ENGGY Q2 2025 Earnings Call
Felisa Martin Villan: Good morning, ladies and gentlemen. Welcome to this Enagás earnings call for the first 6 months of 2025. Our earnings were published this morning before the market opened, and the figures are already available on our website, www.enagas.es. Arturo Gonzalez (sic) [ Arturo Gonzalo ], Chief Executive Officer of Enagás, will be leading this call, which should take about 20 minutes, his presentation, after which we will start a Q&A in which we will try and answer your questions in as much detail as possible. Thank you very much for your attention. I'm giving the floor now to Arturo Gonzalo.
Arturo Gonzalo Aizpiri: Good morning, ladies and gentlemen, and thank you very much for your attention. I'd like to welcome you to this earnings presentation for the first semester 2025. And here with me And here with me are our CFO, Luis Romero; our Board Secretary and CLO, Diego Trillo; our Chief Officer for Communications, Institutional and Investor Relations, Felisa Martin; our Head of Investor Relations, César García; and the Head of Management Control and Business Analysis, Natalia Mora-Gil. I will begin my presentation with the main milestones in the implementation of our strategic plan during the semester. And then I will go into further detail behind the headline figures of our financial performance, which is completely in line with our expectations for the year as a whole, and in fact, even better than expected given the capital gains booked in this semester, which I'll describe in detail later. Finally, I'll go over the progress we've achieved in our ESG commitments and our year-end targets, and I'll wrap up with a few conclusions. We are implementing the 2025-2030 strategy update as scheduled. And in these months, we have made some significant progress along 3 main lines of action. Along the first line, supply security for Spain and Europe. During the semester, we have unquestionably demonstrated the crucial role of gas infrastructures in guaranteeing the security of our energy system. The gas system made a decisive contribution to getting Spain back to normal after the electricity outage we had last April 28, guaranteeing power again to all consumers, and in particular, to combined cycle plants, which went from producing approximately 5% of electricity in Spain to 49% during some of the critical hours of the outage for the entire country. This reflects just how strategic gas infrastructures are. In the short and the medium term, they will continue to play an essential role in serving electricity generation peaks and contributing to the energy transition just as the new green molecule infrastructures will. Total demand for natural gas in Spain rose 5.6% in the first 6 months of 2025, including exports increase was 7.6%. And the reasons behind this number are a 41.2% increase in gas demand for electricity generation, a 24.1% increase in total gas exports in the first semester, particularly the 98.2% increase in clean gas exported to France is behind this figure, which again demonstrates that gas infrastructures are critical not just for supply security in Spain, but also for the rest of Europe. The Spanish gas system continues to stand out, thanks to its tremendous flexibility. So far in 2025, we have received LNG and natural gas from 14 different points of origin. Spain's underground storage facilities are currently at about 75% capacity exceeding the required 64% minimum established by the European Commission for July 2025. Also, our gas system has continued to make an outstanding contribution to the decarbonization of key sectors in our economy such as maritime shipping. In this quarter, GNL earmarked for bunkering, grew 30%. Second line of action is the control of our operating and financial expenses through our efficiency plan. We've continued to hold core operating expenses in check with no increase versus the same period of last year, meeting our target not to let the annual compound growth rise above 1.5% from 2024 to 2026. Our financial income has also improved up to 46% in the year with a reduction in the financial cost of gross debt of 2.2%. And the third area of our strategic plan, green hydrogen is making tremendous strides both in Europe and in Spain. The European Union has taken highly significant steps in this direction. A very relevant milestone took place last week. The European Commission presented its draft community budget for 2028-2034 with a fivefold increase in investments for cross-border power infrastructures such as the hydrogen corridors and networks. The new Multiannual Financial Framework increases the funding from EUR 6 billion to nearly EUR 30 billion for the CEF for the next budget period with the goal, as pointed out by the President of the European Commission, Mrs. von der Leyen, reinforcing energy independence and accelerating the transition to clean energy in Europe. Moreover, last July 8th, the committee -- the commission adopted the delegated act, defining the official methodology for calculating greenhouse gas emissions from hydrogen and low-carbon gases, which will come into force once it goes through the consultation process through Parliament and Council and once it is published. With these actions, Europe will have a comprehensive regulatory framework for hydrogen, offering certainty and once again demonstrating its commitment with the creation of a European market for this kind of vector. In this sense, the European Commission has also launched its hydrogen mechanism to connect supply and demand for hydrogen and its derivatives and to support the development of the infrastructure. All EU member states are taking significant steps, for instance, the German government has just published for public consultation its hydrogen acceleration draft bill, deeming hydrogen projects to be of overriding public interest and underlying its contribution to national security. And last week, the German energy regulator, BNetzA, announced a fixed tariff for the use of the country's core hydrogen network. Green hydrogen also got very solid financial support from Europe and its member states. Between January and June this year, the European Commission has allocated EUR 1.24 billion for funding hydrogen development. Of this figure, EUR 992 million went to the second round of the European Hydrogen Bank auction, which has provided a very precise snapshot of the level of maturity of renewable hydrogen in Europe. As in the first round, the message of the second round is very clear: Spain is the most competitive country in Europe for green hydrogen production with the lowest average production price, EUR 5.5 per kilogram. And it's also the country where the largest number of projects presented, 36 out of 61 submissions and awarded 8 out of 15; also the one with the greatest capacity for electrolysis and production; and a country that has received the most funding. The auction has also made another message clear: in order to connect hydrogen projects, infrastructures are essential. And 64% of the projects submitted for the second auction of the European Hydrogen Bank require pipeline infrastructure with an average length of 384 kilometers per project. Equally relevant is the fact that 38% of the projects have a total or partial direct renewable generation connection to the electrolyzers without going through the grid. And Spain is moving in the same direction as the European Union and its consolidating its leadership in the development of renewable hydrogen in Europe. The Spanish government has approved an additional EUR 377 million, another 3 hydrogen projects that were submitted to the auction, but which were not shortlisted by the European Hydrogen Bank since it had exhausted its budget. Moreover, in the regulatory context, the Ministry for Environmental Transition and Demographic Challenge (sic) [ Ministry for the Ecological Transition and the Demographic Challenge ] has initiated the partial transposition of the third Renewable Energy Directive for transport, and last July 3, started public consultations for its draft Royal Decree for fostering the development of renewable fuels with targets to meet the 16.5% reduction in emissions established by the National Energy Plan for the transportation sector in 2030 and goals for the consumption of Renewable Fuels of Non-Biological Origin or RFNBOs, fundamentally hydrogen derivatives. Spain is becoming increasingly ambitious, increasing minimum 2030 demand for nonbiological fuels for transportation from the EU threshold of 1% to 2.5%. Additionally, it has defined a 1.5% target for the intermediate use of these fuels, renewable nonbiological fuels in refineries. We estimate that this would be equivalent to a minimum annual consumption of approximately -- or a minimum regulatory demand of approximately 180,000 tonnes of hydrogen -- green hydrogen in 2030. This amount could more than double to over 420,000 tonnes of hydrogen if RFNBOs over and above the 12.5% threshold established for the transport sector were also to cover the 5.5% advanced biofuel and biogas quota. Enagás' strategy fits neatly into that of both Europe and Spain. We are moving forward in the rollout of our European Projects of Common Interest, PCIs, for hydrogen infrastructure. At great speed, we have already signed the grant agreements with the CINEA in order to receive EUR 75.8 million for the studies and engineering phase of the backbone network and associated storage and the BarMar and CelZa interconnections for the H2med corridor. As for the Spanish backbone hydrogen network, we've continued to take steps towards a final investment decision by 2027. We're designing a conceptual public participation plan for a network of 2,600 kilometers in length, following its presentation in April at the National Hydrogen Centre in Puertollano. The plan has the backing of the Ministry for Environmental Transition (sic) [ Ministry for the Ecological Transition ] as well as from regional governments. I have been in contact with the presidents of all 13 autonomous communities in Spain, which will be crossed by the network to report on the deployment of the plan to them. And we've already explained the project in over 100 municipalities in Castile-–La Mancha, Extremadura, Andalusia and . We have also awarded the engineering, both basic and detailed engineering, for the pipelines as well as for the 3 compression stations. And we have started work on the basic engineering. As for the North-1 PCI for the development of underground hydrogen storage facilities in Cantabria, during the semester we've signed a partnership agreement with our chemical group partner, Solvay, who operate the mining concession where the infrastructure will be located. And as far as H2med, it continues to grow as the most mature hydrogen corridor in Europe. Perhaps the most relevant milestone in the semester was June 25 when we set up the SPV for the BarMar interconnection, which provides a clear cut business structure for the project. The shareholding of this joint venture will be evenly divided between Spain and France. Enagás will hold 50% and the French operators, Natran and Terega, will hold 33.3% and 16.7%, respectively. The new company's CEO will be Enagás' current executive, Francisco de la Flor. European Commission's support for the H2med is decisive. In the last quarter, the Executive Vice President for the Clean, Just and Competitive Transition, Teresa Ribera, has visited the site of the BarMar plant and its compression station in Barcelona and has also hosted the 5 development partners for H2med Brussels to hear about the latest developments in the project. On the technical side, we've already awarded the feasibility study for the corridor landing in Barcelona and the set of geophysical studies for BarMar. We've also launched the tender for BarMar's pre-FEED engineering and basic engineering pipelines and the 2 compression stations on the interconnections. These infrastructures, and specifically, the Spanish core network, will be essential to connect the hydrogen production projects with the demand centers. The Spanish government through its Recovery, Transformation and Resilience Plan and it's agenda has already awarded EUR 3.15 billion in grants to over 100 renewable hydrogen production projects with a total of about 4 gigawatts. And on top of that, the European Hydrogen Bank has granted an additional EUR 50 million to Spanish projects for hydrogen production. All in all, these projects add up to an installed electrolysis capacity of approximately 4.4 gigawatts. In summary, the progress we're making in Enagás fits neatly with the European Union's strategic vision, promoting renewable hydrogen as a pillar for 3 of its key priorities: strategic autonomy, competitiveness and decarbonization. For decarbonization, the drive to boost green hydrogen stems from the belief that urgent action is required to tackle climate change as shown by data and scientific evidence. 2024 was the first year in which global warming rose above the 1.5 degrees above pre-industrial levels that the Paris Accord set for 2050. And extreme climate events are becoming increasingly frequent. In just 5 years, we will have used the carbon allowances budgeted for 2050. If we continue at this rate, the European Commission has put out clear signals that its green agenda does not just remain as it is, but has actually upped the ante this month. It raised the greenhouse gas emission targets from a 90% reduction -- to a 90% reduction by 2040. So decarbonization cannot be delayed. Before going through our financial performance, I'd like to briefly refer to 2 other specially relevant events that have taken place this semester. First is regulation. The CNMC has published on July 4, it's paper on the methodology for calculating the financial remuneration on electricity transmission and distribution and natural gas regasification, transmission and distribution methodology for public consultation. The tariffs resulting from using this methodology for the gas system of approximately 6.4% are very close, but do not reach the minimum threshold that Enagás used for its financial projections from 2027 onwards. The regulator's proposal incorporates elements that are clearly positive. Nevertheless, Enagás will be presenting its comments and feedback before the established deadline of August 4, underlining the fact that the methodology to be applied to existing assets must be the same for gas and electricity. And no correction factor is justified for the cost of debt since both kinds of assets have to be refinanced in the same capital markets with similar prices. After they review all the feedback, it is expected that the CNMC will publish the final methodology in the fourth quarter of the year. As for the specific CNMC public consultation on the guidelines for the natural gas regulatory framework for 2027-2032, they're also very much in line with Enagas' regulatory vision in its 2025-2030 Strategic Update. The CNMC has emphasized that natural gas will continue to play an essential role in supply security, and the remuneration methodology must be adopted to promote the penetration of renewable gases. And that the regulatory framework must provide incentives for gas assets and established sustainability and efficiency requirements. In this sense, it's important to point out that Enagás is the most efficient TSO in Europe according to the Council of Europe's energy regulators. And on this basis for gas infrastructure to continue to ensure security of energy supply, it is vital that future regulation considers not just the financial remuneration rate I've just mentioned, but also other components such as cost updates and incentives for supply continuity and the sustainability of infrastructures. And this should lead to a regulatory framework that will guarantee a fair return after taxes of between 6.5% and 7%, in line with our other European operators, which will enable us to continue to make an essential contribution to supply security and decarbonization. And the second topic I'd like to refer to is the arbitration on the Gasoducto Sur Peruano, GSP. Last May 23, the CIADI once again found in favor of Enagás rectifying the amount awarded. The total amount, which Peru will have to pay Enagás, is $302 million. Once the rectification appeal is resolved, the figure has been updated using prudent fair value criteria on the credit rights generating net capital gains of EUR 41.2 million, which is the figure we've included in these financial statements. Subsequently, on June 2, the CIADI lodged the request for annulment of the award filed by the Republic of Peru, which meant it was automatically suspended on a provisional basis. And last week, the CIADI Secretary General proposed the ad hoc committee members that will rule on this matter, which is an important step towards the resolution of this case. For the moment we were notified of the award until the provisional stay on its execution, we've optimized our cash and bank balances in Peru, and we currently hold deposits in financial institutions in Peru for a total of $72 million, which exceeds the quantity of the collateral assigned the Peruvian authorities in compliance with the provisions of Law 30737 and its regulations. Likewise, we're still waiting for the CIADI to rule on the second arbitration case regarding Transportadora de Gas del Perú or TGP. Let me now review the most relevant figures in our financial performance for the first semester of the year. Our EBITDA was EUR 329.3 million, on track with our year-end target. After tax profit, June 30, 2025, was EUR 176 million. This includes the capital gains from the rectification of the GSP award in Peru and the sale of our stake in the Soto la Marina station in Mexico. Recurring profit without one-offs was EUR 129.8 million. Apart from these 2 transactions, there are 4 factors driving the performance we're reporting for the first half of the year: the impact of the regulatory framework; the effectiveness of our efficiency plan, which has enabled us to keep our core operating expenses under control in line with the targets of our strategic plan, better financial returns connected to the significant reduction in the company's debt down to EUR 2.29 billion. Our fixed rate debt now represents over 80% of the total. The rating agencies, Standard & Poor's and Fitch, have ratified Enagás as BBB+ rating with a stable outlook. We have an FFO-to-net debt ratio of 28.3%. And our liquidity position is extraordinarily comfortable with EUR 2.73 billion. And fourthly, our subsidiaries have contributed EUR 80.1 million to EBITDA, which reflects their excellent performance. Keep in mind that in 2024 we sold our stake in Tallgrass Energy and in the Soto la Marina station. TAP continues to be vital for supply security in Europe. And since it started operations, it has transported over 45 bcm of natural gas to the continent. The company continues to work on the 1.2 bcm expansion scheduled for January 2026. Together with our consortium partners, Hanseatic Energy Hub, we have continued construction of the 2 LNG storage tanks of 240,000 cubic meters each in the Stade plant in Germany, tanks, which will be set up for renewable ammonia reinforcing the flexibility and sustainability of that terminal. DESFA has received an award of EUR 5.4 million in CEF funds for the technical environmental studies for the PCI H2DRIA for the Greek section of the South-East European Hydrogen Corridor. Meanwhile, Enagás Renovable's projects with Repsol, Moeve and CIP have received over 50% of the grounds awarded under the latest hydrogen valleys program of the Ministry for Environmental Transition and Demographic Challenge (sic) [ Ministry for the Ecological Transition and the Demographic Challenge ] of around EUR 650 million. And finally, in the field of sustainable mobility, Scale Green Energy has signed a grant agreement with the CINEA to develop 6 hydrogen refueling stations within the ECOhynet project. In this semester, we've also continued to meet our ESG commitments in all 3 lines: environmental, social and corporate governance. And thanks to this, as you can see in this presentation, we have maintained our leadership positions in the key sustainability indexes globally. And just to mention some of recent examples, we've been ranked on the A List in the CDP Supplier Engagement Leader for ongoing commitment with sustainability and strategic focus, which we apply to involve our suppliers in the fight against climate change. Likewise, Enagás has been appointed the best company in the world in gender equality by Equileap. About complying with our objectives for 2025, with the results we bring to you today we meet the expectations as we announced at the beginning of the year and if we -- particularly, if we consider nonrecurring deals. I will remind you that this presentation involves a profit after tax of EUR 265 million, an EBITDA of EUR 670 million a year and net debt of approximately EUR 2.4 billion. And maintaining our funds from operations-to-net debt ratio above 15% remains compatible with our BBB+ credit ratings. We have a sound balance sheet, which, along with prudent regulatory assumptions is -- or can be matched with our priority to provide attractive, sustainable returns to our shareholders and maintaining our dividend payout policy of EUR 1 per share beyond 2026. So I will wrap this up with 6 conclusions. Our half year performance shows a higher degree of success in rolling out the 2025-2030 Strategy Update as presented in February. And Enagás is clearly well positioned for the future with a sound balance sheet compatible with a sustainable dividend policy. Enagás infrastructures play a critical role in guaranteeing the security of the power system and to enable Spain and Europe to transition to more sustainable energy. As published by the CNMC, the 2027-2032 regulatory framework needs to establish a fair return on investment to motivate long-term sustainability. Decarbonization requires renewable electrons and also renewable molecules. Europe and Spain are moving fast towards a full take-up of green hydrogen with sound institutional financial and regulatory support. Decarbonization must be competitive. And on this matter, Spain has a lot to say. No other country in Europe has the same level of mature market or such lively competition for producing green hydrogen. Hydrogen infrastructures are vital to take advantage of this potential, and we are rolling out our investment plan as announced in the Strategy Update with significant progress, both in the core Spanish hydrogen network and in the European H2med corridor. And last but not least, Europe has reaffirmed its commitment to decarbonization, disproving rumors of a hypothetical slowdown in the fight against climate change. This is completely in line with Enagas' strategy. Scientific evidence clearly shows that we cannot afford to bring down our level of ambition. Decarbonization is urgent. And at the same time, it is a duty and an opportunity for Europe, for Spain and for Enagás. Thank you very much. Now if you wish, we will be glad to take your questions.
Felisa Martin Villan: We're starting the Q&A period.
Operator: [Operator Instructions] Our first question comes from Javier Suarez from Mediobanca.
Javier Suarez Hernandez: I have 2 or 3 questions. The first one is about the regulatory bill, the bill for regulation published early this year by the CNMC. And I would like to understand the rationale Enagás will provide to enhance remuneration. In your presentation, you state that the remuneration calculation for the gas network would be approximately 6.4% and you consider that this payout should rise to 6.5% or 7%. So what factors should be improved according to you and the regulation to shift that regulation a little bit higher? Also, I understand that when you talk about this regulation, you're talking about existing assets, but not investment proposed to create a next [ NovoHydrogen ] network. So my second question is, what should be the remuneration spread or margin for those assets connected to hydrogen? Well, that was the first question. The second one is about adjustments to GSP compensation. I understand that in calculating the net present value, you also adjusted the discount rate and the period during which you consider you will get that GSP compensation. Could you provide further details to understand the way you calculated these figures and to understand how much the reception of that money could take? And the third one is about the Spanish Hydrogen Bank. Operations are expected to start in early 2030. So could the CEO please give us an update on that starting point because it feels a tiny bit too ambitious today. So how can you give us reassurance that this schedule could be maintained or delayed beyond 2030?
Arturo Gonzalo Aizpiri: Well, thank you, Javier, for that question. First of all, about the proposed rate of financial remuneration published by the CNMC, their proposal already includes a specific value for the electric industry, which is 6.44%. And although they offered a detailed methodology for gas, they do not provide the final data for the gas system vis-a-vis the TRC. So we applied the same methodology and we get 6.4% slightly below the remuneration of the power industry and slightly below the minimum we consider necessary of 6.5% as we show in our forecast. The key element for us, Javier, and the TRF methodology published by the CNMC, we read about reducting ratio applying on the cost of debt in the gas system for assets considered BAU, business as usual. This reduction is about 2.5% of the cost of debt annually and this reducing coefficient is increased with the rationale that the gas system needs to develop lower CapEx, lower refinancing needs, and therefore, lower cost of refunding. We believe that this does not necessarily match the truth. The existing assets of the gas and power system were financed in the same capital market and we'll have to continue to refinance in the same market. Lower refinancing needs are -- do not represent a lower cost of debt, not by any stretch. So we believe it's a sound rationale to say that such reduction ratio or coefficient should not exist as it introduces an unjustified difference between the cost of debt in the electricity system and in the gas system for existing assets -- for present assets. For newly built assets in the future, upon deploying renewable gas systems, we will have to deploy the same incentives as for deploying the electric network in the future. And this is a part of all the forecasts made by the CNMC. For future natural gas assets, an incentive will be required. How much? Well, we believe that those assets will require a remuneration rate ranging between 7.5% and 8%. We need to think that other remuneration elements in the gas system allowing an increase in total post-tax profit to 6.5% or 7% will not be present in new renewable gases assets, particularly green hydrogen. So we will need a TRF with a delta that will place us between 7.5% and 8%. As for GSP and the adjustments we introduced in our plan. Obviously, we have been very cautious and prudent. We do realize that there are new court initiatives like the appeal for annulment admitted to court by the CIADI Secretariat as established in the regulation. We believe that this might lead to a delay of up to 1 year. That means late 2030 for the collection of the right of credit established or ruled by the arbitration court. That leads us to a prudent value of the recoverable amount of approximately $60 million after taxes, which converted to euros would be EUR 41.2 million. As for the backbone network, we maintain our intention and our schedule for the backbone network to be commissioned in 2030, and we're doing -- we're taking every step to meet that deadline. We're conducting all the studies, engineering, consultations. We are counting on the involvement of the Spanish government and the local administrations. We are working on the planning for the entire procurement process for the backbone network. We're launching RSEIs to all suppliers. We are certifying vendors and suppliers. And we're doing everything we can for the plant to be commissioned in time. It is certainly a significant challenge, I admit it, but we continue to maintain our deadline because we are convinced we can meet our promise to commission in 2030. Do we witness delays in Europe? I would say, yes, but those are very limited. The European directive states that the regulated hydrogen system in Europe should be enforced by 2033. And we can see that member states are setting up deadlines for their hydrogen infrastructures in a range that goes between 2030 and 2032. So maybe not for the backbone, but for other elements of the European structure, there might be a slight delay of, say, 2 to 3 years considering the actual deadline established by the directive in view of the projects and initiatives launched and commitments acquired by different member states. I would highlight Germany, for instance. Germany is bound to be the heart of the European hydrogen network not only because of geographic reasons, but also because most of the consumption is located in that country. As I said during my presentation, Germany already has a full legal framework for hydrogen. Even tariffs have been approved. And we know that the hydrogen network in Germany will be launched this year and will be completed by 2030. So Spanish backbone and European infrastructures might take until 2032. But in any case, compatible with the directive deadline of 2033. Thank you, Javier.
Operator: The next question comes from Javier Garrido from JPMorgan.
Javier Fernandez Garrido: My first question is about demand for hydrogen. You have explained in detail the development coming ahead in law and regulation, and backbone networks seem to be moving ahead. But can you tell us about the expected evolution of hydrogen demand and the apparent lack of interest in signing new contracts? Is it a concern for you to see that the future contract hydrogen market is not taking off? Are you at all worried about that? And the second question is about Spain. When do you expect those 4.4 gigawatts of electrolyzing capability receiving public funding in Spain to be ready? And third, pretty much related to the second. What do you think the total demand will be for green hydrogen in 2030 in Spain, particularly after the progress brought by the transposition of the net 3 (sic) [ RED III ] directive in Spain?
Arturo Gonzalo Aizpiri: Thank you, Javier. About the forecast for green hydrogen demand in Europe, allow me to introduce a nuance here. I wouldn't call it a lack of interest in contracts. I would say that large hydrogen consumers are trying to get maximum visibility possible on the regulation framework and the legal framework. And this requires the transposition of the RED III directive as it will be the first big driver to create regulatory demand in Europe, and we're just beginning to see how the transposition takes place. I would say that even exceeding deadlines because RED III directive should have been implemented already or transposed. But these things take time and all member states are showing some degree of delay. As I have said in more than one occasion, the use of green hydrogen in Spain and industry is approximately [ 650 tonnes ]. The PNIEC, the national plan establishing a target of up to 74% of the present demand to be turned to green hydrogen rather than gray, plus our new obligations in the transportation industry that go beyond the hydrogen being used for land transportation fuels. We have seen that just by transposing the directive for transportation, the demand stands between 180 and 200 tonnes of mandatory demand to continue to maintain the levels of transportation in Spain. And we're still yet to transpose the directive on the industry side where it will probably be more complex as it pertains to different ministries. Plus, there are other drivers already on the way like the ReFuelEU Aviation this year -- or as of this year [ CrNbO ] is supposed to be included in air fuel and the FuelEU Maritime doing the same thing for sea transportation. So the numbers we get while studying market data and our call for interest, we may have a demand of approximately 1 million tonnes of green hydrogen around 2030. So I wouldn't say demand is not taking off. I would say that offtakers are waiting for maximum visibility. And also, Javier, they want visibility on the infrastructure because in the absence of infrastructure, there can be no market. Without infrastructure, many contracts cannot stand. One thing I find very interesting is the contract signed by TotalEnergies with RWE to provide 45,000 tonnes of hydrogen per year produced by RWE and carried along 600 kilometers of backbone network to supply the Leuna refinery in Germany for Total. So there is no contract without backbone network. There's no hydrogen market without a backbone network. And big offtakers will not be able to meet the European demand to integrate green hydrogen into their projects. So this element is also a headwind. The higher the visibility on infrastructure timing, the faster this demand will, as you say, take off, which requires regulatory and infrastructure availability visibility. About the 4.4 kilowatts, Javier, I do not have the details with me. But considering the deadlines established by the regulation of the European Hydrogen Bank for the commissioning of projects, after signing the grant agreements, my estimate is that those 4.4 gigawatts should be commissioned approximately in 2030. I believe this was a rounded up answer on total hydrogen demand by 2030 and the transposition of the directive. Beyond my answer, I would like to send out an optimistic message about the development of hydrogen. We are immersed in a project that has no turning back. It is gaining momentum. Member states make it clear with actions. Over EUR 3 million have been granted to hydrogen production by the Spanish administration, and that is only during the first half of the year. Over EUR 1 billion granted by the EU and the same situation is repeated in other European countries. So hydrogen is here, it is happening. And well, offtakers need to have greater visibility, which is becoming more and more specific in recent months.
Operator: The next question comes from Fernando Lafuente from Alantra.
Fernando Lafuente Sesena: My question is about investments in the backbone network. Is there any sort of update on your estimates? Are your estimates the same as they were 6 months ago? And in that context and those small delays you were talking about, you made a comment on the sustainability of euros and the dividend beyond 2026. So what are your numbers on -- or your estimates for investments in '27, '28? And how sustainable it would be to confirm the sustainability of euros -- of the euro beyond 2026?
Arturo Gonzalo Aizpiri: Fernando, thank you for your question. Both on the side of investments on hydrogen projects and on dividend payout beyond 2026, we do stand in the same position we stood when we provided the Strategy Update in February. So on investment on hydrogen projects. In gross numbers, Enagás is EUR 4.4 billion. Well, discounting public funding, which provides a net investment of EUR 3.14 billion. We do not have any new cost estimates. The data we get as in basic and detailed engineering move ahead do confirm these forecast numbers. We are moving ahead on basic and detailed engineering for the entire line structure, and also in basic -- extended basic engineering for compression stations we're also moving ahead. The detailed engineering for these stations will have to wait until the compressors are selected when the time comes. But all the present data confirm our initial estimate. So as engineering moves ahead and the final maps are traced, perhaps we can make a more accurate estimate. All other financial magnitude for the company stay or remain in line with our numbers for February, which comes to reinforce Enagás' commitment to the sustainability of our payout of EUR 1 per share beyond 2026. So these first element we hear from the new regulation period tend to confirm our commitment and our forecast. I will still ask Luis, nonetheless, to remind you how our 40% or 45% payout of [ FCO ] the is maintained considering the updated forecasts we have. Thank you, Fernando.
Luis Romero Urrestarazu: Yes. I would say the first thing we need to make clear is that in the past 18 months, Enagás has made a significant effort to reinforce its balance sheet. If we compare this to the strategy plan we communicated in 2022, the company will be closing 2026 with a net debt EUR 2 billion under expectations, meaning that the new regulation period, '27 to '32, will have a new net provision of approximately 20% to 21%. That is nearly 600 basis points above the requirements of rating agencies, which gives us a huge extra leverage capability. And beyond that, I would say that the expected flow generation for the period '27 to '32 under the assumptions mentioned by Arturo will yield fund-fund operation that will be stable around EUR 340 million, to which we should add full visibility flows in connection with international flows. That would lead us to EUR 170 million to EUR 180 million. And on top of that, we would have an average fund-fund of approximately EUR 60 million. In total, that would be EUR 580 million fund-fund to tackle the hydrogen CapEx of approximately EUR 3.1 billion for the same period and also tackle the EUR 1 per share dividend, which is approximately EUR 260 million. That's a payout of 40% to 45%. And I would say that this fund is fully visible with full support of a prudent forecast following the guidelines established by the ministry and the regulator for the new framework.
Operator: The next question is from Ignacio Doménech from JB Capital. Ignacio Doménech: And the first question is about the other components in the remuneration, which should be published by the end of July. I'd like to hear your views on the remuneration forward progress, which would be particularly relevant for Enagás, whether your view has changed there. And as for the regulatory review, I'd also like to hear your opinions on if this review is not favorable, would you consider revising your investment objectives from '27 onwards? And my next question is about GSP and so on. How much focus have you made in your talks with the Peruvian government after the formal ruling to suspend the award because of the appeal from the Peruvian government. And as for dividend repatriation from GST, I was wondering whether you are now in a better position to rotate that asset? Are you in talks with potential investors to divest?
Arturo Gonzalo Aizpiri: Thank you very much for those questions, Ignacio. As for the other components of the remuneration for the gas system for the period '27-'32, I can tell you what's in the regulatory time line and the letters from the CNMC for this year. So the plan by the CNMC is to have in October a publication for consultation of the draft letters for the remuneration components for regasification, transport and storage infrastructures for the feed-in tariffs for the next period. And so their draft, their proposal will be published for consultation in October. So we'll see whether that actually happens. It's really important, of course, for us to know that as soon as possible. But here, I need to point out that I'm referring to the regulatory proposal for gas, not for hydrogen yet. Why? Because the CNMC doesn't have those responsibilities formally under the law for hydrogen. Those responsibilities under the law are assigned to the future CNE and the project for the creation of the CNE, which is currently going through Parliament. And that's why the CNMC hasn't yet announced the time line for hydrogen regulation. It's only included those elements that are connected with hydrogen, but also with the rest of the gas system. For example, the regulations on connections and access just like they have for biomethane. So we're waiting for the law to assign the hydrogen regulation responsibilities either to the CNE if it's established in the next months or to the CNMC. But those responsibilities haven't yet been legally assigned. As for work in progress, that's a remuneration and regulatory concept, which is key for hydrogen because there, of course, we're speaking about a new asset base and greenfield investments. And in order to be able to finance those before they are commissioned, we need to have that work in progress consideration, which is a key element for hydrogen, but not for the rest of the gas system. We've already done some prudent regulatory estimations. And I have to say, Ignacio, that events have proven us right for the most part and I hope they will do so completely for the TRF after the public consultation, but also in the preliminary consultations on the new remuneration period for the gas system. The approach for the challenges faced by the gas system, which the CNMC has presented and the questions raised and the challenges that they've identified and the aspects to be taken into account, I would say, as we've shared in the presentation with some actual quotes from that prior consultation from the CNMC are very much in line with what we've been proposing and demanding prudently from Enagás. And so I think -- we think that it's a very good reference for our own financial forecasts and our Strategic Update. So we don't really see the need to revise these forecasts or these planned investments. As for GSP and TGP, we are, of course, always willing to talk and negotiate with the Peruvian government and we do so regularly and repeatedly. So far, the Peruvian government has preferred to continue to follow the arbitration route. And particularly this appeal, which I have to remind you that the decision of the CIADI on the effect that this appeal has on the award in the sense of a temporary suspension is something we believe will be resolved pretty quickly. As I said, CIADI notified us of the members of the ad hoc committee, which will be deciding on the appeal. And the first task of this ad hoc committee will be to rule on the suspension of the award. We believe that pretty quickly in the next few months, the award will be resumed and we will, therefore, act accordingly. Whether this puts us in a better position to rotate the TGP asset, I've always said that our priority in Peru is to complete or conclude the litigation with the Peruvian government, but at the same time to make it clear that TGP is not a strategic asset for Enagás long term. But in any case, for this point we cannot proceed until we resolve our litigation with the Peruvian government as we have done through the different arbitration procedures, which have ruled in our favor and have even improved on the award in the May decision with $302 million in our credit rights. So that's our position. When the time comes, of course, we will think about rotating that asset because it's true that it's not a long-term strategic asset for us. Thank you, Ignacio.
Felisa Martin Villan: Thank you very much, Ignacio. Thank you. There are no more questions in Spanish. So let's now switch to the English questions.
Operator: We'll now take any questions from the English side. [Operator Instructions] No questions on the English side, so I will hand back to management.
Felisa Martin Villan: Okay. We've received 2 questions online. The first one is from Arthur Sitbon from Morgan Stanley.
Arthur Sitbon: The remuneration rate for networks to improve from the initial proposal to the final decision by the end of the year. The second question is have you already had early discussions on the evolution of regulatory parameters for gas more broadly, in particular for the RCS?
Arturo Gonzalo Aizpiri: Thank you for your questions, Arthur. Regarding the remuneration rate, we have set a 6.5% value in our financial projections, and this is the minimum rate we are aiming at. We think this is very reasonable. It should go above 6.5%. We think that it makes a lot of sense to bring that value nearer 7% than 6.5%. But being prudent and conservative, we've set a 6.5% value for the remuneration rate for the gas system, and that's the minimum value we are aiming at. Above that, I would be speculating and I'd like to be as clear and as prudent as possible. Regarding the rest of the remuneration elements for the gas system, we maintain an open discussion with the CNMC, and I think we are very much aligned in how we see the next remuneration period. And Arthur, let me suggest to go back to this preliminary public consultation text published by the CNMC for the next gas system remuneration period. I think it's very clear the CNMC when sets the importance of ensuring the sustainability and the security of supply of the gas system to back up the electricity system, to state clearly that adequate remuneration is key for the gas system continuing to support the energy transition. So really, Arthur, I think that, that public consultation initial text shows very clearly that our assumptions are, to a large degree, shared by the CNMC, and in particular, the need of instruments to ensure that the gas system continues providing backup and support to the electricity system. I think -- I don't know if this will be the RCS with the same name or a similar instrument to ensure this critical role of the gas system to support the electricity system as we saw last April 28. Thank you.
Felisa Martin Villan: There aren't any additional questions unless someone has come up with one in either English or Spanish this last minute. Well, it seems there are no further questions. So thank you very much, everyone, for following this call. We are, as always, at your disposal in the Investor Relations department if you have any additional comments or questions on our call. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]