Iberdrola SA

MAD:IBE

[Foreign Language] Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2024 First Quarter Results Presentation.

As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period given by the top executive team that usually is with us: Mr. Ignacio Galan, Executive Chairman; Mr. Armando Martinez, CEO; and finally, Mr. Pepe Sainz, CFO.

Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web. So please ask your question only through our web page, www.iberdrola.com. Finally, we expect that today's event to last no more than 50 minutes. Hoping that this presentation will be useful and informative for all of you.

Now, without further ado, I would like to give the floor to Mr. Ignacio Galan. Thank you very much, again. Please, Mr. Galan?

Thank you, Ignacio. Good morning, everyone, and thank you very much for joining today's conference call. In the first 3 months, 2024, our strong operating performance has led to report net profit of EUR 2,760 million with recurring net profit up 20% compared to the first quarter 2023.

As you can see, reported results in first quarter are affected by extraordinary writings, both in 2024 and 2023. In 2024, we have included the capital gain from the EUR 5,437 million transaction with Mexican infrastructure partners, which has completed in the last days of February with a positive impact of EUR 1.7 billion of EBITDA and EUR 1.2 billion at net profit level.

In the first quarter 2023, we registered the non-recurring recovery of previous year retail deficit in U.K. with a positive impact of EUR 311 million on EBITDA and EUR 238 million of net profit.

Reported EBITDA reached EUR 5,157 million with a 10% increase in recurrent terms, driven by the higher contribution of our businesses. And that was mainly due to the new rate cases in the U.S., the U.K. and Brazil. And then the production and customers with registered better performance, thanks to the record renewable production in Iberia of the last decade and the new capacity mostly offshore wind. We also recorded investment of EUR 2.4 billion in just 3 months, a 36% increase versus previous year.

Network investment grew by 27% to EUR 1.2 billion, driven by new rate cases in the U.S., U.K. and Brazil with an increase of 85% in transmission, which already represent 40% of the total investment in this business.

In Renewables, investments are up 50% to almost EUR 1 billion, driven by offshore wind, which represent close to 40% of the total after 70% increase year-on-year. We have been able to combine this record level of investment with a further increase in financial strength. Thanks to a 14% increase in recurring cash flow reaching EUR 3,145 million, a [ EUR 5,437 ] million proceeds from, as I mentioned, from Mexico transaction collected during this quarter.

All-in-all, FFO to adjusted net debt is already above 25% as CFO, as Pepe, will mention later on.

As you can see, we are delivering in our 2024-2026 strategic plan ahead of schedule in terms of result, investment, cash flow generation, and financial strength.

As mentioned, recurring net profit is up 20% year-on-year. Once we include the positive impact of the Mexico transaction, reported net profit reached EUR 2.7 billion in the last quarter. This was possible thanks to a very strong operating performance across our business and geographies, leading to a 10% increase in recurring EBITDA.

The network business has benefited for new tariff in the U.S., U.K. and Brazil and an increase in regulated asset base, both in distribution and transmission, partially offset by temporary IFRS adjustment. Energy production and customers increased its contribution as well, thanks to 10 years' record renewable production in Iberia, with higher production from manageable technologies.

An additional offshore wind capacity from Saint-Brieuc in France, with all turbines already installed, being gradually commissioned in a process that will be completed in the next 3 months. And the first turbine from Vineyard Wind 1 in the United States already exporting energy as well. Finally, retail performance is better than expected, thanks to our manageable renewable generation in an environment lower prices.

A significant part of our growth was driven by new investments. In the first 3 months of 2024, we have reached a new record of EUR 2.4 billion, up 36% from previous year, with more than 90% allocated to networks and renewables. As anticipated, we presented our planned networks business. It's already our first investment destination after a 27% increase, reaching EUR 1.2 billion in the period. 40% of these -- of network investments were located to transmission with an increase of 85% from 2023, 60% -- to distribution with 6% increase, driven by new tariff frameworks in most of our key geographies.

In countries, 40% of total networks investment were directed to United States, mainly New York due to the increase in transmission and distribution investment included in the new rate case as well as in main both in distribution of our interconnection line with Canada. Brazil represents 29% of the total investment; U.K., 21%; and remaining 10% was invested in Spain, where we continue to have a limit on a lower investment related to GDP growth that we understand is not compatible with the [indiscernible] or new connections, and therefore, we expect it will be removed by the government soon, driven additional economic growth with a very limited impact on tariff. As a result, all these investments, our asset base reached EUR 43 billion, up 9% year-on-year.

In Renewables, investment reached EUR 944 million in the first quarter, 50% up from 2023, driven by increases of 70% in offshore wind, which contributed 40% of the total investment; and an investment in onshore wind was also up by 43%, and storage investment rose by 70%. (sic) [ 75%. ]

By geographies, 36% was allocated in the United States, mainly driven by offshore wind as we keep progressing in the construction of Vineyard Wind 1 in Massachusetts.

34% of the total investment correspond to solar PV, storage and onshore wind in Spain. Followed by 22% allocated to Australia, offshore wind in France and Germany and onshore in Portugal and Italy. Finally, 80% of renewable investments were directed to U.K. morely to East Anglia 3 offshore wind farming construction.

This quarter's results reflect a very strong renewable performance in the Iberian Peninsula, with an increase in production and 19% to reach a 10-year record of 10,600 gigawatt hours. Currently, pricing environment allow us to maximize pumping and storage, driven 18% increase in energy store up to 2,240 gigawatt hours in this quarter. As a result, as today, our results are in record levels of [ 9,500 ] gigawatt hours.

The buildup of new offshore wind capacity is also progressing on schedule, with 1.6 gigawatts already contributing to results, including the first megawatt of 2 of the 3 offshore wind farms that we are already under construction.

Saint-Brieuc in France, 60% of its 500 megawatt are already producing, and the remaining 200 megawatt we are expected in the next 3 months. In Vineyard Wind, in the coast of Massachusetts, 130 megawatt are already supporting energy, and the remaining 370 megawatts are progressing construction.

On top of this, Baltic Eagle in Germany has its first turbines already installed and its 475 megawatts will be fully operational also before the year-end. This means that in 2024, we will install 1,100 megawatts, more than doubling our offshore wind capacity in just 1 year.

Additionally, we have under construction the offshore wind farms of Windanker, also in Germany Baltic Sea, with 315 megawatts and East Anglia 3 in U.K. with 1,400 megawatts of capacity. Both on track to be in full operation by 2026. And we secured route to market.

In the last month, we have also continued to secure additional opportunities in this technology for the coming years. Like the 375-megawatt Happo-Noshiro project recently awarded in Japan doing construction with Iberdrola holds 39% stake. We are currently working with our partners in the supply chains and the route to market for this project, with an expected final investment decision no later than 2026.

We also have 2 projects participating AR6 auction in United Kingdom is East Anglia 2 and East Anglia 1 North, with a combined capacity of 1.8 gigawatts. In the United States, we recently presented bids for the New England multi-state auction with 2 projects, New England 1 and New England 2, totaling almost 1,100 megawatts. We expect the result of this auction before the year-end.

Lastly, we continue securing seabed rights for additional projects for 2030 and beyond, such as ScotWind in U.K., where we have 2 gigawatts, plus a joint venture with Shell, for the loan of another 5 gigawatt of floating offshore wind. Kitty Hawk, with 3.5 gigawatts to the coast of Virginia and North Carolina, United States. As you know, in Australia also, we are expecting a positive result of the auction for Seabed right in Victoria, where we presented our 3 gigawatt Gippsland project.

In the last few months, operating cash flow reached EUR 3,145 million, a 14% increase in recurring terms. And we continue delivering on our asset rotation and partnership plan. As mentioned, we collected EUR 5,437 million from Mexico transaction, and we expect to continue announcing soon additional progress in our co-investment agreement with a Tier 1 partner. All this is driving -- going to increase in our FFO over net debt ratio, which had been improved by 180 basis points to reach 25%.

Will now hand over to CFO, Pepe Sainz, who will present the group financial result in further detail.

Thank you very much, Chairman. Good morning to everybody.

In the first quarter of '24, EBITDA reached EUR 5,857 million versus EUR 4,065 million in Q1 of last year. And net profit, EUR 2,760 million versus EUR 1,485 million last year.

FX evolution has had a minor effect on results. The pound rose against the euro by an average of 3%, the real 4%, while the dollar depreciated 1.1%. There are 2 one-offs impact affecting the evolution, both in the energy production and customer business.

As the Chairman has explained, Q1 '24 has been positively impacted by the sale of Mexico assets cashed in on February 26. The EUR 1.7 billion gross capital gain has been registered at the net operating expenses level with EUR 1.1 billion post-tax impact. And in Q1 '23, was positively affected by a EUR 311 million retail tariff deficit recovery from '22 in the U.K., accounted as higher revenues, negatively affecting the evolution this year.

At net profit, the impact is EUR 238 million. Excluding the Mexico EUR 1.7 billion capital gain, EBITDA was up 2% to EUR 4.14 billion. And net profit grew 7% to EUR 1.6 billion. And excluding also the EUR 311 million of U.K. tariff deficit recovery in Q1 '23, EBITDA was up 10% and net profit grew 28% as the Chairman has presented.

A 33% improvement in procurement costs versus an 18% decrease in revenues has driven a 2% increase in gross margin to EUR 6.8 billion. And excluding the EUR 311 million U.K. retail tariff deficit recovery in Q1 '23, gross margin grew 7%.

As I mentioned at the beginning of my part of the presentation, the EUR 1.7 billion Mexico capital gain positively impacted reported net operating expenses, making them to be EUR 78.5 million positive, as you can see in the slide. Excluding this Mexico capital gain, net operating expenses increased 12% and 8.1%, excluding not only Mexico capital gain, but also mainly the reconciliation impacts in the U.S. due to strong costs that are recognized at the gross margin level also.

Analyzing the results of the different businesses and starting by the networks business, its EBITDA grew 2% to EUR 1,692 million, driven by a higher regulated asset base and tariffs. In Spain, EBITDA fell 6.8% to EUR 404 million, negatively impacted by a EUR 27 million positive regularization of investments recognized in Q1 '23, a higher net operating expenses in this quarter.

In the U.K., EBITDA increased 35.8% to GBP 305 million, with higher contribution in transmission, thanks to higher tariffs and higher asset base and in distribution, thanks to the new framework, ED2.

In Brazil, EBITDA decreased 0.5% to BRL 3,272 million, with higher tariffs and demand, partially offset by lower inflation and lower contribution of transmission due to the deconsolidation of the assets as part of the GIC agreement signed in Q3 of '23.

In the U.S., U.S. GAAP EBITDA increased 8.1% to $578 million, showing the contribution of the new rate cases, mainly in New York. IFRS EBITDA was down to USD 346 million, due to a USD 90 million negative timing effect due to IFRS accounting of higher commodity costs that will recover through 2024 despite higher contribution from the rate cases, especially in New York, as I have commented.

Q1 '24 energy production and customer business EBITDA reached EUR 4.1 billion compared to the EUR 2.4 billion last year, boosted by the already mentioned Mexico capital gain, partially compensated by a higher comparison base due to the EUR 311 million U.K. tariff deficit recovery last year. As you can see in the slide, Q1 '24 has had a better recurring operating performance than last year, 1%, excluding the Mexico capital gain and 16% excluding also the impact of the U.K. tariff deficit.

In Spain, EBITDA was EUR 1,222 million, 2.7% up, driven by higher output, along with lower procurement costs and lower levies. Those positives more than compensate lower prices and a positive effect in gas management in Q1 of last year.

In the U.K., EBITDA fell 11.3% to GBP 514 million, affected by the above-mentioned Q1 '23 positive one-off. Nevertheless, the recurrent evolution of the business with higher contribution in wind onshore and offshore, thanks to better prices and volumes, mostly absorbs the one-off.

In Brazil, EBITDA increased 3.2% to BRL 425 million as the global consolidation of 261 megawatts hydro assets following the swap with Eletrobras last year more than offsets the lower wind output.

In the U.S., EBITDA increased 27% to $211 million, thanks to the positive performance of our flexible generation fleet that improved results despite a 9% lower wind production.

In the rest of the world, EBITDA grew almost 40% to EUR 282 million, with a 29% higher production due to the gradual entry into operation of Saint-Brieuc, offshore wind farm and more onshore capacity installed.

Finally, in Mexico, EBITDA reached USD 2,037 million. Excluding the capital gain, EBITDA reached EUR 176 million, affected by the deconsolidation of the assets sold from February 26. Nevertheless, let me point out that the business from the retained assets evolved positively with better prices and volumes, up 30% to USD 97 million.

EBITDA grew to EUR 4.5 billion compared to EUR 2.7 billion reported in Q1 '23. D&A grew 2%, driven by a higher asset base, partially compensated by 14% lower bad debt provisions mainly in Spain. As you can see in the slide, EBIT, excluding Mexico capital gain, grew 2% and 15%, excluding also U.K. tariff deficit recovery in Q1 '23.

Net financial expenses were up only EUR 14 million to EUR 524 million. Debt-related costs grew EUR 18 million. EUR 23 million increase is due to the EUR 2 billion higher average net debt in the quarter as the EUR 5.4 billion cash proceeds from Mexico transaction were received at the end of February.

This was partially compensated by EUR 13 million reduction due to the lower cost of debt, 10 basis points falling from 5.08% to 4.98% and EUR 8 million of negative FX impact. There is a EUR 4 million increase in non-debt-related results.

Our reported credit metrics improved versus the end of '23, mainly thanks to a EUR 2.9 billion decrease in our adjusted net debt to EUR 44.9 billion compared to December '23 debt of EUR 47.8 billion. Mexico cash proceeds have been partially offset by a record CapEx quarter as the Chairman has commented, dividend payments plus an FX impact.

As a consequence, FFO adjusted net debt rose to 25%, improving to 23.2% at the end of '23. Our adjusted net debt to EBITDA improved to 3.10x versus 3.32x at December of last year. And adjusted leverage ratio was 41.8% versus 44.2% at year-end.

Net profit grew 85% to EUR 2,759.7 million and 7% to EUR 1,595 million, excluding the EUR 1,165 million net Mexico capital gain. Excluding also the EUR 232 million net tariff deficit recovery in the U.K. in Q1 '23, recurrent net profit grew 28%.

Now the Chairman will conclude the presentation. Thank you very much.

Thank you, Pepe. To conclude, we had started 2024 with a record first quarter in the history of the company. I think it's important to mention that one either in recurring terms, either in reported terms, either in tariff as well it record operating performance and investment. This, together with the confirmation of our broad prospects for the rest of the year allow us to improve our 2024 net profit guidance to high single-digit growth, excluding any capital gains from asset rotation.

We continue delivering on targets presented in our strategic plan, with a record investment of EUR 2.4 billion in the first quarter and on the way to reach EUR 12 billion in the full year, also with a very strong operating result and cash flow. And with additional installed capacity, mainly offshore wind, driven by Saint-Brieuc in France, Vineyard Wind in the state and Baltic Eagle in Germany, they will become fully operational by the year-end.

Also, we have 100% of our expected production for 2024 already sold and higher result from manageable renewables, record as well. The increasing result of -- and cash flow from all these activities will drive even stronger financial ratios. This set of results show very clearly the benefit of our model based in our 4 key pillars: vision, anticipation, delivering, and flexibility, driving predictable growth and value for all our stakeholders.

So just to conclude, as you know, we have our Annual General Meeting Bilbao on 17th May, with a great range of options for virtual participation. Let me invite all of you to join us in this event. You have in our website all the information regarding the agenda as well as our proposal on dividend and the rest of the items. Also in the annex of this presentation, you will find all the details of the shareholder remuneration program, Iberdrola Retribución Flexible and its key dates.

Thank you very much. And now we will be more than happy to answer all your questions.

The following financial professionals have asked the question that I will now put to the senior managers present on this event.

Alberto Gandolfi, Goldman Sachs; Fernando Garcia, Royal Bank of Canada; Rob Pulleyn, Morgan Stanley; Jorge Alonso, Bernstein; Gonzalo Sánchez-Bordona, UBS; Manuel Palomo, Exane BNP; Pedro Alves, CaixaBank; Peter Bisztyga, Bank of America; Jose Javier Ruiz, Barclays; Javier Garrido, JPMorgan; Michael Charlton, Santander; Jorge Guimarães, JB Capital Markets; Javier Suarez, Mediobanca; and finally, [ Marquita Quinn ] from Berenberg.

The first question is related to the guidance 2024. Can you please confirm the basis for the new high single-digit growth? Can you confirm the baseline use? And whether Mexico capital gains is included?

So the first thing I would like to clarify that our 2024 guidance is based on 2023 reported net profit, not on recurring net profit. Basically for 2024 guidance, so is in 2023, reporting net profit of EUR 4,103 million. So it excludes any capital gain for an asset rotation and partnership. Does not consider Mexico transaction capital gain of any another resulting [indiscernible] of asset rotations.

So what does that include? Growth drivers. New investment of EUR 12 billion, as I mentioned, in networks with new rate cases in Brazil and United States, transmission investment, U.K. additional revenues for investment under RIIO-ED2.

And in production and customer, the strong renewable production in Iberia, additional capacity that I strongly mentioned of offshore wind, 100% of all energy sold at prices secured, higher reserve for manage resources, let's say, reserves. The consequence is what I mentioned is increase the outlook from 5% to 7% growth in net profit to high single-digit growth.

Another one regarding Mexico capital gain, what is going to be the final use of Mexico capital gains?

So as traditionally related, we will use it to maximize future growth.

Next is regarding, again, to guidance 2024. Given the good Q1 '24 results, can we expect further additional guidance hikes throughout the year as occurred in 2023?

So I insist on that. Given the first quarter result, we have increased our guidance to give you the most updated information as always with us. Of course, if there are any other trends along the year that make us update it again, we will do it. But at this point, we are comfortable with this high single-digit guidance I'm giving to you.

Next is regulation. 1.2% revenue tax in Spain, when should we expect news about the CapEx reduction mechanism in Spain revenue tax?

No recent news, but we expect investment in the energy transition will be become deductible as announced by the government. Nevertheless, you have to know that we have this tax, we are already deductible in our profit because we have already our fiscal resin in the country base.

Next is related to the net debt guidance for 2024. When should we expect net debt for 2024 to be?

Pepe?

Yes. As I mentioned last time, we are thinking about EUR 47 billion net debt, excluding the minorities purchase. If in the end, the minorities of AVANGRID is purchased before the year-end, obviously, we'll have to add that amount to the EUR 47 billion.

Next is related to the net debt, but in Q1. Could you comment on the Q -- net debt evolution?

Pepe?

In the first quarter, as we mentioned, we have had the cash, the EUR 5.4 billion of the Mexico divestment. We have had a record investment quarter, as the Chairman has explained. In addition to that, on treasury returns, we've paid a little bit more. So we've ended up with a CapEx of over EUR 3 billion.

We have also had the impact of the dividend payment in this quarter that it was around EUR 1.4 billion. In addition to that, we have had another EUR 300 million of FX negative evolution and a little bit of working capital and other. Typically, in this first quarter, it's the quarter in which we have more of the bills to collect, okay?

So in that sense, normally, there is a slightly negative impact on the working capital in this first quarter that it is absorbed during the rest of the year. That is what has driven us this EUR 47.8 billion to EUR 44.9 billion. But as I was mentioning, we are maintaining the EUR 47 billion guidance that I gave you in the -- at the -- in the previous results presentation.

Next is related to the AVANGRID results. What do you expect for U.S. grid's at EBITDA level in 2024? Will the recovery in return on equity be reflected in 2024 or gradually through 2026? Is it a cost issue or revenue recognition?

Pepe?

Well as -- we are expecting a strong performance in the EBITDA in grids. Basically, as we were saying, driven by the New York rate case. So I think that this year, we are expecting this strong performance. As I mentioned in the -- in this presentation, there is a negative of almost EUR 100 million impact coming from IFRS accounting due to commodity purchases that still reverse to the year. So basically, we are still looking for a very, very strong performance of our U.S. business, mainly due to networks in '24.

Next is regarding the CCGT in Spain situation. You apparently recently announced the closure of all CCGT plants before 2030. What will be the backup technology for renewables in the future?

So we are not planning to close our combined cycles. I think the first point. This -- because I think in the short term, they provide plant capacity, which is key for the reliability and security of the system. I think even it's going to be more relevant in the current scenario on nuclear closure.

We need already the -- fact there's that, we need to ready mechanism for the economic viability. I think the system operator is now signaling the problem. So I think it's not only about the commission is mentioned that one. The electricity market reform, which has been recently approved by the European Commission, consider this capacity mechanism. And the Spanish government is as well initiating the process to carry out this system, which I think is going to be already in the next few months.

So I think it's -- the fact that we are not closing the combined cycle is absolutely compatible with our targets, given the lower emission linked to lower production. I think we are going to produce much. I think they will secure, but they will not produce a large number of hours. And I think in the mission, they will make we lost the mission with another mechanism.

Next is regarding networks in Spain and the regulatory situation. Can you provide an update on the discussion with the CNMC regarding the update of the allowed WACC expected for 2026? What are your suggestions for the regulator?

Armando?

I think there is now an open consultation from the CNMC. We always said that we need a huge amount of investment in networks. As we explained in the Capital Markets Day, we expect that the rate of return will be something similar. We are seeing other countries where energy transition is taking very seriously the development of networks. In Spain, the need of networks is very, very high. There is a huge opportunity for data centers, and we are very confident that the government will move through this direction and would put networks development as one of the main priorities of the energy transition.

Regarding energy hedge in Spain and U.K., could you please update on hedge volumes for 2025 and 2026?

Armando?

Yes. As Chairman say, 100% of the energy this year is already sold from the period '25-'26 in Spain. 75% is already closed, in a wholesale price in line with the plan that we presented. And the final price for customers would be something around 95 to 105, something around that. In the U.K., during the period '25-'26, we have secured 65% is in line with the market references.

Question 11, demand growth. How much do you expect power demand to grow across your main regions, Spain, U.S., U.K., over the coming 5 years? And what will be the driving -- the drivers?

So I think, I mentioned already in CMD, clearly that electrification is unstoppable. So I finished the electrification, in the current advanced economies, is already growing between 1.5% and 2%. And the developed countries is growing more than 3% per annum. So a share of electricity still, you have to be aware, is represent only 20% to 25% of the total energy consumption worldwide. And I think that the expectation in this share grows by 20% to 30%, 35% by 2030, according with the data of international agency. And I think from 2030, the expectation is that it will be booming because of the more electrification in many, many uses, which are the main drivers.

I think, the transport is already according with the information published today is expected to multiply by 4 by 2030 and by 19 by 2050, electrical transport. In buildings, cooling and heating is more than 50% will be already electricity by 2040. And in industry, the expectation is to increase by 60% by 2040 and continue growing up to 2050.

What are other vectors of this increase in demand? I think digitalization, artificial intelligence, and data centers are key drivers, which are doubling the demand already now by 2026. Those countries like United States with today, the demand for data center is on the rank to 6% to 8%, and the expectation is to double in the next 2, 3 years.

So I think there are certain users today. In heating, we see, today are below 200 degrees centigrade, which is going to be massively using electrification instead of boilers. So I think data centers, transport and industry sectors like food, beverage, tobacco, paper, chemical sectors. So in only these 3 sectors, I think food, paper industry, chemical sectors are consuming 73 terawatt hours, which is roughly close to 30% of the total Spanish demand. So I think a big piece of that one will change drastically the electrification of the country.

Next is related to the power prices in Spain. We have seen that wholesale electricity prices in Spain have been frequently at 0 megawatts hour during the month of April. Which impact do you expect from this phenomenon? What are the short-term solutions to solve it?

Armando?

So at lower prices, due to renewable penetration, I think we were anticipated at the Capital Markets Day in our models when we presented that was very clear that there will be something like that. We maintain our price estimation based on these early periods of low prices. Negative prices response to a very specific situation. We can see that bit lower demand period in the year. Heavy rainfall since October that this increased the reserves in the level of 85% in our case. And also, we have a high wind productible during the year, and also the increase in PV penetration. So this is something like we expected that all these phenomenon is disappearing.

Prices will go to normal. But in any case, we must add that thanks to our hydro pump storage, we are able to capture a huge value of the price volatility from the market.

The next is related to the AVANGRID minorities deal. Have Iberdrola and the affiliated committee began discussion on the terms of the deal? Or are you just waiting for their response after assessing the offered terms also? Do you expect an affiliated committee to consult with shareholders before making its recommendations?

I think the Board has delegated to the AVANGRID Special Committee to already to do whatever necessary for analyze and to nominate advisors, to talk whatever they could consider. After it, this special committee, the negotiation will follow with [ the seller ] depending as well of the special committee. Eventually, we approve, we agree. The merger agreement signed. It will start regulatory approval process.

So I think that we will keep you informed in the next few months. But I think we are making all the process in a very, very transparent manner with special AVANGRID independent Board committee is doing whatever is necessary to give already the proper analysis and to negotiate with Iberdrola, the terms after their analysis is made for the seller and for the adviser, they will nominate.

Next on M&A. Is the company actively scouting for some opportunities to reinvest the cashing from the shale of Mexico? In which sectors and geographies is the company intention to grow? Any update on the pending asset rotations?

I think, when we make already our proposal of asset rotation and partnership in 2022, I think, it is [indiscernible] some were expecting. So I think now our 2025 plan is fully completed, either in asset rotation and either in partnership targets. But we have many additional opportunities in advanced stage, but we would like to be selective.

I think, our focus now is on partnerships, a partnership, we make already value creation, which give us the opportunity to build more projects. Through this partnership, we can share risk in the construction phases and occasions. And I think something which is very important. Our commitment with decarbonization is 100%. And I think that can help accelerate decarbonization with our own resources, with the resources of our partners.

Next is on the current -- on fashion topic of data centers. [indiscernible] argued that you may consider entering into the data center business, which could be the rationale behind such move? And what synergies could you extract from this activity?

So we are in this one. We are already at this moment. A contract signed for supply electricity for more than 70 terawatt hours to our customers in Europe and United States. I think for us it's a very interesting angle to catalyze this new electricity demand. And I think we would like to contribute already using our capabilities to make -- this data center can be developed and can be put in operation.

So what we are making is analyzing how to maximize not only this potential growth demand -- electricity growth demand but as well to maximize the value we can really provide using our capabilities. So saying that, I think it's not new. We are already in this segment. We are in talks with many people, and we will try to help as much as we can all those companies, which are developing these data centers to be beside for providing all -- with our capabilities in electricity, in power, and what, everything we can already give to them to make already to accelerate process for these data centers in the country we have already presence.

And last question received is about supply market in Spain. Can you give color on supply markets in Spain? Higher competition as prices are lower. What do you expect going forward?

So I think the main things we are observing is that we have already moved from customers, from the liberalized market into regulated one. In the same direction -- in the opposite direction, they were moving already the previous year. So I think they are more moving from regulated tariff to liberalize because the conditions were more attractive. Now they are moving to a regulated one. But I think in any case, we are keeping and maintaining our strong position.

Based in what? We have very competitive energy cost. I think, I mentioned very many times, we are not selling -- we are selling depending what is our cost, not what is the market condition. That's why we have most -- our contracts are long-term hedging policies. We are selling -- most of electricity is already sold a long time. I think it's 100% this year, electricity production is sold. Next year is probably 80%, 90% already sold.

And why we can make that one? Because we have the production, which is not depending of the variable cost of the fossil fields. And because we have already -- as Armando was mentioned the storage capacity that we can benefit already in the moment with the market prices, both market prices are very low. We can already store electricity. We beat our record of storing electricity in a quarter, more than 2.5 terawatt hours.

And we have already offering to the customers, not only a tariff, but the range of products, included smart solutions and another thing. So that's why I think, as a whole, our total customer base in Spain has far less volatility than other competitors. We have such not -- there has not such a competitive advantage as we have already as we can offer. So that's why we are already quite satisfied how the things are performing.

Okay. Without further questions, please allow me to give the floor to Mr. Galan to conclude this event.

So thank you very much for taking part of this conference call. I remind you again that the 17th of May, we will hold an AGM, which will be already attended to different digital channels. But as well, we have already present in Bilbao, you are welcome if you would like to be there.

So in any case, related to this quarter result, our Investor Relations team will be, as always, available for any additional information you may require. Thank you very much, and you are invited to be with us on the 17th of May. Thank you.