Good morning, everyone, and thank you for joining Naturgy's first quarter 2026 results presentation. This is Abel Arbat speaking from the capital markets team at Naturgy. Next to me sits the Global Head of Financial Markets and Corporate Development, Mr. Steven Fernández, and the Global Head of Financial Control and Energy Planning, Ms. Rita Ruiz de Alda. As usual, we will begin with the presentation and then move to a Q&A session. Please, submit your questions through the webcast platform and we will address them at the end of the call. With that, I'll hand it over to Steven to start the presentation.
Thank you, Abel, and good morning, everyone. Thank you for joining us today. As Abel mentioned, we're going to go through the presentation. You've had the results publication earlier this morning, and we'd like to focus on a couple of key highlights and then give you room for some questions. If we go to page four of the deck, that would be the energy markets evolution. That's before we get into the financial results and the numbers for the first quarter. We think it's important to set the stage, in terms of context. Basically, in the first months of the year, we've seen milder weather conditions, greater supply visibility and a lower geopolitical risk premium, resulting in lower average gas and electricity prices in Europe compared to the previous year.
However, and this is important to note, these trends reversed following the outbreak of the war in Iran, which obviously has disrupted oil and gas flows through the Strait of Hormuz. Therefore, energy prices have seen a sharp increase through March, reflecting that spike in overall geopolitical risk and supply concerns. If we focus then on the numbers, if we go to slide number five really quickly, what you'll see is that we have achieved a strong operational and financial performance in this volatile market that we just described, delivering an earnings growth of basically over 5% versus the first quarter of 2025. This is underpinned by robust performance across the different business lines. Cash flow generation for the period remained strong, which has preserved our valuable balance sheet flexibility, and we'll discuss that later on in the presentation.
Also as a highlight, in March, we distributed the final dividend for year 2025, which, as a reminder, was EUR 0.57 per share, which ended up translating to a total 2025 dividend of EUR 1.77 per share above the initial guidance of EUR 1.7 per share. Let's now review how the EBITDA evolved across the different businesses, and that's something that you can see on slide six. Basically, EBITDA growth was broad-based across the portfolio. Regulated activities growth was underpinned by a higher regulated remuneration in Spanish electricity distribution, as you all know, and tariff updates across the LatAm markets, which were partially offset by negative FX impacts. The liberalized or merchant activities, and particularly energy management, benefited from higher gas prices and volatility following the outbreak of the Iranian conflict.
In the meantime, the thermal generation contribution increased due to the growing need of ancillary services in Spain following the reinforced operations after the blackout. Finally, in terms of EBITDA, renewables grew, mainly driven by increased capacity and, very importantly, also higher hydro conditions in Spain and wind output, while supply and renewable gases remained stable. We think that the strong start of the year reflects our diversification, the operational resilience that we have, and a very disciplined risk management. That demonstrates that the company is well-positioned to navigate a volatile energy environment through 2026, as long as it remains. If we move over to the cash flow and the debt, you will see that funds from operations remain strong at EUR 1.1 billion in the quarter. That is up 9.6%, and that shows the solid underlying business performance.
Free cash flow after minorities amounted to EUR 810 million, and that is almost 12% increase compared to last year, allowing for EUR 548 million of dividend distribution, while at the same time maintaining or even slightly reducing the net debt levels, as you see in the slide. Key credit metrics remain very robust, with an FFO to net debt ratio standing at 28%, and that is well above the 18% threshold for our current BBB rating from S&P and Fitch. In fact, this is the strongest ratio that we have had over the last few years. All in all, the balance sheet remains strong. This provides the company with a significant strategic flexibility that we will see later on. Now I will hand over to Rita so she can go over the main business unit highlights before closing the presentation and opening the line for Q&A.
Thanks, Steven, and good morning, everyone. Starting with gas networks on page nine. Gas networks reported a total EBITDA of EUR 380 million in March 2026, representing a 2% increase when compared to 2025. In Spain, gas networks experienced remuneration adjustments, foreseeing the current regulatory framework with a stable demand when compared to 2025.
In March, our first draft of the new regulatory framework for the 2027-2032 period was published, and the proposed retribution maintains the parametric formula, providing continuity with the current model and also providing regulatory stability. The new remuneration model reinforces the strategic role of gas in the energy transition, while for the first time supporting the decarbonization of gas consumption through biomethane incentives. Recommendations have already been submitted, and we expect a final retribution scheme after the summer. In Mexico, results mainly impacted by tariff reviews in all of our concessions implemented during the second half of 2025, and positive FX impact. The group has recently renewed concession extensions in three regions in Mexico for the next 15 years, as expected in our strategic plan. We expect to renew the remaining four concessions during 2026-2027.
In Brazil, positive regularization from prior periods, along with higher demand from power generation, mainly due to lower hydro production. The team is proactively preparing for the 2027 concession retendering process with a strong focus on regulatory risk mitigation and early positioning. In Argentina, tariff update compensated with currency depreciation and cost inflation. In Chile, performance affected by FX impact, lower demand, and energy SNL. The regulatory review for the 2026/2029 period has been published with a positive update recognition on the asset base. In summary, solid performance in gas networks and improved visibility with a first draft of the new regulation for gas distribution in Spain, which shows regulatory stability and continuity. Moving to electricity networks business. EBITDA reached EUR 253 million, 4% over 2025 levels.
Regarding electricity networks business in Spain, EBITDA increase driven by a higher regulated asset base and higher remuneration rates, following the application of the new remuneration scheme. This positive impact has been partially offset by the negative impact of final adjustments related to prior year remuneration. In Panama, results positively affected by higher demand and lower losses that compensated for negative FX evolution. Strong commitment to the quality of trade investment plan in Panama, already reflected in improved operational quality metrics. Finally, in Argentina this first quarter, a new tariff review for the 2026/2030 period for the electricity business in San Juan was published, with positive tariff updates, but partially compensated by FX depreciation and cost inflation. In summary, positive impact from regulatory framework in Spain and tariff review in Argentina. Now turning to energy management, on page 11.
EBITDA reached EUR 237 million, which shows an increase versus 2025 of 20%, mainly due to higher margins that compensate for termination in gas contracts. Naturgy is not directly impacted by the supply shortages, as we do not have gas procurement contracts from Middle East. This allows us to ensure full continuity and security of supply of our customers. As a consequence of this supply disruption, there has been an increase in energy prices globally, as well as an increase in volatility. The group's exposure to gas prices in 2026, however, is limited, driven to proactive hedging implemented a hedging concept. However, the group is now focused on risk management and potential capture of opportunities and optimizations from ongoing volatility, leveraging for this on contract flexibilities, LNG tanker fleet, and downstream positions.
As we mentioned in February, we have reached a price agreement with our gas supplier, Sonatrach, for the period 2025-2027, which provide us visibility in a context of energy price volatility. Overall, performance was supported by effective hedging and optimizations, together with a diversified procurement portfolio that guarantees security of supply in a context of uncertainty and increased volatility. Continuing with thermal generation, EBITDA reached EUR 179 million in 2026, 11% over 2025 levels due to higher activity in Spain. In Spain, results increased, supported by higher demand for ancillary services from our combined cycle fleet. But this was partially offset by lower revenues and outputs from nuclear plants, mainly due to scheduled refueling outages. Naturgy holds the largest CCGT fleet in Spain, acting as a backbone to security of supply.
In LATAM, improved performance in Mexico CCGTs and higher production in Dominican Republic, offset by negative impact from US dollar depreciation. In conclusion, CCGTs are key to meeting Spain's growing need for ancillary services. Now let's turn to renewable generation on page 13. Renewable generation reached an EBITDA of EUR 118.5 million during the period, 8% over 2025 levels. In Spain, renewable generation was 10% higher when compared to 2025, and this was mainly due to stronger wind and hydro output. It's important to remember that we had exceptionally high hydro levels in February 2026. Higher renewable output has resulted in downward pressure on wholesale electricity prices versus 2025 levels. However, the group's vertically integrated position offsets this impact. The group continues to pursue selective renewable growth, focusing on repowering and battery hybrids.
In the U.S., results are higher when compared to 2025, mainly due to higher production and higher energy prices. New capacity has entered into operation, and we have a further 125 MW to be commissioned in 2026. Naturgy has successfully completed the disposal of its U.S. renewable project portfolio that did not meet return thresholds, reinforcing with this decision the group's strategic focus on disciplined capital deployment. In LATAM, activity was positively impacted by improved output in Mexico due to recent maintenance improvements, but negatively impacted by lower prices. Finally, in Australia, negative evolution of the mark-to-market valuation of existing PPAs. Additionally, 360 MW are under construction that will become operational in 2026.
Overall, results from renewable generation were higher, driven by commissioning of new capacity in 2025, increased production in Spain, and the successful disposal of the renewable portfolio in the U.S., in line with the priorities set out in our strategic plan. Selective growth continues with 1.2 GW of capacity currently under construction and expected to come into operation by the end of 2026. Last, moving to supply. EBIT, there has been EUR 166 million, in line with 2025 results. In electricity, the sector is experiencing margin pressure due to higher system ancillary services cost. However, commercial policy has been adapted to reflect this new market condition. Margin pressure from lower prices has been contained by the group's integrated position and contracted sales for 2026. In gas, higher margins in industrial segment, together with lower losses in regulated tariffs.
Overall, results are stable, with higher electricity costs offsetting improvements in gas margins. Now, I will hand it over to Steven for conclusions. Thanks, everyone.
Well, thank you, Rita. We move over to slide 16. Looking at the energy scenario for 2026, energy markets continue to reflect geopolitical uncertainty, of course. Spot prices of relevant oil and gas benchmarks remain high, and the current forwards indicate that prices are expected to gradually normalize during the second half of the year. However, clearly remaining above the levels that we saw in January and February prior to the conflict. The Iberian pool prices are expected to remain volatile and largely dependent on renewable resource as we move into the spring and summer season. The scenario reflects continued volatility, particularly in the first half of the year, followed by normalization as the year goes on, but obviously subject to the evolution of the geopolitical environment. In this context, I would like to focus on a couple of points for the year ahead.
If we go to slide 17. I think that looking ahead to the balance of the year, we do see a number of important developments that give us increased confidence in the trajectory of the business. I think the key message is that we have had a strong start to the year, clearly, and visibility for the remainder of 2026 has improved. This is not driven by any single factor, but rather by a broad set of initiatives across the portfolio, like regulatory clarity in networks, disciplined energy management, selective growth in renewables and renewable gases, and opportunities to optimize our thermal and supply positions. Let us start with networks. We do expect the final regulatory framework for gas distribution in Spain to be a key milestone. This should provide overall greater clarity on future remuneration and reinforce the value of one of our most resilient businesses.
In LATAM, we are also focused on the retendering of concessions in Rio and Argentina, where our objective is to preserve and strengthen long-term value in attractive regulated platforms. In energy management, the priority remains security of supply and disciplined risk management. Now, we are using our physical portfolio and hedging capabilities to manage volatility in a prudent way while preserving upside where appropriate. Importantly, this is not about taking directional risk. It is about extracting value from our integrated position, our procurement capabilities, and our market expertise. We are also evaluating additional gas procurement opportunities, which could further enhance flexibility and optionality. In thermal generation, we continue to see value from the role that our assets play in the system stability, particularly in Spain, through grid support and voltage control. These are increasingly important services in a power system with growing renewable penetration.
In addition, in Puerto Rico and Mexico, we see concrete opportunities to extend or reinforce the value from our existing capabilities. For example, in Puerto Rico, the board of directors approved yesterday the participation in a tender for a CCGT. In the meantime, we are also progressing on the negotiations of the PPA extensions in Mexico, and we expect to have visibility on that during the course of the year. In renewable generation, execution remains a core priority. Now, throughout the presentation, you see that we have 1.2 GW under development. That should read, we have 1.2 GW under construction. In fact, following yesterday's board of directors, that number is now 1.6 GW. So clearly, we are continuing to build on our renewable platform and focusing on delivering that pipeline with discipline. That is an absolute critical point for us.
At the same time, we are also prioritizing repowering and battery hybrids in Spain, which can unlock additional value from existing sites and obviously improve the quality of our renewable portfolio. We will also continue to analyze bolt-on acquisitions, but obviously, as always, with a disciplined capital allocation approach. I am sure there will be some questions on that moving forward. On renewable gases, we are progressing on more than 70 projects currently under development. As you know, this is an area where we believe that the company has a differentiated position, combining gas infrastructure, customer relationships, project development capabilities, and a clear role in the energy transition. We are admittedly still at an early stage, but the pipeline gives us confidence that this can become an increasingly relevant growth factor over time.
Finally, in supply, we are adapting our commercial offering to reflect the current market conditions as expected, while maintaining, at the same time, a balanced, integrated position. Now, bear in mind, this is important because it allows us to serve customers competitively while protecting margins and preserving flexibility. We also continue to explore data center opportunities, subject to the publication of the applicable development framework. In this sense, we are encouraged by some aspects of the new draft regulation, which will reduce speculation in the sector and position strong players like Naturgy at a significant advantage relative to others. In general, as you know, data centers could represent an attractive source of incremental demand and infrastructure growth over the medium term. So overall, the message is quite clear, actually.
We enter the rest of 2026 with better visibility, multiple levers of value creation, and a portfolio that is well-positioned across regulation, markets, growth, and flexibility. We remain disciplined, but the start of the year gives us confidence that the business is moving in the right direction and certainly better than we initially expected. Finally, our healthy balance sheet also continues to be an important source of strategic optionality. It gives us the flexibility to continue assessing growth opportunities from a position of strength while remaining fully disciplined on capital allocation. In this sense, we have continued to advance in our analysis of potential opportunities with a clear focus on Western Europe and the U.S., and with a bias towards electricity-related growth, including networks, renewables, and vertically integrated business models. That said, our approach remains unchanged. We will be selective, financially disciplined, and patient.
We do not feel under pressure to deploy capital for the sake of growth. We will only move forward where we see a clear strategic fit and an attractive risk-return profile, and the potential to create sustainable value for our shareholders. Let me close with four key messages, if I may. First, since late February, we have seen a more volatile energy market environment, and our focus has been to manage that volatility with discipline, prioritizing security of supply, prudent risk management, and the strength of our integrated portfolio. This is an environment where flexibility matters, but the key point is that we are not taking directional risk. We are managing our position carefully and extracting value from the capabilities we have built over time. Second, the business is performing well. Earnings are up 5%, supported by a robust performance across the different businesses.
Importantly, this is not dependent on one single driver. We are seeing solid delivery across regulated activities, energy management, generation, and supply, which gives us greater confidence in the quality of the earnings base. Third, our balance sheet remains a clear strength. It gives us strategic flexibility and, importantly, growth optionality. We continue to advance in the analysis of opportunities with a focus on Western Europe and the U.S., as I've mentioned, with, again, a clear bias towards electricity, including, again, renewables, networks, and vertically integrated business models. It's important to highlight that our approach remains disciplined. We're not in a rush to deploy capital. We will remain selective and will only move forward where we see strategic fit and an attractive risk-return profile and a clear path to value creation. Overall, we think we are well-positioned for the balance of 2026.
We've got improved visibility, a resilient portfolio, disciplined credibility and flexibility to navigate volatility, and a healthy balance sheet that allows us to reserve upside optionality beyond the current year. With that, I'll hand over to Abel, and any questions you may have.
Thank you, Steven and Rita, and thank you everyone for submitting your questions through the webcast. We're going to start covering a few generic questions, and there are a number of questions related to guidance for 2026, which I would summarize as, following the strong performance in the first quarter of the year, do we see space to exceed our 2026 guidance? What are the main business dynamics or moving pieces in that guidance?
We will update the market, as we usually do, on the H1 results. What we can tell you is what we just mentioned in the presentation, the year has started very strongly. It started ahead of our expectations. But we are talking about the Q1 results. We need to see how the world evolves, how the volatility evolves, and maybe before we're in a position to provide more indications of guidance, beyond again, emphasizing the fact that we started very strongly ahead of expectations. I don't know, Rita, if you want to add something to that. No. Okay.
Thank you. Then there are a few questions as well around balance sheet capacity. I would summarize them in terms of if we can comment on our balance sheet headroom and if we are open to pivot our strategy towards growth.
The balance sheet headroom, I think there's an easy calculation you can do, which is looking at our FFO and net debt right now, 28%, and look at it at the limit of 18%. It's not as straightforward as that, obviously, because it depends what you're going to be using that balance sheet for. It depends if you're buying a company, the profile of that company, how much leverage that company brings along, how much cash flow, et cetera. So it's a little more complicated than just a pure mathematical calculation. But a back-of-the-envelope calculation is something you can actually do. The reality is that there is balance sheet headroom, okay? Interestingly, I would say yesterday we had a board of directors, and one of the messages coming from the board of directors is unanimous support for the company to actively explore growth opportunities.
That could take the form of organic growth, additional organic growth or, where appropriate, inorganic growth. That's exactly what we're doing. The move right now is we are canvassing the market. We are looking for opportunities. I can tell you that we've done quite a bit of work since we last spoke. We have a pretty clear view of what could be available and what could be of interest to the company. Obviously, this is not something that we're going to discuss publicly here. We've also made great strides in terms of being ready for the right opportunity. So in that sense, we also have financing available, if and when we require it from a number of institutions.
All we're doing right now is deepening our analysis of a number of opportunities that we have identified, and hopefully be in a position to bring something to the board as those become clear.
Thank you, Steven. Also relating to M&A criteria and preferences, do we have a specific preference on electricity or gas? Also there's a question around potential bolt-on acquisitions in renewables and whether or not we prefer several small or medium-sized acquisitions rather than a large one, and also as it relates to operational assets or pipeline.
All right. You summarized a lot of questions into one, right?
Yeah.
I'll start with the last one, and then you remind me.
Yeah.
-once.
Sure.
On bolt-on acquisitions, yes, we are looking at bolt-on acquisitions in the renewable space, specifically. To be more precise, those are opportunities for operating assets. We're not looking to further develop our pipeline. We do have a rich pipeline, but we do look at operating assets that provide upside. For example, if you're looking at wind assets, you'd be looking at wind assets that have the ability of repowering, for instance, right? In terms of whether or not are we open to do small acquisitions or one large one, again, the world is not as simple as that. What I can tell you is that we're open to do the right acquisitions, be them small or large, actually. Right now in the pipeline that we have for actual transactions, we are actively engaged in processes for bolt-on acquisitions, so reasonably small sizes.
Our analysis also includes transactions that are of higher value or rather bigger size, if you may. There is a clear bias for electricity, but we do not shy away from gas either, right? There could be some opportunities that combine both electricity and gas, right? It is very important for you to understand that when we think about growth, we are not thinking about simply a step up in EBITDA, right? So it is not what we are looking for. We do not look for adding on EUR X hundred million or whatever amount of EBITDA. We look for opportunities that beyond the step-up in EBITDA you can have from the acquisition that provide an organic growth path moving forward. If you start thinking about the world, and depending, obviously, on your vision, then that allows you to basically start narrowing the number of opportunities.
Thank you, Steven. I think you covered a lot of the main questions on the M&A topic. Perhaps a question more related to organic growth. Which are the areas where we see greater growth potential for organic development?
I think a couple of areas that were mentioned in the presentation. A good example would be CCGT, the tender in Puerto Rico. We think that is basically organic growth, and it is an interesting project. It is a tender, so it is not a foregone conclusion that we are going to win, but we think we are well-placed, right? That is one area where we can actually benefit from, A, our presence in the island, so we know that, and we feel comfortable with the risk associated to it. Two, our ability to manage projects, and specifically CCGTs. Three, our ability to also incorporate into the value chain the gas procurement contracts that can come from our procurement division. We see value there, and that would be an example that that project in particular would be slightly north of EUR 1 billion of development over a number of years.
Another area that we are looking into growing is repowering in renewables, hybridization renewals in Spain as well. Those are the clear evident areas. There is one in particular where we are waiting for regulatory development to see whether or not we can increase the amount of investment, and that would be electricity networks in Spain. There are numbers, unlike some of our peers who include in their strategic plan assumptions, whereby their CapEx is presented above the regulatory limit, and therefore the number is high. Our strategic plan does not include that, so we limit our CapEx to the regulatory limit. If there is a scenario where we can actually if we are actually allowed to increase that amount of CapEx, then there is upside in electricity distribution in Spain as well, and that would be an area that we would be keen to explore onwards.
Thank you very much. Okay. Still, I guess, on the generic side of the group, there is a question on data centers and whether or not we can expect some deal or partnership announcement in 2026. What are, in our view, the main competitive advantage to be a key partner for hyperscalers in Spain?
With the publication of a new Royal Decree, where the regulatory development still has to be published, I would say it is fair that the development of data centers in Spain is right now at a standstill pending the publication of this, right? Once we have more clarity, both ourselves and off-takers, data center developers, et cetera, that is where we are going to see a significant acceleration. What we bring to the table are two very simple things. Number one, actually, with the new regulation, the cost of blocking capacity increases dramatically. Therefore, one of the objectives of the new regulation pursuit was getting rid of speculation, and there was quite a bit of speculation by blocking connection points. That is going to disappear. That is going to free up a lot of connection points, and that is going to be interesting.
It is going to eliminate a lot of PowerPoint data center developers, and it is going to focus the attention on the strong incumbents, in this sector. What we bring to the table today is access to connection points, access to power, access to land. Those are the three ingredients that are required from off-takers for the development of data centers. Now, whether or not we will be in a position to announce something by year-end is going to depend on how soon we have more regulatory visibility. Certainly working towards it. Our teams have, as I mentioned in a past call, have already identified sites that could be of interest. Some of them are for hyperscalers, some of them are for just more traditional data centers, so capacities of 30 MW or whatever. We are in a position to move forward when we have more clarity.
Hopefully, it is this year. Yeah.
Excellent. One last question before we get into specific business highlights and units. It relates to the positive working capital movement in the period, despite the rising gas prices, and whether or not this strong cash flow generation can mean an improvement in the net debt by year-end.
Thank you, Abel. In this case, working capital evolution is positively affected by, obviously, seasonal demand patterns and also by the negotiation of gas contracts, even in a context of increasing prices. However, the debt remains low as we expect to settle certain liabilities in 2026 related to supply contract agreements and payments to the CNMC, as we already explained in February. As a result, we anticipate an increase in debt over the coming months of 2026, but probably we will provide you an update on the debt with the guidance in July.
Thank you, Rita. Perfect. Let's now move on to the various questions per business unit. I'm going to start with Spanish gas networks. The first question relates to the new proposed regulatory framework 2027-2032, and if we can comment our views on the proposed framework.
Yes. First, I will highlight that the proposed distribution framework reverses the downward remuneration trend of the last two regulatory periods. This trend was mainly driven by regulatory adjustments as well as demand reduction. I think this is an important point. Second, this draft also reinforces the crucial role of gas networks going forward and provides stability and visibility to the sector with the continuity of the parametric formula and with a cap and floor mechanism. For the first time, this regulation introduces two new incentives focused on network digitalization and biomethane, responding to a long-standing sector request and supporting the decarbonization of demand. Nevertheless, on our point of view, the outcome remains insufficient as it does not adequately reflect the impact that high accumulated inflation and decreasing interest rates in the recent years had on distribution activities.
We will continue to promote, in this sense, a constructive dialogue with the regulator, with the aim of reaching a remuneration framework that ensures the financial sustainability and adequacy of the activity. We have already submitted our recommendations, and we expect a definitive proposal at the CNMC.
Thank you, Rita. A couple of questions on our networks Latin American activities. One is a generic question on a general update on the regulatory reviews and if there is any specific update to comment on. The second one relates to the retender process in Rio de Janeiro and whether we have any updates on that front.
Okay. The main priority in LATAM is obviously the concession extensions. We already had three concession extensions in Mexico. Also, we expect Argentina in 2026, Brazil in 2027, and Panama in 2028. Additionally, regulatory management continues to be a key priority in Latin America as we aim to obtain tariff reviews and updates, which compensate for ongoing inflation and FX depreciation. In this sense, we have a positive tariff review in Argentina in electricity and also a positive regulatory review of our asset base in Chile.
On the Brazil tender, what we know is that it will be a tender. We have to see what the conditions for the tender are before making the decision on what the move will be for the company. Obviously, this is something that we're following very closely. There are elections coming up in the state, and therefore, that introduces a certain level of uncertainty in terms of the timing. But clearly, when we think about Brazil and when we think about the concession tenders in Rio, surely, I think everyone would agree that the incumbent has a certain advantage over newcomers, in its ability to better price risk than someone else, right? But having said that, we'll see what the outcome is. You have to bear in mind that there are two outcomes here, basically.
Outcome number one, that we win the retender when it comes to market and we keep operating the asset as it is. Outcome number two is that we lose the tender and that gives rise to a right for payment to Naturgy. Either way, there is basically no downside scenario in this particular case.
Excellent. Many thanks. Let's now move on to the questions in energy markets, and let's start with energy management. There are also a number of questions which I would summarize in trying to understand and measure the potential upside from the current scenario and whether we can quantify the value of this flexibility in the current environment.
Thank you. Well, as you all know, following the recent conflict in the Middle East, gas supply has tightened, leading to higher prices and increased volatility. The key uncertainty now lies on the duration of this conflict and also on the timing of a subsequent normalization of traffic through the Strait of Hormuz. However, it's important to understand that the group's exposure, as we have explained many times, to gas prices in 2026 is partially limited by proactive hedging previous to the conflict. Now the focus of the company has shifted into risk management and also into capturing upside from ongoing market volatility, leveraging for this on contractual flexibility, downstream positions, and on our LNG tanker fleet.
Thank you. Thank you, Rita. Then a specific question on the situation in Yamal and whether is there any update on the Yamal LNG contract? Will deliveries cease from 1st January 2027? How could the volumes be replaced if that is the case?
Okay. As we already explained in February, there are two processes underway in parallel. One is related to sanctions, and the other one is related to tariffs. In July, the European Commission is expected to renew the sanctions, which would require unanimous approval. If these sanctions are confirmed, we would not be able to divert these volumes to other destinations. To date, there have been no further updates in that regard. I think we have to wait and see what happens in July. This ban affects the import of 38 TWh of gas imported, both into Spain and into France, and we will expect to compensate with LNG gas portfolio or access to market volumes.
Thank you, Rita. Another question on that business unit relates to the recent LNG tender in Argentina. What happened? Were those margins expected to be above our current margin for the rest of the portfolio? More broadly, a general question on the situation of that tender process in Argentina.
Okay. Naturgy successfully participated in a highly competitive tender for the supply of LNG in Argentina. However, the Argentine government ultimately decided to keep ENARSA as an intermediary for this operation. I think that, first, Naturgy has been a regular supplier of gas to Argentina, which I think is important, and winning this tender reinforces that the group has capabilities and experience in these type of operations.
Thank you, Rita. Okay, we can now move on to thermal generation, and there is a specific question on the Iberian blackout from April 2025, and what could be the impact of the ongoing CNMC investigations and sanctions to Naturgy.
Regarding the sanctioning proceedings opened by the CNMC, Naturgy has received 11 procedures, and we are carrying out an extensive analysis to ensure a rigorous and timely response to these procedures. The potential impact of these fines are ranging from EUR 600,000 to EUR 6 million. But I think that it is very important to highlight that none of these proceedings are related to the blackout incident.
Okay. Thank you, Rita. We can now move on to renewables. There are a couple of questions related to potential and incremental renewable growth opportunities. We mentioned in the presentation, we have 1.2 GW of-
1.6.
-additional capacity.
1.6.
Okay. Potential capacity coming online. Can we provide some color on that progress and our ambitions in each region?
Okay. As you mentioned, we have 1.2 GW under construction in Spain, U.S., and Australia.
1.6 GW.
1.6 GW. Sorry. 1.6 GW. That will become operational in 2026. in Spain, as Steven also mentioned before, we are focusing investment in repowering of existing wind plants and also in battery hybrids, as well as finishing these projects under construction. In the U.S., as I mentioned during the presentation, Naturgy has reached an agreement with Copenhagen Infrastructure Partners for the sale of 11 photovoltaic plants and storage projects. This disposal is aligned with the group's strategic focus on disciplined capital deployment. These projects, specifically, didn't meet our expected profitability. As Steven has mentioned, and I insist, the group prioritizes value creation, and we are constantly analyzing opportunities, both organic and inorganic, with a preference for vertical integration and very selective international.
Okay.
Go on.
Very clear. Thank you. One question on renewable gases in light of the new incentives that are part of the gas distribution regulatory framework proposal. Biogas seems to have taken more support from the regulator in this draft gas regulation. Does that bring more visibility to the EUR 800 million growth CapEx that was envisioned to 2027 in our plan?
It's true that biomethane seems to have taken more support with incentives recognized in the distribution remuneration model. However, we are expecting a specific policy package to be published in 2026 that will accelerate biomethane production and its use for decarbonization. In this sense, the group has made strong progress with the development of our biomethane portfolio, with more than 75 projects in our pipeline. However, our investment plan has been delayed by slow administrative processes. Apart from these incentives, we need administration collaboration in order to achieve our decarbonization objectives and investment.
Just as a thought, really, as a fact, so you guys know what we're talking about right now. If we look at year 2025, last year, 140 plants, 140 plants presented the documents for environmental authorizations, and that's fundamental for them to go ahead. 140 in the whole country. Of those 140, 40 were from Naturgy. The total amount of environmental authorizations granted in the whole of Spain in year 2025 was 20 out of 140. So clearly, up until now, it hasn't been a clear priority for administrations, both regional and national. What we're encouraged to see when we think about the new CNMC draft regulation, is that there is a clear shift in the authorities or the administration towards a greater support for biomethane.
I may add, by the way, that this is not something that happens overnight and out of a miracle, but this is a function, among other things, of the tremendous effort that the biomethane team here at Naturgy and the company as a whole has been making in talking to the regulator, talking to the government, and explaining the benefits from a higher rollout of biomethane. So hopefully, these efforts will translate into higher permitting than last year. If that is the case, an acceleration of biomethane, where today we can say without any hesitation that Naturgy is the lead player, better positioned than anyone else to capture the growth linked to biomethane.
Thank you, Rita and Steven. Let me take the opportunity to circle back with one additional question related to biomethane and clarify that gas distribution networks don't require any modifications to accommodate for future biomethane injections, so the networks are already prepared to distribute biomethane. As a matter of fact, biomethane is just natural gas, and the only thing that changes is its origin and how it's extracted. But the future biomethane injections and those incentives do not require for modification into the existing gas networks. With that, we can move to the last question, which is on the supply business, as follows. It says, you flagged in the past a very competitive market, but other peers have recently passed a more optimistic message for margins. What's your view? Can you comment on the supply margin dynamics, market shares, and competitive dynamics?
Yes. Generally, I insist that both in gas and electricity, the sector is experiencing high levels of competition with high churn ratios. Additionally, increasing costs from ancillary services in electricity has impacted negatively, and this requires adaptation of commercial policy. However, I think it is important to highlight that our customer portfolio for 2026 has already been contracted. This provide us with a strong visibility into this year margins, which remain solid, and we are now looking into 2027 portfolio renewal.
Perfect. Thank you. Thank you very much, Rita. This finalizes all the questions we have received, with the exception of two very specific numeric questions that the capital market will respond in written form at the end of the call. Just remind you that the management team will be on the road for the next couple of weeks. We are going to be in the U.S. next week, in New York and Boston. If any of you around and willing to see us, please feel free to reach out. Also, we are going to be in London on the May 12th and May 13th. Looking forward to see as many of you as possible and, in the meantime, feel free to reach out with any additional questions. Thank you. Thank you very much for participating in the call. Cheers and bye-bye.