A2A Spa Ord

Hello and welcome to A2A H1 2025 results call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and by the duration of the call the lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand over to your host, Marco Porro, Head of Investor Relations, to begin today's conference. Thank you.

Good afternoon, everyone. Thank you for taking the time to participate to our first half presentation. The conference will be led by our CEO, Renato Mazzoncini, and the CFO, Luca Moroni. I leave immediately the floor to Renato for the first part of the presentation, and then Luca will jump in.

Okay. Thank you. Thank you, guys. Thank you to be with us. So, starting from slide number two, H1 results demonstrate the execution of our strategic plan. You remember we presented it in November, laying a strong foundation for the continuous growth of our company. And looking at the main achievements, we can start from some industrial projects. passion in electricity. You know, our strategy in energy transition is very clear. And some achievements for this semester are the fact that we completed the asset rotation towards electricity grids. As you know, since January is The assets we acquired from Enel, in particular in the province of Milan and the part in the province of Brescia, have been successfully integrated into our asset portfolio. And at the end of this semester, with, let's say, a very clear punctuality, we finalized the sale of a part of our gas network to the company Ascopiave for a consideration of 430 million euros, which we already cashed in exactly in the 3rd of June. Regarding our grid development as presented in the plan, We recently inaugurated a primary substation in Brescia. It's only one example because you know the primary substations are the king of the power grid. In our industrial plant we have 3.4 billion years of CapEx in the next years in power grid. What is very important is that we were able to push strong CapEx also in Duerete, that is exactly the part of the network that we bought from Enel in the first month of our new management of the network. That is not so normal, let's say, because to be able to invest strongly in networks like you need to know very well how the network is built and so on. And so Howard Engineering was able really to start very, very quickly in CAPEX, in the CAPEX plan also in this network. Once again, discussing about... The strategy in electricity, we reached 1.6 million electricity customers on free market, free mass market. Consider that our strategy, also considering our trajectory of Next Zero, is to shift the to switch more and more from gas customer to electricity customer. And also in this semester, the growth of the free mass market electricity customers was 11%. So very, very important. The second achievement is business risk profile optimization. And in our generation business, business unit, we secured a 17-year LNG supply agreement with British Petroleum for more or less 1 billion of cubic meters for every year of GNL, ensuring greater security of supply and price stability. So we are very happy, and this contract will start from the next year. We further improved the visibility of the result stream in our district eating network, in particular by winning the tender for 20-year concession in Sesto San Giovanni that is in the north of Milan. It is a large part of the metropolitan areas of Milan, more or less 100,000 people. in evidence so very important and we remind you that we know reach the regulated bda that arrives more or less 31 32 percent thanks in particular to the increasing exposure of our asset portfolio to regulated and quasi-regulated activities of course the acquisition from Enel was very important for this target. As you already know, we are also enthusiastic about the new opportunity quickly materializing in our sector with which we look forward to illustrating surely in the next Capital Market Day, but in the meantime, Probably some of you have seen that we announced the inauguration of the first liquid-cold data center connected to the district heating. You remember in November we talked during the presentation of our industrial plan about the opportunity to exchange heat from the data center to the district heating. You remember that there is a potential target in Milano in particular to reach 150,000 equivalent apartments with heat recovery coming from this heating. And we did it with a first pilot started in Brescia and the next one will arrive in the next few months in Milano. And We continue to invest in our industrial development. We have already reached more or less 400 million euros in development capex in the semester. So the total capex in the semester is, I don't remember, is more or less 700 million. But once again, 60% are capex. in development, and this is the reason for why our growth is exactly stable and continuous. It's very important also, of course, our relationship with our stakeholders, a dividend payment of more than 300 million euros, in particular 313 million, to our shareholders in line with the promised annual increase, 4% every year, you remember, along with consistent industrial growth. And from the other side, the launch of our company's employee stock ownership plan with an impressive subscription of 86% of our colleagues, was a target for us really very important to engage our employees and to increase the commitment to the future target of the company. Looking at slide number, looking at slide, sorry, in the right part of slide number two, You can also look, of course, how our mood is upgrade of rating outlook to positive. That is, once again, the proof that also from a financial point, we are working well. Looking at slide number three, the consolidation of the new company, Duaretty, from Enel, and the increase in the price of energy commodities. led to an increase in revenues, more or less 13%, so $127 billion in the period. The reported VDA recorded a limited decrease, but reaching $1.22 billion. But as you remember, surely from our call earlier, in the first quarter the big difference is there are main differences against 24 but the biggest one is the extraordinary effect arriving from hydroelectric production during 24 you remember we closed the year with 5.2 terawatt hours and If we offset this extraordinary effect, the BDA grew in 25 against 24 in the first half by 2%. The net profit for the same reason decreased by 11%, but once again, compared with adjusting, let's say, by the effect of the hydraulic production, is increased by 1%. The order in net profit excluding special items, for example, in the other 8 million of euros, referring to the price adjustment or relating to the acquisition of a stake in Tecnoa. Tecnoa was a the industrial waste-to-energy plant in Crotone, in Calabria, in the south of Italy, and showed a decrease of 11% compared with the H124 standing at 426 million euros. And once again, adjusting 24 with the hydroelectric production, there is an increase by 2%. Focus on financial disciplines continuously, allowing us to improve the solidity of the financial ratios. And as you can see, we arrive to the net financial position on a BDA ratio in 2.3%, that is a decrease compared to the 2.5 or 24, and is a very good result also because, let's say, is the flexibility that can allow us to face new opportunity in the future. Slide number four, the CAPEX. The CAPEX is our key elements in our strategy. And also this year, the increasing is strong, 23% compared with 24%. You remember last year, we did also on top on the CAPEX, the industrial CAPEX requisition in ENA. So the total investment last year was... 2.9 billion. This year, the target arrived to approximately 1.7, 1.8, and we are working to reach this target. 403 million are development. The rest is maintenance, more or less, and something peanuts mandatory. The large part of the CAPEX are smart infrastructure. This is the reason for why our RAB continues to increase. But also circular economy and generation are a fundamental part of the CAPEX plan. And Once again, the division between energy transition and circular economy, so our two pillars of industrial plan are 72-28. It's very important to look that the breakdown by SDGs is 85 aligned with SDGs against 15% not aligned. And also the alignment with the EU taxonomy is very high. So we are 51% aligned and eligible 72%. And this is very important because it's the reason for why our capacity to increase the green part of our debt is possible to reach. So I leave the floor to Luca for detailing the BA.

Thank you, Renato. Thank you, everybody, for being with us today. Page number five, I would like to underline the growth of some businesses, in particular smart infrastructure, which contributed to the best to the result of the first half 25, 62 million, followed by 19 by circular economy business unit, which compensate partially the decrease in generation in trading and market business unit. Of course, we come back several times during the presentation with a referral to the hydro effect of 24, which to have a better comparison, we need to take into consideration, keeping in mind that we are talking about 100 million euro in terms of EBTDA. The result of the first half, 1 billion.2, has been quite in line with our target for the year and consistent with the industrial goal we are achieving. Let's go into the detail of each business unit, generation and trading, again and again demonstrating the fact that managing different technologies is a way to hedging the risk profile of the business unit. In fact, as you can see, considering less production coming from hydro for 750 gigawatt per hour for this semester compared last year, We have produced 1.2 terawatt more in term of thermal production, 62% increase. This has been an opportunity for the company to offset partially the negative impact. We have had also the effect coming from the energy scenario. affecting the result for self-25. At page 7, we pass to the market result, where we can underline and point out the very positive performance of the power market in retail business, which offset completely the investment, so some higher cost compared last year, which we can consider as an investment in marketing and commercial future performance. So, $16 million towards the 14 months. End-to-end, the $25 million of decreasing in the result could be linked entirely to the safeguarded market. As you remember, we decided to bid in that tender at the end of last year with a decent marginality, and as the market expressed a marginality very, very low, we remained without that customer in our portfolio. It is very important to underline what also Renato said in the presentation at the beginning, which is the increase of our free market customer base in electricity segment, which increased by 11% compared last year, whilst we have a slightly decrease in the gas customer during the rolling period. The electricity sold has been quite good in electricity, plus 8%, while the gas sales decreased by 6%. In the simple economy business unit, FHA, we continue to experience very nice and positive industrial results, In terms of KPIs, you can appreciate at the right part of the slide how the industrial KPIs are very positive in terms of electricity sales, energy recovery, and heat volumes. And this leads to the positivity of the results. both in treatment and district heating by 14 million and 10 million respectively, which compensate entirely the minus five related to the result of the tender of the collection option for Milan area, which has been, which started at the end of last year and will give the effect for the entire 25. At page 9, the very good news related to our business of smart infrastructure, in particular electricity distribution, with the perimeter of Dueretti, which comes from the acquisition from E-Distribuzione, accounting for $44 million in terms of EVTDA, but also the positivity related to the regulated revenues, which give us the opportunity to increase by 33% in this business unit. It is very important to underline what we have considered in the no-recurring item, 27 million out of those 23 are related to gas adjustment for previous years. So in such a way, we need to consider it in terms of marginality for the gas business. The rub increased both because of the acquisition and for the CAPEX plan acquisition. which is pretty good. Also take into consideration Dueretti, new company, which started very fast in the implementation of the new CapEx plan and also the previous perimeter. In terms of RAB, we reached 1.6 billion for electricity and we are at 1.8 billion for the gas business. Page 10, we can give a look at our profit and loss, starting from the 1.2 billion EBTDA, 469 million depreciation amortization, Twenty-eight increase compared last year, 15 of those related to the delta perimeter related to Dueretti. A decrease in the risk provision related to the debt for the funds of the debt related to the landfill post-operating activities. The net financial position, sorry, the net financial expense is 85 million, related to with an increase of 24 million compared last year, related to the issuance of the new European green bond of last January, and the green loan, the bridge green loan issued last year for the acquisition of Dueretti. the operating profit 635, then we have the taxes with a tax rate of 29%, minorities for 23 million, and the net ordinary income of 426, the special item already mentioned by 8 million to reach the net result, the net income of 434. Page 11, we are very satisfied about our financial performance. Cash flows are quite positive and let us funding all the investment and the dividends with our net operative cash flows. A very nice and positive result in terms of management of networking capital which gave us 200 million euro in terms of positive cash flows we have 300 of cash out related to taxes and financial expenses and as you can see 1 billion.1 of net productivity cash flows which gave us the opportunity to fully fund investment and dividends, resulting then with 126 of net cash flow. Then we have the cash in coming from the asset rotation to Ascopiave of our gas asset we sold to them. So the decreasing of the net financial position by 500 million and 10 giving us the opportunity to decrease the leverage from 2.5 to 2.3 times, which is a very nice result, giving us the opportunity to look at the market in terms of financial stability and sustainability in a very good position. Last but not least, the cash conversion rate plus 65%, which gave us the opportunity to have this kind of items in the cash flows.

Okay, so I guess to conclude, despite, frankly speaking, a super positive semester, we decided to be prudent and so to confirm the upper end of our guidance and the number that you know, so 2.2 billion of EBITDA and 0.7 of net original income. And to conclude in slide number 13, only to recap our strategy, our strategy is completely capex-driven. So also this year, the 25 double-digit capex increase You remember, 23%. On track with targets. So looking at our industrial plan, also in 25, we did exactly the ordinary net income and the BDA that we announced in the 10 years industrial plan, like usually. Okay. As Luca said, very strong cash flow generation, more than 65% of cash conversion only in the first half. That means solid here and net financial position. That means able to invest more and more. So our strategy is on track. Thanks, and we are open to Q&A.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. We'll pause for a brief moment. Thank you. We will now take our first question from Sarah LeCaster of Morgan Stanley. Your line is open. Please go ahead.

Thank you very much. I just have one question please but multiple parts and all related to the electricity distribution concession extension process. Wondering what the latest is on that, when is the next document expected and what can we expect to see in that document? I just want to be really clear please what we can expect and when given I believe today was one of the dates that had been previously discussed and then just further to that could you please remind us what fee if any is already included in your CAPEX plan from last November. Thank you.

And looking at the distribution electricity concession, you know, the law is inside our balance law, national balance law, last December. The topic is that we need ARERA, our authority, to define... some proposal to our ministry for the ecological transition to fix the elements of the evaluation of the capex that we need to have the new concession And in this moment, you know, the actual board of RERA expired the 8th of August, and we are waiting from the parliament the appointment of the new board, probably during August, and so we expected to have some news about in September because it's clear that the new board will take some weeks to close this dossier. But what is key for us is that the law is very clear, the period is very clear, 20 years, And so the only elements that we have to wait is exactly to understand which are the elements of evaluation of a CAPEX plan that you have to present it to submit to open the discussion for the new concession. So there are not other topics, you know, that also... The topic of eventually concession fee is out of the rub because the idea is to have a part of the concession fee one shot but inside the rub so it's not a cost for our companies. And this is coherent, in my personal opinion, with the fact that we have to invest a lot and very quickly in electrical distribution to face electrification. And it is impossible to wait 2030. That is the natural expiration time for the old concession. So, no news. The only news is that we have to wait the new board of ARERA. to close the dossier.

Thank you. And just quickly to follow up, do you assume some element of fee in your CAPEX plan last November?

The fee are not included yet in the CAPEX plan. Of course, also take into consideration the fact that we don't have any rule for the estimation. So the number, it would have been a number. With the new plan, of course, we will adjust it accordingly, and if and when the rule of the game will be issued by Herrera and the Ministry of Economy. Yeah, but of course, also taking into Also taking into consideration the financial sustainability we have demonstrated to have, I think that the amount of money we are talking about don't have any kind of impact which afraid us in any way.

Yeah, but because you have to consider other elements. The total capex in the last 20 years, not only in Italy, but also in other countries in Europe, in electrical grids, was very low, in particular because there was a lot of capex in gas network. In Italy, the total investment in power grid... arrived to 1980, let's say, and then for 30 years, only capex in gas network because the idea was to face the new energy needs with gas. Now, with the decarbonization, we have to come back to invest in power grid. But our industrial plan in January 21 increased a lot the capex for power grid. And if you look at our historical power grid, we arrived already to triple the CAPEX compared with the old period. And also, in this moment, in the new network, both from Enel, immediately in January, February, March, we double the CAPEX that Enel did in 24. And this is inside our CAPEX plan. So, frankly speaking, I imagine that our... our volumes of CAPEX in the power grid is absolutely enough to open the discussion with the authority for the new concession because stand alone we decided to increase the CAPEX.

Thank you very much.

Thank you.

We'll now take our next question from Francesco Sala of Banca Acros. Your line is open. Please go ahead.

Good afternoon, everyone. Thank you for taking my questions. Three, if I may. The first one is agroactive generation. I wonder what you expect in terms of volumes for the second part of the year and what is embedded in your 2025 target. The second one is on treatment. The performance here, both in Q1 and Q2, was particularly strong. I wonder whether you can shed some light on this trend. And secondly, if we will see in H2 the same growth as the one we saw in H1. And finally, on our flexible generation, I wonder what you expect in terms of spark spreads in the next few months or at least as long as you have some visibility on this segment of the market. Thank you.

Okay, for the first question about the volumes, looking at the hydro production, we are exactly in, let's say, in the average level of the last 10 years, so 4 terawatt hours. You know, in winter, the snow was not so exciting, but it's raining, so there is a compensation, and until now, the production is absolutely online with our expectations, so for terawatt-hours. If you look at the thermal production, the reason for why we did more than last year are double. The first one is that there was exactly less hydro production. The second is that looking in Europe there was a reduction of wind of more or less 15-20% depending on the areas and so we saw less import from France probably because France exported in Germany to compensate the reduction of the oil production in the north of in the north of Germany. Of course, I don't know what can happen in the last month, so in our budget, let's say, there is a normal production for thermo for the next semester, of course, it's possible to see some upside also in this case. We know that Let's say if you have like a tray all the form of generation, every time you can go to goal because the total consumption in Italy is more or less the same. And so if you have thermo, hydro, eolic, sun and waste to energy plant, there is a natural edging between the different sources of production. Talking about the treatment, the price you're seeing in the first semester was 9% more better than in 24, and we absolutely expected to maintain the same performance. The reason probably is that the ratio between demand and offer is completely unbalanced to the offer because there are 4 million of tons of waste that go to landfill in Italy. And 2035 is coming, you know, In the EU community, we need to arrive to not more than 10% landfill. And so our plants, when they have capacity, are able to produce, let's say, a good price. The third one, Luca, flex generation, fast spread.

Yeah, actually, it has been partially answered because the The fact that we can play with different technologies gave us the flexibility to stay in the market in a very good position, so taking advantage if other technologies don't work in line with the previous year or the previous month. And what has been... the result in the month of January-February with the production of thermal plants in which we produce much more volumes than expected. In terms of park spread, we can stay on the market and see with the flexibility we have in the plant we manage, when it could be the case to take advantage from the policies as well. So this is the situation. The market is going to express still some spread low double digit, which is not bad. I remember to all of you that we are hedged by 70% of our production for the fixed production at 120, which give us a certain comfort also for the second part of the year. Having said that, we are quite comfortable about the generation performance for the second half.

Thank you.

Thank you. And we'll now move on to our next question from Javier Suarez of Mediabunker. The line is open.

Please go ahead. Hi, all, and thank you for the presentation. Three questions from me as well. The first one is on the guidance. So if I'm not mistaken, the net income of HERSAL 2025 represents something like more than 60% of the full-year target at the upper end of the range. So the question is, what is preventing the company from increasing that guidance that we have for 2025, i.e., which are the dynamics that you see in the second half of 2025 that we should consider and that makes you to confirm guidance and not increasing that guidance? That would be the first question. Then the second question is on the generation, the generation business. I think that you have said that the output that you're expecting for 2025 is four terabyte hour. I think in the previous conference, what you mentioned, 4.1 terabyte hours, just to confirm if you are reducing that hydro output guidance of the year or simply you are rounding that figure. Also, I would like to know the level of contribution from the MSD market that you're expecting this year and the level of hedging that you have for 2025-26 as we speak. And then the third and final question has to do with the hydroelectric concession renewal process. So the question is if you can update us on that process and is as part of that agreement A2A and I guess the rest of the sector could allocate part of the capacity to the energy intensive industry. If that is a possibility and what is that discussion with the different administrations, any update on that would be very helpful. Thank you.

Okay, Xavier. For the first question, I was honest. I said that we prudently decided to maintain the guidance. So this is the This is the answer. For the second, you are, it's correct, 4.1, you remember very well. Yeah, because 4.1 is exactly the average level for the last, from the last 10 years, and we imagine to maintain exactly this level. Then, consider that our storage no and you know very well our storage of water in our basin is 0.5 terawatt hour so you can understand that the regulation 0.1 more or less is very easy to do so how we want to arrive to the end of 25 with 4.1 and our full basin and we imagine to be able to to do

For the MSD contribution, we are expecting to stay in line with the previous year, even though we are a couple of million above the previous year results in the first half. We are talking about a total amount in between 95 to 100 million euros. As it has been several times said by us, which is the target of the plan by now. In terms of hedging, as I said, we are completely hedged for the second part of this year. 70% is exactly the target we want to have to stay in a comfortable situation. We also reach 40% for 26 at the price of 113, which is, again, a very good position in which we are very comfortable.

Okay, for question number four, it's a little more complicated. You remember that we arrived to Vila the so-said fourth way, because the regions can reassign the hydro-concession to PANDAS, direct assignment, mixed society, and now there is the discussion about the fourth way. The fourth way needs an agreement with Europe, because you remember that inside the PNRR agreement there is the topic of a tender for the hydro concession. It's very clear that no one wants to do hydro tenders. And in the last month, there was an open discussion inside Confindustria, in particular with the steel productors, Antonio Gozzi and the other guys, about the fact to have some an hydro release able to reduce a little bit the cost of energy for this sector. After some months of discussion, there is in effect an agreement considering that our company is For us, the impact is proxy to zero because the discussion is between the price of energy and the concession fee. So, our discussion is, if there is an hydro release, for example, the discussion is 15% of energy sold with more or less 70 euros for megawatt hours, if it is impossible to pay in this part of energy, more or less 24, 25 euros for megawatt hours of congestion fee. But in an agreement that seems to be able to target, Region Lombardy decided that it is possible to accept this hypothesis. And exactly last week, there was a meeting in Region Lombardy to discuss to find an agreement between regional producer of energy and consumers. And the idea is to have this hypothesis of hydro release on top of the different solution to reassign the conjecture. So it's the same, let's say, if the region decided to do a tender or to assign to the fourth way. This is key and super important because the idea is not to produce an agreement that produces like an effect the fact that the fourth way is not the best way for the region. So it's very important that both tender or fourth way for the region is the same. So the idea is to change an article of the Decreto Bersani, so on top of the fourth way, in which every solution has embedded the hydro-releasing. And so the effect is that the decision to do tender or to do direct assignment to the actual incumbent don't change anything with the money of the regions, to be clear. And also for us, the impact is really peanuts, because for us, let's say, the four ways means to present a path, so a path A business plan with the current remuneration of our CAPEX, of our operational maintenance. And so in this business plan, there are from one side the price of selling energy, from the other price the cost of the concession fee, and so the sum is 100. It's clear, Xavier. Yes.

Thank you. And we'll now take our next question from Roberto Letizia of ICRITA. Your line is open. Please go ahead.

Yes, thanks a lot for taking my question. The first one is very quick. On the net income guidance, you actually specified that the guidance is net of the non-recurring. But so far we saw only positive, actually, one of the elements. So can you please just very briefly clarify what do you mean for net? the 700 million, so the up of the range without consuming the non-recurring.

Then, I would like... If you can speak a little bit far from the mic, because otherwise... Yes, I'll repeat it, I'll repeat it.

So yes, you specified that the net income guidance in the top end of the range provided is actually excluding the one-off or the non-recurring.

Yes, correct. It is on the order.

Yeah, can you just please clarify, what are we considering here? Because we saw the non-recurring from EBDA, so can you just very briefly clarify what does that mean? Then the data center, or actually, which elements are you actually referring to, basically? The second question is on the data center. Very quickly, we're seeing the first project, which are actually a pile of projects, for that. Wondering if you can update on how fast this market is actually moving and beyond only pilot projects when you actually think there may be something coming into your business which is more consistent from a commercial point of view. How fast is actually this market moving? Then if you can please highlights us which kind of additional offer, and I mean inorganic possible options that are materializing for you in the market, both in terms of clients, networks, or eventually companies that may come in, jump in to help the organic growth. And very briefly, the last one, if you can start thinking designing for us how 2026 is actually starting to look like beyond the forward sale that you mentioned before. So maybe the moving parts that you are seeing are materializing for next year as probably you'll update your primary search plan. Maybe you have at least from a qualitative perspective an idea of what 2026 is going to look like. Thanks a lot.

Okay, again, the first question. Yeah, I confirm that we are talking about ordinary net income. Looking at the first alpha, the difference between ordinary and net income, including a special item, this is the situation in which we explain 8 million related to adjustment we can consider not recurring. Specifically, $7 million related to the adjustment of the price for the acquisition of Tecnoa, the plant in Crotone we bought three, four years ago. And there was a finalization of the open points, which gave us $7 million of a plus, and another million related to a minor price. transaction. That has been the difference between net income and ordinary net income. Related to data center, maybe I switch to Renato.

Probably to give an idea of the incredible acceleration in the data center business is enough to say that starting from the fact that seems that in Italy all the data center want to live near Milano That means that in this moment, 60-70% of the demand for new data centers are around Milano, in Italy, let's say. Only in the power grid that we bought from Enel last year, and only since January, we received a demand for new connections for 220 megawatts of new connections. That means to understand all what is needed in a city like Brescia-Bergamo. So this is huge. And why they ask connection to the DSO and not to the TSO? Because in some cases also data centers are bigger than 10 megawatts. That is the size typically in which there is a switch between the DSO and TSO. Because they asked to Terna to have a connection, let's say, 30 megawatt, Terna said, okay, it's possible, but you have to wait for three, four years. For us, for them, it's impossible to wait because the market is now. And so they arrived to our DSO to do everything and say, okay, but it's possible to have 10 megawatt so I can start. And then when... will arrive the higher connection with there now i can grow let's say and because the dso in particular now that is inside the 8-way is is absolutely quicker so my idea is that the market for the data center also in in italy will will arrive in the next to four years, no longer. Also because if you look at other countries like Ireland and so on, the idea is that this is the moment for Milano, for Madrid, for other metropolitan areas that have to recover capacity against countries that for many reasons are more strong than us in data center. And it is an incredible opportunity for A2A because we have the grid, we have the generation. They need absolutely baseload, and the only way also in U.S., in every part of the world, to have baseload power generation is gas generation. and you know how our power gas generation, how strong it is, and how it is able to give baseload connection. We have this heating, and so we have possibilities to increase the PoE, so the sustainability of this machine, and maybe also the capacity to help, apart from permitting and so on. So I think that can become a business for us quickly. About M&A, I'm sorry, but, you know, the answer is as usual. So we have a strong CapEx plan, and we are able to arrive more than $3 billion of BDA with organic growth. But it's clear that with our flexibility, if some opportunity will arrive on our path, surely, you know, we are able to look it. Okay.

2036, please. That was my last question.

I think that... The only answer you can have now is that it is in line with the business plan. So we already discussed several times, and until we prepare the new budget and the new business plan, nothing changed.

Thank you. We'll now take our next question from Alberto de Antonio of BNP Paribas. Your line is open. Please go ahead.

Hi. Good afternoon, and thank you so much for taking my questions. I have two or three remaining questions. The first one will be regarding a report that I recently published suggesting that you could have been involved in some kind of market manipulation, and there could be a final decision of potential sanctions by March 26 at the latest. Maybe if you could elaborate on what are the implications of this report. If you could quantify what would be your base case and worst case scenario in terms of sanctions, if any. And also if this could trigger any potential revision on your target that you have in your business plan. And the second one will be regarding your balance sheets on the trade receivables past year. I've noticed that in the last few quarters, the amount has increased substantially, although in the last quarter it has decreased. But could you explain us what has driven this increase and what should we expect for future quarters? And if these trade receivables are specific of one business unit coming from all across the business units. And finally, one final question regarding district heating. If I'm not wrong, a new regulation is expected for 2026.

Could you elaborate where we are in terms of the discussions with ARERA and what's the timeline that we can expect for it and your expectations in terms of returns? Thank you so much.

Okay, I think that we can talk about ARERA all together, so question number one and number three. About the first question, I think that it can be useful to divide the two elements arriving from ARERA in the last weeks. From one side, the new interpretation of the remit. probably you know, is a regulated framework defined in Europe in 2011 for the functioning of the energy market, in particular of the marginal price in the free market of energy. And every company that I know in Italy dispatched energy since 2011 in the same way. And, you know, this actual board of ARERA was appointed seven years ago, and for seven years, never discussion about the way to dispatch energy was open. So, first of all, it's very strange that in the last two weeks of this board, they opened a discussion, very complicated, let's say, because the discussion is an interpretation of ARENITA, And in particular, the discussion is if in the merger price is possible to introduce an opportunity cost that is the cost to have a little marginality in your thermal production. That for us, of course, is absolutely normal. Because if the interpretation correct was that you have to put your energy on the after rain market without marginality, for me it's much better to maintain close the plant, of course. So from one side there is a discussion that is open to all the companies that dispatch energy in Italy. inside Electricità Futura Soconfindustria also because in this survey ARERA individuated 25 companies that dispatch energy and for example there are not 25 companies that dispatch thermal energy in Italy that dispatch thermal energy there are four or five let's say so even in a survey open also to solar production only production to all so a very high level discussion and they think that in the next month with the new board electric staff we face this topic to find a solution and if you ask to me i absolutely don't expect it to have effect in the way to dispatch energy for the next years. In particular, the decision of Farreira to open, not a sanction, let's say, but a, I don't know how it's possible to say, is a process to evaluate its sanction, is related to March 22nd. Surely you remember that Putin decided to attack Ukraine on the 24th of February of 1932, and you remember what happened in March 1932. With the highest volatility in energy in all the history of the world, the highest price that arrives to 600, 700, 800 euros per megawatt-hour, The newspaper that says to all the cities, don't use gas because I don't know if in October we'll have gas or not. And our marginal coal account arrived to a couple of billion of euros to be able to trade energy in the long period. So a situation in which, let's say, surely no one company stayed in this situation to try to gain one, two, three euros, four megawatt hours in the dispatch of money. So I don't know, frankly speaking, why ARERA decided to open this. There are 250 days, 250 days to conclude this process, right? If your question is, is material or not, the eventual sanction, the answer is not. It is not material, so it's more a topic of principle to understand. And it's very important because it is a pilot, let's say, that is useful also to face the more general interpretation of Herrera for all the energy market. So, I imagine that we, with Enel, with Edison, with all the friends in Electricity Futura, will be able to face this discussion with the new authority, because this authority expired the 8th of August. This is the reason for why Also, for this new regulation, we have to wait because this authority decided not to move forward in the discussion of this new regulation because, of course, it is correct to leave to the new authority the decision of what to do.

Regarding trade receivables and the performance we are going to expect until the end of the year, the trend, generally speaking, is that trade receivables will increase at the end of the year accordingly to the seasonality of the market. These are more related to the supply business unit, which is the business unit which is on which we have the most important part of the total receivable in the balance sheet. But as we have lost safeguard the market for the reason I explained before, the positive effect on the other side is that we will have a decrease in trade receivable related to the parts of this segment. but also the fact that some of those customers are reassured by a mechanism with the regulator, which guarantees us to receive a certain amount of money for those customers that are not disconnectable. And according to that, we will receive something like 60 million euros uh cash which contribute to give us a better cash inflows for the for the future for for the nda thank you maybe a a follow-up on on this last answer uh if this means that the 60 million is like a recurring In fact, it's just like a compensation one-off. It is a one-off. It is related to the fact that we, let's say, for this, it would have been recurring in the case we gain the safeguarded market again and again. But in our case, as we lost the tender, we for the reason I explained, that the marginality was pretty low, should be considered as a one-off. And therefore, and apologies for following up, of those 700 million of Twitter receivables last year, how much are related to this, to this framework of the safeguards that have to be compensated by just 60 million? More or less 300, but we can be more precise later on if you want. But this is the magnitude, you know, more or less the 50% of the total amount of the trade receivable you see in the balance sheet.

Thank you.

The other ones affected by the seasonality, of course. So you have this amount of... which at the end of the year is a picture in which you are at the peak of the seasonality. And during the year, you have the cash in accordingly.

Thank you. We'll now move on to our next question from Davide Candela of Intesa, Sao Paulo. The line is open. Please go ahead.

Hi, good afternoon, everyone. Thanks for taking my question in the presentation. I also have three, if I may. The first one is still in data centers and more related to A2As, commercial purchases. So I was wondering if your strategy will be participating in the connection for the three-state networks and maybe proposing yourselves as a supplier, or if you are thinking about potentially uh involving and putting some equity in some projects in order to accelerate the execution maybe the commissioning and also some have some i don't know some kind of a framework agreement that is benefiting you just wondering if you can't date on that secondly on the on the energy supply um looking at the the customer base it seemed that among the the biggest one the biggest operators in the market at least looking at the utility side you are one of the few that did not lose some customers in the first half of the year. And so just wondering if you can update us on the competition, how you see the churn rates, and if there are some newcomers that are really treating the market or this is just a temporary thing. And last on a clarification on guidance with regards to the net debt. If I take the up hand of the ABDA, times 2.5 times that is the ratio you are seeing for Delta VDA. I come to kind of close 5.5 billion. The consensus is like more than 200 million higher. Currently, so I was wondering what is the consensus not seeing or if it is just some roundings or if it is some structural working capital that is fully recovered and would not represent by the year on the end. Thank you.

Okay, for the first question about data center, we are discussing exactly in these weeks the new strategy that we want to introduce inside the update of the industrial plan. Surely the idea is to be a partner, a partner because we know that we can be completely key for a data center developer because we are able to give the connection to That is also, to be clear, an incredible opportunity for the manager power grid, because are not activities on rub, on tariff, but are commercial activities, of course. And the cost of a connection for 10 megawatt or 200 megawatt is absolutely relevant. From the other side, without power, baseload power supply is impossible to – with redundancy is impossible to imagine to have a data center. And from the other side, the data center compete one each other, and the sustainability, so the KPI, PUE, of the data center is key to face the appetite of the final customer. So in a situation like this, you can imagine easily how many developers of data center are knocking to our door to open discussion. We are able to put also equity. And can be an interesting opportunity because seems super interesting like return of capital. And for us is also interesting the fact that the area in which is probable to see the really development of the center is exactly our area. That means more or less the triangle with Milano, Brescia, Bergamo. Remember that data center needs also backup. Backup from big problem that is flood, earthquake, and so on. And so there is a need of backup with plants that maintain, let's say, 50 kilometers one from the other. And this is the reason for why we are analyzing also a triangle between different cities in Lombardy, near Milano, but also cities like Bergamo or Brescia or Lodi, Pavia and others. So all in our territories are surely eligible to be backed up from Milano. In this moment, the huge... development is near Milano, but Milano needs backup south of the province of Milano. And this is another reason for why you can understand how it's interesting to have a 2A-like path. If you consider, for example, the tower, the Waste to Energy Plant, for example, the Waste to Energy Plant in Brescia, is able to source 60, 70 megawatts of power, continuous power, base load, 50% of the energy green because it's a part of the waste that is in carbon neutrality, wood and so on. Also, from this kind of plant, it's very interesting to be able to be sourced if you are a data center. so uh we'll define clearly our strategy in the next month but absolutely it's possible also to to see a way like investors in this sector um for the customer base is um is clear our our capacity to compete ever in the last year our churn was much better than the average churn declared from ARERA for all the other competitors. And when the competition is higher, the level of quality that you give to your customers is directly linked to the churn. And the result is the possibility to grow or not with your customer base. So in this moment, we are very happy because our strategy is working well. The cost to acquire increased a little bit because we decided to have also digital, let's say. So not only digital of our direct channel, but also store that is developed in Northern Peninsula. In this moment, we have a customers in 99% of the municipality in Italy. And so the other reason for why we are growing is that our brand, our awareness is very high. And when probably in our call, I said that our awareness in this moment is 67%. Our market share is 67%. And the differences between market share and awareness is the reason for why there is a funnel that helps the growth of our customer base.

Related to the ratio of national position, ABTDA, yeah, I can say that it will improve compared to the, let's say... level to be below 2.7, 2.6, and we are going to project 2.4, 2.5 at the end of the year. This is due to the nice cash flow we are going to experience, as you have seen, but also for the rest of the year.

Thank you. Very clear.

So thank you, everyone, for participating to the conference call. Thank you for your question. If you have any additional deep dive requests, please contact the IR department. And in the meantime, I wish you a very pleasant and relaxing summer break. Thank you, everyone. Thanks. Bye. Bye-bye.