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

Good morning. This is the Chorus Call operator. Welcome to the presentation of the results as of 31st December 2021. Please remember that you can listen now, just listen. And then after the presentation, you can ask questions. There will be a Q&A session. [Operator Instructions] Now Mr. Cecconato, the Chairman and CEO of Ascopiave is going to talk to you. Thank you.

I'm going to start with the summary of economic and equity results Slide, Page 4. The slide illustrates the corporate structure of the group as of 31st December 2021. You should be noted at the end of December 2020 Ascopiave completed the purchase of 100% of the capital of Cart Acqua, the company, in addition to being directly operating in the water sector in which it provides services of a technical nature is also the owner of a shareholding in the share capital of Cogeide S.p.A. The company operates under a safeguard regime in the management of the integrated water service in 15 municipalities in the province of Bergamo. With reference to the energy sector, it should be noted that in September 2021, as energy purchased 11% of Bim Gestione Servizi Pubblici coming to control 100% of the capital. At the end of December 2021, Ascopiave completed an investment in the renewable energy sector as envisaged by the 2022, 2024 strategic plan. Acquiring 100% of the capital of a vehicle company of the EVA Group. The company is now called Asco Renewables S.p.A. manages 6 hydroelectric plants located in Lombardy and Di Monte. The slide on Page 5, consolidated income statement for the year 2021. In the year 2021, the group achieved revenues of EUR 134.9 million, achieving a gross operating margin of EUR 66.4 million and an operating result of EUR 33.8 million. The balance between financial income and charges shows a positive value of EUR 1.5 million, of which EUR 3.5 million relates to dividends received by the investee companies, of EUR 2.7 million and Acsm Agam, EUR 0.8 million. The income deriving from companies consolidated using the equity method equal to EUR 19.9 million is representative of the pro quarter result of the equity investment held by Ascopiave in the EstEnergy Group, EUR 19.5 million and the pro quarter result of the investment held by Cart Acqua and Cogeide, EUR 0.4 million. Taxes weighed on the income statement for EUR 9.9 million, resulting in a tax rate of 31.2%. The value calculated by normalizing the pretax result of the effects of the consolidation of the company's consolidated with equity method. And of the dividends received under equity investments held in Hera Comm and Acsm Agam. Slide on Page 6, consolidated balance sheet as at 31st December 2021. At 31st December 2021, the group holds invested capital of EUR 1.216 billion. The deployment consists of EUR 58 million from property, plant and equipment, EUR 6,473 million from intangible fixed assets, EUR 521.4 million from the value of the minority interest held in EstEnergy. Hera Comm, EUR 54 million; Acsm Agam, EUR 24.9 million and Cogeide EUR, 8.1 million, EUR 35.2 million from other fixed assets. EUR 45.8 million from the negative balance of the items of working capital and the provisions that have been set aside. The intangible fixed as had shown in the assets equal to EUR 647.3 million mainly consist of gas distribution networks and plants owned by the group to the tune of EUR 585.1 million and goodwill recognized following business combinations, EUR 49.3 million. The net financial position is equal to EUR 347.5 million and record an increase of EUR 9 million compared to 31st December 2020. The debt equity ratio at 31st December 2021 was EUR 0.40. The scope of activity is consolidated with the line-by-line method, the slide on Page 8, operating data and December 31, 2021, the distribution companies of the group managed approximately 777,900 users, an increase compared to the previous year. In year 2021, the group distributed through its network, 1.593 billion cubic meters of gas, plus 9% through its networks. Slide on Page 9, the evolution of revenues. Revenues equal to EUR 134.9 million, show a decrease of EUR 29 million due to the reduction in tariff revenues from gas distribution was EUR 0.3 million, the reduction in revenues from energy efficiency certificates for EUR 30.2 million, a change mainly explained by the lower targets for the year 2021, the growth in other revenues of EUR 1.5 million. Slide on Page 10, evolution of the operating profit. The operating result equal to EUR 33.8 million shows an increase of EUR 4.7 million due to the reduction in tariff revenues from gas distribution for EUR 0.3 million, the reduction in depreciation of EUR 2.1 million, the reduction in net operating costs of EUR 2.8 million. The decrease in depreciation is mainly explained by the alignment of the values recorded at 31st December 2021 of the consolidation differentials allocated to the assets in the context of previous business combinations. Slide on Page 11, tariff revenues and other net operating costs. Tariff revenues from gas distribution amounted to EUR 108.9 million and show a decrease of EUR 0.3 million compared to the previous year. Net operating costs equal to EUR 42.5 million recorded a reduction of EUR 2.8 million determined by the change in the following revenue and cost items. Lower personnel costs, EUR 0.1 million, greater margin in the management of energy efficiency certificates EUR 2.1 million, higher concession fees to municipalities for EUR 0.8 million, lower contributions for safety incentives EUR 0.8 million. Higher costs for consultancy, EUR 0.5 million, lower provision for risks EUR 0.8 million, lower nonrecurring costs, EUR 1.8 million. Other changes, EUR 0.1 million. Slide, Page 12, number of employees at 31st December 2021, the group had 471 employees, an increase of 8 units compared to the year before. Slide, Page 13, cost of personnel. Personnel costs equal to EUR 17 million, recording a reduction of EUR 0.1 million due to the higher cost of capitalized labor for EUR 1 million, the higher cost of current personnel for EUR 0.9 million. Investments. The investments made in the year 2021, equal to EUR 53.8 million recorded an increase of EUR 9.2 million. Most of the technical investments concerned the development, maintenance and modernization of gas distribution networks and plants for EUR 38.9 million, of which EUR 13.5 million in connections, EUR 23 million in expansion and upgrading of the network and EUR 2.4 million in reduction plans. Investments in measuring equipment amounted to EUR 11.4 million. Slide on Page 15, net financial position and cash flow. The net financial position as at 31st December 2021 amounted to EUR 347.5 million, an increase of EUR 9 million compared to 31st December 2020. During the year 2021, the cash flow generated financial resources of EUR 77.9 million. Net investments led to cash outflows of EUR 52.9 million. The management of net working capital generated resources for EUR 4.4 million. Dividends collected from investee companies resulted in financial income of EUR 20.9 million. Asset management, distribution of dividends to shareholders and purchase, sale of treasury shares involved financial outflows of EUR 34.6 million. Corporate acquisitions of companies active in the high-grade electric sector resulted in financial outflows for EUR 14.4 million. And an increase in the net financial position for EUR 10.3 million. Slide, Page 16, net financial position and cash flow. Bank debt as at 31st December 2021 amounted to EUR 343.6 million, the loans are 32% at a variable rate and the weighted average cost of debt in the year 2021 was 0.46%. EstEnergy, slide on Page 18, economic and balance sheet data. The slide illustrates the consolidated income statement for the year 2021 and the consolidated balance sheet at 31st December 2021 of EstEnergy, with the weighted data for Ascopiave stake in the company. The economic data relating to 2020 financial year and the balance sheet as of 31 December 2020 as follows: in the financial year 2021, EstEnergy achieved revenues for EUR 459 million, gross operating margin of EUR 42.7 million, operating result, EUR 25.6 million. At 31st December 2021, EstEnergy holds invested capital of EUR 300.5 million. Loans are made up of EUR 2.3 million from tangible fixed assets EUR 311.3 million from intangible fixed assets, EUR 8.5 million from the value of equity investments, EUR 0.1 million from other fixed assets, EUR 21.8 million from the negative balance of the items of working capital and of the provisions set aside. Net financial position is positive to the tune of EUR 51.5 million. Dividend, slide on Page 20. Dividend proposed Board of Directors in concession of the results for the year and the solidity of the group's equity and financial structure will propose to the shareholders' meeting the distribution of a dividend of EUR 0.165 per share for a total of EUR 35.8 million, an amount calculated on the basis of the shares outstanding at the end of the financial year. If approved by the shareholders' meeting, the dividend will be paid on May 4, 2022, with coupon detachment on May 2, 2022. I have finished the presentation. Now the Q&A session starts.

[Operator Instructions] First question from -- is from Emanuele Oggioni.

I have a question. First of all, I would like to ask regarding the new scenario of the economic crisis and that could be regarding an effect on the investments on biogas. There could be an acceleration of investments in biogas because of the crisis, is Ascopiave involved in this? Relating to our participation in new projects regarding to the NRR, the new recovery plan proposed by the EU. Is it planned for the future of Ascopiave investments in biogas in environmental projects? Do you have something in mind for the medium term? This is the first question. The second question is relating to 2022, you spoke about the certificate -- energy savings certificates. Can you give us some guidance on 2022 on revenues contribution, since you speak about obligations high in 2022 with respect to 2021.

Thank you. Thank you for the question. Relating to the economic scenario. First of all, I would like to speak about the impact on the group. We don't think that in the short period, Ascopiave can be touched, can have an impact even if we have a significant stake in EstEnergy 48%, but we don't think -- we don't think there could be an impact unless, of course, the crisis is -- goes on and on at an international level. We don't think we're going to have any negative impact. In the regulated sector, there should be no impact. The procurement of gas can be guaranteed also through other channels, not only Russia, the capability of our transport lines, about 115 billion cubic meters come every year, 115 billion cubic meters, and only 9 billion come from Russia relating to projects that in some ways relate to Ascopiave. Relating to the new trend of energy transition, we have 1 in particular that we are following, that we have already started developing, which is photovoltaic to produce hydrogen related to auto traction. We have already identified the areas, where to position the photovoltaic plant, where to put the hydrogen plant. And we have already signed agreements with the transport company, with a public transport company that will use the hydrogen for transport. So this could be -- this can be financed in part to the European Union funds. And there's an investment here of EUR 100 million, this is not something too big. But anyway, it's a signal for investors, for the shareholders that we are very, very active locally, especially in the energy transition sector so that the country can become self-sufficient in energy. It's about the project is worth around EUR 100 million. So this EUR 100 million should be financed by the European Union for around 30%, 40% and with our own resources for the rest. Relating to your second question, Dr. Paggiaro, CFO, is going to speak to you.

Relating to the energy self-sufficiency. You must have seen -- you must have noticed that relating to revenues, the biggest part of our revenues come from the new modification, the new law, 21st of May 2021. The numbers represented, the numbers coming from the low last in May 2021 related to the figures that the company must present to the authority, and we expect in 2022 to keep up the same performance. The actual number, the actual figures have already been presented in our presentation. And there should be no difference relating to costs in -- so the 2022 project is in line with what we did in 2021.

What about the CapEx for this project? Can you give me a guidance, the quality guidance, on quantitative, qualitative guidance on your CapEx?

Relating to investments in 2021. You must have seen, relating to our core business, distribution investments were EUR 50 million, and we are going to keep this strength in 2022. Relating to 2022 the growth was very important a bit because of the company's growth and also because you will remember that 2020 was conditioned by the pandemic. And so we spent EUR 20 million extra for investments. And we will be doing the same in 2022, what we did in 2020 and 2021 relating to ordinary investments. And then the mergers and acquisition investments, we have signed a lot of agreements as you must have noticed, during the first month of this financial year, and there are the initiatives that we have been evaluating.

In these investments and in general, have you already had some tangible positive effects?

A bit. We have noticed an increase, an improvement in our performance, and we will keep our efficiency procurement under check, and we will keep on monitoring the performance and the costs and try to keep them under check.

Next question is from Roberto Letizia.

Just a follow-up on what Emanuele has just said beyond procurement. Are you worried about on whatever has on the savings, energy savings. Especially because of your exposure to retail, what are you doing about consumption, energy saving? Because everywhere now, everyone would like to spend less on gas consumption, on power consumption. Are you worried about this? In the medium, short term, do you think it can have an impact on your performance.

My name is Gallina. Yes, surely, that the Energy Group has been implementing a lot of services to make up for some, if there could be some drop in the gas consumption and in power consumption. And the group has already been organizing itself in this sense, getting ready for a drop in sales. But so far, we should say that things are going on well. There is a fixed quota that the client has got to pay, and so the margins so far have been all right. So we don't think we should be having any significant negative impact.

[Operator Instructions] So there are no further questions.

So that's going to be the final conclusion now. So if there are no further questions, thank you very much for having participated and for your questions. Thank you very much.

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