Ascopiave S.p.A. (ASC) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Chorus Call operator. Welcome to the presentation of the Strategic Plan of the -- Industrial Plan 2021, 2025 of Ascopiave. [Operator Instructions] Now I will give the word to the Chairman and CEO of Ascopiave, Dr. Nicola Cecconato.

Good afternoon. Welcome I will start immediately by illustrating the strategic plan 2021, 2025. The strategic plan approved today by the Board of Directors traces the development path of the group in the medium term, outlining the objectives pursuit and the actions planned for 2025. Our group listed on the STAR segment of the Italian Stock Exchange is a solid, reliable, and transparent counterpart for its stakeholders. Today is mainly active in the regulated sector of gas distribution also holding equity investments in companies, active in the sales of gas and electricity, in Energy Services and in the integrated water service. In recent months, it has completed 2 growth operations by external lines according to the management of a portfolio of plants for the production of electricity from renewable sources with a nominal installed power of over 62 megawatts. The plan foreshadows a development path for the group that will make it possible to increase corporate profitability, exploiting the opportunities for growth, and improvement offered by the dynamics of the sectors of interest, maintaining a balanced financial structure and a stable and profitable distribution of dividends. Growth will take place within a framework of sustainability combining with the interest of our main stakeholders and leveraging the current positioning of the group and the enhancement of its resources and skills. The corporate strategy is based on 4 fundamental pillars: growth in the core business of gas distribution; diversification into synergistic sectors; economic and operational efficiency; innovation. The strategic guidelines that we intend to follow are closely connected and mutually reinforce each other by supporting the overall business development from a sustainability perspective, both from an economic, financial, environmental, and social point of view. Sustainability Goals, the plan provides for an integration between economic, financial objectives, and explicit social and environmental objectives to which the group will devote particular attention. Ascopiave has identified, in particular, 7 sustainable development goals as basic elements of its development path. Before describing in more detail the content of the strategy and its impacts on the prospective economic and financial data, I would like to state some consideration on the assets currently held by the group. Ascopiave holds a portfolio of assets with stable profitability and a low risk profile. As of 2021, the net invested capital is approximately EUR 1.2 billion, of which approximately 57% refers to activities controlled and managed directly by the group, and therefore, consolidated on a line-by-line basis. The remainder is made up of equity investments. The most important and strategic and value terms is that held in EstEnergy, the leading operator in the sector of gas and electricity sales in the Triveneto area. Ascopiave has been one of the main players of the consolidation of the gas distribution sector and has reached dimensions and a positioning capable of favoring a further path of growth in this business. Thanks also to an intense merger and acquisition activity performed over the years. Today, the group with over 776,000 users served and 12,900 kilometers of managed network is the fifth operator in the sector at national level, with a market share of 29%, the first in the Veneto region, as well as leader in the Northeast. The group also boasts significant presence in some areas of Lombardy. In 2021, Ascopiave set up a consortium together with ACEA and Iren to participate in a tender for the purchase of some gas distribution concessions put up for sale by the A2A Group. The activities covered by the operation include approximately 157,000 users distributed in 8 regions of Italy and over 2,800 kilometers of meters of network. In December 2021, the consortium signed the binding agreement for the acquisition of the assets. Ascopiave's parameter of interest consists of 39 municipal administrations, located mainly in Veneto and Lombardy regions for a total of 114,000 users served. The closing of the operation is expected in the first half of 2022 and will allow Ascopiave to increase its user base by 15%. Distribution is a regulated business with a low level of risk and mostly stable and predictable economic results. In the face of significant increase in EBITDA driven by the growth in size, the economic efficiencies achieved, the EBITDA index records, substantial stability over time. The group, thanks to its efficient management policies in 2021, exhibits a return on capital of 8.3% higher than the benchmark defined by the tariff regulation. Another important asset of the group is the minority stake held in EstEnergy. The company controlled by the Hera group is active in the sale of gas and electricity with the main territorial focus on the Triveneto with over 1 million supply contracts managed. It represents an important regional player. The current configuration of EstEnergy is a result of the complex extraordinary transaction completed with Ascopiave with Hera in December 2019. Through this operation, Ascopiave has implemented a strategic repositioning of the group, enhancing its sales activities and gaining a position of regional leadership in gas distribution. Through the purchase from Hera of the management of various plants in Veneto and Friuli Venezia Giulia. The transaction also allowed the group to reduce its exposure to risk on commercial activities through the possibility of exercising the put option right on its shareholding. Ascopiave, in fact, has sales options on the current shareholdings in EstEnergy and Hera Comm with regard to EstEnergy, the option has very flexible operating time conditions with a maximum expiry at the end of 2026. The exercise price is characterized by a flow and the possibility of creating further upsides linked to depreciation of the initially invested value, which is equal to EUR 395 million. In 2020, Ascopiave subscribed a capital increase in EstEnergy for EUR 32.5 million to service the tax relief of the higher value of the equity investments that acquired compared to the net book value. The benefits for Ascopiave will be presented by higher dividends in years 2023, 2032. In case of exercise of the put option, then the unrealized benefits will be recognized as a supplement to the price. Finally, the group holds a put option on its stake in Hera Comm exercisable between December 2021 and December 2026 and with an exercise price equal to the initial investment -- equal to EUR 54 million, increased by 5% per year and decreased by the value of the dividends distributed. Ascopiave with this decision to exercise options will take into account the [ realizable ] price and the ability to reinvest the proceeds from sales. In this regard, the new plan provides for a partial exercise of the puts on shareholdings in order to finance the important investment plan and maintain a sustainable financial structure. In 2020, Ascopiave completed the acquisition of Cart Acqua, the partner and technological partner of Cogeide. The company active in the management of the integrated water service in favor of over 100,000 users in 15 municipalities in the province of Bergamo. The acquisition was a first sign of the group's interest in managing the water service which has a very significant synergistic potential with that of managing the gas distribution network given the group's current presence in the same area. In 2021, some synergistic activities were launched with [indiscernible] sharing the technological platform for managing the flow of data through smart meters and integrating the IT system for user management. Recently, Ascopiave has concluded 2 acquisitions, operations of electricity production plants from renewable services, making its entry into the second line with the objectives indicated in the strategic plan presented last year. In particular, in December 2021, 6 plants for the production of hydroelectric energy located in Piedmont and Lombardy and with the rated power of 40.6 megawatts [ breakout ] from the EVA Group. The plants operate under an incentive scheme with an average maturity beyond 2033. The transaction was completed through the purchase of 100% of the share capital of a vehicle company of the EVA Group, which would take the name of Asco Renewables. In January, an approximately 80% stake was acquired in Eusebio Energia. The company that manages a portfolio of hydroelectric and wind power plants with a nominal power 57.9 megawatts. The hydroelectric plants are located in the Veneto and Lombardy regions, while the wind plant, which has a nominal power of 14 megawatts is located in the Campania region. The investment opportunities envisaged in the plan can be seized, thanks to the possibility of further exploiting the financial leverage while ensuring a stable and satisfactory distribution of dividends to shareholders. The level of debt equal to EUR 349 million at the end of 2021 can be considered low compared to the current risk profile of the assets held, and this allows the group to benefit from favorable interest rates. Medium, long-term debt amounts to EUR 252 million and has an average life of 2.8 years. In October 2021, Ascopiave signed a shelf program. $200 million private placement program with Pricoa Capital Group Limited, securing a new funding channel for the investment plan. As part of the shelf, Ascopiave has already issued an unsecured ordinary bonds with a maturity of 10 years for EUR 25 million, and consider refinancing of the bank debt. The bonds issued aren't rated and would not be listed on regulated markets. The proceeds will be used by Ascopiave for various corporate purposes, including the refinancing of bank debt, leaving the company sufficient margin for further capital expenditure or merger/acquisition opportunities. In conclusion, I would like to highlight some initiatives performed as some results achieved in terms of environmental, social, and governance sustainability, on which the group has been committed for some time. In 2020, the group signed an ESG-linked loan with Intesa Sanpaolo, the rate of which is linked to the achievement of specific targets on certain ESG indicators. While in 2021, it obtained a green loan from Mediobanca, aimed at hedging investments in renewable energy. In 2021, Ascopiave also established the Sustainability Committee within the administrative body with the task of supporting the company in decisions regarding environmental sustainability, energy transition, and strategies for combating climate change. In the environmental field, we have built some plants for the production of energy from renewable sources and we manage some cogeneration plants with adjoining district heating networks. We have also taken initiatives to reduce plastic consumption at our workplaces. As an equity operating in the distribution of gas, we also called to contribute to the achievement of energy efficiency obligations to the mechanism of the so-called white certificates. As already mentioned, the group entered the renewable energy sector contributing to the Environmental sustainability objectives through the direct management of plants with beneficial impact in terms of containing greenhouse gas emissions. In the social field, we have adopted various initiatives aimed at promoting the professional training of staff and supporting an inclusive approach attentive to gender equality in young people. In addition, the initiatives to promote work-life balance and to support motherhood also significant. With this plan, the group confirms its commitment and determination in pursuing social, environmental improvement objectives. The environmental objectives, in particular, will be very important also in light of the expected evolution of the energy sector towards more sustainable structures. To address the challenges of climate change and promote sustainable growth, the EU has created a European Green Deal, which aims to achieve carbon neutrality by 2050, and sets challenging interim goals to be achieved already by 2030. To this end, the EU has decided to allocate at least EUR 1,000 billion to support sustainable investments for the next decade, and to create numerous tools to facilitate the energy transition. The pandemic situation has also called EU to intervene in support of the economic recovery of the countries of the union with the creation of Recovery and Resilience Facility, which has the energy transition among its main pillars. In this context, the Italian government has allocated approximately EUR 235 billion in favor of PNRR, of which over 29% in the context of the energy transition, with initiatives related, for example, to green gas, energy efficiency, circular economy and renewable sources. In the context of the energy transition, Gas represents a key source for achieving sustainability goals, including through a potential integration with renewable energy sources, while on the one hand, a significant reduction in natural gas consumption, and an increase in electrification of consumption is expected. On the other hand, the main scenario, envisage an ever increasing penetration of the so-called Green gases in Italian consumption, also thanks to the support provided by PNRR. In this perspective, that appreciation of the current infrastructure and in green perspective enabling the transport and storage of green gases with existing infrastructures and an ever greater integration with the renewable energy system. For example, to the storage non-programmable renewable energies and power to gas, to power processes, represent 2 key drivers for the growth of the sector. And the necessary response to the risk of a reduction in gas consumption and a reduction in the use of existing infrastructure. A significant contribution from green gases is expected in the future demand for gas in Italy, also thanks to the role they can play in decarbonization in the circular economy. Biomethane and hydrogen, in particular, will represent the main alternatives to natural gas, and will gain market share exceeding 15% of gas demand by 2040. In addition to the contribution they can make to decarbonization, green gases can enable significant benefits such as greater energy independence, a wide availability of production sources, the possibility of storage and transport through existing transport networks, the multiplicity of end users, transport and the application with a huge integration with the electricity network. A future gas infrastructure network must, therefore, be adequate to allow the injection and withdrawal of new types of green gas, such as biomethane, hydrogen and synthetic gas, which in the near future. Also thanks to the aforementioned integration with the electricity system will play the same role today played by natural gas with the same users and end users. In this regard, technological and infrastructure adaptations to the current network will, therefore, be necessary to facilitate the penetration of new green gases and support the decarbonization of the energy system. The distribution of natural gas in Italy is substantially a mature sector. The service is widespread and a significant portion of the managed infrastructure needs to be renewed, also in order to be able to respond to the challenges arising from the evolution of the energy system. The rules for awarding concessions by minimum territorial area and the significant economies of scale that characterize the management will favor the trend towards a further concentration of the offer with a significant reduction in the number of operators. In the face of this scenario, thanks to stability and transparency of the legislative and regulatory framework, the distribution business will continue to be characterized by reduced operational risk. It is assumed that the [ tariff regulates ] of the authority despite some elements of discontinuity that could be introduced in the near future. We'll continue to guarantee stability to the economic results and cash flows of operators with, however, greater attention to cost management, which, at the same time, will generate opportunities for efficient innovative companies to improve their profitability. In addition to the elements of stability and limited operational risk connected to the regulation of cash distribution, the authority also supports the need to experiment and adopt innovative solutions that promote elements such as optimization in the management of networks, digitalization, convergence between the gas sector and electricity, energy efficiency and decarbonization. Now we're going to see the focus of the strategic pillars, 2021, 2025. The positioning and skills currently possessed by the group in the distribution of natural gas constitute a solid basis for supporting the growth of the perimeter of the activities managed. The sector consolidation process represents a growth opportunity, their scope, we will be able to seize, thanks to the possession of solid technical and industrial skills, it's economic managerial efficiency, and the availability of adequate financial resources. The availability of financial resources is, in particular, essential to meet the huge needs due to the settlement of reimbursements to outgoing managers in the context of tenders for their [ aware ] of the service and the investment plans offered for the development and renewal of infrastructures. The growth pursuit will be achieved in various ways through the award of a significant number of tenders of minimum territorial scope, the acquisition of companies already operating in the sector, the establishment of partnerships for joint participation in sector tenders, better service of the growth strategy in the growth business. During the period of the plan, Ascopiave intends to commit substantial resources, providing for investments of EUR 320 million. EUR [ 155 million ] are linked to the assumed awarding of tenders by ATEM and derived from the payment of the residual value of the plants to the various operators and the subsequent development and maintenance of the networks. It is estimated that these investments could generate an incremental EBITDA of around EUR 15 million -- EUR 155 million [ instead ] due to the M&A initiatives, and are partly intended for the payment to the assigners of the enterprise value of the target companies, and partly for subsequent development and maintenance of the new network acquired. It is estimated that these investments could generate an incremental EBITDA of around EUR 14 million. As regards the investments linked to the expansion of the perimeter, it should be noted that a good EUR 73 million related to the enterprise value of the acquisition of the assets of A2A, which will be completed in the first half of 2022. Thanks to its operation, in just 1 year, the group managed to exceed the growth objectives by external lines indicated in the previous strategic plan. The group has identified some tenders in which it intends to compete also defining their level of priority and interest. The minimum territorial areas of interest have been selected. With the portfolio logic that is making the most of the economies and synergies resulting from the joint management, identifying the advantages is specifically possessed by the group vis-à-vis its potential competitors, taking into account the expected profitability of the operations considering the risks of failure or delayed reinvestment of the income achievable to the eventual exit from current management. The application of these parameters made it possible to define a strategy for participation in tenders, which identifying Northern Italy as a geographical focus, aims to consolidate Ascopiave's leadership in the Northeast of Italy, welcomes both territorial areas in which the group has a significant presence and other areas considered contestable. Having said this, in general terms, it should be noted that the [indiscernible] of implementing the strategy described depends on the timing of publication of the calls for tender. This is a decision that's up to local authorities and contracting authorities despite the fact, there is law has provided for staggered deadlines, which unfortunately, in light of the fact, have been completely disregarded. The tenders currently banned a few, and most of the purchase started ongoing. Moreover, the few experiences available suggest that a time for the final award of the service may be quite long. Also due to the legal disputes that generally accompany award disputes. Ascopiave intends to pursue growth in the sector also through corporate acquisitions, operations, the establishment of partnerships or temporary business groupings for participation in area tenders. Through a partnership transactions, in particular, the group seeks to increase its competitive chances and diversify its financial and operational risk by participating in the results of a broader portfolio of concessions. The industrial advantages for the potential partner and the territorial repercussions are believed to be significant and adequate to generate win-win opportunities for all those involved. By implementing the strategic direction. In 2020, Ascopiave was selected by Aemme Linea Dsitribuzione and NED Reti Dsitribuzione Gas as an industrial partner for the joint participation in future tenders for the Milan 2 and Milan 3 ATEMs. The partner companies currently manage over 150,000 users in the areas of interest. The entry into new business activities is the second fundamental pillar of Ascopiave strategy. After evaluating the different possible directions of development. Some sectors of interest have been identified, such as the production of energy from renewable sources, the production of green gases, energy efficiency, and integrated water service. The diversification activities were assessed, taking into account the synergies that can be activated with the core business, their sustainability and the risk profile. Ascopiave boasts significant skills in the management of infrastructure and energy systems, which will be enhanced in the management of new activities. As for sustainability, the development sectors have adequate growth potential, allowing the group in perspective to reach a size and positioning capable of guaranteeing profitability comparable todays of other market operators. This characteristic is particularly evident for those sectors capable of contributing to the energy transition. Finally, the activities present a low level of operational risk being in part activities regulated and managed on the basis of concessions or in the case characterized by stability of the cash flows produced. Growth in the diversified sectors may take place through the development of internal skills and autonomous offer systems, participation in competitive procedures, company acquisitions and finally the establishment of partnerships with experts. To implement this diversification strategy, the group plans to invest EUR 258 million over the plant and allocate it to the renewable energy, green gas production, energy efficiency and water service sectors. The overall commitments are more than doubled compared to the objectives indicated in the previous plan. However, it must be borne in mind that a significant portion has already been completed. Thanks to the conclusion of some M&A transactions finalized in the last 2 months, after which the group owns a fleet of plants for the production of electricity from water and wind sources with a nominal rated capacity of over 62 megawatts. The enterprise value of the 2 transactions amounts to a total of EUR 99 million. It is estimated that investments in diversification considered as a whole can generate an EBITDA of EUR 22 million by 2025. Renewable sources will play an important role in the context of the energy transition, the possible presence of incentive systems dispatching priority over renewable sources, represents a significant opportunity for Ascopiave to enter the sector. Indeed, Ascopiave intends to structure a portfolio of plants through M&A operations, and the construction of new plants, consolidating as management skills through partnerships with specialized operators. The investments planned over the period of the plan amount to approximately EUR 132 million with a gross operating margin of EUR 12 million by 2025. Hydrogen is an efficient factor that can be produced with 0 emissions from RES by electrolysis. In the long term, green hydrogen will be a valued alternative to natural gas, especially in the sectors of industry transport blending with methane gas. The plant provides for the construction of integrated plants for the production of green hydrogen through the use of energy from renewable sources. The projects performed in partnership with experts in the sector as functional to the objectives of the energy transition could draw on public support. The investments planned over the period of plan amount to approximately EUR 83 million with a gross operating margin of EUR 7 million by 2025. The Biomethane sector represents important development prospects, thanks to its possible contribution to the reduction of greenhouse gas emissions. Ascopiave's investment objectives, concerned the upgrading of existing agricultural biogas plants as well as the construction of new plants. By leveraging internal skills for the management of the plant, the group intends to structure partnerships with operators in the agricultural sector, sharing the returns of the initiatives with them. It should be noted that any injection of biomethane into the group's distribution networks will have positive repercussions for the development of new flexible management methods for that network. The investments planned over the period plan amount to approximately EUR 10 million with the full operational cost operating margin starting from 2028 of EUR 2 million a year. The search for an efficient use of energy resources represents a prevalent way to reduce polluting emissions and constitutes one of the fundamental guidelines of European and national environmental policies. Asco Energy is the group's energy service company that has the skills for the development of initiatives in the energy efficiency sector. Thanks to the presence of incentive mechanisms and the possibility of signing medium long-term management contracts with an appropriate balance of risks and opportunities between the counterparties. The investment presents a level of risk compatible with Ascopiave's objectives. The investments planned over a period of plan amount approximately EUR 10 million with a gross operating margin of EUR 1.5 million by 2025. The management of the integrated water service has very important synergetic potential with Ascopiave's core business. The homogeneity of some processes involved in the management of water and energy infrastructure and, in fact, favor the transfer of functional skills and the sharing of resources allowing the expectation of economies of scale and a better use of the company's production capacity. The group has already entered the sector, thanks to the acquisition of Cart Acqua company. Ascopiave has a priority interest in this business activity as it is a regulated activity managed under concession regime and, therefore, perfectly compatible with the risk profile sought by the group. A further reason of interest is given by the high investment needs of the sector necessary to reduce infrastructure shortages and current water losses. Unfortunately, the sector currently presents significant barriers to entry, primarily induced by the regulatory framework and the political context. Ascopiave would like a great opening of this market in order to encourage investments, and allow the entry of new operators with experience in the management of infrastructure services. Investments planned over the period of the plan amount to approximately EUR 23 million with a gross operating margin of EUR 2 million. In addition to investments in the sectors indicated, the group did see it appropriate to oversee the evolution of technology, the regulatory framework, and the market context of other sectors, assuming it can make investments, that have not, however, been valued in the economical financial plan. These are the innovative sectors of hydrogen, and synthetic gas, and there of other network services, such as, for example, electricity, distribution and district heating. Ascopiave has achieved appreciable results in terms of management efficiency, implementing organizational and technological solutions that are functional to both improving the quality and reliability of the service and to contain costs. Starting from 2016, an extensive process of reorganization of the core activities was launched, which involved all the companies of the group. This process involves the renewal and reengineering of systems and procedures; the rationalization of the logistical and operational offices in the area; the introduction of centralized and integrated management of all the main operational processes; and finally, the adoption of new information systems for the management of the workforce and commercial distribution services. This has allowed the optimization of the use of resources, allowing to internalize many contract reactivities to third parties and, therefore, to reduce management costs, and increase the commitment of internal resources in investment activities. As a result of these interventions, unit operating costs in 2021 fell by 12% compared to 2017. It is also underlying that Ascopiave has a solid experience in the integration of post-acquisition companies, also in this case, achieving management improvements and cost reduction. In the period 2017-2020, the complete integration of 3 companies was achieved, which managed about 50% of the current users of the group. Activities are currently underway to achieve the complete integration of the assets acquired by the A2A Group with the systems and organizational models of Ascopiave Group. Improving economic efficiency is at the heart of Ascopiave's management policies which intends to follow up on the excellent results achieved in recent years. In this sense, the company policies and practices functional to the purpose will be confirmed and strengthened such as the continuous monitoring of the efficiency of processes through the use of operating systems and dedicated organizational resources and incentive remuneration system for staff. The efficiency interventions will be based on the adoption of digital and innovative technological solutions on the control of internal processes, on the training of personnel and careful management of relations with external suppliers, with the ultimate aim of maintaining a streamlined and flexible system. Ascopiave plans to increase operational economic efficiency to the digitalization of networks and processes. In this sense, the plan envisages a significant commitment to efficiency initiatives such as the installation of smart meters on the entire network currently managed. The digitalization of business processes through, for example, virtual and augmented reality projects, RPA solutions, and digitalizing networks by installing sensors that can be efficiently used network data. From such efficiency improvements, many advantages are expected for Ascopiave's activities, such as a greater network balancing more effective consumption profiling, reduction of operating costs, prioritization of maintenance interventions, and reduction of network losses. The plan includes investments and action programs aimed at improving its efficiency to greater environmental and social sustainability of its activities, both from an environmental and social point of view. With regard to personnel management, the average training hour is expected to increase to 15 hours per employee, enriching the training of new learning mode and offer in e-learning mode and offering online training content, collected in a structured platform. This will favor dissemination of knowledge and an improvement in the professionalism of the staff. There are also initiatives in favor of environmental sustainability considering the renewal of the company fleet and the increase in photovoltaic power installed at the company headquarters. Finally, important interventions are planned for the renewal efficiency of assets through innovative methods, and technologies that will allow, at the same time, to raise the quality standards of the services provided, optimize management costs and reduce the environmental impact of activities with an expected reduction in equivalent emissions of carbon dioxide and methane. Innovation is the fourth but no less important pillar of the business strategy. Innovation management is a crucial activity. Ascopiave, targeting both short and medium long-term objectives. In short and medium term, innovation makes it possible to improve the levels of economic efficiency and quality of the services provided which are essential for achieving satisfactory company's profitability, and maintaining an adequate competitive capacity towards the other operators in the sector, also in view of the competition in tenders for the award of concessions. In a long-term perspective, a technological innovation and business models is very essential to responding positively in an economically sustainable way to the transformation processes induced by both the European and national environmental and energy policies. In the next few years, Ascopiave will perform an organic program of innovative interventions aimed at evolution of the infrastructure and the improvement of its safety and functional efficiency. These interventions will be categorically focused on the energy efficiency of the REMI cabins, and in the preparation of networks and plans for the future injection of the green gas. You should also be noted that in 2021, the group adopted an innovative system to search for leaks which, in addition to improving the safety conditions of the network, will contribute to the reduction of CH4 emissions into the atmosphere. The strategic development assumptions were investigated by estimating the economic and financial impacts over the entire period of the plan. The projections are prepared, taken into account both the main risk elements typical of the reference sectors, and the characteristics of the group assessed in relation to the planned actions. That uncertainty about the starting time of tenders and the award of concessions has led to the development of a scenario analysis based on 2 different assumptions. The first assumption, which we have called assumption A, and we suggest that during the planned period no area tender will be able to complete this process after the award and then, therefore, the group will continue to manage the current perimeter of activity in the distribution sector of gas, apart from the growth linked to the acquisition of assets to merger and acquisition transactions. In the assumption B, on the other hand, it is assumed that by 2025, the group will be awarded to area concessions identified among those of interest on the basis of an assessment of the progress or the public tender process. As an assumption common to the 2 scenarios that external growth in the distribution sector was assumed with the acquisition of companies for accrual of 50,000 users, and the execution of an investment plan in diversified activities. In the 5-year period 2021, 2025, the group expects to make a significant volume of investments for a total amount of EUR 599 million, which arises to EUR 658 million in case the tenders are awarded. The above mentioned bonds are shown net of divestments in minority shareholdings. In fact, the plan assumes that the needs generated by the investments envisage to implement the growth and diversification strategies are partially financed using the proceeds deriving from the partialities investment in the equity investments held in noncontrolled companies. The sources of this income are constituted on the other hand, by the exercise of the put options held on EstEnergy and Hera Comm. And on the other, by the excess of dividend distributions over the consolidated net results relating to equity investments consolidated with the method of equity. In scenario A, these resources to cover investment needs amount to EUR 90 million; while in scenario B, assumption B, in which the partial exercise of the -- put on EstEnergy also envisage the amount to EUR 196 million. In assumption A, investments in the distribution sector amount to EUR 424 million over the period of the plan and are due for EUR 155 million to the assets acquired and EUR 269 million to the current management perimeter. With reference to the second part, investments of approximately EUR 146 million expected for renovation and extraordinary maintenance on 257 kilometers of pipeline, on user branches, and on group's reduction in metering systems. Development investments consisting in the laying of more than 305 kilometers of new pipelines and construction of new connections estimated around EUR 64 million. The installation of approximately 293 electronic meters is also planned, mostly corresponding to the obligations to replace traditional meters included by the regulation. Investments in digitalization, efficiency and innovation of the network amount to approximately EUR 17 million in the assumption of an awarding of ATEM tenders, the volume of investments could grow by a further EUR 165 million due in part to the payment of the reimbursement values of the plants to the outgoing operators and in part to the execution of the investment plan offered in tender. The gross operating margin is expected to increase compared to the prefinal figure for 2021, reaching a value of EUR 102 million in assumption A and EUR 118 million in assumption B by 2025. The expected performance takes into account the tariff reductions due to the review at the rate of return on the invested capital recently approved by the sector authority. Of the negative impact for the year 2022 is estimated at EUR 5 billion. Increase in EBITDA by 2025 is attributable for EUR 14 million is due to the consolidation in diversified activities, and tend to be in over in diversified activities. Overall, therefore, a weighted average growth of EBITDA of 11% is expected in the prudential scenario, the assumption of awarding the ATEM tenders, assumption B, would ultimately lead to a further increase in EBITDA for EUR 16 million. The development achieved both internally and externally will come in further consolidation of the group in the gas distribution sector and the diversification of capital investments in other synergies businesses, in the distribution sector, and estimated growth was recorded in the users served, the network managed, and the volumes distributed, and the tariffs invested capital. The capital investing diversification activities reached a value of EUR 211 million, with an incidence on the total net invested capital of the group between 14% and 15%. And the rated capacity installed and renewable energy production plants estimated of over 88-megawatt hours for an annual production of 204 gigawatt hours. Finally, in the annual production of hydrogen by 2025, deriving from the projects in this sector is estimated to be 380 tonnes. Furthermore, thanks to the planned improvement initiatives, a reduction of the equivalent carbon dioxide emissions generated by the group's activities is expected by more than 4% compared to 2021 renewable energy plants by 2025 should also contribute to a reduction of greenhouse gas emissions for a value of 87 tonnes of carbon dioxide. This target clearly do not take into account the positive impact of energy efficiency projects and green gas production. In both assumptions, economic results expected to grow, both in terms of net operating margin and overall net profit in both the assumptions, and the profit projection to 2025 stands at over EUR 46 million, corresponding to a weighted average growth of a plant of 1%. The hypothesized investment plan will lead to a significant growth in invested capital, which will [ rising ] finance through the use of debt. In scenario A, the capital invested in 2025 stood at approximately EUR 1.508 billion, an increase of 5% compared to 2021. Loans in 2025 refer to 58% of distribution activities, for 28% to current investments, and 14% to new diversification activities. In scenario B, the invested capital stands at EUR 1.564 billion, marking a growth of 6%. In this scenario, considering the award of new ATEM tenders, gas distribution would represent approximately 66% of total uses. In both assumptions, financial debt increases, pushing the financial leverage ratio towards levels more suited to the risk profile of the assets held to the benefit of shareholders. Through its activities, Ascopiave contributes to the economic and social growth of the context in which it operates. Economic value generated in the planned period is estimated at EUR 794 million, of which 71% equal to EUR 561 million distributed to the main stakeholders. In particular, most of the added value distributed over the planned period is for the benefit of the shareholders, 34%; the employees of the group, 32%; and local authorities granting the grass distribution service, 22%. Ascopiave aims to create value for shareholders through a balanced and flexible financial structure and inefficient cost of capital. Debt management is aimed at containing interest costs, stabilizing the trend through convenient hedging formulas. Over the course of the plan, further recourse to financial leverage is envisaged against a stable and profitable distribution of dividends. The shareholders' meeting approved the treasury share buyback program expiring November 2022, which will be implemented on the basis of convenience to set up a portfolio of shares to be used. For any shared swaps in extraordinary transactions as has already happened in the past. In any case, it should be noted that the economic financial projections do not envisage any purchase by the company. The group has constantly created a value for shareholders, which can be appreciated considering the growing trend of the share price, and the amount of dividends distributed. In the period 2016-'21, the share price increased by 66%. In the 5-year period 2016-2020, the Ascopiave Group distributed ordinary dividends for approximately EUR 190 million. The stability of the cash flow and equilibrium on the financial structure make it possible to educate over the next 5 years. The distribution of the growing dividend per share from EUR 0.165 per share in 2021 up to EUR 0.185 in 2025. Ascopiave is a consolidated reality active in a regulated market. And with the track of -- track record of growth, the strategy that will guide the group's actions in the coming years is based on growth of the core business. Diversification is new synergistic activities, economic efficiency and innovation. The investment plan over EUR 600 million in the most favorable context is equally intended for the current perimeter and for the expansion of company activities. The expected results foreshadows sustainable growth capable of creating value for the main stakeholders, and the distribution to shareholders of our remunerative and growing dividend. I thank you for your attention. And now, we can start with the Q&A session.

[Operator Instructions] The first question is from Roberto Letizia, Equita SIM.

My first question is about the target, compared to the target of the previous plan, I found that there are some divergences. I know this plan is about scenario A and scenario B. EUR 51 million in assumption A, EUR 58 million in assumption B as profits. You have also spoken about EBITDA, can you explain to me better, if there is no -- if there's a growth in EBITDA -- could there be also a growth in the profit margins. I would also like to ask you, what indications, can you give about the put option towards Hera -- towards the Hera Group. Taking into consideration on dividends, in assumption A, you have financing with the recycling of this put option? So what are your plans? How do you calculate the EBITDA of the new plans? What are the benchmarks that you have used? How much of this portion that you have envisaged of EBITDA will be actually consolidated? And what's the incentives? How many incentives have you received? As you know, the government has already reduced its contribution in 2022 to the sector. What's the EBITDA did you expect in 2022 with all the acquisitions that you have performed?

So expected results, net profit. So what we have planned, what we forecast. Okay. And based on the new tariffs there will be a significant decrease. 0.7% based on the new tariff regulations and the lack of income from financial income relating to EstEnergy. The part, there will be a put option, so it will be sold. So the profit that you have envisaged is net of the possible sale. Yes, it is. The global put is EUR 500 million. It's all our participation, all the stake that we hold in Hera Comm. In the hydroelectric sector, so what we have acquired at the end of 2021 will not be consolidated. And what -- even what we did in last year -- along with it, it will be consolidated in 2022. Regarding EBITDA expected in 2022. This is an information expected EBITDA. It's difficult to foresee now. But maybe by reading the strategic plan, you can calculate it, this is sensitive information, confidential information.

About the new assets that you have purchased. Will there be a contribution for only 6 months? Will you start giving the contributions after 9 months for all the acquisitions that you have done at the beginning of January. What impact will it have on your plans?

We will not calculate it on the [ 12th portion ], but for the entire amount. And we will consolidate our operations from the first of January 2022. What we bought last Friday, 28th of January, given that will be included in 2022 calculations. No impact on 2021 figures. Everything will be consolidated in 2022 as regarding the new government decree. We know that it will have an impact. We have factored it in whatever is produced, which is in excess of EUR 69 per megawatt, will also be factored in -- where factored in all the factors, all the new regulations. So we have calculated everything on the second plant that we have acquired, not on the first one. So we have calculated everything under the new tariff regime. And so all our calculations are completely in line with the government decree.

So what indications can you give me for 2022. So the EUR 50 million, does that include a reference to the new energy tariff scenario? Can you let us know, how much, if you will actually collect EUR 15 million or EUR 22 million?

The 2 plants will give a contribution of EUR 10 million of EBITDA by 2025, additional EUR 5 million related to renewable energy sources and all the initiatives that will be taken by 2025.

Next question is from Emanuele Oggioni.

I would like to ask you, referred towards the put option. What is -- can you explain to us the rationale underlying investments, which is the debt, the financial position on EBITDA ratio target, with which the put option is automatic, which is the idea strategy underlying this issue? If you can tell us something.

Good morning, I'm the CFO of Ascopiave. About put option, clearly, it will be valued according to the level of indebtedness that we will have the ratio which is debt/EBITDA. We have 4, 5x. -- we have put a maximum level of 4, 5x the performance of indebtedness must stay below this target at the moment, the projection within the plant, envisage the 4, 5x ceiling, and we are keeping a watch on it. So we will consider alternative solutions in case, we did not respect the parameters that we have set. And we will also consider the dividend. We refer to the EBITDA adjusted and not the EBITDA planned referring to EstEnergy and also to Hera Comm.

Next question is from Davide Candela of Intesa Sanpaolo.

I have two questions for you. Can you remind us what is the percentage of your own quota that you're holding your portfolio? What are the equity shares, the treasury shares that you hold? And what about M&A that you have planned? And the second question, hydrogen business, we have EUR 83 million investments of EBITDA. So in the hydrogen business, what are the projects that you have? If we can have a significant contribution. How can this project can merge into the -- can met with the initiatives you have taken in renewable sources?

So we have a treasury stock of about 5%. So regarding the second question, the investment that has been -- the investment that we have included in the plan, it refers to a production of energy and green energy from photovoltaic, and the production of hydrogen. Hydrogen that must be allocated for auto traction for public auto traction. It can also be [ disdained ] for the large-scale industries. And also in our pipelines and distribution pipelines. We think that we can make it operational -- investment operational in 2024, within -- in the space of 2 years. This is -- for us, is any way the synergetic business, which it can be executed if implemented with the distribution of gas, as produced hydrogen can be put in the network also with hydroelectric and green energy, in general. We believe that this can be absolutely included in the philosophy, in the management of the company. You can say -- you said that it was photovoltaic generation, so we assume that the megawatt portion that you will have by [ 20 ] -- about 80 of the 62 that we already have. So what will you do with hydrogen. This is something extra that we have included in our plan. It's the amount that we have indicated in the plan is completely what is indicated in our strategic plan. It relates to the production of hydrogen. If we need a pilot project, hydrogen can be installed between 24 to 30 megawatts of power.

Next question is from [indiscernible] Mediobanca.

I have two questions for you. The first is, as connected to hydrogen, what Davide has just asked. I would like to know which is, in general, about your green management policies on transport. What are your expectations about use of hydrogen in households? And do you think the investments will be remunerated relating to what usually happens in the distribution network. The second question is about renewables. I know that you have accelerated on this front. I would like to know -- what are the prices of these assets? And if you think there will be a lot of competition and if you think this company can become in the vanguard, can go into the Vanguard of renewable energy sources?

Regarding our view on hydrogen, we think that this pilot project can have relevance, social relevance. This is what we will produce. It can be dedicated to [ TPL], and it will contribute to energy efficiency and increase the environmental quality, the quality of the environment. So this usually the first goal of what we had thought, an initiative that should also be finalized, financed as we have financed 50% corresponding to PNRR. So this is what is included in the plan of recovery and resilience relating to plants. From renewable sources, it is true that since there is a big competition in the market in this moment, and the price of energy has increased a lot. It sort of falsifies the market situation. And as you know we have also competition in the development of networks in the wind power plants, completely new wind power plants. We have acquired concessions, and now we will start very soon with the commissioning of plants that must be operational in 2023. So we would like both to proceed on internal lines and also on external lines with the organic growth of the company. Even if we say that we need bureaucratic suspension, which is indeed a complex project. Also, this is part of our target. And so we depend on such initiatives in an autonomous manner. I hope I have been exhaustive in my answers.

Next question is a follow-up from Davide Candela.

With the reference to the renewable brands that you have indicated. I would like to know if you have included it in your capacity targets 2025. How many megawatts you expect? You said that last Friday, with wind farm capacity 14 megawatts in Campania. Do you think these plants can be subject to repowering, regarding the capacity relating to the plant that we bought last Friday in the -- over the last 2 months.

Our overall capacity is in the company, we believe that we will achieve the targets by 2025. And this is exactly 81 megawatt. As you can see, on Page 25 of our strategy, 55 of the strategic plan. So within this 81 megawatt, 62 megawatts of installed capacity is included, and we refer to the acquired plants that we already bought from [indiscernible] plants. Plus 20 megawatts that will be brought to the development of plants, internal development of plants that I mentioned before, including the wind power plants that we are directing in South Italy, 21 -- 6 turbines of 21 megawatt, which will be managed -- operated with the other 14 turbines that we bought through the last investment in the [ Ascopiave ] Group. And each of these [indiscernible] 1 megawatt power. This is as far as wind power is concerned. What was your second question? Can you repeat it? can you remind me?

With 14 megawatts that you bought in Campania. Will there be some repowering in this 14-megawatt that you bought in Campania.

Maybe we could do it, but not in the -- over the short period.

Next question is a follow-up from Emanuele Oggioni.

First, you spoke about regulatory framework issues, do you think that things can improve when, how much -- thanks to the intervention of the government. This is the first question. The second 1 is related to PNRR strategic resilience and recovery plan, which are the projects which are not included in this plan?

Sure, sure. Relating to the gas tenders, if there won't be, if there will not be any change in the current regulatory framework, the tenders will not take place as long as the law is not issued. So we think that with the competition decree, we don't know. What sort of decree it will be -- and which will be the provisions of this decree. We don't know how this decree will be. So we will understand if there will be some simplifications to -- or to have the tenders. If things stand as they are, there will be a general grid lock to organize a tender in the sector, the local authorities must issue the tender and it's not an easy process. And most of the times, there are complications the elements which are envisaged in the tender. This usually leads to disputes, which blocks completely the tender. So the tenders will be frozen. So we hope that in a streamlined way to achieve our objectives, we hope there's an immediate law at the government or a parliamentary level, which simplifies the -- which simplifies all the operations so that when there are tenders, it is actually a tender and not something that is disputed by the participants relating to, to the investments in the residence and recovery plan. As we said before, we have foreseen, we have envisaged hydrogen production that we look forward to. We hope we are sure and we believe it can be financed by the this resilience and recovery plan. Otherwise, we can surely finance it with our resources. So it's a plan that anyway, we will carry forward no matter what, regardless of the government initiatives. The PNRR, the resilience and recovery plan includes facilities for such investments, for such operations.

The next question is a follow-up from Roberto Letizia.

I would like to focus on the development of new business, the target that you have -- the target that you have set refers to the [ 2 hour ] megawatts that you already have as of today. I wonder, don't you think it's a bit on a conservative side, on a prudent side. What do you think you are on the prudent side because of the resources? I would like to know if you estimate among the prudent basis. Or do you have other factors which you have not included?

Well, on renewables, we have envisaged EUR 32 million -- EUR 232 million, of which EUR 99 million is already disbursed, which we think that also with the other investments that we have made of the $44 million investment enterprise value of EUR 85 million in the moment. Things have really gone well. So we could finalize this investment. EUR 33 million is what we need now. It is also true that we are very prudent. We are very, very prudent in this plan. So what we say is always what we are sure to manage to achieve. So we want our strategic plan not to be interpreted as a book of dreams, but as something very tangible, very concrete. So we don't want it to be a dream network. And if we have opportunities, we will surely seize them.

[Operator Instructions] Dr. Cecconato. Ladies and gentlemen, we don't have other questions now.

Thank you. If there are no other questions. I thank you for your presence. I hope we have been quite clear and exhaustive. And I hope we have explained to you in the best possible way all the elements that represent that constitute our strategic plan. And we wish you a great day.

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