IBDRY (IBDRY) Q3 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. First, we would like to extend a warm welcome to all of you who have joined us today for our 2026 9 Months Results Presentation. As is customary, we will follow the traditional structure of our webcast. We are going to begin with an overview of the results and the key developments during the period, and the presentation and the Q&A session will be delivered by the top executive team joining us today: Mr. Ignacio Galán, Executive Chairman; Mr. Pedro Azagra, CEO; and finally, Mr. José Sainz, CFO. After the presentation, we'll move on to the Q&A session. [Operator Instructions] Finally, we expect that today's event to last no more than 60 minutes. Should any questions remain unanswered, the IR team will, as always, remain fully at your disposal. We hope that this presentation will be useful and informative for all of you. Now without further ado, I would like to hand the floor over to Mr. Ignacio Galán. Thank you. Once again, please, Mr. Galán. Jose Sanchez Galán: Thank you, Ignacio. Good morning, everyone, and thank you very much for joining today's conference call. In the first 9 months of 2026, reported net profit increased by 10% to EUR 5,816 million, and adjusted net profit reached EUR 5,141 million, which is 9% up. 13% excluded, this increase would be 13% excluding foreign exchange impacts. Adjusted EBITDA increased by 7% to EUR 11,191 million, driven by the strong performance of networks, up 15% due to a higher asset base in all countries, rate increases, and a growing contribution from transmission. Total investment increased by 13% to EUR 10.1 billion in only 9 months, with 75% allocated to the United Kingdom, United States, and Brazil. Network investment reached EUR 6.3 billion, up 28%, leading to a 14% increase in regulated asset base to EUR 56 billion. And we invested an additional EUR 3.6 billion in power and customers, with more than 2,300 megawatts of new capacity operational from January to September, for a total of 3,300 megawatts in the last 12 months. Thanks to our active debt management, we have combined those record investments with an ongoing reinforcement of our financial strength, reflecting a net debt-to-EBITDA ratio of 3.4x. And we maintained 70% of our total debt at fixed rates, excluding Brazil, which provides us significant protection against potential increases in interest rates. Following this result, the Board of Directors approved yesterday an increase of 8.7% in the interim dividend to EUR 0.275 per share. As usual, we will add to this amount a supplementary dividend once approved in our Annual Shareholders Meeting in 2027. Finally, in the last month, the acceleration of electrification and new energy policies have allowed us to increase the visibility of additional regulated investment and growth opportunities across the United Kingdom, United States, Brazil, and Spain up to 2030 and beyond. Moving to results. Adjusted EBITDA reached EUR 11.9 billion, up 7%, with almost two-thirds coming from the United Kingdom, United States, and Brazil. Networks increased by 15% to EUR 6,430 million, contributing already 54% of the total EBITDA, thanks to a higher regulated base in all countries. The positive impact of RIIO-T3 in the U.K. in April, new rates in New York, Connecticut, and the U.S., plus additional revenues from transmission after the commissioning of NECEC, rate increases and contribution from transmission in Brazil, and a strong performance in Spain as well. Power and customers EBITDA reached EUR 5,359 million, as the strong increase in demand in the third quarter led to higher procurement costs for electricity that has been sold at prices fixed in 2025. This negative impact is not expected to continue in the coming quarters, as new sales are already reflecting higher prices. In addition, this business was impacted by ancillary services in Iberia and higher costs in regulated gas tariffs, partially offset by the increasing contribution of pumped hydro in Iberia through the new facilities in operation like Valdecañas and Valparaíso in the Tajo and Tera rivers. All in all, excluding the FX impact, EBITDA grew by 8%. Total investments were up 13% year-on-year, reaching a new record of EUR 10.1 billion to September, or more than EUR 15.5 billion in the last 12 months. The United Kingdom was once again our largest destination with more than EUR 3.1 billion invested in the first 9 months, 31% of the total, followed by the United States and Brazil with 21% each, Spain with 16%, and other European Union countries and Australia with 10% of the total investment. By businesses, network contributed 62% of the total investment, reaching EUR 6,237 million, 20% more than last year. In the U.K., network investment increased by 36%, reaching EUR 2.1 billion or 33% of the total, driven by 60% growth in transmission and a 20% increase in distribution. Investment in Brazil also represents one-third of the total, almost doubling year-on-year, thanks to a 23% increase in distribution and the acquisition of the Neoenergia minorities, which more than offset the decrease in transmission after the completion of the last project awarded. United States network investment reached EUR 1.5 billion, with a 10% decrease due to the full commissioning of the NECEC transmission project last January. Finally, investment in Spain increased by 20% year-on-year to EUR 525 million. As a result, our regulated asset base reached EUR 56 billion, up 14%. Transmission continues to be the key growth driver with a 31% increase in RAB year-on-year to EUR 17 billion, and distribution RAB rose by 8% to almost EUR 40 billion. By countries, the U.K., the U.S., and Brazil registered double-digit growth rates, reaching a combined contribution of 83% of our total regulated asset base. And this trend is expected to continue in the coming years. In the case of the United Kingdom, distribution investment in the RIIO-ED2 framework increased by 20%. In the U.S., the temporary distribution rate recently obtained in New York will support $2.2 billion of investment up to May 2027, and the Powering New York multibillion project continues progressing. And in Brazil, Neoenergia will invest EUR 9 billion in distribution up to 2030, doubling previous investment levels after the renewal of the concessions, and more than offsetting the expected decrease in transmission after the completion of the old projects awarded that already represent EUR 4.3 billion of regulated asset base and will contribute more than EUR 250 million of annual EBITDA. In Spain, we will also continue increasing investment following the improvement in incentives included in the new regulatory framework. And finally, the authorization process for the acquisition of Caruna in Finland is progressing as expected. Investment in renewables reached EUR 3,257 million, with EUR 1.2 billion invested in onshore wind, another EUR 1.2 billion in offshore wind, EUR 450 million in solar, and EUR 400 million in storage and other technologies. As a result, we installed more than 2,300 megawatts of new capacity, of which 1,000 correspond to onshore wind, mainly in Continental Europe, Australia, and the United States; 550 megawatts of offshore wind in the U.S. and Germany; and 700 megawatts of solar and storage, mainly in Iberia and Continental Europe. By countries, more than 600 megawatts were installed in the U.S., in line with the strong increase in capacity registered across the country over the last quarters. In the last 12 months, total capacity additions reached 3,300 megawatts, as I mentioned before. Once again, the increasing cash generation allowed us to register record investments and preserve our strong financial position with a net debt-to-EBITDA ratio of 3.4x, fully compatible with our BBB+ rating. And we have continued to increase the share of fixed debt to 78%, excluding Brazil, providing significant protection from potential increases in interest rates. Following this result, and our strong current financial position, yesterday, the Board of Directors approved an interim shareholder remuneration of EUR 0.275 per share, 8.7% up. Next year, we will add to this amount the supplementary dividend approved at the Annual General Meeting next year. As mentioned, in the last month, we have continued to see similar improvements in our investment outlook to 2030 and beyond, driven by increasing electrification targets and new energy policies. A few weeks ago, the International Energy Agency published a special report on electrification showing that just by using technologies currently available and cost-efficient, global electrification rates could increase by more than 10 points in just 10 years. Under this scenario, global electricity demand will increase by 50% up to 2035. This remarkable growth trend after a decade of flat evolution is visible across all energy uses. For industry, where 40% of low and medium temperature processes could be fully electrified, through transport or cooling and heating, both with 50% electrification potential. And according to the International Energy Agency, this potential is even higher in mature economies like Europe, where the electrification rate could increase by 15 points to almost 40% of the total final energy consumption. These technological trends will be further supported by energy policies that are promoting new investments across our main markets, especially in networks. In the European Union, the electrification action plan recently approved by the commission has set a target of 46% electrification by 2040. And the European grid package calls for a strong increase in network investment up to EUR 600 billion in just 5 years. This includes measures like the acceleration of permitting and the design of regulatory frameworks with sufficient incentives. In the United Kingdom, the Clean Power 2030 plan targets 95% clean electricity in just 5 years, a building block of the country's Net Zero strategy to reduce emissions by 87% by 2040, but also as a way to promote energy security and economy across the U.K. All this requiring present investment in transmission and distribution, in line with the recent report published by the U.K. independent system operator, which estimates that only in transmission networks, investment should reach GBP 89 billion in the next decade, far above the estimates made 2 years ago. This positive outlook is already translating into tangible growth opportunities in all businesses and geographies. In networks, we expect to increase our regulated base by around 60% up to 2030, reaching more than EUR 90 billion, driven by huge investment requirements, including growth investments linked to demand increase, especially in Brazil, but also in Spain and the rest of our markets where we continue receiving more and more connection requests as well as new transmission lines or interconnectors. On top of this, refurbishment investments will also rise considerably, mostly in the U.K. and the U.S. due to the high age of network assets, which average reaches 45 years and in some cases, up to 70, 80, or even 90 years old. Finally, we also expect a strong growth in investment linked to reliability and resilience due to the increased regulatory requirements. Given the positive investment outlook in the U.S. and the U.K., we expect an ongoing rise in the contribution of both countries to our network regulated base, reaching 65% by 2030. In power and customers, we expect 15 gigawatts of new capacity between '25 and 2030, of which 60% are already installed or under construction. 5 gigawatts were already commissioned between January '25 and September '26, and 3.8 gigawatts are currently under construction, with 1.5 gigawatts starting operation already in the fourth quarter of 2026, mainly corresponding to the East Anglia THREE offshore wind farm in the U.K., another 2.3 gigawatts in 2027 and 2028, including the East Anglia TWO offshore wind in the U.K., and 700 megawatts of onshore wind and solar in the U.S. In addition, we have up to 6.5 gigawatts of capacity that will start construction shortly and will be commissioned in '28, '29, and 2030. Around one-third of this capacity will be in the U.S., mainly driven by life extension and repowering opportunities across our 11-gigawatt fleet in the country. We'll now hand over to our CFO, who will present the group financial results in further detail. Pepe?

Thank you very much, Chairman. Good morning to everybody. 9 months reported net profit grew 10% to EUR 5.8 billion, and adjusted net profit grew close to 9% to EUR 5,141 million, supported by a 7% increase in adjusted EBITDA to EUR 11.9 billion. Since last year, the dollar has depreciated 4.1% against the euro, the pound 1.7%, while the real has appreciated 5.5%. Excluding it, adjusted EBITDA growth would have reached 8% and adjusted net profit 13%. The adjustments to the reported P&L are as follows: in this quarter, in Q3, there is an impact of a GBP 382 million U.K. Smart Meter capital gain, which is excluded from the adjusted net profit in '25. The remaining adjustments were already reported at June. Regarding Mexico, in accordance with IFRS 5, Mexico is classified as discontinued operations. Therefore, its contribution is excluded from EBITDA in both reported and adjusted results. At the net profit level, Mexico is presented under discontinued operations in the reported accounts, while in the adjusted figures it is reflected under the equity line. As a consequence, in the second quarter, we excluded the positive capital gain of around EUR 1 billion from the sale of the remaining Mexican business to COX. As usual, U.K. capital allowances are adjusted at the net profit level in '25 and '26. Finally, U.S. past recognition is excluded from adjusted net profit in '25, EUR 530 million gross, EUR 389 million net. You can find all these effects explained in more detail in the annex on Slide 37, 38, and 39. Adjusted revenues increased 8% versus 4.2% at June. Procurements rose to 12.3% compared with 4.8% also at June, mainly driven in Q3 by higher purchase volumes and prices required to support the strong demand and reinforced system operations. Selling prices have started to increase, and the benefit is expected to be reflected in future periods. Adjusted gross margin grew 4%, and excluding the negative FX impact, would have grown 5%. Adjusted net operating expenses were 1% lower year-on-year and remained flat, excluding the FX impact. 9 months '25 adjusted other operating income excludes the EUR 382 million U.K. Smart Meter capital gain. Net personnel expenses increased 8.2% as the second quarter of '25 included some positive nonrecurring impacts. Average headcount increased by 2.9%. External services grew 1.7%, and adjusted other operating income, once excluding the mentioned EUR 382 million Smart Meter capital gain, improved by 37%, as in Q3 of '25, we had a negative impact of EUR 121 million due to the deconsolidation of East Anglia THREE. Analyzing the Networks business, its adjusted EBITDA grew 15% to EUR 6,430 million, with a balanced contribution from the four geographies and driven by a strong performance in all of them. Networks EBITDA already accounts for 54% of the group EBITDA, reflecting the increasing contribution that will continue growing in the following years as the Chairman has commented, and as Iberdrola invests predominantly in networks. In the U.S., adjusted EBITDA increased 19% to $1,780 million. Excluding the EUR 550 million past recognition booked in the first quarter of '25 included in the reported figures, underlying performance benefited from higher rates in distribution and an increased contribution from transmission, including NECEC following the January 16 COD. In the U.K., EBITDA increased 20% to GBP 1,355 million with increasing contribution from transmission, driven by the new RIIO-T3 framework in place from April '26 onwards. In Brazil, EBITDA grew 4% to BRL 10.4 billion, driven by higher revenues in distribution due to better rates and demand, partially offset by a temporary accounting negative impact from recent concessions renewal. As the investments have been completed, there is also a higher contribution from transmission. In Spain, EBITDA increased 18% to EUR 1,586 million due to the new financial remuneration and additionally, the recognition of operational expenditure allowances from previous years, especially visible in Q3. 9 months power and customer business adjusted EBITDA decreased 2% to EUR 5.4 billion. During the period, Iberdrola produced 91 terawatt-hours of electricity, 3% higher than in '25, driven by the U.S. and the U.K. amid increasing demand, with 90% sourced locally and fully emissions-free, advancing in energy self-sufficiency while strengthening the availability and reliability of our supply. In Iberia, EBITDA was EUR 2.9 billion, 4.6% lower, with sales increased due to demand growth, but impacted by higher procurement costs with a slightly lower renewable production, mainly due to lower wind and more gas production. We have been selling at '25 prices, but procurement cost in this quarter has been much higher. We are already selling at higher prices, which will help to offset the increase in procurement costs. The benefit is expected to materialize from '27 onwards. In addition, we registered a negative impact from regulated gas rates linked to the higher cost of gas as well as an increase in ancillary services. We are appealing to the regulator these ancillary services charges to be included as fixed costs in the rates. In the U.K., adjusted EBITDA increased 8.4% to GBP 880 million, thanks to higher wind but with lower prices that will be reviewed for '27. Reported figures are affected by the Smart Meters capital gain in Q3 of '25. In the U.S., EBITDA grew by 4.2% to $847 million. Growth was driven by the higher contribution from wind and solar assets, supported by 750 megawatts added over the last 12 months and stronger power prices, partially offset by lower thermal contribution as well as timing effects. In the rest of the world, EBITDA decreased 11.9% to EUR 580 million with higher production but lower prices, also additionally affected by the sale of Hungary and France and the negative impact of higher ancillary services in Portugal. In Brazil, EBITDA increased 6.3% to BRL 1,007 million with a higher contribution from the retail business, partially offset by lower renewable production. D&A and provisions grew 1%, reaching EUR 4,245 million, in line with previous quarters, driven by higher provisions, partially offset by the life extension in the wind assets. Adjusted EBIT grew 11%, reaching EUR 7,645 million. Net financial result increased by EUR 524 million to a negative of EUR 1.7 billion, mainly driven by negative derivatives impact, especially in the second quarter, reflecting the East Anglia THREE positive one-off of EUR 292 million accounted in the second quarter of '25 and FX hedges linked to the exchange rates, as they were positive in '25 and negative this year, especially due to the recent revaluation of the dollar and the real. Debt cost increased 22 basis points as a consequence of higher Brazilian rates and the real appreciation. Excluding the real, debt cost fell 7 basis points to 3.47%. Debt has had a moderate growth of EUR 600 million in the quarter to EUR 54.6 billion, even after the August EUR 2.5 billion dividend payment, unaffected by currency appreciation. The evolution in the year also reflects the strong effort in CapEx, more than offset by FFO generation and asset rotation proceeds. Iberdrola maintains solid credit metrics with a comfortable BBB+/Baa1 rating. This financial strength allows the group to continue investing while preserving balance sheet flexibility. Our adjusted net debt-to-EBITDA stood at 3.4x. The adjusted FFO over adjusted net debt was 22.4%, and our adjusted leverage ratio 45.8%. Ratios are in line or better than in the first half and weaker than 1 year ago, but remember that we did the capital increase in Q3 of last year. 9 months '26 adjusted net profit grew by 9% to EUR 5,141 million compared to EUR 4,727 million adjusted net profit in the 9 months of '25. Excluding the FX impact, adjusted net profit would have grown by 13%. Reported net profit grew 10%. The difference between adjusted net profit is mainly explained by the EUR 1 billion capital gain from the Mexico transaction recognized in the second quarter, partially offset by capital allowances in the U.K. And now the Chairman will conclude the presentation. Thank you very much. Jose Sanchez Galán: Thank you, Pepe. To conclude, over the first 9 months, we have seen a consistent growth trend that we expect to continue in the fourth quarter, driven by an additional 15% increase in network RAB up to December, mainly due to transmission investment in the U.S., U.K., and Brazil, and rate increases in distribution across markets like the one recently approved in Brasilia. Power and customer results will reflect 3,300 megawatts already installed in the last 12 months, plus 1,500 additional megawatts that will be operational in the fourth quarter, benefiting from higher prices expected year-end and in 2027, as well as the increasing contribution from pumped hydro in Iberia through the new assets in operation. Finally, cash flow generation will continue increasing due to new investments, mainly in regulated networks and long-term contracted businesses, and to our ongoing operational efficiency measures, supporting our strong financial position and our BBB+ rating. All these factors allow us to improve today our guidance for full year 2026 results to more than 10% growth in adjusted net profit. And we are targeting to maintain a 10% average growth rate in adjusted net profit over the next 5 years, benefiting from increasing investment opportunities in networks, renewable generation, and storage across all our markets. Our anticipation, our business model, and our execution capabilities place Iberdrola in the best position to capture these opportunities. Over the last 25 years, we have built a non-replicable footprint of network licenses across the U.K., U.S., Brazil, and Spain, and shortly also in Finland, and a competitive and diversified generation fleet with increasing repowering and life extension opportunities, as well as a mature portfolio of greenfield projects across all our geographies, strong commercial capabilities, and a large base of residential and industrial customers, a solid balance sheet, and full access to capital, supply chains, and talent. So we will provide you further details regarding all these aspects in our Capital Markets Day next March. So thank you very much for your attention. We can now begin with the Q&A session. Thank you.

Thank you, Mr. Galán. And the following financial professionals have raised the following questions: Alberto Gandolfi, Goldman Sachs; Meike Becker, HSBC; Pedro Alves, CaixaBank; Peter Crampton, Barclays; Rob Pulleyn, Morgan Stanley; James Brand, Deutsche Bank; Peter Bisztyga, Bank of America; Ahmed Farman, Jefferies; Manuel Palomo, BNP Paribas; Fernando Garcia, Royal Bank of Canada; Skye Landon, Rothschild; Jorge Alonso, Bernstein Societe Generale; Javier Garrido, JPMorgan; Javier Suarez, Mediobanca; and finally, Gonzalo Sanchez-Bordona, UBS. The first question is related to the main drivers of Iberdrola's adjusted net profit growth in the first 9 months of the year 2026. Jose Sanchez Galán: So I think the business drivers were very clear. Networks higher RAB in all countries, as I mentioned, reaching EUR 56 billion. Also, we have a strong performance in all countries. U.K., higher contribution from electricity in the North West that we consolidated in March, increasing contribution from transmission with the T3 that we had started construction in April. And U.S., higher rates in New York and Connecticut. The contribution of the transmission, the interconnection between Canada and Massachusetts, and NECEC from January. And in Brazil, increasing revenues in distribution, thanks to better tariffs in most cases, better rates, higher contribution of the transmission I mentioned we just completed. It's more than 6,000 kilometers of transmission lines completed. In Spain, a strong performance, thanks to the investment recognition of OpEx allowances from previous years. In power, higher demand in Q3. And the only problem here is with prices fixed in 2025 resulted in a higher procurement cost, as has been mentioned by Pepe. But now is the new sales are already reflecting these new prices. And so I think that can be already a positive contribution on that one. Higher production in the U.K., U.S., EU countries, and an increasing contribution of pumped hydro, especially that one, we are beating records of production during this year. Negative impact as well of regulated tariffs and the increase in ancillary services in Iberia, which we are asking to be regulated. As you know, that is the case of Portugal, where they are already in this moment just putting part of it as a part of regulated things, which is not affecting negatively to us. So all in all, I think the adjusted net profit was 9%, which is 13% if we are excluding the FX impact that Pepe mentioned before as well.

Next, what nonrecurring items affected EBITDA and net profit in the first 9 months of 2026? And how do they compare with the 2025 fiscal year? Pepe?

Yes. Well, as you know, in such a large group, there are always some nonrecurring impacts across the different businesses. But as we have defined them in Page 18 of the presentation, basically, it comes from the asset rotation capital gains or losses in general, and we've been consistent on that. There is an exception with this accounting treatment of the sales in the U.S., which didn't have a cash impact. So basically, at the EBITDA level in '26, there is no adjustment from nonrecurring impacts, defined as we have done it in the Page 18. And in '25, we have had -- we are taking the positive impact of EUR 530 million due to the network past cost recognition in the U.S. and the positive impact of the EUR 382 million that we had also positive in the U.K. due to the sale of the Smart Meter businesses. And obviously, at the net profit, the impact of these two is netted from taxes, so EUR 389 million from network cost recognition in the U.S. and EUR 191 million for Smart Meters in the U.K. And in addition to that, we had the EUR 953 million of capital gains from the asset rotation this year that we are taking out for reflecting on an adjusted basis.

Next, which are the main drivers supporting the upgrade in your 2026 guidance? Jose Sanchez Galán: So as I commented last July, our good performance in the first half has already improved in this quarter due to things I mentioned before. I think increasing our regulated asset base in all countries. I think we are investing more. So the RAB is increasing in all countries. There are some frameworks with better rates as well in regulated. It's as well increased contribution from our transmission business. The T3, I think as much investment we are making, that is directly contributing to our P&L. And NECEC is already fully completed. And in Brazil as well, all our transmission is completed now is, as I mentioned, is making a contribution of circa EUR 250 million to EUR 200 million per annum additional. And also the full ownership of Neoenergia. Since the beginning of the year, we have already this Neoenergia, which is 100% our own. I think power, as well I mentioned, I think we had already built 3.3 new gigawatts in the last 12 months. But I think to this one, we will add another 1.5 gigawatts before the year-end, which now is in construction. I think we have -- we are achieving better prices. I think as -- was mentioned by Pepe, we have been selling most part of the year with 2025 prices in our retail business, that now we are already just signing [ 2026 ] for the rest of the year and for 2027, prices much higher according with the wholesale prices of the market. And that will transform this negative impact we have already had on this one into a positive one. As well, as I mentioned, we are beating records in pumped hydro, and we expect that to continue as well in the following months. Of course, our efficiencies, we will continue systematically on that one in all terms. Now certain of these efficiencies is coming as well by the introduction of artificial intelligence in some of our processes that is already just starting delivering some positive effect. The positive management of the debt and financial expenses, Pepe mentioned as well. And that all the reason -- this reason is what has already allowed us to provide already to increase the guidance to double-digit growth in adjusted net profit by year-end, more than 10%. So that is what we have been saying before.

Next, regarding the next Capital Markets Day. It has been over a year since you presented your strategic plan. What has changed? What upside do you foresee for your current plan? And what should investors expect from the next Capital Markets Day? Jose Sanchez Galán: So I think all the trends and all the expectations is already moving in our direction. So you see -- I presented already the documents that have been made by the International Energy Agency, by the European Commission, by the British government. So all of them are coincident with our vision, which has been already developing across the last 25 years. And that's a lot. So increase in electricity demand, more electrification. So that makes ourselves that we need to make higher investments than expected, both in networks and in power and renewables. And I think if we make more investments, if the demand is increasing, if the prices look already like trends which continue at a good level, this provides better results. And that is what allows us to fix already this target of 10% average growth in adjusted net profit for the next 5 years. Nevertheless, I think we will provide you more details in our Capital Markets Day. But I think I'm quite optimistic. I think for years, I think we've been predicating renewables, networks, and storage. And now all the documents being published are talking about more power renewables, more networks, and more storage. So -- and I think we are 25 years already making this one, so which I think we have the basis for growing more than no one else because we have already the base for making this already growth much higher than others. We now are discovering that it is needed to make more power renewables, more networks, and more storage. I think as I mentioned, in terms of networks, we have already a unique footprint. So we are present in different countries and all countries are already with the same targets. United States for one reason, U.K. for another reason, Iberia for another reason, and Brazil for another reason, and soon as well Finland for another reason. So -- but all of them are coinciding on one thing, needing more and more and more investment in networks, transmission, and distribution. So in transmission, for instance, if you look already at our documents, I think now it represents roughly one-third of our total RAB. So it was almost nil a few years ago. It is not considered, but the growth in this area is huge. In the U.K., we multiplied by 5 our transmission business. In the United States, we have billion transmission in this moment in construction for injecting electricity into New York City. In Brazil, we just completed almost EUR 5 billion of transmission lines that we had nothing a few years ago. So all those target trends will make us to be already positive and optimistic about the future of the results of the company.

Next is asking about Caruna acquisitions, approval processes, explaining the strategic rationale and expected return from this new company in the group. Jose Sanchez Galán: David?

Thank you, Chairman. Regarding the approval process, the authorization progress is advancing as expected. There are three regulatory approvals required to close the transaction. The first one is the European Commission antitrust that has been already received. The second one is the European Commission FSR. All questions received during the pre-notification phase have been replied successfully. And after positive feedback received from the authorities, the formal notification has already been submitted. And third is the FDI in Finland. The filing has been submitted and the authorities are processing it. As a conclusion, approvals are expected to be received before the end of 2026 and transaction closing is expected early in 2027. Regarding the strategic rationale and expected returns, just to remind that Caruna is the largest distribution company in Finland, serving 1.5 million population. Finland is a market that will require huge investments due to electrification with additional opportunities in AI and in transmission. A clear example is the recent announcement made by Google of EUR 15 billion in data centers. Caruna has high-quality assets and a strong team in a stable AA-rated country. It is an accretive transaction since the first year, and net profit is expected to grow at an average of 7% rate in the next decade. Just as a reminder, we financed the transaction with the funds and the capital gains obtained from the sale of our thermal generation in Mexico. Jose Sanchez Galán: So I think I had the opportunity last week to visit Finland with the occasion of the official visit of the Spanish King and Queen. I had the opportunity of meeting in the official dinner with the President of the Republic, with the ministers, with the Prime Ministers, and with members of the financial community. I think I came more than delighted. I think we are more than welcome. Everybody was very positive toward our transaction, our deal. The country expectation is very, very positive in all terms. It's tremendous stability politically. So independently who is running the country, I think there are clear ideas about what has to be done in our sectors to provide stability and predictability. They would like to continue expanding the grid and repowering the grid to electrify more and more and to make the grid even more reliable. I think more than half of the grid is underground, so which I think that is something which is unique in Europe. But they would like to continue making in the same line. So I was very positive and delighted, and I'm very glad what David has mentioned that all the permits are going to be obtained soon and to complete the transaction even shorter than expected.

Would investors expect further M&A transactions after Caruna? Sorry, I repeat because my phone was off. Should investors expect further M&A transaction after Caruna? Jose Sanchez Galán: So I think you know always my answer. So I think let's first complete Caruna and lets me afterwards to talk another thing. I think historically, always, we have already made the same process. We are very predictable. We integrate -- we acquire something, we integrate. And when it's fully integrated, we start thinking on other opportunities. But we are not making 3 things at time. I think it's first now priorities and focus is to complete the transaction of Caruna. Once will be completed, we will integrate this Caruna into our system. And who knows what is going to be in the future. But now it's not our future. It's not -- we are not already dreaming and thinking what you're going to make in 2033 once I think now it's all our people is fully focused, as David was mentioned, is looking and accelerating all the permits needed. All our business people are already prepared for making the integration and with the rest with the [ metal ] system processes, et cetera, et cetera, of the group. And when this will be completed, we will see, but now it's not looking at more things than those which is already, as always, complete the transaction, integrating the transaction.

Next is, what is your view on the new U.K. government and its approach to energy policy, regulation, grid investments and the autumn budget? Jose Sanchez Galán: So the first thing is the Prime Minister is not an unknown for Scottish Power. So you know we have already worked with Andy Burnham and his team in the Greater Manchester area during the time he was a mayor. So we have the distribution in this area. We know well his administration and all the things related. But I think what we are seeing on the comment he is already making already, we are seeing continuity in the key policies. So I think they continue with more support to electrification. They are looking for more self-sufficient in the country, using all kind of means for making that happen. So they would like to diminish the external dependence of import, which is coincident with the European Commission is already predicating as well. That commission is trying for all means to increase the share of electricity, not because only electricity is because of diminishing dependence of importing energy from third parties of fossil fuels and others. So in this sense of more electrification, the government has announced reduction to 0 to the VAT for electricity bills. And as well, they are already announcing the acceleration of more grid connection, even if pushing us to accelerate that one, opening the door to a special company, which is based in British grid or something else, which is a little amount, but I think it's already just is only EUR 4 billion more than EUR 100 billion investment required. So -- but I think that is an incentive for moving faster, and that can help already as well for obtaining permits and on turning already acceleration and more agility in all the things which is needed for being faster. You know as well that the regulation for transmission is already giving incentives for acceleration of the contraction. We can reach even 100 basis points extra return if we accelerate and we -- that is why we're working very hard. And the government is very, very pushing on that one. That is the British government, but I can say exactly the same thing related to the Scottish government. I had the opportunity to have a meeting with the Scottish Prime Minister last week as well. And I think he was more than pleased in helping us for doing the necessary for accelerating all the investment required in the Scotland for making already more electrifying more and more the economy because of the positive effect we have already for the economy. There are still thousands of megawatts pending connection, and that is what we have to deliver as soon as possible for the benefit of the British citizen and the Scottish citizens.

Next is regarding Spain. What is your assessment on the regulatory measures being considered in Spain, including the removal of the 7% generation tax and a higher investment limit for electricity networks? Jose Sanchez Galán: So I think the removal of 7% of generation tax, I think is certain, that's good. That is going to reduce retail prices and wholesale prices that is positive. I think that will be -- you have to be aware, that is going to be implemented gradually from now to 2028 and following one. And there are certain conditions as well as certain fix on that one. I think that is not new. That is following the recommendations of European Union to reduce taxes on electricity and to promote electrification. So I think it's very current with the European directives in the sense of helping to more electrification and penalizing less electricity toward another fossil fuel sources. And other positive things. I think in the case of networks, it has already been eliminated the restriction to invest. So that is positive. You remember that was linked to the GDP and so on was something which is not already reflecting the reality of the needs of the country. Also has been introduced certain improvement in the rate case of distribution with certain incentives for improving -- which can improve the return of equity that gave us the incentive to accelerate our investment. So I think it's -- the numbers, the return on equity they gave was quite low. But I think with this potential incentive, then we will fight for achieving that makes already more attractive. So all in all, that makes that our expectation is to invest on the range of EUR 1.2 billion in distribution in 2027, which is more than 50% of that one we've been making in 2025. So which I think we feel is positive is rational. So we need already connection. We need to make more connection, and we need already to refurbish the grid, and we need already to expand the grid. And I think that is what now has been removed all this limitation and they are giving incentive same than U.K. for another reason to accelerate to make things better in a proper manner.

Next is another about Spain. Are you concerned about possible government intervention in the Spanish electricity market? Jose Sanchez Galán: So I think all what we are hearing at level of European Union at the level of Spanish government and a level of all the stakeholders is they are talking about oil and gas. They're not talking about electricity. All the measures they are already is mentioning in oil and gas as areas where they can already look how to protect the consumers if the prices continues increasing. The fact they are taking measures on this one. They are reducing taxes to oil to gas and to diesel for consumers. And I don't know if they are planning to make another thing. They are already requesting to make some kind of taxation for oil and gas, but never they are not talking about electricity. I think that was the letter sent by different European Union countries to the commission, which was included in Spain. It was absolutely in this line. But I think the document has been sent by a statement made by President von der Leyen and Commissioner Jørgensen and other commissioners are clear. They would like to distinguish clearly between fossil fuels and electricity and all are very focused on promoting electrification. I think you listened the President of the Commission, Ursula von der Leyen in her speech, she was very, very clear that her ambition of diminishing the European dependency through investment more and more in local sources and investing more and more in transmission and distribution and looking for a central planning, European central planning and promoting for all means the use of systems like heat pumps, transport, electric transport, et cetera, et cetera, et cetera. So all -- I think now the European Commission and the European countries understood clearly that the problem is not electrification. Is the solution for the external dependency of the countries and for avoiding the crisis, which time to time is happening as a consequence of the import of energy for their countries. Energy, when I said energy, I mean oil and gas.

Next is what the new and the proposed capacity market in Spain? Any insight of the calendar? Jose Sanchez Galán: So I think we are seeing every day how Red Eléctrica, the Spanish system operator is already just making worries about the level of lack of enough synchronous power and they are already just forcing to stop already to disconnect certain big users and that are already giving us not permission for making some kind of maintenance of the synchronous, et cetera. So I think that means that the need of more synchronous power in the system is clear. I was repeating that one for many, many times. I think in the blackout I was insisting the lack of enough synchronous power connected to the system. And I think that is for that thing is what is this is necessary this capacity payment, you would like to keep already enough power available for that one. I think still that is in final details. I think there are already some documents for making already this happen. I don't know if that is possible or it's not possible to make before election because the election is already stopping a bit all those things. But I think all the, let's say, administrative work is ongoing. And I think the terms of that one is clearly defined. All technologies are allowed to participate. There are different kinds of -- depending of the level of consistency of one or another one. But I think it's something which looks already moving in the right direction, but I think we have to expect that I don't know before the election, after election, but now it's moving faster, that one.

Next is again about Spain. How do you expect Iberdrola's retail margins in Spain to evolve over the long term? Jose Sanchez Galán: I think Pepe was mentioning clearly, I think we've been -- fortunately, the demand is growing. I think that is a very positive thing. I think demand in August grew by almost 5%, which I think that is precisely the numbers, which is the international agency is mentioning that the demand in most Western world is going to move from 2% to 5% or 4%, 5%. So I think that's positive. What happened in our case? I think we sold in 2025, our expected production at the prices at that time they were and the prices were lower. If the demand is higher, we have not enough already production of our traditional sources with most of them are already renewables. And we are forced either to generate with gas, with our CCGT or to buy electricity from the market. And I think for covering the excess of demand, and that is affecting to our accounts. I think we are selling at the prices based in the previous prices, and now we are forced to produce or to buy at prices much higher as a consequence of the today's situation of the gas prices. But I think that is changing. I think in this moment, we are adjusting all this renovation of contracts, we are already modifying the prices for adapting to the new terms. So I think we are going to benefit of the new prices of those contracts that we are already renewing during this period. And those is going to be the prices for 2027, which should be based more in the actual prices and then those what we can already expect next year. As well, then we are fixing all our expectation of production of our, let's say, renewable sources together with the other sources that we complement always. But I think we are positive because prices are higher, covering already the gap between what is the cost for certain marginal cost that we have already for this excess of demand. But the positive thing is the demand is growing. That is a very good news because that means the electrification of the country is already been accelerating, and that's good.

Next is regarding the U.S. What opportunities do you see in the U.S. renewables market, particularly from new projects? Are you seeing higher appetite for signing new PPAs? Jose Sanchez Galán: So we are seeing in the U.S. a huge demand of I think it's -- we are seeing there is project by international agency. And we are seeing as well in the last 18 months, United States has already installed something like 89,000 megawatts of new renewables and batteries, which I think that means that there are demand for that one. And the expectation is in the next 12 months to continue in the same range. I think we identified something like 80,000, 85,000 new megawatts, which is going to be built in the next 12 months. And of course, we are benefiting of this demand. As we -- as I mentioned, we have installed 750 megawatts in the last 12 months. And we have already much additional project online for the next 5 years in 2 lines. One is extending life of the existing assets or repowering those ones. What we are selling, making new PPAs at higher prices. So we are continue having appetite of PPAs at prices better than those one we have already signed before. And I think is I can already say last week, I was in the United States, and I can already -- I saw already the optimism in our people for already for building more and to benefiting of this extra demand. So I think we have a unique position. I think we have 11,000 megawatts already in operation of renewable wind mostly. And I think most of those can already be either extending life or repowering and selling new PPAs as we are doing in this moment. So we are optimistic that the next few years, we will -- months, we will continue already increasing our fleet and our numbers and the contribution of our power business in the United States.

Next is about U.S. Can you provide an update on Avangrid's rate cases in New York and Maine? Jose Sanchez Galán: Pedro?

Thank you, Chairman. I think in the U.S., first, we finished the rate case in Berkshire in Massachusetts, which is a 3-year rate case that's done. I think in New York, we got $2.2 billion of capital expenditure approved between now and the end of May next year. So we're also done $2.2 billion. We're working right now on the OpEx related to the period and also on a multiyear rate case to be approved as well. I think it's important that whatever we get approved next year, there is a make-whole provision, which basically means everything starting June 1, '26 will be already considered in that remuneration that will be approved. I think in the case of Maine, we were focused on the storms recovery. We got everything that was pending last year, several hundred millions. Then early this year, we filed a rate case. That rate case is expected to close in April '27. And it will be all the investments we have done in the last 18 months plus 1 year forward. That's what we expect to happen in April next year in '27.

Next is, which is your outlook for power prices, volumes, sales and commercial margin across Iberdrola main geographies? Jose Sanchez Galán: So as I mentioned, the demand is increasing. And as I mentioned as well, we are seeing higher prices. And so I think if we expect the due at these higher prices, our margin will already improve in the rest of 2026 and 2027. I think the conditions for the -- a bit lost what is already the situation of the Gulf. But I think it looks that the situation of gas prices, the forward prices are not already diminishing much. So if that continues in this one, I think probably the prices will continue higher for a while. I think it's -- I wish that finished as soon as possible. But if not, I think we'll be depending on this one. In any case, prices reach are not already those ones we had already in 2021. So I think it's -- we are already at a level prices, which are much lower than those we achieved at this period. I think this year, at least in Spain and France, in Portugal, I think the highest prices are probably on peak EUR 140, EUR 130, EUR 150. But the average price on the year is on the range of EUR 70, EUR 60, EUR 70 still because we have the first part of the year very low prices. So I think the average is higher than previous, but not much, so which I think that is a reality. So we have not considered only the situation -- puntal situation, but as well the average of the year.

There are a couple of questions on data center, including what opportunities data center and artificial intelligence can create for Iberdrola and our opinion about the Spanish royal decree to regulate their development in Spain. Jose Sanchez Galán: So I've been already mentioning to you the artificial intelligence, we are very positive on it because it's another source of demand growth. So I think it's -- but is another like is cooling and heating, like it is transportation, like is electrification in certain areas of the industry, et cetera, et cetera. So that's why we've been doing our best to facilitate that this new demand will be installed. So we are helping to our customers to invest in data centers, providing in the case we can land connection permits, power, et cetera, et cetera. I think that also is very good for networks. I think it's the extra investment on networks, the extra cost that can already provide this extra investment in networks can be diluted for the citizen for the higher consumption of these data centers. Which I think all citizens can benefit or lower fixed prices in their bill in the tariff as a consequence of the largest use of energy of those one, we can already contribute heavily in the -- supporting the cost of the networks. So as you know, we have already PPAs for almost 14 terawatt hours. And I think we continue already making those one. Every year, we make another 3 or 4 terawatt hours additional, and we continue increasing. I think almost half of those one or more than half is United States. But as well, we are in Iberia, we are in U.K., we are in other markets as well. So in terms of the regulation of data centers, so -- well, my position is really clear. It's going to happen. Data center is going to be built. So they are already -- they are, in some cases, having certain concern about the consumption of water for refrigeration, but they can be refrigerated with water, they can be refrigerated with air or in the case of fill, they can use for central heating. It can be already used the extra heat can be used for avoiding already to boil -- to burn gas or to use some other things for making already central heating, we can already be connected. So in the case of the jobs, et cetera, so certain that is going to provide job, different type of job, but it's going to provide hundreds of thousands of new jobs on that one. So I think all the arguments which in use, I think I'm sure that it is going to come in due time. I think when I listen, the water consumption remind to me once somebody said the nuclear cannot be installed because they make consumption of water. And I said to this one -- we said to me that one said the consumption is exactly the same one that the coal power plant because the [indiscernible] cycle is the same one in the cycle of Rankine, which is exactly using the same thing, steam, which is transforming in water and afterwards is steam and water and refrigerated. So that is the same thing. It is already need to be refrigerated, but that means for refrigeration. We have power plants which are refrigerating with running waters. We have power plant refrigerated with air, and we have power plant chimneys of hydroelectric chimneys, we can refrigerate with less consumption. There are many means for that one. And the central heating is reality in many countries with the central heating exist as a way of heating the people there.

Next is how do you assess the outlook for offshore wind in Europe and U.K.? And what criteria guide Iberdrola's participation in new auctions is? Jose Sanchez Galán: So I think in this moment, we have 7 offshore wind farms in operation. We have already a track record and experience in building and delivering. We participate in all the auction, all this space in selective criteria. But with one clear idea, if we participate and we win, we deliver. So we are seeing in this moment that in the Western world, more than half of the auction awarded has not been built. So almost 78 gigawatts has been awarded in our core markets. Only 50% has already -- even though completed, has FID. So -- but only 4 or 5 has already finally built. But we participate with commitment towards the authorities, then we will build those one if we win. So many others are already coming there as an auction. Then we build doesn't depending on many things. When we make an auction, we already secure our supply chain, guarantee all the terms, permits, et cetera, et cetera. And I think it just execute. That's why all our wind farms are all of them being executed in some cases, even having tremendous difficulties, regulatory difficulties, but we always succeed in making that happen. So what is the criteria? First, if we go, it's because we would like to build. So -- and I think I repeat to all the governments, the big difference between ourselves and others is that always when we bid and we win, we deliver. So -- and I think those countries, what they would like to have already show a success on auction because many bidders, but they don't care about how many of those are executed is fine. In that case, we don't play this game. We play the game and presented already some project with looking for strict profitability, a balanced risk between the construction and operation. We always go with a secure supply chains always prior to the bid. So -- and with -- always as well with the offtakers at a great price. So we are not already insisted for us, it's not an auction just to see if we have opportunity or not. We have already the commitment of execution, which is our -- if you put in our brand, Iberdrola equal execution. Iberdrola never failed, always executed.

Last question. Looking beyond 2030, what do you expect from the long-term investment cycle in networks? And do you believe the current growth trajectory can be sustained? Jose Sanchez Galán: So I showed to you in my presentation that our planning is to accelerate investment in networks up to 2030 and beyond. And not because we are planning, it's because we are requested by regulators and by countries to accelerate that one. I think the case of Spain or the case of U.K., introducing incentives for moving faster. So I think that it's a clear term. The European Commission is recommended to give already better, let's say, make already more attractive. The investment on that one is thing. I think it's the electrification is here. I think it was my dream 25 years ago. Now it's not a dream, now it's a reality. So the demand is growing in all countries. The number of electric vehicles because of this energy crisis is booming in all countries. Now the problem is if it's Chinese, Japanese, Korean or European or American. But I think the demand is there and the cars are already being installed. So the electrification is a fact. I think -- but I think that needs already networks for reconnected. It's no connection only between the production centers to concession center as well it's already the connected between the concession centers and to make already this concession center more reliable to put much more power. So imagine that suddenly Madrid decide that all towns, all the city will be ready with heat pumps, which now is being promoted. So we need already to expand the power of all our connection. All our grid need to be double or triple the capacity at present. And that means new -- reinforcing the cable, reinforcing the substation, reinforcing the transformers because that is happening. And I think I used to say that probably our sector is the only one, which always we are behind the demand. Normally, the factories, I make the sample, the factories are made after the roads are built. Here, we make the factories and afterwards, we are looking to build the road. So that is what European Commission would like to change the trend. So let's put readiness infrastructure for facilitating electrifying many, many uses because if we are expecting, then the usage will be built. Before the connection, that never happened because the people is not ready to build the factory, expecting then the connection arrived. It's looking for the connection for starting the factory. So now the trend which is moving. That's why we are receiving this new incentives for accelerating and accelerating this investment. And that is what we are present. I think we have a unique footprint, United States, U.K., Brazil, Spain and soon as well, Finland and Australia, what all are the same thing. So any country ago is double, double, double. I was -- last time I was in Brazil. They already extended the life of the concession, but the condition is you have to invest more in networks, double. So I think that is the reality we are facing everywhere.

Okay. 10 minutes more than the expected end of this conference call. I will now hand the floor over to Mr. Galán again to close this event. Jose Sanchez Galán: So thank you very much for taking part in this conference. As usual, our Investor Relations team will be more than available for any additional information you may require. But I hope that, that has been useful for you and the explanation we provide and the expectation -- the positive expectation for the short term and the medium term as well. Thank you very much. Thank you.