A2A S.p.A. (A2A.MI) Earnings Call Transcript & Summary

Good morning. Thank you, everyone, for attending our Capital Market Day. We have a couple of busy hours in front of us. First, our CFO, Luca Moroni, will comment the 9 months results. Then our CEO, Renato Mazzoncini, will drive you through the update of our capital and the strategic plan at 2035. So without spending any more time, we are ready to start, and I leave the floor to Luca.

Thank you very much, Marco. I will go through the presentation of our 9 months results. So starting from the highlights as usual. Perfect. So we show a good resilience in economic and financial results despite the exceptional hydroelectric production of the previous year. The contribution of margin deriving from the growing performance of electricity network, the higher premium on the capacity market and the increase in the urban waste treatment prices absorbed the negative effect arising from lower hydrolytic production returning to historical average levels and the exit from safeguard market. Sound economic and financial performance confirmed. Reported EBITDA recorded a limited decrease, reaching EUR 1,729 million. Net of the impact deriving from Hydroelectric production, which is one of the few exceptional effects recorded in 2024, EBITDA grew by 3%. Ordinary net income, excluding special items recorded on both '24 and '25 showed a decrease of 16% compared 9 months '24, standing at EUR 559 million. Adjusting '24 results for the effect of last year Hydroelectric production, [indiscernible] net income decreased by 3%. We confirm the solidity of our financial ratios. Our net financial position land at EUR 5.3 billion with a net financial position to EBITDA ratio equal to 2.4x, with a decrease compared last year's 2.5x. Resilient EBITDA despite normalization in Hydro volumes. Despite a normalization in Hydro volumes, EBITDA remained resilient. Generation & Trading ordinary EBITDA amounted to EUR 623 million with a decrease of 20%, EUR 160 million less compared to the first 9 months '24. The change is mainly attributable to the normalization of our Hydro production, minus 26%, minus 1 terawatt hour, resulting in a margin reduction of around EUR 130 million. The lower opportunity from energy commodity hedging, the higher contribution of thermoelectric production and the increase in the premium awarded, on the capacity market. Supply ordinary EBITDA amounted at EUR 328 million with a decrease of 9%, minus EUR 34 million compared to the 9 months '24. We confirm the level of the marginality recorded in the same period of last year, net of the effect from the safeguard market, which is -- which account EUR 33 million. So the outcome is the positive effect of the commercial development of free market electricity segment, 109,000 customers more, compared last year, plus 7%, lower retention costs and the increase in operating costs arising from sales channel mix. Circular economy ordinary EBITDA amounted to EUR 423 million with a growth of EUR 20 million, plus 5%, compared to first 9 months '24. Here also the increase is mainly attributable to the positive contribution of waste-to-energy treatment prices, being partially offset by lower margin from the new contract with the [indiscernible] region for the management of [indiscernible] plant. The positive contribution of district heating, thanks to higher volumes sold, plus 96 gigawatt per hour, plus 5% and higher volumes from sales of [ white certificates ]. The decrease in the Collection segment, mainly following the new contract signed with Milan after the tender slightly affected the marginality. Regulated network ordinary EBITDA amounted to EUR 359 million with a decrease of EUR 29 million year-on-year. Decrease in the margin is mainly attributable to the performance of the new perimeter in the electricity network at plus EUR 68 million as well as the increase in a low revenues of historical perimeter, plus EUR 23 million and the lower marginality deriving from the disposal of gas distribution assets. Let's see our income statement, starting from EBITDA of EUR 1,729 million. We recorded EUR 704 million depreciation, amortization and write-off, up to compared last year, EUR 45 million, EUR 23 million for the delta perimeter of the new electricity company, Duereti, and the new CapEx plan carried out during the period. Net provision of EUR 69 million. Net financial expenses of EUR 128 million due to the new debt volume effect. I just recall the new issuance we had in January of the EU Green Bond in the new format and the bridge loan for the acquisition of the new asset from Enel Distribuzione. Taxes of EUR 244 million with a reduction of EUR 42 million compared to the first 9 months '24 with a tax rate of 29%, in line with the previous year. Minor interest of EUR 28 million for a net income of EUR 559 million, including EUR 22 million of special item, mainly due to the plus value coming from the asset deal of the gas network. The group net income is EUR 581 million. We continue to invest to growth and to support ecological transition. CapEx in the first 9 months amounted to EUR 1,037 million, up 15% compared to 9 months of the previous year, supporting the ecological transition. Development CapEx amounted to EUR 618 million, mainly focused on upgrading the efficiency of the grid, the increasing of flexibility of generation plants and the development of photovoltaic and wind power plants. 70% of the CapEx are eligible for taxonomy and 51% are aligned. Net free cash flow during the period, the change in our net financial position was positive and amounted to EUR 518 million. Operating cash flow fully financed CapEx plan and dividend payments, which is a very good news. As of September 30, the company reported a net financial position of EUR 5,317 million, consistent with the first half, reflecting an improvement of net financial position to EBITDA ratio to 2.4x compared to 2.5x as of the end of December '24. So in light of the solid results, we have just commented, our guidance for EBITDA is confirmed in the upper end of the range. EUR 2.17 billion, EUR 2.20 billion, and the group net profit net of nonrecurring items between the range of EUR 680 million, EUR 700 million. Thank you very much.

Okay. Thank you, Luca, and good morning, everyone. Thank you for being here or connected at our Capital Market Day. Since Luca's presentation of the last quarter, you have seen the name of the plan presented last year, [indiscernible], which told the story of a company that is committed to building the future every day by investing in infrastructure, renewable energy and smart grids. We need more power today, more efficiency and more sustainability. And data is the heart of this revolution and data centers are spreading across our territory and are growing very quickly. And today, we are ready to seize our momentum, to drive the digital and ecological transition with competencies and responsibility. Just a moment guys, because I started without move the slide. And -- No company is future-proof, but some company are future-ready. And A2A is one such company, ready to face future and ready to power. Today, we will illustrate how A2A is writing one of the most compelling success stories in Europe energy landscape, a story built on financial discipline, industrial excellences and strategical foresight with a long-term vision that focuses on the twofold opportunities of energy transition and circular economy, further accelerated by artificial intelligence development. I'll begin by giving you a brief overview. So we start with a brief overview of the energy landscape that I think can be very interesting for you and we will then run through the key highlights of our strategy. And then I'll hand over to Luca, who will illustrate you, our key financials and our long-term financial stability underpins our growth and ensure the platform for our acceleration into the future. So start with the landscape. Electrification is driven by a rapid growth of data center, which we will talk about at length during the presentation, but not only because also e-mobility and heat pumps are constantly decreasing in cost and entering the market, creating totally additional electrical demand. In this graph, you can see the growth of electrical demand in the next year. And in this graph clearly shows that the demand for electricity is growing, while at the same time, the demand for fossil energy is decreasing. Overall, the total final consumption is decreasing because the efficiency of electrical equipment as well -- is much higher than fossil fuel equivalents and so there is a total reduction. And therefore, electrification is also the only route to decarbonization. Decarbonization where also more niche but fundamental technologies in complex urban context such as waste-to-energy or district heating also helps. And so let's have a closer look of data center trend in Italy. In this map, you can see the total capacity of 55 gigawatt of connection already requested to Terna. The geographical distribution not only rewards Lombardy, which is not a surprise, but also two regions in the South, in particular, [indiscernible] in Sicily, which are located on some of the most important underwater data networks in the world and will, therefore, be able to seize opportunities. So let's think of our plants in the North, but also of sites such as [indiscernible] in Sicily or [indiscernible] Pula. Our estimated, which we presented, you remember in September in [indiscernible] is one of the most conservative on the market in this moment. The base scenario, 2.3 gigawatt, full potential 4.6 gigawatt, and the potential of heat recovery for district heating is interesting because it can double the thermal energy available. That is a particularly interesting opportunity in Milano, which sees 50% of Italian data centers on its territory and the district heating network that currently covers only less 20% of buildings. So from one side, great opportunity to grow district heating from the other it's recovery from data center. Investment needs in electricity distribution grid in Italy are over EUR 10 billion per year only over the horizon of our industrial plan '35, mainly driven by new demand, but also by the need to connect new renewable generation and renewable grid. And it's also interesting to see that the [indiscernible] that is our National Integrated Plan Energy and Climate updated by the Milan government in '24 has pushed the renewable energy target to a level never seen before, 63% by 2030, which, in my opinion, is the obvious reaction after rewards of a country that is the third in Europe for renewable potential after Norway and France. But Italy as neither Norway's fossil fuel nor France's nuclear power. And with renewables, also storage is growing. It's interesting the result of the first [indiscernible] tender -- and the result is due to very low battery prices, the result of competition between Chinese players and consequently, a very low price of time shift. We have calculated about EUR 30, EUR 35 per megawatt hours of the cost of time shift, which make renewable even more competitive during the day. Finally, I would like to point out that the capacity market programs launched by Terna in recent years to avoid the risk of blackouts such as [indiscernible] in Spain are leading to the construction of a powerful fleet of new high-efficiency gas-fired GGT plants. The efficiency is 62%, 63% compared with 40%, 50% of efficiency for the older plants, less CO2, lower energy price, which replaces Italian generation fleet with a power of 5 gigawatt, but more or less is equal to all the Spanish nuclear power. And what is key is that the load factor of GGTs now is around 20% and also in the horizon of the plan without data center. That means that is therefore more than able to cope with the increase in demand from data center. It is enough to look at the following graph to understand how our strategic decision in recent years have permitted A2A to pave the way toward electrification in Italy. We invested EUR 10 billion over the last 10 years, EUR 10 billion, 60% of which focused on electrification. And our investment in electrification include the swap between part of network with Power Grid in province of Milan. The result is the swap in the value of RAB in our asset gas and power grid, focused investment in renewable with a good mix of wind and solar to build increasing competitive PPAs for our B2B customer and an electricity customer base that has grown by 61% between 2020 and today, 61% the customer base electrical. A2A has currently 3 unique features. The first, the presence in both energy transition and circular economy space. The second being established in Lombardy, which is the center of the development area and the third being ready, thanks to the previous investment choices. The first of them, which really distinguishes A2A in the Italian scenario is that is the sole player not only vertically integrated in energy transition networks generation and customer base, but also vertically integrated in circular economy with strong crossover elements such as waste to energy and district heating. And it is an issue that we have been supporting for some time. But today, a phenomenon has arrived that is focusing everyone's attention that is data center. A key tool of competition and enabler of the digital revolution, which, however, requires a systemic approach to sustainability issues. So connection to electricity grid, supply of baseload energy, but with low CO2 impact, efficient cooling system and heat recovery and efficient water management. And Lombardy once again is the heart of action. We are ready. We are ready. A2A is clearly a single development partner capable of addressing all this issue in an integrated and efficient way. This is our momentum driven by growth, new businesses and new geographies, increasing our productivity. And these are our numbers, which Luca will tell you about in more detail later. We are following the path placed in January '21, you remember, when we presented the first 10 years plan. At that time, the target seemed very challenging. But today, we are surpassing most of them despite the delays generated by COVID and worse. And today is the time of our momentum. EUR 23 billion of investment still growing in comparison with the Life Plan, of which EUR 16 billion in the energy transition. And what is important, however, is the graph -- this graph in which you can see the status of our investment. Of the EUR 23 billion of CapEx that will bring its way to EUR 3.6 billion of EBITDA, 35% are already completed or under construction, 35% already approved and ready to start. This is what is needed in Europe as Mr. [indiscernible] also reminds us in his famous report to build infrastructure that make Italy and Europe competitive and sustainable over time. Today, the 12th of November, we have over 250 large scale construction site in all our sector in this moment. And I ask if it's possible to send a video. A very short video. [Video Presentation] And so let's start with the highlights of the strategy. Electricity grid are still growing reaching EUR 4.9 billion, which will bring electricity RAB to EUR 4 billion by 2035. And the acceleration, as we will see, derives mainly from the efficient integration of the former Enel network. I would like to underline two aspects. The first is the EBITDA per [indiscernible] strong growth, thanks to both growing investment, of course, and the economy of scale generating by the doubling of the number of ports managed by A2A. Today, we arrive to 2 million of ports managed. The second aspect is the deployment of electricity network projected to triple our current rate in kilometers of electricity grid lead, reinforcing our commitment to electrification. And you can imagine. I am really happy that the Duereti deal was finally understood properly. The good news for all is that compared to the Duereti acquisition plan in the first year because you remember, we started to manage January '25, this network, we have developed 23% more CapEx than expected. And you know that the value of this network is the quantity of CapEx that you are able to invest on, which was not all obvious in a network that we didn't know and with an absolute value, more than double the investment made at the same pre-acquisition network in '24. And the EBITDA produced is 7% more than the estimated we had in the plan, in the acquisition plan. So we are very satisfied, both from a strategic point of view with the performance that we are achieving on the new network. The strategic value is clearly represented by the 280 megawatts of connection requested for data centers received only from January to date alone. Main connection for data centers up to 10 megawatt. So if the data center arise to 10 megawatt, is the main connection. Backup connection for larger ones because even the larger data center start with a 10-megawatt medium voltage connection because Duereti is faster than Terna in delivery and guarantees a faster time to market for developers. So the topic for them is this one. Today, everybody is talking about data centers, but let's not neglect mobility as car costs have fallen in the last years. This is interesting. 24% less city car, 12% less small car. You know in the same period, the cost of endothermic vehicle grew. So in line with the normal market dynamics, it will react according, reaching 20% of share of electrical vehicles by 2035. So we estimated that at national level, electricity consumption for electric transportation will reach 40 terawatt hour. But there is no doubt that Lombardy and Milano will be front runners also in E-mobility. So we continue to invest selectively in charging infrastructure, specializing in the two segments that we believe will be successful that are only low charging city [indiscernible], so low CapEx for urban widespread mobility or high-power charging apps in traffic extra urban areas. Regarding our investment in renewable energy, we confirm our commitment of reaching 3.7 gigawatt with a balanced development between wind and solar. But it's interesting that we estimate of the increase in production per megawatt installed, due to the effect of repowering and the increased productivity of new plants. We grew by 54% in wind and 28% in solar. And our pipeline has also grown now totaling over 2 gigawatt of wind and solar capacity. Of particular importance is the issue of the derisking of the generation portfolio, that is an issue for you, super important. The first level of derisking remains the diversification of generation sources, both in terms of technology and geography. Compared to the commonly used description, we have added an important distinction, so a new distinction between traditional GGTs and high-efficiency GGTs -- is the blue color. The latter, obviously, will have more market space. You remember 62%, 63% of efficiency and constitute one of the strategic elements of derisking. [indiscernible] incentivize renewable, a capacity market, but also by growing market for PPAs that is growing that we estimated will cover 65% of our renewable production and 70% of our energy mix will be renewable. Lastly, and importantly, the natural hedging between generation and customer base remain crucial. As can be seen from this graph, A2A remains long on sales with generation well covered by final customers' consumption along the whole plan. Regarding customer, so we talk a little bit about customer. The retail sector has been increased competition. These are the data according to ARERA data, the churn rates have risen by 1.8x in recent years. What is happening in '25 that is the curve is changing. But today, this is the data from ARERA. The electricity customer base will continue to grow compared to the gas. So you have seen our mix between customer gas and customer electricity customer is changing completely. And the acquisition strategy aims to carefully select geographies and sales channels focusing on the acquisition on the high-value customers. The target of 5 million customers remain confirmed as per previous plan and also this year despite the loss of customers under safeguard. Margins remain very healthy. In the B2B segment is interesting, the dynamics is the opposite. So the churn is declining with a rate that is now even lower than retail, probably is the first time in the history of our country. And of course, it's interesting because the B2B is a segment in which A2A is very active with over 10% of market share, precisely because of the strategy of vertical integration with generation that allow us to propose corporate PPAs. Corporate PPAs remains key and B2B customers are key, to close agreement in PPAs. Moving in the circular economy, let's start with the waste cycle. Italy is not a bad place on the European scene with respect to the 2035 goals. You remember 10%, no more than 10% in landfill, but there is still a lot to do. Frankly speaking, in the Lombardy region where the incumbent operator is in urban waste is today, the use of landfill is close to zero. The plan provides for growth in both the volume of waste treated and thermal and electrical energy recovered. It is worth mentioning that in '24, the third waste-to-energy line in [indiscernible] started up with a treatment capacity of more or less 250,000 tons. And another plant with another 250,000 tons is already under construction in Crotone, you have seen in the video. And today, A2A is the sole company in Italy that is building waste-to-energy plant in a situation in which the gap that we have to fill with the European target remain 4 million [indiscernible] tons. One of the new elements of this plan is the integration of waste management, water cycle, district heating and data center businesses into the new circular economy business unit. So we have built a new business unit named the Circular Economy with altogether this business. The Circular Economy business unit with EUR 6.5 billion of CapEx plan will reach EUR 1.3 billion of EBITDA. One of the lever will be a higher integration in the B2B supply chain. The Circular Economy business unit will be strongly impacted by the data center development. For example, the issue of water management becomes crucial with data center. So let's take a closer look on how A2A plans to approach the data center business. Let's start with the most easily predictable activity. A2A as an energy partner is normal of a data center in operation or under construction. We have estimated that growth in electricity demand from data center could reach 42 terawatt hours at the full potential of the scenario presented in [indiscernible]. Interesting that our scenario is significantly more conservative than the one published a few days ago by Terna [indiscernible]. The Terna scenario estimated electricity demand of almost 600 terawatt hours, 58 by 2050 with a significant contribution from data center. And also, Mr. [indiscernible] says that we will reach 600 terawatt hours of energy consumption. Again, based on our most conservative scenario, we have estimated that the demand for electricity connection to the medium voltage grid in province of Milano will reach 1,400 megawatts, and likewise, according to our assumption, we have estimated the energy that could be recovered from data centers for district heating with a full potential of 3 thermal terawatt hours capable of hitting about 300,000 apartments in Milano. The impact in terms of CapEx and EBITDA of A2A Energy Partner activity is included within the individual businesses. So in generation, market networks, district heating with potential upside to be captured. But if there is a party, we don't want to go just to [indiscernible] -- and therefore, since we have a very attractive value proposition, we have allocated EUR 1.6 billion of CapEx to develop a part of a great national data center plan. So let's take a closer look to our value proposition. One of the most important needs for data centers is evident related to low-cost high resilience baseload energy supply. The best configuration that guarantees these two elements at the same time is the direct connection of the generation plants to the data center, which requires simply that the data center to be located in close proximity to the generation plants. And it is interesting to see on the map how many generation plants A2A has in Lombardy and how concentrated they are around Milano. The baseload production, baseload production guaranteed by both our waste-to-energy plant and thermoelectrical plants combined with a growing mix of renewable is attracting a lot of interest from operators in terms of final energy supply cost and time to market. It's difficult in this moment to say what is better, cost of energy or time to market because it's the moment really very particular. The EBITDA we expected in 2035 supplementary through the activities of energy partners is EUR 0.4 billion by 2035. And the first projects have already been carefully identified and the first analysis are underway. I can't say the name today, but you can easily understand from the graph. It is very interesting to see in the graph what impact a partner like can have on the economics of the data center development. As you can see, 65% of the OpEx is related to energy consumption. The other is personnel and maintenance. And this 65% once again is 65% for server room, 25% for cooling system and 10% for other components. Thanks to a competitive advantage, we can work on the 65% of energy-related consumption and reduce the overall cost down to less than 50%. And believe me, this is super conservative. By direct connection between data center and generation plants in Italy, is named SSPC. So it's a direct connection, a cable that goes from generation to final user to reduce the network charges because in this case, you have not to pay TSO and DSO and the relative tax recovery. The second is heat recovery for district heating and efficient cooling supply. I keep energy and they reduce the cost for data center. Furthermore, PPAs and energy management could also reduce volatility risk of the business. Consider that data center is the perfect customer for PPAs because it's super predictive, the consumption of baseload of energy for all the life of the data center. I would like to close this section by talking about our geographical footprint, our backyard. I think it is important to recall that when we presented the first 10-year plan in January '21, some of you surely will remember, we had planned to develop A2A in Europe as well with some of the company's most core businesses, in particular, waste-to-energy and renewable energy. In '22, following the Russia-Ukraine award, we updated the business plan by bringing all CapEx back to Italy to contribute more quickly to our country's energy autonomy. But today, we believe that it is necessary to return to a more European footprint. The geographical diversification that lets us identify opportunities with higher returns and faster execution. So the tender, let's say, between [indiscernible] countries is to be more attractive for investment. Therefore, a part of the CapEx envisaged in the plan and not yet definitely allocated, there is a part of the CapEx that is not definitely located. That means not additional to be clear, can be used as an opportunity of international expansion, which will take place gradually and typically with the first inorganic moves. The focus remain on the core businesses, particularly in the waste value chain starting from waste to energy with potential integration with collection. There is a natural hedging between connection and treatment that we have to maintain and district heating and in the area of power value chain by integrating renewable generation, energy management and customer base. Our development strategy will lay on country commitment, identifying potential targets for an initial external growth as an anchor platform model for further development. The work is already underway, and we have identified priorities in different countries according to the targets. You can see the picture in the graph. For example, the Iberian Peninsula and U.K. are most interesting for waste-to-energy, while Germany and Poland are of interest in the power supply chain. Okay. I close this part. And now I leave the floor to Luca, so I can drink some water. Please, Luca.

Thank you. Thank you, Renato. I will now walk you through the planned financials. As an infrastructure company, we are presenting EUR 23 billion investments, a further increase on what we presented last year. This will generate profitable growth over the plan horizon and will enable the company to capture new opportunities arising from the evolving needs in the utility sector. CapEx deployment is going to fuel structural industrial EBITDA, substituting the temporary effect from better hydro condition and good hedging opportunity we seized during the last period. The EUR 23 billion of investment are driven by our two well-known pillars, energy transition and circular economy. But what it is new for you is the EUR 1.6 billion direct investment in data center, the data center platform, which I will elaborate later on. The expectation regarding electrification and the potential for fast and strong demand dynamics driven also by data center lead us to be more selective in our project pipeline. We have decided to increase investment in electricity grid by almost EUR 800 million and to refocus our treatment investment primarily on energy recovery. This plan will result in a robust EBITDA CAGR of plus 5% from 2025 to 2035 and plus 6% of CAGR if we switch our base to 2028 when the development of data center will start playing its role. The data center platform is our initial structural approach to embed this opportunity in our targets, driving a growing contribution up to EUR 300 million, EUR 400 million EBITDA in 2035. Finally, the EBITDA breakdown between merchant and low volatility activities highlights the adequate balance of risk and stability, which underscore our confidence in future growth, sustainability and long-term value creation. The value creation effort is also highlighted in the following slide. Our disciplined capital allocation across the three areas of expertise, generation and supply, circular economy and smart infrastructure is confirmed. CapEx are balanced among each segment and reflect the group strong growth orientation. Specifically, development CapEx is nearly 80% in generation and supply and circular economy and about 50% in the almost fully regulated smart infrastructure business. Overall, our investment target highly attractive return of more than 200 basis points above weighted average cost of capital. A2A focus on value creation is not new to you. So let's address what I'm sure is one of your curiosities, quantifying the opportunity arising from data center. As we have seen in other countries and considering our CEO's earlier remarks, this segment's potential could be incredibly strong. However, it is also true that it is something new in Italy. So we want to take on this new business, providing a quick response along with careful analysis and selective investment decisions. We aim to immediately position ourselves in the segment as a leading energy player. The direct investment in data center, our data center platform will serve as a perfect showcase for our energy management expertise. At the same time, the investment presents a risk return profile aligned with our financial discipline. Data center opportunity is already addressed in this plan with an early but clear target, double-digit return on invested capital with a potential scale-up of investment and become a growth engine within the company's portfolio. Ambitious and timely decision cannot be sustained without solid foundation. We foresee cash generation of EUR 14 billion after maintenance CapEx with a cash conversion rate above 50%, allowing us to maintain a solid financial leverage. The expected increase in our net debt by EUR 3 billion will be fully sustainable from a financial point of view with a 2.7x net financial position to EBITDA ratio in 2030 and 2.4 in 2035. Thanks to a well-managed cost of debt, we estimate a maximum of 3.3% in 2035. The impact of financial expenses in our plan is limited. We have planned for EUR 10 billion funding needs over the planned time period, of which EUR 7 billion is refinancing of existing debt. To ensure a proper risk management, we have adopted a proactive approach to the capital structure, strategically setting the proper mix of floating and fixed rates. We are leveraging sustainability and innovation, targeting 100% ESG debt by 2035 and remaining open to new solutions, as demonstrated by our recent successful deal, the first ever European Green Bond in the market and the first Blue Bond in the Italian market. Our financial policy ensure liquidity and credit strength. We have built a well-balanced debt maturity profile with an average duration above 5 years, thus managing refinancing risk. Our liquidity position is strong with cash and undrawn committed lines comfortably covering our needs. Lastly, we confirm our commitment to maintaining our current rating with FFO to net debt ratio above 24% throughout the period of plan. Infrastructure growth investments and effective capital allocation will lead to a solid earnings profile, strong revenue and shareholder value creation. Earnings per share are expected to grow at a compound annual rate of plus 6% from 2025 to 2035 with a robust 8% of growth in the period of '28 to '35. The growth doesn't include the full potential coming from data center. namely increasing electricity supply, medium voltage connection, district heating network expansion. Our commitment at least 4% year-over-year dividend growth is confirmed, reinforcing the company focus on rewarding shareholders while maintaining financial discipline. We believe that the fruit of our financial management will continue to make A2A a very attractive proposition for our shareholders with a forecast return on investment of plus 9%, a 12% of return on equity and a payout ratio between 45% and 55%. Our guidance is expected EBITDA between EUR 2.21 billion to EUR 2.25 billion and ordinary net income ranging from EUR 630 million to EUR 660 million. These figures reflect the company confidence in achieving a steady operational performance and short-term profitability while laying the foundation for a stronger future growth through a remarkable CapEx plan. Thank you. I will now leave the floor again to Renato.

Thank you, Luca. And a few minutes for closing remarks, and then we will start with questions. Also because it has been a long, but I hope it's interesting presentation. The opportunities are many. And as in the presentation of life years plan, let me leave you with this thought. A2A growth today no longer has the bottleneck of industrial machine. On the contrary, it is full of human capital that wants to do -- want to grow and to create long-lasting value. If any, the bottleneck is our solid and rigorous approach to financial policies, which could also open up to partnership to seize further opportunities in the future. In this slide, you can see another EUR 300 million of potential EBITDA that can be generated by other projects that we already have in the pipeline. Talking about new [ GGTs, ] battery, reinforcement of electricity, the grid district heating growth and so on. We have many things in the toolbox, but not everything. And this is why we have decided to set up the new life venture company to increase our commitment to innovation, venture capital and collaboration with start-ups, universities and research centers. And today, A2A is the largest Italian corporate venture capital in climate tech. And we have just launched the Life To Fund which already raised EUR 150 million out of the EUR 200 million final target. So we are very happy. There are many activities already underway with start-ups and many investments made in the past, [indiscernible], I think that is a super good example. And all are proving to be a great vision and foresight. A2A has already implemented several use cases with the start-up, including, for example, digital twin for predictive maintenance on electricity network, artificial intelligence powered plastic sorting. Really, believe me, digital twins on the networks, a lot of application, in this moment, we have more than 100 projects with artificial intelligence ongoing in the company. And finally, our commitment to a competitive but sustainable transition, our Net Zero commitment to 2050 and the decarbonization curve that you know to 2030 remains solid and remains solid because our decarbonization path will cope sustainability targets with improvement in our performance along our business lines, only some example in water cycle, district heating supply and so on. In this last slide, we summarize the main data, which need, I think, no further comment before we open the floor to your questions. Let me recap some of today's key points. To be in the right place at the right time is always a good thing, but it's not enough unless you are also future fit and ready to seize the short- and long-term opportunities. Today, A2A is ready, ready to power and in particular, ready to grasp the opportunities arising from the growth of data centers in Italy and in Europe. And our integrated industrial backbone powered by EUR 23 billion in strategic investment, expanding regulated assets and growing footprint in electrification, renewable and circular economy give us the scale and solidity to thrive through change. Our clear vision aligned with the Europe energy transition has enabled us to anticipate structural changes and to cover them into opportunities. And our economic stability has provided the platform for acceleration. And this is what makes us the company that is now driving renewed confidence and recognition in the market. Thank you very much, and the floor is open for your questions.

Thank you, Renato. Thank you, Luca. Now we -- first of all, we will open the questions to the floor, then we will also move to the collection lines. So let's start with the floor. First one Javier Suarez from Medibanca.

Thank you, Marco. So two questions that are the first group related to the short term and then to the medium term. Asking for the short-term assumptions that the company has changed in 2026, '27 and '28, can you share with us the underlying assumption for 2026, the changes that you have implemented because I have noticed that the previous net income target was EUR 700 million. If I'm not mistaken, now, the company is targeting EUR 650 million of net income in 2026. So the question is, what is -- which are the moving pieces for that? And then I have also noticed that the target for 2027 has been -- is the same one for 2028. So in that period, that goes from 2026 to 2028, what the company see through different lenses that makes that the profitability of the company and the net income is going to be lower? And then on the medium term, it is fair to say that the company has, for the first time, included into its business plan the data center opportunity from 2028 to 2035. And if that is the case, why the EUR 400 million of increase that you are forecasting is not fully translated into your previous target? Because previous target has been increased by EUR 300 million. Data center opportunity is quantified at EUR 400 million, which is the moving piece the EBITDA target. And a related question is a philosophical on the data center opportunity. How A2A see itself. It's going to be a builder of data center or is to be a company serving data center? And the last question to leave space to other colleagues is how A2A see this business? Because I have noticed that the business hasn't been included into the generation business, has been included into the [indiscernible] circular economy unit. This means that the companies [ see ] are different pricing, different dynamics, a different opportunity for this business that is going to be [ correlated ] from the generation activity. So the thing that I'm trying to capture is that the pricing of this electricity directly sold to data center are going to follow a completely different logic?

Okay. I tried to answer up to the medium term and then I leave Luca for '26, '27. Starting from the exactly from your last question, Javier. Yes, I think that the difference is [indiscernible] differences between this plan and the previous plan is the fact that we decided to invest directly in the development of data center. So to be energy partner, also energy partner able to bring a lot of opportunities from PPAs, grade and [indiscernible] it's normal for a company like us. We are happy to be fully integrated and so to give a lot of opportunities to our customer. What is not obvious is to invest directly EUR 1.6 billion to develop to build the data center. Because the business of data center is different compared to the size of data center. So there are the super big data center 200 megawatts or more probably will be built directly by the over the top Amazon, Google and so on. But the typical size that we expected to see in Italy in the next year is between, let's say, [ 5 and 100 ] probably. So in colocation business model. So the topic of the issue is to have a house for data center that is super efficient. To be able to host the rank of the customer that will arrive. And so our business model decide we should put EUR 1.6 billion on the table exactly to be able to be the owner of the data center. And this is the reason for [indiscernible] EUR 400 million of EBITDA on top on our previous guideline. Because our EUR 400 million completely linked to the CapEx to EUR 1.6 billion of CapEx. We [indiscernible] to have in 2030 already more than EUR 100 million of EBITDA and the [indiscernible] that grow till [ 400 ] with this CapEx. And so I think that is very interesting to understand that the opportunities is linked to the graph in which we have seen how many generation plants that we have in Lombardy. So the opportunities for data centers to be built near close through our generation plant is not easy, but it's absolutely not impossible because there are really a lot of opportunities. And the direct connection is the [indiscernible] application because the [indiscernible] application is to be able to reduce the charges for distribution and transmission. And we have a lot of waste to energy plant in Lombardy. Not only the [indiscernible], like [ Bassi ], [ Milano ], but also [indiscernible]. We have a lot of other plants in Bergamo and a lot of thermal plant. The big thermal plant can be able to attract super big data centers because if you have a thermal plant with 700 to 800-megawatt of power, you can source surely also data center with [indiscernible] or more. A waste-to-energy plant can be the super partner for a data center of medium size 20, 30 megawatts, for example. But big because in this moment, I remember that in Lombardy the biggest data center is the data center of a team in [ Rozzano ], near Milano, 30 megawatt. This is the situation in this moment in Italian. So talking about short term?

Yes. Let me start from EBITDA. Last year, when we presented the plan here, we clearly stated that we came from results that was blown by some exceptional situation like as the hydro volumes and the prices effect. We have calculated those effects into EUR 300 million. So you need to consider 2024 with this normalization. Having said that, 2025, has a queue of price effects because the normalization of prices is going to be to lead us at a level between 100 and 110, which is the normalization of the scenario we ever considered. And if you make the calculation, we are still [ EUR 80 million, EUR 90 million ] in '26 as a queue of the scenario effect. But we did a quite a good job in recovery and being at the same level in terms of EBITDA as in the previous plan. Going forward, we start to have the impact of the data center opportunities, again, which we have considered -- as I say it is very usual for A2A in a very prudent approach. You have seen it. The chance could be really huge. We keep the food underground -- in the ground step-by-step considering only few opportunities on which leverage our growth in the midterm. In terms of EBITDA, we have a couple of things which lowered a little bit the level compared to the previous one, which is the calculation of the allocation of the prices for the acquisition of the network from [ NL ]. As you know, it is an accounting procedure we need to follow for the purchase price allocation. This will account EUR 20 million in terms of depreciation and amortization, starting from the end of this year and '26 onwards. And we have changed a little bit the mix of our CapEx. You have seen we have increased the CapEx plan in electrical distribution with almost EUR 800 million of higher CapEx. And this leaves us from the calculation with higher depreciation compared to last year. So these are the three aspects, energy -- the queue of the energy scenario and the depreciation and amortization.

Talking about bigger construction site, what will [indiscernible] the differences in the next year is Monfalcone. Monfalcone, the first parallel so the first connection with the grid will arrive in October '26. And we estimated to have the operational activities of EBITDA that is EUR 10 million every month since January '27. The second is in more or less in the middle of '28, the new [ West Energy ] plant in [ Corteolona ]. Of course, there are a lot of other CapEx investment, but these 2 elements altogether are about EUR 200 million. So this is the reason for why from '28, you see the full potential of these 2 plants and EBITDA but come back to grow quickly. I think that what is key to understand, but I'm sure that it's clear for you, is that the scenario effect was crucial in the last year, and we was able to offset most of scenario effect due to the CapEx that we did in the last year.

Okay. Let's start. Emanuele Oggioni from Kepler.

Emanuele Oggioni from Kepler. The first question is on the revenue model on data centers. On -- you mentioned before is more than EUR 100 million of EBITDA contribution in 2030, and EUR 400 million in 2035. So what could be the revenue model and the breakdown between generation [indiscernible] networks and also other fee services related to the that recognition to your plans? This is the first question. The second is on the RAB. You increased the -- sorry, the first -- the second question is on renewables. Basically, you cut by EUR 1 billion, the CapEx plan compared with the previous one. At 3.7 billion from EUR 4.7 billion for an additional capacity of 1 gigawatt additional capacity in 2030. So I think this could be one of the reason also the some postponement, or as I said before, the delay of the EBITDA from '27 to '28? And what is the visibility on this -- due to the favorable track record in Italy, not up to [indiscernible] but up to the system overall is quite -- is not excel and in Italy every year, we experienced delay with severe delays in the permitting process, et cetera. And the third question is on RAB. In -- sorry, for the generation business, the CapEx related to the CapEx, the additional question was also the if you have considered, or to what extent you are considered not -- probably not basing on your slides, the possible expansion of renewal of hydrated concession? So what this issue or driver could be further upside probably on the plan? And back to the RAB. The RAB was increased, if I am correct, from EUR 3.4 billion to EUR 4 billion in 2035. So in this case, to what extent the electricity distribution concession renewal extension from 10 up to 20 years, et cetera, will -- has been already considered or not [indiscernible] would be an additional incremental CapEx and development?

Okay, Emanuele. Starting from generation because it's easier to consider that in this presentation, we decided not to recall all what we have in the plan. So the hydro is not in the presentation, but is in the plan. That means that the EUR 4.7 billion of CapEx presented in Life Yards plan included EUR 1 billion for hydro. So the total CapEx for solar and wind remain the same, [ 3.7 ]. EUR 1 billion is inside the plan exactly for the extension of the concession. And we are absolutely confident on the extension of the concession. And this is the reason for why we decided not to focus during the presentation, topic, but exactly [indiscernible] is particularly dedicated. So we want to close the number, are inside the plan, and we imagine to be able to go absolutely in continuity. The revenue model. As we said, the revenue model included our natural activities in supply, distribution [indiscernible] inside our businesses. Probably, there are some upside because in this moment, we imagine that due to the increasing electrical demand. The price of energy will remain more or less at an extra level. But probably being a lombard and due, for example, to the opportunity to development of this heating, or activity with water management. But can be very [indiscernible] with data center. However historical activity can grow. But the EUR 400 million are location of data center. So the business model, this EUR 400 million are completely out of our business -- classical business line. So CapEx and location of space in data center. On the grid, Luca, [indiscernible] do you want to?

I didn't get the question on the RAB, if you can repeat it for one?

It was about [indiscernible] extension to the grid distribution.

Yes, we are waiting for the decree.

We are waiting for [indiscernible] No, no. [indiscernible] The CapEx are absolutely included because in this moment, our investment in the grid is more or less [indiscernible] than the average national level. So surely, A2A is not to put [ other ] on the table. But to know when we start, the problem is that there is an activity from ARERA, and in this moment, we are waiting for the new board of ARERA will arrive, I think that quickly the situation will be closed. [indiscernible] is what we expected like extension 30/50.

And we haven't included any installed payments upfront for the new or the new or the concession, also taking into consideration that there is a discussion in place if this amount of money should be paid or not, considering the bill of the customer. But anyway, doesn't change the picture.

Roberto Letizia from Equita.

Of course, I need to remain on the data center because it's the most interesting part. So just wondering, you're including the EUR 400 million as the return on the investment. But is there the whole upside of serving the energy providing the heating? Or is that included within the EUR 400 million? And if so, how much of that EUR 400 million would be purely the return on direct investment rather than service. So maybe 30% is direct investment, 70% is servicing, forward heating and so on? Just a clarification. Is it -- is that referring to the baseline scenario and not to the full upside potential just to clarify that. And wondering if in that EUR 400 million , there is any inclusion of connection fees? Or the connection fees would potentially come on top of that because that changes the overall return assumption. I would like to recover Javier's question on the 2035 because actually, the old target was EUR 3.3 billion. So if I add up the EUR 400 million, I would be on EUR 3.7 billion, but the target EUR 3.6 billion. So basically, there's a difference of EUR 100 million. Is that because part of the data center was already included in the old plan for the renewables contribution, for example. So just wondering if part of that was already in the old target? Then if you can share a little bit -- one piece of your assumption, which has to do with the [ CCGT ]. As a lot of energy is going to probably provide it by CCGTs. I guess you're assuming an improvement of the underlying spot spread, which are today negative. Can you share us just how much improvement in spark spread sets into the assumption of the data center contribution? And yet, one final one. If you can highlight it back again, the source of the significant client addition through the plan. So as the market conditions are changing significantly and you several times reported higher competition shrinking margins and so on. But you are still sticking to the significant growth in market share on the clients. So maybe we can touch base a little bit on that topic?

Okay. That [indiscernible] starting once again from data center. The EUR 4 million as of EBITDA is totally linked to the direct investment in data center. So it's completely out every EBITDA that arrives from connection, distributing, generation, supply and so on, that are included inside the other businesses. The EUR 1.6 billion is included in the [ 23 ], and this is the main reason for why we shift from [ EUR 22 million to EUR 23 million ] of CapEx. So there are EUR 1.6 billion of CapEx more than the last plan, EUR 400 million of EBITDA in 2035 more. It's correct. The sum is EUR 3.7 billion. There is a problem of approximation because the last was a little bit less than EUR 3.3 billion [indiscernible] little bit more than EUR 3.6 billion. But overall, this is the target. What is interesting, and I understand your question, your doubt is that [indiscernible] we have not changed our target in -- for example, grid connection, totally energy supply B2B -- yes, there is a growth, but not so huge. Or margin in generation, it is fast spread, for example, Also, if you imagine that the load factor of [ GGTs ] will change totally because to be able to source the data center, probably we need to go from 20% to 50% more or less. Well -- so it's clear that there are some upside inside this business. But we believe in this moment, but it's not bad that to remain conservative in the valuation of our structural plan business, considering that we are facing the new business of location -- development, allocation of data center in which our target is material, EUR 400 million is material. So we want to face this plan approaching the data center [indiscernible] from all perspective. When joking, I said I don't want to go to do DJ to the party is because if I arrive simply plug the energy and all the business will be done by the developer. I think that I am not doing my work so well. So I think that there are opportunities, in particular opportunities because there are place near our plans that can be super interesting for the development of this data center. Imaging to do some example to stay near [ Sila ] in [ Milan ], near [ WestEnergy ] plant in Brescia, near [ Cassano ], [indiscernible] 40 kilometers from Milano. All situations in which you can have a huge direct generation with redundancy. In Cassano, for example, in this moment, we have 2 plants because we have [indiscernible] and the new [indiscernible], 108-megawatt installed 2 years ago that are able to give 2 direct source of energy, redundancy completely deconnected from the net of grid. So without [indiscernible] charges. So I think that this activity can be really effective. And surely, I think that there are upside inside our historical businesses for the development. For example, one single example there is not upside in development of the [indiscernible] Milano linked to [indiscernible] but can arrive from the [indiscernible]. Only this example, you can understand. And this is the reason for why in the closing remarks, I said, okay, there are other EUR 300 million of EBITDA linked to potential upside in which our bottleneck can be the financial discipline, and which is possible also to find partners to be able to develop more [indiscernible]. On spark spread?