A2A Spa Ord

Hello, ladies and gentlemen, and welcome to the A2A 2026 Q1 Results Presentation Conference call. My name is Zach, and I will be your operator for today's event. Please note that 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 presentation. This can be done by pressing pound key 5 on your telephone keypad. I will now hand you over to your host, Marco Porro, Head of Industrial Relations, to begin the conference. Please, go ahead.

Good afternoon, everyone, and thank you for joining for the first quarter 2026 results. Today, the results will be illustrated by our CEO, Mr. Renato Mazzoncini, and the CFO, Luca Moroni. I will immediately leave the floor to Renato.

Okay. Okay. Thank you, thank you, and good afternoon everyone. Thank you for joining our call today. Let's start with the statement Alfred North once said that the art of progress is to preserve order amid change, and to preserve change amid order. And let's say in the last three months, we have seen a lot of changing inside the energy landscape in Italy and in Europe. So let me start with a brief overview of the macro scenario and how we are responding to preserve both order and change in our mission to be ready to power. So in Q1, Q1 was marked by uncertainty and super-high volatility in the energy market, fooled principally by two external factors. The first is is the proposed measures in Italy and in Europe to mitigate the impact of rising energy costs and industrial competitiveness. In Italy, as I said, the decree for the tariff. And after a couple of days, the geopolitical tension in the Middle East and in Iran. So, what happened in the slide number two is that, for example, the PSU gas price peaked at around 6 euros per megawatt hours, while the PUN spot price ranged around 80 to 170 euros per megawatt hours. And it continued moves in the forward curves. So, visibility is still limited, but conditions are well below the 22 extremes you can see in the graph at slide 2, in the left part of the slide. Against this backdrop, our actions are geared to support short-term system stability and to deliver on the targets we have communicated to shareholders. And our first step was to give customers, especially households, greater stability by maintaining our six-price contract offers. And this now accounts for around half of our mass market exposure. So consider that 50% of our customer base mass market is in fixed price. Our 26th renewal generation, in line with our policy, is already edged for more than 70%, giving us full visibility for this year. We will continue to closely monitor developments and to respond as necessary, navigating an environment that remains highly fluid. So, that's the short-term picture. But, as you know, a 2A's vision is built on long-term resilience. And this commitment remains unchanged. And the let me say that exactly in this situation to have a 10 years industrial plan is fantastic because in this situation the short term is a problem to face but is not let's say the polar star so the contingent geopolitical phenomena of today only start to underscore the long term importance of Italy's energy independence And for this reason, the expansion of our renewable and high-efficiency flexible capacity remains a key driver. For example, during the quarter, we commissioned the Terzi Banzi plant, adding around 30 MW of wind capacity in southern Italy. And we reiterated our investment strategy, almost half of the quarter spending direct towards generation plants and in our power grid to remain the backbone of the energy transition. Electrification of consumption remains a sector trend underpinning our capital allocation choices And it's super interesting the fact that in Italy, the demand was up to 3% in Q1. You know that there is sometimes a discussion if really the demand will grow. And we can say that in this Q1, there is a visible growth of the demand, especially in Lombardy. in which the growth rises in double digits, 10%. And this is an encouraging signal, of course. Equally encouraging is the fact that data centers will continue to emerge as a new high-consumption customer segment, And we seek confirmation of this in the fact that the connection request in our electricity distribution network, in particular in the province of Milan, in particular Dueretti, that is the company, you know, that we bought... two years ago from Enel, now amount around 330 megawatts. Consider that is a medium voltage, let's say not more than 10 megawatts. That means 33 new data centers, at least, that ask for new connections only around Milan. So, despite ongoing volatility, I can confirm that our resilient business model, diversification, and the long-term perspective supported by strong execution enable us to maintain our investment commitments. So, let me give you a few highlights, looking at slide number three, in which you can see our numbers, our economics. Also, we see both positive and downward variance in these figures. Taken together, they underscore the two crucial factors. Our financial resilience and our commitment on targeted investments. And I think the most evident metric of this is our net financial position, which remains sound and under control. At 5.6 billion versus 5.5 at 0.25, the movement is entirely consistent with the typical business seasonality. The leverage ratio holds 2.5. broadly stable year-on-year, confirming the group financial discipline and balance sheet resilience, even in a quarter of active capital deployment. In short, the figures confirm our resilience, which is far confirmed by our continued commitment to targeted investment. And in slide number four, And we continue in our CAPEX plan deployment, confirming our commitment on our long-term strategy vision. You can see 4% more of CAPEX compared with last year. But what is super important is that in Q1, we have 21% of growth in the development capex. 210 million euros refers to development project. And the key pillars of our investment strategy are improving the efficiency of power distribution networks, accelerating our development path towards renewable energy, increasing the flexibility of generation plants, and Of course, the capex in circular economy that I remember is also this heating and water cycle. So, that's a big picture. Now, let me turn to Luca for a more detailed analysis of the results. Please, Luca.

Thank you, Renato. Thank you, everybody, and good afternoon. As Renato pointed out at the beginning of 2026, presented a challenging conversion of contingent external factors. So, as I unpack our ABTDA performance, I wish to emphasize how we respond to this. I think this slide is a clear summary of how a diversified and integrated portfolio of activities underpins our ability to optimize our risk profiles. By leveraging the diversification of our business, we were able to face negative effects, including some unpredictable costs, delivering an EBITDA of 647 million euros. In particular, this reflects how higher renewable energy production, the ability to capture trading opportunities, and the strong performance in market and electricity distribution business mitigated the adverse impact from higher hydroelectric concession fees, lower shield price, and lower contribution from treatment plants. Naturally, this performance that we found will generate and optimize energy, so let me turn to generation and trading. In generation and trading, increased production during the quarter helped offset the impact of adverse headwinds. ABTDA was 202 million, a decrease of 22 million compared to Q1-25. Starting with renewables, we delivered higher renewable production, although this positive contribution was impacted by two contingent factors beyond our control. higher hydroelectric consumption fees, which affected by €11 million, of which €6 million related to previous years, and lower achieved price based on the scenario. Moving to flexibility, a good performance in trading confirmed our ability to capture market opportunities, although this was partially undermined by fewer chances in gas portfolio management. To sum up, Our operational performance remains solid, with higher production volume and effective trading execution in face of market conditions and regulated cost components that represent a headwind in the quarter. Overall, this confirms both the resilience of our integrated model and the importance of diversification across generation and trading activities to take over volatility. But of course, generation energy is only half of the equation. The real impact happens when we connect it to customers. So let me turn to the encouraging results that emerged in Q1 for supply business. Looking at the market segment, the first quarter confirmed the persistence of our commercial performance. EVTDA was $136 million. with an increase of 3 million compared to Q1 2025. In market, our performance was primarily supported by the growth in electricity volumes, particularly in the free market segment. At the same time, profitability was partially impacted by lower unitary margins, reflecting a more competitive environment and pricing dynamics. Overall, the quarter was marked by solid volume-driven growth, with margin pressure partially offset by the underlying strength of the business. But of course, the future of the energy isn't just about consumption. It is also about circularity. So let me turn to the performance of the circular economy. In the circular economy, the quarter shows a performance affected by a lower margin, in treatment segments in particular. Adjusted EBDDA was $190 million, a decrease of $12 million compared to Q1 2025. The pressure on margin in treatment was mainly due to the new ACERA service contract signed in February 2025 and the lower availability of porona and trezzo plant for maintenance activities. Prices showed a slight increase, and we also saw positive contribution from district heating, in particular related to white certificates sold, and higher allowed returns from the integrated worker cycle. Overall, performance was slightly softer, mainly due to operational and contractual factors in waste-to-energies. with some support from positively training in other activities. That said, let me turn to smart infrastructure. In smart infrastructure, the overall performance reflects growth in unload revenues, partially offset by a change in the gas distribution perimeter, as you remember. The EBITDA on the business unit was 129 million, an increase of 6% on the Q1-25. In electricity network, EBTDA took advantage from higher and lower revenues, driven by the new ROS tariff methodology, and the continued growth in the RAB driven by CAPES development. In gas network, we saw a negative contribution, mainly due to the perimeter effect following the asset disposal completing in July 2025. Now, give a look at the profit and loss, starting from adjusted ABTDA 647 million. We recorded 250 million of DNA, 12 million plus compared to the same period of 2025. The increase is mainly due to the higher capex deployed. Revision and net financial expenses were equal to 25%. and 41 million respectively, in line with the same period of 2025. Adjusted taxes amount to 98 million, a decrease of 10 million compared to 2025, driven by lower taxable base. The tax rate stood at 29.5%, excluding the impact of the ERAP increase introduced by the energy decree, accounting for as a special item, as we said already. Adjusted group net profit was $221 million, a decrease of 11% compared to 2025 at $249. And finally, in Q1, we achieved a solid ROI and ROE above 9% and 10% respectively, well aligned with our target. So let me conclude my comments giving you an overview on the Netflix cash flows. Cash flows Q1-26 showed a negative change in net financial position of €154 million as a result of business seasonality. As of March 31, the group reported a net financial position of €5,628 million with a leverage ratio of 2.5 times, ensuring the full stability of the leverage positions. During that period, the operating cash flow generated 149 million euros. Let me give you an explanation in which way. Networking capital variation was minus 460 million, primarily driven by the increase of trade receivables due to their business seasonality and their energy prices increased starting from March 2026, following the escalation of the conflict in Iran. Payment of net financial expenses, 38 million. Operating cash flow stand at 149. Accounting capex, 315. The net free cash flow amounts at 166 million negative. The change in the consolidation perimeter during the period was positive and amounted to 22 million negative. mainly due to the price adjustment of 25 million related to the sale of the part of the gas assets to AstroPiave in 2025, partially offset by 3 million in other transactions. Overall, considering 10 million spent on the share buyback, the total change in the net financial position amounts to 154 million euro. So, to conclude my comments, our business is are not separate stories, but rather one integrated system that assures our financial results. Results that show how, by leveraging the resilience and diversification of business, we were able to navigate the challenges of geopolitical effects, including the ones that nobody saw coming, and to deliver an ABTDA of 647 million euros. Let me now hand back to Renato for the final part of the presentation.

Okay, thank you, Luca. So, to close, guys, slide number 12, we confirm our 26 guidance. Slide number 13, only some concepts about our robust industrial execution. So let me now briefly really focus on the key highlights supporting our performance and outlook. Starting with execution year-to-date, we have seen solid operational trends across our core businesses. A renewable hydro production benefit from the geographical diversification across Italy is interesting in the fact that this year is Calabria the first class of our hydro production. And more and more, it's difficult to have all the plants from the south to the north, northeast, northwest, at the same level of production. So to have diversification like E2A in Lombardy, Florinetsia Giulia, and Calabria is super nice because it's easier to maintain our target. On the commercial side, electricity volumes recorded double-digit growth. And in particular, free mass market customer base continue to expand. And starting from Q2, we are seeing early signs of improving churn rate dynamics. You can imagine is, of course, also linked to the exceptional growth, the PUN, and the typical situation in this case is that the churn falls down. our visibility in June is a reduction of the churn super strong. But what is important for us is that you remember our strategy is to increase the market share of electricity customers, and our strategy is on track. our power grid activities deliver a sound performance supported by ongoing CapEx deployment. And as I said in our last call, in particular, Duerete, the company that we bought from Enel, is working very well in terms of CapEx deployment and also BDA. At the same time, we continue to deliver on our strategic projects. In power generation, we are progressing in Monfalcone, the new class H thermal plant. Cortelona is a new waste-to-energy plant. HRA remains the only company in the last years that is working to build new waste-to-energy plants. and further renewable development. And we have also identified brownfield sites for our data center platform. In data center, we are working quickly. You remember, we have three projects on track, and we are working to be able to start with some site next year. and all suitable for the end-emitter connection, enabling so fast grid access and competitive energy costs, as you know. Finally, our electricity distribution business is well on track to reach the 28-rub target that is high. Overall, this confirms our ability to execute consistently across all businesses while continuing to invest where it matters most in order to generate a sustainable value. In the last slide, number 14, I need to say that let's see the architecture that supports our strategy over time. First, a diversified and integrated portfolio of activities, enabling us to optimize our risk profile. You know, all our natural edging in generation, in collection and treatment, in regulated market, regulated business, and business on the market. Second, executive exposure to regulated businesses, providing stability and clear visibility on cash generation. And third, our discipline in capital allocation to unlock new growth opportunities. So I began today by underpinning our commitment to preserve the delicate balance between order and change. And to do so, our takeaway today is we will continue to invest where it matters most while maintaining financial resilience and control, turning the megatrends that are reshaping the energy landscape into sustainable result over time and are reshaping the role of the multi-utility company in this new landscape. Thank you very much, and I'm sure that there is space and interest for Q&A. So the floor is yours. Thanks.

Thank you very much. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. And the first question comes from the line of Emanuele Ojoni of Ketner Chevron. Please go ahead.

Good afternoon, and thank you for the presentation and for taking the question as well. The first one is on the 2016 guidance. To what extent, what is the visibility considering that, if I remember well in your guidance, it's not included the change of the scenario for the short-term at least. So, apart Q1, but starting from Q2, indeed starting from March, the worst-case price will be higher here on here, at least for Q2 than we see in H2. And for this 30% roughly merchant exposure for the expected volume from hydrogen waste to energy in 26, we should expect a benefit from this situation, which is not included in the guide. So my question is about the outlook for the next three quarters with an update of the guidance compared with the updated macro scenario. This is the first question. The second one is still on the generation business and the market design, but in this case more in 27 was. We know that the Italian government is under discussion with the European Commission on to define a new market design and decoupling of the power price from gas or the renewables from gas will be through ETS chain or will be through other components or the price of the gas, et cetera, we'll see. But in any case, it's under study. So that is what is your update and your opinion on this situation. And finally, in the market supply, I saw a good resilience in the profitability, in spite of a slightly down number in Qatar, but indeed it was related only to STG and the protected market, not the free market. The experience slightly increased, so the commercial policy seemed to be effective, at least in Q1. And so what is the update about the competitive pressure and your commercial strategy in this respect? Also considering that you think that there are also portfolio, at least according to the Italian press, there are also portfolio customers to be sold in the market. If you are interested, thank you.

Okay, thank you, Manuele. Well, on question number one, I say, you know, we are edged for 26, so it's clear that, and consider that in this moment our edge, as I said, is more or less 70%. That means that, yes, if... The war remains until the end of 26, and I think that all of us hope that in Iran something can change in the next weeks. I don't know, but we have to see. But we can have enough side that is limited due to our hedging. And so this is for the first question. For the second, talking about ETS, Talking about ETS, I can answer using the communication from the Commission about the Temporary Iron Crisis Energy Framework 23 of April, okay? That says that member states can also consider transitory measures to mitigate the impact of high gas prices on electricity generation, but let's say, not only limited only to 26, and you consider that the formula linked to the ETS proposed by our government will start from 27, and this is enough to say that it's impossible to, okay. But it's also interesting that the EU Commission understood perfectly the risk and says that there are some conditions. The first is that the transitory measures They are clearly defined and time-limited, so not structural. The second, they are designed to prevent internal market distortion, ensuring no impact on the merit order and no restrictions to cross-border trade and electricity flow. The third, they preserve long-term investment signals for clean energy. The fourth, they only compensate certain gas cost increase and do not cover ETS costs before maintaining the obligation and incentives of the ETS. Okay, so without reading more, I can say that we imagine that it is impossible to have structural changes, and also due to the roadmap 26-27. we don't think that the decree, the Italian decree, can have effect and that can change the position of EU. That is very clear. Also, because, frankly speaking, Italy is the only industrial country in which ETS is really a tax, because it's the only... in which 2.9 billion or 3.5 is really used to serve the public debt. In all the other countries, starting from Germany or France, 100% of ETS is a cap-and-trade system And so there are companies, corporates, that receive money from the ETS. This is the easy reason for why this country says, no thanks, we don't want to change the ETS. Talking about the mass market, your analysis is correct. For us in this moment, it's clear that the good news is that we have a 1% of increasing of the free mass market electrical in a phase in which the churn in the first quarter was high in all the markets and in a situation in which our visibility of the churn in the second quarter half of the year is much, much lower, and so we imagine to be able to reach our budget, that is a budget in which the customer base electricity free market will grow. The pressure, the competitiveness pressure is a reality, and this is the reason for why Since the first industrial plan, every year we imagined to have a reduction of marginality of 3%. You remember, it's a discussion that we did a lot of times. Until now, frankly speaking, a reduction of marginality is not... on the table, but in our industrial plan, including 26 and 27, we forecast a reduction, and we see, let's say, in this moment, we are happy to have, in particular, some interesting products for example the PPA mass market for our customer the customer base for PPA mass market in this moment is more than 100,000 so 110,000 120,000 but to understand how is important in this moment the total energy sold in PPA mass market is slightly higher than the PPA B2B So it's a proof that working in the customer base also out of the box with instruments like PPAs mass market 10 years long is a good idea and works well.

Thank you. Just a follow-up on the first question. The first question was not only on on generation and achieve the power price compared with the embedding in the guidance, but also the other moving parts in H2 or for Q2 onward compared with the expectation of the business of November when you provided the guidance for the first time. Thank you.

Yeah, Emanuele, I will take the lead to answer to your question. So we see generation more or less in line with the previous year result take into consideration maybe some opportunities we can get in the market as you correctly pointed out the spot price could give us some opportunities so let's see, around 700 is more or less the area we are targeting. Market, supply business is likely behind in our projection by now compared last year, but slightly, I mean, a few millions. That means that there is still a good visibility, high resilience, on the marginality, which stay there, but also on the volumes we are able to sell, which are growing and giving us opportunity to expand also the market share. Circular economy is pretty stable due to the fact that we have incorporated some maintenance maintenance works. Already in the first quarter, they were planned, so the target incorporated this maintenance. You have to consider that these plants are working with full capacity So, from time to time, they need to have maintenance activities. And finally, smart infrastructure, again, more or less in line with last year, considering that in the 518 million of the last year, we had 20... two million related to Ascopiave deal on the gas network, and some one-offs that are not recurring, but we decided last year to consider this no recurring industrial, no recurring item embedded in our results. So all in all, we are in line with the guidance we gave at the beginning of the year, and we have nice visibility by now. Let's see what happens in the next quarter, and we can have an update at the end of the year.

Thank you very much.

Maybe just to give you also a flavor on the fees asked by the region Lombardy. We have an impact in the area of 40-50 million. Half of those are related to previous years, meaning 21-24 years. So these are, as I said, not recurring, even though we consider that amount in the guideline in our expectation. And on the remaining... part, the half, again, has been already provided in the previous year, so it is not an impact, it has not an impact on the net profit, but only on the EVTDA. But already consider in what I already said.

Thank you. The next question comes from the wine of Javier Suarez of Miribanka. Please go ahead.

Hi, everyone, and thank you for the presentation. Three questions. The first one is on the generation of business and electricity prices. You can share with us the pricing level for your hedging in 2026 and eventually 2027 as well. I'm interested in the absolute level of electricity pricing hedging. And also your latest expectations for electricity prices towards the end of the decade and beyond, in a context on which there is a high level of concern on high electricity prices impacting competitiveness of Europe, which are your latest thoughts on potential impact of electricity prices in Italy. That would be the first question. The second question is on the comment that you make on electricity demand increasing in the first quarter. That is quite remarkable. So if you can help us to understand in your area, in your region, in the regions in which you operate, which are the key dynamics that are underpinning this increase in electricity demand, and maybe stating that increase in electricity demand by the different segments. And in this context, when the company thinks that will be able to update the market with latest update on potential development of new data centers in Northern Italy. And the final question is more of a general one. There has been press articles mentioning the potential interest of the company in an M&A activity, being involved in an M&A activity, with an entry in names and second names. Just as a general concept, the question for you is which would be the... of a potential M&A target. Thank you. Okay.

Talking about generation price, your question is the level of price of our aging 26 and 27, correct?

Correct.

Okay, okay. Okay, yeah. For 26, in this moment, we have, as I said, 70%, 70%, 72%, and the level is 111. So it's absolutely nice, slightly higher than our budget. And talking about 2026, 27 is around 60% and is a little bit higher than 100. So also in this case, we are in a space in which we are online with Power Industry Plan. In this moment, there is a few liquidity to cover more 27, but let's say 60% in May 26 is a good level of hedging. The demand is interesting because it's clear that in this moment, For the size, data centers surely have the key elements to increase the demand. Because if you consider that full cities like, let's say, Cremona, has a peak power of 100 megawatt, and is not baseload-like consumption, it's clear that it's enough to have a new data center of 30 megawatts to have an increasing of demand more or less similar to whole cities like Cremona. So in this moment, what is happening is that the data centers are growing, There are new data centers, not really super big till now in Lombardy, but are growing. And so surely the increasing of demand is mainly linked to artificial intelligence and all the digitalization. Also talking about immobility, something is happening, in particular due to the high reduction of prices of the electrical vehicle due to the competition with, in particular, the AD, the motor and others, because the price fall down. A good example is the price of the segment city car, of Renault, for example, starting from the Renault Zoe to the new R5 electrical set a price 30% lower. And so what is happening is that really also the immobility is growing. The last, but not least, is that looking at the gas distribution, year by year, there are 1%, between 1% and 2%, depending where, of reduction of the DDR. And, of course, are people that decided to electrify something. That means cooking, eat pants, or others. And so it's normally to see this increasing of demand. Why so concentrated in Lombardy? I think because Lombardy is every time the local of Italy. And so all the new... trend start typically from Lombardi talking about economy and growth that's all and to close with M&A let's say you know that we can't say nothing about these topics but We do full disclosure exactly through the media of what is correct to say to the shareholders. So, for example, the last news about our non-binding for the plans of... is correct, is true. Of course, we are players in this sector and we are interested to see the number, to have more information about the business because it's useful also for us to define our strategy, let's say. But I have not more information to share.

Okay, and on the question on the timing for latest views on timing for a final or the announcement of an agreement with data center development?

Yes, this is correct. In this moment, you remember that during our presentation, we Put on the slide three projects. In this moment, we can say that one project is in Brescia, one project is in Cassano d'Adda, so near our super big thermal plant, and the survey is under definition. So it is ongoing, let's say. We are working for authorization, of course, but consider that it is also interesting that both the national law and the regional law put some conditions to have acceleration and virtualization, and the conditions are easy for us to face because it is a green field, sorry, brown field and not green field. It is a to reduce the impact on the power grid, so perfect behind-the-meter connection. Connection with the DPT thing, and you know we have the sole operator able to do this, and with a good mix of renewable and, sorry, a mix of decarbonized electricity, and water cycle efficiency. And the reason why H2A is a good player in data center is exactly because we are able to move all these parts and so to move quickly in the authorization. Because we are exactly full committed in these elements. So we are working for authorization and our goal can be to start the first plant, the construction of the first plant next year to be able to see the first BDA at the end of 28.

Interesting, many thanks.

All right. The next question comes from the line of Francesco Sala of Banco Acros. Please go ahead.

Yes, good afternoon, and thank you for taking my question. The first one is if you can give us an update on the concession renewals, especially in Lombardy. The second one, if you can give us the quantified impact of the new HRO service contract for the full year, because there was an impact in Q1, so if we can have an estimate for the full year. And then on the retail business, I wonder what your commercial strategy is now in terms of fixed price versus variable price contract and whether there has been a change in the market or at least in your approach in the last few months. And secondly, finally, as you have thermal generation and more in general your electricity volumes that went up a lot in Q1. whether this is related to strong demand in Lombardy or whether there are other drivers behind this increase.

Thank you. Okay. For the hydroconcession, the situation is more or less the same as you know, so we are waiting to open the discussion for the first way, you know, the Lombardi model, let's say. And frankly speaking, I imagine that it's much easier to open the discussion in the second part of this year after the closing of the PNRR. you can understand that without the vincola from the PNRR is much easier. Also, because, frankly speaking, every time we say that the fourth way is a way to accelerate the CAPEX, and so it's completely online with the target of the PNRR, because the fact that the hydroconcession was introduced in the competition law, was in the original idea a way to accelerate the capex. But at the end of the day, it is the opposite, because till the tender, no one invested one euro in the concession. So, In this moment, all the public authorities understood that the only way to really accelerate the CAPEX is to reassign to the actual players the concession with an investment plan linked to the new 20 years long concession. Talking about Acerra, the impact full year is 15 million. Consider, guys, that Acerra is the only plant not owned by XA. So we are talking about a plant in which the return on investment is super high, probably the highest in the group simply because there are no capex allocation from A to A. And talking about our strategy, in this moment, surely for our customer, it's interesting the fixed price because, as you know, the calendar 27 maintains still a good price for energy. And so when you sign, for example, a two-year contract, the price is averaged between... all the quarter from now till 28. And so the price is interesting and, of course, stable. This is the reason for why 50% of our customers ask for fixed price. But our strategy is really to push more as possible the 10-year contract. And especially yesterday, we signed the first PPA for small business. It is interesting because in this moment, we have PPA for corporate, for large business, steel products and so on. We have the product for mass market, but we haven't the product for small business. And this is the reason for why we decided to build a PPA also for small business. And exactly yesterday started this new product, and immediately we signed the first contract. It's really important in my idea because... For small business, it's very difficult to deal with PPA profile and so on. And so they need exactly like mass market standard products. And the idea to give the opportunity also to small business to understand that with renewable, you can fix the price for a really long term. in my opinion, is the real change of paradigm of renewables. And so it's very important that every category of customers can have the possibility to sign a contract linked to renewables for long term. And we are doing that. And I think that we are the only company that is working in this strategy.

Thank you. The next question comes from the line of Roberto Letizia of Equida.

Yes, thanks. I only have one remaining question, which is still on the retail commercial approach. Just wondering if you can share with us how much of the current fixed sales price are expiring within the end of the year for which you will go into price negotiation. And if you can tell us what kind of approach will you prefer now? So will you be more aggressive on the price even because you can, by serving those contracts through renewable, trying, as you said, push the PPA at very low prices? from a higher starting point because prices in the next six months will be high, so maybe you'll have a chance to be aggressive, not decreasing the offer price that much in order to bring a quote market share and then build up on the strategy of the long-term contract. So can you elaborate a bit how much this is a window of opportunity by having the pull price that is pushed by the end of the year with a mix of expiring fixed contracts that can be renewed at those conditions.

Thanks a lot. Consider that, starting from the fact that today the customers are divided half and half between mix and variable, and starting from the fact that in my idea, looking in 2030, let's say, I imagine a world with a lot of PGA mass markets, so fixed price, but not two years, but longer, linked to renewable, and the rest variable. So, in this moment, surely, the fact that we are able to build PGA mass market and small business give us the opportunity to sign PPA to a higher price than the PPA that we are able to sign with steel products, also with data centers and so on. Because, you know, the marginality in mass market and small business is higher. So, to give a number, for example, the PPA mass market is 105 euros for megawatt hours. the typical PPA in this moment, B2B for a typical profile for a steel product is 85. So the difference is huge, 20%. And the price of a small business is in the middle. So the capacity to put on the market products able to face the needs of mass market and small business, in my opinion, is an incredible opportunity to sell our green energy to a good price. Remaining on the one-year or two-year fixed price, it will, you know, is surely not the company with the lowest price, because our strategy remains to give good services, and we are recognized like a company, both for... mass market then for B2B able to give value in our ancillary services starting from the fact that there is someone that is able to respond clearly to our call center when you have a problem. So Our strategy is this one and seems to work well because if you look at the free market, the fact that in this quarter with the huge return that we saw and with the result also looking at our traditional competitors, I am absolutely happy to see our numbers.

Thank you very much. The next question comes from the line of Davide Candela of Intesa San Paolo. Please go ahead.

Hi, good afternoon, gentlemen. Thank you for the presentation and for taking my question. I have three. The first one is regards to what you said on the power demand evolution in first quarter. I was wondering if you can share some flavor about your ability of capturing this demand increase in the region and maybe if this will be served through your own plans you have in the region like the new renewable developments you expect or your cities per capacity. That is the first one. Second one, with regards to the disruption in energy markets. First one, with the increase in energy prices, I was wondering if you can share some data regarding April and May consumption, if actually the high price levels. is pushing the clients to reduce their consumption in order to contain the expenses related to that. And basically, if you see a trend, according to that. And the last point with regards to this topic, we have seen that... some rumors about other countries in Europe that are thinking about putting something for taxes with regard to the high energy prices. Maybe it would be much more related to the health sector, but electricity seems not to be excluded at all, or at least at the basic level. So, what is your position? Do you think that this risk is still there, also for Italy, and given also the fact that this could be temporary, as you mentioned in your speech before. Thank you.

Hey, Dagde. I will take the lead to answer your question. For the power demand evolution and the prices on the market, you know very well that we are managing different technologies. We are on the market with... constructive approach of our energy management departments. So if you consider that January and February has been months in which the prices went down because of the credible letter, the energy decree, and there has been a lot of pressure and also some speculation regarding a possible decrease conclusion on the Ukraine war with Russia so we take the opportunity to work with the market to hedge part of our exposure for 27 for example immediately after the war with Iran and again we were in the market and we got again another opportunity. And in particular, with our way to sell the market, we optimized our position in the market, creating value for the company by roughly 15 to 20 million. So this is the way we continue to see the future quarters. Of course, volatility in a certain way creates opportunities, but creates also some stress. The visibility on April and mid-May was quite good for the production levels in terms of quantities, like it has been in the first quarter. with good prices, but we need to take into consideration the hedging share we have available, so to offset some peak with the hedging average. Regarding the windfall taxes, well, let me say, apart from having two percentage point increase. On Europe, I hope that this is the end of the story. Nevertheless, we will see and we will follow closely what happened also in Europe, but we don't see and we haven't heard any rumors for a potential new tax rate or cap for the energy prices, also taking into consideration the fact that we are not in the same situation of 2022.

Also because the discussion on the decreed bullet was super tough, and the result was a couple of points of error before a couple of years. So imagine that today the government, in the situation in which, you know, there are only few months of the actual government will reopen the dossier of the rainfall, in my personal opinion, is impossible.

And we do have a follow-up question from the line of . Please go ahead.

Thank you. Just a quick question about the electricity networks. I saw that in Q1, the electricity network benefited from allowed, higher allowed revenue from the ROS mechanism. The question is, to what extent is this really including the guidance and what could be the benefit Thank you.

Yeah, it has been included in the guidance in our target. It comes from part of the new regulation considering the fast money, and it is related to the fact that we are deploying CAPEX maybe to an higher extent also considering the fact that, as Renato said in the presentation, we are able to move CAPEX in the electrification of the grid whenever it is the case there is the chance because other business may be behind the target. So we have this kind of flexibility and it is a very positive aspect of the regulation because it gives us some flexibility.

Thank you. Thank you.

At this point, there are no more questions. I will hand it over back to these speakers for any closing remarks.

Thank you everyone for taking your questions. Attention to our results. If you need any follow-up, please contact the IR department and we will be available shortly. Thank you. Bye.

Bye-bye.