ERG S.p.A. (ERG) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the ERG Second Quarter 2022 Results Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Paolo Merli, CEO of ERG. Please go ahead, sir.

Good afternoon, everybody, and welcome to our webcast. Here with me is Michele, our CFO, will take you through the results in more detail after my opening remarks. Let me start summarizing the key figures over the period. I'm on Page #4. For clarity, those numbers are based on continuing operations, excluding hydro and CCGT from the scope. In a nutshell, results ended up being quite positive, mainly thanks to the contribution of new assets, I would say this is the main message. Looking at the first half, we closed with an EBITDA of EUR 277 million, up 55% year-on-year, driven up, as said, by capacity additions both from M&A and organic growth. In other words, let me say like this, the semester reaped the benefits of all the significant investments made over the last 12 months. We continued to invest heavily with CapEx at EUR 218 million in the first half of the year. Those slightly less than the EUR 300 million last year, which I remind you included almost EUR 190 million of M&A. During the period, in '22, CapEx were related to the solar acquisition in Spain, EUR 96 million, and the reminder to the assets currently under construction in U.K., Poland, France, Sweden and Italy from our, say, organic pipeline, both repowering and greenfield. Net profit from continuing operations was EUR 122 million, more than double year-on-year, reflecting the stronger operating results and lower financial charges. For the sake of clarity, our net profit does not include any windfall taxes either in Italy or in Romania, given that they are temporary and extraordinary measures than accounted as nonrecurring items for a total amount of about EUR 40 million of which EUR 36 million in Italy and EUR 4 million in Romania. All the details, of course, you will find on our financial statements. Net financial position at the end of June was about EUR 1 billion, slightly above EUR 1 billion, about half compared to the one at year-end 2021, mainly reflecting the cash in of the hydro disposal and then, of course, the cash flow during the period, the investments, the dividends, all the items, Michele will comment later on. Please note that the net financial position was inflated by roughly EUR 216 million related to the negative fair value of derivatives on commodities, even huge swings in energy prices. This is an item that should reverse, say, by the end of 2023, given the rollout of this hedging delivery times. Let me move on, on Page #5 to quickly comment on our recent achievements. We are moving forward in investing proceeds from asset rotation thus expanding our portfolio of renewable assets in Europe. As you know, we acquired 18 solar plants in Italy and 7 wind farms in Italy as well. All of them already in operation for a total amount of 206 megawatts. On top of that, we brought into operation a couple of wind farms from our organic pipeline, 1 in France, 20 megawatts and another 1 in Poland for 25 megawatts. After our business plan presentation, it's important to remind you that feature confirmed as investment-grade rating and stable outlook. So our quasi regulated business model was once again awarded by the agents. We also kept implementing our ESG strategy signing in the period, the women empowerment principles and entering the United Nations Global Compact as a clear sign of our commitment towards a more inclusive approach. I'm also proud to say that our ESG strategy received further recognition having been included in the top 10 of the integrated governance index as well as MCI confirming our AA rating. Last, but not least, I'd like to remind you that there has been as publicly announced some important news about our shareholding structure during the period. Some query and IFM investors agreed to form a long-term partnership with a clear commitment to sustain our business plan and foster ERG's leading position in the [ res ] space. So we are all thrilled and honored to be a part of this and personally confident that the partnership will result in upside for air and consequently for all our shareholders. The next couple of charts, some more details on the recent M&A and on Page #6, here about the solar acquisition that was closed in early July. So it will start contributing to our economic results as of July 1. You already know everything just to remind consistently with our business model. All the production is backed by feed-in premium tariffs, that are going to last so cold [ Comp Energia ]. They're going to last up to 2030, 2031. This acquisition strengthens our solar presence in Italy, where we have now about 175 megawatts of installed capacity. And we expect that the integration of these plants within our portfolio will allow us to achieve surely data synergies, but also to carry out some revamping and repowering activities going forward. The next page, Page #7. There are here some more details on the agreement signed last week with [indiscernible] to acquire 7 onshore wind farms located in pre regions in South in Italy. The asset portfolio is made up of quite young assets, as you may see from the average commercial operation date October 2019 on average, with a sound load factor and backed once again by CFD mechanisms, mostly 1 way CFD, 6 out of 7 wind farms, just 1 wind farm has got a 2-way CFD. With this acquisition, ERG strengthens its leading position in the Italian wind market with a total installed capacity of about 1.3 gigawatts after the completion of this acquisition. Let me say that this number is expected to further grow after the deployment of our repowering pipeline as well as greenfield projects right now under construction. The -- those plants are strategically located very near to our existing facility, and this will allow us exactly the same for the Solar to develop important industrial synergies. Important to say that we expect the closing of this transaction in late September, at the antitrust clearance. Therefore, it will be consolidated as of Q4 2022. This is at least the assumption we made for our guidance. Let me now comment on Page #8. This is the most important chart to me as it shows the execution of our business plan is very well on track, I would say, ahead of schedule. Thanks to the significant investments made in 2021 in the first half of this year, we could count during the period on a larger asset base for about 450 megawatts, which was, in the end, what really drove our economic results up. We are continuing our journey forward towards seeing more geographical and technological diversification. Please consider that 1/3 of these capacity additions is made of solar and plants are spread over 5 different countries as shown clearly in the chart. By the end of 2022, we expect to add further 400 megawatts made up of wind farms currently under construction in U.K., Poland and Italy plus the already commented acquisitions of solar plants and wind farms in Italy. This new capacity is going to start contributing to our numbers progressively over the second half of the year, and this has been reflected in our full year guidance, which I'll discuss later on. But before that, I'll now hand over to Michele for his review on results.

Thanks, Paolo. And now let's have a look at our second quarter 2022 results. Let's start with an overview of our unitary revenue trend. The all-in unit revenues for wind were strongly higher year-on-year in all countries where we operate with the exception of Italy, where there is likely decline. As the rise in electricity prices have been more than offset by the hedging mainly in line with our policy and by the 2022 value of the incentive, which declined from EUR 109 per megawatt hour to EUR 43 per megawatt hour being inversely correlated to last year's electricity prices. As regards to the solar all-in-net revenues, we see values in line in Italy. In Spain, where our assets are a tariff mechanism that operate as a floor to our revenues. The holding price is in line with the overall merchant scenario and has been influenced in the last quarter by the recent regulatory framework update the [ gas cap ] in Spain. Overall, a positive scenario in particular for our foreign countries. And now a focus on production. As regard to the second quarter, we have in Italy, 545 gigawatt hour, plus 3.5% year-on-year. Due to better wind conditions, coupled with better sun radiation. In France, 224 gigawatt hour plus 29% year-on-year, thanks to 77 gigawatt hour coming from new perimeter that more than compensated the weaker average production of the period in comparison with Q2 2021. In Germany, 114 gigawatt hour plus 29% year-on-year. Benefiting the perimeter effect -- benefiting the perimeter effect of 21 gigawatt hour due to the acquisition made in 2021 and slightly better wind volume. In Eastern Europe, the production is in line with the second quarter 2021, which reflects a slightly better wind condition in Bulgaria, offset by lower in volumes in Romania. On top of that, we have the contribution to the portfolio of the assets built in Northern Ireland in 2021 and acquired in Spain in January this year for a total of 109 gigawatt hour. The first half, productions reached 2.7 terawatt hour, mainly due to perimeter effect abroad and higher wind production in East Europe. In the second quarter of the year, we have an overall EBITDA equal to EUR 110 million, of which EUR [ 20 ] million from new assets. In Italy, the EBITDA was EUR 67 million in line year-on-year, mainly due to higher wind and solar volumes with a negative price effect due to hedging policy in the period, coupled with the lower value of incentive, as mentioned before. In France, the EBITDA was 46% higher year-on-year and equal to EUR 11 million, benefiting the consolidation of the assets acquired in 2021. The perimeter effect is EUR 4 million. In Germany, the EBITDA almost doubled in the quarter due to a better scenario, thanks to the tax structure, which is in 1 way, CFD and the perimeter effect. In Eastern Europe, the EBITDA benefited mainly from better scenario, which resulted in a EUR 8 million contribution. It is worth mentioning that in Q2 2022, U.K. and Spain have contributed to our result for EUR 13 million. First half EBITDA shows the strong increase of the geographical diversification in 2022. Almost half of our EBITDA comes from a diversified panel of European countries investment and now a brief overview of investments in the period. In the first half 2022, we invested EUR 218 million, an amount which is lower than 1 investment in first half 2021, which was strongly influenced by M&A operations in France and Sweden. CapEx are composed as follows: about EUR 96 million of M&A related to the solar acquisition in Spain 92 megawatts which closing took place in January this year. About EUR 113 million relate to organic CapEx in wind refer to construction activities, mainly in U.K., Poland, France and Sweden. It also includes EUR 43 million of CapEx in Italy for the repowering projects in Sicily and the greenfield project of Roccapalumba. It is worth noting that the made important step forward in our contraction works with the end into operation of [indiscernible], wind farm in Poland 25-megawatt and [indiscernible]. About EUR 5 million related to elevating of solar plants in Italy. This is month is going ahead in line with our targeting on circular economy. The waste in landfill will be a maximum of 90%, in line with our ESG plan. About EUR 4 million related to maintenance CapEx is spread across all countries. We expect a strong increase in CapEx in the second half, thanks to the acquisitions just commented by Paolo. Let's now move on to financials, commenting on profit and loss on a recurring basis. We have higher depreciation of EUR 4 million, which reflects the contribution of new assets, so perimeter effect. Net financial charges at EUR 6 million versus EUR 8 million in second quarter 2021, thanks to a lower cost of gross debt, mainly following the issuance of our third green bond in September 2021. Tax rate in the quarter was 24%, against 17% in second quarter 2021, mainly due to the lower impact from Italian tax benefits. [indiscernible] on the higher EBITDA driven by a very good EBITDA abroad. Taxation in the quarter does not include the effects of under taxes in Romania and Italy as they are counted as nonrecurring items. As of January 2022, CCGT is consolidated in the discontinued items with a net profit in second quarter of EUR 9 million. As a result of qualities, the adjusted net profit for the quarter amounts to EUR 46 million. If we look at the first half of 2022, the adjusted net profit is equal to EUR 135 million, EUR 35 million higher than first half 2021. The tax rate at 22%, slightly higher than previous year. Finally, let's take a look at the cash flow statement and the net financial position for the first half. The net financial debt grows at EUR 1.19 billion, EUR 1 billion lower than at the end of 2021. Starting from the left, we have the cash-in from hydro disposal than our EBITDA than [indiscernible] during the period, the change in working capital, financial charges and [indiscernible]. The net financial position includes EUR 260 million due to the mark-to-market of future derivatives and commodities. I executed according to our policy. Let me just point out that the cash flow from taxes includes $16 million as down payment on windfall tax in Italy and that we will pay the balance of EUR 24 million in November. We expect a leverage of our financial position to reach a more balanced financial structure in the short term, thanks to the CapEx plan in the second half of the year. I think I have touched all the relevant items. Thank you for your attention. I will now hand over to Paolo for his final remarks.

Thanks, Michele. Here we are with guidance for 2022. I'm on Page #18. We revised upward EBITDA range by EUR 35 million. Therefore, the new range is EUR 485 million to EUR 515 million with a midpoint say at EUR 500 million. The upper vision basically reflects the contribution we expect in the second half of the year from the 2 recent acquisitions in Italy. And I repeat, the solar 1 consolidated as of July 1, and the wind 1 expected to be consolidated as of October 1, so in the fourth quarter. Basically, for the same reason, CapEx guidance has been increased by -- increased up to EUR 900 million and EUR 1 billion, this range to factor the about EUR 0.5 billion investments in M&A. Consequently, the new range for net financial position is EUR 1.4 billion EUR 1.5 billion. Please note that the net financial position guidance at year-end still includes about EUR 200 million related to the negative mark-to-market of derivatives, which must be seen as a temporary debt that will reverse, as said, in 2023 with the rollout of hedging at the delivery time. So thank you very much for listening, and we are now ready to take your questions.

[Operator Instructions] The first question is from Enrico Bartoli of Mediobanca.

The first one is related to Italy, it is bit articulated. You announced recently these 2 acquisitions in solar wind. I was wondering if this is, let's say, the start of an increase to us in Italy that we can expect over the next quarters or years. And if we can expect that the gross of capacity on top of what you have in the business plan will derive from additional M&A opportunities or even organic growth in this country. Related to the 2 positions, if you can provide us some indication of the IRR that you are expecting from those transactions and also regarding the contribution on the [ ridge land ], which are, as you mentioned, disposed to [indiscernible] in Italy if we can expect that those plans in 2023 will contribute more than 2022. Second question is related to your hedging policy. If you can update us on where we are in terms of pricing and volumes and particularly considering the current forward curve that is pointing to high prices for next year, if you can expect the price effect that you are seeing your number now to even accelerate next year. And the last one is related to the 120 megawatts of repowering projects that you mentioned that has been authorized, if you can give us the possible timing of execution of these projects and if they are going to participate to the next [ ocean ], so you are considering some PPAs, some indication on the route market that you have in mind for those projects

Thank you, Enrico. Very, very clear your questions. Let me start from the first one about the M&A. In Italy, yes, those were a couple of important M&A in Italy compared to the last one that were all concentrated outside Italy. But let me say, we do not have right now, further plans to push on the accelerator of M&A in Italy. So in Italy, we are now quite happy with the size we reached after the most recent announced acquisition in wind. This allow us to consolidate our positioning as primary as the primary operator in Italy. So we are quite happy with that. And please consider that given that all our repowering projects plus 47 megawatts plant right now under construction greenfield and reconstruction. We will reach more than 1.6 gigawatts of installed capacity in wind in few years. So I think this is a quite sizable positioning for just one single country. So let's say that going forward, it's my feeling for the time being, even though we can say we can't exclude anything. But let's say that going forward, our M&A should be more concentrated outside it. About the IRR of the deal, let me say, it's consistent -- very much consistent with our other rates for this kind of completely the risk asset. But let me say, we should expect our nonlevered return in the region of 7%. And these assets is completely financeable through green bonds. And then on a levered basis, we should expect a return double digit or a little bit -- a little less than double digit or a little bit more, but around, say, 10%. About the hedging policy, let me say, the price we have secured for 2023 is more or less on average, on average, EUR 115 per megawatt hour, EUR 115, which is the average of the hedging done over the last few years, an average price of EUR 60, EUR 65. The hedging with the thing and performing in 2022 with our price on average in the area of EUR 250. Now the prices are even higher. If I look at the forward 2023, we have on the screen roughly EUR 350 million, and that's why we had at the end of June, EUR 200 million in excess of EUR 200 million related to the negative mark-to-market of those hedging that in our forecast for the year end. So given the still movements that we have seen in the markets in July with very huge swing for particular the gas price. In our guidance for the net debt, we expect mark-to-market even higher than the one we reported at 30 of June. But this is, let me say, a temporary debt. It's financed by short credit lines at the cost very negligible, let me say. And this is something that will be completely reabsorbed by the end of 2023, when those futures, we are going to be closed because they got the delivery time. So please consider that our financial position guidance, EUR 1.4 billion, EUR 1.5 billion is inflated by roughly EUR 200 million of negative mark-to-market, which is basically the EUR 200 million we had at 30 of June plus, which is positive, the rollout of hedging during the second half of 2022, plus the spike, the increase of 2023 mark-to-market cause of the further pressure on price, we have seen all over July. So I hope to touch this point. The second one, yes, you are right. We received a couple of Autorizzazione Unica for sole authorizations for the lack of worded my translation, sole authorizations for 2 in the farms, power, both repowering projects, 1 is [indiscernible], is 80 megawatts. It is near Trapani in Sicily and the other one is [ GrichMontaguto ], 40 megawatts wind farm located in Campania. And let me say that both, let me be very transparent with you, all these 2 projects already participated to the last auction that closed for the awarding of the CFD that was closed at the end of June. And -- but for 1 of the 2 projects, the smaller one, [ GrichMontaguto ], we pulled out after a few analysis because the price at EUR 60 is not any longer enough, say, to make this investment sustainable. -- given that the higher prices are boosting the value of the existing assets because the IRR of any repowering projects must be measured on a differential basis because you are going to dismantle an existing asset that today nowadays is worth much more than it used to be, given the price scenario. And then invest to substitute with a new one. While the first project [indiscernible] is a much bigger one, more windy because we are talking about an asset that's got [ 2,700 ] hours. So it's a fantastic asset. We tripled the installed capacity. So for all the specific plant, this plant is sustainable from an economic point of view, even with EUR 60 per megawatt hour, which is the cap or reachable from the ocean. But please consider that I'm not saying that [ GrichMontaguto ] or other projects, we are not going on with those projects. There is another way, another route to market, which is PPA and then we will move on also with the other projects, but maybe looking for a PPA and hoping that in the meantime, the Ministry of the energy transition will adapt the auction system with prices that are more consistent with the current environment characterized by the so-called green Inflation. So I hope to have touch all your answer, Enrico.

Yes, yes. Very clear .

The next question is from Roberto Ranieri of Stifel.

Yes. Good afternoon, everyone. I hope you can hear me. I have a couple of follow-ups and 1 of 2 questions on the outlook and regulatory issues. First follow-up is on repowering. Paolo will be very useful if you -- can you give us an update, not only in the short term, but also in 2023 and 2024 or on how the power is going on. And in particular, if you see any stop or any delays due to regulatory and organization process. My second question is on the outlook. Do you think that I'm afraid that the capacity development in Italy seems to be pretty slow. I mean, if you -- if we want to achieve 70 gigawatt capacity increase for 55 plan. I think that my feeling is that we had to go at a very higher speed in terms of capacity development. So what is happening in this field? And more than that, what the government -- what do you expect from the government to speed up the capacity improvement in Italy. My third question is on regulatory issues and taxation. If we look at Europe, we see that there are also deepened schemes of proposals in terms of taxes. Do you think that this -- I don't think this current government, but the next government could deploy some additional taxes like taxes on revenues in Spain or differently. So I'm wondering what is your feeling about the taxation and outcome in the next few months. And on the auction prices, a follow-up on this item. So if I understand, you haven't [indiscernible] have alternative to the auction and auction prices, which are pretty low. If we look at the current scenario, the most important would be the PPAs. According to your feeling, do you think that the authorities are going to increase this option prices in the next future. Thank you very much.

Thank you, Roberto. Okay. I try to go quickly down the list of your questions, starting from the first one about repowering, I can say, I can try to give you a general view. The repowering is going on very well in terms of permitting, considered that basically almost all our projects have completed the authorization, say, faster. And let's say that now the question for us is whether to delay some repowering or doing it right now because on a differential basis, it seems on paper that maintaining the postponing the repowering in terms of value creation must be stronger, and this is a positive for the company because they're powering once, once fully authorized is in your pocket, you can do it, maybe not now, but in a couple of years. So for the time being, I'm fully transparent with you. The projects that have already been fully authorized where we order the wind turbines and blah, blah, we are going on. And we are perfectly on track with timetable envisaged in our business plan. Well the -- for other projects where maybe we got already the full authorization, but we still can decide when exactly starting up the project, we are making some more analysis in order to understand from an equity point of view, from a value point of view, it's better to start soon or as soon as possible or maybe delay a little bit. But let me say, the general view is that all our projects are worth to be maintained in our business plan. It's a matter of just we are doing now or we are waiting a little bit. That's my point. About the...

Sorry if I interrupt you, Paolo. So basically, I understand that the problem is not authorization process. It's just a problem of opportunities. So you are waiting for exploiting the maximum value from the project.

Roberto, let me be even more clear than that. EUR 60, which is the price set in the fair decree that don't forget, was issued in 2019. It was not -- it wasn't meant to be inflated because the decree do not envisage a possibility of inflate, the cap is not any longer enough to attract all the investments needed to reach the 2030 target. And then coming to your second question, the 7 gigawatt, which means at least every year, this number is going to be higher because you have to divide the 70 by a number of years left to 2030, which is lower and lower. So now it means almost installing 10 gigawatt of renewable capacity every year. We are far away from this point. So even according to the TSO data for the first semester, if it's good, we should have installed in Italy as a country 1,000. So 1% of what's needed. So we are not yet where we need to be. That's the point. The government has done a lot of work in simplifying the procedures, but it's not enough because the point -- the real point is to identify the so-called go-to areas or the eligible regional areas, okay? That's the point. And this is what is written also in the power EU declaration issued just a few months ago at the European level. They said we need to identify the go-to go areas. Okay. Windfall measures I don't know what to expect because we are prepared to everything in this kind of scenario, the predictability of anything is very, very difficult. Let me say that I would be very surprised if the government should issue further measures like those, Italy was the only one in Europe taking this kind of measure because they prove to be very inefficient and they scare the investor. They scare the industrial operator. That should be the ones leading the energy transition discount. And we are already talking about an underperformance in terms of installed capacity every year just touched this point. And I think -- now why I think that would be a big mistake because those are kind of a quick fixing to long-term trend because the energy prices are there to remain high, maybe not at this level, but they should find structural mechanisms to reduce the cost of energy. And I think in the declaration of the authority, the energy authority issued just a few days ago, and I can subscribe every statement that was written in that document. The authority clearly said that we need to insert a price cap on the gas market that is driving up the energy prices in the TTF market, but not a temporary measure like those that are changing the rules through which the operators must be relying in order to invest safely in the energy transition. Yes, PPA auction, yes, I think I have already answered. The problem is the level of prices in the current auction. So we know that Ministry of the energy transition is working to release a new decree that was expected by the end of the year, setting up the new auctions for the future. Unfortunately, and I'm among those that are very sorry for that. The government, in the meantime, fell down. No, it's still there, but is expected to resign, say, September, October, whenever a new government will be formed, and this shouldn't help. Let me be honest, shouldn't help in this direction. Let's see what the energy transition ministry will be able to manage from now until this government will remain in place. And I am quite confident that Mario Draghi will push as much as he can to issue the needed decree, let me say, sorry, I'm optimist, but let's see what's going on, very difficult to say. I'll share everything.

The next question is from Roberto Letizia with Equita SIM.

I want to stick on the coverage and hedging on next year. So you provided us price for the next year hedges. I was wondering if you can give us also a quantity how much of the output for next year has been covered at that price. And as you split it up also the contribution of the old hedges done in 2020 and '21. I was wondering when those hedging will expire. -- in order to better understand how will be your sensitivity on the future power prices. So thanks for these clarifications. I would like to ask you what exactly the contribution of the newly acquired asset in the guidance I guess you meant a differential of EUR 35 million. I was wondering if this EUR 35 million is fully attributable to the acquisition? And specifically, if you can give us an idea generally or what's the expected contribution for the wind acquired from EDP, so those will enter only in the fourth quarter. So how much of that do you assume to be the contribution in 2022? I would like to move for a while, if possible on 2023. So in terms of capacity that you reasonably expect to be added next year, provided the amount of asset and authorization that you currently have in hand. So what's the reasonable potential capacity addition next year? Very quickly, if the EUR 40 million taxation impacts that are one-off are already the full year accountancy of what could be the impact for 2022. And just 2 other quick clarification. Wondering if you can spend a word on the PPA market, so the industrial PPA market. If you are in discussion with payers and if you believe that the price that you currently can get from those countries, is still in the region of EUR 100 per megawatt hour or anything is moving up or downward in this market? And the very final one on the turbine procurement, sorry, if I make all these questions. But on the turbine market, if you can give us an idea on how much of the plan is currently covered, but you already contracted asset? And how much is this that be contracted going forward?

Okay. Roberto, I try to answer. I signed here 6 questions. So the first one, hedging say the volumes we cover roughly 1.4 gigawatt hour of productions, let me say, 1.1 is about 2023 and 0.3. So let's say, 1.4, 1.3 in '22 and 1.3 terawatt hour and 1.1 terawatt hour for 2023. The price at which we hedge those production are more or less the same, say EUR 260, EUR [ 250 ] per megawatt hour on average. Please consider that, for instance, in Italy, the incentive in 2023 will go to 0, based on the mathematical formula to which the incentive is calculated, 180 less the merchant pricing the year before that this '22, and this year probably the price will be in the region, for sure, higher than 108. So the -- Yes, you are right. This mark-to-market that is expected to be at the end of the -- was EUR 216 million at June is expected to be, notwithstanding the rollout during the second half of the year, still at EUR 200 million, fully factored in our net financial position guidance at the end of the year should go to 0, by the end of '23 because all the hedging we were talking about now was basically up to 2023. We have a very, very small amount because we have slowed down on this coverage, this hedging, given the very high volatility of those instruments that should absorb liquidity, as you may have seen for other larger names than our when they reported the results for the semester. So we avoided to go on with hedging for longer duration, I mean, '24 and '25. So all the hedging I repeated, is limited basically to 2023. About the prospective, I already said they may go [indiscernible] already said that we target to reach 3 gigawatt of installed capacity by the end of the year, adding a further 400 megawatts of installed capacity in the second half of the year. 206 are basically the 2 acquisitions in Italy. Then we have a couple of wind farms in Scotland, 1 is Creag Riabhach, 93 megawatts and the other one is Sandy Knowe 86 megawatts and, let's say, a big portion of those megawatts should be already fully up and running by the end of the year, the remaining megawatts should be seen in the first month of 2023. Then we have 62 megawatts in Sweden, that is right now under construction is not included in the 3,000 megawatts because this asset is expected to enter into operation in the first quarter of 2023. And then there are other projects, but are basically the one already included in our business plan. In September, we will run once again our business plan with the new scenarios and so on. And we -- I hope to -- we will be ready to give to the financial community a serious update, say, March 2023. PPA, yes, confirmed that the market is scaling up, not just in Italy, also in Europe because this kind of situation made for consumers of takers, PPA more attractive. In fact, this market, which used to be completely a buyer market. And now I wouldn't say that it's becoming a seller market or producer market, but has changed quite significantly. As the PPA we signed, for instance, in Scotland recently have demonstrated. Probably right now, the pricing would have been even higher than that. And the wind turbine procurement, see, the framework agreement basically covers all the repowering projects and notwithstanding that, I can tell you who can have some overrun costs anyway, even though more than offset by the surrounding price scenario. But let me say that the securing, say, the procurement of a wind turbine on a new -- a completely new project, this is not a matter for area. This is a matter for the industry. It's going to cost in mind our opinion, based on our analysis, at least 20%, 30% more than it used to be before, say, the Russian's invasion, but in general, the inflation dynamics that we have started seeing in the second part of 2021. So the LCOE -- that's our view. The LCOE of both wind and solar is expected to -- after a few decades of continuing declining [indiscernible]. And that's why I'm asking loudly to revise the auction system with higher prices because if we want to get there, get to 2030 with the installed capacity declared by the European Commission and every state members. So we need systems more attractive than the current one.

Sorry, contribution of new assets in guidance.

Sorry, I forgot, yes, I'd say the EUR 35 million, yes, you're right, it's basically the sum of the 2, say, EUR 10 million more or less for solar and EUR 25 million for wind. Maybe as I told you, it's slightly conservative, let me be honest, slightly conservative the guidance, but in this kind of unpredictable and very volatile market, we can't exclude anything. So maybe the guidance of EBITDA is a little bit conservative based on the forward prices that we are seeing for the next part of the year. But we can't exclude and in some way, let me say, even though maybe it's against our economics in some way, it would be appreciated if European commission decided to put a cap on gas in order to keep the energy prices under more control. So let me say that our guidance is based also on an outlook for energy prices that is, say, cool off quite significantly in the second part of the year compared to what the forwards and the screens are saying right now.