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 nine-month results presentation. As is customary, we will follow the traditional structure of our web. We are going to begin with an overview of the results and the key developments during the period. 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. Pepe Sainz, CFO. After the presentation, we will move on to the Q&A session. I would like to remind you that we will only be taking questions submitted through our website. Please send your question exclusively via www.iberdrola.com. Finally, we expect today's event to last no more than 60 minutes.
Should any question 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.
Thank you, Ignacio. Good morning, everyone, and thank you very much for joining today's conference call. In the first nine months 2026, reported net profit increased by 10% to EUR 5,016 million, and adjusted net profit reached EUR 5,141 million with a 9% up. This increase will be 30% 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 higher asset base in all countries, rate increases, and growing contribution from transmission. Total investment increased by 13% to EUR 10.1 billion in only nine months, with 75% allocated to U.K., U.S., and Brazil. Network investment reached EUR 6.3 billion, up to 28%, leading to a 14% increase in regulated asset base to EUR 56 billion.
We invested an additional EUR 3.6 billion in power and customers with more than 2,300 MW of new capacity production from January to September, for a total of 3,300 MW 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 debt-to-EBITDA ratio 3.4 x. 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 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 on 2027.
Finally, in 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 U.K., U.S., Brazil, and Spain, up to 2030 and beyond. Moving to results, adjusted EBITDA reached EUR 11.9 billion, up 7%, with almost 2/3 coming from the U.K., U.S., and Brazil. Net was increased by 15% to EUR 6,430 million, contributing already 54% of the total EBITDA, thanks to higher regulated base in all countries. The positive impact of RIIO-T3 in the U.K. in April, new rates in New York and Connecticut in the U.S., plus additional revenues from transmission after the commission of NECEC, rate increase in 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 had 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 service in Iberia and higher costs in regulated gas tariffs, partially offset by the increasing contribution of pumped hydro in Iberia to the new facilities in operation, like Valdecañas and Valparaíso in the Tajo and Tera rivers. All in all, exclusive effects impacted EBITDA grew by 8%. Total investment 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 U.K. was once again our largest destination, with more than EUR 3.1 billion invested in the first nine months, 31% of the total, followed by U.S. 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 6,277 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 20% increase in distribution. Investment in Brazil also represent 1/3 of the total, almost doubling year-on-year, thanks to a 23% increase in distribution and acquisition of the Neoenergia minorities, which more than offset the decrease in transmission after the completion of the last project awarded.
U.S. network investment reached EUR 1.5 billion, with 10% decrease to the full commissioning of 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 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. This trend is expected to continue in the coming years. In the case of U.K., distribution investment and RIIO-ED2 framework were increased by 20%.
In the U.S., the temporary distribution rate recently obtained in New York will support USD 2.2 billion of investment up to May 2027, and the Propel NY multi-billion-dollar project continues progressing. In Brazil, Neoenergia will invest EUR 9 billion in distribution up to 2030, doubling previous investment levels after renewal of the concessions. More than offsetting the expected decrease in transmission after the completion of the old project awarded, they 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. Finally, the authorization process for the acquisition of Caruna in Finland is progressing as expected.
Investment in renewable reached EUR 3,357 million with EUR 1.2 billion investing 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 2,200 MW of new capacity, of which 1,000 MW correspond to onshore wind, mainly in Continental Europe, Australia, and United States, 550 MW of offshore wind in the U.S. and Germany, and 700 MW to solar and storage mainly in Iberia and Continental Europe. By countries, more than 600 MW were installed in the U.S., in line with a strong increase in capacity registered across the country over the last quarters. In the last 12 months, total capacity addition reached 3,300 MW, as I mentioned before.
Once again, the increase in cash generation allowed us to register record investment and present our strong financial position with the net debt -to -EBITDA ratio 3.4 x, fully compatible with our BBB+ rating. We have continued to increase the share of fixed debt to 78%, excluding Brazil, providing significant protection for 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 next annual general meeting next year. As mentioned, in the last month, we have continued to see significant improvement 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 percentage points in just 10 years. Under this scenario, global electricity demand will increase by 50% up to 2035. This remarkable growth trend, after decades of flat evolution, is visible across all energy uses. For industry, where 40% of low -and medium -temperature process could be fully electrified, to transport or cooling and heating, both with 50% electrification potential. According to the Electricity Agency, this potential is even higher in mature economies like Europe, where electrification rate could increase by 50 percentage points to almost 40% of the total final energy consumption. These technological trends will be further supported by energy policies that are promoting new investment across our main market, especially networks.
In European Union, the Electrification Action Plan, recently approved by the Commission, has set a target of 46% electrification by 2040. The European Grids Package calls for a strong increase in networks investment up to EUR 600 billion in just five years. I include these measures like the acceleration of permitting and the design of regulatory framework with sufficient incentives. In United Kingdom, the Clean Power 2030 plan targets 95% clean electricity in just five years, and a building block of the country's net zero strategy to reduce emission by 87% by 2040, but also as way to promote energy security and autonomy across the U.K.
All this require present investment in transmission and distribution in line with the recent report published by the U.K. Independent System Operator, which estimate that only in transmission, Network investment should reach GBP 89 billion in the next decade, far above the estimates made two 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 asset base by around 60% up to 2030, reaching more than EUR 90 billion, driven by huge investment requirements, including growth investment 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 investment will also rise considerably, mostly in the U.K. and the U.S., due to the high age of Networks assets, which average reach 45 years, and in some cases, up to 70, 80 or even 90 years old. Finally, we also expect a strong growth investment linked to reliability and resilience due to the increased regulatory requirements. Given the positive investment outcome in the U.S. and the U.K., we expect an ongoing rise in the contribution of both countries to our Network regulated asset base, reaching 65% by 2030. In Power and Customers, we expect a 15 GW of new capacity between 2025 and 2030, of which 60% are already installed or under construction.
5 GW were already commissioned between January 2025 and September 2026, and 3.8 GW are currently under construction, with 1.5 GW starting operation already in the fourth quarter of 2026, mainly corresponding to East Anglia Three offshore wind farm in U.K. Another 2.3 GW in 2027 and 2028, including the East Anglia Two offshore wind in the U.K. and 700 MW of onshore wind and solar in the U.S. In addition, we have up to 6.5 GW capacity that will start construction shortly and will be commissioned in 2028, 2029, 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 GW fleet in the country. We will now hand over to our CFO, which will present the group financial study for the detail. Pepe.
Thank you very much, Chairman. Good morning to everybody. Nine 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 GBP 382 million, U.K. smart meter capital gain, which is excluded from the adjusted net profit in 2025. 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 net profit level, Mexico is presented under discontinued operations in the reported account, while in the adjusted figures 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 net profit level in 2025 and 2026. Finally, U.S. past costs recognition is excluded from adjusted net profit in 2025. 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 a 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. Nine months 2025 adjusted other operating income excludes the GBP 382 million U.K. smart meter capital gain. Net personal expenses increased 8.2% as the second quarter of 2025 included some positive non-recurring impacts. Average headcount increased by 2.9%. External services grew 1.7%. Adjusted other operating income, once excluded the mentioned GBP 382 million U.K. smart meter capital gain, improved by 37%, as in Q3 of 2025, 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 USD 1,780 million. Excluding the 550 million past costs recognition booked in the first quarter of 2025 included in the reported figures, underlying performance benefit from higher rates in distribution, and an increased contribution from transmission, including NECEC following the January 16th 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 2026 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. Nine months , Power and Customer business adjusted EBITDA decreased 2% to EUR 5.4 billion. During the period, Iberdrola produced 91 terawatt-hours of electricity, 33% higher than in 2025, driven by the U.S. and the U.K. amid increasing demand. With 90% sourced locally and fully emissions-free, advancing in the 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 2025 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 2027 onwards. In addition, we registered a negative impact from regulated gas rate 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 at fixed cost 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 2027.
Reported figures are affected by the smart meters capital gain in Q3 of 2025. In the U.S., EBITDA grew by 4.2% to USD 847 million. Growth was driven by the higher contribution from wind and solar assets, supported by 750 MW 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 with 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 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 of Anglia Three positive one-off of EUR 282 million accounted in the second quarter on 2025, and FX hedges linked to the exchange rates as they were positive 2025 and negative this years, especially due to the recent revaluation of the dollar and the real. Debt cost increased 22 basis points, consequence of higher Brazilian rates and the real appreciation. Excluding the real, debt cost fell seven 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 August's EUR 2.5 billion dividend payment, and 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. These financial strengths allow the group to continue investing while preserving balance sheet flexibility. Our adjusted net debt-to-EBITDA stood at 3.4 x. The adjusted FFO-to- adjusted -net -debt ratio was 22.4%, and our adjusted leverage ratio 45.8%. Ratios are in line or better than in the first half and weaker than one year ago. But remember that we did the capital increase in Q3 of last year. Nine months 2026 adjusted net profit grew by 9% to EUR 5,141 million, compared to EUR 4,727 million adjusted net profit in the nine months of 2025. 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. Now the Chairman will conclude the presentation. Thank you very much.
Thank you, Pepe. To conclude, over the first nine months, we have seen 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 Brasília. Power and customer result will reflect 3,300 MW already installed in the last 12 months, + 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 to the new asset in operation.
Finally, cash flow generation will continue increasing due to new investment, mainly in regulated networks and long-term contracted business, 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 result to more than 10% growth in adjusted net profit. We are targeting to maintain a 10% average growth rate in adjusted net profit over the next five years, benefiting from increasing investment opportunities in networks, renewable generation, and storage across all our markets. Our anticipation, our business model, 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, Spain, and shortly also in Finland.
A competitive and diversified generation fleet with increasing repowering life extension opportunities, as well as a mature portfolio of greenfield projects across all our geographies, strong commercial capabilities and large base of residential and industrial customers, a solid balance sheet, full access to capital, supply chains, and talent. We will provide you further details regarding all these aspects in our Capital Markets Day next March. Thank you very much for your attention. We can now begin with the Q&A session. Thank you.
Thank you, Mr. Galán. 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 Société Générale ; Javier Garrido, JP Morgan; Javier Suárez, Mediobanca; and finally, Gonzalo Sánchez-Bordona, UBS. The first question is related to the main drivers of Iberdrola-adjusted net profit growth in the first nine months of the year 2026.
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. In U.K., higher contribution for Electricity North West, that we consolidated in March. Increasing contribution from transmission, with all the T3, that we had to start the construction in April. In U.S., higher rates in New York and Connecticut. A contribution of the transmission, the interconnection between Canada and Massachusetts, NECEC from January. In Brazil, increasing revenues and distribution, thanks to better tariffs, in most cases, better rates. Higher contribution of the transmission I mentioned we just completed. It is more than 6,000 km of transmission line completed. In Spain, a strong performance thanks to the investment recognition of OpEx allowance from previous years. In power, higher demand in Q3.
The only problem here is with prices fixed in 2025, resulted in a higher procurement cost, as has been mentioned by Pepe. But now the new sales are already reflecting these new prices, and I think that can be already a positive contribution on that one. Higher production in the U.K., U.S., EU countries, an increasing contribution of pumped hydro, especially that one. We are beating records of production during this year. Negative impact as well of regulated tariff, and the increase in ancillary service in Iberia, which 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 thing, which is not affecting negative to us.
All in all, I think the adjusted net profit was 9%, which is 13% if we are excluding FX impact, as Pepe mentioned before as well.
Next, what non-recurring items affected EBITDA and net profit in the first nine months of 2026, and how do they compare with the 2025 fiscal year?
Pepe?
Well, as you know, in such a large group, there are always some non-recurring 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. We have been consistent on that. There is an exception with this accounting treatment of the sales in the U.S., which they had a cash impact. Basically, at the EBITDA level in 2026, there is no adjustment from non-recurrent impacts. They find that we have done it in the page 18. In 2025, we have had, and 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.
Obviously, at the net profit, the impact of these two is netted from taxes, so EUR 389 million from network past cost recognition in the U.S. and EUR 191 million for smart meters in the U.K. 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?
As I commented last July, our good performance in first half has already improved in this quarter. The U.S., things I mentioned before, I think increase in our regulated asset base in all countries. I think we are investing more, so their RAB is increased in all countries. There are some framework with better rates as well in regulated. It is as well increased contribution from our transmission business. The RIIO-T3, I think as much investment you are making, that is directly contributing to our P&L. NECEC is already full completed. In Brazil as well, all our transmission is completed now is, as I mentioned, is making a contribution of circa EUR 250 to EUR 200 million per annum additional. Also, the full ownership on Neoenergia. Since 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 GW of new capacity in the last 12 months. I think to this one, we will add another 1.5 GW before the year-end, now is in construction. I think we are achieving better prices. 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 signing 2020 for the rest of the year and for 2027, price is much higher according with the wholesale prices on the market. That will transform this negative impact we have already had on this one in a positive one. As well, as I mentioned, we are beating record 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. Certain of these efficiencies 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. That all the reason, this reason is what has already allow us to provide already to increase the guidance to double-digit growth in adjusted net profit by year-end more than 10%. 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?
I think all the trends and all the expectation is already moving in our direction. You see, I present already the documents what has been made by International Energy Agency, by European Commission, by British government. All of them are coincident with our vision, which has been already developing across the last 25 years. That's a lot. Increase in electricity demand, more electrification. That makes ourselves, then we need to make higher investment than expected, both in networks and in power and renewables. I think if we make more investment, if the demand is increasing, if the prices looks already are trends which continue at a good level, this provides better result. That is what allow us to fix already this target of 10% average growth in our net profit for the next five years.
Nevertheless, I think we will provide you more details in our Capital Markets Day. 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 we've been published are talking about more power renewables, more networks, and more storage. I think we are 25 years already making this one. I think we have all the bases 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 the needs needed to make more power in renewables, more networks, and more storage. I think, as I mentioned, in terms of networks, we have already a unique footprint. We are present in different countries, and all countries are really the same targets.
U.S. 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. All of them are considering one thing, needed more and more investment in networks, transmission, and distribution. In transmission, for instance, you look already at our documents, I think now it represent roughly one third of our total RAB. It was almost nil a few years ago. It was not considered, but the growth in this area is huge. In U.K., you multiply by five our transmission business. In U.S., we are billionaire transmission in this moment in construction for injecting electricity into New York City. In Brazil, we just completed almost BRL 5 billion of transmission lines that we have nothing a few years ago.
All those target trends will make us to be already positive and optimistic about the future of the result 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.
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 has been replied successfully, and after positive feedback received from the authorities, the formal notification has already been submitted. Third is the FDI in Finland. The filling 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 investment 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 finance the transaction with the funds and the capital gains obtained from the sale of our thermal generation in Mexico.
I think I had the opportunity last week to visit Finland with 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 minister, and with members of the financial community. 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 positive in all terms. It's tremendous stability politically. Independently who is running the country, I think there's clearly about what have to be done in our sectors to provide the stability, 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, which I think that is something which is unique in Europe, but they would like to continue making in the same line. I was very positive and delighted, and I'm very glad what David has mentioned, that all the permits is going to be of them soon and to complete the transaction even shorter than expected.
Next, should investor expect further M&A transaction after Caruna? Investor expect further M&A transaction after Caruna?
I think as you know always my answer. I think let's first complete Caruna and let's meet afterwards to talk on other thing. I think historically, always, we have already made the same process. We are very predictable. We acquire something, we integrate, and when it's fully integrated, we start thinking on other opportunities. But we are not making three things at a time. I think is first, now priorities and focus is to complete the transaction of Caruna. When will be completed, we will integrate this Caruna into our system. And who knows what is going to be in the future, but now is not our future, we are not already dreaming and thinking what they're going to make in 2033. I think now is all our people is fully focused, as David was mentioned, is looking and accelerating all the permits needed.
All our business people are already ready, prepared for making the integration with the rest, with the method, system, processes, et cetera, of the group. When this we completed, we will see, but now we are not looking more things than those which is already, as always, complete the transaction, integrate the transaction.
What is your view on the new U.K. government and its approach to energy policy, regulation, grid investments, and the Autumn budget?
The first thing is, the Prime Minister is not an unknown for ScottishPower. You know we have already working with Andy Burnham and his team in the Greater Manchester area during the time he was a mayor. We have the distribution on this area. We knows well his administration and all the things related. I think what we are seeing on the comment he is making already, we are seeing continuity in the key policies. 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. They would like to diminish the external dependence of import, which is coincident with the European Commission is already predicating as well.
Commission is trying for all means to increase the share of electricity, not because only electricity, it's because of diminishing dependence of importing energy from third parties or fossil fuels and others. In this sense of more electrification, the government has announced reduction to zero to the VAT for electricity bills. 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 British Grid or something else, which is a little amount, but I think it's only EUR 4 billion in more than EUR 100 billion investment required. I think that is an incentive for moving faster, and that can help already as well for obtaining permits and obtaining already acceleration and more agility in all the things which is needed for being faster.
You know as well the regulation for transmission is already giving incentives for acceleration of the contraction. We can already reach even 100 basis points extra return if we accelerate, and that is why working very hard. The government is 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 First 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 has already for the economy.
There are still thousand 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?
I think the removal of 7% of generation tax, I think is certain that is good. That is going to reduce retail prices and the wholesale prices. That is positive. I think that 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, 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. I think it is very coherent with the European directives in the sense of helping to more electrification and penalizing less electricity toward other fossil fuel sources. Other positive things, I think in the case of the 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.
It 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. We can improve the return of equity. That gave us the incentive to accelerate our investment. I think 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. Overall, 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 will be making in 2025. Which I think we feel is positive, is rational. 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, saying then U.K., for another reason, to accelerate, to make the things better in a proper manner.
Next is another about Spain. Are you concerned about possible government intervention in the Spanish electricity market?
I think all what we are hearing at level of European Union, at the level of Spanish government, and at level of all the stakeholders, is they are talking about oil and gas. They are not talking about electricity. All the measures they are already is mentioned 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. I do not know if they are planning to make another thing. They are already requesting to make some kind of taxation for oil and gas, but they are not talking about electricity. I think that was the letter sent by different European Union countries to the commission, which was included to Spain. It was absolutely in this line.
I think the documents has been sent by a statement made by President von der Leyen, Commissioner Jørgensen and other commissioners are clear. They would like to distinguish clearly between fossil fuels and electricity, and all are very focused in promoting electrification. I think if you listen, the President of the Commission, Ursula von der Leyen, in her speech, she was 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, distribution, and looking for a central planning, European central planning, and promoting, for all means, the use of systems like heat pumps, electric transport, et cetera. 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 we time to time is happening as a consequence of the import of energy for their countries. Energy, when I say energy, I mean oil and gas.
Next is what the new and the proposed capacity market in Spain. Any insight of the calendar?
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 uses and that already giving us not permission for making some kind of maintenance of the synchronous, et cetera. I think that means that the need of more synchronous power in the system is clear. I was repeating that one for 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. That thing is what 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 do not know if that is possible or it is not possible maybe for the election, because the election is already stopping a bit all those things. I think all the, let us 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 to another one. I think it is something which looks already moving in the right direction, but I think we have to expect that, I do not know if before the election, after election, but now it is 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?
Pepe was mentioning clearly, I think 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 the International Energy Agency is mentioning, that the demand in most Western world is going to move from 2%- 4% or 5%. So I think that is 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 now already renewables, and we are forced either to generate with gas, with our CCGTs, 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 consequence of the today's situation of the gas prices. 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 term. 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 than those what we can already expect next year. As well, we are fixing all our expectation of production of our, let us say, renewable sources, together with the other sources that we compliment always.
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. 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 for new projects? Are you seeing higher appetite for signing new PPAs?
We are seeing in the U.S. a huge demand. We are seeing there is projected by International Energy Agency. We are seeing as well that in the last 18 months, United States has already installed something like 89,000 MW of new renewables and batteries, which I think that means that there are demand for that one. The expectation is in the next 12 months to continue in the same range. I think we have already identified something like 85,000 MW of new capacity, which is going to be built in the next 12 months. Of course, we are benefiting of this demand. As I mentioned, we have installed 750 MW in the last 12 months, and we have already much additional project online for the next five years in two lines. One is extending life of the existing asset or repowering those ones.
What we are selling, making new PPAs at higher prices. We are continue having appetite of PPAs at prices better than the one we have already signed before. I think I can already say last week I was in United States, and I saw already the optimism in our people already for building more and to benefiting of this extra demand. I think we have a unique position. I think we have 11,000 MW already in operation of renewable, wind mostly. I think most of those can already been either extending life or repowering and selling new PPAs as we are doing in this moment. We are optimistic that the next few years and months, we will continue already increasing our fleet and our numbers, and the contribution of our power business in United States.
Next is about U.S. Can you provide an update on the Avangrid rate cases in New York and Maine?
Pedro.
Thank you, Chairman. I think in the U.S., first we finished the rate case in Berkshire in Massachusetts, which you have a three-year rate case. That is done. I think in New York, we got USD 2.2 billion of CapEx approved between now and the end of May next year, so we are also done, USD 2.2 billion. We are working right now on the OpEx related to the period and also on a multi-year rate case to be approved as well. I think it is important that whatever we get approved next year, there is a make-whole provision, which basically means everything starting June 1st 2026 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 2027, and it will be all the investments we have done in the last 18 months plus one year forward. That is what we expect to happen in April next year in 2027.
Next is, which is your outlook for power prices, volume sold, and commercial margin across Iberdrola main geographies?
As I mentioned, the demand is increasing, and as I mentioned as well, we are seeing higher prices. I think if we expect the deal at these higher prices, our margin will already improve the rest of 2026 and 2027. I think the conditions for the I may be lost what is already the situation of the Gulf, but I think it looks the situation of gas prices, the forward prices, have not really diminishing much. If that continues in this one, I think probably the prices will continue higher for a while. I wish that it finish 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 one we had already in 2021.
I think we are already at level prices which are much lower than those we achieve at this period. I think this year, at least in Spain and France, in Portugal, I think the highest prices are probably peak 140, 130, 150 EUR/MWh. But the average price on the year is on the range of EUR 60- EUR 70 still, because we have the first part of the year very low prices. I think the average is higher than previous, but not much, which I think that is a reality. We are not considering only the punctual 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.
I've been already, yes, mentioning to you the artificial intelligence. We are very positive on it because it's another source of the demand growth. I think but is another, like is cooling and heating, like is transportation, like is electrification of certain areas of the industry, et cetera. That why we've been doing our best to facilitate the new demand will be installed. We are helping to our customers, to invest in data centers, providing, in the case we can, land, connection permits, power, et cetera. I think that also is very good for networks.
I think the extra investment on networks, the extra cost that can really provide this extra investment in networks can be diluted for the citizen for the higher consumption of these data centers, which I think all citizen can benefit or lower fixed prices in their bill, in the tariff, as consequence of the largest use of energy of those one, we can already contribute heavily in supporting the cost of the networks. As you know, we have already PPAs for almost 14 terawatt hours. I think if we continue already making those one, every year, we make another 3 or 4 terawatt hours additional, if we continue increasing. I think almost half of those one, or even more than half, is U.S. But as well, we are in Iberia, we are in U.K., we are in other markets as well.
In terms of the regulation of data centers, my position is very clear. It is going to happen. Data center is going to be built. 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 can, in the case of wind, 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 another things for making already central heating. It can already been connected. In the case of the jobs, et cetera, certain that is going to provide job, different type of job, but it is going to provide hundreds of thousands of new jobs on that one.
I think all the arguments which you use, I think, I am sure that it is going to come on due time. I think, when I listen, the water consumption remind to me once, somebody said that nuclear cannot be installed because they make consumption of water. And who said to me that one said, "The consumption exactly the same one that the coal power plant, because the thermic cycle is the same one. Is cycle of Rankine, which is exactly using the same thing. Steam, which is transforming in water, and afterward is steam and water and refrigerated." That is the same thing. It is already need to be refrigerated, but that means for refrigeration. We have power plant which are refrigerating with running waters. We have power plant refrigerated with air, and we have power plant refrigerated with chimney. Any means for that one.
The central heating is reality in many countries with the central heating exists as a way of heating the people there.
Next is, how do you assess the outlook for offshore wind in Europe and U.K.? What criteria guide Iberdrola's participation in new auctions?
I think in this moment we have seven offshore wind farms in operation. We have already a track record and experience in building and delivering. We participate in all the auctions, always based in selective criteria, but with one clear idea. If we participate and we win, we deliver. We are seeing in this moment that, in the Western world, more than half of the auctions awarded has not been built. Almost 78 GW has been awarded in our core markets. Only 50% has already, even not completed, has FID. Only four or five has already finally built. We participate with a commitment toward the authorities, then we will build those ones if we win. Many others are already coming there as an auction. Then we build or it doesn't, depending on many things.
When we make an auction, we have already secured our supply chains, guaranteed all the terms, permits, et cetera. I think it's 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. What are the criterias? First, if we go, it's because we would like to build. 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. 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, fine. In that case, we don't play this game.
We play the game of presented, already shown project with looking for strict profitability, a balanced risk between the construction and operation. We always go with secure supply chains always prior to the bid, always as well with the offtakers at agreed price. 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 if you put in our brand, Iberdrola equal execution. Iberdrola never fail, 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?
I show to you in my presentation that our planning is to accelerate investment in networks up to 2030 and beyond. It's 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. in introducing incentives for moving faster. I think that it's a clear term. The European Commission has recommended to give already better, let's say, make already more attractive the investment on those one is the thing. I think the electrification is here. It was my dream 25 years ago. Now it's not a dream. Now it's a reality. 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. The electrification is a fact. But I think that needs already networks for reconnecting. It's not connection only between the production centers to consumption center. As well, it's already the connection between the consumption centers and to make already this consumption center more reliable, to put much more power. Imagine that suddenly Madrid decide that all towns, all the city will be already 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 reinforcing the cable, reinforcing the substation, reinforcing the transformers. But 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 example, the factories are made after the roads are built. Here, we make the factories, and afterwards we are looking to build the road. That is what European Commission would like to change the trend. Let's put already necessary infrastructures for facilitating, electrifying many uses. Because if we are expecting that the users will be built before the connection, that never happen because the people is not ready to build a factory expecting then the connection arrive. He's looking for the connection for starting the factory. Now the trend, which is moving. That's why we are receiving these new incentives for accelerating and accelerating this investment. And that is what we are pressing. I think we have unique footprint, U.S., U.K., Brazil, Spain, and soon as well, Finland and Australia. But all are the same thing.
Any country I go is double. 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. 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.
Thank you very much for taking part in this conference. As usual, our investor relation team will be more than available for any additional information you may require. I hope that has been useful for you and the explanation we provide and the positive expectation there for the short term and the medium term as well. Thank you very much. Thank you