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 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Renata Bonfiglio, IR Manager of A2A. Please go ahead, madam.

Thank you very much. Good afternoon, and welcome to our conference call. A2A CEO, Renato Mazzoncini; and CFO, Andrea Crenna, will present our 2021 Q1 results. A Q&A session will follow, first, with some questions sent in advance, and thereafter, an open session part. I now hand you over to Renato Mazzoncini.

Okay. Thank you, Renata, and good afternoon to everyone. Let me start from our business plan. But as you remember, we presented in January, the 19th of January, because, of course, this is the first quarter of the new business plan, and there are some achievements. Talking about our 2 pillars, energy transition and circular economy. In the pillar of energy transition, very important, the acquisition of 100% of Octopus Renewables, that is, as you probably know, 173 megawatts of solar power plants, the largest portfolio in Italy without incentives. And with this acquisition, A2A is today the third player solar -- for solar generation in our country. In thermal plant, we reached the authorization for upgrading the gas-fired turbines of Cassano d’Adda and Chivasso, our very important thermoelectric plants through AGP that are advanced gas parts. And looking at our customer base, the customer base growth, 40,000 new free mass-market customers. In particular, 25,000 electricity contracts and the other in gas contracts. And this is the reason for why the marginality of our customer base is growing. Shifting to the circular economy, we really need to underline the acquisition of 27.7% of Saxa Gres S.p.A. That is a company that operates in production of ceramics from materials recovered from the waste cycle. For us, very interesting because it's through this company and through this contract, we are able to use all the material recovered, for example, from our waste-to-energy plants in the region, Campania in Acerra. And talking about waste-to-energy, we reached the authorization for phosphorus recovery pilot plants in Corteolona. The phosphorus is recovered from the ashes and waste-to-energy process of depuration sludges. Also in district heating, we have some news. Exactly yesterday, there was the inauguration of the link with Alfa Acciai, a brand-new district heating network and heat recovery system with great environmental benefits, 3,000 citizen house in Brescia that have heat derived from this very important industrial plant. It is the second in Brescia. The first was in 2016, and is the proof that it's possible to reach the 73% of it recovery for this repeating in our plan. Talking about enabler, in particular, in the innovation, we inaugurated the new open innovation portal launched a couple of months ago. And we launched the challenge and calls for ideas as well as receive our corporate venture capital this year. And let's say, also very important, our partnership with MIND that is the Milano Innovation District, that raised a lot of investment in this innovation district. Well, coming back to the high -- industrial highlights of the period. Let's say, there are -- in our typical [indiscernible] with plus and minus, pros and cons, it's very difficult to find some minus in this quarter. So talking about plus, there is the consolidation of AEB that is our subsidiary in Brianza, in the north of Milan. The energy scenario is very positive, EUR 11 million in the generation and trading rights from the energy scenario, in particular, EUR 22 million price effect. But as you know, we have a very strong quarter. So there is EUR 11 million loss from hedging, but it was [indiscernible], and a couple of million that rise from the waste-to-energy business. Also, the MSD margin works very well, EUR 40 million compared with the EUR 32 million of the first quarter 2020. Better hydroelectric production, very good in this quarter, EUR 12 million equal to a couple of hundred gigawatt hours of production, 24% plus than 2020, compared with 16% plus of the overall production in Italy. So we did, in this quarter, 8% plus better than the benchmark -- national benchmark. Also water cycle, it works well due to the tariffs, a couple of million euros increase in particular in Paris in the area of the Province of Paris and Brescia. And the district heating volumes, EUR 4 million more. It is 130 gigawatt in [indiscernible] hours, 10% more than the first quarter of 2020 due to the temperature. And last but not least, paper prices, in particular, there is a very particular situation in which the price of the paper recovery is 173% more than the last quarter of 2020. So some key ESG highlights. I am in Page 5. There is a number of tons of or recovered waste that is growing 14% more. So also this is very important for us, of course. Renewable capacity, 14% more than last year. Coal production, 35% less because, in particular, in Monfalcone and in Brescia, we substantially closed the coal production, and 20% of growing of the avoided CO2 in kilotons. Talking about people, that is very important to enable our plan also because these results surely arrived sourced from a strong commitment of all our employees, our people. And we arrived in only the first quarter to 13% of employees with cascaded objectives compared with 10% of last year. You remember that we have to arrive to 100% in the horizon of the plan. 27% of women representation in group company boards compared with 26%, only 1% more, but it's a path, it's a [indiscernible]. And 20 workshop -- or 20-plus workshops for the development of strategic plan. And looking at Page 6, I'm really very happy to say that our revenues growth of 27% compared with the first quarter of 2020. And you'll remember that the pandemic crisis in the first quarter of 2020 was not so effective. The EBITDA arrived at EUR 399 million, 21% more than 2020, and is the same with ordinary because there is no one-off that changed the EBITDA and the ordinary EBITDA. Also the net income is 21% plus, arrived to EUR 136 million, with a flat net financial position that remained about EUR 3.5 billion. So I give the floor to Andrea Crenna for some detail, Andrea, please?

Thank you very much, Renato. Good afternoon. We are now on Page 7 of our presentation. So we have the usual waterfall of the EBITDA. We keep on reporting the business units, as you have seen them in the past. We're working on the project we presented with the industrial plan of our unique energy division. It's an organizational and corporate projects, which will lead eventually to 1 single business unit. As we said, for the time being, we will keep on reporting for ease of comparison to B2B separately. This has been clearly an extremely positive first quarter, fueled both by organic growth, effects of the M&A deals we closed last year and some temporary effects I will comment on in a second. This quarter compares very favorably, not only versus first quarter of last year when, in March, we started suffering the effects of the COVID emergency, but also in the first quarter of 2019. So it's truly been a very, very strong quarter. M&A, which mostly is referred to the AEB first-time consolidation, as you can see in the right-hand corner accounted for around EUR 19 million. The organic growth, excluding the M&A, has been around 15%. And if we carve out the temporary effects I was mentioning before, organic growth, it's still double digit. On Page 9, we have generation. We also view our recording an extremely good performance with the quarter also beyond our expectation and basically driven by 4 major drivers. One is the hydroelectric production volumes Renato just commented; two, the ancillary services at EUR 40 million versus EUR 28 million in the first quarter of 2020 remains very positive. Scenario is mostly on the hydro prices with the achieved prices up 13% year-on-year. And we also got a positive feed-in tariff that, for the time being, is a temporary effect, which accounted for EUR 6 million. We are currently hedged 67% on the year-to-go, I mean, on the following month, 67%, but we are almost completely hedged on the hydro production. This clearly leaves no downside, but on the other hand, no upside on the forecasted production volumes. We opened, on the other hand, on market prices to any extra productions we might have versus what we already planned. On the CCGT side, on the gas production side, we hedged 50%. And we are open 50 -- remaining 50%, obviously, which roughly, it's about 4 terawatt hour of production. In 2022, instead, we are hedged only 24%. On Page 10, we have the market with 13% growth rate, which is basically due to the first-time consolidation of AEB. This is a business unit where the COVID-19 in 2020 has got a negative impact mostly on the new customer acquisitions on the free market. Whilst on the other hand, the initial months in 2021 are going pretty well and in line with our budget. Excluding the AEB, the quarter is, therefore, flattish year-on-year with 40,000 new customers on the free market, strong volumes in electricity and gas. The unit margins in the mass market are, for another quarter, holding up nicely. We're not seeing any unit margin pressures on the market. B2B unitary margins on the gas are holding. We are seeing a bit more pressures -- competitive pressures on the B2B on the electricity; and clearly got more acquisition costs as the marketing campaigns have restarted after the COVID, which offset the positive contribution margin. On the Waste business, we are reporting a 12% or EUR 9 million, out of which EUR 2 million are from M&A. So 9% growth is organic. Once again, we are experiencing positive trends into the gate fees, albeit at a lower pace than the previous years. But on the other hand, as Renato said, we have got very strong paper prices tripled year-on-year. The next page is networks, as well posted a very solid quarter results, we see EUR 18 million up, EUR 5 million out of EUR 18 million comes from AEB. And they are mostly, if not exclusively, on the gas network. Excluding AEB, the net increase is, in any case, over 9% and comes from a recovery in new connection in gas distribution, which were much penalized last year for the COVID; a tariff increase in hydro and volumes up 10% in district heating. Next page, the waterfall to the net income. There's very few things to be said. The D&A are increasing because we got the first time consolidated asset because we did more CapEx last year and because we are accelerating the depreciation of the 1G meters in their phase out. We have an expectation of about EUR 650 million on the full year. CapEx, Page 14, they're clearly up as we are heading towards the delivery of our industrial plan. You all know we have ambitious target on this item. The next page is the net free cash flow. We...

Andrea. Sorry, Andreas, only 1 minute about CapEx.

Yes.

It's clearly that CapEx, compared with the first quarter 2020, 26% more. It's very important. And we confirm our target to EUR 1 billion of CapEx, we see later in the guidance, and the fact that is not in line in this moment with the budget. Our budget is mainly due to, let me say, accountability effect. So we -- in reality, we are working in CapEx in line with our target. Please, Andrea.

Yes. On the net free cash flow, as you see, we basically square it off. We ended up with a 0 free cash flow variance on the quarter, although we got 200 -- more than EUR 280 million of negative cash from the M&A activity, which basically means we have done EUR 280 million plus on the other cash flows. And it's pretty clear that part of that comes from the working capital, including the other assets and liabilities. This is mostly temporary effects on some tax payables, which clearly we expect to reverse in the following months. All these positive numbers led to revisions of our guidance, which I will ask Renato to comment.

Yes. Frankly speaking, the results are beyond our expectation. We have a temporal effect, but the prospects are clearly positive. And the reason in our analysis are 3. The first is that exactly, as I said, to you during the presentation of a plan, the mainstream in which we have both in energy transition and circular economy in this moment is very strong and very important. So there is a scenario very positive for our sector. The second is, let me say, the value of our assets both in generation, in the environment, in the waste market and in the networks, but also how our customer base is clearly a good asset of marginality. And the third is the very important commitment that, as I said before, for our management, but not only the management or our people as in this moment with our industrial plan. So we decided to forecast the guidance in Page 16, you can see that we imagine to have a range between EUR 1,230 million to EUR 1,250 million. So -- and with CapEx that, as I said before, we confirm EUR 1 billion plus. So I think that we can leave the floor to question and answer, Renata.

Okay. We now start the Q&A session with 2 most requested topics by the analysts. Actually, it's 1.5 because Andrea has already addressed most of its questions. Starting with a question to the CEO. Could you please give us some color on the national plan for recovery and resilience recently approved, in particular, the projects and the total amount of the funding involved for A2A and the signing for the final green light?

Yes. Well, as you surely know, last -- a couple of weeks ago, our government presented the -- our plan for the recovery to the European Commission. And I met directly our Minister of Finance to understand how it's possible to organize the companies to be ready to use the very important energy that will arrive from the national plan for recovery and resilience. And in particular, we identified projects consistent with the national plan for recovery and resilience for around EUR 8.2 billion at 2030. Pay attention, our projects that we have already in our industrial plan and that don't need money from the recovery to be developed. But it's clear that our company is able to use money. And in this moment, our country is like every other country in Europe, has a problem to be sure to spend this money. So we imagine that not later than September or October, will arrive tender, like tender beauty contest or something like beauty contest and tender to identify companies able to spend the huge amount that will arrive from recovery. And so the fact that about 50% of our CapEx, our investment is already in the field in which will arrive money from recovery is, let me say, a good news for us because all the money that we will be able to use from the recovery will be upside on our industrial plan. In particular, 3 areas: circular economy and sustainable agriculture in which we have EUR 1.4 billion renewable energy, hydrogen and sustainable mobility in which we have EUR 4 billion; energy efficiency and building optimization EUR 1.8 billion and the protection of territory and of water resources. So the vision plan is on EUR 1 billion. So only considering the investment at 26. So the timing that we have to spend the money from recovery, our project amount to around EUR 4.9 billion. So my hypothesis in our -- that we are studying are a couple orders. Some of the CapEx will be founded by the recovery plan. And so our financial position will perform better or we'll have opportunity to develop more business and more infrastructure, more renewable, more waste-to-energy plant, waste-to-material plant and so on, more investment in water and so on to grow more than what is forecasting our industrial plan.

Okay. Thanks. Next question for Andrea is about hedging strategy. The question was about the [indiscernible] exposure, level of hedging and prices. Could you -- for 2021 and 2022, could you just add [indiscernible] extra information to what you have already explained during the presentation, please?

Yes. Well, the levels underneath the hedging, I think I just commented on the prices, we have hedged 2021. I will give you the year-to-go prices as the year-to-date have already been included into the quarterly results, it's the purposes. On the year-to-go, we hedge around EUR 51 per megawatt hour on the isolated production and EUR 9 in terms of spark spreads, clean spark spread on the CCGTs. Whilst on the 2022, which I repeat myself, we hedged only around 20%, A bit more on the hydro production, we hedged close to EUR 55 per megawatt hour and EUR 7.5 on the gas spread.

Okay. Thank you very much. We can now start the open Q&A session. Please go ahead with your questions.

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

Thank you for the presentation as well on the numbers, on the first quarter numbers that are certainly strong. I think that during the presentation, it has been mentioned that there is a temporary impact. So if you can please repeat the reason for that positive temporary impact, quantify it and identify that into the different divisions where this -- from where this temporary impact is coming from? And how is that impacting, in your view, the first quarter numbers? Then the second question related is for the increase in the guidance that has been, roughly speaking, in EUR 40 million. If you can help us to elaborate why the company that has recently presented its business plan, now it's increasing the EBITDA guidance for 2021. So to what division that is attributable and to what activity, I guess, is in the Energy division that is attributable as well? That is the second question. And then the third question is on the CapEx. I think that during the presentation, the CEO has mentioned something like the CapEx delivery has been affected by an accounting issue. So if you can clarify and help us understand what you are referring to how the CapEx would have been without this accounting thing. And the very last thing is on the supply activity. So there is a growth that is coming from the consolidation of AEB. But without that, the performance has been flattish. So you can elaborate a little bit more on the dynamics that you see in the market and while you are increasing the asset base, why the EBITDA and the profitability of the company remains flattish? And what is your expectation for the full year?

Javier, I will pick up the first question to start with. Yes, you're right. There has been some temporary effects for a total amount of about EUR 20 million roughly, that are basically from 2 different natures. One is costs. We are expecting to have costs in maintenance of certain planned CapEx -- sorry, CapEx assets; cost for projects throughout the company business units as well as the corporate, which have not been suffered yet. But we still have, in our forecast, to the year-end to do these activities, hence this cost, which we budgeted, will be sustained. For this part, which is a bit more than EUR 10 million, actually around EUR 15 million, it is a temporary effect in terms of lower costs than we are expecting. And then I mentioned, though, very quickly an effect on the feed-in tariff. The feed-in tariff is with the mechanism, which calls for a fixed part and a part which is variable over the production volumes, if you trigger a certain minimum amount of production. The fixed part is basically fixed in the year. So we already know how much money we will get even if we don't generate 1 single megawatt hour of production, but it's accounted in terms of production. So in the first quarter, we got more productions than last year. So we accounted more than the fixed fee per quarter. But if we don't exceed the minimum trigger, this extra part would be reversed in the next 9 months. On the other hand, if in the following 9 months, we will produce more than the variable part of the feed-in tariff will kick in, okay? But in Q1, we still don't see this part. So we're still below the necessary minimum production volumes, which will allow to trigger the variable part. I don't know if I made sufficiently clear, but it's a technicality on the way that the feed-in tariff is calculated. On increased guidance...

A couple of answers, Javier, on guidance and CapEx. Talking about guidance, the bigger part is generation. So let's say, EUR 30 million more than our forecast in January arise from generation. A part, as we said, a scenario because the scenario seems very positive, hydro production and MSD production quality, it seems to work better than our forecast. But let me say also that every business unit is performing better than our [indiscernible] plan, our budget. And of course, with different dimension because the generation, as you know, has a volatility completely different than the other, but also environment market. The market customer base is performing well and so on. And talking about CapEx, the differences is linked to the fact that if you have a big investment, one example on all the new waste-to-energy plant in Parona area, looking the development of CapEx every quarter needs to have a system accountability completely linked to vacant tier. Because if it's linked to the payment to how our supply chain risk is to have some step of cost that can arrive simply 1 month later than the closing of the quarter. So if you have a lot of little work to do or little investment to do, the effects is minimal. But in this moment, we have some big investment. And as I said before, we have to, let's say, we have to better organize our accountability to report the CapEx during the different quarter. But we confirm the guidance, EUR 1 billion more of CapEx, because we are completely confident of recovery of all the CapEx during this year.

I got the fourth question, Javier, it's about the AEB consolidations and the overall impact and the impact on the market business unit, if I got correctly. For full year, we are expecting about EUR 51, EUR 50 million, around EUR 58 million, to be precise on AEB. But last year, we consolidated EUR 10 million. So the variance is going to be around EUR 40 million, EUR 45 million. Clearly, this is not 100% on the market. What I said before is that if we carve out the AEB contributions to the market business unit, the performance is flattish year-on-year. This is not to say that it's a weak performance. If you look at the chart in the presentations, you will see that the contribution margin of the electricity and gas is up 3 million, which in percentage terms, it's roughly a bit less than 5%, which is not bad. But then you will see this amount offset by an increase in costs. These costs are mostly associated with the acquisitions of new customers on the free market, which clearly in the quarter got the acquisition cost, but they do not generate any margins because the margins will be generated in the following months. What we're missing in this quarter are the acquisitions on the Q4 2020 and the 3 quarter 2020. But for the COVID reasons, the acquisition has certainly been lower than we were expecting. We have, over the past 2, 3 years, performed net acquisitions between 150,000 and 200,000 new customers per year. And last year, we ended up with 100,000. So half the amount we were used to do. But actually, the contribution margins is nicely up. And as I mentioned before, apart from the B2B, the electricity, the unit margins are pretty nice. I don't know if I made myself sufficiently clear and I answered your questions, Javier.

No, no, it was very correct.

The next question is from Enrico Bartoli with Stifel.

I have 3 as well. One -- the first one is again about the power generation business. I saw that actually your production volumes, both on thermal production and hydro, were significantly higher than the performance of the overall system. So I was wondering if you can provide some details about this reason. And if you can share with us the volumes both for thermal and hydro that you assume in the new guidance for the full year 2021. Second question is related to M&A activities. If we can expect, during the next quarters, some additional M&A on top on the ones you completed in the first quarter. And also it was mentioned about the possible -- the company is possibly interested in the after that AEB is putting for sale. So if you can comment on this and on the strategic rationale of the positive -- the possible acquisition. The third one is regarding the cost of debt. If you can provide a figure. Interest charges were down very significantly compared to first quarter last year. If we can assume that the figure that we see in the first quarter can be a proxy also for the next quarters.

Enrico, well, talking about regeneration, both hydro and thermal, the reason is for the hydro production, the fact that the volume of water in the basin in the last quarter of 2020 was very important, and we decided to keep it and [indiscernible] this quantity of reserve in the first quarter of '21 and it was a good idea to keep it because the energy scenario was fantastic, and so the results are under your eyes. And talking about thermal, the differences is more linked to the fact that our thermal plants are mainly concentrated in the north of Italy. And in this first quarter, the temperature was lower. And so all the thermal plants worked in the north very well. Probably, the difference is between the average level and country level, and our performance is linked to simply to the geography. Talking about M&A probably not difficult to imagine, but we are looking other opportunities. You know surely that we put some nonbinding offer in exactly in the last months. And so surely, we wanted to grow if it is possible and if we will be able to find partner for minorities. I imagine that it's possible also to grow quicker than in our industrial plan. You -- probably your whole analysts can remember when I said during the road show that in my opinion, our industrial plan is not so ambitious. So as your evaluation and probably as a result of this first quarter confirm what I said in that occasion. Talking about the cost of debt, I leave the floor to my CFO.

I think you also asked questions about the expected production volumes, Enrico, on the full year, which right now, we are expecting a hydro production substantially in line with last year, 4.4, 4.5 -- between 4.4 and 4.5 terawatt hour and 11 tera, more than 11 tera of production of CCGT on the MNGP. So on the ancillary -- excluding the ancillary services production. Okay. And this basically 11 tera, if you carve out the production in Q1, is less with the 8 terawatt hour in the year-to-go, 50% of which we have hedged, which are the numbers I commented before. On the cost of debt, we today have an average cost of debt of 1.7% kind of 0.5% lower than last year for the refinancing we did. And your question is if you can take the net financial expenses at the end of Q1 and do x4 and adding the full year, I think you come up with a number, it's too low, okay? But it's fair to expect that we will be lower than last year, okay? And you can't do Q1 x 4 because clearly, we will have to roll out the CapEx plan. There is some M&A activity. So over the course of the following months, we will probably have more debt, which is what we were expecting in the plant. Hence, more net financial expenses, even at the equal interest rates, basically.

Next question is from Stefano Gamberini with Equita SIM.

Three questions also from my side. First of all, regarding the capacity market. If I'm not wrong, Terna issued the rules for the new tenders, the capacity they need of new plans. So could you elaborate a little bit about this? And if these are more or less in line with your expectations when we can expect the tender? And if this enabled you to go ahead with the investments you have for new CCGTs? The second, regarding the ancillary services even stronger, in the first quarter improved a little bit. What is the scenario for the rest of the year? And is the increase of renewable production impacting -- sorry, impacting positively on this item giving higher visibility on your full year estimates. Then I would like to understand better the situation regarding the waste business. The gate fee has improved in the first quarter. Is the trend still strong in terms of demand? And what you expect for the rest of the year and the forthcoming years? And here, in particular, regarding the situation of the authorization of all your plants that are included in the business plan. Isn't the function should accelerate a lot during 2001 and 2022? The very last one is just a consideration here regarding the recovery plan. You said that you could reach EUR 8 billion of financing from recovery plan. Do you see a risk there of substitution of your investment through the recurring plant funds? And consequently, an impact on EBITDA because it's stronger this case, you have also seen your return on this kind of investment. Am I wrong on this approach or not?

Well, to answer on the capacity market. First of all, only to remember that the EU regulation in 2019 establishes that all the existing national capacity mechanism must be reassessed to be compliant with the regulation from the January of last year. And in November 2020, the European Commission, in particular, the journal direction of energy published its opinion about the Italian implementation plan addressing some remarks but do not imply any changes on the structure of the mechanism. So for the European Commission, that's there. But there is an Italian Photovoltaic Association, the name is Italia Solar. Of course, it is interesting not to have money spent on capacity market on thermal plant and also some Italian companies that have appealed to the Italian Regulation Court against the mechanism. The main issues of the debate are the participation of new capacity and renewable plants. The dispute on the mechanism has been raised also from the European Court of Justice, and we expect the judgment shortly. And in case of rejection, all the claims by the European Courts, the Italian Regulation, Court will be able to take its decision alone. But talking with the Minister of -- the new Minister of Ecological Transition, Roberto Cingolani, he announced the intention to hold the tender for the deliveries at 24 and 25 by the end of the present year together. And it will not be necessary to notify the mechanism to the European Commission, if no measures or changes to the discipline are made, of course. So already, a public consultation by Terna or minor changes to the discipline. But the following steps are 2 new consultation by Terna, 1-1 technical use. One on the reliability standards and value of lost load. And ARERA, that is our regulatory body on energy, ARERA positive opinion of the mechanism to the Minister and publication of the ministerial decree approving the revised mechanism and establish a new portion. So let's say, we are very confident that the tender will arrive this year. And the other good news is that coming back to our thermal plant, in particular, the coal thermal plant in Monfalcone, last weeks, exactly in the last 2 weeks, arrived a couple of good news because in the process of authorization of the revamping of Monfalcone that is very important for us to be concluded before the tender of capacity market. We had a positive opinion from the national -- ISS it is the National Institution of Health in Italy and very important from region Friuli Venezia Giulia. And next week, we start inspections from the ministry to close the authorization, but we hope to have this summer to be able to participate in not only with the plant of [indiscernible] in San Filippo del Mela but also in more [indiscernible] Scenario, Andrea?

On the MSD, I will take your question, if you want, Renato?

Yes.

On the MSD -- on the ancillary services, sorry, in the forecast, in the guidance we have just released, we have an expectation for a total amount of ancillary services around EUR 120 million, EUR 130 million on the full year, which is by evidence, lower than last year where we were close to EUR 180 million, which, however, was really exceptional, really exceptional well above the average of the past 5 or 6 years. And this is the assumptions. You all know we have discussed many, many times about our forecast, about the levels, about the unpredictability of this revenue line. It's on one side might be perceived as conservative. On the other side, it's wrong actually to look at the ancillary services per se. One should look at the overall market performance. Sometimes ancillary services are better than expected, but offset lower performances in other profit lines. Just to name one today, we're seeing on the very, very high CO2 prices. As you perfectly know, it's a good news for A2A as a whole, but there might be periods of times where the CO2 increases before that they are turned to the pool prices actually squeezed the CCGT margins. So these are the assumptions underneath our forecast. Today, clearly, we do believe they are fair and accurate.

[Operator Instructions]

Sorry, the last question was about authorization for the plant in Western Energy with [indiscernible]. And in the plan, we have a couple of authorization for plant, a couple of it to energy and a couple of authorization for [indiscernible]. And let's say, we are on track, and we are working, and I am confident to have some good news also this year.

[Operator Instructions] The next question is a follow-up from Stefano Gamberini with Equita SIM.

Yes. Sorry, just to finish regarding the previous question regarding the recovery plan and what is the scenario in waste business, the demand is going up or not.

I will take the demand on the waste business, Stefano. Demand, you mean the demand in terms of treatment volumes, I guess.

Yes. Okay.

Okay. Well, last year, certainly -- certainly last year was penalized, particularly in the second quarter by COVID. Milano, for instance, got a sharper material drop in treatment in the frequent volumes due to the lockdown, basically a fewer people around. So we're seeing actually a bit of recovery in the treated volumes. This is not going to change dramatically the picture of the comparison year-on-year, let me say. I mean, we do not have to expect millions of euro in EBITDA variance from this effect to be fair, okay? Overall, if we -- if you are talking about the longer-term trends, yes, but to state the obvious, yes, the trend is positive and remains positive on prices, gate fees, as I commented talking about the Q1. I mean if your question is if we are still positive on the business, yes, we're very positive.

Yes, sure.

But because there is -- there are some regions, a good example is [indiscernible] in which the discussion about the gap in waste-to-energy is moving forward. And I think that within some historical regions in which the discussion in this kind of plant, not only this kind of plant, also waste material, plastic [ force and so on ], our feeling is that the mood is changing. And so -- and this is the reason for why I think that we will be able to arrive to some very interesting authorization in the last quarters -- in the next quarters.

There are no more questions registered at this time. I will turn the conference back to Ms. Bonfiglio for any closing remarks.

Okay. Thanks. Thanks, everybody, for your time and attention. The Investor Relations team is available for follow-ups. Goodbye to everybody.

Bye-bye.

Thank you very much. Goodbye.

Thank you to all. Bye.