Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2025 first quarter results presentations. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period given by the top executive team that usually is with us: Mr. Ignacio Galán, Executive Chairman; Mr. Armando Martínez, CEO; and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web, so please ask your question only through our webpage, www.iberdrola.com. Finally, we expect that our event will not last more than 60 minutes.
If any questions remain unanswered, we at IR are, as always, fully at your disposal. Hoping that this presentation will be useful and informative for all of you, now, without further ado, I would like to give the floor to Mr. Ignacio Galán. Thank you very much again. Please, Mr. Galán.
Thank you, Ignacio. Good morning, everyone, and thank you very much for joining this call. I would like to start thanking and recognizing the excellent work of more than 2,000 professionals of Iberdrola, which have already restored electricity in Spain after the blackouts suffered two days ago. At all times, our generation plants were available to operate under the instruction of the System Operator Red Eléctrica. Also, our distribution networks were also connecting and restoring the service progressively as the system operator, who is responsible for the operation, asks us to do it. Moving to results, in the first quarter of 2025, net profit reached EUR 2,004 million, 26% up year-on-year, excluding the capital gains from last year's investment of thermal generation. Reported EBITDA was EUR 4,643 million, also 12% up in like-for-like terms.
Mainly driven by strong operating performance in networks, we represent 52% of EBITDA through March, and higher generation volumes for new assets in operation in the U.S., Iberia, and the rest of the world, partially offset by the normalization of margins in the U.K., especially in Iberia, resulting in a 70% decrease in EBITDA in Spain. Investments were up by 14%, hitting a new record of EUR 2,720 million in just one quarter, and EUR 17,300 million in the last 12 months, thanks to a 30% increase in the U.S. and U.K. over the quarter, which together represent two-thirds of our total investment. By businesses, network investments were up 18%, mainly driven by a 30% increase in the U.K., both in transmission and distribution.
Renewable investment gross by 7%, with offshore wind up 50% due to projects under construction in the U.S., U.K., and Germany, all of which will be operational in 2025 and 2026. In addition, we received the final approval from the U.K. Competition and Market Authority for the integration of Electricity North West, which has been fully consolidated in our accounts since March. As a result, our regulated asset base in the U.K. has now reached EUR 15.5 billion, more than doubling in just five years. Thanks to the contribution of new investment, cash flow increased by 11% with respect to the first quarter of 2024 to EUR 3,502 million, leading to financial ratios that are fully consistent with our BBB+ rating.
As mentioned, EBITDA reached EUR 4,643 million, 12% up, with almost 50% coming from the U.S. and U.K., mainly due to the strong growth in our network asset base in both regions, offsetting the decreased Spain results. As a consequence, networks contributed more than 50% of total EBITDA, almost 10 percentage points above the average of the last five years. EBITDA in the businesses also includes a positive impact due to the recognition of past costs in the U.S. Production and customers operating results reflect 2,600 installed over the last 12 months, of which 660 come from offshore wind. Increased production in the U.S., Iberia, France, Germany, and Australia offset the normalization margins in the U.K. and Iberia.
Finally, we continue closing new PPAs with tier-one customers, with more than 4 terawatt-hours per annum signed in the last 12 months, reaching a total portfolio of around 40 TWh per annum to be supplied per annum in the following years. The record investment figures achieved in this first quarter, more than EUR 2.7 billion, are mainly due to our strong expansion in networks, with EUR 1,432 million invested through March, up 18% over the first quarter of 2024, and more than 50% above the average rates of the last five years. Mainly driven by the U.S. and U.K., we represent more than two-thirds of the total after doubling investment levels over the past five years. This increase will accelerate in the coming quarters, given the huge investment commitments in both countries.
In the U.K., we are progressing with the RIIO-T3 approval process, which is expected to support an unprecedented expansion of transmission infrastructure between 2026 and 2031. We foresee a similar trend in distribution. Recently, Ofgem approved EUR 200 million in additional investment for ScottishPower Electricity North West. in the united States, network investment increased by 10%, with EUR 241 million invested in transmission, mainly in the Northern New England Clean Energy interconnection between Massachusetts and Canada.
In this project, all foundations and poles have already been installed in the DC line, and we continue progressing the converter station and other facilities, expecting to have this infrastructure fully operational by the year-end. Avangrid distribution investment has reached close to EUR 300 million, 80% in the state of New York, where all our companies are reaching and exceeding the headline return on equity set in their rate cases.
In Brazil, the regulator has approved a new tariff review in Pernambuco for the next four years and annual rate adjustment in Bahia and Rio Grande do Norte. That together will add at least EUR 100 million operating results per annum, increasing new energy EBITDA by 10% on the annual basis with this adjustment. In addition, the renewal process for distribution concession is progressing as expected. Our total regulated asset base reached EUR 49 billion, reflecting the organic growth already mentioned and the consolidation of Electricity North West, which contributes EUR 3.4 billion to our asset base and is expected to add around EUR 450 million of EBITDA per annum, exceeding initial expectation.
Following this excellent performance, Electricity North West recently received the Utility of the Year award by Utility Week and was ranked number one in the biennial performance benchmark in all U.K. distribution companies, followed by the other two ScottishPower licenses in Scotland, England, and Wales, which were ranked second and third. Iberia, U.S., and U.K. already contribute 60% of our regulated asset base, which is expected to exceed EUR 51 billion by the year-end. Investment in renewables increased by 7%, up to EUR 1,064 million, with two-thirds in the United Kingdom and United States. More than 50% of renewables investment were allocated to offshore wind, mainly the cross-transit of Vineyard Wind in the U.S., which will be fully operational by year-end, East Anglia THREE in the U.K., and the rest in Windanker in Germany.
Offshore wind accounted for 20% of total investment, more than the U.S. and the U.K. Solar PV represents 21%, highly diversified between the U.S., Iberia, other countries in continental Europe, and Australia. All this investment continues to progress as scheduled, even in the current supply chain scenario, thanks to our procurement strategy. Based on local suppliers, we represent 80% of our total purchase and the anticipation of business needs through detailed planning processes, securing all strategic contracts in advance. This strategy is also protecting us from current global trade dynamics. Currently, we expect no impact from new tariffs in our results, with a maximum increase of just $130 million in the group investment cost, or less than 1% of our total annual CapEx, clearly within our planned contingency levels.
Related to 10% of our investment in our offshore wind and solar PV projects under construction in the U.S., where we have clauses in our contract with suppliers that will allow us to reduce this amount. We do also expect any impact in transmission and distribution investment, as 99% of the U.S. purchases are local and these businesses are regulated. In our offshore wind, where 100% of the supply chain of wind and Windanker is already fully secured. Our strong increase in network investment and our selective approach to renewables is also driving a structural improvement in our cash generation profile and financial ratios. In renewables, we expect the completion of major projects under construction will reduce by 50% the work in progress in this business over the next two years, from EUR 8.6 billion today to between EUR 4 billion and EUR 5 billion by the end of 2026.
In addition, these new assets will add around EUR 100 million of EBITDA on an annual basis, both in 2025 and 2026, for a total of EUR 1.6 billion from 2027, mainly coming from the offshore wind projects of East Anglia THREE in the U.K., Windanker in the U.S., and Baltic Eagle and Windanker in Germany, which have already closed long-term PPAs or CFDs, providing significant stability to revenues and profits. All this will drive a substantial increase in our return on investment in these businesses and in our overall financial strength.
That will continue improving thanks to our focus on networks, where we expect to invest more than EUR 13 billion between 2025 and 2026, as 90% of this investment will have a positive impact on return and cash from year one, including 100% network investment in the U.K. and all investment related to rate cases in the U.S., plus Northern New England Clean Energy interconnection projects beginning in 2026. Our strong operating performance and the acceleration of cash recovery have driven an 11% increase in funds from operations to EUR 3,502 million, allowing us to maintain our financial ratios in line with our plan and with our BBB+ rating after the consolidation of Electricity North West and the purchase of Avangrid minorities. With FFO over-adjusted net debt of 22.3%, in addition, our liquidity remains at EUR 21 billion, enough to cover 19 months of financial needs.
I will now hand over to our CFO, Pepe Sainz, who will present the group financial results in more detail. Thank you. Pepe.
Thank you. Thank you, Chairman. Good morning to everybody. As the Chairman has said, the first quarter 2025 net income reached EUR 2,004 million and grew 26% once compared to the first quarter of 2024 Adjusted net income, excluding the thermal generation asset divestment. As main change of the perimeter, let me highlight that the ENW is fully consolidated since March. FX evolution has had a minor effect on results, with the dollar and the pound growing 3.8% and 2.8%, and the Brazilian real being 13% lower. A 1% increase in revenues, mainly in the network business due to the U.S. recovery of past costs, combined with a 3% decrease in procurements, boosted gross margin by 5% to EUR 7.2 billion.
EUR 1.7 billion thermal generation asset divestments in Q1 of 2024 positively impacted reported net operating expenses. Excluding it, first quarter 2025 net operating expenses decreased 10.4%, mainly due to the EUR 176 million lower storm costs in the U.S. that is neutral at the EBITDA level, as it always lowers the gross margin. Net personnel expenses decreased 0.4%, external services fell 9.8%, and other operating income grew 30% due to indemnities of past year costs. Excluding also the mentioned reconciliation impacts and other minor net operating expenses improved 0.9%. Analyzing the results of the different businesses and starting by networks, its EBITDA grew 43% to EUR 2,415 million, with better performance in the U.K. and in the U.S.
In the U.K., EBITDA increased 10.8% to GBP 339 million, excluding GBP 35 million positive net contribution from ENW effective since March, and higher contribution in distribution thanks to higher RAB, and that more than compensates negative contribution from transmission due to the cap allowance application. In the U.S., EBITDA reached $1,054 million, with higher tariffs and better contribution from transmission, and positively impacted by the new decision. 15.3% down, with a slightly higher production partially offsetting margin normalization and 3% higher levels levies, even despite 1.2% revenue tax termination. As end of April, Iberdrola had record hydro reserves, 9 TWh which will help the performance of the group in 2025. In the U.K., EBITDA fell 17.2% to GBP 426 million, with lower wind resource, both in onshore and offshore, and lower prices partially compensated by lower windfall tax.
In the U.S., EBITDA increased 35% to $296 million, with better wind and solar performance and also some timing effects helping EBITDA growth, despite the fact that in Q1 of 2024 was positively impacted by the Arctic blast storm, one-off of $37 million. In the rest of the world, EBITDA grew 25.3% to EUR 229 million, with a 76% higher offshore production due to the gradual entry in operation of Saint-Brieuc in France and Baltic Eagle in Germany, both of them offshore wind farms. In Brazil, EBITDA decreased 40% to BRL 254 million, with lower thermal contribution from Termopernambuco, our only CCGT in operation, compared to a strong 2024 first quarter. Finally, in Mexico, EBITDA reached $144 million, 93% lower contribution compared to last year.
That included the thermal asset capital gain, and only 17% excluding this capital gain, as the remaining business was favored also by some indemnities of past costs. Depreciation and amortization and provisions grew 2%, driven by a higher asset base in networks and new operating capacity in renewables, partially compensated by lower depreciation of around EUR 30 million, thanks to full year 2024 adjustments and lower bad debt provisions in Spain and in the U.K. EBIT reached EUR 3.2 billion and grew 17% on unadjusted terms. Net financial results improved EUR 16 million to EUR 588 million, thanks to non-debt-related costs that improved EUR 91 million, mainly linked to the FX derivatives that we usually close at the first part of the year due to our P&L hedges.
This more than offsets the debt-related costs that grew EUR 75 million due to the higher average net debt, while interest-related cost has been compensated by the FX due to the depreciation, especially of the Brazilian real. Our reported credit metrics remain comfortable within ratios for BBB / Baa1, even after the ENW consolidation from March, mainly thanks to our cash flow generation with an 11% higher FFO, offsetting higher net debt, mainly linked to the mentioned EUR 2.3 billion ENW consolidation and EUR 0.8 billion called hybrid bond. As a consequence, our ratios remain strong, and we expect to remain in these levels by the year-end. FFO adjusted net debt reached 22.3%, Adjusted net debt to EBITDA reached 3.5 times, and our Adjusted leverage ratio was 47.3%. We are also expecting that, according to plan, debt will end the year around these levels.
Net profit grew 26% to EUR 2,004 million on unadjusted terms, compared to EUR 1.6 billion adjusted first quarter 2024 net profit. Equity method includes EUR 25 million, corresponding to two months of contribution of ENW while from March, as mentioned before, ENW contribution is already at the EBITDA level. In addition, financial results improved 3%, while our tax rate normalized to usual levels, and minorities were lower as a consequence of the 18% Avangrid acquisition. Now, the Chairman will conclude the presentation. Thank you very much.
Thank you, Pepe. Following this first quarter result, in the coming quarters, we expect to continue growing and reinforcing our financial strength. With networks as main driver, thanks to a double-digit increase in our regulated asset base in just one year, reaching more than EUR 51 billion, and the positive outcome on new rate cases, as we recently saw in Brazil.
The clear outward trend in demand across all regions will reinforce the need for new infrastructure and will benefit our energy production and customer business, where we will have 4,000 new megawatts fully operational in 2025. With better green factors expected in Northern Europe, especially in the United Kingdom, after a very low first quarter. In Iberia, hydro reserves are record levels of 9,000 GWh today, as Pepe mentioned, that will secure our production for the second half. Also, 100% of our production in the whole 2025 is already sold at green prices. All these factors will continue improving our cash generation after 11% growth achieved in the first quarter. New renewable assets in operation will contribute additional cash in the coming quarters and reduce our work in progress in these businesses.
We will increase the share of investment in networks projects that generate cash flow from year one. Additionally, we expect to continue our asset rotation in line with the plans. Following recent transactions, like the sale of Maine Natural Gas and the partnership with Kansai in our Windanker offshore wind farm in Germany, closed a few days ago will allow us to continue executing our investment plan as we preserve our financial strength. As a result, today, we reaffirm our net profit guidance of mid to high single-digit growth, excluding capital gains from asset rotation, even without considering the positive impact already mentioned from the recognition of past costs in the U.S. If we include this impact, we expect to reach double-digit growth in net profit in 2025.
With progressive acceleration of the second half of the year, this will result in a very different quarterly profile compared to last year, especially in reporting net profit, given the strong impact of the capital gains from the investment of thermal generation in the first quarter of 2024. As we expect to accelerate this growth over the coming years. In the current macroeconomic scenario, our government is looking for substantial economic growth, and this is driving massive investment infrastructure, especially in sectors which have the lowest exposure to global trade dynamics as electricity. As we saw last Monday in CERAWeek Conference in Houston, or during the summit jointly organized by the U.K. government and the International Agency in London last week, we brought together more than 60 governments and the largest global energy companies, including Iberdrola.
Energy security has become a decisive component of national security, compelling our countries to prioritize energy autonomy. As we have been saying, electrification is the right answer to these global energy challenges, to this potential, to reduce external dependency, geopolitical risk, and price volatility linked to fossil fuels, increase security and self-sufficiency, improve competitiveness due to the higher efficiency of electricity compared to other sources of energy, and promote local industries and jobs across the supply chains, and deliver tangible benefits in terms of affordability and price stability thanks to the market mechanisms such as PPA or CFDs.
Iberdrola is optimally positioned to provide long-term growth in this scenario, building on our track record of more than two decades of sustained increase in resulting dividends, driven by a clear strategy focused on regulating networks and select approaches to renewable investment, with supply chains secured thanks to the anticipation of procurement needs and established relationships with major suppliers of the industry, and benefiting from our geographical diversification with the U.S. and U.K. as our key growth drivers and with a strong presence in continental Europe, Latin America, and Australia, markets in which our scale and relevance allow us to have direct and fluent relationships with key suppliers, financial institutions, government, and regulators. We will continue combining growth and financial strength thanks to cash flow generation, our active debt management, and our asset rotation strategy, allowing us to reinforce our strong financial position or our BBB-Plus rating.
We will continue to report on all these developments in the coming quarters. Thank you very much. Now, I finish for your attention, and now we are ready to answer any questions you may have. Thank you.
Now, starting with the Q&A session, I would like to introduce the following financial professionals that have asked the upcoming questions: Gonzalo Sánchez-Bordona, UBS; Fernando Lafuente, Alantra; Alberto Gandolfi, Goldman Sachs; Manuel Palomo, BNP Paribas; Meike Becker, HSBC; Rob Pulleyn, Morgan Stanley; Philippe Ourpatian , Oddo; Pedro Alves, CaixaBank BPI; Jorge Guimarães, JB Capital Markets; Javier Garrido, JP Morgan; Javier Suárez, Mediobanca; Fernando García, Royal Bank of Canada; Jose Javier Ruiz, Barclays; James Brand, Deutsche Bank; and finally, Andrew Moulder, CreditSights. The first question is related to the: Can you please provide a little more clarity on the net profit guidance for the end of 2025?
The guidance I mentioned is: We reaffirm our mid to high single digit, excluding the past cost recognition of the U.S. Including this impact, we expect net profit to grow at double digit. In all cases, guidance excludes capital gains from asset rotations.
Second question, as well on guidance: Could you please explain which are the key elements which will provide the mid to high single digit growth for this year?
I think the first one is action taken during the past 2024. I think we take certain action, a certain decision which is affecting positively 2024. I think we have already things: electricity and those transactions, the full acquisition of Avangrid minorities last year, efficiency measures that we took already during 2024. Of course, I think in 2025 is our organic growth, higher regulated asset base in all countries with expected surplus to EUR 51 billion, as I mentioned before, more than 4,000 MW of new capacity operating, contributing to EBITDA. I think we expect that that is going to continue during the second part of the year. Nevertheless, Pepe, you would like to provide more detail? You can already provide more details of this.
Yeah, as the Chairman has said, we are expecting, if you look to the numbers and you multiply by four, we are expecting more than EUR 150 million coming from the contribution of ENW. We are also expecting an additional over EUR 100 million coming from the recurrent net profit of the full ownership of Avangrid, and also an improvement in net profit due to lower operating and depreciation expenses linked to the 24 adjustments that we did. As you can see in this quarter, that was giving us EUR 30 million of lower depreciation expenses. All in all, this supports what the Chairman has been commenting.
Next question is related to the blackout occurred on Monday in Spain
as an unprecedented event.
Could you please give us your opinion on what caused it, and if it is possible that an event like this happened in Spain again?
The reason of the blackout must be clarified by the responsible of the system operator, Red Eléctrica de España. I think I have my own ideas as engineer, but I think here it's not a question of engineers to engineers. I think the system operator has to have the clarified because they are the responsible of this one. What I can say is that before, during, and after this blackout, our generation fleet was ready and at the disposal of Red Eléctrica, the system operator, to enter in operation as soon as we received the instruction from the system operator. I think our people, as I started mentioning already, did a great job working and restoring the service which normally takes longer periods in a very, very short period of time.
I think I would like to say it again, to congratulate, recognize the work already done by more, almost 2,000 of our employees that dedicate huge effort to restore a service which is, as you mentioned, an unprecedented situation.
Next is related to the business in the U.S. Has the recent measures taken by Trump's administration changed your view on the country? Can you please provide your view on the future of renewable projects in the U.S., including the IRA?
We have been in the U.S. for more than 20 years, I mentioned several times. We have increased investment with all the administration, also during the previous Trump administration. Today, we have more than $50 billion in assets in the United States. We are present in 24 states. In distribution, we are in New York, in Connecticut, in Maine, and Massachusetts, and serving almost 10 million Americans.
I think we have a very deep presence in the United States. Since the last election, we have invested more than $6 billion in the United States, including $2.5 billion in Avangrid minorities and $2 billion in the capital increase that we make afterwards, more than $1.5 billion in organic investment, almost $1 billion in the last three months, making the U.S. our first investment destination, as I mentioned before, together with the U.K. Over the last months, I had the opportunity of meeting Secretaries of Interior and Energy and the Undersecretary of Energy as well. All of them said clearly the U.S. is totally focused on promoting infrastructure investment. This will drive massive investment in networks. I think that is our main business, is networks. 80% of Avangrid results come from networks. Huge opportunities in this segment.
I think we are expecting more than $20 billion up to the end of the decade in New York, Maine, and Connecticut for already investing in the grid, in the infrastructure. They need more power generation. This power, in this moment, we have 10,000 MW in operation with production sold through long-term PPAs and high-quality, very good, let's say, pipeline for making move. We will make more power or less power depending on the market condition. If the market condition is attractive, we will invest more in power. If the market condition is not attractive, we invest less. I think the ambition of the American government and the American officials I had already met is that they are welcoming investment either in power or either in new infrastructures. We are special infrastructures. We are very, very well located in the country.
Next is regarding the U.S. too. Despite the slide we showed, do you have an estimation on the impact in your accounts of the new tariff that the U.S. is imposing?
As I mentioned, the new tariff has no impact on our results. I think they have impact in terms of CapEx. The impact in CapEx is very limited. It's less than 1% of our total group plan investment in 2025. This impact is fully covered by our standard contingency in all the projects, allowances. We have also agreements with our suppliers to reduce this amount in an important manner. I think the numbers I shared with you before in generation and in power, maximum impact is $130 million. It's less than 10% of the total investment plan in the United States.
We expect to reduce that by the final impact will be much lower because of the agreement we have with suppliers. In the case of networks, I think no impact. First, because 99% of networks purchased are local, but also, I think whatever cost is protected passes through in the right cases. I think in the case, I think those are the main things.
Next is regarding the energy production and customer business in Spain, basically, that has had a lower contribution in this quarter than last year. Can you provide some color on how it will contribute along the whole year?