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

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 2025 first half 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. And additionally, on this occasion only, we will provide details of the equity raise currently underway. Everything done by our top executive team that is today with us: Mr. Ignacio Galan, Executive Chairman; Mr. Pedro Azagra, 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 mentioned previously, in today's event, we will be discussing in addition to the H1 2025 results, certain information regarding a proposed capital market transaction, access to which is restricted for person located in the United States of America. Accordingly, person located in the U.S. will be unable to log in at this time. And if any such persons have logged in here, we would kindly ask them to please log out. Finally, we expect that our event will not last more than 75 minutes. If any questions remain unanswered, we at IR department are, as always, fully at your disposal. 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, Buenos dias, everyone, and thank you very much for joining this call. Today, as usual, we'll present our results, and we will give you also all details of the equity raise announced this morning, which I can already inform to you that now is fully oversubscribed in this particular moment. In the first half of 2025, net profit reached EUR 3,562 million, up 20% year-on-year, excluding the capital gains from the last year divestment of thermal generation asset. And the reported EBITDA was EUR 8,287 million, driven by a strong performance in our Networks business with a 31% increase in EBITDA in the first half of 2025. EBITDA from production and customers was impacted by lower prices and one-off system costs in Iberia, particularly offset by the contribution from new assets in operation and the recovery of production in the second quarter compared with the first 3 months of the year. Investment rose by 7%, reaching EUR 5,662 million in 6 months, driven by a 14% increase in network investment to EUR 3,082 million. Also, we expect this trend to accelerate in the coming quarters, thanks to the new regulatory frameworks and the negotiation to show significant increases in investment. Up in the case of U.K. is EUR 14 billion following the RIIO-T3 draft determination, and EUR 15 billion additional in transmission and distribution according to the rate filings made by AVANGRID subsidiaries in New York and the expected increase in the common rate case in Maine. Renewable investment reached EUR 2,152 million, in line with the first half of the last year with 40% of the total invested in our offshore wind project under construction. All of them, I can already confirm, are progressing on their schedule and budget. We have also continued making progress in our asset rotation and partnership plan. In last weeks, we expanded our partnership with Mazda with an agreement to coinvest in East Anglia THREE Offshore wind farm in U.K., which combined with Baltic Eagle takes the total co-investment to almost EUR 7 billion. And we have also closed other asset rotation transaction worth EUR 1.5 billion, of which EUR 1.3 billion will be cash during the second half of the year. This, together with our strong cash flow generation up to 15%, has led a reduction of EUR 3 billion in our consolidated net debt in the second quarter, which now stands at EUR 52.7 billion and to a strong improvement in our FFO to net debt ratio already above 24%. Now moving to the EUR 5 billion equity raise announced earlier today. The recent progress in our regulatory framework in U.S. and U.K. has materialized an unprecedented investment opportunity to accelerate our growth that is fully current with our strategic focus in regulated networks in every countries with stable and attractive regulatory frameworks. The draft determination published by Ofgem RIIO-T3 and the rate case filed by AVANGRID subsidiaries in New York will imply investment of around EUR 30 billion, leading of total Network investment of EUR 55 billion up to 2031, 75% more than the previous 6 years. And the group total gross investment, including power, will increase to around EUR 15 billion per annum compared to the EUR 11 billion or EUR 12 billion in the last years. This new long-term stable framework in the U.K. and U.S. also offer attractive return, driving expected average regulatory return on equity of 9.5% up to 2031 and making the transaction accretive on EPS, thanks to the contribution of those additional profitable investment. The equity raise, together with our ongoing financial sources, operating cash flow, access to the market, liquidity and our asset rotation partnership plan will be sufficient to fully fund our investment plan with no expected additional equity needs at least until 2030. All in all, this transaction allows us to take advantage of unique investment opportunity to grow faster and take a major step in our strategy focused on networks in the U.S. and the U.K. Moving back to our first half results. As mentioned, EBITDA reached EUR 8,287 million, driven by 31% growth in Networks, thanks to the positive impact of the investment on our regulators in all countries. The full integration of electricity in Northwest and the strong result in United States, which include the recognition of past costs as explained last quarter. This positive performance in Networks more than offset the evolution of production in customers. We have a 13% decrease in EBITDA due to lower prices and nonrecurring impact of one-off cost of more than EUR 135 million in the Iberian Peninsula related to higher ancillary service requested by the existing operator to reinforce the power system after blackout suffered in May. We expect this impact to reduce in the second half as contract with our customers are roll over, reflecting this cost. These 2 effects were partially offset by additional production from the 2,000 megawatt put in service in the last 12 months and the recovery of production in the second quarter after a very low beginning of the year, especially in the United Kingdom. By region, 82% of our EBITDA comes from regulated countries with United Kingdom and U.S. accounting for close to 50% of the total. Investment grew by 7% year-on-year to EUR 5,662 million, mainly due to the strong expansion in Networks up to 14%, reaching close to EUR 3.5 billion, 65% in distribution, 35% in transmission. By region, the United States and United Kingdom represent 2/3 of the total. Transmission and distribution investment in the United States exceeds EUR 1 billion with 2/3 in distribution, mostly in New York. And the investment in United Kingdom also reached EUR 1 billion with 60% in distribution, including electricity in the West and 40% in transmission driven by RIIO-ED2 and RIIO-T2 frameworks. This investment has resulted in total regulated asset base of close to EUR 50 billion, 70% more than just 5 years ago. And we expect to continue accelerating growth until the end of the decade to reach more than EUR 90 billion by 2031, multiplying our network asset base by 3x in just 1 decade with around EUR 35 billion in the U.K. and EUR 30 billion in U.S. for a total combined contribution of these 2 countries of 75% of our total RAB. This unprecedented increase is driven by energy policies across our regions that are reinforcing expanding power networks with the objective of increasing energy security and autonomy and improving competitiveness, like the national policy statement for electricity networks infrastructure in the U.K. recently published, which has improved clarity and efficiency in planning processes. In the U.S., a national transmission planning process has been designed by the Department of Energy to modernize and expand the electricity transmission system. And in Brazil, the renewal of distribution concession will provide long-term visibility to investment. And finally, the European Commission recently published its guidance on electricity grids fit for the future, urging member states to develop policies to attract EUR 730 billion of investment that will be required just for distribution by 2040, like the elimination of investment caps or delays in the recognition of investment made and the implementation of a system capable of attracting those massive new investments. Following these policies, most regulators are approving stable and predictable framework with a strong increase in investment underwriting incentives. In United Kingdom, we expect our investment to reach EUR 26 billion from 2026 to 2031, 4x more than the last 6 years, following the draft determination published by Ofgem for RIIO-T3 in transmission and the strong increase in distribution expected until 2028 under RIIO-ED2 already approved in RIIO-ED3 from 2028 onwards. In transmission, the RIIO-T3 draft determination recently published shows that Ofgem is moving in the direction to promote investment by increasing cash generation, improving returns on equity and introduction of inflation protection measures. We expect final determination by year-end once we finalize the ongoing negotiation. Our investments in United States are expected to almost double in the next 6 years, reaching EUR 20 billion, mainly driven by a large increase in New York, where our rate case negotiations also making positive progress. In the case of Brazil, we expect the renewal of distribution concession for 30 years will be completed in Q3, creating the right framework to increase investment in these businesses. While in transmission, we do not anticipate new investment once the projects already under construction are finished. Finally, in Spain, we're expecting investments that are clearly lower than in the other 3 regions, we expect the initial terms proposed by the regulator will be improved along the process. Moving to Renewables. Investments remained flat in the first half, EUR 2,155 million as higher investment in offshore wind offset the decrease in onshore, especially Solar PV in Spain. By region, 60% of the total investments were made in United Kingdom and United States, where we expect no impact from the new federal budget legislation. It does not affect the 1,800 megawatts we have under construction of the additional pipeline onshore wind and Solar PV ready to be operational before 2029, they could qualify for tax credit under current guidance. Also in New England, 1 offshore wind farm will continue to qualify for tax credit if it's in operation before 2023 (sic) if we decide to go ahead with the construction. Offshore wind investment reached EUR 150 million in the first half and all our projects under construction are progressing as planned with their revenues and supply chains already secured. In the U.S., more than 1/3 of Vineyard Wind 1 turbines are already installed with more than 25% of them already exporting energy. In the U.K., our 2 offshore wind projects under construction with a total capacity of almost 2,400 megawatts continue advancing as schedule. East Anglia THREE is expected to be fully operational by 2026 year-end and the works of East Anglia TWO are progressing. Additionally, East Anglia ONE North project with 900 megawatts of capacity has already secured its permits and could participate in the coming [indiscernible]. As you know, the government recently announced an extension of contracts for difference from 15 to 20 years for the new auction. Finally, in Germany, the construction of Wikinger of 350 megawatts is ongoing with the COD expected by 2026. And we recently commissioned Baltic Eagle with 476 megawatts, the first investment included in our strategic alliance with Mazda. As was recently expanded to coinvest in the East Anglia THREE wind farm in the U.K. with 1,500 megawatt capacity in a deal value of EUR 5.2 billion, driving our total co-investment with Mazda to almost EUR 7 billion between these 2 projects. The East Anglia THREE transaction allows us to reduce our consolidated net debt by EUR 2.5 billion as well. In the last several months, we also signed a co-investment agreement with Kansai for the Windanker offshore wind farm in Germany with a total investment of EUR 1.3 billion. In addition, our EUR 2.4 billion partnership with Norges Bank for Renewables in Iberia is all progression as scheduled with 1,500 megawatts under construction. And finally, Brazil, our agreement with GIC for transmission asset has already delivered EUR 150 million in co-investment. Over the first half of the year, we also closed asset rotation deals worth EUR 1.5 billion, such as the divestment in Baixo Iguaçu hydro project in Brazil with EUR 100 million already cash in, and other transaction like a smart metering business in United Kingdom [indiscernible] distribution asset in Maine that all in all will allow us to receive EUR 1.3 billion in the second half of 2025. Moving to operational cash flow. Our FFO increased by 15%, reaching EUR 6,796 million, driven by higher cash flow in our Networks business in the U.S. and the U.K. This strong cash generation, together with the asset rotation and partnership has led to a reduction of EUR 3 billion in our consolidated net debt to EUR 52.7 billion and stronger financial ratios with FFO adjusted consolidated net debt improving by 190 basis points up to 24.2%, even after the full consolidation of EUR 2.2 billion of debt from electricity Northwest. Finally, as you know, following the approval of our total dividend of EUR 0.645 per share in our AGM, tomorrow, we will pay a supplementary dividend of EUR 0.409 on top of the dividend paid in February of EUR 0.231 and the engagement dividend of EUR 0.005 per share paid in June. Now let me give you some more detail of the transaction announced today. The unprecedented investment in Network infrastructure in U.K. and U.S. explained earlier, constitute a unique opportunity to accelerate our growth. This 75% increase in investment expected in the next 5 years will allow us to reach a regulated asset base of EUR 90 billion by 2031, multiplying size by 3x in 1 decade and increasing the combined weight of our U.S. and U.K. up to 75% of the RAB with clear and stable framework delivering average expected return on equity of 9.5%. As a result of this increase in Networks investment, total group gross investment, including power and others, will reach around EUR 15 billion per annum in the coming years compared to the current EUR 11 billion to EUR 12 billion. Taking a major step in our strategy to increase our focus on Networks in the U.S. and U.K., improving our profitability and our risk profile. Financially, the transaction will have a positive impact on EPS, reinforcing our long-term outlook of mid- to high single-digit growth in net profit. In addition, the amount of this equity raise, together with our other ordinary financial sources, including operational cash flow generation, owing access to debt market and liquidity and our asset rotation and partnership strategy will allow us to fully fund our plan without any further need to increase share capital, expect at least until 2030, preserving our rating and our current dividend policy and therefore, strengthening our value proposition of growth dividend and financial strength. I will now hand over to our CFO, Pepe Sainz, who will present the group financial results in detail. Thank you.

Thank you, Chairman, and good morning to everybody. So let's go through the results. The first half net income reached EUR 3.5 billion and grew 20% once compared with the first half of last year adjusted net income, underpinning, as the Chairman has said, the underlying growth of the business. As main change of perimeter, let me remind you that ENW is fully consolidated since March of this year. FX evolution has had a minor effect on results, thanks to our FX hedging policy with the dollar being 0.5% lower, the pound 1.8% higher and the real 13% lower. A 0.5% increase in revenues due to the Network business combined to a 1% decrease in procurements drove a rise in gross margin of 1.6% to EUR 12.7 billion. Excluding the EUR 1.7 billion thermal generation asset divestment in the first quarter of '24, the first half results, net operating expenses improved 9.8%, mainly due to EUR 300 million lower storm costs that are also diminished at gross margin. Net personnel expenses fell 2.3%, including a net positive EUR 24 million pension adjustment and external services fell 8% due to lower storm costs. Other operating income grew 29% versus the first half of '24, adjusted, as I mentioned before, due to the indemnities of past year cost, ENW consolidation, all of them partially offset by an EUR 81 million negative impact of the East of Anglia THREE deconsolidation. Excluding also the mentioned storm reconsolidation impacts and other impacts, net operating expenses improved 0.5%. Analyzing the results of the different businesses and starting by Networks, its EBITDA grew 31% to EUR 4.3 billion, mainly driven by better performance in the U.K. and in the U.S. In the U.S., EBITDA reached $1,547 million or 129% up with higher rates in distribution and better contribution in transmission and positively impacted by the decision from the New York regulator that allow us to register under IFRS regulatory assets regarding past costs already accrued and registered under U.S. GAAP, aligning both standards. In the U.K., EBITDA increased 23%, reaching GBP 745 million, including 4 months positive ENW contribution up to GBP 150 million and better contribution both in distribution and transmission. In Brazil, EBITDA increased 9.6% to BRL 6,755 million, thanks to higher inflation over a higher asset base and a positive contribution from transmission lines as construction progresses. From April onwards, rate increases in Coelba, Pernambuco, and Cosern improved second quarter EBITDA and will continue to do so during the second half. In Spain, EBITDA increased 9.5%, reaching EUR 892 million, positively affected by adjustments to past year's remuneration following court decisions. The first half energy production and customer business EBITDA reached EUR 4 billion compared to EUR 4.6 billion in '24, excluding the already mentioned EUR 1.7 billion thermal divestment capital gain. The business reached 88% emission-free generation. In Iberia, the EBITDA was EUR 1,960 million, 21% down with higher production, partially offsetting margin normalization. There are EUR 110 million higher ancillary services costs, mainly linked to the reinforced operation of the transmission system operator, Red Electrica, and EUR 136 million higher levies despite 1.2% revenue tax termination. Record hydro reserves, 9 terawatt, will help the performance in the second half of the year. In the U.S., EBITDA increased 5.4% to $508 million with better wind and solar performance and despite the fact that the first half of '24 was positively impacted by the Arctic Blast storm one-off, and there has been, during the last quarter, lower thermal generation due to maintenance. In the U.K., EBITDA fell 18% to GBP 691 million due to lower EBITDA from the supply business, driven by prices and volumes. Also, an 11% lower wind resource and lower prices, partially compensated by the recovery from last year offshore operating problems and lower wind tax contributed to this fall. Net operating expenses, including GBP 68 million equivalent to the EUR 81 million I commented previously, negative one-off impact linked to the East of Anglia THREE reclassification as held for sale, more than compensated this GBP 81 million or GBP 68 million more than compensated at the net financial result accounts. In the rest of the world, EBITDA grew 31% to EUR 411 million, with 68% higher offshore production due to the full entry in operation of Saint-Brieuc in France and Baltic Eagle in Germany offshore wind farms, while the supply business lowered its contribution mainly due to EUR 25 million negative impact in Portugal due to the again ancillary services costs, mainly as a consequence of the blackout. In Brazil, EBITDA decreased 31% to BRL 564 million with lower thermal contribution compared to a strong first half of last year. Finally, in Mexico, EBITDA reached USD 278 million, 87% lower contribution compared with the first half of '24 that included the thermal assets capital gain in the first quarter and 42% excluding it as the remaining business had higher availability and a better balancing revenues. Depreciation and amortization and provisions are up 2% to EUR 2,820 million, driven by higher asset base, partially compensated by lower depreciation, thanks to the full year '24 adjustments, mainly in the U.S. onshore and also due to lower bad debt provisions in all geographies, but especially in Spain and the U.K. EBIT reached EUR 5.5 billion and grew 6% on an adjusted terms. The net financial result improved EUR 183 million from EUR 848 million to EUR 665 million, thanks to a EUR 292 million positive impact from the East of Anglia THREE's derivatives as a consequence of the consolidation of the asset. Other derivatives, mainly linked to the P&L hedges had a EUR 69 million positive impact. Debt-related costs grew EUR 157 million due to the higher average net debt, while interest-related costs improved by EUR 48 million due to a better cost of debt as you can see in the slide that decreases 19 basis points, mainly thanks to lower short-term interest rates, especially with the euro and the pound and to the depreciation, especially of the real despite higher interest rates in Brazil. Net debt reached EUR 52.7 billion, improving from the EUR 55.7 billion peak at the end of March and increasing only EUR 1 billion from December '24 closing. This positive evolution was driven by a EUR 6.8 billion FFO plus EUR 3 billion asset rotation and debt consolidation that covered the EUR 5.7 billion CapEx, EUR 2.3 billion dividend and ENW net debt consolidation. Net debt evolution, together with a 15% growth in FFO, drove credit metrics to be comfortable within rating agencies thresholds for BBB/Baa1. FFO adjusted net debt reached 24.2%, improving versus 22.9% December closing, and our adjusted net debt to EBITDA reached 3.3x. Our adjusted leverage ratio was 46.8%. In the first 6 months of the year, Iberdrola has signed GBP 11.4 billion of new financing, completing some very important transactions like the East of Anglia THREE project finance for GBP 3.6 billion, the recently signed sustainable GBP 2.5 billion credit line, the first green senior bond fulfilling EU, GBS and IGMA standards and being the first European company to be financed by the National Wealth Bank. We have also get financed from the European investment banks based on the next-generation funds, where we have obtained in all of these transactions, benchmark conditions, and we continue leading the green and sustainable financial markets. Net profit grew 20% to EUR 3,562 million on an adjusted terms compared to the EUR 2,969 million adjusted first half '24 net profit. And now the Chairman will conclude the presentation. Thank you very much.

Thank you, Pepe. As you have seen, our first half results show a strong operating performance that we expect to improve even further over the rest of the year. With Networks as the key growth driver, thanks to double-digit increase in our regulated asset base, mainly U.S. and U.K., reaching more than EUR 51 billion altogether. And on top of this, we will benefit from the new rate cases closed in the first half, mainly United States and Brazil and the positive impact in the full integration of electricity in the West. In production and customer, we expect higher production in the second half of the year, driven by the 2,000 megawatts added in the last 12 months, plus 1,400 megawatts more than we expect to put in operation before the year-end as well as by higher wind resource expected in the U.K., where wind conditions in the first quarter were one of the worst in the last 25 years. We have also signed new PPAs for almost 5 terawatt hours per annum in the last 12 months that will deliver revenue certain at the attractive prices for the future. And our hydro reserves remain at record levels of around 9 terawatt hours, allowing us to expect even new record in hydro pump storage at the moment with strong spreads. This positive business outlook, together with our ongoing financial strength leads us to reaffirm today our 2025 net profit guidance of double-digit growth or mid- to high single-digit growth, excluding the recognition of the past cost of the Networks business in the United States. To conclude, the equity raise launched today provide us further visibility and security in our long-term growth outlook and give us a unique opportunity to accelerate our growth, fully in line with our strategy focused on networks in the U.S. and the U.K., reinforcing our value proposition based on strong growth, sustained dividend increases and financial strength. We will give you more information about our future outlook for the coming years in our Capital Market Day will be held in London on September 24. I hope to see you all there this day. Thank you very much for attending this call and for the trust you always place in us. Now we will answer you all the questions you may have.

Okay. Starting with the Q&A session, the following financial professionals are asking us questions today. Fernando Lafuente, Alantra; Gonzalo Sanchez-Bordona, UBS; Ahmed Farman, Jefferies; Pedro Alves, CaixaBank; Rob Pulleyn, Morgan Stanley; Fernando Garcia, Royal Bank of Canada; Jorge Guimaraes, JB Capital Markets; Daniel Rodriguez, Bestinver; James Brand, Deutsche Bank; Javier Suarez, Mediobanca; Andrew Moulder, CreditSights; and Jorge Alonso, Societe Generale. The first group of questions are related to the capital raise deal. First one is the main question analysts are asking is related to the rationale of the equity raise. Why do you think the equity raise is a preferred option versus other means of financing?

Well, I think we have an extraordinary and impressive opportunity to invest in Networks. I think it's not new for us. Then we said already in our CMA that our priority is investment in Networks, and we will prioritize Networks and we'll be selective in renewables. And I think we were expecting that the network business, the network demand increases in most countries, but we are not expecting to increase as soon as it's increasing and the size, which is already being produced. I think once we got already the confirmation of the numbers from the U.K. regulator and once we have already started conversation with the American regulator, so we saw that what is the size of the investment we have to afford in the next few years, and we feel that, that is the best solution. Why? Because I think it's a sector which is clear, stable and attractive frameworks. We are investing in every countries that need this huge investment. But I think that is regulated. And regulated means they require a minimum equity requirements. I think there is limitation to finance all liquid debt. If we would like to maximize the return, I think if we -- the debt is paid by the regulator and the equity is paid in different terms. So that's why I think we feel it's better to make equity instead to put already debt because I think that will be not good for the shareholders. A part of this one for the rest of our investment, we will continue to be financed with our operating cash flow. What you see -- you saw generation increasing by 15% in the first half. With our liquidity, we have more than EUR 20 billion. And with the asset rotation and partnership, we will continue. I think we have already signed very many during the first half of this year, as you saw already, I present already. But I think what is clear is with this opportunity, we are going to accelerate our growth. It's absolutely in line with our strategy. I insist that our priority was network in countries with attractive reserve frameworks. And with this increase in share capital, we are preserving our BBB+ rating. And we are keeping and maintaining our dividend policy, which as we have already done in the last 25 years in the company. So we feel that it's the best opportunity for shareholders making that money in this manner is to make in the form of debt, which I think in form of debt that will not generate the positive returns, then that can already be obtained if we inject equity in these opportunities. Well, it's clearly -- I think it has no sense. If we have priority Networks, it's no sense to sell networks to invest in networks. So I think it's clear that our priority is networks and we would like to keep networks, not to sell networks to invest in networks. So it's no sense. So I think we would like to be current with our strategy. Priority is networks, and we would like to increase our network. I think to give you some numbers. I think in 2020, we have EUR 30 billion RAB. Today, it's around EUR 50 billion, EUR 51 billion. In 2030, it will be EUR 90 billion. If you have an average of equity debt ratio in this RAB, that means we will repay on the range of EUR 45 billion to EUR 50 billion equity at 9.5% that generate already just a net profit of the company in these regulated activities on the range of close to EUR 5 billion per annum. That is the size of the company we are in this moment creating. And that is a unique opportunity. And that's why I think it has been such a huge demand of investors, then they would like to participate in that one. We are very pleased because we are working for investors, and I think we like investor happy, and that is an opportunity for investors to be even more happy.

Okay. Before following with the question number two, we have had 2 more analysts, Dominic Nash from Barclays and Philippe Ourpatian from ODDO. And obviously, I'm sorry for that, Jorge Alonso belongs to Bernstein, not SocGen, as I said. Second question, how much buffer financial flexibility are you trying to obtain with this capital increase? Can you give guidance about what do you expect in terms of leverage metrics over the next 5 years?

So we are fully confident that this transaction is more than sufficient to fund our extraordinary investment opportunities in the U.K. and U.S. I think, as I was saying, it's 75% more investment in this 6 years over the previous 6 years. But I think this transaction will come together with another sources of financing. I think we are generating additional cash flow. So I think we are seeing that our cash flow in the first half is increasing by 50% and also will increase more things of the new investment, which I think is -- the regulator is already generating cash flow from the very beginning. Liquidity as well, we have more than EUR 20 billion liquidity. Recently, we signed another lines of liquidity of EUR 25 billion, Pepe, no? EUR 2.5 billion, and we have more than EUR 20 billion liquidity. And I think we have plenty of access to the debt. So I think all bankers knocking our door all time for giving more money, and we have easy access to the bond market. And I think we are -- Pepe will explain -- has already explained clearly. And also, we will continue with our asset rotation. And those things we consider are not already strategic for us or we continue making partnership. I think only with Mazda, we have partnership of EUR 7 billion. With Norges, it's EUR 2.4 billion. And with others, I think with Kansai, we have EUR 1.2 billion and others and others and we continue on this. And I think with all those things, we consider we have money enough to cover and to fully -- to invest in this opportunity and preserve our ratios and preserve our dividend policy. It's very important on that one. I think for the 25 years in the company, I was already maintaining a very consistent current dividend policy for our shareholders. I think we start already, we committed with shareholders that dividend is a must and we are already just following this criteria in the 25 years. So that means we will keep already our financial solidity. We may increase our growth or speed up our growth, and we keep our dividend policy. But nevertheless, I think that is the basis of our Capital Market Day on the 24th of September, then we can already present with more detail. But I insist on that one. I think we are -- it is a unique opportunity. And that is what today the shareholders or the investors are already asking for more and more oversubscribing this opportunity.

Next is, given the recent changes in our management team, if this equity raise related, in any form, to the naming of the new CEO. And given his past as M&A officer in Iberdrola, should we expect these proceeds to be allocated in a big M&A transaction?

So absolutely, it's not related. Pedro is a good guy. He has a lot of things to do for already taking -- looking for improvement of the business. He's fully committed with the company. He knows the company very well. And in the few days he is in the company, he is fully, fully taking care of all those things which are related with the business. I think this rational transaction is nothing to see with himself. It's something which is rational, which is an opportunity what it appear. And I think -- and that this transaction, this opportunity of increasing the investment plan in networks in U.K. is just because the RIIO-T3 has been published. So it's as simple as that one. So it's not Pepe, not Pedro, it's not Juan, it's not Lopez.It's just Ofgem who has already published RIIO-T3, which is GBP 14 billion investment, which I think is absolutely confirming our expectation. And that's why for confirming this expectation, we are already just looking for this money. Same thing with United States. I think the New York rate case has been presented, negotiated with the regulator now it takes the time, but I think he's aware they have not already -- they already accepted our proposal and now we are in the negotiation how that can evolve. But I think certain -- those are the reasons, nothing to see with Pedro, which I'm delighted what he's doing and what he has to do, but that is nothing to see with himself for the moment.

Next is related to the asset rotation plan. Shall we conclude from your messages that you are not going to do any meaningful asset disposal?

So I think it's absolutely not. I think we will continue with our asset rotation. We'll continue with our partnership strategy in last year, I think it's business as usual plus this extraordinary opportunity. That is the approach. I think this destination of this equity raise is for organic growth, organic growth, organic growth, which means investment in transmission and distribution, mainly in U.K. and United States for already providing and delivering the commitment we can take with the regulators. This equity raise is linked, I insist in this extraordinary investment. And I think I insist, we hope it is sufficient to fully fund our plans together with another success for ordinary investment, which I insist is the cash flow generated, the liquidity we have, the access of the end market and the asset rotation and partnership we will continue as we've been doing during the last few years. This transaction is not triggering additional asset rotation and partnership on top of what we are expecting. I think it's business plus this extraordinary opportunity. So I think if there any potential opportunity for investment arise, we will not expect the moment at all the additional asset, any rise equity again. We will make already with asset rotation as we did. I think if tomorrow, we have to make any, let's say, small opportunity. I think we'll make as we have already done another one. I think we divest something for investing in another thing. But I think we are not going to use this money for making already a new, let's say, acquisition. No, it's for that -- it's for extraordinary investment in networks, mainly U.K., United States, in the lines defined by RIIO-T3 and defined by the new rate case, which we are underway in New York and Maine.

Next, you have publicly stated that you now do not expect to need to come back to the market until at least 2030. Under which circumstances could this situation change?

So please, I think we can foresee what we can foresee. And we have the picture of today and with the picture of today and with the situation of today, that is what we are foreseeing in our commitment, we are not already a company we change our rules every night. So when we said something we are committed and we deliver what we committed. So we are committed that today's -- with today's picture, knowing what we have today, we need money for an extraordinary thing. We've been for many years, what we've been already maintaining our dividend policy, maintaining our investment policy, delivering our commitments always ahead of our outlooks. That is our style. And I think now with the visibility we have already for the next 5 years, with this visibility, we don't need any other increase in share capital. So with our cash flow generation, with our liquidity, with our asset to the market; we are able to invest the visibility. We are going to present to you all these numbers on the 23rd of September, enough resources for affording the visibility of the investment we have to afford in the next few years. Keeping and maintaining our dividend policy, keeping and maintaining our financial solidity as we did and using our asset rotation if needed and continue with our partnership as we have already done in the last months.

Next query is about other means of financing the plan. How much debt hybrid do you expect to raise over the next 5 years...

So I don't know the numbers, but I think -- what I think for us, it's very clear that our FFO net debt will be in line with our BBB+ rating, and that has increased in the size of the company. Also the size of them grows, the debt will grow. But I think we will preserve our strong ratio, and we will maintain our dividend policy. In any case, I think we'll give more details on CMD. But I think you, Pepe, would like to add anything, but I think the data we will share with everybody on the 24th of September.

Yes, absolutely right. I think the idea is to maintain this capital raise that has been done to maintain to be under the BBB+ rating, which is we think that is the cost of capital lowest for us, and that is the idea. So obviously, we have the numbers here. But I mean, the message is that we will be in the BBB+ rating well into this range. And that is what we are expecting. Obviously, we'll raise a little bit the debt. But as the Chairman was saying, we will also expect to raise the FFO. So the ratios will be comfortable between the BBB+ rating.

Next question is about dividend policy. I understand you are maintaining the dividend policy, but could you explain if your decision of issuing equity has been driven by the need to continue to pay an attractive dividend. By how much should you have cut your dividend to avoid the capital increase? Just in case.

So I think I would like to insist again that is an extraordinary opportunity. What we can already increase our RAB at nominal value instead of paying a premium of 40%, 50%, which is the normal transaction, which is made in all transactional regulated activities. And for that, we would like then the shareholders benefit of this opportunity in value increase of the company. So I think nothing to see with the dividend and nothing to see with the debt. The debt is decreasing. The dividend is increasing, and we would like to finance that one, maximizing the return for shareholders. If we increase the debt, that should be bad for shareholders because the debt will not be remunerated. Will be only -- it will be a pass-through. So the equity is going to be remunerated. The debt is a pass-through. So you put more debt in the regulated activity is good for banks. It's not good for shareholders.

Next, why is this capital increase accretive for Iberdrola shareholders?

You may -- because it's accretive. I would like to insist. I think paying the equity at 9.5% and the money is costing to us a 4%. Between 9% and 4%, so you see how much -- what is the return. It's very simple. But I think Pepe, you can make the number. For me, it's very clear. The equities pay at 9.5% and the money is costing at 4.5%. So the difference is accretive.

Yes. Well, that is what the Chairman says. This allows us to invest an additional EUR 5 billion in Networks, as the Chairman was saying, with an average return on equity of 9.5%. And obviously, that is accretive both in terms of net profit and in terms of EPS, okay?

Last question related to the capital raise. Although I think it has been already explained in the previous answer. Why do you think now is the right moment to raise equity? Why not wait until your next Capital Markets Day on September 24?

So I think we would like in the Capital Market Day will be -- we talk about business. We talk not how to finance the business. I think making that one, we can already just confirm then the way how we will finance is already fully solved. Also, it's because I think it's the Ofgem I mentioned before, the Ofgem draft determination was public a few days ago. And I think it's the time for saying, okay, how to make that money to give already to our regulator, the certainty, then we have financial resources for affording the investment required. Same thing in the U.S. I think we just filing the new rate case. And I think the amount of money we are already presenting is such a huge and the obvious question for regulator is, do you have money enough for funding this investment? And I think we can say now, yes, we have money enough. We have equity enough for funding Ofgem in either U.K., either in the United States. And I think that is already -- I insist on that one. It's an unprecedented opportunity for accelerating our growth and delivering our strategy in Networks, which is our priority in 2 countries, which is clear, stable and well known for us. I think we are almost 20 years in both countries, attractive with predictable frameworks. I was recently with the British Prime Minister, and I think he was already explaining the policy related to electrification of the country and the measures they would like to make for making this country more attractive for rising for attracting investment. And that is what we would like to already benefit of this opportunity.

Moving forward to the question related to the results. The first one is, could you please provide your view on the extension of the nuclear facilities, possible extension of the nuclear facilities in Spain?

So -- I think nuclear plants, I think, I said as engineer many times, I was repeating this for many times, are efficient, are safe. I think they provide autonomy and stability to the national energy system, and I insist is the most efficient solution to keep their lights on. And that's why I think all European countries are already extending -- European and non-European, extending the life of these nuclear power plants. However, in the case of Spain, with the current taxation with around EUR 30 megawatt hour, which is compared with EUR 15 is half with Spain in France, made then not viable with the forward prices we are expecting in the future. It was -- already what happened between 2010 and 2020, we were in the lost in our nuclear power plant. Why? Because nuclear power plants are not already manageable. It's a price takers. So whatever price is set in the daily, I think we have to -- we are paying on these terms. So that's why I think we cannot -- as another, I think we can make an off -- price another one. But in those one, we cannot stop and put in service. I think it's already working 24 hours a day. So that's why I think this base load system, which are not already -- you cannot manage in the sense of others like hydroelectric or like CCGTs of gas. That's why we are asking if that is the most efficient solution to keep their lights on, I think it's not at our cost. It has to be already in a manner that we can already not be in a loss. And that's why we ask for a reduction of this tax burden. But I think even if this tax burden is already, let's say, flexibilized, I think some region, Valencia is already flexibilizing that one is already announcing this region to reduce this taxation. But I think even though I think the existing legislation, if there are no changes, they don't allow us to ask for this extension. I think it's needed changes in the actual legislation to allow us for asking for extension. We are not allowed to ask. But I think that I'm sure that can be solved. But I think the point is the first and the second. First one, taxation and the second one, the government has to allow us to ask for the extension even after reduction of this taxation. I think in any case, what I can say for the Spanish citizens. So we are powering enough in CCGTs in gas, more than double than that power we have already in nuclear to provide the service. But they have to pay an extra price that is already -- make already by the analysis of Pricewaterhouse and we disclosed last time, they are expecting an increase of 35% extra cost for consumers if the nuclear power plants are closed. That is analysis made by PricewaterhouseCoopers, which is confirmed as well by PricewaterhouseCoopers what is happening in Germany since they closed the nuclear power plant. The German consumers are paying more than those countries that are keeping the nuclear power plant in operation. But I think that is our proposal, very clear. With the present taxation makes this power plant economically not viable, even if they are absolutely the best and most efficient economical solution for keeping the lights on. But I think the lights on will be made with combined cycle of gas, then we have double power, the nuclear. So I think the Spanish citizens can be sure, then we can provide that one, but the cost will be more expensive than keeping those one open. And that is the point we have to be taking a decision. We are not making the energy policy. The energy policy making by the governments. And the government has to decide. So we are already -- if they like to close, we close. If they would like to keep open, we keep open and we have the solution. But I think nevertheless, I think we are in a continuous dialogue with them, but I think the decision is not in our hands. It's in the hands of those one who are making the energy policy, which is the government.

Next is related to the CNMC proposal for the next regulatory period in Networks in Spain, our opinion.

I can -- to the same point, I'll start with the same comment. Energy policy is made by regulators and the government. So I think we have to adapt to these policies. I think it's clear the European Commission has provided very clear guidance how to incentivize the network investment. And they said clearly, the first thing they are talking is elimination of the investment caps. We have investment caps in Spain still. We need that European Commission anticipatory investment to meet the national integrated dramatic plan change means they need to incentivate investment now in that front if we would like to electrify. So they talk about the elimination of delays on recognition of investment. We are having problems on that one. The fact we have in the court several demands or separate litigation because of nonrecognition of certain investment already done in the past. That is recommended not to happen. And last one, they are talking about rate. We have already to cover full cost recovery to be attractive for attracting this hundreds of billion euros that Europe needs already in investment in the grid. However, this draft proposal, I think, in my opinion, is providing a clear negative signal to the market, signaling the side of reducing the maintenance cost, so the recognition of the cost of maintenance of the current network infrastructure and not incentivating the investment in new assets. I think that is my reading what they have already done. And I think we will make our answer and our response to the consultation in August. And I think we expect then the things will move on the right direction. Nevertheless, as you saw, the size of our regulated business in Spain is quite small compared with the rest of another countries. By 2030, it is less than 10% of our total regulatory asset base, so which I think is important, but I think it's not crucial for us.

Next is what's your take on the draft proposal, draft determination on the RIIO-T3 framework elaborated by Ofgem?

So I think the opposed to the Spanish one, I think our view to that one is positive. It recognized the need of significant more investment in electricity infrastructure. It's aligned with the U.K. government energy and industrial strategy, which position electrification as the key driver of the economic growth, which was reflected in the industrial strategy of the government. It is as well, the government is also underlying the relevance of creating a stable an attractive framework to enable private investment and that is what is reflected. And I think it's that why I think the draft determination include in our case, this EUR 14 billion new investment in transmission up to 2031 on top of the EUR 8 billion to EUR 10 billion that will be invested in the distribution in the next 5 years, so which part of them correspond to ED2 and another one we expect already will be in the ED3 once ED2 is finished in 2028. The draft also introduced improvement in the financial parameters to make that more financeable. But I think we are now in talks with Ofgem because for -- looking for some details and to improve some of those parameters. I think globally, we are positive, but I think that we are already negotiating to improve certain things. Also, I have to say about the British government, the accordance of the British government, the British regulation is I mentioned to you as one of your questions in the last conference, you asked about the zonal pricing. I was saying that, that is going to happen. I can confirm that the government has already confirmed my advice that, that is going not to happen and is not to proceed with the zonal pricing.

Next is related to the East Anglia THREE. Can you please outline what is the impact booked in the different lines in the P&L of the sale of East Anglia THREE in terms of...

Pepe, you can explain that one?

Yes. Well, as I have mentioned in other income, which is in the expense part. So over the EBITDA, we have a minus EUR 81 million negative impact. And we have around EUR 250 million positive impact on the derivatives part. So in this first half, the impact is plus EUR 170 million. The only thing is that in the third quarter, we will have to book another negative impact precisely in net operating expenses of around EUR 60 million that will reduce at the end of the third quarter, the total positive impact to around EUR 100 million before taxes, which is around EUR 75 million after taxes. So as of the first half, we are booking EUR 170 million before taxes. And on the third quarter, we will add a negative impact of around EUR 60 million, and that will give us a net profit for the whole transaction of slightly over EUR 100 million before taxes and around EUR 75 million after taxes by the end of the third quarter.

Next is related to the effects or possible effects of the yesterday's rejection of the Spanish parliament of the anti-blackout decree.

So as always, we respect the decision of the parliament. So I'm going not to enter into the local debate. We have enough debates and we are going to kind of debate. I think as far as I know, some of the measures included has already a sense, sense in the area of increasing security of supply of the system, reduction of the bottlenecks, the gap creating latent demand, which is not covered, especially for industry, and we've been already -- for years already claiming for that one, and promoting the new electricity demand, so with level play field. But I think it's -- I'm sure that I heard as well the other position is thinking to present just a law for covering all these things, which I think I don't know if it has to be a royal decree of a law. Sorry, it was off. I will come back again. So I said that I respect already the decision of the parliament, and I don't like to enter into the local debate. So I was saying that there are some measures included we have already sense such as security of supply in the system, reduction of the potential bottlenecks, covering the Latin demand we cannot be covered today, especially in the industry. And one thing which is very important is promoting the growth in electricity demand with a level playing field. But I think what I heard is that the position is presenting or preparing just a law covering all these things and others, I don't know which ones. And I think we will see what is the point. So -- but I don't like to come into the parliamentary debate. I don't know some reason for that one. And I think the important thing is to solve the problem that we have in the system. And I think those ones, they have to look what is the best way for solving those things.

The last question received is one related to the press news of today about the plan, the possible plan of Iberdrola to sell the remaining assets in Mexico. Can you comment on this?

I don't comment on rumors, no idea.

We have several questions about the next Capital Markets Day to be held on September 24. So obviously, we will drive all these questions to the Capital Markets Day. So now please let me now give the floor to Mr. Galan to conclude this event.

So thank you very much for the participation in this call. So as always, Investor Relations team will be available for making whatever -- answer whatever questions you would like to pass. So I think I would like as well to use this opportunity to thanks to the teams who is already working the transaction, which is becoming already a success. And Pepe and your team, thank you very much because you have already done a great, great job in a few hours when you prepare all those things. Thank you very much, all of you, and I hope you enjoy already with this new opportunity that we have already in this moment. Thank you very much for your attention. And I have not seen the opportunity. I wish you a very good summer holidays, rest of it, and see you in September. Thank you.