A2A Spa Ord

Hello and welcome to the A2A full year 2025 results presentation. Please note, this conference is being recorded and for the duration of the call, your 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 pound key five on your telephone keypad to enter the queue. I will now turn you over to your host, Marco Porro, Head of Investor Relations, to begin today's conference. Please go ahead.

Good afternoon, everyone, and thank you for joining us for Fuliel 2025 performance presentation. Today, as speakers, we have Renato Mazzoncini, our CEO, and Luca Moroni, our CFO. So I'll leave immediately the floor to Renato for the first part of the presentation, and then he will pass to Luca. Thank you.

Okay, thank you Marco and good afternoon everyone. Thank you for joining us. We report another year of strong performance and value creation. The key message that we wish to share today is that we are on track, on trend and on target for short order returns. And so let's start from the slides that you can see. Slide number two highlights. Full year 25 results once again demonstrate our strong execution across all our strategic priorities. Reinforcing A2A's positioning for sustainable growth and short-order remuneration. From an industrial standpoint, in 2025, we delivered on a series of key new milestones, fully aligned with our long-term infrastructure investment plan. Our electricity hub reached €1.7 billion, marking a plus 52% annual increase, growth of perimeter effect and double-digit organic growth, our capex, our investment. These results were driven by disciplined CAPEX deployment and the successful integration of newly acquired assets . We installed 76 MW of new renewable capacity, including the first phase of Santo Stefano in the northern part of Italy near Trieste. At the same time, the group is well positioned to exploit the accelerating electrification trend. We completed a major asset rotation from gas electricity networks, focusing on the backbone of the energy transition. Our supply business unit increased electricity volumes sold by 12%, confirming our ability to capture demand and to serve customers across different segments. We have positioned it ourselves as an early mover along the data center megatrends in Italy. You remember we presented in our industrial plan in November. We launched our data center platform to deliver a fully integrated offering, complementing power supply with land availability, fast grid connection, that is a very killer application, energy efficient buildings, Heat recovery and water management. Heat recovery with this heating, you know. Through this platform, HWA positions itself as a one-stop shop for data centers' energy-related needs. Lastly, our cash conversion rate reached 65% Halloween gas to fully fund our investments and dividends and to improve our leverage ratio at 2.4%. Adjusted earnings per share reached the 22 euro cents, fully aligned with our guidance, allowing us to safely fulfill the commitment to a 4% year-on-year dividend per share growth. So slides number three, in which you can see all our numbers. The consolidation of a new company, Duereti, And the increase in volumes sold in the electricity sector, you remember 12% more, led to an increase in adjusted revenues of more or less 9%, 14 billion euro. We adjusted the EBDA to 1,243 million, decreased by 4% in 2025, but only for the hydro production. If normalized by previous era hydroelectric production, which was 1.2 TWh above the five-year average, the BDA grew by 4%, confirming the resilience of our business model. And the same consideration about adjusted group net profit, that was 686 million euro. Net of agroelectric production normalization is compared to 24. It's the same level. Our net financial position was below 5.5 billion, thanks to an operating cash flow that guaranteed coverage, as I said, of capex and dividends, as well as cash in from asset disposal. And the leverage ratio was equal to 2.4 times, with a decrease compared to 24. Slide number four shows you can see our CAPEX. The capital deployment is the clearest evidence of our sound execution and our long-term strategic vision. With almost 1.7 billion in CAPEX, 11% higher than 24%, of which 1 billion related to development projects. This project has enabled us to improve the efficiency of power distribution network, accelerate our development path towards renewable energy, enhance the flexibility of generation plans, and strengthen our circular economy business. Consider that in particular, in circular economy, imagine the waste-to-energy plant, the authorizations are not easy to be received, and that way, in this moment, it is the only company that year by year has new plants under construction. More than 30% of our development investments were allocated to electricity grid. We are fully committed in distribution. A stable regulated business which allows us to capture the accelerating electrification trend across Italy. We are expanding our renewable plant portfolio in a consistent and balanced approach. Our diversified generation mix combining renewable with flex technologies allow us to support the stability of the system. Key projects such as Cortelona Waste to Energy Plant in the province of Pavia, for example, which will treat 240,000 tons of waste per year, as well on track. And it is very important that we are growing, maintaining edging between collection and treatment. For example, we grow in collection in Piemonte. with a new very important contract in the province of Cuneo in Valle d'Aosta in Liguria and from the other side we are growing in treatment with the new plants, the newest energy plants in Perona, in Cortolone, in Trezzodarda, Crotone and so on. To wrap up, our discipline approach to CAPEX underpins resilient growth today and tangible returns tomorrow. Speaking of results, let me now hand over to our CFO Luca, who will illustrate our financial performance in 25 more in detail. Please, Luca.

Thank you, Renato, and good afternoon to everybody. Let's start to examine our BTDA performance into detail. We can start from slide five. You can appreciate from the graph that all the businesses perform very well, but generation and trading need to be considered in the view of the normalization of the hydrox. Indeed, hydronormalization, the exit from the safeguard segment, and the lower aging prices were largely offset by very positive events, such as the growing of the performance of the electricity network, thanks to the consolidation of Dueretti, which proved even more profitable than expected, a greater contribution from the capacity market, solid retail margins, and higher revenues from waste-to-energy plants. Generation and trading. Generation and trading, as usual, is characterized by a well-diversified technology mix, which is the cornerstone of the business. EBITDA was $728 million, with a decrease of 26% compared to last year. But of course, we need to take into consideration the hydro effect. So the normalization of the hydro effect and some fewer opportunities from the energy commodity edging and trading has been partially offset by higher contribution of thermoelectric production and an increase of the premium awarded in the capacity market. Renewable production decreased by 23% as a consequence of the lower volume in hydro. And thermal production increased by 11%. Supply business. 25, so another year of sound performance in supply business. ABTDA stood at 464 million with an increase of 2 million. compared last year. Here, the exit from safe-car business was offset by the commercial development of the free electricity market, both in the mass market and in business segments. The free electricity market customer base grew by 3% compared to 2024, despite the competitive market, the competitive environment. Along with this growth, In the electricity customer base, we have achieved a remarkable 12% increase in electricity volume sold, up to 27.5 terawatt per hour, as Renato already said. Let's move to page 22. Eight, circular economy. I would particularly like to highlight the strong performance of our circular economy business. Adjusted EPTDA was 595 million with a growth of 2%, 13 million. We delivered a robust result in three key areas, treatment, integrated water cycle, and district heating. Higher treatment prices fully offset lower margin from the Acera plant new contract after the tender, while water cycle benefited from a higher allowed return. District heating showed sound results, supported by higher energy prices, volume sold, and wide certificate margins. The new Milan collection tender saw reduced margins due to our highly competitive bid against that of one international player, Urbazer. We maintain strong EBTDA, confirming the resilience of the business, even considering the newly awarded tenders in some territories in the north of Italy. All key industrial indicators are positive, such as electricity sold, waste to energy and other plants plus 4%, waste disposal for energy recovery plus 6%, and heat sold plus 2%. Smart infrastructure. which marked a step change in scale and profitability. The adjusted EBITDA of the business unit was 580 million, with an increase of outstanding 37%. Thanks to the sound performance of fully regulated activities, our electricity network delivered outstanding growth, 137 million, driven by the consolidation of Dueretti for $93 million, the organic growth in RAB with an increase in electricity and load revenues of the historical perimeter, $25 million, higher revenues for connection and other services for $10 million. The increase in electricity pods, the point of deliveries up 65% year on year, demonstrate how our grid are becoming an enabling platform for electrification and new consumption patterns. Electricity distribution rub increased by 52% and the power network capacity by 71%. In gas network, we completed the asset rotation, strengthening our strategic focus on electricity distribution. Gas distribution, RAB, decreased by 23%. Now, analyzing the profit and loss, starting from adjusted EBITDA, equal to $2,243,000,000. We recorded $964,000,000 DNA, plus $66,000,000 compared to $25,000,000, with an increase mainly due to CapEx deployed and completion of Dwereti purchase price allocation process for $17,000,000. Net financial expenses at 169 million, of which those relating to pure financial management were 157. The remaining part being financial accounting efforts compared to the 116 million of the last year. Adjusted taxes amounted to 306 million, a decrease of 46%. compared to last year, with a tax rate of 29.8% last year, 29.4%. Adjusted net profit at $686 million, with a decrease of 16%, compared to 2024. Normalized by other effects, the decrease was only 1%. This is the adjusted group net profit. The reported group net profit is 750 million. In 2025, we achieve a robust double-digit return on investment, 10%, and return on equity, 12%. Cash flow, page 11. So we accounted a net positive change in net financial position of $361 million. So the net financial position at the end of the year was $5,474,000,000, reflecting an improved leverage ratio to 2.4 times compared to 2.5 times at the end of last year. operating cash flow, $2 billion, fully financed CapEx for $1 billion, and dividends, $1.7 billion, and dividend distribution, $300 million. We achieved a robust cash conversion rate at 65%, reflecting the ability of the company to optimize financial resources to support the growth. Some details, networking capital of 311 was primarily driven by the reduction of trade receivable and say a partial settlement of the safeguard portfolio. Payment of taxes for 400 million and net financial expenses, 116. As the result, the operating cash flow stand at 2 billion. After the 1.7 of capex and dividend for 300. And the hybrid bond coupon payment of 38, 48 million. So the net free cash flow was 4 million. Then we have the change in perimeter, which is due mainly to the disposal of part of the gas network to Ascopiave for 430 million, partially offset by 58 million related to some deals in M&A. Finally, the 15 million spent to our share buyback give to the total change of 361. So thank you very much. Now I will hand back to Renato for the final part of the presentation. Okay, thank you Luca.

Page 12 to look our sustainable dividend growth. The dividend growth is confirmed. We are going to propose to our assembly an increase of dividend share by 4% year-on-year, so arriving to 10.4 Eurocent online with our dividend policy. This dividend growth is supported by strong cash flow, visibility and disciplined capital allocation. Forty five percent of the payout ratio is the proof. Let's say page 13. Our guidance is correct. Absolutely confirmed. We confirmed our 26 guidance with adjusted BDA between 2.21 billion and 2.25 billion. and the adjusted net profit between 630 and 660 million, reflecting our robustness and visibility on our business mix. And to close at slide number 14, our well-diversified business model is really unique and delivers sustainable growth. and attractive returns over the long term, allowing us to transform challenges into opportunities. We operate at the intersection of the energy transition and the circular economy. You know our two pillars. Benefiting from both natural edge activities and fully regulated business supported by a consistent CapEx plan. Year by year, our CapEx plan grows. Our generation portfolio is diversified, allowing us to leverage different technology. Really, I think that 2A in Italy is the only company that has all the generation technology. plants from thermo, hydro, wind, sun and waste to energy plant. So this integration is a super opportunity to optimize energy management to capture market opportunities in different scenarios. Integration across generation plans and different customer segments enable natural edging and reduce our risk profile and support the cash flow generation. And in particular, our fully regulated businesses remain a core strategic pillar backed by a stable long-term regulatory framework. As early movers in electrification and data center, and we are working a lot, we can leverage our energy assets to unlock value from these megatrends, enhancing growth and resilience. And together, these elements guide a balanced capital allocation that sustains cash flow generation, growth, and shareholder remuneration. So really close and as I said in my introduction, our 25 results confirm that we are on track with our long-term strategic plan. on trend with our leadership in electrification, renewables and circular economy and on target for the returns that we ensure for our shareholders. So thanks a lot for your attention and now we'll be happy to open the Q&A session.

Thank you very much. This is a reminder. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The first question comes from the line of Roberto Letizia of Equita.

Yes, good evening. Thanks a lot for taking my question. I hope you can hear me well. My first question is about the current market situation with regards to energy prices and power price change. Just wondering, first of all, if you can highlight any risk, if any, or not, of course, on the gas procurement for your deliveries through this year, meaning if you have any direct LNG imports which is subject to curtailment in the coming month, and eventually if you are in any case exposed to any possible forced majeure events from your reseller, naming E&I or other majors or Edison or Gas Plus or the other providers that currently gives you gas for your internal U.S. So if you can address these topics, if any risk, currently or in the short term that you envisage for your procurement and deliveries. As a subsequent question, if you can highlight to us what is the current level of open positioned through 2026 and 2027 in order for you to get any benefits from the most recent increase in the power price. What is the current situation for the hydro productions in the first month of the year and in terms of reservoir for the rest of the year? And a comment, if you can, on your view about the potential regulatory risk so far, and I mean potential EU interventions in the market, whether it's going to be taxation or ETS revisions or price caps or whatever we will see. if you have any view on what could be the potential regulatory risks.

Thanks a lot. Okay, Roberto. Thanks for your question. I started talking about the general situation of the market. Of course, is critical and these also are some years in which every couple of years there is something incredible in this world, let's say. Talking about the risk to remain without gas in my opinion, is impossible in this moment. So the only problem is the price. But considering the storage that we have in this moment in Italy, that is, as you know, 47%. And considering... the temperature that we have in Milano in this moment. And the diversification that we have in Italy in this moment from all the sources, Algeria, Libya, Azerbaijan, LNG, and so on. Risk of procurement in 26 and in 27, in my opinion, is... is absolutely out of our view. The problem in this moment can be exactly working on the storage because, as you know, we need to maintain a price summer-winter aligned to start immediately to fill the storage. And in this moment, there is still some areas of spread. You remember last year, the government closed the spread with rules in which companies that started early to fill was paid exactly to close the spread. And so I think that we need to wait for two, three weeks to have more visibility of what can happen in Iran, because it is difficult in this moment to understand if this conflict can move for a month or weeks or days. And then I imagine that our government... will use the same instruments that was used in 22 and in 25. Talking about us, consider that for 26, our edging is at 72-73%. So our normal situation in Mars, in which the only flexibility is not to risk to have over-edging, due to the risk of the hydro production. But what is interesting is that we covered 26 to a price that is around 110, so it's high, and so over our budget, to understand, And also in 2027 we have a 50% of energy covered with a good price because it is around 100, so once again aligned with our industrial plan. Of course, the hydro production in this moment, I can say that for this, so January, February and March, we are absolutely aligned with the budget. And we started the year with a good level of storage in our dam, in our basin. And so in this moment, our forecast is to stay at the average level of A2A, so more or less four terawatt hours of hydro production. And to close about ETS, probably two years ago, there was a declaration of the Ministry of Environment in Germany that said that absolutely Germany don't want to move ETS because ETS is a fundamental instrument for decarbonization. And consider that our government asked to Europe to cancel the ETS because it's a tax, but it's very simple to demonstrate that ETS is not a tax. you know, that is emission trading system. And the tax is something that a company pay and the public administration receive. The problem is that only in our country, considering the large countries, industrial country, In fact, there is a tax today because, as you know, there are more or less 3.5 billion euros of ETS paid and only 600 million come back to companies, in particular to energy work companies. So there are 2.9 billion. that remain to serve our public debt. And this is the reason for why Italy is in infraction with Europe. So what the other countries in Europe, in particular Germany and France and Spain says is, okay, guys from Italy, Before discussing about ETS, it is better that you replace the normal situation of ETS, so a system of trading, of exchange. So my personal opinion is that it is absolutely impossible that... ETS can be canceled in the future because it's really a nonsense. Consider all the companies that for 20 years invested in green economy exactly to be more competitive than the company that didn't invest. And price cap for gas is out of every kind of discussion, but also our government don't put the price cap on the table. Luca, I don't know if you want to integrate it something.

No, I think that everybody has been said. As you know, we have the chance also to buy some LNG from British Petroleum with a contract signed. We'll start in 27. So we start also to get some opportunities into the market. And as Renato said, the hedging ratio are pretty comfortable, both for 26 and 27. So I think that, of course, we need to monitor what happens next. on the market with the prices. But by now, everything is under control. Also, take into consideration the financial point of view.

Another element that is important to consider is that if we see a reduction of PUN, the reduction of PUN produce an effect in which the renewables are less competitive and the thermal production more competitive. So consider that today the total energy production with thermo is 115 terawatt hours in Italy on 311 of total demand and our forecast is that with a reduction of PUN due to ETS. That is, once again, a hypothesis, in my opinion, impossible. But in this case, the production of gas jumped to 150, 160. This is the reason for why the effect in the tariff in the bill for our customers is epoxy to zero because the total ETS amount that arrive on the bill It's more or less the same 5 billion under discussion in reduction of raw material. But A2A is a company super strong also in term of production. Imagine the new plant in Monfalcone. So in this case, that is a case that I don't consider. Once again, we have a natural edging due to the fact that a reduction of production renewable from one side is compensated from the other side from a stronger increase of gas production. Because gas production win against import. This is the message. Not because there is a reduction in the renewable, but of course with the marginal price, we have every time. But because the import is more expensive than thermal production without ETS.

Thank you very much. And the next question comes from the line of Javier Suarez of Mediobanca. Please go ahead.

Hi, everyone, and thank you for taking my questions, and thank you for the presentation as well. Two questions on the context and business plan, and recently presented business plan, and one on your guidance. So on the context is if you can make any comment on recent detailed statements reports on the local press arguing a potential interest of A2A on ERG. If you can make any comment on that. And in general, in case of an extraordinary operation, what kind of assets fix better with your current corporate structure? Any comment on that would be appreciated. Second question is on the data center opportunity that was widely elaborated back in November. So when do you think that A2A would be in the position to provide with granularity and a whole business plan on the data center opportunity and with financial detail targets and more granularity versus your statement back in November? So any further guidance on the timing for that higher granularity would be appreciated as well. And then the third question is on the energy decree that has increased regional taxation by 200 additional basis points in 2026 and 2027. So the fact that you are maintaining your guidance on change, is that including any compensation factor that is offsetting this increase in taxation? Is that related to a different pricing for your energy? forward selling is that related to a higher assumption. So any light on reason for maintaining guidance would be appreciated as well. Thank you.

Okay. Thank you, Xavier. Okay. For the first question, you know the answer because we use the press communicator. It regularly conducts a review on its strategic option consistent with our industrial plan. and in this context discusses with many potential partners are absolutely normal i think that is the mission my mission the mission of our management to to create value for shareholders and i also think that in italy there are too many companies working in the energy business, in particular in generation. The strong liberalization that we had 20 years ago produces a situation that probably is not completely efficient today. But to date, many strategic options are being considered as preliminary and explorative thoughts. and no decision has been taken. So this is our answer. HOA will keep, of course, the public informed of any possible development in the correct way. For data center, data center is absolutely incredible what happened. You remember we presented our industrial plan the 12th of November, San Renato. And after a couple of weeks, you can't imagine how many players and actors in data center knock at our door to understand what we are able to do for them. In particular, As I said during the presentation, the killer application in this moment is to have a connection in high voltage. Because today, if you ask to turn, not only in Italy, but in all the other parts of the world, to have a connection for, let's say, 200 megawatt is impossible. It takes five years. and do you know we are in particular in lombardy in a super position in which we have generation is we have land in some in in we have some opportunities and we have a connection in high voltage so you remember during our presentation we underlined a free project without giving a name, and also today I can't say exactly which are the projects, but I can say that for the first two projects in terms of roadmap, we are absolutely on track. So you remember that we imagined to arrive to have a first BDA from data center in 28 to 29. We are on track. And so we are working. The business model can be collocation or we are also open to in some case in which we have the opportunity to build a large data center we can also consider a direct relation with other top companies and please wait for next hour communication to have more visibility on a part of a strategic plan that is working well.

About the decree? Yeah. I would like to start saying that in the decree, in the energy decree, some aspects have been discussed. One being the taxation, the Europe taxation. But you know, reading also from the newspaper, how the discussion is tough regarding taxes. the chance to increase taxes in Italy for corporates and citizens. So, first of all, we need to weight the translation into law of the decree aspect. And in any case, if and when there will be any increase in taxation, we can consider temporarily, because by the discussion, it seems it will be affecting 26 and 27 and not farther. So for that reason, we can consider if it will come as a non-recurring item, so into the so-called special items. This is the reason why we maintain and change the guidance we communicate, and in particular because the guidance on the net profit is on the adjusted net profit.

Thank you very much. The next question comes from the line of Francesco Sala of Banca Acros. Please go ahead, Emilio.

Good afternoon. Thank you for taking my questions. Just a couple. The first one is on the recent spike in electricity prices. I wonder whether you can give us a sensitivity or at least an early look on the potential impact on networking capital and provision. if there is something you have already tried to estimate. The second question is on hydroelectric generation. I wonder whether you can give us an update on the concession renewal, and secondly, whether the recent events have changed your attitude towards revamping and investment in this sector. segment of your business. And finally, if I may, what are the latest trends you have seen in the supply business? Thank you.

Okay.

I start with the effects on the networking capital. Actually, we don't have, we will not suffer for any increase or deterioration of the networking capital. We have experience coming from 2022. where we manage properly the networking capital with different opportunities, which are the same in the case, because by now, we are experiencing only temporarily situation. But in the case, it will last more than this period of time we have in front of us of one, two months. Of course, we have the chance to move on different opportunities, as I said. These are, of course, temporary effects. Also, as I said and I mentioned before, in terms of liquidity, we are currently managing in a very appropriate way with backups lines. After 2022, we increased the backup lines to be well prepared in the case of higher volatility in the market regarding a particular marginal cost. So at the moment, we are really in a very good situation.

Okay, about the hydroconcession, the situation is this one, starting from From the procedures concerning our super little concession of Razio and Coderaratti, launched by Regional Lombardia at the end of 23, so two and a half years ago, are still pending. Temporary adjudication of the renewed concession is expected... at the end of the first half of 26, but I imagine that is difficult for the region to arrive to assign this concession because we put some question in the court about the procedures and frankly speaking, I think that we are in the right position. From the other side, You know that in this moment, talking about the Parliament 360, all things that is not correct to do tenders without reciprocity in Europe. And talking also in Bruxelles with people that can be interlocutors for us in this topic, Talking about the four ways to assign, the idea is that we have to wait to close the PNRR, that means August 26th, and after it's possible to open a quick deal with Europe to be able to extract from the competition law the hydro concession. And to move in a way that is more or less a project finance, in which surely an equilibrium between concession fee, capex, and correct remuneration of our asset would be the final solution. Probably you read about this 15% of hydro release. That is a way, let's say, to have on board also all the lobby of Confindustria that in this moment is strong with our government. and consider that in the project finance the reduction of revenue is more produce an effect for the concession fee not for us because for us the idea is to have a remuneration of all the capex fixed by ARERA so The total amount of revenue that arrives in our company don't change if there is the hydro release or not. But surely to have all the lobby that works together, so our energy company, energy work company, so Confindustria and the regions will bring to the result. Talking about the supply business, what I can say is that from one side, It's super interesting, the B2B business, because the B2B in this moment have a churn lower than B2C. That is strange. In the past, it was every time the opposite. And that way, it's super strong in this business. But it's also super interesting because B2B means a contract with companies, with industry, that can produce space to build PPA. That is the way you know to edge our renewable production. From the other side, it's also interesting our growth of 3% in the mass market this year, so 25 on 24. In the free market, electrical free market, so in this moment we have a reduction in gas. But the reduction in gas, let's say, is natural because if we look at the PDR, So the number of contracts in our distribution asset in Milano, year by year, in this moment, you have a reduction of 2%. So if there is a reduction of the PDR, it's normal to have a reduction in the consumption, number of customers, and so on. So there is space to grow in the electricity-free market, in our opinion. In our business plan, we have a reduction of marginality of 3% every year, but also this year we haven't seen this reduction. So it's a strange situation because our probably five years in which every year we imagine and in our industrial plan there is a reduction Here, probably out of 3%, but till now, this reduction of marginality don't arrive. Okay.

Thank you very much. So the next question comes from the line of Sarah Lester of MS. Please go ahead. I think Sarah got disconnected, so we're going to move on to our next question from Emanuele Odjoni of Kepler Chevrolet. Please go right ahead.

Good afternoon. Thank you for the presentation. My first question is on the cash conversion. It was quite good, 65%, and basically you finance the capex and the dividends. So my question is on 26 outlook, on the same, if this could be improved, and what could be the guidance for in-depth on the BDA, obviously still considering as you retain, you confirm the guidance for BDA net profit before the energy crisis and before the draft law, the Italian energy draft law, so in this case would be a a consistent guidance before this temporary or not one-off intervention. This is the first question. The second is on gas procurement. You mentioned before your contract with BP, but this contract LNG would cover only around 20% of the group's needs. So if you can remind the other sources by geography, basically the breakdown of the sources by geography. The third question is on the price cap. If I remember well, you applied litigation like other companies in the sector against the previous and the older companies. price cap put in place two, three years ago, basically. So, considering that this litigation is still ongoing, what is your opinion? Probably the government will not adopt another similar measure, considering that there is still litigation ongoing, or at least would be the price kept aligned to the European level, which was more than twice, three times, basically, compared with the Italian level. And finally, you mentioned the edging, 70% to 73% of the volumes. I miss, if you have said or not, the price, euro per megawatt hour, for 26%. And indeed, a last final question on the market supply. On the market supply, still focusing on the potential new gas and energy crisis in the next few months. To what extent you are now more protected compared to protect more your profitability in the market supply business unit compared with the previous crisis. Probably you have already changed the contract, the shipping cost, so in order to minimize the shipping cost, etc. So if you could provide more color on that, thank you.

Okay, we'll start, Emanuele, with the first and the fourth, your questions. Cash conversion, we presented the business plan, as you remember, with a cash conversion rate in area of 50%. The year of 25 was quite positive. We managed very well, as I said, networking capital. Also taking into consideration the opportunities we had to lower the trade receivable coming from safeguard market and the reimburse of the safeguard market of the client, so-called not disconnecting, disconnectable. So after the report we submitted, we got some 60 million from the authorities. For Cas426, we are used to managing the same way with the same proactivity, our networking capital, and we maintain the target to achieve a cash conversion rate in line with 50%. As I said, we have different opportunities to manage the networking capital, also in trade receivable, but also in the payments and the contract in particular we have for trading purposes. In 2022, we move some of those to OTC market to take the opportunity to manage also the terms of payments and so on. So I don't have any, let's say, clue to say now that it could be deteriorated by the current situation. On the other side, we are really hands-on to fulfill the target and to achieve it. In terms of leverage... Again, in the plan was 2.7, not to exceed 2.8, and this remains our target. So if we are able to make it better, of course, we can work for it. But 2.7 is pretty in line with... The credit metrics target we have also discussed with the rating agencies.

It's interesting your question about the supply because the lesson learned in 22 was that you can't maintain a fixed price with open quantity. The problem that we had in 22 was exactly that with the people, companies with fixed price and without a limit on the demand, increase the demand a lot, And for us, it was super critical. You remember that we lost a lot of money in that situation. Today, frankly speaking, in this situation, for us, there are only opportunities, simply because every time in which the price increases, for example, there is a strong reduction of the churn. And the churn in this moment is big. bigger problem that our company are facing. So we imagine to be able to grow in the supply market in this moment without absolutely any negative effect exactly because we changed all the contract since 22 till now, avoiding any risk of quantity that we had in 22. um and talking about price cap frankly speaking i can see when if you remember in 22 when there was with the discussion and some output in europe about price cap the price cap was fixed so high that was impossible to imagine to to arrive so in this moment we are very far from what happened in 22 and so the price cap in this moment is not under under discussion and about the possibility to gas procurement In this moment, you know, we signed, as Luca said, an agreement to buy 1 billion of cubic meters of GNL from the U.S. starting from the last quarter of 2017. It was a good idea to consider that our total needs of gas is 5 billion. That means that 20% for us arrives directly from this new contract. And for the rest of 4 billion, in this moment, it's difficult to see a situation in which, in Italy, there is a risk of disruption of to remain without gas. So I think that we are in a situation in which we are in a better position against others. It's enough to see the situation of the storage in this moment. In Germany, in the north of Europe, there are 18% of storage. In Italy, but also in other southern countries, we are more or less 50%. but is also linked to the fact that we need less gas to climatize the buildings during winter, of course.

Yes, sorry, I missed to answer your fourth question about the hedging. I repeat it, for 2026 we are hedged by 72-73% with an average price of 110%. which is quite remarkable. And for 2027, we already complete almost 50% with an average near to 800. And this is quite satisfactory for us taking into consideration the the situation in which we were at the beginning of the year and considering the current situation. So We are pretty in a good shape to face 27 also in terms of budget when we approach the time to do it.

Consider that in this moment, the calendar 27 is higher than 100. This morning was 102, 103. So if the situation remains this one, we are able in the next weeks to arrive to cover our normal 70% to a price fully aligned with our plan. if we see a reduction, consider the side effect on the thermal production. So we face 27 with 50% covered at 100 and the other 50% open, but if we see a pulling reduction, that means that there is more space for thermal production against the import. So In every case, our natural edging is strong and able to face all the situations.

Thank you very much. And the next question comes from the line of Sarah Lester of MS. Please go ahead.

Hello, can you hear me this time?

Yeah, we can.

Perfect. Sorry. I do apologize for not sure what happened. I've just got two very quick questions, please. The first one's on the electricity distribution concession extension. Just given there is this really quite strong political spotlight on customer bills at the moment, I'm wondering if you see that there's potentially a risk that either the timeline gets pushed to the right or delayed, or that the fee may not actually end up going on the RAB and remunerated that way. And then just a second clarification please on the data centre platform and the earlier question. Did I hear correctly that you would also consider partnerships where you would not actually necessarily be building the data centre shell yourself? Thank you.

No, for the second, the answer is not. Our strategy is exactly what we explained during the presentation of our industrial plan. In particular, consider that I talked before about the two first projects in the under design and are both direct investment that we want to do. Consider that for us are interesting partnership also with large players more able than us to find the customer to locate the data center and this is interesting for us because there are There are companies that already have a lot of customers in different data centers. Our goal is to be able to build data centers in good positions, for example, in Milano, to be clear. with a low cost of energy for connection behind the meter and low PUE for connection with district heating and good water management. So more attractive for the same customer that some players already have. So it can be a commercial partnership, let's say, but we want to consolidate in our ABDA all the capex that we put on the table. And for the concession, sorry, you are talking about the grid concession. Okay, the grid concession, the only problem is that it takes some months more than normal the exchange of our authority area because you remember probably that it takes... four months of prorogation on the new board of ARERA. The new board of ARERA was appointed a couple of months ago and immediately with some problems linked to the decree for the energy and now for the war and so on, the concentration to support the government in the grid concession has to arrive. But from our point of view, frankly speaking, it is not a problem because we have a concession and consider that The new concession will be 20 years longer. And so if the starting point is a delay, it's not, frankly speaking, a problem. What is interesting talking about power grid is that if you look at Dwereti, so the piece of the grid that we bought from Enel last year, the performance in terms of ABDA 25 and total capex amount is higher than our business plan. So we are super happy. Because we were able immediately to face a network that we didn't know, in a very efficient way. And so in looking at this opportunity, once again, we did a super good deal increasing our RAB, our CAPEX, of course, linked to the balance law 24 that says that we will have the concession extended. I don't know, Lester, if it's clear for you.

Okay, so we will take our next question from the line of Alberto D'Antonio of BNP XA. Please go ahead.

Hi, good afternoon, and thank you so much for taking my questions. I have a couple of follow-ups. The first one is regarding the energy decree and the potential revision of the ETS mechanism. Could you help us to quantify what could be the potential impact in terms of power prices in Italy and also how this will translate to your generation EBITDA? I guess that more in 2028, once the effects from hedging are lower, This will be the first one. And then the second one will be related to the Marzalcone plant. Could you give us an update on the current state and when do you expect to commission the new plant? And yeah, that's it for me. Thank you.

Talking about ETS, I can say simply that you can't, starting from the fact that I imagine that it is absolutely impossible to have a pool without ETS. So I don't think that the government will arrive to have an approbation from the EU. But you can't simply reduce the cost of ETS that in this moment you know is more or less 30 euros for megawatt hours from the Poon because it's linked to the number of hours in which the Poon price is fixed by the gas production. That is super variable linked to what happened for example with the hydro production. and is linked to the fact that we'll be able or not to increase the total capacity of renewable aligned with the PNIEC, our national plan. So in this moment, surely it's much lower than 30%. It's early to say if it's 50% of this value or more or less. But surely the impact, I can say that you have seen during the presentation on February 23 of Enel, Enel says 85 euros for megawatt hours. That is their estimation. Frankly speaking, we didn't do an estimation because we don't believe that is possible to have this impact. But any hypothesis can be that one. Talking about Monfalcone, Monfalcone is under construction. Under construction means that the delivery is probably in the first quarter of 27. So more or less one year to arrive in commercial operation. because the construction will end this year. Then, you know, there are a pre-operation, operation and so on. And so we expected to have a VDA starting from 27.

Okay, thank you very much. And we'll take our next question from the line of Davide Candela of Intesa São Paulo. Please go ahead.

Hi. Good afternoon, gentlemen. Thank you for taking my question and for the presentation. I have three, actually. The first one that is on the broader context. You already shared your view about the DATS and the Since that gas is fixing the prices in Italy, for example, most of the times, do you see in future if the ETS mechanism won't be canceled from the formation of the final power prices? A scenario where do you see a potential decoupling also of the gas component? So the renewable fixing price and on the other hand, gas? Just wondering, because at the end of the day, the gas is, as you said, one third of the entire demand in Italy, but actually is fixing the price for most of the production. Just a question and if it is viable for you, even in the longer term. Second question on your guidance. You said that your edging for 2026 is quite good, actually a little bit higher than your projection for 2026. And looking at weather dynamics in the first quarter, notably during January for the rigid temperatures, so the potential impact on the city, and actually the higher production as from on the thermal side, there are some positives that are contributing actually to your figures for 2096. I was wondering, confirming the guidance today is just because you see that there could be some potential complexity factors to dispositive or just too early at this time of the year to revise the guidance. And finally, last question on the batteries. You spoke a little about this technology. You mentioned some upside in your business plan. I was wondering if, given the fact that the technology looks in a good momentum, I was wondering if you can provide your view and if you are thinking about investing in this technology in order to let your portfolio generation more flexible and so on. Thank you.

Okay. Coming back to ETS, we considered that we did a simulation to understand what can happen in the bill of the citizen due to the energy decree. And this is interesting because the idea is to be able to reduce, let's say, around 20 euros per pound. In all the energy on the market, the energy on the market is today 275 terawatt hours. Consider that the total consumption is 311, but there is auto consumption. So you have to consider on the market 275. So for 20 is more or less 5 billion. So the idea of the government is to reduce 5 billion of energy a raw material, cost of raw material. From the other side, the idea is to put on the bill the cost of ETS, considering ETS for materials for megawatt hour, in the total terawatt hour of 115 Which is the problem. In this moment, the demand is 148 from renewable, including the hydro, 52 from import, and 115 from thermal production. If there is a reduction of Poon of more or less 20%, the total production in renewal remains the same, and there is no hours in which the price is fixed with renewal. we see a reduction of import from 52 to 10, more or less, with an increase of thermal production from 115 to 155, 116. And in this case, if you multiply 160 for 30, you can see that there are once again 5 billion of cost of ATS on the bill of our customer. So the sum between reduction of raw material and increase of tax is exactly zero. This is the reason for why, if you read the last version of the decree, it is written that it is possible to reduce the ETS only if there is the proof not to have impact on the importer. That means that is, if it's possible, more difficult to calculate the real impact of ETS because you have to imagine an authority or others that have every hour of the day to calculate if the reduction of ATS on the PUN produces a reduction of import or not. So a nightmare, a complete nightmare. So we imagine that it's super difficult to move this part. So to close, I think that in this moment it's really critical to imagine I imagine that in the EU we'll find a solution not to accept our Article 6 of our energy decree. And this is the answer. Talking about batteries, only to close, the business battery is interesting. The reduction of price is huge. During the last tender, Max, the price arrived to a super low level, but this is due to the fact that the supply like cattle or rather from China reduced the price, put on the table 20 years of guarantee. That means a business plan of 20 years. The problem is that the payback period of this business is very long. And so our evaluation is if it is interesting or not to invest a lot in a business that is, let's say, like an infrastructure, but the infrastructure is a battery. So... I confirm that our commitment in battery in this moment is lower than, for example, in power grid.

Okay, regarding the guidance, Davide, I think that it is too early to say something you can appreciate. Yeah, it is true what you said. We have some opportunities, but also we have some other aspects that we need to take care about. First of all, the price of the energy is lower than last year. We already incorporated into the business plan, but if you want to make... A change compared to last year, you have a difference. But sticking on the guidance, we are pretty comfortable to stay on that. Let's see how the scenario is going to move forward. If we have the chance to getting some more opportunity, of course, we are here and also to lower the risk for the aspects that are not in the right direction. So for the time being, I think that we feel comfortable with the current guidance.

Thank you very much. So we don't have any further questions. I will hand you back to Mr. Pato for any closing remarks.

Thank you. Thank you, everyone, for taking the time to participate for the Q&A. And if you need any additional follow-up or deep dive, please contact the IR department. Thank you, everyone.