an EBITDA. close to 200 million euros in 2025. We have to take into account that by 2027, we are going to have an EBITDA of 400 million euros in this business. And probably what you are saying, and you are right, Fernando, is that in the second quarter, there are probably an effect that it could be something lower due to the consolidation in the accounting of the company. So that could be – I'm not sure about that. I'm going to check it. But probably that could be the effect. In any case, 200 million euros in 2025, and we expect 400 million euros in 2027. Thank you. Gracias, Fernando. Thank you.

Thank you, Fernando. Our next question comes from Matt Smith at Bank of America.

Hi there. Thanks for taking my question. And the first one was back to Neonex, but thanks for all the detail that you ran through during the questions there. So my question on Neonex was simply a clarification whether you've included the impact of that deal close, which is imminent, within your full-year guidance, such as the upgraded production outlook. So that was the first, and then the second also sort of production-related, but, you know, bigger picture, thinking about 2026, very strong production in the first half, contribution of additional barrels from the next startups of several projects. You know, how much higher could production run in 2026 versus 2025, please?

Thank you. Thank you, Matt. I mean, your first question, the answer is yes. I mean, we are including UK in the full-year guidance, of course, from now on, from August on. Going to your second question, I mean, we are going to be something in between 575, 590,000 barrels a day. in 2026. That means that we are going to increase something between 25,000 to 40,000 barrels a day of production next year. We will be able probably in the guidance for the year, at the end of the year, to give you a more accurate figure. But the best approach I have today is while the speaking is there. Thank you, Matt.

Thank you. Thank you very much, Matt. Our next question comes from Paul Redman at BNP Paribas, Exxon.

Hi, and thank you very much for your time. Just two questions, please. The first one's just a confirmation on your guidance for net capex in 26 and 27. How much divestment are you including in that guidance? And the second one is just on the distributions, you're guiding to 30 to 35%, and you're paying a buyback of 700 million euros. Is the moving part on that guidance the the macro environment, essentially. You're guiding 6 billion euros of cash flow from operations, whether that's high or low, tell you whether you're at the top or the bottom of that range, or is there any other movement that might happen on distributions from here? Thank you.

Thank you, Paul. I mean, as I said before, frankly speaking, 7 billion euros net capex, 2026, 2027, You can't expect, let me say, a positive effect in divestment terms coming from the EMP. I mean, because we are not seeing, let me say, a disposal divestment process in the EMP in those years. We are not factoring in any case anything that could come from the liquidity event. We are not looking for money in this event. We are looking for the future growth and the future consolidation of our EMP profitable business, so we are not taking into account any money coming from there. So the only difference between net capex and gross capex is going to come from the concept of rotations in the low-carbon business. We will be more precise about that in the guidance for 2026 at the end of this year. Going to the remuneration, I mean, again, I prefer to be prevalent on that. Six billion euros is today the best approach we have in terms of remuneration, and we are comfortable with the percentage of distribution for our shareholders I mentioned before. So the cash dividend plus the 700 million euros of buybacks were announced. So if things are different, if things are different, We will call about that in coming quarters. But today, I mean, in this volatile environment, I'm confident, I'm comfortable about what I'm seeing and what I'm announcing as guidance for coming months that I prefer to be present before talking about upsides, growing and so on. Because, I mean, you know, Paul, and I know the volatile world and environment we are experiencing now, and pregnancy is a good ally in these complex times. Thank you.

Thank you, Paul. Our next question comes from Anis Kapadia at Policy Advisors.

Good afternoon. Just a couple of questions, please. I wanted to get your view on, I suppose, the medium to longer term global gas markets, as it seems like there's a lot of LNG capacity that's being built over the next few years, which should narrow the spread between Henry Hub and bring global LNG prices, gas prices down. So just wondering how you're looking to navigate that market over the coming years. And then just going back to hydrogen, I was just wondering in terms of the various different ways of producing hydrogen, how you're looking at that market. So obviously you've got the existing green hydrogen, but just wondering how you're thinking about the blue hydrogen market and also the kind of natural or white hydrogen market where you could drill for the hydrogen at potentially lower cost. Thank you.

Thank you, Anish. I'm not an expert on gas markets, but what we try to say, because, I mean, it's part of our business, but it's not the core of our business, is to try to be a bit balanced in the positions we have. You know that we are the main Iberian consumer of gas, so we have strong short positions in Iberia, and at the same time we have long positions, some of them in the Gulf, in America, And I mean, some others in Europe, but mainly in America. So in the long term, we are going to try to be, because you have to take into account that we are also growing in our gas retail market in Spain. So if today we could have, let me say, an excess in terms of comparing the long and short position close to 1 BCM, taking into account that we are going to grow in our retail gas market in spain let me say that we are quite comfortable seeing that probably and i say probably because i don't have a crystal clear in three four five years the lng production in the world is going to grow and probably is going to to cover in a quite easy way the current demand so in this scenario we prefer to avoid to have long positions in LNG, and we trend in this evolution because the consumptions. I could elaborate a bit more because we are going to reduce the gas consumptions in our refineries because we are more efficient and so on, but we are growing at the same time in the retail market. So all in all, we trend to be balanced in the long term. And in the midst, we are going to take advantage of this position because, I mean, the value today of this one BCM of excess capacity in Europe coming from the Gulf in America is going to have revenue for Repsol this year that could be at around $200 million, roughly speaking. So that is the view we have. Going to your point, I couldn't agree more about the approach of loving the blue hydrogen. I love it. in terms of combining the carbon capture with hydrogen production, but unfortunately, this blue hydrogen is not part of the European directive of the hydrogen that could be used to fulfill this mandate, this commitment, because the definition is done in terms of renewable fuel with no biological origin, and because it's related to this carbon capture to an organic production. So it's not a non-biological origin. So it's not competing, let me say, with the green hydrogen to be able to cover this regulatory obligation that every operator in our case, of course, in the Iberian market, but in general terms, the European market has to fulfill in coming years. So I take your point. I agree, Anish, that I can't use this blue hydrogen to fulfill this regulatory obligation. Thank you.

That was our last question today. With this, we will bring our second quarter conference call to an end. Thank you very much for your attendance.