A2A Spa Ord

Good afternoon and welcome to 8.1.2024 results. My name is Zach. I will be your operator for today's event. For the duration of the call, your lines will be in listening mode. However, you will have the opportunity to ask your questions at the end or during the conference by pressing star one on your device's keypad. If you need assistance during the call, you can select the star zero on your telephone keypad and you will be contacted by an operator. I will now hand over to Marco Porro, Head of Investors Relations, to start today's call. Good afternoon. Thanks for taking part in the presentation of H12024 results. As you have seen, in the recent press releases, there are many topics to be debated. Without any further ado, I hand over to our CEO Renato Mazzoncini. Good afternoon. Thanks for taking part in this conference call. As you might have seen in the latest press releases yesterday and today, we start a happy holiday. The reasons that are here to be seen. We will first look at H1 results, the reason for being happy with some specific highlights. As you see, we have a positive HIDL contribution. There are three topics here that are necessary to get good results from hydro generation. First, you need water. It has been raining a lot and this has enabled us to have large volumes for the water turbines. Second, we have very high plant efficiency. availability of plants exceeds 99%, which is not usual for plants that typically have lower operating times. In some cases, they have been working around the clock. So this stems from good maintenance, good governance and good operation of these plants. And third, we have the dynamics of hedging. So we have very high achieved single domestic prices thanks to the mix between the hedged part and the minority part, which is not hedged. Then there have been very positive market margins. The free market has grown and all in all. The closing of the liberalization campaign has been very positive for us. We have been awarded tenders and orders in all the calls for bids in the last few years. And the margins continue to be significant. And then, regulated business markets, electricity distribution where we are investing significantly but also gas and water cycle have generated significant margins thanks to the RAB growth and to the results of investments made in the last few years. So we have a thermoelectric production, which is a negative note. This is offsetting renewable energy sources, taking the lion's share. We have exceeded the 60% of RES. If we consider also waste to energy, we then reach 65%. And also the DSM margin has reduced as a consequence of that. And part of this is accounted for by hydroelectric plants. Let's move on. As you can see here, we summarize the main achievements looking at the main ESG KPIs. Here you see some data, there are the results of the incredible impact of RES, most of all hydrolytic in this first half year in scope one and two, looking at the gram of CO2 per kilowatt hour, we have minus 41%, 226 is the target we have set until 2030 when we have done PTI certification using as a reference 2017 when we had about 400. So here you see 61% renewable energy generation with an increase of 27%. We have increased by 10% the overall installed capacity of our electricity networks, which means that peak power We are here over investing considering our depreciations and amortizations to have from 1.7 to 2.7 gigawatts as installed capacity with an increase in wraps and the attendant economics. We keep reducing water losses and we are also very glad of having been able to reduce the injury frequency. Looking at financials, as you know, we have issued our first hybrid bond, which has been very successful. In general, the sustainable finance framework is evolving very positively. And then we have the financial part that is being tightly monitored. And here you see some details. We have increased by 31%. This is one bullet point of the price release, our capex in electricity network. We have opened the largest rooftop photovoltaic system in Italy, the second largest in Europe, in Milan, with about 300,000 square meters of photovoltaic panels installed on the roofs of a city like Milan, a very large system for self-generation. And we are also continuing investments in the water cycle. There is a new water purification plant in the province of Grecia where, as you know, we manage the water cycle. The results are self-explanatory. Good news, we have here lower revenues, which means that the bills of our companies, of our citizens, of the Italian competitiveness has been improving compared to the same period last year. This is driven by the dynamics for commodities. EBITDA, we will then see later why we consider this EBITDA to be recurring. It reaches a very high level with the growth by 46% on ordinary EBITDA and this is dragging also an impact on group net income which grows by 75%. Ordinary group net income increases by 86% net financial position allows us to approach the year end when we will close the transaction with an NL acquisition in a very good position. The difference between 1.7 and 2 is that here we are considering the hybrid component, in the 2 we are not considering that. So that's the impact of the 742 million on the net financial position. So we are therefore in a very stable, very good situation. Consider the other press release. In the Q&A, for sure, you will ask me to provide more details that is with Acquapiave at disposal of some of our assets. I will now hand over to Luca. who will provide more details of EBITDA evolution. Thank you very much indeed and good afternoon also on my side. Slide five. We commend here the performance of the EBITDA growing by 399,046% increase compared to last year. As you can see in the bar chart, this is mainly driven by the very good performance in generation and market, with a very good performance also of smart infrastructures and a stable performance in waste. We will comment more in detail this business unit, there are some specific slides on that, Let me just tell you that we have had a very good industrial performance, which has more than offset the energy scenario, which compared to last year in waste has led to lower margins. Let's now comment each business unit. We have a first generation and trading, very good industrial performance, most of all for renewable energy sources. as anticipated by Renato. They have performed extremely well both in terms of generation and also in terms of operating hours and also thanks to the very high hydro levels. Also the other RES have recorded a very positive performance if we consider the delta perimeter for wind energy that we have had which has allowed us to increase generation 294 million in total more than last year driving the growth in generation. This is offset by 9 million for so-called flexible plants, i.e. thermal production. Here, under this item, we have an additional breakdown. We have a decrease in thermoelectric production. about 60-70 million, which have been more than upset by the good performance of the gas industrial portfolio and how it has been managed. Capacity market is doing well, while the last block is about trading 35 million less than last year. also because the decreasing commodity prices and because of the volatility of prices at 552 at ordinary level ebtda in h1 looking at trading and generation with a significant growth on the right hand side you see the increase in terms of terawatts from 1.8 to 3.2 considering hydro, wind and solar, while we have decreased by 60% to 2 terawatts from 5, looking at the production. Next slide, slide 7, market performance here.

very solid, plus 129 minutes versus the previous year, same semester, same half, with an increase in margins both in power and in gas. Most of all in the retail market, but a good performance was also recorded with medium and large customers. We also benefited from a positive effect, which is a non-negativity that we recorded in the first half of last year, as a tale of the effects of the 2022 contracts that took higher volumes at fixed prices and therefore to some slowdown in the margins in the first half of 2023, which produces a positive effect this year. We continue with our retention program as we previously shared in previous meetings. It includes some 90 millions on an annual basis versus a 6070 millions of last year. Let's say an investment on the customer base for those customers that were repositioned. After the energy price crisis of 2022. For which no. Interventions could be made to review the contract. On the right hand side, you see the customer base market, which goes by 42,000 units up to 3 minutes, 543. What is most important? It's a switch. Between all graduate protection services at the free market. electricity sales and gas sales increase respectively by six and seven percent. On page eight, you see the situation for waste. As I said before, the performance of waste is flat versus the first half of 2023 with a slight decrease for collection with effects that partly offset the higher revenues due to increases in staff costs, also as a result of national employment contracts. A good trend in revenues was recorded, especially in new territories where we were awarded contracts last year. Treatment is doing very well because a negative performance in the energy scenario is offset by a positive industrial trend or performance, rather, which results in a positive total performance of 2 million, which will show its benefits in the second half of the year. On the next slide, we'll look at smart infrastructures networks basically the effect of past investment that increased the RAB you see it on the charts on the right hand side electricity shows a RAB of 13% higher and gas shows an increase of 80% in the water cycle the RAB grew by 20% this coupled with the fact that remuneration the return on regulated domestic capital increased as from january 1st this allowed us to record a positive performance on all regulated businesses so we're doing well in terms of electricity distribution gas distribution and water cycle also the management of tlr warmth heat did well. This minus 10 million is due to the fact that the tax credits super bonus are having their negative impact. We're talking about the contribution that was granted by high-energy consumption plants last year. If we factor out this element, the effect is positive in terms of 40 million impact on the business scenario for this compartment here you see the p l so starting from ebda 1 billion 279 we get to ebd of 700 minutes going to depreciations that increase due to larger investments or investments that we made during the past year. We have 73 million of appropriations or risk provisions in terms of opportunities given the excellent results. So we decided to set aside some one-off items. We recorded a good performance for the financial management. It increases versus the previous year in terms of 8 million. also thanks to a good management of cash and cash equivalents. Looking at revenues before taxes, we see a profit of 207 million, which increases due to higher revenues before taxes with a tax rate that improved from 30 to 29 percent, 479 This is a net ordinary profit. Then we have a small extraordinary item relating to a collection that generated some capital gain amounting to 11 million net of taxes before taxes. Thank you, Luca. Let us focus now on Capes, page 11. All right. CAPEX plan is moving forward. As you know, our corporate strategy has been pursuing a very high level of CAPEX for years now. We see that we have more than 60% of CAPEX under development, plus 12% compared to last year. In the business plan that we submitted in the updated version of 2024 we have 1.5 billions of capex for the year it's very fairly normal that in h1 you have less than half of the capex of the year the situation was the same last year we closed at 3.4 billions I would like to focus your attention on three elements. The high percentage of capex devoted to development, so to the future, 78% of the capex is in line with the EU taxonomy. And then you see investments on thermal plants like Monfalcone. Then on the right-hand side, in orange, you see that smart infrastructures is accounting for the majority, 30% more on electric networks due to our commitment on CAPEX to be devoted to electric networks.

Slide 12, you see the cash flow, which as usual is constantly monitored very closely. You see the good performance of net free cash flow management, which allows us to have an FFO before dividend almost in line with the distributed paid out dividend. Our operating cash generation has enabled us to fully fund the investments and the dividends paid out. Networking capital is slightly is 240 million and this is due to the effect of fewer gas purchases considering the reduction in the production of a thermoelectric plants. Then we are approaching completion of operations from bilateral and OTC arrangements for purchase of commodities. And we have a positive effect on credit management also thanks to the seasonality effect with decreasing credit volumes in this period of the year. Then we have a part relating to the management of tax and financials with an FFO of 832 million here, which allows us to self-finance to pay the 553 capex and the 300 million dividends. Then we have an item relating to the issuance of the bond, 664 NFP variation, allowing to reduce from 4.7 end of the year to 4 billion end of June with a leverage of 1.7. Excluding issuance of the hybrid bond, we have a two-buy factor which allows us to have very high flexibility to tackle the second half of the year. Great. So good news that you have already read is we have decided to increase, to improve the guidance in light of these results. It was pretty obvious. We amended upward, so about 2.2 billion. That's the range with the net ordinary income ranging between 700 and 720 million euro. the take-home messages of this first section. There are a couple of other items requiring some comments for the future. Here you see we have a very good performance of all the business units, most especially the revision of guidances related to energy generation and to the market performance. Then we have the CAPEX plan, which continues to be deployed without any slowdown in these four years. Also, considering NL acquisition, we reach about 8 billion euro CAPEX. And this is the reason why the EBITDA has grown by about 1 billion versus four years ago. And nevertheless, We have a very effective financial management which allows us to optimize and control the cost of debt and the green hybrid bond has been one of the elements which has allowed to do so. A couple of comments about the news we have anticipated. Yesterday we have published a press release on the asset capacity market. We are very glad we are talking about tenders. We have been awarded and these reflect the technique, the good preparation to take part in these calls for bids in these tenders. We know how to manage the process and we have been awarded a capacity at a significantly higher price than the price we had in 2024, so that in 2025 we will have about 80 million more EBITDA versus 2024. We will then take part, of course, in October in the next tenders over 226 and 227, but the performance has been very positive so far considered. Then in 2025, we will also include the EBITDA annual transaction that we are completing. Last week, there was the goal the green light of the Antitrust Authority which have given us an approval without any limitations, a golden power is fine, so two of the suspensive clauses have been solved and as you know we expect a contribution of about 100 million euro for 2025 arising from electricity distribution related to this annual transaction. The transaction announced with Arco Piave a couple of hours ago is a transaction which has been developing in the context of the reflections we were making in our business plan, assuming to cover a part of the capex of the investments in annual network with a disposal or dismissal or swap transaction. We have been reasoning also on minorities options. We have received an interesting proposal from Arcopiave. It's a company with whom we have already closed a deal. In the last deal with Romeo, we had comfort almost all of the ATEMs that were non-strategic for us because they were out of our territory or because they were contributing to the ATMs with very low percentages, so they had been acquired in a tender from IRE, ACEA and ARCOPIAVE. So this is a company we have already been working together. We have a common assessment criteria and it's therefore easy to move forward with them. It's worth mentioning that as written in the Paris release, we are essentially talking about all of our ATEM gas except for Milan where we are present at 100%. there has been a tender where we have been awarded the contract and in these items, on an average, we had 63%. If we had decided to remain in this tendering context, we should have invested for 37% for the missing part so as to take part in the process and be awarded the contracts. In territories like the province of Brescia, which is an important historical base, we had the item where we had a stake of 26% in Brescia 4. In other cases, we had a slightly higher percentage as it was the case in Brescia 2. 44% and Centre of Brescia 85%. These are all ATEMs where the decision to remain was linked to investments in the development of the gas network, while Milan does not require any CAPEX because it's a complete ATEM with a service contract and its own process for the next 12 years. envisaging additional investments and we are very happy of that process and also in this case the due diligence is going to start immediately after the summer break and we will be working in good faith so as to come to signing around here and with an impact on asset transfer if we manage to close the operation which will take place during 2025 could be mid of 2025 as we will see i think we have given enough news and now we open the floor to the q a thank you very much if you have a question or