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

Good afternoon. Welcome to A2A Conference 9 months 2023 results. I'm Zach, I will be your technical operator for the event today. [Operator Instructions] Let me introduce Marco [ Paro ], who is going to start the financial call today.

Good afternoon. Welcome to the presentation of the first nine months. As usual, we will provide insights, Renato Mazzoncini, our CEO; and Luca Moroni will then manage the comments and the Q&A session.

Good afternoon. Thank you for participating in our conference call. You have already received the results so no need for me to tell you that I'm very happy with these results. And we are most notably happy because once more in this quarter, which is drawing to an end, enabling us to have good visibility on how the year is going to end. Also in terms of guidance, it's confirming the sound business plan. We have launched in 2021, the 10-year, '21 plan envisaging sustainable growth, and there has been a positive effect driven by the scenario with good management, and this has enabled us to reach the results we are presenting today. Let me just highlight both of these elements. Structural growth that we had envisaged in the business plan, the 8% annual growth, right, that we have included in the plan, which, of course, was closely monitored by investors and financial analysts. We have gone through a very complex phases. And nevertheless, this strategy has proved to be very, very sound and it will also be the case in the next few years. Talking about this quarter, there have been positive effects arising from higher hydraulicity levels versus last year. As you all know, it was a tragic year. Most of all, Q3 concerning hydraulicity. So we still have a good hydraulicity levels. And there are also effective hedging strategies and portfolio optimization strategies with all the tools and the sources we have, and this has enabled us to record very good results. The retail base has grown significantly, 455k customers plus. So we now have 3.5 million customers. And this is important in 2 perspectives. The first, because it's one of our core businesses. And it's also important that we have parallel growth of customer base and energy generation, which allows us to work in an optimized hedging strategy. Most of all, with reference to customer base and renewable energy sources, we have very innovative initiatives that we have launched in the last 10 months. This positive effects have been offset by lower CCGT production stemming from the contraction of contestable demand. And as a consequence of that, also MSD ancillary services are now normalized. So 2022 was not a reference year for standard planning, that we didn't have a stable electricity market. Slide #3 shows the main results obtained in this first 9 months by our group. Also with reference to ESG indicators, they are very important to us. As you see, if we look at emissions, we are stable. We have 362 grams per kilowatt hour of energy produced. In normal times, this might not be good news. We know we have gone through a year where we had still coal-fired plant in function. We had to replenish our gas stocks so as to tackle quite a stable winter price-wise. And of course, this is also penalized the decarbonization path that is a strong commitment for our group. Our renewable energy production has increased, also supported by higher hydraulicity levels and not only. We have a strong increase, as you can see, of our electricity grid capacities. We are investing constantly. We have a 418-megawatt ampere of growth versus previous year, which means 8% to 9% growth of installed capacity, which enables electrification of consumption, immobility, heat pans and all that is needed for the decarbonization path. We have fewer water leakages in the network. Most of all, if we consider mean average value, we are very low, but we still want to improve. We have a 1% growth in the share of female managers in our group. So we are still -- we still have a gender gap, but it's very important to see that there is a positive change in that. And we have more orders placed with the suppliers that have been evaluated with ESG indicators. We are continuing to work on sustainable finance, EUR 500 million new green bonds issued in 2023. And we have a set of projects that you see on the right-hand side of the slide, we have Matarocco plant built by A2A. It's a wind farm located in Sicily, where we have a strong wind blowing, 8 blades, 30-megawatt of capacity in total, highly performing blades. We are growing in the region of Veneto, where we have acquired 2 plants for 17.5 megawatts each. We are continuing to grow in district heating, which is a key element for decarbonization of our cities. And we have entered into an agreement with Fri-El to increase the utilization of renewable heat in our plant every year. We want to grow by about 100-megawatt -- thermal megawatts, which means that we have to find alternative energy resources, renewable sources. And this is part of an agreement and there are more with data center, enabling us to have more energy efficiency in the district heating network, and that's contributing to decarbonization of Italian cities, most of all of Milan. And we also have growth in electric charging stations. Slide 4, you see the numbers. Revenues, no need to confirm. Here, you see the change. Good news for us and for citizens, we become more competitive, thanks to lower energy prices. At the same time, the EBITDA, ordinary EBITDA has increased by 20%. And this result stems from the business plan already in 2022, the scenario in fact was quite sensitive year-on-year. Therefore, we are really deploying the resolved business plan with a positive scenario, in fact. We have significant growth of the group net income, plus 26% ordinary group net income. And as you see here, we have extremely thorough financial management, leading us to more positive relationship ratio of 2.6 of the net financial position on the EBITDA, very positive attainment. We are proud of these figures. Let me just hand over to Luca Moroni, who will provide more details about the individual business unit.

Thank you, Renato. Good afternoon to everybody also from my side. We are now on Page 5 where you can see the summary of the EBITDA trends, and you see actually in the 9th month, and you have EUR 1.354 million for ordinary, and you have seen a growth especially from the BU generation market, paired with a great contribution on the part of smart infrastructures. And as small as slowing down that I commented in June regarding the waste BU as a result of certain stoppages especially for waste treatment plants. But we expect that we will have a full recovery and actually achieve what we expected, also as the target of EBITDA at the end of the year with the recovery in the last quarter because we have solved the problem of the softness. And then let's go to Page 6, where we see, in the trend of generation BU that has been part [indiscernible] underlined. We have a growth by 20%, EUR 180 million increase in EBITDA. And then, we have especially the industrial portfolio that is leading this increase, and indeed, the production on renewable sources has indeed compensated the lower volumes in thermoelectric plants. Also as a result of less contestable demand, but we have in there a positive hedging strategies and the management of the financial portfolio with regard to energy management. And of course, the rainfall of this year has given an important contribution to hydroelectric production. And we also had some opportunities because last year, in this quarter, we had another ranging due to the growth. And now we see that there is a trend, the possibility of exploiting of the various technologies being part of our portfolio of the plants in the generation BU has allowed to actually take the entire value we have always rated as a competitive factor in the group. And we see, on the right, the graph, we see a normalization of, indeed, the MSD margin and the renewable production and PUN baseload and, indeed, also for ancillary services, the MSD margin regarding then what are indeed seasonal different values of 2019 regarding indeed ancillary services, ASC. And then we have actually achieved an average result in line with the previous years before crisis. And then on Page 7, we see indeed the market to BU, which is one, indeed, one of the 2 big performances of this 9-month period. And we also see in perspective that it is a growth opportunity. And here, we see how the, indeed, the electric growth and the volume and also gas sales have indeed performed very well. And considering that if we consider this phenomenon as the customer by the phenomenon, we see a confirmation of the big, good margins in the -- as a recovery margin and there was an improvement compared to previous year so not only margin being recovered, but improved and also with customer base mass market. In addition to that, we have the volume effect of the customer base that has increased by 400 new customers coming from indeed the various bids, 1 in the safeguard market, the protected market that was the first -- last part of the free market of the liberalization market. And then we see that we've always inherited this as an effect of the [indiscernible] for the safeguard market. And this allowed us to perform those retention actions for the customer base as a result of the point [indiscernible] contracts that had a fixed price and indeed, we've seen a quite high prices for which we have actually indeed put our CapEx available to protect this. Page 8, regarding environment and the waste BU. So this has different performance compared to last year. Last year, we had suffered a lot regarding collection due to the increase in prices, especially in energy and oil that has indeed the operating costs regarding our fleet for collection. This year, on the contrary, we are able to achieve good margins and just a small reduction that can be partially offset, and we will be able to express entire value of the new treatment plants that had some delays at the beginning, especially in the WTE in Parona, and due to its bidding, we have to stop another plant. So we had this accumulation of delays for these reasons. But as a whole, we don't have the full operation of these 2 plants of [indiscernible] and the other one actually allowed us to recover days up. So for the -- indeed the organic waste treatment. And so we will have record closure of the year. And the smart infrastructures are performing very well. On all regulated business, on all RAB. And indeed, we have a benefit of trauma with the investments made, especially for the [indiscernible] distribution where RAB increases by 15%, in line with the targets of development through -- indeed a quite significant investment plans made in the group. RAB gas increases by 6%, and again here indeed the CapEx, the good performance, the good stages of our network and also CapEx for indeed the hydraulic cycle are in line with our targets. We always likely suffer is in the heat volumes because, we have lower volumes due to indeed the temperature, especially in last winter. So now we see Page 10, how indeed our income statement performed regarding EBITDA. And we have seen after EUR 1.354 billion, we have D&A for EUR 579 million. We have a slight increase for greater CapEx. And indeed, we have -- indeed it is actually [indiscernible] the specificity that needs to be underlined. And actually, this had release of the provisions indeed for actually the waste disposal management. And due to the increasing of actually tax rate and now we have the effect indeed of the provisions. And regarding the bad debt provisions we had in effect of lesser expenses of energy. But then, we have the effect of quantity on new customers for competitive markets. Financial management has been positive, financial charges [indiscernible] the proactive management also of the cash we have available. We have done [indiscernible] as already mentioned by Renato, at the beginning. We have issued green bond [indiscernible]. We have -- are investing this liquidity will give good results enabling us to limit average cost of debt, we see 2.5%. CapEx -- as you see here, we have close to the 9 months with about EUR 800 million, that's the 2022 value. I would like to remind you since you have all been following these calls over time, then the last quarter, where you close some projects. So CapEx result is not linear. We are going to close with a very high value also this year. I would like to highlight anyway, that EUR 477 million, 50% are linked to development. We are still investing in infrastructures because this CapEx are the main driver growth of the group, EBITDA in [indiscernible]. The main elements where we have investment are electricity grid, with a significant level of CapEx 3x. If we take 2010, 2020 time window also for gas, most of all, the agreement with the municipality of Milan envisages an investment plan, which has been indicated and finalized. We are following it. We have a growth in wind plants at Iraq, it's now in operation. And then we have solar plants also. And we have the [indiscernible] GT assisted-like capacity market. Then talking about the way. So we talk about the energy recovery and material recovery. We are investing in [indiscernible] in the new WTE TecnoA plants. And then we have also finalized the investment in Parona. We have more CapEx, 75% of the CapEx is consistent with SDGs and 65% of the CapEx is in line with the EU [indiscernible]. Let's now look at the positive cash flow trend, you see our management of the working capital has been able to attain these results, as I said earlier, financial expenses and taxes are performing well. In taxes, we have optimization of the same, with a tax rate which is decreasing from 32% to 29%. And we also have an extraordinary outflow, the extra profit, EUR 120 million relating to last year. If we consider that as it should be done, this is an extraordinary item, of course. So the cash flow, the positive cash flow would have been even higher than EUR 856 million that you see here as FFOs. Previously, EUR 856 million have allowed us to deploy the investment plan until September 30. Also leaving some dozens of millions of euros for sales financing in terms of dividend payout with this additional EUR 120 million. The effect would have been even more positive with these results. As you have seen, we have revised and improved our guidance for year-end. The EBITDA will be [ EUR 1.880 million, EUR 1.920 million ]. That's the range which allows us that to have some flexibility in the year-end results with net ordinary income ranging between EUR 550 million, EUR 570 million. So an important result. The key takeaway is pretty simple. There is very good business performance, of course, positive expectations also for 2024 in market and generation that to be used, that have allowed us to correct the guidance upward. We are still investing significantly in energy and environmental transition. That's our map, our direction for the future. It has not changed. So we are navigating in a challenging quarter like all other players. So we adjust the route, depending, of course, on external events. And I would also like to underline that we are paying great attention to the net financial position and to other financial ratios, which allow us to maintain safe route. Now we open the floor for your questions.

[Operator Instructions] First question, Javier Suarez.

I have some questions about the new guidance of the company. You have revised the guidance upward for 2023. Looking at the figures, I think that this is a culmination of better results than expected in generation and also in energy supply. With the focus on guidance increase, can you help us quantify or the positive indication [indiscernible] has taken by. And in generation, what has been the deviation so as to improve the rationale underpinning the guidance review, first question. Second question relates to 2024. The CEO has mentioned that this allows you to have enough visibility also in 2024. Considering business terms, can you give us your latest indication about hydro production that you expect to have in 2023 and '24 and the forward selling levels also in scalable production, and also the level of pricing you are closing at for internal generation. So can you give us an indication of the [indiscernible] of generation for 2024, so as to see whether this figure, this [indiscernible] that you have announced should be still corrected upward in 2024, should stabilize or should decrease? Third and last question relates to the supply business. I would like to have your indication about the direction for 2024, 2023 has been a year of strong recovery. What are the underlying dynamics that you expect for 2024 as opposed to 2023? Do you expect growth in 2024?

Let's first answer to the guidance review. We can't give a breakdown about market and generation, reached quite a good balance between the 2. As you have seen, it has [indiscernible] losses, our reservoirs are now more full than they were. In June, we had already commented on that, between June and September, the level of the reservoirs has further increased so better than in 2021, with a heavy rains that we have had towards the end of the summer. We have been able to have larger volume system that we could make a better use of the available water in reservoirs which, in turn, has enabled us to produce larger volumes of hydro energy. And to leverage on this opportunity which has generated value and a contribution of EUR 57 million. Talking about the market, we have about EUR 40 million resulting from the very good performance that the market is having in terms of margins, additional volumes that the customer made enlargement. And we, therefore, expect a positive trend also for the future, not only for 2023 closing. As you know, [indiscernible] for gas typically start in summer. The electricity campaign spread all through the year. This has allowed us to consolidate the margins and also to have a very good outlook for 2024. As I said earlier, EUR 60 million, EUR 70 million from generation and about EUR 40 million comes from market. And then we have smart infrastructures, which have also contributed with EUR 10 million to EUR 15 million, EUR 100 million new guidance, mainly stem from these 2 main drivers. Talking about 2024 hydro, we had started with the year that we expected to be normal. And after all the problems we had, had in 2022, where we had no water stock. This is the reason why we -- in our budget, we had assumed for 2023, an ordinary rain level. So before lesser than [indiscernible]. We had assumed a 3.8 tera. Our expectations were then adjusted. We have revised the forecast to 3.2 tera. Do you remember in the first fall of the year, where we had assumed we could not outperform 3.2 versus 2.7 in 2022. Rainfalls after May have bumped us to corrected upward to 3.5 tera, 3.6 tera maximum. This should be the end of the movie, so to say, at year closing. With a major difference versus 2022, we have a full water reservoir. So this was not the case in 2022, where we had 2.7 tera and empty reservoirs. Therefore, considering the fact that we have full water reservoirs. And using the empirical method, as usual, so we calculate the mean value considering the 10-year timeline, 2022 has recorded 2.7 in the previous year, 2.5 tera, So the forecast is now between 3.8 to 3.9, is slightly less than 4 tera. We have an important potential with our turbines daily production, 30 megawatts per hour, which is significant. So we have a great potential in our plants. And of course, the very ability linked to rainfall is very significant. It has -- it might prompt an upward adjustment. We assume 2024 with a production which is about 10% higher than in 2023. Looking at the supply, considering pricing 2024, Luca might give you additional details. We have good coverage also in this case, we have good prices, and we expect generation performance in 2024, which is very significant. Also for supply, we have reported very good figures in 2023 despite the fact that we have invested significantly, which means several dozens of millions of euros in customer retention initiatives, mainly the application by the antitrust and enforcement of the provisions of unilateral contract amendment. What has happened in a nutshell? Some customers, and not few customers, have renewed at a fixed price at very high prices. There are agreements, we have covered that. So we have purchase level that we could not correct. And these customers are more exposed to the churn rate that they might interact with the neighbors and realize that they are not aligned price-wise. The antitrust authorities has obliged us to do that. So unilateral contract amendment, no variable prices, no contract renegotiations were possible. And we expect them to call us. We have allocated a budget so as to retain these customers. Why am I telling that, Javier. The very good result in 2023 would have been even better if we had not decided to invest a part of the margins so as to maintain a good reputation among the -- among customers so customer retention. And as you probably all know, [indiscernible] on a safeguarded market play a central role that will start on the 11. The customers hit might take place on April 1 as expected or more likely during summer of next year so the expansion of losing some marginality is more than offset by the growth in customer base [indiscernible]. So we assume for 2024, growth in this on the supply side, in general. An exercise that we continue to conduct in the company is to normalize these results, comparing them to the TAM scenario in January 2021, when we have first approved the business plan, where the price scenario was a year-end 2020 scenario, that it is done from the current one. Therefore, comply with the industrial plan. The industrial plan target is very important. We monitor the effect of the growth, 2024. We cannot give you more details as of today, but the scenarios [indiscernible] our system is quite flat versus 2023, and we have the growth in the business plan as expected. You can take a look at the business plans which have been submitted, and we had assumed a certain growth rate in 2024 versus 2023. Let me just close by saying that we have also hedged for 2024. This is very similar to 2023 and therefore, higher than EUR 150, and with a managing level that is about 6%. So this is the confirmation of what Renato was saying, that we have indeed a similar scenario to the one we have had this year. So we expect, in any case, to exploit at first all opportunities also in generation. And regarding market, we said that we will have the possibility of having the best value from new plants that come into operation in the waste BU, given their own contribution to the growth. And regarding networks, we then have the adjusting of regulation with WACC that we're expecting where an increase of positive effect for the factors and some other items that will provide their contribution. Indeed, that's going to be interesting also for next year.

So just to make a follow-up. What I have understood is that from all these, the 2024 may be similar to 2023? Is this indeed the takeaway metric. Is this what you are saying or I have misinterpreted?

Well, regarding the growth, the scenario effect and the industrial effect, the scenario effect will remain the same. I won't give you an additional contribution to the process, whereas the industrial part, to which Renato was referring, we will then recover the average growth we have stated when we presented the industrial plan, and that should be confirmed. As a matter of fact, if you look at the industrial plan and the upside we had in January 2022, the last big update. We indeed had expected before the scenario effect we were expecting indeed an EBITDA of EUR 1.6 billion. So if you look at the scenario effect, we are in a situation where the scenario effect compared to last period amounted EUR 250 million, about [indiscernible] EUR 300 million. So it means that we are [indiscernible]. We are performing a little bit better about the scenario effect that started in 2024, that would be stable, whereas the industrial plan is continually increasing because of a series of things. We are following our industrial plan that is indeed regarding your first questions and observations, but that was considered partly ambitious, but we are respecting it, and we were lucky enough to actually have a scenario effect that is allowing us to achieve certain targets earlier.

Next question comes from Stefano Gamberini from Equita.

I also have some questions. The topic in power generation and the normalization of ancillary services, or there might be a reduction considering the [indiscernible] on this aspect. So what can we expect in '24 to '25? The other question concerns indeed the reduction of the CDP. What can we expect for next year? Was it a trade-off due to some other elements, could be a stabilization or growth of volumes in next year and [indiscernible] spread because that was quite high [indiscernible] so you may [indiscernible] The second question in this sector is my usual question regarding the hydroelectricity concessions. So there might be a decree that should be issued by the government regarding the longer period concessions. So we would like to understand the debate that the second place in Europe and on the other side, whether you are talking about a RAB system or there has been a longer period in concessions? So regarding CapEx, the trade-off. And the other thing I wanted to understand, regarding this part of the energy phase, that was EUR 15 million available as an offset that were not used or partly used, if I have understood well. So of this EUR 40 million more you told us about so 2040 becomes 2080. And so this may become something that can be projectable also to next year because that make greater unit margin that can be expected also in the future. And the other thing, the last thing is to understand whether there is better guidance, also the debt to level at the end of the year will be improved, also regarding CapEx that you have given as guidance. For '23 and '24, CapEx was about [indiscernible] more or less. Can you confirm that? I'm sorry, I apologize for the many questions I've made.

Well, I'll start with the hydroelectricity concessions. Regarding this, there can't be any RAB system because if there is a fixed point in Europe in fact the electric generation market is a free market. So in no scenario there might be a RAB mechanism. So a regulatory mechanism, RAB mechanism. And you should consider that right now, we are not talking about these regulations. So coming into big [indiscernible]. There is no longer extension of concession. So it is not an extension of concession that can be hardly accepted by Europe, but we are talking about reassignment of concessions to current operators motivated by important CapEx being made in the next 10 years so that we can maintain the optimum performance to achieve the objective. So under this point of view, what might have led you to understandings of the new -- the investment that want to be correctly remunerated. So there is evaluation of the new investments of that just somehow is within this assignment of concessions. So the debate with Europe, considering a low tax, low draft that has the alignment of regions and government for the operators. I don't see any problem with Europe apart from timing. There's no regulations in Europe, with a mandatory [indiscernible] hydroelectricity. And indeed, in most member states, there is this idea that this is a sector that is stable without significant growth and does not require any big operations to be managed. And with respect to the commitment Italy has taken in the recovering resilience plan is that Italy should issue regulations and laws in order to accelerate investments in many sectors including this one. So as of today, there's indeed a draft law, it's more consistent with indeed recover resilience plan objectives because almost most concessions, some from us, and some from Parona expires in 2029. So the current [indiscernible] will be capped in May 2029. And then for the next 4, 5 years, we will see whether there'll be a reassignment of concessions. So Europe has no interest about investments in hydroelectricity [indiscernible] 2029. So that is a reason why and indeed of the [indiscernible] would explain to Europe business situation. So we believe that an agreement can be found on this point. So that investment should be started immediately, also on concession expiring in 2029, because almost all hydroelectricity plants have lost some capacity of generation over the last few decades compared to when they were built. So under this sense, we are working for that. And regarding CapEx, I say that we can confirm our previous guidance of 1.3, 1.4. That is the idea. We closed the gap, it is under control, might be also go down compared to 2.6, but we are already at a quite good level. So we are satisfied of this. Whereas, with regard to the issue of indeed what we have left for the market and for compensation for that matter we have, we have spent some of it about EUR 30 million and -- rather than 50. And we think that was a good investment because we had the churn of these customers that is much lower compared to the cases we had not treated them well enough. So the margins we can bring, we can take home also from big customers. So margins, we expect can be confirmed also for the 2024. And with regard to MSD, regarding normalization. So every year, we see -- we start with MSD, that is very low. And then without mentioning the 2022 [indiscernible] have always been higher. So when we have MSD and we calculate an MSD in an ideal world, in a world where there's some variability because that is normal. Nothing can be. I mean, so precisely for cost, but it is a value that is normalized compared not to current scenario, but compared to an ideal world. So if you ask me, what we expect from MSD in the next few years, we will have [indiscernible] normalized MSD. And I expect that we might do something more rather than something less. I don't know, if Luca, you would like to add something?

Yes. [indiscernible] spread has increased. We are hedging with the [indiscernible] markets [indiscernible]. And therefore, we can only do what the market allows us to do. We are at physiological levels for this time period. We have like 10% and 12% hedging with the levels of [indiscernible] In terms of transaction, we don't expect disrupting situation where brands are producing like are less than in a normal situation. Contestable demand in Italy is an important driver, and we consider [indiscernible]. What we can do very well, if we are strong in technology because we have the opportunity to do so, we should leverage on the use of the other as we have [indiscernible] we need to reap the benefits of the specific time. We know with higher margins, which also means higher spreads than you can typically find out [indiscernible]

Next question.

Thanks for your presentation, congrats for the performance. I have a couple of regional questions. The first is about the revised guidance or outlook for 2024, most notably, for the waste business. You have mentioned earlier that -- we have a scenario price effect in generation and on the retail market, which is positive about EUR 300 million in 2023 to be confirmed in 2024. And for the industrial part, you proceed as per business plan. I would like to understand whether this also applies to the waste business unit? You have outlined some delay in Parona and in other plants has this been offset by other projects that are proceeding faster. Could you also remind us about the guidance that is probably less than the EUR 400 million, EUR 450 million for EBITDA, for the waste business. Is this value confirmed, is the business plan confirmed for waste? And what are the updates on this specific business unit? First question. Second question, second focus is about retail and the energy supply. You have said that there is still a significant part of the customers who have agreements [indiscernible] prices, and some of them still have very high prices. Can you provide us some indication on that? During the last full year, you have said 50-50 so 50% at this price, 50% at variable price. And what issues do we expect? Is there going to be a progressive reduction in operating margins per customer considering that as this contract [indiscernible] price reach maturity, they are more beneficial to you. They will be replaced through contracts with lower margins. And then, of course, as a result of market liberalization, which leads to an increase in volumes and numbers of customers on the one hand, but in the short term or at the beginning, it should also lead to more competitive pressure and to greater dilution of the margin per customer of the unit margin.

Talking about waste, I confirm, Emanuele that the business unit continues to grow, hence [indiscernible] CapEx and new operation of plants, 2 important projects. One is already operating, WTE of TecnoA in Crotone, Calabria. We have acquired the plant in 2022, the authorization for the new plant with a double capacity was already in the pipeline. There have been some delays. This is one of the CapEx specific deal [indiscernible] positive fact, the business plan was to shut down the older WTE plants to start building the new one with a different layout, with local approvals. We have managed to keep the old one in operation while we are building the new one. This is the WTE plant, which will greatly contribute to the performance of the business unit and prices. We have been awarded the order for WTE plants in Brescia, Lombardy, we will start building quite soon. Then we have Parona, [indiscernible], where land reclaims have been completed so they are ready to start now. So environment waste is the business unit with the greatest number of plants, which will be constructed within the next few months in 2024 and with less than EUR 400 million. That's our guidance. But the growing business plan can only be confirmed for 2024. Commenting upon retail, we have a very specific dynamic. We have the last [indiscernible] market of the competitive scenario has now weakened so after the sacrifices linked to the energy crisis in 2022, considering the companies that have gone bankrupt, they are no longer on the market. Considering the reduced competitive scenario, we are taking stock of the market evolution and we don't expect to go back to the competitive dynamics, which was so tight as before the energy crisis when there were 800 large and small energy players competing on the market, putting pressure on margins and eroding them. Nowadays, to stay on the market, you need to have well conceived hedging policies. You need to have financial capabilities to finance the net working capital, think of the agreement have fixed prices. And the reason why fixed prices of ordinary customers are twice as high as the prices for variable agreements. In the past, they were 5% higher, which means that the cost of hedging has completely changed. So you can reap EUR 800, which was unconceivable in the past. So this is what is happening now. One of the reasons for the driver of [indiscernible] offering is that 70% of the price is fixed and it's very competitive with EUR 119 per megawatt hour, you can compete with prices of the market that are quite high. And it brings a significant marginality to us much better than other agreements. We can make the retail leads to higher margins than B2B. Therefore, working in this segment is really possible to have a very positive situation, and you can reap good margins. It's a win-win situation. Also customers who have undersigned a dual offering are more than happy because they have realized that they have managed to stabilize their energy prices also in some cases, under variable prices. So I think that the margins we see today in retail, as I said earlier, responding to Stefano, will probably reduce to some extent with the expansion of the customer base. And the market BU is expected to go on a continuous growth.

Next question [indiscernible]

Thank you very much indeed for presenting the results. I have a couple of questions with reference to your financing policy commencing Slide 24. You have a well-balanced situation when it comes to debt maturities. Considering the liquidity, you have more than EUR 2 billion liquidity also thanks to the strategies. So how are you going to invest this liquidity? Are you going to refinance your assets? Also considering the cost of damage in light of the evolution in interest rates, are you going to invest the cash to do more CapEx than you had originally assumed in the plan? The second question linked to this topic. Looking at the leverage and the lending value at year-end, considering it could reach 2.6, considering the level of debt as of 2023, [indiscernible] ratio, you have EUR 800 million, EUR 900 million of allowance, the flexibility you have in the balance sheet because therefore be used for specific M&A transactions to support more growth, or are you going to push in development CapEx because you have many projects in the pipeline also considering a possible evolution of hydro tenders and the concessions? So you might consider investing there because there are many investments to be performed there? Last question, about waste, in 9 months CapEx have slightly decrease. I'm wondering whether this is just a timing issue? Can you give more details on the timing for waste specific projects in 2024 and '25?

And in the policies, as you have seen in this slide, we don't have a large need to go to the market. We can play ahead of time, as we have done so far, also using other funding channels as we are doing through bilateral agreements or through [indiscernible] lines, which will allow us to control the cost of debt compared to public debt market values, and then we will see next year whether we will have the opportunity to see an interest rate trend that is changing. And so that values have become more accessible, more affordable. We take an opportunistic, and on that, we consider the different opportunities we have and we closely monitor the average cost of debt. Considering the financial leverage, as Renato said earlier, we have a very comforting level, and we consider to maintain it. We are now at 2.6 in line with the metrics of the rating agencies, considering the size of the portfolio 3 level. And this is a theoretical room, we have the range, we have -- but it would be good to maintain the current level if, of course, we see a great opportunity to generate more value. We have some additional flexibility. But we prefer to maintain the level we have today, which is also underpinning in the forecast. I hand over to my colleague for the answer about the waste business unit.

They slow down, as I said earlier, is only linked to the delay in Crotone, CapEx. We have negotiated the possibility to change plant layout so that the old plant was still in operation while building the new one. This has caused some months of delay as we're very close on the time delay until year-end, and we will do it completely next year. Same goes for [indiscernible] plant. The awarding station has replaced the RUP, person has retired. This might happen in the public administration of major problems, but there have been some process specific delays and some CapEx that we had assumed in these [indiscernible] have been slightly postponed. Nevertheless, less ordinary administration of things, I don't remember who had asked the question on that, probably it was Stefano. We closed -- we reckon to close at EUR 1.3 billion CapEx, which means about EUR 500 million in Q4.

Thank are no more questions. I hand over to Marco [ Paro ] to conclude the call.

Thank you very much indeed. If you need further clarifications, don't hesitate to contact us, to contact the IR team. I hand over to Renato for the closing remarks.

Nothing else to add on my side. We look at 2024 with [indiscernible] closing. You have already some way closed 2023. Okay, thank you very much indeed, and have a nice afternoon. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]