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Hello, and welcome to Repsol's First Quarter 2026 Results Conference Call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Pablo Bannatyne, Head of Investor Relations.

I would now like to hand the call over to Mr. Bannatyne. Sir, you may begin.

Thank you, operator, and good morning to everyone joining us today. Welcome to Repsol's First Quarter 2026 Results Presentation. Today's conference call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well. At the end of the presentation, we will be available for a Q&A session. Before we begin, let me remind you that during this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated on our disclaimer.

With that, I will hand the conference call over to Josu Jon.

Thank you, Pablo. Good morning, and welcome to everyone. Last quarter marked a solid start to the first year of our update 2026-2028 strategic road map that we presented 6 weeks ago in March here in Madrid, and most of you were present here. This strategic road map is built on 3 clear pillars: increased cash flow generation, higher shareholder returns and disciplined capital allocation, always preserving the strength of our balance sheet.

Since then, since our Capital Markets Day, the escalation of the conflict in the Middle East has had global implication for our industry, increasing volatility across commodities and reinforcing uncertainty around the near-term economic outlook. Our market environment has since become more complex, shifting from concerns about oversupply risk to a very different context of actual physical disruptions. The closure of key energy routes has led to a significant tightening of oil, gas and products markets, increasing price fluctuations and reshaping global trade flows. In this situation, Repsol has remained focused on the safe and efficient operation of its assets, ensuring continuity of energy supply while taking timely and disciplined actions to help mitigate the impact of fuel price volatility to our customers.

As of today, across our assets remain stable and reliable, all the operations, I mean. With no material exposure to the Middle East, we are well positioned to navigate the current environment and benefit from commodity market dynamics, all that supported by our diversified and resilient portfolio. Looking at the main developments of the first quarter. In the upstream, we completed the agreement to incorporate the TotalEnergies to our U.K. JV, creating the largest independent oil and gas producer on the U.K. continental shelf.

In addition, we continue moving forward with our project pipeline, starting production at Lapa South-West and reaching the latest stages of development in Pikka, Alaska. In Venezuela, the recent updates in the country could provide a material upside within the portfolio. In the industrial side, the performance benefit from the strong refining environment in March and the increased contribution from trading businesses. Results were partially held back by nontranscended results and time lag effects on product pricing, which are expected to flow through the P&L in coming months in the next quarter. In customer activity remained resilient, supported by higher mobility sales and the continued growth of our customer base.

In terms of results, first quarter adjusted net income reached EUR 873 million, a 57% increase over the same period in 2025, mostly due to a stronger contribution from industrial. Cash flow from operations stood at EUR 1 billion, 2% higher than in the first quarter last year. Cash generation was impacted by a EUR 1.4 billion working capital buildup, mainly related to inventories linked to higher prices and volumes as we ensure full security of supply to our refining system in this complex and volatile environment.

Excluding working capital movements, operating cash flow generation amounted to EUR 2.4 billion, more than covering investments, interest and shareholder remuneration in the quarter. Net debt closed at EUR 4.8 billion, a EUR 0.3 billion increase over December. Gearing rate here stood at 14.3% and 6.5% if we exclude leases. Shareholder remuneration was aligned with our distribution objectives. The first cash dividend of 2026 was paid in January, amounting to EUR 0.5 per share.

The second dividend will be paid in July to reach a total dividend of EUR 1.051 per share in the full year. And thus this figure is, roughly speaking, an 8% increase compared to 2025. Dividends will be complemented with share buybacks to reach our committed 30% to 40% cash flow from operation distribution objective. And aligned with this, the first buyback program of 2026 was launched in March for up to EUR 350 million with additional buybacks to be implemented in the second half of the year.

Looking briefly at the evolution of the main macroeconomic indicators in the period. Brent oil averaged $81 per barrel, 7% higher year-on-year, moving within a range between $61 and $127 through the quarter, so a strong volatility in the period. The Henry Hub averaged $5.1 per million BTU, 13% higher than in the same period in 2025, driven by severe weather at the beginning of the year and the ongoing ramp-up of new LNG export facilities in the U.S. Repsol's refining margin indicator was 106% higher compared to the same period in 2025, mostly driven by higher middle distillate spreads since March, particularly diesel and jet fuel. At the exchange rate, the dollar averaged $1.17 in the quarter, an 11% depreciation compared to the first quarter last year in 2025.

Turning now to upstream performance. Adjusted net income was EUR 302 million, 5% lower year-over-year, driven by a weaker dollar, as I mentioned before, and the divestments executed in 2025. This was partially compensated by higher gas realization prices and a stronger contribution from equity affiliates. Production averaged 539,000 barrels equivalent per day, in line with the first quarter in 2025. The higher contribution in the U.K., the Gulf of America and Trinidad & Tobago was partially offset by disposals at FoxMeyer situation in Peru and lower unconventional production due to the extreme solid weather conditions we had in the U.S., mainly in January and February. Excluding these disposals I mentioned before, production was 4% higher year-over-year.

In the U.K., on the 13th of March, we completed the agreement to incorporate TotalEnergies assets into our North Sea JV. The resulting entity that is named NEO NEXT+ is projected to produce around 250,000 barrels per day in 2026, of which around 60,000 are net to Repsol. In Libya, first quarter production reached 42,000 net barrels per day, 11% above the same period in 2025, demonstrating the resilience of our operations despite a localized disruption in March. Furthermore, we strengthened our position after being awarded with 2 new exploration blocks in the first licensing round held in the country in nearly 2 decades.

In our development pipeline, the volume growth forecast to 2028 will be supported by derisked projects that are already producing or close to first oil. In Brazil, in the Santos Basin, the development of Lapa South-West reached first oil in March. The project features 3 wells tied back to the existing FPSO, contributing to increase the total production in the Lapa field to 60,000 gross barrels of oil per day, where Repsol holds a 15% interest. Furthermore, the development of Raia, Raia, remember that is the former Campos 33 in the Campos Basin entered its 6-well drilling phase, representing an important milestone towards the planned start-up in 2028.

In Alaska, the first phase of Pikka is mechanically complete and undergoing final commissioning. First oil is expected in -- I mean in imminent period, coming days, coming weeks. And key facilities are being integrated with the objective of reaching a plateau production capacity of 80,000 gross barrels per day by the end of July, early third quarter. In the Quokka unit that is located in the Nanushuk area to the east of Pikka, the successful completion of the first appraisal well earlier this month in April has further delineated the potential of all this Nanushuk reservoir. In addition, our commitment to Alaska was reinforced after securing 42 new exploration licenses in the latest federal round, supporting future development plans in the area.

Finally, in Venezuela, last quarter, we reached a strategic agreement to ensure the continuity of natural gas production in Cardona IV. Moreover, after quarter end, we signed an agreement to resume operational control of the Petroquiriquire oil asset, and this includes plans to increase gross crude oil production in the country by 50% within 12 months and to triple it over the next 3 years, all under a disciplined free cash flow positive framework for capital allocation.

Our priorities in the country are clear, monetizing current production and increasing our volumes. Within this framework, next week, our Cartagena refinery will receive the first oil cargo linked or associated to the gas production of Cardon since the issuance of the new U.S. export licenses that remember, we received we were allowed to -- with these licenses at the end of February. Additional cargoes are expected going forward.

Continuing with Industrial, first quarter adjusted net income was EUR 440 million, 233% higher than in the same period a year ago. The improvement was driven by higher contributions in refining, Peru and the trading businesses, partially offset by weaker chemicals and non-transcended sales. In refining, the better results due to higher refining margins were partially offset by non-transcended sales adjustments, as I mentioned before, and a negative price lag effect, mainly in kerosene sales. I mean, these adjustments are expected to be fully reverted in coming quarter.

The refining margin indicator averaged $10.9 per barrel, roughly in line with the fourth quarter of 2025 and $5.6 higher than in the first quarter last year. The indicator averaged $6 per barrel through January and February, rising in March to an average of $20, driven by stronger middle distillates as a result of the conflict in Iran. Since the closure of the Strait of Hormuz, diesel and jet fuel spreads have suffered extreme volatility resulting from the interruption of product flows and tight global inventories.

HVO and SAF margins have also experienced a material increase due to the escalation of the mineral alternatives and also because the increase of the regulatory demand of this kind of products. The premium generated over the indicator averaged $5.7 per barrel in the quarter, mainly due to a better crude and products balance optimization and the contribution of buyers. Let me say that in this disrupted and complex situation, I mean, the margin indicator in some way is losing the capacity to define what is happening in margin terms in the refining system.

So we are going to see this kind of, let me say, exceptional premiums because with the high flexibility of the assets we have, all that is enabling us to efficiently adapt the crude diet and our products yield to this kind of exceptional situations and disruptions that are happening in the market. That is the explanation, let me say, for this exceptional situation. Utilization of distillation capacity reached 79% in the quarter, while conversion units operated at 86% crude throughputs were negatively impacted by the reduced availability of the topping unit in Cartagena. Remember, the fire we had in January, together with crude supply constraints in January and February due to the severe weather and the storms that were preventing vessels from docking at some of our refineries, mainly Tarragona, Petronor and Coruna.

The trading businesses delivered a very strong performance in the first quarter. The operating income was EUR 343 million higher year-over-year, reflecting a solid contribution from both crude and gas trading activities. In Chemicals, Repsol's margin indicator averaged EUR 174 per ton in the first quarter, negatively impacted by the sharp increase of raw material costs in March, which was not yet reflected in selling prices.

The situation in the Middle East has tightened the global petrochemical market due to supply constraints and the consequent reduction of production in Asia and Europe. Margins are going through a period of exceptional volatility, especially affecting naphtha-dependent producers with limited feedstock flexibility. Regarding the transformation projects within our industrial portfolio, the new HVO unit in Puertollano is this week starting the production, becoming our second facility in Spain for the production of 100% renewable fuels. In renewable hydrogen, we approved the construction of our second large-scale electrolyzer to be built in Bilbao at our Petronor refinery and is expected to start up in 2029. Remember that the project has received EUR 160 million in funding from the European Union.

Going on now with Customer division. First quarter adjusted net income was EUR 160 million, a 3% increase over the same period in 2025. And this result was mostly driven by a higher contribution from mobility. Cash flow from operations amounted to EUR 429 million in the quarter. Sales of road transportation fuels in Spain were 11% higher compared to the same period last year. Nonoil contribution margin in our service stations was 11% higher year-over-year. So nonoil is increasing step-by-step its contribution margin to our service station business.

In a complex environment of higher fuel prices, and significant daily volatility, Repsol strength its customer value proposition by doubling discounts that are applied through the Waylet app as well as increasing discounts to professionals and self-employed workers. These initiatives had a direct and positive effect on Waylet registrations and fuel sales. In power and gas retail, we added 129,000 customers in the first 3 months of 2026, reaching 3.2 million clients. That is equivalent to a 20% increase year-over-year. And as a result of the larger customer base, the power commercialized by Repsol was 26% higher compared to the first quarter in 2025. The number of digital clients reached 11.2 million at the end of the quarter, a 17% increase over the same period of 2025 with Waylet as the main contributor. Finally, around 1,600 service stations offer 100% renewable fuels as of the end of March with 62% of our Spanish network already providing multi-energy solutions.

Turning now to Low Carbon Generation. The adjusted net income was EUR 4 million negative, a EUR 6 million decrease compared to the first quarter in 2025, and results were negatively impacted by lower electricity prices in Spain that more than compensated the higher power production. The average pool price in Spain was EUR 43 per megawatt hour, roughly 50% below the same period last year due to an exceptionally rainy quarter. The power generated by Repsol increased by 57% year-over-year due to a higher contribution from combined cycles and renewables. Wind and solar production reached 2.3 gigawatt hour, 80% higher comparing with -- compared to 2025.

Renewable generation capacity under operation reached 6 gigawatts by the end of the quarter, thanks to the start-up of new capacity in Spain and the addition of the last part, 133 megawatts of Pinnington solar farm in the U.S. that is now reaching its maximum capacity of 825 megawatts. Finally, we continue to execute our asset rotation strategy. In the U.S., the divestment of our stake in our post agreed in December was cash in, in the first quarter and the rotation of Pinnington is expected to be launched over the course of 2026. And in Spain, we are progressing with the second phase of the rotation that was launched in 2025.

Moving now briefly to a summary of the financial results. In this slide, you may find an overview of the figures that we cover today. And for further details, I encourage you to refer to the complete set of documents released this morning. Regarding the outlook for the rest of the year, let me say that it is the most complex part of my speech because first, I mean, what is known, April production has been impacted by the planned turnaround of Peru LNG liquefaction plant and now almost complete, which is factored in our budget. Full year production guidance remains in the range between 560,000 and 570,000 barrels per day, and that is driven by the increased production in conventional that is already happening and the start-up of Alaska.

In refining, diesel and jet prices are expected to remain strong in the second and third quarters, even in the case of the reopening of the Strait tomorrow. Moreover, the drawdown of strategic reserves implies that inventories will need to be refiled, boosting European diesel demand into the second half of the year. The refining margin indicator has averaged $11 in April and the current scenario of refinery maintenance plan for 2026 has been adjusted to prioritize production and feedstock flexibility. The premium over the indicator has averaged above $10 this month, underpinned by the higher share of middle distillates in our mix and increased sales to our domestic market in Iberia, strong disruptions in spreads and discounts of our crude slate and products are allowing optimization of our planning and programming, increasing our refining premium to high figures.

And with respect to the cash flow from operations outlook, and I was referring to this outlook when I said that this is the most complex part of my speech. I mean, in light of the extreme level of uncertainty and volatility, we are not providing a revised guidance at this point. I mean, let me remind you that based on the updated sensitivities under the new reporting model, every $10 increase in the Brent price would translate into roughly EUR 250 million of incremental annual operating cash flow on average for the period 2026, 2028, roughly speaking, it's a bit higher, EUR 285 million. But I mean, this year, because the gas component in the production is a bit higher, let me approach saying that could be roughly speaking, EUR 250 million.

Similarly, for every $1 per barrel increase in the refining margin indicator, the cash flow from operation will increase by around EUR 200 million. You may apply those sensitivities to estimate the expected cash flow from operation under the commodity scenario you deem appropriate. I mean I don't have the crystal ball that is needed to give you a guidance about the evolution of the commodities over this year in this disrupted scenario. And that being said, we can confirm that between 30% to 40% of the additional cash generated will be allocated to shareholder remuneration in any case, as I said in the speech of the Capital Markets Day last month, in line with our capital allocation policy.

To conclude, this first quarter marks a solid start to the first year of our updated strategic road map. Our recent Capital Markets Day established a robust framework to deliver cash flow growth with great visibility, increase shareholder remuneration and maintain a rigorous capital discipline. Even though the current market environment is clearly more uncertain than what we had at the beginning of the year as the closure of the Strait of Hormuz has altered international trade flows. The economic impact of the conflict solely will depend on its duration the damage to energy infrastructure that we don't know in the whole dimension and indirect effects through industrial value chain and financial conditions.

In this scenario, Repsol benefits by a limited exposure to the Middle East and our Tier 1 refining system in Europe, heavily weighted towards middle distillates output and production with flexibility to adapt our crude oil diet. In addition, our advantaged location in the Iberian Peninsula provides access to feedstocks and markets in the Atlantic Basin. The start-up of Pikka will provide near-term growth to our upstream volumes while adding a world-class asset to our portfolio with a long-term production plateau. The improved situation in Venezuela, not factored in our projections is another material upside to our strategic plan. At this moment, we are prudent in our financial outlook, as I mentioned before, subject to the evolution of the macroeconomic scenario in coming months, always maintaining our commitment to distribute 30% to 40% of the cash from operations to our shareholders.

With this, I will turn it over to Pablo as we move on the Q&A, and thank you very much for your attention.

Thank you very much, Josu Jon. Before opening the Q&A I will kindly ask participants to limit yourself to a maximum of 2 questions. If time permits we will try to cover more in a second round. To begin I would like the operator to remind us of the process to ask a question. Please, operator, go ahead.

[Operator Instructions].

Thank you, Operator. Let's get started. Our first question comes from Biraj Borkhataria at RBC.

Just the first one on refining. There's obviously a lot of volatility in that and you're very well set up to benefit. Could you just unpack the premium as you see it? Can you talk about the biofuels contribution in the quarter and anything else to note? And just on the maintenance point you made, should we assume that refining is running at full capacity through 2Q and 3Q through the summer? And then second question is just on the Pikka ramp-up, which you mentioned. I've noticed that those barrels, the Alaska North Slope barrels have been, in particular, bid and trade at very strong premiums relative to other benchmarks. So could you just highlight when you expect to get that project to plateau?

Thank you, Biraj. So first, our refining system is running at full capacity. The distillation percentage average in April is 85%, 86%. That is the average of last year. You know that we try to refine or to distillate, better said, the last barrel giving us a positive margin, looking for the full coverage of the conversion. And we moved as far as we could, the turnaround, the maintenance period. For instance, we had a turnaround period in May in Cartagena to change the catalyst of the hydrocracker. And we moved this maintenance to October, November. So that was done.

On top of that, we also had in Tarragona, a turnaround that was the place also to first quarter of 2027. So we are going to operate because now -- I mean, it's not only a financial approach. I think that now we have the responsibility as a responsible operator to guarantee that we could provide the products that our hinterland and our customers, they need. So you know that, for instance, kerosene production is very important for the Spanish economy because mainly in summer is very dependent on the aviation and the tourism season. We have been able over the last weeks over the last 2 months to invest and to change logistics in our refineries to increase our historical kerosene production.

We have increased now 25%. I mean, May, better said, we are going to be prepared to increase now 25% of level -- the level of kerosene we had 3 months ago in February. We are going to be able to produce 95,000 barrels a day of kerosene in our refining system from May on. That means that we are going to not only to be able to provide our customers -- but even more, we are going to be able to offer an additional production to any problem or disruption that could come in the Spanish market from some other operators.

I mean we are going to be able to provide a 25%, roughly speaking, of the demand we had last year from our kerosene customers. I'm not saying that the game is over because, I mean, we could have tensions in the market. And we could have tensions because, first, the countries sending tourists to Spain, they could have problems to fuel their planes in their countries, in the countries of origin. Perhaps some of our competitors, I mean, I don't know the situation, so I can't speak, of course, on behalf of them. But saying that we are developing all the effort to, let me say, squeeze the production capacity we have in this second quarter with our refining system.

So you could assume that Biraj, that the refining system is going to work at this full, not only capacity, I mean, adapting their products to the main needs in the market. I mean, again, as I said before, now the margin is not exactly the best indicator or the best KPI to follow what is happening. But I mean, even if tomorrow, and that will be great to see that the Strait of Hormuz is getting fully operational.

I mean, I think that this year, as average, we are going to see even in a full normalization of the situation in a good way, a refining indicator that is going to be probably above $9 a barrel for the whole year and a premium that seeing the figures that we are experiencing now and even seeing a normalization in 2 months, probably the premium is going to be above $5 for the whole year. So -- and we are, of course, prepared to take and to capture these margins. I mean, going to pick a high rely on the operator, Santos, I can't add more to the information that was provided last week by Santos.

We fully agree with -- because, I mean, our technical people is engaged in the technical team of the operations. I mean all the mechanical part of Alaska, where mechanical is fully completed. Commissioning activities are almost finished. They are progressing well. First sales revenues are expected roughly speaking in 2 months. And the plateau capacity of 80,000 barrels a day gross, of course, is expected in July. So that is, roughly speaking, the approach I could give you about Pikka and let me say that the first oil is imminent. Thank you, Biraj.

Our next question comes from Sasikanth Chilukuru at Jefferies.

I afraid I also had a question on the $10 premium to the indicated refining margin. I specifically wanted to check on one key factor that you had highlighted. You talked about spreads on the discount and discounts to the crude slate, which seems a little different from what we are hearing from your peers. I just wanted to understand what your crude slate was, how this -- you're getting these discounts, I suppose? And also if the Venezuelan barrels and the cargoes are going to make any material impact or they're already factored in this, yes.

Thank you, Sasi. I mean, I know that it's perhaps -- and I'm sorry because I mean, the complexity of what I'm going to explain, and that is my problem, it's not yours, it's not easy at all. But again, I mean, when you -- we take the refining margin indicator, what we are taking is the structure of a slate and the structure of yield of products and the conditions we have and we see in the market, and we budget that for the whole year.

What is happening now, for instance, I mean, you know that our exposure to Middle East is tiny, but we have a 6% of Basra oil that -- I mean, when you introduce in our refining margin, the Basra, I mean, because it's very complex crude oil to be bought today in the market. I mean, the premium over this crude oil is extremely high. So we are not, of course, using Basra in our system. We substitute the Basra by heavy oils with strong discounts coming from Latin America.

So all that is improving in a dramatic way. I mean we are taking in a very volatile situation. We have extreme opportunities to optimize the refining margin indicator that are not there every day because you have, let me say, very heavy oil, you have residues with -- because the Brent price is very high. You have heavy oils that are competing probably with fuels and some other products that today could be in relative terms, extremely cheap. And because the high conversion capacity we have in our refining system, we are taking advantage of this crude oil.

So we are, let me say, beating in a clear way the refining margin indicator. Going to the yield of products. Again, I mean, remember, we were producing, roughly speaking, I mean, don't take the exact figures, but we could be producing 350,000, 360,000 cubic meters of kerosene per month at the beginning of this year. And that was budgeted in our refining margin indicator. What is happening now, thanks to the investment we developed over the last 2 months, either operational, either logistics in some of our refineries in May, June, we are going -- from May on, we are going to be able to produce 560,000 cubic meters of jet per month.

What is happening with these figures that because the spread of the jet is significantly higher than the spread of the alternative products we were producing in a refining margin indicator, we are going to improve in a dramatic way the refining margin indicator through the premium. I mean you are seeing this premium. I mean $1 per barrel of this premium is coming from this change or this increase in the jet production. So you could say, okay, please change the margin indicator because all that is going to be more simple. That could be an option. But I'm even discussing with my own team because we don't know in this volatile situation, what will happen in May or in June. So perhaps we have to change twice the refining margin indicator over the quarter.

So at the moment, please, what is real is that the refining margin indicator plus the premium is reflecting the real margin we are capturing. The refining margin indicator is, let me say, the theoretical construction that works in a normal situation, in a normal way and the premium is what we are capturing above this, let me say, refining margin indicator. I know that it's complex. But again, I don't have another way to explain that. Saying that, when I said before to Biraj that even in the case of opening tomorrow Hormuz, we are seeing a minimum of $9 plus $5. That means that we are seeing a total refining margin over the year, even if situation is normalized tomorrow, probably above $14 a barrel for the average of the whole year.

Thank you, Sasi. I'm going to Venezuela. I mean, again, the Venezuela cargoes, structurally, they don't improve the refining margin because if I have to assume that we are buying the Venezuela cargoes at the same, let me say, fair discount, fair value that the Colombian Castilla, sorry, the Mexican Maya or the Canadian heavy oil. That is theoretical, of course. But if there is more heavy oil in the Atlantic Basin, I mean, from Venezuela, from Canada, from Colombia, from Brazil, from Mexico and so on, the equation supply/demand of heavy oil is not so tight. So the discounts are higher.

So let me say that not because 1 or 2 cargoes are coming to our refining system, but because there are more heavy oils thanks to the Venezuela recovery. And I think that is important to see that Venezuela in social and economic in production terms is starting to recover after January were a new opportunity for Venezuela started. So I have to assume that in some way, having a good access to heavy oils is good for our refining system. Thank you, Sasi.

Our next question comes from Alastair Syme at Citi.

Josu Jon, I wanted to ask about biofuels. I think from memory, your biofuels investments are based on a 15% hurdle rate and a EUR 275 tonne of HVO versus feedstock I just really wanted to confirm those assumptions and ask with current margins, I guess, around 5x that level, if that's having any impact or discussion in Spain about how RED III gets implemented?

Thank you, Alastair. First, I didn't say before that in this premium, a part of this premium is also coming from the bio component that nowadays that is included in this premium. And as I mentioned before, it's significant. I mean, when we prepare the budget of the year, we assume, roughly speaking, for this year that the HVO minus UCO margin could be at around $850, $875 per ton. And those figures, roughly speaking, the margin for this year, I mean, we have to take into account that Puertollano is starting the production this week. So I mean, we missed from January to April, the Puertollano's production.

The EBITDA for this biofuel industrial business could be at around EUR 90 million. And we have to add another EUR 25 million from the trading area and EUR 25 million from the client renewable fuel EBITDA. So roughly speaking, we had budgeted EUR 140 million for the bio business as a whole, I mean, taking, let me say, the comprehensive view of the business for this year. We have to take into account that today, we could have EUR 570 million, roughly speaking, of capital employed in this business. That is important.

You know that when we talk about EUR 570 million, we are taking the C43, I mean Cartagena, Puertollano, plus what is now in the investment pipeline in the Ecoplanta and that is, of course, still producing. If we take the average as of today, so it could be $1,450 per ton of HVO minus UCO. At those prices, roughly speaking, the industrial EBITDA, I mean, if we maintain this average over the whole year could be at around EUR 220 million, roughly speaking. And if we include trading plus the commercial side, we will be talking about EUR 270 million of EBITDA. That is, roughly speaking, almost close to half of the capital employed in this business. So that is the best picture I could provide you today, Alastair. Thank you.

Just to jump, I mean, obviously, the return on investment that's -- the return on investment of that's huge. And does that provoke any discussion in Spain about RED III?

Discussion about RED III, yes.

Well, just implementing, making?

Alistair, you are right. I mean let me say that there is a road map to increase this demand that is mainly linked to mandates in the framework of the RED III. I mean, if we take -- I don't have all the figures in mind, Alastair, Alastair, sorry. But if we take the potential demand in Europe this year could be a 30%, 35% higher than the demand we had last year due to the application of European directive. On top of that, we could expect some additional impacts coming from the change of the concept of the double counting in Germany that they are also to increase the real demand and so on. So on the other hand, you are going to have also, I mean, new capacity entering in the system that in some way is going to balance all that. We have to take into consideration, Alastair, that the price of the HVO is in some way depending on 2 factors.

The first, we can't forget that the HVO is also competing with the mineral diesel. So there is a component coming from the mineral diesel that is also, in some way, contributing to forming the price of the HVO and you have a premium delta that comes from, let me say, from the nature of the bio market. So in this sense, about RED III. I think that increasing the mandates of RED III could, in some way, increase this delta. From the Repsol point of view, let me remind you that with the new plant of Puertollano, we are only providing a 70% of our own sales with our customers of biofuels. So we could have even in a prudent way, some kind of room to increase a bit our production, taking, let me say, a limited risk. Thank you, Alastair.

Our next question comes from Michele Della Vigna at Goldman Sachs.

Congratulations on the strong results in such a volatile environment. I wanted to ask 2 questions, Josu Jon. First of all, I was wondering if the current better macro environment makes a potential liquidity event over your E&P business more or less likely. On one side, you will probably get a better valuation. On the other one, the company is able to generate a higher free cash flow in the near term. So I was just wondering how you're thinking about that.

And then second, perhaps a bit of a difficult and unfair question. But I was wondering, do you have in mind a number of months whether if the Strait remains closed, you would end up finding it difficult to have enough feedstock to feed into your refineries. Clearly, this is not just about your refiners. It's more about the global balances. But do you have in mind a kind of duration that would really start to put the feedstock to the refining system at risk of shortages?

Michele, going to your first question, I mean, I'm going to be crystal clear about that. Now I'm not in a hurry to jump into a liquidity event in this context. We have, and let me say that the 2 partners of the business, Repsol and EIG, we are fully aligned on this perception. In technical terms, we are fully prepared. All the -- I mean, reporting, adaptation to SOX, I mean, all this, let me say, this burden, we have to work in to prepare the company to be prepared to go to the American market. All that was done.

But going to the fundamentals, I mean, I think that we are very comfortable in this 2026 year, not jumping into this liquidity event. I try to elaborate. We are convinced that the upstream, the quality of the upstream we have and not because the commodity prices and so on is better than what we had 3 months ago or 6 months ago. I mean, with Venezuela derisked with any significant increase showing to the market that we are increasing the production -- oil production in Venezuela with all the support of Venezuelan government and all the support also of the American authorities.

With seeing that the payments of the gas we produce in Venezuela to help to stabilize the country, they are -- got in a regular and good way with Alaska producing in a good way. With Quokka, the results we are seeing in the wells in Quokka in Alaska, giving us new expectations about Alaska, preparing the FID of Pikka 2 for the beginning of 2027. I mean when we take all that, the perception we have is that, I mean, decoupling, the commodity scenario, we are going to have a better upstream in 3 months, in 6 months and probably in 1 year on from now.

So if we take this analysis, I'm not saying that is right. I'm saying that is our analysis and is our expectation. So we are comfortable in the current situation. And let me say that we are not going to jump to a liquidity event in the short term, Michele. Going -- and I mean, the better valuation, you know the M&A world probably as far as I know or better probably. And you know that -- I mean, these temporary circumstances are not changing in a dramatic way the valuation of our business because an investor is seeing the long-term view of the business. So we are improving the fundamentals. So I think that this view is in our mind, more important than taking, let me say, the opportunistic advantage of seeing the oil price high to jump into the market. So that's our view.

Going to your second question, I mean, probably -- and I have had the opportunity to talk to most of you in -- most of you, I say the analysts you are today following this conference in a personal way over the last 8 weeks, even when we were -- most of you were here in Madrid and we were having a coffee after the Capital Market Day and so on. And you know that my view has been, let me say, I have had from the very beginning, a concern about what is happening in the market related to the situation in the Middle East.

I mean -- and I'm going to say that quote of "never say never". I think that what we are seeing in the market is so disruptive. I mean, it's unprecedented that we could see, let me say, disruptions that probably we haven't experienced in any time in our lives. Saying that, we are more protected. I mean I'm not going to say never, but we are more protected than others, Michele. And the reason is, first, because, I mean, in logistic terms, we are fully dependent on the Atlantic Basin, North America, Latin America, West Africa and a bit of Northern Africa, Algeria and Libya and a bit of North Sea.

So we are, let me say, in the more robust and safest part of the supply chain. I could imagine a war with a crude oil disruption, yes, because, I mean, we are missing probably today 11 -- I mean, following your company owned estimations, 11 million, 11.5 million barrels a day, adding crude oil plus products. And I mean, we can't sustain the world situation. So we have to -- if this situation goes on, the only solution is the destruction of demand. And probably, we are going to see, in this case, you are analyzing, I mean, the -- and/or moves that could remain closed for more time. Probably the demand is going to show some kind of elasticity to price.

So in that case, perhaps countries or areas, and I think mainly in Asian countries, they could have more difficulties to get the supply, not only because of the logistics, also because of the price because, I mean, today, we are seeing countries like Pakistan, Bangladesh, Philippines and some others that they have real difficulties to provide or to have the oil. So I think that we are not going to suffer this oil restriction.

And because we have a strong refining system, and I'm not only talking about, of course, Repsol, but in Spain, I have to -- I only have positive words to my competitors like Moeve, ABP and the other companies with assets in Spain or Galp in Portugal, I think that in the Iberian Peninsula, we have a real privileged situation to resist the situation of guaranteeing the supply in a better way than some other countries in Europe. Saying that, I mean, I can't say never because it's going to depend on the evolution of the situation.

Our next question comes from Alejandro Vigil at Santander.

The first question is in continuation with these comments about this second energy crisis in 5 years. In the previous one, there were several European countries taking intervention is view, market intervention, price caps. If you are seeing a similar potential risk of market intervention in this context? That will be the first one. And the second one is about the blackout in Spain last year. How is the situation in terms of potential compensation or which is the amount you are claiming insurance? What can you tell us about that?

Alejandro, thank you so much. I mean, you mentioned the previous crisis of 2022. First, I mean, let me say that the nature of both crisis is fully different, mainly for our market, for Repsol because in the Ukrainian crisis, Ukrainian invasion crisis, better said, we didn't lack in Europe a single drop of oil products over this crisis because all the Russian products were diverted towards China, Asia, India, I mean, some other geographies. And now what we have is a real problem of supply, a product restriction.

Remember that at that time, you perfectly know because you are a Spaniard. In November 2024, there were proposals at the Spanish Congress to reintroduce similar mechanisms for the energy sector from 2025 onwards. And these proposals, they didn't succeed because they lack the parliamentary support in Spain. In the European level, remember that at that time, there was some kind of approval of some kind of windfall tax that was called contribution. And we are not seeing at the moment a real aim to approve such a measure in the European level. But let me elaborate perhaps a bit more.

We are now in Spain, as I said to Michele some minutes ago, we have reinforced supply system, thanks to companies like Repsol, Moeve, ABP, Galp. That's Galp in Portugal that invested hard in the refining system. So in the case of Repsol, we have invested EUR 15 billion in our industrial business in Spain since the financial crisis of 2008. And on top of that, I have to mention that we have invested more than EUR 1.4 billion in the last weeks to guarantee the supply of kerosene to guarantee the Spanish tourism season.

I mean if you suffer the losses from time to time, and every time you have profits, you suffer from confiscation. I mean you are not going to invest anymore, of course. You are not going to invest in working capital to guarantee the supply if you don't have the incentive of profits, the legitimate incentive of making money. So it seems to me that introducing an extraordinary levy on the energy sector will be not only unjustified and counterproductive. I think that it will undermine the security of supply and erode the competitiveness of European industry at this critical moment.

I mean, if we take also into account that over the last 15 years, at 20% of European refining capacity has been shut down or idle. I mean, a new levy will accelerate this trend, increasing the dependence on imports and in some way, also reducing the security of supply. So from my point of view, this kind of debates, they create regulatory uncertainty. They divert resources away from investment. And also they put at risk the projects we need to decarbonize our industry and our economy. And of course, the risk is worsening the risk of security of supply in coming months in Europe. So I tend to think, Alejandro, that this kind of confiscatory levies are not going to appear this time, neither in Europe nor in Spain.

Going to your second question about the blackout that you know that is a trending topic in the Spanish media these days. I mean we know exactly, I mean, what the consequences of the blackout were for Repsol. Remember that we talk about different incidents, a first blackout impacting in Cartagena, another disruption, nothing to do with that in Puertollano related to a distributor. I mean, if we go to the major blackout on April 28, 1 year ago, which shut down our operations for days at 5 refineries and 3 petrochemical sites.

Remember that I explained before that we experienced a similar event in 2016 in Bilbao in the Petronor refinery. And in 2022, the Spanish Supreme Court issued a decision confirming full compensation for Repsol's affiliate Petronor that was EUR 18 million for the 12-minute blackout we suffered at that time that stopped our operations in the refinery for 4 days, and we were fully compensated. I mean, roughly speaking, this EUR 18 million is close to the impact on each of our refineries from the blackout we suffered in April. We estimate a recoverable amount of EUR 105 million in the legal claim we are entering in.

So we are fully committed, Alejandro, to seeking legal accountability from those responsible for these events. And we initiated this legal process last week. And I mean, before entering in any lawsuit, the law requires the opposite party to be invited to seek a settlement. And in this sense, I mean, last week, Repsol already was complying with this legal requirement, and we sent formal notices, what is called bulla faxes of access to Red Electrica and to the distributors with which our industrial centers, they have contracts.

And if this prior attempt dispute resolution is not satisfactory, Repsol will formally file the corresponding lawsuits to all these companies. And let me say, I rely on the Spanish justice system. I believe we have a solid and reliable judiciary. In the end, we will be compensated as we were in the Petronor case. But let me say, and I finished Alejandro, that probably the court task may be somewhat more complex this time because the regulator, the CNMC, didn't fulfill from my point of view, its duties in an efficient way because I have the impression that the regulator, the CNMC has applied what is called in Spanish, the la teoria del ventilador, we could say describe that in English as an scattergun approach.

And it has mixed very serious issues that affected the supply allegedly caused by the system operator with dozens of alleged deficiencies over a 2-year period. And all that is creating confusion. Perhaps that is what the regulator intended, I mean, to give the impression that it's distributing blame. I mean, however, a technical reading makes the responsibilities much clearer. So again, we have a solid judiciary. Spain is a democratic and solid state where the rule of law works. And I'm convinced that the truth will prevail and Repsol will be at the end of the road, fully compensated.

Our next question comes from Guilherme Levy at Morgan Stanley.

Maybe showing the refining crude procurement debate, could you perhaps even if just qualitatively, share with us how much of your crude supplies currently come from purely spot transactions versus how much they are coming from perhaps the benefits of your long-term relationships with different players in LatAm because I wonder if that's also playing a role here in your ability to source crude maybe better than peers. And then secondly, thinking a bit more about upstream, perhaps pick your brain about short-cycle investment opportunities that you could now pull the trigger on in light of the higher oil and gas price environment?

Going to the refining, roughly speaking, 80% of our supply comes from long-term contracts and 20% is spot. But I mean, saying that we don't see -- I mean, that is not our mainstream case. We don't see any kind of concern to supply our refineries. I answered before, I think that it was to Michele. I mean we could see disruptions. I'm not going to say never because things could be worse. But I mean, in the current situation, I think that price is going to be the concern. Price is going to be a problem, but we are going to be able to supply our refineries, I mean, in our central case in a normal way.

Going to the upstream -- only -- I mean, you mentioned that we have short-cycle opportunities to invest due to these prices. I mean, you have 3 ways, let me say, to increase your production in a structural way, first, M&A and today is not the best moment to buy. Secondly, exploration. Exploration, the results are going to come. And we continue exploring as we demonstrated with the Alaska a bid where we were granted in 43 new leases, new licenses.

And the third one is the unconventional. And of course, in the unconventional, we are taking flexibility to improve our position. So if we take the figures of the first quarter and we compare with what we have over the whole year, we are going to increase in 22,000 barrels a day our unconventional production, but you have to take into account that there are 2 effects here. First, because the cold weather probably we were producing 10,000 barrels a day less in the first quarter because the cold we have in Marcellus and Eagle Ford and the increase of new parts that we are going to take advantage of them to increase our production over the year.

All in all, 22,000 barrels a day of increase over the whole year in the unconventional, if we compare with the first quarter. If we take that, we take the Peru incident, we take the ramp-up of Leon-Castile plus Alaska that is going to come plus Lapa South-West for that reason, we are quite comfortable with the guidance of 560,000, 570,000 barrels a day for the whole year. Thank you, Guilherme. And today, I mean, this morning, that is not -- I'm not going to extrapolate today's production to the whole year. But this morning, we are producing 570,000 barrels a day in our system.

Our next question comes from Fergus Neve at Rothschild & Redburn.

Two for me, if I might, please. Just first on chemicals, you talked to a tighter petrochemical market in your slides. Could you just give us any color on how the chemicals business has been performing this month and whether it's been able to kind of start capturing those margins, please? And then secondly, can I just ask what you're seeing in Iberia in terms of fuel demand at your retail sites given the current price environment? Do you expect to start seeing demand destruction if prices remain at current levels? Or do you think they need to move higher before you would see any meaningful destruction start coming through?

Thank you, Fergus. So going to your question, first, in the short term, the chemical business is performing in a bad way. And I tried to elaborate. And that is behind also the -- you could see the impairment we have introduced in a prudent way in our P&L this quarter because, I mean, the huge increase of raw materials, naphtha, LPG, energy, natural gas, plus -- I mean, we are not able to translate these prices to our customers. I mean, the plastic producers from the -- I don't know, the automotive sector, the food sector and so on.

So what we are seeing in the short term is a worsening of these margins because this short-term situation that has, in some way, pushed us to be prudent in terms of the book value of the chemical business in our company. Saying that we are fully focused on putting in operation the new projects that are going to give us additional margin, the ultra-high molecular weight polyethylene plant in Puertollano, the derivative chemical business in Sines, plus the electrification of crackers, as I mentioned before, plus the splitter of propylene in Petronor that is starting this second quarter its operation.

With all the cost measures, improving the logistics and so on, we are enforcing. I mean, yesterday, we have the Board meeting, and I maintain my commitment to the Board yesterday that in 2026, we aim to have 0 EBITDA, a neutrality of EBITDA in our business, in our chemical business. And we aim to be positive in our operational results in the EBIT in 2027. So we are fully focused on that. And when we go to the Iberia fuel demand, what we are seeing in the first quarter and in March and in April is an increase of a figure that is close to 10%, 10% in the first quarter and 3%, 4% in April, roughly speaking.

And that is curious, Fergus, service because it's counterintuitive. But remember, I don't know what is going to happen. So I don't want to -- I don't have a crystal ball. But I only introduced a variable in the debate. We have Spain received 100 million visitors a year. We are after France, the second country receiving visitors in the world and in revenues, the second one behind the U.S. So I think that we are going to see a twin phenomenon this summer in Spain. And I don't know what is going to prevail. I think that the global tourism probably is going to suffer because, I mean, aviation prices, lack of security in the world and so on.

But on the other hand, Spain is a tourism destination more secure, safer than some others. And it seems to me that many Northern European citizen, they are going to take the decision instead of going, I don't know where, and you could imagine places, and I'm not going to mention any country to come to Spain. So we could have a positive effect on the Spanish tourism. I don't know what is going to prevail. But taking into account this reflection, we don't see today a reduction of volumes in our Iberian business. What I'm saying for Spain, I mean, it's also replicable for Portugal that is, I mean, as attractive as Spain in tourism terms.

Our next question comes from Henri Patricot at UBS.

Two questions, please. The first one I wanted to ask on Venezuela. Good to see the progress with the payments for Cardon IV. I was wondering if you have had any more discussions regarding the payments for the past production over the past year in particular. And secondly, coming back to a question around short cycle potential upside due to production. I wanted to check on Libya, what's your latest outlook on the production potential in near and medium term?

I mean, Venezuela, I'm going to be crystal clear about that step by step. Now we are fully committed to collaborate, to contribute to the recovery of Venezuela. And our main contribution to be -- to recover Venezuela taking advantage the opportunity we have in our hands is first, to stabilize the gas production. We are going to increase up to 10% in coming months, thanks to our debottlenecking process, the gas production in Cardon.

Of course, all that under the agreement we achieved 3 weeks ago about the sustainability of this production, that means that this year, we have a clear commitment from PDVSA to receive the cargoes that are going to pay the full gas we are producing in Venezuela. And in Petroquiriquire, last week, we signed an agreement where as paying agents, Repsol, we could be able to manage the oil production, of course, paying the royalties, paying taxes, paying the OpEx and CapEx. Petroquiriquire needs to increase the production and having a percentage -- a fair percentage for the service that the operators, the shareholders, PDVSA and Repsol will provide to the Petroquiriquire assets.

So that means more cargoes to be paid and increase in production, more taxes. And royalties for the country, a contribution to the recovery of Venezuela and the social and economic recovery of Venezuela, the political stabilization in a win-win strategy. From my point of view now, and of course, we know what is the debt we have with PDVSA. PDVSA knows that. I think that, I mean, a time for that will be open in the future, no doubt about that. But now from our point of view, it's time to do what I mentioned before. And if Venezuela recover from the current situation, if there is any higher production, more revenues, I'm sure that we are going to find windows of opportunity to talk and to try to address this question.

Going to the Libya, I mean, Libya, remember that this quarter, we have been producing 42,000 barrels a day, even taking into account that we have an event of 2, 3 days, an operational event in a pipe that is -- I mean, transporting the crude oil from El Sharara to Zawiya and the refinery in the Libyan Coast. I mean, 42,000 barrels a day could fit, roughly speaking, and I could -- I mean, perhaps make a mistake with the figure, with 320,000 to 325,000, 327,000 barrels a day.

And the best expectation I have today gross. I mean, the figure I mentioned now is gross that we could finish 2026 with 350,000 barrels a day. That means an 8%, roughly speaking, of the current production increase. That means that we could be producing something net Repsol 45,000, 46,000 barrels a day in Libya. So an important improvement comparing with the 32,000, 34,000 we produced 2 years ago. On top of that, connecting new wells, of course, is the magic for getting these figures.

We are exploring. We are now engaging in an appraisal drilling well in Libya. And on top of that, you know that this quarter, we were awarded with 2 new exploration opportunities, one of them onshore in the Sirte basin and the second one offshore in front of Benghazi in the east part of Libya. So again, we rely on Libya, stability is there. I think that the job that -- I mean, General Haftar and the Libyan Army is developing, I mean, to stabilize the country to -- I mean, to reduce over the last year, the impact of any security disruption in the country, including terrorism and so on.

It is very important, not only for Libya, not only for the stability of the country, but also for the stability of Europe and the Mediterranean basin. So we rely on Libya. And I think that we are going to have in the country, I mean, good news step by step in terms of political and social stabilization.

Our next question comes from James Carmichael at Berenberg.

Just wanted to come back on Alaska for a second. I was just wondering, obviously, Pikka looks to be going well. Just wondering if you can provide a bit more detail on the Quokka appraisal, the operator's commentary seem to indicate some positive results there. And obviously, you flagged winning sort of just over 40 exploration licenses. How important, I guess, do you think Alaska could be to growth going forward? And then just coming back on refining, not to sort of underestimate the achievement. But in terms of that 25% increase in kerosene production you flagged February to May, I mean is that as far as you can push it? Or is there potentially sort of more upside if you see that as the right way to go further in the year?

Thank you, James. I mean, Quokka, the test of the well was really very, very positive. I think that the production was at around 2,800 barrels a day that for a test is an impressive figure. I mean it's perhaps too early to comment that. But our perception today is that in gross production, Quokka is a new Pikka 1. I mean what we have in our hands in Quokka is something equivalent to a Pikka 1. If we take into account -- of course, we'll have to drill new wells to maintain the plateau in Pikka1 in coming years and so on. But we take that.

We take what we are seeing in the prospect of Pikka 2. Pikka 2, we are working, in fact, in the FID, the preparation, the engineering preparation of the FID. But of course, our approach fully shared with Santos is that -- I mean, it's important to analyze to see the behavior of the production of the wells of Pikka 1, I mean, to incorporate to use all this information to improve the engineering of Pikka 2.

When we take Pikka 1, Pikka 2, where we take FID next year plus Quokka and we put and project this development. I mean, we are seeing in 2032, 2033, a gross production at around 150,000, 160,000 barrels a day in Alaska. So where we retain a 49%. So in some way, Alaska is for Repsol could be -- let me use the term, I know that perhaps could be a bit -- I mean, big words, but a bit a company maker for Repsol because what we are growing the way we are growing -- we are going to grow in Alaska is going to add a lot of value to our company.

I mean, I prefer not to say, not to answer to your question in front of my refining team because when I asked to them 4 weeks ago, they developed a huge effort to increase enough 15% the production in Coruna and Petronor. And when I ask to them about going on with this effort, they answer, Josu Jon, that is impossible. I mean we are achieving the limit. 3, 4 days ago, this extraordinary team came to me saying, we have been able and we are going to be able in May to increase in an additional 10% this production.

That means that all in all, we are going to increase in at 20%, 25% the previous production we have. So now my answer is no. We had -- and we got the limit because, I mean, in technical terms, it's not easy. Let me say that we increased the logistics. In operational terms, we changed things and so on. But I mean, 95,000 barrels a day of kerosene, it means that is a figure close to 12%, 13% of our total production is a very high figure. So my answer will be we can't do more. But again, we are going to do our best to increase this figure, James.

Our next question comes from Nash Cui at Barclays.

Two, please. The first one, you delivered very strong trading results in Q1. I wonder if you could provide some color on the trading performance in April and perhaps some of your expectations for Q2, please? My second question is, Josu Jon, I agree we are in a very volatile environment. But could you just update us on Repsol's current oil and gas hedging positions and how the current volatile environment could lead you to change your hedging strategy?

Thank you, Nash. I mean, as far as I know, so April, I don't, of course, talk about the whole second quarter. April is going to be close to March in terms of solid results in trading. And the second quarter probably because it's going to be probably even better than the first one. I'm talking about the trading of liquids because if we go to gas, you know that the gas trading business of Repsol is fully impacted by the American winter. So you know that January, February, depending on weather, we captured a lot of positive margins because we are able to replace the gas from Canaport towards the New England area, capturing the high margins in the area.

So as always, gas is going to be lower in the second, third quarter and fourth quarter is going to depend on the December weather. And liquids, probably second quarter are going to be even better than the first one. Hedging, we don't use to hedge the oil. The only exception we have.

[Audio Gap]

$2 per million BTU, roughly speaking and 5.2 or something similar as a call. And we have a similar color covering 20% of the 2027 production with no cost, but only related to Henry Hub production. Thank you, Nash.

Our next question comes from Matt Lofting at JPMorgan.

Can I just ask, I mean, obviously, the refining environment is exceptionally volatile. When you look at April, perhaps as an example, could you share a sense of the range in the realized margin that you've seen around the sort of the average that you mentioned earlier, if the sort of the daily range is too volatile and too wide, perhaps, for example, is a 5-day moving average or whatever you think is most appropriate?

And then second, I just wanted to ask you on cash flows. Generation in operating cash flow in the first quarter is very, very strong. I just wondered if you could share the extent to which there's positive timing effects in there, perhaps linked to inventory gains that we should be aware of as we think about the cash flow trajectory for the rest of the year.

So Matt, I mean, it's not -- I mean, I agree with your point about volatility, mainly if you analyze the margin indicator, then day after day, when we see the whole picture of the margin, I mean, the indicator plus the premium is not so volatile. So I'm going to give you the real figures. April, we have an indicator of $12 a barrel and a premium that is going to be at around $15 a barrel. So that means that we could have $25, $27 a barrel for the whole system.

And some days, we have seen -- and I mean, probably I have to dip a bit more on -- to dive -- sorry, a bit more on that. But some days because the decoupling between the physical Brent and the financial one, we saw strong decreases of this refining margin indicator. But those days, in real terms, the premium we were capturing was significantly higher. So all in all, I mean, there is some volatility as always, but we are seeing a quite constant margin in April that all in all, as I mentioned before, could be at around $12 a barrel indicator and $15 the premium.

And we are entering May tomorrow, I mean, under this scenario. I don't know what could happen. It would be great, I mean, to see some kind of because, as I mentioned before, we could have concerns about the supply and so on worldwide. But the situation today is there. Cash flow, and you are right, the cash flow generation in first quarter was high. You know, and we were very transparent about that, that we took advantage of -- to increase our working capital.

First, in a physical terms, let me say that we have fulfilled all the capacity we have to store crude oil products in our refining system. And I mean even contracting new capacity and so on, that means that it's not going to be easy for us to increase the physical exposure over the year. I mean the working capital is going, of course, to evolve depending on the evolution of the price, and that is not in our hands.

But if we -- I mean, decouple this effect that is, of course, important to guarantee the supply of our customers in this complex and volatile time, we could think that the inventory effect is not going to have any negative influence over the year in terms of tons of volume. I mean, we are not going to see changes and the changes could be only positive, that means or neutral. I mean, maintaining the current storage or reducing the level of physical storage depending on the evolution of events.

If we talk about prices, Matt, I mean, I don't -- I can't give you a clue because that is going to depend on the evolution of crude oil price and product price. And that is not in our hands. But I could imagine that the cash flow from operation is going to be pretty good over the year. As I mentioned before, I'm not going to give you a guidance because I'm not able to do that. But remember, we had something in between $5.5 to $6 in an environment where we were talking about $7.5 a barrel of refining margin and $1.5 of premium for the whole year and $65 a barrel for the Brent oil for the whole year.

So if you take the sensitivities that you perfectly know, of course, Pablo and the team will be ready to work this figure with you. And you take the consideration I developed in this conference, probably you are going to have some kind of real clue about the cash flow from operations for the year that, again, is not going to have any negative effect in terms of inventory coming from the volume side. If we talk about prices again, I could give you additional clues. Thank you, Matt.

Our next question comes from Paul Redman at BNP Paribas Exane.

Yes, two questions. First one just on CapEx. You've guided to EUR 2.7 billion for the year on a net CapEx basis. I just wanted to ask how much divestment or acquisition you're including in that number? And then secondly, Accelerate EU has come out. I want to see whether you're getting any -- or having any conversations with governments about -- it sounds like you're running as hard as you can around jet fuel, but whether there's any more pressure on Repsol from governments to see if you can go further.

Thank you, Paul. So I mean, the exact figure I give in the Capital Market Day, you are right, it was EUR 2.7 billion. I mean I'm working under the range, EUR 2.5 billion. I mean that's in the middle, I think EUR 2.5 billion, EUR 2.7 billion, as you mentioned, could be today our best approach to the net CapEx of the year. There is no any disposal or acquisition included in that figure. That means that the only, let me say, inorganic thing in this figure is the rotation -- the recurrent rotation of the assets of low carbon. And let me say that it's working in the right way.

If you analyze the cash figure we released this morning with the papers of the results and so on, you could see that even the renewable business, the low carbon business has a positive free cash flow this quarter because this model of cash flow from operations plus investment, we are growing in this business, of course, minus the -- in this case, the cash in coming from the outpost rotation. So now we are engaged in the final part of another rotation of 700 megawatts of assets in Spain, and we expect to have a positive result of this process. So things are going to work in the right direction, and we are comfortable with the EUR 2.7 billion for the year net CapEx you mentioned before.

We have a very transparent direct and positive dialogue with the Spanish government because, of course, the Spanish government knows that -- I mean, in any European country, jet is important. But I mentioned before, if you analyze the percentage of the gross domestic product that tourism represents in Spain. And if we go to areas like Balearic Islands or Canary Islands that are fully dependent on aviation, I mean, that is, let me say, in national terms, is fully strategic for Spain, the jet production.

We have a very positive dialogue with -- in this case with the Environment Transition Ministry and with the Vice President that is leading this ministry. And we are informing them of all this evolution before we are developing the robustness of the refining system in Spain. And in this sense, again, as I mentioned before, I can't say that the game is over because it's not dependent only on Repsol. But Repsol today is ready and could say that we are going to provide all the jet that we provide to our customers last year over the whole summer. And we have an excess of 30% of this figure that we are ready to work in terms of trying to solve another problems that could appear.

And when I say another problems, I'm talking of, for instance, I mean, some other operators that they could have a gap between production and demand or what could happen, as I imagine, a fight, Birmingham Malaga, transporting British tourists to Malaga. That is quite normal in summer, nice city Malaga. And I mean, if we have the product in Malaga to provide the fuel or the refueling this company needs to go to Birmingham is okay. But perhaps this company could have in Birmingham a problem to be refueled.

So when I say that I don't know if this 25%, 30% of excess capacity is enough, I'm talking about that. It's true that now there are some kind of restriction in regulation in European level that every airport has to refuel a minimum of 90% of the fuel this plane needs for this flight. It seems to me that -- and we are talking with administration about that, that in European level, probably they have to change this rule because otherwise, we could have problems in some European countries not able to fulfill or to enforce this rule. But again, Repsol is going to do its best to contribute to the Spanish society in terms of guaranteeing the maximum security of supply, not only with our customers, but also thanks to the efforts we develop to provide additional needs. Is that going to be enough? I don't have a full answer, but we are going to do our best in this direction. Thank you.

Thank you, Josu Jon, I'll put my Malaga flight.

I mean I'm from San Sebastian, but from the other side of the Peninsula. But again, Malaga is a fantastic destination. Thank you, Matt.

Our next question comes from Christopher Kuplent at Bank of America Merrill Lynch.

Just two more questions, please, and maybe a view as well. Josu Jon, you were mentioning potentially having to change definitions of indicators versus premium. I hope you don't. As long as you give us the transparency that you're giving us on both, I'm very happy with sticking to the existing definitions. And to that point, if I could ask one more question on your March data. You told us about the indicator being as high as $20 then. Do you have the data for how high the premium was in March that you were able to extract? That's question number one.

And question number two, sorry, a tiny detail, but just wanted to see whether you could give us some insight into the extra central costs that you have recorded in industrial EBITDA in Q1. That sounds like a one-off in your spreadsheet at EUR 250 million. But if not now, we can revisit after the call as well.

Thank you, Chris. So first, you are right. And again, I have to excuse myself because, I mean, the indicator is working in a normal situation. But what we are seeing is fully disruptive and it's not working. So we -- of course, we are fully transparent, Chris, and you have on top of the indication on the figures I could provide you here, you have the team of Pablo Bannatyne ready to work with you in terms of providing all the figures you need to follow what is happening.

In March, roughly speaking, the indicator was at around $20 a barrel and the premium was at around $10 a barrel. In the case of April, as I said before, we could be talking about $12 and $15, roughly speaking. So it's -- the total figure is similar in both months. And behind this $10 of indicator of premium in March is the 5.7 average I mentioned before. This extra negative central cost that we reflect in industrial, I'm going to try to elaborate. I mean this is happening every quarter. What is happening now, again, that because the price differences are so high, the impact in the P&L is significantly material this time. And for that reason, we have to explain that.

I mean, imagine that our refining is selling in March 30, the product to our service station network or to our trading business. And the refining business is, of course, taking the price of this product and what the market is defining that day. But because in March 31, the last day of the quarter, the product is still in a company included in Repsol Group, I mean, we can't -- in the consolidated figures of the company, we can't take this market price. We have to discount or to reduce the real price in the market till we are able to sell this product in the market. That probably is going to happen in the service station case in April 1 or 2 and in the trading perhaps 10 or 15 days later.

So that it's happening. I mean, it's a rule that is working every quarter. But this quarter because the high increase of prices, the effect of this, let me say, extra negative cost is included as a non-transcended operation that is included in the central cost of the industrial area. Be sure that this EUR 200 million, roughly speaking, EUR 250 million in March are EUR 250 million we take not only Spain, but also Peru, they are going to appear in the second quarter. And if they don't appear in the second quarter, it is because at the end of June, we are still seeing, let me say, a higher increase of prices. Probably that is not going to happen.

The central scenario is that this EUR 200 million, EUR 250 million of negative central cost plus an additional EUR 200 million that they come from the lag in the pricing for the aviation sector that you know that this industry is working with the prices of the month before are also going to appear in the result of April. And that is perhaps behind the comments that in a right way, some of you did this morning saying that probably the industrial area result, the adjusted net income was below the -- slightly below the expectation. If you add this EUR 450 million that are going to appear in the second quarter, perhaps you have an answer to your reasonable doubt. Thank you, Chris.

Thank you, Chris. That was our last question today. With this, we will bring our first quarter conference call to an end. Thank you very much for your attendance.

Good morning, ladies and gentlemen, and welcome to Repsol's Capital Markets Day. My name is Pablo Bannatyne, I'm the Head of Investor Relations. I would like to thank you for joining us in person today here in our headquarters in Madrid. A warm welcome as well to everybody joining us virtually this time. Today, we will present our updated outlook for the 2026-2028 period. This is a refresh of our road map following the progress achieved over the past 2 years. The event will be led by our CEO, Josu Jon Imaz, who is joined by Antonio Lorenzo, our CFO. The rest of the executive team is also attending this presentation.

This opportunity also serves to revise our financial projections under the new reporting model introduced with our full year 2025 results. Unless otherwise stated, all the projections shared today are presented under the new reporting framework. As a reminder, all the materials published this morning are available on our website at repsol.com. This is a live streaming event and the replay will be available once the session has finished. To make you aware of the logistics, the presentation and the Q&A session is scheduled to finish at 1 p.m. and this will be followed by Spanish wine.

And without further ado, I leave the word to Josu Jon. Thank you very much.

[Foreign Language] Good morning, everyone, and welcome to this fantastic city of Madrid, people coming from some other places in Europe or in America. I want to thank you all of you for joining us today. And also, I want to extend my thanks to people that is following now via streaming online. And let me start saying that I like to be very transparent and share with you that last week, I had significant doubts about whether today was the right moment for this Capital Markets Day. We were talking about that some minutes ago, [indiscernible]. And especially given the complexity of the current environment and I won't pretend otherwise. However, after careful consideration, we ultimately decided to move forward.

And the driving force behind our approach was that the belief about the Repsol robustness and the solid foundation on which the company stands. So in this challenging and ever changing times, we feel that it is especially important to demonstrate that Repsol remains resilient even under prudent scenarios. I mean, decoupling what is happening this week in the world. Repsol is well positioned for solid ground and is increasingly less dependent on a volatile external environment. We are confident that now is the perfect moment to showcase the strength and adaptability that define Repsol. So thank you once again for being with us today. And in this presentation, we are going to go on our progress over the last 2 years. And we are going to update the strategic lines of the company and the targets we have for 2027 -- 2026, 2027 and 2028.

To begin with, Repsol is today a leading, fully integrated multi-energy company with EUR 32 billion of capital employed and more than 80% of this capital concentrated in the Iberian Peninsula and in the U.S., our 2 core markets. We serve more than 24 million customers. We hold a 20% energy retail market share in Spain and Portugal, and we operate with a high degree of vertical integration in our company. After the strong delivery in recent years, Repsol is now a more profitable, sustainable and predictable company. Our integrated model and everything behind this diversified portfolio allow us to generate cash across cycles, providing resilience in lower price scenarios.

In Upstream, we reshaped over these years, our portfolio into a higher quality and more focused business. We produced at around 550,000 barrels of oil equivalent per day and increasingly concentrated in the U.S. and delivering higher margin and lower emission barrels. Our industrial area is anchored by our position as a Tier 1 refining system in Europe with around 50% of the total refining capacity of Iberian Peninsula and supported by a growing low carbon fuels footprint. In the Customer business, we are leading multi-energy retailer market in Spain and Portugal, with almost 3,800 service stations, and we have developed new streams of profit, and this business now contributes around 1/4 of the group's total cash flow from operations.

In the low carbon generation, the renewable generation, we have built a growing and profitable business with 7.5 gigawatts of operating capacity and a successful story of value delivery. And let me say, most importantly, Repsol is now a company capable of generating more cash and materially improving shareholder remuneration in a disciplined and sustainable way, something the market has recognized with Repsol leading the industry in total shareholder return in our sector in 2025. So over the last 2 years, 2024 -- sorry. In 2024, 2025, we remained fully committed to the strategic foundations of the plan we presented 2 years ago. And more importantly, we delivered on those commitments. We prioritize attractive and committed shareholder distribution, providing certainty and predictability to our growing dividend.

And this, while maintaining a strong balance sheet and protecting our credit rating with capital discipline, always at the core of our strategy, at the core of our plan. Over the period, we generated EUR 11.2 billion of cash flow from operations. We invested EUR 7.8 billion on a net basis, and we returned EUR 3.6 billion to our shareholders. The cash dividend increased by nearly 40%, complemented with share buybacks to reach the higher end of our strategic cash flow from operations distribution range. This strong delivery provides a solid starting point and more importantly, a high visibility on cash flow generation in our company.

Let me now walk you through our strategic outlook for 2026 to 2028. Starting with the macro environment that it seems to me that we are going to have a lot of questions after this presentation about the macro environment. We see better fundamentals in our 2 core markets. Economic activity and energy demand are expected to remain solid in Iberia, so Spain and Portugal and in the U.S., which together represent more than 80% of our total capital employed. Power demand is also set to grow strongly. The share of renewables in the generation mix will continue to increase, while natural gas will play a key role to stabilize the system for years to come. In addition, the decarbonization requirements for transport value chains will continue to drive demand for low carbon fuels.

Our planning assumptions are based on a Brent price of $65, a Henry Hub of $4 per million MBTu and a refining margin in our system at $6.4 -- $6.5 per barrel. This scenario is broadly aligned with the market consensus and forward curves prior to the recent geopolitical developments. Repsol is well positioned to manage volatility, thanks to the integration level we have and the diversification of our business mix. As in our 2024 update in February 2024, we have also run a lower scenario confirming our ability to deliver on our priorities even in a more stressed market environment. You can see in the slide the [ AC ] or lower scenario.

With this macro context in mind, over the next 3 years, we will remain fully committed to the pillars of our current strategy, adapting our road map to an evolving environment. We will continue to prioritize distribution in our strategy while preserving a strong balance sheet and CapEx flexibility. Our focus will remain on businesses and geographies where we can generate superior returns, where we have the right to win. The expected growth in operating cash flow will be supported by projects that are already on stream or close or near to completion. Higher free cash flow and distributions will be supported by the transition to a more normalized CapEx cycle. Low carbon investment will be moderated in line with market dynamics, always with our rigorous capital discipline and focus on areas where our right to win is crystal clear.

And finally, we will complete the transformation of our Upstream business open to new optionalities and a potential liquidity event. The business priorities that support our capital allocation are clear. Under this update plan, we aim to deliver cash flow growth with high visibility, consolidating our new business platforms and leveraging our strong position in Spain and Portugal. Upstream will continue to prioritize free cash flow generation. And this target, this aim will be underpinned by disciplined execution and an active management of optionalities, including a potential liquidity event and our current exposure to Venezuela. The Industrial division will remain a core cash generator for the company, strengthening competitiveness while further developing our low-carbon platforms in the Industrial side, I mean.

Customer will extend its track record of cash flow growth, consolidating an advantaged multi-energy model through scale, efficiency and client-centric expansion and low carbon generation, we will transition our model towards self-financed growth in renewables following the build-out phase of recent years. The strength of our portfolio is reinforced by our advantaged exposure to the Iberian Peninsula and the U.S. because you know that Repsol is an integrated energy leader in Spain and Portugal, where we have 50% of our total capital employed, and we generate more than 55% of our total cash flow from operations. Both countries, Spain and Portugal, are among the fastest-growing economies in Europe, which translate into resilient and growing energy demand that has consistently outperformed our expectations over the last years.

At the same time, the Iberian Peninsula benefits from structural advantages in low carbon generation, world-class solar and wind resources, combined with increasing power demand that provide the foundation for disciplined self-financed growth in renewables. In the U.S., we have 30% of our capital employed, and we generate already in that country more than 20% of our operating cash flow. This market provides a compelling backdrop for value-driven Upstream execution. While it's growing power demand and resource base support the development of our renewable portfolio in that country. Our position across core markets underpins the high visibility of our cash flow growth, which I will now walk you through.

Under our planning assumptions that you can see in this slide, cash flow from operations is expected to increase by 20% compared to 2025, reaching EUR 6.5 billion in 2028. This improvement, I mean, under the same, of course, commodity price basis is grounded on new projects coming on stream and a balanced exposure across commodities and market dynamics. The Upstream division, the conventional Industrial business and Customer will be the main sources of positive cash generation. Low carbon platforms will progressively increase their contribution as previous investment begins to deliver cash flow.

From a geographic perspective, by 2028, approximately the 80% of cash flow from operations of a company will be generated in OECD countries with Iberia and the U.S. as main contributors. The cash flow generated by our renewable fuels and power and gas integrated value chains will increase from the current EUR 0.7 billion in 2025, I mean, to more than EUR 1 billion in 2028. To further reinforce our growth ambition, we have structured a comprehensive competitiveness improvement program expected to deliver EUR 500 million of pretax cash flow from operation per year from 2028 onwards, comparing with a 2025 baseline.

Our capital allocation framework remains broadly consistent with the framework we presented 2 years ago in 2024, adapting, of course, our investment plan to the features to the characteristics of the next delivery cycle. Our commitment to competitive and attractive remuneration remains a key priority. We will increase the funds distributed as cash dividends by 3% per year. And this will be, of course, as we mentioned, 2 years ago, complemented by share buybacks to reach a total distribution of 30% to 40% of cash flow from operation over the period.

We will preserve the strength of our balance sheet, ensuring our current credit rating. Our financial framework is defined to withstand even stressed market conditions. Net CapEx is expected to range between EUR 7.5 billion to EUR 9 billion, reflecting in some way a normalization of the investment cycle. We will retain flexibility within this range, depending, of course, on macro conditions and the maturity of the opportunity set, always preserving our distribution commitment. This plan, because I mentioned, as you could see, you could listen as I said, net CapEx term because this plan includes EUR 1 billion over the whole period of proceeds from portfolio management. The 3% annual increase of the funds that are allocated to dividends is written in stone. This will be complemented by buybacks, bringing total distribution to our target distribution range.

As a result of the capital reductions that are associated with these buybacks, the dividend per share will increase by 6% to 9% per year over the period. I mean, combining the 3% growth of the total amount of the cash dividends plus the reduction of shares coming from the buyback. And of course, all that is going to be subject to the operating cash flow variability and share price evolution depending on these 2 factors, we will have growth of 6% or 9% year after year. The investment plan has been designed to balance value-driven growth and capital discipline. We expect an average net CapEx, as I mentioned before, of EUR 2.5 billion to EUR 3 billion per year. This level represents, as you can see, a material reduction from the EUR 4 billion per year we invested in 2024 to 2025, reflecting a transition away from a period that was a period of elevated capital intensity.

We are, in some way, going to a normal cycle that if you compare, of course, with the historical cycle of Repsol, I mean, it's quite intensive in capital, but it's different of what we experienced over the last 2 years. Upstream will account for 1/3 of our annual investment as major projects in Alaska and the Gulf of America are already largely invested and the development of Campos 33 or Raia in Brazil will be mostly self-funded because the joint ventures now, as you know, they accounted by the equity method and the impact on consolidated CapEx and debt of this project will be limited. The share of industrial CapEx will increase to 40% to 50% of the company, driven by higher investment in low carbon, which is projected at around EUR 1.5 billion over the period. CapEx in the Customer division will represent 15% to 20% of the total investment of the company and low carbon generation will account to 5% to 10% of net CapEx.

And this reduction reflects the evolution of our renewables model towards largely self-financed growth, supported by operating cash generation and proceeds from asset rotation and tax leases. Geographically, approximately 90% of CapEx will be allocated to our 2 core regions, Iberia and U.S. and only a 7% of investment will be deployed in non-OECD countries, and we will maintain around 30% of investment in low-carbon businesses. This will ensure continuity of our decarbonization ambition adjusting capital intensity to value-driven opportunities and appropriate market conditions. All business segments with the exception of industrial low carbon are expected to be at least net free cash flow neutral over the next 3 years.

This includes low carbon generation division from the renewable power side, which will move into sales efficiency over the period with the business in Spain, generating already positive free cash. This balance profit highlights the diversification and resilience of our financial framework. Overall, we expect to generate EUR 9 billion of free cash flow over the period and in the lower scenario with low commodity prices and low refining margin. I mentioned before, the free cash flow remains resilient at around EUR 7.5 billion.

Let me underline that our plan is fully financed without placing pressure on the balance sheet. Over the next 3 years under our central scenario, we expect to generate EUR 18 billion of cash flow from operations that they are going to be complemented by EUR 1 billion of proceeds from portfolio management and a potential financial flexibility of up to EUR 2 billion. Shareholder remuneration is expected to total EUR 5.5 billion to EUR 7 billion in the central scenario or EUR 4.5 billion to EUR 5 billion under the lower case. CapEx will represent 50% to 60% of cash flow from operations with flexibility to adapt depending on macro conditions and project maturation. The ROCE is expected to reach 12% in 2028.

I will now walk you through the strategic priorities and metrics for every of each of our business divisions. We are going to start with Upstream. Repsol's Upstream today is the result of our successful transformation that we launched in 2019, which prioritize value over volume and leveraging on the flexibility of our portfolio and higher operational efficiency. We now have a linear more predictable and more profitable business with a focused presence in the U.S. and some other international key basins. Our resource base totals 4.1 billion barrels of oil equivalent of 2P and 2C reserves. Since then, we have reduced operating cost by -- since 2019, I mean by 13%. We have increased cash flow per barrel by more than 40%, and we have reduced our geographical footprint from 18 countries where we operate in 2019 to 10 producing countries today.

Importantly, we have achieved this -- all these targets while having reduced our emissions per barrel by more than 80% versus 2016 in line with our strategic target of going on decarbonizing our carbon footprint. This journey was reinforced in '22 with the incorporation of our strategic minority partner with a 25% stake. And for the next 3 years, more than 80% of investment will be allocated to the U.S., broadly split between conventional and unconventional assets. Production assets, they are expected to grow by 6% to 10% to an average of 580,000 to 600,000 barrels per day in 2028. So we have a growing history in our Upstream.

And this growth will be supported by the risk projects that are already producing or the case of Alaska that are close to first oil. These new barrels with a lower carbon content are expected to contribute around $30 of operating cash flow per barrel by 2028. And this is roughly twice the margin of the legacy portfolio we have today, including consolidated entities and joint ventures. Let me highlight that these figures don't take into account upsides such as Venezuela. So these figures, I'm presenting here in production terms and so on, they don't include the upsides that are going to come from Venezuela. And beyond organic growth, we maintain the optionality around a potential liquidity event, ready to pursue strategic transactions if and when opportunities arise.

In the U.S., we expect to invest EUR 2.5 billion, increasing production by around 28% versus 2025 to an average of 240,000 barrels per day in 2028. The U.S. continues to play a central role in our portfolio, delivering growth and value, underpinned by the ramp-up in the great state of Alaska and the Gulf of America together with an increasing contribution from unconventionals. The first phase of Pikka will achieve, as I mentioned before, first oil before the end of this month, reaching 80,000 gross barrels per day in the third quarter, I mean, there is a ramp-up phase in coming four months. And the project is expected to contribute 30,000 to 35,000 barrels per day by 2027 and 2028 net to Repsol.

In parallel, we will continue derisking of the current exploratory position we have in the region, in the North Slope region with excellent perspectives in Quokka and Horseshoe and subsequent development phases have the potential of doubling our production in Alaska through the next decade. In a conventional production, we are well positioned to capture the strong North American gas outlook maintaining scale and with a current breakeven below $2.1 per million of BTu. We will work to continue improving our operating model and upgrade this asset case.

Outside the U.S., our portfolio offers an attractive international footprint with material upsides. Production is expected to average 350,000 to 360,000 barrels per day by 2028 outside the U.S. I mean, including joint ventures. At the consolidated level, CapEx is estimated at EUR 0.5 billion in these international regions outside the U.S. until 2028. And this figure largely represents the CapEx incurred by our consolidated entities, including Libya, Norway, Algeria, Peru and operated assets in Bolivia. As most of the investment incurred by joint ventures will be self-funded by their own cash generation and nonconsolidated debt.

In Libya, let me underline the stabilization of the country. That is allowing us to reach last year our highest production level since 2012. In this context, we expect Libya to continue playing active role as a sustained cash generator for Repsol with relevant production, adding opportunities and increased exploration activity. Moreover, we are continuously improving the profitability of our JVs. In the U.K., the strategic alliance with NEO Energy and TotalEnergies positions the resulting entity as the leading operator and producers in the U.K. continental shelf. Over the horizon of the plan, our objective is to unlock value through operational synergies with disciplined financial execution.

In Brazil, the development of Raia, the former Campos 33 is expected to reach first gas in 2028. This gas project with a significant liquids content has the potential to supply 15% of the country's total gas demand and production is expected to reach a peak of 40,000 to 50,000 barrels per day in 2030 net to Repsol. Finally, let me underline again the figures presented don't include any acceleration activity in Venezuela, that is going to happen, but it's not included here. That is an upside of this plan. We have been operating in the country since 1993 and we are ready today to deploy resources and scale up operations fast and consistently. I think that a new and positive horizon goes open in Venezuela in January and the current legal framework opens a significant opportunity for Repsol to contribute to the recovery of Venezuela's oil and gas sector. And Repsol is prepared, is ready to contribute to the recovery of the country.

As a result of the activity -- of this activity, the Upstream division aims to increase cash generation supported by disciplined capital allocation and the addition of new high visibility volumes. The share of liquids in our production mix will reach 38% by 2028, consistent with the contribution of liquids-rich developments in our pipeline. We expect our reserve replacement ratio to remain around 80% over this period of 3 years. And this figure is going to be boosted by Venezuela as the new situation may create an opportunity to move forward with projects that have been on hold. So 80% is the baseline, not including Venezuela, and Venezuela could help us to increase this recovery of these reserves replacement ratio over the period.

At our commodity price deck, cash flow from operations will increase by almost 40% versus 2025. Over a period, the business will invest EUR 2.6 billion to EUR 3 billion and generate around EUR 4 billion of free cash flow. The cash flow margin of our volumes, including joint ventures, is expected to increase by 30%, driven by the new barrels coming on stream and an improved production mix with a higher liquids content.

Moving now to the Industrial division. Repsol operates a highly competitive industrial system, including world-class assets in Spain, Portugal and Peru. We have a Tier 1 refining system in Europe with 5 refineries in Spain optimized as a single one, and our operations benefit from resilient demand for transport fuels in Iberia. We have also become Spain leading producer of advanced biofuels reaching 0.6 million tons of production in 2025. Over the cycle, this division has maintained a sustained strong financial performance and this has been underpinned by a structurally healthy refining margins together with an ambitious plan to reduce emissions and transform our legacy complexes into decarbonized multi-energy hubs. The strategic lines remain focused on maximizing value in the conventional business and consolidating the renewable fuel platform built in Iberia.

To deliver on this, we keep working to reduce the breakeven -- increase the resilience of the chemical business and enhance the role of trading. At the same time, we will continue scaling our renewable fuels platform with a clear right to win while strengthening and expanding our Hinterland. Resilience and growth will be driven mostly through more efficient operations and increasingly competitive trading activities. We target an additional $0.6 per barrel reduction of the refining breakeven over the period by 2028, driven by increased energy efficiency, operational excellence, optimization and digitalization.

In Chemicals, the start up of the Sines upgrade in Portugal is expected in the third quarter of the year, reinforcing profitability at this point of the cycle by expanding margins through the differentiation of this business. The relevance of the trading business will increase within our portfolio as we continue to develop capabilities, expand our geographic footprint and increasing the use of optionalities in portfolios and value chains. As a result, the cash flow from operations generated by trading and wholesale gas trading is expected to double in the period compared to 2022.

Turning to the renewable fuels. Repsol is currently the largest HVO and SAF producer in Spain. We are -- in fact, we are already producing the 10% of the SAF produced in Europe. And we are one of the leading players in Europe. Our production is highly integrated with our refining, which provides advantage processing costs. More than 90% of our HVO volumes are marketed through our own commercial channels. Feedstock availability secured through the participation we have in Iberia West and our JV with Bunge in Iberia. Demand for this fuel is expected to increase strongly at an annual rate of 10% to 15% until 2030, accompanied by supportive price spread and attractive production economics.

Over the next 3 years, we will continue to strengthen and mature this position with competitive advantages to increase cash flow contribution and benefiting from a growing market supported by the regulatory framework in Europe. In hydrogen, we have a clear and robust business case from the projects approved and for the upcoming FID expected in the first half of 2026 in Tarragona. And beyond this project's perspective for further growth, we think that we have to evolve in line with regulation market and project-level economics. In circularity, Ecoplanta currently being built in Tarragona is a flagship project with its own technological complexity that positions Repsol in a leadership position in this emerging space.

It will be the first industrial scale plant in Europe to produce circular methanol and advanced biofuels from treated municipal urban wastage and that is going to create a high-value solution for hard-to-abate sector such as maritime transport. Over the horizon of this update, we expect industrial cash flow from operations to increase by 40% compared to 2025. And this growth will be driven by a higher contribution from low carbon fuels and trading the start-up of Sines upgrade and the efficiency and optimization measures across refining and chemical businesses. This division will continue to be a major cash contributor for the company generating approximately EUR 3.3 billion, EUR 3.4 billion of free cash flow over 2026, 2028 period. Around 40% of the CapEx in these businesses is going to be deployed in low-carbon platforms.

Production capacity of advanced biofuels is expected to reach 1.5 million tons per year by 2028 while renewable hydrogen capacity is expected to reach 0.3 gigawatts equivalent. Both segments will continue scaling through 2030. These revised targets reflect the slowdown and pacing of certain investments to ensure we meet our return threshold and to ensure that capital is deployed only where we can create value.

Turning now to the Customer business. Repsol is the leading energy brand in Spain and Portugal, serving more than 24 million clients, of which 11 million are digital across a network of 3,800 service stations. This division has a solid track record of cash flow growth and value creation, and we expect to maintain this growth pathway in the close future. Over the past 2 years, sales of product transport fuels recovered to pre-pandemic levels, non-oil margin increased by 21%, and our multi-energy offering reached 60% of our network. Further to this, we added over the last 2 years, 800,000 clients in power and gas retail surpassing the 3 million mark last November.

As a result, cash flow from operations increased by 32% over 2023 to EUR 1.2 billion and anticipating by 2 years, remember the target we defined for 2027 in our previous plan. To 2028, we will accelerate value creation under the same strategic guidelines, boosting profits and expanding our commercialization platform beyond energy. The strategy continues to rest on the same pillars, strengthening the core business, consolidating our multi-energy and multiproduct proposal and scaling new growth opportunities. To achieve this, we will leverage customer experience, digital, AI and of course, our people.

Core businesses remain the main source of cash flow in this customer business, of course, with a clear priority on protecting our leadership while enhancing efficiency and margins. We are going to continue growing in power and gas retail, supported by this multi-energy advantage, physical channels and B2B sales capabilities. Finally, our proposition will be enlarged through new businesses like e-mobility and the international expansions of the current lubricants business. Repsol has developed a very ambitious multi-energy offering that has been around the Waylet app with the aim of providing a differential service to our customers covering all their energy needs.

We have translated this commitment into a unique value proposition based on the strength of our brand, our cross-energy capabilities and unmatched customer access. Aligned with this ambition, Repsol, we have consolidated our position as the fastest growing power and gas retailer in Spain, and this growth has allowed us to have an operating cash flow of this business with a growth of 36% compared to the cash flow we have in 2023. Moreover, we expect to incorporate 1 million additional customers to this retail power business over this period, 2026, 2028, contributing to deliver a cash flow from operations of more than EUR 260 million in 2026.

In more mature businesses, we continue to identify and develop new opportunities in our service station network. The non-oil margin has increased by 21% versus 2023, thanks to initiative as the expansion of the company's retail business and the rollout of our digitally enabled cargo service. In parallel, we have significantly extended our offer of renewable fields through most of our network and NEXA, our 100% renewable diesel is already available in more than 1,500 service stations. And more recently, we have started the commercialization of renewable gasoline after starting production of this product at industrial scale. Looking ahead, we aim to maintain our market share in road fuels, continue growing in non-oil and further scale our multiproduct proposal. And by 2028, we expect to exceed 13 million digital clients, grow our multi-energy customer base by 30% and extend this alternative to the 80% of our total Spanish service stations network.

This strategy will allow us to reach EUR 1.5 billion of cash flow from operations, representing a more than 20% increase over 2025. To achieve this, we will invest EUR 1.4 billion to EUR 1.6 billion, roughly split between the legacy businesses and the new platforms, and we expect to generate EUR 2.4 billion of free cash flow, supported by the low CapEx intensity of these commercial businesses. Moving now to low carbon generation. This is a business that we have built from scratch following the acquisition of Viesgo in 2018. Nowadays, Repsol operates 7.5 gigawatts of installed generation capacity across a diversified portfolio of green, solar, combined cycles and hydro, mostly focused on Spain and the U.S.

In 2022, we incorporated 2 strategic and experienced partners in this business with a combined 25% stake. Over 2024, 2025, we successfully executed our business model based on rotating assets in late phases of development to crystallize value and limit our financial exposure to this business achieving more than 10% equity IRR. Moreover, we added 3.1 gigawatts of new renewable capacity over the period under operation and generated close to EUR 2 billion through asset rotation, project finance and tax credits in Spain and the U.S. In Spain, our right to win is clear, driven by strong local presence, vertical integration and a set of attractive optionalities like Aguayo II, that is a pump storage project or the Escatron plant to serve data center demand.

We will continue developing our premium pipeline with an industrial model, focusing on wind, self-consumption, storage projects, batteries on top of Aguayo's new pumping storage facility, hybridization and vertically integrated projects and always optimizing financial exposure through rotations. Over the next 3 years, Repsol will add 800 megawatts of new renewable capacity, reaching 4 gigawatts under operation in Spain in 2028. CapEx deployed in our Spanish pipeline will be based investing selectively on high return opportunities. We will also maximize the value of our combined cycles and explore alternatives to unlock attractive opportunities with our Industrial and our customer businesses.

This strategy will be executed with -- in Spanish case with our net CapEx close to 0 because asset rotation, I mean, we have a lagging effect coming from the last year, will offset the investment. To 2028, we expect to generate an accumulated positive free cash flow of EUR 0.6 billion in this business in Spain. In our international portfolio, we will maintain a strict capital discipline and control exposure to the U.S. In the U.S., we have a high-quality portfolio under development with up to 7.3 gigawatts with safe harbor conditions under the IRA framework. Investment will be concentrated on top-tier projects with clearly defined limits to our financial exposure. Returns will be highly dependent on project quality and accordingly, we will develop our pipeline with focus on projects with secure safe harbor and strong visibility of returns.

At the same time, we are preserving option value in our broader pipeline, providing flexibility to accelerate when market conditions become more attractive. Our commitment in the U.S. is to limit our net CapEx in the U.S. to EUR 0.5 billion to EUR 1 billion over the horizon of this update and this is a hard selling, which will not exceed. And under this disciplined framework, we expect to have more than 2 gigawatts of operating capacity, incurring a net free cash flow deficit in the U.S. between EUR 0.4 billion and EUR 1 billion to 2028. So as a part of our value optimization strategy, we are also evaluating the potential incorporation of additional investors at the platform level in the U.S.

To summarize, the key message for this division is clear. This business will be self-financed over the next 3 years. We are going to grow with the financial resources of this business. And this represents a critical inflection point as the business transitions from cash consumer to cash generator, moving from build-out phase to disciplined growth. By 2028, we expect to reach approximately 9 gigawatts of global renewable capacity under operation, excluding combined cycles, and this implies adding on average around 1 gigawatt per year, maintaining our objective of generating an equity IRR above 10% in new products.

Cash flow from operations is expected to reach EUR 0.3 billion in 2028, supported by a more major asset base and the start-up of new capacity. Net CapEx, as I mentioned before, will be capped at EUR 0.5 million to EUR 1 billion with Spain being largely self-financed and final figures may, of course, vary within this range subject to macro conditions, strategic priorities and project attractiveness. Finally, our strategy to reduce carbon intensity remains based on the same strategic pillars with a firm commitment to becoming carbon neutral by 2050.

In 2025, that is important because, I mean, talking about the future is easier than talking about delivery. In 2025, we delivered our key near-term decarbonization target, achieving a 15% reduction in our carbon intensity indicator. So our carbon footprint, including Scope 3 of our products. Looking ahead, we are moderating our trajectory to reflect current market and regulatory conditions, adjusting our 2030 target to 25%. At the same time, we will continue to make tangible progress across our broader decarbonization targets to minimize the carbon footprint of our operations.

To summarize, we believe this update reinforces Repsol's attractive investment proposition that is built on the pillars of growing returns, yield delivery and capital discipline. Anchored in the strong execution achieved in recent years, we are also positioned to consolidate this trajectory through 2028. On growth, cash flow from operations will increase materially underpinned by projects in advanced stages of development and structural efficiency gains and moreover, our diversified and integrated portfolio will allow us to cope with adverse scenarios preserving cash flow generation during the period.

Second, shareholder distribution. We will distribute 30% to 40% of cash flow from operations through a combination of cash dividends and buybacks. A total of EUR 3.6 billion will be allocated to dividends, and all that will be complemented with buybacks to reach our targeted distribution range. As a result, and I underline again, the dividend per share will grow more than 6% per year, more than 6% to 9% depending, of course, of cash flow from operations and the price of the share.

Finally, we will execute a disciplined CapEx plan, following a high investment cycle associated to development of projects that will deliver cash flow in the horizon of this update, our CapEx intensity will normalize over this period 2026 to 2028. As I anticipated in some way 3 weeks ago when we were presenting the results of fourth quarter and anticipating the figures of net CapEx by 2026, I mean, there was some clue about this normalization. In low carbon, we will evolve our model pacing investments aligned with market conditions, focusing on opportunities where we have a clear right to win.

Based on the financial targets presented today, our plan is expected to deliver material improvement in key per share value metrics. Let me explain this slide that I like a lot on an annualized basis, the operating cash flow per share from $65 a barrel will increase by more than 10% year after year. The net free cash flow will increase by 12% and adjusted net income of the company will grow by 12% through 2028. And that is important because, I mean, today, we are seeing the geopolitical events and so on, but the life is long, and we have to take into account every scenario.

I mean if we take the low scenario of this plan, the $55 a barrel, the resilience of this plan is underlined by the fact that at this lower scenario, most of the per share metrics, I mean, the cash flow, net free cash flow and the adjusted earnings are in line with the levels delivered in 2025, even under this [ asset ] scenario. So that is a proof of the resilience of this plan to maintain the commitments I was defining and expressing before.

To conclude, the foundation of our long-term strategy remains firmly in place. Our consistent delivery against key strategic priorities underscores our ambition to deliver differentiated growth with a multi-energy approach. Our legacy businesses are stronger and more resilient, while new sources of profit are emerging and will contribute materially to 2028 and beyond. Our portfolio has continued to evolve and improve. We have today a more competitive Upstream, a distinctive position in low carbon fuels in our Industrial business and a Customer division that in some ways is the hidden beauty of the company because it's already accounting for 25% of the group's cash flow. And at the same time, we have built a platform in a quick way over the last 6 years in low carbon generation, that is transitioning to a cash-generative business and is shaping a part of the Repsol's future.

So as a result, Repsol is a company capable of generating higher cash flows and delivering a committed material and predictable improvement and shareholder distribution. The targets defined in this update consolidate this progression, and we will work to ensure that by 2028, Repsol is an even more efficient, more profitable and more sustainable company than it is today.

With that, I think that this is enough. And now I hand over to Pablo, who is going to take us through the Q&A session. Thank you very much for being here.

Thank you very much, Josu Jon. We will now begin with the Q&A session, which I will moderate. We will go through a first round of questions to ensure that all the attendees have the opportunity to participate. [Operator Instructions].

Please, Michele at Goldman Sachs.

Congratulations on what has been quite an extraordinary 12 months. I wanted to focus on the E&P division. When you created the joint venture with private equity, you were thinking about transforming the business, and it has been transformed. It's more focused geographically, it's longer life, higher growth and higher margins. How do you think about the next stage of transformation. Clearly, there is the potential for the liquidity event, which could add scale. But how are you thinking about, for instance, leveraging on the changes we are seeing in digitalization and AI? Does that bring you more towards exploration with maybe better success there? Does it bring you more towards a shale where you can get more productivity improvement, more enhanced oil recovery? Do you think that shale could become a global business outside of the U.S.? Or do you think that the U.S. should remain the core of that business? How are you thinking strategically of the next transformation there?

[Foreign Language] I think that you, I mean, summarized in a perfect way. The strategy for Repsol Upstream business. So first, you define that we are in the midst of this transformation, and we are going to go on in this transformation. Remember that we have in mind, we still have in mind this liquidity event. But we are going to choose the best moment to -- for this opportunity because, I mean, we don't want to rush. We are not in a hurry. Day after day, we are improving the quality of our business. So our partner, EIG and Repsol, we are convinced that what we are doing is getting and transforming to have a better Upstream. So from this position, I mean, we are going to go on in this pathway and of course, looking for potential opportunities.

Next steps. First, putting on track all the projects. I mean, those days, Lapa Southwest is going to be producing at the end of this month. Alaska, we have a tough and challenging ramp-up process in Alaska in coming 3, 4 years. Wells are performing in the right way. So we hope that, that is going to go in the right direction. We have the strong optionality of Venezuela, and Venezuela because you can say, why don't you include Venezuela in all these metrics? I mean, first, because we want to put a base case but from the conviction that we have a strong upside because our business in Venezuela. 10 days ago, we received all the licenses from the American administration we need to be in the country to operate, to commercialize our products. Now we are in the phase of adjusting a small contractual thing.

We are ready to start increasing our position in the country. We rely on the capacity of this new Venezuela to perform in the right way. And in metric terms, we maintain the commitment I expressed in the White House 2 months ago. We are ready to increase in 12 months our oil production in a 50% in Venezuela and to multiply by 3 our production in coming 3 years. And we have the conviction that we are going to be able to do that using the cash flows and the proceeds we are going to get in the country. So things are not going to change dramatically in terms of we are going to have, of course, a higher cash flow from operations and so on. But in terms of debt, things could be a bit better, but things are not going to change in coming 1, 2 years dramatically, but we are going to increase the production of the platform we have in the country, paving the way for a better future.

On top of that, we go on, working hard trying to optimize our portfolio. The last move in U.K. is a proof of that. Remember that in November, we announced -- December, the JV with TotalEnergies. Closing process is going to be finished in some weeks. But that is not the end. I mean, it's the second step of our way to go on transforming, improving the business we have in the U.K. Exploration is there, starting by Alaska. In Alaska, we are already working on the FID of Pikka II, that means that after -- I mean, having all the data and so on about the performance of wells, we could be prepared for in coming months next year to eventually take on FID of this Pikka II project.

We have Quokka where the wells are performing in a good way. We have Horseshoe. So now we are engaging an exploration campaign in Alaska. Alaska could be, in some way, a company maker for Repsol, and we are engaged there. Libya, where we were allowed to be part in 2 new exploratory wells, one of them onshore in the Sirte Basin and the second one offshore in front of Benghazi that is going to add the [ fourth]. We are making and developing new wells and so on, increasing the production. Remember that we finished 2025 with our production close to 325,000, 330,000 barrels a day gross. We expect that this year we were going to arrive to 350,000 barrels a day.

And as you mentioned, technology, IT, AI, digital is a part of this transformation. In the sales side, we are working hard, reducing the breakeven of our business, working not only the G&A side, that is part of our efficiency program, but also through the optimization of these production campaigns, thanks to these new technologies. And going to your last question, I mean, first, I'm not an expert on E&P, Michele remember, I'm the CEO of the company, but my background is more downstream than upstream. But let me be more skeptical in the short term about the capacity of extending the model of the American shale everywhere. Probably we could see places where that could happen. But remember that behind the success of the unconventional in the U.S., there is a political stability, regulatory stability. People are investing for 10, 15, 20 years, a very efficient service industry. So can all that be replicated in some of the geographies in the world? Yes, no doubt about that. But probably it's not going to be, let me say, a universal model for everybody. [Foreign Language]

Please Alejandro Vigil at Santander.

Congratulations for the presentation. The first question is about Venezuela. What are the implications in terms of this plan in terms of cash flow from operations, for example, of a normalization of the operations in Venezuela just being paid all the production you have there and potential upsides on the plan from this country?

And the second question is about the momentum on cash flow of the company in terms of refining margins, gas prices, probably you have a very strong momentum, which are the implications in terms of buybacks? You have announced the EUR 350 million for the first half of the year, but probably looking at the potential distribution this is the low end of a potential range for the full year, right?

[Foreign Language] Alejandro. Thank you. Starting by the end of your question, I mean, I'm not naive. I know that -- not the risk, but the implication of having today the Capital Markets Day is that your logical first question will be, okay, you are designing a whole $65 a barrel. And what happened with the current oil prices, with the current gas prices, with the current refining margin and so on.

First, I mean, as I try always to be, I will be very transparent about that. We prefer to -- I mean, to have this open dialogue with you. And my first reflection is, I mean, going to what is happening in the Middle East, and that is important from the logistics point of view for Repsol. We don't have any exposure -- direct exposure to the Middle East. We don't have assets in the area. We are not there. We have a small exposure to Kurdistan coming from the former Talisman that some months ago was fully disposed and we are fully out of the area.

In logistic terms, we are an Atlantic company, that means that our crude oil supply that comes from the Middle East is very, very, very low. We have a lighter Arabian quality that is used for producing some lubricants in Cartagena, not more. And we have also some supply from [ MEDAC ], some heavy oil coming from the area of [ Basra ]. But I mean, that is a small part of our slate. So we don't have a significant and strong exposure in the area. That is the first positive view in the mess we are experiencing these days.

Secondly, of course, we have an indirect impact, as you mentioned, because prices are there and commodity prices and margins are there. My first reflection is that we are not investing for 1 month, 2 months. We invest for 20 years. I am sure that in coming 20 years in these cycles, we are going to see everything. We are going to see ups and downs. We are going to see supply restrictions. We are going to see, I don't hope, pandemics. I mean everything will happen in 20 years and that is a volatile business. So what we are experiencing these days is volatility. And volatility means that, I mean, you have some additional prices that you have to manage, you have to manage first in logistic terms, and we are doing that. We are guaranteeing and for us, that is a must that the supply of Spain and Portugal is guaranteed because we have the crude oil and the refineries on track to guarantee that. That is an important part also of the functions of Repsol.

And going to this volatility and prices you mentioned. So I mean, first, I think that is too short to say that what is going to be the effect. We have more uncertainties and uncertainties. I don't know how long this complex situation in the Middle East is going to last. I don't know today what is the real destruction capacity or the real destruction effect of infrastructures in the area, we don't know. And all that is going to depend of the end of the tunnel. After the end, we are going to need some time to recover. And probably at the end of the road, things are going to go to a quite normalized situation.

Remember, the Ukrainian war effect was huge. Today, at the moment, I don't know if that is going to happen or not because I don't have a crystal ball, but the effect on oil prices or gas prices. In the case of gas prices, we had a strong impact on industries and families and power prices is significantly lower than what we experienced in 2022 in Europe. And seeing this situation, I think that -- I mean what we have to do is to follow the situation. And of course, we have a very comprehensive and clear enterprise capital allocation framework. If over this period, there is any additional, let me say, cash coming from some external circumstances, our priorities are fully defined. We have a distribution framework, 30% to 40%. So any impact is going to be reflected in this part. Of course, we will have less tension, let me say, in any disposal program and so on.

And what is more important in these volatile situations, we are going to try to use the resources to strengthen our balance sheet because to weather -- to serve these complex situations, I think that reinforcing and having a strong balance sheet has to be a must. In the case of Venezuela, let me only add a comment, Alejandro, that because what we have in Venezuela are 2 JVs, the JV we have with Eni in Cardon and the JV we have with PDVSA in Petroquiriquire with the assets, oil production assets in Petroquiriquire. I mean, any impact in terms of cash flow from operations and so on is not going to be a direct effect. It's going to come because the dividend policy of this company.

So what we are going to try to do is, of course, to finance all this effort and that is going to be possible, thanks to the cash flows generated in these JVs and what we are going to see in Repsol SA is the effect of the potential dividends coming from these JVs we have in Venezuela. So -- but we are -- you are not going to see, let me say, a strong impact in the short term. And for that reason, we prefer to say, I mean, Venezuela is decoupled from these metrics. These metrics are going to happen without Venezuela and with Venezuela, of course, everything could be upside. Thank you.

Next question, Sasikanth Chilukuru from Jefferies.

Sasi from Jefferies. Just wanted to ask regarding your investment cycle. You highlighted saying it's a normalized investment activity going into 2028. If you could talk about the profile of the CapEx and what the CapEx in 2028 is what we should assume as being the right size for Repsol going forward as well.

The second question on -- related to balance sheet strength. You did highlight saying the balance sheet strength is to maintain your investment-grade rating. Just wondering, in your base case scenario, how you see the balance sheet evolving? And is there any way you can utilize your balance sheet strength as well for additional distributions or maybe perhaps acquisitions?

I mean, going to your first question, I mean, what is the right size for Repsol? I mean the question is fully logical. But let me say, only to add that the right size is going to depend on the targets we are going to have for the future. So what is crystal clear is that for next 3 years, the right size taking into account maintaining our production, maintaining the running and maintenance of our current commercial and industrial businesses and so on, plus growing in our production in E&P with the new projects plus growing in the new low-carbon businesses in Spain plus finishing our chemical diversification or differentiation plant in Sines.

All that is going to require at around EUR 3 billion a year, EUR 3 billion, EUR 3.5 billion depending on the target, I mean, but around EUR 9 billion, EUR 10 billion of total CapEx over the period. But if we split -- and let me split, what we need to maintain our production plus maintaining our installation and so on, we could say that EUR 1.6 billion, roughly speaking, will be running and maintaining in some way and EUR 1.5 billion, EUR 1.6 billion will be growth. Probably, I mean, in 3, 4 years, I'm sure that we also will have a growing project. So depending on our growth ambition, we are going to have less or more CapEx. But splitting this CapEx, I mean, even in the E&P, roughly speaking, EUR 0.5 billion, EUR 0.6 billion could be what we need to maintain this running CapEx. But all in all, in the company, I think that half or 55% of this CapEx will be some kind of run and maintain.

So going to the balance sheet, when we take the current leverage rate is at around 14% of our capital employed. If we exclude leases, we could be at 5%, 5.5%. What we are seeing over the period is that, I mean, we have the flexibility in what we define as the average scenario, I mean, to be neutral or to increase in EUR 1 billion, EUR 2 billion because we are going to have a more higher cash flow, so we could surgically have also a higher opportunity for leveraging our position, but things are not going to change dramatically. We are going to stay there and in the low case scenario, we'll be more prudent, reducing the CapEx effort and because the cash flow is going to be a bit lower, the distribution will be also a bit lower logically.

But I don't see, let me say, now a change in the distribution policy of the company. Probably, if I mean, the cash generation is significantly higher, we will be closer to the higher range and it will -- it is -- I mean, we are experiencing a crisis probably we trend to be lower to the lower range that is logical in order to preserve the balance sheet. But the framework is crystal clear in the definition I did before. Thank you. I think that is crystal clear. It's up to you to confirm that.

The turn is now for Alessandro Pozzi at Mediobanca.

Two questions. The first one is about the ongoing crisis, clearly, a big impact on heavy-light differentials, on product prices and crack spreads as well and inventories. Can you give us your thoughts about what is the impact of the crisis for the next -- for this year in terms of refining margins, in terms of ability of inventories? You mentioned Repsol has -- is playing a key role in maintaining inventories of crude oil and products.

The second question on customer. You have a big growth ahead towards 2028 with more than 4 million new customers. And I was wondering if you can give us your thoughts about what's next to 2030 and beyond because clearly, you're probably going to hit some sort of a ceiling staying in Spain and Portugal in terms of market share. Is it becoming a cash cow, the customer? Or do you see growth beyond 2028 new opportunities?

[Foreign Language] Alessandro. I mean going to a refining margin and what is happening in spread and margin terms, I mean to refresh, probably you have in mind similar figures. But as of today, the average refining margin indicator for Repsol is over the year at $8 a barrel today, the average from the beginning of the year. In March, the average has been at around $20 a barrel. Remember that 3 weeks ago, we were talking -- I think that I used the figure of $5.4 or something like that. I can't remember the exact figure. That means that we are experiencing -- and what is this situation impacting in the refining business, mainly because we are middle distillates producers. 55% of our production in our refining system are middle distillates, diesel, gasoline and kerosene. And Alessandro, you take -- and I know that you follow that the spreads of the products you could see, I mean, I don't know this morning now that yesterday evening, the crack of the kerosene was at around $90 a barrel and so on. So I mean the impact is very hard on kerosene. So that is a competitive advantage for Repsol.

And secondly, because the effect and the Middle East is more exporting place of diesel and kerosene and gasolines, the effect on the cracks is going to be higher as far as this crisis last in the case of middle distillates. So -- and taking into account that in Europe, we are gasoline exporters. But as a whole, Europe, middle distillates importer. So Europe is strongly exposed to what is happening now in the Middle East. It's true that in the Spanish case, we are fully even in terms of middle distillates production and consumption, but countries like France that I mean we have 2 refineries in the French border in Tarragona and in Bilbao. France, sorry, needs an import level of 22 million, 23 million tons of middle distillates a year. This figure is higher than the total production of the 5 refineries of Repsol in middle distillate terms.

That means that, I mean, our position is unique in some way. And let me say, I'm going to add a comment that I don't know if that is the right place to say that but I think I starting seeing some lights in the European institutions and European Commission about the role of the oil and gas and the refining that are fully new because for years, we were, let me say, some forbidden and banned sector. But I think that it's time to rethink the role of the refining sector in Europe. Because if we talk, and I fully agree with the statements of the European Commission President, von der Leyen, in terms of the strategic autonomy that Europe needs in economic terms, if we need a strategic autonomy, it's crystal clear. And what we are seeing these days is putting crystal clear that we need a strong refining business in Europe.

We need industry, we need refining. We need to rethink the role of CO2 prices for the European industry. That is not true that it is a driver to the carbonized industry. It's not true. It's a driver to shut down the industry and to export industries and to export jobs importing these products and increasing the CO2 emissions in the world. So I think that what is happening has to serve to do that. In terms of inventories and so on, I mean, Juan Abascal, our Managing Director is there, but we are in a normal situation. We don't have any special problem to get the supply of products we have.

It's true that the first days of this crisis, we were prudent and say, okay, we are going to go on selling in a normal way to our customers, but there were some kind of extraordinary appetite from everybody to store product and so on, so we are not going to be part of that. We are 5 refineries producing in a normal way. We have a normal supply of the crude oil we need to produce our products, and we have the capacity to supply the Spanish and Portuguese society without any concern or problem in the current status of the situation. So going to the customer, I mean, being clear, the mandate that this business has from my side is grow, grow and grow. And you have to use the proceeds of the cash flow for generation of this business to finance your CapEx.

And let me say, last year, they were able to have a cash flow from operation of EUR 160 million, roughly speaking. And having a positive free cash flow of EUR 30 million, EUR 40 million last year. So I don't know what is going to happen in 2028, but let me say, Alessandro, we are going to go on growing, trying to have probably one of the -- with the ambition of being 1 of the 3 first players in the Spanish market from '28 on and we are going to go on in this growing process because we are convinced that we are creating not only value that is crystal clear, a new platform and what I said in that message, I mean, when you have the most reputed brand in a country, in energy terms, you have 24 million customers, Spain and Portugal, 2 countries. You have an app with 11 million customers. You have 4,000 physical sales shops. I mean the next question is, may we use this platform to do additional things beyond energy? We are in this reflection. So growing is going to be a must in this business for us, taking advantage of the position we have today.

Next question comes from Biraj Borkhataria at RBC.

So one of the shifts here relative to the last couple of years is CapEx moving from low carbon generation to low carbon industrial in the plan. So could you just give some context on drivers behind that? Is that a view on asset rotations being a little bit more difficult? Or is that just a view of that business getting to sufficient scale and your priorities moving elsewhere? And then just a follow-up on your comments on policy in Europe. What do you expect to sort of actually happen? Because European policymakers are really good at talking about stuff and then not actually doing much. So what's a realistic outcome there and a time line? And maybe just remind us what you paid in carbon taxes in 2025?

Thank you, Biraj. So let me say that from the very beginning, we said, I mean, we don't have operational commitments in these kind of businesses. We are entering in these low-carbon businesses, either industrial, commercial, renewable power to make money, to get returns because our customers, they are asking for a multi-energy approach. They want molecules, they want electrons, they want also sustainable molecules, and we are, let me say, going in this service to our customers. What has happened in the low carbon business.

So first, again, we are today underlining the ambition to grow in this renewable power business. That is important because you know that nowadays, and I respect, of course, the strategy of every company, depending on the position they have that some companies, they are going back to some of their positions. We have the ambition to grow. But we know what is happening. I mean, for instance, in Spain, we want to grow more, but I mean, today, investing in the solar in Spain because the current prices curve, the lack of interconnection with France and so on, it's difficult to capture and to get good returns there. So for that reason, we are limited in Spain, the growth 2 areas that are very interesting that it's wind, it's self-consumption, it's hybridization, it's the pumping storage facility of Aguayo and some batteries. So there is a limit to this growth? Yes, of course. This is the limit of the projects we could cope in terms of technical growth in some way.

Going to the U.S., I agree with your point. I mean, what we have is two restrictions. First, the safe harbor limit. And let me say that we are happy seeing that we were able to protect more than 7 gigawatts, and that is a significant figure that is giving us also optionalities for the future. But the financial environment today is not exactly the same financial environment we had in terms of interest rates and so on, we had 4, 5 years ago before the Ukrainian war. So we have limited in some way this growth because our priority is first returns.

So we are going to focus on projects that where we could get this 10% on equity. For that reason, we are limiting to these 2 gigawatts in operation in coming 3 years in the U.S. And on top of that, we are also limiting the capital exposure we are going to put in this business in the U.S. from EUR 500 million to EUR 1 billion. Why? Because you know that because the protection of the safe harbor, we have tax leases of something between 30%, 40% of the project plus an asset rotation is going to allow us to do that. So are we changing in some way our mind? Yes, I think it's my duty to try to adapt what is happening.

Going to the -- and that is an independent history in some way, the renewable fuels, liquid fuels or gas fuels in Spain and Portugal. In this case, after putting in operation Cartagena and producing last year a figure of something 600,000, 700,000 tons of this kind of renewable fuels in our installations in Spain. I mean, we had last year, if we take only the Industrial business, a positive EBITDA of EUR 120 million, EUR 125 million, roughly speaking, plus the EBITDA coming from the renewable side of the commercial area plus the trading area. All in all, we have an EBITDA of EUR 175 million to EUR 180 million last year, remembering that at the beginning of the year, we have a significant low margins in the HVO and SAF businesses.

So with that capital exposure, capital employed of around EUR 800 million and a part of this capital employed because Ecoplanta and so on is not producing. So it's a very profitable business with good margins. It's complementing our transformation part of our industrial businesses. The integration concept is very important for these 2 businesses. I mean, if we take, for instance, this year, 2025, the production that we have in our renewable side in Spain, is, roughly speaking, fitting with the production we have in -- is a bit lower, but fitting with the consumption we have in our customer side in the retail power business.

And if we go to the renewable fuel side, what we are producing today is a 50%, roughly speaking, half of the needs of our customers. That means that even with the new projects on track and mainly here the project of Puertollano, that is going to start operating next quarter, we are going to arrive in 2028, producing the 70% of the fuel that our customers are asking for. So there is a pathway to work. Going to the policy in Europe, Biraj, what I expect to happen, I don't know, I mean, I have my own expectation for that. In our case, I mean, I'm going to your question related to the carbon cost and so on, I mean today, we could be producing -- emitting, better said, in all our industrial businesses at around 10.5 million tons of CO2 but because the benchmarking and so on, we could be paying 2.5 million, 3 million tons as a combination, combining the refining and the chemical business.

So all -- and CCGTs, of course, I forgot CCGTs. All in all, combining all that, we could be paying EUR 250 million, EUR 300 million of this cost. But I mean that is not only for Repsol. I mean, it's for steelmakers, for paper mills, for all the chemical sector. I mean if we analyze what has happened over the last 2 years in the European chemicals sector, roughly speaking, at 12% of the petrochemical sector shut down in Europe over the last 2 years. So I hope that the European Commission and European institutions are going to be sensitive to what is happening in the European industry. And my message will be also that, I mean, I don't know if the European Commission is going to change the rules in the future to promote the competitiveness of the European industry. I mean, CO2 prices in a logical way could go in a down direction, but I mean, I'm not a market expert, but what we expect is that the European Commission could be sensitive to this reality.

The turn now is for Guilherme Levy at Morgan Stanley.

I have two related to disposals. The first one, in your strategic plan, of course, you have the EUR 1 billion target into 2028. I understand that you are currently happy with your Upstream portfolio. So I was keen to hear more about how to think about the breakdown of this EUR 1 billion into 2028?

And then secondly, going back to Venezuela, should we think about Venezuela being a core part of your Upstream portfolio? Just thinking about if everything goes smoothly on this one, and the M&A market becomes liquid again. Would you be keen to sell at some point?

[Foreign Language], Guilherme. Going to the disposals, these disposals, they don't have no name, no surname. I mean we have a portfolio of EUR 34 billion, roughly speaking, of capital employed. And I mean, there is -- we are going to have acquisitions and disposals over this time. I mean, small acquisitions, small disposals. We have infrastructures in our portfolio, in the E&P pipes, in the Industrial business and so on. So there are plenty of potential assets to -- and what we have is we are putting a target to our M&A people to say, okay, you have to do all that, but over the period, you have to have a net cash in of EUR 1 billion. That is what is behind.

So seeing our track record over the last years, I think that, that is not going to be. It's going to be, of course, challenging, but not difficult to get. We are not thinking about selling, let me say, core positions in the E&P and so on, perhaps I don't know, pipelines, infrastructures, storage capacities. I mean things like that could be part of this effort. And we will, of course, deliver any move in this direction over this period.

Venezuela, we are comfortable being in Venezuela. We are convinced that since January 3, a new horizon of hope not only in business terms, also in political, social, economic terms for Venezuela was open. We have stayed in the country fully committed in very hard years. We think that we are entering in a new arena in a new situation. We want to be part of this transformation and this growth of Venezuela. The Venezuelan government is fully aligned with this target, with this ambition of Repsol. The American government because -- I mean, it's also an indirect player in this because I can't forget that because the American administration made possible this opening to a better and new situation in Venezuela in January is also fully committed to have Repsol in this task.

We have the people, we have the talent, we have the knowledge, we have the resources, we have the fields to do that. We are ready to enter to invest in Venezuela, to grow our production. And I mean disposing Venezuela is not an option today for Repsol. We are committed to this country growing there. I don't [ discard ], say, the challenge is very huge in the future, we could require partners and so on in this effort because that is going to depend on the dimension of the effort, but we are fully committed to be part of the growth and the transformation of the country.

And I mean we have to underline that Venezuela needs the revenues coming from the oil and gas. The oil and gas is going to be the main part of the Venezuelan fiscal revenues. The Venezuelan people need this sector to transform the economy and to have a different future. And we are going to fit to this target, and we are fully committed to be part of this transformation. So Venezuela, let me say that for Repsol in knowledge terms, geological terms, in operational terms, has been for years one of our assets. And we are ready and we are prepared to take advantage of the opportunity that is opening up.

The turn is now for Alastair Syme at Citigroup.

Some macro questions and then one on the Upstream. So the macro, can you just quantify what you've built in, in terms of the chemical margin improvement? It looks like it's probably quite a big part of that industrial pickup in cash flow. And also on the biofuels, you mentioned $929 a ton, how do you think about the risk at an EU level on the sort of the price inflation that will push on to consumers? .

And then my other question on the Upstream, can I just clarify the red lines that you've had before, which I think is a 51% ownership of that business? And will it be always Madrid headquartered in Spanish domicile?

Thank you, Alastair. Let me say, first, that in the improvement of the chemical business that there are, roughly speaking, EUR 200 million, EUR 250 million of cash flow from operation improvement over the period. The main, main part probably 75%, 80% comes from measures that are independent on the cycle evolution. The main driver is, of course, the Sines starting point, this third quarter. Sines in us even [ asset ] cycle is going to add a figure close to EUR 95 million of EBITDA and EUR 120 million, EUR 130 million in a more normalized cycle. The plant of ultra-high molecular weight of polyethylene in Puertollano that is going to start operating in the second quarter is going to add EUR 20 million, EUR 25 million of EBITDA.

On top of these 2 projects, we have a very tough and challenging program, focusing on variable margins where we are trying to increase the differentiation of our products with our local, when I say local, I'm talking about Western Europe, customers in terms of improving the value we offer to them. We have a very tough cost, a very tough program to reduce variable cost. We are changing the logistics of chemical business. We have this summer, some -- I mean [ restructuration ] of this logistic impacting mainly in Puertollano, but also is going to change in Tarragona. There is a part coming from the increase of sales because the cracker of Sines that has been shut down for many times because of the lack of competitiveness, not having the polyethylene and polypropylene new plants in the site is going to increase in a dramatic way. So there are new sales coming from there.

And we are working also under the principle of maximizing the variable cost, I mean, optimizing new streams. We are changing the -- [ without splitter ] the FCC of Bilbao, I mean I'm not mistaken. I'm talking about Bilbao and chemicals because we are going to increase the production of propylene, sorry, in Bilbao to export to Sines, to feed a part of the polypropylene plant in Sines. On top of that, we are trying with our neighbors of Dow in Tarragona, optimizing streams and so on to reduce common cost we could have. So main part is going to have from the improvement of the business.

Going to the inflation prices, consumers, I think, first, it's probably too early to have a clarification about that. Let me only say that I don't know what is going to happen in the future, of course, because I mentioned before, we don't have the crystal ball. But today, gas prices, LNG prices being high. I mean, it could be at around 20 -- roughly speaking, $20 per million of BTu for TTF, NBP and so on, a bit higher. In the case of JKM, I mean, we have to remember that in the midst of the crisis of Ukraine, the gas prices with a strong impact on industry, families and power prices, they achieved a peak of $80, $85 per million of BTUs at that time.

And probably, I have to check, but prices were for more than 1 year above $25, $30 per million of BTUs for the NBP, TTF. I have to check this last figure, but I'm not far from this approach. So we are fortunately quite far from that situation. I'm not saying that, that is not going to happen because I don't have the crystal ball to know the evolution of events in the Middle East. But today, we are not there. Going to Upstream. I mean, Alastair, you defined in a perfect way. And you read my mind, yes. For us, today, this 51%, I mean, consolidating the Upstream business, controlling this Upstream business in any case is a red line. It's a red line because we maintain our fully vision that we are an integrated company. And the E&P, the exploration and production is a core business. It's a core pillar for Repsol. We are -- we want to stay in the E&P business. We are comfortable and happy in our E&P business. We are improving our E&P business, and we are even in this period growing in the production in our E&P business. So this 51% is a red line as you defined, Alastair.

Next question is for Chris Kuplent at Bank of America.

I'm going to try and make you, Antonio, do a little bit of work and ask you whether you can help with the bridge. And I appreciate the last 4-year plan is a while ago. But at the time, you were pointing towards EUR 8 billion of CFFO in 2027. Today, you're presenting an outlook for EUR 6.5 billion in 2028. And I appreciate a lot has changed, particularly your accounting and reporting. So maybe you can help us explain the gap between the two.

And then for Josu Jon, it's been a little while now, a more strategic question. What are your thoughts around the changing competitive space here in Iberia in downstream considering the Moeve, Galp JV prep that we are watching.

It's great to see Antonio working, but let me say that Antonio has worked a lot before arriving today here, probably Antonio la Torre, Pablo, Antonio and the whole team, they are behind this Capital Markets Day. But I mean, let me say that because I don't want to be out, let me say or to avoid answer any question. I mean, we have to compare. And your question, Chris is right. But we -- in order to compare both things, let me first say that we have a different reporting model. So we'll have -- we'll check with you the figures later to compare what was the cash flow from operations with a former reporting model and what is exactly the [ parallel reason ] with the new one. So first point, we have to consider.

Remember that, for instance, we have with the old model and I ban myself to talk about the old model. But in 2025, we had a cash flow of EUR 6.1 billion, EUR 6.2 billion, but with a new model, it's EUR 5.3 billion, EUR 5.4 billion. So there is a gap that is also projected in a largest way to 2028. Second factor, I have to check the figure, but it seems to me that the oil price was also different and now is lower, $65 a barrel in '28 in the projection we do. And third, that is also a consequence of a question that I think that I answered to Biraj or to Guilherme about the evolution of the investment in some parts of the low carbon. In 2027, 2028, we have in the previous plan, more gigawatts in operation, so adding more cash flow from operation. And at the same time, we have more hydrogen projects in a more ambitious pathway.

So from my point of view, these 3 factors are explaining a main part of this difference. But of course, we could check with you, Chris, exactly the numbers and the figures and the hydrogen approach, you know. I mean we want to invest under the conviction that we are going to have returns. And today, we have a clear case to have roughly speaking, 350, 400 megawatts of hydrogen coming from electrolyzers by 2030 because that is going to be supported by the sales of our products in Europe under the principle and the mandate of having a 1% of our sales produced with renewable fuel with non-biological origin and the only way to produce that under the current technology is hydrogen. So -- but we don't see today that could happen in the future. I mean, we have to be open to a different perspective, but we don't see a business case for increasing this effort for hydrogen in our business. So for that reason, we took the decision of slowing down this CapEx. That is behind what you mentioned, but we could check Chris these figures.

So first, let me say that we have good competitors. Moeve and Galp are good competitors. Having good competitors is positive, seeing a consolidation process in the sector is positive. And what is behind first is that the Iberian market is attractive for the retail fuel business. And that is one of, let me say, of the upsides coming from this transaction and that we are in some way going to have, I mean, another competitor stronger, consolidated and this is going to help us to have a better delivery and a better performance to our customers in Iberia. But I think that these kind of things in our sector are positive. When you are in a sector with no appetite with no people ready to buy, to make transactions and so on, that is not good news. Thank you, Chris.

The turn now is for Nash Cui at Barclays, please.

I have two questions on refining, if that's okay. The first one, if you look back for the last 10 days, there were lots of volatilities, uncertainties. [indiscernible] part as well, I wonder how much of the $20 per barrel spot margin were you able to capture?

And then the second question, looking forward, I think during the Q4 earnings call, you talked about that $2.5 per barrel premium, refining premium. I thought that was really good. And you are going to have HVO volume coming online. You are going to have lower, 0.6 breakeven refining reduction targets over there, then you are going to have [indiscernible] crude oil as well. How should we think about this refining premium going forward? Do you think this $2.5 is sustainable?

Thank you, Nash. So first, the answer to your first question is, yes. I have to check the figures. But I mean, over these months, we have had, roughly speaking, an 87%, 88% of distillation percentage of our refineries and a convert because we had 1 or 2 spalling processes in some cokers, a conversion production that could be close to 87%, 88%, roughly speaking. So we are capturing these margins. The answer is yes. I can't give you a full clue about the premium over the period because, I mean, it's perhaps too early. But let me say that we'll talk about that at the end of April, but my approach is that we are going to be able to half over the period of 3 months, and that is not a commitment, it's an approach, please, that could be close or even above $2 a barrel.

My expectation is even if we have some problems in February that I explained, linked to some days in Cartagena in some distillation unit due to the fire. And we have storms and bad weather in Tarragona and Bilbao with some -- at the beginning of February with some problems to get the access of supply. We have 2 strong drivers improving the premium comparing with our own previous assumptions. First, the level of margins of buyers that is significantly higher because remember that when we talked about the budget of 2026, we took an assumption of an HVO minus UCO margin of $875, $850 a ton. If we take the average of the year as of today, it could be close to $1,300 per ton. So these better prices of [ bios ] plus a better access than expected to heavy oil are going to help us to improve this premium more than offsetting the negative side because the incidents I mentioned before. That's okay. Thank you.

Next question comes from [ Pedro Sosa ] at Caixa.

The first one is on your CapEx program. Can you give us a rough figure of how much of that CapEx is tied to projects not yet contributing to CFFO by 2028? There are some projects like in Industrial low carbon that may be hitting your CapEx, but not yet contributing.

And the second on data centers opportunity in Iberia. Is there any possibility over this plan period of Repsol eventually monetizing or accelerating plans to leverage on the potential boom of data centers in Iberia because we are seeing a lot of renewables and utility companies speaking about these opportunities. You have flexible generation. You actually increased your flex gen with Aguayo II. You have energy management capabilities. You have trading capabilities. Could you eventually monetize this asset or eventually joining a partner in data centers?

[Foreign Language] Pedro. Thank you. Going to the CapEx, I have to check and we'll send you the figures more elaborated. But let me say that roughly speaking, we are going to have -- if we have an average of EUR 3.2 billion, EUR 3.3 billion of CapEx a year, we are going to have at around EUR 1 billion [ yearly ] that are not going to be generating in 2028 cash flow from operation. I try to elaborate first, all the part of the exploration that is not going to come, of course, by 2028. The Raia project, that is not in this CapEx, it's in the JV of Brazil that is going to start operating in '28, but is not going to capture the whole cash in the period. In [indiscernible] Spain, the Ecoplanta is not going to be in operation. It's going to start operating in 2029. So this part is not going to be there.

The 2 hydrogen plants or the 3 hydrogen plants better said because probably what we saw, it was 99% of security, we are going to have the FID of Tarragona in coming months. These 3 projects, they are going to be operational also in 2029. So it seems to me that all in all, we could have 1/3 of the CapEx over these years that is not in production on top of Pikka II that, as I mentioned before, Pikka II in Alaska, we could have the FID next year. So we are going to give you a more accurate figure, but that could be, I think that roughly speaking, applying the rule of thumb are quite approach to this data.

Going to the data center in Iberia, I mean, we are open to do and to take opportunities on that. What we see is that the most clear, the clearest opportunity we have is in Escatron. Escatron is in a CCGT, a combined cycle. We have in Aragon in the Northeast part of Spain, close to [ Saragossa ]. What we have there is a combined cycle of 800 megawatts of capacity that is in operation. And last February, we were allowed under the Spanish regulation to having the possibility first to develop an 800 megawatts renewable new capacity, in our case, win at around that asset. So a new pipeline, and we are starting to work in and secondly to use half of this potential capacity, 400 megawatts to be used under the rules of self-consumption in terms of [ tolls ] and so on.

So because in this area, we have a combination for 24 hours of potential supply without PPA combining the renewable side plus the combined cycle. We have land. We have facilities and we have water that is important because these are close to the Ebro River because the system, the refrigeration systems of the Escatron CCGT. What now we are going to try to monetize this asset, this opportunity to someone that is going to develop the data centers. So Repsol is not going to be an investor in this data center. What we are going to do is to take the pack and offer this pack to a potential investor to develop a data center in Spain. So -- and we are -- I think, that comfortable seeing that we are going to be able to monetize this opportunity and probably in this period of time. And I mean, taking the rest of our portfolio, that because the configuration of restrictions and so in the area in [indiscernible] CCGT job is here, but I think that, that is no job so evident. So that probably is going to have our opportunity. Thank you.

If it's okay for you, we will continue 10 minutes for more questions. James Carmichael at Berenberg, next question, please.

Just a couple from my side. Just looking at the trading CFFO, obviously, good growth there over the last 2 or 3 years, but '25 to '28 that growth is relatively small. So just wondering if you can say how much sort of additional CapEx is needed to deliver that increase in CFFO.

And then looking at the low carbon business in the U.S. It looks like tax equity is obviously a sort of decent contributor to bringing your net CapEx in line with what you're projecting. Most of the disruption has obviously been in the offshore, but could you maybe just give us a sense of the health of the sort of tax equity market in the U.S.?

Thank you, James. It's true that, I mean, the growth could be -- I mean, but we are talking about the growth that could be close in our trading of EUR 100 million over the period -- in terms of cash flow from operation over the period. I mean, it's after years of significant growth. I think that is -- I mean, it's another step in the right direction and with no significant new CapEx exposure because, I mean, we are going to use perhaps a bit more of working capital that could be CapEx but I mean, all that is going to be contained roughly speaking, in the use of working capital of the business. So being more efficient in some other uses.

So we could have probably a new storage capacity that we could be talking about EUR 20 million, EUR 30 million, EUR 40 million of CapEx, roughly speaking, but with no significant investment. So that is material, small, but it's material and with no significant new exposure to CapEx. And what we are seeing in the renewal business in the U.S., so what is important is to have the safe harbor for guaranteeing that this tax, lease tax equity is going to be there. Taking into account the potential projects we are going to develop. In some of the projects, we could be closer to a support of up 40% rather than the 30% because some of the projects are in areas with specific local additional support because the needs of jobs and so on in the area.

And we see, let me say, a quite open market for investors that are ready to enter with us in exploiting this tax equity. So we are being able to play this game, if you allow me to use this expression in the case of Frye, Hecate [indiscernible] Outpost recently in the last month with Outpost. And now, I mean, we are quite comfortable about what we have to do on that. But saying that, our commitment is clear. I mean if we have any kind of restrictions or lack of possibility to go ahead, we are going to restrict the capital. We are going to invest in this business in the U.S. from EUR 0.5 billion to EUR 1 billion because what is written in stone is the self-financing view that we have for the whole business, including U.S. and Spain for the renewable power business in the period 2026, 2028. Thank you, James.

Next question is Ignacio Domenech at JB Capital Markets.

The first one is on the Upstream business. By the end of the business plan, you are increasing a bit the weight of the -- of liquids in the Upstream portfolio. So coming back to the possibility...

So it's true that we want more oil. But what we have is a strong inertia coming from the projects we have now producing. I mean, because there is, as you could see, an influence of new projects, adding more oil, mainly Alaska, mainly coming from the Gulf and America and so on. But I mean, we still are going to retain a lot of production coming from oil. In price terms, things are different because if you take our whole production, roughly speaking, I mean, the whole production in barrels of Repsol, a 50% of the production could be -- 45% better said, related to liquids. I mean, either oil or some gas related to liquids, we have 15% with fixed prices, I mean, either local contracts or the methanol price in Trinidad and Tobago and so on. We could have, roughly speaking, 35% of price related to Henry Hub and something between 5% to 10% related to the combination of LNG, JKM, NBP and TTF.

So growing this part of liquids is probably in 3, 6 months, we are going to have even a better upstream. So time here is an important driver because we are, in some way, gaining position. But in any case, we are not contemplating any proceeds coming from a merger process or a reverse merger process to be listed.

The turn is now for Henri Patricot, UBS.

Two questions, please. The first one, just a quick clarification on Venezuela and whether you're including any payments for your gas in your plan for the next 3 years? And when would you expect to have visibility on that? And secondly, coming back to the upstream be increased that given the quality of what you could find?

[Foreign Language] Henri, I mean, to be technically precise, when I said we are not seeing any kind of upside coming from Venezuela, technically, and that is a technicality, what we did was to take the 2024 case when we were capturing a small part of ships and cargoes to be paid for the gas and take this assumption over the whole period. So we could have a difference probably of EUR 150 million when we compare this figure with 2025, more positive in 2024, but that is what is going to happen. No, I mean we have the conviction and the work of entering in a full new dynamic where we are going to be paid for this gas we produce, either with the condensates, the liquids associated to this gas that we call export oil cargoes. And on top of that, we have a different kind of contract for Petroquiriquire that is not included here. But being technically precise, that is exactly what is in our metrics for your models.

In the Upstream, I mean, first, let me say, and you know that I have -- we have, as a company, to be fully transparent. We have an Upstream CapEx that is in this, let me say, consolidated operation we have, but we have an additional CapEx that is also in the JVs where we don't consolidate. But all in all, probably this year, we will have an additional CapEx in the JVs that could be, in some way, significantly close to EUR 1 billion, EUR 1.2 billion additional to the CapEx we have in the consolidated businesses. So that is mainly the Raia project in Brazil and the CapEx we have in the U.K. that they are going to be mainly financed because the cash generation of these businesses in these countries.

So default is still significative. We believe in our E&P business. And if we have, let me say, projects and we have an evolution of this upstream, we are ready, of course, to invest more from 2028 and beyond. And as you mentioned, probably Alaska is going to be the main driver of this growth because I mean I think that I mentioned in the speech that if we have a gross production of 80,000 barrels a day. Remember that we retain a 49% of stake in this project. When we apply Pikka II, Pikka II is going to allow us to maintain the production of Pikka I from 2029 on. But when we add Quokka and Horseshoe, we are close to doubling the production of Alaska for the period 2022, 2025, roughly speaking. So Alaska is a good opportunity for Repsol.

And on top of that, as I mentioned before, probably we'll have some news on that in coming weeks. We are increasing default in the exploration site in Alaska. So yes, we are ready to look for opportunities. I mentioned Libya also before. So let me say that Libya, Venezuela, Alaska, what we are doing in the U.K. in terms of having new opportunities, reducing breakeven and giving us new opportunities to invest in this basin, there could be some of the opportunities we will have in our portfolio in coming years. And on top of that, of course, the great effort of the investment we are making in Brazil and is not in the metrics because the consolidation effect. On top of that, in Trinidad and Tobago, we are going to invest also at around EUR 200 million, EUR 250 million over the period that are also included under the same principle.

Marco Cristofori at Intesa Sanpaolo.

Short question on lubricant. BP is divesting from Castrol and yesterday, Shell announced the divestment of a part of the business in the U.S. while you are saying that you aim to grow internationally. So just to understand why this different strategy? And if you are a potential buyer of lubricant business outside Spain?

[Foreign Language] Marco. First, of course, every company is different. We have different strategies. I respect strategy of others. We have our local features. I mean, we are probably more downstreamers than some others. In average terms, we are -- we have a strong exposure to Spain and Portugal, I mean, with more domestic markets. So things are different for every company. So in our case, what we see is that in this customer business, we are making money. And we have -- in lubricants, we have an operational model for our business. We have a brand that is allowing us to make money in this business in new opportunities outside Spain. The experience we have with SK in Cartagena, the JV has been very positive for years. The experience we have in Bardahl, in Mexico, where we entered in [ IGB ] in 2018, 2019 before the pandemic has been very positive and profitable. We have good returns.

Same experience in the Indonesia, Singapore, in the United JV we have, entering in Philippines. So I mean, we have a model that is working. And for that reason, because we see returns, we are going to work within this model as a part of our strategy, and that is also part of the -- with a prudent CapEx, the road map we have to grow in EBITDA and in cash flow from operations in our Customer business. But again, we are not thinking about -- I mean, I have the figures here. This year, in 2026, this lubricants business is going to add EUR 223 million of EBITDA to Repsol, growing from the EUR 174 million we had in 2024. And we see the way to go on, but again, with prudent bets. We are not thinking about buying, let me say, large companies in this business and so on. These small bets are going to allow us to grow with this operational model.

Alvaro Navarro have one question.

This is Alvaro Navarro from Bestinver. Just a quick question about hedging your gas production. I don't know if you continue with that policy, hedging more than 50% of your gas production.

Yes, Alvaro, thank you. I mean, as a general policy framework in Repsol, we try to be open and exposed to commodities. That is gas, oil and so on. But it's true, and you are right, we try to do something different in the unconventional in the U.S. Why? Because it's, let me say, a very industrial market, industrial business. When you are investing, if you could monetize your production in 2, 3 years and you have a hedge, you could, in some way, guarantee not 100% because sometimes you could have CapEx increases and so on. You are not guaranteeing 100%, but you have a quite close clue about the return you are going to have.

For that reason, we go on in this policy. And roughly speaking, this year 2026, we have hedge in our production in the U.S. with 50% with that color with output that will be at around $3.2, $3.3 per million of BTUs and a call at $5.2, $5.3. That means that when we see that we grew close at $3, $3.2, $3.3, taking into account that our breakeven is at around $2.1 per million BTU and capturing this part of the upside, I mean, we closed the position with no cost. This I think that we have an additional this quarter that is really tricky because, I mean, we could have a [ color ] with a floor of $3 and capturing the whole price till something as $12, $12.5 per million BTU with no cost at 10%, 15% of our production this quarter. And on top of that, we also have a closed position of 30%, 40% -- sorry, 20% in a similar way by 2027 with something between $3 and $5, $5.2 per million BTU, roughly speaking. And then we see opportunities in the market, we should. Thank you.

Okay. We have some pending questions virtual that we will answer from the IR team. That was our final question today. With this, we will bring our presentation to an end. We really appreciate your participation. Thank you also to everyone who has followed the session online. Let me remind you that a replay of today's presentation will be available on our corporate website. Thank you once again.

And let me, Pablo, if you allow me breaking the protocol. I mean, thank you from our heart for being here. I mean, I know that for you it's an effort coming here. Madrid is always a fantastic city to come. But I mean, we appreciate your effort being here with us in this day that is important for Repsol. Thank you very much. [Foreign Language].

Hello, and welcome to the Repsol's Fourth Quarter and Full Year 2025 Results Conference Call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Pablo Bannatyne, Head of Investor Relations. I would now like to hand the call over to Mr. Bannatyne. Sir, you may begin.

Thank you, operator, and good morning to everyone joining us today. Welcome to Repsol's Fourth Quarter and Full Year 2025 Results Presentation. Today's conference call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well. At the end of the presentation, we will be available for a Q&A session.

Before we begin, let me remind you that during this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in our disclaimer. With that, I will hand the conference call over to Josu Jon.

Thank you, Pablo. Good morning, and welcome to everyone. 2025 was a year of strong execution for Repsol, underscored by solid strategic delivery and progress on our path of disciplined growth. In a complex geopolitical and macroeconomic backdrop, we continue to advance our strategic priorities, enhancing the returns to our shareholders, strengthening the portfolio and maintaining a consistent approach to capital allocation. Operating in a lower and volatile oil price scenario, performance remained robust across all 4 divisions.

In the Upstream, we continue to improve the business by bringing new growth projects on stream and optimizing the portfolio. In the Industrial division, we continue advancing on the transformation of our sites, developing a scalable low-carbon platform within our Iberian hinterland. Our positive refining momentum, especially in the second half, helped us to overcome the disruptions generated by the Spanish blackouts in the first part of the year. In Customer, we leverage our brand, scale and integration to develop an ambitious multi-energy offer, grow electricity retail and reinforce profitability.

And in Low Carbon Generation, we continue to execute our business model for renewables, rotating assets to crystallize value and limit our exposure. All of this, combined with the achievement of our key decarbonization targets for 2025 as set in 2021, delivering a 15% reduction, the carbon intensity indicator. Other targets such as methane emissions intensity and routine flaring reduction were met as well.

Our capital allocation framework continued to prioritize shareholder remuneration, underpinned by a strong balance sheet and the delivery of disciplined and transformational CapEx. Last year, we increased the dividend by 8.3% to EUR 0.975 per share. Total shareholder distributions were EUR 1.8 billion, comprising EUR 1.1 billion in cash dividends and EUR 700 million in share buybacks to reduce capital, placing us at the higher of our strategic cash flow from operations distribution range.

As we look ahead to our Capital Markets Day next month, the same key strategic principles will guide our update road map to 2028. Ensuring a predictable and growing dividend complemented with buybacks will remain fundamental to the strategy. Let me underline this point. For 2026, under our planning scenario, distributions will continue improving with the cash dividend growing around 8% to EUR 1.051 per share and buybacks in line to 2025.

Moving on to results. As detailed in the documents you have in your hands released this morning, Repsol has implemented a new group reporting model by business segment. I know that, that is complex, but let me say that the aim is to be fully transparent and adapting this reporting model to a new perimeter where we have [ minoritarian ] shareholders in some of our businesses, and that is pushing us to change, to give you in a transparent way, the more simplified information we can. The revised framework aligns our reporting with how the company currently manage and evaluate business performance, reflecting both the incorporation of strategic minority shareholders in 2 of our divisions and the increased relevance of joint ventures within our business model.

In addition, the company seeks to align all its financial information with the financial statements prepared under IFRS, which are not impacted. The reporting segments remain unchanged. However, under the new model, the contribution of joint ventures previously integrated by proportionate consolidation is now recognized using the equity method. Upstream production and reserves will continue to be reported based on Repsol's effective interest in its joint ventures. The main measure of segment performance is the adjusted net income presented net of the income attributable to minority interest and excluding special items.

For 2025, adjusted net income was EUR 2.6 billion, a 15% decrease over the comparable figure in 2024. Cash flow from operations was EUR 5.4 billion, 8% higher year-over-year. Net CapEx stood at EUR 2.7 billion, which compares to a EUR 5.1 billion net investment in 2024, including the rotation of Outpost announced in December and cash in this month in February, net CapEx was EUR 2.5 billion. Net debt closed at EUR 4.5 billion, a EUR 0.5 billion increase over 2024 and a EUR 1.2 billion reduction over the third quarter of 2025. Excluding leases, net debt closed at EUR 1.6 billion, so roughly a 5% of the capital employed of the company. Gearing ratio stood at 14% by year-end, as I mentioned now, 5.5%, excluding leases.

Under the previous reporting model, full year cash flow from operations reached EUR 6.1 billion, slightly ahead of guidance announced in -- last time in October and 13% higher over 2024. Net CapEx was EUR 3.5 billion under the previous reporting model, so the former one, in line with guidance at EUR 3.3 billion when we are including the Outpost rotation that, as I mentioned, was cash in this month in February.

Looking briefly at the evolution of the main macroeconomic indicators in 2025. Brent price averaged $69 per barrel, 15% lower year-on-year, driven by OPEC production increases, geopolitical uncertainty and commercial tensions. The Henry Hub averaged $3.4 per million BTU, 48% above 2024 figures, driven mainly by the continued ramp-up of our North American LNG exports. And in Europe, the TTF reference was 12% higher, mostly due to better demand and tighter inventory levels. Repsol's refining margin indicator increased 20% year-on-year, mainly due to stronger middle distillate differentials. On the exchange rate, the dollar weakened against most major currencies, including euro, averaging $1.13 per euro, a 5% depreciation versus 2024.

Continuing with Upstream performance. 2025 saw a strong delivery across the business as we continue to high-grade the portfolio with new projects and optimizing our legacy assets. Full year adjusted net income was EUR 957 million, 7% lower year-over-year, reflecting lower oil realizations, weaker dollar divestments and a lower contribution from equity affiliates, partially offset by higher gas prices. Production averaged 548,000 barrels equivalent per day at the higher end of guidance and 4% lower than in 2024. The higher volumes in Libya and the U.K. were more than offset by divestments and natural decline. Excluding disposals, 2025 production was 2% higher year-on-year.

In Libya, the stabilization of the country allowed us to reach our highest production level since 2012, exceeding 300,000 barrels per day in gross terms. In unconventional, representing around 30% of our volumes, we continue to accelerate activity in Marcellus and Eagle Ford as the markets evolve into a more bullish outlook for U.S. gas. Development activity across the portfolio focused on the efficient delivery of projects for which we took FID in recent years.

In [ Trinidad and ] Tobago, the Cypre and Mento projects reached first gas in April and May, respectively. In the Gulf of America, Leona and Castille delivered first oil in September. In Brazil, Lapa Southwest is nearing completion and is expected to start up before the end of this quarter. And in Alaska, development of the first phase of Pikka is close to full completion and expected to begin production in March. This flagship project with meaningful growth potential will contribute to reverse the great state of Alaska's production decline.

Together, these [ G5 ] projects are expected to contribute 80,000 barrels of low breakeven, low CO2 intensity barrels in 2027. With respect to portfolio management, we continue to strengthen our fundamentals through active management of our assets, making the business more resilient, transparent and profitable. Last year, we completed our exit from Indonesia and Columbia consistent with our strategy to concentrate operations in more material and better margin geographies.

In the U.K. we completed strategic agreement with Neo Energy to combine our assets in the North Sea. And in December, the partners agreed to incorporate TotalEnergies U.K. to the venture. Repsol will own a 24% stake of the resulting entity to be called Neo Next Plus and the new company is projected to produce around 250,000 barrels a day in 2026. This alliance will allow us to unlock value by combining operational synergies with disciplined financial execution. Completion of the deal is expected in the first half of this year, 2026.

In our upcoming CMD, we will have the opportunity to discuss in detail our next steps in this division. For 2026, our focus will be on Alaska's ramp-up to ensure we'll reach 80,000 barrels of gross production by the third quarter, the preparation for the liquidity event and the resumption of operations in Venezuela. In this regard, last week, the U.S. administration issued new licenses that provide the legal framework we need to resume our oil and gas operations in the country.

Continuing now with Industrial, full year adjusted net income was EUR 963 million, EUR 484 million below 2024, mainly due to a lower contribution from refining, chemicals and the trading business. The blackouts that impacted the Iberian Peninsula in April had a material impact on results. In the Refining business, uncertainties around tariffs deteriorated the margin environment in the first part of the year. Stronger diesel, gasoline and naphtha spreads supported the gradual recovery of margins towards year-end with indicator reaching in November its highest level in more than 2 years.

Repsol's margin indicator averaged $79 per barrel, $1.3 higher than in 2024. The premium over the indicator was $0.7 per barrel. The utilization of distillation capacity averaged 83%, which compares to an 88% rate in 2024, negatively, as I mentioned before, impacted by the consequences of the blackouts and conversion units operated at 95%, which compares to a 100% utilization rate in 2024. In 2026, the indicator has averaged $5.5 year-to-date. We expect margins to remain healthy, supported by improved economic activity, higher structural gasoline demand and low inventories.

In Chemicals, Repsol's margin indicator was 20% higher than in 2024, mainly driven by lower feedstock prices. Even so the business incurred a loss as market conditions remain challenging in Europe with flat demand, higher relative cost comparing with some other regions in the world and large product imports. On this environment, we remain committed to our strategy of reducing breakevens and expanding margins through differentiation. In this direction, the expansion of Sines in Portugal is expected to start operations in the second half of 2026.

With regard to the transformation of our facilities, we continue to drive key initiatives in renewable fuels. Starting with Puertollano, the retrofitting of our former gas oil unit to produce HVO is expected to commence operations next quarter. This facility will join our advanced biofuels plant in Cartagena to reach 0.5 million tons of production capacity per year between both plants and a total of 1.5 million tons biofuel capacity at group level. A potential new retrofitting project is currently under evaluation.

In Tarragona, construction of the Ecoplanta received approval at the beginning of last year, 2025, and the project moves ahead towards starting production in 2029. Repsol has already secured its first offtake contract for the renewable methanol to be produced in this facility.

Finally, in renewable hydrogen, we took the final investment decision for our first 2 large-scale electrolyzers to be constructed in Cartagena and Bilbao with a capacity of 100-megawatt seats and construction of a third large-scale electrolyzer in Tarragona progresses towards FID approval in coming months.

Moving now to Customer. Full year adjusted net income was EUR 754 million, 17% over 2024, thanks to a higher contribution in all business segments. EBITDA reached EUR 1.4 billion, a 20% improvement year-on-year. This implies achieving our 2027 strategic target 2 years in advance, reflecting the resiliency of our core legacy business. And also, let me underline the increasing contribution from power and gas retail and our multienergy offer to our customers.

In Mobility sales of road transportation fuels were 11% higher than in 2024, being now at the level of the pre-pandemic sales. The non-oil business delivered a robust contribution margin growth in Spain, up 12% year-on-year. And in aviation, results benefit from sustained demand growth. Let me add that approximately 60% of our Spanish network already provides multienergy solutions with more than 1,500 service stations offering fuel that is 100% renewable.

The number of digital clients reached [ 10.8 million ] by year -- by year-end, I mean, in December, a 16% increase over 2024, contributing to an increase of business to customer sales in service stations. Waylet app, that is our app leading the Spanish retail businesses keeps on growing in new sales and in transactions, reaching 89 million transactions in 2025, 10% above 2024.

Finally, in Power and Gas Retail, we add more than 0.5 million customers, reaching a record figure of 3 million clients by December. Repsol has maintained a steady growth trend since we entered in this business in 2018, almost multiplying by 4 our customer base since the acquisition that year of Viesgo.

Turning to Low-Carbon Generation. We continue to execute our renewable strategy, bringing new projects into operation while rotating assets to crystallize value, maximizing returns and limiting our financial exposure. The adjusted net income reached EUR 53 million, EUR 77 million higher compared to 2024, supported by higher low carbon production. The average pool price in Spain was EUR 66 per megawatt hour, 4% higher than in 2024. The power generated by Repsol reached 11.6 terawatts hour, 49% higher year-over-year. Renewable generation was 7.7 terawatts hour, 34% higher year-on-year. We add 2.2 gigawatts of new capacity under operation this year, 2025, achieving our objective for 2025 and bringing total capacity to 5.9 gigawatts by year-end.

As of today, installed capacity has reached 6 gigawatts of renewable power. We were able to rotate 1.8 gigawatts through 3 different transactions in the U.S. and Spain. In the U.S., we divest a stake in a solar portfolio that included Frye and Jicarilla and reached an agreement to divest a stake in outpost solar farm, including around EUR 200 million tax equity. In Spain, we divest a participation in a 400-megawatt renewable portfolio in the first part of 2025. And let me say that since 2018, Repsol has developed and brought 5.1 gigawatts of wind and solar capacity into operation. 100% of more than 3 gigawatts fully commissioned have already been successfully rotated with an average equity IRR above 10%.

To date, EUR 2.7 billion of capital has been captured through a combination of asset level debt, tax equity investment and value-accretive asset rotation strategies. Of the remaining capacity, 1.4 gigawatts are close to commercial operation date, around 79% is currently at an advanced stage of negotiation.

And to finalize, let me highlight that last year, we had a new 805-megawatt wind pipeline to our Spanish portfolio with the aim of hybridizing production at our combined cycle in Escatron in Zaragoza securing the power supply for the future data center to be built in this area by a third party.

Regarding our outlook. In our Capital Market Day, we will provide the regular guidance for the period together with projection to 2028. For 2026, our planning assumptions are based on a Brent price of $60 to $65, a Henry Hub of $3.5 to $4 and a refining margin indicator between $6.5 and $7.5 per barrel. In the Upstream, we are expecting a higher production in a range from 560,000 to 570,000 barrels per day. Under this scenario, shareholders distributions will continue improving, including cash dividends and share buybacks. The first buyback program was approved by the Board yesterday for up to EUR 350 million and will start in coming days.

Regarding our decarbonization pathway, having delivered on the short-term commitments set for 2025, we will modulate medium-term goals while keeping long-term objectives according to the current regulatory and business framework. To summarize, 2025 proved to be another year of solid delivery for Repsol with strong progress across the priorities defined in our previous strategic update 2 years ago. And let me enumerate some of these progresses. First, between 2024 and 2025, we have allocated a total of EUR 3.8 billion to remunerate our shareholders at the higher end of our cash flow from operations distribution range. We have increased the dividend per share by 39%, and we have reduced our capital by 9%, canceling 112 million shares. We have evolved our E&P portfolio into a more profitable business, which is now more resilient and predictable, and we have transitioned to more normalized CapEx levels.

In Industrial, we are accelerating efficiency and competitiveness, reinforcing the role of free cash flow generating trading business and building an advantaged low carbon platform to reinforce our leading position in Iberia. In the commercial side, we are developing an ambitious multienergy proposal that will strengthen Repsol's competitive position in our core markets. And in renewables, we continue developing our pipeline, rotating assets in early stage of production to deliver required rates of return under the principle of a limited capital exposure to this business.

Considering the significant progress towards our targets and in light of changes to the macroeconomic, regulatory and geopolitical backdrop next month in March, we will refresh our strategic framework. The core principles are growing predictable remuneration, a strong balance sheet and disciplined growth will remain at the basis of our plan. We will share with you further details in less than 3 weeks, so see you then. With this, I'll turn it over to Pablo as we move on to the Q&A today. Thank you very much.

Thank you, Josu Jon. Before opening the Q&A, I anticipate there is a lot of interest on the details of the Capital Markets Day to be unveiled in March. As you can imagine, at this point, we cannot share details, so please adjust your questions accordingly. I would also kindly ask participants to limit yourselves to a maximum of two questions. If time permits we will try to cover more in a second round. To begin would like the operator to remind us of the process to ask a question. Please, operator, go ahead.

[Operator Instructions] Our first question comes from Michele Della Vigna at Goldman Sachs.

I'm looking forward to the Capital Markets Day. It looks like quite a few countries that have been difficult to operate in are offering better fiscal terms and opening up more to companies. You certainly had the example of Venezuela of Libya. I was just wondering if you could lay out what you think could be the opportunities there in Venezuela to get paid for your normal activities, which I think would be around EUR 250 million, but also to potentially ramp up production and in Libya, if you're seeing an opportunity to grow production there?

I mean, let me say that Venezuela now is in a significantly better situation that Venezuela was 2 months ago. I think that a new window opportunity for a better future is opening in Venezuela. And it's also, I mean, let me say, a better situation for our sector in that country. And I think that it is now time to help consolidate this improvement, strengthening the social stability and the economic development in the country. You know Michele, because we have talked about that for years that Repsol has consistently been a responsible operator in Venezuela. Our commitment to the country's future has been clear. And now we are fully dedicated to contributing to this brighter future.

You know that we were support by the licenses over the last days that are going to assist and allow Repsol to work in this framework. We appreciate the American support and the American approach to our role and our operations. And we are working also closely with Venezuelan authorities and our partners [indiscernible] to move all that in a positive direction. But let me say that our initial contribution, and we are -- of course, we have, let me say, and we received this open flag 5 days ago. So now we are preparing everything to restart and to resume our operations in a direct way in the country.

Our initial contribution will be to continue supplying gas to stabilize the country, providing the gas that the national power system needs. We will resume a regular dynamic in gas supply and the process of lifting contractual condensates and oil cargoes will restart to pay for the gas supply. So we are preparing everything to start lifting the contractual cargoes. At the same time, we are also preparing debottlenecking project to increase gas production in Venezuela to a plateau of 640 million cubic feet per day from the current 580 million cubic feet per day. So an increase of 10%, roughly speaking.

Regarding the oil production, we will also restore normal operations. That includes -- and we are starting to engage our team in the operations, investing in production facility renewal, such as pumps and some other facilities, considering the introduction of a rig in the area and working to reverse the decline in oil production. And simultaneously, of course, we will restart the commercial lifting of oil cargoes within the framework of our contracts in Petroquiriquire, exporting oil from Venezuela to Spain, the U.S. or any other suitable destination that is allowed by the license framework.

Additionally, we are also preparing a plan for the Petrocarabobo oil field where also we see potential to increase this quick win initial production leverage in the existing infrastructure. So it's early perhaps Michele, to provide specific figures because, as I mentioned, we are in the first days of this new dynamic. But let me say that my view is optimistic about Venezuela, about the country, about the evolution of the political, social and economic environment in the country and optimistic about the hydrocarbon sector that has to play a significant role in this stabilization and growth of Venezuelan society and Venezuelan country.

We see now that we could be able to increase oil gross production in Venezuela by more than 50% over the next 12 months. We have the ambition, and we see plenty of room to get this target of multiplying by 3 the production within 3 years. But I think that what is important is to put the focus in the short term.

So a 50% of oil increase -- oil production increase in coming 12 months. And we are confident that the cash flow from normalized commercial activities that is going to be resumed in the short term under the 16 contractual framework is going to finance this effort. So we are confident that a normal commercial relationship will be able to finance this win-win approach because, I mean, the country is going to get more production, more revenues coming from royalties and from taxes. We are going to have more cargo -- more cargoes to pay for this operation. And of course, we remain open to exploring other opportunities for the future.

And I mean, as Pablo said, I understand that you want to have all the figures about that. But as I said, step by step, it's probably too early and further details will be provided in 3 weeks in the Capital Market Day event. But again, let me say that I remain optimistic that I see that a new opportunity is opening in Venezuela, and we see room to start a normalized operation and commercial activity pushing in the direction of increasing the oil production in the country. And Repsol is fully committed to this pathway that was open 5, 6 weeks ago.

Going to Libya, I mean, I also have a positive view. I mean, we rely on Libya. We see that it was stable. We see more security on the ground. As I mentioned in our last call, I think that -- I mean, we underline the important contribution of Marshal Haftar and the Libyan Army in this positive evolution of the country, thanks to the force deployed over the last years to combat terrorism that is important, of course, for Libya, but let me say that it's also an important contribution of the Libyan Army to the European security that has to be recognized.

And I mean, over last year, 2025, we have a production that -- I mean, in the quarter average a figure above 300,000 barrels a day gross. That could be 39,000 barrels net Repsol. But the production, thanks to new wells that were explored in 2025, 27 wells achieved a maximum peak of 326,000 barrels at the end of the year. We are continuing with this infill drilling campaign, and we expect to have a production at the end of this year, 2026, close to 350,000 barrels a day. That roughly speaking, will be a figure close to 40,000 to 43,000 barrels a day net Repsol. But I mean, we also rely on the future of the country. We go on in the exploration campaign. We are exploring the 2 areas, the NC115 and the NC186 areas.

On top of that, you know that in February, we were awarded with 2 new exploration blocks. One of them is onshore in the Sirte area, and the other one is offshore in the north part of -- I mean, in the northern part of Benghazi. So positive evolution in social and economic terms in the country and in security terms, production growth and the full commitment of Repsol with the country.

Our next question comes from Alessandro Pozzi at Mediobanca.

I have 2. The first one on cash flow guidance for 2026. I'm not sure if you want to keep some guidance for the -- at the Capital Markets Day, but I was wondering if you can perhaps give us some color on the moving parts under the new reporting model for cash flow from operations and CapEx. And the second question also always on cash flow is on asset rotation. I was wondering if you can maybe share us your thoughts in terms of asset rotations for 2026 and maybe a potential preparation for the liquidity event for your U.S. assets. We have heard about potential combination with another American players. But I was wondering if you can give us your thoughts on the progress there?

And maybe a final question, if I can squeeze in a last one. Customer has grown a lot, the gap between Customer and Industrial or Upstream, not as much -- not as big as in the past. Can you give us your thoughts about the growth potential for customers?

Alessandro. I mean, believe me that Pablo is looking at me and saying don't enter in the cash flow guidance for 2026. But I mean, I'm going to break a bit my deal with Pablo. So I'm not going to talk about the '27, '28 path. But I think that it's fair to talk about the guidance for 2026. So under the assumptions I mentioned before, Alessandro, in the speech, that means a Brent price something in between $60, $65 a barrel, a Henry Hub $3.54 per million BTU and a refining margin, something in between $6.5, $7.5 a barrel, the cash flow under the new metrics of the new reporting model expected as guidance for this year 2026 will be in the range EUR 5.5 billion and EUR 6 billion.

Let me say that this figure compares with under the same reporting model metrics with EUR 5.4 billion in 2025. And let me also remind you that in 2025, the metrics in terms of commodity prices and environment were higher. So higher Brent price and higher refining margin. That means that in an environment that is not going to be so good as it was in 2025, we see that the cash flow from operation is going to be significantly higher this year in 2026. Why is that? Because, I mean, it's not something magical. It's because, first, in the E&P, we have new production, more production and more projects. I mean, Leon-Castile, Alaska and so on.

In the Industrial side, we have the chemical business improvement with Sines with high molecular weight polyethylene plant of Puertollano that is going to start operations in the second quarter of 2026. We have significantly better margins for biofuels, and we have a higher production of HVO comparing with 2025. On top of that, as you mentioned in your last question, Alessandro, the Customer business is improving its position comparing with 2025.

And I mean all that is behind this cash flow production. On top of that, the renewable power production is also contributing to this cash flow growth, and that is what is behind.

Going to the CapEx, and again, sorry for, I mean, comparing both reporting models and so on, but I will try to be clear, simplifying things. If we consider and we take the net CapEx figure in 2025 under the new IFRS model, EUR 2.7 billion, what we expect in CapEx terms this year, net CapEx terms in 2026 is the same figure, EUR 2.7 billion.

Let me say that I think that last year, the gross CapEx under these figures was EUR 4.1 billion in 2025. And this year, the gross CapEx is going to be lower. That means that this year, we rely a bit less on disposals. I mean clearly speaking, there are not any significant disposal in our budget this year. And what we have is a normal dynamic in terms of rotation of our renewable assets under this principle of contained financial exposure to this business. I mean growing in some way, being self-financed by the dynamic of the business.

In this sense, let me underline that we already had a cash-in of EUR 230 million in February coming from Outpost. And now we are in the last part, in the advanced last part of the process to dispose, overtake, better said, 700 megawatts in Spain. So we are comfortable with a figure of EUR 2.7 billion as net CapEx figure under the new reporting model for 2026.

Going to the liquidity event. I know, Alessandro, that probably I'm going to be boring, repeating the same message I launched in the last call. But now it's even clear than before. I mean our Upstream today is better than the Upstream we had 3 months ago. And 3 months ago, the Upstream was better than the Upstream we had 6 months ago.

So why? I mean Venezuela is crystal clear. We could understand that, that is a clear upside to the figures I mentioned before because let me say that we are not including Venezuela in the cash flow from operations I mentioned before. I mean we are not that -- probably we could, I mean, check some figures before the Capital Market Day, but Venezuela will be an upside for the figures I mentioned before.

And let me say in this sense that, I mean, we are not in a hurry to prepare or to jump, better said, into this liquidity event. We are preparing the company. We are going to have in coming weeks, next month, Alaska in operation, Leon-Castile, the production is growing. Before the end of this quarter, we are going to achieve 20,000 barrels a day net production in the Leon-Castile project. We are going to work hard to have the ramp-up of Alaska, producing 80,000 barrels a day gross by the third quarter.

So we are, in some way, improving our portfolio, improving our Upstream. And let me say, the later, the better in some way. So open, of course, to this improvement of our Upstream. These potential opportunities we could have in the -- for the liquidity event. But again, as I mentioned, improving this business. And I think that the customer growth potential for this year, I already answered your question, Alessandro. Perhaps for coming 3 years, we will talk about that in the Capital Market Day. [Foreign Language]

Thank you very much, Alessandro. Our next question comes from Alejandro Vigil at Santander.

In line with the previous comments and also very interesting to understand the net debt position of the company because looking at '25 versus '26, which could be the moving parts. And also to understand that in the reporting, we have some data about the net debt level in the subsidiaries, 6 billion in the Upstream and 3.2 billion in the Low-Carbon business. If you can elaborate in the whole picture of the company in terms of net debt?

And the second question is about refining. I see you relatively, or I would say, constructive about refining margins, looking at the scenario you are discussing this morning. If you can elaborate in the moving parts as well in this view.

Alejandro, thank you. I mean going to the net debt position, I mean, again, to compare your figures at the beginning, better said, at the end of 2024, the net debt of the company was EUR 4 billion under -- including leases, of course, under the new reporting model. At the end of 2025 is EUR 4.5 billion. So vertically an increase of EUR 0.5 billion.

Let me elaborate to say that this net debt has been flat over the year. I'll try to explain that because we have 2 financial effects that are not really associated to our net debt change over the year. First, remember that after the closing of NEO NEXT, we had an increase of the financial debt in EUR 1.1 billion. I mean because that goes formerly in the decommissioning commitments of the company in our balance sheet that due to the new structure passed to be part of the financial debt. So an increase of EUR 1.1 billion. And because the combined effect of hybrid, remember that we issued a hybrid in the last quarter, EUR 700 million, EUR 725 million I had in mind, minus the purchasing part of EUR 100 million of a former hybrid. So all in all, we improved the net debt in [ EUR 600 billion ] because this financial hybrid effect.

I mean these 2 effects, they had an increase of net debt of EUR 500 million. That is exactly the figure of the increase of net debt over the whole year. So for that reason, I elaborated in some way that we are going to -- we have a flat debt over the year.

Saying that, we also expect, I mean under the assumptions I explained before, that at the end of the year, we are going to have, roughly speaking, a debt that is going to be probably flat comparing with the debt we had at the beginning of '25.

Going to the subsidiaries. I mean let me stress the fact, Alejandro, that the debt of the company is the debt I mentioned now. What we try to do, of course, is to try to optimize in financial terms, the debt that every company subsidiary in the group could have as a debt in its structure. But all this combined debt is included in the total debt of the group, in the total debt of the company. So the figures are the figures I mentioned before.

Of course, we try agreeing with our partners in every business to optimize the debt of these subsidiaries we have, in some cases, in the Upstream to ensure the investment grade of the vehicle as we demonstrated in the emission of bonds in summer and so on. And in the E&P business, we are also preparing the business for the liquidity event, and that is quite logical, taking into account the target I mentioned before.

Going to the refining margins. So crystal clear about what is happening today. As of today, the indicator has been $5.5 this year, 2026. Comparing with last year, 2024, that in this period was $5.4 a barrel, the indicator. These days, the margin is at $6.5 a barrel. The premium over the -- you remember that we have in our budget, $1.4 a barrel as a premium for the refining margin for the whole year. As of today, the premium is at around $2.5 a barrel. That means that the margin capture as of today over this year 2026 is at $8 a barrel in our refining margin.

Saying that, I mean, we have a probably positive view about refining margins for the year. Why? First, I mean, if we go to the fundamentals, what happened over last year, what has happened, sorry, over the last year. First, the shutting down of refineries in the whole world were at around 1 million, 1.1 million barrels a day of capacity, mainly Europe, U.S., Japan and Australia and China. New capacity has been at around 1 million, 1.1 million barrels a day. The increase of demand worldwide is at around 800,000, 850,000 barrels a day. So there is some kind of pressure coming from the demand on that capacity that is not growing.

If we go to the current capacity, I mean, my view is that Dangote in Nigeria is going to achieve in coming months a normal production, I mean fulfilling expectations they have. So this part, in some ways included in the increase. In Olmeca in Mexico, probably they are going to need more investment in infrastructures to be able to get the expected production they forecast.

If we go to the fundamentals, the demand and pressure on gasoline margins is very high in our markets in Europe. And going to the diesel, we see that because the shortage we have in Europe, this diesel is very dependent and has a strong upside depending on 2 factors. The first, the sanctions enforced for products coming from Russia and refined in some other parts of the world entering European market. So that's, in some way, putting a pressure on diesel margins. And because this, let me say, lack of strategic autonomy in Europe related to diesel, any geopolitical event has a direct impact on diesel margins in Europe. So I don't have to elaborate today the potential geopolitical risks we are seeing in the world.

So for all that, I mean being prudent, we are quite comfortable with the refining margin indication. We are guiding, forecasting or elaborating. [Foreign Language]

Thank you very much, Alejandro. Our next question comes from Guilherme Levy at Morgan Stanley.

I have 2, please. Firstly, if we could with refining, could you comment on the fire that you had in the Cartagena refinery this year. How quickly do you expect the Topping unit that is currently down to return? And what should we have in mind in terms of financial impact related to this incident? Apart from the lower utilization impact itself, is there any sort of CapEx that needs to be made for it to be active again?

And then secondly, a few in the downstream theme. In January, we had the announcement that 2 of your downstream competitors in Iberia are starting a potential merge of their refining and distribution operations. And I was keen to pick your brain on the potential impact that, that transaction could have to your marketing business in Portugal and Spain. And if it comes to a point in which they are requested to sell down some stations in Portugal, would you be interested to further increase your presence there?

[Foreign Language] Going to the Cartagena fire, I mean, I don't know if everybody knows what happened. But we had on January 25, 2026, a leak in atmospheric crude distillation unit in one of them, in Cartagena, that -- I mean affecting the bottom part of this distillation unit. We had a fire, and the fire was fully extinguished using internal resources and with no personnel injuries reported. I mean let me say that the rest of the units of the refinery, except in this distillation unit, worked and are working in a normal way. So that means that the conversion units are fully operational in Cartagena.

We are going to have an effect in terms of the repairing of this distillation unit that is going to last at around 8 months because we have a combined and integrated system, and you know that our distillation is not at the 100%, it's not usual. What we try is to cover and to fulfil the conversion units we are solving in logistic terms, the normal operation of the conversion using the products from other refineries. That of -- so from the point of view of the market, from the point of view of conversion, from the point of view operation, the situation was fully normalized in the first days. And there is an economic impact, as you mentioned, because of logistic costs and so on.

Roughly speaking, the cost is going to be at around EUR 6 million, EUR 8 million per month during 3 months because all the rest is covered by insurance company and so and so. We could have something in-between EUR 18 million and EUR 25 million all in all as an impact of this incident. That's -- roughly speaking, that is with a better -- sorry, with the best information we have today, the impact of that event we had on January '26.

On top of that, I mean, let me say that this merger first is indicating the attractiveness of the Spanish and Portuguese markets for this business, and that is a positive. And let me say with my whole respect, both of them, they are good competitors and having a strong competitor and a good competitor in our market, I think that is good news for the market and it's good news for Repsol. We like competition. And let me say that probably, it's too early to talk about what could happen after the closing of this merging process and so on. But I think that is positive to see a dynamism in the service station market in Spain and Portugal that is in some way fruit of the positive momentum and experience we are seeing in our markets in commercial terms. Thank you, Guilherme.

Thank you, Guilherme. Our next question comes from Irene Himona at Bernstein Societe Generale.

Congratulations on a successful year in terms of your asset rotation program. In the Upstream, you exited, you sold assets in Indonesia and Colombia last year. You also reported a CO2 emissions reduction of nearly 300,000 tons. I wanted to ask if you can give us a sense roughly what proportion of that emissions reduction was organic, if you like, versus emissions sold, please?

And then my second question is on capital allocation priorities. And thank you for guiding on 2026 CFFO and net CapEx at your new scenario. And I don't know if you want to leave these for the CMD, but I wanted to ask about 2026 upside and downside to your base case given the near impossibility of getting the commodity rights. So the balance sheet is strong. In a higher $70 Brent scenario and in a lower $50, let's say, stress scenario, should we assume that your key lever would be the share buyback? Or would you also look at change in gross capital expenditure?

Thank you, Irene. I mean first, let me elaborate that because in the reporting of Scope 1 and 2 emissions, we only consider operating assets. The inorganic disposals in the Upstream, I mean, Indonesia and Colombia, they don't have any impact in this Scope 1 and Scope 2 emissions reported. So the improvement comes mainly from the continuous efficiency effort coming from the industrial area, refining and chemical, that in some way has been offset this year, partially by the increase of the activity of the CCGTs, the combined cycles in Spain.

You know that after the blackout of April 28, the Spanish power grid operator, Red Electrica, dramatically changed the operation rules, opening or giving more role to the CCGTs to avoid frequency and tension volatility in the grid. And for that reason, I mean, the operation level of our CCGTs since April has been higher than before. So the net is an improvement with a real improvement coming from more efficiency in our refineries and chemical plants and more emissions coming from the CCGTs because the activity for this operational move in the Spanish electric system has been higher.

So if we go to our capital allocation priorities, but first, let me say that when we talk about Brent, our central scenario goes from $60 to $65 a barrel. As of today, the Brent has been over this year at $66 a barrel as average. And today, the price is around $70, $71 a barrel. So I see more room for -- with the current information, of course, things could change as you perfectly know, Irene. But I see more room for upside than downside. As I mentioned before, we have upsides that are going to come for this Brent price probably.

Secondly, from Venezuela, as I mentioned before, I mean, the metrics of cash flow from operations in Venezuela are not -- this potential improvement is not included in the range I mentioned before. We have to look at the impact that the extremely cold winter, January and part of February in North America, is having on our gas business, gas downstream business in North America, plus the Henry Hub price because remember, the indication of price I gave before. And in case of having, let me say, $50 a barrel in the stress scenario that -- I mean now is not the central scenario that, of course, could happen. I mean you know that we have the capacity in the oil side of unconventional to reduce a bit the CapEx. In the gas side, of course, it's going to depend mainly from the Henry Hub. And let me say that our distribution guidance and our distribution priority is going to work under any scenario, positive or ACID scenario. Thank you, Irene.

Thank you very much, Irene. Our next question comes from Biraj Borkhataria at RBC.

Looking forward to the CMD. Just 2 questions. The first one is on asset rotations. You mentioned the smaller gap between gross and net CapEx this year. Is that a function of your view on the market and when it's best to transact? Or is this a function of you having done a lot in the last couple of years and so there's less assets going through the system?

And then the second question is on the customer segment, marketing. That business has done exceptionally well over recent years. You've sold -- this is more for the CMD, but you've sold minority stakes in the Upstream and renewables in order to provide those sort of value markers. Would you consider doing something similar for that segment?

Thank you, Biraj. I mean going to, as you said, the shorter gap between gross CapEx and net CapEx, the main reason is that in the E&P, I mean we are not forecasting or seeing disposals in our portfolio. I mean that could happen, of course, disposals or acquisitions, depending on the dynamic of the market. But remember that we have a clear target in the first years of this plan to reduce the countries where we were present in the E&P business. And now with 10, 11 countries, we are comfortable with. So we don't -- we are not factoring any disposal coming from the E&P business. And if we go to the Low-Carbon or Renewable Generation business, I mean, our comfortability comes from 2 sides. First, because in Spain, as I mentioned before, we have, at the end of the road, a rotation of 700 megawatts that, I mean, is in the final part of the process. So we are comfortable with. We already rotated in the U.S. Outpost and the cash-in came -- the taxes came just here, but the cash-in coming from the partner came this month in February. And I mean, that is the main reason for having, let me say, a shorter gap.

First, the answer, we are not considering any minority divestment in this segment of marketing or customer centric business. I mean we see that -- I mean we are in the Iberian Peninsula with our industrial and customer businesses. They are, in some way, fully integrated. We have a common view about our leadership in the Iberian Peninsula in energy terms. And what we are seeing is that there is room for growth in these customer-centric business. So we'll talk about that in the Capital Market Day, but we anticipated 2 years, the growth forecast by 2027 in 2025, but we are going to go on in this growth road map.

Our mobility business including the non-oil part is growing and is going to go on in this sense, growing in results. Our retail power business is clearly growing in number of customers and in cash flow from operation. Our lubricants is also performing the right way and growing. The aviation segment is very positive. I mean let me say that, that is a quite interesting reference because, I mean, it's, of course, the work of our team and the good performance of our team and also taking advantage of a place where we are.

This year in '25, we sold the 10% of the total SAF sold in Europe. And that is -- I mean first, because we have a strong position in Iberia, that because Iberia has a strong position in aviation terms in Europe and in the world. We received, last year, 100 -- more than 100 million visitors, tourists in Spain, I mean the second country in the number of visitors after France and the second one in revenues after the U.S.

So I mean, all that is pushing our mobility businesses up and that is going to go on in coming years. So in this context, we prefer to go on in this advantage we have.

We are leading in terms of brand, in terms of digital support for these businesses with this multi-energy offer and we are going to go on growing. In this business, now let me say, that is quite hidden because we are always talking about E&P, refining and so on. And that is okay. But if you check the figures and the figure I have in mind, perhaps I'm wrong, but this business had a free cash flow of EUR 1 billion in 2025. I mean that's -- and growing. So not -- we don't have any intention of consider any minority divestment in this segment. Thank you, Biraj.

Thank you, Biraj. Our next question comes from Ignacio Domenech at JB Capital.

Two questions for me. The first one is just wondering if you could provide an update on North America Upstream. What are the plans for 2026 in terms of adding rigs, okay, in North America?

And my second question is related with the blackout in Spain in 2025. I was wondering if the company is planning or what is the possibility that the company could receive a compensation from the economic loss of the blackout in the industrial operation?

Ignacio, thank you. I mean Upstream North America, mainly 3 parts of the portfolio, Alaska. Alaska is going to start first oil this quarter in March. And as I mentioned before, a ramp-up, achieving 80,000 barrels a day gross. You know that we retain a 49% of the stake in this project by the third quarter. So -- and on top of that, I mean, I'm not going to elaborate now. But remember that in Alaska, we have Pikka 2, we have Quokka, we have a clear possibility of growth in this state. And of course, we are working in the direction of the FEED and so on about the analysis of a potential future FID for Pikka 2. But now fully focused on the production.

Second, the Gulf of America, there, we have the productions we already had before that are Buckskin and Shenzi. And we put in operation the Leon-Castile project. I mean perhaps I have a mistake, but today, we have 3 wells connected. I think that we are going to connect the first one in May, June, and connecting the first one in May, June, we are going to achieve the net Repsol of 20,000 barrels a day.

Going to the unconventional, we put in operation a rig in Marcellus in September. This rig is operating, and it's going to stay the whole year, 2026. And in Venezuela -- sorry, in Eagle Ford. I was thinking -- I mean after so many questions about Venezuela. In Eagle Ford, we put in operation a rig in October, I think, September, October, and we are going to stay there until the second quarter of this year because oil price is not exactly at the point that the cash price is always.

And again, someone could think that perhaps we could be more aggressive, putting more rigs and so on. I mean remember the history of the unconventional. If you are prudent, if you are fully focused in maintaining your high productions and so on, you could be clearly free cash flow positive in these assets. If you start increasing in a dramatic way your CapEx, the risk of having inflation of cost in the area and so on, it's always there. So we have a fully positive view that in the framework of this financial prudency in the area.

The blackout, you know that there is still an ongoing investigation led by the regulator, CNMC. I mean I prefer not to enter in the public debate about the origin of the blackout because I prefer to read this important analysis about what happened that day. You know the consequences for Repsol.

Let me split because remember that in April, May, June, we talk about 3 different events. One of them, nothing to do with the blackout. That was a problem with the distributor in Puertollano. And we have a secondary event in Cartagena that could be related to the origin of the blackout, but it's a different event.

Going to the blackout, the big black out of April 28, the potential claim only of this event is around EUR 125 million that we consider recoverable, not about the rest of events. And I mean, we are waiting for this report to have more clarity about the potential responsible of these events. But in any case, we are going to start a claim in legal terms before the end of April, in the time where in legal terms, this claim is allowed.

I mean I don't know what is going to happen because I don't have a crystal ball. But let me say and let me remind you, Ignacio, that there was a resolution taken by the Spanish Supreme Court in 2022, ratifying a full compensation to Repsol's affiliate, Petronor with EUR 18 million for those 12 minutes of blackout that we suffered at that time in Petronor in one of our refineries that, of course, provoked the full blackout and the shutdown of the refinery for days, and we were fully compensated.

So roughly speaking, EUR 18 million is a figure very close to the impact of every of our refineries of the blackout we suffered in April because we have to consider that we have 5 refineries plus 3 chemical sites, Puertollano, Tarragona and Sines in Portugal. So we are preparing this case, waiting for this report that -- attentive to that. But in any case, we are going to work in legal terms to have a fair compensation for this impact on our industrial plants. [Foreign Language]

Thank you very much, Ignacio. Our next question comes from Fernando Abril at Alantra.

[Foreign Language] A few questions, please, if I may. First on Upstream production, you closed the year with 544,000 barrels and you guide to 560,000 to 570,000 barrels. My question is how should we think about the production ramp up through the year? And where do you expect output to stand by year-end '26?

Second, on refining margins. You've mentioned the very strong refining margin premium year-to-date. So what are the main drivers? And how sustainable are them? And additionally, what is the potential upside you see from the possible recovery of Venezuela and crude cargoes? And last recent press reports mention about the favorable Supreme Court ruling for Galp, and I think BP as well regarding the regional hydrocarbon tax in Spain. I don't know if you have similar claims. I don't know if there could be also a material financial impact or recovery for you as well.

[Foreign Language] Fernando, thank you. Going to the Upstream production, I mean, the main increase is going to come from, as I mentioned before, the ramp-up of Leon-Castile that today could be the Leon-Castile in a production of net 12,000, 13,000 barrels a day. And as I mentioned before, it's going to go up to 20,000 barrels a day. Alaska, clearly speaking, is going to be one of the drivers of this growth.

We have a positive impact that could be at around 10,000 barrels a day, roughly speaking, in U.K. due to, first, the effect of the merger with Hitec creating NEO NEXT last year, plus the pre-emption process of calling the gas asset production that could have a production at around 40,000, 45,000 barrels a day, roughly speaking, gross, and was incorporated to the JV at the end of the year.

So on top of that, of course, you are going to see some natural declines and so on. And at the end of the year, we could have, after these ramp-ups, a production closer at around 580,000 barrels a day and the average of the year because, as I mentioned before, a part of this growth. Alaska, Leon-Castile and so on is going to happen over the whole year. So you have to take the average of the year. The average of the year is going to be at around 560,000, 570,000 barrels a day.

Refining premium, main drivers, of course, again, and take, Fernando, please, as an indication my comment because I don't have a crystal ball. But there are 2 solid fundamentals for this increase in the premium and for the sustainability of the premium. First is that we have seen that in the market. So that is not -- it's not something that is going to happen in the future. It's going to be increased in the future, but it's happening today is the supply of heavy oil in the Atlantic Basin. And Venezuela is going to change the game in this sense.

So more heavy oil in the market means, first, a capacity to fulfill our conversion units, mainly cokers that is higher. So a higher utilization of our conversion units, plus, I mean, more pressure on prices, pushing prices down, discounts, increasing discounts in the case of heavy oil. So that is very important for our system and it's very important for the premium we could capture.

On top of that, buyers. Remember that last year, I can't remember the exact figure, but we could have a figure in average close to $550, maximum $600 per ton as a margin of HVO minus UCO for the HVO and bio's production. We're seeing for the whole year a figure close to GBP 850 -- $850 per ton this year. But reality is that as of today, the figure is at around $1,200 per ton. That means that, that is supporting also a higher premium.

So on top of that, we have energy efficiency, we have good operation and many things, but the main drivers for this, let me say, premium momentum are both I mentioned before. And for that reason, not having a crystal ball, I see them quite sustainable for the year. The potential upside for a recovery of Venezuela, as I mentioned before, I mean, the fundamentals are clear, are evident. We have had and we appreciate the full support of the American government and American authorities to push our activity in the framework of the licenses we received. And that is, I think -- that's a very positive step that I want to underline and to recognize.

Secondly, we have a clear dialog and a positive dialog with the government of Venezuela in terms of taking the contracts we have in the country to support these operations we are going to increase, and the potential upside in figures terms, we talk a bit more, as I mentioned before in the Capital Market Day.

But the first upside is that we are going to enter in a normal commercial relationship. That means that, I mean, we are going to be paid by this product -- or for this product, sorry, we produce.

And secondly, that we are going to have a clear commitment to invest in our production to increase the oil production of the country because we think that, that is important for the social and economic development of Venezuela, for the political stability of the country and it's also very important in terms of building a win-win dynamic where more oil means more royalties, more taxes, more production for Repsol and a better future for Venezuelan people.

So we are fully committed in this dynamic. And as I mentioned before, the upsides are not included, sorry, in the figures, in the guidance -- in the economic and financial guidance I mentioned before. All that is upside.

Going to the Supreme Court ruling. Yes, I mean, you know that, as you mentioned, there were some Supreme Court decisions regarding as non-legal, the autonomic hydrocarbon tax in the past. We have a very similar claim, probably, I mean, I'm not a lawyer, I'm a chemist, but I think that in legal terms, it could be the same.

And as happened in the case of Galp, BP and some others, there was a first resolution also for Repsol coming from what is called in Spain, the Audiencia Nacional, that was dismissed, negative related to our claim. And we are now waiting the Supreme Court decision, and the Supreme Court decision was positive for Galp and BP. I can't anticipate what is going to be the decision of the Supreme Court for Repsol because I mean, it's not in my hands. But I mean, let me underline that the claim is almost the same or very similar.

So I prefer to talk about recoverability on how to do these kind of things in the future because now, I think that we have to wait for a legal decision of Supreme Court about that. [Foreign Language]

Thank you, Fernando. Our next question comes from Matt Lofting at JPMorgan.

You've covered a lot of ground. I'll just ask you 2 quick follow-ups. On Venezuela, I just wondered if there's any next or additional fiscal regulatory steps that Repsol thinks is required to support you putting forward the activity and investment that you talked about earlier on the call and how you're thinking about how prudently capital allocation towards Repsol needs to be managed within the sort of the group balance sheet.

And then secondly, what, aside from the sort of the recent outage that you talked about at Cartagena, what sort of kind of planned maintenance schedule you're anticipating on the refining system for 2026 within your guidance? And any sort of notable weighting on that within the quarters?

Thank you, Matt. I mean again, as I mentioned before, I'm a chemist, I'm not a lawyer. But let me say that in general terms, and I'm going to add some comments later. But in general terms, the contractual framework we have today in Venezuela for our operations in gas and in oil is fully valuable and is fully supported by the American government and the licenses we received.

Saying that, we have to adjust small things in the framework of these contracts. And what is positive is that what we are seeing are full cooperation behavior coming from the Venezuelan government to do that because, I mean, they are fully interested on that. We have a close relationship with them. And we have the full support of the energy dominance group in the White House and the full support of the Secretary of Energy and the Secretary of Interior in the U.S. to support our activity and support our operations in Venezuela. So our operational people and our lawyers, they are working together with them in order to adjust some small contractual terms. But I mean, roughly speaking, the Supreme Court is fully valuable and is fully supported by the licenses we've received from the American government.

At Cartagena, the maintenance scheduling of refineries for this year is a year with, let me say, medium, low turnaround program. This quarter, we have a conversion turnaround program that probably is going to enter some days in the second quarter in the smallest of our refineries in Coruna that is going to impact mainly in the FCC and the coker, so the main conversion units of the refinery.

We have small units in Tarragona, so the visbreaker that is producing fuel. So it's not, let me say, nuclear, if not core in the refinery in the first and the third quarter. The coker of Petronor, 26 days this quarter. And I'm checking everything. I think that there is a catalyst change or something like that in Tarragona in the second and in the third quarter.

So I mean, in general terms, it's quite medium, low maintenance year. And on top of that, I mean, we have mainly concentrated in the first part of the year. And I mean, with small reformers, hydraulic separation units and some small units over the whole year. But I mean, nothing more significant I mentioned before. Thank you, Matt.

Thank you very much, Matt, for your questions. Our next question comes from Henri Patricot at UBS.

Two questions, please. The first one, I'll come back to Venezuela. You mentioned earlier that you anticipate this preparing to lift cargoes again for payment for the natural gas production. Would that be just for kind of current production? Or do you expect that you'll get payments for the past production for which you were not paid over almost the past year?

And then secondly, on the cash tax payment, which was quite low in the fourth quarter and the full year '25 as a whole. Just wondering as we look at the 2026 cash flow guidance that you mentioned, what sort of cash tax payments have you assumed?

[Foreign Language] In Venezuela, I mean my approach now is step by step. I think that now it's time, first, to recover a normal commercial operation, so being paid by the production we have. That will be a significant step. I think that it's time to use a part of these proceeds to invest in the country and to increase the production. I think that the future of Venezuela is important, of course, for Venezuelan people, mainly, but I think that is also important for the operators that we are in the country, and Repsol been there for years. And we have to be part of the recovery of Venezuela.

So to do that, we are fully focusing recovering and normalizing or resuming the normal commercialization framework to invest, to increase the production in a quick way in Venezuela. I mean, I personally even took a public commitment in our statement that we are going to multiply by 3 in 3 years, the production in Venezuela. That was not blah, blah, blah. It was fully checked with my team, was fully analyzed, and we see also room in the short term to increase 50% of production in 1 year in Venezuela. That is now our priority.

I think that if we enter in a win-win dynamic, if Venezuela recover a normal production, if the economic development of the country is evolving in the right way, I'm sure that we are going to find frameworks and solutions to talk about the past, but now it's not the priority. The priority is to recover a normal framework of operation and commercialization of the products in Venezuela. So that is not now on our agenda in the short term. It's, of course, in our balance, and that is all right, but that is not in our agenda. And as I mentioned before, we are not including these figures now, and we talk about that in the CMD.

Cash tax payments that we are assuming in 2026, I mean the figure could be something in-between the 15% or 20% over the -- I mean, refer to the cash flow from operations, I mean, as some kind of guidance of the volume of these tax payments, that, of course, is before the cash flow from operations. I mean between the EBITDA and the cash flow from operations, but as a guidance, it could be a figure close to a figure I mentioned before. [Foreign Language]

Thank you very much, Henri. Our next question comes from Paul Redman at Exane BNP Paribas.

Just one question. Your Upstream operating income is down around 50% quarter-on-quarter. I just wanted to see if you could talk me through the main moving parts and then how we should think about that as we look into 2026?

Thank you, Paul. I mean it's true that there is a reduction of the operating income in the Upstream last quarter, and there are 2 factors for that. And when you analyze quarter after quarter, it is the Brent price evolution that is -- it goes -- I mean, clearly lower. That is the main reason.

Then secondly, I mean, you also have to take into account that there are 2 disposals, Colombia and Indonesia. And probably what is more important is that there are EUR 80 million, roughly speaking, of exploration costs in the last quarter that are influencing the result of the Upstream. So the main reasons. I mean that is, I mean the explanation. I mean oil price, Indonesia and Colombia disposal. And probably what is the most important fact in numeric terms in the last quarter, that is that EUR 80 million of exploration costs that we used to -- I mean because we don't have any expectation of developing these projects, we pass this cost or factor this cost in our P&L. Thank you, Paul.

Thank you very much, Paul, for your questions. That was our last question today. With this, we will bring our fourth quarter conference call to an end. Thank you very much for your attendance.

Hello, and welcome to the Deutsche Bank Virtual Investor Conference, dbVIC. This is Zafar Aziz from the Deutsche Bank team. I'm pleased to welcome our next presentation by Repsol from Spain. Before I introduce our speaker, a few points to note. Please click on the questions box to ask a question. All of today's presentations were recorded and can be accessed via the Deutsche Bank website, adr.db.com.

I'm happy now to hand over to Repsol.

Thank you. Thank you, and welcome to everybody joining Repsol here today online. Let me begin by thanking our organizer, Deutsche Bank, for this virtual ADR conference, a milestone indeed for other companies that are in this market. My name is Álvaro Visús, and I work within the Investor Relations department at Repsol as the front office manager handling institutional investors communication.

Today, I'm going to convey who Repsol is, what we are at this company and what we are going to become in the future following our latest strategic update. However, before we begin the slide deck per se, let me draw your attention to our disclaimer. During this presentation, I may make forward-looking statements based on estimates. Please take into consideration actual results may differ materially depending on a number of factors as indicated in this disclaimer.

First, let's focus on who we are here at Repsol, our company overview. We are a multi-energy provider born, raised and headquartered in Madrid, Spain. But nowadays with a global spin that comprises 4 business verticals. We are integrated all along the energy value chain within the upstream, the industrial, the customer and the low carbon generation.

Taking into consideration 2024 data as a template, our Upstream production stood at around 570,000 barrels of oil equivalent per day, 5-7-0, with around 2/3 being gas and 1/3 crude oil. We had 1.8 billion barrels of proved reserves, of which around 3/4 were gas and 1/4 or 25% were liquid.

Industrial comprises several businesses, highlighting 6 refineries, 1 in Peru and 5 in Spain that operates as a single one in an integrated system with more than 1 billion barrels of capacity per day. 3 chemical complexes located in the Iberian Peninsula back to back to our industrial facilities and are growing thriving business.

Customer, mainly located in the Iberian Peninsula, remember, where we were born, raised and headquartered. It offers a multi-energy approach and unique approach, and that is a strategic line and our key competitive advantage in this business to our more than 24 million clients in excess of which 9 million clients are digital. This business includes 4,500 service stations, a growing retail electricity and gas business with almost 3 million clients, LPG and lubricants.

And finally, the Low Carbon generation business, 3.7 renewable generation capacity in operation at the end of 2024, right now in excess of 5 and with a pipeline of in excess of 30, 3-0, gigawatts.

At this point, we have covered who Repsol is. Now we must look forward to the future to see what this company is going to become towards 2027. For the next 4 years, we maintain an approach towards an energy transition, convinced that this is the right strategy for us, embracing the decarbonization process for decarbonized world, of course, but also because we see a clear opportunity of profits and growth for this company in this new decarbonization scenarios, transition but a profitable one.

Our road map to 2027 is based on the accomplishment of these strategic pillars within our 4 verticals, the Upstream, the Industrial, the Customer and the Low Carbon generation and our fundamental commitment being to shareholder distribution, providing certainty and predictability to our dividend, okay? Our enterprise capital allocation will be based on 3 main levers. The first, as I was mentioning before, the shareholder distribution, our first priority, our net CapEx and maintaining our current credit rate.

All these figures under a central scenario with $80 per barrel, $3 per MMBtu and $8 of refining margin, respectively, for 2024 and $70 with Brent, $3.5 MMBtu and $6.0 per barrel for the period 2025, 2027. Of course, these figures are being adjusted as the quarters go by because situation is evolving, but this was our original estimates.

As previously indicated, this is our first priority, the dividend, the cash dividend commitments. The umbrella under which our shareholder distribution operates is that Repsol is going to distribute between 25% and 35% of its cash flow from operations to its shareholders. Under that umbrella, the first commitment set in [ stone ] whatever happens is the cash dividend commitment that you have in the top part of the slide.

To the unit, you may see the amount of euros that Repsol is going to pay to its shareholders to 2027. Let me put you an example. In this 2025, we have already paid to our shareholders EUR 1,128 million. Next year, 2026, we are going to distribute to our shareholders EUR 1,162 million. In this 4-year strategic plan, that means a cash -- total cash dividend of EUR 4.6 billion with our commitment to 3% growth. But that growth is higher. Why? Because complementing that cash dividend that -- remember, it's set in stone, whatever it happens, we are doing a share buyback program to reach that 25% to 35% of the operating cash flow, up to EUR 5.4 billion between 2024 and 2027, okay?

In this 2025, for example, we are going to allocate EUR 1.8 billion in total, remember, EUR 1,128 million due to the cash dividend and the remaining EUR 700 million through share buybacks. This year, our dividend was EUR 0.975, an 8.3% increase over 2024. And in 2026, our dividend is going to jump over the euro and it's going to be around EUR 1.05 depending on the latest share buyback program that we are doing right now.

Why is that? Because in this 2025, we have done a first capital reduction that was carried out in July for EUR 350 million for the redemption of shares acquired for an equivalent amount of EUR 350 million. And the second capital reduction for the same amount is going to be executed before year-end. For this new share buyback was launched this September 1 month ago for acquisition again for the Q1 of EUR 300 million with the remaining EUR 50 million coming from the settlement of existing derivatives.

Ensuring a strong distributions to our shareholders remains the key priority in our story of value growth. We maintain a clear commitment to our robust balance sheet and our net CapEx objectives. Here, the second priority, the net CapEx, net CapEx between EUR 16 billion and EUR 19 billion, it plays a key role here at Repsol with a total gross CapEx of between EUR 24 billion to EUR 26 billion after portfolio management, after low carbon generation rotation, after project finance, the net CapEx figure is going to be EUR 16 billion to EUR 19 billion. That was original plan.

What we have announced is that we are going to be closer to the lower part of that range at around EUR 16 billion of net CapEx for the full period 2024, 2027. It is worth noticing that in excess of 35% of that CapEx, net CapEx is going to be devoted to Low Carbon businesses, namely the biofuel, the hydrogen, electrifying, circular chemical and renewables per se, wind, solar, hydro. These are the sources and uses of cash that we are going to use in this strategic plan.

As you may see, we offer 2 scenarios, central scenario and a lower more asset scenario. In those 2 scenarios, taking into consideration the financial flexibility that this company has had at the beginning of the plan, we are going to be able to fully fund our net CapEx, our financial commitments, our dividends and share buybacks even in this [ specific ] scenario that you may see on the right part of the slide.

Lastly, Repsol was the first company within the oil and gas sector to commit to be a net 0 company in 2050, the first one with clear milestones and intermediate decarbonization targets for 2025, as you may see in the slide, 2030, 2040 and 2050. Our short-term and medium objectives were being successfully tightened. That you see the 2 lines there. The first one that we tied in those objectives was in October 2021 and the second in 2022.

Going forward, we are maintaining these ambitious objectives. During this decade, the carbon intensity indicator reduction of 15% by 2025 28% by 2030. And that's going to be achieved using a wide range of technologies and businesses in some way in line with the vision that we have in Repsol about the energy transition. We are also displaying other objectives on the top -- on the right part of the page, regarding net 0 absolute emissions, methane emissions, [indiscernible] and so on.

Now a fully -- a further breakdown of our business is needed to understand fully the integrated capabilities of a company such as Repsol, remember, integrated across the value chain. Let's start with [indiscernible], our first business [indiscernible]. Repsol owns an international portfolio with key position in Latin America, in the States and Europe and North Africa. In 2023, we incorporated EIG in our business with a 25% with a minority stake, Repsol maintaining 75%.

With this agreement that we brought in, a reference investor in general sector that is fully aligned with our vision. Since 2021, we have transformed the business into a more profitable one, exceeding the key targets that we set in our previous strategic plan. With these components that you are seeing here, the ones that I mentioned before at the beginning of my presentation, we have defined 3 strategic priorities, the unconventionals, the conventionals and the low carbon solutions.

We are going to focus right now on the 2 first ones. In the unconventionals, we have a position in the states in both the Eagle Ford and the Marcellus asset, the ones that you have on the left part of the slide, in which we want to continue to improving our operating model to reduce breakeven and targeting between 180,000 and 200,000 barrels of oil equivalent per day of production.

In our conventional assets, we are going to prioritize higher-margin barrels with these projects that you have on your slide. If you see the cash flow from operations per barrel average, it's going to increase by 2.1 of those new projects be the legacy portfolio with a lower breakeven lower than $50 per barrel within these new projects. But on top of that, we have been upgrading and enhancing our portfolio, reducing the span of our portfolio to 10 producing countries and an exploration activity in Mexico.

For example, this year in the United Kingdom, we have merged with Neo Energy operation that was completed this July. This new joint venture in which we own 45% is going to be projected to produce around 130,000, 150,000 barrels of oil equivalent per day in 2025, increasing after this joint venture, our net production from around 30,000 to 59,000 barrels per day. On an annual basis, this joint venture, high grade in our portfolio, is expected to contribute of around $700 million of EBITDA to Repsol this year -- sorry, in 2026.

We have been divesting all part of our portfolio that didn't met our criteria in terms of operating efficiency [indiscernible] critical mass or lower breakevens, such as Colombia, such as Indonesia. We are consistent with our strategy in the Upstream business in which we want better barrels, lower breakeven barrels and concentrating our operations in geographies where we hold the strongest competitive advantages. In this regard, the U.S. continues to strengthen its position as a strategic growth region within our Upstream portfolio.

With, for example, these 2 main projects, the Alaska Pikka and Leon-Castile. Leon-Castile started its production a couple of weeks ago. Alaska Pikka is going to start its production earlier next year. Together with the upcoming Lapa Southwest in Brazil, we are expected for these 3 projects, Alaska, Leon-Castile and Lapa Southwest to give us around 50 additional 1,000 barrels of oil equivalent per day of new low emissions, low breakeven production by 2027.

In addition, and this is something to have in mind, these main assets have accounted for a substantial share of the Upstream investment for the last years. We have peaked our investor in the Upstream last year, EUR 3 billion; this year, around EUR 2.5 billion. Next year, it's going to be a normalized CapEx level in this division at around EUR 2 billion per year. Finally, within the EIG agreement, we stated that we were going to have everything ready for a potential listing event in the states of this vertical in 2026. Not an obligation, but just to have everything ready.

And as part of the preparation for that, Repsol E&P completed last quarter a $2.5 billion bond offering, the largest in U.S. dollars in Repsol's history. The offering structured in 3 tranches attracted strong demand, underscoring the solid support for our Upstream strategy.

Going now towards our second vertical, the Industrial business. First, we leverage on one of the most competitive and integrated refining systems in Western Europe. Our portfolio combined best-in-class assets with leading operational expertise and integration that is reflecting every benchmark published in Europe, compounding refining systems.

The average cash flow from operations between 2021 and 2023 was 50% higher than the initial target for this division and almost 40% of that improvement was a consequence of increased competitiveness within our business. With this map of our assets, mainly Iberian Peninsula, remember, as you may see in the map, we have 5 refineries that operate as a single one system. For the Horizon 2027, we have identified 5 key lines of actions with a focus on maximizing the value of the conventional business.

We aim to have lower breakevens with efficiency. We aim to decarbonize our operations in refining and petrochemicals, and we are also increasing the development of our trading business to optimize the value and capturing the refining of our low carbon assets. We are transforming our legacy sites, modifying the feedstock, producing new products, producing renewable fuels where we maintain our pace of decarbonization and always stepping up the pace of our trading in accordance with the rest of our businesses.

For example, during the third quarter of this year, we have launched -- sorry, we have the FID of a hydrogen plant of our first large-scale electrolyzer to be constructed in Cartagena back to back with one of our refiners. We are finalizing the analysis for the approval of another 2 projects in Bilbao and Petronor. These electrolyzers will constitute the main part of our total capacity in operation by the end of the decade in hydrogen.

And why is that? Because as you may see here, our industrial strategy is based on 2 things. The first one is our legacy assets and the second is to build up a new decarbonization of our legacy asset businesses, including the renewable fuels, the hydrogen, the biomethane, the [indiscernible]. For that, for example, within the fuels, renewable fuels we build up a new plant, C43 in Cartagena, 200,000, 250,000 barrels of capacity per year of production in our refinery in Cartagena.

We are retrofitting our [indiscernible] located in our refinery in Puertollano that's expected to be in operation in the second quarter of 2026 that is going to increase the renewable fuels capacity. In Tarragona, we are developing Ecoplanta. It's going to produce biomethanol. And last week, we signed our first offtake contract to supply renewable methanol to the produce of this facility. 2 main lines in industrial, the legacy and the new businesses.

Now the customer. Moving towards the customer, we have today more -- as I mentioned before, more than 24, 2-4, million clients in our customer division in excess of 9 million clients are digital. We possess in excess of 4,500 service stations worldwide, 3,800 in the Iberian Peninsula. We have other businesses here such as the retail electricity and gas clients. In this slide, you have 2. But right now, we are on the edge to reaching our 3 million clients in this business.

We are the fourth largest operator in the Spanish electricity market. We have 4 million LPG customers, being the #1 energy brand in Spain. We are, as I mentioned, the leading energy retailer in Iberia with an attractive commercial business with a stable free cash flow generation, low capital intensity and a track record of new business built.

In 2025, we expect the division to deliver an EBITDA of EUR 1.4 billion. That objective was the original objective to 2027. Thus, we are going to achieve the objective 2 years in advance. For 2024, 2027 in this growth business, we are going to strengthen our core, which are the backbone of this division and the source of cash flow that is expected to multiply as it's doing the cash flow generation operating -- the cash flow generation for [indiscernible] to maintain our market shares, to increase our margins by investing in differentiation and digitalization.

We will invest in non-oil growth, accelerate efficiencies and deliver a unique offering of 100% renewable fuels produced in our refineries, 100% diesel, it's called [indiscernible] and 100% [indiscernible] renewable diesel. We expect by 2027 to have around 2,000 of our service stations to sell 100% renewable diesel in Iberia becoming also the [indiscernible] fleet. We also aim to build a multi-energy advantage based on our growing position in the retail power [indiscernible], we have a unique value proposition in this sense, combining different kinds of energy.

our in-house developed app pilot is a market leading transportation app in this space, and it's also one of the most used ones in the country. We have as of today in excess of 9 million digital clients. As you may see here, the objective of operating cash flow to 2027, the objective of the EBITDA of 2027, the EBITDA is going to be achieved in 2025, 2 years in advance. Why is that? Because every single business within the customer is growing.

In the results for Repsol's third quarter 2025, the customer vertical achieved its highest results in a quarter ever. That translates to a business that is growing, it's a backbone of this company and it is being strengthened every single day through oil margins, through non-oil, increasing its retail customers in adapting to a new LPG business. And that's with a really controlled net CapEx in the period 2024, 2027.

Moving towards our latest vertical that's Low Carbon generation, where we have a clear success story of value generating business. We entered this business in 2018. And today, we operate in excess of 5 gigawatts. If you check in 2024 at the end of 2024, we were operating 3.7; right now, we are operating in excess of 5 gigawatts. And we expect another 500 megawatts to enter into stream by the end of this year.

In 2023, we had 1.1 gigawatts. And then we are growing the number of megawatts put on stream every single year. Right now we have a pipeline of in excess of 30 gigawatts, meaning our core markets in Iberia and in the U.S. and a guarantee for maximum discipline of investment decision, we have combined business growth and capital discipline with a model of a double-digit equity IRR return in our projects. For the coming years, our business has an ambitious but [indiscernible] to deliver a growth that is profitable, that is concentrated geographically and technologically.

We expect to reach around 9 gigawatts, as you can see at the top right part of the slide by 2027, with around 30% of allocated in the U.S. and a growing share of wind energy in the portfolio. We are focusing just on 3 technologies: solar, onshore wind and hydro and import markets, mainly Spain and the States and then Chile and Italy.

Internationally, as I mentioned right now, we have a clear focus in the states. Our business is going to use project financing covering 60% to 70% of the capital needs and the sale of 50% of the project is going to be rotated every project, thus our total exposure to the country is going to be decreased. Our proposed strategy will allow us to optimize the net capital exposure in 2024, 2027 period from EUR 8 billion to EUR 9 billion gross CapEx to a net exposure of EUR 3 billion to EUR 4 billion of net CapEx, as you may see in the middle part of the slide, with always an equity IRR target of in excess of 10% of [indiscernible].

It has to be acknowledged. This is a growth business. It's a business that is going to be negative free cash flow in this 2024, 2027 period because it's a business that is really heavy intensive of capital at this moment. However, as you may check on Repsol's third quarter results, its results have been increasing in this year, okay?

Now here at Repsol, we are extraordinarily confident that this strategic update for 2027 represents a compelling investment proposition. We want to develop our story of value growth, and we will deliver attractive and committed shareholder distribution with the cash dividend growth guaranteed in this scenario to 2027. In 2026, the same key strategic principles will guide our path.

After the release of our full year 2025 results in February of next year and in light of the changes in the macroeconomic, regulatory and business landscape that our industry in the oil and gas sector has gone through, our Capital Markets Day will be held in March 2026, where we will provide updated projections to 2028.

In this slide, you have the main metrics that sustain our cash and business growth for this strategic plan 2024 to 2027. Starting with the distribution, remember the first priority of this company, the strength of our balance sheet and maintaining our credit rating, the cash flow generation linked to the net CapEx, remember the sources of uses of cash, self-funded plan, of course, always taking into consideration our sustainability objectives, the returns that we are providing with our businesses and the Upstream production.

On the right part of the slide, you have the outlook for 2025, and you may check that the figures are aligned with the original objectives to 2024, 2027.

And to conclude, let me remind you that Repsol is a multi-energy integrated across the whole value chain, home-based, raised and headquartered in Madrid with 4 business verticals, the Upstream in which its motto is value over volume with better barrels coming on stream every day that has peaked its CapEx in the past years and with projects coming on stream that are going to increase our production, lower the breakeven and focus our geographical portfolio, mainly in the United States and Brazil.

Second, with an Industrial business that is focusing on a double path, the legacy business increasing its efficiency, enhancing its margins, growing its trading and then a second path to decarbonize our industrial facilities to launch new businesses, new low-carbon businesses, hydrogen, renewable fuels, circular chemicals.

A customer division that is a growth business, a story of success with a unique strategy, a competitive advantage in which Repsol offers every single molecule and electron that a citizen may need in Spain, a business that in the third quarter of 2025 achieved its highest quarterly results ever.

And finally, a Low Carbon generation business, geographically concentrate, technology concentric and always looking for a double-digit equity IRR return going forward. We are a company that is integrated all along the value chains. We have a presence worldwide and a leading actor in the decarbonization process towards a profitable and decarbonized future.

To conclude, I would like to thank you again for attending this session and to our host for making it possible. I hope you have a really nice day and good luck.

Hello, and welcome to the Repsol's Third Quarter 2025 Results Conference Call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO and a brief introduction will be given by Mr. Pablo Bannatyne, Head of Investor Relations.

I would now like to hand the call over to Mr. Bannatyne. Sir, you may begin.

Thank you, operator, and good morning to all. Welcome to the Repsol's Third Quarter 2025 Results Presentation. Today's conference call will be hosted by Josu Jon Imaz, our Chief Executive Officer with other members of the executive team joining us as well. At the end of the presentation, we will be available for a Q&A session.

Before we start, let me draw your attention to our disclaimer. During this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in the disclaimer.

I will now hand the conference call over to Josu.

Thank you, Pablo. Good morning to everyone, and thank you for joining us. Repsol delivered a solid operational and financial performance in the first quarter of 2025, moving ahead on key projects, optimizing the asset portfolio and reinforcing its commitment to shareholder value and capital discipline.

The energy landscape continues to be shaped by geopolitical stability and concerns of all our supply. In the U.S., gas prices softened compared to the previous quarter, yet fundamentals still point to a tighter market heading into next year. The Refining business continued to build on a positive momentum in a market characterized by additional supply deficit. Operations at our industrial sites restore activity levels following the disruptions caused by the Iberian outage in the second quarter.

On the Commercial side, all business segments delivered a stronger year-over-year contribution. Retail fuel sales remained robust, well supported by seasonal trends. The adjusted income totaled EUR 820 million, 17% above the second quarter and 47% higher than in the same period of 2024. All four divisions improved their results over the third quarter last year.

Cash flow from operations amounted to EUR 1.5 billion. The accumulated operating cash flow through September reached EUR 4.3 billion, 15% higher than in the first nine months of 2024.

Net CapEx was EUR 0.3 billion in the quarter with a EUR 0.8 billion contribution from disposals, asset rotations and the EUR 0.2 billion received from the sale of tax credits in the Outpost project. The accumulated net CapEx to September was EUR 2.5 billion, including EUR 1.3 billion in proceeds from disposals and rotations. By quarter end, all the transactions announced in 2025 have been fully collected.

Net debt stood at EUR 6.9 billion by quarter and an increase of EUR 1.2 billion compared to June, mainly due to integration of the new joint venture established with NEO Energy in the U.K. As part of the agreement, Repsol has retained a funding commitment of the commissioning liabilities related to a portion of its legacy assets. This amount was previously recognized as a nonfinancial liability in our financial statements. Repsol doesn't increase at all, Repsol exposure but it is now classified in a different way, it is classified as financial debt at the consolidated level. So is only, let me say, an accounting procedure and excluding the impact of U.K. integration, net debt would've been flat compared to June. Gearing rose to 20.5% by quarter end and 10.4%, excluding this remaining aligned with our strategic objective of preserving our current credit rating.

Looking at the evolution of the main macroeconomic indicators in the quarter. Brent crude averaged $69 per barrel, 2% higher than in the second quarter and 14% lower than the same quarter last year. The Henry Hub averaged $3.1 per million BTU, 9% lower quarter-over-quarter and 41% above the same period driven by strong middle distillate differentials, the refining margin indicator stood at $8.8 per barrel, 49% higher than in the second quarter and 120% higher than the same period in 2024. Finally, the dollar continued to weaken against the euro with an average exchange rate of 1.17.

Turning now to the Upstream performance. This division continued to deliver efficient and competitive growth, enhancing returns through new projects and portfolio management. We are improving the business and together with our partner, positioning the company for a potential liquidity event. Third quarter adjusted income was EUR 317 million, 28% below the second quarter and 11% higher year-over-year. Production averaged 551,000 barrels oil equivalent per day, about 1% lower than the previous quarter and probably in line with a year ago.

Compared to the third quarter of last year, the impact of divestments and natural decline was offset by higher contributions from Libya and the U.K. In the U.K., the merger with NEO energy was completed in July. The new inventory is projected to produce around 130,000 barrels per day in 2025, increasing Repsol's net production in the country from around 30,000 to 59,000 barrels per day. On an annual basis, the JV is expected to contribute around $700 million of EBITDA for Repsol in 2026.

In Indonesia, in September, we agreed the disposal of our stake in Sakakemang, completing our country exit after the disposal of our interest in Corridor announced in the second quarter. After this transaction, Repsol E&P is now present in 11 countries, 10 producing plus an exploratory position in Mexico, consistent with our strategic objective of concentrating operations on geographies where we hold the strongest competitive advantage. In this regard, the U.S. continues to strengthen its position as a strategic growth region within our Upstream portfolio.

In the Gulf of America, the joint development of Leon and Castile reached first oil in September. And in Alaska, the first phase of Pikka is expected to start up early 2026. These projects, together with the upcoming startup of Lapa Southwest in Brazil are expected to add around 50,000 barrels of oil equivalent per day of new low emissions, low breakeven production by 2027. In addition, these developments have accounted for a substantial share of the upstream investment effort outlined to 2027 and their completion will allow us to transition to more normalized CapEx levels in the division at around or even below EUR 2 billion per year.

Finally, as part of the preparation of our vehicle ahead of a potential liquidity event, Repsol E&P completed last quarter, a $2.5 billion bond offering, the largest in use U.S. dollars in Repsol's history. The offering structure in three tranches attracted a strong demand, underscoring the solid support for our upstream strategy.

Continuing with the Industrial division, third quarter performance was driven by the consolidation of the refining up cycle and the solid contribution from the trading business. Following the impact of the Spanish outage on second quarter, operations activity at our industrial complexes returned to normalized levels, enabling us to capture the positive refining scenario. The adjusted income totaled EUR 315 million, 218% higher than in the second quarter and 70% above the same period a year ago.

In Refining, our margin indicator climbed to levels not seen since the first quarter of 2024, supported by stronger product spreads, mainly in diesel. The premium of our indicator was $0.7 negatively impacted by the turnaround of Cartagena and planned maintenance at the C43 biofuels unit, and the absence of crude shipments from Venezuela. The C43 plant resumed full capacity operations in October. Distillation capacity utilization was 85%, while conversion units operated at 101% of nameplate capacity.

Refining margins have remained robust. In the fourth quarter, with the indicator averaging $9.8 in October and $7.1 year-to-date, the export margin this morning was $13 per barrel. No major refinery turnarounds are planned this quarter, supporting healthy utilization rates. Fuels margins remain also at solid levels, driven by stricter regulatory mandates in Europe and lower imports.

In the Chemical business, Market conditions in Europe remain challenging with flat demand and higher costs compared to other geographies. Repsol's petrochemical margin indicator declined by 22% over the previous quarter, driven by lower prices and higher energy costs. Our priority for this business remains lowering breakevens and expanding margins through differentiation. The Sines expansion scheduled to start in 2026 is expected to add around EUR 80 million of EBITDA at the current scenario. And in Puertollano, a new plants dedicated to highly specialized application is also planned to come onstream next year.

In the wholesale and gas trading business, we received 5 cargos from Calcasieu Pass last quarter. This is in line with our goal of reaching a total of 11 cargos listed in 2025 contributing around EUR 100 million of incremental EBIT compared to initial plan. In our industrial transformation initiatives, the project to retrofit a former gas oil hydro-skimmer in Puertollano is expected to begin operations in the second quarter of 2026. An additional retrofitting project is currently under evaluation, which will become our third major advanced fuels facility in Spain.

In Tarragona, the development of the Ecoplanta is progressing according to plan. Thus we signed our first offtake contract to supply renewable methanol to continue at this facility as part of our long-term agreement for the supply of renewable marine fuels. In hydrogen, during the quarter, we took the FID for our first large scale electrolyzer is going to be constructed in Cartagena, and we are finalizing the analysis for the approval of another two projects. These electrolyzers will constitute the main part of our total capacity in operation by the end of this decade.

Moving now to customers. This division delivered the highest quarterly result in the history of Repsol's commercial businesses with all segments delivering higher contributions year-over-year. Third quarter adjusted income reached EUR 241 million, 22% above the second quarter and 34% higher than in the same period of 2024. EBITDA was EUR 434 million, a 25% increase year-over-year, bringing the accumulated figure through September to EUR 1.1 billion.

This performance keeps us on track to deliver in 2025, the EUR 1.4 billion EBITDA targeted for 2027 in our plan. So this figure is going to be achieved this year. And all that is supported by resilient demand, efficiency gains, growth in power and gas retail in Spain and Portugal and the growth of aviation fuel sales in Iberia.

In Mobility, sales of road transportation fuels grew 14% year-over-year, reaching pre-pandemic levels. The non-oil business delivered robust contribution margin growth in service stations, 10% above the third quarter of 2024. As of today, 56% of our network in Spain offers multi-energy solutions. In October, the range of renewable fuels available at our service station has been expanded with the incorporation of 100% renewable gasoline after our Tarragona refinery achieved the first industrial scale production of this product, a real technological milestone.

Finally, in power and gas retail, we add 157,000 new customers last quarter for a total of 2.9 million clients by the end of September, on track to reach our 3 million target before year-end.

Turning to low carbon generation. The adjusted income reached EUR 31 million, EUR 24 million higher quarter-over-quarter and EUR 38 million increase year-over-year. These better results were driven by renewables, the main driver, a higher contribution from combined cycles, whose activity increased to ensure system stability following the Spanish outage, the blackout we suffered in April. The average pool price in Spain was EUR 67 per megawatt hour, 71% above the previous quarter and 16% below the same quarter in 2024. The power generated by Repsol reached 3.3 terawatt hour, 39% higher year-over-year. Repsol has reached 5 gigawatts of installed renewable capacity under operation, and we expect to add another 500 megawatts before year-end, mainly driven by the startup of Pinnington Solar in Texas.

We keep -- sorry, executing our business model based on building our projects from stretch and divesting in early stages of production to optimize financial structure and maximize returns. In the U.S., the 629-megawatt Outpost solar project achieved commercial operation in September joining Frye and Jicarilla that are already producing in the country. We are now in the process of closing the partial divestment of this development with cash in expected in 2025.

In Spain, an additional asset rotation is also under negotiation for a 700-megawatt renewable portfolio, of which and that is an important fact to see in the current market situation, more than 400 are wind. Finally, earlier this month, we acquired an 805-megawatt wind pipeline with the end of hybridizing production at our combined cycle plant in Escatron in the Spanish region of Aragon securing the power supply for the future data center to be built in the area by a third party.

Moving now briefly to a summary of the financial results. In this slide, you may find an overview of the figures that we have covered today. For further details, I encourage you to refer to the complete set of documents released this morning.

Regarding our update outlook to the end of 2025. The cash flow from operations guidance remains unchanged at around EUR 6 billion, with the benefit of a higher refining margin indicator, as I explained before, and this effect is going to be partially compensated by the lower Henry Hub price and weaker dollar. Net CapEx is unchanged at around EUR 3.5 billion. I have the ambition to put this figure below EUR 3.5 billion by the end of the year, subject to the timing of the divestment processes under execution.

Upstream production remains at an estimate of around 550,000 barrels per day. We will allocate EUR 1.8 billion to shareholder remuneration, EUR 1.1 billion for cash dividends and EUR 700 million to share buybacks to reduce capital at the higher end of our strategic cash flow from operation's distribution range.

Following July 2 dividend payment, the total EPS distributed in 2025 has been EUR 0.975, an 8.3% increase over 2024. Our first capital reduction was carried out in July through the redemption of shares acquired for an equivalent amount of EUR 350 million and a second capital reduction for the same amount will be executed before year-end. For this, a new buyback program was launched in September of the acquisition of shares for the equivalent of EUR 300 million with the remainder, EUR 50 million coming from the settlement.

In conclusion, Repsol is delivering on its commitments and the strength of our business model position us well to manage the uncertainties of the current environment. In the upstream, we are improving the margin of the barrels we produce, bringing forward our growth projects and upgrade in the portfolio. In Industrial, we are capturing the positive momentum in Refining while progressing on the transformation of our sites, building resilience to ensure the long-term sustainability of the business.

Customer keeps increasing its cash contribution to the group, helped by a successful multi-energy story and a growing power retail business in Iberia. And in low carbon generation, we continue to deliver along our strategic lines, targeting free cash flow neutrality after factoring the proceeds generated by asset rotation. Ensuring strong distributions to our shareholders remains a key priority in our history of value growth. Always, of course, maintaining a clear commitment to our robust balance sheet and our net CapEx objectives.

Next year, after the share capital reduction executed in 2025, our ordinary dividend per share will be around EUR 1.05 per share. I said around because that is going to depend on the exact figure of the shares we are going to redeem at the end of the current share buyback program. In 2026, the same key strategic principles will guide our path. After the release of our full year results in February, and in light of the changes in the macroeconomic, regulatory and business landscape that our industry has gone through our Capital Markets Day will be held in March and were we will provide updated projections to 2028.

With this, I will turn it over to Pablo as we move on to the Q&A session. Thank you very much.

Thank you very much, Josu Jon.

[Operator Instructions] As usual, I would like the operator to remind us Of the process to ask a question. Please go ahead, operator.

Thank you. [Operator Instructions]

Thank you, operator. Let's get started with our first questions coming from Michele Della Vigna at Goldman Sachs.

Thank you very much. And congratulations on the strong results and looking forward to the Capital Markets Day. Two questions, if I may. First, I wanted to focus a bit on biofuel, an area that you're growing very fast but also where we're seeing a tremendous improvement in margins. I was wondering if you could lay out what is the contribution at the moment from that business? And how big that could get next year with potentially further tightening with RED III and also higher volumes in the second half of the year.

And then secondly, I wanted to come back to Venezuela. You're building up receivables. They are clearly difficult situations with the U.S. sanctions, I was wondering if there is any ongoing dialogue that could resolve the situation and allow you to take more Venezuelan cargos?

[Foreign Language] Going to your first question, I mean, next year in 2026, taking into account the production we have in the co-process of our industrial activity plus the operation of C43, plus the second half of the year where we are going to have production coming from the retrofitting of Puertollano and adding the trading activity of these biofuels, plus the commercial side because you know that we already have 40% of our service stations commercializing this product.

I mean to give you only a reference, not at the current levels of margins. But if we take -- roughly speaking $800, I mean I'm not giving, let me say, a guidance of prices because I don't have a crystal ball. But if we take $800 per ton as HVO minus UCO margin for 2026, with all these concepts, we will capture EUR 125 million of EBITDA.

I mean roughly speaking, because that is not exactly -- it could be a rule, but you could add roughly speaking, EUR 30 million, EUR 35 million for every $100 per ton of margin.

You have to take into account, Michele, you perfectly know that after investing in Puertollano, we will have a capital employed in this business of around EUR 400 million. So my point is that the business is performing in the right way. And that is -- it's positive. If you ask me if I see the current margins stay for coming months, I mean the normal situation will be to see some kind of going down of the margins because, I mean, we have had a lot of capacity out in turnaround program and so on in Europe. So that will be the most logical. But I mean, there is room to have a pretty good situation in this business.

Going to Venezuela. I mean, let me say that as always, we are always to comply and will comply with all laws and regulations applicable for all operations in Venezuela. You know that we are still there. We maintain our presence and production in Venezuela. We are producing gas for the domestic market is our main activity in Venezuela. And I could confirm you that we maintain, and we are shipping going, maintaining a constructive and fully transparent dialogue with the U.S. administration at the moment to try to ensure a stable framework for our activities.

I mean, and when I say a stable framework for our activities, this framework, of course, includes viable mechanisms or monetizing our products. So I mean, I'm not going to say that situation is okay because you know the difficulties that -- in political terms, the country is experiencing but let me say that I could confirm that we maintain this constructive and transparent dialogue with all the authorities, of course, including the American authorities. [Foreign language]

Thank you very much, Michele. Our next question comes from Alejandro Vigil at Banco Santander.

The first one, I'm very curious about this strategic update in March, probably I'll have to wait for March to have more details. But you can elaborate about the reason for this update on potential moving parts of this strategic update.

And the second question is about distributions. I agree that you are delivering these distributions in line with your range. But considering the strong cash flow this year and potentially good expectations for next year if there is potential upside in your share buyback program of EUR 700 million?

[Foreign Language] I mean I could confirm that -- I mean, this strategic update, that is a terminology discussion, obviously, it's irrelevant Alejandro, what I'm going to say. But I mean I prefer to talk about the Capital Markets Day because the strategy is defined and the strategy is written on stone and that means that the priority is going to be the shareholder distribution, as we defined in February 2024 plus the strong balance sheet for Repsol because for us, it's very important and a proven CapEx transforming and pushing in the growth process of the company. But that is going to be the priority of the strategy that is going to go on from next March on.

So what is going to be the target? So you can't expect, let me say, surprises because these three principles are going to be defined and written on the stone. Saying that the Capital Market Day is going to try to give you because, I mean, things metrics are changing in two years and giving you a clarity about '26, '27 and '28 years, in terms of all kinds of operational and financial metrics. That is the end of the Capital Markets Day we are going to call for March. So -- but again, the strategic principles are written on stone.

First, distribution for our shareholders, strong balance sheet and a prudent net CapEx. That's -- I mean, if you allow me, Alejandro probably, and you were right. The consensus of the market six months ago would be that we have problems to deliver this prudent CapEx in net CapEx terms because the perception after 2025 on the first -- sorry, 2024 and the first month of 2025 for the market could be, and you were right that the CapEx effort was very high at the beginning of this strategic plan. That was right because we were, let me say, paving the way for the growth for the projects we were investing in and we were taking advantage of the negligible debt we had at the end of 2023 for launching this view.

But as you could see, I mean, at the end of September, net CapEx is at a figure of EUR 2.5 billion. And again, the target we have is EUR 3.5 billion for the end -- by the end, better said, of 2025. But my ambition is to be below this figure this year. And next two years, if you take and that is going to be probably speaking, what I have in mind, a figure close to this EUR 3.5 billion in 2026 and 2027, you can see that we are going to be in the low range of the net CapEx we defined in the range for our strategic plan, EUR 16 million, EUR 19 billion. Today, our view is that we are going to be at around EUR 16 billion in this period.

So we are going, let me say, to elaborate a bit more, all these figures that you could see in the figures of this quarter that we are on track of going in this direction. So what you could expect in terms of general framework of distribution and I said, priority we are going to be, of course, in the range of what you said and you could be sure, Alejandro, that in the current program in the current market conditions is going to be delivered also next year.

So -- but of course, I prefer to wait and talk about that in March in the Capital Market Day, that we are going to be in the range defined. And if we see a higher cash flow from operations and that could happen in the current environment, what you could expect, of course, is going to be -- in fact is going to go, better set, in that direction.

Excuse me, sorry, this year's , Alejandro forgot. I mean, if we take EUR 6 billion of -- and we are in the higher range, 30, 35 of this -- of the range. I mean it's true that we are going to have probably, as I mentioned before, a higher refining margin. What I'm seeing for this fourth quarter in terms of Repsol refining margin is going to be probably in the double digit is how I see the refining margin of Repsol in this fourth quarter at double digit. But if you take this figure, I mean, we could add, let me say, roughly speaking, $200 million more to the expectations we had -- the guidance we had before. It's true that the dollar-euro exchange rate is showing us a weaker dollar.

So that is, I mean, reducing a bit also the cash flow from operations for our businesses and slightly weaker Henry Hub comparing with the $4 million BTU of last guidance. I mean, all in all, it could be possible to be above the EUR 6 billion, I mentioned before, as guidance but the figure is going to be negligible. And I mean, you are going to understand that if we are EUR 100 million, EUR 140 million of -- above this figure, I mean, we are going to be open a program of EUR 40 million, EUR 30 million or EUR 50 million. So I mean, we prefer to say that is over this year 2025 and we talk about that in March, but always under the same principle we are applying now. Thank you.

Thank you very much for you question. Our next question comes from Alessandro Pozzi at Mediobanca.

The first one is on the Refining margin outlook. You mentioned the spot prices into the double digits. What is your view for the rest of the year and going into 2026? Do you think the current, say, strength is driven more by lack of products? Or is it concerns around the availability of these or maybe in 2026, so more of a panic buying right now.

And the second question is on capital allocation, clearly, customer is delivering much better results. As you look at 2026 and 2027, what do you think are the areas of the business that can give you a better return and where you can probably increase CapEx in the next couple of years?

[Foreign language] I mean, starting by your first question related to Refining margin. Of course, let me underline that is evident but I'm going to repeat that I don't have a crystal ball but analyzing from our experience and the facts and the indications we are seeing in the market, I'm going to jump a bit into the unexplored arena of seeing what is going to happen with Refining margins.

So First, current evidence. I mean, as of today, this year, we have $7.1 per barrel in our system. This month, in October, this figure is at around $9.8 per barrel. And this week, I mean, what we are seeing is something in between $12, $14 per barrel. That's our facts. What is behind that? My perception is that we have two drivers and both drivers pushing this direction, demand and supply. Supplies are crystal clear. I mean, new refining projects in the Atlantic Basin, they are -- they continue facing delays and operational problems. You know Olmeca in Mexico, my perception is that the problem of Olmeca is not going to be solved in the short term. So that could go on next year. Dangote is having operational problems that is going to be probably solved by 2026.

In the midst, we have seen -- I mean, everything we talk about that remember in February, when I said that we were seeing probably speaking 1 million barrels a day of discontinuing activities in the refining in the world. I mean, in Europe, Wesseling in Germany, Lindsay and Grangemouth in the U.K., they are close on track in the case of Lindsay, Houston and Los Angeles also in the U.S., Dalian in China, Osaka in Japan, Kwinana in Australia, I mean all that is going to add more than 1 million barrels a day of less production.

We said that new projects this year, they were going to be slightly above 1 million barrels a day. But with the operational problems I mentioned before, in the case of Dangote and Olmeca, this figure is lower. And I mean, there is a new, let me say, a new fact over the last 2, 3 months that due to the attacks on Eastern European refineries, the best approach we could have today, and again, that is not easy to be reported in an accurate way because, I mean, in a war situation, truth is sometimes hidden but probably a figure close to 37%, 38% of the refining capacity in Russia has been attacked and probably a figure close to a 25% of the total capacity could be out of operation.

So we are speaking about a very important figure that is 1.5 million barrels a day, fully unexpected. On top of that, we are seeing that over the last 2, 3 years in a very unfair way for competition, refiners from China, India and so on, they were taking advantage of not fulfilling the sanctions against the Russian oil. They were buying cheap Russian oil, refining this oil and putting this product in a very unfair competition way in the European market. Thanks to the policies of the European Union and the Trump administration related to enforce sanctions against this unfair way, all that is going to have an impact in the market.

I mean if we go to the demand, I mean, demand is growing, that is also a fact to 0.6 million, 0.7 million barrels a day this year. In our markets, we are experiencing a high demand as you could see in our Commercial businesses. And we have to say that -- I mean, we are still -- we are not already in the European coal season. I mean the European coal season is going to increase pressure on diesel. If we add to that the new ECA regulation in the Mediterranean that are effective from May 1 that are boosting marine gas oil demand.

And at the same time, we are seeing that gasoline is also strong because the new hybrids that they consume a lot of gasoline and so on. I mean, again, I don't have a crystal ball but I'm comfortable. It's not a commitment because it's not in my hands, of course, that we are going to see an average of double digit in Repsol this quarter, I mean, a refining margin with double digit. I mean, jumping into the 2026 is more complex. But I could say that the $6 per barrel we saw 1 year ago for 2026, I mean, we are going to be clearly above this figure. Probably the first quarter, we are going to experience a similar situation we are going to experience the fourth quarter of the year. We could see probably in the second half a more normal market in terms of supply. But all in all, I think that -- I mean, seeing margins of, I don't know, $7, $8 per barrel over 2026 is not going to be a surprise for me.

Going to the capital allocation on the 2026, 2027, we are going to see, I mean, good results and improvement, clearly speaking in the Upstream, new barrels, Leon-Castile already in operation, Alaska that is going to start the operation at the end of -- or the first part, as I said, of the first quarter. U.K., where the improvement is going to be clear. So better margins, new barrels, more production, 570,000 barrels a day, roughly speaking, we will clarify this figure in the Capital Market Day that we are going to be at around this figure and a clear improvement in the Upstream.

Going to the Industrial, as I mentioned before, better by margin, Puertollano, the retrofitting in operation, a higher refining margin, and I mean, I know that there is -- and I have a concern related to the Chemical business because the performance and what we are suffering in the market is very negative. We have a competitiveness program that we are enforcing new margins, reduction of energy cost, cost reduction. On top of that, we are going to see, so the derivative chemical even in this exit margin adding at around EUR 80 million of new EBITDA in a year. We also have the ultra-high molecular weight polyethylene plant in Puertollano.

So all in all, the commitment I have with my Board is that next year, in this acid margin scenario, so with no, let me say, tailwind pushing margins, we could be EBITDA neutral in 2026, and we will have in 2027, a positive result in the Chemical business. Again, at the current bad margins environment. Of course, any tailwind coming from the point of view of margins is going to improve this figure.

In the customer growth is going to go on because -- I mean, it's not because of market situation, it's structural because we are entering new businesses, retail, power and gas is a new business where we are growing. We already have EUR 200 million of EBITDA and growing 3 million customers this year. Probably next year, we will be at around 3.5 million customers. That is -- we could be close to this figure but we have a clear growth road map.

We are growing in lubricants. In aviation, I mean, if you check the figures in Iberia, we are in historical flights. Overcoming year after year, the figures we have. We are growing in the non-oil, as I mentioned before. So this EUR 1.4 billion of this year is going to be a figure close to EUR 1.5 billion of EBITDA in this business by 2026. And I mean, you see in low carbon businesses, I mean, in power generation, you could see that we are improving the result. We will see ups and downs, but there is a clear structural trend. Why? Because we are reducing our cost, our unitary cost because we have a business to operate more gigawatts and month after month, we are adding new production. So the unitary cost is going to be reduced in coming months and in coming years.

On top of that, with difficulties at the beginning in the U.S., but the rotation business, the rotation game is going to go in the right direction because the projects we have Outpost has a higher PPA than Frye. Pinnington has a higher PPA than Outpost. That means that things are going in the right direction. These 9 months, if you take the total concepts, you could see that this business is close to be neutral in cash terms. I mean that is not going. It's not structural. We are going to have in coming months, I mean, capital needs for this business.

But we are not going to be far in the period of a Capital Market Day defined to see that this business could be able to grow with a minimum capital commitment from Repsol because it's starting to work the model. So my point is that this EUR 3.5 billion is going to be deployed in a prudent way in these businesses, reducing, let me say, slightly default in the E&P because the projects are already on track.

In the Industrial business, we will put on track the projects I mentioned before, customer business, I mean, it's investing but the investment level in intensity is lower than in some other businesses. And in the case of renewable power, this effort, let me say, has an asymptotic direction towards being neutral in cash terms. Are we going to achieve this target in 2026? Probably not. But this time, it's not far. So thank you.

Thank you very much, Alessandro. Our next question comes from Biraj Borkhataria of RBC.

So first one, just on refining. I might have missed this but I understand you have no maintenance in Q4 but are you able to give a bit more detail on the first half of '26. Just thinking about your ability to capture $13, $14 refining margins over the coming months if that was to persist.

And then second question is just on the financials. There is a very significant difference between P&L tax and then the cash tax you pay and the gap seems to be getting wider. Just trying to understand if there's any particular reason why those 2 numbers won't converge over time. So any color there would be helpful.

Thank you, Biraj. I mean, going to your first question, I mean, let me say that this quarter, in 2025, what I have in mind is that we are only to turn around the 1 crude unit in Puertollano and the breaker. I mean, breaker with my whole respect to this unit because its fuel production is negligible in Tarragona. So that is going to be the only turnaround campaign this quarter. If we go to 2026, what we have in the program, I mean, accepting some hydrosulfuration units, some catalyst changes and so on that are negligible in days terms. The only large turnaround campaigns are A Coruña, that is the smallest of our refinery, where we are going to have the conversion units maintenance that is going to stay for something between 40, 50 days in 2026.

And in PetroNor, we are going to maintain the coker and the coker stay out of service for 40 days more or less. I mean that is the only -- any kind of significant maintenance campaign neither in Cartagena nor in Tarragona, as I said before, some -- I mean, catalyst changes, a hydrosulfuration unit, but I mean, nothing relevant. And let me say that if we see this historical what is program, a program could happen. I hope that we -- and I expect we could cope with any incidents in this sense. But when we analyze the historical -- in historical terms, the turnaround campaigns, it's going to be a quite soft year in terms of maintenance campaign in coming 15 months.

Going to your second question, of course, you could check the figure in a more accurate way with our IR team. But there is no anything relevant to report related to the P&L in tax and in cash. We are, of course, optimizing, as always, credit tax positions. You know that because we are investing hard, we have a lot of tax credits because the investment we are developing in some jurisdictions like I don't know, the U.K. and some others because the losses of the past. And probably in the whole year 2025, we could have a figure close to EUR 800 million at the end of the year. But again, we are trying to optimize these figures and trying to use the credit tax positions we have. So that's clear.

Thank you, Biraj. Our next question comes from Guilherme Levy at Morgan Stanley.

Two questions from me, please. The first one, thinking about the next steps around the listing of the E&P subsidiary in the U.S. You, of course, started to talk about a potential reverse takeover process. So I was wondering if there are any particular features that you would like to see in a potential target to be taken over in the U.S. if exposure to either gas, oil or to any particular basin would be preferred.

And then second one, also in the U.S., can you provide us some color in terms of the hedges that you currently have on gas prices over the coming quarters?

Thank you, Guilherme. I mean, we are preparing the company for being ready for a liquidity event in 2026. As I mentioned before, in July, liquidity event could mean first, an IPO, a reverse merge with a company listed in the U.S., a new private investor entering in Repsol. So I mean, that's the broad meaning of liquidity event. And again, for me, here it is more important, the road and the journey at the end. That means that we are putting all the effort first in having a better upstream with better barrels. We are delivering in terms of improving the portfolio. We are in less countries in better jurisdictions with better barrels.

When I say better barrels in terms not only of more sustainable barrels but also in terms of higher cash flow from operation per barrel, we are putting on track the projects that is very important. In a period that has been complex in terms of inflation and so on in the market, we have been able to put projects on track that has happened in September with Leon-Castile and it's going to happen in coming 3 months with Alaska. So that is the full focus of the company in this sense.

On top of that, we are working internally in all the requirements and reporting and so on to be prepared for any event in this direction. But again, we are not in a hurry. We don't need any proceeds coming from this liquidity event. We are seeing that day after day, we are improving the quality of our upstream. That means that we will be prepared alongside 2026. We are fully aligned with our partner, EIG in this strategy. And of course, we will be ready to take advantage of any opportunity in the market but not being in a rush, not jumping any opportunity that could appear in the horizon and having crystal clear that maintaining the control on the 51% of the stake in this business, so consolidating this business is a line for Repsol.

So we are going to own in this way. Going to some color about the gas for -- I mean, in 2025, we have 55% of the volumes hedged already with a collar with no cost, 6.1, so capturing all the value, guarantee the $3 million BTU and capturing all the value up to 6.1. Next year, if we go to the first quarter, we have a 20% of the production in the first quarter in a collar 3.5, 12.3. That is a surprising figure. But I mean, it was done with no cost. That means that we are guaranteeing the $3.5 million BTU and capturing all the price to $12 per million BTU.

On top of that, we have a collar over the whole production of 2026, covering 52% of the production with a floor of 3.2 and capturing the value up to $5.1 million BTU, and in 2027, we have already hedged at 12% of the production debt is with a floor of 3 and capturing the price up to $5.8 per million of BTU. So let me say, as I summarize, we are comfortable because we are guaranteeing a minimum that is going to give us the return we expect in the gas production we have. And on top of that, we have plenty of room to capture any upside appearing in the market. Thank you, Guilherme.

Thank you very much, Guilherme. Our next question comes from Ignacio Doménech at JB Capital.

Just a question on asset rotation, both on Upstream and on Renewables. So starting with Upstream. There was some news regarding potential asset rotation in Pikka and Alaska. So I was wondering if you are comfortable with your stake there or you are planning to dilute part of the exposure to the asset. And then in terms of asset rotation in Spain, just wondering if you've changed any -- if you've seen any change in appetite, just thinking about the 700-megawatt portfolio you're planning to rotate.

Ignacio, thank you. So going to your first question, I don't have any appetite to divest in the Upstream business. We are comfortable with the position we have in the upstream business. We are an oil and gas company. We are adding barrels. We are adding new barrels. And probably, let me say that Alaska is a company maker asset in terms not only because the barrels we are going to start producing in 2026 but because the potential growth that this asset in Pikka 2 in coke and so on could have around the current production in lands and fields that are already in the hands of the JV we have with Santos.

So I mean we have always to consider any option because, I mean, the portfolio is -- has to be managed. But today, I don't have any appetite to dispose or divest Alaska, I mean, and I need, let me say, a real very high figure to consider any option for that because, I mean, we are very happy, and we are very close to the first oil.

So we are going to start monetizing this asset in 3 months. So we will consider, as always, any option in any asset. But to date, we don't have any target and any appetite to divest any asset in the upstream or Repsol.

Going to the renewable asset rotation in Spain, I mean, we are seeing a positive appetite. It's curious because if you analyze Ignacio and you perfectly know Spanish renewable business, we have been able to rotate in a very successful way all the processes we have had over the last 4 years. And remember that the last one happened 8 months ago, roughly speaking, with green coat in a basket of assets that I thought I have in mind was that they were around 400, 500 megawatts in Spain.

And we are seeing a very high appetite for these assets because, I mean, you know that today, 400 new operational production in wind in Spain is a quite scarce asset because you know that wind is able to capture the prices over the whole day, capturing also high prices in some parts of the day. And the advantage of the minority part of this basket of assets that is solar is that the PPAs are already there and are very good PPAs because they were negotiated in the -- I mean, 2 years ago, roughly speaking, in the high peak of the crisis, energy crisis in Spain, when there was Spain and Europe, when there was a strong appetite to negotiate PPAs.

So very good asset with very good PPAs with very good mix of wind, solar. And I mean, for an investor, it's a real attractive asset. So I'm probably -- in the case of Outpost, I think that we are going to be able to monetize or to cash in, probably we are going to be there before the end of the year. In the case of these assets, we will close with a high probability of the transaction this year in 2025. And I prefer to be prudent because the authorization competition and so on, we need in terms of permits, probably the cash-in could enter in 2026. But in any case, the expectations are very positive. Thank you.

Thank you very much, Ignacio. Our next question comes from Irene Himona at Bernstein -- Societe Generale.

Just one quick one for me. I understand some of your disposal proceeds are from selling tax credits. And I'm not sure I understand myself how that works. How would it influence, for example, the future economics of those projects, if you can perhaps elaborate a little bit?

Thank you, Irene. I mean you know that all the assets we have in the U.S., they are covered by the IRA, not only the current one but also the rest of the assets we are going to develop because we have in a safe harbor 3 gigawatts more in the country. So that means that we shape, let me say, the much more in terms of the support of the IRA.

And in the case of how it works, there are 2 ways to monetize this support the PTC and the ITC. The ITC is some kind of upfront cash coming from the tax administration that is, I mean, in the range of 30%, 40% of the CapEx, even 50% in some places because it depends if there are industrial training areas and so on, the support, the local support is higher. And in some cases, you have what is called the PTC. The PTC is some kind of continuous payment for 10 years in your operation but you could monetize up 50% in upfront payment of this PTC.

And in the case of Outpost, this EUR 185 million, something that appear, roughly speaking, are the part fitting with this upfront payment coming from this PTC. So it's quite complex, Irene, because some projects they have the ITC, some others, the PTC take the message that all of them, they are going to have sufficient support in the range, 30% to 50%. And if you need more granularity about these projects, of course, be sure that the team of IR will be ready to give you more clarity about that, Irene. Thank you.

Thank you, Irene. Our next question comes from Matt Lofting at JPMorgan.

First, I wondered if you could add some thoughts and color on what you're seeing in the market on light heavy spreads and the sort of the cost effectively of the feedstock basket in the Refining business. Just thinking about that in the context of the moving parts in the market at the moment. It looks like some debits and credits, more barrels coming from the Middle East, on the other hand, some of the constraints around Venezuela, et cetera, that you talked about earlier and what all that means for the outlook on the premium over the benchmark.

And then secondly, just Jon, I wanted to just pick up on the earlier points that you made around CapEx. you talked about the low end of the sort of the range on the 4-year plan. I just wonder whether there's a case and a sort of a need to be more ambitious on medium-term CapEx reduction below that range rather than the low end in the context of moderated upstream prices now versus early 2024 areas of the low carbon value chain and the economics of that being still more challenging and probably greater geopolitical uncertainty in the macro backdrop than was the case when you did the CMD 18 months ago. I appreciate the thoughts there.

Thank you, Matt. I mean, going to the -- it's true that this third quarter and one of the factors impacting a negative way in the premium of the refining margin that -- I mean, it was pretty good at $0.7 per barrel, we expect a bit more was the scarcity of heavy crude oil in the Atlantic Basin. And the main factor was the reduction of the exports of Maya crude oil from Mexico in this summer. The potential, let me say, reasons or problems behind this decision, they were left behind. And this quarter, we are seeing more Maya in the market. So probably we are going to see higher discounts for the heavy crude oil.

On top of that, I mean, the rest of the crude oil, I mean, Colombia, Canada, what comes from Middle East, I mean, Basra and so on, they are entering in our system. Also, I mean, a small amount coming from Italy, Albania and so on. So my perception is that this component of our refining diet is going to be better in the fourth quarter than in the third one. In the case of Venezuela, it's clear because, I mean, you perfectly know that the constraints in the market are higher. But what we could see could be a more favorable environment this fourth quarter comparing with the third one, mainly because the Maya crude oil could be the driver that changed.

I mean, we will talk about the -- in the Capital Market Day about the CapEx effort and so on. But again, we are comfortable with the figures I mentioned before. If things are worse, there are plenty of room to reduce this figure. In the case of the -- I mean, in case of seeing low oil and gas prices, that is not the case today, and we are not seeing that. We have the unconventional buffer, as you know. So the E&P could reduce default but we are not now there. We don't want now to reduce default because we are seeing good prices and good returns.

You see that we have been able not because a CapEx reduction mindset because we prefer to be prudent guaranteeing the returns in the decarbonization of industrial assets. We have reduced the hydrogen ambition in almost 2/3 by 2030 comparing with the figures we have 2 years ago in our ambition. We are also prudent about the future investments in renewable fuels in Spain. We are analyzing a third project, and probably that is going to be done but we want to guarantee that this project is going to have good returns, and we are analyzing this option. You see that we are also being very prudent in the development of guaranteeing the returns of the renewable power generation.

So my point is that situation is different. We have reduced our CapEx in a significant way because we want to guarantee returns. And in case of needed, we will be ready to do it. But today, we are comfortable in these figures because, as I mentioned before, the distribution to our shareholders will commit is guaranteed under this scenario. The balance sheet is strong, and we could modulate the CapEx in this effort. Thank you, Matt.

Thank you very much, Matt. Our next question comes from Naisheng Cui at Barclays.

Two questions from me, if that's okay. The first one is on data center in Spain. I understand you also do some data center things as part of your business. I wonder if you can add a bit of color on that. What's your view over there on the sector?

Then the second question is just to clarify on the $2 billion divestment target for the year. I understand you mentioned earlier, there's no appetite to divest any upstream asset, but can you get to the $2 billion by just divesting the remaining U.S. and Spanish asset, please, the renewable ones?

Thank you, Naish. I mean, first, I'm not an expert in data centers, my first disclaimer. Secondly, if I have to imagine a place in Europe, where you need to have data centers, computation capacity and so on. And energy is an important driver and renewable energy is an important driver. It seems to me that Spain is the right place to develop this data center. So from this point of view, I'm quite positive about the possibility to develop this data center. We are not a data center operator. So we are not going to invest in this business.

What we are doing is because there is an appetite from investors to be in data centers in Spain, we have an asset that is Escatrón a CCGT with 800 megawatts of power in operation. And because the current regulation, we could use the connection permits of this asset to promote around this asset, an equivalent figure, in our case, 800 megawatts of wind hybridization with this CCGT plan. For that reason, we acquired an early pipeline of 800 megawatts of wind assets in Aragon in this region that is going to be developed something between '28, '29. So that means that we have the unique opportunity to develop wind assets in Spain that, as I mentioned before, is a very valuable production.

And we could use half of this figure, 400 megawatts to fit with renewable power, combining with the CCGT, a potential investor in the area. And what we have is we have water in the area because you know that this kind of CCGTs, they need the refrigeration cooling processes. We have land. We have good connections, fiber in IT terms in this area. So what we are going is to sell the right to develop a data center in the area to a potential promoter -- and on top of that, we are going to provide this data center with PPAs with self-consumption, combining the wind and the gas.

So we are seeing as an opportunity. I mean, we are going to monetize an option we have. And there is -- what we are seeing is that there are a lot of people interested in these assets. So it seems to me that today are a lot of people ready or interested in investing in Spain in this business.

But again, Naish, I mean, if you need more clarity, of course, we have our team to -- at your service my comment related to your question. I mean, when we go to the figures, -- as you could see in the first months, we got the figure of EUR 1.3 billion by September. I mean, I'm taking EUR 1 billion of divestments plus the EUR 0.3 billion additional coming from -- I think that EUR 100 million, roughly speaking, from Aguayo Project. Aguayo Project is the first rotation we did in Spain at the beginning of the year. But because we retained the 51% is not in our accounting divestments but you could see the cash entering in our accounting. And on top of that, we have the $200 million coming from the PTC I mentioned before of Outpost.

All in all, EUR 1.3 billion by September. We expect EUR 300 million more coming from the rotation of the U.S., I mentioned before, Outpost and the cash-in is going to be -- we have very high probability before the end of the year. All in all, EUR 1.6 billion, that is going to be enough to reach this EUR 3.5 billion net CapEx. And as I mentioned before, what could be out in cash in terms of this year 2025 is the rotation of the 700 megawatts in Spain that because the permit and authorization process and so on could be probably closed but not monetized before the end of the year.

In any case, because we have been more prudent in gross CapEx terms, we are going to be below this EUR 3.5 billion -- that is my ambition before this EUR 3.5 billion of net CapEx by the end of this year. Thank you, Naish.

Thank you very much, Naish. Our next question comes from Henri Patricot at UBS.

I have 2 questions, please. The first one, I want to come back to the comments you made, Jon, on the customer business. You mentioned on track to reach the EUR 1.4 billion EBITDA this year and maybe close to EUR 1.5 billion in 2026. But actually, you're already very close to EUR 1.5 billion over the past 12 months. So I was wondering if you're just being a bit conservative on the outlook for 2026 or if there was some exceptional performance over the past 12 months in the third quarter, in particular, that will explain why we should expect a slower growth in '26?

And then secondly, on the Puertollano advanced power fuels plant, which you now plan to start up in the second quarter and have the first contribution in the second half of '26. If I'm not mistaken, you're previously flagging start-up in early 2026. Wondering why it's taking a little bit longer and if there's a risk of further delay of this project.

[Foreign Language] Going to your first question, I mean, EUR 1.4 billion of EBITDA, that is going to be this year. Cash flow from operations will be at around EUR 1.2 billion, roughly speaking, this year. I mean I think that I'm not conservative. I'm ambitious for 2026 when I say that EUR 1.5 billion of EBITDA is our target. Why I'm, let me say, ambitious because the target we are achieving now for customers in the retail and power business in terms of EBITDA are the targets we had for 2027. So we are anticipating 2 years the delivery of the strategic plan.

Is this performance exceptional? I mean, I don't think so. I think that is structural. I mean, if you take what has happened with our customer business over the last 10 years, from 2016, 2017, we have doubled the EBITDA figures of this business. And we are developing this effort year after year. That is not because ups and downs in the market because we have had ups and downs over these 10 years. It's structural. And the reason is, first, new businesses, I mean, an EBITDA that was not there and now is there and is growing when new businesses mainly.

I mean, I could talk about power and gas. I talk about lubricants that you know that now we have an international footprint. We will talk about the [ gas ]. I mean, this kind of business developed around the energy efficiency that is also new. On top of that, I mean, we have almost 10 million digital users of our app Waylet. That is a unique position, not only in the energy sector in Spain, in the retail leadership in Spain.

So we are becoming a leading retailer in the country with more than 3.5 -- almost 4,000 sales points with 24 million customers, including Spain and Portugal without digital leadership. So it's structural. We are growing this business. Of course, we will have better and worse situation of the market. But let me say that with EUR 1.5 billion of EBITDA, I'm feeling quite comfortable.

And in this sense, I think that it is ambitious. I mean, if you take the EBITDA of this business and taking into account the investment level in this business that, I mean, it's also growing because we are growing in the gas and power business and so on, that you could pay almost 60%, 70%, the 2/3 of the cash dividend of Repsol could be paid by the free cash flow of this customer business that is always hidden because we are in all forms always talking about Brent price, Henry Hub price, refining margin. But the reality of this business is there.

The retrofitting of Puertollano, I mean, it's going to be in operation at the end of the first quarter. So there are some -- there is -- I mean, no material delay. Perhaps some weeks of commissioning the project, but that is not, let me say, material in a complex industrial project like that. It is on budget. It's going to be finished at the end of the first quarter. And in the second quarter of 2026, it's going to be fully operational. [Foreign Language]

Thank you very much, Henri. Our next question comes from Paul Redman at BNP Paribas.

Two, please. The first one is just on the EUR 3.5 billion of CapEx you're talking about, I think it's for next year. How much divestment is included in that? And will the cash in from the Spanish sale be included in next year's or this year's divestment target?

And then secondly, you mentioned earlier, Jon, about a possible EUR 1.05 dividend for next year. I see that's in between your EUR 1.3 and EUR 1.1 dividend guidance or range for 2026. I just want to understand how you get to that EUR 1.05, what we need to think about.

Thank you, Paul. I mean going to your first question, that is net CapEx, the gross CapEx is going to be higher. What we are seeing, clearly speaking about rotation today are mainly the 700 megawatts of Spanish assets I mentioned before that is going to be cash in, in 2026. Plus probably Pinnington in the U.S. that is going to be partially in operation at the end of this year, 2025 but we are not yet in the process of rotation and so on because you have to prove, let me say, the operation of the asset. So that probably is going to be in 2026.

And I don't have in mind any other disposal now, but you know that we always are analyzing our portfolio in a dynamic way. But you are right. This figure is net gross is going to be higher, and we will give you more clarity about that in the Capital Market Day of March.

And going to the dividend, I mean, as I mentioned before, and I'm sorry for not having the possibility to be more precise, but you are going to understand why. This year, the dividend has been EUR 0.975. What we have in the strategic plan is that the total amount distributed in cash is going to increase in a 3%. So there is a first effect of a 3% growing of this figure. But on top of that, the absolute amount is growing but we are going to have less shares in 2026 than the shares we had at the beginning of this year. Why? Because we are going to redeem and here is where I can't be more precise because we are still in the process of acquiring the shares in the share buyback process. But probably, I mean, we take the prices and so on, we are going to cancel a figure that is going to be close.

And again, disclaimer is going to be close because this math effect to a 4.1%. When I take the 3% plus the 4.1%, we arrive to a figure that is going to be close to EUR 1.05. We will have a full clarity about this figure at the end of this year, knowing exactly the number of shares redeemed but we are going to deliver and we are going to do what we commit in our strategic plan in terms of distribution. Again, that is an important target and what we said on that is going to be delivered. Thank you, Paul.

Thank you, Paul. That was our last question today. With this, we will bring our third quarter conference call to an end. Thank you very much for your attendance.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

[Audio Gap] The margin environment remains solid, consolidating the recovery trend initiated in the second half of 2024. In Iberia, activity in our key industrial facilities was negatively impacted by the power outage that affected the entire Peninsula in April, reducing utilization rates and preventing us from capturing the positive refining momentum.

Against this broader context, Repsol delivered a solid set of results, driven by the recovery of upstream volumes and the continued robustness of its commercial businesses, highlighting once again the resilience of our business model. Second quarter adjusted income was EUR 702 million, 8% above the first quarter of the year. Cash flow from operations amounted to EUR 1.7 billion, a 50% improvement compared to the first quarter, benefiting by a EUR 0.6 billion working capital inflow, mostly related to inventories and optimization measures.

The accumulated operating cash flow until June was EUR 2.9 billion, 25% higher than in the same period a year ago. That includes the settlement with Sinopec with a neutral contribution from working capital movements in the first half of the year. CapEx amounted to EUR 1.3 billion in the quarter and EUR 2.7 billion in the first 6 months. Regarding our divestment target, out of the EUR 2 billion objective for 2025, we have announced disposals and asset rotation for a total of EUR 1.2 billion, of which EUR 0.5 billion were cash in the first semester. Net CapEx stood at EUR 1.2 billion in the quarter and EUR 2.2 billion accumulated until June. If we had cash in all the divestments announced this year, net CapEx until June will stand at EUR 1.5 billion.

Net debt closed at EUR 5.7 billion, a 2% reduction compared to March. Gearing, including leases, was 17.9% by quarter end. Looking ahead, we remain on track to deliver on our main strategic objectives for 2025 according to the priorities defined at the beginning of the year. Back in April, we discussed the possibility of an exit scenario for the rest of the year, the evolution of the main indicators has brought us back to our base case.

Regarding our shareholder remuneration objectives, we will distribute 30% to 35% of the cash flow from operations generated in 2025 through a combination of cash dividends and share buybacks. We have increased the funds dedicated to dividends by 3% as committed in our strategic plan. In July, we paid the second dividend of the year for a total EPS of EUR 0.975, equivalent to an 8.3% increase compared to 2024 after factoring for the lower number of shares after the capital reductions executed last year. For 2026, our AGM held in May approved to distribute a first dividend of EUR 0.5 to be paid next January. 2025 dividend in cash will be complemented by share buybacks for the equivalent of EUR 700 million to reduce capital.

Yesterday, we announced our first capital reduction through the redemption of 29 million shares acquired by an equivalent amount of EUR 350 million. A second capital reduction of shares to be acquired for the equivalent of another EUR 350 million will be executed before year-end. For this purpose, EUR 300 million will be acquired through a new share buyback program to be launched in coming days, weeks and the remainder EUR 50 million through the settlement of existing derivatives.

Looking at the evolution of the main macroeconomic indicators over the last quarter. Brent averaged $88 -- sorry, $68 per barrel, 10% lower compared to the first quarter and 20% below the same quarter last year. The oil price experienced significant volatility, fluctuating within a $20 range over the course of the period. The Henry Hub averaged $3.4 per million BTU, 8% lower quarter-over-quarter, but significantly, I mean, 79% above the same period in 2024, with market consensus pointing to a rise of U.S. gas price, I mean, towards the end of the year.

In refining, Repsol's margin indicator averaged $5.9, 11% higher than in the previous quarter, primarily driven by stronger gasoline spreads. After declining to around $4 in April, the indicator recovered in May and June, supported by solid demand, low inventories, capacity closures and delays in some of the new projects coming on stream.

Finally, the dollar weakened significantly against the euro to an average of $1.13 in the quarter, and this trend has continued in July with the euro-dollar trading in the $1.16, $1.17 range.

Turning to the highlights of the Upstream division. Our focus remains firmly on value generation and portfolio optimization, supported by the upcoming start-up of new strategic projects. Second quarter adjusted income was EUR 439 million, 4% below the previous quarter and 3% higher than in the same period last year. Year-over-year, the higher gas realization prices, lower production costs and lower taxes were partially compensated by lower oil prices, lower volumes and the depreciation of the dollar. Production averaged 557,000 barrels per day, a 3% increase over the first quarter, thanks to the higher contribution in U.K., Trinidad and Tobago, Eagle Ford and Libya that compensated the impact of divestments and natural decline. Uuai's production has stayed at second quarter levels, putting year-to-date average at around 550,000 barrels per day at the higher end of our full year guidance.

In Indonesia, as part of our objective to concentrate operations in countries where we have possibilities to grow competitive advantages, we reached an agreement to divest our 24% stake in Corridor for $425 million. This nonoperated position contributed around 17,000 barrels per day to our production in the first half of 2025. In Trinidad and Tobago, the Cypre and Minto projects reached first gas in April and May, respectively, expecting an average 28,000 barrels per day -- barrels equivalent, I mean, contribution over the 2026, 2028 period.

In the U.K., the closing of the agreement with NEO Energy is expected in coming days before probably the end of this month after receiving the approval from the NSTA. The resulting joint venture will become one of the largest independent producers in the U.K. Continental shelf with a projected production of 130,000 barrels per day in 2025, of which 68% is oil. Post closing, Repsol U.K. production, so from the end of this month on, will increase to around 59,000 barrels equivalent per day, which compares to a production of around 30,000 barrels a day in the first half of 2025 in this legacy position.

In unconventionals, we resumed drilling activity in the Marcellus with one operated rig from April to June. In response to the better gas price outlook, we are preparing the campaign for 2026, expecting to have 1 rig in Marcellus and 1 rig in Eagle Ford and around 55% of our 2025 and 2026 North American gas volumes are covered through a zero cost collar between $3 and $5.5 to $6 per million BTU. In the Gulf, the development of Leon-Castille is reaching its final stages with the start of production planned for this third quarter. In Alaska, the development of the first phase of Pikka progresses towards an early start-up between December 2025 and January 2026. We expect full ramp-up of production during 2026, reaching a gross capacity of 80,000 barrels per day within the year.

Finally, in Venezuela on the 27th of May, the United States Administration revoked the oil license of several international companies, including Repsol. Carbon 4 continues producing gas and the management of Petrobroqui Chile operation has been returned to PDVSA. In Industrial, second quarter adjusted income was EUR 99 million, EUR 189 million below the same quarter in 2024, mainly due to the lower results in refining, chemicals and trading, partially compensated by a higher contribution of Peru and wholesale and gas trading.

Let me underline this point. The quarter was defined by the consequences of the power blackout that affected the Iberian Peninsula on the 28th of April due to a network instability, a blackout disconnected all generation facilities in Spain and Portugal from the grid. This led to the shutdown of all our refineries and petrochemical plants, which had to be restarted progressively. Our teams acted swiftly to restore operations and ensure continuity in supply. In refining, this blackout, the outage, along with the electricity supply disruptions in Cartagena and Puertollano had an estimated impact of around EUR 130 million at EBIT level.

All these challenges coincide with planned maintenance across several sites, and as a result, utilization of distillation capacity declined to 74%, while conversion units reached 86% of nameplate capacity. The current refining margin or the actual refining margin over the period was better said, $0.3 below the indicator, reflecting a negative premium due to the issues that affected our operations. Excluding the impact of the blackout and subsequent incidents, the margin premium would have reached $2.1 positive in the quarter.

Activity in our refining complexes has normalized in the third quarter. The margin indicator has averaged $9.6 in this quarter, so in July, for an average of $6.1 year-to-date, benefiting from very healthy product spreads, in particular diesel cracks. The utilization of distillation has reached 93%, 94% this month and conversion units have run in July at 102%. In addition, margins for renewable diesel have reached levels above $900 per ton as supportive policy developments have stimulated demand and domestic production.

Going to the chemical business, Repsol's margin indicator increased by 76% over the first quarter, driven by cheaper naphtha and LPG feedstocks. However, this better margin -- again, this better margin environment couldn't be captured due to the lower utilizations and soft demand. The blackout had a negative impact of around EUR 45 million in the operating result. We have to take into account that we are talking about 3 petrochemical complexes, Tarragona, Puertollano and Sines in Portugal. Without the impact of the outage, the business would have reached breakeven in EBIT terms.

The total estimated impact of the incidents that occurred in our industrial business in the Iberian Peninsula during the second quarter amounts to approximately EUR 175 million, and the company is currently assessing legal actions and awaiting the official determination of responsibilities related to the power outage to the blackout.

Finally, in wholesale and gas trading, we have received 5 LNG cargoes from Calcasieu Pass after the plant started commercial operations in April ahead of date assumed in our budget. And this factor increases the total number of gas cargoes to be lifted by Repsol in 2025 from 7 to 11, contributing an additional EUR 100 million to the operating result over the whole year.

Moving to Customer. This division continues to demonstrate a sustained track record of solid quarterly results built around a competitive multi-energy offering recently enhanced by a new identity and brand evolution. Second quarter adjusted income was EUR 198 million, a 25% increase over the same period in 2024, thanks to a higher contribution in all the business segments. The accumulated EBITDA until June was EUR 0.7 billion, putting us on track to meet the EUR 1.4 billion. Remember that, that was the target originally set for 2027 and is going to be captured as early as in 2025, so this year, anticipating 2 years the target we had in our strategic plan.

In Mobility, sales of road transportation, fuels grew by 16% year-over-year, mostly due to the anti-fraud measures and control mechanisms adopted in Spain. The solid evolution of sales now in pre-pandemic levels challenges projections that anticipated a significant destruction of demand. The number of service stations offering 100% renewable fuels reached more than 11 -- sorry, 1,200 as of the end of June, and we expect to reach 1,500 by the end of the year.

In Spain, 53% of our network already offers multi-energy solutions. The number of digital clients, including wallet users, reached 10.1 million, a 17% increase over the same period in 2024.

Finally, in power and gas retail, last quarter, we added 142,000 new net customers, reaching 2.8 million clients by the end of June, consolidating Repsol as the fourth largest operator in the Spanish electricity market. In low carbon generation, the adjusted income was EUR 7 million, EUR 6 million higher than a year ago, thanks to the higher result in combined cycles and in renewable generation. The average pool price in Spain was EUR 39 per megawatt hour, EUR 5 higher than in the same quarter last year due to a lower share of renewables in the generation mix.

The power generated by Repsol reached 2.8 terawatts hour, 58% higher year-over-year. The execution last quarter of our first asset rotation in the U.S. confirmed the strength and appeal of our portfolio for leading investors. We agreed to divest a 56% stake in a 777-megawatt portfolio for $340 million, including the Frye solar project in Texas and the Jicarilla solar and storage complex in New Mexico. The portfolio was valued at $795 million, including $60 million in tax equity proceeds.

Finally, we reached an agreement to settle the litigation process with Heecati. Under the terms of the settlement, Repsol will divest its 40% stake in the company, resulting in a negative impact of around EUR 100 million registered against second quarter results under special items. Looking ahead, our growth in the U.S. will be driven by the platform acquired through ConnectGen, mainly focused on onshore wind.

Now regarding our updated outlook to the end of 2025, the guidance for the year remains broadly unchanged. Under a $70 Brent, $4 Henry Hub, $6 refining margin indicator scenario, we expect to generate around EUR 6 billion of cash flow from operations after factoring the impact of the Iberian blackout. Investment will remain concentrated on the efficient development of our growth projects in the Upstream, the transformation of our Industrial assets, and let me say, optimization of them, growing our power and gas retail business, enhancing the multi-energy offering to our clients and expanding our low carbon generation portfolio.

In renewable fuels, the construction in Puertollano of our second advanced biofuels plant in Spain progresses towards starting up in the first quarter of 2026. Net CapEx is estimated for the year 2025 at around EUR 3.5 billion, subject to the timing of the divestment processes under execution, but that is the target and the guidance we have now with the better or the best information we have in our hands. In renewables, we are currently working on 2 new asset rotation expected to be closed before year-end. One is in Spain for a 700-megawatt wind and solar portfolio and the other involves the Outpost project in Texas.

As discussed before, we maintain our shareholder remuneration commitment for the year. The dividends paid in cash, together with share buybacks for the equivalent of EUR 700 million will put total distributions of 30% to 35% of the cash flow from operations at the higher end of our strategic range.

To conclude, despite the material impact of the blackout affecting the Iberian Peninsula, Repsol delivered a resilient performance in the first half of 2025, supported by the recovery of our Upstream volumes in the second quarter and the continued strength of the commercial business. We remain confident on delivering our strategic objectives for 2025, growing value for our shareholders in a sustainable way, firmly committed to a profitable transformation and the achievement of our decarbonization goals.

The strength of our business model built on a sound financial position and a disciplined capital allocation approach positions us well to manage the uncertainties of the current volatile environment. In Industrial, following the normalization of operations in July, we expect to capture in coming quarters, the ongoing positive momentum of the refining business. In the Upstream, the completion of Leon-Castille and Alaska will enhance future cash flow generation and enable us to normalize CapEx levels from 2026 onwards after the significant investments made in 2024 and the first half of 2025.

In addition, our exposure to North America could benefit from the relative strength of the Henry Hub, driven by new LNG infrastructure, increasing demand and the potential deregulation of the U.S. energy sector.

With this, I will turn it over to Pablo as we move on to the Q&A session. Thank you very much.

Thank you, Jose Jon. Before opening the Q&A, I'd like to ask the participants to limit yourselves to a maximum of two questions. If time permits we will try to cover more in a second round. Of course, the IR team will be happy to assist for any followups afterwards. As usual, I would like the operator to remind us of the process to ask a question. Please go ahead, operator.

[Operator Instructions]

Thank you, operator. Let's get started. Our first question comes from Michele Della Vigna at Goldman Sachs.

Congratulations on the strong results. Two questions, if I may. The first one is on U.S. gas, the outlook for 2026 looks really good, possibly the best in a decade. I'm just wondering what would lead you to put more capital there and maybe take on 1 or 2 more rigs and increase production into the 2026 time frame? And then secondly, I was wondering on your U.S. renewables portfolio with the changes to the IRA, it looks like there is a big benefit in starting construction early and still getting the full incentives there. Does that mean that effectively CapEx there needs to be brought forward, especially towards '26 and '27?

Michele, going to your first question, you are right. For this reason, I mean, you know our point of view, we try to maximize cash. And knowing the experience of the sector in the U.S., you know that sometimes when prices are okay, some additional CapEx effort, they could have also some impact in the unconventional in the local level in terms of inflation and so on. So we have to combine both views. And because we have this prudent view, I mean, we are increasing our investment approach, our investment effort in the unconventional, mainly for gas production. For that reason, we are going to have one rig in the Marcellus and another one that is going to put in operation at the end of the year in the Eagle Ford.

And at the same time, as I mentioned before, we are covering -- at the moment, we have covered through this color 55% of our production for coming 2 years, 2026, 2027. And that is positive in terms of guaranteeing, let me say, some breakeven for this operation. But again, we are following in a very close and accurate way, what is happening in the market. We are covering positions. We are increasing our effort, but always under the principle of maximizing the cash of the operational free cash flow, let me say, is the key and has to be the key in the unconventional. And I think that, unfortunately, and let me say, I'm not blaming some others because sometimes, I mean over the last years, we also -- we've made mistakes on that, probably maximizing the concept of net price value on and investing hard in these unconventional assets. And sometimes not maximizing the cash concept now, I mean, I think that we are quite close to have a right balance in this effort.

Going to your second question, I think that one of the large advantage we have is that the IRA changes in the American Congress at the end of the road were quite reasonable. I mean, it was, I think, that are quite right balance in terms of the decision that the America legislators, they took or they did. And in this sense, I mean, we have 5 gigawatts of our pipeline that are, let me say, secure to benefit from the tax framework that is supported either through ITCs or PTCs in the framework of the IRA. So we were quite comfortable and let me say quite happy seeing the result of the American Congress that is supporting the growth we have for coming years in the American renewables arena.

And that is important because what we are seeing in the market is the appetite for this renewable power is growing. Demand is growing in the U.S. The appetite for PPAs is also growing. Prices of PPAs are growing. Everything related to AI and data center on top of more industrial activity in some places like Texas, also the increase of operations in the area is increasing the energy needs. And today, I mean in practical terms, the only source able to cover this demand growth in the America -- in American economy, it's renewable energy because the bottleneck, the crunch that they have in terms of providing some other facilities like CCGTs and so on because the difficulty that providers of these capital goods they have to increase their production and to put in operation on these facilities in coming 2, 3, 4 years.

So I think that there is a good momentum in the American market for that. There is a clear policy from the administration in the U.S., very supportive about producing all kind of energies for covering the American demand that is positive, and we are there in the U.S. offering all kind of energies, oil, gas and power. And we think that under the regulation that was approved by the American Congress that we see in a positive way, we have the supportive framework to maintain our bet to go on investing in the U.S.

Our next questions come from Alastair Syme at Citi.

Hello.

Hello, Alastair.

Just 1 question, actually. Just on, you look to have made huge progress in the transformation of the Upstream business. So congratulations on that. What more do you think you have to do to prepare the business for the 2026 liquidity event? And has there been any evolution in your thinking of what that liquidity event now might look like?

So Alastair, you know because we have asking to your questions, we have talked sometimes about that. I believe in the end of the road, so in the liquidity event, so we are preparing the company to be fully prepared by the end of the first half of 2026 to be prepared for that. But I also am a believer in the journey. As you mentioned, in some, let me say, implicit way in your question because what we are doing in the way is improving the quality of power, disposing and divesting from areas where the capacity we would have to create value is more limited, investing hard as we are doing in areas where cash flow from operations per barrel and growth in projects is more evident and at the same time, increasing the quality in terms of cash flow of the barrels we produce.

I think that -- I mean when you are in a journey like that, you are investing hard their fruits, they arrive later, but now we are in a moment where things are starting to be more balanced. I mean, this summer, we will start producing the Leon-Castile asset from the end of this month on. We will have a new picture in the U.K. with more borrowers, more cash flow from operations. I mean, from the U.K., better quality of power. Alaska is going to be happen, in the way we announced in the framework of a strategic plan. So we are closer in terms of having, let me say, a good approach of the liquidity event, not only because we are, let me say, preparing the -- all the control mechanism of the company adapted through the American market, not only because we are advancing in terms of preparing the reporting and so on. We are preparing the company for all that, but also because we have an action business that could be better understood by an American investor.

On top of that, of course, we are analyzing alternatives. I mean, you know that when we are taking about liquidity event, that is a very broad concept, it could be a direct IPO that probably is not the -- our favorite option that is there. We could talk about the possibility to have a reverse takeover ourselves with an American listed company or it could be, let me say, a private investor entering in our business to go on in this transformation pathway. I mean we are there. We are not in a hurry to do that. We are -- in the meantime in the midst, we are improving the business. So that means that things could be issued, if we go on improving this business. We are fully aligned in this approach with our partner, EIG and that is the way to prepare the company. Thank you, Alastair.

Our next question comes from Biraj Borkhataria at RBC.

I have 2, please. The first one is just on Pikka. There were some contradicting comments on the start-up timing, and I think it was related to a better window or a view on the weather window. Could you just confirm when you expect that to start up? And any thoughts on the ramp up, whether it's late '25 or mid 26? And then the second question is just on the gross CapEx. As we're thinking about this year and into next year, you've got a number of projects in the upstream that are rolling off, some kind of M&A activity as well. And then, I guess, any comments on. I'm just trying to get a sense of what we should expect for gross CapEx in 2026.

Thank you, Biraj. I mean going to Pikka. First, we have a full alignment in terms of the operational approach in terms of dialogue with our Santos partner that is the operator. So don't -- in case of that, I mean, I underline that Santos has always the last word on the approach because, I mean, they are good operators in the area. I had the opportunity, even in physical terms last month to visit our offices and Santos team operating the asset in Alaska. It was at the beginning of June. At that time, we still have -- and they had some kind of concerns related to the level of the Mackenzie River that you know that it was needed to transport all or some parts of the modules from the area of Alberta towards the Northwest by the river.

I mean in case of not having the liquid levels, the alternative was more complex through the Canadian Western coast delay in 3 months of the project. So I think today, I mean that is not, let me say, rocket science, but I think that we are in the mainstream scenario and the mainstream scenario could be, I mean, to start up something in between the end of December and the end of January. I mean in this -- in those weeks, I mean, of course, there are in a project that is complex like that, you could always have some days, let me say, of delays and so on. But I mean, for me, the mainstream scenario is that in the call of the full year results in February.

I mean, we will probably be talking that Alaska is producing oil. So that's going to the ramp-up, it's the best approach in a direct way, I mean, in terms of connecting, we will start producing in gross terms, 25,000, 27,000 barrels a day and probably towards in summer '26, we will be close to the 80,000 barrels a day of production. We have -- and there is a plan to go on connecting wells to sustain, to maintain this production and what is more important, probably it's too early to talk about that. But I mean there are plenty of resources in the area to be developed and there is a Pikka 2, I mean, of course, we are not going to enter in developing the full engineering, thinking about FIDs of Pikka 2 before, no inaccurate way how the wells are performing in Pikka 1 and so on.

There are more areas and the perception I have is that Alaska is going to push hard in positive terms in the process of transforming the E&P of Repsol.

Going to the gross CapEx, the better figures we could have today is that in 2026, the E&P business is going to reduce in our figure equivalent to EUR 500 million a year. The CapEx effort because -- I mean, due to the projects coming on stream in 2025, La Paloma and Leon-Castile and taking into account that probably because this ramp up because these new connections of wells and so on, Pikka is going to require some CapEx effort in 2026. But I feel that the best approach we will have today is a reduction of EUR 500 million of the gross CapEx in this business in the CapEx or in this business in 2026.

Going to the net CapEx of the company, remember, when we presented the strategic plan in February last year in 2024, the range for net CapEx grow something between EUR 16 billion to EUR 19 billion. I mean today, my best estimation is that we are going to be in the strategic plan period in the range EUR 16 billion to EUR 17 billion. That is going to be the range we are going to be there. If you take into account that combining the figures of last, PAUSE with the figures of this year in net CapEx terms with indication of EUR 3.5 billion, I mentioned before. We will be at around EUR 9.2 billion, EUR 9.3 billion of net CapEx combining 2024, 2025. I mean, you could approach the figure of EUR 7 billion of net CapEx base for the period of 2026.

So all in all, the today estimation is a net CapEx of EUR 16 billion to EUR 17 billion for the period. What is behind this figure, I mean, mainly there is, as I mentioned in the last call, some confirmation that we are going to delay a bit and reduce the intensity of investment in terms of hydrogen megawatts in our refineries to a figure that is going to be important, but it's going to be close to 600, 700 megawatts by 2030, combining electrolyzers and EUR 200 to 250 coming from biogas that is going to be transforming the performance of our refineries.

On top of that, you know that we also reduced the default in the renewable fuel side, outside the Verian Peninsula concentrated our forks in Spain and Portugal. And you know that we also, I mean, the most accurate figure in terms of gigawatts in operation by 2027 was also reduced. That is behind this reduction of net CapEx and the best estimation we have EUR 16 billion to EUR 17 billion for the period of 24 27. Thank you, Biraj.

Our next question comes from Alejandro Vigil at Banco Santander.

The first question is about the very strong performance of the customers' business. If you can give us an indication of what should we expect in the future after almost delivering the '27 target this year and the underlying drivers of this very, very strong performance? And the second reason is about the European diesel market. What do you think about what's driving this may be a strong momentum? And if you think could continue during the coming months?

I mean let me start, I mean, I thought I had those days. You know the Spanish flight space operator published last year, a figure showing that in 2024 in Spain was a record year for the aviation sector. I mean they control or manage 2.35 million flight operations in Spain in 2024. When you analyze the figures of this organization and I did, at the end of June, we are overcoming in 5.9%, the record of 2024. That means that -- I mean, we are experiencing in this part of Europe, in Spain and Portugal, I mean, an extraordinary growth of services, tourism and so on. Spain is going to receive EUR 100 million through this year. Only overcame by France in global terms in terms of number of visitors and by the U.S., I mean as a second country, Spain, in terms of revenues.

So that means that the -- for instance, they get middle distillates, consumption is growing, that is supporting our operation. When you analyze and you see our growth, the activity related to services, tourism, economy, the changes in economy after the pandemic with more online sales. That means more trucks, more banks. I mean, all that is explaining, let me say, in the fundamentals, what is happening in Spain and in Portugal, and in the fuel business. So on top of that, if you analyze our sales comparing with 2024, the growth has been at around 16% year -- comparing year-to-year in terms of volumes. I mean, that is not only economic activity, it is also related to the anti-fraud measures.

I mean the figures over the last 2, 3 years were highly contaminated by this illegal activity. And let me say that, of course, that is not fully over, but the Spanish authorities are fully committed to cope with this problem, and they are taking real measures to combat, to attack this fraud. On top of that, you have -- I mean gasoline market in Europe is booming. It's okay. Margins are okay. Diesel because a middle is because the mentioned the reasons I mentioned before, Alejandro, they are also okay. On top of that, we are supported by this 24 million customers we have in the Iberian we are entering in a successful way in new businesses.

For instance, the power and gas retail business, we are approaching the figure of 3 million customers. This year, we are going to achieve 3 million customers in this business, that is, let me say, a material figure and with a positive high EBITDA, positive free cash flow. So we are growing, making cash for the company. The non-oil business and you are a Spanish person, you could visit our service station. You can see that more and more this premium approach in terms of position in the market of Repsol has improved a lot over these years. So all that is explaining in fundamental terms the results.

Of course, we could see as always in business, ups and downs in coming quarters. But there are fundamental reasons for that. So no doubt that taking into account that we will increase the targets of our customer business for coming years because we have to go on growing and improving. Remember that -- I mean, the figure I have in mind probably I'm wrong, but in 2016, this business had an EBITDA at around EUR 750 million a year, roughly speaking, on the perception of the market was that this business was declining. So this year, we are going to have EUR 1.4 billion in terms of EBITDA and growing.

So let me say that it's a hidden business because we always talk about all Brent, Henry Hub refining margin, and it's okay because they are drivers of our business. But we have some kind of a hidden beauty here in Repsol that is growing and has already an EBITDA of EUR 4 billion. Yes. And let me say, going to the yes, what is happening also in Europe, excuse me, because I was fully excited, let me joke talking about what is happening in the Spanish market. I mean, first, as I mentioned before, there is a fundamental in terms of consumption in the market.

On top of that, you have low inventories in Europe. You have the new maritime regulation coming from IMO, from the ECA zones impacting in the Mediterranean as a shift in volume from fuel oil to diesel. So it's increasing demand. And on top of that, you also have the momentum in the market in terms of fleet costs and so on, that is giving a more competitive position to European producers for the European market, reducing the competitiveness of some other areas of the world and India, Middle East and so on. And my perception, Alejandro, is also that all these sound around sanctions on Russia is also starting to be discounted to impact European diesel market and probably is going to have a higher effect in coming months. Thank you.

Our next question comes from Irene Himona from Bernstein.

Congratulations on the quarter. My first question is on trading within the Industrial division. It remains very strong. It certainly increased sequentially. It's the second largest contributor to divisional EBITDA. Some of your peers have mentioned reducing trading positions due to unpredictable geopolitical volatility. I wanted to ask if you can talk a little bit around your trading strategies in this period of, let's say, enhanced uncertainty?

And then second -- the second question, on your 2026 planned E&P listing, can you please give us a sense of the percent interest which you expect Repsol will retain in the listed entity, please?

Thank you, Irene. I mean, in structural terms, our trading is growing. Why is it growing? Because you know because you are following and you have followed all over these last years. And you know that at the very beginning, our trading was the supplier of our refining business, not more. And more and more, these businesses start to work taking some other positions, start working with the biofuels and these new fuels enter and providing, let me say, service to the E&P business of Repsol, taking volumes, taking global positions in Singapore, Houston and Europe and so on. So there is a natural growth in this trading.

And let me also include, in some way, the cash trading in this equation because you know that because the long positions we have mainly in the Gulf of North America, in terms of LNG, Calcasa, Sabine Pass, Cameroon and so on. We are increasing our exposure. We have strong short positions in the Iberian Peninsula. And this business is also growing. All in all, our is going to be close to -- I mean, last year in the year around the figure I have in mind around EUR 1 billion, close to EUR 1 billion. I mean saying that, we have a very risk limited appetite in our liquids trading business. That means that if, I mean we try to avoid volatility. If we -- let me say, two positions in a part of the world, and we have to supply a different quality in other parts of the world, we try to be -- or to reduce to 0 our exposure to main figures like Brent like general markers of this product and we try to go to the delta in terms of qualities of products in terms of geographies, in terms of playing with the time that could be, in some way, opening an arbitrage opportunity for our trading business.

So we have a very risk limited trading activity. And because this approach we have, I think that this uncertain period is not closing any opportunity to the trading activities we have in our hands. So for that reason, we could expect are trading -- trading activity that could be, in some way, similar to some other periods. And I said before, with that asset base that is growing. Going to the plans for the Upstream listing, I mean today, a clear approach we have is that we want to retain a minimum of 51% in this upstream business and maintaining the control of the company that are today the framework that is better said, the framework we have in this liquidity event approach we have. Thank you, Irene.

Our next question comes from Pedro Alves from CaixaBank.

The first one on the asset rotation plan for the remaining of the year. I think you have assets to be sold in Spain and U.S., as you explained. So perhaps if you can give us some outlook on how do you see the asset rotation market, not only from the projects you have already launched to be sold, but also the -- looking ahead for the remaining years because we have seen some more cautious comments from some of the utility names, but also other players where they try to sell assets and particularly in the U.S.? So can you give us some comfort here or at least what's your confidence in keeping this asset rotation plans in renewables for the remaining years to keep your total net CapEx, as you said, in the EUR 16 billion to EUR 17 billion over the plan, and therefore, keep sustaining your distributions to shareholders?

And the second question is on the refining margins, if you can give us an update on the latest levels that you are seeing, particularly in this month of July and given the current balances in Europe, what's your outlook for the remainder of the driving season?

I mean, going to your first question, well, first, going to the cash in. Yesterday, we had the cash in coming from Frye and Jicarilla. So -- but as I mentioned before, that was announced in the second quarter, but the cash in arrived yesterday, so that it's going to be in the third quarter. Going to the projects that are now on track. I'm going to start surgically by the most difficult part of the equation that is the U.S. because you perfectly know, Pedro, the interest rates in the U.S. that are making things more difficult than they were 2, 3 years ago. So good news is that we are in the process of disposing the Outpost project, the talks are quite advanced for that. As I mentioned in the last call, the transaction of what we call Pecos, that was the addition of Frye and Jicarilla was not an easy game. The advantage of outpost is that the PPA is better than the PPA we have in Outpost -- sorry, in Frye.

And in Frye was lower because it was our first project, was developed after the pandemic in a period where the PPAs were lower and Outpost has a PPA higher than Frye and Pennington that is the next one is going to have a PPA significantly higher than Outpost so things are improving in the American market for that reason and because we are also in talks, we have the perception that things are going to go in the right direction in terms of the asset rotation of Outpost. On top of that, because the fiscal framework of this project, we are going to have a cash in, in this in the year with the asset rotation of Outpost. That is going to be at around $200 million as equivalent of ITC or, let me say, the tax direct impact supporting the investment.

So we expect to have the cash coming from the rotation of Output, plus $200 million coming from the fiscal support through this project. And things, I mean, are not ever easy, but I think that it's going to be better than the expectation we have for Frye that was closed on April 28, I mean, we closed that transaction, the blackout day. Going to Spain, I think that, again, the market is not easy, but is significantly better than the position the American market has. We have had our last experience Gallo happen at the beginning of this year, 2025, was okay in terms of the multiples paid by the investor.

You know that, I mean, the solar projects, they could have a bit more difficulties in Spain. The large advantage, the great advantage of this new basket of assets, 700 megawatts is that a figure close to 500 are win. So you know that new wind projects in Spain are quite scarce resource. The great advantage of wind is that the production and the capacity to capture prices is more extended to more flat, not slightly flat, but I mean with better distribution over the whole day. So taking into account the structure of the Spanish pool price and wholesale market, the capacity you have returns is clear in this kind of project. So I mean, we'll have to work in this direction. But today, we are quite comfortable about the possibility to go on with these 2 rotations.

Going to the refining margins, I mean, as you know, let me say that it's not important only to have high margins, but it's also important to be producing because in the second quarter, the problem we have, unfortunately, because this outage, this blackout, is that our capacity to produce was reduced. I mean going to the most important thing, what is happening in operational terms. First, the program turnarounds of the refineries, most of them were done in the first half of the year. We still have to maintain for some days the Isomax unit in Tarragona this second half of the year. And we also have a turnaround in Cartagena that is going to impact one of the three distillation towers, some hydro reflation units and probably some days the hydrocracker because the supply, because the spread could be a bit reduced because the maintenance are impacting in these units.

But I mean taking into account our whole system, the best new is that, I mean, the system is going to be working at high level of distillation over the year. If we go to the current figures, each quarter, as I mentioned before, we have a utilization rate of 93% over the whole month and 102% the conversion units. So we are capturing these margins and going to what is happening in this third quarter, the average as of today in our system is the $96 a barrel. So the forecast for the next months is initially for healthy refining margins. I mentioned some reasons for that, talking about demand, jet, gasoline, diesel, the potential impact of Russian sanctions and so on. Let me say that on the supply side, new refining projects in Atlantic Basin continue to face delays in Dangote, in Nigeria or Meka in Mexico.

And on top of that, I mean, closures in Europe this year are taking place, especially in Germany, Granchmouth in the U.K. going to U.S. Houston and I mean, additionally, there are some concerns in the market affecting the Lindsey refinery in the U.K. So geopolitical tensions are also there that some way from time to time, they could impact the middle distillate market. So for that reason, I mean, markets are good, and we have a good perception of markets for coming months. Thank you, Pedro.

Our next question comes from Henri Patricot at UBS.

Two questions, please. The first one, team industrial, but on the chemical side where grows quite a nice improvement in the indicator in the second quarter, but you can't catch that. So I wanted to check whether you continue to see this improvement in the third quarter and whether we could expect to see chemicals EBITDA back into your positive tertiary in the second half?

Then secondly, on the upstream side, there was a nice increase in production in the second quarter, Europe, Africa. And you mentioned Libya new wells there. Can you give us an update on what you see in terms of production potential in Libya? You previously talked about maybe some growth. So I just want to get an update on the developments in that country.

Going to your first question, I mean, I'm going to be clear about that. I mean the crisis in the chemical business is not over. I mean that is my first, let me say, a highlight. It's true that things are improving in the right direction. And as you said and as I mentioned before, without the outage effect, we will be close to the breakeven in EBIT terms this quarter. But there are still some fundamental concerns in this chemical business, I mean, flat demand is there, high energy costs in Europe. And what we are doing is, I mean, and the results of this quarter are a good example of that is now focusing on reducing cost, pushing breakevens down and increasing the margin through a higher differentiation for products.

We are implementing technical upgrades that are improving the competitiveness in our operations. We are, I mean, taking a lot of measures that I could explain, but I don't want to bore you in terms of reducing the breakeven and these measures are going to have by the end of the year, combining the all effect over the year, an impact of EUR 68 million in terms of costs, yearly speaking. And what is important is that new margins are going to come next year. And new margins are going to come from Sines in the second quarter of '22026 is going to add in a scenario low EBITDA in up, let me say, average scenario a figure of EUR 130 million, EUR 135 million of EBITDA. That is positive. On top of that, we are going to have next year also a high molecular weight polyethylene plant in Puertollano, focused on producing polyethylene for very specialized applications, defense and so on, included that is going to add new margins to the business.

So we are not, let me say, waiting for a margin improvement. It's true that margins are improving a bit, but that is not going to change dramatically from -- suddenly. And in the midst, we are reducing costs, and we are improving margins. And I'm sure that quarter after quarter, this effect is going to be seen.

If we go to Libya, I mean, since -- again, I think that the country is improving in social, political, security terms, the position of the country year after year that is important. I think that -- I mean, we have to underline the efforts that the country is doing, the effort that -- I mean, for instance, in terms of security, we have seen over the last years that the army of Libya led by Mr. Hector had a crucial role in combating terrorism in the country, in increasing the security in the country, improving the position and the stability of the country. So all that has a clear reflect on the ground. And going to the production, again, production in this quarter reached a maximum of 307 thousand barrels a day. When we took the Repsol stake of this production, we have been in 43 thousand barrels a day net. That is the fruit of what happened last year in terms of increasing production with new wells during this drilling campaign in progress in 2025, 12 wells -- new wells were reported in the first quarter and in the second quarter, and we are going to see new wells connected in coming months.

So all in all, the production is going to be increasing cross terms in 12,000 barrels a day that probably could increase the Repsol production at 1,500, 2,000 barrels a day. But we are going more things in Libya. I mean the exploration campaign in Libya start in December, we had the that was a dry well. But now we are fully focused in a second well that it has been in June. And on top of that, we are increasing our bet in this country and a second rig has been contracted to fulfill the remaining exploration commitments, including potential early development in the Waha area. So we rely on the country, we rely in the increase of our security in the country, we are increasing our production there, and we are betting for future projects in Libya.

our next question comes from Lydia Rainforth at Barclays.

Two questions, if I could. The first one, just on refining margins in the guidance, just given everything you said about the refining margins where they are at the moment, can you just ask why not take the guidance higher for those refining margins and just the impact on cash flow from operations? And I think probably a little bit linked to that. If we could talk about the buyback, your share price has been incredibly strong this year on the best performing European stocks. Does that play into how you start to think about the buyback going forward as well?

Thank you, Lydia. I understand your point. But let me say that my -- part of my duty is to be always prudent. And I prefer to stay there because I mean, you perfectly know that 3 months ago, we were in this -- I mean, you were in your analyst in the micro, and I was in this room with my team. And we were talking about an scenario, the possibility to have $4 a barrel in terms of refining margin, abrupt in the Brent prices and a scenario in terms of -- and we are taking -- I mean, taking advantage of that opportunity, we are increasing the efficiency of many of our businesses and so on because, I mean, these kind of levers are positive to do this kind of cleaning in some way of more efficiency in our operations.

So -- but it can't change in a dramatic way 180 degrees in 3 months. So I think that volatility is still there. The clouds in the world economy are not over. It's true that we have a better expectation related to refining margins. The average as of today is $6.10 a barrel over the whole year. So we are already above this guidance we have for the whole year, probably taking into account what is happening now in the market we are going to be in a higher refining margin than expected over the whole year.

But I mean the dollar-euro exchange rate is there, potential change in the global economy are there. So let me say, I have and that is a clear a more positive approach that I had in April. I'm quite confident about the EUR 6 billion of guidance for the cash flow from operation of the year. I don't know if we are going to have potential upside there. But taking into account all the volatility we are seeing in the market, I prefer to be [indiscernible]. And I'm sure that in case of that what you are saying is true and probably could be, I mean, I'm not -- let me say, challenge your point. I take your point. Probably you are right, but I prefer to wait a bit, and I'm sure that we'll have the opportunity to talk about that in coming calls. Thank you, Lydia.

And now our next question comes from Peter Low, at Redburn Atlantic.

Just 1 question. You said in the presentation you expected to take your first hydrogen FIDs in the second half of the year. I was wondering if you could give us some color as to what sort of returns you expect on those projects? And then perhaps more importantly, what's the mechanism through which you make that return? Is there some form of direct government subsidy? Or how does it work? Any color on that would be helpful.

Thank you Peter. So, going to have probably in the third or fourth quarter to, one of them related to 100 megawatts of electrolyzer in Cartagena -- sorry, not of installed capacity of electrolyzer in Petronor Bilbao. And in the first half of 2026, the third one in Tarragona, probably 100, 150 megawatts of electrolyzer. So with these three electrolyzers plus the biogas produced using, I mean, biomethane, I mean, this biogas reform in our refineries and producing hydrogen, we will be in this figure of 600 megawatts, roughly speaking I mentioned before. So what is this green hydrogen producing an electrolyzer competing in price with hydrogen we produce today using gas -- mineral gas in our refineries, not at all. I mean that is going to be more expensive.

So the competitiveness of this hydrogen is not based in this competition with the green hydrogen. It's based on regulation. And regulations set today that the 1% of the sales we have in the Spanish market, in European market, but in this case, in the Spanish market, by 2030, they have to contain renewable fields with no biological origin. And the most competitive way, today, existing in clinical terms to produce this renewal fuel with non-biological fuel this hydrogen. So based on this, let me say, market, not appetite, market needs to fulfill this regulatory mandate, we are seeing the economics, the returns of these electrolyzers evolve the 10% of return. So not double digit. And that is, let me say, the pillar, the fundamentals of this economic returns, you also have to take into account.

I mean that is -- I mean additional more and more, yet for these 3 electrolyzers, we are going to have a strong support coming from European innovation funds. In the case of argon or by the subsidy approved to accelerate new technologies in terms of the carbonization but the Spanish ecologic transition ministry. So these 3 electrolyzers, they have the support that in CapEx terms could be roughly speaking, EUR 1.3 million, EUR 1.4 million per megawatt of electrolyzer I mean, all in all, that is going to support the economics of these projects. I mean, it's not only subsidies because let me say even -- I mean, subsidies are helping, of course. But the main driver is not subsidy because when you take -- I mean I'm not going to enter too much time on that, that when we -- you take this hydrogen and the cost structure, 75% of the cost is OpEx in terms of energy, I mean, power, 20% is CapEx and 5% are additional OpEx. I mean, with many subsidies over the you can't have a competitive installation if you don't have something additional. And the main driver is the regulatory mandate that is supporting this return. Thank you, Peter.

Our next question comes from Ignacio Doménech at JB Capital.

The first one is on the evolution of net debt. I wanted to get your view on, particularly after the closing in the third quarter of the transaction in the U.K. What are the moving parts there? What their best guess we should end up '25, in terms of net debt? And my second question is related to -- or a follow-up on hydrogen. We are seeing the other peers here in Spain that are also gain with FID in hydrogen. So I want to get the view on the deployment of this technology in Spain and in the medium or long term. if you think you could actually be exporting the molecule? That's my question.

Thank you, Ignacio. So going to your question about net debt. What we are seeing in general terms is a stable net debt over the year. But as you mentioned, there is a pretty much of change. And this parameter change is going to come because the integration of the U.K. There is no change in terms of commitments in our balance sheet, but due to the specificity of this transaction, what we are going to see is that a part of the commitment that is already reflected in our balance sheet related to the commitments for the future is going to be from now on a financial commitment instead of other commissioning commitment. So the commitment is there, but being a financial commitment is going to be part of the net debt.

This figure today, the best approach we have is that it's going to be close to EUR 1.2 billion, roughly speaking, EUR 1.25 billion roughly speaking. So -- and that is going to be a consequence of the change of the perimeter. So there is no any additional, let me say, a financial commitment is there, let me say, in some way. We are changing in the balance sheet, the commissioning commitment by our financial commitment. On top of that, we also have to say that because this transaction, we are going to have a delta an increase of EBITDA of $700 million, roughly speaking, coming from the U.K. We are going to have an increase in terms of free cash flow also coming from the -- in annual terms. I mean because you know that the is going to be done next week. So I'm talking in annual terms, we are going to have $740 million of EBITDA, and we are going to have $320 million new of free cash flow.

So that is going to be, let me say, the consequence in terms of perimeter of the financial commitments on 1 side, not increasing the debt, but changing the figure in the balance sheet. And on top of that, we are going to have a new EBITDA that is going to be higher than $700 million, and this free cash flow that probably is going to be higher than $320 million in yearly terms.

Going to your second question, Ignacio, I mean that's is a very -- let me say, a subjective discussion and almost an academic discussion. I have my personal point of view on that. But I'm not saying that I'm right, but when you have -- I mean, today in Spain, we have, roughly speaking, 600,000 tons a year of hydrogen consumption in the whole Spanish economy, mainly in the refining business plus fertilizers and a tiny part and Repsol is consuming 360,000 tons a year of high retail today. So with this 600 megawatts ready speaking, I mean we will be able to produce from our 360,000 tons a year, perhaps 80,000, 85,000 tons a year. So 1/4 of the total consumption that Repsol has.

I mean it seems to me, but that is common sense that when you have a potential consumer in your own industrial plants in your own country, I mean, probably the most efficient way to treat this hydrogen. Now I'm not talking about the future, of course, probably things are going to evolve. But today, is not going to be for an, perhaps some others, they have some other strategies, and it could be nice. But in our case, exporting molecules is not probably our best business. I mean because you could understand if we have a consumption there, it will be easier and cheaper decarbonizing what we have in industrial terms in Spain, than exporting molecules, I don't know, to Germany, for instance, that will happen in the future, of course. But our effort is going to be fully focused on that.

Our next question comes from Matt Lofting at JPMorgan.

Thanks all for the update. Appreciate it. Two quick if I could, some of my questions have been asked already. I wanted to just firstly, if you could share how you see the business implications from here of the situation with Venezuela upstream also the materiality of impact on the refining margin premium through light heavy spreads, et cetera, as you look forward? I noticed Repsol referred to having taken credit risk provision with the Q2 results. And then second, I just wanted to come back to the full year cash flow guidance. I noticed that your mark-to-market not refining, but oil and Henry Hub, but we look like the changes that are somewhat offset there. So could you just expand on the factors that caused you to move to the low end of the sort of the prior range in terms of the EUR 6 billion, how much of that perhaps related to the Iberian blackout during the second quarter and also maybe euro-dollar remarks versus underlying factors?

So, thank you, Matt. Going to your first question, I mean, Repsol always complies all and will comply with all laws and regulations, national and international applicable to our operations in Venezuela. You know that we had the winding down process in May of our license. But we maintain our presence in Venezuela. At the same time, we are maintaining a very constructive and transparent dialogue with the U.S. administration in a very open way to ensure some kind of a stable framework for our activities. And that includes a viable mechanism for monetizing the production we maintain in Venezuela because we are producing cash there in Cardon. And we have, of course, the stake that is now, as I mentioned before, operators by of the JV in. So -- and at the same time, of course, we maintain a very transparent dialogue also in the country because we are supplying gas for the domestic market.

All in all, taking into account that now we are not monetizing this production, but we have an open way and open hope to find some kind of framework in this open dialogue we have with the American administration to monetize this production. We prefer in accounting terms to be prudent. And for that reason, we have reduced the total exposure of Venezuela to $360 million, $370 million probably speaking in our books. About the refining margin premium impact negligible, I mean, because the situation we are seeing in the market now is that the supply of heavy oil is quite guaranteeing the Atlantic Basin. And because of that reason, I mean we have been able, as I mentioned before, with any cargo coming from Venezuela in the second quarter and decoupling effect of the outage in Spain, will have a remun of $2.1 a barrel in our refining system.

So that is the best proof that there is no visible impact on our refining system. There is, of course, an impact in the Astron business. And the impact in the business is that -- I mean, the cash flow from operations coming from Venezuela that we have last year is not going to be this year in -- from that asset from June on in our accounts. But I mentioned this EUR 6 billion of guidance, of course, I'm taking into account this figure. And for that reason, we have this credit risk provision in the second quarter of the year.

Going to the cash flow full year guidance. I mean remember that in April, we had a different situation, in April, March, April, we have a negative impact in terms of in terms of our guidance of refining margin, crude oil and so on that were lower than expected. So the whole year is reflecting also this experience we have in March and April. On top of that, we have the power outage effect close to EUR 0.2 billion. That, of course, is going to be and is included in the guidance for the whole year. We have this working capital increase, the effect of Venezuela you mentioned in your first question is also included in this EUR 6 billion target for the whole year.

There are, of course, potential upside, yes. I mean I mentioned Lydia was pointing out before and I support in some way higher approach, we could have an upside coming from the refining margin from the Henry Hub. And for that reason, I mean, all in all, we are quite comfortable with this EUR 6 billion of cash flow from operations for the whole year. Thank you, Matt.

Our next question comes from Fernando Abril-Martorell at Alantra.

Only 1 question. On renewables, a simple prices have gone up double-digit your electricity generation also jumped, I don't know, 50% plus. Did EBITDA in the low carbon segment didn't grow in the quarter? I don't know if you could please elaborate on the drivers behind this? And more broadly, what EBITDA contribution should we expect from this business in the near term? I recall you previously had a target in mind? I don't know if you have any target also for the next few years.

So thank you, Gracias, Fernando. I mean, we are growing, and we are scaling up in our renewable power business. And I think let me say, probably the best good news coming from this business this year is going to be from the financial side. Probably the year, I'm targeting -- I'm not committing this quarter. I'm going to say now, but I'm targeting this objective. And I think that we are going to be close to this target. This year, this business is going to be close to cash neutrality 2025, that is important. That means that this business is going and it's growing and it's going to be close to cash neutrality in 2025, combining cash flow from operations plus investments plus rotation.

So I know that this figure is going to be probably by the lag effect of some rotations coming from 2024 investments. I know that. So what I'm saying is some way tricky. Let me use the term. But that is very clear, and that is a clear trend. And probably this business with some strong growth is going to be self-financed in 2, 3 years in a recurring way. So that is the first good financial news coming from the low carbon business. Going -- saying that, I mean, in 2025, we are going to have an EBITDA close to EUR 200 million in 2025. We have to take into account that by 2027, we are going to have an EBITDA above EUR 400 million in this business and probably what you [indiscernible] and you are right, Fernando, is that in the second quarter, there are probably an effect that it could be something lower due to the Frye consolidation in the accounting of the company.

So that could be, I'm not sure about that. I'm going to check it. But probably, that could be the effect. In any case, EUR 200 million in 2025 and we expect EUR 400 million in 2027.

Our next question comes from Matt Smith at Bank of America.

The first one was back to NEO next, but thanks for all the detail that you ran through during the questions there. So my question on the Neo was simply a clarification whether you've included the impact of that deal close, which is imminent within your full year guidance, such as the upgraded production outlook. So that was the first and then the second also sort of production related, but bigger picture, thinking about 2026, very strong production in the first half, contribution of additional barrels from the NEO NEXT start-ups of several projects. How much higher could production run in 2026 versus 2025, please?

Thank you, Matt. I mean your -- I mean, your first question on the answer is yes. I mean, we are including U.K. in the full year guidance, of course, from now on or from August on. Going to your second question, I mean, we are going to be something between 575,000, 590,000 barrels a day in 2026. That means that we are going to increase something between 25,000 to 40,000 barrels a day of production next year. We will be able probably in the guidance for the year, at the end of the year to give you a more accurate figure. But the best approach I have today is roughly speaking is there.

Our next question comes from Paul Redman at BNP Paribas.

Just two questions, please. The first one is just a confirmation on your guidance for net CapEx in '26 and '27. How much divestment are you including in that guidance? And the second one is just on the distribution, you're guiding to 30% to 35%, and you're paying a buyback of EUR 700 million, is the moving part on that guidance? The macro environment, essentially, you guided EUR 6 billion of cash flow from operations, whether that's high or low, tell you where you're at the top or the bottom of that range? Or is there any other movement that might happen on distributions from here?

Thank you, Paul. I mean, as I said before, roughly speaking, EUR 7 billion net CapEx 2026, 2027, you can't expect, let me say, a positive effect in divestment terms coming from the E&P, I mean because -- I mean we are not seeing, let me say, a disposal divestment process in the E&P in those years. We are not factoring in any case, anything that could come from the liquidity event. We are not looking for money in this event. We are looking for the future growth and the future consolidation of our E&P profitable business. So we are not taking into account any money coming from there. So the only difference between net CapEx and gross CapEx is going to come from the concept of rotations in the low carbon business.

We will be more precise about that in the guidance for 2026 at the end of this year. Going to the remuneration, I mean, again, I prefer to be prudent on that. EUR 6 billion is today the best approach we have in terms of remuneration and we are comfortable with the percentage of distribution for our shareholders, I mentioned before. So the cash dividend plan EUR 700 million of buybacks we announced. So if things are different, if things are different, we will call about that in coming quarters. But today, I mean, in this volatile environment, I'm confident and comfortable about what I'm seeing and what I'm announcing as guidance for coming months, but I prefer to be prudent before talking about upsides, growing and so on because, I mean, you know, Paul, and I know the volatile world and environment we are experiencing now and prudency is a good ally in these complex times.

Our next question comes from Anish Kapadia at Palissy Advisors.

Just a couple of questions, please. I just wanted to get your view on, I suppose, the medium to longer term global gas markets. It seems like there's a lot of LNG capacity that's being built over the next few years, which should narrow the spread between Henry Hub and bring global LNG prices, gas prices down. So just wondering how you're looking to navigate that market over the coming years? And then just going back to hydrogen. I was just wondering in terms of the various different ways of producing hydrogen, how you're looking at that market. So obviously, you've got the existing green hydrogen, but just wondering how you're thinking about the blue hydrogen market and also the kind of natural or white hydrogen market where you could drill for the hydrogen at potentially lower cost?

Thank you, Anish. So I note I'm an expert on gas markets but good get me to say because -- I mean, it's part of our business, but it's not the core of our business is to try to be a bit balanced in the positions we have. You know that we are the main Iberian consumer of gas. So we have strong short positions in Iberia. And at the same time, we have long positions, some of them in the Gulf, in America and I mean, some others in Europe, but mainly in America. So in the long term, we are going to try to be -- because you have to take into account that we are also growing in our gas retail market in Spain.

So if today, we could have, let me say, an excess in terms of comparing the long and short position close to 1 bcm taking into account that we are going to grow in our retail gas market in Spain. Let me say that we are quite comfortable seeing that's probably, and I say probably because I don't have a crystal clear in 3, 4, 5 years, the LNG production in the world is going to grow and probably is going to cover in a quite is way the current demand. So in this scenario, we prefer to avoid to have long positions in LNG and weak trend in this evolution because the consumption in -- I could elaborate a bit more because we are going to reduce the gas consumption in our refineries because we are more efficient and so on, but we are growing at the same time in the retail market.

So all in all, we tend to be balanced in the long term. And in the midst, we are going to take advantage of this position because, I mean, the value today of this 1 bcm of excess capacity in Europe coming from -- in America is going to have a revenue for Repsol this year that could be at around $200 million, roughly speaking. So that is the view we have. Going to your point, I couldn't agree more about the approach of loving the blue hydrogen, I love it in terms of -- I mean, combining the carbon capture with hydrogen production, but unfortunately, this blue hydrogen is not part of the European directive of the hydrogen that could be used to fulfill this mandate, this commitment because the definition is done in terms of renewable field with no biological origin and because it's related to this carbon capture to an organic production.

So it's not a known biological origin. So it's not competent, let me say, with the green hydrogen to be able to cover these regulatory obligation that PAUSE every operator in the -- in our case, of course, in the Iberian market. But in general terms, the European market has to fulfill in coming years. So I take your point, I agree, Anish, but I can't use this blue hydrogen to fulfill this regulatory obligation.

That was our last question today. With this, we will bring our second quarter conference call to an end. Thank you very much for your attendance.