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 Group Full Year 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 Group. Please go ahead, madam.

Thank you. Good afternoon, and welcome to our conference. Renato Mazzoncini, CEO; Andrea Crenna, CFO, will present our results. A Q&A session will follow. I now hand you over to Renato Mazzoncini. Please go ahead.

Okay. Thank you, Renata, and good afternoon to everyone. I'm Renato Mazzoncini. So you have a presentation. We can start on Slide #3 about the achievements in the last quarter '21. In particular, talking about the energy transition and acceleration in renewables, in particular for our pipeline. It's very important to underline the acquisition of Volta Green Energy. It is an Italian development and asset platform with a very recent pipeline of more or less 800 megawatts of renewables, but with our pipeline, bring the total pipeline to 2.5 gigawatt of new pipeline. Of course, the acquisition of stakes in 3New & Partners and 4New for about 350 megawatts of wind -- mainly wind and some solar plants in Italy and a little part in Spain. And the authorizations obtained for 4 gas plant upgrades in particular in Cassano, Chivasso, Sermide and Piacenza. and talking about the circular economy, the acquisition of TecnoA that is a company operating in industrial waste management in South of Italy in Calabria with an authorization to treat 300 kilo tonnes per year of industrial waste. Water management, there was -- let's say, in Gavardo, we opened a new plant of treatment. And we can shift to Slide #4, simply to say that some key ESG highlights that are very important in our strategy. So 71% of average waste collection is benchmark in our country. 4.2 million tonnes of waste treated, so 10% more than last year. Also a reduction of 5% in linear water leaks that is one of the target in our management. And solar & wind production with more than 184 gigawatts versus last year due to the acquisition of the Octopus portfolio. So 5 terawatt hours of green energy sold. And the level of grams of CO2 per kilowatt hour is 22% less than 2017, that is our target point starting from the certification with Science Based Target. The numbers for social and governance are clear. It's interesting but the sustainable debt is 45%, so 28% more than in 2020. And this is very important and is one of the results of our ESG strategy. I think that we can go directly to Page #6, only to say that some initial highlights are more MSD margin and trading portfolio. District Heating Volumes more than expected, in particular for last May '21, and more M&A deals closed in '21 compared with our business plan. Some minus due to gas portfolio and the cost of hydroelectric concession fees. In Slide #7, you can see the results. So in EBITDA, I'm very proud to bring the EBITDA over EUR 1.4 billion for the first time. The level of group net income, ordinary group net income is EUR 400 million. So 19% more than 2020 and more than our budget. And the ordinary -- the net financial position with EUR 4.1 billion, the ratio between EBITDA and net financial position is more or less, Andrea?

2.9.

2.9, so surely a good result. Okay. Andrea, if you want to give some detail about the breakdown?

Yes. Thank you, Renato, and good afternoon to everybody. I will jump to Page 9, briefly telling you the highlights of the different business units. Generation, generation went through a quite challenging year with some ups and downs between the quarters and different value drivers. Profitability grew 36%, close to EUR 100 million. Basically, 3 reasons. One, the industrial portfolio grew EUR 180 million. I will get back to the portfolio in a second. Gas portfolio reduced EUR 60 million, mostly due to the mismatch between contractualized volumes with our customers through clearly the business unit -- the market business unit and the actual supply with extra volumes that we had to buy at high growing prices on the market. And then we recorded higher fixed costs of EUR 40 million, basically 50% higher concession fees. These were all expected apart from the part related to free energy and the variable part of the concession fees, which clearly were hit by the higher energy prices and 50% higher maintenance costs, mostly because we had to enter into extraordinary, in the sense of nonrecurring, not unexpected, maintenance on some of our CCGT plants. Going back to the industrial portfolio. Two basically different dynamics between hydro and CCGT production. Hydro reduced EUR 30 million. You might remember, we hedged our expected volumes 100% at about EUR 55 per megawatt hour. The overall yearly volumes have been in line at 4.2 terawatt hours. But whilst at the end of September we were ahead of plan, Q4, because of drought, we have been short 20%. And once again, we had to go back to the market -- to the spot market and buy the production capacity we missed at very high prices. On the contrary, CCGTs had a record year, up 2.5x the performance of 2020. This has been due to very excellent results, not only on the ancillary services, where we actually got a record year, over EUR 300 million, but also on the CCGTs on the day ahead market fueled by stronger volumes and higher spreads. Last comment, the EBITDA from renewable -- renewable meaning solar and wind productions reached EUR 40 million. Moving to the market. Definitely, the market got the tough Q4 that has flattened basically the full year results. We reported very strong results at the end of Q3. And on the other hand, a nil -- ordinary growth on the full year. This is basically due to only one reason, which we just saw on the Generation as well. And this is the very high commodity prices associated with the mismatch between programs and contractualized volumes with our customer base and the actual customer demand, we generated short positions, once again hedged on the spot market at the then prevailing prices. This single item accounted on the quarter for EUR 18 million of lower profitability. Excluding this item, the business unit actually performed very well with a positive contribution from the increase of the free market customer base for about 180,000 customers -- new customers. Positive volumes on both electricity and gas in the region of 20% and quite flat actually unit margin. We had an overall decrease for only EUR 2 million year-on-year on the unit margin. Waste. Differently from market, waste got a very positive Q4, accelerating the already strong performance at the end of September. The full year ordinary growth has been 18%. We have got the benefit of the contributions of M&A for EUR 19 million and first-time consolidation of IB contributing EUR 6 million to this business unit. And excluding these 2 items, growth still has been double digit, a bit more than 10%, driven by higher energy prices, paper prices and higher fees, gate fees, for treatment of waste in our plants. And finally, on the networks. Here, we got the Q4 in line with initial 9-month trends, growth confirmed 18%. This business unit got the benefit of EUR 70 million of first-time consolidation of IB and of higher capitalized cost. On an ordinary comparable scenario, growth has been 8%, mostly driven by higher tariffs and invested capital in water networks and a truly positive year in district heating on both volumes and prices. On the following page, I would actually leave any questions on any items between EBITDA and the net income for the Q&A, if you have any extra demand on this item. And likewise, before turning the stage to Renato for the investments, likewise, on the free cash flow, it's quite self-explanatory. We actually performed better than we were expecting at the end of September. You might remember we were expecting EUR 100 million to EUR 200 million negative free cash flows before the extraordinary M&A activities and we closed the year with a free cash flow generation positive cash of about EUR 100 million. Renato, if you want to comment on...

Yes. Simply, it's very clear on the slide. There is a strong acceleration in investment, 46% more than 2020, but it was the record year in investment in A2A. So it's clear that we changed the speed completely. 60%, 65% in development. So EUR 641 million of CapEx in investment, concentrated more in Waste business unit and Smart Infrastructure. But all is growing, 78% in SDGs taxonomy and more or less 55% energy transition and 45% circular economy. So we are really very proud to be able to put on track so many investments this year, that means EBITDA in the future. Okay. I would say, to close -- okay, one information about dividend because we just closed our Board. The decision was to propose to the shareholders in meeting a dividend of EUR 0.0904 per share. That is 3% as ordinary dividend compared with last year. So EUR 0.0824 for share, and an extraordinary dividend of 0.008 that is more or less 10% more of dividend compared with the ordinary dividend. And this is the result of an extraordinary year, not linked, let's say, to the result of renewable or hydro, but due solely to the energy scenario and in particular, the MSD activities, but also a very, very good performance in all the business units that are performing really very, very well. Okay, the last information before I leave to question and answer is that during this Board, we decided and there is a press release some minutes ago, we decided to announce the interruption of negotiations for the creation of a partnership in energy generation and supply, because despite the effort made, the situation, let's say, also the situation of the international tension and the relevant consequences on the volatility of energy market in Europe have hiked so big not to give us the possibility to free to close all the economics necessary for a so important deal. So we decided to interrupt the negotiation and to look forward to the new world after this incredible situation that we are living in, in Europe not only. Okay. I think, Andrea, that we can leave the stage to questions and answers.

Okay. No, it's for question and answer for the analysts. Please go ahead.

[Operator Instructions] The first question is from Enrico Bartoli of Stifel.

First of all, I have, let's say, a general question on recent events and, let's say, statement at European level the toolbox that has been issued by the European Commission. And particularly there, there is some, let's say, open to go back for a limited period of time to regulated tariffs. There were discussions about setting a cap to gas prices. And in Italy, there seems to be also a discussion about possibly setting a cap to power tariff. So I was wondering what your opinion is on the state -- the actual implementation of these measures. And if you have, let's say, some comments on which companies in theory could be affected. And if you expect any impact on A2A from these regulatory changes. My second question is related to the guidance for 2022 that you provided at the end of January. Actually, several things have changed since there. Volatility in the energy prices has even improved. There is the risk of, even in theoretical, of some reduction in supply of gas to Europe from Russia. I was wondering if you can elaborate a bit on what you think the main risks in your opinion are for the guidance that you provided to the market. And the last one is related to Slide 16 on the cash flow. I see this EUR 258 million of positive contribution to cash flow from changes in other assets and liabilities. If you can provide some details on this figure. And if this amount you expect to be recovered at least partially in 2032?

Enrico, let me answer to the last question, which is on accountancy business. It basically, pre-tax, okay, in Italian once upon a time were called [Foreign Language]. Please forgive me for the Italian words, the international investors. They relate to advance payment on future contracts on commodities, which have been cashed in. So money received in 2021, but whose -- I'm missing the English word for competence -- the year of accountancy, proper accountancy is 2022. So we basically have cashed monies and at the same time returned debt towards the counter-party for the part relating to 2020 and '22, okay? And certainly will be reversed, okay? It's a debt. It's an increase in cash because it's an increase of debt. I don't know if I made myself sufficiently clear, Enrico.

Yes. That's fine.

Enrico, talking about, let's say, the market design, because your question is very open. My personal opinion is that we need a different market design to develop renewable in Europe in the next year. I imagine that the energy word before and after the war in Ukraine will change definitively. And I think and I hope really that is an occasion to move forward in renewable. But it's clear and there is also a very interesting discussion in Italy that we need a market design that brings the result to stabilize the price of energy for renewable stable, but the correct price to give the return of investment that we have in our plan. And so I think that the business model of renewable, as you know, is completely different from the gas production business model that is able to give very high satisfaction to companies like A2A in a situation in which the price is correct, let's say, EUR 60, to give a number not too hard to understand, but stable, stable in the year, because it's stability that we need. And I think that will arrive, because in this moment, this incredible volatility asks a regulatory answer and a new market design. Talking about gas, I think that if Europe will be able to really build a unique point of deal with all the products of gas upstream to fix something like a price gap is surely a very good -- can be a very good thing for all the citizens in Europe and surely also for A2A. In this moment, talking about the guidance '22, and also starting from the first 2 months, we don't see a particular risk in energy price, also because looking at our renewable, the price that we have in our plan, in our budget is, not sure, the credible price that you are looking now. And in energy retail, the margin that we have in the business plan is correct. So the only risk can be connected more then to the financial situation. So it's clear that if you look in 2021, our revenue arrived more than EUR 11 billion. It's clear that if all these dimensions grow, there is a potential risk of credit and so on that grow, of course. And so it's very important to stay -- to keep a very important attention to this. Andrea, do you want to integrate something on the guidance?

Yes. On the guidance, well, so far, as a matter of fact, we are in line with budget despite all the volatility and things which have happened. At the end of February, we were pretty much in line with our forecast. This is not to say that all what is happening might not have an impact. It's just to say that we believe that it's too early to say that all this will generate any potential negative or positive material variations. We will probably have a better view on what's going on by the end of May and we will release the Q1 results. Now if I have to tell you what is most concerning in terms of possible risks is, it's clearly the market scenario, but being a bit more precise on what we see as the effects that I just mentioned commenting on 2021, in particular, on the Q4 of 2020, and the effects on the mismatching between the contractualized volumes and the actual volumes. Since these mismatchings are clearly hedged -- not hedged, sorry, are closed by buying on the spot market, and by buying on the spot market, clearly we're hit, whether we're talking gas or electricity, by the extremely high values. In order to mitigate these risks, what we're doing, we're doing a lot of things, but mostly 2 things. One, we are hedging less on the hydro productions than we were hedged last year. Last year, we were hedged 100%. This year, we hedged 80%, a bit less than 80%. So we're leaving more margin on our internally generated productions to meet with increasing demand. And on the market side, we have stopped selling contracts at fixed price, because here the problem comes when you sell at fixed price. And so by doing all of that, we are planning the possibility to partially or totally mitigate the effects. Now the other thing why it's now impossible to provide an update of the guidance is that similarly to what we have done in 2020, when the COVID hit, if we see a materially negative scenario, then the company clearly will react by setting a recovery plan in order to once again mitigate the negative effects we might have driven by the scenario. But I repeat myself. At the end of February, and it's 15 days ago, we were okay.

Very clear. Just if I may, a quick follow-up on the first answer from the CEO regarding the cap on gas prices. So if I understood well, you expect that this would be possible only if there is a coordinated action by European governments and the impact will be mainly on importers of gas to Europe and on producers of gas, not too much on utilities.

No. So on utility, absolutely 0. For us, it also is only good news because if there is a price cap on gas, let's say, the capital involved is lower. And so for us, the risk is lower. But in this moment, it's clear that our spread on gas don't change. And so the problem is that this incredible volatility increasing of the cost of gas is a problem also for us. So really I hope that will -- Europe would be able to arrive to put on the table or negotiation a price cap.

Good luck to Andrea for the new adventure.

Thank you very much, Enrico.

The next question is from Javier Suarez of Mediobanca.

Two or three questions also on my side. The first one is on the interruption of negotiation with Ardian. So if you can help us to understand what this implies for the company strategy to 2030 on renewable energy. So my understanding was that this joint venture was instrumental to accelerate expansion of renewable energy. Once that the negotiations are stopped or interrupted, what this may imply in terms of your target for 2030 in terms of expansion of renewable energy. That would be the first question. The second question is on forward selling strategy. I'm interested on that comment that you made on forward selling less hydro generation, I guess that's because of the drought. The drought seems more significant than initially expected. So I would just question the risk that you see related to the possibility that the real -- the actual hydro production through 2022 could be, in fact, significantly lower than expected and then the company may face again that situation of being -- having oversold that hydro generation. So any visibility on your expected hydro production for 2022 would be helpful as well. And the third question is on the rationale for the dividend increase. I think that during the presentation, there have been several comments on volatility, uncertainty, there is plenty of things that are going on, many of them beyond the management control and company's control. So what is the rationale to increase the dividend in 2021 in front of that significant uncertainty. Any clarification on that would be helpful as well.

Well, talking about the interruption of the deal with Ardian, the effects on our business plan are 0, simply because the business plan that we presented in January was a stand-alone business plan and is a business plan that factorized inside the acquisition of the 2 portfolio plants from Ardian, 3New and 4New, that for us is a very important acceleration in our strategy or renewable, because we doubled, with this acquisition that will be finalized in the next weeks, the mention of our renewable from 350 to 700 megawatt and in particular with eolic because, as you know, in this moment, or before this deal, A2A was without wind production. So when we presented in January our business plan, and there are EUR 4.5 billion of investment of CapEx in renewable, arriving to 3.9, if I remember, gigawatt of total production, eolic and wind, more 2 gigawatt of hydro. The idea was exactly to be sure to have a strong strategy also alone because at the end of January, the situation or the scenario was already very critical, very difficult. And so the difficulties in the deal of Ardian was on the table also in that period. So our exercise to define a business plan higher, stronger than the business plan presented in '21 was exactly to be sure that our strategy is strong also without this partnership. So implication in our business plan and our guidance is 0. As you know, because you followed the presentation in January, in between here and '24, our total green energy production due to this acceleration is more or less 5 terawatt hour of new green energy. So in this moment, more than in January, it's very important to have this strong production. The rationale for the dividend, now question #3, Javier. We are talking about -- we are talking on EUR 25 million compared with a total investment that we have in our business plan of EUR 2 billion. So can I say that is peanuts and that I think that a company like A2A with a payout more or less 50% with a growth in the net income year by year of 9% of the growth of dividend of 3% is a situation in which the closing of the year, like this year is so much better than the budget can decide to give to our shareholder a little extraordinary dividend. That is big compared with the dividend because it's 10% more, but is little compared with all our economics of A2A, because it's clear that if you compare this EUR 25 million with the EUR 2 billion of CapEx, it's very clear that there is not a risk to reduce the investment, for example, to give dividend. So we decided that considering the scenario and the closing of this very strange year '21, an extraordinary dividend could work. Andrea, if you want to say something about hydro.

Yes, absolutely. Let's say that we have today an expectation of closing the quarter -- the first quarter with 150 gigawatt hours of lower production, lower versus the average of the past 5 years, which is the criteria we use to plan and to budget, okay? So in Q1, we'll be short of 150, and clearly this is a quite reasonable assumption. It's not raining. And on top of that, it actually doesn't rain since, I can't remember, December. And it doesn't snow. So we won't have the positive effect of melting, there's no melting in spring and summer. It's not the easiest thing to calculate which will be the loss of production due to that, but we have made an estimate and it's reasonable to assume that we will miss an additional 500 gigawatt hours from April to December 2022 for a cumulative effect of 650. That basically takes us to 3.6, 3.7 terawatt hour, the overall expected production throughout the year. And clearly, this is the lower production volumes versus the average and versus certainly last year. Now we have to compare that with the number I gave you before, the number I gave you before that we are hedged between 75% and 80%, means that we are unhedged, not hedged on 1.1 terawatt hours of expected production. Accordingly, if our assumptions that I just gave you are correct, we still have 50% of this amount, basically 600, 500 gigawatt hours of expected productions not hedged yet. Okay. Now whether this is sufficient or insufficient, we will have to see because that will depend on the amount of electricity which will be eventually called by our customer base on top of our expectation. This is where the mismatching arises basically. And now this is impossible. It's always impossible. I mean it's a question of so many elements that it's unpredictable. Last year, when we had this very negative effect from the mismatching, the forecast error that we did was minimal. It was one of the lowest in the history of Ardian. So it was not a question on the queue, it was just a question of the peak, i.e., the energy prices. This is only to say that the forecast errors on the quantities is negligible. And we always got that and actually higher than that and we never had a significant impact on our accounts. Now all this story is basically driven by prices. So we still have part of spare capacity to hedge this risk. Is that going to be sufficient? We don't know. Are we concerned, I don't know if we are concerned, we're not concerned. Certainly, we monitor that and this is, as I said before, probably the higher risk that we have. If we have to single out one, it's the unbalancing between actual demand and contractualized demand.

Okay. Good luck, Andrea also from me.

You're very kind Javier. It was my pleasure.

The next question is from Stefano Gamberini of Equita SIM.

A few questions also from my side. I would like to come back again to the measures that are under study by the EU and the government, both for the market and hydroelectric concessions. First of all, regarding the power gen market, 2 measures probably, a clawback on the extra profit and second a change of the design of the market. In both cases, do you expect that your estimate of power gen prices will remain at this level for your hydro and WTE production? What I mean the 5 gigawatt hour of production -- 5 terawatt hour, sorry, of production that you expect in your plan will have a price in your plan in the region of EUR 80 to EUR 86 per terawatt hour. So also considering all these changes that could arrive, you still expect that these 2 kinds of productions, hydroelectric and WTE will continue to have the same prices? Or do you see some risk, in order to have a clear scenario on the margins on these very important activities. The second, regarding hydro concession. There were a lot of articles and also some meetings in the parliament about this topic. What do you expect? Because Lombardy region seems to go ahead with the tenders that should arrive, if I'm not wrong, during next year. And on the other side, it seems that some changes could arrive. So you are still confident that you can confirm and retain your concession even on the already expired concessions? Or what is the big risk that you see for this? The second point is regarding this increase of the dividend again. It is a sort of new floor where we can calculate the increase of DPS, because, frankly speaking, this level should be reached only in 2024 or 2025 in your business plan. So being here already now sounds to be very good news despite all the risks we see on the market for 2022. So it could be interesting that after 2 months of the presentation of the business plan, there are some positive novelties on this topic. The third is just a clarification about the waste business, because you already reached this year an EBITDA of EUR 330 million, while you have a target in your business plan to improve to EUR 360 million in 2 years' time, even including an important acquisition in this sector. So could you help us to understand why there is such a little growth in the waste business in 3 years despite such strong market during 2021.

Okay, Stefano. Let's start from the energy market. Well, we can start from the sector, but in our industrial plan, the price of energy of our renewable is not EUR 86. I don't know where you find it this data, but it is EUR 60 to EUR 64 level, more or less EUR 65, let's say. So it's completely compliant with the level that, in my opinion, in my personal opinion, will be the correct price for the energy in the next years for renewable. And this is also the reason for why we don't expect to have problems in our economics for a clawback and so on. You have seen that talking about the '22, the [indiscernible] story from the governor. The effect that we calculated is EUR 35 million. That's the reason the plan is inside the budget. But it's clear that is a number little because we sold forward the energy from hydro, for example, at this price, and in our industrial plan in the next years, the price of renewable energy, both hydro and solar and wind is more or less at this level. So I think that really a new market design that brings stabilization of the price of renewable, also if the level of price is more or less what I said, is for our company only a good news. Because in this moment, risk and opportunity is volatile because in this moment, the price is very high, but in 2020, during the first round of pandemic, you remember the price of renewable energy in Portugal, in Spain, and the risk to stay under the level of correct remuneration of the assets. So really, I think that we can go in a new market design with the confidence to maintain our industrial plan, because the numbers that we have in the industrial plan are completely reasonable. Talking about hydro, it's true. In this moment, the situation is absolutely not clear, because when the European Commission closed the procedure of inflection against Sweden, Austria, Poland and other countries and also Italy, we said, oh, fine. So there is not -- we are not obliged to do tender. It's possible to find another way to push the investment or redefine the fee for the regions and so on. But at the same time, the government in the deal for PNRR introduced in the deal competition, the hydro concession. And in this moment, it's true that there is one table to say, okay, but probably in this situation, in this incredible and critical scenario, to bring all the hydro concession to '29 can be a good idea. And all the companies are agreeing to a solution like this. On the other side, regional Lombardy say, in some newspaper, in some news, that they want to proceed with tender, but there is a regional law, but to do the tender, it's necessary to have a decree to act below. And in this moment, I think that without a general decree from the Ministry of Ecological Transition, it's very difficult for the single regions to adopt single decree. So I think that it's absolutely necessary, a homogeneity between the procedure in the different regions. And so my vision is that there'll be a risk to lose the concession that is not. We want to relaunch the investment. It's not a problem to increase the fee for regions. We put it on the industrial plan. And if you ask me if it's more probable to arrive to some kind of tender, but let's say, also project finance in regional Lombardy is an option, or to go directly to '29. In this moment, I can't give you an answer. But for example, the situation, not clear on hydro is one of the reasons for a while. It was difficult to close the deal with Ardian because our hydro plant is more or less the 50% of the total value of our generation assets. And it's clear that without a clear regulatory framework in this sector, it's also very difficult to give an evaluation to these assets. Talking about dividend, Stefano, from next year, we come back to our plan. So the answer is that it's not a new floor. So the decision that the Board takes today is this one, extraordinary, and the communication is very clear that it's an extraordinary dividend. But next year, we want to come back to our floor. That next year, let's say, it's 3% -- we'd be 3% more than this year. So a very good dividend.

Waste. I will pick up the last question on waste. I guess, if I have correctly interpreted, your question is that the target at 2023 might seem weak.

Considering that you already reached EUR 330 million in 2021, why just EUR 30 million up despite investments and acquisitions?

Yes, yes. Yes, I perfectly got where you're coming from and where you want to go, actually. But the reality is that when we presented the plan, the expectations for 2021 on the waste were EUR 310 million, 3-1-0. And we have planned EUR 360 million with the base starting point of EUR 300 million basically, when you say. And clearly, you know that in the Waste business, the EBITDA growth, when we plan, especially when we plan, is due to new plants, the rollout of new plants, and M&A, if we already have the target more or less in mind. So at that point in time, in the initial 2 years, where we do have a quite clear visibility on which new plants will enter into operations in order to deliver the expected EBITDA made EUR 360 million a reasonable assumption. Then we have closed the year better than we were expecting. I think I've mentioned in my speech that Q4 was very positive for Waste business, not because of the M&A, but we certainly got a tailwind from energy prices and paper prices. Paper prices have been amazingly, amazingly high. So if the point is, do we -- if we forecast or if we assume that energy prices will keep on remaining very, very strong, and paper prices very, very strong, which is not the assumptions we have in our business plan, you know the energy price assumptions in the plan, because we have made them public. So if you assume a better scenario, then, yes, you are absolutely right, the possibility for a better performance is there, all the rest being equal. Certainly, when we had planned, we were not expecting such a strong energy scenario and paper prices. We were assuming a more normal, let me say, normal scenario on both prices.

Just a quick follow-up, if I may, regarding the topic of the energy prices. You underlined for renewables the price is lower than what I mentioned, that is the prices -- the Page 48 of your presentation, we see prices for the pool in the region of EUR 80 to EUR 86, and for the peak load from EUR 86 to EUR 93. So also Water and Waste business are not related to these kind of prices, are lower than this?

Water, which page in the plan, the page of the plan?

It's 48. Yes. The backup business energy.

Yes, yes, yes. No, sorry, because here in front of me I have the quarterly numbers and not the plan. But yes, it's -- on the Water, I didn't get your questions properly. I think...

The question is just if you have a cap or a redesign on the market, power generation market, do you see the risk that these prices will be kept?

On the waste to energy?

Right. Just the power prices for the 5 terawatt hour that you have from hydroelectric production and waste to energy.

Okay. For waste to energy, no, I think that is impossible. And in fact, also from the [indiscernible] story, where waste-to-energy plant was completely out because, as you know, ARERA, the authority, did the new regulation some months ago, deciding that there is a [indiscernible] of free market completely, Lombardy, let's say, compared with the regulated other regions. And in this framework, the waste-to-energy plant are considered, let's say, plant for waste more than plant for energy. So it's very clear that from a regulatory point of view, the world of waste-to-energy plant stays in waste. In fact, if you look, for example, in a region like Emilia-Romagna, for example, in which there is regulation, there is a trade-off equilibrium between price of waste treated and the price of energy. So there is a connection between the PUN and the price of energy waste created by the plant. In Lombardy, the decision is that the markets have to work and is a waste market. So no, I think that is absolutely impossible. There is no one -- absolutely no one discussion about the energy production from waste-to-energy plant, never in this month, in never meeting, never level. So it's another world, let's say. Talking about hydro production. I imagine that your question is, it's possible a price cap also for '23. Is this your question?

Yes,'23 and the following years due to a price cap or the market redesign, means if CCGT are not anymore setting the marginal price, clearly, there is a risk that this price will be by far lower.

Probably, the correct answer is that it depends from the plant. If you consider, for example, that our plant in Friuli-Venezia Giulia has a mechanism of setting tariff with a connection also in this case between subsidiaries and PUN. The answer is that the cost of production of energy in a different plant is connected to the investment that you have to do, the complexity of the plant. So it's not so easy to say, okay, this is the price and you have to stay. And in our industrial plan, the price of energy from hydro, [ Filippo ], you know how much is it the price of hydro energy production in the industrial plan -- in our industrial plan in the next years. It is not so different from a hypothesis of price cap question. If you consider that in 2030, we imagine to have a PUN base load of [ 80 -- 86 ] in 2030. It can be higher than the [ 65 ] because with [ decree ] is 60%, more 10%, so [ 66 ] is the price cap defined this year. With the inflection that we'll have surely in the next years, I don't know exactly when we can arrive, but the impact of risk of price cap is surely not high in our industrial plan. And in this moment, if you talk with all the authorities, ministers and so on, there is no one that is talking about this hypothesis. So now for what we know, I can surely say to you that there is no one table of discussion about hypothesis of price cap for '23 and other years.

Many thanks, Renata, and greets also from my side for Andrea, and I hope to see you soon.

Thank you very much, Stefano. Thank you very much.

The next question is from Emanuele Oggioni of Kepler Cheuvreux.

The first one is on waste, in particular waste to energy outlook after the energy crisis ongoing. Italy, such as other European countries, needs to have more power capacity through, for example, also new waste-to-energy plants and Italy needs it in any case or has needed it in any case also before the crisis. So my question is if you expect either a permitting process to debottleneck also your projects already you have submitted to the authorities, but can't be stopped by local communities, et cetera, on waste to energy? And the second question is on Ardian, on your financial structure and the also ratio of net debt on EBITDA due to your strong growth in CapEx also in 2021 and also expected in 2022. This situation will lead to a temporary higher net debt on EBITDA compared to the average of the plan and the history also of the company. So you mentioned during the Capital Markets Day that in case of a sale or of a negotiation with Ardian, you could have issued a hybrid bond to maintain your investment grade rating and to finance the recent acquisition from Ardian and of TecnoA. So could we have more color on that?

Okay. Yes. Good question. The first, because also, I think that in a situation like this, our government and the regions need to have more renewable energy, and it's also very important to remember that energy that arrives from waste-to-energy plant, 50% is renewable, because it arrives from biogenic burning. And the other 50% is much better in a waste-to-energy plant than in a landfill. And I really think that the fact that we need autonomy for energy in Italy is very clear now. And the only [indiscernible] energy that we can produce are from wind, from sun, from water, and from waste. There is no other solution. Waste, let's say, waste-to-energy and wet waste-to-energy, so biomethane. You remember that in our industrial plan, we push a lot also in bio energy. And if you think, that from bio energy, we can produce in Italy till 10 billion square meters of biomethane compared with a couple of billion that we can extract from Adriatic, I think that is very clear what we have to do. So let's say, Minister Cingolani is saying that the government want to produce simplification law. I absolutely agree that are not necessarily only renewable, but also in waste plant. And I underline, Emanuele, both waste-to-energy and wet waste-to-energy plant, because there is a high potential also in this plant. So yes, I think that we can grow. You know that we put on the table of regions like Sicily or Lazio, our project, our plan. And I am very confident that something can move. In this moment, there is under construction a new plant in Parona, a new plant for biomethane in Cavaglia in Piedmont, a new plant in La Carella in Lombardy for biomethane, and we are really growing a lot in this sector. For our financial, Andrea?

Emanuele, I think the news we just released on Ardian is not changing in any way what we discussed and disclosed with our plan back in January. So if you -- we have to go back to that plan and take that numbers and that capital structure as what we will do from now on. The Ardian has always been a possibility to do more than we had in the plan, not to [indiscernible] the plan. In this sense, today's news is not putting any additional pressure on the capital structures versus what we plan, actually. And what we plan was the guidance we released, including the guidance of the CapEx and including the dividend, let me say, as we discussed, Renato, said one second ago, the dividend, the expected dividend, ordinary dividend that we put in the plan. And yes, since the capital requirements are very strong, we put the possibility to issue EUR 600 million that nominally, we said was related to the acquisitions of the assets portfolio from Ardian, but actually, as you know, that is financing 100% of the activities of the group. So it's not a special purpose debt, its debt financing 100% of the free cash flow needs of the group in 2022. Let me say that the EUR 600 million is really far away from the maximum hybrid capacity of Ardian at this point in time, which is close to EUR 1.5 billion -- just below EUR 1.5 billion. It's just a planned amount that squares the circle. It's the amount which allows the company to stay within the limits set to date by the agencies. And we confirm that. We've worked throughout this month to be ready with the program. We will be ready to issue midyear. And we will see -- once again, we will reforecast and if we are in the need, we are prepared to issue. And as far as all the rest and capital structure, you'll go back to the plan and that's our plan.

The next question is from Davide Candela of Intesa Sanpaolo.

Yes. I have 3. The first one is on the current geopolitical situation and which could be the problem with regards to your gas activities. I'm referring especially to your gas procurement, if you see some risk on that in the short term? And both in the short term and in the longer term, we can assume that gas consumption could reduce since Europe is deciding to lower the dependence of gas from Russia for gas energy mix. So I was wondering if this lower consumption, which could be the impact for [indiscernible] and on a strategical point of view, which could be the levers for your company to offset this potential effect of lower gas consumption. Second question is on power generation. Mr. [indiscernible] a few weeks ago that coal production could come in place again in Italy. So I was wondering if you can recall us which could be your capacity that could come again into operation at high level. And maybe if there is something with regards to the potential remuneration scheme for this coal production. And a third question, very quick on, if you can recall your hedging policy for 2022. I didn't catch all the data that you explained before. And very last question on hydrogen. Looking at this scenario where you have high energy prices and it is my understanding that electricity prices are one of the main cost drivers for green hydrogen production, I was wondering if this scenario is delaying the adoption of green hydrogen in Italy and originally in Europe? And also because maybe renewal production would be more directed to fulfill power needs rather than the green hydrogen?

Okay. The answer about gas consumption in Europe, in Italy and Europe, and the effect on our strategy, if you look at our strategy defined in the Industrial Plan 2021-2030 communicated the last year or so in a period that seems another world compared with today. In our strategy, there is electrification. So a couple of billions of investment in electrical network, electrical mobility, renewable and so on. So our focus was absolutely in the direction of electrification of the final consumption. So let's say, for us, if really we see a reduction of consumption of primary energy through gas versus electron is only good news because it goes directly in the direction of our industrial plan. And in fact, if you look this year, the total quantity of energy production with -- sorry, if you look in this moment, the situation of energy -- electrical energy sold, you can see that in '21 compared with '20, we grew a lot in electrical energy, sold less in gas. Well, talking about coal, I consider that we have only 1 plant that is Monfalcone with 300 megawatt of power capacity installed. So it's, of course, a leader plant now compared with other big plants that we have in Italy. We want to swap this plant in a gas plant, and we won the tender for capacity market for this plan. So frankly speaking, I hope that we have not really to use this plant with coal, also if, of course, the problem of safety due to turn a regulation, can ask us to use it. But for us, the topic for Monfalcone is to deploy as soon as possible the new thermal plant in gas to hike efficiency. And talking about hydrogen, yes, sure, there is a problem of cost of energy. Consider that in our industrial plan, we have EUR 200 million of investment in green hydrogen. And we are trying to define a new taxonomy for green hydrogen because in our industrial plan, there is only the production of green hydrogen from waste-to-energy plant, exactly using the 50% of energy with the green certificated, so the part of energy products by the biogenic part of the waste. And this is the reason for why the cost of our green hydrogen is lower because the load factor of the electrolyzer is higher compared with electrolyzer connected to solar plant, for example. And this is also the reason why the impact of the cost of energy for our hydrogen is lower. The only problem is that at European level, hydrogen that arrives from energy -- from waste-to-energy plant is not in any taxonomy. And so we are working to define which is the color of this hydrogen. But you know that the first pilot is in Lombardy in [indiscernible] between A2A Snam and Ferrovie Nord Milano, so the decision to use this hydrogen on the trains is taken. The last question. Hedging levels...

Hedging. As I said, we are hedged 80% on the hydro production on 2022 and 50% overall, including also CCGT productions where we clearly hedged the spread, on an average selling price of about EUR 68 per megawatt hour. And we hedged less than 50% on the hydro production, hydro plus WTE, less than 50% on 2023 at EUR 130.

Ms. Bonfiglio, there are no more questions registered at this time. Back to you for any closing remarks.

Okay. Thanks for joining us today. Until the next time, goodbye.

Thank you very much. Goodbye.

Bye-bye. See you.