NATURGY ENERGY GROUP SA (NTGY) Q2 2026 Earnings Call Transcript

Good morning, everyone, and thank you for joining Naturgi's first half 2026 results presentation. I hope you're well. This is Abel Arbat speaking from the Capital Markets Team at Naturgi. Presenting today are our Executive Chairman, Francisco Reines, the General Counsel to the Board, Manuel Latiaco-Vadella, the Global Head of Financial Markets and Corporate Development, Mr. Steven Fernandez, and the Global Head of Control and Energy Planning, Ms. Rita Ruiz-Dealda. As usual, we will run through the presentation first and then open the floor to questions. Before we get into it, there is a small change in how we manage the Q&A session. From today, we will have the opportunity to ask live questions through the conference call, while we also maintain the possibility to submit the questions in written form if you prefer, okay? A reminder that the questions should be only done by equity analysts and investors. So at the end of the presentation, the operator will remind you of the mechanics to ask your questions live via the conference call, okay? Okay, so with that, I will hand it over to our executive chairman, Francisco Vines.

Hello, good morning, everyone. Thank you for taking the time to join us. And it's a pleasure to address to all of you today on this first health results presentation for year 2026. Before going into numbers, I would like to spend a few minutes on strategic positioning, because as you may think, the year 2026 is marking the beginning of a new phase for Natalgy. After this first part, we will then move to financials, first global and second business performance and as a last part we will look on the year and the half year ahead 2026 and talk about how we are seeing the guidance for for this year therefore if you allow me to ask you to move to page number four um page number four uh key messages of that play of that page has to do about the recent changes in the company and key messages we would like to give to you is number one the substantially increase on the free float that today is about 46 percent and clearly if you remember they it was one of the most important targets of our strategic plan 25-27, and it has been achieved just after a year that we launched the self-takeover in June 2025. Second important message is about the overhang. During many months since that date, we have been suffering overhang concerns related to the position of certain large shareholders, now these concerns have been cleared. Third message, it has to do with the current shareholding structure that in principle is leaded by the market over 46% of free float with two reference shareholders, Criteria Caixa and IFM investors, that are clearly aligned with a common long-term vision for the company with a clear objective to grow and add value. As a consequence of these movements, we have simplified the governance and as the most important outcome. The special majorities included in the bylaws of the company have been removed. The company now is more agile to take decisions of investments, disposals, financings, and other key business decisions. As we said in the page number four, we are now very well positioned to take advantage of the strong balance sheet capacity that should help us to accelerate EPS growth. eps growth together with an attractive dividend policy makes the value proposition of our company for shareholders we think very very attractive and finally as always i think that we have been recognized by the market and it has been our most important objective to deliver our commitments Our track record of financial discipline, our track record in making the company more operationally efficient, and at the same time, delivering our commitments towards value creation objectives have been helping us from our point of view to start facing a new phase with very positive pillars. If we move to page number five, I wanted to remark, there are many, many data here, but I wanted to remark why we think today Naturgi is well positioned. First, because of our diversified and resilient earnings profile. Second, thanks to our strategic gas and energy infrastructure in Iberia that helps to warranty a sizable generation fleet. Third, because the sizable generation fleet, together with a large customer base, help us through a vertical integration strategy. Fourth, with a quite balanced international generation portfolio, which 84% of the output is regulated, as you know, that removes any concerns of volatility. Fifth, clearly proven track record on capital discipline. And today, around 500 million per year savings on annual OPEX can be compared to the 2018 baseline. that is leading us as the most productive and efficient utility in the European industry. And sixth, as I said before, an attractive cash yield and balance sheet had room with a leverage which is around two point times EBITDA with an SP FFO net depth metric of over 30%. I remember to all of you that 18% is the threshold for maintaining triple B, which means we are clearly far above. It gave us a very compelling, from our point of view, position for our shareholders. If we move to the next page, we have been talking in the last presentations about the opportunity that an integrated model provides the company as a resilient platform for growth. These pillars that come together in our integrated model are really one of the most important backbounds of the company. Our presence across both value-added changes, gas and power, give us resilience, complementarity, operational synergies, and integrated margins. This is clearly non-replicable in the case of the fewer players. In electricity generation, we have flexible gas turbines and renewables vertically integrated in Spain and contracted in the case of our electricity generation plants abroad. In electricity networks, we have a platform for electrification with, we consider attractive regulated returns. In the case of the gas and LNG procurement forming part of the energy management, we benefit from a diversified portfolio. And in gas networks, we play a key role in energy transition and we consider, as it's demonstrated in many countries in Europe, that these are enablers of renewable gases to be established. And altogether, in the center of all our business, over 17 million customers, we provide integrated margin optimization and they help us to get a natural hedge across the whole portfolio. In our view, this is what makes sense and generates It's worth much more than the sum of its parts. We'll move to the next page, please. The platform we have today give us multiple organic growth levers across our core markets, and we have also significant optionality to accelerate. Let me specify some of them. In networks, our objective is to continue to be investing on adequately remunerated and stable frameworks. In GATS Spain, for example, the proposed 2732 new framework is continuity-based but introduces relevant incentives for digitalization and biomethane introduction. In electricity in Spain, for example, we expect very soon a lift on the investment cap that will allow us to invest more and quickly with an adequate remuneration. In Latin America, the visibility continues to improve and consolidate a much higher level of profitability than we had years ago. On the renewable side, we see organic growth through hybridization, repowering and storage. These are the three key fundamental pillars of our organic growth. We have one gigabyte coming online this year and over two gigawatts more in 2027 onwards. In these over 2 gigawatts of new capacity, more than half of it is around batteries as a clear attachment to the existing renewable generation that will help us to capture higher prices and higher margin in the electricity delivery. On gas turbines, increasingly is a key actor in ancillary services, as you know. So, we had almost 5 terawatts of energy in the first half, and in Puerto Rico, 400 megawatts on a tender that we expect to get, in this case, news on the final decision by this Data centers. We have an opportunity to unlock value with limited capital, 900 megawatts already in projects under development, and 2 gigawatts in our pipeline. In renewable gases, we have the largest biomethane pipeline in Spain with over 75 projects and more than 5 terawatts of energy. We see a context which is increasingly favorable, but we are seen at the same time to support our positive vision that we had the introduction of mandatory biomethane consumption targets by the regulators. And on efficiency, further upside is expected in our new efficiency plan, which is supported by our trial record, and in particular, through the EIS and enable process optimization. Within that, artificial intelligence may help us to be even more productive and more accurate. In summary, I would say that we have multiple organic growth levers across our core markets. If we turn to page number eight, I wanted just to show three important messages on this page. As you can see, our metrics are clearly better than the ones we had in 2018. That's the reflect of a very tough war by the team in the last seven years. But altogether, this is translated into between 10 to 12 billion euros of five power that we are going to give us flexibility for any project based on two key restrictions. Number one is maintaining triple B rating of standard imports as a floor. And second, maintaining the strict capital discipline on value creation. We are not, I want to remark this idea, we are not a distressed buyer on any project anywhere at any time. On page number one, to finish my part of the presentation, I wanted to address exactly the point I mentioned before as discipline for our investment criteria what we are today is that any capital we want to deploy should be anchored in our famous value over size proposition and we will guide by clear criteria, which are the following. Number one, in terms of portfolio and risk profile, we will focus on hard currency geographies with a clear bias towards electricity and regulated or vertically integrated assets. In terms of growth and strategic feed, We prefer projects which embedded organic growth, where there is clear, strong industrial rational, and where we can achieve synergies as an upside. What it refers to financial discipline, we look for projects that are accretive in terms of EPS with returns which are value accretive, clearly above our weighted average cost of capital, and consistent, again, as I said, on this threshold or triple B rating. And finally, a very clear restriction for the management team is that we want to control and execute these projects and to warranty that it may happen. We want clear control positions and clear alignment with our stakeholders. So to summarize this first section, I wanted to remark again, the overhang is clear, the shareholders are aligned, the governance is much simpler, we have a strong balance sheet, and we keep the optionality under financial discipline way of thinking. With this strategic backdrop, I would like to hand over to Stephen Fernandes now that will go through the consolidated financials. Thank you for listening. And I give the floor to Stephen.

Thank you, Balco. And good morning, everyone. Thank you for joining us. It's always a pleasure to be able to come to the market with very good results. And I think that what we have presented today in terms of the first half of 2026 are results to be proud of. Not only are they good results, they're also results that allow us to upgrade our guidance for the full year. Overall, what you've seen today is a strong operational and financial performance, despite the volatile environment. In fact, the earnings growth of 6% is underpinned by the robustness of the integrated model that our chairman has just exposed. We also continue to generate strong cash flow and continue to apply that cash with discipline. This led to a decrease in net debt, although we remind you that net debt for the rest of the year should increase by around 400 million euros, taking into account a one-off Sonotrack payment. We've also taken the chance yesterday in the board to approve the first dividend against the year results of 60 euro cents per share in line with what we announced last year fully aligned with what we have presented in the strategic plan and which will be payable on the 29th of july in headline terms ebitda reached almost 3 billion euros that's up from 2.8 million billion euros a year ago and net income rose to 1.2 billion euros up from 1.1 billion euros a year ago so obviously you can tell from these numbers that we have now the confidence to confidently upgrade our guidance for the rest of the year. If we think about it in terms of the evolution by business, looking to page 12, and we think about it in terms of the EBITDA bridge, growth has been led by our regulated activities, which is also something interesting, and by thermal generation. These two contributions more than offset software contributions elsewhere. So if we think about it, for example, in terms of distribution networks, they added around 180 million euros to the EBITDA line, and they were, in fact, the main driver of growth in the half. Remember that there is a one-off of around 74 million euros that we flagged last year, and we also flagged in the Q1 included in this number. Thermal generation contributed close to 50 million euros on the back of strong ancillary services demand. And as I said before, these more than offset the lower contributions from energy management, which is down around 10 million euros, renewables also down around 10 million euros, and supply close to 70 million down, which we will cover in Rita's presentation shortly. So all in all, it's a broad-based delivery that reflects the diversification and the resilience of the integrated model. If we think about it in terms of cash flow, and that's on slide 13, the picture is one of continued strength and flexibility. Funds from operations remained robust at around €2.3 billion, and the free cash flow after minorities reached almost €1.3 billion, which have allowed us to fund the dividend while while still reducing net debt from $12.3 billion to around $11.7 billion. In this sense, it's worthwhile highlighting that our credit metrics remain solid, with FFO2 net debt at around 30%, that's 3-0, which is comfortably above the 18% BBB threshold. As I mentioned, net debt, remember, will rise by around €400 million in the second half of the year as a result of a one-off Sonatrack payment. But even so, the balance sheet remains strong and gives us significant strategic flexibility, as the chairman outlined earlier on. With that, I'm going to hand it over to Rita to go over the specific business units, and then we'll finish off with the outlook.

Thanks, Stephen, and good morning, everyone. Starting with gas networks on page 15, gas networks reported a total EBITDA of 883 million Euro in June 2026, representing a 6% increase when compared to 2025. Spain Gas Networks experienced the remuneration adjustments foreseeing the current regulatory framework, with lower demand when compared to 2025. The new regulatory framework for the 2027-2032 period was published. This proposal maintains the parametric formula, providing continuity with the current model and also providing regulatory stability with a downside protection against demand variation. The new remuneration model reinforces the strategic role of gas in the energy transition, while for the first time supporting the decarbonisation of gas consumption through biomethane incentives. The next step is now for the Council of State to formally approve the remuneration framework. If we move to Latin America, where we had growth across the different geographies, In Mexico, positive results mainly impacted by tariff reviews in our concessions implemented during the second half of 2025 and positive effects impact. In Brazil, positive evolution because of regularization from prior periods along with higher demand for power generation due to lower hydro production in the country and positive effects impact. We are now preparing the extension concession process expected in 2027. In Argentina, Tireep update compensated with currency depreciation and cost inflation, and in Chile, performance positively affected primarily by improved energy efficiency. As announced in the first quarter report, the regulatory review for the 2026-2029 period has already been published with a positive update recognition on the asset base. In summary, growth in LATAM and improved visibility of the new regulation for gas distribution in Spain, which shows regulatory stability and continuity. Moving to electricity networks business, a bid that reached 637 million euros, up to 24% versus 2025 levels. This extraordinary result is affected by a one-off remuneration adjustment and the regulatory reset in Spain. If we look to the different geographies in Spain, a bid increase to 28% supported by a higher regulated asset base and higher remuneration rates following the implementation of the new remuneration framework that was approved last year. This result also shows an important one-off game related to the recommission of operational maintenance remuneration corresponding to years 2021 and 2022 of 74 million euro impact. This is indeed a retroactive remuneration. In Panama, results positively affected by higher demand for high temperatures that compensated for negative effects evolution for the depreciation of the US dollar. The group has a strong commitment to the quality upgrade investment plan that is already reflected in the improved operational quality metrics in our distributors. Finally, in Argentina, results driven by a new tariff review for the 2026-2030 period for the electricity business in San Juan that was published with positive tariff updates but partially compensated by FX and cost inflation. In May, another important key milestone was achieved with the 10-year renewal of the electricity concession in San Juan. authentic. In summary, strong results were driven by the positive impact of the new regulatory framework in Spain, together with the recognition of previously outstanding remuneration. Now turning to energy management on page 17, a bid that reached 513 million euros, which shows stability in results when compared to 2025, mainly due to higher margins from hedge volumes that compensated for the termination in gas contracts in December 2025 that we already announced in the Estrategic Day. The conflict in the Middle East contributed to higher energy prices and elevated market volatility through the first half of the year, and geopolitical uncertainty will remain a key market driver in the next month. The Club has a head position for the 2026, but was able to capture opportunities from growing volatility, Leveraging for this on our contract flexibilities, our LNG tank of fleet, and also on downstream position. As you all know, in June, the European Commission confirmed the ban on the long-term Russian LNG contracts from 2027. This affects our contract with EMO. Let me be clear on two aspects. The first one is that security of supply to Naturgy clients is guaranteed, as Naturgy holds sufficient gas with predestiny clauses to cover our gas commitments in Spain and Europe. And second, this ban is structured as a post-major event by the EU, which relieves standard take-off pay obligation.

This is Manuel. May I add to that that the European Commission flagged this measure as a post-major, so this basically relieves from the take-off pre-obligation of the long-term contracts but secondly you were aware that today the European indexes, the TTF peaked its height in the last two years and even surpassed mid-March when odd moves started. So, probably this should make the European Union to review the ban system, because it has to be applied in a context quite different to the context in which they were decided, which was basically in autumn of 2025.

Thanks. Overall, performance in the business was supported by effective hedging and contract optimizations, together with a diversified document portfolio that guarantees security of supply to our clients in a context of uncertainty and volatility. Continuing with thermal generation, EBITDA reached €360 million. This is 15% over 2025 EBITDA levels due to higher activity in Spain. In Spain, results improved, supported by a stronger demand for auxiliary services, where CCUTs have proven to be a backup technology amid increasing renewal penetration. Natural G-split, reliability, flexibility, and efficiency remain a key competitive advantage in the auxiliary services market. In LATAM, improved performance in the Dominican Republic upset the negative impact of the U.S. dollar depreciation and an operational incident at a combined cycle power plant in Mexico. In LATAM, negotiations for PPA contracts covering our combined cycle fleet are still ongoing. We expect this agreement to be renewed by the year end on terms broadly consistent with the current PPAs. In conclusion, combined cycle gas turbines have consolidated their role as a backup technology in an increasingly renewable power system. Let's turn now to renewable generation on page 19. Renewable generation reached an EBIT of €313 million during the period, 3% lower when compared to 2025 levels with 360 megawatts of additional install capacity. In Spain, results were affected by lower renewable generation due to higher hydro-recorded and also a weaker price environment. This was partially offset by the contribution of a new capacity commission at the end of 2025. Higher renewable output has resulted in downward pressure on wholesale prices versus 2025 levels. However, the group's vertically integrated position offset partially this impact. In the United States, results are higher when compared to 2025, mainly due to high production and energy prices. New capacity has entered an operation with a further 125 megawatts to be commissioned this year. In LATAM, activity was positively impacted by improved output and margins in Mexico and Chile. And Thailand in Australia increased output from the commissioning of new capacity, 360 megawatts added. added, but negative evolution of the mark-to-market valuation of existing PPAs under accounting criteria. Overall, renewable results were supported by the contribution of new commission capacity despite a lower price environment. Selective growth continues with 360 megabatt added in H1 and further 700 megabatt expected to become operational in the second half of the year. Last, moving to supply, EBITDA has been 319 million euros, 17% lower when compared to 2025 levels. In electricity, the sector continues to face margin pressure, driven mainly by higher auxiliary services costs. However, the commercial strategy has been adapted in order to reflect these new market conditions. In addition, the impact of lower prices have been largely mitigated by the group's integrated business model and its contracted sales position for 2026. In gas, results were affected by lower industrial demand and reduced margins in regulated tariffs. Meanwhile, the process to recover regulated tariff deficits remains ongoing. Overall, sector-wide margin pressure partially contained by the integrated model both in gas and electricity. I will now hand it over to Steven to take you through the outlook. Thank you.

Thank you, Rita. It's Steve again. So let's turn now to the following slide to look at the outlook, right? And when we start thinking about the outlook for 2026, I think it's worthwhile to start with the market scenario. So forwards for the year for 2026 point to a certain stabilization, but it's fair to say that uncertainty remains elevated. Oil and gas benchmarks are above pre-conflict levels and the Iberian pool prices are likely to stay volatile, largely driven by renewal resource. In this context, our proactive risk management, diversified portfolio and operational flexibilities give us both protection on the downside and the ability to capture upside at no incremental risk. Now, recent events on the geopolitical front are, of course, not indicative of lower energy prices near term, and fundamentals remain tight, as we will see on the next page. In fact, looking a little further ahead, I want to spend a moment on next winter, because we frankly believe that planning for the winter 26-27 must start now to mitigate the risk of shortages on price spikes. There are basically four dynamics worth highlighting right now. One, the Russian gas ban removes somewhere between 10 to 13% of EU supply at peak, and importantly, was approved when the market was still expected to be well supplied. Two, the Hormuz disruption has removed around 20% of global LNG. Let me make that clear. 20% of global LNG. And there's no clear timeline for resumption. That into an already tight market. Number three, EU storage is at its lowest level in five years, with limited economic incentive to refill given the TTF backwardation. And finally, let's remember that its storage is highly weather-sensitive. That means that a cold winter, for example, as we have seen in the recent years, could risk shortages by February 2027. So essentially, the Russian ban was designed in a market of abundance, now facing a very different reality. Low storage, Hormuz risk, and an already tight LNG market. Planning must be made now ahead of the winter. If we move over then to close, I want to close where we began, where the tournament began, really, which was delivery. Reflecting our strong first-half performance, we are upgrading our 2026 guidance with the key metrics revised favorably versus the consensus. EBITDA above 5.5 billion euros, a net income above 2.1 billion euros, both ahead of consensus. Net debt now expected to close around 13 billion euros and a dividend per share of 1.8 euros per share, implying a circa 6.2% yield at current prices. So to conclude, NatronG is entering a new phase. We've cleared the overhang, we've strengthened our balance sheet, and we have disciplined growth optionality ahead of us. And all these are reflected in an upgraded guidance for the year. We are well-positioned to navigate volatility, as you have seen, and above all, to create value for all our shareholders. As we approach 2027, we'll start working on a new strategic plan. I may add, a new exciting strategic plan that reflects the company's full potential. Ahead of this new plan, as regards our 25 to 27 strategic plan, what we can say specifically as regards our guidance, is that we feel comfortable with the 5.3 billion euros EBITDA guidance and 1.9 billion euros net profit guidance for 2027, assuming a worst-case YAML scenario. Again, 5.3 billion euros EBITDA, 1.9 billion euros net profit, assuming a worst-case YAML scenario. In fact, we feel that there is more upside potential to these figures than downside. And, of course, we'll be updating the market on the 27 guidance at the latest at the full-year 2027 results, if not before that. So, with that, we'd like to conclude the presentation. I'm obviously happy to take any questions you may have.

Great. Many thanks, Stephen, and everyone for listening. So now, as we mentioned at the beginning, we'll open the call to Q&A. And as we pointed out at the beginning of the call, we've now given the opportunity to equity analysts and investors to do live questions through the conference call. OK, so if you rather prefer to make questions through the webcast, you can also do so. but we encourage you to participate in the call and make your live questions to the call. So with that, I will hand it over to the operator. If you can please remind everyone of the mechanics who will make the questions, please operator, go ahead.

Thank you. Ladies and gentlemen, we will now begin the Q&A session. If you would like to ask the question, please press star 5 on your telephone keypad. If you change your mind, please press star 5 again. Please note that you may ask maximum of three questions per time. And our first question comes from the line of Pedro Alves from Kaiser Bank. Please go ahead.

Yes, good morning and thank you for the presentation. The first question on energy management and the Russian LNG ban. So, you mentioned no shortfall risk given sufficient U.S. LNG volumes, but replacing your long-term Russian linked cargos with spots or U.S. index volumes will likely compress your achievable margins, and you commented also that for 2027. So can you please quantify the expected 2027 EBITDA delta that you can see for energy management from this repositioning? Could we be talking on a triple-digit million-euro negative impact? And then somewhat related to that, we have seen news of the Spanish Prime Minister and other energy executives visiting Algeria, targeting higher piped volumes and LNG shipments. Can you comment on how could this play out for Natogy and if this eventually is a real lever for additional volumes in the coming years? And then lastly, also on the energy management. So you are flagging gas storage at five-year lows, the Tf in backwardation, and the potential risk of shortages beginning of next year if we have a cold winter. can you please share your level of hedges for next year and if your hedging book leaves you in a position to capture still relevant upside from the potential price spikes that we may have and repricing of the TTF curve. Thank you.

If I'm correct, you have assumed that we would be buying some spot cargos during the next year. What we have said is with the current long-term contracts basically those coming from Algeria and the states we have volume enough to supply all our end customers plus our power generation so if your question relies on this assumption of having to buy relevant volumes of spot LNG this is not the case in Naturgeek so just a quick reminder right because you're asking us to quantify the amount of contract and we don't quantify contracts.

What we can tell you is we feel extremely comfortable with the 2027 guidance that we provided at the time of the 2527 strategic plan presentation, 5.3 billion euros EBITDA, 1.9 billion euros, and that is assuming a worst case scenario from EML. So there is potential upside there, but we're not going to quantify how much EML contributes right now.

On the argilia question um you may know two things number one as we explained in the past presentations the pipeline that connects spain with argilia the metgas where we participate together with as owners is already prepared to increase its capacity by around half a million half bcm or 1 BCM. It's between, depending on the pressure, 0.6 to 1 BCM. This is already prepared and the relationship between SonaTrack and Naturgy is good enough to plan for increase this volume on the next winter. The balance sheet that Stephen has been speaking about on global EU gas situation has already considered that this volume is arriving, but as you may imagine, with the whole volume that is required by the EU, this is a very, very small part. The pipeline has intrinsically a limitation, physical limitation, to pipe gas on circumstances that can be distributed later into the Iberian Peninsula. Therefore, this incremental capacity is due to the excess of pressure that is provided by the new compression stations, but there is a limitation because of the size of the tube.

Regarding our hedging position in 2027, we have our US gas exposure fully hedged for next year. and we don't have any hedging regarding the Yamal LNG contract. However, we will try to optimize our margins, taking advantage of our LNG tanker fleet and our downstream positions as we did this year.

Next question, operator, please.

Our next question comes from the line of Alexander Brannhausen from Bank of America. Please go ahead.

Thanks for taking the question. The first one regarding Spanish electricity networks and the $74 million one-off retroactive adjustment. I don't think we had any detail about the retroactive adjustment that you made in 2025, which I think happened in Q1, and it kind of feels that you disclosing a specific number means that this one-off was perhaps more meaningful than in previous years. So just wanted to get a sense of the delta here and if we should expect something of the same magnitude or not in 27-28, as you commented on the slides. And if so, given the regulation already in place, what would be the drivers of that one-off in 27-28? Secondly, just regarding renewables, I think you are now targeting for 1 gigawatt for the year, and that compares to, I think, a guidance of 1.2 gigawatt that you had given at Q1. So the first question is why the decrease, and equally, why are you only targeting 2.1 gig over 27, 2030, which would mean a drop in capacity addition from, you know, one gig to 500 megawatts per annum, therefore not utilizing the strong balance sheet capacity that you have. And then last and finally for my third question, I do note that regulation has been more supportive for gas distribution in terms of Gaion gas injection targets. You do mention some potential support in terms of consumption of gas. I'm just wondering if there's any more date or specific regulation upcoming or announcement from the government that we should look out for your 700 million of capex in biogas production onto which I think you still have not taken FID for 2017.

Let me start on the renewable side first as a strategic view of how are we approaching the renewable CAPEX program. Point number one, as you can imagine, as time goes by, the adaptation of the calendar of real investment to our objectives are made more solid than today. We are forecasting the figures we mentioned to you, which are based on the figures you mentioned, but taking into account that six months of the year has already gone. And for the next six months, we see how the delivery of equipments and the delivery of permitting, etc., may incorporate these gigawatts in operation. Point number two, the reason why the figures are not matching and are decreasing a little is because it's a consequence of our constant adaptation of our prognosis of electricity prices that are making the projects more or less profitable. As we have been saying every presentation for us, value matters more than size and therefore the investments in renewables should be also linked not only to the obligation of increasing number of megawatts in place, but also that these megawatts are profitable. Therefore, we have been discarding certain projects that at the present circumstances are not as profitable as we thought they were a couple of years ago. Then the adaptation of our figures is a consequence of the evolution of the reality of the market. On electricity distribution, in general, not only about electricity distribution, but in general, the problem of comparing apples to apples in terms of all the figures is that in our business, because decisions by the regulator are not taking exactly calendar year by calendar year, we have always a very small part of our results that include one-offs. The reality is that every year we have certain one-offs, but in comparison, the delta is negligible, is less than 2% of the total EBITDA figures. In our 2026 first half results, we have certain one-offs in electricity distribution compared to last year, which are around 70 million euros in total. But we also expect new one-offs in coming years because of decisions that are taken late by regulators and adapting. As you have seen, our accounting policy is more conservative than aggressive, and one-offs are normally being positive and with negative impacts. And on gas regulation, I can tell you, the gas regulation is not finished yet. It has been pre-approved by the State Council. Then we cannot come in on precise figures till they will be fully released. And even less for 28 that we haven't shared any figure for the whole company.

Our commitments on figures are finishing with the strategic plan 25-27. next question next question please operator our next question comes from the line of r2 seed bomb from morgan stanley please go ahead hello uh yes thank you for taking my questions the first one is on the comment that you made on the 2027 targets uh the 5.3 billion ebitda 1.9 billion net profit minimum and you were saying you are extremely comfortable with that even assuming a worst-case scenario for YAML. I was wondering if you could provide a bit more detail on what would be this worst-case scenario for YAML and what would be the range of possibilities between that worst-case scenario and a status quo which, as I understand, is ruled out now but of still having the volumes of that contract. So that's my first question. The second one would be on net income growth. I understand that you will present a new strategy plan later on, but I was wondering if the current level of net income for 2026 is something that you are comfortable to grow from, even without M&A or if to be able to deliver higher net income than in 2026 in let's say 2028 or 2030 you necessarily need to do to do to do to conduct an acquisition thank you very much all right thank you for for your questions Steve here so worst case Yamal means no volumes

okay as regards to net income you're asking us to go beyond 27 so we've given you a guidance for 2027 in line with our strategic plan which is 1.9 billion what we've said during the call is that we feel comfortable with that level of net income even in a worst case yaml scenario which i just mentioned includes no volumes coming from yaml i also mentioned that we see upside to these figures, the 5.3 billion EBITDA, 1.9 billion euros on net profit. Going beyond 27, i.e. 28, 29, 30, give us some time. We promise we're working on a new strategic plan that we'll present to the market where we'll provide you with sufficient visibility so you can actually test us in terms of the credibility. I think we've gained some credibility in the market since 2018. Every single time we've provided guidance, we've met, we've actually exceeded it. But right now, on the 22nd of July of 2026, we're not going to be disclosing guidance for 28, 29, 30 or beyond.

Next question, please.

Our next question comes from the line of Alberto Gandolfi from Goldman Sachs.

Good morning, and it's Alberto. Thank you for taking my three questions. The first one is going going back to your very helpful slide number seven, where you talk about the organic growth levers. My first best, but I suspect, given Stephen, what you just said, you're not going to reply would be, is there any chance you can help us understand underlying organic growth by Natuji before any M&A? So if you start from 1.9 or 2 billion, you said there is upside 27. I mean, And is this slide 7 telling us there is a low to mid single-digit TPS growth before M&A? And if you don't answer that, my backup would be, is there any way you can quantify how much capex slide 7 implies between 27 and 2030? The second question is, you know, you were very clear on slide 8 to talk about up to 10, 12 billion balance sheet headroom. This is very clear. I wanted to ask you, is there more we need to think about? I mean, is there a portion of the business that, given the right opportunity, you might be willing to rotate? So maybe your total transformation is not 10 to a billion. Maybe it's closer to 20 billion. That's what I was thinking. And the last question, very quick, number three. um still on slide seven you talked about uh 900 megawatt project center development data centers plus a two gigawatt pipeline any chance you can give more granularity on what you're specifically doing there is this connection point um are you thinking about ppa uh are you thinking about being part of a wider project in a jv so what would be your business model here thank you so um thank you uh thanks um alberto um so on on it's a good try though it's a good try trying to

to come up with uh with an estimate for net profit uh beyond 27 um that wait wait until we provide you the uh the details right what we can say i think comfortably is that um a normal run rate for capex for the company uh would be comfortably at around two billion a year a year as a year That would be, I think, a baseline that you could work with. And then we're always looking for ways to increase that. In terms of the balance sheet headroom, the question is whether or not we would be considering any asset rotation. First and foremost, the figure that is included in the presentation, 10 to 12 billion, does not include any asset rotation, correct? This is simply an exercise of re-leveraging. um as to whether or not we would be open to the option we've always said that we have no sacred cows in the company and obviously everything depends on on price but i can tell you nonetheless is that you know we we are clearly on a growth mode as opposed to a shrinking mode uh but if someone comes in with an offer that we cannot refuse then obviously i think we all have a responsibility to bring it to the board and analyze it then and as regards the development of the data center opportunity. The model that we are focusing on right now is a power land model and coupled with a PPA, long-term PPA contracts with offtakers. We are not at this stage thinking of taking up equity in data center projects, but rather monetizing some of the prime locations that the company has. And here we continue to develop the projects, be it through the acquisition of land where we have to, the engagement of offtakers, there is a hurdle that we need to clear for us and for everyone else in Spain that is not developing data centers off-grid, and that is the development of the new reglamento, the new regulations, which we expect to have cleared by the government hopefully before year end.

And that is a clear catalyst for us to move forward with some of the projects that are in a more advanced stage next question please a nice question comes from the line of peter crampton from barclays please go ahead that's peter crampton here from barclays and congratulations on today's results and guidance raise um two questions if i may one is around the capital market day or kind of an event where you kind of update um on strategy and targets, given a lot that's happened over the last year. Is there any idea on kind of rough timing when this could be? And then secondly, just taking the big step back, is it correct to assume that obviously because next year you have more unhedged volumes, the trends you saw in the first half, obviously one could extrapolate even more positively to next year? Thank you.

So on the capital market day or our capital market day, we understand the interest. Again, we are going to be developing a new strategic plan throughout the course of 2027, because as you understand, our current strategic plan ends on the 31st of December of 2027. So we have to have some visibility for 20 and forward. And so I think it's a safe bet that next year we will be coming to the market. And when we have a clear picture of the timing, we'll obviously give you a heads up so everyone is organized there. In terms of potential upsides for 2027, we're going to fall back. We provide the market with guidance at the time of the full year results. In this particular case, we've mentioned that this is going to be at the latest. So there is a possibility if we have more visibility of providing you more guidance for 27 in the Q3 numbers later this year. We emphasize, we feel very comfortable with 5.3 billion euros of EBITDA, 1.9 billion euros of net profit, assuming a worst case YAML scenario. And again, we see upside, more upside than downside to those figures. uh be patient okay we we are a company that prides itself in delivering on its commitments uh will provide you more tangible commitments uh in in the coming months thank you next question please a nice question comes from the line of javier suarez from medio banker please go ahead hi good morning good morning all um three questions from me as well the first one is on the on the

Increasing the guidance by 200 million euros, you can help us to understand the different components of this increasing guidance. I guess that there is a component of higher natural gas prices, also better forex. You can help us to understand the different moving pieces that has led you to increase this guidance by, again, 200 million euros. Then on the firepower, and that has been quantified over 10 billion euros. In slide number nine, you are giving some details, and so in preference for electricity, but open to selective gas acquisitions as well. So my question is, which is your interest on brownfield renewable assets and how this opportunity to acquire renewable energies compared with investment on regulated assets in the Western world? I'm also interested in your view, and that is the third question, your view on the profitability of investing in new battery systems and your latest thought on the hydrogen opportunity. Thank you.

Okay, so for the first question, obviously we have a more supportive energy price environment this year than expected. Remember that at the beginning of the year, prices were close to 27 EUR megawatt hour for the year. Second, we also have a more favorable FX outlook in LATAM than we were expecting. in Argentina, in Mexico, and in Brazil. And finally, we also had a stronger than expected CCEGT performance in auxiliary services. That reinforces our view that CCEGs are essential in a system with increased renewable penetration. So these are the three main impacts that made us review our estimations for the year.

Hi, Javier. I think you were asking about the potential interest or views that we have on brownfield renewables. We have looked and we are looking actively at brownfield renewal opportunities, but only those markets where we can actually export or already have the integrated model. Correct. Also, when thinking about standalone growth in renewables, we have to be mindful. We are not technology agnostic. So we have a clear preference towards wind as opposed to solar. And it's also very important to understand, as I mentioned before, that we are looking for that vertical integration. So when thinking about renewals, bear in mind that one of the things that we like about the company, and it's by design, is that we are well balanced. So we're not long generation. We're not long clients. We have a clear balance in front of our general generation with clients. So when thinking about opportunities as well, that's something that we have to be mindful of. The chairman mentioned in slide nine, the first point was the portfolio and the risk profile. What we are looking to do when approaching growth opportunities is to improve the company's business risk profile or overall business risk profile. So those are some of the questions that we ask ourselves is by doing acquisition A or B, what does the resulting company look like? So, you know, buying large exposure to standalone renewals without accompanying clients would necessarily shift the risk to us towards higher risk versus what we have right now. And therefore, naturally, we look to ways to offset that. And if we can't, then those investment opportunities would rank lower than some of the other ones that we're looking at. Yeah. Speaking of which, you asked the question about our views on hydrogen is, you know, we like hydrogen. We think hydrogen is the future, but it's the long term future, is the future of the future. So, you know, we think we have to bridge the gap between the current economy and a hydrogen economy. And one way we think we bridge that gap is through renewal gases. And that's why instead of focusing on hydrogen, we're focusing on biomethane, because we think that's what bridges it right now. And in fact, you've seen the Spanish government for the first time in a while finally present some incentives for the introduction of biomethane. So we think that is encouraging. In terms of battery systems, we are investing in battery systems in natrogy, specifically every single new facility on the renewal side that we're building right now. as battery systems coupled with them. So we think they're going to be playing an increasingly important role and specifically as we start moving towards capacity payments. So yes, we would agree that this is an area to continue investing in as we're doing right now.

Excellent. Next question, please.

Our next question comes from the line of González Sánchez-Bordona from UBS. Please go ahead.

Hi, good morning, everyone, and thank you for the presentation. I have two questions. One is a quick clarification on the worst-case scenario that you mentioned earlier on the Yamal for this 2027 guidance. My question there is, you said that means no volumes from Yamal, but I just want to make sure that you are not including any potential take or pay penalties. I don't know what is the right word to call it, but basically it's no volumes, but no further impacts than not getting the volumes. So that will be the first one. And then on the second one, I appreciate that you will not provide guidance beyond 2027, but this is more of a qualitative question. It's regarding your very good performance in the past few months slash quarters on the CCDT fleet in Spain and obviously benefiting a lot from ancillary services, which partly are driven by the growing renewals penetration, but I guess partly it's also driven by the reinforced operation of the grid post-blackout last year. so I guess my question is how do you see the evolving going forward qualitatively, I mean do you think as more renewables, more batteries come to the system that can remain stable, go up, go down or basically any thoughts on that front thank you This is Manuel, on the take your pay consideration, precisely the force

major, the basic consequence of raising force major and being allowed to raise force major against the other party is that you get released from your take-or-pay obligation and hence for any payment related to the take-or-pay. Regarding the batteries installation, how this impacts on the ancillary services, this is more in a medium long-term view. We are expecting capacity payments to be approved by the government once they got the authorization from the DG competition of the European Commission. We expect to see them by the beginning of the year. But this won't change very much the ancillary services market as we know it. It will just be a payment to be available and to have the combined cycles properly maintained. But this doesn't change in any way the ancillary service system that we have. It's true what you say, that there's a correlation with the renewables penetration, We've been seeing this in the last three, four years, but the mention that you made to the reinforced operation, at this point, we don't think we can continue to speak about reinforced system because now it becomes the ordinary way of running the system. And somebody could think if this way of running the system shouldn't have been already in place before the incident of April 28th. So basically, it's not a reinforced operation of the system. It's the system that is required by the volume of renewables penetration that is in place before April 25th and not only after April 25th.

Thank you, Manuel. Well, I think there's one last question. Operator, if you can pass it through.

Thank you. Yes, next question comes from the line of Fernando Abril from Alantra. Please go ahead.

Hello, good morning. Thank you for taking my question. Just a follow-up on the M&A front. So, we've recently seen one of your peers use M&A to enter a new regulator networks market. So, would expanding into a new European geography through the acquisition of a regulated network asset be something you would also consider as part of your inorganic growth strategy? Thank you.

So, hi, Fernando. The answer is yes, provided that it meets the criteria that we outlined in slide nine, right? And I think there's also an element of size, right? I mean, you know, getting a small footprint in a small European country with limited growth potential, you know, is something that would make us look in potentially another direction, right? But as a general rule of thumb, if it meets the four criteria that are outlined in page number nine of the presentation, then yes, we'll look at it. And I think we've been clear on point one, bullet one. We're looking at hard currency geographies, Europe, North America, with a bias for electricity, regulated or benefiting from vertical integration. Those are the rules of engagement that we've set ourselves. And that's where we're spending our time, actually.

Many thanks, Stephen. I think this concludes the questions, the online questions. and there are no other questions through the webcast. I think most of them have been addressed and well covered during the conference call. So thank you very much for joining and listening. The Capital Martins team remains available for any follow-ups or any additional concerns you may have in the coming days. And other than that, many thanks and have a good summer, Thank you.