Snam Spa

Good afternoon. This is the College School Conference Operator. Welcome and thank you for joining the SNAM First Health 2025 Consolidated Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Did anyone need assistance during the conference call? Then make a signal and Operator will press install and zero on the telephone. At this time, I would like to turn the conference over to Francesca Pezzoli, Head of Investor Relations at SNAM. Please go ahead, Madam.

Good afternoon, ladies and gentlemen, and welcome to the presentation of SNAM H1 2025 consolidated results, which were approved by the Board earlier today. Our presentation will be divided into three parts. First, SNAM's CEO, Agostino Scornaienchi, will share his opening remarks offering an overview of recent market developments, regulatory updates, and the main industrial and financial milestones achieved during the period. Luca Passa, NAMCFO, will then provide a detailed review of our financial performance. After that, Agostino will return for some closing remarks, followed by our Q&A session. With that, I'm pleased to hand over to Agostino.

Thank you very much, Francesca. Good afternoon, everyone, and thank you for joining us today. This is my first call since my appointment as SNAM CEO in May. I'm honored to lead such a solid organization, which is a pillar of the energy system and plays a central role in ensuring energy security for our country and for Europe. I found a company with strong fundamentals and with people. Let me begin by highlighting a few key facts that underscore the central role of Italy's gas infrastructure. Here, we transport around 600 terabyte power of energy, twice the amount carried by the electricity grid, and at less than 50% of the unit cost. Approximately 40% of this gas is used in gas-fired power generation, producing around 120 terawatt-hours of electricity. This accounts for about 45% of Italy's total electricity output and up to 70% on days when renewable generation is low. In addition, we deliver more than 110 terawatt-hours for industrial and hard-to-abate sectors, including steel, ceramics, and chemical subsectors. Moving now to slide number four, the energy crisis and geopolitical situation have reshaped perception of energy security across Europe. This has triggered the need of strengthening gas infrastructure. In few years, the country shifted from a system largely dependent on pipeline imports from Russia to a more diversified mix. including growing imports from North Africa, Azerbaijan, via the TAP pipeline, and liquefied natural gas. LNG in particular more than doubled versus 21, accounting for 30% in H125, supported by new regasification terminals in Piombino and Ravenna. has created the need of the new marine infrastructure requiring a new set of engineering and operational competencies. Moreover, gas plays a critical role as a stabilizing energy source in a system increasingly dominated by intermittent renewables. Events such as Spain's blackout highlight the importance of determining the appropriate share of traditional generation needed to ensure system security without creating excess capacity. Rather than focusing solely on an energy transition, we strongly believe we are entering into an energy addition or energy integration phase based on a balanced mix of energy sources to maintain both competitiveness and sustainability. Let me now turn to some key trends at page five. in the Italian gas market during the first half of 25. Between January and June, gas demand in Italy reached 33 billion cubic meters, a 6% increase compared to the same period last year, marking the first rebound in four years. Residential and commercial sector were up by 3%, largely due to slightly colder weather conditions, while industrial demand remained broadly stable. The key driver of the increase was the thermoelectric sector, which grew by 12%. This underscores the critical role of gas-fired power generation in balanced energy systems, especially as we integrate an increasing share of renewable energy. The flexibility provided by gas plants proved to be vital to maintaining grid stability in a context of greater intermittency, and this is an European phenomenon, with gas-fired electricity production up 17% in Europe. Exports have also risen sharply, growing largely fourfold compared to the previous year, driven in particular by flows from Tarvisio. Looking at supply flows, we have seen a notable shift. Pipeline imports decreased by 1.8 billion cubic meters, more than offset by liquefied natural gas imports, which rose by 2.4 billion cubic meters, with a significant 32% increase. This growth was supported by the full return to operation of the OLT terminal in Livorno and the start-up of the new terminal in Ravimna. As a result, liquefied natural gas accounted for over 30% of Italy's gas imports. This contributes significantly to enhancing both the country's energy security and the diversification of supply sources, which is crucial in today's complex geopolitical environment. We have been able to successfully navigate sudden shifts in market dynamics and gas flows, ensuring security of supply, thanks to the flexibility of SNAM's existing infrastructure, further enhanced by the addition of new gasification terminals. In H1-25, we progressed on the strategy delivered. I'm now at page six. Let me remind the key highlights on gas infrastructure. Works on phase one of the Adriatic line are moving forward steadily. which 42% of the pipeline installation completed, and progress on the compression station reaching 20%, with overall completion at 35%. The BW Singapore regasification unit, moored offshore Ravenna, began operations in May. Short-term auctions have already allocated capacity for June and July, with four vessels having arrived so far. The first half of the year, Italy received more than 100 LNG tankers, nearly half of which coming from the U.S., for a total volume of about 10 billion cubic meters. At the end of June, the storage exceeded 70%, approximately 10% higher than the European average. At the end of July, we are about 80%. Moving to our energy transition platforms. The first phase of the CCS project in Gravina has delivered solid technical results. Our meeting for the pipeline is at an advanced stage, and the process for storage has recently begun. We expect the technical regulation on CO2 transport to be published soon. We look forward to greater regulatory clarity to move ahead with the next phase. On biomethane, We have 72 megawatts already in operation, authorized or under construction, and our mission is to speed the ramp up and maximize the value of the asset. Renovi's backlog is broadly stable at 1.4 billion euro. With regard to the H2 backbone, we have been awarded 24 million euro contribution by the Connected Europe Facility, energy program to cover approximately half of the feasibility studies. Let's look now at sustainability. 32% of CAPEX aligns with the EU taxonomy and 61% with SDGs in H125, while sustainable finance reached 86% of the total. We expect 25 scope 1 and 2 CO2 emissions down approximately 20% versus 2022, which is our baseline. As part of our commitment to transparency and biodiversity, we have published our FIS-TNFD, Task Force on Natural-Related Financial Disclosure Reconciliation Table. We have also launched our first employee share ownership plan, supported by a dedicated communication campaign aimed at reaching our entire workforce. Let's now move to the H1 results at page 7. We have delivered sound performance despite persisting volatility. Adjusted EBDA of 1,492,000,000 is up by 5.3% year-on-year, driven by growing regulated revenues. Adjusted net income of 750,000,000 plus 8.5% year-on-year, thanks to higher EBDA and greater contribution from associates, only partially offset by higher depreciation and financial charges. Investments at $1,122,000,000 were broadly in line with H-124 following the completion of works related to the Ravenna LNG terminal. Net debt reached $17.6 billion, mainly reflecting the investment carried out and the dividend payment. The average cost of debt was stable at 2.5%. Standard & Poor's raises NAM rating to A-, following the upgrade of the sovereign and confirming our strong credit profile. Let's now move to key regulatory updates. The regulator has changed the RAB indexation from 25 to the harmonized index of consumer price with the European Union countries related to Italy, the so-called EPCA Italy. At the same time, the deflator for 24 was updated to 7.9% from 5.3 to recover past adjustments. Therefore, 2025 tariff rub was lifted to 26.2 billion from 25.8. On May 22nd, ARERA published a consultation document that contained some adjustments to the implementation criteria for the ROS-based regulation and the general guidelines for the progressive implementation of the full ROS by 2028 with a transition period 26-27. It adopts a step-by-step, proportionate approach designed to ensure a smooth transition for all market participants. The Council of Ministers approved on June 30th a draft law for the definition of a legislative framework for carbon capture and storage, hydrogen, and methane emission reduction. The draft now needs to pass through Parliament, and it will lay the groundwork for establishing a CCS market in Italy and attribute to our era the role of regulator for the hydrogen and CCS market. Several progress were made on the financing front. In an extremely volatile geopolitical context, we have successfully issued our U.S. dollar our first U.S. dollar multi-trans sustainability-linked bond totaling 2 billion U.S. dollar and 1 billion first EU green bond. Very good job, Luca. With this transaction, we have completed the refinancing for the full year. Moving now to our associate portfolio. In March, the stake in AdBlock gas pipeline was sold to Lunate for 234 million. In May, we have successfully placed via accelerated book building the sale of a portion of Italgas option rights. In partial default, the capital increased, diluting our stake by approximately 2%. In addition, we have recently concluded our exit from ITM power for an amount of 11.5 million equivalent. With regard to OGE acquisition, the closing is up to some condition precedents that were partially met. In particular, no other should exercise the right of the German antitrust authority provided the green light. The process for the foreign direct investment is ongoing, and our base case is to close the deal by the end of Q3 this year. Now, I hand over to Luca for the comments on financial. Please, Luca.

Thank you, Agostino, and good afternoon, everybody. Moving to slide number nine, Out of the total around 1.1 billion of investment broadly in line with the previous year, 32% EGU taxonomy aligned and includes. With regards to gas infrastructure, H2 radio replacement, dual fuel compressor station, biomethane plant connections. As for the energy transition businesses, H2 and CCS, a large part of biomethane depending on plant technical standards and energy efficiency excluding co-generations. SDG alignment is instead 61%, of which the majority goes towards SDG 7, 9, and 13, respectively affordable and clean energy, industry innovation, and infrastructure and climate action. More than 50% of CAPEX are development investment, reflecting the company industrial growth phase. Let's now move to H1 2025 EBDA analysis on slide number 10. The BDA for the period was €1,492,000,000 plus 5.3% compared to last year or plus €75,000,000. The growth is mainly attributable to regulatory items for a total of around €70,000,000 related to the recognition of the 2024 deflated update for €52,000,000, the adoption of the Italian IPCA for the rubber evaluation starting in 2025 for around 50 million euro, partially counterbalanced by the WACC decrease for around 50 million euro. Regulated revenues increase for around 54 million euro. Stogic Adriatica that entered into perimeter from the 3rd of March 2025 and possibly contributed by 18 million euro. Ravene FSRU that started operation in May and contributed by 4 million euro. In detail, the regulated revenues growth was driven by transport and storage revenues increased by around 77 million euros linked to the investment plan execution. Fast money effect for around 11 million euros. Higher allowed OPEX mainly due to inflation. These effects were partially counterbalanced by the absence of LNG extra revenues recognized in second quarter 2024 for around 40 million euros. The output base reduction of around 70 million euros versus last year, mainly attributable to the storage reverse flow services and the expected phase-out of input base incentives. The increase in gas infrastructure operating costs, about 30 million euros, is mainly attributable to level costs, in large part due to inflation and new hires. With regard to the energy transition business, the 8 million euro EBITDA contribution is is mainly driven by biomethane supported by higher volumes. As for the full year, our guidance is €2,850,000,000 EBDA, which does not reflect the positive impact of the 2024 deflator update, which accounts for around €52,000,000, nor the switch to Italian IPCA index for rubber evaluation starting in 2025, which is worth approximately €40,000,000 for the full year. As described at page 11, during first half 2025, our associates contributed to the group net income by €204 million or plus €47 million increase compared to the same period of the previous year. Out of the total contribution, €131 million came from our foreign associates and the remaining €73 million from the Italian associates. Let's now dive into the performance of each one. TAP's slightly higher year-on-year contribution is driven by inflation-adjusted tariffs and lower net financial expenses. With 15% of Italian imports covered in the first half of 2025, TAP is the second largest import route by a pipeline, with commercial operations starts of the 1.2 BCM expansion in January 2026. Construction works are almost completed and commissioning activities have already started. The corridors operating performance remain broadly in line year on year, with approximately 11 BCM of gas transported to Italy in the first half of the year, confirming it as the country's leading import route by a pipe. The REGA contribution was slightly lower compared to the first half of 2024, mainly due to higher energy costs driven by strong storage withdrawals, as well as higher interest expenses following a bond refinancing in 2024. Moving to Austria, TAG benefited from the new regulatory framework, which removes volume risk, allowing TAG to fully record allowed revenues versus last year, bringing net income contribution to positive. Also, GCA's performance benefited from the new regulatory framework, however, offset by a worsening in the booking situation, which will be recovered from T plus 2. In H1 2025, we recorded a significant increase of exports from Italy to Austria, underline the strategic relevance of this route. Deaths for lower contribution is due to lower auction premium on LNG imports and exports to Bulgaria, now in line with historical trends. However, Greek demand rose by 15% compared to first half 2024, driven by a colder winter and a higher demand for power generation. Alexandropolis FSRU is expected to be back in operation by the beginning of the next thermal year 2025-2026. Interconnexus contribution remains in line year-on-year since we are reaching the yearly regulatory cap thanks to capacity almost 50% book until 2026. EMG contribution is substantially in line versus first half 2024. We do not expect to record material deviation on the yearly contribution from the upstream interruption occurred in June. Regarding... ...represented only one month on the stinking contribution, while you can see the consolidated report level, the capital gain. Italian associated growth is mainly driven by heat and gas overperformance in First Alpha and by higher contribution from Adriatic LNG following the increase... of SNAP participation in the company from last December. For the full year, we expect approximately 360-365 million of contribution from associates, assuming OGA contribution starts in fourth quarter. You will find in the index the updated info pack with detailed contribution and data of all our associates. Let's now move to the first half 2025 net income analysis on slide number 12. Adjusted net income for the period was €750 million plus 8.5% compared to first half 2024 due to higher DNA by €51 million following rising investments and entering into perimeter of Stogica Adriatica from March and Ravene FSRU from May. Higher net financial expenses by €22 million mainly driven by a slight increase in financial expenses related to debt reflecting higher financial indebtedness with an average cost of net debt flat at approximately 2.5%, lower non-debt-related financial income, in particular lower interest related to the default service. Higher contribution from associates, as already commented, which was the result of higher international associate contribution for 20 million euro, and higher Italian associates for 27 million euro. Lower taxes reflected higher contribution from associates to EDT, as well as tax credit adjustment late 2024 income taxes. It is important to note that the €1,350,000 net income full-year guidance does not include the positive impact of the 2024 deflator update, which is worth around €52 million, nor the switch to the Italian IPCA index for rubber evaluation starting in 2025, estimated at approximately €40 million for the full year. Turning now to cash flow on slide number 13. Cash flow from operations for the period amounted to around €1,118,000,000 and was the result of €1,039,000,000 of funds from operations and €79,000,000 of working capital cash generation. The change in working capital was mainly driven by regulatory working capital with around €300,000,000 to tariff-related items, mainly driven by additional tariff components, around 330 million absorption due to balancing and settlement activities and default service, and about 100 million cash generation mainly driven by super bonus fiscal credit decrease. Net investment for the period amounted to 1,575,000,000 euros, including 564,000,000 euros of cash out related to storage Adriatica and around 133,000,000 euros of ad-hoc disposal cashing. Other outflows were related to the payment of dividends for €955 million, resulting in a change in net debt of about €1,342,000,000. The BDA cash conversion reached a very healthy 78%. Moving to slide number 14, net debt amounted to around €17.6 billion at the end of the first half of 2025. Net cost of debt, which is calculated as financial charges net of liquidity incomes on average net debt for the period, remains stable at 2.5%, while fixed floating mix is at 89.11%. The stable finance ratio is at 86%, well on track to reach our long-term target of 90% by 2029. The new sustainable finance framework has been published, including the new targets on carbon neutrality for Scope 1 and 2 by 2040 and net zero for all Scope by 2050. Following the publication, SNAM successfully placed its first U.S. dollar multi-tranche sustainability bond totaling $2 billion. It represents the first sustainability link transaction globally with a net zero emission target across Scope 1, 2, and 3. Moreover, in June we have published the European Green Bond spreadsheet in a full alignment with the European Green Bond standards. Following it, we issued our first Green Bond aligned with the European Green Bond standards for a total amount of €1 billion, the largest European Green Bond by European corporates so far. Following these two transactions, funding for the year is completed, leaving the remaining part of the year for further opportunistic pre-funding activities. Credit ratings were confirmed by Moody's and Fitch following OJ acquisition announcements, while Standard & Poor's raised NAMP positioning to A-, following the upgrade of the sovereign, providing the strengths of our credit metrics and business profile. I will now hand over to Agostino for the closing remarks.

Thank you very much, Luca. In conclusion, we have reported solid financial results, across all key indicators while making tangible progress in the execution of our strategic plan. This confirms the strength and the resilience of our business model. The broader energy and geopolitical landscape remains volatile and complex. In this context, the central role of gas within the energy system has become increasingly evident. Our infrastructure, has proven essential both in supporting supply diversification and in providing the flexibility needed to balance a market that is increasingly reliant on intermittent renewable sources. Looking ahead, we benefit from strong visibility and we are very comfortably on track to deliver or even exceed our full year 25 guidance. As a new CEO, I am fully committed to delivering sustainable growth, maximizing long-term value creation for all our stakeholders, and preserving the company's robust financial position and flexibility. We move forward with confidence, supported by solid fundamentals, a clear strategy, and a purpose-driven organization ready. And on this, let me thank all the SNAM people for the tremendous effort and professionalism they put in their daily activity. In conclusion, things are happening in a very volatile energy environment, as NAM wants to play a central role in reshaping the energy sector toward the future. We are now available to take all your questions in a live Q&A session. Thank you very much.

This is the chorus call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. The first question is from Javier Suarez of Mediobanca. Please go ahead.

Hi, everyone, and thank you for the presentation. Three questions. The first one is a high-profile, I guess, question after the publication in the Italian press of the first draft of the energy decree that should be approved by the Council of Ministries anytime soon. The question is, which are the implications of that energy decree draft? for a company like SNAN and the implication for your strategic priorities. That is a question for the CEO. Then second question is on your guidance. So the numbers, the net income that the company has released represents 55% of the net income target and the guidance is not considered any important. regulatory update so the question is what is preventing you from increasing the guidance just for the sake of being conservative or there is something that we should be aware of that is preventing you for increasing that guidance at this stage and then the third question is a specific question on the carbon capture and storage activity if you can provide more color on the long-term strategy from the company in that activity and the implications that this may have for a company like SNAM. Thank you.

Thank you very much, Javier. It's a pleasure to take your question. Regarding, in general, let me say, the strategy of SNAM and the approach related to what is happening on the legislative framework, well, I think that We do have an environment in which we have to face as a nation high energy cost and also some increasing concern for the security of supply. This is our life in the latest four or five years with the crisis following the invasion of Ukraine. And also, this is something that is continuing with the recent events and blackouts events that happened not so far from here. But there are some concerns about the stability of the electricity systems and the long-term perspective about such sector. I do appreciate a lot the effort of the government in trying to find long-term solution to these complicated issues. that involves the proper structure of the market after 30 years of functioning of a certain market system that probably was defined several years ago with different priorities and the criteria that now need to be updated. So we are very positive on this. But we don't want to play, let me say, a passive role. We want to play a proactive role in supporting institution to find the right solution. We presented last January a business plan. And I say we, meaning that the business plan is not my business plan. It's the business plan of the company. I personally will be focused in ensuring continuity and delivery. And at a certain point, we will update such business plan. I want to ensure that STEM will remain a key pillar of the European energy system and a current over the security of supply, especially when the geopolitical market dynamics are changing rapidly and unpredictably. What we know is that today, the gas molecules represent more or less 30% of the energy mix, and this represents the main source of electricity in the country. We also consider financial discipline as an essential element of our strategy. We will continue seeking the right balance between investing or grow while maintaining a solid capital structure in order to be able to deliver a long-term value for all our shareholders. We are also conducting an in-depth review of our portfolio of associates and all the ancillary businesses to assess how they best fit with our strategy, maximize their value creation for SNAM and stakeholders. Regarding your second question on the update, potential update of the guidance, well, you're right. We are talking about very positive results, and based on the results at the end of June, we are more than comfortable to deliver the full guidance, even to exceed such guidance. You have also to consider that the $1.35 billion of adjusted net income guidance does not reflect the positive impact from the deflator update, which accounts per se for around $52 billion. So, for sure, there is good possibility that we will exceed such guidance. But you have to consider that I've just taken the role of NAMCO, and I'm now currently conducting a thorough review of all potential upsides and risks, if not anything relevant. But while the initial signs are more than encouraging, I believe it's still premature to formally revise the guidance before completing such analysis. Although you expect that additional 90 million deflator update at least will be finally delivered. We will come back on this in November when we'll comment our nine-month results. Relating CCS, well, from a technical standpoint, let me say that we are continuing to advance in the Ravenna CCS project with a very good partnership with E&I. We consider that CCS will be a relevant part of our industrial future. And this is something that need to be connected with what we just explained during the presentation. We know that we will need a certain amount of gas to continue to provide technical support to the electricity system and to industrial sector. This is what I mean with energy integration We have to integrate our gas and we have to accept that a certain part of CO2 need to be emitted. So the question is not how to put gas to zero because this is impossible from a technical standpoint, but how can we manage this in a sustainable way? And CCS is a technology tool that we want to explore at the best of our possibility And this is what we will do in the coming future. The Ravenna exercise is an excellent example of what Italian technology can do in partnership with relevant players. And aside this, we consider very positive the decision of the government to start discussing about the future regulation on CCS, We will follow it and we will provide all our support to this evolution.

Thank you.

The next question is from James Brown from Deutsche Bank. Please go ahead, sir.

Hi, thank you for taking my question and Agostino, congratulations on joining SNAM and I wish you all the best of luck in the new role. I just had one question actually and that was on new incentives. As I understand it, the regulator is working on potentially two or three new incentives for you or maybe two new incentives and you can propose one. So I was just wondering whether you could give us some more detail in terms of how you think those incentives might look, the new ones that the regulator is looking at, like how are they anticipated to work and when will they be brought in? Thank you very much.

Well, I think that you are talking about the consultation document issued by ARERA at the end of May. that contains adjustment to the implementation criteria for the ROS-based regulation. And of course, it includes also some element in order to anticipate some about the impact of some output-based incentives. Well, that's for sure an interesting tool. We will explore it. We'll do our best to take benefit from this evolution of the regulation. But let me tell you that we will follow proportionate approach. We want to not to use this tool with, let me say, speculative approach. We try to do our best to implement evolution that will provide real changes for the benefit of the final customers, but without creating any to our risk profile. Great.

Thank you so much.

The next question is from Bartek Kubicki of Bernstein. Please go ahead.

Thank you very much and good afternoon and Augustina, all the best as well. Two questions, one big picture and one company specific. is related to the EU-US deal announced over the weekend where EU is going to buy a much bigger amount of energy from the US. So I just wonder how do you look at this from gas infrastructure perspective because I guess it also means importing much more gas to the EU market. So your view, whether it's actually feasible and whether there's enough transport energy capacity in Europe and in Italy to take more U.S. gas. That would be the first one. And second, the company specific, it's look at you, regarding the funding structure. I recall in the past, SNAM used to have much higher proportion of floating debt. I think it was even hitting around 25% years ago. Now you have 11%, so you have kind of fixated a higher amount of your debt. Is it... Is it like this to be going forward? I mean, you want to have much more fixed debt in the funding structure, or this is only temporary and future will be financing with short-term floating debt as well? Thank you.

Thank you. Thank you very much, Bartek. And also, James, thank you very much for your . I will do my best as . So regarding the evolution on import side on LNG and the recent news happened between, on the agreement between you and the United States. Well, let's start from some historical figures. In 24, energy imports were evaluated at more or less 350, 370 billion euro, of which around 70, 75 billion, more or less 20% came from United States. Under the new trade agreement between the U.S. and the European Union, it seems that Europe committed to import 700 to 50 billion worth of energy, including a lot of things, oil, gas, nuclear, raw materials over three years. It means 250 billion per year that is more or less three times increase in the annual energy imports from the U.S. So let's look now, and nothing to comment on this, it's not up to me, but let's look at Italy specifically, looking at our gas demand. Well, full year 24, the total gas consumption was 62 billion cubic meters, of which 15 came off from LNG. So we are talking about 25%. On this 15 billion cubic meters, five came from US. If we move to 25, we do expect the total gas demand will move from 62 to 64, with 20 BCM, 20 billion cubic meters, so 30% expected from liquefied natural gas. If we look at the figures at the end of June, we are more or less on the U.S. gas where we were at the end of 24. And we expect that if this trend continues, we will expect to more or less double the volumes from U.S. in 25. If you look at the regasification capacity of the Ravenna terminal, that has been added to the other station unit, The total reclassification capacity for the country reached 28 billion cubic meters. That is more or less 50% of the capacity that could be used to accommodate potential LNG imports from the U.S. Regarding your question on depth structure, I will give the floor to Luca. Please, Luca.

Hi, Bartek. Regarding, you know, the funding structure, the 89, 11% fixed to floating is temporary. We have, let me say, a target to be on 75, 25 every year. It's temporary, and it's related to the fact that we issued longer-term fixed rate as you might recall in the U.S. So current duration is 4.7 years overall. We expect to finish the year shortening the duration between 4.2 and 4.3 average, as well as cost of funding. Today is 2.5. We expect to finish the year at 2.6% overall net debt cost of funding.

Thank you very much.

The next question is from Alberto D'Antonio of BNP Paribas XA. Please, go ahead.

Hi. Your new role. And a couple of questions from my side. And the first one may be a follow-up on guidance regarding the net income of 1.35 billion. And you mentioned the deflator, which is 52, so 52 million. And then the APCA adjustment. Could you remind me the number is 40, so 4-0 or 14-1-4? It will be the first one. Then the second one is regarding the ItalCas stake that you have not fully subscribed all the shares. And actually the share has performed really well. Could you consider to sell or part of this stake to finance your operations? Do you have a full discretionary decision power regarding this or would you have to reach an agreement with CDP, your major shareholder, or do you have any other contractual or legal requirement that prevents for doing so? And finally, maybe if you could update us on the mark-to-market value of the WACC for 2026, if you expect the threshold of the trigger mechanism to be rich or it's still below the 30 basis points. Thank you so much.

Okay, Alberto. So the two positive effects which are not currently in the guidance is 52 million euros regarding the adjustment of the deflatable inflation index for 2024, which is 52 million, 5-2, and 40 million, the move to IPCA for 2025. So 92 million in total pre-tax. And that's, you know, basically what is not currently included in the formal guidance. Regarding the ItalGas stake, you might recall that we have one shareholder pact with CDP, which is our shareholder and also ItalGas shareholder, that provides us not to go below 6.4% in ItalGas. And on top of that, we've issued an exchangeable back in 2023 that is basically covering what is left between 6.5% and 11.4%, which is our current stake. Therefore, we do not expect to do anything on italgas, given, you know, the contractual framework that is actually in place on both the exchangeable as well as the shareholder pact. Regarding the third question, mark-to-market on WAC, we currently are still above the triggering mechanism on the WAC. It's currently 15 basis points away on the transport, which is the, I would say, most relevant one, and about five to six basis points away when it comes to regasification. There are only two months left, so our expectation is clearly for the trigger not to be triggered.

For any further questions, please press star and 1 on your telephone. The next question is a follow-up of Alberto De Antonio from BNP Paribas. Please go ahead.

Hi. Thank you so much again for taking my questions. Maybe one additional question regarding your debt. In 2026, you will have to finance around 3.6, refinance around 3.6 billion of that much you've been doing in 2026. What is the expected impact on your cost of debt, and what do you see the average cost of debt by year-end 2026? And also, maybe if you could explain us the rationale behind issuing some debt in U.S. dollars, and whether you think that this is an interesting way of financial operation, given that actually all of your operation are in euros. Thank you so much.

Thank you, Alberto. I'm answering first the second part of your question. So the reason why we have tapped the U.S. dollar market is because it's the most, I would say, developed capital market when it comes to fixed income across the globe. The company with its investment plan has between 2.5 and 3.5 billion of funding every year to be done, and clearly the euro market is – I would say very available to us, but we want to have alternatives, so diversification of funding. Now, we don't take any currency risk. When we issue in dollars, we swapped all our issuance directly into euro, so there is no currency risk attacks, and the rationale is just to diversify market access. When it comes to 2026, we haven't gave the guidance on our expected cost of debt. I said that 2025 full year expected cost of debt is 2.6%. Clearly, if interest rates remains where they are, we might have some increase, but we're very far away from the 3%, which is at the end of our plan in terms of estimates.

Yes, if I may add something, Luca, if you don't mind. I will insist on what I told you previously. We consider our financial stability and confirmation of our rating important element of the strategy of the company. We will do our best to keep it, to keep the debt under very strict control, to pay as less as possible for future investments. future bonds and also consider, I said before that I would like also to explore all the possibility inside our portfolio in order to assess if all the participation that we do have are strategic or not and also leveraging on these to make our capital structure more and more efficient also in the future.

Any further questions, please press star and one on your telephone. There are no more questions registered at this time.

Thank you very much for listening to the call. As usual, the investor relation department is available for any follow-up questions. Thank you very much.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.