EDP, S.A. (EDP) May 2026 Investor Update Transcript

Good morning, ladies and gentlemen. Thanks for attending EDP's first quarter 26 results conference call. We have today with us our CEO, Miguel Stultes-Drad, and our CFO, Peter Sheira, which will present you the main highlights of our strategy discussion and first quarter 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 web platform and then by the phone. I'll give now the floor to our CEO, Miguel Stultes-Drad.

Thank you, Miguel, and good morning, everyone. Welcome to the EDP First Quarter 2026 Results Conference Call. I'd like to start off by saying that EDP delivered a really solid set of results. This was supported, to a large extent, by the new regulatory period in the Iberian networks, also the continued growth in renewables, particularly in the U.S., though this was then partially offset by lower electricity prices in Iberia. If we move to the first slide, we can see that the recurring EBITDA reached around 1.4 billion euros. This was a 3% decline year-on-year because obviously we're comparing this with an abnormally strong first quarter of 2025. I'd say we had hydro resources well above average combined with high pool prices. This year we had hydro resources above average, but obviously much lower pool prices. This performance reflects a very strong contribution also from our electricity networks business. It's up 9% year-on-year, and it's up 16% in Iberia alone, mostly in Portugal, driven by the new regulatory period that started in 2026. EDPR also posted a positive performance, EBITDA was up 2% year-on-year or 10% excluding FX, mostly supported by new capacity additions in the U.S., and we spoke about that yesterday at some length. I'd just like to also note that there's been a very strong cost discipline on the OPEX side, decreasing 4% year-on-year and 8% over the last two years. We spoke a little bit about that yesterday also on EDP renewables, but it's true for the overall EDP group as a whole. A significant improve here in efficiency, and we will talk about that also later on. These positives were, however, offset by the lower electricity prices, as I mentioned, and also higher and tillary services costs on the supply side in Iberia, which weighed on the flex-gen and client segment. As a result of all this, recurring net profit for the quarter came in at around the 0.4 billion euros, down 9% versus the first quarter of last year, reflecting the EBITDA performance and also the challenging comparison with the exceptionally strong first quarter of last year when, as I mentioned, the hydro resources were high and also the pool price is high. Now, I wanted to move forward to the next slide about something I think that is really quite interesting and we've been following very, very closely. So Portugal continues to stand out as one of the fastest growing countries in Europe. When we look at the evolution of electricity consumption across the different European countries, Portugal clearly outperforms the broader European trend. And you can see Portugal there on the graph on the left-hand side is the green line, clearly well above not just the European average, but sort of a lot of the other European countries that we consider peers. Electricity consumption has increased by around 12% over the last couple of years. It's been supported by population growth on one hand of roughly 4%, but also by accelerating electrification. So we've had electric mobility going up, industrialization. So all of these trends, so a lot of the consumption has been at the low voltage level. So this is without the sort of data center consumption that will be on top of this communion. Spain has also shown a pretty resilient trajectory. It's also above the European average, which declined 4% over the last 10 years, although it is showing some signs of recovery. If we look more to the short term, and specifically the first quarter of 2026, demand grew 4% year on year in Portugal and 1.2% in the rest of Europe, so 4% significantly above the 1.2%. even after adjusting for temperature and working days. So this just reinforces, I think, the structural momentum that we're seeing here. Looking ahead, we expect the Portuguese electricity demand to grow at around 4%, 5% CAGR between 2026 and 2035, supported by some of the factors I already mentioned, so electrification, some population growth, but also increasingly by the deployment of data centers. And here it's important to note that in this CAGR, that I just talked about, we're assuming some of the data center projects coming online by 2030, according to the planned date. So it's a significant amount of consumption coming through the pipeline that we're getting pretty good visibility on. Overall, this is an area that we are engaging with several players here in the sector, positioning ourselves to capture, outside from this demand growth, and make sure that we can capture also these business opportunities as the ecosystem develops. So I think very positive macro trend here, which we intend to be a part of the solution to help make sure it actually comes to fruition. We move to slide five. I think I'd just like to highlight here, it's something we've talked about also in the past, but that the power prices in both Portugal and Spain remain very competitive, not just at the wholesale level, but also for end users, despite the growth in demand that I mentioned earlier. If you look at the chart on the left-hand side, you can see that residential electricity prices in Portugal and Spain remain structurally below the European average and well below several of the large European economies, even after the energy crisis. So this reflects a system that is much more resilient to fossil fuel shocks. It's supported by relatively low gas exposure and a much higher share of renewables in the generation mix versus some of the other economies. So overall, IBEAR is reinforcing its electricity competitiveness through a number of these structural drivers. First, this demand growth that I talked about, it's above the European average. It allows for dilution of fixed costs.

And so that's obviously positive for the domestic consumer.

Secondly, legacy system costs are also being progressively phased out. Tariff deficits are expected to be fully eliminated by 2028. And also support schemes such as feed-in tariffs and the record in Spain are gradually rolling And so that's also reducing the pressure on the end-user prices. Finally, investment in electricity networks are increasing, but this has been done in a disciplined way. So it will have a very limited impact on final tariffs for the customers, given that they will be diluted with increasing demand. On a more macro perspective, public finance has remained very sound, declining tax burden on electricity, including generation taxes coming down, investment incentives, corporation tax also decreasing. So all of this is further supporting the affordability of the sector. Combination of rising demand, structurally competitive prices, improving systems fundamentals, significantly reduces the regulatory and political intervention risk and supports the sustainable growth in electricity consumption over the medium and long term. So I just wanted to make that very clear that the prices are very competitive versus the rest of Europe and with a positive trend, so coming down over time for structural reasons. If we move forward to talk a little bit about networks, and specifically, let's talk about Iberian electricity networks. So we've had the start of new regulatory periods at the beginning of the year for both Portugal and Spain. It's already delivering a clear impact on both investments and earnings. The capex in the Iberian electricity networks has increased 40% year-on-year in the first quarter of 2026, reaching 164 million euros. So this reflects our commitment to accelerating the investment under the new regulatory frameworks in both Portugal and Spain. This does include around 20 million euros of net impact related to infrastructure rebuilding following the severe storms in Portugal in early 2026. But again, highlighting this increase in networks, which as we know is well needed in these economies. Importantly, this ramp up in investment is being achieved while maintaining strict cost discipline. So the OPEX supply point remains flat year on year at around 13 euros. Looking ahead for 2026, we're planning around 0.7 billion euros of CAPEX in Iberian Electricity Networks. So this is a 13% increase year-on-year, 4% uplift versus our December assumptions. We will be ramping up over the following years, and so there will be a significant amount of investment. So it's increasing this year. It will increase even more in 27, even more than that, and then in 2028, and so on. Particularly in Portugal, these investments should be supported by the Electricity Networks Resilience Study requested by the government. that's expected to be released before the end of the year, and it could provide additional clarity on future investment needs. There's a lot of debate about whether we should be burying more of the power lines. I think that really requires a good cost-benefit analysis to make sure that there's not an additional burden on the consumer that really makes sense from a resiliency perspective. On efficiency, Totex will be updated using a GDP deflator in 2027. tariffs. The GDP deflator is currently running at 3.2% for 2026, according to the IMF. And finally, on returns, we remain fully on track to deliver our targets, all in returns on RAB, around 8% in Europe, in Portugal, and around 9% in Spain. In Portugal specifically, the regulated rate of return for 2026 has increased by eight basis points versus our December assumptions, reflecting in an evolution in the 10-year bond yields. Overall, the start of the new regulatory period is doing exactly what it was designed to do, enabling higher investment in resiliency and modernization of the grid, preserving efficiency, and delivering stable and attractive returns, with a clear impact on EBITDA, which increases 16% year on year in the first quarter. We now move to FlexGen, and the outlook also for for the rest of 2026. So the first quarter of 26 was impacted by exceptionally strong hydro conditions across Iberia. Hydro resources were more than 50% above the historical average. In Portugal specifically, the hydro availability was well above normal levels, reaching close to 100% above the historical average in February following the Christine and subsequent storms. Now, although these volumes were very strong, this translated into lower average electricity prices, particularly during February, which was the peak of those storms, and where the Portuguese pool prices were at 12 euros per megawatt hour. So as you can see on the left-hand side, final electricity prices in Portugal declined from 100 euros per megawatt hour in the first quarter of 25 to around 63 euros per megawatt hour in the first quarter of 2026. And this reflected the decrease in the baseload price. But then this was compensated by a much higher component attributable to ancillary services and restrictions. So ancillary services for the quarter were much higher than last year. Looking at the monthly evolution, prices progressively adjusted as we moved through the quarter. March already showed some stabilization compared to the very low levels seen in February. Now, let's talk about the outlook for 2026. So hydro reservoir levels are exceptionally strong. At the end of March, the reservoir stood at a historical high of 94%, which is 20 percentage points above the historical average. And by the end of April, levels remained close to 90%, still around 16 percentage points above average. So very strong visibility on hydro availability for the coming months. At the same time, on pricing, forward baseload electricity prices in Niberia for the second half of 2026 are currently in the range of 70 to 80 years per megawatt hour, and they point to a clear recovery versus the very low price environment seen in the first quarter. So, and then also just to mention, ancillary services costs are expected to normalize over the remainder of the year as the pool price also improves.

Now about the U.S.

I mentioned some of this on the EDPR call, but power demand growth in the U.S. we see as staying structurally strong. Over the 2025 to 2035 period, the electricity demand is expected to grow at around 3% per year, driven primarily by tech and electrification. And I think very importantly, this increase in demand needs to be met by reliable and clean energy sources. So we're expecting that renewable generation will be growing faster than non-renewable sources. And we're expecting around 8% CAGR between 2025 and 2030 for the growth of renewables in this period. This trend is already visible in the current system data. So in March, renewables accounted for more than one-third of U.S. electricity generation, overtaking gas the first time. PPA prices have also continued to increase, and they're reflecting the increased value of reliable clean power, PPA prices are meaningfully higher than in previous cycles and they're supporting really strong returns for new investments.

So if you see here on the right-hand side, EDPR's strategy continues to benefit really from this constructive market context.

Over the last nine months, following the signing of the BBB or the big, beautiful bill. EDPR has secured 1.4 gigawatts of new capacity in the U.S. We have strong commercial execution. We're also prospective for the next couple of months. And so we actually expect this 1.4 gigawatts to grow significantly over the next couple of months. In parallel, we are actively capturing data center optionality. We currently control around 2 gigawatts of powered land. It's approximately 0.8 gigawatts already in advanced permitting, primarily located in ERCOT and PGM. Finally, we're advancing with wind repowering opportunities across our existing portfolio. These projects benefit from life extension, renewed tax credits, lower capex, and attractive repricing potential with around 1.6 gigawatts currently in the marketing phase. This is not incorporated in our business plan numbers, so this would all be upside either within the business plan period or even just following the business plan period, so post-2028. Overall, combination of strong demand growth, attractive PPA pricing, discipline execution, I think that positions us really well to continue to deliver profitable growth in the U.S. If we move to the next slide to talk about the business plan targets. So just a quick recap on secure capacity. So EDPR, fully on track to deliver business plan targets. 60% of the business plan target for the 2026 to 2028 period is already secured. In terms of geographical mix, North America is around 60% of secure capacity. Europe around 30%, and APAC and offshore, the remaining share. So this just reflects our focus on core growth markets, attractive fundamentals, and strong demand visibility. From a technology perspective, the secure capacity is well-balanced. It's got a good mix of wind, solar, storage. And importantly, the secured capacity delivers an attractive value profile, which has a spread to WAC of around 285 basis points. This visibility that we have already for the secured is complemented by reliable commercial execution. So I mentioned earlier, we currently have around one gigawatt of PPAs under active commercial discussions. We have a pipeline of around 20 gigawatts, around half of that located in MyZone PGM, which, as you know, are very attractive markets, particularly for data centers and others. In Europe, we have approximately 0.8 gigawatts of PPAs under discussion, and here again, 15 gigawatts of pipeline in the core markets. And in addition, we have significant optionality in APAC in A-rated countries, namely Australia, Singapore, and Japan. So overall, a high level of secure capacity, attractive returns, and a strong commercial pipeline to give us visibility on growth. And this just underpins our confidence in delivering the business plan targets.

Now, a quick comment on Brazil.

Brazil, I mean, the real, as some of you may have seen, is appreciated meaningfully versus the euro. The current exchange rate of 5.8 compares to the 6.5 level that was assumed in the capital market today back in November for 2028. And so, as per our sensitivity analysis, a 50-cent change in the Euro-Brazil real exchange rate would translate into a positive 50-million-euro impact on net income in 2028. At the same time, interest rates in Brazil are clearly on a declining path. I mean, the salary rate is expected to decrease to around 13% by December 2026, with further normalization expected into 2027, supporting economic activity and sector fundamentals. The rates are coming down a little bit slower than maybe expected, but we are seeing them decrease. If you look at the right-hand side of the slide, just a couple of comments. The macro, the improving macro backdrop is also complemented by a very sound regulatory framework. On electricity distribution concessions, you know, the concession in Spiritscent has been extended by 30 years. That's providing us good long-term visibility and stability. The concession of Sao Paulo is on track to be renewed very soon. In fact, I think the signing is taking place tomorrow. And I think we have very strong visibility on that. So we'll have both of these signed within this month. Importantly, revenues under this framework are 100% inflation length. In parallel, and I think this is an important point, there are ongoing regulatory discussions that include the anticipation of CapEx recognition in the regulated asset base, as well as the regulatory treatment of wind curtailment. So that's an ongoing discussion with the regulator on two critical points for the Brazilian business. Finally, just a point on the Brazilian electricity market. it's becoming more and more dynamic. There is a strong push to liberalize the Brazilian market, and that's going to enhance the value of our integrated position across generation and clients. So the value of having an integrated position in Brazil, I think, is going to become more and more important over time as the sector becomes more liberalized. I'll just stop there and pass it over to Ruiz to give you an overview of the first quarter financial performance and then come back at the end for our closing remarks. Thank you, Miguel.

Well, and good morning to all. So let's go through the first quarter results. So we delivered nearly $1.4 billion of recurring EBITDA in the first quarter of 26. This is down to 2% year-on-year, or I would say broadly stable with minus 1% if we exclude the effects. Again, and as Miguel said just previously, it is important to highlight that there is a normalization from the exceptionally strong 25, the first quarter in 25, rather than any deterioration in the underlying performance of the business as of now. But let me write this down. So electricity networks delivered a strong performance with EBITDA at 36 million year on year, reaching 438 million and representing about 32% of group EBITDA. This was driven by the start of the new regulatory period in Iberia, combined with a continued rapid growth and obviously the operational discipline. Flagsternan clients, EBITDA, declined by 81 million to 445 million euros, also representing about 32 percent of the group EBITDA, and again, this was primarily driven by the lower electricity prices that we experienced in Iberia, but also the higher ancillary services costs in the supply business. These effects follow exceptionally strong conditions in the first quarter of last year, as you may remember, when it benefited from not only very good hydro resources, but also high power prices. EDPR delivered an EBITDA of $489 million, that's up to $12 million year-on-year. It's a 10% growth excluding FX and supported by capacity additions and the operational efficiency, and again, particularly good contribution from our U.S. business. Geographically, our earnings remain highly concentrated in low-risk core markets with Iberia, USA, and Brazil representing over 90% of our EBTA. Let's move to costs now on slide 13. Recurring OPEX is down 4% year on year and 8% over the last two years on an inflation and effects adjusted basis. And I want to highlight this because this is obviously the result of a very strong cost discipline. The structural efficiency improvements that we have across the group, they cover a reduction of OPEX per megawatt in EDPR at about 3%, and this is in the context of a portfolio growing. The continuous deployment of digital and AI tools that obviously improve overall efficiency and particularly O&M efficiency. Workforce optimization that enables to scale, but without a proportional cost increase. So as a result, productivity continues improving, and the EBITDA per headcount is increasing to €119,000. So obviously, a very good performance and a very good contribution on the efficiency side to the value creation at the group level. Let's move now to the following slide with FlexGen and clients. EBITDA decreasing 15% year-on-year, reaching $445 million in the first quarter. And this is breaking this down. So we have lower electricity prices in Iberia, with the average pool price in Spain and declining 48% year-on-year from 85 euros per megawatt hour to 44 euros per megawatt hour. And obviously, this is also a result of the very strong hydro and wind conditions that we experienced in the first quarter of this year. Higher ancillary service costs in the electricity supply business, and this is particularly in Portugal as a result of the Christine storm impacting the very high voltage lines and obviously having an important impact on the ancillary services costs. The lower pumping revenues, and also because of the flood management actions that include some spillway releases that temporarily limited the pumping activity, and this is related to the weather events in Portugal, the storms and then the sequenced rainfall. There was also, I mean, these were partly upset by, obviously, the overall good hydro condition. but also the CCDT generation. So overall, this segment, FlexGen and clients, will reflect that the performance reflects a price-driven normalization following an exceptional good first quarter 2025. Networks. If we move to the following slide, regarding EBITDA, being increased 9% year-on-year, reaching $438 million. Iberia was the main contributor, with EBITDA up to 165 million, up 16% year and year, on the basis of neurodegenerative framework, the raw growth, and continued efficiency. Brazil remained resilient with a stable EBITDA of 173 million euros. So there is a strong operational performance in distribution, an uplift in the region's economic activity, where we have the sick concessions, and also lower losses, offsetting the lower inflation update on the speedy percent concession after the under-inroll. Also, some growth in transmission, offsetting the deconsolization of the Lot 21, the one that we saw last year. Overall, networks continue to be a high-visibility, low-risk growth pillar and continuously increasing the contribution to the group's earnings. Moving to EDPR, which we commented in more detail yesterday, such as highlights, we reported a 2% if it's a growth or a 10% if we exclude the effects. This is on the back of continued capacity additions, and obviously here in the U.S. with the biggest contribution, 3% increase in generation, and the operational efficiency improvements overall. This is partly offset by lower renewable resource and the normalization of the selling prices in Europe. But overall, a very good performance on EBITDA growth. So if we now move to financial costs, the net financial costs increased to 253 million euros. That's up 16 million year-on-year. I would say there are two main drivers. So there's the first one related to net interest costs, which has 8 million. And this is a reflection of, in one hand, the higher weight of the debt denominated in Brazilian reals, and this is mostly reflecting the effects impact, but also the slightly higher cost of debt in euro, with the average cost of debt excluding Brazil going from 3.3 to 3.4%. Secondly, lower capitalization and other effects that contribute with an additional 8 million. The debt portfolio continues to be predominantly euro-denominated at 64%, followed by the US solar at 16%, and Brazilian real at 15%, increasing from 13% in the first quarter last year. Finally, highlighting that we continue to access very competitive funding, just to remember the January issue of the six-year 650 million euros senior bond with a 3.25% coupon. While looking to the net debt, so that $15.7 billion from the $15.4 billion at year-end, $25. Key drivers for the change in net debt include $0.6 billion of organic cash flow, $0.6 billion of net cash investment, about $0.2 billion of FX impact, mostly the Brazilian Real appreciation, about $0.1 from other impacts, mainly regulatory receivables. We keep very strong credit metrics with 20.5% FFO net debt and 3.4 times net debt to BTA. Towards the year-end, we are comfortable with the guidance of the $16 billion. Bear in mind that, obviously, throughout the year, actually today we just paid $0.85 billion of annual dividends, we'll obviously have the asset rotation and tax equity proceeds being more concentrated into the second half and later part of the year. So there will be some evolution or fluctuation into the overall debt, but the guidance remains the $16 billion towards the year end. Now on the net profit, it reached 399 million euros. It's a 9% reduction year-on-year, or 8% if we exclude the FX. Again, this is a reflection of the lower epita versus that very strong performance in the first quarter of 35. higher DNA and provisions in line with our investment profile, higher net financial costs due to the higher average cost of debt and lower capitalizations, and lower income taxes. So while the first quarter of this year is a very strong quarter, obviously the comparison year on year is a reduction, again highlighting the exceptional performance that we had in the first quarter of 2025. The year-on-year also reflects that normalization between these two quarters. But again, I highlight what I said in the beginning. It does not mean any deterioration of today's performance. It just means that we have an exceptionally good 2025 first quarter. So if we compare the last two years, excluding asset rotation gains, the underlying net profit increased 53% versus the first quarter 2024. So, again, highlighting the very solid performance that we are seeing now. In reported terms, net profit reached 378 million, decreasing 12% year-on-year. This includes 21 million of non-recurring items, and those are mostly related with Christian It's approximately 11 million euros, and other smaller impacts. Now, to finalize, before I hand over to Miguel, I would like to highlight the resilience of our business model and the business portfolio, particularly in the current market context. So if you look to the left-hand side of the slide, we are showing the sensitivity of our 2028 net profit guidance to changes in energy prices. And this is versus what we assume as forward prices when we presented the capital market today back in November. As you can see, the net impact of using today's forwards compared to the business plan assumption is about 1%, which is immaterial and is a good reflection of EDP's diversified portfolio, both from a business but also a regional perspective, with U.S. and Brazil positive evolutions on the forward prices offsetting Europe's and particularly those in the Iberia Peninsula. In Iberia, on the other hand, the subsidiary markets and our hydro and pumping profile provide a natural upside in volatile conditions. Also, our supply business acts as a natural hedge against wholesale price movements. So structurally, those are two important elements on our portfolio in this market. But additionally, there are some structural elements to the portfolio that support this resilience, and I would just like to name a few. So first of all, long-term gas contracting, we have large contracts which end here in the U.S., no exposure to the Middle East. Low political intervention risk. I mean, we are exposed to mostly to Iberia, where we benefit from the tax relief measures and reduced regulatory risk. There is a very limited exposure to UK and Italy merchant markets, and therefore, I mean, this potential political intervention is not impacting materially our portfolio. Financing position remains very strong, around 80% of the debt at fixed rates and very solid liquidity and good competitive new issues, as I just mentioned, the one we did in January. Significant share of our revenues, particularly in the networks in Portugal and Brazil, and in renewables through the PTCs in the U.S., is indexed to inflation. So very good relation, or sorry, very good indexation and protection against inflation swings, and also a robust supply chain, particularly the one for the U.S. growth, but also for the network's CapEx execution. So overall, I want to highlight that this shows the resilience of not only having a very diversified portfolio from a business perspective, from an integrated perspective, and from a regional perspective. With this, I will now hand over to Miguel for closing remarks.

Yeah.

So just moving on to slide 22, based on the performance of this first quarter, and also the better visibility we have for the remainder of the year, we are increasing our 2026 guidance by around 5 percent, to need about 5.2 billion euros, and a net profit of around 1.3 billion Sorry to highlight that this upgrade is broad-based across the group, so it's not only one specific area. On the network side, there's a positive contribution from higher investments, continued efficiency, and detractive returns in Iberia. There's also an improved Euro-denominated contribution in Brazil, driven by the stronger exchange rate. In FlexGen and clients, the performance is supported by, obviously, higher hydro reservoir levels and an expected recovery in electricity prices in the second half of the year. Obviously, this was partially offset by the the higher ancillary services that we had, but that's already built into this forecast. At EDPR, the upgrade reflects the updated market and political context, the continued cost efficiency, and also the higher asset rotation gains now expected at around €200 to €300 million. Finally, the guidance also incorporates updated assumptions for the financial markets, including FX and interest rates. So overall, strong beginnings of the year, good improved fundamentals across the key businesses and geographies, and so it gives us the confidence not just to upgrade our 2026 guidance, but also it reinforces our resilience and visibility on the earnings trajectory going forward. And I'll detail that on the next slide. So on slide 23, just doing a quick overview of the business plan period and the post-2028 prospects. Overall, I'd say we're well on track to deliver the targets for 2028. Demand growth remains its central pillar, both in Iberia and the U.S. And demand growth is also a positive thing. This growth is being driven by long-term electrification trends. As I mentioned earlier, artificial intelligence data centers, electrical vehicles, industrial electrification, so it's pretty broad-based. In networks, we benefit from a very high regulatory visibility. The Spanish regulatory framework is set until 2031, Portugal until 2029, and in Brazil, EDP, or the concessions that we have in Brazil have been extended by 30 years. As I said, it should be sent already done, signed, Sao Paulo signing tomorrow, and that gives us long-term stability and earnings visibility. We also see a growing role for flexible generation. So ancillary services, hydropumping, battery storage, battery and energy storage systems, they're becoming increasingly valuable, particularly from having realized price premiums in peak On the renewable side, the 5 gigawatt target for 2028 reflects sustained demand for new renewable capacity and storage, and also the need for continued investment. And as I said earlier, we're not looking to maximize volumes. We're just looking to maximize this balance between volume and risk return projects, making sure we get good projects rather than just volumes. In the U.S., also, it's important to highlight that we're seeing higher PPA prices. we're seeing recontracting upside, and we're also seeing the repowering of existing wind farms, so additional value creation opportunities beyond the current plan. Finally, they focus on leveraging digitalization and AI to improve efficiency and asset performance. You're seeing that in the numbers, and overall, just strengthening the operational execution across the portfolio. With that, I'd probably stop there, and happy to move over to Q&A and to take your questions. Thank you, Miguel.

So, we start with the questions from the websites. So, we'll start from several questions that we get from analysts. So, Oli Jeffrey from Deutsche Bank, Alex Brunchens from Ago American, Javier Garrido from JP Morgan. Why is EDP increasing EBTA guidance around the 150 million euros on EBITDA, and the grid in terms of guidance on net profit is smaller more in the region of the 50 million euros in the midpoint.

So there's a little particular mystery here. So below EBITDA, you don't have to have amortizations or depreciation amortizations, which we're assuming that's not explaining this difference. It's essentially on tax and financial costs. The FX assumptions for the real, they're going from 6.4 that we had in the business plan to around 6.2, so 4% more positive in EBITDA than in net profit. Financial costs are slightly higher also due to a slower pace of the decline in the interest rates in Brazil, so we're expecting a slightly faster decrease, so this is giving us slightly higher interest costs in Brazil. So there's also a concentration of tax equity and asset rotation proceeds in the second half of 2026, which was the back end of the year. So that's impacting the average net debt that we're assuming over the year. So that's on the financial cost side. On the tax side, we are assuming an effective rate more in the mid-20s rather than the low 20s. And that's due to a change in mix also of where the data is coming from. So essentially, financial costs and taxes, what's explaining that sort of cascade from EBITDA to net profit.

Second question, still around the issues, the new flow of the last few days in terms of potential windfall taxes in energy companies in Portugal, and how do we see it in terms of potential impacts for EDP?

So to be clear, this is a discussion that's happening all across Europe, And we've seen that also in the past, post the crisis back in 2022. And we understand that there are measures aiming to address extraordinary profits that might exist in the fossil fuel sector following price shocks. What I really wanted to highlight is that renewables and just the broader power electricity generation sector has not benefited from any windfall. And the evidence for that is that power prices have actually been very low since the start of the year, despite the war in Iran, and particularly in Iberia, that's the case. And that's largely driven by strong renewable generation. So we don't see any case for having any taxes or extraordinary taxes on windfall profits, because there aren't any, certainly not in the case of GDP, and certainly not in the case of the power sector here. So it's early in the process. I think there's only very limited comments made about this. So we'll wait for further clarity for additional conclusions.

We have also a question around the trajectory of net debt over 2026 till the end of the year. How do we see this evolution of net debt?

Thank you, Miguel. So again, reiterate the $16 billion target for the end of the year. as typically we are expecting to have sort of a peak throughout mid-year, reflecting what is the typical front-load CapEx execution and also the dividend payment today being paid, or paid already. And then the asset rotation proceeds and tax equity may be coming in the second half of the year. So $16 billion by the end of the year, but with this evolution over the quarter.

Then we have from Sky Lennon from Redburn If we could elaborate a little bit on this mechanism of ancillary service cost and how it's priced and our ability to incorporate these additional costs on our pricing of our offers, and also the timing of this incorporation.

Okay. Okay. So maybe just taking a step back, I mean, these ancillary costs are normally driven by, in the past, they used to be very much by hydro. More recently, or the last year or so since the blackout, driven very much by a combined cycle plants, so CGTs, which have a higher marginal cost. And those are being requested by the system operator to provide backups to the system. That's what's been driving higher ancillary costs over the past year or so. There's a particular spike in this first quarter. Part of that is specific to the fact that there was very low pool prices, and so the ancillary services events as an additional premium when that happens. But it was also due to a very specific circumstance that in the case of those storms in Portugal, there was a power cable that was sort of out of line. And so basically the country was almost like cut in half and you had to have additional backup services to make sure that in both sides of the country you could keep that backup services in place. So that drove a much higher cost of ancillary services in this first quarter. We estimated that could be around 50 million euros of costs in that first period. We expect a normalization of these services in the electricity prices, so it's around 23 euros per megawatt hour in Portugal in the first quarter. In April, it's been 23 euros per megawatt hour in April in Spain. What we've done is to go on incorporating this prices into our offering, and we expect to gradually be repricing it 60% of it in 2026 and 80% in 2027. So we are reflecting these higher costs in executing the pricing to customers. So that's essentially where we are going forward.

And we have a question also around retail. So regarding the evolution of LST retail supply business in Portugal, which is evolving regarding clients and volumes?

So, I mean, the retail business in Portugal is extremely important to us.

I think it provides us a solid base in terms of the volumes of energy that we place from our generation. And it gives us a sort of integrated margin, which has a lot of advantages in terms of the stability, I think, of these of these earnings for the first so we're obviously the incumbent we had an extremely high market share you know back many years ago we're sort of in the high 80s percent market share that's been coming down naturally over time but actually for the first time in five years we're actually seeing positive monthly net client additions that's been very much supported by reinforcement on the offering that we're doing, competitive pricing. And so, as I say, for the first time, we're actually seeing a net client additions, which is obviously extremely positive. Overall, the volumes, our B2C volumes in the free market have actually increased 8% year on year. So, as I say, the number of clients is stabilized and the volumes are actually increasing. I talked earlier about the increase in demand in Portugal and that a lot of it was coming from the low voltage and that's a lot of it is domestic customers which you know of which we have a large share i also wanted to just reinforce that we are also doing a lot of cross-selling of services to contracts so we're currently at around 43 percent um of customers have not just energy but also additional services which we think add a lot of value to our customers so i think it's a good value proposition and that overall means that our retail business is delivering significant value We have then a question from Alex from Bank of America regarding the CapEx plan in Iberia.

So 0.7 in 26, but it's being revised up. The question is more around clarity on 27 and 28 CapEx and if we see upsides here both in Portugal and in Spain.

So to be clear, yes, we're expecting an increase in the Iberian CAPEX for 26 versus the previous For 27 and 28, in the outlook, so we're obviously going to deliver what's in the PREVIV, which is the Portuguese CAPEX plan, which is for this next five-year period. The outlook on whether there is any additional CAPEX will depend on the conclusions of the Network Resilience Study, which is being done in Portugal. This was requested by the government after the February storms. It's currently with the Departments for Energy and Geology to be done over the next couple of months. I mean, expect it to be concluded before the year end, but let's see. But I just wanted to reinforce one thing, which is that we are expecting to ramp up in CapEx over the next couple of years. Overall, for this period, it's around 60 plus percent of increase in investment but you obviously don't just flip a switch and immediately increase the capex by 60 percent from one year to the next so there will be a ramp up over the period it's expected to be over 60 percent higher than over the previous five-year period uh we have then a question uh around the um post 28 how do we see uh over the last six months for cmd uh increasing developments of more visibility on growth post-28?

Yeah, so post-28, I think it's still early to talk a lot about that.

I mean, as I mentioned earlier, we're six months into the plan. We came out with Capital Markets Day in November. We're in May. So what I would say is that we are focused on strengthening our renewables pipeline further, obviously not just till 28, but beyond, out till 2030. we are seeing opportunities for repowering they weren't incorporated into the 2028 numbers but certainly we think that they are viable post 2028 and so that's something that we are also working on we're also seeing good asset rotation support from investors so there's a lot of demand and also good pricing we have a very strong execution track record here So I think we have a pretty good sense for where the market is at any particular moment in time. And as I say, we're seeing sort of pretty good demand for this, certainly in the U.S. Network acceleration under the regulatory frameworks. I just talked about that, but that maybe is an option as well. And then just generally growing optionality from flexibility, co-location, hybridization, storage. I mean, there's a lot of different optionality that we are looking at and working on. So, I mean, we have no doubt about the growth post-2028. I think just putting numbers to it is something we'll be looking at over the course of this year, and obviously we'll come back to you as soon as we have sort of a more defined view on that.

We'll move now to the questions on the phone, and the first question on the phone comes from the line of Arthur Sipon from Morgan Stanley. Arthur, please go ahead.

Thank you for taking my question. The first one is you touched on during the presentation on the progress made by the Start Campus data center project in Portugal with the second building expected to be built by mid-2027. I know you have an MOU with Start Campus. I'd like to understand a little bit better what this Start Campus second building could mean for ADP basically. I mean, given the project seems very advanced, I suspect it does not need PowerLand. So I suspect this is not about selling PowerLand. So if it's correct, then is it about PPA negotiations? Are you negotiating a PPA with that second data center building? Would the negotiation be directly with Start Campus or more with Microsoft? So, yeah, any caller on that would be helpful. And the second question was more detailed. I think you mentioned in the report from yesterday, again, linked to an acquisition in Brazilian networks. I was wondering if you could quantify that effect and if it only impacts Q1.

Thank you very much. Thanks, Arthur.

So on Start Campus, I mean, there's only a limited amount I can say at this moment. But what I can say is the following. It's around 1.2 gigawatts of computing, which would translate, if everything was built into around 10 terawatt hours, 8 to 10 terawatt hours of demand, if all six phases were built. So it's six phases. We're now talking about the second phase and potentially then moving on to the third phase. So the second phase would be, you know, obviously around 200 megawatts. um so that's around let's call it one and a half terawatt hours um that can be supplied from the market and so that's what we're engaging with them to do um in terms of additional demand just in general this will contribute to the growth in demand in portugal which i think has a lot of positive ramifications as i've mentioned i think over the call there could be additional optionality around our land or other opportunities that we could do together. So we're exploring that. I'm not going to elaborate much more on it, except to say that obviously we want to be part of the solution and to be constructive and help contribute to more investment in Portugal and anything which creates value here. I think we obviously want to be a part of that. On the second, on the networks.

Yeah, sure. Hi, Arthur. So basically, this is related to a small acquisition that we did in Brazil itself, but then discussing with the United States, they feel that we actually acquired this below what is the market value, and therefore we have to book a positive of $18 million, so it's sort of immaterial.

Thank you very much.

Thank you, Arthur. The next question comes from the line of Alberto Gandolfi from Goldman Sachs.

Alberto, please go ahead.

Miguel, thank you for taking my questions. The first one is about the industry backdrop. Considering rising focus on energy security, electrification, artificial intelligence, adoption rates, I was wondering if at the EDP level you might not be tempted to perhaps shrink to grow or think about some external funding, considering that it looks like the plan you presented in November last year is really still focused on deleveraging. So at what point you might change your view from deleveraging to growth? What do you need to see? You know, last night you talked about extremely attractive returns in U.S. renewables. You have data center to be growing and inflecting positively. don't you feel constrained and are you thinking about potentially something beyond you know the 28 the second question is just to be clear on slide six in networks the 20 million you talk about is that a permanent increase in revenues or is it just 20 million from this quarter and then would be 20 million lower revenues from from the following quarters and lastly Given we are nearly halfway through the year, is there anything you can tell us about your FlexGen for the year? What are the key levers that could impact this business or really should we just expect? What I'm trying to say is that you gave us a guidance of about $1.4 billion, but I was trying to understand if we were to flex it, if demand keeps growing 3%, Will you make more money in FlexGen? If it trains more, what do you think happens? So how do we think about the sensitivities to that business, particularly to the upside?

Thank you, August. So I'll take the first one. So we are focused on growth, very much so.

We're not focused on the leverage. What we're focused on is making sure we have a solid balance sheet and so that we keep the BBB rating. What we want is also to have the optionality to take advantage of good opportunities as they come, and that's what we've also built in, and so we're focused on being able to do that. We don't see the need for additional funding. I think we have precisely the amount of flexibility, I think, that we need. The fact that the asset rotations are going well, disposals, I think, are also on track. So that allows us to basically keep the solid balance sheet and at the same time take advantage of the growth opportunities that we see. But as I say, and I've stressed this before, and I'll stress it again, we want to make sure we get good value-creating opportunities with good risk-adjusted returns. And so not just do volume for volume's sake. So we'll continue to invest heavily in the network side because we're seeing now long last after many years, decent returns. And so that obviously gives us an incentive to invest more there. And on the renewable side, we want to make sure that we are getting these good high quality projects that we can then rotate and then reinvest that capital back in. So that's our focus. And we don't see the need for additional external funding. And we'll be able to, I think, do what we want with the balance sheet and with the business plan that we have. I'll just jump to the third one on FlexGen for the year. So what are the key issues here?

Obviously, on one side, hydro, for sure. We obviously have the dams very full.

And so that's simply a question of price times volume. A big part of the price is locked in and already hedged for the year. To the extent that there is additional rainfall over the year, you could monetize that as well, depending on the prices at the time. What I would just stress is that in the first quarter, we have had much higher ancillary costs. So that's on a negative side. That's already also incorporated. But we're expecting some normalization of that also over the course of the year. But in any case, there was that negative, let's say, cost that we had. So basically, that's that. I mean, if you break it down into hydro price times volume and the ancillary services normalizing, but with this additional cost. On the second point, I didn't quite care, but I think, Rui, you got.

So, hi, Alberto. So you're referring to that call out that we have the 20 million net impact from the infrastructure rebuilding, correct?

Yes, that is correct.

Okay.

So, again, so these are, on a net basis, the investments that were carried out by the network's business to replace the destroyed assets throughout the Christine Storm and the significant weather events. So it's an addition to the RAB, which obviously is a positive, and it will flow through the revenues through the period. But that's an additional RAB increase, just driven by what happened in Portugal.

Thank you so much. Very clear. Next question comes from the line of Pedro Alves from CaixaBank.

Pedro, please go ahead.

Good morning. Thank you for taking my questions, and congratulations for the solid start to the year. Looking at your 2028 targets and given the upgrade this morning on the 2026 recurring net profit guidance to the 1.3 billion, which is already in line with the 2028 target of the CMD, which I understand excludes the 40 million euros of extraordinary energy tax that is still impacting this year results. can you please explain us what still prevents you from revisiting at this stage net income target for 2028? And the second question is on the Iberian Networks EBITDA, which was strongly up with the new regulatory frameworks. Can you tell us your most updated view on the underlying run rate expectation for Iberian networks by 2028, so including the expected capture of incentives and efficiencies. And just related to this, can you elaborate a bit on the potential financial details coming from the Portuguese government resilience plan and if this could create any kind of upside to the current business plan target? Thank you.

Sorry, just on the third question, could you just repeat it because I didn't catch it?

Yes, just related to the heavy storms that affected Portugal earlier this year and the resilience plan and their study by the Portuguese government.

Okay, okay, got it. So maybe just starting from there. So the resilience study, as you know, there was a big debate in Portugal following the storms about whether you should have more lines buried to sort of increase the resilience and not have such a strong impact when we have some of these storms. First thing I'd say is that, you know, the Christine storm and that whole period was absolutely exceptional with exceptionally high winds and well, well above, you know, unprecedented. So this infrastructure has been in place for decades and it's gone through a lot of very heavy storms and stuff like that without this type of impact. So in any case, obviously it is important to revisit it and to look at the resiliency of these networks. And so that's what's being requested. I think the big debate that opened up was whether we should bury more lines. I mean, our view is that in some cases, maybe it will make sense and others not so much, but there are other ways of increasing resilience, which isn't just to bury lines. You can have redundancies, you can have different types of technologies. In any case, the point is you need to do a good cost-benefit analysis because you want to increase resiliency, but that comes at a costs. And so we want to keep that under control to make sure consumers are not bearing undue costs. So that's our position on this. It will probably come out by the end of the year. That's more or less the time it's been requested. We'll see if it suggests additional CapEx or additional investments to be done, which our assumption is it would be on top of the existing CapEx plan, which already is defined. On the 2028 numbers, what I'd say is it's still early. So the key assumptions in terms of pool prices for 2028, in terms of effects and others, I mean, we're not revisiting those on a daily basis. And so assuming a normal hydro year, assuming the pool prices where they are for 2028, assuming all of those different factors, assuming the secured number of megawatts that we have, what we're still planning to do for 2028. You know, materially there have been some ups, some upsides, some downsides, but nothing too much. So we think that overall we're still comfortable with that 2028 target. Obviously we're off to a good start, but some of these things are, you know, obviously having more hydro this year is obviously a positive, which we're not assuming for the 2028 numbers. On the second point, Gabriel Network's gone with, I think we're going to take that. Thank you.

Hi, Peter. So it's about 8% in Portugal, 9% in Spain. So again, that includes the return on drop, but also all the efficiencies, benefits, et cetera, that we are able to cover in both of the geographies. Again, I highlight that in Portugal, we also have this linked to inflation and the Portuguese bonds.

So very good returns, 89%.

Thank you.

So thank you, Pedro.

And the last question comes from the line of Pierre Ramondek from Berlin. Pierre, go ahead.

Hi, thanks for taking my question. Two on my side, if I may. The first one is regarding the 20 gigawatt pipeline in the U.S. I wonder if you could confirm what proportion is expected to be safe onboard before the end of July 2026. and therefore eligible for IRA incentives. And secondly, looking at hydro reservoir in Spain, I assume such levels of reserves were not anticipated. So I was wondering if you could have any visibility on the proportion that is edged and what upside potential we might expect from these historically high levels, whether in terms of earnings or market spreads. Thank you.

Okay, thanks, Keir.

So on the first question, so we already have most of that, or we have all of it, safe harbor, to be honest. And we were doing that already since the summer. So it's around six gigawatts that's safe harborage. And bear in mind that this excludes batteries, because batteries have a much longer time frame in which they'll be able to get the credit so you don't need to safe harbor them. So you can put on top of this additional, let's say, battery megawatts. On the second question, it's mostly hedged. Obviously, there's still exposure to the upside from the realized premium over base load. We never hedged 100%. That was one of the changes we did a few years ago. We suddenly thunder hedged, just in case, for example, there was a drought or anything like that, we typically hedge the base load. So the premium, let's say the realized price is an upside. The upgrade and the guidance that we've given already includes that. And so just to be clear on that.

Thank you, Pierre. So we finish here the Q&A.

And so I'll end over back to you, Miguel, for some final words to close this call.

Well, I think there's two messages. One, solid start to the year, which gives us good confidence on the full year. And that's why I think we feel comfortable also in doing the upgrade and the guidance for the year, the first one. The second one is that we recognize there's a lot of interest in what could happen in 2028 and beyond. I think it's still early to start talking about that. But certainly, over the next couple of quarters, as we go on getting more visibility, we'll be happy to come back and provide you additional guidance on 2028 and beyond. I think we obviously have an optimistic view on the world and driven by the fundamentals that I talked about, the strong demand growth. That's absolutely key. good pricing both in the US certainly which is the key market for the renewables good prospects in terms of the networks and even potentially some upsizing on the investment there but I'd rather that we were able to go on consolidating this before coming out with any specific numbers or any revisions for 2028 or beyond that which we're already beginning to look at what 2030 could look like and we'll talk about that in the future. So thank you very much and look forward to talking to you again soon.