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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the A2A First Quarter 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Renata Bonfiglio, Investor Relations Manager of A2A. Please go ahead, madam.

Thank you very much. Good afternoon, and welcome to A2A conference call. The Q1 results will be commented by A2A CEO, Valerio Camerano; and the CFO, Andrea Crenna. The presentation has been sent to you and is also available on the company website. The presentation will be followed by a few questions, which you sent to us, which will be addressed by both Valerio and Andrea. And there will be, at the end, the opportunity for you to make -- to pose direct questions. Now I'll leave the floor to Valerio Camerano. Please go ahead.

Thank you, Renata. Thank you to everybody. Thanks for joining our conference call. Let me go through the presentation. So let me drive your attention to Page 3. We have in Page 3, as usual, the main highlights of the quarter. So from the positive side, we had a fairly positive ancillary services posting this quarter, which is more than EUR 110 million, EUR 11 million up versus last year, which confirms that the ancillary service market, that's still quite dynamic in the period. Second, we have a continued increase in customer base, on the free market for mass market. We do have also important results on the B2B segment, in which we mark for now -- for several quarters, enlarging our customer base and our market share, mostly on the electricity side. On the waste treatment, we have, of course, negative and positive effects. We do have some negative effects on the cost for treatment. But overall, we have increasing prices on the waste treatment. So the global effect on waste treatment is positive for more than EUR 2 million. Then we were starting accounting the 2 M&A deals we have concluded on the environmental view, which are the Electrometal acquisition and the Agritre acquisition in -- from LGH. So that's on the positive side. On the negative side for the quarter, we have a certainly decrease in coal margins. You may have noticed that we have decided to anticipate the closing of the coal plant in Brescia, Lamarmora. That's about EUR 3 million less on coal margins versus 2019. On portfolio, gas portfolio, there's some negative side due to mostly on the unbalancing of the volumes sold. As you may understand, that it becomes a little bit more difficult for B2B clients to predict their consumptions. So we might have some situations where we have some imbalances on gas portfolio. Of course, we continue to improve our ability to forecast, but that's, of course, especially in March. And in these months, this has been more unpredictable. On retail gas volumes, clearly, we have less consumption, mostly on the deal side, but on the B2B side. That it's basically 5% less in terms of consumption. And last but not least, of course, we have the starting of COVID emergency, which is producing effects on our balance sheet. We will go on this more in detail in a few minutes. So if we go to Page 4. I'll start to respond to some of the questions raised by you. In particular, we will give you more details on the impacts and mitigants we have on COVID-19. So let me start from Generation. Of course, we have a scenario effect. This is the direct and indirect effect. Mostly it's coming from the decrease in gas prices, which began in Asia. They are now actually affecting the European market and Italian market. And that, of course, has an impact on the energy price. We do have also a lower contestable demand, which for us was minus 6% on generation. So this has required a revision on production plan. On the mitigants, we have almost 70% of production hedged. And also, we have taken immediately decisions on labor and operating cost reductions, which have contributed significantly to offset the impacts of generation. On market, we have lower energy volumes on B2B. Reduction is about 8% on electricity and gas. We have, of course, a slowdown in commercial development, especially on some of the sales channels, in particular, the physical channels. We have taken the decision to suspend the activity. But we still confirm our objective to get to the end of the year with 150,000 increasing new free clients by year-end. So there's a slowdown. There's lower consumption. But of course, we are actually targeting still a growth on the numbers of clients. On the mitigants, again, here, we have taken immediate labor and operating cost reductions. We, of course, lower marketing activity. So the overall effects on the Market division, according to us, will be quite limited. On waste, we have lower volumes on waste treated, about 7%. We have also clearly emerging costs from COVID-related activity, mostly personal protection equipment, sanitization, disinfections and so on. And on the positive side, we have treatment prices up, labor and operating cost reduction again, M&A deals. As I mentioned earlier, with the inclusion of Agritre and Electrometal, we're going to have a contribution by year-end from those acquisitions in the region of EUR 10 million. So Waste overall will be quite balanced. So we are not expecting some Waste particular impacts coming from COVID. On network, again, margin cost from the managing of the companies, production equipment, sanitization and so on. There's some slight scenario effects on this district heating. On the positive side, we have labor and operating cost reduction, positive effects coming from the tariff adjustment related to previous years. That's a significant amount coming from water, especially from water. So overall, on networks, we do expect positive contribution in 2020 versus the COVID effects. So I should conclude that the most affected view being affected by COVID will certainly be generation, though, again, generation is largely hedged at the moment. So the mitigants are expected. We have put in place robust, we have taken sudden decisions on operating costs and freezing of hiring and selecting CapEx expenditures. So we do expect a controlled effect from COVID-19. Page 5. A few comments on the ESG initiatives. We're trying to be quick. But I think it's worth mentioning that we have taken a lot of initiatives in terms of social responsibility and we -- with prompt creation of crisis committee, insurance schemes for our employees. We have given rise to a very stripping and sudden extension of Smart Working in the group. So we went from, I think, 400, 500 employees Smart Working in 1 day to now almost 5,000 employees entirely Smart Working in the entire week. Very successful, smart and rapid development. And by the way, we are very happy regarding some of this digitalization processes that occurred in such a very limited time. And then solidarity fund and training courses and so on, on employees. In customers, we are taking a lot of decisions in order to smooth the impacts in the problems for customers in terms of suspension on cuts, no penalties for payment delays and then flexibility of payment schedule for clients in difficulty. Of course, clients should ask for that. And then we have promotions of digital billing, which is, of course, a permanent plus from our auto accounts and from our operational activity. In community, we have actively participated. For example, we are the one of the first to produce the valves for emergency oxygen masks in our plant in Cavaglià, donations, and we are the first one to develop strong and extended street cleaning and disinfections in various cities. We also had a pleasure to cooperate with Italian Civil Protection by providing sensors for first aid activities. So there's a lot which has been done for communities, employees and customers, and we're very proud of it. Don't forget that A2A didn't have any lockdown. 99% of our activity are actually essential. So we will continue probably to provide all the activities during this period with no practical interruption. On Page 6. So revenues are, of course, are affected by decrease in the wholesale but also prices. Prices decreased on commodities. EBITDA is up 1%. Of course, in a very complex period though, we want to underline this result. So we have a slight growth despite the various critical situations linked to the COVID-19. Net income is up by 8%. This is linked to less financial costs, though we have some increased [ summer '20 ]. On net financial position, we have a situation which is practically, if you accept the change in perimeter -- and I will comment in a second we have a net financial position which is in line with 2019. The change in perimeter is mostly due to the acquisition of Agritre, and the other is the acquisition of Electrometal in the environmental view. So let me go through the Page 8, which is the group overview EBITDA, before I turn the stage to Andrea. So we have here a few more details. Generation, in a very difficult scenario, it's keeping the position and it's holding the line, really. We have EUR 11 million up compared to 2019 in ancillary services. So as I said earlier, the market is still dynamic. We had some positive contribution from San Filippo del Mela. It's a plant which was more engaged in the flexibility in production in the electrical system. And we have some negative effects on portfolio, gas portfolio. As I said earlier, this is mostly due to imbalances due to the unpredictability of some B2B clients' portfolio. On clients, so market, we have increased the number of clients in free market, increased market share on the B2B. So as a result of that, we have a year-on-year 5% growth. So remarkable. This is, again, for now, I think the 20th quarter we are experimenting growth on the market. Waste, as I said earlier, we had positive effects from treatment. We had some negative effects coming from the electricity side. So the price component, electricity. Networks, up. There's a small contribution coming from water cycle. There's also a contribution coming from the commercial development of district heating. And we do see -- we start to see the effects already on the first quarter. So let me ask Andrea to complete the presentation by going to each -- by each BU and to provide you with the other details.

Thank you very much, Valerio. [Technical Difficulty]

Excuse me. This is the operator. We cannot hear you. Your line is on mute.

Can you hear me now?

Yes, we can. Okay. Perfect.

I apologize. Starting from Page 9. In Generations, we're reporting a flattish quarter despite a strong headwind, as Valerio said, from market scenario and production starting at the end of March. As a matter of fact, all the drivers mark a very limited variance year-on-year. On the portfolio management, the performance of the hydroelectric plants were flat with stable production and actually quite negative PUN prices, down more than 30%, but totally hedged or totally offset in the quarter by our hedging activity. On the CCGT, performance was slightly positive in terms of contribution margin, positive on the MGP due to the clean spark spread and stronger than last year on the ancillary services. Coal, on the other hand, was quite negative, both in terms of a weak clean dark spread, and we suffer some destocking costs. Total margin on the ancillary services was up to EUR 30 million. It was EUR 20 million last year. And anticipating one of the questions, which has been raised by most of you, we have hedged today, on the year to go, 67%, 6-7, 67% of our production. Next page, 10. On the Market, here, we are reporting a very satisfactory performance. The business unit is up 3%, but it's actually up 9% on the retail operations only. Also, these business units started suffering negative effects from the COVID late in the quarter, in March, mostly on new customer acquisition and on the volume. In spite of that, both customers and volumes were high in Q1 '20 than they were in Q1 '19. Overall, we are reporting a customer base on the free market up 45,000. The unit margins are quite flat in gas. Overall, slightly reducing in electricity. And volumes are significantly up, mostly driven by the B2B. Next page, 11, on the Waste business division. Here again, we are flat year-on-year. This is clearly the outcome of several offsetting different effects that to simplify on the negative side, we've got energy prices. By the end of the subsidies and [ chip 6 ] in Parona and starting the Grottaglie landfill, just to remind you that last year, for 1 month, Grottaglie was in operation. And on the other side, on the positive side, we still are recording a positive trend in treatment prices. The volume of energy produced by the WTE has increased, and the M&A activity started to deliver the expected results. On Page 12, there is really nothing to be mentioned in particular. The positive performance in the district heating basically comes from the commercial development. If you turn to Page 13, the waterfall down to the net income. Just one point. It's about the depreciation and amortization. They are growing basically due to the CapEx that we rolled out last year, was a record year for the deployment of CapEx in [ Adia ]. And as you may recall, we have revalued some CCGT's assets with the impairment as a consequence of the improvement test later with the approval of our annual report, and this clearly drives the higher depreciation. The forecast on the full year on the D&A, it's more or less EUR 30 million higher than 2019. Last page, the free cash flow. It's Page 15. The negative variance, I think Valerio already commented on that, it's EUR 140 million. It's totally due to our M&A activity on the full year. Again, I anticipate one of the questions, which has been asked by some of you. On the full year, expectations on the net working capital due to the effects, the estimated effects of the sanitary emergency, we are currently expecting to have a few days of possible delays in the DSO, amounting for anything between EUR 70 million and EUR 100 million of higher net working capital, which will clearly be reabsorbed later on. At this point, I think we can answer some of the questions that you have raised, which we have received in anticipation, for which we thank you. I will let Valerio to answer his set of questions more on the strategic side and forward-looking, and then I will pick up some of the more technical questions. Valerio?

Okay. Thank you, Andrea. So let me provide you a few more insights on what is our view, my view on the -- on 2020. And then, of course, I will hand over to Andrea. And then we will hand over to you for your questions. And then I will take back the stage for a few minutes in order to say a lot to you because this is my last conference call. And so I want to take a few minutes to say hello to all of you. So let me go through the 2020. We commented earlier on the first quarter. So first quarter is definitely a quarter that already embodied some of the effects coming from the COVID. We are living in a scenario with quite weakening electricity price. But of course, we will -- to make more quantification, we'll have to see whether the speed of the recovery, the economic activities will be clearer. So we do have also some signals of strengthening of prices by year-end. In particular, spreads, clean spark spreads. And they will also have some more positive effects that might come from the nuke management and maintenance in France. But I will comment on that a little bit later. So globally, I mean, we will see in 2020, we believe that we will be able to achieve the positive economic results and satisfactory results, substantially in line with the expectations, by which I mean by market consensus at the moment. So market consensus today, it is really in line with our internal expectations. So we are very confident to do that. And we believe that we will do that through very balanced capital structures. So on cash flow, also, we do see some delay in receivable collections. We expect it will be partially absorbed in the final part of 2020. So today, we're all expecting a few days of worsening in the DSO, which basically means that the net working capital addition should be, at the moment, by year-end, in the region of EUR 70 million, EUR 100 million. So we quite -- we think this is a quite controlled situation. We do expect the capital -- the CapEx program will be slightly decreased. I will comment on that in a few minutes. But still, we will be more or less in line with 2019 investment plan, which I remind you was in the region of EUR 630 million. Liquidity position of the company is very strong and has been recently improved with the new committed and unused facilities. So we have now a liquidity position of EUR 1.5 billion, and we have -- out of which more than EUR 1 billion are made of a new committed -- uncommitted -- committed trading facility -- committed credit facility. So a few comments on the power scenario. As I said earlier, I mean, the short-term outlook was pretty deteriorated. So gas and CO2 prices went very -- down deeply, about 25%. And still, the PUN price looks quite low. We have, according to our forecast, now a recovery as spark spreads, base spark spread and clean spark -- and peak spark spreads by year-end. So we do expect in 2020 spark spreads -- peak spreads not far from EUR 10 per megawatt hour and for peak spark spreads in the region of EUR 16 per megawatt hour, which are strong spark spread going forward. So this is, again, all in all, so I should say that we had impacts on EBITDA, but we have a very strong remediation plan in place. We do see limited effects on working capital by year-end. Investment plan at the end will be slightly delayed with no impact on the strategy of the company. And the liquidity position of the company is strong. So this is our view on 2020. A few comments on the regulation impacts. For waste collection, we don't expect any impacts. Thinking about the collection now, the waste collection, we don't have any impacts from 2020 onwards. So on urban waste treatment, we have no impacts. We have no considered impacts in 2021 onwards. Since the authority resolution has not been issued yet, we have absolutely no elements to make educated guess. So far, they say the authority itself is considering to issue a resolution early in February, if I correctly remember, that it's considering postponement of the decision after 2020. So globally, impacts from the regulators on the waste collection are 0 in 2020. And for the time being, we don't see an impact in 2021. And on M&A, a few comments on M&A. As I mentioned, we have now on board the 2 acquisitions made on Electrometal and on Agritre. So that's going on. Agritre is a company with an EBITDA of above EUR 11 million. So that's already up and running. It's included in the LGH group. A few updates on the 2 M&A deals, the territorial deals. The first one is AEB. AEB, the shareholder meetings of the company have approved the deal. And more importantly, the municipalities have already approved the project and the various activities that will have to be delivered in order to complete by July 1, the JV. So from our perspective, the decision process is concluded. And the post-aggregation value of the entire JV will be in the range of EUR 50 million. So that will be up and running from July 1. So from our perspective, this is already gone. It's been already completed. On the AIM and AGSM, so the 2 JVs in Veneto. As you know, the Veneto and Vicenza company have an aggregated EBITDA in the region of EUR 150 million. We have done, from my perspective, the vast majority of discussions on all fronts, on governance and on values, on business plans, et cetera, et cetera. So I consider the deal in a very advanced stage of development and approval. As you know, yesterday, which is a key date, of course, from our perspective, the presentation -- the JV was presented to the mayors of Verona and Vicenza and to the towns, the political towns. And this is a decision, of course, taken by Verona and Vicenza, which confirms the willingness to go ahead now to share details of the deals and to give rise to the last technical adjustment in order for the deal to be completed. And my expectation is that the deal will be completed in a question of weeks now, 2, 3 weeks, no longer than that. So that's pretty much about the first things I wanted to share with you. I hand over to Andrea. Then I will hand over to you.

Okay. I got a few questions on the generation capacity, ancillary services -- sorry, not capacity, Q1 and full year expectations. Q1, just to repeat the numbers we gave you before, we made kind of EUR 30 million versus EUR 20 million last year, plus EUR 10 million. It's usually very difficult. We keep on saying the same story now for long about predictions over the ancillary services. Just reminding you that we usually say that on a normalized scenario, we can assume EUR 25 million, more or less. That was true in this quarter as well. EUR 30 million is not really far away. So today, on the basis of the information we have, we keep on -- stay -- stick to this fair assumption. Second question is level of hedging ratio and prices. Again, on the year to go, where it's relevant, we are hedged 67%. The price, if we hedge, it's EUR 59 per megawatt hour on the overall portfolio. We today have opened 1.8 terawatt hours of production on the fixed price, hydro and WTE production. Another question was about the demand reduction in March. The electricity demand, as communicated by Terna, was more than 20% down year-on-year. The coal production was mostly affected, clean dark spread to a negative, basically. And CCGTs, despite they should have increased production to offset the lower coal production, actually, where the plant is most suffering from the slowdown in the economic production. Hence, they have not completely recovered the volumes. Hydroelectric production expected in 2020. In the first quarter, we had production in line with last year. We have today a forecast of about 4 terawatt hours on the full year, which is in line with the historical average and a bit lower than last year performance, which, however, was very much favored by the fourth quarter, which was surprisingly very positive. So we're not making today the same assumption -- the assumptions that the fourth quarter 2020 will be same as last year. Then I have a question on the generation about the trading losses to the overhang output. You might know that sales contracts on the platform or over the counter under [ IFIT ] do not provide for the possibility of no collection. So the risk occurs only with nonstandard contract, used typically in sales to the mass market and industrial customers. With this in mind, in March, we suffered for about 130 gigawatt hours with a loss of about EUR 3 million. And our forecast on the full year, it's about EUR 15 million negative. Market demand reduction in March on the segment. We had a decrease of about 5% in gas. And in electricity, we were actually 50% power year-on-year, mostly due to the commercial development. So the business development more than offset the COVID impacts. We got a question, I would say, a typical question on the margin evolution expected in 2020. We keep on planning for unit margin reductions in the region of 3%, 4% year-on-year. This has been our historical and still is our assumptions on the full year. That was not the result up until the end of last year. And in the Q1, as I commented before, we got some sort of mixed situations with gas margin holding up, B2B margins, unit margins on the electricity actually going up and electricity on the mass market on the other side reducing. Overall, year to go, we're still planning for our usual unit margin reductions of the size I just mentioned. We got a question on net working capital absorptions. I think I answered that and Valerio did. Guidance on the free market customers' base on the full year, it's 150,000 new net additions. Last year, we did 220,000. And this year, basically, we will do a bit less than expected because of the COVID impacts. And let me say here, a percentage of total electricity volumes sold to industrial clients -- the electricity volumes sold to industrial clients is about 80% of the total volumes or about 30% of the overall contribution margin of the business unit. On waste, a question on price dynamics. As I said, we recorded an increase in treatment prices, about 6%. We believe that this trend will continue. There are no reasons underneath to support that the situations will change during the year. WTE performance, Q1 was very positive. As I said, overall, there were positive volume effects offset by negative price effects and then a net positive contribution from treatment prices. And once again, this trend is expected to stay throughout 2020. And then questions on volumes. On March, yes, we saw in Q1, especially in March, a reduction in the disposal, not really much in the urban waste and more obviously on the industrial waste. This situation was still there in April. And clearly, we are expecting that starting from mid-May and over the next month, when the lockdown expires, that the situation should start to improve. Demand reductions in Q1 for district heating. Actually, as we commented in Q1, demand was a bit better than 2019 due to commercial development, which more than offset the warmer than last year winter. And 2020 will very much depend on the winter season. It's just a question of temperatures, as always. And these, I think, are most, if not all, of the questions which we already received on my side. So as Valerio said, now, we can open to some questions which might come from you, if you have any additional. Please feel free.

[Operator Instructions] The first question is from Javier Suarez with Mediobanca.

Many thanks to the CEO for the job done during the last few years. So the questions -- the first one is on the guidance. Well, the company have said they feel comfortable with the guidance. If you can make a split on those numbers in terms EBITDA, net income and net debt, with which you felt comfortable. Latest guidance that I see is EUR 115 million EBITDA, EUR 300 million in net income and EUR 3.3 billion or EUR 3.35 billion of net debt. Are those the numbers that you are referring to when saying that you feel comfortable with? That is the first question. The second question, please, on the COVID-19 impact. During the presentation, you mentioned an impact on the net working capital in terms of net working capital deterioration between EUR 75 million to EUR 100 million. If you can elaborate for us on where do you see that, that is being the peak, I guess, given the second and third quarter and up to what level do you see the maximum of net working capital deterioration happening. And also a related question, if you are expecting also a negative impact in terms of P&L and not just in terms of net working capital deterioration. And then the final question is much more a strategical one. At the company, your mandate has been very active on consolidating the company or on developing the company [ long, but not only ], if you can elaborate on how do you see you let the company reach a strategical position to continue that journey.

Okay. Javier. First of all, thank you for your encouragement and your thanks. So on guidance, I mean, as usual, I'm sorry, but I cannot go in details. But I can assure you that we have simulated performance plans. We have already clear ideas regarding what is going on in terms of costs and CapEx. We have agreed with the various view in the company what should be the measures -- what measures they should be taking. We have agreed on the CapEx postponement. So we can confirm today, overall, that our guidance is in line with the consensus. The consensus is between 100 -- 1-4-0, 1-5-0, and today, we can confirm that. And we feel comfortable that on the basis of the information we have today, that is achievable. Then, of course, there can be plus and minus. But today, on those perspective, I think we have -- we are very confident. And we are confident also with the associated other KPIs, including, of course, net income. So that measure drives the other measures. So globally, we feel comfortable that we absolutely are absolutely not far from what we have achieved in 2019 and the guidance in 2020. So I think that's my overall comment on that. COVID, I mean, the numbers that you have mentioned, then I will lead to Andrea to elaborate a little bit. But the range I provided, which is EUR 1,700 million additional working capital is at year-end. So it's including all the effects in the year. So that is our today forecast. And again, I think it's a reasonable, fairly small amount given the circumstances and given the variables in place. The journey. The journey has been tough and difficult, as you know and extremely challenging but also very positive. So I think we have demonstrated that complex deals can be achieved. But more importantly, they can generate value progressively. And if we see the lifetime of our territorial deals, including LGH, I mean, LGH today is still one of the most experienced "acquisitions." So we're very happy. The level of synergies are above our expectations. The integration with A2A is up and running and functioning very well. There's a combined cultural managerial experience. So I think there are all the ingredients to continue to do that but also to leverage on the existing JVs in order for them to develop their small aggregation. So I do expect that LGH will lead its territorial smaller deals. We have a few ones that we are discussing at the moment in the frame that it will be easier for LGH to conclude similar-sized deals or smaller-sized deals in their region versus A2A itself. So we want to delegate. We wanted to delegate the aggregated JVs to lead their expansion in the local areas identified for their leadership. So I think that will have to continue to go on. So there is Lombardy. We know that there is a Lombardy potential EBITDA to be targeted, which is extremely sizable, still to be targeted. So more and more, this opportunity will become available to the company. We know how to do, we know how to integrate the company, we know how to generate value. So that's a very solid base for the company to continue to generate value under that perspective. Andrea, do you want to answer on working capital?

Yes. Thank you. Before, if I may, Javier, on the net income with the EBITDA indications that Valerio just commented. I don't know if you were connected before. But I repeat, on the D&A, I told before that we are expecting about EUR 30 million more than last year. Then on the net financial expenses, you know that we don't have major bonds to be refinanced during the year. So I can guess a reasonable amount of net financial expenses. So at the end of the story, I believe you can quite precisely work it out which might be the expectations on the net income. On the net working capital, the EUR 1,700 million we have discussed before was actually the answer to the questions what is going to be the expected impact of COVID on the net working capital. This has been estimated quite partially, let me say, on the different business units mostly affected by basically retail sales, i.e., sales of energy and gas, district heating and water, assuming different delays in the DSOs in each and any of these business unit or sub-business units. Clearly, it's an estimate. The total average came up to be around 2, 3 days, okay, of delay versus our expectation at December 31. So instead of having the "normal year," we are assuming this year, we'll end up with 3 days of DSO higher, okay, which is not negligible. But still, it's not huge. And that is on top of the normal dynamics of the net working capital, okay? The overall might be a little bit higher, okay? That was only, I repeat, the impact of the estimated -- the estimated impact of the COVID. Okay. I don't know if we have answered all your questions. Are you happy?

Yes, sir.

The next question is from Enrico Bartoli with MainFirst.

I'd also like to thank the management for the very good job done in the past years. I have 3 questions. The first one is on the possible M&A in the Veneto area. If you can give us some color on the role that A2A is expected to have in the merger between Verona and Vicenza, the disclosure about the industrial role. Actually, if you can elaborate a bit more on what you are going to provide to the JV, and if after -- if the transaction actually is completed, if you would have the possibility to consolidate the impact of the transaction. Second question is on the outlook about duration for the next quarters. If I interpreted it well, actually the ancillary services should be at least in line with last year and maybe a bit better. And the impact on the drop in power prices should be limited to the 1.8 terawatt hours, which has not been locked down in terms of prices. If you can also elaborate a bit on that. And the third one is on the volumes on industrial customers. Actually, I was a bit surprised that actually, you stated that volumes increased considering the lockdown in March. If you can also, in this case, provide some details on your commercial activities and what the impact could be in April and in May considering that in those 2 months, maybe the impact of the lockdown would be more than in March.

So Enrico, again, thank you also for your comments. On Veneto, of course, you understand that there's still a certain amount of confidentiality on the deal. But clearly, the way the deal was structured was to look for a strong industrial partner. So the role of A2A is called to act. It's called to act. It's actually a very strong industrial role, which means that we will be helping to lead the company to more -- a bigger growth in their businesses. We also will expect it to provide assets, which may contribute to position the company, the Vicenza/Verona company in a safer zone in order to increase their renewal base, in order to strengthen their secure economy closing activity, in order to protect their waste flows, in order to increase their smart cities ambitions, et cetera, et cetera. So the deal is built in a way to provide a stronger industrial role with the consequent governance implication. And having said that, clearly, our objective, which is by the way reflected in the role of a key industrial player in the group will be to consolidate the entire company. So I don't know if I told you yet. I think before I say that, the aggregated amount of EBITDA, Vicenza plus Verona, is EUR 150 million. So including our contributions, that would be around EUR 200 million. So it's a major step in the region of Veneto. So industrial, governance, strong governance effects from our side and ability to consolidate. These are important pillars of the JV. So on the MSD margin, we -- it's going to be still quite strong MSD year. We're expecting something in the region of EUR 130 million, which is something, today, EUR 20 million below last year. So below 2019. But we've been repeating this for a long time. So I apologize for going back and back on this point. But of course, you know that summer is a key season to hammer this number, to fix this number. And so we'll have to see also the summer, how it works. But we have some interesting dynamics of the market. We do see that when you have the low load in the generation, especially in the South, essentially you have more opportunity to go MSD up, of course, in order to protect the system. So we are experiencing the fact that even if you have low loading scenarios where the demand is going down, but you have some unpredictable variables, the MSD market, it's still very active on both directions, up and down, of course, depending on the various zones. So South is very different from North, and North has very different issues compared to the South. So there are structural reasons underpinning the reason why MSD should still be a dynamic market in the coming months. So we have a very solid idea on this point. On the 1.8 terawatt hour open, yes, they are open. So as you say, so we will be keeping now the position open. We have built a view with a promising fourth quarter on the basis of the present forward rates. Particularly, I'm talking about the spreads, of course, the clean spreads, peak spreads. So if we have the opportunity, we will close on the satisfactory levels of spreads that we deem appropriate. And as I said earlier, we have been -- not we, but the market was -- communicated that the EDF maintenance programs for the nuclear fleet have been postponed in quarter 3. So it could be between quarter 3 and quarter 4. That certainly will have an impact on the decrease in incoming energy from France. So overall, we do see some positive lights, especially in the fourth quarter. And second quarter is weak. But as you know, second quarter is not really particularly important for companies like us because the load and the consumption is very low. On B2B, I understand you are surprised. But you need to understand that with the exit from the market of several various players, we have now a very interesting opportunity to occupy a portion of the market shares we didn't in the past. And at the same time, the unpredictable pricing structures for the future push the companies to adapt their pricing strategy. So we do have increasing opportunities to reset the contract prices of our clients. And of course, the resetting prices generates additional opportunities to gather more margin. So we have a volume effect. That's basically the increased market share. But we also have very interesting margin effects coming from the fact that we do have certain pricing power given the market structure at the moment.

The next question is from Stefano Gamberini with Equita.

Thanks, Valerio, also from my side for this 6 years together. I have 3 questions, if I may as well. First is regarding the guidance. What is the contribution from new acquisitions that you plugged into this guidance in terms of EBITDA? You referred to the 2 acquisitions from LGH, then AEB. What is -- if you had EUR 50 million from this acquisition, and also as regard to Veneto/Vicenza that probably maybe these are not included. The second is a clarification. I didn't catch this negative impact of EUR 15 million at the year-end. Where does it come from? If you can elaborate on that a bit.

Sorry, Stefano, can you say it again? Because I didn't catch your second question.

Yes. Previously, they underlined that there is a negative impact of EUR 15 million full year estimate. If you can elaborate a little bit better where does it come from. Other 2 quick question, if I may. First of all, regarding the bad debt, the unpaid deals. So are you experiencing that this is not a trend in these 2 months? Otherwise, I guess the impact on net working capital could be even worse. Very final question, if you can, when you go ahead with the acquisition or with the aggregation of Verona/Vicenza as we wish, what could be the EPS accretion that you expect from this deal?

Okay. On the M&A contribution. If I correctly got your point, there is no effect coming from AEB, from Veneto/Vicenza. So 0 from Veneto/Vicenza, so for Verona/Vicenza, 0 from Brianza from AEB. The contribution is coming from the 2 acquisition and the environment. They account for about EUR 16 million on a year-on-year basis. And second question on the EUR 15 million balances, this is very, very, very easy. Say, for example, you are B2B clients and you have a gas contract with the A2A and you plan to consume, I don't know, 1 BCM, okay? And so your prediction -- your contract is 1 BCM. What we do is we basically buy gas, 1 BCM. But of course, if it comes the month of April or the February or March, you are shut down because of the COVID, you are not going to consume any gas. But still, we have, of course, the gas that we have bought for you we need to sell in the market because nobody is using that gas. So there is what we call the unbalancing and the unbalancing costs due to the mismatch of the forecasted anticipated consumption of a client and the reality of the client. So in other words, this is the effect of the uncertain scenario coming from COVID, which puts the B2B clients in the condition not to be able to consume under the contract schemes that have been contracting months and months before, okay? So that's the situation. So we have now experimented on imbalance side between EUR 3 million and EUR 4 million. And Andrea said that the forecasted number would be EUR 15 million by year-end. So the amount of clients that will not be able to consume under their anticipated scheme of consumption. But still, we need to get rid of the gas both for them under the market conditions, which are not positive, especially for gas. Unpaid bills, yes, again, yes, we confirm the view that we are not concerned. We have a DSO -- delayed DSO between 2 and 3 days, as we said earlier. So at the time, in this moment, we don't have particular concerns about that. And we confirm that. On Verona/Vicenza, certainly there would be in our target EPS accretion, but we are not able to confirm that and to provide you the details at the moment. I apologize. And you may understand the reasons why. Is it okay, Stefano?

Yes, absolutely.

[Operator Instructions]

Okay. So if there are no other questions, let me take this few minutes. As you know, my mandate as a CEO of this company is going to expire, to end after 6 years, tomorrow, which is the day of the general assembly. And I want to share with you a few thoughts. I mean this has been an extremely wonderful period for me. I've tried to work a lot on the objectives to transform this company, to make it more modern, more balanced, more sustainable, more strategic positions and I'd say also more motivated from the people. And we have, I think, made a lot of efforts. The team recorded very important achievements. Of course, we had a few defeats, but we had -- we never lost the spirit of trying to regain and adjust our behaviors. Since the beginning of my mandate, I have made it a priority to build a long-term dialogue with you, with you both from buy and sell side, with a few very important key points: first of all, to defend and promote our fair value, which has been always of paramount importance to me; but also to provide full transparency, good quality of company information, widespread sharing of the data, and I hope, coupled with the continuous availability of top management for meetings and discussion. And of course, from my heart, I'm very grateful for you -- to you, or you, for your support, for your suggestions because I think you provided me with the constructive criticism, which have been, for me, very valuable in helping me to improve decisions. So I really want to thank you. As I said before, the journey has been tough and challenging, but it was an extremely good journey for me. And you, as a financial community, have made a significant contribution to making this experience very interesting and value to me. So my dear friends, I hope to meet you soon. All the best from me, and take care given the period. Thank you to everybody.