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

Ladies and gentlemen, good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the results as at the 31st of December 2020 of the ACEA Group. [Operator Instructions] I'll hand you over to Ms. Ira Angrisani, Head of Investor Relations of ACEA.

Ladies and gentlemen, good evening, and thank you very much for joining us during this conference call. Giuseppe Gola, CEO; Fabio Paris, CFO; and Stefano Songini, Director of Investor Relations and Sustainability will now start the presentation, after which there will be a Q&A session. Giuseppe, you have the floor.

Just a second, we are connected from remote. So good evening. This is Giuseppe Gola. Good evening to everyone, and thank you for joining the presentation of the results of 2020. Well, I have to say I am very proud of the results that we are going to disclose. We are at the end of a year that has been very difficult for all us with the complications and problems that were unexpected at the beginning of the year. And the ACEA Group has shown considerable resilience based on the fact we have a regulated business, but also because of the capability of the people to take upon themselves unexpected challenges, which allow now to disclose results, which are beyond our expectations, which are better than the guidance that we gave you last year. Now to summarize the results. Let me tell you the main highlights of the year. EBITDA, EUR 1.155 billion, up 11%. Such a growth is meaningful considering that we had a very strong organic growth, as we should see later on; net profit, EUR 285 million, in line with the previous year, but as we should see later on, it has allowed us to neutralize all of the positive one-offs that we had in 2019. So on a normalized basis, the net profit rose by 22%. CapEx, above the ones that we gave you in our guidance, up 14% versus the previous year, EUR 907 million as a whole, 84% of these are related on regulated assets. It has been a very difficult year. In certain periods of the year, we could not even open our sites. And then the net debt, EUR 3.528 billion, in line with our guidance, despite the fact that we had the pandemic, and we managed to neutralize the impact of lower revenues due to the lockdown effect and because of the changes in the perimeter, which were not expected. The leverage, net debt-to-EBITDA ratio is 3.05x above our expectations and improving. Now as we said when we disclosed the strategic plan, we are also disclosing another ratio, net debt/RAB, which is fundamental for us because it gives an idea of how the growth of our debt grows in line with our RAB. So 0.74x, stable versus the previous time. On the basis of these results, we're now going to give you the guidance for 2021 which shows considerable growth. The EBITDA expected for 2021 is between -- is going to grow by 6% and 8% versus 2020. So in line with what we had in the strategic plan although today, we start from a 2020 year-end result, which is higher-than-expected. CapEx around EUR 20 million (sic) [ EUR 900 million ] and net debt, which is to be between EUR 3.85 billion and EUR 3.95 billion, in line with our expectations that are contained in the strategic plan. Moving on to Page 3. We see here the main events of the year, and the main acquisitions and the most important events. April 2020, we completed the acquisition of 60% of Ferrocart and Cavallari, basically, as 4 waste storage, treatment and sorting plants, which are of strategic importance for the recovery of materials. In June, we completed the acquisition of 70% of SIMAM, a leading company in design, construction and operation of the plants, fundamental for us to further drive our presence in the field of high-technology solutions. And then we continued our developments in the photovoltaic plants, and now we have a total installed capacity of up to 52 megawatts, and we now have 41 megawatts, which -- on which we are working at this moment with a pipeline of 300 megawatts. October 2020. We disclosed our strategic plan. And there we devoted considerable attention to the issue of sustainability, which will guide us from now on to the next few years in managing our business. The fundamental lines of our strategic plan include EBITDA growing CAGR 7%, EUR 4.7 billion of investments between 2020 and 2024 correlated to specific sustainability targets for 50% of these. And then in November 2020, the last event, we completed the line-by-line consolidation of Servizi Idrici Integrati Terni company which manages water businesses in Terni. And we acquired another 25% of the company. We changed the shareholders agreement within the company. Then Page 4, we have the main sustainability indicators, and I now hand you over to Stefano Songini who will talk about this.

Thank you very much, Giuseppe, and good afternoon to you all. As the CEO said before, sustainability is at the core of our strategic plan, and we tried to reflect it in the presentation of our 2020 results where we have our core businesses, which are related to sustainability. We have a number of indicators, which are fundamental for us for each business line. Starting from the water business, a reduction of water losses by 3% versus the previous year. This is one of the fundamental goals of the strategic plan. And during the year, we installed 30,000 smart meters to be able to measure accurately the consumption of water in ACEA ATO2. As to energy infrastructure, the installation of 60,000 2G smart meters, and then 25% of reduction of the outage risk indicator, which shows the resilience of our network. So a reduction by 25% of interventions on non-positive events. Generation, 70% more or less of renewable energy. So 70% of our energy comes from renewable sources of energy, which allows us to save 210,000 tons of CO2. Environment, 1.9 million tonnes of waste treatment capacity, thanks to the acquisition the CEO mentioned before. And in certain waste materials, plastic, metals and paper, we now have the capability to recover 85% of the total incoming waste. As commercial trading is concerned, 1,363 gigawatt hour of green electricity sold on the free market, around 30% of the electricity that we sell on the free market, and which is strongly growing. And then as to the social and governance, in our Board, we have over 44% of women presentation, very high data. And then another important beta, which is now explained also by the pandemic because we pushed on digital channels. We have avoided 105.5 tonnes of paper, thanks to the digitalization of channels. And then sustainability ratings, both of these, CDP and the standard ethics, are both confirmed; the former A minus leadership, the latter EE minus positive. Here, we put in place a number of initiatives related to COVID-19 in terms of sustainability, which the CEO will tell you about now.

Thank you, Stefano. Page #5. Before moving on to talk about the financial and economic results, let me give you an overview of what we have done for our people and for our services during the pandemic. We set up a committee to manage the COVID-19 pandemic preventive measures. As soon as the pandemic broke out, this committee has been meeting once a week to deal with all the possible issues and prevent the problems that might arise. When the pandemic broke out, we very rapidly reorganized the work by moving people to smart working, also remote working -- work. So we had some 100 workers already working remote, but we had 4,000 people to reorganize at that point, and our network was capable to support remote working for all this 4,000 people, which means that the investments we had made before had been made quite well. Before we had not tested the network in this manner. And then we have a system of workforce management, which allows our workers to have on the tablets an indication of what they have to do during that particular day without that coming to our offices. And so they continued to work without the need to come to the office. In so doing, we managed to guarantee continuity and efficiency of all the services that we provide. And we have also managed to make the -- envisage the foreseen investments. As to certification, we have adopted a biosafety trust certification, a certification that not many companies have, which monitors and controls the spread of infection within the company. To safeguard our workers, our employees, we put in place a special insurance coverage for the group's employees and families in case of their becoming positive to COVID. And then we also set up a medical area within our offices where we carried out 2 serological testing campaigns for more than 4,000 employees. Those who wanted to be tested, they could come to our offices. We also put in place a flu vaccination campaign. And in this moment, we have prepared an [ area ] for molecular, rapid antigen and salivary-based test. And we have already carried out more than 1,000 of these, and we do them on a daily basis. And we're also ready to give our employees the COVID vaccination shots should our employees need them. Of course, in order to manage the emergency and have the necessary ID tools, we had to train our employees, and we organized some 12,000 hours of training. Now Page 6. Here you have a summary of our results which we talked about before. When I see the details, now consolidated revenues in 2020, EUR 3.379 billion, up 6% versus the previous year. As we saw, EBITDA went up to EUR 1.155 billion, up 10.9%. EBIT, EUR 539 million (sic) [ EUR 535 million ], up 2.3%, and group net profit EUR 284.9 million, in line with that of the previous year. But as we said before, organic growth is much higher. And then today, during the Board of Directors, we proposed the distribution of a dividend per share amounting to EUR 0.80 growing versus the dividend per share of the previous year that was EUR 0.78, and in line with what we had already disclosed during the strategic plan presentation. CapEx, EUR 907 million, growing by 14.4% versus the previous year. Now net debt. Our net debt at the end of the year is at EUR 3.528 billion, growing versus the one that we had at the end of 2019, which was EUR 3.062 billion. This is in line with our guidance, EUR 3.450 billion -- EUR 3.550 billion, which takes into account, however, also the consolidation of SII Terni, which we made at the end of November. And this consolidation basically amounts to EUR 70 million of our net debt. So net of this, our net debt would have been EUR 3.470 billion, that is in the low range of the guidance we gave you a year ago. Page 7 of the presentation. Here, we have the dividend -- dividend per share in 2020, EUR 0.80 per share, which is growing versus the one in 2019, EUR 0.78 per share and also higher than what we paid in previous years, which is tantamount to a payout of 60% on our net profit, which is in line with guidance we gave you in the strategic plan, a 60% payout in terms of dividend distribution, which amounts to a dividend yield of 4.6% on the average value of the share for all the year, and this is in line with our plan in terms of dividend policy, EUR 860 million in the period between 2020 and 2024. Let me hand you over to Fabio Paris, who will give you the details of different businesses.

Thank you very much, Giuseppe. We are now on Page 8 of our presentation. On the left, you see the breakdown percentage-wise of our business. And here you see that regulated assets accounted for the majority of the ACEA Group business. Dwelling on details to show the EBITDA growth rate, you see that EBITDA grew 10% versus previous year and mainly thanks to water that contributes EUR 109 million and EBITDA amounted to EUR 614 million in the year. Then energy infrastructure follows contributing EUR 412 million, 21%. Commercial and trading business, well, this business was mostly impacted by the COVID crisis. But nevertheless, it reports EUR 3.3 million growth in the period and the contribution to EBITDA of roughly EUR 72.4 million. As for the environment business, it contributed EUR 50.3 million to the EBITDA and reports a reduction of EUR 1.7 million. Please remember that the environment business was impacted on by the changes of the CIP6 contribution that was there in 2019 and that was withdrawn in 2020. And then you see engineering and services and the parent company revenues contribute by EUR 5.5 million EBITDA with a reduction of EUR 18.7 million. The average number of employees is up of -- by 627 headcounts, and this is mainly related to the changes in the business scope. On Page 9, as Giuseppe already pointed out, you can see the evolution of the 2020 -- I'm sorry, the evolution of 2019 EBITDA. As already pointed out, 2019 EBITDA was impacted by positive items that are not there in 2020. The most important ones are reported in the diagram, namely EUR 36 million, the water bonus, CIP6 contribution of that amounted to roughly EUR 19 million and the antitrust fine that again had a positive impact of EUR 16 million in 2019. Therefore, the normalized EBITDA in 2019 is EUR 971 million. Then you see the evolution of EBITDA in 2020 with the contribution of several nonrecurring items, mainly regulatory items, then the impact of a wider business scope that is detailed in the table on the right. And then organic growth amounted to EUR 102 million. That is to say, 10.5% of the growth in 2020. As for the business scope changes, you can see the details reported in the table on the right and the most relevant being the consolidation of AdF. On the following slide, we can see more details about the various businesses. We already pointed out the substantial growth of the water business that substantially contributed to the EBITDA growth. You can see that all the companies -- all the water companies of the group contributed similarly to the EBITDA growth. And particularly investments that were made in this business area contributed substantially to the result. Our CEO mentioned the resilience of the group during the pandemic and it is exactly because of the ability of maintaining our planned CapEx or even speed up the CapEx planned is a clear evidence of the group's resilience in 2020. CapEx is definitely one of the major items contributing to the EBITDA growth. Please remember that last year, as we already mentioned, the water bonus was there, which was no longer there in 2020, of course, amounting to roughly EUR 35 million. This, the lack of the bonus, was offset by new items, let's say, that is to say the items or the new cost components of -- relating to sludge disposal. Then, as we already pointed out, we consolidated del Fiora Acquedotto, the acquisition of Alto Sangro Distribuzione Gas in August 2020 that contributed EUR 1.7 million, then the line-by-line consolidation of Servizi Idrici Integrati Terni contributing EUR 1.3 million. Then on Page 11, you see the energy infrastructure business showing an EBITDA growth of 5.3%, mainly driven by electricity or electric power distribution. As for CapEx, well, here what I said about water CapEx applies again. You may see substantial increase of CapEx to a lesser extent than the water business, but nevertheless, again, the growth of CapEx shows the resilience of the group and the ability of the group to withstand the impact of the pandemic so -- as far as electricity distribution is concerned. As for the key highlights of electricity distribution, the better economic result is mainly driven by tariff regulatory items. Again, please remember that 2020 is the first year where we started installing the 2G smart meters amounting to roughly 60,000 units. The plan started rolling out in 2020 and will be progressively -- will be continued in the following years and will be completed in 2025. Then you see the reduction of electricity grid losses. That is another factor that substantially contributed to the result. As for public lighting, and here, I would like to point out that we reported a drop of EUR 3.9 million, mainly due to fewer new PODs implemented in 2020, an increase in maintenance costs -- ordinary maintenance costs that had, of course, an impact on the public lighting business result. As for generation. Generation contributes EUR 0.8 million to the EBITDA result. The photovoltaic business contributed EUR 8.5 million in 2020, that is twice the volumes of 2019, which offsets the shrinking of the hydroelectric business, mainly due to the decrease of energy prices that inevitably dropped in 2020 and also due to lower volumes. As for the trading and commercial business, again, here, we have reported substantial EBITDA growth of 4.8% and again, the CapEx was maintained as planned and were slightly higher than 2019. All the components of the commercial and trading businesses are growing. And the items that mainly drove the EBITDA growth are the following: despite the COVID pandemic impact that led to the sale on the market of energy in excess that had been purchased and not distributed in 2020, but despite this negative effect, as you can see, total energy sold is up 9.2%. The number of electricity customers is flat. I must say that, in fact, the free market customers have grew by 9.5%. And total gas sold in cubic meters grew as well as the customer -- the number of customers -- of gas customers. Coming to the key highlights of the commercial and trading business. We reported an increased free market margin, but a reduction of the enhanced protection market, which had a negative impact on the regulated business tariffs. Moving on to Page 19 (sic) [ 13 ]. Here, we have the environment business. That reports a drop of 3.3% in terms of EBITDA year-on-year. And I would like to dwell on this performance a bit longer because, in fact, the environment business performance was positive. If you consider that 2019 benefited from the CIP6 contribution that was withdrawn in August 2019 and contributed EUR 2.6 million in 2019. So the actions put in place in 2020 and the business strategy managed to almost completely offset the absence of CIP6 contribution. And if you consider that in 2020, the reduction in prices of the energy sold had a negative impact of EUR 4 million. Such negative effects were offset by favorable factors like the higher treated volumes and the disposal tariffs increase, contributing EUR 14 million. And then the M&As that were completed in 2020 that were already mentioned that contributed to the results in 2020 together with the acquisitions that were completed in 2019 and that only partially contributed to the 2020 results total amounting to EUR 7.9 million. And then you see the breakdown on the slide referring to the various acquisitions made. And then the final point as far as the environmental business is concerned, CapEx that are much lower in 2020 than in 2019. But in 2019, we made substantial investment to revamp some compost plans amounting to overall EUR 34 million. On Page 15, you see the evolution of CapEx. I'm sorry, I'm skipping a slide. So I go back to Slide 14 now. On Slide 14, you see the evolution of net profit and the snapshot of EBIT as we did with normalized EBITDA. We normalized net profit as well. And as you can see, net profit normalized was impacted on by the same items we already mentioned. CIP6 contribution, the water bonus, the antitrust fine plus the release of the GALA provisions that was made in 2019. So normalized EBITDA amounted to EUR 535 million. Following the del Fiora Acquedotto consolidation, we had an impact of EUR 15 million. So the organic growth amounted to EUR 49 million in 2020, which is tantamount to a growth of 22.2%. As for items concerning depreciation, impairments and provisions, let's say, the depreciations were mainly driven by the investment increase and the changes of the business scope with the consolidation of the del Fiora Acquedotto that contributed EUR 20.8 million. Then impairments compared with 2019 was higher by 28.7% in 2020 versus 2019, which is mainly a consequence of the release of provisions made in 2019 of the GALA provisions amounting to EUR 13.5 million. The tax rates in 2020 was 29.2%, in line with 2019, only slightly higher, but this is mainly due to the fact that there were some items like the antitrust fine that had an impact on the tax rate. Moving on to Page 15, you see the CapEx evolution. And as already pointed out, CapEx held well. I'd say CapEx managed to grow in 2020, which again testifies the resilience of the group. As for EBITDA, CapEx were accounted for by investment on the regulated assets by 84%. Here, you can see that water accounted to EUR 476 million, energy infrastructure, EUR 325 million, up EUR 37 million; commercial and trading, EUR 44 million, which is more or less flat vis-à-vis 2019 then a drop by EUR 28 million in the environment business, which as already pointed out, mainly refers to the revamping of several plants in 2019 referring to compost plants. So environment contributes EUR 24 million in terms of CapEx and then other businesses and the holding company account for EUR 8 million -- no, EUR 38 million, which means an increase of EUR 8 million. Moving on to the next slide. I would like to comment on the cash flow and working capital. 2020 cash flow was impacted by CapEx amounted to EUR 886 million, EUR 88 million finance income; change in provisions, EUR 112 million; Dividends, EUR 166 million; income tax paid, EUR 123 million; M&A and first-time consolidation, EUR 154 million; IFRS 16 is mainly an adjustment due to the business scope changes. So IFRS 16 had to be applied to the new acquisitions. As for working capital, working capital improved by EUR 22 million -- I'm sorry, has increased by EUR 22 million, which is mainly the result of regulatory items, EUR 63 million, EUR 49 million of which refer to the water business and the balance to the electric business. The COVID impact on collections, which we repeatedly mentioned during the year was EUR 10 million at the 31st of December. So this is the residual amount, which means that in the last part of the year we managed to recover substantially collections. The reduction is mainly -- of the working capital is mainly related to increased capital expenditure, especially in the second part of 2020, which will imply cash effects in 2021, but will contribute favorably to the working capital of 2020. And then we put in place some actions to improve our working capital by increasing factoring of receivables of several clients referring to the [indiscernible] plan. That is the main tool that was used to recover collections during the pandemic. And then a further increase in reverse factoring in the -- use of reverse factoring following the changes implemented on the group's platform, where we are now migrating as many suppliers as possible. Let us now move on to Slide 17, where we can see our debt. The net financial position amounts to EUR 3.528 billion versus that in 2019, which was EUR 3.062 billion. And we talked about this when we made comments in previous slides. The net debt-to-EBITDA is 3.05x. As our CEO said now, also are introducing the net debt/RAB ratio, which is stable versus our expectations, but also versus the data we presented through the business plan, which amounts to 0.74x. And the profile of the financial debt, as we said previously, does not have major maturities in 2021 and 2022. In 2023 and 2024, we have the first major maturities. Now let's move on to Page 18. And here, we are considering these details of the structure of the debt, 81% of which is accounted for by fixed rate debt. The average cost of 1.74% and the average term is 5.4 years. The debt falling due, as we saw before, is 97% is going to have a maturity after 2021. And what we can say at the moment is that even following the issue of the bond in January, the average cost has gone down to [ 1.41%. ] We should see that prospectively. But this is why I'm telling you. We had an issue -- a bond issue at the beginning of 2021, which was very successful, and so we can expect a reduction of the average cost. As to ratings, both Fitch and Moody's ratings are stable. Fitch ratings is BBB+ and Moody's rating Baa2.

Thank you very much, Fabio. This is the end of the presentation. We can now start the Q&A session.

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

I have 3 questions to ask. The first, about the 2021 guidance. In 2020, the company has progressively improved its guidance to the market and also has improved its productivity. Organic growth was around EUR 100 million. I wonder whether you can give us an idea of what this will be in 2021? Is this growth fair, aggressive? So can you tell us something about this for 2021? And then, is there, within this growth, a nonorganic growth? And then -- and the debt that you are -- the debt [indiscernible] that you give for '21 does it also include any possible M&As? Now in October last, you disclosed the strategic plan, where the minimum dividend was to be EUR 0.80 per share, which was confirmed today. Can you give us your guidance for 2021 or up until the end of your business plan in 2024? Now another question about the current scenario. We have a new government, perhaps with new ideas. Italy has to submit the next-generation EU fund proposals to the European Union commission. So I'd like to know your point of view about this new political scenario. And about the new EU funds and how this can impact your company and the growth of ACEA as well?

Well, thank you very much, Javier. Thank you for your questions. Let me try and answer your questions which are not very easy to answer. As to the guidance for 2021, this is a sound, solid guidance, which is in line with our budget and our expectations. Certainly, I am confident that the company is going to be capable to reach these results, if not, even better. But at the moment, 6% and 8% growth is a result, which is good considering that we closed at 2020 much better than what we forecast in October. So a growth by 6% and 8% is even better to the indication that we had in our plan for 2021. We hadn't disclosed the growth data for 2021, but please remember that we closed 2020 with a higher EBITDA than we expected. But based on this, we are going out to improve it. As to this growth and as to the possibility of such growth, incorporating some new M&As, I can tell you that our net financial position, the one that I gave you today includes EUR 100 million of M&As, which can generate between EUR 10 million and EUR 15 million of further EBITDA in the year. So this is the EBITDA that we gave you in the guidance. The nonrecurrent component related to the change of our perimeter is about EUR 10 million, EUR 15 million. But it depends on whether we will be able to close these M&As, these deals. As 2021 is concerned -- as far as 2020 is concerned, we are in line with what we included in our strategic plan. Every year, dividends are growing. Our guideline is that of distributing around 60% of net profit, so 60% payout. So this will be driven by the growth of the net profit that we are going to have at the end of 2021. We're not giving you a specific guidance of net profit and payout for 2021. So during the year, we shall decide whether we are going to give a guidance on the dividend. So when we have clear ideas, we'll give you a guidance on the dividend for the year. We tend to make promises that we can deliver. So the most difficult question to answer is that about the new political scenario. We continue to do our work and we believe that even in this scenario, we can play a very important role. What is fundamental for us is the new EU next-generation plan. So the component of that plan that can have a direct impact on our company. We are strongly motivated in providing our contribution in for instance, building new water structures. We know that within the -- this recovery plan there will be a component which will foster the doubling of the capacity of the Peschiera Aqueduct. However, our plants are always drawn up on a stand-alone basis, that is without considering possible contributions that we may receive. If such contributions have a positive impact on us, it will be an upside on our results, which we haven't factored in our forecasts at the moment.

Next question by Enrico Bartoli with Stifel.

A number of questions on my side too. I would like to start with the water business. Will you be able to provide us more light on the tariff increase in 2021? And what kind of evolution do you expect for the investment fund compared to 2020? Then the electricity business. You mentioned that you started replacing the counter with the 2G Smart counters -- oh, meters, sorry. So what was the contribution in 2020? And what do you expect for 2021 the following years? And then a third question about the waste business. You mentioned M&A is planned for 2021. As for the waste business, are we going to witness further M&As as was the case with 2020? And what kind of evolution do you expect for the waste EBITDA both in terms of organic growth and in terms of contribution of M&A?

Fabio Paris will be answering your first 2 questions, and I'll be answering the question about the waste business.

Well, in terms of a tariff increase, we are talking about the 5 -- I'm sorry, I remember 5.6% -- for ATO5, we're talking about 7% for 2021, yes, in 2021. As for the FoNI component that contributed to the 2020 result, the FoNI component, as SME component for ATO2 amounted to EUR 42.5 million whereas all the other companies do not imply any SME component, but only FoNI component. The 2G meters that contributed to the 2020 EBITDA. Well, the replacement of the old meters with the new smart meters had actually no economic impact. Please remember that replacement of the 1G meters with the new 2G meters is fully covered by tariffs. So whenever 1G -- the old 1G meters are, let's say, dismissed before the regulatory deadline they would nevertheless continue to generate the same revenue stream. In other words, the tariff impact will be felt following the completion -- or during the rollout of the plan. So we started in 2020 with 60,000 units in 2021 and 2022. We should be reaching 300,000 units per year and then in 2024 and '25, we'll see the number -- this number dropping while we completed the replacement of the total 1.3 million units. So of course, there would be a kind of a tail, very long tail that we would have to handle.

As for the waste business M&As, we are certainly scouting the market for opportunities and considering the authorization process. We are definitely planning to grow through M&As. I can't disclose anything. But certainly, in the guidance, we factored in the contribution of an M&As. As for the environment EBITDA growth, if you remember, in our business plan, we factored in a CAGR growth of 20%. And I can tell you that, in 2021, we are very much in line with this 20% cost. The ability to reach the targets will depend not only on our ability to complete the acquisitions because, as you know, you have to be two to tango. So we have to reach an agreement with the sellers. But nevertheless, there is another variable that we find it more difficult to control. That is to say the timing of such transactions. So the impact on the 2021 EBITDA will very much depend on the timing of such acquisitions. For the time being, we expect we'll be able to keep to our plans.

Unfortunately, I couldn't hear your answer about ATO5 and tariffs.

We expect ATO5 tariffs to grow by 5.6%. As for FoNI contribution, we expect to be in line with the past.

Next question by Stefano Gamberini, Equita SIM.

I also have a few questions to ask. Now the first is the following. Over and above M&As, what is the impact of Servizi Integrati of Terni in terms of EBITDA. And then also the companies that you consolidated in 2020, what kind of impacts will they have in 2021? Now tariff increase, are they going to be accounted straight through the P&L or are these due to some recoveries of previous years and therefore they will not be accounted fully on the P&L, but you will see them mainly on the top line. And then RAB for distribution and water -- the water business and then renewable sources of energy. Now you have 100 megawatts under construction. You are, however, growing presence in this field. You also said that you wanted to set up a fund. Now are there novelties here, and do you expect the new government that is going to accelerate the authorization timing. Will this have a positive impact for you?

Thank you, Stefano. I will start about the EBITDA of Servizi Integrati of Terni. So based on our experience when we start managing the operations of a company and we control the company, we tend to have a performance, which is better than our expectations. So I hope the result will be close to EUR 20 million. And it will be consolidated on a line-by-line basis. Let me then take the renewable sources of energy question. We have a pipeline on which we are working, as we said during the presentation. We have a pipeline of around 300 megawatts. Our plan envisages the implementation of part of this pipeline in 2021. At the moment, however, processes are slow because authorization processes are slow in this moment. So we hope that what the government is saying, there is cutting by 50% the authorization timing will help us to accelerate our [indiscernible]. Now this could also allow us to accelerate another project that we have in our plan on which we are working, which is the project of having a fund or financial partners join us to deconsolidate our stake, but maintaining an industrial control of our assets. Now as to our current plan, we drafted the budget, I'd say, on a continuity basis, considering also the new regulatory and government scenario. But thanks to the new government, we may have the possibility to accelerate our projects. Now as to the RAB, let me incidentally say that the RAB is, at the moment, still estimated because we do not have the same timing for the closure of the regulatory components. But to give you a reference at EUR 2.460 billion for water and EUR 2.328 billion for electricity distribution. Of course, the water business is including all of the companies that we have in our perimeter, ATO2, ATO5, Gori, Acquedotto del Fiora, these are the most important ones. But as to the end of 2021, we also have had the contribution of Terni. Now as to the tariff growths and the possible economic effects of 2021, well, yes, we expect tariffs to grow, although we are still trying to understand how much. Then ATO2 needs to take into consideration the fact that in 2021, is -- was not possible to -- it was not possible for us to include the settlements because of the tariffs was 2.7%. Were you talking about 2021?

No, I was talking about 2020.

The next question by Emanuele Oggioni with Banca Akros.

I have a couple of questions to ask, if I may. And then I have a follow-up question. I lost the tariff increase of ATO2. And then also the contribution of SII Terni, Servizi Integrati Terni, what was its EBITDA? And so that was the follow-up question. As to my questions, one, about the environment business. So what are the moving parts of 2021, considering that in 2020 you made some acquisitions. And so what is the expected growth in 2021, considering also the possibility to grow the prices of energy sold. And then as to commercial and trading, what do you expect in terms of organic growth, considering also the lockdowns in Italy, which are imposed and then lifted quite frequently? And then the very last question. I'd like to have some greater clarity about what you think will happen in Tuscany related to the new utility, coal, which is being to set up utility hub, you may call it, with the participation of a number of companies considering that you have some companies in that region as well. So what is your position about it?

I answer the questions, and then Fabio will go back to the other questions. First of all, the environment business. So we expect the drop in revenues reported will be recovered. And apparently, we are going back to energy prices in line with 2019. So we expect we'll be able to recover the EUR 4 million that we reported as a revenue drop in 2020 in terms of energy sold, of course. And then we will have the impact of acquisitions, particularly Ferrocart and Cavallari completed in 2020. So we will have the full impact in 2021. And then you have to add what I already mentioned. So the new acquisitions that when completed will contribute pro rata, let's say, in 2021 and then the full impact will be felt in 2022. Then, if you consider our plants efficiency recovery that is ongoing, altogether will lead us to reach our target, that is an EBITDA growth of roughly 20%. As for the commercial trading business, clearly, the year ahead is going to be a complex year, but we are not witnessing any substantial impact, neither economic nor commercial due to the pandemic and no impact is being felt by the collections either. Should the situation remain unchanged or improve, this would lead us going back to normal in terms of commercial activity. 2021 is going to be the first year coming from the -- sorry, of -- where we'll be reporting revenues coming from the so-called smart services, and we'll be reporting the first revenues coming from electric mobility. We already installed columns in Terni and we are doing the same in Rome. So the charger stations, in other words, are being installed both in Terni and in Rome. And this is a business that is currently contributing marginally, but is due to grow. So I'm absolutely confident that the commercial trading business will improve in 2021 and will contribute to the group's growth. As for your question on Tuscany, currently -- so far, we haven't been involved in the project. We certainly have our stake in Acquedotto del Fiora and in Lucca. As for our stake in Acquedotto del Fiora, this is a consolidated stake, and we do not expect any unexpected evolution. So we do not expect Acquedotto del Fiora will be involved in such projects. As for Pisa and Florence, and our stakes there, these are minority stakes that we do not consolidate. Such stakes are accounted for in our equity. So far, we haven't been involved in the multi-utility hub project. We certainly are ready to do our part should the conditions be there that may justify our contribution as industrial partners.

As for ATO2 tariffs, we mentioned a growth of 5.6%. As for SII Terni contribution in 2021, we expect a contribution of EUR 15 million with upside up to EUR 20 million.

[Operator Instructions]

If there are no further questions, we would like to thank you all for attending our conference call. An investor relation manager is available for further questions. Thank you very much, and goodbye.

Thank you, and goodbye.

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