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 Half 2020 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Renata Bonfiglio, Investor Relations Director of A2A. Please go ahead, madam.

Thank you very much. Good afternoon, and welcome to our conference call. With A2A's CEO, Renato Mazzoncini; and CFO, Andrea Crenna. The presentation has been sent to you and is available on the company website. The manager presentation will be followed by a session of pre-sent questions. At the end, there will be room for additional questions. I now hand you over to Renato Mazzoncini.

Okay. Thanks, Renata, and good afternoon to everyone. We just finished, the Board has approved the first half of this year, so some highlights. Well, the plus and minus versus the first half 2019. Talking about retail customer base, the good news is that the number of pure D or PDR, so number of customers increased and 50% more in the free market and 4% minus in the total heated market. So it's also interesting that in -- today, the number of customers in free market inside our group is 56%. That is good considering that we are a historical incumbent. So the total clients in this moment is [ 2,000,687 ]. Well, the B2B electricity volumes is 13% more. So I'll say a terawatt hour more. It's also interesting to say that the other player in competition analyzed a reduction of 10%. So good work in -- of our colleagues in B2B. The waste treatment prices increased a lot. The price in the last 3 years is more than -- 10% more. So of course, considering our waste-to-energy plant, of course, this is another good news. Remaining inside waste, some operation of M&A, in particular, Agritre is a company acquired in February 2020, is biomass energy production companies. And the contribution 2020, full year group EBITDA is about EUR 8 million. And in this first half is a couple of million. The other company is Electrometal, is a company acquired in December 2019 and is a company for industrial waste treatment, in particular, treatment of [indiscernible]. And the contribution full year is EUR 4.5 million, of course, half of this in this semester. The other plus is the lower operating cost, about EUR 50 million of cost savings to offset, we see later, the COVID-19 effects, so recovery plan, let's say. Of which EUR 30 million of external costs and EUR 70 million of labor costs, so mainly [ replanning ] new hires, and so some delay in this. The minus, as you can imagine, is energy scenario, is clearly an incredible situation. So a strong energy scenario impact, EUR 62 million in this semester. The good news is that is offset by effective forward hedging policy for EUR 46 million. So EUR 62 million minus of scenario and EUR 46 million plus of hedging. Retail gas volumes, 11% less of gas sales. Let's say 50% climate and 50% lockdown. Climate, because the temperature was higher than in the last winter. So less electricity and gas power revenues. There is a reduction in regulated -- all of the revenues also made negative contribution towards the network business units result for EUR 4 million in this semester both for gas and electricity distribution. In particular, there was in April and May some deliberation by the regulatory body, ARERA. Water cycle and district heating volumes, a reduction mainly for lockdown, a couple of million of meter cube in water and 74 gigawatt hours done in district heating and, of course, the COVID-19 emergency with some impact. Deep down inside the COVID-19 exposure. Looking at the different business units. You all knew that we have 4 business units, generation, market, waste and network and district heating together. So talking about the generation, the negative impact is scenario mainly and the lower contestable demand because is at 4% less than in the period, July, December. The mitigants, so plus are 69% of production hedged. And in fact, to have 70% more or less of capacity to hedge, the scenario is a good result, in my opinion, and labor and operating cost reduction. So as we can see, also if other companies have high level of generation, the impact in this semester was not so bad. Market. The minus is, of course, lower energy volumes in B2B and the slowdown of commercial development. But the mitigants, so labor and operating cost reduction and lower marketing activities, at the end of the day, brought a result in line with our hypothesis. The waste, there is -- the minus is lower volumes of waste treated, about 2% and some emerging costs, COVID, because it's clear that, to protect our guys, our -- with equipment, [ sanification ] and so on, the cost that we had was higher than in the last semester. But also in this case, the mitigants is labor and operating cost reduction, there is a recovery plan in all the company to reduce this cost, and the lower marketing activities. And in waste, it's interesting also that 2 positive elements was M&A, M&A that brought some EBITDA in changing of perimeter, and treatment price because exactly the price of waste was increased. Talking about networks and district heating. The negative impacts are emerging cost, COVID. Also in this case, lots of guys working during COVID, so cost to protect personnel. Scenario effect in district heating for the temperature during winter. And so -- and lower volumes of water distributed for lockdown. The mitigants, also in this case, labor and operating cost and some positive allowed tariff adjustment related to previous years. Talking about liquidity, the temporary working capital expected increased to -- due to COVID, about EUR 100 million as of December 13, 2020. This is, of course, the negative impact. The mitigants is that liquidity profile improved by additional EUR 0.5 billion committed credit facilities. Okay. Let's say, COVID-19 virus, of course, has a negative net impact on group economics. But the total sum of negative and positive impact is EUR 7 million in this first half of 2020 compared with 2019. So in our report, is this -- the full year 2020 results [ compared ] with last year, the COVID impact can be between EUR 10 million and EUR 20 million. So not [ very ] dramatical. Slide #5. So only some highlights also in this case with ESG initiatives. Talking about employees. The extension of smart working was also, for our company, an incredible experience. Very quick, in particular, considering that historically there was smart working in the company but with a few number of employees and not surely for 7 days a week. So the extension to over 4,500 employees worked really very, very well. The level of productivity was at a good level. The prompt creation of a centralized committee for business community -- continuity, sorry, and business unit committees. Interesting, in 2018, was defined in A2A a crisis plan to manage a situation like this. So if it's clear, better to forecast a pandemic. It's not clear, but -- it's not possible, but the crisis plan worked very well. And so the business continuity was granted. Talking about employees, I can also underline the solidarity fund for COVID-19 victims with, in few months, we donated the economic equivalent of more than 400 days of holidays for managers and other employees, so very interesting. Talking about customers, only to underline the full-time operating services for clients via remote call center, was very interesting from the operational point of view to be able to remote-ing completely the call center in a few days. And in this situation, the call center worked very well. And the close engagement with the ARERA body, government and other stakeholders. For example, in Phase I with ARERA introduced suspension of supply cuts and payments reminders, so no penalties for payment delay and other situation were regulated to be -- to stay on the side of our customers. Community, talking about community, only to say that, inside the EBITDA, there are also EUR 2 million of donations for the emergency to the Lombardy territory. So directly to some municipality to be able to buy, for example, equipments in the hospital and all what you can easily imagine. So Slide #6. Some highlights of the key financial indicators. The revenue are a decreasing of 14%, between EUR 3.7 billion to EUR 3.2 billion. Of course, the lower revenue are due to lower electricity and gas prices, so mainly generation and mainly scenario. But the impact on the EBITDA was only 4%. So last -- comparing with 2019, the reduction is between EUR 580 million to EUR 559 million, so EUR 23 million of EBITDA less. The ordinary EBITDA is aligned because there are not one-off real event. So from EUR 575 million to EUR 553 million, EUR 22 million less, 4%. And the group net income is EUR 12 million, 7%, from EUR 166 million to EUR 154 million due to lower, of course, EBITDA. And on the positive side, there is a strong reduction of net financial expenses. It is a good work of our financial groups inside. The net financial position increased also at -- from EUR 3.154 billion to EUR 3.3 billion, so about EUR 280 million, 9% more. But in this case, there is EUR 122 million of changing of perimeter for the operation of M&A. So excluding the change in perimeter, the increasing of the net financial position is about 5%, so EUR 157 million. So I leave the floor to my friend, Andrea Crenna, the CFO of the company, to go deep down inside the results obviously in all business units.

Thank you very much, Renato. Good afternoon to everybody. I would jump directly to Page 9, by Page 8 is the waterfall of the EBITDA, clearly highlights that basically all the variance comes from the generation. So let's go immediately to the business unit per business unit analysis. In Page 9, the usual waterfall on the generation. We -- as you might recall, we reported a flattish year-on-year in Q1. So the total negative variance came in the second quarter. We clearly got a very tough energy scenario with the electricity prices base load, but also peak load down more than 40%. We got negative Clean Spark spread and positive Peak Spark spreads but reducing over 70% year-on-year. And I'm sure you know the Clean Dark spread on coal were negative, hence, commanding basically 0 or very limited production. The year-on-year scenario effect, the price effect, if you wish, as Renato clearly stated before, was negative for over EUR 60 million, certainly influenced by the COVID emergency at global level and its consequences, especially on gas prices, which the [ PS BU ] were down 70%. We -- that has already been said, that we mitigated the negative price through hedging with results covering 70%, more than 70% actually, the negative variance and leaving a net negative scenario impact of EUR 14 million roughly only. The ancillary markets was, on the other side, positive. We reached EUR 78 million in the half year which is up EUR 6 million versus same period last year. On the other side, the volume effects were negligible. Hydro, slightly up, and CCGT production slightly negative, 2 of them basically offsetting. We also have got in the business units, some other negative effects, San Filippo. It's by way of the expected [ decalage ] in the remunerations, which clearly was stated when we contractualized the plant a few years ago. And then the portfolio of gas was also down due to the very weak prices. On Page 10, there is the market. If we exclude the scenario effects, the market business unit is where the COVID has impacted most, especially in percentage terms, I would say, for the reasons Renato just commented before. The BU, as you can see in this stage, is reporting an overall flat result, which is actually the sum of 2 very different performances. One is the performance of the retail business, which is up EUR 7 million, i.e., 7% year-on-year. And the second part is the performance of the public illumination and energy services, which is down EUR 7 million, basically offset the retail. The result in the retail is plus 7% which, by the way, includes most of the effects of the COVID in this business unit. And as Renato said before, the effects, the negative effects of the milder winter is, therefore, very positive. We judge it's very positive. So 7% growth despite the COVID and despite the milder winter. And basically confirms the underlying trends in the drivers, i.e., the development of the free customer base. The increase in the volumes to the large customers, the B2B. We certainly got positive trends in the regulated components. Unit margins, once again, are overall holding up. We not see -- we haven't seen so far pressures on the unit margins, though we keep on planning for them. And as a partial "positive effects on COVID", clearly, with the slowdown in the marketing and commercial activity, we also reported a lower acquisition costs. On the other hand, energy efficiency and public illuminations suffered from the decisions to postpone the date from May to November when the distributor will have to cancel their white certificate obligations. So the margins that we are expecting from our white certificate portfolio, which is about EUR 5 million, it's going to be recorded forward in November versus May, which was the date last year. So in other words, EUR 5 million out of this EUR 7 million might be considered temporary effects. If you turn to Page 11, on the waste business, clearly, we have here another business unit which we believe it's reporting solid results. The EBITDA is up 6% on the recurring and 7% on the reporting EBITDA. Here, the COVID-19 effects have been totally squared off. So the impact is basically 0 on the BU, which basically leaves the performance to be driven only by the underlying structural drivers that, as we have several times discussed, remain positive, i.e., the net treatment prices are up. Once again, Renato mentions kind of 10% compounded growth rate year after year now. The volumes of energy produced. You might recall last year, we several times commented about the extraordinary maintenance on our WTEs which are currently running at full capacity. The M&A clearly is contributing. And the new treatment plants. Now this year, we have the client in Muggiano, in Cavaglià, for the plastic treatment which are up and running, were not last year. And clearly, there have been some negative effects. Also -- and especially from the scenario. The low electricity prices hit EUR 8 million on the BU. But also we have got also some others, many others, tiny, singularly, small effects which offset the energy prices. Page 12, just -- on the networks, just to say that, as you see, most comes from the district heating. And I think Renato mentioned that, in this business unit, on the district heating, basically it's 50% COVID effects and 50% it's warmer climate in the winter season, basically the same impact that we got on the gas sales in the retail business. Whilst the minus you see in the regulated assets are in the name of the lower allowed revenues, especially on the recognized OpEx, which we already commented in Q1 and where we are expecting an overall EUR 8 million hit on the full year, on both electricity and gas distribution, this EUR 8 million. I would skip Page 13. There is really nothing worthy any explanation on the lines below the EBITDA. Page 14 on the CapEx. We are in line versus last year. As you might have seen in our press release, that makes us quite proud. As a matter of fact, we -- last year was the record year for [ A2A ] in terms of CapEx deployment. We have not slowed down. Clearly, we're lagging behind budget because of the COVID lockdown which made some very difficult times to lay down CapEx. But still, we are in line with last year, and we have a positive view on the full year that I'm sure our CEO will comment on....

Sorry, Andrea. It was interesting. But if you look at there is, Page 14, the percentage of development investment is about 55%. So it's interesting because, of course, in particular, the development investment -- we see more EBITDA in the future so...

Page 15. Page 15, it's the free cash flow. Once again, I believe the variances are quite self-explanatory. The net working capital, you see much larger net capital absorption versus last year, EUR 80 million over. As a matter of fact, we can, for the sake of simplicity, split in two. One is the COVID effect for about EUR 30 million. We've got some delays at the end of June. In our -- I would say, that was completely in our retail business. All the impact on the net working capital of the other BUs has been really negligible. That accounts for roughly EUR 30 million. And then we got some delays in cashing in EUR 40 million from one of our municipalities. But that was fixed at the beginning of July. So for EUR 45 million, this issue is basically already over. As we have just commented, Renato just commented before, we do have some expectation of the COVID effects on the full year, on the net working capital. We're currently estimating it might reach something like EUR 100 million more or less on the net working capital. Then I would leave again the floor to Renato for commenting the guidance that we are using. [indiscernible]

Yes, yes. So you can see at Page -- Slide 16. So our guidance 2020 is EBITDA at EUR 1.140 billion. So including nonrecurring for EUR 20 million. CapEx between EUR 670 million and EUR 710 million. And net free cash flow at about minus EUR 300 million. So this is our guidance that is confirmed, is for the full year, in line with our exciting guidance released in May. So I can confirm that this is the path on which our company is moving forward. Okay.

Okay. Renata, now, I think now we can move -- we got lots of questions. No, I can take the floor now, Renata. We really got lots of questions from you. Thank you very much. In order not to fill up the time answering all the questions and leave some rooms for open questions, we will try to answer some of them, those that we believe are of interest to basically the broadest possible investors and analyst space. For the questions that you have raised and we are not answering now, clearly, we can follow up later on with the Investor Relations team.

Okay. I can -- if you want, I can start with answering some questions, in some case, very quick, in other case, with a more deep down information. There is, of course, a general question about our opportunities from the new Green Deal. All Europe are talking about the new Green Deal. You know that in Italy, the recovery plan probably will bring a lot of money. And so one company like A2A that is completely in the field of energy transition and the circular economy is -- let's say, it's our moment. So I see that we have really lots of opportunity to grow because the energy efficiency is confirmed as the first option for Europe. We are very strong, for example, in the district heating and also in municipality, very important like Milan, in which there is room to grow a lot. And all the transition to the energy efficiency in new building is also supported in Italy with -- as you probably know, with fiscal incentive that is very strong, that can be -- have to be an opportunity for our companies. But also the circular economy, so biomethane, the use of biological waste and so on. So all activities in which our company is strong and can be absolutely protagonist. New business, interesting, for example, energy storage or the use of gas of hydrogen. Lots of questions about hydrogen. In my opinion, hydrogen can be absolutely interesting both -- like storage. And so we have to study and to understand how to eventually invest in this sector. And this is also interesting, the use of hydrogen like in blending with gas to have green gas and so to reduce the CO2 impact for our what we call heating or energy production. But also electrical vehicles. In this moment, we are with another 2 companies in Italy, the best-in-class in infrastructure of recharging. And we are working with [indiscernible] to define a new business model, able really to bring in Europe in 2030 [ 3 million ] of recharging infrastructures. So another opportunity to grow. But, let's say, all -- the new Green deal is very interesting. All the money will arrive probably with project. And so inside our industrial plan, we are also working to define emblematic huge projects to -- able to be destination of the European fund, so with our municipalities, our stakeholders. Talking about circular economy, so the discussion -- there is a law in discussion which is to equal the special recoverable waste to [ essential ] waste, is not a problem for us because we are in both of the business. So I think that the impact for our company also if there is a changing of law is absolutely [ nimfa ]. Well, there is a question about hydro repowering potential in Italy and concession in particular in Lombardy. Here, it's necessary to give more detail because, as you know, it's absolutely very important. There is the law of December 2019 Article [ 11.25 ] that provides [indiscernible] regulator, estimates, procedures and criteria for the location of concession through a tender or JV with the selection of the private partner through a tender or another public way to define the partner. As for the concession, already expired because you know that [ lots of it ] are expired, but currently under temporary continuation because we are working. We are -- the tender procedures must be started within 2 years of re-entry into force of the regional laws and no later than 31 October 2022. In this moment, the situation is that only [indiscernible] have the actually went out with the law. So however, the continuation regime could be granted by actually until mid '24 according to Court Italia decree. And during the transition period, the law has established the payment by the concessionary of an additional fee. In Lombardy, was fixed in EUR 20 for each kilowatt of concession nominal power. So the new concessional length will be between 20 and 40 years, which may be expanded by a further 10 years depending on the complexity of investment and so on. And pursuant to a law, December 2019, and after consultation with the authority, ARERA, the Lombardy regional law, May of this year, a couple of months ago, has redesigned the concession fees divided into fixed component, EUR 35 per kilowatt, linking to average nominal power of a concession. And the variable calculated as 2.5% of normalized revenues. Business structure of hydroelectric, see, will be applied as of 2021. The region, with the law #23 2019 also -- had also required concessionaires to supply 220 kilowatt hour per kilowatt per year free of charge. So of course, another reduction in [ rentability ]. Detailing in the following, the deliberation of the 6th of July 2020, [ #11 33 47 ]. For each concessionary [ industrial plan ], that the energy volumes to be allocated to province and region, respectively, equal to 70% and 30% in 2020 as a consequence of COVID-19 emergency and [ 20% ] as standard regime for the following years. Only for [indiscernible] province in which where is our plant in [indiscernible] has been set to assign 100% of volumes. So compensation to ongoing operators weren't assessed. So they transferred without compensation to other regions. And in case of authorized investment, an indemnity relative to the asset are not depreciated. And dry asset, the residual value arise there from accounting records also certified appraisal net of depreciation assets. So I think that there is a huge discussion also between our central government and the regions because there is, let's say, a discussion about competencies. The idea of our government is that, for example, in this case, region of Lombardy went out of its competencies. And so it's also interesting for us to see what will happen in the next months in the discussion, very important between the central government and region of Lombardy. Also because this discussion, of course, will have effect also in the future law in region Piedmont, in [indiscernible] and others. Okay. We are, of course, confident that at the end of the day, we'll find a correct regulation in the relationship between company, generation company and the local authorities. Well, another question is the impact from ARERA regulation expected in 2020, in particular, for waste collection. We don't expect any impact for 2020 onward. There is a resolution, ARERA, for EUR 443 million 2019. But in relation to the urban waste treatment, really, we don't consider -- no impact, not only for 2020 but also for 2021. Another question is what is your 2020 and '21 scenario from the market area? Are you detecting a margin contraction due to the competition? Will you accelerate your presence in the digital area? What do you expect for the political economical front? Well, probably I answered this question during my presentation, when I said that in this moment, we have 56% of customers in free market. And we have a couple of years between the full utilization. So it's clear that we are on the track. The marginality in this moment of the customer in free market is higher than the marginality that we have on the regulated customer. And this is the reason for why, in other semesters, the [ rentability ] of the business unit of market is growing. And so in the business plan assumption, and this is actually mathematics, in Italy [ margin] is a reduction of 3% year-over-year in the period 2024. But looking at the performance of our business unit in the last quarter -- or the last quarter, we see only positive effect. Talking about M&A, a question about our operation in Brianza with the company AEB [ Energia ], you know that in our forecast the 1st of July, the new company participated by A2A and with the control of our company will start. But there was -- let's say, there was a discussion about the process. So in this moment, there is -- we are waiting a decision from the administrative law, so from the tribunal, that we expected, of course, a bit positive. From an industrial point of view, the new company is absolutely interesting because the EBITDA that in this moment is out of the perimeter is EUR 38 million full year with the revenues of about EUR 20 million, EUR 50 million, and is a little multi utility, but is active in networks, in market, waste, lights and so on. And so there are a couple of hypothesis. The first hypothesis is that we have to wait the regional administrative court, so in December. The other hypothesis is that we are delayed with the suspension designed by the administrative court at the Council of State. And at the 27 of August will take place, an audience in the Council of State, and there is an opportunity that we can move forward without waiting December. In this period, there is on track the antitrust clearance that have to finish in October. So our forecast is that in [indiscernible], this new company will be inside our perimeter. More complicated in terms of time, like timing is the opportunity of operation of M&A. Yes, in Veneto. So with Verona, GSM in Verona and the company of [indiscernible]. You know that the key highlights of this company are absolutely very interesting because there is an aggregated EBITDA of EUR 150 million. And in particular, is interesting because it is the opportunity to move in a new region in which, in this moment, we are not managing network base and the others. And it's enough to read the newspaper every day to understand that, in this moment, there is a huge political discussion. You have to consider that in Veneto in the 20th of September, there is the Election Day for the President of region. And so our strategy is not to push until the election, to be sure not to conflict with other aspect that can be instrumentalized during this difficult period. And so the hypothesis is to try to move forward this operation at the end of September. Okay. I think that I can leave the floor to Andrea for some question from the [ people ].

Thank you. Let me go very quickly. Sometimes -- let me say, that one is the quite usual questions on the forward view on the MSD market. As I said before, we reported EUR 78 million in H1 versus EUR 72 million H1 last year. The capacity payment, it's not capacity market -- capacity payment system was EUR 2 million more for '16 versus '14. If we look forward, let me tell you what's in our guidance. In our guidance, it's basically the usual assumptions we made of making anything between EUR 8 million to EUR 10 million of ancillary services per month, okay, on the year to go, which would basically take the full year at anything around EUR 130 million, more or less, okay, on the ancillary services. Another question was on the bad debts, how it's going, I guess, related to the COVID. I think it's fair to say that, as of today, we are not reporting any worsening into the bad debt, but it's probably too early to say. So we will have to wait up to the end of the year, keeping in mind that we start from a very healthy situation of the customer base in our regions, where the usual delinquency is around 1% or 2% at the worst. Another question is about our hedging levels. We are currently hedged 70% on the year to go, July to December. So basically, we are open, 30% of our exposure. Clearly, the amount hedged is already plugged into the guidance. So I guess it's more interesting to tell you that what we have not hedged, so exposed to the market, is today 1.1 terawatt hours of production at fixed price. And I think, out of my memory, around 1.5 on the CCGTs. Clearly, we are not assuming productions in coal at these spreads going forward. Hydroelectric expected productions 2020. Again, as usual, I would say, we are expecting the normal productions. What is normal is the average of the past 5 years, which is not what happened last year, to be fair. In Q4 2019, productions was above the average. But clearly, it's impossible today to say what's going on. So we keep on assuming we have basically, overall, 4 terawatt hours overall productions on the year. Let me say, there is a questions on the guidance on the free market customer base. I guess this comes from our past records of around 200,000, 220,000 new customers on the free market, which we recorded consistently over the past 3, 4 years. This year, we are planning to do less. Of course, the COVID has caused certainly a slowdown into a new net addition. This year, I think we will reach something around 150,000, 120,000, 150,000 new customers on the full year. Another question is about the percentage of electricity volumes and profitability coming from the B2B. It's -- they contribute clearly a lot in terms of volumes, about 80%, but much less in terms of contributions of the EBITDA for about 15%. Prices on the waste treatment. I think we already commented that is going up double digit, double digits. If there is any other questions about delays we might be experiencing on the authorization processes for new plants, the answer is no. We are in line, apart from one plant for the treatment of the humid fraction in -- near to Brescia [indiscernible]. These plants actually got some few months of delay versus our expectations. I think these are the most frequently asked questions on my side. If there are others, as I said before, we can follow up with Renata's team and myself, of course. But now, for the sake of timing, I think it's...

We can open the Q&A session.

Thank you, madam. Excuse me, this is the Chorus Call conference operator. We will now begin the Q&A session. [Operator Instructions] The first question comes from Javier Suarez of Mediobanca.

Two or three questions. The first one is on the overall strategy and M&A. There has been plenty of articles on the press during the last few days talking about possible large integration amongst the local multi utilities in Italy. And I was wondering which is the position of the new management on that possibility, the possibility of being part of a large-scale integration with other integrated -- or excuse me, local multi utilities. That would be the first question. The second question is if you can update us on the -- on your renewable energy strategy. Obviously, you are a large generator, and things are moving quickly with the energy transition. If you can update us on your strategy for strengthening your renewable energy asset base. And the third question is on the -- also on strategy, your interest on the fiber optic business. There has been also several press articles talking about the possible interest on the -- of A2A to strengthen that business as well.

Okay. Well, some quick answer. About M&A, particular, the hypothesis that this is all on the table every time about aggregation between the big multi utility, Italian multi utility. Let's say, there is clearly an economy of scale that is fully demonstrated by also the last operation that we did in A2A, with [indiscernible]. And so also talking about the others, surely there are some synergy to extract. But it's not only -- the only way to grow. And so I'm sorry, but you have to wait the presentation of industrial plan in the end of the autumn to know how A2A will forecast to grow in the future. Talking about [ renewable ] production, it's sure that is a macro trend, very important. In this moment, you know that in 2030, the growing of [indiscernible] production is expected to grow in Europe about 88%. And photovoltaic, 188%. The hydro is flat and also [ biomass ] is flat. So surely, we want absolutely to remain a big player in energy production. And the way to remain in the future a big player is to move forward with [ renewable ] energy. So our ambition declared in the last industrial plan, for sure, we grow in the new industrial plan that we presented. You know that in the last industrial plan, the ambition was 1.5 gigawatts in 2030. I think that we have to grow much more. Talking about fiber optic, I can't answer because, inside the business plan, in particular, we have to decide where to put our CapEx, but are not infinite, of course, like other companies. And so we are working to define our strategy and to design which are the more interesting network in the future and, in particular, in which sector we can be more competitive, more able, which sector [ now ] can be more useful to produce [ rentability ] to our company. And so of course, fiber optic in this moment is one of our activities like water and others, a very little revenue in this moment. Also for this question, I have you to wait the presentation of the industrial plan.

The next question is from Antonella Bianchessi of Citi.

Yes. One is a very quick question. If you can just highlight the amount of EBITDA that has been contributed by new acquisition, by the expansion of the scope of the business in H1. And the other one is a little bit more big picture. And I was wondering if, first of all, it is the A2A is well positioned in the effort to -- on the Building Renovation act. Would you think that it's an opportunity for the company and if the company can play the renovation and the energy efficiency of building for a profit? The other point was A2A is managing gas, electricity, district heating, a number of different sources. Have you made up your mind on which one could be the best solution for a decarbonized world? And would you consider to allocate your CapEx also on the back of this vision?

Antonella, let me answer very quick to your first question. Thank you very much, by the way. The amount of EBITDA from the M&A in Q1 has been roughly EUR 4 million from the 2 acquisitions we have done, EUR 4 million.

Answering to your question about the possibility of our company to play a role in the energy efficiency, in particular, with building, yes. Yes, of course. And not only for the general market, but with our stakeholder, we have some very interesting opportunity to cooperation. For example, we are starting with another municipality company of Milan that is [ MM ], that is the owner of roughly 1,000 buildings in Milan. And so it's very interesting, the opportunity to manage a huge amount of building with only a few tender, and so to be able to concentrate our effort without spend too much energy to find the portfolio. So in this moment, probably like other multi utility, is the portfolio that is coming in our home and not [indiscernible] . So I think that surely, we can play this role and very quick because, as you probably know, the opportunity to use this fiscal benefit is in a couple of years, so 2022. After 2022, it's finished. So we have to play a role. Talking about energy, district heating and gas. If you talk about CO2 reduction, one good example can be a study that we did in Milan, in which the target that Milan defined to 2020 -- 2030 is to reduce of 1,200 kilotons of CO2 in 2030. And the cheapest way to reach this target is exactly to use district heating, in particular, district heating that we, say, [ 4.0 ]. So using energy that is already [ produced ] in other plants, for example, from industry, but also from [ thermal central ] and so on. So the combination between district heating and energy that is already [ produced ], so it is -- in terms of CO2 is very, very interesting. Of course, also to use electricity with [indiscernible] and so on is an opportunity, a little bit expensive. And during the transition period, it's also interesting to understand what can happen in the blending between gas and hydrogen. You know that in Italy, there is Snam that is working to introduce 10% of hydrogen inside the gas for heating. That is another way to reduce the CO2 without new investments. And so I think that to manage well the big network that we have in Italy in the gas, in particular, in municipality like Milan is interesting also to follow the innovation but also in the gas are expected.

The next question is from Emanuele Oggioni of Banca Akros.

Actually, most of them have already been addressed. So you have basically 2 left. One is on the water business. You mentioned recently that the A2A footprint in this business is quite limited, only some 5% of the group's EBITDA. And the Italian waterways needs a lot of investments, in particular in, not in Northern Italy, but in Southern Italy. So I wonder what is your strategies, your expansion strategy in the water business as actually it's very difficult to close acquisitions in this sector unless there is a regulatory change will push the consolidation. This is my first question. And the second is on the EUR 8 million positive one-off in generation, I missed your explanation.

Okay. Talking about the quarter, I surely can confirm that in my personal opinion, the water business is absolutely very interesting. And when Utilitalia last week said to our government that the companies inside Utilitalia ready to do EUR 50 billion of investment or to manage EUR 50 billion of investment, probably EUR 30 billion are on water network. And surely, in the south of Italy, but pay attention also in the north of Italy, we have a lot of problems in the collection, but also connection between different networks. So regional and the province investment because in this moment, all the network are very local. Our networking side, the municipality, not connected. In Italy, you know that we have a national network for gas, managed by Snam and electricity managed by Terna, but we don't have a national network for water. So only to say that the investment that we have to do inside this network in all Italy, from the north to the south of Italy are really huge. The problem is that ARERA, the authority, designed very interesting [ rentability ] in -- for the water investment in the last regulation, and this is, of course, very good. But we have a problem of dimension and in particular of actors because there are in Italy 2,551 companies that manage water. This company have mainly managed -- owned by the municipality and so, in a lot of case, not in condition to put on the ground the investment that are necessary. So I think that a company like A2A also if in this moment -- I confirm, of course, that the level of revenues in water is at 3% and 5% of EBITDA, so very, very few. I think that is a sector in which is very interesting to grow. Also because in the future, if I look to 2030, 2050, surely, the network of water will be very, very, very important and very interesting for everyone that will be able to manage it. So how to grow? Participate into tender. There are, for example, in this moment, to have participate into a tender in [ Regiomedia ] for one example. Investing also in our network in a reduction of -- optimization of the performance of the network. Only last year, we spent EUR 61 million of investment in our little network in Asia, for one example. But I think that the real possibility to grow is, if from a regulatory point of view, will be a changing in the idea of reintegrating the cycle of water. So if a solution like a bundling, there will be the possibility to have a part of the tariff divided between different actors. In particular, one actor is able to manage investments, a company like A2A, and actors more fitting with activity with only OpEx. So typically, companies with the balance sheet consolidated with the municipality and so not able to do that.

I think I want to answer on the nonrecurring and the generation, it's actually an item which dates back 2012, 2014 and relates to the prices paid on energy, on unbalancing. I don't know if unbalancing is the right English words, by the way, it's [Foreign Language] in Italiano, and where there was basically questions -- a few -- actually more than 1 questions in front of the Consiglio di Stato, the administrative court, which -- where we were not recurring. I mean, we were not part of the discussions with the court, but the court came with the sentence settling basically our discussions, which has been pending for years. And by -- according to the decisions they took, we basically settled these long-standing questions. So if you wish, it's just a question of prices on the unbalancings, where the right and fair price for this unbalancings has just been settled in front of the court 1 month ago for discussions which arose in 2012, 2014. Then if you really want to know the technicalities, just let us know, and I will give you all the references. It's really a technically complicated questions on the dispatchment of energy.

The next question is from Stefano Gamberini of Equita SIM.