ACEA S.p.A. ($ACE)

Good afternoon. This is the Chorus Call operator. Welcome to the presentation of the results of ACEA as of March 31, 2026. [Operator Instructions] Let me now give the floor to Mr. Dario Michi, Head of Investor Relations of ACEA, please.

Thank you. Good afternoon, and welcome to the presentation of the results of the first quarter of 2026 of the ACEA Group. Pier Francesco Ragni, Co-General Manager and Valentina Bracaglia, CFO and Planning and Control Manager, will give you a detailed illustration of our results. Let me now give the word to Mr. Pier Francesco Ragni, the Co-General Manager.

Good afternoon, everyone. As usual, let me give you some information on the regulatory environment. In Water, the main tariff approvals under MTI-4 have been completed by local authorities, and ARERA is about to finish the whole process to approve all group operations by ACEA. As far as Grids are concerned, we expect the professional -- provisional reference tariff for 2026 for Grids to be published in May this month. The final 2024 reference tariff was published in March this year. As for commodities, in the first quarter of 2026, the energy prices and gas prices are decreasing versus the same quarter of 2025 by 6% and 14%, respectively. The uptick is happening with prices that are increasing by an average of 1.7% in the quarter. As to interest rates in the first quarter of 2026, the 6-month Euribor rate is slightly decreasing whilst the 8-year MidSwap is up to 2.8%. As to the Group's results for Q1 2026, we confirm robust performance, operating performance. Organic pro-forma EBITDA is increasing by 4%. And this growth is virtually all driven by regulated businesses that now account for about 95% of the overall group EBITDA. We also point out that organic EBITDA in the first quarter of 2025 was adjusted to include the effect of the new perimeter, meaning the sale of High Voltage to Terna, photovoltaic and [indiscernible], which we will discuss in detail later on. Organic net income has a double-digit growth, which is about plus 14%, and it also shows the improvement of operating performance. As to CapEx, CapEx net of grants and public contributions increased by about 18%. These investments are mainly going to support the regulated activities to support infrastructure sustainable long-term development. Operating free cash flow is about minus EUR 91 million. This allows us to keep a robust financial structure and net debt-to-EBITDA pro-forma ratio, which is stable at 3.3x, which is in line with the end of 2025. As I was saying, the first quarter results are perfectly in line with the guidance we provided when we first published our data in 2025. As I already said, pro forma organic EBITDA is increasing 4% year-over-year up to EUR 344 million. This result is in line with the year-long objectives and is mainly driven by regulated businesses. CapEx net of grants is EUR 286 million, up 18% versus last year. Considering the CapEx with grants, the overall CapEx is up to EUR 302 million. Organic net income, as I said earlier, is up 14% versus the first quarter of 2025. And once again, it benefits from the improvement of operating performance. Net debt is virtually stable and has shifted from about EUR 5 billion as of December 31, 2025 to EUR 5.1 billion as of March 31, 2026. On a pro forma basis, considering that [indiscernible] we will find details in note, the net financial position is about [indiscernible] as of March 31, 2026, about EUR 4.6 billion [indiscernible] 2025. And the debt-to-EBITDA ratio is unchanged and it stands at 3.3x. So in view of the results achieved in the first quarter, we confirm the 2026 guidance that we have already disclosed in March. Let me now give the floor to our CFO, who will give you more details about the results that I just outlined. Valentina, over to you.

Let's now look in detail the EBITDA performance. [indiscernible] in the first quarter of 2026 was wholly driven by the organic development and growth of regulated businesses. Net of nonrecurring events and variations in the scope, the operating dynamics is robust and fully in line with our expectations, which confirms quality and visibility of growth in the group. In detail, in this quarter, recurring EBITDA is EUR 344 million, which shows an organic growth of EUR 14 million compared to the first quarter of the year before. This increase is due to the [indiscernible] in Water and -- but also to the operating efficiencies we [indiscernible] in this quarter. On the right-hand side of the slide, you see the main one-off events and changes in scope, which in the first quarter of 2025 amounted to a total of EUR 10 million. This effect may be due to the elimination of the contribution of High Voltage and photovoltaic assets and has been first [indiscernible]. As to the first quarter of 2026, the one-off elements and changes in scope may be due in particular to the revamping some installations in the environment business. Let's move on to Slide 7, which shows the performance of net profit. Net income is up EUR 10 million versus the recurring results in the first quarter of 2025 with an organic growth of 14%. This increase also shows the improvement of the operating performance that has already been reported under EBITDA. [indiscernible] in this slide, too, on the right-hand side of the picture shows one of the components of changes in scope as described before. Besides this, we should add the contribution of income from discontinued operations and with reference to the first quarter of the 2026 [indiscernible] surcharge of the [indiscernible] as per the [indiscernible]. Let's move on to CapEx. In the first quarter, [indiscernible] regulated, which accounts for 89% of overall CapEx of [indiscernible] EUR 302 million, including EUR 60 million of public fund. This slide also shows the main initiatives which were started in the quarter for each individual division and the initiatives [indiscernible] In the following slide, we see cash flow. Cash flow confirms the robustness of the group's financial. Operating cash flow is negative by EUR 91 million, mainly due to the high level of CapEx and the dynamics of working capital, which reflects the current seasonal performance in the first quarter. With reference to the financial structure on Slide 10, we can see that nearly 80% of our debt is at a fixed rate and the average -- overall average cost is 2.15% whereas the average duration is about 4 years. This allows to guarantee a significant protection versus the volatility of interest rates. The robustness of this [indiscernible] also confirmed by the fact that we kept our ratings and both Fitch and Moody's gave a stable outlook on our company. To support the investment plan, we also point out that a new EIB financing has been underwritten for an overall amount of EUR 190 million to finance the [indiscernible] CapEx. Following slide, Water business [indiscernible] first quarter of 2026, a really robust growth with organic EBITDA up 6% year-over-year with results mainly driven by the tariff growth. Also, we continue our CapEx investment plan and CapEx net of grants is up 20% to support the development of infrastructure [indiscernible]. For Grids and Public Lighting, too, we see in the first quarter a very positive growth with an increase of organic EBITDA by 8%. And this increase is supported by the investment plan and by the operating efficiencies we have achieved. Net CapEx growth by 7%. It's now EUR 90 million, and these are designed to support and to enhance network infrastructure. The environment business in the first quarter of 2026, there is a slight decrease of EBITDA by about EUR 3 million, but this is just a temporary phenomenon, which is mainly due to the increase of WT volumes because of the planned shutdown of some installation. We continue our CapEx investments in the business. CapEx is actually up 35% to support our plans to modernize revamp and enhance installation with a view of strengthening their operational efficiency and capacity over the medium to long term. Slide 14 shows generation. Organic EBITDA is particularly significant as much as 21%. And this performance is driven from the strong recovery of hydro electricity generation, which is up 27% versus the first quarter of 2025, which is more than offsetting picture of energy prices, which is less favorable with an energy price dropping by 6%. [indiscernible] energy generated grew by 11% from 210 to 233 gigawatt hours. Also, we can see our CapEx plan in this business is up EUR 5 million versus the first quarter of 2025 to support the development and efficiency of our [indiscernible]. That's all on the presentation. We now open the Q&A session. Thank you.

[Operator Instructions] The first question is from Javier Suarez of Mediobanca.

My first question is on the update of your business plan is when do you think you will be in a position to update your business plan? And can you provide us with some general ideas on what you think should be the main basis for the business plan update and what kind of time frame you have in mind for this update? I have a second question on the guidance for 2026. And I would like to try and understand whether you can help us understand what guidance you have in mind for the net income of 2026. Do you have any update about that? That would be extremely useful. Also, I have a question on a possible update on the process to build the waste management plant in the city of Rome. I'm really interested to understand whether you have some timing in mind for that. And finally, can you give us some update on your expectations on the future activities from 2027 onwards?

Thank you. Now as to our business plan, we, as a management team, are always looking, of course, at the economic and financial conditions. So we monitor them carefully to understand and monitor the business performance. But we're waiting for the new Board to become effective and to fully take office before we complete those plans together. So the average duration would be the same direction as the previous business plan, but the final details will have to be defined as soon as the new Board takes office. As to our guidance, in general terms, we can confirm the guidance we have already disclosed for the 12 months. As to the perspective for the individual businesses for the rest of the year, we do expect that the improvement of results we have given guidance about will be driven by Water for Grids, we expect growth to be pretty dynamic. Much will depend on regulation and the -- whatever happens with the new regulation. The negative trend we had in the environment business at the beginning of the year is mainly due to some planned [indiscernible] some plants and so we expect that to disappear during the rest of the year. But overall, we should stay within the guidance we have already given for the rest of the year. Now we know that the Aquanexa deal has been closed. And so starting from April, the Aquanexa results will be consolidated in our accounts. And the EBITDA of that company at the beginning of the year was about EUR 30 million. As to net income, we are not giving any guidance specific, but apart from the capital gain that we are posting in April after disposing of retail, we don't expect anything disruptive to happen in this. Now as to the individual grid, as you know, right now, we are actually experiencing energy prices that are on the decrease. But of course, there will be a big impact from the conflict in the Middle East and what's going to happen in the rest of the year. It is important to realize that after losing AA rate in some standard, we expect that we will remove some countries from the spread cancellation panel. And so if that happens, if Iran is canceled in particular from the overall average calculation system that will have an impact on pretty much everything we do. As to the waste disposal plant, we are waiting for the finalization of the current dealings, and we expect something to be communicated to us in the next few weeks.

The next question will be asked by Francesco Sala of Banca Akros.

I have 3 questions. First is, can you give us some idea of the working capital performance on a full year basis apart from the seasonal impacts we had in Q1? The second question is about waste and in particular, about waste treatment. So what should we expect for the rest of the year considering that some installations are not working in Q1, but they should open again for the rest of the year? And third question is ACEA going to be involved in tenders on some regions, [indiscernible] in particular, that are actually starting to open up for the next.

Thank you. As to the working capital dynamics that we have included in our guidance and we expect for the end of the year, it's pretty neutral. So what we see, the portion we see at the beginning of the year was mainly due to the timing of [indiscernible], which was mainly concentrated in the last quarter of 2025 and to the payment of some fees, which were connected to the extra profits of 2022 and which were in the first quarter of this year. But we expect dynamics to be pretty neutral. And as to the waste, as I said earlier, we expect a partial reabsorption of some of the shutdowns. So quite a few shutdowns that happened in the first quarter. Some will continue during the second quarter, too. But these are all planned maintenance shutdowns, and we are consuming them in the next few months. However, partially shutdowns will be completed between today and the end of the year. As to the hydroelectrical tenders, we have been following what the individual regions [indiscernible] carefully ourselves. We are in the process of evaluating individual tenders depending on their future, depending on the geographical location. And so we will evaluate that. We're actually already looking at that, too.

Next question is from Roberto Letizia of Equita.

I have a question on guidance again. Could you please give us an idea of the main elements right now that may take you to the high end of the guidance or even beyond that because of favorable market conditions, favorable pricing conditions or whatever. So what are the elements that might actually bring us over 5% over the current guidance? Then maybe you have some more information than we have on the concessions of electric distribution. And can you give us some update on Peschiera? This was expected for April, if I'm not mistaken, but there may be some new features there. And also, can you give us an update on M&A? This is still a really important topic. And you said that full integration may happen anytime soon. So do you think 2026 may still be a pretty active year in terms of possible M&A?

Thank you. As to the guidance, well, there are 2 key elements here. So the first would be water. And with the tariff approvals and the 2-year update of tariffs that are going to happen in the second half of the year, there will be some tariff components such as recovery in inflation that needs to be calculated. So at that time in the year, this will have an impact on our results and eventually [indiscernible] guidance. Another key element was the acquisition of Aquanexa. Aquanexa was included -- is actually included in the guidance. This happened in April. So it has no impact on Q1, but it's going to support that growth from now on. For the rest, we expect generation to keep sustaining growth, but it's been quite sharp to begin with in Q1. As to the extension of the concessions on electrical distribution, there's nothing relevant, nothing particularly new there, but we are ready with our CapEx plan. Our CapEx plan is already in line with the ARERA target. We are actually talking to the ministries and all the other stakeholders, but we have no specific preference on any given timing or any kind of tariff update. So right now, we're following and monitoring the process carefully, but there's nothing particularly new. As to your questions on M&A, M&As are by definition, hard to plan. And so after the asset rotation season, which was completed with the sale of ACEA e Eni Plenitude and buying from Plenitude their platform for services in the Water business. Well, after all that, right now, we are actually looking at possible new opportunities in the market. However, our main focus is always our fundamental core businesses, and we want to grow organically there. So we have all the CapEx plan we need to improve network efficiency and resilience. Then should any opportunities appear on the market that might help us accelerate our growth process, as usual, we will take them into account. As we speak, this is what we're doing now. It's premature to comment on any other things now. As to Peschiera, we are at the final stages of the construction procedures. So we are going to start the economic offer and the blueprint designs, and we're going to start construction in the second half of 2027.

The next question will be asked by Emanuele Oggioni, Kepler Cheuvreux.

I have a question on tenders. Can you give us an update because ACEA was awarded in the last years, virtually all the tenders where it was involved also out of its historic geographical presence and locations. So what kind of major interest in tenders are going on now? Or is there any tender that has already been decided or nearly so? We all know there are several steps in the process. So this is the first question. Then I have another question, which is connected to water regulation again, but it's a more general question. So considering that the new ARERA Board has taken office and the Chairperson is actually very experienced in managing water and emergencies connected to water, we may suggest and we may consider they will be particularly sensitive to this. Actually, the water network situation is pretty much of a disaster, whereas it's really, really efficient for electricity and gas. So we all know there are major problems in water losses in Italy, especially in the central and southern part of the country. So are you talking to the new Board to make sure there may be some structural long-term solutions that may actually push a new opening of investing capital or entering joint ventures or maybe partnering with non-listed companies, private companies so that industrial players like you may actually start working in those concessions that are really abandoned or lacking investments and that have a terrible situation. There are some places where there's as much as 45% of the losses. So can you have a role in improving that? Sorry, I cannot hear you anymore.

Yes, sorry. We did have a technical problem with the microphone. Can you hear me now? Okay. Good. Now as far as tenders are concerned, in the next few months, the [indiscernible] of tender is going to be decided. We are the only player in [indiscernible]. In particular, we are working with the Water Board of Campania, the Campania region. They have completed their due diligence and they approved to continue the tender. Another tender that's going on is [indiscernible]. In particular, we are in the competitive dialogue phase right now. And so before the summer, the actual tender is going to be launched in [indiscernible]. Further tenders we may expect during the year is the Messina tender in particular. We know this will be one of the opportunities, but more opportunities we'll actually get during '27, '28 and many concessions are going to expire in the next 2 years, too. As to ARERA, right now, we have a very constructive dialogue with ARERA and we also have full connections with the new Board. So we all agree on the need to invest to improve the quality of the grid. And we see the possibility to discuss some methodological issues in order to fine-tune them and improve them. We expect that some mechanisms and the RAB evaluation parameters and some will be assessed on a priority basis. Actually, in the last 2 years, with some geographies, we already had some very interesting discussions with ARERA, and this put us in the right position to improve the grid as much as possible. So the next biennial update [indiscernible] Also, we discussed wider issues with ARERA governance and extending to other geographies and that is part of the future work we're going to have with them.

Well, may I have a follow-up question on water. Can you please give us an update on the litigation with Florence?

Yes. We know that on March 10, 2026, the Court of Florence said we need to sell our share in [indiscernible] to another company. And so far, the Court of [indiscernible] has frozen the actual implementation of the first agreed decision and a temporary decision. So the hearing to discuss this has been postponed to May 15. So all the economic impact of this transaction have already been accounted for in the 2025 financial statements and the guidance for 2026 does not include the [indiscernible] results in our 2026 results, we have not included the impact of [indiscernible] and started in 2027, it will be excluded from the scope. So that's where we stand now. But it's not included in Q1 2026, and there's no grant -- Exactly. No, it's not included. There's no contribution to the economic performance, [indiscernible] or income. There was no contribution to the guidance. And when I say no contribution to the guidance, I was also referring to the fact that in the net financial position, we have not accounted for the possible sale of [indiscernible]. So there was no contribution to either EBITDA or net income. And in 2026, no contribution is posted for EBITDA or net income. And this is something we have excluded from our accounts or not even the disposal of the company. But if you dispose of the company, it's not necessarily going to happen in 2026 if it happens at all, right? So if we will sell our stake, we will actually cash in the proceeds because that will happen at the same time. On the other hand, if [indiscernible] happens, we'll only cash in the sales proceeds of EUR 114 million if and when we sell our stake. So if we do sell our stake, we will be cashing that money in, but we're still waiting for the final decision from the court.

Next question from Davide Candela of Intesa Sanpaolo.

I only have one question on the disposal of ACEA Energia. The closing happens. So do you think there may be some capital gain you can derive from that? And as you did in the past with Terna, will that actually increase dividend, which is what happened in 2025?

Well, the sale of ACEA Energia includes a capital gain, which is certainly higher than that we have from High Voltage. It's about EUR 200 million on separate accounts and consolidated accounts, it will be even higher. As to dividends, the dividend policy we have today is a 4% increase over the ordinary dividend of 2025 without the extraordinary component. But of course, as we update the plan and approve the results of 2026, we will certainly review everything and see what we will decide at the time.

Next question in English from [ Ennis Kaya ] of ODDO.

Almost all of my questions have been already answered. Maybe a follow-up question on the Environment segment, just to understand, you say that contribution in Q2, you should have also partial shutdowns in Q2 and coming back by the end of the year. Is it what you said?

Thank you, [ Ennis ]. Yes, we confirm that the shutdowns will also have impact in the second quarter, but not the second half of the year. So as we continue throughout the year, we will actually conclude the planned shutdowns and we'll close the impact on P&L too. Thank you.

And maybe one question also on discontinued operation. The contribution in Q1, EUR 32 million. It came in well above expectation. Could you elaborate on the main drivers behind the stronger-than-expected performance? And also, should we expect any further contribution in Q2 for the 10 days prior to the closing of the transaction?

Yes. As to discontinued operations, the contribution to net income in Q1 was EUR 32 million, but that EUR 32 million also includes a purely accounting effect, which is due to the stoppage of amortization because discontinued operations are classified as finalized for sale. And so in our results, the amortization of these assets are neutralized. So we have net profit from the assets that's been disposed of, which is an [indiscernible], which is about EUR 16 million plus an accounting effect, which is due to amortization cost, which is another EUR 16 million. So the overall impact is EUR 32 million. If we compare that result to the results of the first quarter of 2025, that EUR 16 million of ACEA Energia compared to a result of EUR 19 million last year. And so last year, the stock of amortization didn't happen. So actually, the business is showing a slight decrease of EUR 3 million of net profit -- of net income year-over-year. In Q2, we expect no impact because the asset has been disposed of in April. So we'll have the impact of the capital gain, but we won't have any impact on the economic performance.

[Operator Instructions] There are no further questions in the line.

Thank you very much for your attendance. As usual, the Investor Relations team will be happy to answer any possible future questions you may have. Thank you.

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