Repsol Sa Sp/Adr

Good morning to all. Welcome to REPSOL's third 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 a 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 Josuyon.

Thank you, Pablo. Good morning to everyone, and thank you for joining us. Repsol delivered a solid operational and financial performance in the third quarter of 2025, moving ahead on key projects, optimizing the asset portfolio and reinforcing its commitment to shareholder value and capital discipline. The energy landscape continues to be shaped by geopolitical instability and concerns of oil oversupply. In the US, gas prices softened compared to the previous quarter, yet fundamentals still point to a tighter market heading into next year. The refining business continues to build on a positive momentum in a market characterized by a diesel supply deficit. Operations at our industrial sites restore activity levels, following the disruptions caused by the Iberian outage in the second quarter. On the commercial side, all business segments deliver stronger year-over-year contributions. Retail fuel sales remain robust, well-supported by seasonal trends. The adjusted income totaled 820 million euros, 17% above the second quarter and 47% higher than in the same period of 2024. All four divisions improved their results over the third quarter last year. Cash flow from operations amounted to 1.5 billion euros. The accumulated operating cash flow to September reached 4.3 billion euros, 15% higher than in the first nine months of 2024. Net capex was €0.3 billion in the quarter, with a €0.8 billion contribution from disposals, asset rotations, and the €0.2 billion received from the sale of tax credits in the outpost project. The accumulated net capex to September was €2.5 billion, including €1.3 billion in proceeds from disposals and rotations. By quarter end, all the transactions announced in 2025 have been fully collected. Net debt stood at 6.9 billion euros by quarter end, an increase of 1.2 billion compared to June, mainly due to integration of the new venture established with New Energy in the UK. As part of the agreement, Repsol has retained a funding commitment of the commissioning liabilities related to a portion of its legacy assets. This amount was previously recognized as a non-financial liability in our financial statements, so it doesn't increase at all Repsol exposure, but it is now classified in a different way. It's classified as financial debt at the consolidated level. So it's only, let me say, an accounting procedure, and excluding the impact of UK integration, net debt wouldn't be flat compared to June. Gidding rose to 20.5% by quarter end and 10.4% excluding business, remaining aligned with our strategic objective of preserving our current credit rating. Looking at the evolution of the main macroeconomic indicators in the quarter, Brent crude averaged $69 per barrel, 2% higher than in the second quarter, and 14% lower than in the same quarter last year. The Henry Hub averaged $3.1 per million BTU, 9% lower quarter over quarter, and 41% above the same period in 2024. Driven by a strong middle distillate differentials, the refining margin indicator stood at $8.8 per barrel, 49% higher than in the second quarter, and 120% higher than the same period in 2024. Finally, the dollar continued to weaken against the euro with an average exchange rate of 1.17. Turning now to the upstream performance, this division continued to deliver efficient and competitive growth, enhancing returns through new projects and portfolio management. We are improving the business and together with our partner, positioning the company for a potential liquidity event. Third quarter adjusted income was 317 million euros, 28% below the second quarter and 11% higher year over year. Production averaged 551,000 barrels of oil equivalent per day, about 1% lower than in the previous quarter and broadly in line with a year ago. Compared to the third quarter of last year, the impact of divestment and natural decline was offset by higher contributions from Libya and the U.K. In the UK, the merger with Neo Energy was completed in July. The new venture is projected to produce around 130,000 barrels per day in 2025, increasing Repsol's net production in the country from around 30,000 to 59,000 barrels per day. On an annual basis, the JV is expected to contribute around $700 million of EBITDA to Repsol in 2026. In Indonesia, in September, we agreed the disposal of our stake in Sacakeman, completing our country exit after the disposal of our interesting corridor announced in the second quarter. After this transaction, Repsol EMP is now present in 11 countries, 10 producing plus an exploratory position in Mexico, consistent with our strategic objective of concentrating operations on geographies where we hold the strongest competitive advantages. In this regard, the U.S. continues to strengthen its position as a strategic growth region within our upstream portfolio. In the Gulf of America, the joint development of Leon and Castile fields reached first oil in September. And in Alaska, the first phase of PICA is expected to start up early 2026. These projects, together with the upcoming startup of Lapa Southwest in Brazil, are expected to add around 50,000 barrels of oil equivalent per day of new low emissions, low break-even production by 2027. In addition, these developments have accounted for a substantial share of the upstream investment effort outlined to 2027. And the completion will allow us to transition to more normalized capex levels in the division at around or even below 2 billion euros per year. Finally, as part of the preparation of our vehicle ahead of a potential liquidity event, Repsol EMP completed last quarter a $2.5 billion bond offering, the largest in U.S. dollars in Repsol's history. The offering, structured in three tranches, attracted a strong demand, underscoring the solid support for our upstream strategy. Continuing with the industrial division, third quarter performance was driven by the consolidation of the refining up cycle and the solid contribution from the trading businesses. Following the impact of the Spanish outage on second quarter, operations activity at our industrial complexes returned to normalized levels, enabling us to capture the positive refining scenario. The adjusted income totaled 315 million euros, 18% higher than in the second quarter, and 70% evolved the same period a year ago. In refining, our margin indicator climbed to levels not seen since the first quarter of 2024, supported by stronger product spreads, mainly in diesel. The premium over the indicator was $0.7, negatively impacted by the turnaround of Cartagena, and planned maintenance at the C43 biofuels unit, and the absence of crude shipments from Venezuela. The C43 plant resumed fuel capacity operations in October. Distillation capacity utilization was 85%, while conversion units operated at 101% of main plate capacity. Refining margins have remained robust in the fourth quarter, with the indicator averaging $9.8 in October and $7.1 year-to-date. The spot margin this morning was $13 per barrel. No major refinery turnarounds are planned this quarter, supporting healthy utilization rates. Renewable fuels margins remain also at solid levels, driven by stricter regulatory mandates in Europe and lower imports. In the chemical business, market conditions in Europe remain challenging, with flat demand and higher costs compared to other geographies. Repsol's petrochemical margin indicator declined by 22% over the previous quarter, driven by lower prices and higher energy costs. Our priority for this business remains lowering break-evens and expanding margins through differentiation. The CNES expansion scheduled to start in 2026 is expected to add around 80 million euros of EBITDA at the current AC scenario, and the important January new plan dedicated to highly specialized application is also planned to come on stream next year. In the wholesale gas trade, we received five cargos from CalCasioPas last quarter. This is in line with our goal of reaching a total of 11 cargos lifted in 2025, contributing around 100 million euros of incremental EBIT compared to initial plan. In our industrial transformation initiatives, the project to retrofit a former gas soil hydro-thriller in Porto Llano is expected to begin operations in the second quarter of 2026. An additional retrofitting project is currently under evaluation, which will become our third major advanced fuels facility in Spain. In Tarragona, the development of the Ecoplanta is progressing according to plan. Last week, we signed our first offtake contract to supply renewable methanol to this facility as part of a long-term agreement for the supply of renewable marine fuels. In hydrogen, during the quarter, we took the FID for our first large-scale electrolyzer. It's going to be constructed in Cartagena, and we are finalizing the analysis for the approval of another two projects. These electrolyzers will constitute the main part of our total capacity in operation by the end of this decade. Moving now to customer, this division delivered the highest quarterly result in the history of Repsol's commercial businesses. with all segments delivering higher contributions year over year. Third quarter adjusted income reached 241 million euros, 22% above the second quarter, and 34% higher than in the same period of 2024. EBITDA was 434 million euros, a 25% increase year over year, bringing the accumulated figure through September to 1.1 billion euros. This performance keeps us on track to deliver in 2025 the 1.4 billion EBITDA targeted for 2027 in our plan. So this figure is going to be achieved this year, 2025. And all that is supported by resilient demand, efficiency gains, growth in power and gas retail in Spain and Portugal, and the growth of aviation fuel sales in Iberia. In mobility, sales of road transportation fuels grew 14% year over year, reaching pre-pandemic levels. The non-oil business delivered robust contribution margin growth in service stations. 10% evolved the third quarter of 2024. As of today, 56% of our network in Spain offers multi-energy solutions. In October, the range of renewable fuels available at our service station has been stamped with the incorporation of 100% renewable gasoline after our Tarragona refinery achieved the first industrial-scale production of this product, a real technological milestone. Finally, in power and gas retail, we had 157,000 new customers last quarter for a total of 2.9 million clients by the end of September, on track to reach our 3 million target before year end. Turning to low carbon generation, the adjusted income reached 31 million euros, 24 million higher quarter over quarter, and 38 million increase year over year. These better results were driven by renewables, the main driver, a higher contribution from combined cycles whose activity increased to ensure system stability following the Spanish outage, the blackout we suffered in April. The average pool price in Spain was 67 euros per megawatt hour, 71 percent above the previous quarter and 16 percent below the same quarter in 2024. The power generated by Repsol reached 3.3 terawatt hour, 39% higher year over year. Repsol has reached five gigawatts of installed renewable capacity under operation, and we expect to add another 500 megawatts before year end, mainly driven by the startup of Pennington Solar in Texas. We keep, sorry, executing our business model based on building our projects from scratch and investing in early stages of production to optimize financial structure and maximize returns. In the U.S., the 629 megawatt outpost solar project achieved a commercial operation in September, joining Fry and the Jicarillas that are already producing in the country. We are now in the process of closing the partial divestment of this development, with cash-in expected in 2025. In Spain, an additional asset rotation is also under negotiation for a 700 megawatt renewable portfolio, of which, and that is an important fact seeing the current market situation, more than 400 are going. Finally, earlier this month we acquired and 805 megawatt wind pipeline with the aim of hybridizing production at our combined cycle plant in Escaton in the Spanish region of Aragon, securing the power supply for the future data center to be built in the area by a third party. Moving now briefly to a summary of the financial results. In this slide, you may find an overview of the figures that we have covered today. For further details, I encourage you to refer to the complete set of documents released this morning. Regarding our update outlook to the end of 2025, the cash flow from operations guidance remains unchanged at around 6 billion euros, with the benefit of a higher refining margin indicator, as I explained before. And this effect is going to be partially compensated by the lower price and weaker dollar. Net capex is unchanged at around 3.5 billion euros. I have the ambition to put this figure below 3.5 billion euros by the end of the year, subject to the timing of the divestment processes under execution. Upstream production remains at an estimate of around 550,000 barrels per day. We will allocate 1.8 billion euros to shareholder remuneration, 1.1 billion to cash dividends, and 700 million euros to share buybacks to reduce capital at the higher end of our strategic cash flow operations distribution range. Following July's second dividend payment, the total DPS distributed in 2025 has been €0.975 and an 8.3% increase over 2024. A first capital reduction was carried out in July through the redemption of shares acquired for an equivalent amount of €350 million and a second capital reduction for the same amount will be executed before year-end. For this, a new buyback program was launched in September for the acquisition of shares for the equivalent of 300 million euros. With a reminder, 50 million euros coming from the settlement of the 16 derivatives. In conclusion, Repsol is delivering on its commitments and the strength of our business model position us well to manage the uncertainties of the current environment. In the afternoon, we are improving the margin of the barriers we produce, bringing forward our growth projects and upgrading the portfolio in industrial we are capturing the positive momentum in refining while progressing on the transformation of our sites building resilience to ensure the long-term sustainability of the business customer keeps increasing its cash contribution to the group helped by a successful multi-energy story and a growing power retail business in iberia And in low-carbon generation, we continue to deliver along our strategic lines, targeting free cash flow neutrality after factoring the proceeds generated by asset rotation. Ensuring strong distributions to our shareholders remains a key priority in our story of value growth. Always, of course, maintaining a clear commitment to a robust balance sheet and our net capex objectives. Next year, after the share capital reduction executed in 2025, our ordinary dividend per share will be around 1.05 euro per share. I said around because that is going to depend on the exact figure of the shares we are going to redeem at the end of the current share buyback program. The same key strategic principles will guide our path. After the release of our full year results in February, and in light of the changes in the macroeconomic regulatory and business landscape that our industry has gone through, a capital markets day will be held in March, and where we will provide updated projections to 2028. With this, I will turn it over to Pablo as we move on to the Q&A session. Thank you very much.

Thank you very much. Before opening the Q&A, I would like kindly ask participants to limit yourselves 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 you for any follow-ups afterwards. As usual, I would like the operator to remind us of the process to ask a question. Please go ahead.

Thank you. If you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again.

thank you operator let's get started with our first questions comes from michele at goldman sachs thank you very much and congratulations on the strong results and looking forward to the capital market today two questions if i may first i wanted to focus a bit on biofuels an area that you're growing very fast but also where we're seeing a tremendous improvement in margins i was wondering if you could lay out what is the contribution at the moment from that business and how big that could get next year with potentially further tightening with RAID 3 and also higher volumes in the second half of the year. And then secondly, I wanted to come back to Venezuela. You're building up receivables there, clearly difficult situations with the U.S. sanctions. I was wondering if there is any ongoing dialogue that could resolve that situation and allow you to take more Venezuelan cargo. Thank you.

uh going to your first question i mean uh next year in 2026 taking into account the production we have by in the co-process of of our industrial activity plus the operation of the c43 plus uh the second half of the year where we are going to have a production coming from the retrofitting of puerto llano and adding the trading activity of of this biofuels plus the commercial side because you know that we already have a 40 percent of our service stations commercializing this product i mean to give you are only a reference not at the current levels of margins but if we take probably speaking, $800. I mean, I'm not giving, let me say, a guidance of prices because I don't have a crystal ball, but if we take $800 per ton as HVO minus UCO margin for 2026, with all this concept, we will capture 125 million euros of EBITDA. I mean, roughly speaking, because that is not exactly, it could be a thumb rule, but you could add, roughly speaking, 30, 35 million euros per every 100 dollars per ton of margin. You have to take into account, Michele, you perfectly know, that after investing in Porto Llano, we will have a capital employed in this business of around 400 million euros. So my point is that the business is performing in the right way and that it's positive. If you ask me if I see the current margins stay for coming months, I mean, the normal situation would be to see some kind of going down of the margins because, I mean, we have had a lot of capacity out in turnarounds program and so on in Europe. So that will be the most logical. But I mean, there is room to have a pretty good situation in this business. Going to Venezuela, I mean, let me say that as always, we are always to comply and we comply with all laws and regulations applicable to operations in Venezuela. You know that we are still there. We maintain regulations. our presence and production in Venezuela. We are producing gas, gas for the domestic market is our main activity in Venezuela. And I could confirm you that we maintain and we are keeping going, maintaining a constructive and fully transparent dialogue with the U.S. administration at the moment to try to ensure a stable framework for our activities i mean and when i say unstable framework for activities this framework of course includes viable mechanisms for monetizing our production so i mean i'm not going to say that situation is okay because you know the difficulties that in political terms the country is experiencing but let me say that i could confirm that we maintain this constructive and transparent dialogue with all the authorities, of course, including the American authorities. Thank you very much, Michele.

Thank you very much, Michele. Our next question comes from Alejandro Vigil at Banco Santander.

Hello. Thank you for taking my questions. The first one, I'm very curious about this study updating in March. Probably I'll have to wait for March. to have more details, but you can elaborate about the reason for this update and potential moving parts of this strategic update. And the second question is about distributions. I agree that you are delivering these distributions in line with your range, but considering the strong cash flow this year and potentially good expectations for next year, if there is a potential upside in your sell-buy-back program of 700 million euros. Thank you.

Thank you, Alejandro. I mean, I could confirm that, I mean, this strategic update, that is a terminology discussion, so it's irrelevant, Alejandro, what I'm going to say, but I mean, I prefer to talk about the capital market day because the strategy is defined and the strategy is written on stone. And that means that the priority is going to be the shareholder distribution, as we defined in February 2024, plus the strong balance sheet for Repsol, because for us it's very important, and a proven CapEx transforming and pushing in the growth process of the company. But that is going to be the priority of the strategy that is going to go on from next March on. So what is going to be the target? So you can't expect, let me say, surprises, because these three principles are going to be defined and written on stone, saying that the capital market day is going to try to give you, because I mean, things, metrics are changing in two years, and giving you a clarity about 26, 27, and 28 years in terms of all kinds of operational and financial metrics. That is the end of the capital market day we are going to call for March. So, but again, the strategic principles are written on the stone. First, distribution for our shareholders, strong balance sheet, and a prudent net capex That, I mean, if you allow me, Alejandro, probably, and you were right, the consensus of the market six months ago could be that we had problems to deliver these present CAPEX in net CAPEX terms, because the perception after 2025 and the first, sorry, 2024 and the first month of 2025 for the market could be, and you were right, that the CAPEX Effort was very high at the beginning of this strategic plan. That was right because we were, let me say, paving the way for the growth for the projects we were investing in, and we were taking advantage of the negligible debt we had at the end of 2023 for launching this view. But as you could see, I mean, at the end of September, net cap exists at a figure of 2.5 billion euros. And again, the target we have is 3.5 billion euros by the end of 2025. But my ambition is to be below this figure this year. And next two years, if you take, and that is going to be, probably speaking, what I have in mind, a figure close to this 3.5 billion euros in 2026 and 2027, you could see that we are going to be in the low, low range of the net capex we defined in the range for our strategic plan, 16, 19 billion euros. Today, our view is that we are going to be at around 16 billion euros in this period. So we are going, let me say, to elaborate a bit more all these figures that you could see in the figures of this quarter that we are on track of going in this direction. So what you could expect I mean, in terms of general framework of distribution, I said, priority, we are going to be, of course, in the range of what you said, and you could be sure, Alejandro, that the current program in the current market conditions is going to be delivered also next year. But of course, I prefer to wait. and talk about that in march in the capital market day but we are going to be in the range defined and if we see a higher cash flow from operation and that could happen in the current environment what you could expect of course is going to be in that is going to go better set in that direction gracias alejandra thank you excuse me sorry uh this year survey back alejandra i forgot it uh i mean If we take 6 billion euros and we are in the higher range, 30, 35 of the range, I mean, it's true that we are going to have probably, as I mentioned before, a higher refining margin. What I'm seeing for this fourth quarter in terms of refining margin is going to be probably in the double digit. how i see the refining margin of result in this fourth quarter a double digit but if you take this figure i mean we could have let me say probably speaking 200 million dollars more to the the expectations we had the guidance we had before is true that the dollar uh euro exchange rate is showing us a a weaker dollar uh so that is I mean, reducing a bit also the cash flow for operations for our businesses and slightly weaker Henry Hub, comparing with the $4 million BQ of last guidance. I mean, all in all, it could be possible to be evoke these 6 billion euros I mentioned before as guidance, but the figure is going to be negligible. And I mean, you are going to understand that if we are 100, 140 million euros of evoke this figure, I mean, we are not going to be open a program of 40, 30 or 50 million euros. So, I mean, we prefer to say that is over the year 2025 and we talk about that in March, but always under the same principle we are applying now. Thank you.

Thank you very much for your question. Our next question comes from Alessandro Pozzi at MediBanca.

Good afternoon all and thank you for the questions. The first one is on the refining margin outlook. You mentioned the export prices into the double digits. What is your view for the rest of the year and going into 2026? Do you think the current strength is driven more by lack of products or is it concerns around the availability of diesel, maybe in 2026. So more of a panic buying right now. The second question is on capital allocation. Clearly, customer is delivering much better results. as you look at 2026 and 2027, what do you think are the areas of the business that can give you a better return and where you can probably increase capex in the next couple of years? Thank you.

Thank you, Alessandro. I mean, starting by your first question related to refined margin, of course, let me underline that it's evident that I'm going to repeat that I don't have a crystal ball, but analyzing from our experience and the facts and the indications we are seeing in the market, I'm going to jump a bit into the unexplored arena of seeing what is going to happen with the finding margins. So first, current evidence. I mean, as of today, This year we have $7.1 per barrel in our system. This month in October, this figure is at around $9.8 per barrel. And this week, I mean, what we have seen is something in between $12, $14 per barrel. That's our facts. What is behind that? My perception is that we have two drivers both drivers pushing in this direction demand and supply supply is crystal clear i mean new refining projects in the atlantic basin and they are con they continue facing delays and operational problems than you know mecca in mexico my perception is that the problem for mecca is not going to be solved in the short term so that could go on next year dangote is having operational problems that is going to be probably solved by 2026. In the midst, we have seen, I mean, everything we talk about that, remember, in February, when I said that we were seeing, probably speaking, one million barrels a day of discontinuing activities in the refining in the world. I mean, in Europe, Veselin in Germany, Lindsay and Grangemouth in the UK, they are They're close on track in the case of Lindsay, Houston, Los Angeles, also in the US, Dalian in China, Osaka in Japan, Kuinan in Australia. I mean, all that is going to add more than one million barrels a day of less production. We said that new projects this year, they were going to be slightly above one million barrels a day, but with the operational problems I mentioned before. In the case of Dangote and Ormeca, this figure is lower. And I mean, there is a new, let me say, a new fact over the last two, three months that due to the attacks on Eastern European refineries, the best approach we could have today, and again, that is not easy to be reported in an accurate way because, I mean, in our situation, truth is sometimes hidden, but probably a figure close to a 37, 38% of the refining capacity in Russia has been attacked, and probably a figure close to a 25% of the total capacity could be out of operation. So we are speaking about a very important figure that is 1.5 million barrels a day, fully unexpected. On top of that, we have seen that over the last two, three years, in a very unfair way for competition, refiners from China, India, and so on, they were taking advantage of not fulfilling the sanctions against the Russian oil. They were buying cheap Russian oil, refining this oil, and putting this product in a very unfair competition way in the European market. Thanks to the policies of the European Union and the Trump administration related to enforce sanctions against this unfair way, all that is going to have an impact in the market. I mean, if we go to the demand, I mean, demand is growing. That is also a fact. It would be 0.6, 0.7 million barrels a day this year. In our markets, we are experiencing a high demand, as you could see in our commercial businesses. And we have to say that, I mean, we are still, we are not already in the European cold. I mean, European core system is going to increase pressure on diesel. If we add to that the new ECA regulation in the Mediterranean that are effective from May 1st that are boosting marine gas oil demand, and at the same time we are seeing that gasoline is also strong because the new hybrids that they consume a lot of gasoline and so on. I mean, again, I don't have a crystal ball, but I'm comfortable. It's not a commitment because it's not in my hands, of course, but we are going to see an average of double digit in Repsol this quarter. I mean, a refining margin with a double digit. I mean, jumping into the 2026 is more complex, but I could say that the $6 per barrel we saw one year ago for 2026, I mean, we are going to be clearly above this figure. Probably the first quarter we are going to experience a similar situation we are going to experience the fourth quarter of the year. We could see probably in the second half a more normal market in terms of supply. But all in all, I think that seeing margins of, I don't know, $7, $8 per barrel over 2026 is not going to be a surprise for me. Going to the capital allocation on the 2026, 2027, we are going to see, I mean, good results and improvement. Clearly speaking, in the upstream, new boroughs, Leon Castile already in operation, Alaska, that is going to start the operation at the end of the first part, better said, of the first quarter. UK, where the improvement is going to be clear. So better margins, new boroughs, more production, 570,000 boroughs a day, roughly speaking. We will clarify this figure in the capital market data that we are going to be at around this figure. and a clear improvement in the upstream. Going to the industrial, as I mentioned before, a better bios margin. Porto Llano, the retrofitting in operation, a higher refining margin. And I mean, I know that there is, and I have a concern related to the chemical business because the performance and what we are suffering in the market is very negative. we have a competitiveness program that we are enforcing new margins reduction of energy cost a cost reduction on top of on top of that we are going to see seen as so the derivative chemical even in this acid margin adding at around 80 million euros of new evita in a year we also have the ultra high molecular wake a polyethylene plant in puerto llano so all in all the commitment i have with my board is that next year in this acid margin scenario so with no let me say a tailwind pushing margins we could be a bit neutral in 2026 and we will have in 2027 a positive result in the chemical business again at the current bad margins environment of course any tailwind coming from the point of view of margins is going to improve this this figure in the customer growth is going to go on because i mean it's not because a market situation it's structural because we are entering new businesses retail power and gas it's a new business where we are growing where we already have 200 million euros of FEPIDA and growing. Three million customers this year. Probably next year we will be at around 3.5 million customers. That is, we could be close to this figure, but we have a clear growth roadmap. We are growing in lubricants. In aviation, I mean, if you check the figures in Iberia, we are in historical flights. overcoming year after year the figures we have we are growing in the non-oil as i mentioned before so this 1.4 billion euros of this year is going to be a figure close to 1.5 billion euros of a big day in this business by 20 20 uh six and uh i mean you see in in in in low carbon uh businesses i mean in power generation you could see that we are improving the result We will see ups and downs, but there is a clear structural trend. Why? Because we are reducing our costs, our unitary costs, because we have a business to operate more gigawatts, and month after month, we are adding new production. So the unitary cost is going to be reduced in coming months and in coming years. On top of that, with difficulties at the beginning in the U.S., but the rotation business, the rotation game is... is going to go in the right direction because the projects we have outpost has a higher PPA than Frye. Pennington has a higher PPA than outpost. That means that things are going the right direction. These nine months, if you take the total concepts, you could see that this business is close to be neutral in cash terms. I mean, that is not going. It's not structural. We are going to have in coming months, I mean, capital needs for this business. But we are not going to be far in the period of a capital market day defined to see that this business could be able to grow with a minimum capital commitment from Repsol because it's starting to work more. So my point is, that this 3.5 billion euros is going to be deployed in a prudent way in these businesses, reducing, let me say, a slightly default in the EMP because the projects are already on track. In the industrial business, we will put in track the projects I mentioned before. Customer business, I mean, is investing, but the investment level in intensity is lower than in some other businesses. And in the case of renewable power, this effort, let me say, has an asymptotic direction towards being neutral in cash terms. Are we going to achieve this target in 2026? Probably not. But this time is not far. So thank you. Thank you for the answer.

Thank you very much, Alessandro. Our next question comes from Viras Borkataria at RBC.

Hi, thanks for taking my questions. The first one, just on refining, I might have missed this, but I understand you have no maintenance in Q4, but are you able to give a bit more detail on the first half of 26? Just thinking about your ability to capture, you know, $13, $14 refining margins over the coming months if that was to persist. And then second question is just on the financials. There is a very significant difference between P&L tax and then the cash tax you pay, and the gap seems to be getting wider. Just trying to understand if there's any particular reason why those two numbers won't converge over time. So any color there would be helpful. Thank you.

Thank you, Villas. I mean, going to your first question, I mean, let me say that this quarter in 2025, what I have in mind is that we are only to turn around the one crude unit in Porto Llano and the beach breaker. I mean, the beach breaker with my whole respect to this unit because its fuel production is negligible. in in tabagona so that is going to be the only turnaround campaign this this quarter if we go to uh 2026 what we have in the program i mean accepting some hydraulic circulation units some catalyst changes and so on that are negligible in in in in days terms the only large uh turnaround campaigns are a coruna that is the smallest of our refinery where we are going to have the the conversion units maintenance that is going to stay for something between 40 50 days in the in 2026 and in petronor we are going to maintain the cooker and the cooker will stay out of service for 40 days, more or less. I mean, that is the only, any kind of significant maintenance campaign, neither in Cartagena nor in Tarragona. As I said before, some, I mean, catalyst changes, a hydro-desulfuration unit, but I mean, nothing relevant. And let me say that if we see this historical, You know that a program could happen. I hope and I expect we could cope with any incidents in this sense. But when we analyze the historical terms around campaigns, it's going to be a quite soft year in terms of maintenance campaign in the coming 15 months. Going to your second question, of course, you could check the figure in a more accurate way with our team, but there is not anything relevant to report related to the P&L in tax and in cash. We are, of course, optimizing, as always, credit tax positions. You know that because we are investing hard, we have a lot of... tax credits because the investment we are developing in some jurisdictions, I don't know, the UK and some others because the losses of the past. And probably in the whole year 2025, we could have a figure close to 800 million euros at the end of the year. But again, we are trying to optimize these figures and trying to use the credit tax positions we have. So that's clear. Thank you.

Thank you, Viraz. Our next question comes from Guilherme Levy at Morgan Stanley.

Hi, good morning. Two questions from me, please. The first one, thinking about the next steps around the listing of the EMP subsidiary in the US. You, of course, started to talk about a potential reverse takeover process. So I was wondering if there are any particular features that you would like to see in a potential target to be taken over in the U.S. if exposure to either gas, oil, or to any particular basin would be preferred. And then second one, also in the U.S., can you provide us some color in terms of the hedges that you currently have on gas prices over the coming quarters? Thank you.

Thank you, Guilherme. I mean, we are preparing the company for being ready for a liquidity event in 2026. As I mentioned before, in July, liquidity event could mean first an IPO, a reverse merge with a company listed in the US, a new private investor entering in Repsol. So, I mean, that's the broad meaning of liquidity event and again for me here is more important the road and the journey at the end that means that we are putting all default first in having a better upstream with better barrels we are delivering in terms of improving the portfolio we are in less countries in in better jurisdictions with better barrels uh when i say better barrels in terms not only of uh of more sustainable barrels, but also in terms of higher cash flow per operation per barrel, we are putting on track the projects. That is very important. In a period that has been complex in terms of inflation and so on in the market, we have been able to put projects on track. That happened in September with Leon Castile, and it's going to happen in coming three months with Alaska. So that is the full focus of the company in this sense. On top of that, we are working internally in all the requirements and the reporting and so on to be prepared for any event in this direction. But again, we are not in a hurry. We don't need any proceeds coming from this liquidity event. We are seeing that day after day, we are improving the quality of our upstream. That means that we will be prepared alongside 2026, we are fully aligned with our partner, EIG, in this strategy. And of course, we will be ready to take advantage of any opportunity in the market, but not being in a rush, not jumping any opportunity that could appear in the horizon, and having crystal clear that maintaining the control and the 51% of the state in this business so consolidate in this business is average line for repsol so we are going to own in this uh in this in this way uh going to some color about the the gas for i mean in 2025 we have a 55 percent of the volumes a hedge already with a color with no cost uh three uh six point one So capturing all the value, guaranteeing the $3 million BTU and capturing all the value up to 6.1. Next year, if we go to the first quarter, we have a 20% of the production in the first quarter in a quarter 3.5, 12.3. That's a surprising figure, but I mean, it was done with no cost. That means that We are guaranteeing the $3.5 million BTU and capturing all the price to $12 per million BTU. On top of that, we have a quarter over the whole production of 2026 covering a 52% of the production with a floor of 3.2 and capturing the value up to $5.1 million BTU. And in 2027, we have already a hedge at 12% of the production that is with a floor of three and capturing the price up to $5.8 per million of PQ. So let me say, as I summarize, we are comfortable because we are guaranteeing a minimum that is going to give us the return we expect in the gas production we have. And on top of that, we have plenty of room to capture any upside appearing in the market. Thank you, Guilherme. Thank you.

Thank you very much, Guilherme. Our next question comes from Ignacio Domenech at GB Capital. Please, Ignacio, go ahead with your question.

Hi. Yes, thank you for the email questions. I have a question on asset rotation. both on Upstream and on Greenables. So starting with Upstream, there was some news regarding potential asset rotation in PETA in Alaska. So I was wondering if you are comfortable with your stake there or you are planning to dilute part of the exposure to the asset. And then in terms of asset rotation, In Spain, just wondering if you've seen any change in appetite, just thinking about the 700 million portfolio you are planning to rotate. Thank you.

Gracias, Ignacio. Thank you. So, going to your first question, I don't have any appetite to divest in the upstream business. We are comfortable with the position we have in the upstream business. We are and oil and gas company. We are adding bubbles. We are adding new bubbles. And probably, let me say that Alaska is a company maker asset in terms not only of because the bubbles we are going to start producing in 2026, but because the potential growth that this asset in PICA2, in coke and so on, could have around the the current production in uh lands and uh fields that are already in the hands of of the jb we have with santo so uh i mean we have always to consider any option because i mean the portfolio is has to be managed but today i don't have any appetite to dispose of the best alaska I mean, and I need, let me say, a real, very high figure to consider any option for that. Because, I mean, we are very happy and we are very close to the first oil. So we are going to start monetizing this asset in three months. So we will consider, as always, any option in any asset. But today, we don't have any target and any appetite to divest any asset in the absence of Repsol. Going to the renewable asset rotation in Spain, I mean, we have seen a positive appetite. It's curious because if you are analyzing nothing and you perfectly know the Spanish renewable business, we have been able to rotate in a very successful way all the processes we have had over the last four years. And remember that the last one happened eight months ago, roughly speaking, with a green coat in a basket of assets. What I have in mind was that they were around 400 or 500 megawatts in Spain. And we are seeing a very high appetite for these assets because, I mean, you know that today 400 new operational production in wind in Spain is a quite scarce asset, because you know that wind is able to capture the prices over the whole day, capturing also high prices in some parts of the day. And the advantage of the minority part of this basket of assets that is solar, is that the PPAs are already there, and are very good PPAs, because they were negotiated in the, I mean, two years ago, roughly speaking, in the high peak of the crisis, energy crisis in Spain, when there was Spain and Europe, when there was a strong appetite to negotiate PPAs. So, very good asset, with very good PPAs, with very good mix of wind, solar, And, I mean, for an investor, it's a real attractive asset. So I'm probably, in the case of Outposts, I think that we are going to be able to monetize or to cash in. Probably we are going to be there before the end of the year. In the case of these assets, we will close with a high probability the transaction this year, in 2025. And I prefer to be proud because the authorization competition and so on, we need in terms of permits, probably the cash-in could enter in 2026. But in any case, the expectations are very positive. Thank you.

Muchas gracias.

Thank you very much, Ignacio. Our next question comes from Irene. Please, Irene, go ahead with your question.

Thank you very much. Just one quick one for me. I understand some of your disposal proceeds are from selling tax credits. I'm not sure I understand myself how that works. How would it influence, for example, the future economics of those projects, if you can perhaps elaborate a little bit? Thank you.

Thank you, Irene. I mean, you know that all the assets we have in the U.S., they are covered by the IRA, not only the current one, but also the rest of the assets we are going to develop because we have in a safe harbor three gigawatts more in the country. So that means that we shape, let me say, much more in terms of the support of the IRA. And in the case of how it works, there are two ways to... monetize this is support the ptc and the itc the itc is some kind of of uh upfront cash coming from the tax administration that is uh i mean in the range of 30 40 percent of the capex even 50 in some places because it depends of uh if there are industrial cleaning areas and so on the support the local support is higher And in some cases, you have what is called the PTC. The PTC is some kind of a continuous payment for 10 years in your operation. But you could monetize 50% in upfront payment of this PTC. And in the case of Outpost, this 185 million euros, something like that, that appear. broadly speaking, are the part fitting with this upfront payment coming from this PTC. So it's quite complex, Irene, because some projects, they have the ITC, some others, the PTC, take the message that all of them, they are going to have official support in the range 30 to 50%. And if you need more granularity about these projects, of course, be sure that the team of IR will be ready to give you more clarity about that. Thank you.

Thank you, Erin. Our next question comes from Matt Loftin at J.P. Morgan. Please, Matt, go ahead with your question.

First, I wondered if you could add some thoughts and color on what you're seeing in the market on light-heavy spreads and the cost effectively of the feedstock basket in the refining business. Just thinking about that in the context of the moving parts in the market at the moment, it looks like some debits and credits, more barrels coming from the Middle East. On the other hand, some of the constraints around vendors, etc. that you talked about earlier and what all that means for the outlook on the premium over the benchmark. And then secondly, John, I wanted to just pick up on the earlier points that you made around CapEx. You talked about the low end of the range on the four-year plan. I just wonder whether there's a case and a need to be more ambitious on medium-term CapEx reduction below that range rather than the low end in the context of moderated upstream prices now versus early 2024. areas of the low carbon value chain and the economics of that being still more challenging and probably greater geopolitical uncertainty in the macro backdrop than was the case when you did the CMD 18 months ago. Appreciate the thoughts there. Thank you.

Thank you, Matt. I mean, going to the history of this third quarter and one of the factors impacting in a negative way in the in the premium of the refining margin that, I mean, it was pretty good, $0.7 per barrel, but we expect a bit more, was the scarcity of heavy crude oil in the Atlantic Basin. And the main factor was the reduction of the exports of Maya crude oil from Mexico in this summer. the potential, let me say, reasons or problems behind this decision, they were left behind. And this quarter, we are seeing more Maya in the market. So probably we are going to see higher discounts for the heavy crude oil. On top of that, I mean, the rest of the crude oil, Colombia, Canada, what comes from the Middle East, Basra and so on, they are entering in our system. Also, small amounts coming from Italy, Albania, and so on. So my perception is that this component of a refining diet is going to be better in the fourth quarter than in the third one. In the case of Venezuela, it's clear because you perfectly know that the constraints in the market are higher. But what we could see could be a more favorable environment, this fourth quarter, comparing with the third one, mainly because the Maya crude oil could be the driver of change. I mean, we will talk about the capital market today, about the CapEx report and so on. But again, we are comfortable with the figures I mentioned before. If things are worse, there are plenty of room to reduce this figure. In the case of seeing low oil and gas prices, that is not the case today, and we are not seeing that. We have the unconventional buffer, as you know, so the EMP could reduce the force, but we are not now there. We don't want now to reduce the force. because we are seeing good prices and good returns. You see that we have been able, not because a capex reduction mindset, but because we prefer to be proud and guaranteeing the returns in the carbonization of industrial assets. We have reduced the hydrogen ambition in almost two-thirds by 2030, comparing with the figures we had two years ago in our ambition. We are also proud about the future investments in renewable fuels in Spain. We are analyzing a third project, and probably that is going to be done. But we want to guarantee that this project is going to have returns, and we are analyzing this option. You see that we are also being very proud in the development of guaranteeing the returns of the renewable power generation. So my point is, that situation is different. We have reduced our capex in a significant way because we want to guarantee returns. And in case of needed, we will be ready to do it. But today, we are comfortable in these figures because, as I mentioned before, the distribution to our shareholders we commit is guaranteed under this scenario. The balance sheet is strong. and we could modulate the CAPEX in this effort. Thank you, Matt.

Thank you.

Thank you very much, Matt. Our next question comes from at Barclays. Please, Nas, go ahead with your question.

Thank you. Two questions from me, if that's OK. The first one is on data center in Spain. I understand you also do some data center things as part of your business. I wonder if you can add a bit of color on that. What's your view over there on the sector? Then the second question is just to clarify on the $2 billion divestment target for the year. I understand you mentioned earlier there's no appetite to divest any upstream asset, but can you get to the $2 billion by just divesting the remaining U.S. and Spanish asset, please, the renewable ones? Thank you.

Thank you, Nash. I mean, first, I'm not an expert in data centers, my first disclaimer. Secondly, if I have to imagine a place in Europe where you need to have data centers, computation capacity, and so on, and energy is an important driver, and renewable energy is an important driver. It seems to me that Spain is the right place to develop this data center. So from this point of view, I'm quite positive about the possibility to develop this data center. We are not a data center operator, so we are not going to invest in this business. What we are doing is because there is an appetite from investors to be in data centers in Spain, we have an asset that is SCATRON, a CCGT with 800 megawatts of power in operation. And because the current regulation, we could use the connection permits of this asset to promote around this asset an equivalent figure, in our case, 800 megawatts of wind hybridization with this CCGT plant. For that reason, we acquired an early pipeline of 800 megawatts of wind assets in Aragon, in this region, that is going to be developed something between 28, 29, So that means that we have the unique opportunity to develop wind assets in Spain, that, as I mentioned before, is a very valuable production. And we could use half of this figure, 400 megawatts, to feed with renewable power, combining with the CCGT a potential investor in the area. And what we have is we have water in the area, because you know that these kind of CCGTs, they need the refrigeration cooling processes. We have land. We have a good connection fiber in IT terms in this area. So what we are going is to sell the right to develop a data center in the area to a potential promoter. And on top of that, we are going to provide this data center with PPAs, with cell consumption, combining the wind and the gas so we are seeing as an opportunity i mean we are going to monetize an option we have and there is what we are seeing is that there are a lot of people interested in these assets so it seems to me that today are a lot of people ready or interested in investing in spain in this business but again nash i mean if you need more clarity Of course, we have our team at your service. My comment related to your question. I mean, when we go to the figures, as you could see in the first month, we got the figure of 1.3 billion euros by September. I mean, I'm taking 1 billion of divestments. plus the 0.3 additional coming from, I think that 100 million, broadly speaking, from GAIO project. GAIO project is the first rotation we did in Spain at the beginning of the year, but because we retained the 51%, it's not in our accounting as divestments, but you can see the cash entering in our accounting. And on top of that, we have the 200 million dollars coming from the PTC I mentioned before of Outpost. All in all, 1.3 by September. We expect 300 million euros more coming from the rotation of the US, I mentioned before, Outpost. And the cash-in is going to be, we have very high probability before the end of the year. uh all in all 1.6 billion that is going to be enough to reach this 3.5 billion net capex and as i mentioned before what could be out in cash in terms of this year 2025 is the rotation of these 700 megawatts in spain that because the permit and authorization process and so on could be probably closed but not monetized before before the end of the year in any case because we have been more prevalent in gross capex terms, we are going to be below this 3.5, that is my ambition, before this 3.5 billion euros of net capex by the end of this year.

Thank you, Nash. Thank you very much, very clear. Thanks for the clarification. Thank you, Nash.

Thank you, Nash. Our next question comes from Enric Patricot at UBS. Please, Enric, go ahead with your question.

Hello everyone. I have two questions please. The first one, I want to come back to the comments you made on the customer business. You mentioned on track to reach the 1.4 billion EBITDA this year and maybe close to 1.5 in 2026, but actually you're already very close to 1.5 over the past 12 months. I was wondering if you're just being a bit conservative on the outlook for 2026 or if there was some exceptional performance over the past 12 months and in the third quarter in particular, that will explain why we should expect a slower growth in 2026. And then secondly, on the Puerto Lano Advanced Power Fuels plant, which we now plan to start up in the second quarter and have the first contribution in the second half of 2026. If I'm not mistaken, you were previously flagging startup in early 2026. I'm wondering why it's taking a little bit longer and if there's a risk for the delay of this project. Thank you.

Merci, Henri. Going to your first question, I mean, 1.4 billion euros of EBITDA, that is going to be this year. Cash flow from operations will be at around 1.2 billion euros, roughly speaking, this year. I mean, I think that I'm not conservative. I'm ambitious for 2026 when I say that 1.5 billion euros of EBITDA is our target. Why I'm, let me say, ambitious, because the target we are achieving now for customers in the retail and power business, in terms of EBITDA, are the targets we have for 2027. So we have anticipated to use the delivery of the strategic plan. Is this performance exceptional? I mean, I don't think so. I think that this structure, I mean, if you take what has happened with our customer business, Over the last 10 years, from 2016, 2017, we have doubled the EBITDA figures of this business. And we are developing this effort year after year. That is not because ups and downs in the market, because we have had ups and downs over these 10 years. It's structural. And the reason is first, new businesses. I mean, an EBITDA that was not there and now is there and is growing. when I knew businesses mainly, I could talk about power and gas. I talk about lubricants that you know that now we have an international footprint. We could talk about the cars. I mean, this kind of business developed around the energy efficiency that is also new. On top of that, I mean, we have almost 10 million digital users of our app wireless that is a unique position not only the energy sector in spain in the retail leadership in spain so we are becoming a re leading retailer in the country with more than 3.5 almost 4 000 sales points with 24 million customers including Spain and Portugal, without digital leadership. So it's structural. We are growing this business, of course. We will have better and worse situation of the market. But let me say that with 1.5 billion euros of EBITDA, I'm feeling quite comfortable. And in this sense, I think that is ambitious. I mean, if you take... the EBITDA of this business and taking into account the investment level in this business that, I mean, it's also growing because we are growing in the gas and power business and so on, that you could pay almost 60, 70%, the two-thirds of the cash dividend of Repsol could be paid by the free cash flow of this customer business that is always hidden because we are in all forums always talking about rent price heavy half price refunding margin but the reality of this business is there the retrofitting of puerto llano i mean it's going to be in operation in the at the end of the first quarter so uh there are some uh uh no there is i mean no material delay perhaps some weeks of the of commissioning the project but that is not let me say material in a complex industrial project like that. It is on budget. It's going to be finished at the end of the first quarter. And in the second quarter of 2026, it's going to be fully operational. Thank you. Merci, Henri.

Thank you. Thank you very much, Henri. Our next question comes from Paul Redman at BNP Paribas. Please, Paul, go ahead with your question.

Hi, yeah, thank you very much for your time. Two, please. The first one is just on the 3.5 billion euros of capex you're talking about. I think it's the next year. How much divestment is included in that? And will the cash in from the Spanish sale be included in next year's or this year's divestment target? And then secondly, you mentioned earlier, Josh and John, about a possible one euro at five dividend for next year. I see that's in between your €1.3 and €1.1 dividend guidance or range for 2026. I just want to understand how you get to that €1.05, what we need to think about. Thank you.

Thank you, Paul. I mean, going to your first question, that is net capex. The gross capex is going to be higher. What we are seeing, clearly speaking, about rotation today are mainly these 700 megawatts of Spanish assets I mentioned before that is going to be cashed in in 2026, plus probably in the U.S. that is going to be partially in operation at the end of this year, 2025, but we are not yet in the process of rotation and so on because, you know, we have to... to prove, let me say, the operation of the asset. So that probably is going to be in 2026. And I don't have in mind any other disposal now, but you know that we always are analyzing our portfolio in a dynamic way. But you are right. This figure is net. Gross is going to be higher. And we will give you more clarity about that in the capital market day of March. I'm going to the dividend. As I mentioned before, and I'm sorry for not having the possibility to be more precise, but you are going to understand why. This year, the dividend has been 97.5 cents. What we have in the strategic plan is that the total amount distributed in cash is going to increase in a 3%. So there is a first effect of a 3% growing of this figure. But on top of that, the absolute amount is growing, but we are going to have less shares in 2026 than the shares we had at the beginning of this year. Why? Because we are going to redeem, and here is where I can't be more precise because We are still in the process of acquiring the shares in the share buyback process. But probably, I mean, we take the prices and so on. We are going to cancel a figure that is going to be close. And again, disclaimer, it's going to be close because this math effect to a 4.1%. When I take the 3% plus the 4.1%, we arrive to a figure that is going to be close to 1.05. We will have a full clarity about this figure at the end of this year, knowing exactly the number of shares redeemed, but we are going to deliver and we are going to do what we commit in our strategic plan in terms of distribution. Again, that is an important target and what we said on that is going to be delivered. Thank you, Paul.

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