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

Welcome to the presentation of the industrial plan 2022-2026 of Ascopiave. [Operator Instructions] Now Dr. Nicola Cecconato is going to speak to you, Chairman and CEO of Ascopiave.

Thank you. Good morning, everyone. The strategic plan approved today by the Board of Directors traces the group's development path in the medium term, outlining the objectives pursued and the actions planned in 2026. [indiscernible] 1 of strategic guidelines, our Group listed in the STAR segment of Borsa Italiana is a solid, reliable and transparent counterparty for its stakeholders. Today, it is mainly active in the regulated sector of gas distribution and the production of energy from renewable sources, and holds shares in companies active in gas and electricity sales, energy services and integrated water service. The plan prefigures a development path for the Group, which will allow it to increase corporate profitability, exploiting the opportunities for growth and improvement offered by the dynamics of the sectors of interest, while maintaining a balanced financial structure and a stable and remunerative distribution of dividends. Growth will take place within a framework of sustainability, combining with the interest of our main stakeholders and leveraging the Group's current positioning and the enhancement of its resources and skills. In the plan, economic and financial objectives integrated with social, environmental and governance objectives in order to pursue sustainable success. The company's strategy is based on 4 fundamental pillars: growth in the core businesses of gas distribution and renewable energy; diversification into [ synergistic ] sectors; economic and operational efficiency; innovation. The strategic directions we intend to follow are closely connected, and which reinforced each other by supporting the overall corporate development with a view to sustainability. The plan envisages an interaction between objectives of economic financial nature and explicit objectives of social and environmental nature, to which the Group will devote particular attention. Ascopiave has identified 7 sustainable development goals as basic elements of its development path. Before describing in more detail the contents of the strategy and its impacts on the forward-looking economic and financial figures, I will make a few remarks on the Group's current activities. Ascopiave holds a balanced portfolio of assets characterized by low-risk profile. As of 2022, net invested capital is about EUR 1.3 billion, of which about 66% relates to assets controlled and managed directly by the Group, and thus consolidated on a line-by-line basis. The remaining consist of equity investments. The most significant strategic and value term is that held in the company EstEnergy, the leading operator in the gas and electric sales sector in the Triveneto region. Ascopiave has been one of the key players in the consolidation of the gas distribution sector and has achieved a size and positioning capable of further growth in this business. Thanks also to intense M&A activity conducted over the years, today, the group with approximately 890,000 users, served in over 14,000 kilometers of managed network, is the fifth largest operator in the sector nationwide, with a market share of 32%, largest in the Veneto region as well as the leader in Northeast. The group also has a significant presence in some areas of Lombardy. Last in April 2022, Ascopiave finalized the purchase of the A2A Group of concessions for a total of over 110,000 users, mainly located in Veneto, Friuli Venezia Giulia and Lombardy regions. The distribution is a regulated business with a low level of risk and mostly stable and predictable economic results. We increased significantly EBITDA driven by the growth inside the economic efficiencies achieved. EBITDA user ratio remains substantially stable over time. Thanks to efficient management policies, the Group [ show ] return on capital of 6.9% in 2022, higher than the benchmark defined by the tariff regulation. Another important asset of the group is its minority shareholding in EstEnergy. The company controlled by Hera Group is active in the field of gas and electricity with its main territorial focus in the Triveneto region. With more than 1 million supply contracts managed, it is an important regional player. The current configuration of EstEnergy is the result of the complex extraordinary transaction finalized by Ascopiave with Hera in December 2019. Through this transaction, Ascopiave implemented the strategic repositioning of the group, enhancing its sales activities and gaining original leadership position in gas distribution, through the purchase from Hera of the management of several plants in Veneto and Friuli Venezia Giulia. The transaction also allowed the group to reduce its risk exposure on its business activities through the possibility of exercising the put option on its shareholdings. Ascopiave holds put options on its current holdings, in EstEnergy and Hera Comm. With regard to EstEnergy the option has a very flexible terms of exercise with the maximum expire date at the end of 2026. The exercise price is characterized by a flow and the possibility of further upsides linked to the depreciation of the value initially invested of EUR 395 million. The Group holds a put option on its equity investment in Hera Comm exercisable between -- and -- today in 2026 and with the exercise price equal to the initial investment of EUR 54 million, increased by 5% per annum and reduced by the value of dividends distributed. Ascopiave partially exercised in December 2022 a put option on the shareholding in EstEnergy, transferring an 8% share of the company's capital to the Hera Group and collecting over EUR 79 million. The plan assumes a full exercise of the put by 2026 in order to finance the maintained investment plan. In 2021-2022, Ascopiave entered the renewable energy sector through a number of business acquisitions and establishment of partnerships for the development of new generation plants. Specifically, in December 2021, 6 localized hydroelectric power plants with a nominal capacity of 4.6 megawatts were acquired from the EVA Group in January 2022, and then an 80% stake was acquired in Eusebio Energia. The company [ thus ] operates a portfolio of hydroelectric and wind power plants with a nominal capacity of 57.9 megawatts. The hydroelectric plants are located in the regions of Veneto, Lombardy and Piedmont, while the wind power plant with a nominal capacity of 14 megawatts is located in the region of Campania. Also in 2022, a partnership was formed with the Renco Group for the development of a new 21.6 megawatt wind farm in the Calabria region. The authorization process has already been completed, and the plants are being installed. In 2022, Ascopiave completed acquisition of Cart Acqua, a shareholder and technology partner of Cogeide. The company has given the safeguarded management of the integrated water service for over 100,000 users in 15 municipalities in the province of Bergamo. The acquisition was the first sign of the Group's interest in managing the water service, which has significant synergic potential with that of managing the cash distribution network, given the Group's current presence in the same category. Since acquisition, the number of synergetic activities between Ascopiave and Renco JV has been -- brought up [ light ], sharing the technology platform for data for management via smart meters and integrating lighting system for utility management. In 2023, Ascopiave had partnership with Hera Group, acquiring control of Asco Tlc, a company active in the provision of private cloud connectivity service, mainly to the corporate customers and public administrations. The company owns a fiber optic network of over 2,400 kilometers, mainly in the province of Veneto. The acquisition represents the first step in a potentially large operation that would lead to the merger of Asco Tlc into Acantho to the creation of multi-regional operator capable of achieving significant operational synergies. Investment opportunities envisaged in the plan can be connected due with other possibilities of financial leverage. The debt level of EUR 416 million at the end of 2022 is compatible with the current risk profile of the assets held, allowing the group to benefit from favorable interest rates. Medium and long-term debt amounts to EUR 290 million and has an average life of 3 years. In October 2021, Ascopiave spent USD 200 million private placement shelf program with Pricoa Capital Group, securing a new financing channel for the investment plan. As part of the shelf, Ascopiave has already made 2 successive issues of ordinary unsecured bonds with a 10-year maturity for a total of approximately EUR 105 million. The bonds issued are unrated and will not be listed on regulated markets. The process will be use by Ascopiave for various corporate purposes, including the refinancing of bank debt, leaving the company sufficient margin for further capital expenditure and/or merger and acquisition opportunities. The initiative of Ascopiave aim to combine environmental, social, government, sustainability industrial growth in order to generate long-term value for the benefit of shareholders, taking into account the interest of other stakeholders relevant to the company. As far as environmental aspects are concerned, Ascopiave is committed to combating climate change, intends to contribute to the decarbonization objectives defined at national and European level. Under the social profile, the group promotes the improvement of social quality standards in its business activities, with initiatives and policies that promote social values, business organization and in favor of local communities. Finally, as far as government aspects are concerned, Ascopiave is aligned with industry best practices, not only in the composition of its corporate bodies, but also in the content of its code of ethics, remuneration policy, bylaws, management and coordinated guidelines, including sustainable success as a key principle. The Group's attention and commitment to environmental issue translates into various initiatives, all aimed at minimizing the impact of its activities. These initiatives range from the construction and management of energy production plants powered by renewable sources, wind, photovoltaic and hydroelectric, with the implementation of the best technologists for the cost of the monitoring of consumption and the inventories of sustainable behavior. As an entity operating in gas distribution, we are also called upon to contribute to the achievement of energy efficiency obligations to the mechanism of the so-called white certificates. The involvement of people, also in the accomplishment of economic and social sustainability objectives, is forwarded by Ascopiave Group in the context of mutual trust and cooperation. Particular attention to personnel training, the enhancements of diversity, work-life balance and maternity. With regard to the supply chain, the group gives preference to suppliers in possession of environmental quality, health and safety certifications. The company continues its approach of communicating social and environmental performance through the drafting and publication of the nonfinancial statements in relation to the sustainability report, responding to the strategic objective of developing and maintaining relations with the stakeholders community overtime. Market trends. To address the challenges of climate change, the European Union has initiated the European Green Deal, which aims to achieve climate neutrality by 2050, while setting challenging intermediate targets to be reached as early as 2030. The pandemic situation has also called the European Union to intervene, to support economic recovery of EU countries, with the creation of the recovery of residence facility. In this context, the Italian government has earmarked about EUR 235 billion from the RRF, of which more than 21% has been earmarked for energy transition. Over the past year, however, the Russian-Ukrainian conflicts has exacerbated the energy market prices, leading to a high increase of volatility in energy commodity prices. In this situation, European Union has presented a Repower EU plan, which aims to reduce the union's energy dependence on Russian gas. The plan envisages among other things 2x more biomethane and 4x more green hydrogen production than initial targets by the Fit for 55 package. As part of the energy transaction, the gas represents a key source for achieving sustainability goal, including too potential integration and renewable energy sources. Despite of the fact that the significant reduction in natural gas consumption and growth of electrification of consumption is expected, the big scenarios predict an increasing penetration of the so-called green gases in Italian consumption, also thanks to the support it provided by PNRR. In this perspective, the upgrading of existing infrastructure from a green perspective, enabling the transport and storage of green gas with existing infrastructure and an increase in integration with the renewable electric system to the storage of nonprogrammable renewable energies and power to gas, power processes, represents 2 key drivers for the growth of the sector, and the necessary response to the risk of shrinking gas consumption and reducing the use of existing infrastructure. The contribution of green gases to the gas demand in Italy is expected also due to the role they can play in decarbonization in the circle economy. Biomethane and hydrogen in particular, will represent the main alternatives to natural gas, and will account for about 16% of gas demand by 2040. Green gases in addition to the decarbonization attribution can enable other significant benefits such as grid energy independence, a wide availability of production sources, the possibility of storage and transport for existing transport networks, the multiplicity of end users, transport industrial users, power generation applications with a view to integration with electricity grid, power -- to gas to power. Within the Italian PNRR, some EUR 3.7 billion are earmarked for hydrogen development projects. There are 6 types of interventions, all included within the emission of ecological transaction. These are the following: the creation of Italian hydrogen valleys in which to support the local production and the use of green hydrogen produced by renewable plants in the area; the use of hydrogen in hard to [ abate ] sectors; the use of hydrogen in the transport sector, both on the road through 40 fueling stations for transport vehicles; by rail through 10 storage and fueling stations along 6 railway lines; investment in research and development to improve knowledge of hydrogen-related technologies in the products of storage and distribution phases; the creation of an all-Italian hydrogen supply chain, with plants producing electrolyzers and associated components. The future gas infrastructure network will, therefore, have to be adapted 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 electricity system, will play in the same role as natural gas today, with the same use and end users. Technological infrastructure adjustments in this scenario will therefore be necessary to facilitate the penetration of new gases and support the decarbonization of the energy system. In Italy, the business of gas distribution is substantially mature. The sector is widespread and a significant share of the managed infrastructure needs to be renewed also in order to be able to meet the challenges arising for the evolution of the energy system. The rules for avoiding concessions by minimum territorial area and the significant economies of scale that [ centralized ] management will favor the trend towards a further concentration of supply with a significant reduction in the number of operators. Against the backdrop, thanks to the stability and transparency of the legal and regulatory framework, distribution activities will continue to be characterized by low operational risk. It is assumed that the authority tariff regulation detracts an element of discontinuity that will be introduced in the near future. We'll continue to guarantee stability to the economic results and cash flows to the operators in an increased focus on cost management, which, at the same time, will generate opportunities for efficient and innovative companies to improve their profitability. In addition to the elements of stability and limited operational risk associated with the regulation of gas authority, also emphasizes the need to experiment and adopt innovative solutions that promotes elements such as optimization in network management, digitalization, convergence within the gas and electricity sectors, energy efficiency and decarbonization. From 2021 onwards, especially due to the recovery of energy demand following the pandemic crisis, and even more significantly in 2022 as a result of the Russian-Ukrainian conflict, energy price developments were characterized by a high level of volatility, leading to record prices, while at the same time introducing a high degree of uncertainty into the market. European decarbonization policies from European Green Deal of 2019 to the RePower EU of 2022, have introduced increasingly challenging decarbonization targets. Consequently, national energy policies, long-term strategy and plan for ecological transition have followed the impetus from EU initiatives by setting ambitious targets for Italy. In this context, renewable energy sources assume a central role in decarbonization process. In this regard, it is important to anticipate how 2022 was a peculiar year for the economics of renewables, as the revenues were significantly affected by 2 factors that caused them to fall short of the forecast made at the beginning of the year, namely, the introduction of compensation mechanism to fair support degree, which provided for the repayment of the so-called extra profits by electricity producers; the introduction of cap of 180 megawatts for revenues from renewable energy production through the budget log 2023. The deployment of renewables in Italy has shown a trend substantial growth over the past 20 years with the total installed capacity of 60 gigawatt by '21 and a CAGR of 5.6%. However, to which national decapitation targets an additional 60, 65 gigawatts will need to be installed by 2030, roughly double the amount installed up to 2021. Despite of renewables, has also made possible in recent years to improve the degree of coverage of electricity demand at the expense of fossil fuels. Specifically in 2021, renewable energy products amounted to about 160 terawatt hour or about 36% of the entire demand in that year. At the same time, traditional turbo sources dropped from coverage ratio of 74% in 2005 to 51% in 2021. Italian renewable capacity with a view to meeting decarbonization targets is expected to reach high levels of installed capacity in the short to medium term with a level of about 130 gigawatt by 2030, 180 gigawatt by 2040. Photovoltaic in particular will drive the growth of renewables, accounting for 65% of installed capacity by 2040. In such context, all generative energy sources such as green gases, hydrogen and biomethane in particular, and technologies such as storage system will also make it possible to preserve excess renewable production for future use. It will be increasingly emerging and central to the future policy. The positioning and expertise in the strategic pillars, currently possessed by the Group, natural gas distribution, provides a solid basis to supporting expansion of the scope of activities managed. The consolidation process in the sector represents growth opportunity That Ascopiave will be able to see, thanks to its solid technical and industrial capabilities with economic management efficiency and availability of adequate financial resources. In particular, financial capacity is crucial to coping with the huge needs due to the settlement of investments to outgoing operators in the context of the tenders for the award of the service, and the investment plans offered for the development and renewal of infrastructure. The growth pursuit will be achieved in several ways through the award of significant number of minimum area tenders, acquisition of companies already operating in the sector, the establishment of partnerships for joint participation in scope tenders. As part of its growth strategy in gas distribution -- as the growth strategy of gas distribution, Ascopiave's interest to committing substantial resources over the planned period and [ initiating ] investments of EUR 387 million. EUR 230 million are related to ATEM tenders and derived under the payment of the residual value of the plant to the previous operators and the subsequent development and maintenance of networks. It is estimated that these investments could generate an EBITDA of approximately EUR 21 million by 2026. EUR 166 million on the other hand were due to M&A initiatives that are partly allocated to the payment of the transfers of the enterprise value of the target companies, and partly to the subsequent development and maintenance of the newly acquired networks. It is estimated that these investments could generate an incremental EBITDA of approximately EUR 17 million by 2026. With regard to the investment related expense of the [indiscernible], it should be noted that as much as EUR 77 million relate to the enterprise value of the acquisition of A2A assets, which has already been finalized in April 2022, aligning the Group to increase its user base by about 15%. The group has identified a number of tenders in which we would like to compete, also defining the level of priority and interest. The minimum territorial bases of interest selected with the portfolio logic, [ expert in ] economies and investigating which is resulting from their joint management, identifying the advantage is specifically possessed by the group vis-a-vis potential competitors, taking into account the expected profitability of operations, taking into account the risk of nonutility investments of proceeds realizable through the possible exit from current management. The application of this benchmark made it possible to define a bidding strategy that's identified not in Italy as the geographical focus. It aims to consolidating a profitable leadership in northeastern Italy, assessing favorably both territories in which the group has a significant presence and other areas in countries that's contestable. Having said this, in general terms, it will be pointed out that the possibility of implementing the strategy described depends on the timing of the publication of the scope of tenders. This is a decision for local authorities and contracting stations despite the fact that law provided for staggered deadlines, which unfortunately, in light of the facts have been completely disregarded. For tenders -- the tenders have been very few. Moreover, the few experience available such as that the time frame for the final award of the service may be rather long, also due to the legal disputes that generally accompany awarding decisions. Ascopiave intends to pursue growth in the sector through business acquisitions, the establishment of partnerships or temporary groupings of the companies for participation in tenders. Through partnerships in particular, the group seeks to increase its competitive chances and to diversify its financial and operational risks, we're participating in the results of a broader portfolio of concessions. The industrial benefits of the potential partners and the territorial spinoffs, I expect it to be significant and adequate to generating win-win opportunities for all parties involved. Pursuing the strategic direction in 2020, Ascopiave selected by Aemme Linea Distribuzione and NED Reti Distribuzione Gas as an industrial partner for the joint participation in future tenders for the Milan 2 and Milan 3 ATEMs. The partner companies can be managed over 150,000 users in the areas of interest. Renewable energy sources will play an important role in the context of the energy transition and the sector has important development prospects. Ascopiave intends to structure a diversified plant portfolio through M&A transactions and the construction of new grid plants, consolidating its expertise also through partnerships and specialized operators. A dedicated business unit established in 2022 in the group competencies in the sector by integrating and rationalizing internal competencies to those of the personnel of the company required in 2022. For the planned period, Ascopiave expects to make investments in the renewable energy sector amounting to EUR 328 million. EUR 151 million is related to Green Deal development of new plants with sites already identified. Part of the interventions related to the installation of plants [indiscernible] and the construction to the company's [indiscernible] the operation of the Greenfield plants are pre-launched stream with the plan for horizon, incremental EBITDA. The plants would generate in 2023 a revenues of EUR 11 million, EUR 188 million due to the acquisition of plants already in operations, M&A transactions, which is estimated by these investments, which are the rate -- incremental EBITDA for EUR 9 million. It should also be noted that in 2026, that would be EUR 29 million in EBITDA. In the current energy context, the Group will have a strategy localized in the restructured that will allow it to value synergies in the cash efficient, the target investment activities to which EUR 74 million are allocated at green gas. Ascopiave wants to play an important role in this territory. Specifically, we're talking about hydrogen and biomethane, the water service to date. In addition to this, we completed the acquisition of Ascopiave operating in the telecommunication sector. Overall, the contribution to profitability is EUR 9 million in the year 2026 in terms of EBITDA. A breakdown for the contribution of the individual activities is given on this page with regard to hydrogen. There is a project currently in progress that will enter saturation phase after the last year of the plant. Expected investments for the development, dissemination of green gas amount [ EUR 30 million ], in particular in the biomethane sector. We are already in collaborations with agricultural companies and it's an important potential for development in the Veneto region on more than 100 megawatts of agriculture biogas that need to be converted. With reference to hydrogen, we plan to implement the [ Green Deal ] project from production to sale, also by seizing opportunities arising from the PNRR, which have not, however, been reflected in the investment figures. With this project, we intend to contribute to spreading, giving hydrogen in the Veneto region. The main target audience is transport, especially public transport, but also private transport. In this sense, we've already initiated talks with directly interested parties as well as assessing the potential for use in production processes, with particular reference to energy-intensive ones. The management to integrate the water service is very important synergies potential with Ascopiave's current core business. The opportunity of some processes involved in the management of water and energy infrastructure can in fact, favor the transfer of [ SKU ] and the sharing of resources along the expectation of economies of scale and better use of the company's production capacity. The Group has already entered the sector to the acquisition of Cart Acqua. Ascopiave has a priority interest in this business as it is a regulated activity, managed under the contraction and publicly compatible with the risk profile sought by the Group. Another reason for interest is the fact of [ fine ] investment needs necessary to reducing infrastructure deficiencies and current water losses. Unfortunately, the sector currently presents insignificant barriers. to entry introduced first foremost by the regulatory framework and the political environment. Ascopiave would like to see a greater opening in order to favor investments with the operators with experience in the management of infrastructure services. Supply and [ energy, efficiency ] and expectation of the water sector were looking carefully at possible opportunities and believe we can make a positive contribution to the development and digitalization of the sector as they have done for Cogeide. Cogeide [indiscernible] user management software already used in distribution. Lastly, it is Ascopiave's interest to evaluate opportunities in the energy efficiency sector, particularly in the industrial and public administration with a possible carry out interventions with a larger average investment site that it would allow Ascopiave to obtain incentives in the form of EEEs used to communicate the impacts of obligations in gas distribution. In addition to the investments in the sectors indicated, the Group considers it's advisable to monitor evolution of technology, whether it's a framework, market context, assuming that we will be able to realize investments that were not -- have been weatherized in the business plan. These are the innovative hydrogen and synthetic gas sectors and there are [ regulatory ] services sector. Ascopiave have achieved appreciable results in the management efficiency in implementing organizational technological solutions to improve both the quality and reliability of the service and to contain costs. Starting in 2016, an extensive reorganization process of the co-activity was initiated, which affected all growth companies. This process involves the renewal of reengineering of systems and procedures, the rationalization of logistical and operational locations because the territory, introduction of centralized and integrated management to all major operational processes. And finally, the adoption of new information systems for the management and the distribution of workforce and commercial services. It may be possible to optimize use of resources, making it possible to internalize many activities contracted out to third parties, and thus reducing operating cost and increasing the commitment of internal results in investment activities. As a result of measures, unit operating costs in 2021 were reduced by 15% compared to 2017. It should also be noted that Ascopiave has solid experience in integrating post-acquisition companies, again, achieving management improvements and cost reductions. Since 2017, the complete integration of 4 companies has been achieved, managing more than 50% of the Group's current user base. Improving economic efficiency is at the heart of Ascopiave's management policies, which intends to build on the excellent results achieved in recent years. In this sense, corporate policies and practices that serve this purpose, which has the continuous monitoring of process efficiency through the use of operational systems to dedicate organizational resources. And in certain regulation system, it will be confirmed and strengthened efficiency interventions will be based on the adoption of digital innovative technological solutions in terms of cost control, staff training, careful management of relations with external suppliers, with the ultimate aim of maintaining a lean and flexible cost structure. Ascopiave plans to increase its operational economic efficiency due to digitalization of networks and processes. To design a significant commitment to, efficiency initiative is planned, such as the installation of smart meters on the entire network currently operated, the digitalization of business processes through, for example, virtual and augmented reality projects, RPA solutions and the digitalization of the network through the installation of sensors, couple of currently efficient utilizing network data. This efficiency enhancement is expected to bring in multiple benefits to Ascopiave's operations, such as improved network balancing, more effective consumption profiling, reduced operating costs, prioritization of maintenance network and reduced network losses. Innovation constitutes the fourth but no less important pillar of corporate strategy. Innovation management is a crucial activity of Ascopiave, targeting both short and medium to long-term objectives. In the short and medium term, innovation makes it possible to improving the levels of economic efficiency and quality of the services provided which are indispensable for achieving satisfactory company profitability and maintaining an adequate competitive capacity vis-a-vis the other operator in the sector, also in view of the competitive concentration in tenders by awarding concession. In long-term perspective, a technological business model innovation is fundamental is responding positively in economic and sustainable way to the transformation processes induced by both European and national environmental and energy policies. Over the coming years, Ascopiave will implement an organic program of innovative interventions, aimed at involving infrastructure and improving the safety and functional efficiency. The interventions will focus, in particular energy efficiency of REMI cabins, the preparation of network, installations and future introduction of green gas. Ascopiave intends to implement several initiatives with increasingly integrated efforts to sustainability. Starting with people, we also intend to increase in training targeted employee to 25 hours per year by enriching the training, further expanding the [ e-learning ] service available in the platform and undertaking activities aimed at obtaining certification of equality. It is also planned to renewing the company's need according to the high industry standards and renewing domestic meter fleet by choosing meters capable of receiving the new gas mixtures made of recycled raw material. It was also planned to perform energy efficiency utilization work on the network, making it compatible with gases other than methane as well as the implementation of the efficiency measures for preheating in REMI cabins and the adoption of innovative methods for CH4 dispersion in the network which will allow reduction of emissions. Economic financial objectives. The strategic development hypothesis is given by activating the economic and financial impacts over the entire period. The projects were prepared, taken into account both the main risk elements typical of the reference sectors, and the group's characteristics assessed in relation to the planned actions. The uncertainties over the timing of the start of tenders and the awarding of transactions, led to the development of scenario analysis based on 2 different assumptions. The first assumption, assumption A, envisages that during the planned period, no ATEM tenders will be able to complete its purpose until it is awarded. Therefore the group will continue to manage its current perimeter of activity in the gas distribution sector, apart from the growth related to the acquisition of assets and M&A operations. In the second scenario, on the other hand, it is assumed that by 2026, the group will be awarded 4 ATEM transactions identified among growth of interest on the basis of assessment of the progress of the tendering process. As a common assumption for the 2 scenarios, growth for external lines in the distribution sector was assumed with the acquisition of companies totaling 50,000 customers and the execution of an investment plan in the renewable energy sector and diversified activities. In the 5-year period, 2021-2025, the Group expects to realize a significant volume of investments totaling EUR 873 million which rises to EUR 873 million, which rises to EUR 1.93 billion in the above mentioned tenders awarded. The plan assumes the needs generated of investments and which is just to implement the growth and diversification strategies, will be partially financed using the proceeds from the full divestment of the equity investments as the non-controlled companies. The sources of disperses amount in total of [ EUR 197 billion ] consists on the one hand all the price realized backing, sizing put options held on EstEnergy and Hera Comm, in scenario A, investment. In distribution, EUR 469 million over the planned period are refer to EUR 166 million in acquired assets, EUR 303 million in the current scope of operations. With guidance to the latter, investments of approximately EUR 197 million applied for renewals and extraordinary maintenance work on 342 kilometers of pipeline, user funds, the reduction in measurement permits and plants, development investments consisting of the laying of about 153 kilometers of new pipeline and the construction of new connections estimated at EUR 41 million. It is also planned to install around 293,000 electronic meters, mostly corresponding to the obligations to replace traditional meters displayed in the regulation. Finally, investments in network digitalization. Efficiency and innovation amount approximately EUR 12 million. Assuming the tender awarded, the volume of investments could increase by an additional EUR 20 million due partly to the payment or planned repayments without going operators, EUR 107 million and partly with implementation of the investment plan profit in the tenders, EUR 23 million. The expansion of fleet managed plants involved investments of EUR 328 million, of which EUR 188 million in M&A transaction and EUR 141 million in the greenfield development of new plants and the maintenance of existing one. With regard to the latter, provision is made, EUR 36 million investment for the development of 2 megawatts of wind power. Authorization process has been completed. Investments have been implemented, and the start-up is planned in 2024. EUR 21 million for the developer of 38.6 megawatts of photovoltaic power sites which have already been identified, and for which authorization processes have already been initiated. It is expected that these plants can start operating partly in 2024, partly in 2025, EUR 43 million for the development of permits of wind power plants inside that have already been decided. And in 2023, this is operating. It is assumed that these plants enter operating in 2027 and after the end of the plan horizon, EUR 4 million relates to the maintenance work on existing facilities. EBITDA is expected to grow compared to the preliminary 2022 figure, reaching EUR 153 million in scenario A, and EUR 152 million in scenario B. In scenario A, the increase in EBITDA to 2026 is attributable to EUR 27 million to gas distribution activities, EUR 36.4 million to renewable energy activity and EUR 9 million to diversified activities. The increase in the contribution to results of distribution activities is mainly attributable to expansion of current activities. The growth in margins in the renewable energy segment is due both to the increase in the number of plants managed, normalization of the production levels of current plants, and energy sales price. In fact, it should be noted that the segment's results in financial year 2022 were heavily penalized by the low production of plants due to the adverse weather conditions and by transitional RAB plan regulation aimed at limiting the prices of energy produced from renewable resources. Finally, the assumption data, ATEM tenders to be about in assumption B would lead to a further EUR 20.8 million increase in EBITDA. The development of realized -- can be realized, both externally and internally, can be further consolidation in gas distribution sector with an estimated growth of user served, network managed, volume distributed and tariff invested capital. By 2026, the capital invested and renewable energy will reach a value of approximately EUR 290 million, accounting for 22% of the Group's total net invested capital. The normal installed capacity renewable energy is estimated at 223 megawatts, depending on total capacity capital employed of 22%, in production energy, in renewal energy in '26 it will be 223 megawatts annual output of 371 gigawatt hours. Over the plan horizon, plant improvement initiatives are expected to reduce the average annual carbon dioxide equivalent emissions generated by the Group's activities by approximately 3%. Renewable energy installation by 2026 should equal to 169,000 tons for carbon dioxide equivalent reductions, so climate changing gas emissions. These targets do not take into consideration positive impacts of energy efficiency projects and green gas production. In both scenarios, financial results expected to grow, both in terms of net operating margin and overall net profit. The profit projection of 2026 planned at EUR 41 million corresponding to a weighted average annual growth of the planned period of 7% and EUR 44 million in assumption B. The results generated up to 2022 here are almost entirely from activities controlled by the group, which will be able to continually replace the results to-date from minority in sourcing companies, active in the marketing of gas and electricity. Compared to the forecast of the previous strategic plan, the weight of financial expenses increases both due to the increase in financial debt, and above all, due to the expected increase in the interest rates. The assumed investment and divestment trend will result in a stability of the invested capital, and it will be balancing towards fully consolidated assets. In assumption A, invested capital 2026 stands at approximately EUR 1.3 billion, up 1% from 2022. In 2026, 7% of the investments are related to the distribution activities, 22% to the renewable energy segment. In assumption B, the invested capital stands at EUR 1,504 billion by a growth of 17% in the scenario, considering the award of new ATEM tenders. That distribution account to about 72% of total investments. In scenario A, financial debt is reduced, while in scenario B, it increases pushing the leverage ratio towards levels more in line with the risk profile of debt net held to the benefit of shareholders. So its activities after contributes to economic and social growth of the contracts in which it operates. Economic value generated over a planned period is estimated EUR 914 million, over 72%, of [ EUR 583 million ] is distributed to the main shareholders. In particular, most of the added value distributed over the planned period is to the benefit of shareholders, 29%, group employees 30% and the local authorities grant [ cattle ] distribution service at 20%. Remuneration of investors. Ascopiave aims to create value of shareholders through a balanced and flexible financial structure and an efficient cost of capital. That management is aimed at containing interest costs, stabilizing in the trend to convenient hedging formulas. In the 5-year period 2016-2021 Ascopiave Group distributed operating dividend of approximately EUR 226 million. The cash generation of operating activities and the balance of the financial structure allows the distribution over the next 5 years, a dividend of 13% in 2022 to 17% in 2026. Ascopiave established company with a balanced asset portfolio net track record of growth that will guide the group sections in the coming years with [ aim of ] growth in core business, diversification into new strategic activities, economic efficiency and innovation. The investment plan of EUR 870 million in the most prudent contract is equally earmarked for the current scope and expansion of the company's activities. The plan will be financed with approximately EUR 100 million. So the resource is stemming from the size of put option to the shareholdings in EstEnergy and Hera Comm, which result for shadow sustainable growth capable of creating value for key stakeholders and the distribution of the remunerated dividend to shareholders. I think I have finished my presentation. And now we can start with the Q&A session.

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

Some questions. The first is a reflection on the reduction of the dividend paid by the company in the light of the put option, the level of indebtedness in this moment, which is also true with the potential proceeds of the put option. So at the end of the period -- so surely, your [ debt ] level will be decreased, if you consider the entire 5-year plan period. So can you give us some more information on how and why you are reducing the dividend? On the put option, I would like to ask you, if this will consider the scenario of taxes? If this will happen in one shot? Or, will it be something distributed over the years? In the EBITDA that you have mentioned, is there any contribution of profit that you have made, that you have factored in? On the multiples of M&A what you've have indicated is on M&A acquisitions. So the multiples come from the distribution activities? Is it split over 2 years? Or is it split over the entire 5-year period? So I would like you to highlight how you intend to manage the dividends, the profits and the debt portfolio of the company? Especially regarding the wind farms and solar energy.

Your first question, reducing of dividends. As you must have seen in the actual results of 2022 -- in the forecast of 2022, there has been a small reduction compared to the budget, and this is what we have explained from renewable sources that we have -- at the beginning of the year 2022, we have both some renewable energy plants that were immediately fit by -- to the [ country ] measures, and also the drought, the lack of rain, in the region especially, not in Italy. So we have been operating at about 40% compared to the 8 previous years. So there has been a crisis no doubt in the energy field. So especially as energy has had problems in the sector, our plan is to -- was to distribute more dividends, and in any case as you must have checked, we have tried to give a satisfying dividend yield to the benefit of the shareholders of 5.4%, which is an average number -- average performance in the sector. So the rationale that has -- that is -- that drives the choice refers to these assumptions relating to the put option, especially relating to the subsidiaries, EstEnergy and Hera Comm for 2023. We don't think that we will exercise any put option maybe in 2, 3 -- or maybe 2, 3 times we'll exercise the put option between 2024 and 2026. Relating to profits, we have not indicated anything. So the prime strategic trend doesn't -- is not affected at all because they have not indicated profits. Relating to your fourth question, Dr. Paggiaro will talk to you now.

So regarding the multiples that you have calculated relating to the tenders, it depends to the multiples we're going to pay on EBITDA, the value of the plant and so on, where concessions are necessary. So there are many, many assumptions that drive this decision. What we can tell you is to evaluate the price, the value of the shares we have taken into consideration that the refund value of the plant will have a RAB value, which is very, very small. So also the multiples will -- are fully below what we calculated in the past. So this is the result of this assumption. So we really hope we won't be forced to pay any concessions on -- land concessions, some property concessions and so on. So regarding -- if the values are normal, property values, regarding profit, acquisitions of companies that have different characteristics we may be able to pay higher multiples. So this is -- on these grounds, we calculated the multiples. Relating to renewable energy, I would like to focus to draw your attention, not all the investments that we have included in the plan will be -- will become operational, for example, the EUR 40 million that we have envisaged. We will -- we have included the spend over the 5-year period, but this EUR 40 million will not generate any EBITDA. In any case, if we take into consideration the investments that we have considered like the realization of new plants, the acquisition of -- the upgrade of plants existing and the other plants that couldn't operate on 2022. The total investments between 2021-22 is EUR 328 million. This is what we have said. The generated EBITDA up until 2027, it will be around EUR 40 million. If you see the increase in EBITDA related to distribution, the multiple is -- in reality is higher than what has been indicated. If you calculate this multiples, it depends on what factors you actually consider. So relating to production that we have planned, we have planned a normal production cycle of the generation plants that we have considered.

[Operator Instructions]

So if you need any further information, you can call me after the call. Anyway, you should have all the elements to see how we calculated the multiples.

The next question is from Emanuele Oggioni, Kepler Cheuvreux.

I have 2 questions for you. I'll start with a follow-up. I want to know, if you have given the full answer about the capital gains, is that included in the target -- or EBITDA target? Have you included the capital gains in the EBITDA target? This is something I haven't understood. And refer to 2022, can you tell me EBITDA 2022, how can we have EUR 65 million EBITDA against a distribution of EUR 4 million from renewables, EUR 69 million reported EBITDA, and that EUR 8 billion positive of capital gain, and then, a negative amount of EstEnergy contracts, so EUR 2 million differential of EUR 2.5 million extra. So EBITDA should be EUR 71.5 million. So I don't understand how you can calculate -- how you have calculated this figure? This is my second question. The third question refers to the distribution and assumption -- regulatory assumptions of 2024, 2025, 2026 period, if you have considered it, the deflatory factor of RAB plane. I would also like to add last question referred to, if you could specify the cost of debt that you expect along the plan?

So dating to '22, your reconstruction is right. That has been something which has not presented clearly EBITDA distribution is EUR 65 million. EUR 9 million is the result of renewable energies. EUR 4 million, so this must be added to capital gains from the sale of investments. Then the other nonrecurring components again been factored in on as normal operating cost from corporate. So the EBITDA of EUR 67 million, significantly, EUR 65 million is a contribution of debt distribution. EUR 4 million is renewable and the rest is significantly substantially the capital gain that we have realized from the sale of our assets. Our President, the Chairman has already told you that in order to avoid polluting the figures regulating to '20 to '26, no capital gains have been make out [ before ]. So that's a normal result that we have done to avoid and also all the put options we have factored between for 2026. And the net financial position and also the performance of results that takes into consideration eventual profits, relating to other parameters that we have utilized for projections at the last page of the document -- we have a backup page where we have given you all the formulas of calculations, which can help you understand the numbers. The WACC has been 6.5% over the 5-year period. So this should also come from adjustments, updates since the correct -- the tax regulations also affect the calculations of our figures. Relating to inflation, the average is 2.35%. We have considered 4% on 2023 in order to develop our budget, our figures for 2023. Then we have assumed inflation in line with what some agencies have forecast, 1.8%, 2024, 2026, in order to adjust the monetary value of RAB plan, in order to inflate the cost. So our investments have already factored in as factors. For the average [ passive ]. rate, it depends on the period. It depends on the loans that we have outstanding The [ SOA ] is 3%. This is 3%, so this is the passive figure that we have considered. I think on the sale of energy, as Roberto in fact talked about 690 megawatt hour, this is the data that we have calculated considering the forward prices, how the shares are traded over the past months, which looks at something really tangible, viable, also considering other operators which have presented their plans. So you can make your considerations, the production is 371 gigawatts hour up to 2026, and sale is EUR 135. If you think the price can be different, you can verify. You can verify it easily, just reading what has been presented. So this is a wholesale price. It doesn't include through the incentives. There is a part, but it's already a tiny portion. It's a price, let's say, which is realizable, as you have seen it's about 40 gigawatt hour, which have been subject to incentives, even though there are prices which are higher.

[Operator Instructions] Next question is a follow-up from Roberto Letizia.

I would like to know your reflections on renewable energy projects over the next 5 years, on the wind plants -- some visibility on projects where you can already start work, do you have any projects? Can you give me the profit margin that you're going to have on the wind farms? And tell us how much EBITDA you can have on hydro production, if you imagine you can have some -- if some -- there can be some negative occurrences which can hamper your profit on current assets? I would like to know how the debt position can evolve over the years.

Relating to projects. Development projects of renewables, the development of new plants, as I said, in the description of the plan about the wind farms, as we have said many times, there are 2 projects: one is photovoltaic; one is the Industrial Commission, industrial plant where there will be hydrogen production of [ project ] transport. Other will be simply a photovoltaic field of about 10 megawatts of installed capacity, while the previous one was 20, 30 megawatt installed capacity. So the one which is destined for hydrogen production, only one since then there was an agreement on public transport company, it will help to fuel -- to service fuels or buses and electric buses. The excessive portion will be sold to the grid. It's a profitable business. It cover an area of about 50 hectares. It is a decommissioned area. We are about to close an agreement -- a framework agreement and then start with authorization procedures, but we have already defined a definitive plan to erecting these plans relating to reaching to the smaller plant of 10 megawatt, the photovoltaic plant that will be best aimed for the energy will be sold to the grid. We're at an advanced stage of negotiation and we look forward to presenting a plan authorization simply -- simplified authorization over the next few months. No sooner we have the no objection certificate, we will start with the works. So these are projects which are definitive. The areas have been identified and optioned. So the acquisition will be perfection with the authorization procedure. So absolutely, everything is in the pipeline. It's only the bureaucracy that we are trying to -- that we are waiting for and that we have to deal with, and we already organized to start the works. For other questions, the CFO.