Edp Energias De Portugal SA (EDPFY) July 2026 Capital Markets Day Transcript

Good morning, ladies and gentlemen. Thank you for attending EDP's First Top 26 Results Conference We have today with us our CEO, Miguel Estudio Andrade, and our CFO, Rui Teixeira, which will present you the main highlights and our strategy execution and First Top 26 financial performance. We'll then move to the Q&A session, in which we'll be taking your questions starting with the written questions that you can insert from now onwards at our webcast platform and then by phone. I'll give you now the floor. to our CEO, Miguel Estrello-Bendraza.

Miguel Estrello-Bendraza Thank you, Miguel. Good morning to everyone, and welcome to the EDP First Half Results conference call. I'll jump straight into slide three and start off by saying that EDP delivered a very strong first half of 2026. We had a recurring EBITDA of around 2.7 billion euros, so that's up 5% year-on-year. We had a recurring net profit at around 0.8 billion euros, so broadly flat versus the last year. However, the key message really is that the group is performing very well across its core platforms. You have a very visible growth in the networks business, and I'll talk a little bit about that later on, sound performance in the FlexGen and clients, and continued delivery of EDP renewables that we also discussed in more detail yesterday. Starting with networks, EBITDA increased 14% year on year. So that was driven by the new regulatory periods in Niberia, both Portugal and Spain, started beginning of January, but also growth in Brazil. So this is an important confirmation that the regulatory framework in place now is really translating into much higher investment, better returns, and stronger earnings contribution. At EDP Renewables, EBITDA increased 8% year-on-year, or 12% excluding foreign exchange, and that's mostly supported by the growth in the U.S. and improved asset rotation gain. And in the FlexGen and client, performance remains sound. It's supported by flexible generation in Iberia, so you can see the hydro-realized prices and volumes, the hydro-pumping and storage, all of that contributed to the FlexGen. And despite the year-on-year comparison being affected by the lower electricity prices and higher ancillary services costs. Overall, the first half gives us additional confidence in the execution of the business plan, and it also supports the guidance upgrade that I'll cover later on, on both the EBITDA and the net income level. If we move to slide four, going into depth on electricity networks. So this is one of the clearest examples we have of the improved visibility that we have across the group. So electricity networks investments increased 25% year on year in the first half, reached 555 million euros. The acceleration is mostly in Portugal, where CapEx increased 40%. but also in Brazil, where it increased 20 percent, and in Spain, where it increased 4 percent. Importantly, this investment growth is supported by positive regulatory development in all the geographies. In Portugal, the investment plan for 26 to 2030 increased by 66 percent to 3 billion euros, with an all-in free tax return on RAB of around 8 percent for the 26 to 29 regulatory period. And in addition, the government has ordered a study on the rationale for reinforcing the climate adaptation investments and giving more resilience to the networks, and that may support future investment needs or additional future investment needs. That's expected for around the end of the year, and we should have visibility on that. In Spain, the plan we proposed to the regulator increased CapEx by 40% to 1.1 billion euros. As an all-in pre-tax return on RAP of around 9% for 2026 to 2031, and we're still assessing the impact from the latest royal decree released by the Spanish government on the investment plan limits. It may present some upside on the 2027 to 2030 investments. And so generally, we consider it positive news. In Brazil, we now have a very strong long-term visibility, as you know, with both EDP Xperia Centro and EDP São Paulo electricity distribution concessions extended for 30 years. So overall, networks clearly moving into a new investment cycle with attractive regulated returns and strong visibility across Iberia and Brazil. Going to slide 5, you can see here some of the key trends in Portugal, and I think the first thing is to really highlight that Portugal continues to stand out as a market where the demand growth is accelerating, supported by electrification, population growth, electrical vehicles, heat pumps, air conditioning, but also by the development of data centers. And we expect electricity demand in Portugal to grow at around 4.5% CAGR between 2026 and 2035. And as I mentioned earlier, this growth is driven by just a broad set of factors, including a big part of it, around 60% of it, to data centers over the next couple of years. And here, I'd highlight that Portugal really has an important structural advantage. This growing demand is improving the network's utilization. It helps dilute fixed system costs over a larger consumption base. And so this, together with the high renewable penetration, abundant resources, leads to competitive electricity prices versus other European countries, which is increasingly relevant for industrial demand and for large-scale electricity users. I just stress this point. Often, when you have a large increase in consumption, the first thought is that this will lead to higher power prices. But it's very important to bear in mind that it also dilutes the fixed costs. And so the net impact, for example, in this case, is expected to be relatively neutral on power prices, on overall tariffs for the customers. On data centers specifically, Portugal's positioning itself as an emerging hyperscaler data center hub. So there's a significant pipeline of grid connection requests. We have around 4.6 gigawatts already requested. That's the equivalent of roughly 50% of the current peak demand. We're also benefiting from a strong subsea cable connectivity and robust telecoms infrastructure, and we're seeing that advantage in action. Just recently, you may have seen Google, there was an inauguration of Google Nuvem Transatlantic Cable that landed in Finnish, just south of Lisbon. It's part of the company's broader $40 billion investment in AI and cloud infrastructure coming to Portugal. Ultimately, data centers are more than just digital infrastructure, and I just wanted to also reinforce this. They attract investment, they create skilled jobs, They boost GDP growth, and they strengthen the country's digital competitiveness. So it obviously has to be done well with good regulation and regulatory sort of frameworks, but it can create a significant amount of value added for the country. All in all, we see Portugal nowadays as a huge growth opportunity across networks, supply, renewables, and potentially integrated solutions for large customers. So Portugal is definitely a very hot market at the moment, and I think we're very happy to have a strong presence here. On slide six, talking about FlexGen. What we're seeing is the structural improvement in the value of flexible generation. You have solar and wind penetration increasing, and the system also needs backup and more flexibility. The integrated margin of FlexGen and clients in Iberia has materially increased over the last decade, moved from 19 years per megawatt hour in 2017 to 48 years per megawatt hour in the first half of 2026, and we expect to remain in the range of 40 to 45 euros per megawatt hour over 26 to 28 periods. This reflects structural increase in the price spreads between solar and non-solar hours, between high and low demand periods and across months. These spreads increase the value of hydro pumping and CGTs as backup technologies. The ancillary services are also becoming more relevant. The ancillary services component reached 23 years per megawatt hour in the first half of 2026 compared with up to 18 years per megawatt hour in the first half of 2025. Looking ahead, reservoir levels remain above average in June, around 70%, and forward baseload prices in Iberia at around 110 euros per megawatt hour for the second half of 2026, and around 67 euros per megawatt hour for 2027, while still remaining below that of other European markets, so still more competitive than other markets. The key point here is that we're seeing a structural increase in the results from our flexible and client-support portfolio, highlighting the value of our integrated management. That takes me on to slide seven, talking about retail electricity supply in Portugal. I just wanted to highlight this here. We've been reinforcing our competitive positioning on the retail side, the clear focus on pricing, on efficiency, and quality of service. EDP has around 4 million customers in Iberia. If I just focus in on the B2C business in Portugal, I just wanted to stress the impact that we're seeing from some of the commercial initiatives we've been implementing. Client losses have reduced materially. They're down 13% year on year. We have new client additions increasing 24% year on year. And importantly, we already saw a monthly net gain in March of 2026, which is a positive sign of stabilization in the client base. And this improvement has been supported by three key levers. First, a more competitive pricing strategy with offers in all of the key B2C electricity segments. Second, the very successful mass market communication campaign, which has helped improve visibility and competitiveness of our offers. And third, continued improvement in the customer experience and digitalization. And that's been complemented by targeted local commercial action. So the team has really pulled out all the stops here to deliver, I think, a very successful execution of the strategy. Overall, it supports the resilience of the integrated FlexGen and clients platform, and it reinforces our ability to capture value in both the generation and the retail business.

I move on to slide eight, EDP renewables.

The fundamentals here in the U.S., in particular, speaking about the renewables, is very, very strong. I mentioned this briefly yesterday. I mean, according to the July 2026 EIA outlook, U.S. power demand is expected to grow at around 2.3% CAGR between 2025 and 27. This demand is expected to be sourced mainly by wind and solar, as they're their cheapest and fastest solutions to be deployed, particularly as coal capacity is phased down. This demand growth continues to support the increasing PPA prices, and it creates a very constructive backdrop for EDP renewables commercial activities. So since the approval of the one big beautiful bill the 4th of July of last year, 2025, EDPR has contracted already one and a half gigawatts of new capacity through nine deals. The risk return profile of this contracted capacity is attractive. So just a couple of key metrics, around 290 basis points of spread IRR to WAC above the target of more than 250 basis points, and 90% of the NPV is contracted above the target of more than 60%. So with very little risk on the backside of that contract. Additionally, looking ahead, we have around 1 gigawatt of PPAs under active discussion, around 6 gigawatts of safe hybrid wind and solar projects with 2025 to 2030 CODs, and a pipeline of more than 20 gigawatts with around half in MISO and PJM. Finally, just highlighting that we continue to reinforce our domestic content procurement strategy. We have a diversified supplier base. We have increasing resilience supporting the execution of our pipeline and the projects under construction. So in the U.S., combination of strong demand, attractive PPA pricing, low regulatory risk, and a high-quality pipeline continues to support our growth strategy. Moving on to slide nine, and a quick update on the asset rotation and secure capacity. So the asset rotation execution in 2026 is progressing very well. We continue to demonstrate the attractiveness of the investments we're making. I mean, very clear data points that we can show and show you all about the value creation of these investments. So far in 2026, we've signed asset rotation transactions representing a total enterprise value of around 0.9 billion euros, if we consider 100%. And these include 68 megawatts in Italy and 384 megawatts in the U.S. of solar and batteries. I mean, as the U.S. transaction in particular, I highlighted this also yesterday, was the first asset rotation transaction of a project approved post the big beautiful bill in the US last year. And it really showcases our ability to capture value in this geography. So I think we were very happy with that transaction. The implied enterprise value per megawatt remains attractive. It's around 2.2 million euros per megawatt in Italy and around 1.8 in the US with a total average of around 1.9 million euros per megawatt. And very importantly, the gain on the invested capital is around 40%, so well above the target of the 15%. The proceeds, as mentioned earlier, are expected to be concentrated in the second half of 2026, and we do have some additional transactions in the pipeline expected to close either still this year or the first half of 2027. On secure capacity, EDPR now has 3.4 gigawatts secured for the 2026 to 28 period, which represents approximately 70% of the 5 gigawatt editions target. 2026 editions, as you know, are fully secured under construction. 2027 is already 80% secured, again, with very attractive risk-return metrics and an IRR to WAC spread of around 285 basis points. And so overall, this provides very strong visibility on execution while maintaining the discipline on returns and risks. And I'll stop there. I'll pass it now to Rui, who will take you through the financial performance in more detail, and then I'll come back for guidance and questions.

Thank you very much, Miguel, and good morning to you all.

So let's start with the EDP first half results. Again, we delivered another solid set of results, recurring EBITDA increasing 5% year-on-year to 2.7 billion, or 6% excluding FX. And this was driven fundamentally by the growth in the networks and the renewable segments. So let me break this down. Electricity networks now represent almost one-third of the group EBITDA and continue to increase their contribution to the earnings. This is a segment that is obviously delivering a very strong performance, with EBITDA 109 million year-on-year, reaching 874 million. This was driven by the start of the new regulatory period in Iberia, combined with continuous RAP growth and operational discipline. FlexGen and clients EBITDA declined by 39 million to 808 million euros, representing 30% of the group EBITDA. This was primarily driven by the normalization of average electricity prices in Iberia and higher ancillary services costs in the supply business that we also highlighted in the first These effects follow exceptionally strong conditions in the first half of last year when we benefited from both hydro, very high hydro resources, and also high power prices. EDPR delivered EBITDA of 1.03 billion euros, up 73 million euro a year, supported by the capacity additions, particularly in the U.S., and also the capital gains from asset rotations. So geographically, around 90% of EBITDA continues to come from core low-risk markets, Iberia, North America, and Brazil. If we now move to slide 12, cost discipline remains a clear priority, as we have been highlighting for quite a while. Despite the continuous growth of the business, recurring OPEX remained broadly stable in nominal terms and declined on an inflation-adjusted basis. Recurring OPEX was down 3% year-on-year and 7% over the last two years on an inflation and FX-adjusted basis, driven by a strong cost discipline. At TDPR, as we highlighted yesterday, OPEX per megawatt decreased 5% despite the portfolio There has been a group-wide continuous deployment and development of digital and AI tools, improving O&M efficiency, and also the internal organization that is currently aligned with the growth outlook. As a result, productivity continues to improve. EBITDA per headcount reached 135,000 euros, OPEX per gross profit improving over the last two years. This obviously demonstrates the ability of the company to grow earnings while keeping the cost base under control. So let me move now to the EBITDA by segment. Let's start with the FlexGen and client segment. EBITDA decreased 5% year-on-year, reaching $808 million in the first half of the year. This is actually a very sound first half of the year, although the negative evolution that is mainly driven by lower hydro volumes year-on-year, given that the first half of the year was an extraordinary quarter or semester, 41% above in resources versus the average, versus the 19% above the average in 2026. So while 2026, we have a good performance, actually 2025 was abnormally high. Lower electricity prices in Iberia, with the average pool price in Spain declining 19% year on year. It's basically an average of 50 euros per megawatt hour this semester compared to 62 last year. Higher ancillary services cost in the electricity supply business, and this has been compensated by higher pumping activity that increased actually 4% year-on-year. Let me move now to the slide 14 and the cover the network segment. Recovering EBITDA in this segment increased 14% year-on-year, reaching $874 million. Iberia was the main contributor, EBITDA of $536 million, up 16% year-on-year, reflecting the new regulatory frameworks, the RAB expansion, and obviously the continued efficiency in operations. Brazil also delivered a solid performance, EBITDA increasing 11% year-on-year to $338 This is, in one hand, supported by the economic activity growth in our concessions areas, but also the transmission construction that upsets the consolidation of LOD21 and LODQ following the asset sales. Networks definitely continues to be one of EDP's highest quality growth business, combining visibility, attractive returns, and increasing earnings contributions. We can now move to slide 15 to EDPR, which we commented yesterday. EDPR delivered an 8% growth in EBITDA, 12% if we exclude FX. On the back of the capacity additions, particularly in the U.S., and also higher asset rotation gains, a 4% increase in generation, operational efficiency gains. And this partly was offset or was slightly offset by slower or lower prices in Europe, as well as lower renewal resources in Europe. But overall, a good performance for ADPR. On costs, financial costs. Net financial costs remain broadly flat at $472 million, higher interest expense mainly driven by a modest increase in euro funding from 3.3% to 3.4%, also affects impact on the Brazilian debt. This was largely offset by improvement in other financial results that include higher capitalization of interest costs. Our debt profile remains very conservative, actually, with around two-thirds of debt denominated in euros and continued access to attractive funding markets, including our May issue of a seven-year, $750 million senior green bond with a 3.75% coupon. On net debt, it stood at $17 billion from $15.4 billion at year-end 2025. This reflects the temporary expected increase following the annual dividend payment, continued investment, and some of FX impacts. We maintain strong credit metrics, 20.4% FX loan to net debt, and 3.5% net debt to EBITDA. For the year-end, we remain fully comfortable with the guidance of approximately $16 billion, considering that asset rotation and tax equity proceeds will be concentrated in the second half of the year. On net profit, just to finalize, recurring net profit reached $753 million, pretty much flat year-on-year, or 1% higher if we exclude FX. This is the result of higher EBITDA by $131 million versus the first F-25, slightly lower DNA and provisions in line with our investment profile, higher net financial costs due to what I mentioned about the average cost of debt partially offset by other impacts, also lower income taxes. In reported terms, net profit reached $732 million, increasing 3% year and year. This includes 21 million of non-recovering items that were already booked in the first quarter of this year, 26. And with this, I will now pass on to Miguel for final remarks.

Thank you, Huy.

So let's move on to the slide on the earnings upgrade, which I think is what most people are probably waiting for. So based on the strong first half performance and also the improved visibility that we have on the remainder of the year, we're upgrading our 2026 earnings guidance versus the capital market state assumptions, and also versus the previous upgrade that we'd already given in the first quarter results. We're now expecting recurring EBITDA of around 5.3 billion euros and a recurring net profit of around 1.4 billion euros. So this is a 12% upgrade in net profit versus the CMD guidance range. The upgrade is supported by all three main business platforms. On the network side, it obviously reflects good execution of investment plans, better regulated returns and efficiency, as well as a favorable Euro-Brazilian-Riel evolution. On the FlexGen and clients, it's supported by hydro reservoir levels in Iberia, so that are above average in July of 2026, and higher forward electricity prices for the second half of the year. And at the EDPR level, the guidance reflects the upgrade on the asset rotation gains that are now expected at around 0.3 billion euros. On top of all of this, we have significantly improved efficiency and productivity, as we have already mentioned, which I believe is best in class, leveraging on AI and digitalization of our operations, back office, and just general improvements in productivity. All in all, this guidance upgrade showcases, once again, the quality of our business plan execution across all of the different business lines. Looking forward and on slide 21, the positive momentum we're seeing today is not limited to the current year. It also includes visibility for the 2027 and 28 years, and it creates additional opportunities beyond the current plan period. Starting with 2026, the outperformance versus this CMD guidance is supported by FlexGen and clients backed by strong peak-off-peak price spreads and higher demand for backup services, as well as the successful execution of our asset rotation strategy with two transactions signed and gained the expected 0.3 billion, leaving us to increase the net profit guidance at 12% versus the CMD numbers, as I've already mentioned. But for 27 and 28, the outlook is also positive. So you have here a couple of comments, positive evolution of forward electricity and gas prices, Iberian flex-gen market dynamics, better-than-expected regulatory outcome for the electricity networks, strong investment execution, and from a macro perspective, We expect favorable evolution of the Brazilian and the dollar versus the euro. And post-2028, we also see several emerging opportunities. We see wind repowering, batteries, hybridization, PPA repricing, data center-related powered land opportunities. We continue to see low- to mid-single-digit electricity demand growth supported in the U.S., in Europe, primarily in Iberia, Portugal in particular, data centers, electrical vehicles in the broader electrification trends. Network investments are obviously also expected to continue to grow well beyond 2028, so into 2030 and beyond, into the next decade, both in Iberia and Brazil, and renewables in batteries, extremely competitive generation technologies, so they'll continue to also have growth post-2028. So overall, a much stronger 2026, a positive outlook for 27 and 28, and an increasing set of opportunities beyond 2028. So as commented yesterday in EDPR's conference call, we expect to provide visibility on this post-2028 guidance by the second quarter of 2027. With that, I'll stop there and happy to take Q&A, and I'll pass it back to Miguel.

So we go now to the Q&A session, and we'll start with the questions that ever arise from from the web. So we have some questions from Pernando Garcia, RBC, Pedro Alves, CaixaBank, Gonzalo Barbona from UBS, Jorge Alonso from Burstein, Sky Lennon from Redburn, D'Arturo from Jefferies. So first one is regarding the evolution of data center development in Portugal, including questions around the 4.6 gigawatts grid connection requests and and the Merlin and Start Campus Data Center's development. And so what can be the impacts of this strong growth of power demand projected for Portugal over the next decade for EDP business?

Well, I don't have specific updates for now, but what I would say is these are real projects which are being built. I just recently in Sienge visiting also Start Campus and earlier also in Merlin Carregado. So these are on track to be built over Berlin by next year, and Start Campus already has the first parts built and are already beginning to move forward with the additional sections. Overall, this is just bringing a very strong demand growth over the next decade. And I very stressed this in the presentation, but it's definitely something that will support and provide support for the electricity networks investment growth. on top of what was already needed to modernize, to digitalize, and things around climate resilience. So definitely this is positive for the network. It's also going to be positive for the generation business because you will need new capacity. And I think we have a strong pipeline of projects, wind, solar, batteries, hydro pumping, storage. But it's also positive for the existing flex-gen capacity. So all of our hydro pump and storage that's already built as well as the combined cycle. So just generally all-around positive for the business. We do see some opportunities that we can also develop around the PPAs for some of these projects or co-located generation powered land. We continue to work on these, as I say, as soon as we have any specific transactions or commercial agreements, we will obviously provide them. I would just add one additional note, which is that on the powered land, we are leveraging our renewable portfolio. and the grid connections that we have and sort of some land positions that we have have around 500 megawatts already secured and over one and a half gigawatts of additional opportunities identified. So our goal is definitely to capture value from these digital infrastructures that are being built. And the fact that, as I said, the number one thing that you need for these data centers is power. I mean, the chips without power are not worth anything. So we are obviously well-placed to provide that power and to support all of the development of that infrastructure and help create value for the country and obviously for ADP as well.

Next question comes here from several analysts also about the impact of upgraded 2026 guidance. What does it mean in terms of the second part of the year performance? and here you go.

Yeah, so what do we see for the second half?

First, we see a second half which will deliver year-on-year growth versus the first half across all business segments and then sort of on the underlying business. The EBITDA growth we're expecting will accelerate from 5% in the first half to around 8% in the total for 2026, which means that the second half has a double-digit EBITDA growth. So obviously the 5% plus the double-digit will get us to the 8% for the full year. Again, just going by parts, by the different parts, FlexGen Client Solutions. Obviously there is seasonality of hydro generation between winter and summer, but we do see in the second half a positive year-on-year EBITDA evolution. We are seeing good peak-off-peak spreads, hydro-optimization. We're seeing that EBITDA margin I mentioned of at least 40 euros per megawatt hour. On the EVPR side, we are also seeing EBITDA growth year on year for the second half, both on the underlying EBITDA. And so we expect the underlying EBITDA to grow in the second half of 2026, year on year. But also, obviously, significantly higher profitability in the asset rotations with gains expected to almost triple versus the previous year. On networks, mostly this is supported by Iberia. And we see here a strong year-on-year growth in the second half in line with the first half. So we have positive regulatory updates in Portugal and Spain at the beginning of this year that's obviously going to carry forward from the first half to the second half. Bottom line, so we're guiding for double-digit growth of recurring net profit in the second half of 2026, including an acceleration of the earnings growth versus the first half of 2026, even excluding asset rotation, also contributions to the net profit.

I'll probably stop there.

So the next question, it's about the recent news on the approval of the Royal Degree on further investments in distribution in Spain. So what is our assessment from the news flow of the rail decrease not yet published?

I'd say it's a positive step. I mean, we've been waiting for this for quite a while. It's different in Spain from in Portugal. In Portugal, you typically, you know, already last year, so more than a year ago, there was already an investment plan that was submitted to the regulator. It was then approved by the regulator and then the government. And so we already had full visibility coming into this regulatory period on what was the investment criteria. Because of Spain, it's a little less sort of milestones or less clear. So this is an important step to give visibility for these additional investments in the networks. It does seem to recognize that accelerating electrification requires stronger, more resilient, just better equipped electricity networks. I think we all recognize that, but it's good to see it in the Royal Decree. Generally, the new framework seems to increase the current investment cap. So obviously, it provides some room for additional increase in general investment. We were already incorporating part of this in the current business plan, but this provides some additional, potential additional upsides towards the back end of this decade. So we still need to go through all the details when it's finally made public, but I'd say the first impression is it's positive.

And we have some questions regarding the message from the presentation is clearly optimistic regarding years beyond 2026 following today's guidance upgrade and considering 2028 target what we see as our target in terms of guidance for 2028. And that's around what we see also in terms of targets for 2028 and the visibility on post-2028.

So we expect to give more guidance and greater visibility on both the 2028 target and the post-2028 outlook as part of the strategic update on the second quarter of next year. Obviously, since the capital markets last November, so it's only been a few months. It's hasn't even been a full year. But just in these months, the underlying market conditions have improved. So the stronger demand fundamentals, increasing forward power prices. And we expect some of these drivers that we're seeing in 2026 and in these upgrades to carry through into 27 and to some extent 2028.

As I say, we see the demand, outperformance on OPEX, all that. But I'll get into this probably more in the updates next year. I just say the generally positive outlook for 2028 and beyond.

Then on integrated margin and on FlexGen, we see 2028 forward prices below the assumptions. How do we reconcile that, even that the margins that we are presenting in the presentation are stable in the 40 to 45 percent, the 40 to 45 euros per megawatt hour?

So the integrated margin guidance is relying on a 40 to 45 euro per megawatt hour EBITDA sold for this period, 2026 to 2028. What we've been seeing, and to a certain extent was expected, but is really a structural increase in the value of the flexibility. as there is a higher penetration of solar and wind that has increased the need for hydro pumping storage and and the combined cycles as well so we've seen all of these the value of these uh really shining uh this is something we've talked about i think for years but we're actually seeing that materializing in numbers on the 2028 i think it's important to note that the forward market has very limited liquidity, so we don't use it or we don't consider it a reliable reference at this stage. We would typically look more to either our own internal modeling or even just externally to the TTF gas prices and the CO2 prices, sort of as having more liquidity for that time period. But I just want to reinforce the integrated margin is not driven just by the baseload pool prices. It also benefits from the intraday balancing market spread. It depends on ancillary services. It depends also on the value of this integrated generation and customer portfolio. So overall, we are very confident that the structural market trends continue to support the resilience of our integrated margin.

And I think that's the important point.

We have then a question regarding guidance for the net depth of 2026. If we reiterate the guidance and how do we see this evolution until the end of the year?

Thank you, Miguel. So we remain fully comfortable with the guidance of around $16 billion for the end of the year 2026. It's typical that we have in the second quarter this increase in depth given the dividend distribution, and also the fact that in the second half of the year is typically when we have the tax equity proceeds as well as the asset rotation proceeds. So that is our expectation for the year. So fully comfortable with this 26 guidance. Just also to add cost of debt, we are also expecting to be around the same level that we have at this first half of 26.

We have here, maybe we'll go to a last question from Alex from Bank of America regarding power prices and if you can give us an update in terms of edgings and levels for 2027 on EDPI and EDPR.

I think this one, thank you. So, I mean, the way we have been managing this is obviously integrated and looking at the entire volumes, you know, generation as well as clients. And I think more and more what we are highlighting is the value of the FlexGen, which is obviously not related to any hedging. So we keep the conservative approach where we try to close all the positions that we have with customers. And again, just highlighting that what we will expect for the remaining of the year is actually an improvement versus what we have in the second half last year.

So second half versus second half, better this year than last. We are now to the questions on the phone. First question from Pedro Alves from CaixaBank. Pedro, please go ahead.

Hello, good morning. Thank you for the presentation. On data centers in Portugal, it is indeed striking that we have 4.6 gigawatts of grid connection requests representing half of the current peak demand in the country. So I'll be interested in knowing how do you assess this generation and demand balance here. And I also wanted to check if you have had any relevant updates from the high demand area framework in Portugal, the so-called Zonas Grande Procura, that could eventually accelerate the power land opportunities for you. And the second question is on the evolution of some of the building blocks in Etat. On financial investments, it caught my attention that there was a material increase in the second quarter. I guess this relates to something temporary on equity investments in ocean winds, but will be helpful to get additional color here. And also on the regulatory receivables in Portugal, which also increased. And we'll be able to know the expected build for the remaining of the year and recovery schedule. Thank you.

Okay.

Thank you, Pip. So on the data centers, I mean, as you say, the 4.6 gigawatts is indeed quite impressive. Just as a background, so actually there were 40 gigawatts initially requested, sort of if you go back about a year. And then what happened was that the government ran this process of the high demand zones and those 40 gigawatts, and they demanded that to participate, that you had to provide sort of strict guarantees or sort of higher guarantees, bank guarantees, and also that you had to commit to certain timetables and calendars to actually then implement those projects if you were awarded that capacity. And that meant that a lot of people sort of dropped out and the 40 gigawatts went down to 4.6, which, as you say, is still a huge amount. But it just shows you sometimes a little bit of the speculation that exists in the market when you just don't have any commitments or any costs associated with actually asking for these interconnections or requests. So on the high demand zones, we don't have a final calendar, but what we are expecting is that over the next few months, so before the end of the year, that we would have visibility on that and we would know who has been awarded megawatts and how many. It is foreseen that in some cases, if there is more requests than availability, that there might be an auction. But as far as we understand, that won't happen. So there won't be the need for that. So that's on the high demand zones. On the generation balance, as you say, demand is certainly growing very well in Portugal and has been growing in the last couple of years and is expected to grow going forward. It's been growing faster than generations. I think what we've been calling attention to is that at a certain point, we need to get the demand supply balance in order. And so that means that you need to speed up the licensing and permitting of projects, and that's being done. So the government has moved, as you know, has actually started to move forward with the acceleration zones for renewables in Portugal. I think that's a very important initiative. It already was recommended by the European Commission way back in 2022 as part of the Red 3 directives. That's now been sort of under public consultation, so that should be moving forward. They're also doing restructuring of some of the agencies to make sure that they are faster and they can really speed up some of these processes. So we're actually feeling quite optimistic about what we're seeing and the movement on the ground. But to your point, as demand grows, it can outpace generation for a while. But at a certain point, generation will also need to start moving faster to keep pace and keep that supply demand in balance.

Hi, Pedro. On the financial investment, this is related to Oceanwinds and specifically to one of the UK projects where we have equity bridge loans. And then when the project starts to run into operations, basically convert that into equity.

So that's the impact. this was already foreseen in our strategic investment and CMD plans so we can go now to the next question on the phone from the line of Arthur Sittmann from Morgan styling Arthur please go ahead yes thank you very much for taking my question the first one is a follow-up question on on data centers the first One thing I was wondering is, you talk about very strong demand growth in Portugal and there's this big Start Campus project and other projects. I was wondering if you think that this could eventually at some point lead to some gradual divergence in power prices between Portugal and Spain, and if that were to be the case, how could that impact your business? And the second question linked to data center is just you talk about grid connections that you have. I think you mentioned 500 megawatts in Iberia. I was just wondering if you could give us a little bit of color on where those connections are located. I imagine it's not the same if they are located, let's say, near Madrid or outside of in places further away from data center hubs. and just my last question is on the curtailment in Brazil I think there's been progress made regarding the compensation of past curtailment I was wondering how much that will impact you and if you've already booked anything for that thank you very much thank you so on the first point on the demand growth could it lead to basically market splitting between Portugal and Spain fortunately what i'd say is that portugal and spain have a very high level of interconnection

it's probably one of the most interconnected or two of the most interconnected countries in europe and so that and even recently there was a another line that was sort of upgraded in terms of its interconnection capacity so so yes i mean it's possible but um but what we've been seeing so far is that there is a significant amount of volume that can flow both from Spain to Portugal and Portugal to Spain. Actually, what we've seen, Spain has significantly more solar than Portugal on a relative basis. And so for many of the hours in the middle of the day, there is a flow of solar from Spain into Portugal. I mean, at a certain point, if the demand continues to grow in Portugal and there is not additional generation, it could lead to some market splitting. I mean, that would have to be incorporated into the pricing then that is being done for customers. But at the moment, what I'd highlight is really the high level of interconnection that we have. And so that there hasn't been market splitting even with that growth in Portugal over the last couple of years. I'll take the one in curtailment in Brazil, just to say that, I mean, what came out essentially is, We think it's a step in the right direction. We still don't think it's enough. It essentially does allow us to be compensated for a significant part of the past curtailment, but it would require us to give up the right to fight for reimbursement of the curtailments going forward. And so we're still assessing sort of the proposal, and we still have to take a decision on whether we will move forward with that or continue to try and find other ways of being reimbursed for that curtailment. It's something which is impacting all of the sector in Brazil. It has been now for a while. It's obviously incorporated directly into account. Curtailment is less production. So you see that in the volumes in the Brazilian generation. So that's already in the business numbers that we're seeing. There are other solutions that are being discussed to also sort of get around this issue of curtailment, bringing demand further up to the northeast of Brazil where you have all this power, trying to leverage also on the batteries. There's going to be batteries auction also in Brazil. So multiple different ideas to really try to solve this curtailment issue in Brazil. On the grid connections in Portugal, So I'd say that, sorry, I didn't get whether the question was in Portugal or just generally Iberia.

Generally speaking, Iberia.

Generally speaking. I mean, a lot of our interconnections are located close to urban centers, at least the ones that we are considering. So in Portugal in particular, you know, Sotubal, Cargazzo, Sinez, those are some of the key ones. We also have some near Madrid, just on the outskirts of Madrid, which we're also considering. So they're typically where we think they would be more attractive for data centers, which means closer to urban centers because of the latency. Apparently, it's a more attractive sort of area.

So that's what the teams have been working on.

Thank you very much. so we have thank thank you arthur uh we have now uh the next question from jenny ping from city jenny please go ahead hi uh thank you very much a couple of questions from me please um firstly just following up on arthur's uh um question around brazil uh two questions there could tellman can you give us a size of the historic recognition if uh that indeed is a path that you choose to take up. And secondly, relating to that, where are we now on the regulatory recognition of the CAPEX in terms of faster recognition? That really I know is still ongoing, but any updates on timeline in terms of decisions and recognition there? So that's my first cluster. Secondly, if I look at your slide 20, and if I add up the low and upper range of the different divisions that you give, it gives us 5.2 to 5.5 billion EBITDA for 26. And you obviously average at a level of 5.3 below the midpoint. Can I just check what you need to see or what needs to play out in terms of the business? Where is the most uncertain part of the business which effectively allow you to get to the top end of the range? And then just very lastly, can we just go back to the 500 megawatt powered land position that you say you have secured? Can you just – sorry, maybe I missed it, but can you just sort of outline what that being secured actually means? Is it just the grid connection in itself, or is there a contract behind it already in terms of data center?

Hi, Jenny. So I didn't quite catch the beginning of your first question, but I think I then caught the second part of it, which was around RAB, right? the recognition of the RAB. But the first part was on curtailment.

It's just on the curtailment, but back to Arthur's question in terms of if you were to recognize the entire historic curtailment benefit, what size are we talking about if that's something that you choose to recognize and then give up future curtailment costs as a result?

So we're talking about around 100 million reais percentage of value, seeing rough numbers. So it would be basically the volumes of the past that's sort of under curtailment that would be recognized by this proposal from the regulator. On the second part, which is on the RAB recognition. So since we're the first company to have the concessions renewed, we're also the first ones to start raising this issue around the RAB recognition sort of on the interest cycle. As far as we know, But since then, other companies have also started having their distribution concessions renewed and so also facing the same issue. And so there's a working group that has been discussing this with the regulator. I don't want to create any expectations, but let's say the messaging has been positive. At least they recognize the issue. I think it'd still be some time before you can get a firm proposal. as you know we have presidential elections this year in brazil november so they may be may make things a little bit slower because people's minds may not be very focused on this over the next couple of months not our mind is totally focused on it but on the the counterpart is not necessarily 100 focused on it um so i'd say probably a 2027 type um uh moment to to take decision um but we do think it is important i think people recognize on the counterparty also recognizes so the regulator and the government also recognizes it it makes sense it's now a question of how do you translate that into something concrete from a regulatory point of view um on the second point on the um on the guidance so if i understood if you sum up the pieces five 2 to 5.5. I think when we gave the 5.3, it wasn't that we were trying to say anything that we were being conservative. For us, that was around the midpoint of those numbers. By giving the ranges that depends on hydro, what will happen to hydro in the fourth quarter, it depends on what happens to prices. So there are different factors that may impact the, let's say, the Jen Taylor piece, which is obviously more, has more uncertain. The networks, I think, is very predictable. And on the ADPR side, I think we've also talked about, so the asset rotations, we've given a very clear guidance on that. But then on the underlying, you know, we're expecting an acceleration or sort of an improvement on the underlying. But again, it then depends on the wind, on the sun. I mean, you know, there's a certain amount of volatility on the volumes, which we also, So we try to just manage for the P50 in those scenarios. On the powered land piece, what does secured mean? So first, I think we will have hopefully some good news still over the next couple of months where you have some data center developers that want to use some of our existing sites to essentially co-locate a data center and potentially use part of our existing land. So those are situations where we are taking advantage of our existing sites and leveraging on them to create value because of a data center that actually wants to use part of that site or co-locate there. On new greenfield developments, essentially it's having interconnections, so being able to consume from the network. having a size which is relevant. So typically hundreds of megawatts is when it starts to be relevant for data centers. And then having some sort of options on land around it that would enable them to build the actual data center. So that's when we talk about powered land, essentially that's it. It's sort of having that land with some degree of licensing and permitting to be able to actually develop the site there and having that interconnection to be able to consume from the network, which, as you know, is a scarce resource in many countries.

Hopefully that helps.

Yes, thank you. So just to clarify, that 500 megawatts, that's still yet, although it's secured based on what you said today, the announcement to come to the market has yet to be announced effectively. in terms of which data center, et cetera, and that to come, as you say, in the next few months.

Yeah, so when we say it means that we have, let's say, the basics in place to be able to have a package which is marketable, it then depends on finding a counterparty that is willing to transact on that package or on those packages, on terms that we think are attractive. So having the power land secured means that we have those things in place. We then need to have someone to transact with to actually crystallize that value.

Got it. Thank you very much.

So we will close then here the session of Q&A and I'll hand over to the final remarks by our CEO.

So the final remarks, I'll just make a couple of points. First, I think we had a great first half. I think there's no denying it. And I think that makes us very positive for 2026. And that's why we're also upgrading for the second time this year our guidance for the year. And this is good performance across all the different segments, FlexGen, Networks, EDPR. We do see improving network, improving outlook post-2026, so 27 and 28. I'm not going to give specific numbers on that, but obviously, just given the general tailwinds that we're seeing, it's positive, you know, strong demand growth. I mean, all the things that we talked about in the call. So that's good. And we are seeing improving visibility post-2028. And as I mentioned earlier, we'll update sort of in a couple of quarters on that. So we're working to basically firm up some of the different assumptions and get back to that. that. So all in all, I think we're in a great position, proving to be a great year for EDP and, you know, great prospects also for the next couple of years. So I think in general, very good. I didn't want to finish without wishing you great holidays if you are going off on holidays and I hope to catch you on the way back in probably early September. So talk to you soon. Thanks.