Hello, good morning to all the people connected. Welcome to the nine months 2025 results presentation which will be hosted by Endesa CEO José Bogas and the CFO Marco Palermo. Before we start, let me remind you that after the presentation we will have the usual Q& A session. Thank you. Now let me hand over to our CEO José Bogas.
Okay, thank you Mar, and welcome to everybody. Let me open this presentation by highlighting the strong economic and financial of the period, which as we will see shortly resulted in a remarkable cash generation. This clearly proves the resilience of our business model which enable us to meet our commitments, maintaining predictable results and consistently creating value despite a complex and uncertain market context. Regarding shareholder remuneration policies, we are making steady progress in the implementation of our share buyback program as we will detail later on.
Finally, when it comes to the distribution remuneration framework, the current proposal clearly does not provide adequate support and incentives for the investment effort required by the National Energy Plan. Let's now have a look at the key financial and operational highlights of the period. On slide number four, we can see the solid financial results achieved by in this nine months of 2025, EBITDA reached EUR 4.2 billion, marking a 9% increase year- on- year, while net income came in at EUR 1.7 billion, up by a sound 22% versus last year. Cash generation remains strong with an FFO rising to EUR 3.4 billion, a 29% increase year- on- year. These results allow us to confirm that we are well on track to reach the upper range of our forecast, both in terms of EBITDA and net income. We continue to progress on our capital allocation strategy.
As you can see on slide number five, we acquired the remaining 62.5% stake in Cetasa, enabling full consolidation of this wind asset portfolio. In September, we entered into a strategic agreement with MasOrange to provide combined energy and telecom offers. As part of the deal, which will be completed in the coming months, we will acquire Energía Colectiva, bringing over 350,000 energy customers to our portfolio and gaining access to more than 1 million potential clients. This will reinforce our commercial strategy and opens new opportunities to foster customer loyalty through an integrated service offering. Furthermore, the strategic partnership with Masdar, which we announced last March, was successfully concluded in early October. Lastly, as already commented on, we are progressing on the implementation of our share buyback program.
After completing the second tranche, we will launch a third one with a target of up to EUR 500 million to be executed no later than February 28 next year. Slide number six provides a brief overview of the progress achieved on the capital allocation strategy and the execution of main industrial KPIs. We invested around EUR 1.4 billion during the period with nearly half allocated to networks as shown in the slide. Industrial KPIs confirm our progress. Starting with grid, our efforts are reflected in the improvement of the interruption time index while total losses remain stable at around 10%, still significantly impacted by non-manageable losses due to localized fraud in renewables. The consolidation of new renewable capacity allowed us to achieve a 79% emission-free output.
Lastly, in the customer segment, it is important to keep in mind that we are pursuing a strategy focused on higher value customer, reshaping our customer mix profile with a focus on long-term loyalty. From a market perspective, on slide number seven, commodity prices show signs of normalization throughout the period, gradually stabilizing after the volatility seen in early 2025. In the Spanish electricity market, final prices were mostly affected by the post-blackout measures to prevent future incidents and the resulting notable rise in ancillary service costs. While daily electricity price averaged EUR 63 per MWh, that is a 21% increase year- on- year. It remains unclear how long the system operator will maintain its special anti-blackout measures, which poses a significant cost to the system. Besides, we must consider the lesson learned from the incident.
Our electrical system is secure, but we must update the system operation that has undergone structural changes, now dominated by renewable technologies. In this scenario, we believe it is critical to reconsider the nuclear phaseout schedule starting with Almaraz. This facility has become key as its location helps to strengthen the grid security in an area with vast renewable generation. In addition to rolling out all the measures to boost electrification, there are other steps we must take to ensure system security of supply, such as implementing a flexible control model. Slide number eight shows how mainland demand continues to consolidate sustained growth, recording a 2.4% year- on- year increase that is 1.8% adjusted. When it comes to Endesa's area, demand rose by 4.2% and 2.5% respectively. Deep diving into the analysis by segment, residential consumption spanned significantly, largely influenced by the rise in temperatures.
The rebound of industrial and services demand is part of a broader sector wide increase in energy usage. This clearly aligns with the market rise in connection requests seen in recent years, which are now starting to materialize into actual consumptions. In this regard, it is worth highlighting the growth of the service sector demand, particularly in the Aragon area, which has seen a 9% year- on- year demand increase mainly associated with the incorporation of data center activity. The strong performance achieved since last year is a clear sign of a turning point of trend, not only in terms of the consolidation of the recovery in demand, but more importantly in the materialization of a new industrial demand. On the next slide we review, that is slide number nine, we review the most significant highlight of the distribution regulatory framework.
Although the new remuneration proposal introduced certain improvement, it still falls significantly short on meeting the ambitious and urgent requirements to achieve Spanish decarbonization and electrification goals in sharp contrast. The context evolves in a different direction and reflects very different dynamics and challenges. Grid connection requests continue to steadily rise and some demand growth scenarios, such as one of those considered in the 2025-2030 Transmission Network Development proposal, even exceeds 2030 National Energy Plan assumptions. REIT availability was only 17% at the beginning of September, being virtually zero in Endesa's area as of today. Due to these capacity constraints, we have been forced to reject most of the new demand connection requests for 2025. It is crystal clear that investment in distribution network must be accelerated to meet electrification goals, the Ministry's proposal being a step forward in raising the strategic investment limit by 62% for the 2026-2030 period.
However, a fair and forward looking regulatory framework that incentivizes investment is essential. Moreover, the pending rate of return update must urgently resolve existing asymmetry with other European countries as well as addressing inconsistencies with other regulated sectors. In conclusion, we urge the CMC to recognize this reality and to respond accordingly by approving a remuneration framework that rises to the challenge. Let me now hand over to Marco for the financial results.
Thank you Pepe and good morning everybody. Let's start with the analysis of the financial results. I'm now on slide 11. As we have just mentioned, EBITDA rose to around EUR 4.2 billion, up 9% from the previous year. This solid performance was driven by several key factors. First, the removal of the 1.2% extraordinary levy which negatively impacted last year's results by around EUR 200 million and second, the 8% increase in generation and supply. EBITDA more than offsets the lower contribution from distribution affected by one-off capital gains that we booked in 2024. Moving to slide 12 for a closer look at the generation and supply segment. EBITDA expansion was primarily driven by the 8% gross margin increase, while fixed costs rose slightly, impacted by -1 offs in the O&M.
The moving parts of the margin evolution were as conventional generation delivered a 16% increase driven by strong results in gas management supported by positive prior hedging position, more than offsetting the lower results from short position management with less opportunities in the current price context and a nuclear margin decline mainly explained by higher variable cost due to taxes. Basically, the full and reservoir tax and the 7% tax on generation. Supply business also contributed positively, mostly due to stronger gas retail margin while the power supply was stable year- on- year. Finally, the renewable business remained flat overall. Higher hydro volumes were offset by lower wind and solar output and lower capture price. Moving to slide 13 now, the free power margin evolution reflects all these dynamics, normalizing compared to the record high attained last year.
The integrated unitary margin stood at EUR 53 per MWh with a power supply margin of EUR 18 per MWh. This supply margin remained nearly flat, underscoring the effectiveness of our strategy focused on customer value over volume and mostly offsetting the impact of rising ancillary service costs and peak costs for the full year. We expect the integrated unitary margin to remain at the current level of around EUR 53 per MWh. On slide 14 now we analyze the gas business from an integrated perspective. The gas margin showed a strong improvement supported by favorable previous hedging positions and resilient pricing. In the B2C segment, the unitary margin reached EUR 10 per MWh with expectation of ending the year at around EUR 9 MWh.
Moving now to slide 15, in the below EBITDA D&A slightly increased compared to the previous year, mainly due to higher amortization from investment in distribution and increased depreciation in renewables, which included the consolidation of the Hydro Asset Inc. since February. Financial results showed a notable improvement, driven by a reduction in average gross debt and lower cost of debt. Finally, the effective tax rate stood at approximately 24.5%, no longer impacted by the non-deductibility of the 1.2% temporary levy that penalized last year's results. Net income rose by a solid 22%, with net ordinary income to EBITDA conversion ratio reaching 41% in the period.
Turning to the next slide, page 16, cash generation continued to be strong, with an FFO standing at EUR 3.4 billion, improving on the previous year's levels mainly due to the robust EBITDA growth and the positive working capital evolution versus previous year, which was impacted, you probably remember, by the EUR 530 million Qatar arbitration payment. On the other hand, the higher corporate income tax payment made in this third quarter reflects the exceptional results achieved in 2024 compared to 2023. On slide 17 now, net financial debt came in at around EUR 10 billion, with cash generated in the period more than covering the deployment of CapEx, including EUR 1 billion of inorganic CapEx. In addition, the change in net debt reflects dividend payments totaling EUR 1.5 billion and the completion of the second tranche of the share buyback program, which resulted in a cash outflow of approximately EUR 450 million.
Gross financial debt remained unchanged, with the average cost declining to 3.3%. Now I hand over to Pepe for the closing remarks.
Thank you. Thank you, Marco. As we mentioned throughout the presentation, the solid delivery across all business areas reaffirmed our confidence in achieving the top end of the full year guidance. This confirms the successful execution of our strategy and the resilience of our integrated business model. The soundness of our results is reflected in our commitment to shareholders with a solid dividend policy, further supported by the share buyback program that will drive sound and long term returns to our investors. Lastly, we firmly believe that capital allocation must rely on fair and forward looking regulation. A stable regulatory framework that incentivizes necessary investment is essential to unlock the full potential of our capacity to accelerate the energy transition. Thank you for your attention. Let's now move to the Q& A session.
The telephone Q& A session starts now. If you wish to ask a question, please press star five on your telephone keypad. If you change your mind, please press star five again on your telephone keypad. Please ensure your phone is not muted.
Okay, we start now with the round of different questions, and the first one comes from Peter Bisztyga from Bank of America, please. Peter, go ahead.
Hi, thank you for taking my questions this morning. Three if I may. First one just on numbers. Just looking at your strong nine month performance, it looks like you need only EUR 300 million of net income to hit your full year guidance. At the top end of a range that would be down quite a lot versus EUR 600 million that you did in Q4 last year. I was wondering if you could just explain what the year- on- year negative moving parts are going to be in the fourth quarter. Next question is on ancillary services. I was just wondering what was the positive impact of higher ancillary service costs on your generation business in the nine months, and despite your flat retail margin, do you think that you can pass on those higher ancillary service costs to your customers in 2026?
Should we expect your supply margin to actually increase above 18% next year on that basis? Finally, you lost another 130,000 deregulated customers in Q3. I know you've said that you focus on high value customers, but just wondering what proportion of your remaining 6.3 million liberalised customers you see as low value and are willing to lose. At which point do you sort of have to start focusing on customer numbers rather than margins? Again, thank you.
Okay, thank you, Peter. I will try just to give some color to the first question and the last one and then Marco will add whatever with regard to the guidance. As we have said, we can confirm that we expect to reach the top end of the capital market day guidance for the full year 2025. That is clear and we feel very, very, very comfortable. We don't use to change our guidance but believe us, we feel very, very comfortable regarding the customer that we have lost in the last quarter, how much customer we are thinking that could be in a vulnerable, let's say, that position. It is clear for us that the competitiveness in the Spanish sector is a good thing and is improving the way in which we offer and supply services to our customers.
It is clear also that just because of the more than 25% churn rate that we have at the level of the system and also at the level of Endesa, there are many switchers that it's very difficult just to obtain any profitability from this. As you could see, we have reduced our customers but our margins in supply, even with the increase in the ancillary service costs, continue being the same at the last year, more or less. That means that these customers that we have lost are not a value customer. As we have said, we are trying to put first the value over the number of customers that we have.
On the other hand, I would like just to add that this movement that we have done with MasOrange is trying just to really change a little bit our offer to our customer, trying to offer bundled services of telecoms and energy and giving a better service just to increase the fidelity of these customers. We will continue that and we will see if this strategy really reduces the losses and even more increases the customer in our customer base. Now Marco at whatever and talk about the ancillary services.
Okay. Hi Peter, thank you for your questions. Again, let me add something also on question number one. Yes guys, I mean it's like there is no secret here, it's EUR 0.3 as a net income for fourth quarter. Generally the fourth quarter is a strong quarter. That's why we're saying that we are very, very comfortably in the higher part of the range. Regarding question number two, ancillary service costs. There were two questions I guess there, but basically first one, just to give you a few numbers in order to have an idea on quarters for us, the penalization of the increase of ancillary service costs this year weighs approximately as a gross penalization EUR 75 million per quarter. Basically nine months is approximately EUR 200 million.
On the other side, this is the gross penalization because you have some recover this on the generation side, so around EUR 25 million per quarter. If you sum up, it's like basically the impact, the negative impact in nine months should be approximately EUR 120 million, something like that. That's why we say that we believe that for year end will probably be around EUR 150 million net, you know, negative impact from ancillary service costs on our account. That of course if you see it grosses a higher number and in terms of supply margin, I mean the supply margin stays where it stays because we have done, you know, we have managed to our portfolio. All those, I would say that all those management we were thinking to do that. I mean it's now what we have to do is working on absorbing somehow these higher costs on ancillaries.
That's why we have to continue to work this year but also next year on recovering this, these costs and on the loss of customers. I guess that the job that we're basically doing there I would say is almost done. Part of this is probably also related to the fact that on one side we've been losing those clients that made no sense in terms of acquisition from the push channels. On the other side, I mean we're somehow we decided just to go through with the acquisition of the clients, power clients from MasOrange that somehow showed a different trend in terms of churn and so on. That I guess is mostly related to the fact that they have bundled, they buy bundled products and probably in these offers it's easier to see the value that you give to the customer. Thank you, Peter.
Thank you, Peter. Now we have Alberto Gandolfi from Goldman Sachs.
Good morning and thank you for taking also three questions. I want to bypass a big question of regulation. I'm sure you get some more later. Can I ask you if you were to receive a decent outcome? It's quite binary here, right? Either returns are good or they are just not. If you have a decent outcome, how much RAB growth do you think Endesa can deliver over the coming five years? The second question is can you place a share buyback somewhere in your capital allocation priorities. Do you think this is going to be an ongoing, not just a tool, but an ongoing feature, meaning like a base case until December 2027. Could we see this continuing to 2028? I'm thinking in case returns, for instance, are not particularly good in distribution.
Should we look at your share buyback almost as a safety net, as a silver lining here on capital allocation, or is it more central? The last question, I think we need to give you credit. You've been the first company to talk about an inflection power demand. You've been the first company to talk a bout p articularly for Iberia, for Spain. Can I ask you, it seems to me there's like 35 GW of connection requests to the grid when it comes to data centers in Spain. Obviously we cannot imagine that 35 GW will come online because it's the entire demand of Spain. Can I ask you two points on this 35 GW, how much is from hyperscalers or third party data center specialized companies vis a vis entrepreneurs that are trying to make money out of this early stage development? Secondly, how much of the 35 GW you think it's realistic to assume will become operational by 2030 or 2035 in Spain? Is it 5%, 10%, 20%? Just trying to gauge here what we should expect for this very important driver. Thank you so much.
Okay, thank you. Thank you. Alberto, let me say you something in relation with the two first questions. We are an under leveraged company. That means that we have strong potential just to invest or just to invest in general, just to give value to our cash to our shareholders. If we could give this value through investment in the system, we will do it. If we are not able, just because of the regulation or because anything, we will look for ways just to return this value to our shareholders as we have done with the share buyback that we have launched. It is very clear for us that we want to give value to our shareholders. If it is possible just to do it through investment in the system, we will do it through the investment in the system.
If not, we will do things like the whole owner buyback that we have done or similar thing. That is clear. Absolutely, absolutely. For us with regard to the decent outcome in the distribution regulation, what I could tell you is that in our last plan, that is the plan from the year 2025 to the year 2027, we invest around EUR 4 billion in gross investment in distribution and we increase something around EUR 0.7 billion, EUR 0.8 billion in the wrapping the year 2027. What we said in that context is that we have further firepower, let's say, to invest even more. If we obtain a decent remuneration, we will try to increase this investment in the future. With regard to the power demand, you write the 35 gigawatt data center. We will see how many will be materialized up to the year 2030 because it would depend on many things.
Let me say you something. The government of Spain has increased the cap, the limit from the EUR 100 to the EUR 162. That will give us an increase that doesn't reach the one previously forecasted in the National Energy Plan. We are on that. In that way, what I think is that we would be able to reach the increase in demand that was forecasted in the National Energy Plan and even perhaps a little bit more. I'm talking around 3% each year up to the year 2030. All this demand increase will be beyond the year 2030. We will have a huge increase in this year up to the year 2030, as I have said. Unfortunately, the investment that we are going to do like the Spanish sector in the distribution and transmission networks is not going to be the total amount forecasted in the National Energy Plan.
Thank you, Alberto, and sorry if I go long on the question. I don't know why I feel that I would like to talk today. On question number one on the RAB increase, in the last plan that we presented, I remember that we had approximately EUR 3 billion of net CapEx along the plan and that was giving us an increase in RAB that was lower than EUR 1 billion. That was previous to the current plan, that's not the new one, and it was based on other kinds of assumptions. Now we have to see what is the regulation that comes out finally, also in terms of level of investments and what are the kinds of investments that are allowed. It looks like this figure can somehow improve. Second question, share buyback. Is it a priority? Of course, I guess that the answer is basically in the number.
If you look at our net debt and our gross debt now, despite the fact that we've been doing CapEx, we have been doing M&A, and despite the fact that we have been completing the first tranche of the share buyback, so EUR 450 million, we are still at 1.8 net debt EBITDA. Whatever we do, we are still there. That's why we decided to stop with the previous tranche and launch a new one, because we do see that there is space here for a lot. Just to give you a few numbers, I always said that probably this company should run at an entire EBITDA that is between 2.5 and 3. If you take the numbers of today, the EUR 5.6 billion EBITDA, you multiply, there is space at least for another EUR 5 billion.
As you can see, probably you can understand that despite whatever we can assume on distribution, there is still ample margin for share buyback. That's why we launched the third tranche. On the third question on the power demand, it's in the making. Alberto, the answer to this question is in the making, in the sense that that's exactly what we are discussing right now for the new business plan. What we can say is that in this request for data centers, in terms of numbers, of course, there are many little entrepreneurs, but those little entrepreneurs, generally speaking, ask for small quantities of capacity, while the big guys, the ones with the brand on top of the hat, go for the big numbers. Their presence is relevant when it comes to the proportion of big guys somehow requesting capacity for the data centers. Thank you.
Okay, we move now to Manuel Palomo from Exane BNP.
Hello, good morning everyone. I will ask just a couple, and sorry to insist on the buyback and on the regulation, but I was wondering w hether c ontinuing with the buyback at current share price levels, which with the stock still being below 5% makes still a lot of sense, or whether it would make much more sense to invest as much as possible in electricity distribution business, even if the 6.46% return is not changed or it's not improved that we expect it will be. My question is whether you will do as much as you can even if the regulation does not improve. My second question is on the margins. I'd like you to please help me to understand what will happen with the margins for the next years, because we've got one very positive driver which is hopefully the pass through of the ancillary service costs to final clients. On the other side, I guess that we are all expecting some normalization in the hydro reserves.
My question is whether you could help us to understand where you expect the integrated margin for electricity to land in 2026. Thank you.
Okay, thank you. Thank you. Manuel, let me try to say something about the first question. You are right. Perhaps the Spanish regulation with regard to the distribution remuneration is one of the more complex of Europe, could be all over the world. What I really think is that we need certainty and what we are obtaining is uncertainty, just because of this very, very complex regulation that really you need to, or we need to understand. When we have, when we will have the final and full picture of this, we will take our decision about this. This is a little bit confused. I would prefer more clear, transparent, direct regulation. If you allow me, I could tell you something about Paracelso. Paracelso was a 16th century alchemist that said that the difference between medicine and poison was the dose.
This excess of regulation can become poison for the network. I ask the regulator just to simplify and just to give more clear regulation. Having said that, we need to have the full picture and we will evaluate what to do.
Okay, so given that also Pepe is very inspired today, I will try to make answers short because otherwise it will take too long here. Yes, CapEx is a priority. Let's see the final results and then we will check regulation. On regulation, sorry, on margins, what we do expect for 2026 integrated margin in line with this year. You were saying correctly, maybe the hydro next year will not be exactly the one that we have this year. Not very sure about it. If that is the case, I hope that also solar and wind will not be next year the one that has been this year because actually there was not so much sunshine and even less wind till now in the year 2025. I would say that's it. Basically, integrated margin 2026 in line with the margin of 2025. Thank you. Manuel,
Sorry, here they're saying buyback and versus CapEx. Mar was so CapEx. Of course, again we will do, you know, we want to grow. If there are a condition, we will grow. Of course, they should be profitable. This should be profitable growth. In terms of buyback, I guess that there is, as I said, there is space in the debt basically, frankly, for both. Buyback, it's a way of giving back to our shareholders. That could be also dividend policy. All this stuff will be somehow managed and addressed in our capital market day end of February next year because they are all in the make. Thank you.
The next question comes from Pedro Alves from Kaisavank.
Hi, good morning. Just one question, please just understand how you frame your thoughts in terms of capital allocation besides the potential investments in distribution networks. Basically on potential M&A opportunities because given your balance sheet flexibility and the fact that valuations for renewables pipeline in Spain have sort of come down over the past year, do you see this perhaps as the moment to buy for instance a renewable developer being for instance a smart hedge given the uncertain fate of nuclear in Spain? I mean if nuclear does close, you reduce your short position in infra marginal generation and benefit from higher power prices without nuclear. If it's extended, you obviously still capture the upside from your nuclear fleet. Just to understand if you can really hit the pedal now on M&A. Thank you.
Thank you, Pedro. On your question, do we have space for M&A in our balance sheet? Yes, and that's exactly what we have been doing with the acquisition of the assets of Acciona, with the majority of the wind assets in Cetasa, with the acquisition of clients from MasOrange. If we see an opportunity, of course we do it. Now, does this bring us to buy renewable developers? I don't think so, because we have plenty of projects in wind, in solar, in BESS, plenty of that. What we will love eventually is something that is up and running. If there are things there that are up and running, but again probably not on solar, but on the other technologies, and those kind of things are not easy to find or not cheap to buy. Thank you.
We have now Javier Garrido from JPMorgan.
Hi, good morning. Thank you for taking my questions. I think most of them have been addressed, to be honest. I will focus on two results. Firstly, on your financial costs. Do you think that the Q3 numbers give a good outlook for the steady rate of financial costs going forward? Given that your gross debt has now stabilized and regardless of what decisions you make on external holder remuneration, you plan to keep similar structure of financing in terms of the balance between fixed variable costs and short and long term debt profile. The second question is on the regulation in Endesa. If I understand correctly, your priority when you think about the potential improvements that might come in the final determinations of the regulator would be to get more visibility and predictability about the inclusion of assets into the RAF and lose the risk of having.
Is that correct? Is there any other top priority in your mind about what should improve in the regulation for you to be more aggressive in your distribution CapEx profile? Thank you.
Let me try to answer the last one. In terms of regulation, it is a whole. All the remuneration, the distribution, as I have said, it is complex, very complex. We need just to understand clearly, the most important thing for me is to have the guarantee that all the investment that we are going just to go ahead with will be remunerated. That is something that in the last draft, and we are waiting for the next draft, really creates some kind of uncertainties. There are many levers just to improve the remuneration in this regulation that we should understand clearly just to take the decision. We prefer just to go ahead with investment in the system, in the network, and to give enough profitability just to give value to our shareholders. That is what we want. That is why we are working now.
If we don't have the opportunity, we will look for other ways just to give value to our shareholders.
Thank you, Javier. Let me answer the questions on the financial structure and financial costs. Can we assume that the financial costs that you are seeing right now are the stable financing costs? I would say yes, in terms of price. In terms of rate, even though I still expect that maybe we can do slightly better than that. In terms of quantity, let's hope that we'll have the opportunity to increase our debt. On the proportion fixed versus variable, we are now approximately 60% fixed and 40% variable. I guess that probably this is close to what we want to have vis a vis the future in terms of structure. Thank you.
The next analyst is Javier Suárez from Mediobanca.
Thank you, Mar. And good morning. All three questions from me as well. The first one is on the electricity demand dynamics. In slide number eight, you have mentioned that there is a sharp increase in electricity demand. There has been a mention of some impact on new data centers in the area of Aragon. Could you give us more granularity on the underlying dynamics for electricity demand increase affecting the industry, services, and residential activities? That would be very helpful. On the regulation, again, back to the need for a different proposal. Can you help us to understand which would be, in your view, the implications from optimal regulatory outcome? Do you see the necessity for the government to intervene, maybe calling a committee of collaboration between the sector, the regulator, and them as well?
The third comment is on the supply activity and the decrease in number of clients by -6% year to date. Can you help us to understand why you think that the client base is going to remain sticky in an environment that you have defined as significantly higher competition? Thank you.
Okay, thank you, Javier. Trying to be short in the answer, I will pass the questions to just not to repeat.
I mean here things are becoming hot, the climate here. On question number one regarding electricity demand, probably the only comment that I would add, if you go back to page number six, when we had the split, is that data centers are in the service cluster. On industry, you start to see a recovery of industry, and that's what was easy to see for us because we were seeing our clients somehow switching from gas to power. We were seeing this, or asking for more capacity, so we were seeing this starting to happen. On services is where you find the chapter of data centers. If you look at our area, there is a strong increase. We believe that still much has to be seen here.
On residential, it's what has always been somehow sustaining the consumption for the time being, and it's even more related to weather and these kinds of things. On question number two on regulation and what could be the effect of a suboptimal regulation, on one side if maintained, if there is really a decision on that, of course it means much longer time for developing the network that the country needs to have and the country deserves. Basically, it's somehow unfortunately losing an opportunity. Does this mean that in the process things can change? I don't know. For the time being, I still want to hope that the fundamentals will somehow be there because it's too good an opportunity for the country.
On question number three regarding the supply decrease, frankly the churn level that we are seeing right now, we don't think it's a sustainable level for any market, for any country. It's over 25%, in that range. We believe that it's because of many things. There are a lot of components there. Not so sure that all the clients are so happy just to switch so much. In some cases, I can tell you that there's a level of fraud that is terrific. We think that sooner or later this will decrease, in a way of fighting the frauds and so on. It's not only in our hands, but for what we can do, of course it's in our hands just to give a compelling proposal to clients.
That is why we decided just to acquire the clients coming from MasOrange that somehow they come with the bundle proposal, and on the other side also try to have an agreement with them in order to offer also to the other clients of our base other services and other offers that they can find somehow attractive, all of this in order to decrease the churn level that, as I said, is not sustainable. Thank you.
Okay, the next question comes from Fernando Lafuente from Alantra.
Que tal? Buenos días. Hopefully the last one on regulation, just about the timings in which you expect the new drafts, drafts or new steps from the CNMC, both on the model and on the WACC and also on networks. In this case, I would like to have your view on what would be a recurrent EBITDA for this year and under the current circumstances, how do you see that EBITDA evolving ahead of 2026? Lastly, on the capital allocation, it's very good to hear you being more active on capital allocation and especially these messages regarding shareholders returns.
My question is on the dividend policy, Marco, you basically commented it a little bit and I know you said capital markets day, but my question is basically if under this strategy of increased value for shareholders, you could consider a new dividend policy with, say, more visibility or less volatility than what we've seen in the past. Obviously, without wanting to give you a specific answer on what's going to be the new policy, what are your views on that side.
Fernando, talking about the timing in the regulation of the CMC, who knows. Let me say, having said who knows it's going to be before the year end. The real thing is that we are waiting in the next days just to have another draft that hopefully will take into account at least some of our comments on these regulations. We hopefully think that it will improve the picture that we have today. It could be enough just to take decision or not, I don't know. We will see in a short period of time the first results and movement. The last draft or the final picture could be before the end of the year.
Hi Fernando, thanks for the questions. Number two on network, I guess that the recurrent EBITDA, the one that we were seeing for this 2025, is approximately EUR 2 billion in 2026. We were seeing this going up in the previous plan, EUR 100 million in 2026. I mean let's see what happens, what is the final regulation, and what are the decisions that we take on CapEx. On number three, dividend policy, I mean that's another thing that is in the make. We are having this kind of discussion right now and yes, I guess that there are two parts here. On one side, you know, CFO claiming for having somehow some flexibility in order then to fix the dividend and on the other side somehow giving confidence to our investors about the profile for the future. I mean those two things I guess that not necessarily are not compatible.
That's the way we are starting to work. Having said that, your question was very elegant. I don't know if my answer was at your level, sorry for that.
Sure. Next question comes from Rob Pulleyn from Morgan Stanley.
Hi, thank you, appreciate long call. Thanks for taking a couple of questions at the end. The first one, if I just revisit something from earlier, could you confirm for the network CapEx what is the upper side to your current guidance? Given the investment caps increased and appreciating it's contingent on the regulatory package. I believe that the three-year guidance you've given to 2027 is that the regulatory CapEx on networks would be EUR 1.2 billion. It'd be interesting to hear what upside potential there could be for that if the stars align and the regulator gives you what you ask for. Secondly, apologies if this has been answered, but I hadn't heard it.
Could you give us a steer as to how the repricing of your supply contracts is going to pass on this ancillary service cost you spoke to earlier and how that will look for 2026 and 2027 in terms of passing that through to your retail base. Thank you so much.
Thanks Rob. On network CapEx level again, you know it's difficult to say without having the details, and it's difficult to say because we are in the make of the new business plan. What I can tell you is that if the outcome is positive, we believe that the current business plan that actually was envisaging approximately EUR 3 billion of net CapEx along the three years could be substantially increased. I don't want to give numbers on that. Regardless, in question number two on the supply, I mean as I said the supply margin you have seen, it's basically constant, is EUR18, and it's because of the management of the portfolio that we did along the year and that was what we thought doing before the increase of ancillary service costs came into play.
In order to somehow digest this increase in ancillary service costs that I was estimating is approximately something in the region of EUR 150 million. Could be a bit more probably at the year end 2025. We need time and part of it has been done because there are contracts that somehow foresee that. Part of it cannot be done immediately. It will be something that will take us busy along 2026 and maybe a bit longer than that. Thank you.
We move now to Fernando Garcia from RBC.
Hi, good morning. Thank you for taking my questions. I have just two left. Coming back to the data center topic, are you having any conversations to do PPAs with data centers? Second question, for the EUR 5 billion potential leverage optionality that you commented before specifically related to Servevac, is there any financial limitation to do that, like for example EPS accretion? Many thanks.
On data centers, are we having conversation on BPAs? Yes, of course. It's mostly related with the big guys. I would say question number two that is on the leverage optionality. I guess that there, frankly the only things we are checking and seeing in the share buyback use is not reducing structurally the liquidity of our shares. That is the only real limitation and the only thing that we are carefully look for the use of the share buyback mechanism for the time being. Thank you.
Okay, this was the last question from the conference call and now I will read just one pending question that comes from Philip O'Patian from ODDO. The question is regarding the Portuguese statement from the rate of return and if this could be a good proxy for Spain. He mentioned the increase of 170 basis points in the rate of return. Please Pepe.
Thank you. Let me say that increase of 170 basis points will give us something around 7.1, 7.2%. It is better than the one that we have today. I think it would have more sense also if we take into account what the CMC are doing with all the regulated sector in Spain that will give us something around 7.2%. That is very close to the one in Portugal. The other thing is that the financial remuneration rate all over Europe is something between 7%- 8%. Let's say that. It would be in the lower range that we see in other countries. It would be better than the one that we have today, of course.
Okay, now yes, this was the very last question of the conference call. Thank you for your participation and as always our team will be available in case you need any further question. Thank you very much.