Earnings call transcript: Redeia Q2 2025 reveals earnings miss, shares dip

Redeia Corporacion SA reported its financial results for the second quarter of 2025, revealing a miss on earnings and revenue forecasts. The company reported an earnings per share (EPS) of €0.23, falling short of the forecasted €0.2464, resulting in a negative surprise of 6.66%. Revenue also missed expectations, totaling €406 million against a forecast of €442.23 million, an 8.19% shortfall. Following the announcement, Redeia’s stock fell 2.39% during market hours, closing at €16.34.

Key Takeaways

• Redeia’s earnings and revenue fell short of analyst expectations.
• The company’s stock dropped 2.39% in response to the earnings miss.
• Revenue grew by 2.2% year-on-year, driven by the Transmission System Operator segment.
• Major investments focus on electricity transmission infrastructure projects.

Company Performance

Redeia’s performance in the second quarter of 2025 showed modest revenue growth of 2.2% to €24 million, primarily driven by its Transmission System Operator segment. EBITDA increased by 2.8% year-on-year, while net profit remained stable at €269 million. Despite these gains, the company’s results fell short of market expectations, affecting investor sentiment.

Financial Highlights

• Revenue: €406 million, 8.19% below forecast
• Earnings per share: €0.23, 6.66% below forecast
• EBITDA: Increased by 2.8% year-on-year
• Operating expenses: Grew by 3.1%
• Net debt: €5.54 billion, an increase of €169 million

Earnings vs. Forecast

Redeia’s actual EPS of €0.23 was below the forecasted €0.2464, marking a negative surprise of 6.66%. Revenue came in at €406 million, missing the forecast by 8.19%. This underperformance contrasts with previous quarters where the company met or exceeded expectations, indicating potential challenges in maintaining growth momentum.

Market Reaction

Following the earnings announcement, Redeia’s stock price decreased by 2.39%, closing at €16.34. This decline reflects investor disappointment over the earnings miss. The stock is now trading closer to its 52-week low of €15.69, highlighting the market’s cautious outlook.

Outlook & Guidance

Redeia projects its EBITDA for 2025 to exceed €1.25 billion, with net profit expected to surpass €500 million. The company anticipates its net debt to reach approximately €5.7 billion, aligning with its investment strategy focused on electricity transmission infrastructure.

Executive Commentary

Roberto García Merino, CEO, emphasized the company’s commitment to boosting investments in the national transmission grid, stating, "We are continuing to boost our investments in the national transmission grid." CFO Emilio Cerezo highlighted the sustainability of these investments, noting, "94% of our investments are eligible under the European taxonomy."

Risks and Challenges

• Regulatory changes in transmission remuneration could impact future earnings.
• Increasing operating expenses may pressure profit margins.
• Market volatility and macroeconomic conditions pose ongoing risks.
• Sustaining investment-grade credit ratings amid rising debt levels.
• Potential delays in key infrastructure projects.

Q&A

During the earnings call, analysts inquired about the April 28th power outage, with management confirming no provisions are expected. Discussions also focused on regulatory changes affecting transmission remuneration and the company’s confidence in maintaining its investment-grade credit rating. Management also hinted at potential hybrid bond issuances to support future financing needs.

Full transcript - Redeia Corporacion SA (REE) Q2 2025:

Moderator/Unidentified Presenter, Redeia: Good morning, ladies and gentlemen. We’re now going to start our presentation of the earnings from the first half of 2025. Welcome everyone who’s following us by telephone and on our website. Along with us today, we have Roberto García Merino, our CEO, and Emilio Cerezo, our CFO. I’ll hand over now to our Chief Executive Officer. Good morning, everyone, and welcome. Thank you for attending this presentation. Today, we want to share the most significant milestones of the first half of 2025 with you, looking at Redeia’s performance and all the results achieved by the group during the period. We’ll wrap up the presentation with our vision for 2025. You may remember that’s the last year of our current strategy plan. At the end of the presentation, we’ll have a Q&A so we can address any questions you might have.

I’d like to start by identifying the highlights of the period. Firstly, as you’re all aware, at the end of April, there was a total power outage on the Peninsula mainland, which I’ll discuss in greater detail later. Once again, it highlighted the importance of electricity grids and the need to strengthen the electricity system with additional flexibility tools. That’s why we’re continuing to boost our investments in the national transmission grid. These investments will enable us to achieve energy independence, supporting the development of the very fabric of industry and production. In this regard, during the first six months of the year, TSO investments exceeded EUR 560 million. That’s 34% more than in the same period of 2024, with a particular focus on international interconnections, links between islands, and energy storage, moving towards the goal of exceeding EUR 1.4 billion by the end of the year.

That’s the largest investment in the history of Red Eléctrica. This enormous investment effort has been supplemented by optimal management of the facilities, achieving a transmission network availability rate of close to 99% nationwide. Quite apart from the aspects related to the incident of the 28th of April, one of the main milestones of this half year was the divestment of Hispasat at the end of January, for which the process of obtaining regulatory approvals is still progressing. We do expect to complete the transaction in the fourth quarter of the year, which is when we will collect the EUR 725 million. I’d also like to highlight the support of major financial institutions such as the European Investment Bank, which will enable us to roll out strategic projects such as the Salto de Chira and the electricity interconnection between Spain and France.

We’ve also signed additional loans for EUR 800 million with various financial institutions, thereby strengthening our financial capacity to tackle the new investment plan we’re starting with. In terms of sustainability, you should note that Redeia has been recognized in the S&P Global Sustainability Yearbook 2025, ranking us among the top 5% of the world’s most sustainable companies and standing out as one of the best in the electricity sector worldwide. Moreover, we’ve updated our green finance framework to align it with the European taxonomy and the 2025 green principles. The framework seeks to ensure that our financial activities can support the projects to promote respect for and conservation of the environment. Now I’d like to focus on the incident that occurred last April. As you know, at 12:33 P.M. on Monday, the 28th of April, there was a widespread power outage affecting mainland Spain and Portugal.

Regarding the events that led to the Peninsula electricity system reaching zero, starting at 12:03 A.M. on April the 28th, there was a first forced oscillation caused by abnormal behavior at a power plant in the province of Badajoz, which was repeated at 12:16, and then another inter-area oscillation at 12:19, both of which forced the system operator to adopt protocol measures to mitigate them. These measures were effective but resulted in a very different configuration of the electricity system to that initially planned for the 28th of April. Likewise, there was generation that was incorrectly disconnected when the voltages in the transmission grid were within the permissible ranges according to regulations, and several generation facilities did not comply with the voltage control obligations imposed on them by Operating Procedure 7.4, which was in force at the time.

These circumstances caused an increase in voltage and a cascade disconnection of more generation facilities, which brought the system to zero. Regarding this incident, then, we can highlight that the grid was not the problem, but part of the solution, as demonstrated by the rapid restoration of supply. Thus, from the very outset, Red Eléctrica, together with other companies in the sector, worked to restore electricity supply throughout the Peninsula as quickly as possible. The restoration process was carried out swiftly and without any significant incidents in the transmission grid managed by Red Eléctrica, and power was restored to most of the affected areas during the course of that same day and earlier the following night.

On the 17th of June, the Committee for the Analysis of the Circumstances that Led to the Electricity Crisis, chaired by the Minister for Ecological Transition and the Demographic Challenge, issued a report approved by the National Security Council. Likewise, Red Eléctrica, as system operator and in compliance with current regulations, specifically the Operating Procedure 9. On the 18th of June, presented the report resulting from the analysis carried out, which also proposes measures to be taken to prevent a similar incident from occurring in the future. Both reports conclude that the incident had multiple causes, with a series of cumulative circumstances that far exceeded the N-1 safety criterion and led to a power surge and a cascade of power outages.

A technical report on the causes of the incident is still pending from ENTSO-E, although the Association of European TSOs, despite being in the preliminary stages of their investigation, have published the first findings of their analysis. This analysis identifies the events that occurred on the 28th of April, which basically coincide with those outlined in the reports from the Ministry and from Red Eléctrica, also confirming that the voltages in the transmission grid were within operational limits at the time of the first disconnection of generation. It also confirms that the actions taken by the TSOs to mitigate the serious situation caused by these oscillations were those established in the defined protocols. In addition, the investigation into the incident is continuing, both in the CNMC and at the National Court. In this context, the incorporation of measures to reinforce the electricity system is essential.

Thus, in its report of the 18th of June, Red Eléctrica proposed a series of recommendations, including the provision of greater capacity and more resources so that the system can control voltage continuously and dynamically. It’s also necessary to incorporate mechanisms to reduce sudden changes in energy flows, as well as to review the adjustments to the overvoltage function in the generation and evacuation networks, and provide the system operator with greater system observability. We’re confident that a consensus will be reached in the coming months on the implementation of these measures. In this context, the Council of Ministers has approved a new specific amendment to the 2021-2026 Electricity Transmission Network Development Plan, the second after the one approved in 2024.

This includes 65 actions aimed at incorporating additional tools into the networks to facilitate voltage control, stability in the event of oscillations, and, in general, the reinforcement of the electricity system throughout Spain. The investment associated with these actions is EUR 750 million, bringing the total investment for the 2026 plan to EUR 8.2 billion. In addition, the planning process for 2030 continues to move forward. Finally, it should be noted that the Royal Decree regulating the direct granting of subsidies from the Recovery, Transformation, and Resilience Plan funds of EUR 931 million has been approved, which will give financial support to the investment effort in coming years. Moving on to remuneration.

At the beginning of July, we learned of the CNMC’s proposal on the methodology for calculating the financial remuneration rate based on the weighted average cost of capital for the next regulatory period, 2026 to 2031, which sets it at 6.46%. Now, that’s an increase of 88 basis points compared to the current 5.58%. A public consultation process is now open, during which the corresponding feedback can be submitted until the 4th of August. To calculate the rate, the CNMC uses the methodology established in Circular 2-2019, although it does introduce certain modifications that support the increase in the rate to levels close to 6.5%. However, in the new calculation of the parameters of the proposed methodology, certain issues have been identified on which we will convey our views within the established deadline for consideration in the methodology finally approved.

The coming months will be very intense in terms of regulatory activity. Following the aforementioned public consultation on the financial remuneration rate, the Ministry may issue a report on the suitability of the proposal in line with the energy policy guidelines, which point out that it was necessary to establish appropriate signals to encourage electricity transmission and distribution activities, particularly to meet new demand and integrate growing renewable generation. Once the feedback period has ended, after analyzing the comments received, the CNMC will draw up a new proposal, which will be submitted to the Council of State for its opinion. The deadline for issuing the opinion will be two months if it’s processed as a general matter and 15 days if it’s processed as a matter of urgency.

Finally, after taking into account the feedback from the Council of State, the new circular will be definitively approved, and that’s expected to happen in the final quarter of 2025. Moreover, the proposal for the revision of the methodology for remuneration of electricity transmission activities is due to be published shortly, initiating the corresponding feedback period with a similar timetable to that of the TRF. The entire regulatory review process is expected to be completed in the second half of the year and implemented at the beginning of 2026. Let’s now discuss the results achieved by the company during the first half of the fiscal year. As you can see, the results obtained in the first half of the fiscal year are in line with market expectations, with positive performance across all lines now that we’ve left behind the effect of pre-1998 assets.

Total investments amounted to EUR 603 million, and debt at the 30th of June stood at about EUR 5.54 billion, which is EUR 170 million more than the EUR 5.37 billion at the end of 2024, due to the heavy investment during the period. Of the total investment volume, I should highlight the investment in the TSO, which reached EUR 564 million. That’s 34% higher than the investment made in the previous year. It suggests that the year-end investment volume should be over EUR 1.4 billion in regulated activity in Spain. I’d also like to remind you that following approval by the General Shareholders Meeting, a supplementary dividend of EUR 0.6 per share was paid out on the 8th of July against the 2024 earnings, thereby fulfilling our market commitments and reaching a total dividend for the past year of EUR 0.8 per share.

Now, we can look at the income statement in its entirety. As we did in February, the 2024 financial year includes a reclassification of the various items in Hispasat’s income statement attributable to Redeia into a single line item called Profit from the Period from Discontinued Operations. The sale of Hispasat brings the percentage of the group’s EBITDA from regulated businesses, both in Spain and internationally, to 89%. I’ll now give the floor to Emilio Cerezo, who will be analyzing these results in greater detail. Emilio. Thank you, Roberto. Analyzing the revenue performance in detail, we’ve seen a growth of 2.2%, mostly due to the EUR 24 million increase in TSO. This increase comes from the new financial remuneration rate in line with the recent draft published by the CNMC for assets subject to N+2, according to the accrual criterion.

Revenues from new additions net of subsidies were offset by the amortization of RAB under the current remuneration model. In the international business, we can highlight the positive performance of Chile and Peru, although this does not seem to be enough to offset the negative impact of the Brazilian real’s exchange rate on Argo’s performance in Brazil. At the same time, the fiber optics business was affected by contract renegotiations in a context of market concentration, partially compensated by the effect of inflation on contracts linked to the Consumer Price Index. Turning to operating expenses, we see a growth of 3.1%. However, if we exclude the expenses offset by other operating income, such as Salto de Chira and projects for third parties and others, growth was slightly lower, specifically 2.4%.

Staff costs increased due to a larger average workforce required to meet the challenges arising from the strong growth of the group’s regulated assets. As for other expenses, we observe a moderate increase of approximately EUR 2 million. In this context, the evolution of income and expenses leads us to an EBITDA growth of 2.8% compared to the previous year. The positive contribution of TSO was offset by a slight decline in international activity coming from the mentioned performance of the Brazilian real, which at a constant exchange rate grew by EUR 2 million. It is also due to the aforementioned performance of the fiber optics business. To conclude the income statement, our net profit was EUR 269 million in line with the first half of the previous year, although profits from continuing operations grew by 1%. 5% compared to 2024.

The performance of profit can be explained by several factors, not just the EBITDA performance already seen. On the one hand, amortization and other items increased, mostly due to higher operating assets. In addition, the financial result was worsened by $10 million due to lower financial income compared to the first half of 2024 due to lower placement of cash surplus. The corporate income tax remains in line with the previous year with an effective rate, excluding the result of investee companies, of 24.6% compared to 25% during the first half of last year. Finally, the income reduction from discontinued operations for 4 million is due to the positive results of Hispasat in the first half of 2024. Now, in 2025, and depending on the contractual agreement for the sale, Hispasat’s results will not affect the group’s income statement.

Now going into investment, during the first half of this year, EUR 603 million were invested, out of which EUR 564 million were in the TSO, thus exceeding the investment made in the previous year by 34%, and thus consolidating the serious effort the company is making to accelerate investment in the transmission network. With regard to TSO strategic projects, we could highlight the following: the electricity interconnection between Spain and France via the Bay of Biscay, which continues to progress with the aim of reaching the milestone of commissioning the first link in 2027. Also, the new Peninsula-Balearic Islands interconnection also moves ahead, including the new high-voltage direct current link between the Peninsula and Mallorca, and other actions like synchronous compensators in Mallorca and a battery system on the islands of Menorca and Ibiza.

Also, work continues on the interconnection between Tenerife and La Gomera, a strategic infrastructure for the smaller island electric system. In addition, progress is also being made on the Peninsula-Ceuta and Galicia-Portugal interconnections. All these projects are expected to be commissioned by the end of this year. Furthermore, other projects relating to asset renewal and renewable generation evacuation measures continue, as well as the distribution support. As for our Salto de Chira project in Gran Canaria, civil works continue. As do works for the hydraulic conduit of the construction of the pressure pipe and the installation of the pumping station in Ume. 94% of our investments are eligible under the European taxonomy, thus reinforcing Redeia’s commitment to sustainability. Turning to financing now. The group’s financial net debt at the end of the half year stands at EUR 5.539 billion.

That’s EUR 169 million more than at the end of 2024, and the generation of a solid operating cash of EUR 548 million partially offsets the group’s heavy investment and the interim dividend payout. This cash flow of EUR 548 million comes mostly from the following aspects. First, the generation of a positive FFO of EUR 473 million and the reduction in working capital, which involved a cash flow of EUR 75 million, mostly due to lower payment of balances payable to other companies and differences in refunds in the system due to excess transport tariffs charged in previous years. Items pending refund to the CNMC for these provisional tariffs rise up to EUR 351 million at the end of June. Considering the above and the investments made during the year, as well as the dividend payout, our net financial debt grew by 3.1%, showing solid financial ratios.

As for our credit rating, we maintain an A minus rating both from Standard & Poor’s and Fitch, although Standard & Poor’s recently placed Redeia on credit watch negative among other reasons due to the possible effects that our heavy investments will have on the group’s financial ratios. As for the makeup of our financial debt, it is worth noting its diversification in terms of financing sources, with 79% at fixed rates until maturity and the continued predominance of euros over other currencies. This structure has enabled us to maintain a competitive average cost of debt in the current environment, now standing at 2.2%. We also continue to have the support of the European Investment Bank.

Thus, on June 16, an agreement was formalized with the European Investment Bank for financing EUR 800 million of the interconnection with France, and we signed the first tranche of a loan for EUR 400 million. Thanks to this, we have strengthened our financial position to carry out the significant investment plan we are facing. Over the next four years, we will be facing maturities of around EUR 3.5 billion, most of which are covered by our solid liquidity position, which will be further strengthened following the completion of the Hispasat sale, estimated to conclude by the fourth quarter this year. And finally, our ESG-related financing continues to increase, now reaching 80% of the total, thus bringing us ever closer to our commitment of achieving 100% sustainable financing by 2030. I will now hand it back to our CEO, who will conclude today’s presentation. Thank you very much, Emilio.

Having analyzed the first half of the year, we’ll now discuss how we expect the company to perform in the second half of 2025. Focusing first of all on the investments in our core business, the TSO, we closed the first half of the year with over EUR 560 million committed to projects that will enable us to define a robust, interconnected, and digitized network. We approach the second half of the year on the same positive path, and we estimate that we’ll reach investment levels of over EUR 1.4 billion by the end of the year. That’s what we committed ourselves to at the beginning of the year, if you remember. That will mean we’ll probably exceed the EUR 4.2 billion in cumulative investment for the whole 2021 to 2025 period, which is well above the target initially set.

We’re thus maintaining our commitment to the energy transition, ensuring investment in the transmission network as a catalyst for the transformation of the entire energy model towards a more sustainable, efficient, and emission-free model. To wrap up, we confirm our financial targets for the 2025 financial year, offering attractive remuneration for shareholders and maintaining a solid financial structure. The group’s investment allows us to envisage estimated EBITDA of over EUR 1.25 billion and net profit of over EUR 500 million. Net debt will increase mainly due to the high volume of planned investments, although this increase will be offset by the EUR 725 million received from the sale of Hispasat, with net debt estimated to be at around EUR 5.7 billion at year-end 2025. That’s the presentation. Thank you very much for your attention. We can now move on to the Q&A if you have any questions.

Ladies and gentlemen, if you wish to ask a question over the phone, press asterisk 1 on your keypad. The first question comes from Javier Suárez from Mediobanca. Go ahead, Javier. Yes, good morning everyone, and thank you for the presentation. I have got three questions. The first one has to do with the blackout, with the outage. I’d like to know if you consider, or if you might consider, during the second half of the year, the possibility of endowing provisions in order to cover the company against any future complaints that might come in from retail and wholesale customers regarding the blackout, and the possibility of having an impact on the payout policy. That’s the first question. The second has to do with regulation. You talked about the possibility of improving the proposed return on invested capital. Now, could you be more specific?

What are the factors that might be improved or amended in order to improve the regulator’s initial proposal? And then the methodology for electricity transmission in Spain, when do you expect this will be published and what do you expect it to say? How will it improve on the current regulation? What do you think would happen? And then my third question has to do with the updating of the National Infrastructure Plan. When do you expect the plan to be enacted? And what’s your opinion regarding the annual CapEx that the company ought to invest over the years of the plan? Thank you. Javier, thank you very much. Going straight into your first question. I would say that on April 28th, Red Eléctrica acted with enough diligence in compliance with all the standards and protocols established.

Their performance was absolutely compliant, both in technical and procedural terms, as established by the regulator. We do not expect to save any provisions, as we do not expect any legal claims, as we acted with diligence. This version of the event of April 28th was ratified both by the external auditor and also external legal consultants. Considering the conclusions of their analysis, which are in the report of the Follow-up Commission and in the PSOE report, and thanks to our own internal analysis, no provisions are required, as no claims are expected. Therefore, our financial statements will not be affected, nor do we expect the situation to change in the future. I mean, the longer or the further we are from April 28th, the more certain we are of the sound performance we had before, during, and after the incident.

We’re not expecting any provisions now or in the future. You ask about the regulation as well. First of all, I would like to underscore the open dialogue the CNMC, our regulator, has established in this stage of the regulation model. In our case, in the transport field, we need to have an open perspective. I will later talk about the financial remuneration rate. In the case of transmission, there are things that could be improved in the remuneration structure, not just the rate. I believe it would take a joint comprehensive analysis to come up with an answer to that. Red Eléctrica has been meeting the milestones established for this year, as they did on July 4, by launching the consultation on the distribution model. Along that schedule compliance history, the transmission activity will be publicly consulted, as established, probably very soon.

As I was saying, we observe that the TRF is a starting point. Obviously, it is below our own expectations, but it is a step ahead from the regulator to adapt that TRF to present market conditions. We do feel that the regulator has an intention, albeit we do not consider it enough, to adapt to new market conditions. We do see a potential for improvement. During the allegations period, we expect to bring in some of the rationales to the table and hope that the regulator will listen. Perhaps the most relevant aspects we want to put on the table are the fact that we believe that the cost of funding is actually very far from the true market cost of financing in a structure like the transmission network. Also, the financial cost hypothesis used by the regulator is below the free risk rate.

I am sure that the regulator can reconsider their position in the light of these numbers. There are other aspects we are contemplating to update, other parameters to standardize our practices to those of other European actors, like the market risk premium. You are surely aware that this parameter should not change because the activity it is applied to is different. On the side affecting us, that number is substantially below other parameters established by the very CNMC in industries like telecom, railroad, or airports. We do believe there is potential for improvement there. About the model, there is even further opportunity for improvement because in terms of remuneration, if we compare ourselves to other European structures, we see that several things could be improved, like acknowledgment of ongoing works. Obviously, the regulator would have to approve standard values both for investments and for operations.

Some incentive aspects are not fully contemplated in the present methodology. We are convinced that once the allegations period is opened by the regulator, several things or aspects can be improved. I suppose we will have to wait until we see the full model. We do expect certain improvements in the FRR. As for our 2025 to 2030 plan, the process started in late 2023. During the first quarter, agents involved brought their development proposals to the ministry. They put their scheduling on the table, and the system operator sent the initial proposal for development on October 1. A public consultation process should start to begin negotiations once the ministry finishes their internal analysis on that early proposal.

During the past few months, the ministry has communicated that they’ve been working on the figures, and we expect them to launch or to open the process in the next few weeks or months. Just an extra comment, Javier. In the half-year financial statements we published, specifically on note 22, we explain our approach about provisions in great detail following the existing accounting standards, particularly IFRS 37. Since we do not expect resources to leave our company in connection with the blackout, no specific provisions were made. Note 22 is very specific about it. Thank you very much for your questions. Next question comes from Ignacio Dominique from JD Capital. Go ahead, please. Hello, good day, and thanks for the presentation and for taking my questions. About investments, the administration has approved an increase in investments in this kind of network.

Do you have any potential date to publish the scheduling, and what do you expect for the next few years, particularly years 2026 and 2027? The second question, about the credit rating for Redeia. Would you help me understand if you have any measure or if you have considered any measures to maintain the present rating, even if there’s no formal commitment to do so? If you were downgraded, do you have any forecast about the financial cost for the next few years deriving from that? My third question is about OPEX considered and approved. What’s the outperformance on the TSO, or what can we expect from this new draft that will be published soon? Thank you. Thank you, Ignacio. I’ll answer your first and last question, and then Emilio will talk more about the rating. Investment, first of all.

It’s true that we’ll have to wait and see a bit because it’s up to the ministry to make further progress, which has to follow the consultation period, although I think that they’ve already had quite a lot of feedback. The advantage is that we, with the current planning and the amendments that have come up subsequently, we have managed to get a forward-looking view of what will happen, and we’re pretty sure that we’ve already secured investment over the next three years for 2026 and 2027, and a lot of 2028 as well. We are quite sure about that. Because we’ve got ready in time, we know that we should be able to guarantee the investment. What do we expect for the future? This year, we had committed to reaching EUR 1.4 billion, and we’re pretty sure that we should get there and indeed exceed it.

Over the next few years, we expect to have, and we’re talking about averages here because you know that part of the CapEx is always subject to actually obtaining the permits, but we would expect to get an average of about EUR 1.5 billion a year, perhaps a bit higher. That is a sort of valid run rate for the investments. The level of certainty over the next three years is quite high for our supply and our operation. I mean, OPEX, yes, it’s true. Here, I want to refer back to the incident on the 28th of April. I wanted to make it very clear yet again how quickly we restored the system and got the transmission network to work that day and up to the following evening. More than 5,000 maneuvers were carried out in the transmission system, and that was automatic.

We didn’t actually have to do anything manually. That does show that the level of maintenance of our installations is really high. That’s something that should be recognized evidently within the regulatory parameters. That’s an indicator that has to be analyzed by the regulator. There’s always a certain amount of headroom that has to be left for operations. We share the figures with the regulator on a constant basis. The model, we’ll have to see how the efficiencies can perhaps offset some of that margin, that buffer. Regarding maintenance, there are certain things that could be used by way of compensation. I think that this philosophy of maintaining the quality of the transmission system should be lauded. Before you talk about the credit rating, the situation we started from was A minus, and that’s a very sound rating.

Over the next few years, the outlay in investment is going to be quite high. It was never a target as such to maintain the A- rating. It is possible that in the future this rating might be reconsidered. Emilio, we are always managing the company with a balance sheet which is sufficiently strong to deal with the current moment and the strategy plan we have for the future. Totally, Roberto. As we said before in the presentation, right now, we have an A- from Fitch and Standard & Poor’s. Standard & Poor’s has published what they call a negative credit watch. That means that before three months, it is quite likely that they might notch us down to a lower level because they have seen our very demanding investment plan. Ignacio, you were asking about what measures we might put in place to conserve the investment grade.

Our priority, as always has been and always will be, is to have a sound investment grade rating. There are aspects that lead us to think that we should continue to have it. Amongst other things, the improvement in the regulation, and it is what we were talking about before, in the improvement in the FRR should improve our FFO. As Roberto said in his presentation, we have the Perte funds as well, which we will be receiving EUR 931 million in order to really shore up our balance sheet over the next few years. Apart from that, we have also got other measures you know about, which we are going to be using. We reckon in putting out hybrid bonds.

We have already an issue going out of EUR 500,000, and we have some which have come out since 2023, and over EUR 1.5 billion more should come in through that into our balance sheet structure. That is an instrument that is well suited to the moment here in Redeia, where there is such strong investment in our core activity in Spain. We are pretty sure that we will be using these hybrid bonds in the future, which will mean that we should be able to maintain our sound credit rating without a doubt. Anyway, Ignacio, as you can see, looking ahead to the next few years, first of all, we have a very sound starting position with several tools at our disposal for financing the heavy investment over the next few years.

That means that really we are looking ahead with our strategy plan to feel that the investment will be financed easily. Then coming back to the financial costs, and if we are not. One down, one not, that would not have a significant impact on our debt costs, maybe 10 basis points. I do not know, that is about what it would be. It is not really a relevant issue. The next question comes from Manuel Palomo from BNP. Go ahead, please. Hello, good morning, and thank you for answering our questions. I have got three. The first one has to do with the blackout, another about funding and finance, and the other, it is thinking about the future more than anything. Okay, the blackout first. I mean, you have said that Red Eléctrica acted in line with all the technical and procedural regulations.

However, from the day of the blackout, there has been a big increase in the restrictions and the supplementary services, leading to an increase in the system costs. If everything was done so well, why did you have to have such a big increase in these? That is my first question. The second one has to do with the financing. Coming back to what the previous analyst asked about in your answers. For the next few years, you are talking about a CapEx of about EUR 1.5 billion, more or less. With the national energy plan, it would seem that you will probably go further. Could you give us a threshold over which we might think that these other mechanisms, sale of assets or additional hybrids or, I do not know, any other action you might take, could be necessary? Have you got anything in mind?

Might that be boosted up to EUR 1.7 billion or EUR 1.8 billion a year? My final question has to do with your plans for the future. I think it was the CEO who said that this is the final year. 2025 is the final year of the current plan. I wonder when you will have your capital markets day to give us more clarity about what Redeia is going to be doing in the next few years. Thank you very much. Perfect, Manuel, and thank you for your questions. About the blackout incident again. One thing we do know is that Red Eléctrica was diligent to act in agreement with all established procedures, which is more than we can say about other players out there. Considering the situation, we decided to have a reinforced operation system in place to prevent non-compliance or failure to comply with operating procedures.

We want to have enough coverage to cover for potential non-compliances from others. The ministry knows this, and so does the CNMC. Until there are full measures in place to guarantee full compliance with the standards, we decided to create this safe and secure alternative with a reasonably curtailed impact in terms of how it affects the system. As for investment, I think Emilio said it already, there are plenty of levers and buttons we can use to take up investments in the next few years. Of course, we will have to wait for further visibility on the proposed plan announced by the administration. As I said a while ago, our investments for the next three years are practically insured. Approximately EUR 1.5 billion a year. As soon as we hear from the government plan, we will round up our midterm plan.

That EUR 1.5 billion sounds sensible enough, and the group has enough financial muscle to tackle that investment safely. We can increase our hybrid capabilities. There are European funds out there, and maybe other assets from the company could come into play. That’s not on the table yet because we still have the financial muscle to tackle the kind of investment we expect to face in the next few years. As for the strategy plan, and yes, you heard correctly, 2025 is the last year of our present plan. Until we are aware of the remuneration proposal and the new planning and scheduling, it is hard to make progress in a strategy plan. Once we are fully aware of regulation changes, which might come in the next few days, and the planning, we will draft and issue a new strategy plan and publish it by the end of the year.

We have no further questions from the Spanish room. Over to questions from the English connection now. Thank you. As a reminder to ask a question, please press Star 1 on your telephone keypad. First question from the English room is from Arthur Sitbon at Morgan Stanley. Please go ahead. Hello, thank you for taking my questions. The first one is on the regulatory parameters document that the CNMC will publish. I understand from your slides that it’s expected in the coming days. I was wondering if you are confident that the remuneration of work in progress CapEx will be included in this proposal, or if you think this is going to be a matter of negotiation in the allegation period and until the end of the year to obtain that. That’s the first question.

The second one is just I was wondering if you could please quantify the OPEX outperformance that you expect in 2025 in electricity transmission versus the regulatory benchmark. If you think you may have, the CNMC may want to implement a sharing mechanism on OPEX outperformance similar to what has been proposed for electricity distribution. Thank you very much. Okay. Many thanks, Arthur. Right. The regulatory review, a lot of work has been done internally with the CNMC technical teams so that we can share the current situation with them and they understand the costs of supplying the services and the kind of equipment that we need to roll out our investments. Right now, the team in the CNMC does share our information for 2022, 2023, and 2024. Now they know that they have to come up with a significant review of the unitary costs and remuneration.

The current remuneration model covers benchmarks for costs going back to 2008. Now they’re working with a benchmark which is based on 10 years prior to the investment period. You can imagine that working together, we’ve now got a database which is much more updated. We can expect that a review will be forthcoming, changing the parameters quite significantly. Remember that this adjustment, which will be applicable as of 2026, covers the commissioning after 2024 because of the plus two methodology covering the costs that we took on over the period leading up to 2024. That will be everything then that’s commissioned as of 2024 after that. As to the works in progress, the CNMC knows that there’s a need, a relevant need in our remuneration model. This is common practice elsewhere in other European remuneration setups to remunerate work in progress.

As we’re speeding up our investment, the volume is pretty significant. We are expecting that the new remuneration model being proposed will cover work in progress. The ministry as well has in the Chira-Esoria proposal reflected something that’s a reality for us, which is the remuneration of every work in progress as we do it. All they have to do is ratify the return rate which is established by the regulator. We think that this should be one of the aspects covered in the initial proposal. If it’s not, for whatever reason, obviously that will be a relevant part of our feedback. Emilio, do you want to talk about OPEX? Yes.

Our operating expenses in the second half of the year are estimated to go up slightly, rather more than proportionally if we compare them to the first half of the year, amongst other things because of the seasonality in the kind of work we do in maintenance. But we think that at the end, the EBITDA will be very much in line with what we’d already announced at the beginning of the year. Regarding the possibility of implementing any sharing of, well, any sharing with the regulator of these, well, basically, well, sharing costs is something that we think, well, you know the standard mechanisms of the CNMC entail sharing certain profits or losses depending on the performance of our business. We think that evidently this is a possibility. According to the regulations that are about to come out, the CNMC may well take us up on that. Thank you.

The next question is from James Brand at Deutsche Bank. Please go ahead. Hi, good morning, straight afternoon, depending where you are. I had two questions, please. The first is on work in progress. I appreciate you just kind of made some very high-level comments on work in progress. You expected it to be remunerated. Are there any more details you can give us in terms of what your expectation is or maybe what your hope is for how work in progress will be remunerated? For instance, things like, do you expect it to include all your work in progress? Do you expect the T plus two to remain in place with work in progress? Do you expect to get the initial return on capital that you get on other assets? Would you expect to get less?

I do not necessarily expect concrete answers to all of those things, but just is there any information you can give us to just flesh out a little bit more what your expectation is in that area? The second question is, do I understand it right that you’re still expecting to get the transmission proposals in July or August, so early August in the next few days, or is that going to be pushed back until after summer? Thanks. Thank you very much for your questions. First of all, your first question and work in progress, the kind of volumes we’re talking about as we increase our investment, that’s an item that naturally will have to grow. To the end of June, the volume of work in progress is EUR 1.8 million for the transmission operation, for the additional work that we’re doing in Tira-Esoria, which is remunerated.

There we’re above the EUR 2 billion level. Breaking down work in progress, you remember that we’ve got relevant projects that move an enormous amount of CapEx, like the interconnection with France. That will be a process which will roll out. Concluding at the end of 2027 or beginning of 2028. We do expect that there should be a reasonably high level of work in progress in 2025, 2026, and 2027. In 2027, 2028, we will be commissioning both the Salto de Chira project and the interconnection with France, which will bring down the amount of work in progress, but then we will be incorporating one-off projects, which will also generate a high level of investment, like the future interconnection with the Balearic Islands, which will push the figures up again. Over the next two, three years, we will see a high level of work in progress.

In 2028, that work in progress will go down slightly as we commission the interconnection with France and the Chira project. What we are proposing to the regulator here is evidently for the projects which are one-offs, they should consider how much investment they are moving over such long time periods. That evidently means that we need remuneration. If you look at the volume or the difficulty of the projects, they do take place over a long period, so they should be reflected within the work in progress. We are reasonably optimistic about this because it is habitual practice in the European regulatory framework. We have got precedents like the Salto de Chira, which is backed by the ministry. You ask about the model, the proposals for the transmission grid. You ask about the initial proposal which will come out for remuneration.

The CNMC so far has complied with the deadlines established so that by the end of the year, they will have the remuneration model for the distribution and for transmission before the year-end. We expect that the publication should occur in the next few days or at the beginning of September, maybe. We are expecting it is more likely to be now or at the beginning of August as they do comply with the deadlines they set. Thank you. Our next question is from Martin Wachtall from Bank of America. Please go ahead. Yes. Thank you so much for the presentation. It sounds like your investments are clearly going to increase over the next few years. I was wondering, is there any impact on your dividend policy? Are you still committed to have a floor of EUR 0.80 for the next, let’s say, three to five years?

Or could maybe changing your dividend per share be also a tool that could allow you to fund the CapEx while, let’s say, protecting your balance sheet? I would appreciate if you could provide a bit of color. Thank you. Thank you, Martin. Right. Our dividend policy, our commitment, is to charge the 2025 results dividend in 2026 of EUR 0.00 per share, which is our commitment that we’ve made. And we assumed those commitments in the current strategy plan. Evidently, when we’re estimating the new dividend policy, we’ll have to look at the context of the new strategy plan. Above all, take into account the demanding investment plans that we’ve got. Take into account the relevance of the dividend policy. We recognize it in the company. It’s really important, the financial strength of the group and the horizon for growth that we have over the next few years.

We think that we’ve been coherent in cutting back dividends when we had to cut back the other parameters in the company. We expect that we’ll go through a positive evolution if the financial situation of the company allows for that. We expect that it will. We have to wait for the next strategy plan, but we will continue to be coherent. We know that the dividend policy will continue to play a very important role in everything we do. Let’s hear the questions we got over email. Victor Perreau from GBC asks, what are the net investments expected for 2025 and 2026, starting with a gross EUR 1.2 billion? Okay. Investment, Emilio could give us more color maybe, but I can say that the subsidy we got for that EUR 930 million for TRT, for commissioning as of 2024 to the end of August 2026, certain facilities.

Netting this out, the real remunerated investment for everything commissioned in that period, and that will affect us, netting out the baseline. We assume that we’ll end 2024, 2025 with a total level of EUR 700 million, which will be for the commissioning of 2024 to 2025. That’s going to move on to 2026. Our benchmark for what we’ve commissioned this year is about EUR 1.1 million for 2025. In 2024, 2025, Emilio, we’ll be moving around about EUR 1,700 million or EUR 1.7 billion in gross RAB. Yeah. Up to the end of 2025. Yeah. Okay. I can only add that in terms of our subsidies, the level of subsidies we have, that EUR 930 million from the Perteflan funds. Then we’ve got about EUR 600 million for the interconnection with France.

Evidently, as we receive these subsidies over the next few years, they’re booked as subsidies as revenue, and that will improve our net financial position. You have to net out that in the investment figures that we’ve given you for the next few years. It is within the general environment of, yes, that EUR 1.5 billion. Arturo, thank you for your question. I think that we should wait to find out the proposed review of the remuneration model for our transmission, though we think that there’s quite a high potential that it will be improved. We will have to wait and see, if you don’t mind, until we actually have the proposal before us so that we can see exactly to what degree we can improve that rate. We have to wait a bit. Thank you very much, Alberto, for your question. Let’s see. The investment of investment, obviously.

We have to stick to what we have in the electricity planning. We have a plan in force, and we’ve got quite a lot of certainty already because we tried to get ready in advance, looking at the supply chain and the internal issues that we had to deal with. Over the next three years, we think that that benchmark of EUR 1.5 billion is properly adjusted to the projects that we’ve incorporated into our planning. Over the next three years, that is what we think we’ll have. We will have to wait and see the new planning proposal so that we can see clearly what kind of CapEx we’ll be expecting to roll out as of 2027. We think it’ll be about EUR 2.5 billion. That is the benchmark we’re using for that period.

We will have to look at the supply chain and the execution capacity we have internally, but that’s the basic level. The earnings per share? Alberto, we will have to wait again, I’m afraid, to see all the other parameters within the model because they obviously come into play and have a significant impact on the bottom line. We will look at the volume of investment and exactly how we’re going to roll it out in the next strategy plan. We have to wait and get the full picture. Once we’ve got that full picture and have analyzed all the details, obviously, we will announce the new strategy plan, and we will share it with the market before the end of the year. We have finished today’s presentation. Investor Relations will be happy to help you if you’ve got any further questions. Good day.

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