Ignacio Arambarri - IR Ignacio Galán - Chairman & CEO José Armada - Chief Financial & Resources Officer

Good afternoon, ladies and gentleman. First of all, we would like to offer a warm welcome to all of you who have joined us today. We are delighted you are able to be with us for the presentation of our 2018 nine months results. The presentation will follow our traditional format. Firstly, we will begin with an overview of the results and the main developments during the period given by the top management that usually we have with us: Our Chairman and CEO, Mr. Ignacio Galan; Mr. Francisco Martínez Córcoles, Business CEO; and finally, the CFO, Mr. Pepe Sainz. Afterwards, we will move on to the Q&A session. We'd also like to point out 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. We expect that the event will last no more than 60 minutes. Hoping that you find this presentation both useful and informative. Now without further ado, I will hand over to our Chairman and CEO, Mr. Ignacio Galán. Thank you very much again. Please, Mr. Galán. Ignacio Galán: Good morning, everyone, and thank you very much for your participation in today's conference call. In the first nine months of the year, Iberdrola's operating net profit grew 38% to €2.051 million, thanks to the normalization of operating conditions, the positive impact of the reinvestment and our continued improvement in efficiency. EBITDA growth accelerated in the third quarter to reach €6.7 billion, up to 22.5% versus 2017 and about 70% growth over the first half. We have continued delivering on our 2018-2022 Plan, as total CapEx in the period reached €3.6 billion, and we have taken measured steps in our asset rotation plan with divestment worth of €1.2 billion, most of them in the last week. Operational efficiency has also continued improving substantially in most businesses and countries. All this has allowed us to reach at operating net profit of €2,091 million, almost free of extraordinary impact in contrast to the €759 million of 2017. The positive evaluation of operating results was driven by the acceleration of growth in all businesses. In Networks, EBITDA grew almost 18% due to the annual tariff increase in Connecticut and NEO, resulting from our most general rate plans and the positive performance of Neoenergia in Brazil, which is fully consolidated since last year. A 5.85% annual tariff adjustment for Electro has been effective from September on top of the tariff reviews made for our distribution companies in Bahía, Grande do Norte earlier in the year that we had reported to you in the previous conference call. Growing renewables, we improved significantly accelerating from 25% in the first half to 38% as of September. In Spain, output was 34% higher to the internalization of production. Europe, United States and U.K., offshore wind output registered double-digit increases, thanks to the additional onshore wind power facility and diverting wind resource. And in onshore, our 350-megawatt Wikinger wind farm in Germany fully operational since April, led to increase 140% in offshore wind output compared to the year earlier. Generation and Supply EBITDA increased 17%, thanks to the normalization of market condition in the U.K, the CFE tariff in Mexico resulting from the gradual application of the full additive tariff model and the consolidation of our Brazilian Neoenergia. In total, the solid performance of our businesses led to an EBITDA increase of 22.5%, despite the negative foreign exchange impact of €312 million, due mostly to the dollar and Brazilian real. Net investments have reached €3.6 billion in the first nine months 2018. 43% of investments were allocated to networks, 34% to renewables and 20% to Generation and Supply businesses. The group will complete 2.2 gigawatt of new capacity in the fourth quarter of this year out of the 2.7 added in the year. Up to 2022, the group will increase its power by 12 gigawatts, more than 20% of the current capacity, 10 gigawatt of which correspond to project progressing in most cases in construction. These figures include 3.5 gigawatt of combined cycle with long-term PPAs in Mexico and 5.3 gigawatts of onshore wind, hydro and solar-portable type. In offshore wind, from the 2.5 gigawatt in progress, our 1.5 gigawatts are expected to be in operation by 2022. Our current four offshore projects with PPAs signed are expected to be operational by 2023. The first one East Anglia ONE in the North Sea in Britain. We'll have 740 megawatt of capacity, it will be in operation in 2020. Saint-Brieuc in France will have the capacity of 500 megawatt with commission in 2023. We have recently agreed new condition with the French government, they get started - adjust tariffs by maintaining profitability of the project. In Germany, last quarter, we have awarded a Baltic Eagle project in the Baltic Sea, next to our Wikinger wind farm. The technical works have been already begun and the technical plans are in negotiation for this project. We will add 486 megawatts of capacity by 2023 as well. On the other side, Atlantic in Massachusetts, AVANGRID is making progress in the first largest scale American offshore wind farm project. This wind farm will be built in partnership with a team has worked with us in our U.K. offshore project West of Duddon Sands. Half of the 100 megawatt of capacity is expected to be operation in 2021 and other half in 2022. All in all, our total offshore wind capacity in Europe and United States will reach 3 gigawatts by 2023, with a total investment of close to €9 billion. And we have an additional pipeline of 3.1 gigawatts in Europe in the north Baltic Sea, U.K. and Germany. And in the United States, where recent transition approved in the high-market evolution of this technology, our Vineyard project has potential for up to 2.2 gigawatt all ready for future auction, expected to be - to - expected in the following months in Massachusetts, Connecticut, New York and Rhode Island. Also, in North Carolina, we have applied for grid connection for our 2.4-gigawatt project in the area where a high demand is expected. Finally, in networks, which accounted for almost 50% of our investment in the nine months to September, we have €14 billion secure in construction until 2022, all which are covered by long-term regulatory frameworks. As a result of these investments, our regulated asset value will increase almost €11 billion, around 38% reaching €40 billion by 2022. Globally, the execution of our plan is progressing as scheduled with 86% of our €32 billion plan investment already construction of secured. Operating cash flow increases 12.5% to €5.2 billion, exceeding investment by over €1.6 billion. All businesses generated positive net cash flow during the period. Our operational efficiency measured by the net operating expenses to gross margin ratio also continues to accelerating, improved by 180 basis points year-on-year, up to the 80 basis points in the first quarter and the 100 basis points improvement in June. In fact, net operating expenses, including - excluding Neoenergia and exchange rate impact, remain flat. Efficiency will improve in the following months as Neoenergia continues with the implementation of measures identified during integration process. And rest of the group continues to benefit from synergies and the implementation of the practices. The company is also delivering on its asset rotation plan, allowing us to focus on more profitable business based on low-carbon technologies. In the past months, we have divested around €1.2 billion, including the sale in the U.K. of our traditional generation will make us [indiscernible] power, the first power utility in the country that 100% renewable. And the divesture of 50-megawatt solar thermal plant in Puertollano, Spain for €180 million around the end of last week. I will now like to go through the most relevant regulatory effects that have taken place in the last quarter. In Spain, the Royal Decree-Law of Urgent Measures For Energy Transition was approved last week, including the suspension of 7% tax on power generation and the removal of so-called greensand and gas tax that applies only to coal in this moment. The measures have - are having a direct impact on pool prices, radiation energy imports as well as prices for consumers. This demonstrates the direct relation between taxes and generation and market prices, like we have always maintained, and its effect on the competitiveness of the Spanish generation in comparison with European competitors. In the meantime, in the U.K., Ofgem recently published for consultation the methodology and the proposed level of the Standard Variable Tariff cap. We considered the importance of methodology use is a request to make sure that the tariff reflects actual cost, and we are making a specific proposal to apply it appropriately using the true value of each component of the model. But the current allowed margins are too low to guarantee the sustainability of the complex business like energy retail. I do know, in recent months, we have seen several NEO supply's failures. In any case, always, we are confident that the British regulator will apply the model accordingly to the parameters based in real data. In United States, the Connecticut Natural Gas three year rate case settlement is in progress to enter into force in January 2019. In Mexico, as I mentioned, the implementation of the New CFE-additive Tariff Model progress as schedule. And in Brazil, as previously mentioned as well, Electro tariffs were increased in September. Moving on to our United States subsidiary AVANGRID, adjusted net profit, in U.S. GAAP, grew 3% in the period to reach $511 million, thanks to the group performance on the - in businesses. Renewables, adjusted net profit increased by 29%, driven mainly by new capacity. And in networks, performance was stable compared to last year, even considering the negative impact of minus storm in the first half. The company has filed new rate case for Central Maine Power and is moving forward with a settlement of the rates for Connecticut Natural Gas & Berkshire Gas in Massachusetts for new tariff effective from 2019. AVANGRID has also continued to make progress on development of the New England Clean Energy Connect transmission project. The 1,200 megawatt high-voltage, direct-current transmission line that will transport clean and competitive hydro generation from Connect to New England. The project is being managed by the same team that successfully executed the Maine Power Reliability Project completed in 2015, and all permits are expected during 2019 for the commission in 2022. In Renewables the company has 970 megawatt of additional onshore wind capacity in construction, all of which will be in operation during 2019. Finally, the Vineyard Wind project is on track and has recently signed and filed 20 years contract with Massachusetts Public Utilities Commission. In Brazil, one year after its measured with Electro, Neoenergia registered net profit of BRL1,170 million, increasing 357% in the nine months. There have been possible things to the growth registered in businesses' activities, the improvement in efficiency, the positive tariff reviews, already mentioned in networks, and the decrease in financial cost. Neoenergia has 800 megawatt of hydro generation capacity in construction, due operational between 2019 and 2020 and 472 megawatts of wind capacity with commissioning expected in 2022. Also in networks, the company is progressing on six transmission lines with commissioning between 2020 and 2022, which were awarded last year under 30 years contract. And the company intends to participate in new auction expected in the near future. So now, I'll hand over to Pepe Sainz, who will present these results in further detail. José Armada: Thank you, Chairman. Good morning to everybody. As the Chairman has explained, the nine months operating results have been strong, accelerating growth versus the first half, with double-digit growth in all businesses, despite depreciated currencies, minus 7% in the dollar, minus 21% in the real and minus 1% in the British pound. Our operating net profit grew 38.5%, up from 27% in June, and operating cash flow was up 12.5% to €5,256 million more than doubling the 5.6% growth as June. And from the end of August, NEO [indiscernible] as the full consolidation started in September, 2017. Revenues increased 19.7% to €26.3 billion, and procurements grew 22.4% to €14.9 billion. As a consequence, gross margin rose by 16.4% to €11.3 billion versus a 12.2% growth in June. Neoenergia global consolidation for 8 months more than compensated the FX negative impact. Excluding the above mentioned effects, gross margin grew by 9.7%. Net operating expenses were up by 10.7% to €3.9 billion, driven by the Brazil reorganization partially compensated by the FX impact. But excluding these 2 effects, net operating expenses remained flat. Levies increased by 4.4% to €1.5 billion, mainly affected by a €93 million increase in Spanish taxes on generation due to higher prices and higher output. I would like to point out that taxes are paid based on the high-pool prices that internalizes CO2 cost. While [indiscernible] revenues and generation are mainly based on forward references, which have been lower than the above mentioned pool prices in '17 and '18. Tax authorities benefit from this high-pool prices through VAT and other taxes. In addition to that, they also collect CO2 proceeds, which, in the end, is an additional tax. This impact has been partially compensated the impact of the €93 million of the Spanish taxes on generation, has been compensated by positive FX and lower U.S. taxes. Analyzing the results of the different businesses and starting with networks, its EBITDA was up 17.8% to €3.6 billion with positive evolution in all geographies. As you can see in the slide, Spain contributed 36%, the U.S. 27%, Brazil 19% and the U.K. 18%. In Spain, EBITDA grew by 10.9% to €1.3 billion, thanks to positive settlements from previous years and the positive court rulings from assets given by customers, of which €53 million is a one-off that was already accounted in June. In the U.S., EBITDA was 2.6% up, to USD 1,157 million due to growth in the rate plans and positive IFRS impacts, which have been partially compensated by storm costs that were $56 million higher than last year, reaching close to USD 151 million, which is an extremely big amount that should not be repeated in following years. AVANGRID has had also the negative impact from tariff adjustments accounted for in Q3 due to the tax reforms once it is being agreed with the regulator in each state. In Brazil, EBITDA grew BRL2.1 billion to BRL3 billion as driven by the NEO consolidation and the strong tariff revisions in Coelba 16.95% and Cosern 15.6% up from May 2019 as well as higher demand 2.5% up and efficiencies. It is worth mentioning, as the Chairman has said that in August Electro tariffs have increased 5.85% that will fully contribute in the fourth quarter's results. Finally, in the U.K, EBITDA grew 4.2% to £591 million with higher revenues both in transmission and distribution. Renewables EBITDA rose 38% to €1.8 billion, accelerating the 25% first half rise with growing results in all markets. Output increased by 22% to 46,874-gigawatt hours with 4.3 percentage points higher load factor. Installed capacity reached close to the 30,000 megawatts. Spain is now the main contributor to the renewables EBITDA with a 40% stake followed by the U.S. and the U.K. In Spain, EBITDA reached €702 million, 46.8% higher than last year, mainly driven by higher output both in Hydro with a 34% increase and in wind with a 4% increase. In the U.S., EBITDA grew 15.8% to $529 million, growing versus the 4.4% increase in the first half, thanks to our 12.7% higher output linked to the 9% rise in average capacity and some extraordinary results in Q3. In the U.K, EBITDA was up 18.7% to £267 million with an 8.5% average operating capacity in onshore, together with better prices and higher ROCs. In Brazil, EBITDA grew BRL380 million to BRL482 million due to the NEO consolidation and efficiencies. In Mexico, EBITDA was up 33% to $44.5 million, improving the first half 24.7% growth as a consequence of the 31% higher output with 7.8 percentage points higher load factor. Finally, in the rest of the world, EBITDA reached €162 million due to the entry of Wikinger during the first half, which is now fully operational. Generation and Supply EBITDA grew 17.4% to €1,325 million with a strong improvement from the first half 1.7% rise as a consequence of the recovery in Spain from the adverse operating environment in 2017 and better performance in the U.K. and Mexico. As you can see in the slide, Spain accounts for 50% of EBITDA, Mexico 32%, the U.K. 14% and Brazil 4%. In Spain, EBITDA fell 1.6% to €669 million, recovering from the 27% losses in June, but this is still the only business with lower results than 2017 first nine months, affected by the one-off accounted for gas last year and, as I previously mentioned, the big increase in taxes due to the high-pool prices, while revenues are based on bilateral contracts. Output recover and was almost flat, this was a 10.7% fall in June with [indiscernible] production compensating lower nuclear and coal. Retail activity was strong. In the U.K., EBITDA improved £137 million to reach £170 million, thanks to margin recoveries, smart metering capacity payments as well as improvement of operating costs. Customer acquisition costs are now accounted for in D&A under rule IFRS 15. In Mexico, EBITDA grew 10.1% to USD 490 million, accelerating from the 3.2% growth in June, driven by the expected regularization of the tariff methodology during the year as well as new store capacity with our plants of Altamira and Bajío in operation. In Brazil, Brazil reached BRL235 million as a consequence of the NEO consolidation and efficiencies. Driven by the EBITDA growth, EBIT increased 27.8% to €3.8 billion. Depreciation and provisions increased 16%, mainly due to Brazil consolidation, higher activity and the IFRS 15. Net financial expenses reached €164 million, €224 million more than previous year, mainly due to the full consolidation of NEO financial expenses that accounted for €172 million. There has been a €49 million increase in nondebt-related costs due to the higher FX gains in 2017 and some other positive impacts also during last year. Debt-related costs increased €26 million, of which €19 million is an accounting change that comes from the IFRS 9. Our average net financial cost was 3.43% as higher real weight increases the average cost of debt. Excluding NEO, our cost of debt remains at levels of 3%. Our credit metrics have improved strongly from the nine months in 2017. FFO over net debt was 21% up from the 19.9% of last year, net debt to EBITDA was 3.9x versus 4.1x the same time last year and retained cash flow over debt reached at 19.5% from 17.2% last year. As you can see in the slide, year-on-year net debt grew by €0.7 billion to €34.4 billion, driven by measurements and by a one-off tax payment of €665 million that will be recovered, hopefully, next year. Nevertheless, we expect net debt to fall by the end of the year as divestments of around €1.2 billion, of which €1 billion has been announced in October, so it is not reflected in our third quarter debt. If it would have been reflected, our third quarter debt would have been around €33.5 billion. We lower the net debt by the end of the year. Thus, we will continue improving and strengthening our solvency ratios. Our average debt maturity stands around six year target. In addition, as you can see in the slide, we maintain a comfortable maturity profile. Our debt is currently 76% fixed, having the company prepared for a possible rate-increase scenario. Operating net profit grew 38.5% to €2,051 million, thanks to the strong performance of the group with reported net profit decreased 13.5% to €2,091 million due to the €737 million lower nonrecurring results. In addition to the impact from the Gamesa merger, in the Q3 of 2017, we included €520 million of capital gain from the NEO merger that was fully reversed on Q4. In the annex you will find January 2019 Iberdrola dividend program payment. Thank you very much. So thank you, Pepe. To conclude, I would like to reiterate that the good operational business performance during the first nine month has been accelerating along the third quarter is expected to continue speeding up in the last three months of the year. Thanks to the regulatory tariff increases in networks in United States and Brazil. The new solar photovoltaic and on-shore wind capacity in operation in Mexico, Brazil, and the U.K., and the United States, plus the full year contribution of our Wikinger offshore wind farm in Germany. And increasing input from Mexico driven by two new CCPP plants in operation and the evolution of the CFE tariff. We also expect to continue improving our efficiency further through the implementation of practicing synergies. All this allow us to refine our outlook of over €9 billion EBITDA level for 2018. As a consequence of this acceleration in business performance, and bearing in mind the seasonality of the sector with a strong first and fourth quarters, we expect reporting net profit for the year to reach €3 billion, excluding the capital gains resulting from the recently announced transaction. In light with - of this, the Board of Directors have approved a 7.1 rise in interim shareholder remuneration to €0.15 per share payable in January 2019, maintaining the scrip dividend scheme and the cash dividend option as well as the share buyback program to avoid dilution. In addition, our supplementary dividend will be announced in February 2019, and subject to the approval of the annual general meeting will be paid in July 2019. To conclude, from the evolution of the three main pillars, we can positively affirm that our plan is well on track. All businesses and geographies are growing despite foreign exchange impact. And efficiencies continues improving. The delivery of our investment plan continues as programmed. Almost 90% of the plan is in construction, 10 gigawatts in generation of renewables and €14 billion in network projects. As a result of our installed generation capacity will increase over 20% and our regulated asset value by 30% by 2022. We have divested €1.2 billion, as part of the asset rotation plan and leverage our experience and know-how in the offshore business. We have 2.5 gigawatts in progress in Europe and United States, with investment of €7 billion in a pipeline of almost 8 gigawatts in this moment. And we are maintaining our financial strength, improving financial ratios, actively managing our debt with 76% on long-term fixed rates, and leading the green financial market. So thank you very much for your attention. And now we are ready to answer any questions you may have.

Okay, we're going to start with the Q&A session. The first question comes from Alejandro Vigil, Cygnus; and Jorge Guimaraes, Haitong which is the impact in our guidance - 2018 guidance of the capital gains obtained from the recent disposals. Can you quantify this capital gains? And if this capital gains is to be defined will impact as well to the dividend? Ignacio Galán: So our commitment in the guidance given with the first quarter results was close to €3 billion. Today, we are comfortable with this figure of €3 billion, without taking into account the extraordinary results that we have to register due to the recent divestment. At the end of the financial year, as normally we used to do, is the estimation of this capital gains will be started in order to establish efficiency measures that will improve the group results in the future years as normally we used to do every year.

Second question comes from Carolina Dores, Morgan Stanley. And she is asking about is it possible the separation to the dividend per share increase of 7% in this interim dividend to the final of the year? José Armada: Well, as I already announced, our plan is - and our was - our commitment was to increase the dividend in line with the increase in results. So now we are already just giving a signal with the 7%. But as the final word is in hands of the AGM. But I think our intention is already to continue increasing the dividend in line with the growth of results.

Third question come from Rui Dias, UBS, and it is regarding as well to the dividend policy. Given the high level of visibility of your covering growth plans to 2022, could you potentially consider a more visible dividend growth policy over the same period? José Armada: Well, if I don't remember back. And I think, Pepe, you can correct me, our commitment was - if the things are going online what we are already just planning. And I think for the time being, we are seeing that this result has been accelerated. Our commitment was to reach a level of dividend in the range of €0.4 per share with a result of 2022. So I think, we are a company what we try to fulfill our plan. We are working on this plan to achieve these numbers. And I think that is what you can receive for visibility to you. We are quite comfortable that this is in line to be achieved.

Next question from a kind of a large group of people, Alejandro Vigil, Cygnus; [indiscernible]; Stefano Bezzato, Crédit; Javier Suarez, Mediobanca; [indiscernible] Bank of America, Merrill Lynch; and Rui Dias, UBS, and it is regarding that good how - what kind of things we can expect from the proposal of regulatory intervention to the nuclear on hydro in Spain? And if you don't mind for basically for the English speaker, we would like to answer this question in Spanish. Thank you. Ignacio Galán: Thank you, Ignacio. So try to answer - and if you're saying to explain that in Spanish. So the first thing that this noises which are not new. Would it be possible that those make these statements that are not - you do not have the correct information, and all you have to do is look at our balance sheet and to see what this is all about. So firstly, let me explain to you why these assets are not fully amortized. And well, I'd just like to give you a few figures. And if I'm not wrong, I think that at the end of 2017, the net asset book value for hydro assets was close to €4.8 billion. And in the case of nuclear plants, this amount totaled €3.2 billion. But why do we have these values. Well, it's very straightforward, and that is the legal and accounting regulations. It means that we have to amortize the civil works in the concession period. Bearing in mind that, that these electromechanical equipment have 50 years of life, so that means that we still have another 35 years to go to carry out the amortization of the civil work. And then secondly, the equipment is amortized both in the nuclear sector as well is in the hydro sector according to what we consider to be the useful life. So throughout their life, and while they are replaced, there is equipment that lasts 40 years, especially, electronic equipment and which are amortized in a much shorter period. But just to give you some figures, and since I've been working for the company since 2001, I think we've invested in hydro, we have invested something like €3.8 billion in order to replace equipment to replace it with other equipment. But in the case of the nuclear sector, the figure is even larger than that. I think that is nearly €2 billion in the period. So these are the figures that have been concentrated. And the second issue has to do with the results achieved. And if you want, all you have to do is look at our balance sheet to see what's the result were like in 2017. And this has been made public, and you can see this information. And in the particular case of nuclear production, it's an independent company, which is Iberdrola Generation Nuclear, that's an American type registry. But you can also see this in the annual account. And if I'm not mistaken, I have been repeating this many times in recent years since the very high taxes were imposed in 2013, since 2013 until this point in time, we are paying between €700 million and €800 million in this period of additional taxes that didn't exist before. So that means that the nuclear power stations have reported losses. And last year, I think, that we lost just over €100 million, and the year before that more than €200 million. So this is something that is happening all the time. And with regards to the hydro business, well, last year it is true that it was a very dry year. But last year, they also obtained a negative result. So I think, that there is data and those that I mentioned just possibly didn't have any access to this information, information that was made public sometime ago, so that it can be consulted by anybody that wishes to make any comments on it.

Next questions from Mickey Baker, Bernstein; Carolina Dores, Morgan Stanley; and Stefano Bezzato, Crédit Suisse. Considering your most recent discussion with the Spanish government, what is your current expectation of the rate of return for regulated activities in Spain? And the development of the recently reduced taxes in generation? José Armada: Well, I think related remuneration [Foreign Language] the remuneration on regulated activities, we're not based in [indiscernible], we're based in the Spanish bond, which I think is not reflecting the reality of the business. All the countries are based in [indiscernible]. I think, it's - with new, then the national regulator - the regulated, the Spanish regulator is now announcing that they would like to move back to a system based in [indiscernible]. I think, we are in this moment in discussion about the figures that they are already proposing. But I think, it's good that, at the end, we are already standardizing the system, the Spanish system, remuneration in the international system that everybody is recommending on the same manner. Related to the taxation, so I think, for - we've been for long times and then the prices in Spain artificially inflated, as a consequence of the taxes we are supporting. So I think, it's the fact that these temporary reduction of these taxes are already just automatically been reflected in the market prices, which I think that the news is that, that is good for their market price, which has already fell down. And as well, it's good for the increase of the Spanish competitive, who are already changing the way how the Spanish electricity is being - traditionally, we are being supporting electricity. Now with the high taxes in Spain, we have been reporting. So these taxes has been already reduced, the flow has been more equalized and that is a positive effect in our - in the Spanish balance of payment, which I think that's good as well for the country.

Next question comes from Harry Wyburg [ph] from Bank of America, Merrill Lynch. Press reports suggest CNMC strike is right - is looking to the balance sheet valuation of power generation assets after large write-downs from [indiscernible]. Is there a sense that Iberdrola may be required to change accounting values for plants? And what could be the potential impact of - on book values and ongoing depreciations? Ignacio Galán: I imagine - I think, we've been - we received this letter from CFE. We have already replied. I think, I imagine that this is a consequence, as you mentioned not for [indiscernible] a consequence mostly because how is depreciated the nuclear assets between ourselves and DESA. So because the rest are - almost everybody already is doing in the same manner. So how we are depreciating, I think we are depreciating, as I mentioned before, our hydroelectric asset according with their accounting rules, which is the legal terms, which is civil works according with the life of the concession - the equipment according with the technical life of this installation. In the case of nuclear 40 year, which is the life - the standard life of these assets. And in case of the rest of the equipment as well with the standard life on the ground, which I think is as well in the range of 40 years. So I think that is what is the terms that we are depreciating, which has not been changed for a long time. I think, we are already using this criteria. In that case of that one, which is concession, according with the concession in the case there is a limit of life, which is the nuclear according with Iran. And if this is standard, we will understand it. But I think in the - for the time being, we know the nuclear is 40 years is the end of this - of the operational life, if we are not making additional investments.

Next question comes from Rui Dias, UBS. Is regarding the recent disposal in the U.K. And then he is saying that Spain is now the only region where Iberdrola holds noncontracted conventional power generation and will it make sense to reduce exposure to these activities sooner rather than later? Ignacio Galán: Possible disposal of the Spanish generation assets. José Armada: Well, I think it's not in our mind for the time being. I think in the case of Britain, the size was - I think the criteria that we used for divestment as you know is always the same one, either because graphically it's not fitting in our geographies, either because the size is not big enough, or because I think the returns, which are given - we are not seeing future for those ones. So in the case of Britain, there are two, I think, they are not already - they are not giving profitability. And second, the size was small just for being already involved in this business. And we've been trying for a long time to try to expand this business with certain project. But the auction was being made for capacity payment was so low they were not used to fund the investments. So that's why we decided to leave, as we did in the past in another like Chile, where we sold as well all our conventional power generation.

Question number eight comes from Jorge Alonso, Societe Generale; and Stefano Bezzato of Crédit Suisse. It's regarding the amount of energy fixed for 2019? And our view in power prices in Spain for the expected output in 2020? José Armada: Well, we have as you know, we have a 100% of 2019 volumes committed. And also close to 90% of 2019 postproduction already committed too. With the current forward prices, we expect to close next year around €2 to €3 per megawatt hour above this year prices. And about 2020 that is too far, for the time being is in the same level of forward prices at 2019.

Next question comes from Jorge Alonso, Societe Generale. What are the next renewable standard auctions Iberdrola will participate in? Iberdrola views on U.S. wind offshore, a new wave? And finally, when a new project could be developed?

Our standard auctions that we are in condition to participate... Ignacio Galán: Well, we are already in this moment participating. We have already submitted an offer for a Connecticut auction, which I think is going - I feel that by the year-end is going to be already take the decision. Now is already another auction for Rhode Island, which I think we are going to participate as well if in those days it's going to be made already the proposals. And I think, we are already hearing another one, which I think is with potential is going to be in the next few years or months, which is New York, which is I think some more in Connecticut, some more in Massachusetts. I think that is in Rhode Island's as well is going to be some more. I think that is that. But for the time being, we are already participating in one in Connecticut. And we are going to make some proposal for Rhode Island, which is going to be presented in the next few days.

Next question #10 come from Mickey Baker, Bernstein. And it's regarding the price cap in the U.K.? What actions can you take to mitigate the effect of the price cap? José Armada: Well, as I mentioned, in the press conference. I think the methodology is correct. The margins are too low. The margin - I think, if somebody feel that with less than 2% or 2% margin, a business like that one we are moving billions of pounds, and you are put at risk of a lot things - bad debt, failures, et cetera, et cetera. You can already leave this. I think - I'm hoping it's not correct. And we are already just in discussion and in comments with the regulator in this sense. The second one, as I mentioned, is finished importance, the data used for fixing this cap will be real. We are not already where we would like to be. But I think what it really is, I think is the cost of service is a number - is the cost of service is a number, it's not another one. If the gas losses are 5%, it's 5%, it's not 1%. And I think we will be delighted to be another number, but if that is the reality, that is the reality with the [indiscernible]. But I think saying that, I think we have been working as seen in the last few years to try to improve our efficiency in time. I think, we have invested almost £300 million in new IT system for billing and for customer care, et cetera, et cetera, just to be able to make the things in a much more efficient manner. So - but I think, we continue working in this direction to be more efficient to try to minimize. Nevertheless, I think the range that we are seeing the effect - you know that we are the less effective of all the companies in U.K. and our standard variable tariff is affecting - we have less than 1 million customers. There's one of our competitor we did already 60%, 70% or 80% of the customers in this tariff. We are already much less in our total number of customer. The effect in our case will be in the range between, let's say, £40 million and £80 million. But I think, we are working the - with the actual methodology is applying the numbers, which are current numbers, it should be £40 million. If they are not applying correctly what we hope, then the British regulators will understand the numbers properly, if they use the numbers properly. As I mentioned, in my speech, I think that we'll be already almost double-digit numbers.

Next question comes from [indiscernible]. And it's regarding the U.K. issue pricing? [indiscernible] assets, so the question is [indiscernible]? José Armada: Well, I think it's been a long time in the U.K. we are short. So I think we are being forced to buy electricity for selling retail. So I think, we are now depending since long time for our power generation. We are selling much more than we produce. So, which I think that is to absolute different business, which have no relation between themselves. So I think that is going to continue in the same way, we have been already been up to now. Which is a positive thing, which I think we were losing money in these traditional power generation, we are not going to lose money in this moment. So, which I think the losses that we are suffering during the last recent years in our power generation, now we are going to lose - to have these effects. So I think that will have a positive effect in our business there. So I think that's...

Next question comes from Carolina Dores, Morgan Stanley; Javier Suarez, Mediobanca. And it's regarding the results yesterday released by AVANGRID. AVANGRID is guiding towards the lower range of EPS guidance for this year. What has driven the weaker results? José Armada: So I think, as I mentioned, they are already being suffering some impact of the minor storm. You know the system in the U.S. Gulf, the biggest storms they have already been - are included in the [indiscernible] and the expenditure is included in the next rate cases as part of the - to be already paid during certain number of years. But the minor rate cases, I think is considered as a course. I think this year they already have - they are already - but fortunately the numbers of small storms are already affecting negative to the [indiscernible] that is part of their cost. I think another year the situation will differ and I think that is one effect. The second effect is the thing related with weak performance. I think in certain case it's better, in other cases it's worst. But mainly in this year, the main reason for that one is due to the minor storms. José Armada: And I think in renewables, you mentioned, Pepe? Ignacio Galán: There has been some start-up issues and transmission outages in new wind farms. And they have had some higher corporate expenses related especially to taxes. As you know, we need to make a big investment plan to there. And so that has been the main issues.

Next question - there is a couple of them comes from Mickey Baker of Bernstein. And the first one is, how is the efficiency program in Brazil is progressing compared to the business plan? And what further steps are you planning? And second is how you are progressing in the deployment of renewable capacity compared to the business plan? José Armada: In Brazil of all things or globally.

First one is Brazil and the second one is global. José Armada: Well, I think in the first one, I think we are already rationalizing all the things. We are concentrating our net loss in - by year. We are already standardizing all our equipments. We are benefiting of better acquisitions. We are changing the system that we were already externalizing. We have a lot of activities externalized. Now we are internalizing this one which are more efficient. We are working hard against losses and [indiscernible] and the bad debt. So all these things are already going on. And I think that is something, which is already generating effects. So which I think is an ongoing thing, which will continue in time, and it's already achieved. Part of what we're expecting but still the target is to continue reducing cost in a very, very important manner. Related to the program of renewables, I think is, I also already mentioned, and we already - we present to you what we are doing at present. We are already in the Unites States in this moment 1000 in construction. We have already the offshore in Germany, the offshore in Britain, the offshore in France, the offshore in the United States. We are starting making some one offshore in Spain. We are already building a Neo - affordable type. We start recently two new photovoltaic power plant in Mexico. We have completed another two in Mexico. We are already almost 400 megawatt in Brazil. I think we are in line. And I think that's continuing in the same - according with plan. Even in the case of offshore, even we are more than what we're expecting.

Next question comes from Jorge Alonso of Societe Generale and Javier Suarez of Mediobanca. And both like to know a clarification in the expected net debt level for full year of 2018? José Armada: We're expecting to close the year with net debt of around €33.2 billion. So we are talking around €1.1 billion below the closing of the third quarter results. So as I was mentioning, basically driven by the divestments and good performance in the fourth quarter will allow us to reduce our debt by the end of the year in more than €1 billion.

Next question comes from Jorge Guimaraes, Haitong. And he is asking about if we can elaborate better on the one-offs mentioned in nine months 2018 report in the U.S. renewables. What was their size? José Armada: Perhaps, Pepe can give some color? Ignacio Galán: Yes, I think that we are talking around €10 million to €15 million. And this is basically to compensate as the Chairman has mentioned that during the first half of the year, we have had some extraordinary negative impacts basically coming from delays in startups, and some transmission outages in new wind farms. Okay. So basically these are compensating the extraordinary problems that we have had at the beginning of the year. Basically it's coming from the sales of receivables and some transmission rights.

The last question comes from Jorge Guimaraes, Haitong. And he is asking about when are the new hydro projects in Brazil expected to be operating? And what could be their impact on P&L? Ignacio Galán: So if I don't remember that, the [indiscernible] is one of them, which is going to come into - in service at the end of the year, beginning of next year. And another one is Belo Monte, which is already started soon of the - two lines in operation. But I think during next year almost all will be already in operations. So I don't know the precise number. But ask Ignacio, you can already make these numbers, you can already give to him, not in mind. But both are already positive effect in the P&L.

Okay. So after almost 55 minutes of results presentation. Please let me now give the floor to Mr. Galan to conclude this event. Ignacio Galán: So thank you very much for participating in this conference call. I hope to see you next February in 2019, in London in our - presenting our full year results. And in our Investor Day as traditionally we use today in which we will have the opportunity to update our long-term plans, which as I mentioned to you, we are very optimistic about how the things are going on. So in any case, whatever question you may have, please you are - Investor Relations open to reply to all of you. Thank you very much for attending the meeting. Thank you. Q -: