Earnings call transcript: Iberdrola Q4 2024 sees profit surge amid renewables push

Iberdrola SA (OTC:IBDRY) reported robust financial results for the fourth quarter of 2024, marked by a 17% increase in net profit to €5.6 billion and a 70% rise in EBITDA to €8.48 billion. The company, currently valued at $91 billion in market capitalization, trades at an attractive P/E ratio of 13.9x. Despite these strong financial metrics, the stock price saw a slight decline of 0.89% in pre-market trading, closing at $13.87, down from its previous close of $14. According to InvestingPro analysis, the stock is currently trading near its 52-week high of $14.92, reflecting a remarkable 37.6% return over the past year.

Key Takeaways

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• Iberdrola’s net profit increased by 17%, driven by renewable investments.
• EBITDA saw a significant rise of 70%, reflecting operational efficiency.
• The company invested €17 billion, primarily in renewable energy projects.
• Proposed dividend raised by 15% to €0.635 per share, continuing Iberdrola’s impressive track record of maintaining dividend payments for 45 consecutive years, with increases in the last 9 years. The current dividend yield stands at 3.4%.
• Stock price fell by 0.89% despite strong financial performance.

Company Performance

Iberdrola demonstrated strong performance in Q4 2024, with net profits and EBITDA showing substantial year-over-year growth. The company’s strategic focus on renewable energy and infrastructure investments has positioned it well in the growing clean energy market. Iberdrola’s presence in 24 US states and its €40 billion in US assets underscore its significant international footprint.

Financial Highlights

• Reported net profit: €5.6 billion, up 17%
• EBITDA: €8.48 billion, up 70%
• Adjusted net profit: €5.3 billion, up 15.1%
• Operating cash flow: €836 million, up 10%
• Record investment: €17 billion, with €12 billion in organic investment

Market Reaction

Despite Iberdrola’s strong financial results, the stock experienced a slight decline of 0.89% in pre-market trading. This movement may reflect investor concerns about the company’s projected net debt levels, expected to reach €55-56 billion by the end of 2025, and potential geopolitical uncertainties affecting its operations.

Outlook & Guidance

Iberdrola maintains a positive outlook, with expectations of mid to high single-digit net profit growth in 2025. The company plans to continue its focus on network investments in the US and UK, and anticipates full contributions from recent acquisitions. The ongoing expansion in renewable capacity and infrastructure is expected to drive future growth.

Executive Commentary

Ignacio Galan, Executive Chairman, emphasized the company’s commitment to electrification, stating, "Electrification is unstoppable." He also highlighted the company’s long-standing presence in the US market, saying, "We are more than twenty years in United States."

Risks and Challenges

• Potential impacts of US political changes on operations.
• Management of projected net debt levels.
• Considerations regarding the closure of the Spanish nuclear fleet.
• Volatility in the Iberian energy market.
• Supply chain sustainability compliance.

Q&A

During the earnings call, analysts inquired about non-cash adjustments in the renewable pipeline and the potential impacts of US political changes. Iberdrola also addressed considerations regarding the Spanish nuclear fleet’s closure and provided updates on its offshore wind projects in Vineyard and New England.

Full transcript - Iberdrola SA (IBE) Q4 2024:

Moderator, Iberdrola: 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 twenty twenty four 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 and 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 webpage, www.iberdrola.com.

Finally, as today is a very busy day for all of you, given the many companies reporting results this morning, we expect that our event will not last more than sixty to seventy minutes. If any question remain unanswered, we at IR are, as always, fully up to your disposal, hoping that this presentation will be useful and informative for all of you. Now with further ado, I would like to give the floor to Mr. Ignacio Galan. Thank you very much again.

Please, Mr. Galan.

Ignacio Galan, Executive Chairman, Iberdrola: Thank you very much, Ignacio, and good morning, everyone, and thank you for everyone for joining us today. We are today presenting the result of an extraordinary year, driven by our ordinary operations with a strong performance across all our business and geographies, but also due to the extraordinary factors in 2024, we took huge step in the execution of our strategy using the proceeds from the divestment of thermal generation to accelerate with these resources growth in networks in The UK with the electricity in The US transaction in The US where we acquire our main minorities. In addition, as a result of our customer prudent accounting practices, we made EUR 1,100,000,000.0 on noncash adjustment and efficiency measures which offset the capital gains from divestment made and will enhance our future earning. As a result, our reported net profit reached EUR 712,005,000, up 17%. Reported EBITDA was increased by 70%, up to €848,016,000 driven by a new record in investment up to €17,000,000,000 of this total, 12,000,000,000 were organic investment.

And BRL 5,000,000,000 were the result of the two corporate transaction already mentioned in U. S. And UK. Operating cash flow reached 836,011,000, up 10% in recurring terms, allowing us to combine growth and financial strength with FAO to adjusted net debt close to 23%. To secure this growth, last year, we also made record purchase totaling 853,007,000, more related to the investment that will mature in 2026 and probably some fewer than in 2027.

All in all, this strong performance is leading the board to propose to the general shareholders meeting a total dividend of EUR $6.35 per share, up 15%. Moving to operating results, the 70% increase in EBITDA reflects our growth in all our businesses and geographies. Electricity production and customer benefit from 2,600 of additional renewable capacity, including more than 700 of offshore wind sold through a diversified portfolio or route to market, mainly CFDs and long term PPAs with Tier one companies like Meta (NASDAQ:META), Microsoft (NASDAQ:MSFT) or Amazon (NASDAQ:AMZN). As well as the excellent performance of our pumping storage facilities, we generate almost six terawatt hours in market with growing intraday price spreads as we predicated in our last Capital Markets Day. Net loss operating result reflect rate increases across all geographies.

In a higher asset base, mostly in The U. S. And UK. After EUR 11,000,000,000 invested in the last twelve months, almost doubling last year’s figures. Net gross organic investment increased by 21% to EUR 62,000,000,000, of which almost 60% was allocated to distribution, mainly in The U.

S. Where invested €1,500,000,000 driven by New York rate case and UK where invested €700,000,000 The remaining 40% correspond to transmission investment also due to the growth in The U. S. With more than 1,000,000,000 invested in New York and the ESC interconnection between Massachusetts and Canada. In The UK, where investment reached 100,000,000 million Rio T2 project in the Easter Green Link subsea cable.

Additionally, we allocated 5,000,000,000 to Electricity Northwest and Avangrid (NYSE:AGR) transaction, as mentioned. All in all, our net regulated asset base increased by 60% to EUR 49,000,000,000 with two thirds in The UK and The U. S. UK RAP reached EUR 15,000,000,000, up 45%, driven by the electricity towards transaction and organic investment, followed by U. S.

With EUR 14,000,000,000, Brazil with EUR 10,000,000,000 and Spain finally with EUR 9,000,000,000. Growth in The U. S. And The UK was also the main driver of renewable investment, which reached $5,400,000,000 with almost $2,000,000,000 allocated to offshore wind. U.

S. Investment increased by 37% to $1,500,000,000 mainly in our Vineyard wind offshore wind farm, which is on track to be fully operational in 2025. Also in The U. S, we completed more than seven fifty megawatts of solar PV and made significant progress on the construction of 1,500 wind and solar megawatts of all of them with supply chain, tax credit and PPR secures. Following this increased investment in 2024, we do not expect to start new renewable period in The U.

S. In 2025. In The UK, investment reached 1,200,000,000 mainly in this Anglia 2 And 3 offshore wind farms, which, as you know, obtained CFDs in last auction. We also invested $1,400,000,000 in Iberia, putting in service 1,000 new megawatt with 500 more under construction, mostly with partners and PPA secured. In addition, we completed 2,000,000 kilowatt hours of pump and storage capacity at Santiago Harris and Valparaiso projects.

In Germany, we completed the Balti Kegel offshore wind farm with four seventy six megawatt of installed capacity, and we continue investing in Bwindacker, which will add three fifty megawatt to our portfolio next year. Finally, in Australia, we commissioned 145 megawatt wind capacity and we have three seventy five more under construction. In total, as December, our balance sheet include EUR 9,000,000,000 in renewable projects under construction that will begin contributing to result in 2025 and 2026. To guarantee the delivery of this ongoing project and the access of supply chains for new investment in 2024, we made purchase worth EUR 18,000,000,000. More than EUR 14,000,000,000 of these purchase relate to investment that will be made in 2025 and beyond, allowing us to secure 100% of strategic contracts follow all our project under construction in networks and renewables.

Mainly through framework agreement, they give us full certainty on availability and prices with minimal financial commitments. In addition, 81%, eighty eight % of the companies in our supply chains comply with all our sustainability criteria. And we continue increasing the share of local suppliers covering now 82% of the total purchase. As a result, we expect virtually no impact for new tariffs in The U. S.

Given our focus on American supply chains and the protection clause included in our clauses in our contracts. Finally, we are already working to secure supply chains for protects after 2026 given the strong demand in global market, especially for net growth in The U. S. And The UK. In particular, in Britain, we have guaranteed access to purchase worth EUR 6,000,000,000, mostly for transmission investment in the next regulated period we will start in 2026.

As mentioned, the corporate transaction completed in 2024 had accelerated the delivery of our strategy, expanding our present net worth business in The U. S. And The UK with hence obtained from the divestment our thermal generation assets and preserving our financial strength. After the acquisition of Electricity in The West and Abangir Minorities, our combined net worth asset base in these two countries reached EUR 30,000,000,000 or 60% of our total regulated assets base, enhancing our position ahead of a huge investment opportunities in transmission and distribution in The U. S.

And The UK that will exceed EUR 41,000,000,000 by 02/1930 with around 52% in distribution and remaining 48% in transmission. In The U. S, the total net worth investment will reach EUR 90,000,000,000, both in distribution in New York Main And Connecticut and in transmission mainly in the NCC (NSE:NCCL) interconnection, a new project in Europe on top of our ongoing investment. Net growth investment in UK will reach EUR 22,000,000,000 by 02/1930, mainly transmission multiplied last year’s figures by two times by four times due to the Rio T3 and major project like Eastern Green Link. Investments are also expected to grow significantly in distribution driven by Rio ED2 and ED2 frameworks.

In addition, we will continue increasing our footprint in The U. S. And The UK through renewable projects already under construction, which will imply total investment of EUR 10,000,000,000. Our sustained increase in cash flow generation will allow us to finance all this growth and preserve our financial strength. Even in the year record of investment in 2024, our FFO over net debt ratio remained in 23%, thanks to a 51% rise in operating cash flow to billion.

Recurring cash flow increased by 10% to EUR 836,011,000, and we have EUR 20,000,000 of liquidity in order to cover twenty two months of financial needs. The combination of sustainable growth and financial strength is leading the board to propose a 15% increase in the dividend corresponding to the full year 2024 result, up to EUR 0.635 per share, 50% above our dividend flow for the period and reaching 2026 estimate two years ahead of schedule. The proposed supplementary dividend to be paid in July will reach EUR 0.404 per share on the top of EUR 0.231 already paid three weeks ago. Also, in line with previous year, we expect to maintain our engagement dividend linked to attendance of AGM, which in 2024 amounted EUR 5 per every 1,000 shares. And we continue to combine shareholder remuneration with growing social dividend, creating industry and jobs contributing to public finance and promoting innovation and sustainability across the communities.

In 2024, we incorporated 6,000 people in our workforce, including more than 2,100 from electricity to the Northwest. And we made E18 billion euros of purchase, as mentioned, to 1,000 suppliers that employ 500,000 people. We also made a record tax contribution exceeding DKK 10,000,000,000 for the first time in our history, driven by a 16% increase in taxes charged to our income statement. And our commitment to equal opportunities were recognized by the top employers and the age certificates. Regarding innovation, Iberdrola was nominated by the European Commission as a private utility with the highest investment research and development worldwide for the third consecutive year after dedicating more than EUR 500,000,000 for this effort in 2024.

Finally, we continue minimizing our carbon footprint, reaching levels close to net zero. In Europe, our CO emission decreased once again to only 38 grams per kilowatt hour, which is five times less than European Union average. This commitment to social responsibility is being recognized by the most prestigious institutions. Recently, Standard and Poor ranked Iberdrola as the top utility worldwide in its Daljeon based in class index based on a wide range of social, environmental governance and ethics criteria. I will now hand over to our CFO, who will present the good financial results.

Pepe?

Pepe Sainz, CFO, Iberdrola: Thank you, Chairman, and good morning to everybody. As the Chairman has outlined, 2024 results were strong, both in reported and adjusted terms, underpinning the underlying growth of the business. In reported terms, ’24 net profit reached 5,600,000,000.0, growing 16% and adjusted net profit was 82,000,000 lower and grew 15.1% to 530,005,000. Net operating expenses, net positive adjustment, mainly capital gains from our thermal generation asset divestment, has been mostly compensated by other negative adjustment and efficiencies below the EBITDA level, mainly in onshore renewables in The U. S.

Given the delay in developing the onshore pipeline, as we will have less renewable growth as we prioritize especially investments in networks and in repowering. As a consequence, both EBIT and net profit are slightly lower in adjusted terms versus reported terms. This is not new in Iberdrola’s strategy as we try to compensate for extraordinary positive results with efficiencies and adjustments that help the group continue growing on a recurrent basis in the following years. For example, last year and to a lesser extent, we compensated in Brazil capital gains due to an exchange of assets with a cleanup of higher costs and delays in transmissions due to COVID that we are trying to recover in the future. For transparency purposes, you can see in the slide the reconciliation between reported and adjusted 24 figures in our P and L.

Main difference between reported and adjusted figures at EBITDA level is billion, as net operating expenses include $1,745,000,000 net capital gain, mainly as commented in thermal generation asset divestment. And other ones related to other minor transactions in The U. S. Gains of million, in Brazil losses of million, as well as minus million related efficiencies in Spain. This 1,600,000,000.0 difference is almost compensated at EBIT level as D and A includes 1,500,000,000.0 negative adjustments and efficiencies mainly related to The U.

S. Onshore business and other renewables out of The U. S. Due to the greater focus and networks and the expected delay in developing the pipeline mainly in The U. S.

As a consequence, the difference between reported and adjusted EBIT is reduced to million. At net profit level, the difference is just million, consider tax and other minorities impact of adjustments. As a consequence, 24 adjusted net profit grew 15.1% to 530,005,000, slightly over our €5,500,000,000 last guidance update. In the annex, you will find an even more detailed reconciliation between reported and adjusted income statement. And now starting to go into the P and L analysis, a 20% improvement in procurement costs mainly in energy, production and client business versus a much lower decrease in revenues, 9% only, thanks to our fixed price sales and the growth of that comes from our network business has driven a 2.5% increase in gross margin to billion.

As you can see in the slide, on reported basis, net operating expenses improved 27%. Net operating expenses excluding capital gain impact as explained in the previous slide as well as other adjustments and efficiencies improved 0.7%. Adjusted net personnel expenses improved 2.6% excluding Q4 efficiencies impact. Adjusted external services increased 3.5% excluding expenses linked to the thermal generation asset divestments. Adjusted other operating income increased 12.8% excluding the positive 1,700,000,000.0 impact from thermal generation asset divestment driven by recoveries and indemnities.

Reported levies reached 567,002,000 in 2024 versus 748,002,000 in 2023, improving 7%, positively affected by sentences in Spain already accounted in our nine months result, 79,000,000 positive of the hydro cannon and 193,000,000 for the social bonus. Excluding this court rulings levies grew 3% driven by the higher hydro cannon, the 7% tax on the Spanish production and the nuclear waste tax and the windfall tax in The UK. As you can see in the slide, Spain is by far the country where we pay the highest levies, 57% of the levies paid by the group worldwide. This, as mentioned previously, is the main reason why electricity in Spain is more costly than in other geographies. Analyzing the results of the different businesses and started by networks, its EBITDA grew 7% to EUR 423,006,000, driven by higher regulated asset base and tariffs.

Brazil accounts for 33 of total EBITDA followed by Spain, The UK and The U. S. But if we consider recent E and W transaction, The UK would have increased its weight to 28%. In Spain, EBITDA was million minus 0.7% as our operating performance was in line with Netree, but affected by negative impact of the regularization of past investments. In The UK, EBITDA increased 5.6% to million with higher contribution in distribution, thanks to the new ED2 framework and growing demand.

There is also a partial recovery of a provision made in the Q3 of twenty twenty three and net operating level. 2024 does not include EBITDA contribution from EMW. In Spain, EBITDA grew 23%, improving the 18% rise sorry, in Brazil, EBITDA grew 23%, improving the 18% rise in September to BRL12157 million with higher demand and higher tariffs in distribution and transmission positively affected by a BRL2148 million negative one off in 2023 related to transmission. In The U. S, U.

S. GAAP EBITDA increased 2% to $1,091,000,000 dollars as there is an improvement in contribution from the new rate cases mainly in New York, thanks to higher tariffs. IFRS EBITDA was 5% lower to $1,439,000,000 dollars with higher contribution from rate cases, partially compensated a negative timing effect due to IFRS account and higher cost. The variation versus Q3 is due to a positive Q4 in 2023 due to the recognition in that quarter of higher tariffs in New York since May 2023. Energy Production and Customers business EBITDA reached €10,000,500,000,000 compared to the €8,600,000,000 last year, driven by the investments of thermal generation assets and better business performance.

In adjusted terms, there is a 2% growth despite the fact that there was a million positive one off in The UK last year. I want to point out that the business reached close to 84% emission free generation in 2024. In Iberia, EBITDA was billion, eight % more due to a 4.7 terawatt hours higher manageable renewable production in 2024, including pumping, storage and lower procurement costs compensating lower prices. 90% of our production in Iberia was non emitting. In The UK, EBITDA fell 15.7% to $1,530,000,000 pounds affected by the million positive one off related to tariff deficit recovery in 2023, as I mentioned in the previous slide.

Excluding that, EBITDA increased 3.8%, thanks to higher production and wind onshore and better prices, partially offset by higher windfall tax and a GBP 150,000,000 negative operating issue in offshore already fixed. In The U. S, EBITDA increased 43% to $1,059,000,000 dollars thanks to the positive performance of our flexible generation fleet and better prices that improved results with our renewable production increasing 3%. In addition, in Q4, there is a positive $92,000,000 capital gain from the partial sale of Kitty Hawk, an offshore seabed. In the rest of the world, EBITDA grew 72% to EUR $721,000,000 with 31% higher production due to the entry into operation of Sambrook Wind Farm at full capacity since May and more onshore capacity installed in Poland, Greece and Australia.

In Brazil, EBITDA decreased 30% to BRL1318 million due to the capital loss of Baixoibas to sale and lower thermal contribution. Finally, in Mexico, EBITDA reached US2.3 billion dollars excluding the divestment, EBITDA reached US459 million dollars affected by the sale and the consolidation of the assets sold from February 26, but the remaining assets still contribute around half of what they did previously. Mexican business continued to use dollar as a functional currency. Reported D and A and provisions grew 31% to billion, mainly due to already mentioned billion provisions related to onshore renewable assets mainly in The U. S.

Excluding 1,500,000,000.0 adjustments, D and A provisions grew 3% to €5,600,000,000 as adjusted provisions include 141,000,000, mainly due to lower bad debt provisions, while depreciation and amortizations grew 6.8% in line with our higher asset base in networks and renewables. EBIT reached million and grew 8%. As you can see in the slide, billion net capital gain, mainly thermal generation asset sale, has been almost compensated by billion different adjustments mainly in The U. S. Onshore and inefficiencies.

As a consequence, adjusted EBIT grew 7% to billion, 132,000,000 below the reported EBIT. Net financial expenses improved million to million. Debt related cost improved million as a consequence of million reduction due to lower cost of debt, 16 basis points. 57,000,000 linked to FX, mainly the Brazil depreciation that compensates lower EBITDA in euros, partially offset by a 52,000,000 increase due to 2,200,000,000.0 higher average net debt. And non debt related result got better by $552,000,000 including $280,000,000 linked to FX derivatives that in $24,000,000 are $90,000,000 positive versus $120,000,000 negative in 2023, mainly due to the divestment of thermal generation assets in Mexico compensated at tax level.

It is important to point out that the thermal generation asset divestments was in dollars, but for tax purposes, it was in pesos, So hedges were needed. And there is another $272,000,000 positive due to capitalized interest, €163,000,000 and one offs, 67,000,000 mainly due to court rulings. Our reported credit metrics remain strong driven by higher FFO compensated higher debt. Iberdrola rating remains in the BBBB plus Baa1 rating level also helped by the improvement of our business profile with more regulated assets in countries with better ratings. 24 credit metrics were as follows: FFO adjusted net debt reached 22.9% our adjusted net debt to EBITDA remained in line with last year at 3.4 times and our adjusted leverage ratio increased slightly to 41.4%.

Our net debt has evolved from 47,800,000,000.0 at the end of twenty twenty three to 51,700,000,000.0 at the end of twenty twenty four. As you can see in the slide, our 11,800,000,000.0 cash flow generation compensated gross investments and our 6,000,000,000 asset rotation funded non organic investments. Let me also highlight that ’24 net debt includes 15,000,000,000 of work in progress that it is not still contributing to cash flow generation in the plant, but it is the source of future growth. Twenty four reported net profit grew 17% to EUR 5,600,000,000.0 compared to EUR 23,408 so EUR 4,800,000,000.0 reported net profit. In this slide, you can see net of taxes how the net capital gains EUR 1,118,400.0000 mainly thermal generation asset sale that was already in our account since September results has been almost compensated in the fourth quarter by 1,100,000,000 of efficiencies and adjustments already explained.

As consequence, ’24 adjusted net profit grew 15% to 530,005,000, only 82,000,000 below reported net profit. Adjusted net profit in 2024 is the base for 2025 guidance and is reported net profit excluding capital gains from asset rotation, adjustments and efficiencies. Now, the Chairman will conclude the presentation. Thank you very much.

Ignacio Galan, Executive Chairman, Iberdrola: Thank you, Pepe. Last March, we presented our outlook for the coming years with a clear message. Electrification is unstoppable. Less than one year later, all the data confirms our vision. Electricity demand is accelerating, especially in Europe and U.

S, where after years of flood or decreasing demand consumption is now expected to grow at least in line with GDP, driven by electrification of cooling and heating, transport industry and new demand sources like data centers, artificial intelligence, which will be more than offset energy efficiency improvements. In 2024, demand already grew by more than 2% in U. S. And UK, and this trend is set to continue in the coming years. But if we want electrification to reach its full potential, network infrastructure must be ready ahead of consumption.

For this reason, most regulators are now recognizing the need of speed up network investment to serve the latent demand of electricity that homes and especially industries will be consuming today if they had access to sufficient grid capacity. In U. S, transmission and distribution investment rose by 30% in 2024 compared with the average of the previous five years. In The UK, the business plan sent to Ofgem by transmission operators show that the investment will need to multiply by three or four times from ’26 to 31. Meeting this demand, we also require additional generation sources to provide competitive, local and efficient electricity with the lowest price volatility.

This is pushing most countries to choose zero emission technologies. Last year, renewables covered 80% of new demand globally with double digit production increases in countries like U. S. Rising renewable penetration is also increasing intraday price variability in most wholesale market, making storage even more critical to preserve system stability and cover demand 20 fourseven. For example, in the Iberian system, where last year average price stabilized at 63 megawatt hour, hourly price spread rose by 75% compared to 2023 and have multiplied by three since 2020.

In this context, we have accelerated our plan to maximize our competitive advantage and capture growth opportunities, especially in networks business. Accordingly, in 2024, we reached EUR 49,000,000,000 regulated asset base with 60% in U. S. And UK, a huge prospect of both countries. In renewables, our first mover position across markets allow us to be highly selective with new investment as assets under construction already guarantee our growth over the coming years.

All new projects are progressing well with supply chains and route to market secured, mostly through PPS or CFDs. In terms of geographies areas, The UK and U. S. Remain at the core of our growth strategy. Ligero investment in this market reached EUR 12,000,000,000, 70 percent of our total investment, mostly in Nevos, bringing the share of our global regulated asset base over 60%.

This improvement in our business profile is already driven additional growth in 2025. Net loss will benefit from increasing organic investment and better framework in all markets, plus EUR 3,500,000,000.0 of regulated assets made from electricity in North West, a 100% contribution from Navangrid in terms of net profit. In electricity production and customer, we have 2,600 of additional capacity and 22,000,000 kilowatt hours of new storage, including the full commission of the Tamika hydro power plant. In addition, the efficiency measures implemented in last quarter in 2024 will start delivering their first positive impacts in 2025. We will continue with our active management of financial expenses and we have already secured better exchange rates.

As a result, in 2025, we expect mid to high single digit growth in net profit, excluding capital gains for an asset rotation, well above $5,300,000,000 to $5,400,000,000 estimate last March. In fact, we already exceed these figures in 2024, reaching already levels close to our estimates for 2026. And we see a clear consolidation of these growth trends in the coming years, driven a structural improvement of our loan churn outlook. In 2026, we expect higher rates implies to a larger network asset base across all countries, and operating result will reflect the full consolidation of electricity Northwest in The UK. In addition, the contribution of major transmission project will continue rising, given the progress in NCEC in The U.

S, a new asset under construction in UK and Brazil. In renewables, we will benefit from an additional offshore wind capacity from Windaker in Germany, Windyard Wind One in U. S. And Assembly three in UK, and from continuous improvement in market fundamentals driven by electrification. To conclude, our evolution in 2024 and the underlying trends in all our market confirm our vision.

Every major invention of technological revolution in the first twenty first century were electrical, including electric vehicles, heat pumps, digitalization, artificial intelligence. All these are powered by electricity, making this electrification inestopper. In fact, the countries that are achieving a higher share of electricity in their total energy demand are improving their competitiveness and registering higher growth rates. Over the last several years, this demand growth has been faster than the build out of new network infrastructure, creating a latent demand that requires upgrade in transmission and distribution grid urgently. And the age of the electrification has just begun, accelerating the need of for grid investment to govern new demand, integrate renewables, improve resiliency and promote digitalization.

Of course, meeting these new concerns will also require more clean and reliable energy sources as well as storage facilities to preserve the system flexibility. Government across the world are recognizing all these by promoting additional investment to improve energy security and autonomy, competitiveness and decarbonization. And thanks to our vision and execution, we are in the best position to capture all these opportunities across the geographies and region we serve. We will give you detailed information about our growth prospect in our Capital Market Day in September 2024 this year. Of course, in the meantime, every quarter, we will continue to update you in our progress.

Thank you very much for your attention, and we’re now more than ready to answer all your questions.

Moderator, Iberdrola: The following financial professional have asked the question that we are going to entry in following. First, Fernando La Fuente, Alantra, Meki Becker, HSBC, Onfalo Sanchez Bordona, UBS, Rob Pullein, Morgan Stanley (NYSE:MS) Peter Vistiga, Bank of America Pedro Alves, Caixa Bank Fernando Garcia, Royal Bank of Canada Jorge Alonso, Societe Generale (OTC:SCGLY) Javier Suarez Mediobanca (OTC:MDIBY) Jose Reith Barclays (LON:BARC) James Brand, Deutsche Bank (ETR:DBKGn) and finally, Emmanuel Palomo, Exane BNP. The first question is related to there are few analysts asking the following. How does the company’s full year 2024 results compare to the guidance?

Ignacio Galan, Executive Chairman, Iberdrola: So thank you very much. I think guidance provide for 2024, almost, as we said, for 2025 as well, was excluding the study in our results. So what I said is full year results are slightly better than our guidance. Adjusted net profit was $530,005,000 growing 15%. And our reported net profit includes 1,100,000,000 of capital gains, almost fully offset that Pepe has already explained by noncash adjustment that Google (NASDAQ:GOOGL) hates our future earnings and always do.

Moderator, Iberdrola: Next (LON:NXT) question is, can you provide please more color on the noncash adjustment? Which factors have driven the adjustment in the Renewable business? How does this affect future investments?

Pepe Sainz, CFO, Iberdrola: Pepe? Yes. Well, basically, the thing is that due to the fact, as I have commented, that we are going to dedicate more investments to networks and will be more selective in renewables. Obviously, in the valuation of that assets, there is a especially in renewables, we value less the pipeline, especially in The U. S.

Because in The U. S, as we mentioned, we prefer to concentrate in networks. Obviously, that lower valuation of the pipeline is what drives the adjustments that we have commented most of the EUR 1,600,000,000.0 adjustment. So basically, it’s the valuation of the pipeline because we’re in the mainly in The U. S, although there is some other adjustments that we are doing in onshore in other smaller adjustments in other geographies.

What is basically the driver is that we expect to develop the pipeline in a much longer time. So that means that the pipeline has less value for us today. And that is because as I was mentioning is and as the Chairman has mentioned, because we prefer to concentrate our investments in networks and to be more selective in renewables.

Ignacio Galan, Executive Chairman, Iberdrola: Well, I think just to add, as I mentioned before, I think we always have already a system prudent system. And our rule is to provide a stable growth trend and to avoid already future surprises negative or positive. So always, we the history of the company has been based in this prudent approach and not to celebrate extraordinary things, but to keep all these extraordinary things for improving our future results as always we did.

Moderator, Iberdrola: Next is regarding to 2025. What drivers are expected to influence the company’s mid to high single digit growth guidance for 2025, which is the base for the growth calculation? And how will Avangrid one hundred percent of Avangrid, obviously, and ENW contribute?

Ignacio Galan, Executive Chairman, Iberdrola: So as I explained in my speech, I think it’s 2025 guidance, so this mid to high single is based in adjusted net profit of $530,005,000 based in various things. First, organic investment in transmission and distribution. So as I mentioned already, mainly U. S. And U.

K, which are already coming into service. Increasing our RAP as well in all countries because of our investment and with better tariffs in some cases, which are already we have freight cases, which are already been implemented during 2025. There are as well 2,600 new megawatts of renewables. And I think it’s a full contribution of electricity in the West and Avangrid, which is 100%. So but the Hasepepper, you can already give us a update which are the numbers of this Avangrid and UWE we are expecting?

Pepe Sainz, CFO, Iberdrola: Yes. We are expecting that both of them will contribute the sum of both of them will contribute somewhere between 100,000,000 and 200,000,000 for the for EUR 25,000,000. So these both companies, E and W, will contribute twelve months versus two months last year. And obviously, Avangrid, the acquisition of the minorities, will also add. So I think we think that 150,000,000 to 100,000,000 could come from these two deals.

Moderator, Iberdrola: The community is also asking what will be the expected net profit level for 2026, taking into account the slide.

Ignacio Galan, Executive Chairman, Iberdrola: Well, I thought and I’ve already I tried to clarify that one in my comment, but I think I will insist again. So I think it’s mainly is due to our network business in U. S. And U. K, as well as the completion of the project under construction.

I think we mentioned that we have EUR 15,000,000,000 in this moment of work in process. It’s not providing result. And I think most of them, they are going to be completed during this period. So I think it’s the and we have already the distribution in our countries will contribute more because we have more regulated base. There are new projects which will be completed during this year, which is NCC in U.

S. And Soguan in U. K. And Brazil as well the transmission we are already in construction. And offshore, Sangria 3 will be completed during next year.

Vindaka will be completed this year. And Vindjar Green will be completed by the end of twenty twenty five. So and I think as Pepe mentioned, we have the full contribution of electricity in Northwest, which this year we will contribute partially only because we are expecting the final approval of CMA. We are expecting soon, but I think a few months we’ll not be contributing. But in any case, I think as always in our Capital Market Day on the September 24, we’ll provide you a very detailed all these things.

And I hope that it will be as well and as good as we are expecting.

Moderator, Iberdrola: Next question is related to the sorry, for the guidance of net debt at the end of twenty twenty five and the main drivers or factors that are influencing these figures.

Pepe Sainz, CFO, Iberdrola: Okay. Yes. Well, we are expecting to end the year with adjusted net debt somewhere between EUR 55,000,000,000 and EUR 56,000,000,000. Basically, apart from the obviously the traditional investment plan and that we always have, this year, what is going to change is the E and W consolidation. That could add around €2,500,000,000 2 point 6 billion euros of new debt when we consolidate E and W.

But it will add also the FFO, okay? So it will consolidate a debt, but we will consolidate the FFO, which we are right now not consolidating. To compensate that, we are right now with two or three initiatives of asset rotation that we hope to complete through the year. We might see depending on when we consolidate E and W that we might have a peak in-depth in the first half. But obviously, if we finalize these two or three initiatives that we are expecting, that will compensate.

But in the end of the year, as I was saying, 55,000,000,000 to EUR 56,000,000,000 of debt. And the FFO over net debt will be more or less stable compared to this year. So we are expecting that by the end of the year, the FFO over net debt will be in line with the FF over net debt of this year.

Moderator, Iberdrola: This question is related to the European Union and it says about the recent clean industrial deal and the affordable energy plan. What is your view on the subject?

Ignacio Galan, Executive Chairman, Iberdrola: So I think it’s first thing, we are positive on the document. I think it’s a good initiative. I think it’s deep analysis how to improve the European competitiveness. I think most of our recommendation are included in terms of clear market orientation, promoting long term contract, PPAs, DFTs, etcetera. It’s a strong message on reduction of taxes and charges.

You know, I’ve been for many years insisting on this for compare the taxes and charges with Europe compared with Americans, which is much, much higher. And the need to increase network investment, I think I’ve already spoken enough about networks needed. And I think that is one more document which are encouraging to invest more in networks to already provide electricity demand, which now is waiting for this grid. But I’m positive on it.

Moderator, Iberdrola: Next question is about how President Trump administration may affect your plans in The U. S. In the future and also the impact it may have on your ongoing renewables project.

Ignacio Galan, Executive Chairman, Iberdrola: So we are more than twenty years in United States. We have in this country almost more than $40,000,000,000 in asset. We are present in 24 states. We have the distribution networks in New York, Connecticut, Maine, Massachusetts. We have seven, almost 10,000,000 Americans.

We have increased investment history in these twenty years. We have increased investment in our administration. We have reached a level asset because of the investment we’ve been making, including during the previous Trump administration that we continue investing in increasing our asset base. I’m sure that we will work well with anyone. In fact, in the chains of administration, we have already committed around $4,000,000,000 into this country, a capital increase to Avangrid plus facilities liquidity facilities to Avangrid as well.

I think there is something certain. The demand in The United States continue growing more than ever and investment in grid, in power more needed than ever. So I think we that’s why I think the networks which is not dependent on federal authorities, depending on the states are encouraging us to invest more and more and to put more money already to provide electricity and citizen require. So but I think that why our position in U. S, Eighty Percent of our business, as you know, is networks.

In this networks, I insist, are regulated by states. And these are already we have plans of investment almost of EUR 19,000,000,000, EUR 20 billion in networks in the next few years in all the states. In Europe, mainly, it’s the major place that we have to make because they need more resilience in the grid, more digitalized grid, and they have to have access to the new demand of data centers and others. The rest 20% of our business is 20% of our the rest of business is renewable power, I’ll just say. And this power is we have 10 gigawatt in operation.

We have the production of all these gigawatt sold through long term PPAs. And also, we have a strong pipeline where we can develop according with the demand. So, we have a strong prospect, data center, etcetera. But we will modulate because our priority now is investment in networks as you know very well. So, I think as I mentioned as well, most of our supply chains is to America is secured either in networks, most of it is American production.

And in power, many of it is as well. But I think in this moment, for all the project we are in construction, it’s already fully either the components are in America or the few of them, less than 5% of the total investment are already underway. So which I think the risk is minimum of whatever thing can happen in terms of regulation.

Moderator, Iberdrola: Next question is related to the tariff, U. S. Tariff, but has been already answered and also has been mentioned in the speech. Next question is regarding to Spain. What is your opinion about the Spanish nuclear fleet closure plan?

Has there been any change in the current situation?

Ignacio Galan, Executive Chairman, Iberdrola: So I’m going to in the last few years, the energy scenario is already changed worldwide. In Spain and Europe, as consequence of many things, of new demand for electric vehicles, data centers, cooling and heating and geopolitical factors. I think the need of become more and more safe sufficient in the countries is a reality. So we are seeing countries around. I think yesterday, Germany announced that they would like to revise and to reopen the nuclear power plant.

They closed the same political party with now is in power. They now they are trying to reopen those ones. In Belgium, they are already reopening those ones. I think the European Commission is already providing some support or supporting the state aid for reopening or extending life of the nuclear power plant. And I think that is what is happening in the rest of the geographies, Britain, United States, whatever.

So I think my point is that in this situation require deep analysis to see what is the impact of a potential shutdown and that’s in all danger we have to participate. What I can say is Spain Nuclear Fleet is safe, efficient and reliable. And I think myself as electric engineer, in my opinion, is that currently are absolutely necessary for the system stability and to keep the lights on. So we are seeing a problem in countries which are already having problem with blackouts. As a consequence of the stability of the system is already been effective for several circumstances, mainly because of the volatility of certain of the power which now are in the system.

So my approach is clear. So, Agati, something that have to be done with an open dialogue with all parties to create a common vision of the future of the electricity system and the nuclear in this electricity system to provide this competitive reliable service to the citizens. We are looking for competitively. We are looking for reliable service. We are already all committed to provide the best for the citizen as other countries are doing.

So we are not trying to invent the wheel. The wheel has been embedded. Everybody is moving in what direction. We have at least to make an open dialogue to analyze why we are moving in different direction if we move or why it’s not better to move in the same direction of number one. So, Iberdrola, as always, we are ready to participate in such a dialogue as we already done.

I think we would like the best for the citizens and we would like the best for the system and we would like the best for Spain. So I think in that way, I think we are a Spanish company. We are very pleased to participate in this dialogue for doing our best for providing the best service to the Spanish citizen in the best condition for all of them.

Moderator, Iberdrola: Next question is related to The UK. Could you please share some insights on the Sonal pricing that is being proposed in the review of electricity market arrangement? And if possible, the effect that could have on your UK business?

Ignacio Galan, Executive Chairman, Iberdrola: So I used to say that when something is working well, it’s better not to generate noises. We can already affect to the investment, which is already required for making that one. Unless when all these things that people are talking about cannot be implemented before 02/1935. So why to generate now just a debate, something which cannot be implemented in the next two years? So Britain is and the government is already encouraging us to invest almost 200,000,000,000 in The UK infrastructure, only Scottish Power, Iberdrola.

I commit with the prime minister a few months ago, 24,000,000,000 up to 2028. So and I think it’s for making such a 200,000,000,000 investment, we need stability and predictability. So no noise and no disturbances in the discussion, theoretical discussion. That for this reason, large investors and trade unions agree that this will go against the urgent infrastructure investment required in the country. So I know very well members of the government.

They are very committed with to make the country to grow and for making this grow to attract as much as possible private investment to build infrastructure the country require. I’m sure they’re going to be very sensitive to this approach of the largest investors to not generate now noises, which are not helping precisely to move on the speed up with the country required for making this investment happen as soon as possible.

Moderator, Iberdrola: Next question is related to the percentage of production in Spain and UK. You have we have locked in 2025 and 2026 for Spain and UK, as I mentioned, and the prices linked to this. Armando?

Armando Martinez, CEO, Iberdrola: Hello, everybody. In Spain, for 25%, around 95% is already committed. And for 26% is 75%. It is worth highlighting that the wholesale prices in 25% are better than in ’twenty four and around 20% or higher than expected in our Capital Markets Days last March. In The UK, we have more than 90% of ’twenty five and ’70 ’5 percent of ’twenty six already committed, and the prices are similar of the ’24.

Moderator, Iberdrola: Next is related to Spain again. Could you provide update, timing, expectation on Spanish electricity distribution regulation and returns and the condition expected?

Ignacio Galan, Executive Chairman, Iberdrola: I think the process is ongoing. I have no recent news. We expect in any case to be finalized before the year end. And I already I hope it’s going to be already moving in the positive direction. Anyway, we have a huge investment opportunities in networks, as I already mentioned, in all our countries.

Spain today is our fourth country in terms of rate base. And then sure, then Spain is going to move in the at the same speed for new investment in the same returns than other countries is already providing us.

Moderator, Iberdrola: Next question is related to Vanjar Wind. And if we could give an update on the current situation of the offshore park?

Ignacio Galan, Executive Chairman, Iberdrola: I was last week there in Boston, and we were already revising the project. I think the build up is progressing very well. All the foundation and the patio pieces are already installed. I think it’s the only thing is already just is only we are just depending on one single provider, which is General Electric (NYSE:GE), which has installing, completing the installation of the turbines. And I think the expectation is that it will be fully completed by 2025.

In this moment, we are already exporting electricity from some of our installed turbines. And I think that it works very well. I think the fastest credit has been received, and we expect already to continue receiving as soon as the new turbines have been put into service. So I think I was quite, let’s say, satisfied how it’s progressing the work on that one.

Moderator, Iberdrola: And last question is related to another offshore power plant. Is New England one in The U. S? We cannot give us some update as well.

Ignacio Galan, Executive Chairman, Iberdrola: So I’ve not been visiting New England one, but I promise after this question, I’m going to go for review on that one. But as far as I know, I think it’s we have 100% of the supply chain secure contract signed. We are already there starting already the construction of these components. We will the plan is to be in operation by 2029, I think, ’28, ’20 ’9, yes. And I think it’s going well.

I think it’s the most important thing is supply chains. Supply chain is secure, and I think we are in the progress and progressing that one well. I think we are the PPA, the CFD assigned and all the terms of this is already done and is already in a process, in normal process on that one. So the most important thing is the supply chain. The supply chain is absolutely secured in this moment.

Moderator, Iberdrola: Okay. One hour later than the starting point of this presentation. Now please let me give the floor to Mr. Galan again to conclude this event.

Ignacio Galan, Executive Chairman, Iberdrola: So thank you very much once again for attending this conference call. And if you have any doubt, as always, the Investor Relations team will be available for any additional information you may require. Thank you very much, and I think see you soon. Thank you.

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