A2A S.p.A. ($A2A)

Hello, and welcome to the A2A Full Year 2025 Results Presentation. Please note, this conference is being recorded. [Operator Instructions] I will now turn you over to your host, Marco Porro, Head of Investor Relations, to begin today's conference. Please go ahead.

Good afternoon, everyone, and thank you for joining us for full year 2025 performance presentation. Today, as speakers, we have Renato Mazzoncini, our CEO; and Luca Moroni, our CFO. So I'll leave immediately the floor to Renato for the first part of the presentation, and then he will pass to Luca. Thank you.

Okay. Thank you, Marco, and good afternoon, everyone. Thank you for joining us. We report another year of strong performance and value creation. The key message that we wish to share today is that we are on track, on trend and on target for shareholder returns. So let's start from the slides that you can see, Slide #2. Highlights. Full year '25 results once again demonstrate our strong execution across all our strategic priorities, reinforcing A2A's positioning for sustainable growth and shareholder remuneration. From an industrial standpoint in '25, we delivered on a series of key new milestone fully aligned with our long-term infrastructure investment plan. Our electricity RAB reached EUR 1.7 billion, marking a plus 52% annual increase gross of perimeter effect and double-digit organic growth, our CapEx, our investment. This result was driven by disciplined CapEx deployment and the successful integration of newly acquired assets [indiscernible]. We sold 76 megawatts of new renewable capacity, including the first phase of Santo Stefano in the Northern part of Italy near Trieste. At the same time, the group is well positioned to exploit the accelerating electrification trend. We completed a major asset rotation from gas electricity networks focusing on the backbone of the energy transition. Our supply business unit increased electricity volumes sold by 12%, confirming our ability to capture demand and to serve customers across different segments. We have positioned ourselves as an early mover along the data center megatrends in Italy. You remember, we presented in our industrial plan in November. We launched our data center platform to deliver a fully integrated offering, complementing power supply with land availability, fast grid connection that is a very [indiscernible] application, energy-efficient buildings, heat recovery and water management, heat recovery with district heating. Through this platform, it really positions itself as a one-stop shop for data centers energy-related needs. Lastly, our cash conversion rate reached 65%, allowing us to fully fund our investments and dividends and to improve our leverage ratio at 2.4. Adjusted earnings per share reached EUR 0.22, fully aligned with our guidance, allowing us to safely fulfill the commitment to a 4% year-on-year dividend per share growth. So Slide #3 in which you can see all our numbers. The consolidation of the new company Duereti and the increase in volumes sold in the electricity sector, you remember 12% more led to an increase in adjusted revenues of more or less 9%, EUR 14 billion. The adjusted EBITDA EUR 2,243 million decreased by 4% in '25, but only for the hydro production. If normalized by previous hydroelectric production, which was 1.2 terawatt hours above the 5 years average. The EBITDA grew by 4%, confirming the resilience of our business model. And the same consideration about adjusted group net profit that was EUR 686 million, net of hydroelectric production normalization is compared to '24 the same level. Our net financial position was below EUR 5.5 billion, thanks to an operating cash flow that guaranteed coverage, as I said of CapEx and dividends as well as cash in from asset disposal. And the leverage ratio was equal to 2.4x with a decrease compared to '24. Slide 4, you can see our CapEx. The capital deployment is the clearest evidence of our sound execution and our long-term strategic vision with almost EUR 1.7 billion in CapEx, 11% higher than '24, of which EUR 1 billion related to development project. This project have enabled us to improve the efficiency of power distribution network, accelerate our development path towards renewable energy, the [indiscernible] flexibility of generation plants and strengthen our circular economy business. Consider that in particular, in circular economy, in the waste-energy plant authorization are not easy to be received and in this moment is the only company that year-by-year have new plants under construction. More than 30% of our development investments were allocated to electricity grid. We are fully committed in distribution, a stable regulated business, which allow us to capture the accelerating electrification trend across Italy. We are expanding our renewable plant portfolio in a consistent and balanced approach. Our diversified generation mix combining renewable with flex technologies allow us to support the stability of the system. Key projects such as Corteolona waste-to-energy plant in province of Pavia, for example, which will treat 240,000 tons of waste per year as well on track. And it is very important that we are growing -- maintaining hedging between collection and treatment. For example, we're growing collection in Piedmont with a new very important contract in province of Cuneo, in Valle d'Aosta and Liguria. And from the other side, we are growing in treatment with the new plants, the new waste-to-energy plant in Parona, in Corteolona, in Trezzo sull'Adda, Crotone and so on. To wrap up our disciplined approach to CapEx underpins a resilient growth today and tangible returns tomorrow. Speaking of results, let me now hand over to our CFO, Luca, who will illustrate our financial performance in '25 more in detail. Please, Luca.

Thank you, Renato, and good afternoon to everybody. Let's start to examine our EBITDA performance into detail. We can start from Slide 5. You can appreciate from the graph that all the businesses performed very well, but generation and trading need to be considered in the view of the normalization of the hydro. Indeed, hydro normalization, the exit from the safeguard segment and the lower hedging prices were largely offset by very positive events such as the growing of the performance of electricity network, thanks to the consolidation of Duereti, which proved even more profitable than expected, a greater contribution from the capacity market, solid retail margins and higher revenues from waste-to-energy plants. Generation and Trading. Generation and Trading as usual, is characterized by a well-diversified technology mix, which is the cornerstone of the business. EBITDA was EUR 728 million with a decrease of 26% compared last year. But of course, we need to take into consideration the hydro effect. So the normalization of the hydro effect and some fewer opportunities from the energy commodity hedging and trading has been partially offset by higher contribution of thermoelectric production and an increase of the premium awarded in the capacity market. Renewable production decreased by 23% as a consequence of the lower volume in hydro and thermal production increased by 11%. Supply business. '25 saw another year of sound performance in supplies business. EBITDA stood at EUR 464 million with an increase of EUR 2 million compared last year. Here, the exit from safeguard business was offset by the commercial development of the free electricity market, both in the mass market and in business segments. The free electricity market customer base grew by 3% compared to 2024 despite the competitive market, the competitive environment. Along with this growth in the electricity customer base, we have achieved a remarkable 12% increase in electricity volumes sold up to 27.5 terawatt per hour, as Renato already said. Let's move to Page 8, circular economy. I would particularly like to highlight the strong performance of our circular economy business. Adjusted EBITDA was EUR 595 million with a growth of 2%, EUR 13 million. We delivered a robust result in 3 key areas: treatment, integrated water cycle and district heating. Higher treatment prices fully offset lower margin from the Acerra plant new contract after the tender, while water cycle benefited from a higher allowed return. District heating showed sound results, supported by higher energy prices, volumes sold and white certificates margins. The new Milan collection tender saw reduced margins due to our highly competitive bid against that of one international player, Urbaser. We maintained strong EBITDA, confirming the resilience of the business, even considering the newly awarded tenders in some territories in the north of Italy. All key industrial indicators are positive, such as electricity sold, waste-to-energy and other plant plus 4%, waste disposal for energy recovery, plus 6% and heat sold, plus 2%. Smart Infrastructure, which marked a step change in scale and profitability. The adjusted EBITDA of the business unit was EUR 518 million with an increase of outstanding 37%, thanks to the sound performance of fully regulated activities. Our electricity network delivered outstanding growth, EUR 137 million, driven by the consolidation of Duereti for EUR 93 million. The organic growth in RAB with an increase in electricity alone revenues of the historical perimeter, EUR 25 million, higher revenues for connection and other services for EUR 10 million. The increase in electricity pods, the point of deliveries up 65% year-on-year demonstrate how our grids are becoming an enabling platform for electrification and new consumption patterns. Electricity distribution RAB increased by 52% and the power network capacity by 71%. In gas network, we completed the asset rotation, strengthening our strategic focus on electricity distribution. Gas distribution RAB decreased by 23%. Now analyzing the profit and loss, starting from adjusted EBITDA equal to EUR 2,243 million we recorded EUR 964 million D&A, plus EUR 66 million compared to '25 with an increase mainly due to CapEx deployed and completion of Duereti purchase price allocation process for EUR 17 million. Net financial expenses at EUR 169 million, of which those relating to pure financial management were EUR 157 million, the remaining part being financial accounting effects compared to the EUR 116 million of the last year. Adjusted taxes amounted to EUR 306 million, a decrease of EUR 46 million compared to last year with a tax rate of 29.8% last year, 29.4%. Adjusted net profit at EUR 686 million with a decrease of 16% compared to 2024, normalized by other effects, the decrease was only 1%. This is the adjusted group net profit. The reported group net profit is EUR 750 million. In 2025, we achieved a robust double-digit return on investment, 10% and return on equity, 12%. Cash flow, Page 11. So we accounted a net positive change in net financial position of EUR 361 million. So the net financial position at the end of the year was EUR 5,474 million, reflecting an improved leverage ratio to 2.4x compared 2.5x at the end of last year. Operating cash flow, EUR 2 billion fully financed CapEx for EUR 1 billion and dividends, EUR 1.7 billion and dividend distribution, EUR 300 million. We achieved a robust cash conversion rate at 65%, reflecting the ability of the company to optimize financial resources to support the growth. Some details. Net working capital of EUR 311 million was primarily driven by the reduction of trade receivable and say, a partial settlement of the safeguard portfolio. Payment of taxes for EUR 400 million and net financial expenses, EUR 116 million. As a result, the operating cash flow stands at EUR 2 billion after the EUR 1.7 billion of CapEx and dividend for EUR 300 million and the hybrid bond coupon payment of EUR 48 million. So the net free cash flow was EUR 4 million. Then we have the change in perimeter, which is due mainly to the disposal of part of the gas network to Ascopiave for EUR 430 million, partially offset by EUR 58 million related to some deals in M&A. Finally, the EUR 15 million spent to our share buyback to the total change of EUR 361 million. So thank you very much. Now I will hand back to Renato for the final part of the presentation.

Okay. Thank you, Luca. Page 12 to look our sustainable dividend growth. The dividend growth is confirmed. We are going to propose to our assembly an increase of dividend per share by 4% year-on-year, so arriving to EUR 0.104 on line with our dividend policy. This dividend growth is supported by strong cash flow visibility and disciplined capital allocation. 45% of payout ratio is proof, let's say. Page 13, our guidance is absolutely confirmed. We confirm our '26 guidance with adjusted EBITDA between EUR 2.21 billion and EUR 2.25 billion and the adjusted net profit between EUR 630 million and EUR 660 million, reflecting our robustness and visibility on our business mix. And to close at Slide #14, our well-diversified business model is really unique and delivers sustainable growth and attractive returns over the long term, allowing us to transform challenges into opportunities. We operate at the intersection of the energy transition and the circular economy, our 2 pillars, benefiting from both natural hedge activities and fully regulated business supported by a consistent CapEx plan year-by-year, our CapEx plan [indiscernible]. Our generation portfolio is diversified, allowing us to leverage different technology. Really, I think A2A in Italy is the only company that has all the generation from thermal, hydro, wind, sun and waste-to-energy plant. So this integration is a super opportunity to optimize energy management to capture market opportunities in different scenarios. Integration across generation plants and different customer segments enable natural hedging and reduce our risk profile and support cash flow generation. And in particular, our fully regulated businesses remain a core strategic pillar backed by a stable long-term regulatory framework. As the early movers in electrification and data center, and we are working a lot, we can leverage our energy assets to unlock value from these megatrends, enhancing growth and resilience. And together, these elements guide a balanced capital allocation that sustains cash flow generation, growth and shareholder remuneration. So really close -- and as I close -- I said in my introduction, our '25 results confirm that we are on track with our long-term strategic plan on trend with our leadership in electrification, renewables and circular economy and on target for the returns that we ensure for our shareholders. So thanks a lot for your attention. And now we'll be happy to open the Q&A session.

[Operator Instructions] The first question comes from the line of Roberto Letizia of Equita.

I hope you can hear me well. My first question is about the current market situation with regards to energy prices and power price change. Just wondering, first of all, if you can highlight any risk, if any, or not, of course, on the gas procurement for your deliveries through this year, meaning if you have any direct LNG imports, which is subject to curtailment in the coming months. And eventually, if you are, in any case, exposed to any possible force majeure events from your reseller, naming ENI or other majors or Edison or [indiscernible] or the other providers that currently gives you gas for your internal unrest. So if you can address these topics, if any risk currently or in the short term that you envisage for your procurement and deliveries. As a -- say, subsequent question, if you can highlight to us what is the current level of open position through 2026 and '27 in order for you to get any benefit from the most recent decrease in the power price, what is the current situation for the hydro productions in the first month of the year and in terms of reservoir for the rest of the year? And a comment, if you can, on your view about the potential regulatory risk so far, and I mean potential EU interventions in the market, whether it's going to be taxation or ETS revisions or price caps or whatever we will see in the coming years, if you have any view on what could be the potential regulatory risks.

Okay, Roberto, thanks for your question. I start talking about the general situation of the market that, of course, is critical and is also -- some years in which every couple of years, there is something of incredible in this world, let's say. Talking about the risk to remain without gas, in my opinion, is impossible in this moment. So the only problem is the price. But considering the storage that we have in this moment in Italy that is, as you know, 47% and considering the temperature that we have in Milano in this moment. And that gave us certification that we are [ illegal ] in this moment from all the sources [indiscernible], Libya, Azerbaijan and so on. Risk of [indiscernible] in '26 and '27, in my opinion is absolutely out of our view. The problem in this moment can be exactly working on the storage because as you know, we need to maintain a price summer, winter aligned should start immediately to fill the storage. And in this moment, there is still some [indiscernible] of spread. You remember last year, the government closed the spread with rules in which companies that started early to fill was paid exactly to close the spread. And so I think that we need to wait for 2, 3 weeks to have more visibility of what can happen in Iran because it's difficult in this moment to understand if this conflict can move for months or weeks or days. And then I imagine that our government will use the same instruments that was used in '22 and in '25. Talking about gas, considered but for '26, our edging is 72%, 73% so our normal situation in [indiscernible] in which the only flexibility is not to risk [indiscernible] due to risk of [indiscernible] production. But also [indiscernible] is better. [indiscernible] '26 to a price around 110 it's so over our budget to understand. And those '27 -- also in '27, we have a 50% of energy covered with a good price because it's around 100. So once again aligned with our industrial plan. Of course, the hydro production in this moment, I can say that for this -- so January, February and March, we are absolutely aligned with the budget and we started the year with a good level of storage in our dam, in our basin. And so in this moment, our forecast is to stay at the average level of A2A, so more or less 4 terawatt hours of hydro production. And to close about ETS, probably 2 years ago, there was a declaration of the Ministry of Environment in Germany that said that absolutely Germany don't want to move ETS because ETS is a fundamental instrument for decarbonization, consider that our government as to Europe to cancel because it is a tax, but it's very simple to demonstrate that ETS is not a tax that is emission trading system and the tax is something that a company pay and the public administration receive. The problem is that only in our country, considering the large countries -- industrial country effectively is a tax today because as you know, there are more or less EUR 3.5 billion of ETS paid and only EUR 600 million come back to companies, in particular to energy companies. So there are EUR 2.9 billion that remain to serve our public debt and this is the reason for why Italy is an infraction with Europe. So what the other countries in Europe, in particular, Germany and France and Spain says is, okay, guys from Italy. Before discussing about ETS, it's better that you replace the normal situation of ETS. So a system of trading of exchange. So my personal opinion is that it is absolutely impossible that ETS can be canceled in the future because it's really nonsense, consider all that companies for 20 years invested in green economy, exactly to be a more competitive as the company that didn't invest. So -- and price cap for gas is out of every kind of discussion, but also our government don't put the price cap on the table. Luca, I don't know if you want to integrate something.

No, I think that everybody has been said. As you know, we have the chance also to buy some LNG from British Petroleum with a contract signed will start in '27. So we start also to get some opportunities into the market. And as Renato said, the hedging ratio are pretty comfortable both for '26 and '27. So I think that, of course, we need to monitor what happened on the market with the prices. But by now, everything is under control, also taking into consideration the financial point of view.

Another element that is important to consider is that if we see a reduction of the [indiscernible] produce an effect in which the renewables are less competitive and the thermal production more competitive. So consider that today, the total energy production with them is 115 terawatt hours in Italy on 311 of total demand. And our forecast is that with a reduction of [indiscernible] due to ETS that is once again, a hypothesis, in my opinion, impossible. But in this case, the production of gas jump to 150, 160, this is the reason why the effect in the tariff in the [indiscernible] for our customers is approximately 0, because the total ETS amount that -- arrive on the bill is more or less the same EUR 5 billion under discussion in reduction of raw material. But A2A is a company super strong also in terms of production. Imagine the new plant in Monfalcone. So in this case, that is a case that I don't consider once again, we have a natural hedging due to the fact that reduction of production renewable from one side is compensated from the other side from a strong increase of gas production because gas production win against import, this is the message, not because there is a reduction in the renewable, but of course, with the marginal price [indiscernible] every time. But because the import is more expensive than thermal production without ETS.

And the next question comes from the line of Javier Suarez of Mediobanca.

Two questions on the context and business plan and recently presented business plan and one on your guidance. So on the context is if you can make any comment on recent detailed reports on the local press, [ arguing ] a potential interest of A2A on ESG. If you can make any comment on that? And in general, in case of an extraordinary operation, what kind of assets fits better with your current corporate structure? Any comment on that would be appreciated. Second question is on the data center opportunity that was widely elaborated during -- back in November. So when do you think that A2A would be in the position to provide with granularity and a whole business plan on the data center opportunity and with financial detailed targets and more granularity versus your statement back in November. So any further guidance on the timing for that higher granularity would be appreciated as well. And then the third question is on the energy decree that has increased regional taxation by 200 additional basis points in 2026 and '27. So the fact that you are maintaining your guidance unchanged, is that including any compensation factor that is offsetting this increase in taxation? Is that related to a different pricing for your forward selling? Is that related to higher assumption? So any light on reason for maintaining the guidance would be appreciated as well.

Okay. Thank you, Javier. Okay. For the first question, you know the answer because we used a press communicator. A2A regularly conducts a review on its strategic option consistent with our industrial plan. And in this context, discussions with many potential partners are absolutely normal. I think that is a mission -- my mission, the mission of our management to create value for shareholders. And I also think that in Italy, there are too many companies working in the energy business, in particular in generation. The strong liberalization that we had 20 years ago produced a situation that probably is not completely efficient today. But to date, many strategic options are being considered as preliminary and explorative thoughts and no decision has been taken. So this is our answer. A2A will keep, of course, the public informed of any possible development in the correct way. For data center, data center is absolutely incredible what happened. You remember, we presented our industrial plan on November 12. San Donato. And after a couple of weeks, you can't imagine how many players and actors in data center knock at our door to understand what we are able to do for them. In particular, as I said during the presentation, a killer application in this moment is to have a connection in high voltage because today, if you ask to Terna, not only in Italy, but in all the other part of the world to have a connection for, let's say, 200 megawatts is impossible. It takes 5 years. And we are, in particular, in Lombardy in a super position in which we have generation, we have land in some -- we have some opportunities, and we have a connection in high voltage. So you remember during our presentation, we underlined 3 projects without giving a name and also today, I can't say exactly which are the project, but I can say that for the first 2 projects in terms of road map, we are absolutely on track. So you remember that we imagine to arrive to have first EBITDA from data center in '28 to '29, we are on track. And so we are working. The business model can be colocation or we are also open to -- in some case in which we have the opportunity to build a large data center, we can also consider direct relation with the top companies. And please wait for next our communication to have more visibility on a part of a strategic plan that is working well.

Yes. I would like to start saying that in the decree, in the energy decree, some aspect has been discussed, one being the taxation, the Europe taxation. But you know reading also from the newspaper, how the discussion is tough regarding the chance to increase taxes in Italy for corporates and citizens. So first of all, we need to wait the translation into law of the decree aspect. And in any case, if and when there will be any increase in taxation we can consider temporarily because by the discussion, it seems it will be affecting '26 and '27 and not further. So for that reason, we can consider if it will come as a nonrecurring item so into the so-called special items. This is the reason why we maintain unchanged the guidance we communicate also and in particular, because the guidance on the net profit is on the adjusted net profit.

The next question comes from the line of Francesco Sala of Banca Akros.

Just a couple. The first one is on the recent spike in electricity prices. I wonder whether you can give us a sensitivity or at least an ordered look on the potential impact on net working capital and provision if there is something you have already tried to estimate. The second question is on hydroelectric generation. I wonder whether you can give us an update on the concession renewal? And secondly, whether, let's say, the recent events have changed your attitude towards revamping and investments in this segment of your business? And finally, if I may, what are the latest trends you have seen in the supply business?

Okay.

I start with the effects on the net working capital. Actually, we don't have -- we will not suffer for any increase or deterioration of the net working capital. We have experienced coming from 2022, where we manage properly the net working capital with different opportunities. which are the same in the case because by now, we are experiencing only temporary situation. But in the case, it will last more than this period of time we have in front of us of 1, 2 months. Of course, we have the chance to move on different opportunities, as I said. These are, of course, temporary effects. Also, as I said and I mentioned before, in terms of liquidity, we are currently managing in a very appropriate way with backup lines. After 2022, we increased the backup lines to be well prepared in the case of higher volatility in the market regarding in particular the marginal cost. So at the moment, we are really in a very good situation.

Okay. About the hydro concession, the situation is this one. Starting from the procedures concerning our super little concession of Resio and Codera Ratti launched by Regional Lombardia at the end of '23, so 2.5 years ago are still pending. Temporary adjudication of the renewed concession is expected at the end of the first half '26, but I imagine that it is difficult for the region to arrive to assign this concession because we put some question in the court about the procedures. And frankly speaking, I think that we are in the right position. From the other side, you know that in this moment, talking about the parliament, 360 all thinks that is not correct to do tenders without reciprocity in Europe. And talking also in [indiscernible] people that can be interlocutor for us in this topic. So talking about the said Quarta Via, also said fourth way to assign. The idea is that we have to wait to close the PNRR that means August '26. And after it possible to open a quick deal with Europe to be able to extract from the competition Law of the hydro concession and to move in a way that is more or less a project finance in which surely an equilibrium between concession fee CapEx and current remuneration of our asset will be the final solution. Included probably you read about this 15% of hydro release that is a way, let's say, to have on board also all the lobby of Confindustria that in this moment is strong with our government. And consider that in the project finance the reduction of revenue is more produce an effect for the concession fee, not for us because for us, the idea is to have a remuneration of all the CapEx fixed by ARERA. So the total amount of revenue that drives in our company don't change if there is hydro release or not. But surely to have all the lobby that works together, so our energy company, [indiscernible], so Confindustria and the regions will bring to the result. Talking about the supply business, what I can say is that from one side, is super interesting the B2B business because the B2B in this moment have a churn lower than B2C that is strange. In the past it was every time the opposite, and that way is super strong in this business. That is also super interesting because B2B means contract with companies with industry that can produce space to build PPA that is the way to hedge our renewable production. From the other side, it is also interesting our growth of 3% in the mass market this year, so '25 on '24. In the free market -- electrical free market, so in this moment, we have a reduction in gas. Reduction in gas, let's say, is natural because if we look the PDR so the number of contract in our distribution asset in Milano year by year in this moment, we have a reduction of 2%. So a reduction of the PDR normal reduction in consumption, number of customers and so on. So there is space to grow in the electric free market in our opinion. In our business plan, we have a reduction of marginality of 3% every year. But also this year, we haven't seen this reduction. So it's strange situation because probably 5 years in which every year we imagine in our industrial plan, there is a reduction per year of 3%. But till now, this reduction of marginality don't arrive.

So the next question comes from the line of Sarah Lester of MS. I think Sarah got disconnected. So we're going to move on to our next question from Emanuele Oggioni of Kepler Cheuvreux.

My first question is on the cash conversion. It was quite good 65%. And basically, you fully financed the CapEx and the dividend. So my question is on '26 outlook on the same, if this could be improved? And what could be the guidance for net debt and EBITDA, obviously still considering as you retain -- you confirmed the guidance for EBITDA and net profit before the energy crisis and before the drafted law, the Italian energy drafted law in this case would be a consistent guidance before this temporary or not one-off intervention. This is the first question. The second is on gas procurement. You mentioned before your contract with BP, but this contract LNG could -- would cover only around 20% of the group's needs. So if you can remind the other sources by geography, basically the breakdown of the sources by geography. The third question is on the price cap. If I remember well, you applied litigation like other companies in the sector against the [indiscernible] of the older price cap put in place 2, 3 years ago basically. So this -- considering that this litigation is still ongoing, what is your opinion? Probably the government will not adopt another similar measure considering there is still litigation ongoing or at least would be the price cap aligned to the European level, which was more than twice -- 3x basically compared with the Italian level. And finally, you mentioned the hedging, 70% to 73% of the volumes. I missed if you have said or not the price EUR per megawatt hour for '26. And indeed, last final question on the market supply -- on the market supply, still focusing on the potential new gas and energy crisis in the next few months. To what extent you are now more protected compared -- so could you protect more your profitability in the market supply business unit compared with previous crisis. Probably you have already changed the contract, the shipping costs in order to minimize the shipping costs, et cetera. So if you could provide more color on that.

Okay. I will start, Emanuele, with the first and the fourth, your questions. Cash conversion, we presented the business plan, as you remember, with a cash conversion rate in area of 50%. The year '25 was quite positive. We managed very well, as I said, net working capital, also taking into consideration the opportunities we had to lower the trade receivable coming from safeguard market and the reimbursement of the safeguard market of the client, so-called not disconnectible. So after the report we submitted, we got some EUR 60 million from the authority. Forecast for '26, we are used to manage in the same way with the same productivity, our net working capital, and we maintain the target to achieve a cash conversion rate in line with 50%. As I said, we have different opportunities to manage the net working capital also in trade receivable -- in trade receivable, but also in the payments and the contract, in particular, we have for trading purposes. In '22, we move some of those to OTC market to take the opportunity to manage also the terms of payments and so on. So I don't have any, let's say, clue to say now that it could be deteriorated by the current situation. On the other side, we are really hands-on to fulfill the target and to achieve it. In terms of leverage, again, in the plan was 2.7, not to exceed 2.8 and this remains our target. So if we are able to make it better, of course, we can work for it, but 2.7 is pretty in line with the credit metrics target we have also discussed with the rating agencies.

It's interesting your question about the supply because lesson learned in '22 was that you can't maintain fixed price with open quantity. The problem that we had in '22 was exactly that with people, companies with fixed price and without limit on the demand, increased the demand a lot and for us was super critical. You remember that we lost a lot of money in that situation. Today, frankly speaking, in this situation for us, there are only opportunities simply because every time in which price increase, for example, there is a strong reduction of the churn. And the churn in this moment is bigger problem that our company are facing. So we imagine to be able to grow in the supply market in this moment without absolutely any negative effect exactly because we changed all the contract since '22 till now avoiding any risk of quantity that we had in '22. And talking about price cap, frankly speaking, I can see when -- if you remember in '22 when there was a discussion and some output in Europe about price cap, the price cap was fixed so high that was impossible to imagine to arrive. So in this moment, we are very far from what happened in '22. And so the price cap in this moment is not under discussion. And about the possibility to gas procurement in this moment, we signed, as Luca said, an agreement to buy 1 billion cubic meter of GNL from U.S. starting from the last quarter '27. It was a good idea considering that our total needs of gas is 5 billion. That means that 20% for us arrives directly from this new contract. And the rest of 4 billion in this moment, it's difficult to see a situation in which in Italy there is a risk of disruption of to remain without gas. So I think that we are in a situation in which we are in a better position against others. It's enough to see the situation of the storage in this moment in Germany, in the north of Europe, there are 18% of storage in Italy, but also in other southern countries, we are more or less 50%. That is also linked to the fact that we need less gas to climatize the buildings during winter, of course.

Yes. Sorry, I missed to answer your fourth question about the hedging. I repeat it for 2026, we are hedged by 72%, 73% with an average price of EUR 110 which is quite remarkable. And for 2027, we already complete almost 50% with an average near to EUR 100. And this is quite satisfactory for us, taking into consideration the situation in which we were at the beginning of the year and considering the current situation. So we are pretty in a good shape to face '27 also in terms of budget when we approach the time to do it.

Consider that in this moment, the calendar '27 is higher than EUR 100. This morning was EUR 102, EUR 103. So if the situation remain this one, we are able in the next weeks to arrive to cover our normal 70% to a price fully aligned with our plan. If we see a reduction, consider the side effect on the thermal production. So we face '27 with 50% covered at EUR 100 and the other 50% open. But if we see a PUN reduction, that means that there is more space for thermal production against import. So in every case, our natural hedging is strong and able to face the situation.

And the next question comes from the line of Sarah Lester of MS.

Can you hear me this time?

Yes, we can.

Perfect. Sorry, I do apologize. Not sure what happened. I've just got 2 very quick questions, please. The first one is on the electricity distribution concession extension. Just given there is this really quite strong political spotlight on customer bills at the moment. I'm wondering if you see that there's potentially a risk that either the time line gets pushed to the right or delayed or that the fee may not actually end up going on the RAB and remunerated that way? And then just a second clarification, please, on the data center platform and the earlier question. Did I hear correctly that you would also consider partnerships where you would not actually necessarily be building the data center shell yourself?

No. For the second, the answer is not. Our strategy is exactly what we explained during the presentation of our industrial plan. In particular, consider that I talked before about the first project under design and are both direct investment that we want to do. Consider that for the interesting partnership also with large players more than us to find the customer to locate the data center. And this is interesting for us because there are companies that already has lot of customer in different data center. Our goal is to be able to build data center in good position, for example, in Milano, to be clear with a low cost of energy for connection behind the meter and low [indiscernible] for connection with [indiscernible] heating and good water management. So more attractive for the same customer that some players already have. So it can be a commercial partnership, let's say, but we want to consolidate in our EBITDA all the CapEx that we put on the table. And for the concession, sorry, you are talking about the grid concession? Okay. The grid concession, the only problem is that it takes some months more than normal the exchange of our authority ARERA because you remember probably that it takes 4 months of prorogation on the new Board of ARERA. The new Board of ARERA was appointed a couple of months ago. And immediately with some problems linked to the [indiscernible] for the energy and now for the war and so on, the concentration to find -- to support the government in the grid concession has to arrive. But from our point of view, frankly speaking, is not a problem because we have a concession and consider that the new concession will be 20 years long. And so if the starting point is a delay, is not, frankly speaking, a problem. What is interesting talking about power grid is that if you look Duereti, so the piece of the grid that we bought from Enel last year performance in terms of EBITDA 25% and total CapEx amount is higher than our business plan. So we are super happy because we was able immediately to face a network that we didn't know in a very efficient way. And so in looking this opportunity once again, we did a super good deal increasing our CapEx, of course, linked to the [indiscernible] '24 that says that we will have the concession extended. I don't know Lester if it's clear for you.

Okay. So we will take our next question from the line of Alberto de Antonio of BNP Exane.

I have a couple of follow-ups. The first one is regarding the energy decree and the potential revision of the ETS mechanism. Could you help us to quantify what could be the potential impact in terms of power prices in Italy and also how this will translate to your generation EBITDA? I guess that more in 2028 once like the effects from hedging are lower. This will be the first one. And then the second one will be related to the Monfalcone plant. Could you give us an update on the current state and when do you expect to commission the new plant? And that's it for me.

Talking about ETS, I can say simply that you can't -- starting from the fact that I imagine that it is absolutely impossible to have a [indiscernible] without ETS. So I don't think that the government will arrive to have an [indiscernible] from EU, but you can't simply reduce the cost of ETS that in this moment is more or less EUR 30 megawatt hours from the PUN because it's linked to the number of hours in which the PUN price is fixed by the gas production. That is super variable linked to what happened, for example, with hydro production and is linked to the fact that we will be able or not to increase total capacity of renewable aligned with PNIEC, our national plan. So in this moment, surely is much lower than [indiscernible] it's early to say if it is 50% of this value or more or less. But surely, by impact, I can say that you have seen during the presentation in '23 of February of Enel. Enel says EUR 85 per megawatt hours. That is their estimation. Frankly speaking, we didn't do an estimation because we don't believe that it is possible to have this impact. But a hypothesis can be that one. Talking about Monfalcone, Monfalcone is under construction. Under construction means that the delivery is probably in the first quarter of '27. So more or less 1 year to arrive in commercial operation because the construction will end this year. Then there are pre-operation, operation and so on. And so we expect to have EBITDA starting from '27.

And we'll take our next question from the line of Davide Candela of Intesa Sanpaolo.

I have 3 actually. The first one that is on the broader context. You already shared your view about the ETS. And since that gas is fixing the prices in Italy, for example, most of the times, do you see in future if the ETS mechanism won't be canceled from the formation of the final power prices, a scenario where do you see a potential decoupling also of the gas component, so the renewable fixing price and on the other hand, gas. Just wondering because at the end of the day, the gas is, as you said, 1/3 of the entire demand in Italy, but actually is fixing the price for most of the production? Just a question and if it is viable for you even in the longer term? Second question on your guidance. You said that your hedging for '26 is quite good, actually a little bit higher than your projection for 2026. And looking at what the dynamics in the first quarter, notably during January for [indiscernible] and actually, the higher production as from Terna on the thermal side, there are some positives that are contributing actually to your figures for 2026. I was wondering, confirming the guidance today is just because you see that there could be some potential competitive factors to these positives or it just too early at this time of the year to revise the guidance? And finally, last question on the batteries. You spoke a little about this technology. You mentioned some upside in your business plan. I was wondering if -- given the fact that the technology looks in a good momentum, I was wondering if you can provide your view and if you are thinking about investing in this technology in order to let your portfolio generation more flexible and so on.

Okay. Coming back to ETS, we consider that we did a simulation to understand what can happen in the bill of the citizen due to the Energy Decree because the idea is to be able to reduce, let's say, around EUR 20 in all the energy on the market. The energy on the market is today 275 terawatt hours. Consider that the total consumption is 311, but there is auto consumption, so you have to consider on the market 275. So for 20 or less EUR 5 billion. So the idea of the government is to reduce EUR 5 billion of raw material -- cost of raw material. From the other side, the idea is to put on the bill -- the cost of ETS, considering ETS EUR 30 for megawatt hour in the total terawatt hour of 115, which is the problem. In this moment, the demand is 148 from renewable, including the hydro, 52 from import and 115 from thermal production. If there is a reduction of PUN of more or less 20%, total production in renewable remain the same and there is no hours in which the price is fixed with renewable, but we see a reduction of import from 52 to 10, more or less with an increase of thermal production from 115 to 155, 116 and in this case if you multiply 160 for 30, you can see that there are once again EUR 5 billion of cost of ETS on the bill of our customers. So the sum between reduction of raw material increase of tax is exactly 0. This is the reason why if you read the last version of the decree, it is written that is possible to reduce the ETS only if there is proof not to have impact on the import. That means that if it's possible, more difficult to calculate the real impact of ETS because you have to imagine an authority or others that every hour of a day to calculate if the reduction of ETS on the PUN produce a reduction of import or not. So a nightmare, a complete nightmare. So we imagine that it is super difficult to move this part. So to close, I think that in this moment, it's really critical to imagine an ETS effect. I imagine that in EU will find a solution not to accept our Article 6 of our Energy Decree. And this is the answer. Talking about batteries only to close, the business battery is interesting. The reduction of price is huge. During the last tender max, the price arrived to a super low level, but this is due to the fact that the supply like [indiscernible] or rather from China reduced the price, put on the table 20 years of guarantee. That means business plan of 20 years. The problem is that the payback period of this business is very long. And so our evaluation is if it's interesting or not to invest a lot in a business that is, let's say, like an infrastructure, but the infrastructure is a battery. So I confirm that our commitment in battery in this moment is lower than, for example, in power grid.

Okay. Regarding the guidance, Davide, I think that -- it is too early to say something you can appreciate. Yes, it is true what you said. We have some opportunities, but also we have some other aspects that we need to take care about. First of all, the price of the energy is lower than last year. We already incorporated it into the business plan. But if you want to make a change compared to last year, you have a difference. But sticking on the guidance, we are pretty comfortable to stay on that. Let's see how the scenario is going to move. If we have the chance to getting some more opportunity, of course, we are here and also to lower the risk for the aspect that are not in the right direction. So for the time being, I think that we feel comfortable with the current guidance.

Thank you very much. So we don't have any further questions. I will hand you back to Mr. Porro for any closing remarks.

Thank you. Thank you, everyone, for taking the time to participate for the Q&A. And if you need any additional follow-up or deep dive, please contact the IR department. Thank you, everyone.