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

Good morning. This is the Chorus Call operator. Welcome to the Strategic Plan 2021-2030 update of A2A. [Operator Instructions] Let me now turn the conference over to Mr. Renato Mazzoncini, CEO of A2A.

Good morning to all of you and welcome to our conference presenting -- conference call presenting an update of our Strategic Plan spanning 2021-2030. If you notice, we named it Towards Green Autonomy because what happened in 2022, of course, put energy autonomy at the center everyone's dialogue and discussion. So we put it on the center of our strategic plan update. I have Luca Moroni here with me. He is the CFO. He only -- he joined us a few months ago, and he will tell you about the financials. Let's start. Let's dive into it right away. So a brief reference to our brand. We are a life company, and we keep pushing and focusing on what we do. We are focusing on energy, water and on the environment. And we, of course, focus on central topics that affect life quality and the quality of citizens' life. Involving our stakeholder is definitely providing excellent results, showing our overall commitment in a changing world, with consumers, with becoming prosumers and energy efficiency at the very core of the matter and planet resources that are to be protected and safeguarded. In 2022, we were faced with a very complex geopolitical and economic backdrop with very high volatility. Energy price peaking in August at 700 megawatts per hour. Inflation surging in the Euro area and running at about 10%. The Euribor 12-month interest rate higher than 2% in September. And with the situation that is somehow positive, if we compare it to the strengthening of our cornerstones, the strategic parallels our business plan relies on. And this very complex backdrop makes it even more important to invest in the 2 cornerstones, in the 2 pillars that are energy transition and circular economy. On the other hand, European policies -- and let me remind you of the repower EU bundles. EU reinforced commitment vis-a-vis energy transition. And the Draghi government law bills are starting to produce results. We've seen all the red tape for photovoltaic plant below 20 megawatts to be simplified, and we have a simplified single model for plants below 200 kilowatts and that have to be installed on building. So that's really simplified installation. And then the production of biomethane up to 40% incentivized when it comes to CapEx. And of course, we expect the new government to carry on along those lines and providing more and more simplification to speed up the installation of renewable plants. On the use of available resources to unlock renewable energy sources are very, very important. In Colombia in September, we presented a survey showing that we have a potential for 100 gigawatts solar energy, and that indeed something Italy can avail itself and can have a major importance. And we can also really enhance our wind production. We have a potential of about 20 gigawatts with the repowering of plants and the installation of new plants and also on the hydro side where Italy is the third country in Europe after Norway and France. And we believe -- we are confident that there's a lot of potential, about 3 gigawatt worth of investments. In the first 2 years of a 10-year business plan, we have spun off the investment in infrastructure for the country. And I think this shows clearly how A2A is a company that is focusing on infrastructure for environmental transition, energy transition. And between 2021 and 2022, we invested EUR 3.5 billion. And more specifically, let me remind you of some of the most meaningful items in the world of circular economy. In 24 months, we built 2 plants for biomethane production from OFMSW from organic trash, and municipal solid waste, 1 in Lombardy and 1 in Piedmont, Lacchiarella and Cavaglià with a production of 13 billion cubic meters of biomethane. And also, we completed a sludge treatment plant also in Lombardy, Corteolona with a treatment capacity of 55,000 tonnes. The -- and then the treating of sludge is also very important to do with agriculture. And so it's fundamentally important to have sludge treatment plans, especially in Lombardy, they play a paramount role. And then we also made a very meaningful acquisition in southern Italy in the region of Calabria. It was an M&A transaction for a WTE, for industrial weight. And with the treatment capacity of 300,000 tonnes, it is a plant that somehow is connected with our Bergamo plant, the Filago plant. Also from a geographical perspective, one is located in the north of Italy and the other one is located in the south of Italy, so that really is streamlining our logistics. And we are completing the conversion of another plant in the Province of Cremona, Biofor for the production of biomethane starting from agri food waste. And we also acquired from SEA, we acquired SEA Energia from the company managing Milanese airport. It's a company that was managing 2 very important plants for the production of both electricity and heat in Malpensa and Linate. And the Linate one is especially meaningful to us because the district heating network of the east of Milan is connected to it with the thermal power of 100 megawatts. And when it comes to water, we managed to complete new water purification plant. Especially on December 13, we're going to open a new one in Val Trompia in the province of Brescia. And the number of -- the overall number of inhabitants that receive services from A2A for water purification grows by 130,000 units. We are the best national player for inhabitant and covering all municipalities. And for energy transition, we have embarked in very important acquisition deals on the wind and solar energy. I'm sure you remember the Octopus portfolio deal for solar plants. And the acquisition we completed this year with the Ardian. We acquired the 2 wind power portfolios, 3New and 4New, especially in Italy, with a small franchise also in Spain for a total of 436 megawatts, and that really takes us to a leading position in the country as far as renewable sources are confirmed. We also developed further pipeline both in-house or through the acquisition of Volta Green Energy that is a company focusing on renewable energy sources. And we are building the first greenfield plant in Sicily. It's a wind plant, 30-megawatt plant, and we are focusing on flexibility. You're going to hear this word a lot today. And flexibility for thermoelectric generation, which is a type of generation that will enable the energy security and safety for the country and -- so as to make sure that the intermittent nature of renewable energy is somehow complemented with thermally generated power. We've strengthened the Chivasso and Cassano plant, also helped by the capacity market so that we can have new thermal engine that can ensure maximum flexibility to electricity supply. On the network side, we -- when it comes to the going lines of substation, substations are of paramount importance. We will see that in our business plan, we have 16 of them to be rolled out. Every substation is a building, 2,000 or 3,000 square meters with a height of [ 10 ] connecting the substation to the city grids. And especially in Milan where the working of grid -- the working with the grid will lead to the electrification of consumption, 1.7 giga. This is the level we want to reach to increase the overall electric power of the electric capacity that we're going to make available. And then our customer base is also growing. And we have digital channels, partly digital channels designed for that because they're very meaningful. 180,000 is the figure for them, which is probably the most valuable part of what our salespeople do in the market. And what are the impact for -- well stemming from the -- this very unstable scenario that led us to update our strategic plan? What are the criticalities to be taken into account to make our plans very resilient? So procurement costs for raw material and then the components because, of course, we have the effect of inflation. And that is quite clear. And also to -- until now, we've not had any procurement problems. Building sites are working smoothly. We have had price increases on some of the components and also on the new contracts we have entered into. There's a growth of net working capital, a nominal increase in customer and installment faced by customers. And the cost of commodities is also increasing, and then we have an increase of interest rates as well. So the guidelines that we can rely on as far as our strategic update is concerned are the following: So we have strategic continuity on the one hand. And the pillars, as I said, are very clear and even more so against this backdrop. This backdrop reconfirms that the strategy we outlined in 2021 was the right one, and we have a selective approach. What does that mean? At the time in which the financials are also of paramount importance, it's very important to focus our investments, our CapEx where profitability and returns are safe and are fixed and firm. And from a strategic viewpoint, we want to focus on organic growth in the domestic market. And because the energy autonomy for our country, and we disclosed that -- we discussed that in Cernobbio, at the Cernobbio event, according to us it's a top priority, an absolute priority. And so we are happy to be able to give our own contribution in that respect. Focusing on organic growth, of course, will enable us to have higher profitability, our plants to have higher profitability when it also when it comes to M&A transactions. And we also rely on the fact that energy autonomy, the need for energy autonomy and the simplification mechanism that we are seeing put in place, and also from a regulatory viewpoint, we hope they'll be clearer and clearer so that we can pursue our investments. And also against the current backdrop, adopting a flexible approach when it comes to investments and the main financial indicators will give a greater financial soundness to our company. As you can see in the chart, we have decided to reconfirm our 2021 targets, EUR 16 billion worth of investments within the business plan time frame, and you can compare them against the EUR 18 billion from the update we gave in January 2022. And as you see, basically, 2021 and 2022 were very positive years when it comes to, well, being able to invest against a growth backdrop with no major turbulence, with very low interest rate. So we had an average of investment of EUR 1.7 billion. And then we -- between 2023 and 2026, our average investment will be EUR 1.4 billion, and then it will go back to EUR 1.6 billion in the last part of the strategic plan. I'd like to say that when we first presented our business plan in January 2021, the EUR 16 billion worth of CapEx were defined as ambitious. I remember during the road show, talking to analysts and investors, A2A coming from investments and CapEx that were then -- well more than half of that, well, people were wondering whether or not we would be able to ensure the execution when coming to such a big acceleration in our CapEx. Today, these EUR 16 billion, we see them as a cautious move. 21 months ago -- 22 months ago was -- we considered that ambition. And today, thanks to the execution we've had over the last couple of years, we can see them as conservative and cautious. That really gives you an idea of the transformation we have been going through as a company over the last 21 months. Let us now get into the figures of our plan, circular economy and energy transition. You see that the production of green energy from recovery is, at the moment, 7 terawatt hour. This is the green average we'll now produce. You can see the light blue part. I'm referring to the wheel at the center. In blue, you have hydroelectric power, and then you have a solar and wind production, which is smaller. Whereas, the green part of the wheel is waste to energy. The dark green our plants, and then we have bioenergy. Overall, the energy that we generate at the moment, we spend at 4.5 terawatt hour of power produced by generation plants and the remaining part from WTE plants. And regardless of getting to 2030 to double this, there is 13 terawatt hour. The mix is presented by hydroelectric power around 4 terawatt hour and growth of solar -- an important growth of the wind energy. Bioenergy as well will grow considerably, and WTE will continue to remain a key factor in production. So this is the goal that we set for ourselves. In order to achieve these goals when it comes to the circular economy, we have EUR 5 billion CapEx to make. And now here, you can see the breakdown of CapEx in different sectors. When it comes to WTE, it will absorb 36% of this EUR 5 billion, so 19% district heating. Let me remind you that district heating is in the other part the circular economy because we always work in order to recover thermal waste. And the goal is that of having heat, which is decarbonized or increasingly decarbonized, then material recovery, 17%, from typical tractions like glass, paper and so on. Bioenergy and organic traction and the production, of course, of the biomethane from urban waste and agricultural waste at 12% and then investments in waste collection, there are a number of tenders to be done in Milan, and major CapEx are conceived here. Now you can see the EBITDA is envisaged to grow from EUR 600 million of this year to EUR 800 million. Half of the plan would come from waste energy and part -- or an important part, around 20% of the EBITDA will come from WTE. Now, from district heating, this is a slide that shows very simply the cycle, or if you like, our value cycle. At the bottom, you see the primary sources, A2A plants, A2A energy to the system and distribution. And primary sources are residual waste, organic fraction and by-products from agriculture. This is the waste line, if you wish. In terms of residual waste, in 2030, we shall collect 3.6 million tonnes. We recover heating, and energy heating is to be used for district heating. And heating is going to be used basically for Milano, Brescia and Bergamo, not for [ Arca ] and Napoli the electricity network, and bioenergy goes into a gas network. Where it comes to organic fraction and by-products from agriculture, which produce 0.4 million tonnes and 3 million tonnes respectively, which means 170 million cubic meters of biomethane. Please remember that what we're doing in 2022 lead us from 0 to 20 million of -- tonnes of biomethane. Now as far as the consolidation of our leadership in waste treatment throughout the country. In 2022, we treated 2.8 million tonnes of waste. This is the whole presentation for 2026 and 2030. So we have a growth of 1.1 million tonnes of 2026. So from 4.2 million tonnes to 5.3 million tonnes in 2026 and 7 million tonnes in 2030 with a growth in the plan of 2.8 million tonnes. In 2021, we had a market growth of 45% for urban waste energy and 10% in the industrial special waste with the energy, with the market is fragmented and the acquisitions in Calabria helped us to grow our leadership in this sector as well. As to the production of biomethane, we shall reconvert our biogas plants and we will develop new greenfield plants. I'd like to remind you that the acquisition of agri power plants allows us now to have 20 biogas plants or biogas production plants, and we should start the conversion or reconversion 12 conversion, 13 greenfield plants in 2026. So there's having 25 plants for biomethane and 38 plants at the end of 2030 with an overall production of 170 million cubic meters. And thus, ranking as the third player in Italy in the field of bioenergy. We do not want to lag behind in the sector of batteries, which is going to be a very big market for the future end-of-life market, well, rare earths and commodities, which are contained within the batteries are very important and precious. For this reason with the research centers and the Politecnico Milan, we started doing research to plan -- a plan for battery recycling. And the goal here is that of reaching 4,000 a year of black mass, which is the value part of the batteries with 10,000 tonnes of growth of batteries. Now you know the growth in batteries is envisaged to be exponential. Only the waste of giga factories can fuel recycling battery plants. And we believe the mines of nickel and lithium and cobalt is going to be this one as it was the case for the metal industry. Now as to energy transition, investments are certainly quite high, EUR 11 billion. You can see that the most important CapEx are renewables, 35% of CapEx around therefore EUR 4 billion, 30% of our CapEx in the distribution network. Yes, there is a strong acceleration of electricity networks. Flexibility, we mean investments in combined cycle clients or repeaters to guarantee the flexibility of the system. And then we have e-mobility, which is growing. We have done the market A2A energy, which has a number of investments mainly in digitalization and then investments in other infrastructures like public lighting and smart city. The EBITDA of the energy transition is growing from EUR 9 million -- EUR 900 million in 2020 forecast to EUR 1.4 billion in 2026 and to EUR 1.7 billion in 2030. In this case, too, we have a slide, which shows the value chain starting from the primary resources from the sun. We get 2 gigawatt of power, which then contribute together with wind where the installed capacity is 1.1 gigawatt. And together with hydroelectric power, 2 gigawatt of installed capacity, altogether 9 terawatt hour of renewable energy, which is then distributed to networks. On the other hand, the gas network remains essential fundamental for the production of electricity. And our plants -- our thermal plants or our plants, which, in 2030, are going to have an installed capacity of 6 giga with a production, which is going to be overall 6 terawatt. Now you can see that the hydroelectric energy is put partly within renewable energy and partly within flexible energy. Hydroelectric power, you see is the only source that is renewable and flexible because it can be switched on and off, and it will play a role in the next few years. As to the distribution, the growth of the RAB in electric network will start from EUR 800 million, so quite important. As I said all that doubling between here and 2030 investments on electricity networks. And this will help us to guarantee the growth of our customer base with special focus on electricity customers, but also the growth of energy services. As to the renewable capacity in Italy, we confirm the targets that we set for ourselves, 5 gigawatts at the end of the plan, grew by 2.5 gigawatts. At the moment, we spend at 2.5 gigawatt. And in particular, the goal is -- considering that we are ranking fourth in terms of industrial companies for renewables, and on the right, you see the figures that I mentioned before. The goal, as I was saying is that we'll get into 9 terawatt hour. It is interesting to note that in the first 2 years, we have worked a lot on M&As because we have the need to make up for some debt when it comes to our positioning on renewables. Meanwhile, we start working on our pipelines. The curve, as you can see, starts actually accelerating from 2025 onwards where our pipeline becomes mature. Now we have a pipeline of 800 megawatts, which is quite strong, robust. We have quite an important structure working on the pipeline, the goal we said of providing opportunities to build our envisage to greenfield plant. As to the storage and flexibility, well, this is quite relevant. In our plan, we envisage to build a 410-megawatt storage plants but integrated with renewable plants. We also have a development of a CCTG plant in the north area with a new programmable power and hydrogen-ready with a blending of around 30%, which won the auction of the capacity market, and then 390 megawatts of upgrades, which are projects envisaged to provide peak power all of this supported by the capacity market to already rebuild 1 in Cassano, 1 in Chivasso. And so the additional flexibility is going to be 1.7 gigawatt, 25% storage, 23% upgrade and then 50% (sic) [52%] the new CCGT plant, which is going to be made through the capacity market. Now this is a chart that you have already known. You saw it in other presentations. It shows our commitment in the consumption electrification. In 2021, the RAB gas was doubled -- of electricity. The RAB gas was 0.6, whereas the electricity RAB was 0.8. Our investments are made, on the one hand, to maintain and provide security of supply. And on the other hand, we also want to decrease the costs and the management of a service where users, end users are going to diminish in the future. And therefore, you need to make the OpEx costs more efficient and the management costs as well. On the other hand, the strong growth of networks helps us reach a peak power of 3.3 gigawatt of peak power of electricity networks within 2030, which means that 12 new substations within 2026, too, have already been built. 10 are being planned, 16 new substations really in 2030 and then 2,500 kilometers of new networks, very important topics. We tripled our investments on electricity networks versus the past. As to the customer base, incidentally, let me give you just one piece of data to conclude the part of distribution and generation versus the average of 2010-2020 where A2A invested EUR 60 million a year. Now we invest EUR 600 million a year. The investments on electricity was EUR 70 million. Now we spend EUR 210 million in terms of investments on electricity networks. The same applies to waste energy and waste material. The recovery of material have grown by 3.5x. As to our customer base, as I was saying, we have about 3 million customers. This is the forecast closure at the end of 2022. The goal is set of reaching 4.5 million of customers and the 5 million in, say, in 2013. Now part of the growth, a major part of the growth comes from the auctions of the enhanced protective market. Now in 2030, we want to sell a 30 terawatt hours of electricity. We rank second in terms of operators selling a terawatt hour in Italy. As earlier said, all the having 3.4 billion cubic meters of gas in 2030 and 30% acquisitions of customers through digital channels. Our plan envisaging a decrease of productivity from sales of -- pure sales extension of value-added services portfolio related to mobility. And moreover, you have to include seeking a small-scale solar as well, which is becoming very important for our prosumer customers. And at this point, let me give you some other information about our margin stability, which I believe is going to be very interesting because perhaps this is the part, which is most difficult to talk about or to story about. Now we have a clear view on this to make investments, our accelerated investments in a direction, which today is very clear and which falls within the mainstream of the ecological transition. There are a number, however, of natural hedges. Here, you see the margins of the generation, which you see the most volatile part of our business. And you can see the black line, EUR 500 million of EBITDA margin, which remain basically stable because the mix of sources, blue hydroelectric and green, gray, thermo electric, blue and light blue, dark blue, wind and solar and light blue, incentives. Well, our sources, as you can see, and we don't have 2022 here, this is where hydroelectric power is not much because we have periods of droughts like in 2020. And as you probably have seen when we presented the quarterly results on the November 10, hydroelectric was offset by thermo and by incentives Now in those years when we had a strong hydroelectric power production, we had a lower contribution by thermo. So this flexibility works very well, and this depends on the technologies of our plants and on the geographic distribution of our plants in the country. The other natural hedging factors between renewal electric generation and domestic customers. And as you can see, the renewable energy production is 3 terawatts per hour and sell to domestic clients so far. RES production will reach 9 terawatt per hour, and the sales to the domestic customers to households will get to 10 terawatt. We are an integrated group. And so that really has helped us and has proved to make us very resilient and flexible. When it comes to PPAs going forward and long-term sales to households, mass market clients as well, we're working on that as well, will entail a natural hedging between the 2 positions. And another important hedge is in the waste universe, again, integral -- vertical integration. And in 2021, as you can see, we got the 1.9 million tonnes of -- we collected 1.9 million tonnes of waste. And we have waste treatment plants that can gather for 1.2 million tonnes. Within the business plant time framework, we increased in waste collection up to 2 million tonnes of treated management. And in waste treatment, we land at 1.7 million tonnes. And therefore, this 85% makes collection and treatment universe to work together to roll out synergies, and that is very important because it enables us, when we collect waste, we have somewhere to treat them and dispose of them. And that is a paramount importance to ensure the security and safety in our cities. And then treatment plants enable us to have a feedstock to work with. There's a very strong integration among our businesses because the heat produced by WTE is sold for district heating purposes. And let us think of what we are doing in the fume or flue gas treatment in Brescia, recovering energy for district heating purposes. And then the waste flood treatment for energy recovery, once again, closing the water cycle and the waste treatment cycle and making them fully circular. And last, but not least, we have a very strong credibility in our business plan that goes through the fact that by 2026, 80% of our projects will have been completed or will be underway or will have been authorized already. And the backlog, therefore, is very, very robust. Think that when it comes to WTE development, we have 3 urban WTE plants, 2 of which in operations starting from 2023 to urban WTE with authorization position in -- ongoing, and 1 industrial WTE authorized for expansion when we acquired in Colombia and then we have 2 plants for organic fraction plants that were completed. 20 projects, heat projects were contractualized, and they're underway for renewables. We have 1 wind power and 2 solar plants that are underway, 2 solar plants authorized to be built by 2023. And for new flexibility, we have 2 upgrades completed, 2 underway; 1 peaker underway; 1 CCGT underway; 2 storage projects authorized. And after the energy networks, we have 2 primary substations completed; 3 primary substations underway; 11 planned and with site identified with the municipalities resilience work on energy networks. And so definitely a sound track record going forward. And now we have a lot of backup as well. We rely on backup. And as you could see, we introduced some caution when it comes to CapEx against the backdrop we are all witnessing. It's a deteriorating backdrop affected by volatility, and we know that. And we hope that at the same speed, it will also go back to normal. So that's why we need to have a backup when it comes to projects. These are some of them with potential upside embedded in them. We have projects we are working on when it comes to project engineering and authorizations to be received. This is the upside, EUR 100 million on our EBITDA, water cycle out of scope for district heating and energy efficiency, 30 to 50 flexible energy. We mean a second WTE -- sorry, CCGT plant and capacity market, renewables and tonne storage, market development. This is the potential EBITDA upside. So we can really roll out projects. We can do engineering and roll projects out. That is even -- has even a greater firepower compared to what we have today and also investment power we have today. So we went from a situation where we have an investment, well, CapEx that were very quiet in a situation that, well, they were considered ambitious. And now we are in a situation where we have proven to be so good at execution that we can even enter into partnerships to ensure the rollout of our investments. Let me now hand it over to Luca, who will give you some data to crunch from a financial standpoint.

Thank you very much, Renato. Good morning to all of you. Let me start from the 3 keywords that were mentioned by our CEO, the strategic continuity, selective approach and financial discipline. These are 3 keywords. And let me add the fourth word to it, is low-risk profile. And let me walk you through the first slide of the section dedicated to financials. And I think it's very important to look into our financial profile, especially with the new credit metrics, especially FFO on net debt. If you compare us against 2021, which was a very positive year, by the way, this year was characterized by the commodity price sway and, therefore, an absorption of working capital. So this has seen this metric to go to a level of forecast, which is around 20%. And hence, we are trying to reposition at above 23% starting from 2025 already. So going away -- going a pathway to recover to a very sound level. That means having a net debt to EBITDA relation of 3x in 2023 and 2024 and then progressively declining until 2026 where we foresee a 2.6x, and at the end of the plan, 2.5x. I said low risk profile. As you can see, 45% of our investment of this EUR 9 billion worth of investments until 2026 and EUR 16 billion from now to 2020. All these CapEx are focusing on low volatility businesses. That is to say the businesses that can generate very predictable cash flows because they come from regulated businesses or contractualized businesses. And here, we have distribution networks, waste collection. And then we have capacity market, incentivized renewable sources, and then we have district heating. We then have 60% that is focusing on the merchant part, but we have to look at it very carefully because it is characterized by a limited risk profile. If we look at the components, we will see power generation. And Renato explained very clearly that there's a natural hedge within the different energy generation components that represent our main electricity production base. And then we have energy retail that is tied in with our customers where our customer base is very stable with churn rates that are quite limited, and also waste treatment. This is to say -- well, I said waste treatment, where we are leaders at domestic level despite the fact that our country is suffering a level of infrastructure that is underperforming, that is too low, and therefore, calls for investments to meet the waste treatment demand. Let's now move on to the financial domain, financials in our strategic plan. As you can see, margins are growing and net income is also growing. And they are very well balanced, which are from EUR 1.4 billion in 2021 EBITDA and to a forecast for 2022, as for guidance disclosed, in the range between EUR 1.45 billion to EUR 1.5 billion until 2026 where we expect growth to EUR 2.5 billion with an average growth of -- weighted average growth of 8% to get to 2030 of EUR 2.6 billion and a CAGR of up to 7%. And the same growth profile is expected for net income up to EUR 600 million in 2026, starting from EUR 400 million with a CAGR of 8% and until 2030, EUR 700 million with a CAGR of 6%. And also, earnings per share will grow accordingly. Our investment plan, our CapEx plan, was very sizable between 2021 and 2022 to EUR 3.5 billion with an average of investment per year of EUR 1.7 billion. EUR 6 billion is the expected figure between 2023 and 2026 with the year average of EUR 1.4 billion. And then eventually, in the time spanning 2027-2030, EUR 6.5 billion, with a yearly average of EUR 1.6 billion. Having said that, these figures are -- well, we do not provide a guidance on the first year of the plan. However, I can tell you that the growth pathway shown from here to 2026, we'll see an EBITDA growth in the range of EUR 100 million, EUR 120 million, stemming or driven mainly by the organic growth and the CapEx we have included in our business plan. As to cash flow generation, you can see that a big chunk of our cash flow generation will enable us to fully fund our investment plan, our CapEx plan, both as far as the maintenance CapEx is concerned, EUR 2 billion between 2023 and 2026. And also to fund the development CapEx, that is to say, EUR 3.8 billion with a positive cash flow of EUR 400 million. That would be the residual cash flow. And same applies to 2027-2030. Overall cash generation, EUR 400 million after funding both maintenance CapEx, 1.6 -- EUR 1.7 billion and development or growth CapEx in the range of EUR 4.7 billion. The positive cash generation will enable us to confirm our guidance on dividend going -- showing a dividend growth of 3% year-on-year starting from this year already where our benchmark are referenced for inflation scenario. In 2023, the assumption is 2.7%. And for 2024, declining to 1.7%. And the funding need, we have to really fund our investment plan, is EUR 3.3 billion between 2023 and 2026. And it will move to EUR 4 billion between 2027 and 2030. Our average cost of debt will go from 1.5% roughly, which is the value we expect to have at the end of this year to 3% by 2026. As a consequence of the increase we expect in interest rates that we see in the market, but also embeds the excellent work that we did until 2021 by focusing on our cost of debt maximization. We have no specific maturity concentration in any given year, and we are very cautious when it comes to debt maturity management. We leveraged different funding opportunities. And of course, we rely on investors as well. Consistently with our pathway, so to say, we will fund our strategic plan with green finance, with green bonds and sustainability linked bond together with EIB loans. And we will land to a level in excess of 70% of our funding need through green, as I said, and sustainable funding and we'll get to in excess of 90% of our needs covered by 2030. And the idea, the goal is to have an average debt duration in excess of 5 years. Let me now turn the conference over to Renato again for our ESG focus.

A couple of slides on ESG. And we called our transition ecological, environmentally-friend compared to decarbonization target by 2030. Of course, we are, of course, aligned with SBTi targets, net zero by 2030 and waste reduction with energy recovery and heat. We want to be just harnessing our individual potential inclusiveness, et cetera, and shared. Shared, why? Because, of course, we will do a lot of work together with the supply chain and the ecosystem for industrial innovation. As you probably know, we are certified for Scope 1 and Scope 2 for science-based target initiative to get to lower than 230 kilograms of CO2 by 2030 -- sorry, grams -- per kilogram of CO2. And we reconfirmed our net zero target by 2040. And we are definitely working on it. And this will call for a further commitment on the renewable energy sources universe and to complete a research when it comes to carbon capture for certain plants, those who are tied in with flexibility and waste-to-energy matters. And as far as people are concerned, our people, we take care of our people. And we have a strong focus on safety on the job. And you see the accident or injury frequency index, you can see it on the bottom of the slide, is constantly declining. The target is get to 13, 1-3. And then, of course, we are working with deskilling -- and reskilling of our staff and so that we have a competent exchange across generations, so that we can reduce onboarding time framework for new hires. As the world is speeding up, so we need our young people to be onboarded in the shortest possible time. And then we have talent management, and we have mentoring programs. And training within the company is very, very important. So as I said, we have cross-mentoring by focusing on an induction program for the new hires. And then we have, of course, diversity and inclusion targets. From now to 2035, the amount of manager -- women who are managers, and then we have 20 -- more than 25%. We have 48% of women who are part, members of our Board, and we want to get to higher level. And then so not just focusing on management, but we want the opportunity for each and everyone to have a targeted for science and then, of course, the inclusion of disabled people to enhance their role in the company. And then let's get to the supply chain. The objective is to get -- to use scored vendor, rated vendors. We are already at 60%, but we want to get to 90% with the impact of sustainability criteria when it comes to vendor rating, affecting them for 30%. So much heavier, much tighter than you would have on conventional or ordinary scorings. And then we want to scale up innovation projects. We are really working on innovation. We have EUR 40 million in a venture capital fund devoted to innovative start-up, EUR 17 million invested in start-ups focusing -- there are 7 start-ups focusing on energy transition, circular economy. And there, we are very much -- we have a stake in them. And then, of course, we want to focus on disseminating this type of culture. Closing remarks. This is what I was saying at the very beginning, we are going to wrap up with the slides, few slides. And if we compare new business plan, the current strategic plan with the 2 updates, January '22 and November 2022, the plan is perfectly aligned with the plan we disclosed in January 2021. So we came up with the right forecast and then the speeding up, the acceleration we have assumed in January 2022 because of the extraordinary growth we had experienced in 2021. So that was capped somehow by the war and the international backdrop. But the real closing remarks that we want to share with you is that in 2021, we consider this plan ambitious, whilst now we consider it a cautious plan. That means that our execution capacity and our growth ability and capacity is well consolidated by now. It's something that is well aligned in the market, and that means that A2A, going forward, will give a great contribution to environmental transition, not just in Italy, but in all of Europe. Thank you all. Let's now start the Q&A session.

[Operator Instructions] The first question from the Italian conference, Javier Suarez with Mediobanca.

I have 3 questions to ask. The first one is connected to the -- on the dividend. In the presentation, Page 33, there's a statement, which speaks about the dividend growing by 3%. Now can you help us understand this statement? And perhaps we can interpret it as softer commitment to dividends, growth of 3% a year, until when? Until the end of 2030 or until 2026? So the second question -- now I heard that the CFO speak about the level of gearings that were to be achieved. Is this something that we don't know? Is there something that we should interpret here? Third comment, in the previous strategic plan, you had a guidance of EUR 1.6 billion. And then in your presentation, I heard that the EBITDA growth in 2023 should be around EUR 110 million. Now is the net income and EBITDA target for 2023 still valid? I do apologize if I had so many questions.

Now as to the dividends, the goal was that of not creating confusion or perhaps we obtained the effect that in the opposite direction, meaning we are not going to change the dividend policy that we announced with the plan of 2021. Our plan was starting from EUR 0.8 of dividend. Every year, the dividend would grow by 3%. So in 2021, EUR 0.84; in 2022, 3% more and so on and so on. So a growth of about 3% year-on-year. We thought we could generate the confusion because, as you know, in 2021, we had an extra order dividend, which, as the term says, it was extraordinary in nature. So the dividend policy is confirmed, a growth of 3% year-on-year, consistent with the growth of the net income and consistent with our CapEx plan. Because the heart of the net income, which is devoted to dividends, is growing less than the EBITDA and CapEx. EBITDA has grown by 7% year-on-year and with a stable net income growing consistently with a dividends growing by 3% year-on-year considering also the CapEx that we have to make. Now as to the gearing, I confirm what I said during the presentation and also I confirm what I said when I presented -- when I disclosed the Q3 results. I told then that 3x or 3 per -- was a very important result for the company. Although this year, we expect 3.2, let's say 3x is a reference for 2023 and 2024. We expect not to release the working capital for the whole year 2023 and then progressively starting from 2024 onwards, we are going to release it. And therefore, FFO on net debt is going to grow consistently from 20% up to about 2023 and 2025 and a gearing of 2.6 in 2026 and 2.5x in 2030. So a progressive situation from 3x, it will go down progressively. As to the question about the guidance for 2023, well, I said that the growth of 2023 versus our guidance for 2022 is a growth of around EUR 100 million, EUR 120 million of growth of EBITDA. We feel quite comfortable with this. We've made a number of assessments and simulations on scenarios. We also considered the cap coming from the [ Decreto Sostegni ], a law decree. Also we took into consideration the indications of the European Union of -- or about renewable energy sources. And considering also the exceptional conditions that we had this year. Some -- on a positive note, there is a good performance of MSD and trading. And on a more negative note, the more difficult situation due to the drought that we have experienced this year and the reduction of hydroelectric power generation. However, we have kind of a natural hedging which allows us to offset and use the different sources of energy in a flexible manner. The reduction of hydroelectricity power production was more than offset by CCGT plant. Now the contribution status situation of our company to the country has to be provided. As to generation, these are the drivers. As far as the market is concerned, we are going to turn into positive margins the negative margins that we're now having related to multi annual contracts we had in 2022 and also due to a consumption profile of our customers that had fixed rate contracts and, therefore, when consuming more led to some negative margins. Offsetting this, going back to a positive profile, as we said announcing the results of September, we are moving our fixed rate contracts when they expire into flexible rate contracts. And therefore, we're going to be able to recover some EUR 50 million of margins on the retail business. Now another EUR 20 million, EUR 30 million are going to have them in the field of waste because new plants are going to start operating that we mentioned during the contribution, which will provide a full contribution starting from next year. And then we will have something also in the field of the networks. Electric networks will certainly contribute because investments which will be made -- which will be offset by the normalization of district heating, which had a positive effect in the first part of the year because also of the temperatures we had last winter.

The next question by Stefano Gamberini with Equita.

I have a few questions to ask. The first is about the targets, 2026. EBITDA energy, EUR 0.94 billion, now it's EUR 1.1 billion, this is the EBITDA. How can you improve by EUR 160 million with the lower investments in renewables in the period? And can you also give us the idea about the price scenario that you have considered, not only in 2026, but it's in 2023 and 2024? What is the gas PUN curve that you expect in the period? Networks, we invest the EUR 3 billion networks but EBITDA runs flat at EUR 500 million in ['27]. Why is it so considering such high investments? And then another thing I wanted to understand is about the results. So the bottom line, EUR 600 million, is there an improvement of some other variables since the cost of debt is growing? What is the scenario that you expect? And then 2023, how is the price cap going to work? We know that [ 65 energy ] for a megawatt hour on the [ sales ] market become EUR 110 for the integrated market. I don't know whether also for you this is true, [ a surprise].

Now as to the question about generation, well, I guess the main factor or main difference in our evaluation and your valuation ['26] is the operation of Monfalcone CCGT plant. This plant is going to come up and be operating in 2025. And everything is assisted with capacity market. Around 870 megawatts of power for an overall EBITDA value of EUR 100 million in 2026. So please remember that in 2026, the change of renewables is not to be seen because what we have reduced there is the impact of development abroad that was envisaged to occur in the last part of the plan. As to networks, while we have a very strong acceleration of CapEx for electricity and network but, versus the old plan, we have a reduction of the hydro power -- hydro cycle. Why? Because we are not yet capable to find a way to increase investments in the water cycle because after the referendum of 2011, we know that once management expires, well, they have to be given to companies of municipalities that comes to their management. And so versus the old plan that we presented, we have less investments and, therefore, lower EBITDA of the water cycle. And on the contrary, there is a catch-in for the water cycle because the expiry or the end of some concessions, in particular in the province of Brescia, generates some EUR 300 million in the plan and lower investments in our EBITDA as a consequence. Thereafter the EBITDA of 2026 for networks is envisaged to be around EUR 570 million considering that we start from EUR 475 million over 2022. All of the growth is envisaged to be in electric networks and district heating. You can realize that the growth is not only a little. Perhaps you had a question about the trend of net income, which is actually growing. 2023, 2024, while we have some provisions for bad debt as we saw also in 2022 and an increase in financial charges, which as I said, have a cost of debt which will go from 1.5% this year to slightly above 2% next year, reaching then 3% in 2026. And then what happens starting from 2025? While we expect the normalization of the working capital also of receivables which, let me remind you, that the provisions to the bad debt fund is mainly related to a calculation -- a proportional calculation related to the trend of revenues and not to the trend of bad debts. Cashing in money of receivables is stable. The so-called unpaid is stable at 1%. Starting in 2025, we expect a lower amount of provisions to the bad debt fund because of the normalization of the situation. These are the drivers that then lead us to grow the EBITDA and also of net profit with a tax rate which is expected to remain stable around 31%. However, we are working on a number of opportunities, optimizations that we have -- would provide a contribution -- a positive contribution. I think the last question was about the price cap. Looking at the next 2 years, we made our own assumption, which we believe is conservative, if not very conservative because we expect for 2023 to maintain a cap of EUR 58, which is the current cap envisaged by the [ Decreto Sostegni ], the law decree. And we also expect this to be extended. We'll have to see what happens from now on to the next few weeks. When it comes to Europe, perhaps Europe should take a common position on renewables, so as to provide a symmetric situation and conditions for all countries. We have to avoid having a situation whereby, for investors, it is more favorable to invest in other countries than in Italy and vice versa. But we have a cautious position here. As to 2024, our assumption is that of a European directive being translated into Italian legislation. We have to see what the cap is going to be fixed. In this moment, we are cautious. EUR 120 a megawatt hour, this is our expectation, although yesterday, the minister talked about EUR 118. So we believe that our position, our assumption is quite cautious. And then we expect from 2025 onward the situation to normalize. Some price increase is due to the fact that the renewable plans are being built with incremental CapEx by 20%, 30% because of inflation. And this will have an impact on the energy prices. Our models are used to simulate the long-term periods -- simulate going below EUR 100 from '25 onwards but a bit higher than what was the price before the crisis because of inflation. This is the scenario that we expect and where we think we can really have some upside.

Can I only ask you another question? In the previous plan, in 2026, TTF was at EUR 20 a megawatt hour, and the precedent is EUR 75 per megawatt hour. What are your assumptions today when it comes to 2026 estimates?

TTF around EUR 39, EUR 40. And the PUN baseload, EUR 130; at peak, EUR 140. This is the price for 2026. And for the renewables and the hydroelectric power is lower, below EUR 100 in 2026. Well, we introduced a major cap in 2023, which is EUR 58 and then a cap in 2024, EUR 120. And we expect things to -- or the market basically, in 2025 onwards, I guess there will be a market cap, but we expect it to be above the value that we gave to ourselves in this moment for 2023 and 2024. But then we are speaking of a maximum PUN values, and we expect the average hedge in the year to be lower than that, that depends then at what we are looking at. Thank you.

Next question comes from the line of Davide Candela with Intesa Sanpaolo.

I have a couple of questions. The first one is on CapEx. The CapEx you're assuming from 2023 onwards. And you say that you're going to mainly engage in greenfield investments. So can you elaborate on CapEx, your CapEx for the projects you have? You say 80%, but could you -- as I said, could you elaborate on that? And your CapEx you're assuming for M&A purposes in the EUR 12.5 billion that you have in store from here to 2030. And then a clarification on the world of energy among the different sources and the use of energy. From 2030, 100 terawatts per hour of power sales whereas if you combine sources, you get to 23, 24 terawatts against a higher price scenario compared to the previous plan, this delta, this difference, if you have to buy volumes in the market to meet the domestic client request or demand, is this going to affect your EBITDA going forward? Or is there something else you'd like to add?

As to the answer on CapEx. So when we were talking about CapEx, by 2026, with the calculation you made, we can say CapEx from here to 2030. So in those CapEx, we did not factor in any M&A. All our CapEx are industrial CapEx. EUR 9 billion until 2026 and EUR 7 billion between 2026 and 2030. Out of this EUR 9 billion, EUR 3.5 billion have already been completed and others are underway -- currently underway. And I must say that projects -- well, there are really, really very many of them because our company is a large company and we engage in multiple projects and multiple activities and initiatives. So we really have a huge amount of projects. Let me give you an example. We talked about CCGT plant for Monfalcone, takes up about EUR 400 million, EUR 500 million worth of CapEx. And then we have renewable energy sources. Right now, we are building a plant in Mataroco, another one in Sicily, in Mazara. And then we have acquired a ready-to-build plant in Friuli Venezia Giulia, it's a very big -- it's a solar plant, a 70-megawatt plant. And these plants are 150 megawatts, and you multiply them by the average plant value. It's EUR 1 million per megawatt just to somehow make some computation. So we have very meaningful investments on electricity grids. Electricity grids take up EUR 376 million between 2023 and 2026. We have CapEx focusing on energy retail, takes up EUR 190 million. Then we have CapEx to be devoted to -- well, it's maintenance or development or growth CapEx. For energy transition, it's EUR 1.4 billion and, I'll look for the right figure, for waste, EUR 175 million. On the waste side, waste treatment side, we have a lot of projects and very meaningful ones. WtE in Corteolona, which will be completed by 2026, EUR 230 million taking up as CapEx. And then we were awarded the expression of interest tender against [indiscernible]. We were awarded for the upgrading of the [ trench ] for WtE. We're awarded the order. We have a revamping of the WtE in Crotone, TecnoA -- with TecnoA and it's EUR 100 million for the doubling up of its power, its capacity. And I'm just mentioning the most important ones, the largest projects we have in the pipeline. And then water cycle, we have about EUR 100 million devoted to the upgrade. And then -- and growth. We have a series of investments. As I say, they are larger in numbers, but they are very well defined. They've all been authorized already, and many of these are already underway. So I don't know whether I answered your question, but I'd say that we are going to retain 40% of the water to circular economy and 60% to energy transition. That's the split-up. And when it comes to generation, power generation versus the old CapEx, it's 8x or 9x. On electricity grids, 3x. And on waste, it's 4x. So this is the -- we're adding up all investments and authorizations to build that we have right now on the table, so to say. And think about, for instance, the Cassano engines, the ones we acquired with capacity market account for EUR 60 million. So every investment, although it might seem small, it's worth a lot of money still. What other questions did you have? 30 terawatts something? I don't know whether we understood your question correctly whereby you asked, we sell 30 terawatts. We generate about 22 to 23 terawatts. So if -- well, will our growth will be determined or driven by the purchasing of the delta, of the remaining amount. Correct me if I'm wrong, if I'm mistaken, if I did not interpret your question correctly. But clearly, the growth is mainly driven by our CapEx, the investments we've just mentioned. And if we focus on the retail world or the retail universe, Page 22 in the presentation, it's driven by growth in our customer base, especially electricity customers and mainly driven by acquisitions, opportunity to acquire among which the one stemming from market liberalization initiatives of the safeguarded market, the protected market, of the enhanced protection market and where we can have a big contribution to increase our customer base. So that will take us to the disclosed volumes that is to say 30 terawatts worth of sales. And then, of course, the assumptions today. Our variable contract -- variable rate contracts and in some cases, variable cost contracts and then some fixed cost contracts. You have to think that we go from 95% fixed cost contracts to a percentage that is going to decline sizably in the next 2 years, talking about fixed price contracts. And we are sure this is going to be a win-win situation for customers because if you were to block or freeze prices as they are now -- as high as they are now, it would be for no one's interest, for no one's benefit. And then in Q3, bio market picked up, recovered because we probably played ahead of the curve when it came to making variable cost or variable price contracts available to our customers. So we think those will be the prevailing contracts going forward. And as Luca was saying before, there's some kind of unbalancing in 2-year contracts that led to an EBITDA loss in 2022, whilst we recovered in -- we'll be recovering in 2023 because the average sales price was between 2022 and 2023, where 2023 was going to be assumed to be lower than 2022. So we are seeing -- we are witnessing a margin recovery coming from the bio market, from the business unit market, and that will make us hope for the best also for the coming weeks and months. So it's not high prices that are driving growth, also because the business is characterized by a cost plus of the commodity portion, of course and is -- and of course, has to come to grips with both purchases and sales balances, so to say. You could have greater or lower margins. But if we assume things to be stable, it will be mainly driven by an increase in volume stemming from an increased customer base. Thank you very much.

Something about CapEx between 2023 and 2026, EUR 1.4 billion. Are you going to invest, made more front-loaded? Also taking into account the effect of working capital on debt is about 3x from now to 2023, and then a progressive recovery of working capital through the year. So you're probably putting -- shifting CapEx towards the end of the plan versus the beginning of the plan.

No, I think it's well balanced. The spreading out is well balanced. And we definitely were helped. So the machine is working, is up and running and is helping us get to the expected results. What we didn't want to have were peaks and troughs, so to say, when it came to CapEx. And we want working capital not to decline again because of commodity prices. So if it's not going to decline, we want to reduce CapEx a little bit to keep ensuring robust cash flows versus net debt. And we always wanted to ensure business continuity also for the works that were underway, the plans that were underway. So the recovery will -- we are talking about doubling up our investment versus historical data sets. So this will retain a strong storytelling on our strategy, on open building sites or building underway -- and therefore, we want to retain consistency over the different years of the plan.

The next question from Emanuele Oggioni with Kepler Cheuvreux.

A number of clarification on issues that have already been dealt with. First of all, generation prices. You talked about the reference prices of PUN and the assumptions on the price cap that might be changed or might be introduced also for other technologies. Now -- but my request is about the short term 2023. Can you give us an update about volumes that have already been sold forward by technology and the level prices at which they have been hedged? And then in line with the European Union regulations, they should be free of any price cap. For instance, hydro power, EUR 58 per megawatt hour price cap. And not all of this, however, not 100%. For the free part, how much is sold forward? And how much is exposed to the spot price for 2023? As to the price cap, you talked about precise numbers. So thank you very much for your precision. Let me ask a question. From your side, and considering the growth of EBITDA for the waste energy business. You are assuming that things will continue as they are in your plan, whereas the proposal of the European Union of mid-September waste to energy was considered about the intramarginal sources on which to apply a price cap of EUR 180. So if in Italy, we were to apply the price cap, we should apply EUR 180 of price cap. Since you haven't mentioned, I'd like to know why you haven't taken this into consideration. And then another clarification about the networks. As my colleagues, I have also noticed a relatively limited growth of EBITDA. So I guess that you have -- assuming the [ right ] assumption, the regulatory framework to remain stable. And then what is the RAB deflator? Is it going to be unchanged versus the previous plan? But let me say that we are in a context where interest rates and inflation are higher, and you should have an upside on the RAB deflator until 2024, also an increase of regulated WACC starting in 2024. I guess you haven't included this assumption in the plan perhaps to be a bit more conservative. So I'd like a clarification about this. Last question about the retail business. During the call, you mentioned a decrease by 3% year-on-year of the unit margin per customer, on the profitability of the customer due to competition and so on. And then the absolute EBITDA goes up because you expect to acquire new customers getting out forcibly from the enhanced protection market. So I'd like to know how you calculated this 3%.

Let me start from the last question you asked. All of the plan was built that the -- was built thinking that the level of competition in the free market in Italy remains similar to what we have seen over the past 10 years. And so our scenario assumed that -- a loss of productivity by 3%. So which way can we use to offset this? First of all, value-added services to lock in a customer, like a wall box or a heating [ box ] in-house or solar on the wind. So that was the first assumption. The churn rate is very low. The useful life for a client is around 10 years. And then at the end of the plan, we expect 10% of our customers to buy not only commodities but also one value-added service which would help us make up for the loss of productivity coming from the market competition. And then we are going through a volatility scenario which is certainly decreasing competition. Suffice it to look at our churn rate and to the one of other large competitors, which shows that the level of competition is decreasing because of the difficulties smaller companies are facing up to. When it comes to the first question that you asked, well, as usual, we sell production at a fixed price. 3/4 of our production is sold forward, EUR 150 per megawatt hour. That was the prices generated in the fourth curve in 2022, looking at 2023. And the reason why I'm saying 3/4 of our production and this explains why in 2022 we were not highly penalized on the overhedging of the hydroelectric production. Hydroelectric production was going very strong -- strongly in the past 3 years. We -- for this reason, we do not hedge everything, to be flexible in terms of the use of our production. In our plan, in 2023, hydroelectric power is going to be below the average of the previous 10 years. A production of 4.2 terawatt hour, that was our average production. Now this year, by including the 2022, and you know we're going to close with 2.6, 2.8 terawatt hour. This lowers the average and then we've been a bit conservative. And for 2023, we estimate the value of 3.8, 3.9, but certainly below 4 terawatt hours. So -- and we hope a few months to go differently. As to thermal power, the hedging is 10% with EUR 20 per -- EUR 20 spread per megawatt hour. As to WtE, we basically sell it on the trading market at EUR 60 per megawatt hour, which is in line with the EUR 58 of the envisaged cap, let alone the EUR 180 of the waste to energy plans. Now the assumptions that we are taking within the plan for WtE is simply a conservative assumption. As you also anticipated, our assumptions are conservative also for networks. I mean, I confirm that we haven't updated the real WACC which is certainly going to happen following the increase in the inflation-related indices. So 5.2 for electricity, 5.7 for gas. And so against our assumptions, but we expect some upside. We did not want to anticipate regulation and then mention values. We thought it was going to be fairer using the current legislation and knowing that analysts can do their own calculations quite well by themselves. Thank you.

The next question with Antonella Bianchessi with Citi.

I have some clarification questions. First of all, on the guidance you provided for 2022, despite the fact that you said that you've seen improvement in your supply chain, you keep saying -- you keep using -- providing this guidance that would hint at a particularly weak Q4 just because you want to be cautious or because there are maybe some issues that maybe you could elaborate on in that case? And the second question, always -- concerning your guidance for 2023, you said EUR 120 million versus 2022. This is regardless of what will happen in 2022. It's just -- or is it just focusing on your EUR 1.6 billion EBITDA regardless of what is going to happen in Q4 2022? And then another question on debt, the previous plan you talked about EUR 7 billion of debt from here to 2026. In the new plan, if we consider the cash flow you're mentioning, from here to 2026, EUR 6 billion, so it's a much lower debt. Could you elaborate on the amount of CapEx, which is referred to this level of debt, which is lower than the one you mentioned before? And then on the waste side, despite the meaningful increase of the PUN, waste -- waste-to-energy is basically unchanged both in the old and new plan. Could you elaborate on it? Are you being cautious? Conservative? Or are there any issues?

And as to the first 2 questions, Antonella. For sure, we were very conservative or somehow conservative. And as to the closing of the yearly account, the guidance we provide is the one you heard. If you ask me whether I'm an optimist or a pessimist, I will say that I'm an optimist because we keep seeing good results. But you cannot expect the same level of MSD you had -- or we had in that quarter because MSD is always very high when -- maybe if it's too high, there's always a problem of how to manage the system. When you see growth of both EBITDA from capacity market, MSD, it means that something has to be corrected or adjusted. It's clear that our forecast for both this quarter and 2023, we keep assuming a normalization of MSD because we keep assuming that investments on the capacity market will then lead to a normalization of the MSD. If you ask us, if you see this normalization now being very strong, the answer is no. So this is one of the things that could generate an upside. As to 2023, so we're not going to change our guidance. We're not going to amend it. But if you ask me if I think that will be in the top part of the range or the low part of the range, I will say the high part of the range, the top part of the range. And as from here to 2023, the figures Luca mentioned before rely on the closing of 2022. And therefore, we are assuming to have a 2023 that can be closed above EUR 1.6 billion. And we are taking in the effects of the EBITDA growth driven by new plants that are coming on stream, the full deployment of EBITDA of the 3 or 4 new plants and then the production of biomethane that we opened in October, the full deployment of RAB stemming from the 2 primary substations that we just opened. And so it's mainly a mathematical exercise, where we have plants, we have new investments coming on stream, and they generate EBITDA. Otherwise, it wouldn't be meaningful to have such a monster CapEx plan if we were not generating additional EBITDA through it. And then in 2023, we were somehow cautious in estimates as to the -- or assumptions as to the scenario. This EUR 58 cap, we assumed it to stay for the whole year. I don't think this will -- or that will probably be the case. And Italy will probably -- together with the other European members, will have to find common ground to find a price cap on renewables. And I think the EUR 180 cap could be a correct value for -- to reward or remunerate investments in renewable energies because there's no floor. So it's easy somehow to assume the potential upside that could be embedded in that kind of estimate. Even though the -- we do not expect the WACC to stay unchanged going forward, as you said. So it's 2023 where we like to be cautious somehow. And you know us very well. So you know that we try and stay which -- and stay cautious when we disclose official info because we'd rather give you a positive surprise when we close the account rather than disappoint your expectations. As to debt, I will ask Luca to step in.

And as to debt, we have a level of debt which is around EUR 5.5 billion in 2026, and EUR 6.3 billion in 2030. In the old plan, we had an average of CapEx that was higher in the first 4 years, 2023, 2026, of about -- higher of about EUR 300 million per year or maybe more. So here, we're already recovering EUR 1.2 billion already. And then we had another EUR 100 million per year of delta between now -- sorry, between 2027 and 2030. So there again, it's another EUR 400 million, EUR 500 million. The main source for recovery around cash flows is by reshaping our CapEx or the CapEx we made -- modulation of the CapEx we made, focusing on Italy and on organic growth, that is to say without factoring in any M&A opportunity or any investment board. And as to cash flow, Sicilian cash flows, we have an absorption or a take-up of about EUR 400 million to EUR 500 million starting from this year that will slowly be recovered going forward, starting from 2024 onward.

The next question is a follow-up question by Stefano Gamberini with Equita.

A couple of things, if I may, very briefly. Can you give us the sensitivity of EBITDA of 2026 for every EUR 10 of PUN or EUR 10 of the gas price because I'd like to know what may happen in a more conservative scenario. And then what could happen if the 2 markets were to be decoupled? The 2026 scenario favors you because of the higher prices of renewables that you can sell on the market. Now if then in 3 months the European Union decides the decoupling of 2 sectors, all this may be at risk. What are you getting from Brussels? And what are you thinking about? And another consideration about the price cap of gas at EUR 275 per megawatt hour, if the gas price goes there, at that level, we don't have a problem for the working capital for 2023, 2024. And also you have no problem in terms of bad debt. 2 weeks ago, you told us that you see no risks there. But if the scenario was of such a high price, how can you then manage it?

Now as to the sensitivity of the -- or on the PUN, for every euro of PUN, we have an impact of EUR 10 million. This is a very rough sensitivity. The company will absorb it without doing anything. So we keep it as a number reference, and that's it. As to the gas, a change of around EUR 10 gives us an impact of around EUR 75 million. Now, when it comes to the European Union, I am part of the technical table of energy of the Italian Confindustria, the association of Italian entrepreneurs, which is the only association that suggested to the European Union to decouple the markets. Our idea or our sensation is that nothing will be done in terms of decoupling in Europe. We opened up an office in Brussels. We are the first multi-utility company to do that because we want to control and see what goes on there. The proposals that -- of setting up or create the marketplaces or platforms where you have demand and supply meet following the logic of the PPA, the only way to separate, decouple the 2 markets is to separate the mechanisms which you build the price and basically go to a RAB-based mechanism, which, however, envisages long-term contracts. So we are assuming not so much mechanism of market separation, going from a one-stop shop moving 2 different shops. But if you keep them on the market would be 2 shops will speak to each other and prices will remain aligned. So we need to make sure or have to make sure that renewables, which had very strongly managed to have a different business model which then becomes a RAB-based mechanism, providing a fair productivity to the market -- fair profitability to the market and a low price for customers. Although this goes through change in the culture of companies that buy energy both on the part of mass market customers. The mother platform that was proposed or submitted by Italy to Europe following the negotiating table between energy-producing and energy-consuming companies. At this table, we have A2A and the idea of proposing this platform is that of changing things with the mechanism works. The idea is not that of working on the spot market but trying to get out a renewable set from the market by using a longer-term mechanism. The last question of the price cap at EUR 275. Should the market get at that point? So what was your question? First, company is very , very high. I don't know where -- what you think. Yes, we agree. It's a good price cap, so much so that we haven't included such a high price cap in scenario. We do not think that this is going to be a realistic scenario, so I agree with your observation. Let me go back to the first question, which I partly answered, a question about sensitivity. The change I said would imply a rough number. Both for the price of electricity and the price of gas, we use hedging. So there is a natural protection to the price changes, in particular, for gas. Even for gas that we use for electricity production, that gas price is always hedged between surges in sales and resorting to all the components that are useful to feed the plants. So there's no real risk of price exposure.

Next question is a follow-up question by Javier Suarez with Mediobanca.

Again, 3 follow-up questions. Now first of all, about your flexibility or the flexibility of the business plan. The company has confirmed the dividend. What is the dividend payout? 70%, 75%? So with a relatively high payout, where do you see the flexibility? Is there any deviation to what you have seen in your business plan? Because I wanted to understand what kind of managing actions you can take if there is a deviation from the business plan. Second question about supply management. What is the changes that you have introduced in your commercial policy? And how have you -- or how are you going to make sure that your commercial policy becomes more successful? And then, perhaps a guidance for 2023, which is around EUR 75 million for 2023.

As to the payout ratio, I confirm that yes, for 2023, it's around 70%. As I said, however, starting from our plan, and the 2 years have already elapsed, we've seen EBITDA growing by 7%, 8% a year, if not more. And I mean increase of dividends by 3% year-on-year, this shows that in certain years, the range grows. In '26 it is 60%. In 2023, the guidance that we have assumed is a bit higher, EUR 380 million, EUR 390 million, which gives us that 70% of the payout ratio. Please remember that in '26, we go down to 60%. And at the end of the plan in 2030, we are at 50%. So dividend yield at that point was going to be very high and capability to fund CapEx which is going to be as high. What have we learned in 2022 from the market? The main mistake that all companies operating on the market in the past and that we've seen the effects now is that we had fixed rate contracts that was okay. All structured companies kind of took hedges there. But we do not assume those high quantities, so we do not expect meaningful changes, say, in quantities from customers, and I'm referring to small and medium-sized companies rather than retail customers or citizens. Well, the precondition was that should we have any changes by 10%, 20% versus what we had assumed that by energies that I hadn't hedged will not mean much. But we had fixed rate contracts, companies that had low prices that consumed more, that had high prices and consumed less. The difference was EUR 100 million or hundreds millions of euros and that give a few problems to electricity-providing or electricity-supplying companies. So the underlying reasoning is quite clear. In moments like this, it is much better to move on to variable rate contracts within discussion, so with our customers. So we actually push the idea of moving to variable rate contracts because that is in their interest. Blocking a high price would be dangerous for them. I had said that we had quite a big deal of trust from our customers. And this is due to the reputation that A2A earned on the market. And in this moment, this is particularly important that we're very close to our customers. We have a sound base of customers in a sound part of the country where discussions on paying on installments was very easy. For customers, it was a matter of managing cash flow. We have levels of DSOs which at the moment are acceptable versus what it was. Now in the very short time, we are working on moving to variable contracts -- variable rate contracts that reduces the risk and gives us incremental capital. So the commercial activity has already started to change the contracts when contracts expire, trying to recalibrate the situation. And this is what we are seeing in the figures quarter-by-quarter. We are an integrated company and we develop and produce with energy sources increasingly. And the idea is that of moving our customers to a PPA's logic. And we -- sooner or later, we'll have to find PPAs for the mass market for our citizens. For companies, this is simpler. They have the energy management team that are able to negotiate with us, I believe, a lot in the development of PPAs, but we need to find simple solutions, helping or allowing our customers benefit from renewables. Also in the light of a possibility of having that longer-term contracts. But this, you can do it only if you have a strong trust between suppliers and customers. The idea of getting connected, bond for a long period of time relies on trust. We welcome this. We are going to work on this. And this will help us to develop further renewable sources of energy in a very selective manner.

[Operator Instructions] Mr. Mazzoncini, ladies and gentlemen, for the time being, there are no questions from the conference call.

Well, thank you very much to all of you for joining our conference call. We are, however, available should you have any other clarifications. Thank you very much, and have a nice day. We can now conclude our conference call.