Iberdrola, S.A. (IBE) Earnings Call Transcript & Summary

[Foreign Language] Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2023 fiscal year results presentation. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period given by the top executive team that usually is with us. Mr. Ignacio Galan, Executive Chairman; Mr. Armando Martinez, CEO; and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web. So please ask your question only through our web page, www.iberdrola.com. As well and given that we will be holding our Capital Markets Day in London on March 21, any question you may have related to the medium and long term, please save them for that day. In this way, we will be able to adequately answer today the question related to the legacy of the 2023 results and also the ones about the expectation for 2024 and not take up too much of your valuable time. We know that many of you also have the results of other utilities today. Thank you very much for this. Finally, we expect today's event to last no more than 1 hour or 1 hour and quarter, hoping that this presentation will be useful and informative for all of you. Now without further ado, I would like to give the floor to Mr. Ignacio Galan. Thank you very much again. Please, Mr. Galan.

Thank you, Ignacio. Good morning, everyone, and thank you very much for joining the results presentation. In 2023, net profit increased by 11% to EUR 4,803 million, driven by investment of EUR 11,382 million with an increase of 6%. This new record of investments reflect a huge activity carried out by the group in 2023, with EUR 18,100 million of purchases to several thousands of suppliers, which already employ close to 0.5 million people worldwide, also with 4,700 new hires to reach a workforce of almost 42,300 employees. And a tax contribution of EUR 9.3 billion globally, up 24%, with EUR 3.5 billion only in Spain after an increase of 35% year-on-year. EBITDA increased 9% to EUR 14,417 million, even after EUR 117 million recorded in last quarter for future efficiencies. Without that one, the increase will be higher. This growth in operating result was driven by 8% increase in networks asset base to reach EUR 42.2 billion and 3,250 megawatts of renewable capacity installed during the year, reaching 42,200 megawatts worldwide. In 2023, we completed the installation of turbines at Saint-Brieuc offshore wind farm in France with [ 100 ] megawatts, and we started the production of Vineyard Wind 1, the first largest scale offshore project in U.S., I think today is something like 62 megawatts already in operation. On top of that, we continue reinforcing our portfolio route to market. We led the PPA market in Europe in 2023. We closed 1,000 megawatts of new -- megawatts, and we increased our retail market share in Iberia. In addition, in just 3 months, we have completed our 3-year asset rotation and partnership plan a few days ago. We received the final regulatory approval for the sale of 55% of our business in Mexico, and we expect to collect around $6 million in February 26. Also, our co-investment alliance with Tier 1 partners like Norges Bank, Masdar and GIC, allowing us to maximize investment opportunities. And continue improving at same time our financial strength. In 2023, our operating cash flow increased by 8% to EUR 11.1 billion, and the FFO to adjusted net debt ratio reached 25.8%, including the Mexico transaction. So as you can see, in 2023, we have maintained one more year, our long-track record of execution, allowing us to reach or exceed our outlook once again. As mentioned, investment grew by 6% to set the new record of EUR 11,382 million. Around half of total investments were located to networks after an 11% increase and other half to renewables. Our co-investment partner contributed to -- with EUR 1.1 billion to these investment figures. By geography, the United States was once again our first destination with more than EUR 3 billion, followed by Spain and U.K. with EUR 2.2 billion, 53% up versus 2022. We also invested EUR 1.8 billion in Latin America, mainly in Brazil, and EUR 2 billion in other countries like Germany, Italy, France, Portugal, Australia, Greece and Poland, among others. Driven by investment, EBITDA increased 9% to EUR 14,417 million after the EUR 117 million for future efficiency registered in our fourth quarter as mentioned earlier, and the CFO is going to explain more detail. Network results increased, thanks to new rate cases, used mainly in New York, in U.K., RIIO-ED2, and in Brazil, where they have tariff reviews in 3 of our 4 -- of our 5 distribution companies. Results from production and customers reflect an improvement of market conditions in the U.K. where Scottish Power recorded a retail deficit accumulated over the last years and the normalization of production in Spain after a very low renewable and nuclear output in 2022, which has, as you remember, obliged to purchase energy at very high prices to supply to our customers. Our networks asset base reached EUR 42,210 million, up 8%, driven by growth in United States, U.K. and Brazil. Avangrid contributed 1/3 of our total RAB, EUR 13 billion, with a rate case secured for around 80% of our asset base included our New York utilities would represent 60% until April 2026 and Central Maine Power until June 2025. In the United Kingdom, [indiscernible] has increased by 8% to EUR 10.3 billion, mainly driven by RIIO-ED2 and RIIO-T2. And we are already starting the approval process of RIIO-T3 with investment that could exceed GBP 5 billion between '26 and '31 on top of the EUR 1.1 billion of the Eastern Link interconnection project, which was already approved. In Brazil, our total asset base reached EUR 9.5 billion, an 80% increase year-on-year, and we have continued progressing our co-investment alliance with GIC in transmission. Finally, regulatory charges were flat at EUR 9.3 billion, affected by the existing regulatory cap investment in the country. However, in the last weeks in Spain, we have seen a few positive signs. The government has said it may reconsider this limit and the regulator has started to review the rate of return, which today is, as you know, at low level compared to other countries for the next regulatory period. In Renewables, we added 3,250 megawatts of capacity that will continue balance sheet our generation supply position. This asset implied total investment of around EUR 5 billion in the last year with 60% corresponding to offshore wind and hydroelectric. [Audio Gap] And the first group of turbines, 62 megawatt of Vineyard Wind 1 started production in the last days of 2023. On top of that, 700 megawatts correspond to onshore wind farms in Brazil, Spain and other European countries. And 1,150 to solar PV in the United States, Spain, Portugal and Australia. And the rest is hydroelectric capacity in Brazil and Portugal, mostly pumping storage. In Iberia, we increased our co-investment alliance with Norges Bank to more than EUR 2 billion and finished the installation of Alto Tamega in Portugal, with a third dam of the Tamega Hydroelectric Complex with the last 160 megawatt additional capacity to reach 1,200 altogether. On top of that, we have reached 45,000 charging points, 6,000 of them public, with further acceleration expected through our EUR 1 billion partnership with BP, especially high -- ultra-high rapid speed charges. In the United States, the Vineyard Wind 1 offshore wind farm has achieved first power to the grid. And in Europe, we are also progressing in our second offshore wind farm in Germany, Baltic Eagle, with 476 megawatts, which will be fully operating in the fourth quarter of this year, and we have installed as well 91 megawatts in Poland and Greece. And finally, in Australia, we have commissioned 245 megawatts of solar PV, and we are progressing on 145 megawatts of onshore wind. Moving to routes to market. In 2023, we continued reinforcing our integrated profile, providing us with high visibility for the coming years. We lead the European PPA market with almost 1,000 new megawatts signed, 7% of the total in the European Union, reaching alliance with top-tier customers like Amazon, Vodafone and Meta. We are significantly expanding the demand of clean energy. And we continue reinforcing our position in retail market. In Spain, our market increased to 27.3%. Today, we have 8.3 million customers in Iberia, with an average around 3 contracts per customer. Also in the U.K., where the retail market is still strong, conditioned by the tariff cap, we have continued improving our customer service, reaching the first position among all suppliers according to Citizen Advice. This places us in the best situation to compete as soon as the market reactivates. As of today, we have around 3 million customers in the U.K. with 2.5 contracts per customer. Last week, we received the final regulatory approval for the sale of the 55% of our business activities in Mexico to the equity fund Mexico Infrastructure Partners, and we expect to collect around $6 million of the transaction on the 26th of February. As you know, the business we have divested include all combined cycle gas generation plant that currently supply electricity to CFE. This transaction also ends previous litigation in all power plants that were stopped for regulatory administrative reason are now back in operation. As a result, we will maintain the remaining 45% of our business, continuing to supply electricity mostly produced renewable to our industrial customers. We also keep more than 6,000 megawatts of renewable pipeline in over 30 projects in 14 states, with 2,000 on trucks for the next few years. This will allow us to continue growing and increasing -- creating wealth and jobs in a core country for us after more than 20 years of presence in Mexico. Yesterday, Avangrid and Neoenergia presented their full year result, showing a strong performance in both cases. Avangrid registered record investment of more than $3 billion. EBITDA increased 10% to $2.7 billion, and adjusted net profit reached $808 million. Driven by new rate cases, they will drive $9 billion of total CapEx until 2026, including transmission and distribution. In renewables, as I mentioned, our Vineyard Wind 1 offshore wind farm achieved first power export and the company has 1,000 megawatt of onshore wind and solar under construction. Also, the company's first repowering project of around 100 megawatts is already underway. In the case of Neoenergia, investment reached close to BRL 9 billion. EBITDA increased by 7% to BRL 12,359 million. And net profit reached close to BRL 4.5 billion. In 2023, new tariff reviews were approved, covering 75% of Neoenergia distribution asset base, driving several billion reais in investment over the next 5 years. In transmission, Neoenergia has continued progressing in the construction of the project already awarded, which will imply more than BRL 10 billion of investment. The co-investment alliance signed with GIC will maximize Neoenergia investment capabilities and [ pressures ] financial strength. Finally, in renewables, over the last 12 months, Neoenergia has put in service 700 new megawatts and closed an asset swap with Eletrobras related to hydro facilities, as you know. At the group level, all this activity has driven an 8% increase in operating cash flow to EUR 11.1 billion, allowing us to maintain our adjusted net debt below EUR 48 billion. This figure will be reduced in the coming days of -- to around EUR 42 billion to EUR 42.5 billion once the cash from the Mexico transaction is collected. As a result, our financial ratios remained strong. FFO to adjusted net debt ratio reached 23.2% and will increase to 25.8% considering the Mexico transaction. This will mean an improvement of 250 basis points compared to 2022 figures. This set of result will allow to the Board of Directors to propose to the annual shareholders' meeting a total shareholder remuneration of EUR 0.55 per share, up 10.8%. Once approved, a supplementary dividend of EUR 0.348 per share which will be paid in July on top of the EUR 0.202 per share already paid in January. Additionally, we plan to maintain the engagement dividend related to our Annual General Meeting, as you know, last year amount EUR 0.005 per share. Following our commitment with social dividend, this huge increase in our business activities has driven positive environmental, social and governance impact for all our stakeholders. Our CO2 emission reached only 55 grams per kilowatt hour in Europe, 80% below our peers. We made 4,700 new hires in 2023, reaching a total workforce of almost 22,300. And our purchase reached EUR 18.1 billion to thousands of suppliers worldwide. We deployed more than 0.5 million people. We also invested EUR 385 million in research and development, becoming the private utility that invests most in innovation according to European Commission. And our global tax contribution reached EUR 9.3 billion, 24% more than last year. Out of this, EUR 3.5 billion corresponds to Spain after 35% increase year-on-year. Just in detail, in 2023, levies in Spain, where as higher as salaries, all operating and maintenance expenses, external services and financial costs combined. Thanks to all this social contribution in 2023, we received several recognition. To our leadership in ESG by the Foreign Policy Association in the United States by Standard and Poor's, we include Iberdrola in the top 5% of the companies with the best ESG score worldwide, also to our corporate governance by World Finance or to our climate action like A rating awarded by the Carbon Disclosure Project. So now I will hand over to Pepe Sainz to complete the presentation.

Thank you, Chairman. Good morning to everybody. As the Chairman has explained, EBITDA was 9% up to EUR 14.4 billion and reported net profit grew 10.7% to EUR 4.8 billion, including in Q4, 2 one-offs for EUR 141 million net of taxes, one related to efficiency plans as the Chairman has commented, EUR 90 million after taxes and the other to a provision in the U.K., EUR 51 million after taxes, that will -- that we are expecting to be recovered in '24. Net profit would have grown 14%, excluding the one-offs in Q4 that I have just mentioned. FX evolution had a negative effect on our EBITDA results, but it's recovered at the net profit. The pound and the dollar depreciated against the euro by an average of 2% and 2.6% each one, while the real slightly appreciated 0.6%. Revenues decreased $4.6 billion or 8.6% to EUR 49.3 billion, mainly due to the energy production and clients in Spain, but procurements fell more, 23% or EUR 7.7 billion to EUR 26 billion. As in '22, Iberdrola had to buy electricity due to renewables and nuclear shortfall in Spain at very high prices. In '23, the situation has been reverted due to a normalized production and lower prices. As a consequence, gross margin rose by 15% to EUR 23.3 billion. Reported net operating expenses increased 17.8% to EUR 6.1 billion, but excluding extraordinaries and non-reconciliation -- sorry, and reconciliation impacts in the U.S., net operating expenses increased 8.2%. Reported net personnel expenses grew 17.6%, but 7.4% excluding the already mentioned efficiency plan of EUR 117 million in Q4, excluding also reconciliation impacts in the U.S. and other minor extraordinaries. Reported external services increased 11.1% and 4.8%, excluding the reconciliation impacts in the U.S. and other negative extraordinaries mainly in the U.S. where we have the cost of the cancellation of the offshore projects in the U.K. and in Spain. Levies, as the Chairman has pointed out, grew 56% or EUR 986 million to EUR 2,748 million, of which EUR 847 million are due to Spain. As a consequence, levies over net operating expenses ratio in Spain reached 123%, meaning that we are paying in Spain, levies more than the total -- than our total cost of net operating expenses, while in the rest of the group, levies only account for 22% of our net operating expenses. As you can see in the slide, Spanish levies doubled in '23, representing 86% of total group increase. Let me highlight the most relevant ones, the social bonus, the EUR 67 clawback, the 1.2% revenue tax, the nuclear tax, the hydro cannon, the local land use tax, the Ecotax, the nuclear waste tax, and other 37 taxes. Clawback and revenue tax are imposed as temporary levies, and we expect that will disappear. Actually, clawback is actually gone in '24, but thanks to the European legislation, and we expect that the 1.2% revenue tax will also disappear or fall significantly. Nevertheless, excluding these 2 taxes, this will -- the rest of taxes will continue to be in a disproportionate amount that reaches 90% of our net operating expenses, much higher than in other geographies, as commented in the previous slide. Analyzing the results of the different businesses and starting by networks, its EBITDA reached EUR 6,011 million, 7.9% down, but grew 9% on a recurring basis, excluding EUR 1 billion of one-offs with negative impact in '23 mainly in Brazil and the U.S., as I will explain now. In Spain, EBITDA fell 3.4% to EUR 1,553 million affected by the efficiency plan in Q4. Operating performance in the business was in line with '22. In the U.K., EBITDA was up 15% to GBP 1,072 million, thanks to the ED2 new regulation from April onwards and higher asset base, especially in transmission. In Brazil, EBITDA fell 6.2% to BRL 9,867 million due to lower contribution from the transmission business that includes 2 one-offs for a total of BRL 2.4 billion. The first one related to GIC deal, minus BRL 290 million, and the other related to the overrun costs in transmissions due to COVID BRL 2.1 billion that we have already claimed to ANEEL, expecting to recover them. The negative impacts in transmission are partially compensated by an improvement in distribution as the tariff reviews had positive impact, around BRL 700 million positive. Finally, in the U.S., EBITDA was 24% down to USD 1.5 billion, improving versus 40% down as of September after including in Q4, $150 million of recovery following the New York rate case approval as its effects are recognized from May 1, '23. Year-on-year IFRS evolution is still affected by the negative impact of $550 million positive one-off booked in the second quarter of '22 linked to the recognition in IFRS of regulatory assets and $87 million from pension provisions, both accounted in IFRS, but not in U.S. GAAP. U.S. GAAP EBITDA grew 12.6% to $1,950 million, also including the recovery of USD 195 million in Q4 from the New York rate case approval. Energy production and customer business EBITDA grew 28% to EUR 8,600 million. Beginning in Mexico, after the recent transaction, EBITDA of the retained assets was $412 million with higher results from thermal assets despite lower contribution from renewables, resulting in $89 million more than in '22, while EBITDA of the disposed assets was $437 million, with lower contribution from contracted plants with CFE due to lower availability. Mexico total EBITDA fell 5.6% to $849 million. In the U.K., EBITDA increased 155% to GBP 1,815 million, thanks to the collection of GBP 341 million of '22 deficit in a context of margin normalization this year in our retail business. Higher offshore results more than compensated lower onshore results due to wind load factor and the windfall tax. In Spain, EBITDA was EUR 4,277 million, 24% up driven by production reaching normal levels with 6 terawatt hours higher hydro production, compensating minus 1 terawatt hour of lower wind production and also higher sales as the Chairman has mentioned, due to almost 2 percentage points increase in market share to 27.3%. Also contributing to these results were energy purchases at lower prices than last year. Positives on the operating performance evolution has been partially compensated by more than a double increase in levies as explained before, and higher net operating expenses due to the Q4 efficiency plan also mentioned previously. In the U.S., EBITDA reached $741 million, flat excluding the offshore break-up costs that drove EBITDA down 2.4%. In Brazil, EBITDA fell 13.9% to BRL 1,880 million due to lower contribution from thermal business as last year was exceptionally strong, partially offset by contribution from new renewable capacity in operation around 500 new megawatts in Brazil. Finally, in the rest of the world, EBITDA fell 1.7% to EUR 420 million with 1 terawatt hour higher production due to new capacity in operation, that is more than offset by higher net operating expenses linked to the business expansion. EBIT was up 12% to EUR 9 billion. D&A plus provisions grew 3.8% to EUR 5.4 billion, mainly due to the business growth with higher asset base and activity and bad debt evolution, due to increased customer billing. There is also, as I have mentioned, some nonrecurring provisions in Q4, including EUR 67 million in the U.K. linked to the regulator code of practice that we expect to recover in '24. Net financial expenses rose EUR 349 million to EUR 2,187 million. Debt-related costs grew EUR 477 million, EUR 149 million due to a higher average net debt and EUR 303 million due to higher cost of debt, 70 basis points up to 4.97% that nevertheless is below the 5.05% peak at June. Excluding Brazil, the cost of debt was 3.76%. Cost of debt is in line with the one expected in our Capital Markets Day of '22. The higher financial expenses have been partially offset by EUR 128 million positive nondebt-related results mainly linked to FX hedges and capitalized interest. Our reported credit metrics remained solid. 12 months FFO was flat at EUR 11.1 billion and up 8% if we exclude the hydro canon payment in '22. Adjusted net debt was EUR 47.8 billion, and pro forma net debt, including the Mexico proceeds, decreased to a range of EUR 42 million to EUR 42.5 billion due to some cash adjustment pending, but clearly below the December '22 debt of EUR 43.7 billion. Reported FFO/adjusted net debt stands at 23.2%, maintaining the September levels. And pro forma ratio, including Mexico proceeds grew to 25.8%. Our adjusted net debt to EBITDA is 3.3x, 3.03x pro forma including the Mexico proceeds. And our adjusted leverage ratio was 44% and decreased to 40.8% pro forma, including the Mexico transaction. Our diversified portfolio provides flexibility to target different markets and the right timing, achieving very favorable conditions. In '23, we have signed deals for EUR 14.7 billion, 91% ESG transactions reaffirming Iberdrola's commitment. Iberdrola continues to be the world's leading private group in green bonds issued that provide high quality and strong ESG investor demand, driving lower spread than other bonds. Liquidity is at 27 months or 21 months at risk. Reported net profit grew 10.7% to EUR 4,803 million. But if we add the EUR 140 million, as I mentioned, the growth would have been 14%. Equity method results increased EUR 143 million, thanks to Brazil renewable asset swap that offsets the already mentioned Brazilian transmission one-off at EBITDA level. Income tax is negatively affected by the positive one-off accounted in '22 in Brazil and by the negative one-off in Mexico to be reversed in '24. As you can see in the slide, stripping out the effect from the asset rotation from our Mexican transaction, EUR 19 million negative, mainly linked to deferred taxes, partially compensated by lower amortization, and the Brazil EUR 91 million positive, mainly at the equity level as [ advanced ] before, net income reached EUR 4,809 million, 10.8% more in line with the reported net profit and achieving double-digit guidance, reaffirming Iberdrola's high-quality results underpinned by the fourth quarter EUR 141 million of negative one-offs that will help '24 and subsequent year-end results. Thank you very much. And now the Chairman will conclude the presentation.

Thank you very much, Pepe. This result places Iberdrola in the best position to accelerate growth in the coming years. In 2024, we expect 5% to 7% increase in net profit, including (sic) [ excluding ] capital gains from asset rotation, clearly exceeding EUR 5 billion for the first time in the 120 years company history. With dividend growing in line with results, we will reach a new record of investment of EUR 12 billion, mostly in networks with focus in United States driven mainly by the new rate cases of New York and Maine, in the U.K. through the RIIO-T2 and ED2 and in Brazil, thanks to the new rate cases in Neoenergia. Renewables will continue growing, thanks to the contribution of offshore wind with a 600 megawatt installed in the 2023 in Saint-Brieuc, plus the additional result from our other offshore wind farm construction. On top of this, we will commission 2,000 megawatts of new onshore capacity. In addition, we have already sold 100% of our energy for 2024 with prices secured, and we expect to benefit from lower financial expenses due to the positive impact of Mexico transaction and the co-investment with our partners in other geographies. All this, the result of an integrated business model that maximizes growth and predictability, with a recognized track record of optimal execution. In the coming years, Networks will continue representing 45% to 50% of our EBITDA, 10 points above our European peers, focused in high rating countries with a stable framework. We have already closed rate cases for almost 100% of our asset base until 2025. This model allows us to secure growth and predictable margin in the Networks business as we have done in the last 3 years when our EBITDA increased by 8% on average. And we expect the growth trends will increase in the future, driven by the huge investment needs transmission and distribution in all our geographies following the analysis recommendation of the COP 28, the European Union, the European Commission or the International Energy Agency, among others. In Production and Customers, we'll continue balancing our generation and supply position with optimal means to routes to market. We have already 100% sold to our output for 2024 and [indiscernible] 85% for 2025 with stable margins, thanks to our portfolio, which does not depend on the volatility of fossil fuels. On top of that, we have around 5,000 megawatts of storage capacity with 20-hour duration of Iberia that means 100 million kilowatt hours of storage capacity, providing us with 100 million -- this megawatt -- which will become more and more relevant in the market with higher price volatility driven by renewable penetration. Already in 2023 this storage capacity allow us to produce 5,000 gigawatt hours, 58% more than in 2022. And we have 1,000 megawatt of more than 20 hours of additional pump storage capacity under construction. We also expect continued benefiting for our global PPA portfolio of 12 million retail customers to which we have provided the best service through clean energy and other value product at competitive prices. On top of this, our diversified geographical footprint in high rating countries will allow us to minimize regulatory risk. We are convinced that all these competitive advantage make Iberdrola different company in the utility universe and that the upcoming changes in the industry driven by electrification and the penetration of renewables. That will maximize our opportunities to invest and create more value for shareholders and the whole society in the coming years. As you know, we will hold our Capital Market Day in London on March 21 with more details of our outlook. I hope you see all of you there. Thank you very much. Now we will answer any questions you may have. Thank you. [Audio Gap]

The following financial professionals have asked the question that I will now put to the Senior Manager present in this event. Gonzalo Sanchez-Bordona, UBS; Peter Bisztyga, Bank of America; Daniel Rodriguez, Bestinver; Philippe Ourpatian, ODDO; Manuel Palomo, Exane BNP; Tomas Raiz, CaixaBank; Fernando Lafuente, Alantra; Rob Pulleyn, Morgan Stanley; Javier Garrido, J. P. Morgan; Ahmed Farman, Jefferies; Alberto Gandolfi, Goldman Sachs; James Brand, Deutsche Bank; Fernando Garcia, Royal Bank of Canada; Ahmed Farman, Jefferies; Jorge Guimaraes, JB Capital Markets; Javier Suarez, Mediobanca; and finally, Marc Ip Tat Kuen from Berenberg. The first question is related to the net income 2023 and the main drivers that has driven to these results.

So well, I think the first one is our increase is 11% due to the higher investment in the [indiscernible] renewables. I think this 11% is even after EUR 170 million of provision for the future efficiencies where that means there should be instead of 11% should be as Pepe was mentioned around 14%. So I think we have higher renewable production. We recovered the hydro resources with resulting with higher production. And I think something I mentioned is the pumping storage volume with that is about volatility. I think it's the average production tradition in Spain hours around 12 terawatt hours. And I think this year only in [indiscernible] will produce 5 terawatt hours. So what that means with dry or not dry year, we are able to produce and generate more and more minimizing the volatility that is already with these new times, thanks to the increase of renewables in the mix is generating. So I think it's in terms of the energy purchase as well we diminish -- we diminish the buying of electricity. Then in 2022 we bought on the range of EUR 200 million. Also, the retail deficits in the UK, I think it's almost EUR 300 million, but we had already recovered during the year. So all these are making that one. I think more production, lower purchase, recovery of the deficit of UK and more contribution to our networks as a consequence of the increase of our investment in these regulated activities which as you know is amount close to 50% of our total EBITDA in this moment.

Next question is related to Mexico. Could you give us an indication of how much the cash in after tax of the asset rotation in Mexico should be? And how much certain are you on receiving the funds on February 26?

So I think it's -- we are expecting to receive this on the 26th of February, as I mentioned in the presentation. And I think it's -- and that is consequence that the last approval would remind was the competition authorities, which is [indiscernible]. We got the approval a few days ago. We are expecting that when received this amount, the Board of Directors of Mexico -- our subsidiary in Mexico will meet and I think we will know already the conclusion about the terms of the capital gain they can already achieve. And I think is, in any case, I think all the details about that one will be already -- we will provide you as soon as we have all the detailed one that is finally cash. But certain, before the 21st of March, you will have all the detail and we [indiscernible] all the details by the 21st of March in the Capital Market Day.

Next question related to the 2024 guidance in net income. Can you please give us a bridge from full year '23 to full year '24 net income? What are the main variables that could lead this growth to be in the higher part of the range, plus 7%?

So I think the first thing in 2024, I think the first one is the new investment. I think we are going to invest EUR 12 billion, which I think is in networks, we have already commitments on the new rate cases. I think as I mentioned, in Brazil, we have already 75% of all our [ ramp ] is already signed, the new rate cases with increase of commitment of investment. United States the same thing with new rate cases, we cover 80% of the asset base, New York and Maine as well. We have new rate cases and with new commitment of investment, a new remuneration. In the case of UK, I think it's a new investment under RIIO-T2. I think I have to say in the RIIO-T2, the awarded amount for investment is going to be over-passed in a significant manner. So I think it's probably the amount, if I don't remember that was in the range of EUR 1.3 billion, EUR 1.4 billion awarded amount for CapEx. Probably you're going to overpass the EUR 2 billion and I think we are paying according with the extra investment we are making. And in production and customer, so I finish our production has been normalized in the case of win factor. Hydro reserves are already in line with historical average, even more than historical average, I think, we are most of our dams are on the range of 70% to 80% capacity cover. The increase in role of pumping storage, as I mentioned, I think that [indiscernible] 5 terawatt hours probably this year going to [ may move ]. In offshore, as I mentioned as well, the Saint-Brieuc is already just completely in production. Just to give you an idea, the amount of the contribution of these offshore wind farm of France is similar to the reduction of EBITDA, we are going to have in Mexico as consequence of the transaction. So really it's a huge operation. In onshore, we expect to put in service 2,000 megawatts and, I think, something very important is 100% of all our electricity is sold as price which are secured, which I think we are not being affected by the volatility of the today's prices. The case of the cash in the EUR 6 billion in the partnership with others, so as well, is going to help already to diminish our financial expenses. And as consequence, that is what we are expecting this growth between 5% and 7% with reaching for the first time in the company history this EUR 5 billion net profit by the year end.

Next question is related to the guidance of net debt. Can you also provide a guidance for the 2024 net debt?

Pepe?

Yeah, we are expecting to end the year in '24 with a net debt of around EUR 47 billion, more or less.

Related to the hydro in 2024 included in the guidance, in 2024 guidance, what is the extra contribution for hydro versus a normal year? Can you quantify in million euros?

Armando?

As always, our budget is based on average hydro year as always, but I want to highlight what the [indiscernible] very positive for this year 2024. First of all, we will full commission the Tamega facility will increase our capacity. The second is the good levels of the reservoirs that we have now, the most important things we are taking advantage of the market volatility, it's very important increasing our hydro production during the year.

Next question is related to taxes in Spain, the 1.2% revenue tax. What is your expectation for 1.2% revenue tax impact in full year '24? Any visibility about how energy transition CapEx deduction to 1.2% revenue tax in Spain will be defined?

Well, I think as we explained, I was shocked when I was seeing the numbers, when we closed accounts, that seemed that our taxes, a part of the corporate tax, the levies, are more than our personal expenses, more than our external services, more than operational maintenance, and more the financial cost together. So which I think is -- I think, Pepe has already mentioned that the average in other countries is 20% of the operational cost, and here is 120% of the operational cost. So which I think is something, which some of these taxes are already temporary base. I think one has already disappeared, which is the price cap, which has been after the approval of the measure, the new regulation for the European Union, the reform of the market. But I think another one, which I think they are still maintained, even was a temporary. So I think the case of 1.2% part of the news already is in the court, the challenge in the court. But I think what I heard from the government is then they would like to modify that one in a manner that, that can be already minimized or transform according with -- the meanings with according with the investment you can make. In any case, I think it's something which has not a logic. It's the only country where still we are keeping this tax base in revenues, so which has no sense. And I think it's making already the country, which is, I know already, here are the list with 38 different taxes or levies in the country, which I think 18 are from the central government and in another 20, well, now it's 22 because there are another 2 regions which has already increased in the region now. So I think it's no sense. I think that is making the things in a manner, which is not precisely making the things as accretive to be. And as you are in transitory measures, we can already leave, but I think in a stable base, I think it's something which is out of whatever is in the rest of the world. So Spain have not to be different as well in that one. And we have to align with the rest of the Europeans and align with the rest of the countries, because I think it will lie in this country, will be as attractive as all will lie then it will be.

Next question has in some way relation with one with the recent answer from you, Mr. Chairman, networks investment in Spain. We are seeing continued investment upgrades across several countries in power grids, but not as much in Spain distribution. In which way would you like to be incentivized to invest more, and what is the status of conversation with the government and regulators?

Well, I think what we are facing is a law which was made in 2012. We don't remember that during the previous government. It was after -- for trying to cover the electricity deficit, they have already [ irritated ]. I think the country has already a huge deficit. And at that time, the government, they took certain measures to try to minimize. One of them is that one, which I think is not much sense because you link the GDP with the investment in grids. I don't know what is the relation. It's something we have not in my view as engineer. I don't know if the economy is different, but GDP and the electricity grid, I don't think what is the connection, but that's remind. The typical thing which is made and the following government has not already modified that one. So, now, it's already a global demand internationally that, if we would like to electrify the economy, we would like to reach the carbonization target. We would like to diminish the external dependence. The grids are crucial has been said in the COP28, is the European Union is saying the same thing, is the international agency saying the same thing, and Spain as well. The national plan for renewables and electrification as well as included. So I think that is something with one time to another one, have to be changed. And I think that is what the Minister of Energy, by President of the Government has already just mentioned that she's open to change those one. But for that is not enough to take the cap. I think they have to make something attractive. Today's rules, if there are no change, the attractiveness of the investment in renewables are very low, I think it's the return expected -- in networks, sorry. The expectation of returns for the next few years, if that is not modified, it's much lower than those one we have in the rest of geographies. So I think if all countries, leading by United States, which is the highest, the returns, followed by Brazil, followed by Britain, or whatever countries we have present, I think they have to align with those ones. And that is what, now, we are in process. I think it's very open discussion. I think is what we are perceiving by the regulators and government is the interest of modifying this rule and reaching some level of agreement which makes attractive to make the necessary investment that the country requires. And that is what I can tell you about that one.

Next question related to power price in Spain and the UK. Can you share a chief power price for '23 and '24 in Iberia and the UK?

Armando?

Okay, so for this year, 2024, in Spain, we have for our generation for this year already sold, and around EUR 100 per megawatt hour. In the UK, the price should be something around GBP 150 per megawatt hour.

Next, related to PPAs, could you position the average PPA price in a euro megawatt hour you reached with your new corporate off-taker in '23 and by geographies?

Armando?

Okay, signing PPAs for us is not new. We have been signing PPAs for many years, but we are continuing to celebrate and we have new PPAs signed worldwide for, in 2023, for around 5.3 terawatt hour per year in the whole, all the regions. As you know, we are the leader in the European market PPA. We are selling more than almost 1,000 megawatts of contracted supply. That is something around 3.5 terawatt hour per annum that we are selling only in Europe. And for prices, we have been signed -- just the last time PPAs were signed, for instance, in Germany, something in the range of EUR 70, EUR 80 per megawatt hour.

Next question is related to the offshore wind. Can you talk about offshore wind plans for the year? Which auctions do you intend to participate in? How are you seeing off-take prices developing?

Well, I think, as you know, we have already two projects in New England, which I think is, we are analyzing to participate in the joint Connecticut and Massachusetts Rhode Island auction. I think, we are committed, but we will be very selective. It depends very much on the times of this one. We have already, after the participate another one we have a period of negotiation, which I think is six or seven months. So I think nothing is going to be the final up to the middle of this year or after summer. In UK, we have as well, I think, good news. The government, after our conversation with them, has already modified the terms and the conditions of the new auction. So I think the strike price is for the AR6 auction is 66% higher than it was for AR5, as well, we are analyzing this one. We have as well a couple of projects to participate with around 2,000 megawatts. And, I think, we will see what is going to be our final position on that one, but we are positive in the view. In the other ones, there are very many auctions in the announce in Germany, France, Portugal, Spain, whatever. But in most of them are still in a draft phase. So when we have more details, we will be ready to take a decision to participate or not. But I think we are -- I would like to summarize, we are positive in offshore, we are committed, we have a good team, but we will be -- as we've been in the past selective, going to those one which are in other tracks, and not going to those one who we feel are not attractive enough.

Next question is related to U.S. offshore business. Could you elaborate about U.S. offshore current market condition regarding CapEx and price trend?

Well, I think once again we are the first mover. I think we won four years ago, three years ago, two auctions for Connecticut, for Massachusetts. We saw the terms in which we had already made the bid, we had already changed drastically before deciding to made FID. And so that's why we went to the authorities of all the states, first to renegotiate the terms, and then when we saw that, that is impossible, it forced ourselves to renounce. Many of our colleagues and competitors, we are not enough, let's say, agile as we did. And they not only -- has not already took the decision we took at the right time, but I think they've been forced to take the decision later on after making a huge expenditure and committed a lot of money, we forced themselves to make a huge write-off. I think the cost of renouncing to this project in our case was US$40 million, which I think, Pepe has already mentioned as an extraordinary expense we have already in year 2023, but another one they've been forced to make billions of dollars of write-offs on that one. So now the terms, it looks, then it's changing. I think the recent auction in new year shows that they are already accepting certain of the rules that we've been already discussing to give already taking the time between the moment, we made the bid for the auction up to the moment that you made the FID. We can't take years, because the period of permits and etcetera, I said, is long in the state. So I think they gave the opportunity of revising this price auction according with certain parameters. And second, is as well to adjust the final price with certain parameters, inflation or whatever, for the period of the duration of the PPA. So I think those are positive. I think now in the another state that's New York, another state something is like but the still is not completed, but they gave already an opportunity as I mentioned before to negotiate since the moment you participate to negotiate during certain number of months with the different regulators of the state the terms of your offer. So which I think, probably, all these things will be included on that one. If the thing goes in the right direction, we will proceed if not who will renounce to those ones, so as sample. I think is plenty of opportunities in this moment of different countries for auctioning offshore. They are not very many players. What we'd be ready if we have the capabilities, the technology and the knowledge for making those ones. And, I think, we would like to be on this one, but as insist on that one committed but selective as we are in all the things related to renewable particularly in offshore with the investment are huge.

Next is related to solar PV, in the conclusion is like you comment on wind onshore and offshore addition. Have you changed your mind regarding solar PV?

No, I think is -- I know always say the same thing, I think is that all technologies are needed for achieving the target of autonomy, decarbonization, self-sufficiency, etcetera, etcetera. I think, it depends on the countries, it depends on the region, it depends on the moment. I think solar PV is good in certain countries, in certain areas of the countries, which is good in certain countries, in certain parts of the countries. And so, I think, we are not in favor of one another one. I think is it depends saying that they are already we have to analyze carefully in this country. What is the curve of production and the curve of demand? As I show you in the last presentation. And I think it's clear if everybody makes only solar. So probably at the middle of the day, it will be an overproduction of electricity, which I think in some countries like Spain, for us it's good because we can already use this overproduction for pumping water. We can already generate electricity in the hours where the sun is not shining. So that's why I think we are not in favor of, again, it depends. But I think in the particular case of Spain, we feel that large scale production of solar can already give us an opportunity of gaining and making extraordinary contribution of all our large-scale pumping storage facilities. We are unique in the country on this one and we continue already investing. We've been first movers on that one for the last 20 years. We continue being on this one. I think we just completed the pumping storage facilities of Tamega, Portugal, which is fully connected with Spain as well, in Portugal. And we are in this moment as I mentioned before already building a new pumping storage facilities for almost 1,000 megawatt we gave already 20 million of kilowatt hours of pumping storage capacities. So last year we made 5 terawatt hours of pumping storage production in Spain and, probably, this year if the volatility continues not only we can help the system thanks of our pumping storage facility, because this volatility is very, very difficult to manage in the system, but as well to that same time that we held the system to keep the lights on, we expect to have already some extra contribution to our accounts.

Next question is related to M&A. At the beginning of the year you ended the merger agreement with P&M and you will soon receive the casting for the Mexican generation assets. How do you intend to invest these additional resources?

Well, I think, we will have the meeting on the 21st of March, the Capital Market Day and we will give you more detail. But, I think, I would like to tell you something clearly. I think I mentioned that our -- in this moment, in net worth we have huge opportunities. So in the United States, I think only in the case of New York, our case commitment is EUR 7 billion of investment of up to 2026 in transmission and distribution, applies another probably EUR 3 billion in transmission and up to 2030. We have already UK transmission, as I mentioned, huge demand. Only I think the recent days we have launched an auction for GBP 5.4 billion of purchase of equipment expecting to secure the supply chains for the future investment required in the country. And, I think, in Brazil, the situation as well is huge on that one. So, I think, we have plenty of opportunities either in the state, in networks, either in Brazil, in networks, either UK in networks. So I think only that one, plus I think what I mentioned the auctions that we can participate in renewables in different countries. But I think certain networks, which is already as our core business or more core business with 50% almost of our EBITDA is already an area in which we have plenty of opportunities to grow with existing commitment we have already taken in different countries.

Last question is related to hybrid issues. We saw Iberdrola recently issued a hybrid bond with coupon around 4.7% that this indicated that the company could undertake more hybrids and if so how much more hybrid capacity the company has?

Pepe?

Well, yeah, now as we mentioned in the last Capital Markets Day, the strategy of the group is to maintain more or less the same hybrids that we have right now. We issued a 700-million hybrids, because we had to roll it over. We don't have more hybrids to roll over in the next month, so we are comfortable there. But the idea is not to increase the amount of hybrids issued by the group. Although, as you know, the group could issue much more has a much higher hybrid capacity. But, in principle, the strategy is to maintain the same hybrids issued as we have up to now.

With this 14 question we are finishing the Q&A session and, now, please let me now give the floor to Mr. Galan to conclude this event.

Well, perhaps I will conclude with certain message of optimism. I think we are already certain opportunities, which has already been a problem, but I think it's an opportunity, taxes cannot be worked, levies, so I think it can improve. The investment on Mexico is a clear opportunity. Co-investment with others is as well a good opportunity for diminishing our financial cost. 50% of our business is regulated. Regulated means we are protected against financial cost, which is a pass-through, and is protected against inflection. So we are already a lot of opportunities in the regulated business to grow, and as well we have already a lot of opportunities in renewable being already selected. So that's why I finish those things make ourselves a bit different. I think that will be the basis of our Capital Market Day on 21st of March. So up to this day, thank you very much for attending this presentation. And I think you have any question, I think our Investor Relations team can already give you additional information that you may require. Thank you very much. We'll see you in London on 21st of March. Thank you.