ERG S.P.A.

Good afternoon. This is the Coral School Conference operator. Welcome and thank you for joining the ERG second quarter and first half 2026 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo Meltli, CEO of ERG. Please go ahead, sir.

Good afternoon, everybody, and welcome to our second quarter and first half results webcast. Here with me, as usual, is Michele, our CFO. Before commenting on the economic results over the period, I'm on page number four. Let me put them into context. Once again, and same as last year, the periods for the first half and the second quarter were characterized by lower wind speeds than the historical average. But while Q1 was better year on year, Q2 was more or less S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. which we could expect for the second part of the year, but I'll elaborate a little bit more on that in the next chart. So, back to results against this backdrop of low wind. The first half EBDA was 295 million euro, plus 9% euro near, let me say a solid set of results. And even looking at Q2, notwithstanding lower productions, S.P.A. Looking more specifically at Q2, the contribution from new installed capacity basically offset the lower productions on a life-for-life basis. Then the upside came from what was overall a positive price effect due to a combination of factors that is not so easy to summarize. Let me try it. Contrary to common belief in Italy, we had an average realizing price that was lower year on year, mainly reflecting the execution timing of hedging derivatives, so contracts that you know are closed typically well in advance of delivery. On the other hand, We enjoyed better selling prices in other geographies, such as Eastern Europe, USA, and UK. With the latter, I mean UK performing very, very well as a country. We also had a higher year-on-year contribution from capacity market in USA, as well as from managing productions effectively during S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. mainly reflecting, say, the dividend distribution, the higher capex, and partly compensated, say, by the solid cash generation over the period. Let me move to page number five, commenting the deep dive analysis we conducted on wind resources, given the lack, say, of it... S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. historical average. I think you are getting used to this chart. Let me now elaborate more on our internal analysis. In June 2026, this is a fact, major global agencies including the World Meteorological Organization, the UK Met Office, formally issued an El Niño advisory confirming that conditions have developed and will persist. So there is a high likelihood, according to reports issued by these entities, that this El Niño pattern will last through the end of 2026 and persist into early spring of 2027. In light of this, we recently conducted an empirical Let me stress empirical analysis to understand our assets and consequently our production levels performed in the past during El Nino periods. We observed, and I'd like to emphasize that this analysis is empirical rather than scientific, that production generally exceeded budget during El Nino periods. As is clearly shown by the graph, we circulate the quarters where the El Niño was, say, intense, with an intensity index above 1%. So, of course, weather remains difficult to predict and influenced by several complex meteorological phenomena. But this could provide, let me say, at least internally a supportive backdrop and upside to our full year guidance. But let's see, because in the end it will be as it is. Now let me comment our achievements, say, during the period, in the first half of the year, and comment on page number six. I think we kept delivering on our strategy. On growth, we are moving on with assets under construction in line with our budget. We energized a few weeks ago Acro in Germany, a 22 megawatts greenfield wind farm. I'm happy to say that we successfully integrated S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. and a revamping program for a portfolio of 60 megawatts of photovoltaic assets in Italy. When talking about revamping, PV revamping, installed capacity, I want to be sure the message is clear, installed capacity will remain unchanged, but given the cutting-edge technology with new panels and trackers, we expect a significant increase in productions, which will enjoy the incentives of Contra Energia until the end of the scheme. Our pipeline is moving on very well as well. The objective to secure building permits for a material amount of projects that you should remember was our priority. One of our priority for 2026 is gaining visibility. We can now rely on 570 megawatts fully authorized, 330 wind powering, not just in Italy, but also in France and Germany and UK. And 240 megawatts is the best. For sure in the next months, we'll be working hard to get these assets ready for the next auction. In particular, I'm talking about Italian assets. S.P.A. value creation. For sure, we'll be working on that in the second part of the year. On route to market, we continue during the semester our path of signing long-term BPAs. Others, contracts around the negotiation we sort. Never say never, but we hope to deliver more of these by the end of the year. On finance, S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. Thank you, Paolo, and good afternoon. I'd like to start with the observation of the electricity demand trend in the first half of the year.

After a long period of stagnating demand, we see positive signs of recovery in all countries where we operate. This is driven by climate factors, industrial demand growth and the first effects of the electrification of the demands. And it is in line with the forecast of all the major industry experts that see a structural upward trend for the power demand in the medium to long term. Looking at the spot power markets in the second quarter, prices were higher year on year in all countries where we operate. This trend leads to an increase in unitary revenues in most countries, even if the impact on our unitary revenues was only partial, reflecting the post-elaborative nature of our portfolio, where a large share of volume is already secured through PPAs and CFDs, all covered by our three years rolling edging policy. I would like to highlight the higher capital price in the UK, driven by our newly acquired assets in England, which benefit from renewable obligation certificates. And on the other hand, we see a new unitary revenues decrease in Italy, mainly driven by short-term hedging at a lower price and by the reduction of the green cent. Moving to the production, in the second quarter, ERG generated 1.6% of a tower, 3% lower than previous year. following the low windiness trend already recorded in 2025 in most countries. We are still recording production well below the long-term historical average of our assets, as already commented by Paul. The production of the quarter is also affected by higher grid curtailment. This effect was partially compensated by the production of a new asset with roughly 70 megawatts of additional capacity contributing during the quarter. In the second quarter, we have almost doubled the production in UK, mainly thanks to the new acquisition in England and the production of a new greenfield plant entering operation in Northern Ireland at the end of the year. The first half of the production is 3.9 terawatt hour, 0.3 terawatt hour higher than previous year, mainly driven by higher windiness in the first quarter of the year. In the second quarter, EBITDA reached 1.129 million, a slight increase against the second quarter of 2025. The positive perimeter effects was offset by slightly lower production and lower capture prices in Italy and France. Thanks to the last acquisition in England and the new greenfield plant in Northern Ireland and some recovering wind, the U.S. and the U.K. doubled the EBITDA of the previous year. On the other hand, Italy is impacted by lower aging prices and green incentive in the comparison with the second quarter of 2025. In the first half, Group's result is 25 million higher than previous year, mainly driven by first quarter results. I comment now on the investments. In the second quarter, we invested 54 million, mainly for ongoing activities on repowering projects in France, Germany, and Italy, and for the construction of greenfield plants in Germany and France. In the first half, the investment stands at 203 million, of which $115 billion are related to the acquisition in the UK. Finally, let's take a look at the cash flow statement and the net financial position. The net financial debt at the end of the quarter is $1.9 billion, in line with expectation, and $57 million up versus the end of 2025, thanks to the BDA cash generation and the disposal of other Swedish assets in January, compensated by investment over the period. The second quarter, the national position is impacted by $150 million of dividends paid to our shareholders. So thank you for your time. Now I leave the floor to Paolo for his final comments.

Thank you, Michele. I'd like to wind up this presentation by providing you with our updated guidance for the full year. Very simple. Very easy. We are confirming all predictions. The solid set of results over the first half of the year and reasonable optimism about wind in the second part of the year, based on the analysis I outlined earlier, make our guidance more visible than before. That's the positive message in my comment. But EVDA As far as the PDA is concerned, we confirm our range of 520, 590. We are now, of course, a little bit more optimistic about the final outcome. CapEx is expected within a range of 330, 380, and includes just the M&A in the UK and the S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

S.P.A. S.P.A. S.P.A. S.P.A. comes from Alex Brauchausen with Bank of America. Please go ahead.

Hi, thanks for taking my question. I've got two, if I may. Just regarding your capacity addition, I think, you know, over the last couple of months, a couple of quarters, I think you just had to firm up a little bit more your plan regarding your strategic ambition and capital deployment. And I think We should still have, if I'm not mistaken, a strategic update for the full year 2026. So in a little less perhaps than six months. But, you know, given that you've got 300 megawatts of assets under construction, any kind of early view regarding organic capacity addition for 26 and 27, perhaps, and if you had been able to accelerate or initiate your plans regarding battery storage. And then secondly, if I may, regarding your recent PPA with Statcraft, I'm just wondering the rationale here in signing with Statcraft for seven years and not perhaps keeping this capacity to S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

find the data about the deployment of NATO was under currently under construction. But the PPA, let me specify that all the production that has been sold through this PPA is coming from existing assets. So assets that are not allowed to take part to the FERICS because our S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. We are talking about out of the 300 megawatts under construction, say 200 megawatts come from repowering projects, especially in Italy where we have Carlentini and Greci Monteguto for a total of 130 megawatts, more or less, a little bit more. And then others projects that are in Germany and France for a total of 65, 70 megawatts. So all in all, let's say 200 megawatts. Then we have three projects currently under construction. Greenfield, two in German for a total amount of 28 megawatts. And one in France, 25 megawatts. Then part of the megawatts under construction are referring to solar revamping, which means changing completely the trackers, not changing, insert, say, the trackers where they are not yet, and change the panels with cutting-edge technology that can have and higher efficiency. This will not translate into higher megawatts because we are simply changing the technology, but the projects itself got a very high return because according to the Italian regulation, all these projects increase of production coming from this revamping S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. Thank you. Maybe if I can just do a follow-up on the PPA question. Given the improved power prices curve that we've seen in the recent week and month,

Could we have an update on your overall hedging levels or perhaps, you know, the merchant exposure that you see on the portfolio following this PPA for 27 and 28, in particular for Italy?

Yeah, just give a second to find it out.

Okay. In 2026, we have an open position for the remaining months of the year overall. S.P.A. S.P.A. S.P.A. S.P.A.

You know that we have this rolling edge policy that at the end of the day has a final target that before we enter a specific year, we want to have 80% of our production edged, considering all the tools for edging that we have in our hands, so CFD, PPAs, and short-term edge. Normally, we expect to enter the new year with a S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

S.P.A. S.P.A. S.P.A. are very buoyant on the outlook on the U.S., so what are your opinion and link to the about the operation per se of this asset base, but as regards the development, the future development, I think you are still exploring further opportunities to increase your footprint in the country. Thank you.

Thank you for your questions. About July, I can say that we are in line with our budget, or slightly above. Volumes are still suffering a little bit from low wind. I'd say a little bit lower than the historical average, but this gap is fully or more more than compensated by higher prices. So we are absolutely in line or even better than our budget embedded, say, in our guidance for the full year. About U.S., yes, for sure in the second quarter it was better than Q1, but as I had the chance to say during the last webcast, Q1 was affected by a mixture of events, all negative, unfortunately, that reduced the economic performance of our portfolio. In particular, we had some congestions for external forces, say, all around the node where our plant, the wind plant, is connected. And that had an effect on the settlement of the PTA, which is based on the differential between real-time price and the day-ahead price. It's a little bit complex, but in our feeling, our feeling is that was a S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. potential growth in the U.S. We are still working with our partner, Apex. We are now discussing some potential, say, acquisitions. But as you know, the preferential right that we have in place with them is a sort of first look S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

S.P.A. S.P.A.

We are very positive on the last degree that was finally approved by the European Commission, because if you look at it, you will notice that two-thirds of the entire capacity that is expected to be deployed over the next three years is more concentrated on wind out of the 27 gigawatt of installed capacity that is expected in the next three years, two auctions, 16.5 is wind, just 10 is PV. We think this is a wise reflection from the regulator because the market needs, in our opinion, more wind than solar right now because solar keeps producing in the S.P.A. is a pay-as-produced tariff, which would translate, let me say, in 95 in terms of baseloader. It's an equivalent of 95, yeah, re-parametered, say, in terms of baseloader. But the last auction, the clearing price was 75, so 10 euro less than the target. the target has been reconfirmed and if the volumes they are looking for are the one written in the decree, we are quite confident that the price should fall nearby, say, the target tariff, which I repeat is 85. For the time being, we have roughly, for sure, 200 megawatts completely authorized in terms of wind, but also we have another three projects that got the VIA. VIA is the Environmental Impact Assessment, which is the condition needed to take part to the oceans. All in all, we could participate in the next FairX auction with 350 megawatts for wind. And then we have a similar amount, maybe slightly less, for BES. Even though, let me be totally transparent, we are also studying alternative route to market when talking about BES. because the last cleaning price for Bess was not as good as we thought. So the returns associated with this kind of project were very low single digit. And we are quite confident that maybe through other route to markets, a mixture of tolling and merchant could be the best way to maximize the return and the flexibility of this kind of investment, which is quite complemented to the renewable asset generation. But anyway, we accredited all these assets to the Marx auction, because in the end, we are flexible to bid at whatever price S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

The next question comes from Roberto Letizia with Equita. Please go ahead.

Yes, good evening. Thanks a lot for the presentations. I would like to ask Paolo a view on the most recent trend in the power prices. So we all know the main drivers of the very high increase. And the forward curve has started also to increase through the whole year. So since few months ago, we only saw the first quarter of next year increasing significantly. But nowadays, we are seeing the whole curve moving up through to December next year, upwards in a significant way. So can you spend a few words, maybe elaborate on what's your view about possibly evolution of power prices, 27, 28? And then, if you can please split the hedging of 27 by country in order to get what the sense of the Italian and other countries' exposure to the variation of market price. Thanks a lot.

Okay, Roberto, I'll try to make my best to answer your question. I say, let me start... You know that the European Commission was working on a revision of the ETS mechanism. And they came out with, in our opinion, minor changes. And in fact, in the trading market, the ETS market, the certificate still trades above 80 euro per ton. First comment is we still expect a strong sign from the ETS going forward because based on the fundamental analysis the price that is needed to switch from coal to gas is in the region of 70-80 euro per ton and the one that will be needed is in the future maybe to switch from gas to hydrogen is above 100 euro per ton. That's why the market was pointing in this direction. Then the commodities. The TTF price today got here on my screen in front of me is almost 60 euro per megawatt hour, thermal megawatt hour. You have to multiply by two. So it means that whenever gas is needed to cover the demand, prices will be above, for sure, 100 euro per megawatt hour. Well above, because 60 multiplied by 2 plus one-third, say, of the cost of the ETS, you know, you arrive more in the region of 150 euro. Of course, if you look at the forward markets, they are pointing lower than that because probably they expect this situation not to last forever. But anyway, even in the medium long term, forwards are now pointing at a higher value compared to a few months ago. So we are positive, but let me be honest, in our guidance even in the short term. We are not assuming the last forward even for the second part of 26. If not, the upside would be more. Of course, this upside is strictly related to the presence of wind and then to the presence of production. So we confirm our guidance, but we are certainly more optimistic today than we were a few months ago when we provided our last guidance during the first quarter results. Back then, our best estimate, say, was in the middle or mid-lower part of the range. Today, it is in the upper-middle part of the range. From that perspective, you can take it as the guidance has been improved, even though the range itself remains unchanged.

And I can't remember if... No, if you, the detail about the hedging speaks by the countries.

So I will try to answer on explaining, detailing the merchant portion, so the part that is not covered by hedging. In Italy, for the remaining part of the year, we have 0.2, roughly. We have a tower still exposed to merchants, so starting from August.

Minor figures in France and Spain, and 0.1 in Eastern Europe, and 0.2 in the UK. Regarding the next year, so 27, Immersion exposure for Italy 0.7, 0.3 in France, 0.1 in Germany, 0.2 in Spain, 0.6 in Eastern Europe, and 0.3 in the U.K. To give you some overall and rough figures.

The average hedging price that we expect for 2027, we expect in line with 2026, because we expect that the hedging that we are going to close in the next months, October 2027, will benefit of the current level of the price, and so we'll end up with an average hedging price more or less in line with the current hedging price that we have in 2026, or maybe a bit higher than the 2026 levels.

The next question is from Beatrice Gianola with Mediobanca. Please go ahead.

Yes, good afternoon, everybody, and many thanks for taking my questions. I guess my point is on the evident acceleration in the permitting process for renewable projects in Italy. We are seeing a number of positive developments reported in the press recently. So I was wondering, how are you seeing this evolution? Is this something that could eventually impact the timing of your business plan? I mean, do you believe that this may lead you to consider presenting the BP ahead of your current plans? And then I had a follow-up on the U.S. You mentioned before ongoing discussions about potential acquisitions. was wondering if you could provide more color on which type of assets you might consider. Thank you so much.

The first one was about the timing of permitting. Yes, Beatrice, you're right. The timing, even though maybe it's not yet as the operators like, but I confirm that there are The speed of the permitting is accelerating. And now there is a huge pressure also from consumers, Confindustria, asking for more renewable in order to lower the price on the day ahead market, on the wholesale market. And in our case, as I said, we have a huge pipeline basically already approved or near to be approved, at least by the end of the year. In particular, I confirm that the permitting process associated to battery storage is much quicker than wind process. But for us, the main theme remained the route to market. So we have already enough, I mean, let me joke, of assets already authorized. Now we need to secure the route to market before making the final investment decision on these projects.

Because all in all, as we reported in the press release,

Here in the presentation, we have 570 megawatts basically already authorized, not just in Italy, but also France, Germany, UK, plus further 400 or something like that that are very, very close to be authorized. Maybe they got already the environmental impact assessment and so on. So we should... reasonably expect to get the final authorization by the end of the year. Now the point for us is to secure the route to market through auction systems, through PVA, through whatever mechanism that can stabilize the revenues over a long period of time. consistently with the infrastructure, this kind of infrastructure investments. For doing this, we need to wait in Italy, for instance, the Ferrix and Max options, and both these schemes are expected to be by the end of the year, probably November, December. That's why we prefer to wait S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. We are still talking about the MISO market, which is the one we know better. And we are still talking about an acquisition of assets already at COD. So the approach we are using in the U.S. is to have an acquisition of completely the risk asset. which means fully constructed, fully in operation with a long-term PPA, and if it's the case, a tax equity scheme already closed. That's the three conditions we are looking for when dealing with APEX about the new acquisitions. That was a part also of the agreements we signed with them a couple of years ago. Now we are working on a couple of projects and we will see in the next months if there is a deal or not. We are not obliged to do it. We want to do it in the condition we consider fair for our portfolio.

The next question comes from Francesco Sala with Banca Acros. Please go ahead.

Yes, good afternoon, and thank you for taking my questions. The first two are on courtainments. I wonder whether you can give us the economic impact of courtainments in Q2. And secondly, if we should expect S.P.A. S.P.A. S.P.A. on the production that was available at the right time or whether there is something more structural about electricity prices there. Thank you.

Okay. So about the curtailments, yes, I confirm curtailments is all, as they like to call them, dispatch down orders. are something that is a trend that is growing all the time. We had quite significant curtailments during the second quarter. In fact, when you see the production all in all, you see that it's a little bit lower than the same period last year, but say is fully due to curtailments. Not because of the wind. The wind was more or less in line with last year. And part of them are, say, refunded, reimbursed. Some of them are not. And the impact can tell you the number for the first half. We had an impact of roughly 8 million euro in our portfolio. in the first half. Let me say that part of this 8 million euro will be recovered in a few years. I don't know exactly when, but the part are related to the Conto Energia, for instance, and the PV associated to PV assets in Italy. And according to the rules, the incentives will be S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. that are performing very well because we have the 73 megawatts that we acquired early this year that are enjoying the ROC, the Renewable Origin Certificates, and also the Corlacchi Wind Farm in Northern Ireland, which was developed organically by the company enjoyed a much, much higher price fixed in a PPA, in a long-term PPA, because this PPA was negotiated in a much better price environment compared to the other two assets we have in Northern Ireland. So I hope to cover your questions.

Yeah, yes, many thanks.

The next question comes from Davide Candela with Intesa San Paolo. Please go ahead.

Hi, gentlemen. Good afternoon. Thank you for the presentation and taking my question. I have three. First one, a follow-up on curtailments. As a more general view, as you said, this trend is growing and likely as more renewal capacity will join the generation, this will grow further. So I was wondering if you can share what a company like Erg is doing in order to contain this kind of risk, meaning that is there something in your energy management approach or S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. in your hand, given the, of course, route to market, the visibility in the pipeline, authorizations, and so on. Thank you.

I say about curtailments, there is not much you can do to reduce the curtailments because the curtailments is an external force and is decided, say, by the TSO, which is the discretionary to ASK THE OPERATORS TO DISPATCH DOWN THEIR ENERGY WHEN IT'S NOT NEEDED INTO THE SYSTEM. THE DISCUSSION IS ON A DIFFERENT LEVEL. SO WE ARE DISCUSSING WITH TERNA AND GSC IN ITALY, FOR EXAMPLE, TO HAVE THE FAIR REIMBURSEMENT FOR THESE CONTAINMENTS WHICH ARE NOT UNDER S.P.A. For instance, what we are doing in Northern Ireland, which is one of the few countries where curtailments are not refunded at all, are not reimbursed at all, so we are fully exposed to this risk. We are discussing with the TSO there in order to gain, say, the Qualification said firm connection. The title that allow the operator to be reimbursed. So we are discussing about this. And along with this, we are also discussing some measures they can take in order to reduce the curtailments going forward. And in particular, they are investing in a cable connecting the Northern Ireland and Ireland in order to transport the energy because the problem is that area is long of production because there are a lot of renewable and not enough demand. So the trick or the solution can come from S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. fixing the supply and demand imbalance we are living now and a fair remuneration for this kind of reimbursement. Say that the assets are performing quite well anyway, but they could perform even better without these curtailments. So just to give you a number in the first half of the year, We had 57 gigawatt hour of curtailments in Northern Ireland. Multiply by more or less 60 euro or even more, and realize that it's a 3 million euro economic effect in our P&L. So we could improve quite substantially S.P.A. S.P.A. S.P.A. S.P.A. S.P.A.

S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. wind repowering that we see possible in 2027, particularly in Italy, thanks to the Felix and the Max auction that are all alternative to market, as mentioned by Paolo before. So again, hybrid is a tool that we can leverage on to full our growth at an accelerated pace.

We have already said that we have roughly a pipeline of 5 GW, but as we had the chance to say during the webcast for the full year results of 2025, we are focused on S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. S.P.A. from, say, has offered the final investment decision. But let me joke a little bit. If we answer all these questions, you wouldn't leave us anything to say during the business plan. We are working on that in order to fulfill the assumptions for the years to come. And we will be working hard on this in the second part of the year. And we think in March, March probably when presenting the full year results, we'll be also ready to present the business plan with all the details.

Okay. Thank you. You're welcome. No questions.

Mr. Medley, there are no more questions registered at this time.

Okay, thank you very much for listening and happy summer. See you in the second part of the year. Bye, bye, bye.

Thank you, bye.