ACEA S.p.A. (ACE) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. This is the Chorus Call conference operator. Welcome, and thank you for joining the 2019 results of the ACEA Group. [Operator Instructions] At this time, I'd like to turn the conference over to Ms. Angrisani that is the IR manager of ACEA.

Ladies and gentlemen, good afternoon, and thank you very much for connecting to the conference call for the presentation of the ACEA Group results as at 31 December 2019. Mr. Donnarumma and Mr. Gola will hold the presentation, and then there will be a Q&A session. Stefano, you have the floor.

Ladies and gentlemen, good afternoon, and thank you very much for connecting to the conference call. Now we held this morning the Board of Directors, as you know. And this is the last Board of Directors meeting for this mandate, basically. And so until the shareholders' meeting of the 28th of April, there will be no meetings unless there are extraordinary board meetings, which are not expected so far. We approved the data of 2019, and we summarized the trend, the performance of the past 3 years, which were very satisfactory and very positive for us all. So I'll start from the stock price, Page 2, of the presentation, and you can see here the share price which historically has reached unprecedented levels. I mean we have to go back 20 years ago to see such a price, but we were not listed back then. And in 2019, this share price went up by 53.5%. And in the past 3 years, we went up to -- by 38.6%. The EBITDA is above EUR 1 billion, EUR 1.42 billion. This is the objective that we achieved and that we set for ourselves. So we're very happy for this result because the results are very sound. Growth has been double digit for all the period. As you can see, from EUR 840 million to EUR 1.42 billion. CapEx are growing by around EUR 800 million. We are among the utilities investing more in Italy in this moment. We are highly focused on regulated business infrastructures. Many of these investments are to do with the water and the energy or electricity sector. But also, we have some investments in the waste treatment business. The debt/EBITDA ratio is below 3. As you can see, that was one of our targets of the business plan. And we are very satisfied of this because if we compare it to the investments that we made, well, the debt/EBITDA ratio reflects the good management of the company. As you can see also, the net working capital is very, very satisfactory. There are some EUR 100 million of difference in 2019 versus 2017. And this is due to the very strong financial control. Now let's go to Page 3 now, and we continue with the presentation. On the 2nd of April 2019, we presented the new business plan 2019-2022. And if you take into account that the business plan envisaged the following target, which was EUR 900 million of -- EUR 972 million of EBITDA, and we went to EUR 1.42 billion, which means that we managed to achieve our goals. And we also reviewed our targets 1 year ago because of this reason because of the good performance. Now at this point, we need to assess the fundamentals of the company, which are very sound. And we also decided to also associate to our fundamentals, practical, sustainable goals. I said oftentimes that this company is actually sustainable. We manage the water business and water resources with particular attention to the sources of water. If you take the energy, the power distribution of, for instance, the Roman plant, we tried to reduce the dispersion, the loss of power, and we focus on resilience. As to waste management, we are focusing increasingly on this killer economy. And so this means that all of our businesses are in line with the sustainable goals. Sustainable goals are also part of the bonuses of our managers. When it comes to the evolving business mix, well, this has improved. The management team of the company has decided to review the composition or the weight of the different businesses, and we have increasingly and progressively gone into the distribution of gas, and then we have increased the waste management capability. When we started, we had some -- little capability to manage 800,000, 900,000 tonnes a year. Now we are above 2 million tonnes a year of waste management. So -- which means that we are growing organically. We are investing in our plants and this has made it so that our company is among the top 3, 4 utilities in Italy. We invested also in photovoltaic plants in renewable energies and this is certainly making sure that our company is among those companies that are favoring the so-called energy transition process, favoring renewable sources of energies, which will continue in the next few years. If you go to Page 4, you see the financial highlights. Revenues are growing, as you can see. And this is also due to the fact that in regulated business tariffs have gone up. EBITDA is up 11.7%, and the group net profit is quite considerable without one-offs here. We only have one fee that was canceled by the antitrust authority. But you can see that the group net profit is now EUR 284 million, up 4.7% versus the previous year. And we consolidated Gori. And so you need to take into account that, by consolidating Gori, the difference between this year and last year or 2018 (sic) [ 2019 ] versus 2018 is certainly greater. CapEx have grown by 25.7%, mainly in regulated business -- businesses, that is growing, but the net debt-to-EBITDA ratio is below 3, and this does say that our company is financially sound, in very good health. As you can see at the bottom of the page, we have the guidance for 2020. EBITDA is envisaged to grow between 6% and 8% versus 2019, in line with the CAGR of the business plan 2019-2022. CapEx will be broadly in line with 2019. In 2019, we had peak of investments, and we will probably replicate this in 2020, but it is in line with the business plan CapEx. And then net debt is going to be around EUR 3.45 billion and EUR 3.55 billion. This being said, I'd like to give the floor to Mr. Gola, who is the CFO, who will start analyzing the data, starting from Page 5, and he will also assist me during the Q&A session.

Thank you, Stefano, and good afternoon, and welcome to everyone. Let us now see the details of our performance. EBITDA, 2019, EUR 1.42 billion, 82% of which come from regulated businesses, so water and energy infrastructure; 19% from nonregulated business, which means commercial and trading and the environmental businesses. Now the water business accounts for 48% to the total EBITDA; energy infrastructure, 37%; commercial and trading, 7%; environment, 5%. Now if you look at the growth of the different businesses, starting from the 2018 EBITDA, the water business growing by EUR 72 million, not because only of the organic growth of the business, but because of the full consolidation of Gori and the partial consolidation at the end of 2018 of del Fiora, and then energy infrastructure by EUR 31 million. This is due to the regulated business, but also it is due to the development of the photovoltaic business, which had some effects in 2019. Commercial and trading is going down by EUR 7 million because of the decrease here over the regulated tariffs. Environment, minus EUR 13.6 million because of the end of CIP6 incentive and the other businesses have limited effect. Other here also has the fine that was paid. And -- sorry, that we -- sorry, that was canceled and which had a positive effect on our profit and loss account. And so you see here other EUR 24 million. If we look at this slide, you see the impact of 2018 and 2019 on the table on the right. Gori, 2018, EUR 14.7 million and EUR 68 million in 2019. And then we had the acquisition of Pescara Distribuzione Gas, the Fotovoltaico acquisition and then Demap and the Berg, the 2 waste management plants. Then let's see the different businesses. The water business, Page 6. EBITDA at EUR 505 million, which is growing by almost 17% versus 2018. And this growth, as you can see, is due not only to the effect of consolidation of companies and then the growth of ATO5. ATO2 has remained almost stable. We have some nonrecurrent positive one-offs that we consolidated in 2018. And then as to the key highlights here, we have the line-by-line consolidation of Acquedotto del Fiora, and in March 2019, the acquisition of Pescara Distribuzione Gas. CapEx is growing from EUR 380 million because of the consolidation of Gori and partly of the Fiora Acquedotto. As to the -- those companies consolidated at net profit, you have here Gori and del Fiora getting out from this consolidation which were not present in 2018 in -- del Fiora is only partly present in 2019 and Gori is no longer there. And then as to energy infrastructure, EBITDA, EUR 392 million versus EUR 360 million of 2018, up by almost 9%. This is due almost exclusively to the growth of distribution that is of the regulated business which is accounting for EUR 345.4 million versus EUR 317 million. Generation. The generation business had a positive effect because of the photovoltaic business, which accounted for EUR 3.6 million. So the generation is slightly going down because, in 2018, we had accounted EUR 5 million of one-off. And then let's go to commercial and trading next page. EBITDA almost EUR 70 million, down 9.2% versus the previous year. This is due mainly to the reduction of margins because of the review of the RCV component tariff. The business, however, as you can see from the key highlights, shows that the business is growing. The number of customers is growing versus the previous year. And you can see that from 1,185 (sic) [ 1,177 ] customers, they went up to 1,177 (sic) [ 1,185 ]. The total gas customers are also growing by almost 11%. What is important is the performance here in terms of the credit management as we should see later on when we consider the net working capital. The credit performance is up. The unpaid credit has gone up by 1.6% versus the previous year. And then moving on, we have the environment business, which is closing the EBITDA with -- an EBITDA of EUR 52 million versus EUR 65 million in 2018. This reduction is due to the reduction or the end of CIP6 incentives, which we do not have from August 2019, minus EUR 16.7 million, but we have the effect of the acquisitions of Demap and Berg. As for waste treatment, we have exceeded 1.2 million tonnes in 2019 with 327 gigawatt-hour electricity sold. On Page 10, you see the items below EBITDA. EBIT reached EUR 518 million, up 8.3% versus the 2018 and net profit reaching EUR 284 million, up roughly 5% on the previous year. As for net profit, as Stefano already pointed out, it is worth considering that this figure has normalized. If you consider that in 2018 and in 2019, this item is net of -- because we had a net of some nonrecurring items. In 2018, to be precise, we had the provision for Gori that was released, amounted to EUR 44.2 million, then we had roughly EUR 9 million for TWS gain, and then we added the antitrust fine negative impact of roughly EUR 16 million. So the 2018 results normalized was EUR 234 million versus EUR 271 million. In 2019, we have again 2 nonrecurring items, namely the antitrust fine cancellation, EUR 16 million roughly, and then the release of the provision that referred to Gala considering resolution was adopted by ARERA in December that enabled us to release a provision of roughly EUR 12 million, that has a net impact, net of tax, of roughly EUR 9 million. So the net-net profit normalized in 2019 is roughly EUR 258 million, up 10% versus the normalized figure for 2018. If we consider then the dividend history and the dividend that we are going to submit to the general shareholders' meeting, we'll be submitting EUR 0.78 per share, that will amount to a total EUR 166 million with a dividend yield based on the average stock value in 2019 amounted to 4.7% and the dividend payout, minorities excluded, of 59%, which is perfectly in line with the guidance that we disclosed when we disclosed the business plan, the new business plan. And we announced EUR 0.75 as a minimum dividend to EUR 0.78 that is what we are submitting to the general shareholders' meeting this year, thanks to the good performance that we managed to report in 2019. On Page 11, you see CapEx that grew substantially over the previous year, reaching EUR 793 million. Such growth is the result of the following items. As for water, EUR 50 million higher CapEx that were mainly due to the consolidation of Gori assets amounting to EUR 44 million. That is the difference that we had to consider and EUR 11 million for the consolidation of del Fiora Acquedotto. And then substantial investments were made on the repairment and widening of water and sewage pipes, on extraordinary maintenance of water centers and work on treatment plants. As for the energy infrastructure, investments grew by roughly EUR 50 million, 5-0, again, mainly to upgrade and improve and expand the grid. Then, we invested on the resilience plan, focusing on secondary substations and on the mid-voltage and low-voltage network. And also to revamp the Mandela hydroelectric plant and the Tor di Valle and Montemartini thermoelectric plants. As for commercial and trading, investment grew to upgrade our system and to acquire new customers. As for environment, we opened Monterotondo Marittimo plant in October 2019 and we expanded the Orvieto landfill. The other investments refer to corporate IT project of roughly EUR 23.5 million. On the following page, you see the cash flow evolution in 2019 compared to 2018. So in 2019, EBITDA amounted to EUR 1.042 billion. Working capital increased by EUR 16 million versus EUR 35 million in 2018, as Stefano already pointed out and -- versus EUR 115 million in 2017, which bears some witness to the fact that we managed to improve our receivable management. So our cash-ins have remained flat this year, but we managed to improve the cash-ins of Acea Energia that managed to increase the cash-ins by roughly EUR 50 million, 5-0. As for the working capital absorption, it is worth mentioning that, as a consequence of regulation, that is to say both water and electricity, accounted for revenues that are cashed in, in the following year or the following 2 years, we have a negative impact of EUR 41 million. Net of this effect, we can say that net working capital this year generated cash amounted to roughly EUR 25 million, and this is the first time, at least in the recent history of ACEA. But going back to the cash flow. Our free cash flow net of CapEx generated cash amounted to EUR 233 million, net finance charges amounted to EUR 90 million, change in provisions EUR 107 million. And here, clearly, the improvement of Acea Energia performance is offset by the large business scope following consolidations; income tax paid, EUR 134 million, much higher than the previous year as a result of higher net profit in 2018, and we paid taxes in 2019. Dividends amounting EUR 151 million paid in 2019 on the 2018 results. And then we have M&A and consolidation activity. And here, the impact is much higher because of the change in the IFRS accounting principle. Then we have EUR 50 million that is noncash impact because this is the result of the consolidation of Acquedotto del Fiora. So we have roughly EUR 80 million referred to M&A activity and the IFRS 16 impact is a noncash impact and amounts to EUR 64 million, as already pointed out. All in all, this leads to an increase of our net debt by EUR 495 million. On the following page, you see the full picture. So net debt reaches EUR 3.62 billion, but net of noncash items and the M&A activity that had not been factored in, in our guidance, as we always pointed out. We have EUR 2.826 billion adjusted net debt that is below the minimum range -- level of the range that we disclosed last year. As for net debt/EBITDA, as Stefano already pointed out, it's 2.9x. As for debt structure, 81% of our debt is fixed rate. We issued a bond in 2019 amounting to EUR 500 million in May 2019. And in 2020, we issued another bond for EUR 500 million with 9-year maturity at a fixed rate of 1.75%. And this means that the total cost is at 2.19% on a 3-year period. As for our ratings, Fitch Ratings, BBB+, stable outlook; and Moody's Baa2, stable outlook. This is it as far as I'm concerned. And I'm -- we are ready to answer your questions.

[Operator Instructions] The first question is by Javier Suarez, Mediobanca.

I got 3 questions. First concerns the working capital. I was impressed by the work carried out by the company to improve the working capital over the past couple of years. Can you please explain what you had identified as a problem in the past 3 years when it comes to working capital management? So what were the issues that you identified and what measures were put in place to achieve such an improvement of working capital? And I would like to know whether such improvement in working capital can be expected to stay also in the next year? So can you again explain how you managed to improve the working capital over the past 3 years and what were the issues you faced? The second question refers to the net debt of the company -- I'm sorry, the dividend, the dividend you submitted is -- or you're going to submit is EUR 0.78 per share, in the -- at the time of disclosure of the business plan, you mentioned EUR 0.75 per share. So can we consider EUR 0.78 as the minimum dividend up to 2022? Or should we go back to the previous target you announced? And then another question that I would never imagine I could ask it. But in the light of what is happening with the coronavirus, I wonder whether the company is looking at -- with different eyes at the level of debt that it is ready to accept up to 2022? So the situation in Italy is definitely very difficult. So I would like to know whether you see your debt with different eyes, considering the coronavirus crisis and whether you have to consider different ways to retain your financial soundness. And then another question on the commercial activity. The EBITDA improved by 9%. I listened to what you said about the changes in tariffs in the regulated market. But I would like to understand better how this impacted on the free market or nonregulated market and on your EBITDA?

About the debt, Mr. Gola is going to answer.

Well, I'll try and summarize what was done over the past few years. We have always explained this at every conference call. Considering that the working capital is not just made of receivables, but let's say that over the past 3 years, we changed the procedures and the processes to manage credit, both in the energy business and in the water business. And the 2 businesses reacted differently because the water business reacted promptly in 2018. And in 2018, if I remember correctly, we managed to cash-in roughly EUR 70 million, EUR 80 million more than 2017. And this achievement was made possible thanks to the new procedures for credit management or receivables management that are, in a way, standard procedures, but we didn't have them in the past. Such procedures also imply stopping the supply of water to delinquent clients. In the past, we used to slow down the process because it was managed fully in-house, and this had a clear impact on our results. As for energy, it took a bit longer to revisit the processes and the procedures. We had to start bottom up, and that's why the performance improved only in 2019. As I said, unpaid at 6 months in Acea Energia dropped from 4.9% to 3.3%, which means that long-term unpaid invoices have improved substantially, we should be at around 2% when it comes to long-term unpaid invoices. And this is a market benchmark. In other words, we are in line with best-in-class also when it comes to Acea Energia. However, this doesn't mean that we can rest on laurels. We have to work hard to improve this performance even further. Certainly, we cannot expect to report such an improvement in cash-ins as we experienced in the past 2 years.

And if I may add something, what Giuseppe said is absolutely right. He mentioned processes and procedures, but I would like also to mention the organization. We may have had the opportunity to talk about this when we met in Milan with investors. So I believe that what really made the difference was shifted focus from the administration to the business. Giuseppe Gola and I managed to involve the heads of the various businesses in the management of the working capital of receivables and cash-ins, setting them as objectives and targets for them. Management was typically focusing on the business KPIs, but not of such targets. So today, we have made these targets, targets underlying the incentive plans for the top managers and the middle managers. And I believe that this has made a real difference. Then you asked the question on dividends. I believe that, as we pointed out when we disclosed the business plan, the new business plan, EUR 0.75 was the low level of the range. So it was, in a way, the minimum. We did better this year, and we are happy because the performance was very good in 2019. But as pointed out when we disclosed our business plan, we are convinced that we'll be able to be in upward trend going forward unless unexpected events take place. And here, I would like to refer to the question on the coronavirus and then I'll let Giuseppe add something if so -- he so wishes. Clearly, we are experiencing a crisis that no one could expect or anticipate. And of course, it does create problems. We have adopted protocols. And currently, 50% of our staff works, thanks to smart working. Thanks to our IT system, this is possible. Clearly, we hope this is not going to last for a long time because in the long term, this may slow down the activity clearly. We do not expect the coronavirus crisis to have a substantial impact on our business because, I mean, water and energy distribution are, of course, essential and will become even more essential going forward. At the same time, as I said, the energy distribution will not be impacted on because we have to go on supplying energy as we have always done and the same applies to waste, waste disposal and waste treatment. Our group is considered as a player that can really bridge the gap existing in some Italian regions. So we'll go on investing on this. As for our -- let's say, for the commodity business, despite this crisis, we do not expect any substantial impact. The only problem we may anticipate is the delay in the payments of invoices by small and medium-sized enterprises, even though most of our clients are local clients. So I don't really expect a major impact in this regard either. Anyway, I would like to hand you over to Giuseppe.

As for your question about debt, the difference between the dividend that we are submitting EUR 0.78 and the minimum dividend of EUR 0.75 implies a negligible impact, but we believe that in the long term, our dividends must go on growing, certainly not 10% a year, but certainly, they must go on growing. As for our debt, we managed to retain 2.9x the EBITDA despite the impact that we reported this year accounted for by M&A activity and the growth of CapEx and the introduction of the new accounting principle, IFRS 16, which lead to a slight increase of EBITDA of EUR 10 million, but an increase of EUR 60 million of our debt. The consolidation of the del Fiora Acquedotto contributed EUR 90 million to our debt, but only EUR 14 million in terms of contribution to EBITDA because the contribution comes only in the last 2 months of the year. So despite all this item, we managed to limit the growth in our gearing. Over the next few years, we would like to retain this type of trend. So the guidance we provided for the next year is consistent with this approach, that is to say, retaining some drivers for the management of the working capital and debt that are in line with what we have done so far. As for our guidance, we expect capital absorption in 2020 slightly higher than 2019 because, as I said, we cannot go on cashing in our receivables forever, and also because there is a new regulation called REMSI, if I remember correctly, that will enable building managers or facility managers to delay payments. Nevertheless, we expect our debt and working capital to remain in line with the guidance that we have provided. And the last question about performance, the commercial performance. As I already pointed out, the deterioration of our EBITDA is exclusively due to the reduction of the regulated tariff. And therefore, a reduction in the cashing in of delinquencies. Despite this, we have managed to improve on the previous -- on 2018 because we managed to sign 270,000 new contracts versus 135,000 in 2018. In other words, we have doubled our, let's say, commercial capacity, which has increased the number of clients on the free market by 20%. And in terms of margins, the impact so far has been negligible because the new clients do not -- are not accounted for the full year. And we have also experienced a slight decrease of margins and prices on the free market or the unregulated market. But let's say that we have definitely improved our commercial performance.

The next question by Enrico Bartoli with MainFirst.

I have a few questions to ask myself. Now I'd like to start with the regulatory review that was made in the business, and we already -- or you discussed the impact on your accounts. Can you give me the impact on the OpEx and on quality bonuses because of the review of the regulation? Do you expect something else in 2020? Can you take actions to increase the efficiency inside of the company? Now -- and then a question about your guidance. Based on the calculation, you expected EBITDA to grow by EUR 60 million, EUR 80 million in 2020. EUR 40 million should come from the full year consolidation of the del Fiora Acquedotto, and then considering the CapEx of 2019, some EUR 600 million may come from the RAB, and then based on my calculation, I have a final result a bit higher than your guidance. Am I missing something, or does my calculation include some mistakes? And then a third question about waste. What is the expected evolution of this business in 2020? The CIP6 were terminated in August, and so you should have a negative comparison in 2020 versus 2019. Do you have any start-up of new plants in 2020 that may make up for this shortcoming? And then another question about M&A. Can we expect something or some new transactions in 2020 in terms of M&A? And can you give me an idea of which business can be impacted upon? We read something in the papers, but nothing was clear. Can you give me something about -- or can you tell me something about this?

Okay, let me try to answer your questions. As to the water regulation, overall, there are effects that tend to be compensated inside of the new water regulation. Now we are, at the moment, assessing all of the effects of the new regulation. But it is very likely that the quality bonus will go down, and it will be partly offset by making of investments by -- sorry, by operating costs, OpEx. Now we are internally working on an efficiency plan to be able to make up for the negative effects so as to have an overall neutralization of the impact of the quality premium caused by the regulation. Now I understood your calculation. But in regard to your question, you started with the next question, it is true that there is an impact given by the del Fiora consolidation and there is an impact of the regulated business, and there is a negative impact of CIP6 which will have a full year impact in 2020. And this will lead you to the guidance we gave. So our expectations are quite stable in terms of EBITDA performance as far as the corporate customers are concerned. And then as to the CIP6, considering the plan that we made in 2019 and considering the acquisitions that we want to make in 2020, now despite this, they will not make up fully the loss of CIP6 in 2020. Now Stefano will give you something about waste and M&A in 2020.

As to the waste business, and if we remember our business plan targets, well, our business plan was built in the following manner, through organic growth and through acquisitions, we expect to be able to make up for the loss of CIP6 during the plan period. CIP is around EUR 30 million and not peanuts, considering the overall EBITDA of this business. Now the acquisitions that we made in 2019, but also repowering of new plants, and in 2020, we are going to continue along these lines, we have some files that we are taking into account assessing in terms of M&A. And here I answer your last question. The M&A activity will proceed in 2 directions: one, focusing on the photovoltaic business, but we're also focusing on primary energy plans. And then we will continue assessing them and we're looking in the business of waste management, Unieco. Certainly, we are interested to that transaction. And we are working together with A2A and we should see the timing and the modalities. But this is certainly an interesting transaction for us, and I'm referring to Unieco.

Now the next question by Emanuele Oggioni with Banca Akros.

I got a couple of questions. One refers, once again, the impact of the coronavirus crisis. What kind of impact do you expect on the process of acquisition of new clients and the migration of clients from the regulated to the unregulated market? So I realize it's too early to say, we still have to see how long this crisis is going to last. But we can expect an impact going forward on this business as well? And then my second question refers to the debt guarantee for 2020, which is in line with my calculations and my estimates. Even though the debt is much higher than my calculations, and then also considering what the consensus figure is, can you explain us why there is such a difference of hundreds of millions, considering the growth of the EBITDA that is in line with our expectations?

So if I understood your question about the panic deriving from the coronavirus crisis and the impact on the market behavior, so I would say, first of all, it's too early to say because the panic is spreading now or, say, more than panic, I would say deep concern. Honestly, I do not expect an immediate impact of this concern on the market. You may smile at what I'm saying, but we discussed this during the meeting of the executive committee with our managers today. Probably, consumers will pay more attention to the offering -- offers made by the various players, the market players because they will be spending more time at home. This may sound trivial, but this is what we perceived from the calls that we received. So people who are generally not very much interested in -- when they are offered something, they're calling us because they are reconsidering the offerings we made. And they say that this crisis may benefit us from a commercial point of view because, again, our offers are very interesting, our brand is a strong brand. So I believe that we shouldn't expect any substantial impact from the crisis. As for our debt, I'll hand you over to Giuseppe, again.

So if we consider the cash absorption for 2020, as I already pointed out, we estimated a slight increase of working capital in 2020 following the REMSI regulation, the new regulation. Also considering that our CapEx is, let's say, remaining -- going to remain flat, you know that an increase of CapEx would have an impact on working capital. When CapEx remains flat, there is no impact on working capital quarter, of course. Then as for financial charges, we expect these to be flat. We expect a slight increase in tax -- in taxes because of the improvement of the performance, and then the growth of dividends, as we already mentioned. So we consider roughly EUR 100 million worth M&A activity that has already been factored in. So all in all, we expect an increase of our debt in line with -- our net debt in line with the guidance we provided. Considering that we always disclose a range and we tend to say that we prefer to stay on the low level of the range, we expect that going forward we might be able to go below this minimum level. But anyway, let's say that we stick to our guidance.

The next question is a follow-up question by Enrico Bartoli with MainFirst.

I do apologize. I want to ask you for further delays. First of all, provisions and write-downs, that were EUR 115 million in 2019. Is that going to be similar in 2020 and in the next few years? And then the performance of public lighting which now has a positive EBITDA. Is this or can this be assumed to be a positive trend for 2020 and future years? Tax rate, it was around 29%, which is slightly lower than the guidance you gave. Is this sustainable? And then another thing about the gas tenders. Now in the press, we read that considering the coronavirus crisis, the government might take into consideration the possibility to speed up the process with appropriate rules and regulations. What is your view here? And do you have contacts with the government or is this view realistic?

Now as to write-downs and provisions, there is only one item that we showed. Write-downs, EUR 66 million, which is net of the release of EUR 12 million provisions that we released for the Gala business that we could release. The rest is stable. Net of these EUR 12 million, that is going to be stable. Let me give you a very quick answer on the tax rate. It may appear that 2 tax rates are different, but they're very similar. Last year, we had provisions, the AGM sanction which was not subject to taxes. This year, we released it without considering the tax impact, net of the tax impact of EUR 16 million. Tax rates are very similar, anyway, of the 2 years.

As to the public lighting, I have a comment -- I have a reply here to give you. Your comment is very appropriate. Last year, we had to make investments for the maintenance plans that was quite considerable. And at the end of the year, the figure was quite negative. This year, we are seeing the positive effect of investments. Investments have grown last year and in 2019 as well, and in 2018 as well. With the technical offices of the Rome municipalities, we are assessing the possibility to repower, and therefore, make investments in plants. And I believe this is going to be positive. Let me take your questions about the gas tenders. We did not have any -- or the view of the government in this moment. We did not discuss this with the government, but I think this is going to be discussed in the next few weeks because the government might take into consideration speeding up the process and -- with a view of guaranteeing the correct and appropriate implementation of the investment plans, which is certainly going to be very important.

Next question, Stefano Gamberini, Equita.

I've got a couple of questions. First, a question about the EBITDA guidance. Considering EUR 100 million higher debt due to M&As, I wonder whether you are factoring in these acquisitions the EBITDA figure as well, considering they imply substantial investment. I would like to know whether these are processes that are already advanced in the waste business. And if there is anything also for the other renewable energy sources? Then, you mentioned EUR 800 million CapEx. Where are these CapEx going to be? I wonder whether when you update the business plan, whether we can expect more investment on the water network and the electric energy distribution as well. And can -- when can we expect an update of the business plan? And then, don't you think that the government may ask for a delay in the payment of the utility bills to at least consumers, considering the difficult times we are going through, and may this have an impact on your -- on the -- your business going forward? So are there any negotiations ongoing with the government about this?

Well, as for our guidance, again, the full year impact of the M&A activities that we conducted in 2019 is higher than we expect for 2020. And these M&As can be announced only one at a time when they are completed. As we announced, we'll be focusing mainly on the photovoltaic business. On the secondary market, we'll be reaching the 50 megawatt that we have -- we had planned in our business plan. We have currently reached 20 megawatts, but our pipeline is very busy, let's say. So we'll be soon reaching 50 megawatts. And as Stefano already pointed out, we'll be focusing on the primary market as well. Because as I said, in the secondary market, despite the high returns for us, considering that we have a very selective approach to the targets that we are going to acquire, the impact on our debt is substantial. This is why we consider stopping when we reach 50 megawatts, whereas we'll be focusing on the primary market more going forward. And then we'll be certainly making acquisitions in the environment business. Currently, we have some targets, but we haven't completed any negotiation as yet, as well as some opportunities in the gas business. As for our CapEx, our investment in 2019 because I believe that you asked the double question, let's say. As for our 2019 investments, such investments amounted to EUR 800 million and EUR 700 million of which were mainly on water, which means that we are focusing mainly on the regulated infrastructure, in other words. And this focus has not been changed over the past 3 years during our mandate and will not be changed in the next 3 years, as already explained when we announced the new business plan. And then, of course, we'll be investing on the electricity infrastructure and on the environment business as well. You mentioned the fact that we may revisit our business plan. Well, after the general shareholders' meeting, we may be revisiting our business plan. This should happen before the summer, and we are still working on it.

So you do not expect any risk deriving from the postponement of payments of the utility bills?

Oh, yes. I forgot this question. Well, honestly, we do not know whether this is going to happen. Should this happen, should the government decide to ask for the postponement of payments of the energy bills, I expect this will be confined to certain sections of the population only. And of course, at that point, we will have to follow suit.

And don't you expect that this will have an impact on your M&A plans?

No, absolutely not. Not for the time being, at least.

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

I have a couple of questions, the first about synergies. When you disclosed the latest business plan, you talked about some EUR 50 million between 2018 and 2019 in terms of efficiencies. Now based on your calculations, how much synergies did you get in 2019 and in which areas? Now second, follow-up questions made by Enrico and Stefano about CapEx. Now considering the economic deceleration, I believe the government is interested in those companies that can invest in the country. Now what are the conditions for you to improve your CapEx capability? Now in which conditions would you put more capital at work to create a virtuous cycle? We know that the gas tenders are not ideal, but that's the only -- that's not the only point. So what do you think would force you to put your capital to work better? And then another question about the photovoltaic business. Can you give us an idea about the IRR that you have in mind to invest in primary and secondary plants, after taxes?

Well, Javier, as far as the synergies are concerned, well, that's something recurring for us. As we said before, we are accelerating. We are pushing our work to try and improve the efficiency gains in our operations. And in 2020, we would like to offset -- neutralize the impact of the new regulation. In 2019, we had some EUR 15 million, EUR 20 million of synergies versus the actual data of 2017. As to the other question about CapEx. Well, I share your observation. Of course, we need to relaunch the economy, at least in the areas in which we operate, and new investments can certainly be a key for this. We discussed this issue very often with the central and local authorities, and they are certainly interested in this. For instance, the Acquedotto del Pescara is a big investment. It's a project that we are continuing to work on, and we hope it will have the authorizations soon. If your question was the following: what do you need to be supported in your greater investment or to have to make greater investments? Well, authorizations is the big problem for us. So perhaps the red tape should be streamlined because this slows down investments, so that reducing red tape could be important to accelerate investments. Certainly, ACEA has all of the tools, financial, engineering know-how. We have it all. We have a number of opportunities. And we can also slow down or accelerate our multiannual plans based on the efficiency of the period, which makes us, so to speak, a very interesting machinery, if you wish, for the central and southern part of the country, which are the areas in which we operate. Now as to the other question about photovoltaic, well, we keep sharing our opinions about this with you. Our minimum target of IRR in terms of investments in photovoltaic and secondary plants is 7%. Very difficult to keep this figure. There's a lot of work behind for us to be able to continue to achieve this kind of return. As to the primary business, we have the same target unlevered. I mean, considering, however, that in the primary business the cost of energy is conservative without, however, a PPA -- a long-term PPA in Italy, you can only make it at low energy prices, which, for us, are not convenient. Now we buy energy net as a group.

Let me add something else. We are also assessing something else, meaning, in the short term, we may acquire minority stakes in photovoltaic companies that may have a return, not so much IRR-- unlevered IRR, but may have a return on EBITDA above 7%, considering the debt level of these companies. This may bring about critical mass in terms of megawatt that we manage. But this would expose the company's -- our company through a lower level of indebtedness when it comes to these companies.

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

Sorry, a very quick question. Can you provide us with tariffs for electricity distribution and for the water business for 2020?

I'm sorry, Stefano, we couldn't hear your question, can you repeat it?

Yes, I would like to know whether you can provide us with RAB for electricity in 2020 and the same for the water in the -- for the various companies of the group?

So to be honest, I don't have these figures available now. We'll be calling you later to inform you with the -- to provide you with precise figures, but you have the total of investments, so you can easily make your math.

Ladies and gentlemen, there are no more questions. Thank you very much.

And as customary, we are ready to take your questions. If you so wish, send us your e-mails. Thank you very much. Thank you for attending.

This is the Chorus Call operator. The conference call is over. You can disconnect now. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]