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

Good morning. This is Chorus Call. Welcome to the presentation of the consolidated results as of 31st December 2024 of Ascopiave. [Operator Instructions] Now Dr. Nicola Cecconato, the Chairman of Ascopiave, is going to deliver his speech.

Good afternoon, everybody. I'm going to start with the consolidated results as of 31st December 2024 and comparison with consolidated results as at 31st December 2023. Let's go to Slide Page 4, structure of the Ascopiave Group as at 31st December 2024. Compared to financial year 2023, the group's corporate structure has had some simplification because of some extraordinary operations in the year 2024. On 31st December 2024, the reorganization of some subsidiaries exiting the gas distribution and renewable energy sectors became effected for strategic purposes. So there were some mergers, end mergers and demergers and all the subsidiaries were channeled into 2 companies, Northeast and Northwest. AP Reti Gas and Rovigo S.r.l. became -- entered Ascopiave, and the other which entered AP Reti Gas S.p.A. And on the same date other companies also entered the Ascopiave Group, the other companies of Edigas, Serenissima Gas were merged by incorporation into Romeo Gas S.p.A. Following this operation, Romeo Gas S.p.A., which changed its company name to AP Reti Gas Nord Ovest S.p.A., carried out a partial and proportional demerger in favor of AP Reti Gas S.p.A. On the same day the planned merger by incorporation of Asco Renewables became effective and it became Asco EG S.p.A. and it changed its name to Asco Power S.p.A. That same day the merger transaction that took place were effective for statutory purposes as of 1st December 2024 and became effective for tax and accounting purposes 1st January 2024 whereas the demerger transactions were effective as of 31st December 2024. On 16th December 2024 and with effect from 31 December 2024, the company Salinella Eolico S.r.l changed its company name to Asco Wind & Solar S.r.l. In December 2024, Ascopiave exercised its put option on 25% of the capital of EstEnergy S.p.A. And the transfer of the shares, according to the agreements made with the Hera Group, will take place -- this will take place by July 2025. Slide Page 25 -- Page 5, consolidated profit and loss account. In the financial year 2024, the group realized revenues of EUR 205 million, achieving an EBITDA of EUR 103.4 million and EBIT of EUR 51.6 million. The balance of financial expenses and income shows a negative value of EUR 10.2 million, up EUR 2.3 million compared with 2023. This change is mainly explained by higher interest expenses accrued on variable-rate loans due to the increase in interest rates. Income from companies consolidated using the equity method amounted to EUR 7.9 million. It was propensity of the pro-rata result of the Ascopiave's holdings in EstEnergy Group and investment in EstEnergy and Cogeide, and increased by EUR 4.3 million. Taxes weigh on the income statement by EUR 12.8 million. The tax rate, calculated by normalizing the pre-tax result of the effects of the consolidation of the companies consolidated using the equity method and dividends received from investees increased from 3.2% (sic) [ 30.2% ] as of 31st December 2023 to 34.5% as of 31st December 2024. Slide Page 6, consolidated balance sheet as of 31st December 2024. As of 31st December 2024, the group had invested capital of EUR 1.245 billion. Investments consists EUR 1.9 million from tangible fixed assets. EUR 787.4 million from intangible fixed assets. EUR 105.5 million the value of minority interest have in Hera Comm, EUR 53.3 million. Acinque EUR 21.6 million, Cogeide EUR 8.2 million, and Acantho, EUR 22.3 million. Also EUR 4.2 million from other fixed assets. EUR 566 million on the negative balance of working capital items and events. EUR 202.4 million from net invested capital in assets held for sale. Intangible assets shown under assets were equal to EUR 787.4 million, mainly consist of capital efficient network and plants owned by the group, [ EUR 710.5 million ], goodwill recognized following business combinations EUR 61.7 million. Tangible assets consist mainly of real estate and the value of renewable energy production facilities. During the equity investments recorded an overall decrease of EUR 202.9 million, this change is mainly explained by Ascopiave exercise of put option to sell 25% shareholding in EstEnergy. The sale will be completed during the financial year of 2025 properly deciding of the investment measures as of 30th September 2024 was reclassified to assets held for sale in accordance with the directive of IAS/IFRS. Shareholders' equity as at 31st December 2024 amounted to EUR 807.8 million of which EUR 9.8 million was attributable to minority interests. Net financial position amounted to EUR 387.6 million, a decrease of EUR 1.8 million compared to 31st December 2023. The debt net equity ratio is 0.45. Company's consolidated using the line-by-line method, Slide Page 8, operating data gas distribution. As at 31st December 2024, the group's distribution companies managed 871,410 users, a decrease of 0.3% compared to 31st December 2023. In the financial year 2024, the group distributed 1.456 million cubic meters of gas through its networks, it amounts to plus 2%. Operational data, Renewable Energy, Slide Page 9. The group has 29 plants for the production of electricity from renewable hydro and wind power with an installed capacity of 84.1 megawatt. In the financial year 2024, electricity production amounted to 217.6 gigawatt, an increase of 66.8 gigawatt plus 44% to which the regular rainfall and new wind farm in Calabria also contributed. Revenue development, Slide Page 10. Revenues of EUR 205 million, showed an increase of EUR 24.2 million, determined by the increase in gas distribution tariff revenues by EUR 58.4 million. The growth in revenue from the sale of electricity generated from renewable sources by EUR 8.7 million. The growth of revenue from energy efficiency certificates EUR 2.3 million. The decrease in other revenues, EUR 2 million. Development of the operating results Slide Page 11. EUR 51.6 million. Operating results, increased EUR 5.7 million due to the increase of EUR 15.4 million in gas distribution tariff revenue, an increase of EUR 8.7 million in revenue from the sale of electricity generated from renewable sources. Increase in depreciation and provisions of EUR 3.2 million. An increase in net operating costs of EUR 15.2 million. Revenues from the distribution -- of sales of energy, Slide Page 12. Gas distribution tariff revenues came out to EUR 139.5 million, that show an increase of EUR 15.4 million compared to the previous year. EUR 7.4 million, for the change of the remuneration of the regulatory invested capital, EUR 6.5 million on the monetary adjustment of the various tariff components. EUR 21.1 million in fare changes and renewable disbursement increased by EUR 8.7 million mainly due to growth in production. Net gains realized in the segment over the first half of 2023 has been affected by the containment measures ordered by the government, which is to take effect as of 1st July 2023. Other net operating costs, Slide Page 13. Net operating expenses, EUR 64.1 million increased by EUR 15.4 million due to the change in the following revenue and cost item, increased license fees to municipalities by EUR 2.3 million, higher-margin energy efficiency bonds, EUR 0.4 million, low contributions for security incentives, EUR 2.4 million. Lower personnel costs, EUR 2.7 million, lower service contract revenue, EUR 1.1 million. Lower capital gains from the sale of 15% stake in EstEnergy, EUR 15.3 million. Lower other nonrecurring costs, EUR 3.7 million. Other changes with a negative impact, EUR 0.9 million. Number of employees, Slide Page 14. As of 31st December 2024, the group had 495 employees, a decrease of 8 from -- at 1st December 2023. Slide Page 15, personnel costs. EUR 18.2 million, personnel expenses decreased by EUR 2.7 million, due to higher capitalized labor costs of EUR 2.7 million lesser. Slide Page 15, capital expenditure, intangible and intangible assets realized during the year amounted to EUR 81.1 million, decreased by EUR 6.5 million. Most of the technical investments considered the development, maintenance and modernization of gas distribution networks and plants amounting to EUR 47.9 million, of which EUR 17.5 million in connections, EUR 26.3 million in network expansion and upgrades and EUR 1.2 million in reduction from. Investments in measuring equipment amounted to EUR 13.8 million. Capital expenditures in the renewable energy sector mainly related to costs incurred in the completion of wind farm in the amount of EUR 1.9 million, for the maintenance and expansion of hydroelectric plants. EUR 2 million for the construction of photovoltaic plants amounting EUR 7.4 million. Construction of other green energy plants, hydrogen production plant and electric charging station and a hydrogen filling station, EUR 4.6 million. Investments in hardware and software amounted to EUR 1.5 million, other investments amounted to EUR 1.9 million. Related to purchase of company we booked EUR 0.6 million. Equipment, EUR 0.7 million. And extraordinary maintenance on company registered EUR 0.6 million. Net financial position and cash flows, Slide Page 17. Net financial position as at 31st December 2024 was EUR 376 million, down by EUR 1.8 million compared to 31st December 2023. During the financial, cash flow generated financial resources of EUR 80.3 million. Net investments in tangible and intangible assets resulted in cash outflows of EUR 81.1 million. Net working capital management generated resources of EUR 20 million. The group received dividends of EUR 13.5 million from investee companies. Not consolidated on a line-by-line basis, equity management resulted in cash outflows of EUR 1 million, mainly from the distribution of dividends to shareholders. Net financial position and cash flows. Slide Page 18, financial debt as of 31st December 2024, amount to EUR 383.7 million. Financing is 59% variable rate and the weighted average cost of debt in the year was 3.39%. EstEnergy, income statement and balance sheet, in the Slide Page 20, the slide shows the income statement for the first 9 months of 2024 and the balance sheet as of 30 September 2024 of EstEnergy Group as compared to the financials discussed in assets held for sale. Income statement of 2023 and balance sheet figures as of 31st December 2023, are also shown. In the 9-month 2024, EstEnergy realized revenues of EUR 840.1 million with an EBITDA of EUR 74.3 million and EBIT of EUR 42.7 million. As of 30 September 2024, EstEnergy has an invested capital of EUR 544.4 million. This consists of EUR 5.3 million intangible assets, EUR 617 million in intangible assets, EUR 17.7 million value of participation, EUR 0.6 million other fixed assets, EUR 96.2 million negative balance of working capital items and provisions. The net financial position was positive EUR 93.6 million. Slide Page 22, dividends, proposed dividend. Page 22, the Board of Directors of Ascopiave in consideration of the results of the year and the solidity of the group's equity and financial structure, proposed at the Shareholders' Meeting the distribution of a dividend of EUR 0.15 per share, for a total of EUR 32.5 million, an amount calculated on the basis of the shares in circulation and the closing date of the financial year. If approved at the shareholders' meeting, the dividend will be paid out in 2025. Tax dividend rate active from May 2025. So I have finished the presentation, now you can start with the Q&A session.

[Operator Instructions] The first question is from Alessandro Di Vito, Mediobanca.

I have 2 questions for you. The first question is we have noticed that there is a variation in some of the figures that you had submitted some time ago. So what is the cause of this variation? How come there is this variation? The second question relates to regulated activities in the macroeconomic scenario, which keeps on changing. Do you have any forecast for the next year? And what about the returns of regulated activities for next year?

Dr. Cecconato, can you hear us, please?

Relating to your first question. Variation is because of the variation in tariff revenues which couldn't be forecasted by us compared to the data indicated of the -- on the income statement. So there was a variation which registered a surge in how to get lease so it was quite a surprise even for us. Relating regulated activities so now we are at a forecast were made on the tariffs on the way which had in that particular moment of based on the ramp regulatory tax and all the other taxes which determined the tariffs. So we have based all our forecasts, all our tables, all our calculations based on that. So all the acquisitions that also happened had an impact on the figures.

[Operator Instructions] Next question is from Davide Candela, Intesa Sanpaolo.

3 questions for you. The first one is a follow-up. Relating to the previous question, what is your take on EBITDA and EBIT and the financial expenses compared to the preliminary results? Can you give us some highlights on this issue? The second question relates to the spending of assets by -- are to A2A, what's going to happen on the -- relating to the residual amount? Are you going to list it on the stock market? Do you have any plan of a stock placement? And the third question refers to can you just remind us on mergers and acquisitions? What is your approach about -- for Edigas, what is your approach, the sort of approach [indiscernible] relating to the Northern region? Or do you want to expand? Or would you like to go beyond your region?

I'll start with the third question relating to the M&A, merger acquisition, we obviously focus on the local territories because it helps us retain our efficiency in get supply. It is also true that in this moment, there are many, many operations small, medium scale that we are focusing on because our goal is to grow in the gas distribution field with assets that we can integrate those back to those where we can finalize our acquisition within the first 6 months of the year in coordination with [indiscernible] so this is our objective to focus anyway to remain in the northern part of Italy. Also because we can manage our services better and offer greater efficiency on operating costs. So it's a question of operations relating to funding of A2A, so the amount that we are going to collect from the EstEnergy operation Hera Comm, the put option has been postponed to April 2026. The 2 assets -- on the sale of these 2 assets, we should collect about EUR 30 million bring something more. So that after that, the rest will be done through bank loans and stock placement since we have already availed ourselves on this option in the past so we can say that underlying factor or finding factors with what we have just said. So the CFO Dr. Riccardo Paggiaro at this point will be speaking now.

Relating to your first question about the variation in what we said and about the variation on the actual figures, as I said this just happened because the actual tariff it changed completely, they entered into pause and they were totally unexpected. But anyways, it helps us to protect us, let's say our balance sheet figures, depreciation has also had a positive impact on our balance sheet. So these are the main elements. They also have a small [indiscernible] that we are sort of fine-tuning.

[Operator Instructions] The next question is from [indiscernible].

About your financial structure. My question is 40% of your debt is on fixed rate. This is what you said at the end of 2024 with maturity of 3 years. So you have a very -- quite a high debt exposure. So subject to interest rates. In the meanwhile, have you adopted any measures to safeguard yourself from a rise in interest rates? Can you give us any guidance on 2025?

End of 2024, debt is fixed rate that was 40% actually, if you, in the immediate future interest rate shouldn't rise. In the medium, long term, they could happen. It is also true that over the next few months our debt will have some changes. We are going to be a new debt because of the A2A operation. In that case, we have to decide how to cover our expenses. So we will avail ourselves of all the instruments possible in such cases and also our fixed interest rate, which is also going to be an advantage. Our distribution companies are connected to various benchmarks that the debt cost debt. So if the debt increased also the rates get increased. Related to fixed cost, how much could the fixed cost be, fixed interest rate can be. That we just pray for [ 62.4% ] of our total debt at least. So if our debt structure changes, we can also change the [indiscernible] of the rates that require some space.

[Operator Instructions] Dr. Cecconato, at this moment, there are no more questions.

If there are no more questions, I thank everybody for your participation, and have a good afternoon and a good day all of you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]