A2A S.p.A. ($A2A)

Hello, ladies and gentlemen, and welcome to the A2A 2026 Q1 results presentation conference call. My name is Zach, and I will be your operator for today's event. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Marco Porro, Head of Investor Relations to begin the conference. Please go ahead.

Good afternoon, everyone, and thank you for joining for the first quarter 2026 results. Today, the results will be illustrated by our CEO, Mr. Renato Mazzoncini; and the CFO, Luca Moroni. I will immediately lead the floor to Renato.

Okay. Thank you. Thank you, and good afternoon, everyone. Thank you for joining our call today. I'll start with a statement Alfred North Whitehead once said, that the art of progress is to preserve order amid change, and to preserve change amid order. And let's say, in the last 3 months, we have seen a lot of changing inside the energy landscape in Italy and in Europe. So let me start with a brief overview of the macro scenario and how we are responding to preserve both order and change in our mission to be ready to power. So in Q1, Q1 was marked by uncertainty and super like volatility in the energy market, fueled principally by two external factors. The first is the proposed measures in Italy and in Europe to mitigate the impact of rising energy costs and industrial competitiveness. In Italy, it's the [ societad decreto ] for Decreto Bollette, the decree for the tariff. And after a couple of days, the geopolitical tension in the Middle East in Iran. So what happened in Slide #2 is that, for example, the PSU gas price peaked at around EUR 6 per megawatt hour, while the PUN spot price ranged around EUR 80 to EUR 170 per megawatt hours amid continued moves in the forward curves. So visibility is still limited, but conditions are well below the 22 extremes. You can see in the graph at Slide 2 in the left part of the slide. Against this backdrop, our action are geared to support short-term system stability and to deliver on the targets we have communicated to shareholders. And our first step was to give customers, especially households, greater stability by maintaining our fixed price contract offers. And this now account for around half of our mass market exposure. So consider that 50% of our customer base mass market is in fixed price. Our '26 renewable generation, in line with our policy, is already hedged for more than 70%, giving us full visibility for this year. We will continue to closely monitor developments and to respond as necessary navigating an environment that remains highly fluid. So that's the short-term picture. But as you know, A2A's vision is built on long-term resilience. And this commitment remains unchanged. And let me say that exactly in this situation, to have a 10-year industrial plan is fantastic because in this situation, where short term is a problem to face, but it's not, let's say, the polar star. So the contingent geopolitical phenomenon of today only serve to underscore the long-term importance of Italy's energy independence. And for this reason, the expansion of our renewable and high efficiency flexible capacity remains a key driver. For example, during the quarter, we commissioned the [indiscernible] plant, adding around 30-megawatt of wind capacity in Southern Italy. And we reiterated our investment strategy, almost half of the quarter spending direct towards generation plants and in our power grid to remain the backbone of the energy transition. Electrification of consumption remains a sector trend underpinning our capital allocation choices. And it is super interesting, the fact that in Italy, the demand was up to 3% in Q1. You know that there is sometimes a discussion if really, the demand will grow. And we can say that in this Q1, there is a visible growth of the demand, especially in Lombardy, in which the growth arrives in double digit, 10%. And this is encouraging, an encouraging signal, of course. Equally, encouraging is the fact that data centers will continue to emerge as a new high consumption customer segment. And we see confirmation of this in the fact that the connection request in our electricity distribution network, in particular, and in the province of Milan, in particular, Duereti, that is the company that we bought 2 years ago from Enel, now amount around 330-megawatt. Consider that is medium voltage, let's say, non-broadband 10 megawatt. That means 33 new data center, at least, that ask for new connection only on Milan. So despite ongoing volatility, I can confirm that our resilient business model, diversification, and the long-term perspective, supported by strong execution, enable us to maintain our investment commitments. So let me give you a few highlights. Looking at Slide #3, in which you can see our numbers, our economics. Also, we see both positive and downward variance in these figures taken together underscore two crucial factors. Our financial resilience and our commitment on targeted investments. And I think the most evident metric of this is our net financial position, which remains sound and under control at EUR 5.6 billion versus EUR 5.5 billion at year end '25. The movement is entirely consistent with the typical business seasonality. The leverage ratio also at 2.5, broadly stable year-on-year, confirming the group financial discipline and balance sheet resilience, even in a quarter of active capital deployment. In short, the figures confirm our resilience with -- which is far confirmed by our continued commitment to target the investment. And the Slide #4, we continue in our CapEx plan deployment confirming our commitment on our long-term strategic vision, you can see 4% more of CapEx compared with last year. But what is super important is that we have 21% of growth in the development CapEx, EUR 210 million refers to development project. And the key pillars of our investment strategy are improving the efficiency of power distribution networks, accelerating our development path towards renewable energy, increasing the flexibility of generation plants. And of course, the CapEx in circular economy, if you remember, it's also district heating and water cycle. So that's a big picture. Now let me turn to Luca for a more detailed analysis of the results. Please, Luca.

Thank you, Renato. Thank you, everybody, and good afternoon. As Renato pointed out, at the beginning of 2026 presented a challenging conversion of contingent external factors. So as I unpack our EBITDA performance, I wish to emphasize how we respond to this. I think this slide is a clear summary of how diversified and integrated portfolio of activities underpins our ability to optimize our risk profile. By leveraging the diversification of our business, we were able to face negative effects, including some unpredictable costs, delivering an EBITDA of EUR 647 million. In particular, this reflects our higher renewable energy production, the ability to capture trading opportunities, and the strong performance in market and electricity distribution business mitigated the adverse impact from hydroelectric concession fees, lower achieved price, and lower contribution from treatment plants. Naturally, this performance start with how we generate an optimized energy. So let me turn to Generation and Trading. In Generation and Trading, increased production during the quarter helped offset the impact of adverse headwinds. EBITDA was EUR 202 million, a decrease of EUR 22 million compared to Q1 '25. Starting with renewables. We delivered higher renewable production. Also, this positive contribution was impacted by two contingent factor beyond our control, higher hydroelectric concession fees, which affected by EUR 11 million, of which EUR 6 million related to previous years, and lower achieved price based on the scenario. Moving to flexibility. A good performance in trading confirmed our ability to capture market opportunities, although this was partially undermined by fewer chance in gas portfolio management. To sum up, our operational performance remains solid with our production volume and affecting trading execution in face of market condition and regulated cost component that represent a headwind in the quarter. Overall, this confirm both the resilience of our integrated model and the importance of diversification across generation and trading activities to take volatility, but of course, generation energy is only half of the equation. The real impact happened when we connect it to customers. So let me turn to the encouraging results that emerged in Q1 for supply business. Looking at the market segment, the first quarter confirmed the persistence of our commercial performance. EBITDA was EUR 136 million, with an increase of EUR 3 million compared to Q1 2025. In market, our performance was primarily supported by the growth in electricity volumes, particularly in the free market segment. At the same time, profitability was partially impacted by lower unitary margins, reflecting a more competitive environment on pricing dynamics. Overall, the quarter was marked by solid volume-driven growth, with margin pressure partially offset by the underlying strength of the business. But of course, the future of the energy isn't just about consumption. It is also by circularity. So let me turn to the performance of the circular economy. In the circular economy, the quarter shows a performance affected by a lower margin in Treatment segment in particular. Adjusted EBITDA was EUR 190 million, a decrease of EUR 12 million compared to Q1 2025. The pressure on margin in treatment was mainly due to the new Acerra service contract signed in February 2025, and the lower availability of Parona and Trezzo plant for maintenance activities. Prices showed a slight increase, and we also saw positive contribution from district heating in particular, related to white certificates sold -- some white certificates sold and higher allowed returns from the integrated water cycle. Overall, performance was slightly softer mainly due to operational and contractual factors in waste-to-energies, with some support from positive trend in other activities. That said, let me turn to Smart Infrastructure. In Smart Infrastructure, the overall performance reflect growth in allowed revenues, partially offset by a change in the gas distribution perimeter, as you remember. The EBITDA on the business unit was EUR 129 million, an increase of 6% on the Q1 '25. In electricity network, EBITDA took advantage from higher allowed revenues driven by the new ROSS tariff methodology and the continued growth in the RAB driven by CapEx development. In gas network, we saw a negative contribution mainly due to the perimeter effect following the asset disposal completed in July 2025. Now, give a look at the profit and loss, starting from adjusted EBITDA, EUR 647 million. We recorded EUR 250 million of D&A, EUR 12 million-plus compared to the same period of 2025. The increase is mainly due to the higher CapEx deployed. Provision and net financial expenses were equivalent to EUR 25 million and EUR 41 million, respectively, in line with the same period. Adjusted taxes amounted to EUR 98 million, a decrease of EUR 10 million compared to 2025, driven by lower taxable base. The tax rate stood at 29.5%, excluding the impact of the IRAP increase introduced by the Energy Decree accounting for as a special item, as we said already. Adjusted group net profit was EUR 221 million, a decrease of 11% compared to 2025 at EUR 249 million. And finally, in Q1, we achieved a solid ROI and ROE above 9% and 10%, respectively, well aligned with our target. So let me conclude my comments, giving you an overview on the net free cash flows. Cash flows of Q1 '26 showed a negative change in net financial position of EUR 154 million as a result of business seasonality. As of March 31, the group reported a net financial position of EUR 5.628 billion, with a leverage ratio of 2.5x, ensuring the full stability of the leverage position. During the period, the operating cash flow generated EUR 149 million. Let me give you an explanation in which way. Net working capital variation was minus EUR 460 million, primarily driven by the increase of trade receivable due to the business seasonality and the energy prices increase starting from March 2026, following the escalation of the conflict in Iran. Payment of net financial expense is EUR 38 million. Operating cash flow stand at EUR 149 million. Accounting CapEx, EUR 315 million. The net free cash flow amounts at EUR 166 million negative. The change in the consolidation perimeter during the period was positive and amounted to EUR 22 million, mainly due to the price adjustment, EUR 25 million, related to the sale of the part of the gas asset to Ascopiave in 2025, partially offset by EUR 3 million in other transactions. Overall, considering EUR 10 million spent on the share buyback, the total change in the net financial position amounts to EUR 154 million. So to conclude my comments, our businesses are not separate stories, but rather one integrated system that assure our financial results, results that show how by leveraging the resilience and diversification of business, we were able to navigate the challenges of geopolitical effects, including the ones that nobody saw coming, and to deliver an EBITDA of EUR 647 million. Let me now hand back to Renato for the final part of the presentation.

Okay. Thank you, Luca. So to close guys, Slide #12, we confirm our '26 guidance. Slide #13, on the same concept about our robust industrial execution. So let me now briefly really focus on the key highlights supporting our performance and outlook. Starting with execution year-to-date, we have seen solid operational trends across our core businesses. In renewable, hydro production benefited from the geographical diversification across Italy. It's interesting, the fact that this year, is Calabria, the first class of our hydro production. And more and more, it's difficult to have all the plants from the south to the north and northeast, northwest at the same level of production. So to have diversification like A2A in Lombardy including Calabria is super nice because it's easier to maintain our target. On the commercial side, electricity volumes recorded double-digit growth, and in particular, three mass market customer base continuing to expand. And starting from Q2, we are seeing early signs of improving churn rate dynamics. You can imagine, it's, of course, also linked to the exceptional growth of PUN, and the typical situation in this case is that the churn fall down. And our visibility in June is a reduction of the churn super strong. But what is important for us is that you remember our strategy is to increase the market share of electricity customer and our strategy is on track. Our power grid activities delivered a sound performance supported by ongoing CapEx deployment. And as I said in our last call, in particular, Duereti, the company that we bought from Enel, is working very well in terms of CapEx deployment and also EBITDA. At the same time, we continue to deliver on our strategic projects. In power generation, we are progressing in Monfalcone, the new class H thermal plant. Corteolona is a new waste-to-energy plant. A2A remains the only company in the last years that is working to build new waste-to-energy plant and further, renewable deploy -- development. And we have also identified the brownfield sites for our data center platform. In data center, we are working quickly. If you remember, we have three projects on track, and we are working to be able to start with some site next year, and all suitable for behind-the-meter connection, enabling so faster grid access and competitive energy cost, as you know. Finally, our electricity distribution business is well on track to reach 2028 RAB target that is high. Overall, this confirms our ability to execute consistently across all businesses while continuing to invest where it matters most in order to generate sustainable value. In the last slide, #14, only to say that -- let's see the architecture that support our strategy over time. First, the diversified and integrated portfolio of activities, enabling us to optimize our risk profile. All our natural hedging in generation, in collection and treatment in regulated market, regulated business and business on the market. Second, exactly the exposure to regulated businesses, providing stability and clear visibility on cash generation. And third, our discipline in capital allocation to unlock new growth opportunities. So I began today by underpinning our commitment to preserve the delicate balance between order and change. And to do so, our takeaway today is we will continue to invest where it matters most, while maintaining financial resilience and control, turning the mega trend that are reshaping the energy landscape into sustainable result over time and are reshaping the role of the multiutility company in this new landscape. Thank you very much. And I'm sure that there is space and the interest for Q&A. So the floor is yours. Thanks.

[Operator Instructions] And the first question comes from the line of Emanuele Oggioni of Kepler Cheuvreux.

The first one is on the '26 guidance. To what extent is the visibility, considering that, if I remember well, in your guidance, it's not included, the change of the scenario for the short term at least. So past Q1, but starting from Q2, indeed, starting from March, the wholesale price will be higher year-on-year, at least for Q2 than we see in H1 -- in H2. And for this 30% roughly merchant exposure for the expected volume from hydro and waste-to-energy in '26, we should expect a benefit from this situation, which is not included in the guidance. So my question is about the outlook for the next three quarters, with an update of the guidance compared with the updated macro scenario. This is the first question. The second one is still on the generation business and the market design, but in this case, more, in '27 onwards. We know that the Italian government is under discussion with the European Commission to define a new market design and the capping of the power price from gas and all this, all the renewables from gas will be through ETS change or will be through other component or the price of the gas, et cetera, we'll see. But in any case, it's under study. So what is your update and your opinion on this situation? And finally, in the market supply, I saw a good resiliency in the profitability in spite of a slightly down number in customer, but indeed, it was related only to STG and the protect market, not the free market, which experienced a slight increase. So the commercial policy seems to be effective in, at least, in Q1. So what is the update about the competitive pressure and your commercial strategy in this respect? Also considering that you think that there are also portfolio, at least according to the Italian press, there are also a portfolio of customers to be sold in the market you're interested in.

Okay. Thank you, Emanuele. Well, on question #1, I say we are hedged for '26. So it's clear that -- and consider that in this moment, our hedge, as I said, is more or less 70%. That means that, yes, if they will remain until the end of '26, and I think that all of us hope that in Iran, something can change over the next weeks. I don't know, but we have to see. But we can have an upside that is limited due to our hedging. And so this is for the first question. For the second, talking about ETS. Talking about ETS, I can answer using the communication from the commission about the Temporary Iran Crisis Energy Framework, 23 of April, okay? Let's say that the member states can also consider transitory measures to mitigate the impact of high gas prices on electricity generation, but, let's say, not only limited only to '26. And you consider that the formula linked to the ETS proposed by our government, we start from '27, and this is enough to say that it's impossible to -- okay. But it's also interesting that European Commission understood perfectly the risk and say that there are some conditions. The first is the transitory measures. They are clearly defined and time limited, so not structural. The second, they are designed to prevent internal market distortion, ensuring no impact on the merit order and no restrictions to cross-border trade and electricity flow. The third, they preserve long-term investment signals for clean energy. The fourth, they only compensate certain gas cost increase and do not cover ETS cost. Therefore, maintaining the obligation and incentives of the ETS. Okay. So without reading more, I can say that we imagine that it is impossible to have structural changes and also, due to the road map '26 to '27. We don't think that basically, the Italian decree can have effect and that can change the position of EU that is very clear. Also because, frankly speaking, Italy is the only industrial country in which ETS is really attacked because it's the only country in which 2.9 billion or 3.5 billion is really used to serve a public debt. In all the other countries, starting from Germany or France, 100% of ETS is a cap-and-trade system. And so there are companies, corporate, that receive money from ETS. So this is the easy reason for why this country says, no thanks. We don't want to change ETS. Talking about the mass market, your analysis is correct. For us, in this moment, it's clear that the good news is that we have a 1% of increasing of the free mass market electrical in a phase in which the churn in the first quarter was high in all the markets and in a situation in which our visibility of the churn in the second half of the year is much, much lower. And so we imagine to be able to reach our budget that is a budget in which a customer base electricity free market will grow. The pressure -- the competitiveness, the pressure is the reality. And this is the reason for why since the first industrial plant, every year, we imagine to have a reduction of marginality of 3%. If you remember, it's a discussion that we did a lot of times. Until now, frankly speaking, a reduction of marginality is not on the table, but in our industrial plan, including '26 and '27, we forecast a reduction and we see, let's say, in this moment, we are happy to have, in particular, some interesting products, for example, the PPA mass market for our customer. And the customer base for PPA mass market in this moment is more than 100,000, so 110,000, 120,000. But to understand how it's important in this moment, the total energy sold in PPA mass market is slightly higher than the PPA B2B. So it's a proof that working in the customer base, also out of the box, with instruments like PPA mass market 10 years long, is a good idea and works well.

Just a follow-up on the first question. The question was not only on generation and achieved power price compared with the -- embedded in the guidance, but also the other moving parts in H2, for Q2 onwards, compared with the expectation of business, as you remember, when you provided the guidance for the first time.

Yes, Emanuele, I will take the lead to answer to your question. So we see generation more or less in line with the previous year result, taking into consideration maybe some opportunities we can get in the market. As you correctly pointed out, the spot price could give us some opportunities. So let's say, around 700 is more or less in the area we are targeting market. Supply business is slightly behind in our projection by now compared last year. But slightly, I mean, a few millions. That means that there is still a good visibility, high resilience on the marginality, which stay there. But also on the volumes, we are able to sell, which are growing and giving us opportunity to expand also the market share. Circular economy is pretty stable due to the fact that we have incorporated some maintenance works already in the first quarter, they were planned. So the target incorporated this maintenance, you have to consider that these plants are working with full capacity. So from time to time, they need to have maintenance activities. And finally, smart infrastructure, again, more or less in line with last year, considering that in the EUR 518 million of the last year, we had EUR 22 million related to Ascopiave deal on the gas network and some one-offs that are not recurring, but we have -- we decided last year to consider this non-recurring industrial -- non-recurring item embedded in our results. So all in all, we are in line with the guidance we gave at the beginning of the year, and we have nice visibility by now. Let's see what happened in the next quarter, and we can have an update at the half year. Maybe just to give you also a flavor on the fees asked by the region Lombardy. We have an impact in the area of EUR 40 million, EUR 50 million, half of those are related to previous years, meaning '21, '24 years. So these are, as I said, non-recurring, even though we consider that amount in the guide, in our expectation. And on the remaining part, the half, again, has been already provided in the previous year. So it has not an impact on the net profit, but only on the EBITDA, but already considered in what I already said.

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

Three questions. The first one is on the generation business and electricity prices. If you can share with us the level, the pricing level for your hedging in 2026 and eventually, 2027 as well. I’m interested in the absolute level of electricity pricing hedging. And also, your latest expectations for electricity prices towards the end of the decade and beyond, or in a context on which there is a high level of concern on hydroelectricity prices impacting competitiveness of Europe, which are your latest thought on potential impact of electricity prices in Italy? That would be the first question. The second question is on the comment that you make on electricity demand increase during the first quarter. That is quite remarkable. So if you can help us to understand in your area, in your region, in the regions in which you operate, which are the key dynamics that are underpinning this increase in electricity demand, and maybe splitting that increase in electricity demand by different -- by the different segments. In this context, when the company thinks that we’ll be able to update the market with latest update on potential development of new data centers in Northern Italy. The final question is more of a general one. That has been press articles mentioning the potential interest of the company in an M&A activity, being involved in M&A activity without entering names and second names, just as a general concept. The question for you is which would be the entity of a potential M&A target that could the company management press a button on that deal?

Talking about generation price, your question is the level of price of our hedging, '26 and '27, correct?

Correct.

Okay. Okay. Okay, yes. For '26, in this moment, we have, as I said, 70%, 70%, 72%, and the level is 111. So it's absolutely a nice, slightly higher than our budget. And talking about '26, '27, it's around 60% and is a little bit higher than 100. So also in this case, we are in pace in which we are online with our industrial plan. In this moment, there is few liquidity to cover more '27, but let's say, 60% in May '26 is a good level of hedging. The demand is interesting because it's clear that in this moment, for the sites, data centers surely are the key elements to increase the demand because if you consider that full cities like, let's say, Cremona as a peak power of 100-megawatt and is not base load like consumption, it's clear that it's enough to have a new data center of 30-megawatt to have an increasing of demand more or less similar to full cities like Cremona. So in this moment, what is happening is that the data center are growing. There are new data center, not really super big until now in Lombardy, but are growing. And so surely, the increasing of demand is mainly linked to artificial intelligence and all the digitalization. Also talking about e-mobility, something is happening, in particular, due to the high reduction of prices of the electrical vehicle due to the competition with, in particular, BYD, Leapmotor, and others because the price was down. A good example is the price of the segment city car of Renault, for example, starting from the Renault Zoe to the new R5 electric car set the price 30% lower. And so what is happening is that really also the e-mobility is growing. The last but not least is that looking at the gas distribution year-by-year, there are 1% -- between 1% and 2%, depending where of reduction of [ DDR ] and of course, are people that decided to electrify something. That means cooking, heat pumps, or the others. And so it's normally to see this increasing of demand. Why so concentrated in Lombardy? I think because Lombardy is every time, the local of Italy. And so all the new trend start typically from Lombardy, talking about the economy growth. That's all. To close with M&A, let's say, that -- we can say nothing about these topics. We do full disclosure through -- exactly through the media of what is correct to say to the shareholders. So for example, the last news about our non-binding for the plans of biogas is correct, is true. Of course, we are a player in this sector, and we are interested to see the number, to have more information about the business because it's useful also for us to define our strategy, let's say. But I have not more information, Javier, to share.

Okay. And on the question on the timing for -- latest views on timing for a final -- or the announcement of an agreement with data center development?

Yes, this is correct. In this moment, if you remember that during our presentation, we put on the slides three projects. In this moment, we can say that one project is in Brescia, one project is in Cassano d’Adda, so near our super big thermal plant, and the third is under definition. So it is ongoing, let's say. We are working for authorization, of course. But consider that it's also interesting that both the national law and the regional law put some conditions to have acceleration in authorization. And the conditions are easy for us to face because it is a greenfield -- sorry, brownfield and not greenfield, is to reduce the impact on the power grid, so perfect behind-the-meter connection, connection with the district heating, and we are the sole operator able to do this. And with a good mix of renewable and -- sorry, a mix of the carbonized electricity and water cycle efficiency. And the reason why A2A is a good player in data center is exactly because we are able to move all these parts, and so to move quickly in the authorization, because we are exactly full committed in these elements. So we are working for authorization, and our goal can be to start the first plant, the construction of the first plant next year to be able to see the first EBITDA at the end of '28.

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

The first one is if you can give us an update on the concession renewals, especially in Lombardy. The second one, if you can give us -- quantify the impact of the new Acerra service contract for both -- for the full year, because there was an impact in Q1. So if we can have an estimate for the full year. And then on the retail business, I wonder what is -- what your commercial strategy is now in terms of fixed price versus variable price contracts and whether there has been a change in the market or, at least, in your approach in the last few months. And secondly, finally, as we got thermal generation and more in general, your electricity volumes that went up a lot in Q1, whether this is related to strong demand in Lombardy or whether there are other drivers behind this increase?

Okay. For the hydro concession, the situation is more or less the same as you know. So we are waiting to open the discussion for the fourth, third way, the Lombardy model, let's say. And frankly speaking, I imagine that it's much easier to open the discussion in the second part of this year after the closing of the PNRR. You can understand that without the vincula from the PNRR is much easier. Also because, frankly speaking, every time -- so we say that the fourth way is a way to accelerate the CapEx. And so it's completely online with the target of the PNRR because of the fact that the hydro concession was introduced in the competition law was, in the original idea, a way to accelerate the CapEx. But at the end of the day, it’s the opposite because until the tender, no one invest EUR 1 in the concession. So in this moment, all the public authorities understood that, that's the only way to, really, to accelerate the CapEx, is to reassign to the actual players, the concession, with an investment plan linked to the new 20 years long concession. Talking about Acerra, the impact full year is EUR 15 million. Consider, guys, that Acerra is the only plant not owned by A2A. So we are talking about the plant in which the return on investment is super high, probably the higher in the group, simply because there are no CapEx allocation from A2A. And talking about the -- our strategy, in this moment, surely, for our customer, it's interesting, the fixed price, because, as you know, the calendar 2027 maintain still a good price for energy. And so when you sign, for example, a 2 years contract, the price is the average between all the quarter until now -- from now until 2028. And so the price is interesting and, of course, stable. This is the reason for why 50% of our customer ask for fixed price. Our strategy is really to push more as possible, the 10 years contract. And exactly yesterday we sign the first PPA for a small business. That is interesting because in this moment, we have a PPA for a corporate, for large business, steel product, so on and so on. We had the product for mass market, but we haven’t a product for small business. And this is the reason for why we decided to build a PPA also for small business. And exactly yesterday started this new product, and immediately, we signed the first contract. It's really important in my idea because for small business, it’s very difficult to be -- to deal without PPA profile and so on. They need exactly like mass market standard products. And the idea to give the opportunity also to small business, to understand that with renewable, you can fix the price for a really long term, in my opinion, is the real change of paradigm of renewable. And so it’s very important that every categories of customers can have a possibility to sign a contract linked to renewable for long term. And we are doing it, and I think that we are the only company that is working in this strategy.

The next question comes from the line of Roberto Letizia of Equita.

I only have one remaining question, which is still on the retail commercial approach. Just wondering if you can share with us how much of the current fixed sales price are expiring within the end of the year for which you will go into price negotiation? And if you can tell us, what kind of approach will you prefer now? So will you be more aggressive on the price even because you can by serving those contracts through renewable, trying, as you said, push the PPA at very low price from a higher starting point because prices in the next six months will be high, so maybe you will have a chance to be aggressive, but not decreasing the offer price that much in order to bring a quote market share and then build up on the strategy of the long-term contract. So can you elaborate a bit how much this is a window of opportunity by having the pool price that is pushed by the end of the year with a mix of expiring fixed contract that can be renewed at those conditions?

Consider that -- starting from the fact that today, the customer are divided half and half between mix and variable. Starting from the fact that, in my idea, in the -- looking in 2030, let’s say, I imagine a world with a lot of PPA mass market, so fixed price, but not 2 years, but longer, linked to renewable and the rest, variable. In this moment, surely, the fact that we are able to build a PPA mass market and small business give us the opportunity to sign PPA to a higher price than the PPA that we are able to sign with steel product or also with data centers and so on. Because, you know, the marginality in mass market and small business is higher. So to give a numbers, for example, the PPA, the PPA mass market is EUR 105 per MWh. The typical PPA in this moment, B2B for a typical profile for a steel product is EUR 85. So the differences is huge, 20%. And the price of a small business is in the middle. So the capacity to put on the market products enable to face the needs of mass market small business, in my opinion, is an incredible opportunity to sell our green energy to a good price. Remaining on the one year or two years fixed price, it is surely not the company with the lowest price because our strategy remain to give a good services. And are recognized like a company, both for mass market and then for B2B, able to give value in our ancillary services, starting from the fact that there is someone that is able to respond clearly to our call center when you have a problem. So our strategy is this one, and it seems to work well because if you look exactly at the free market, the fact that in this quarter, with the huge churn that we saw, and with the result also looking our traditional competitors, I am absolutely happy to see our numbers.

The next question comes from the line of Davide Candela of Intesa Sanpaolo.

I have three. The first one is regards to what you said on the power demand evolution in first quarter. I was wondering if you can share some flavor about your ability of capturing this demand increase in the region. And maybe if this will be served through your own plants you have in the region, like the new renewable developments you expect or your CCGT spare capacity. That is the first one. Second one, with regards to the disruption in energy markets. First one, with the increase in energy prices. I was wondering if you can share some data regarding April and May consumption, if actually the high price level is pushing the clients to reduce the consumption in order to contain the expenses related to that. And basically, if you see a trend according to that? And the last point with regards to this topic. We have seen that some rumors about other countries in Europe that are thinking about putting some windfall taxes with regard to the high energy prices. Maybe it will be much more related to the whole sector, but electricity seems not to be excluded at all, or at least at the basic level. So what is your position on that? Do you think that this risk is still there also for Italy? And given also the fact that this could be temporary, as you mentioned in your speech before.

Davide, I will take the lead to answer your question. For the power demand evolution and the prices on the market, you know very well that we are managing different technologies. We are on the market with a constructive approach of our energy management department. So if you consider that January and February has been months in which the prices went down because of the Decreto Bollette, the energy decree. And there has been a lot of pressure and also some speculation regarding a possible conclusion on the Ukraine war with Russia. So we take the opportunity to work with the market to hedge part of our exposure for '27, for example. Immediately after, the war with Iran. And again, we were in the market, and we got, again, another opportunity. And in particular, with our way to sell the market, we optimized our position in the market, taking -- creating value for the company by roughly EUR 15 million to EUR 20 million. So this is the way we continue to see the future quarters. Of course, volatility in a certain way create opportunities, but it creates also some stress. The visibility on April and mid-May was quite good for the production levels in terms of quantities, like it has been in the first quarter, with good prices, but we need to keep taking into consideration the hedging share we have available, so to offset some peak with the hedging average. Regarding the windfall taxes, well, let me say, apart from having 2 percentage point increase on Europe, I hope that this is the end of the story. Nevertheless, we will see and we will follow closely what happened also in Europe, but we don't see and we haven't heard any rumors for a potential new tax or cap for the energy prices, also take into consideration the fact that we are not in the same situation of 2022.

Also because the discussion on the Decreto Bollette was super tough, and the result was a couple of points of IRAP for a couple of years. So imagine that today, the government, the situation in which there are only few months of the actual government, will reopen the dossier of the windfall. In my personal opinion, it's impossible.

And we do have a follow-up question from the line of Emanuele Oggioni of Kepler Cheuvreux.

Just a quick question about the electricity networks. I saw that in Q1, the electricity networks benefited from allowed -- higher allowed revenue from the ROSS mechanism. The question is to what extent that is already included in the guidance, and what will be the benefit for the full year?

Yes, it has been included in the guidance in our target. It comes from part of the new regulation, considering the fast money. And it is related to the fact that we are deploying CapEx maybe to -- and I understand, also considering the fact that, as Renato said in the presentation, we are able to move CapEx in the electrification of the grid whenever it is the case, there is the chance because other business maybe are behind the target. So we have this kind of flexibility, and it is a very positive aspect of the regulation because it gives us some flexibility.

At this point, there are no more questions. I will hand it over back to the speakers for any closing remarks.

Thank you, everyone, for taking your attention to our results. If you need any follow-up, please contact the IR department, and we will be available shortly. Thank you.

Bye.

Bye-bye.