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 2025 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, everyone, and welcome to our quarterly results presentation. Here with me, as usual, Michele, our CFO. So let's get started with an overview of results over the period. I'm on Page #4. First of all, let me put the results into context. The first half of the year, including the second quarter was characterized by much lower wind speed than last year and historical average. I'll soon share the results of the historical wind analysis conducted by our experts. Against this backdrop, in the first half, our EBITDA closed at EUR 274 million, slightly down minus 3% year-on-year. While looking at Q2, results got back to positive with EBITDA at EUR 128 million, plus 11% year-on-year. There were 2 major effects behind this performance. On one hand, and this is true for the semester and for the second quarter. On one hand, the much weaker production on a like-for-like basis partially offset, this is the second effect by the contribution from new installed capacity. With the first repowering projects now up and running and the full contribution of the U.S. asset portfolio, which I remind you is being consolidated as of April 1, 2024. Despite the higher prices on screens, all in all, the price effect on a year-on-year basis was just marginally positive as the lower production resulted in lower merchant volumes. Investments amounted to EUR 143 million, significantly down year-on-year. But I remind you that the reduction is mainly due to the fact that the CapEx in the first half of last year included the acquisition of a wind and solar portfolio in U.S.A. and a smaller one in France. Out of the total invested in first half this year, about 50% was again related to M&A with the acquisition of Broken Cross wind farm in U.K. and the remaining about 50% allocated to organic development, mainly greenfield and repowering in France, Germany, Italy and the U.K. Bottom line, adjusted net profit in the first half was EUR 83 million, down 22% year-on-year due to the already mentioned decline in EBITDA, higher depreciation and financial charges linked to new assets. But again, looking at Q2, earning direction returned positive with net profit at EUR 34 million, plus up 21% year-on-year. Net financial position at 30 June was EUR 1.949 billion, plus 9% higher versus the end of 2024, discounting -- also discounting, not just the investment, a total distribution, I mean, dividends and buyback of roughly EUR 160 million, which basically fully justify the increase. Michele will provide more details on the cash flow over the period. As mentioned, I'm now commenting Page #5. As mentioned, the economic results of the period were significantly impacted by unfavorable wind conditions throughout Europe. The economic impact of lower volumes, I mean, on a like-for-like basis versus our budget and versus last year in the first half was in the order of EUR 50 million to EUR 60 million. So I think it's important for you to understand the magnitude of this event. The map above shows the usual map that we are posting on our webcast. The map shows the deviation of wind speed from the long -- from its long-term average, say, in Europe, in this case, in Q2. Dark blue indicates the areas where the negative deviation is greatest. It's quite unusual to see a situation like this with weak wind virtually everywhere in the regions where we have installed capacity -- or I mean, everywhere, say, across Europe. This map in Q1, and you can find it in the last webcast presentation, was even worse. This prolonged wind drought was caused by a persistent high-pressure system all over Europe. Please consider that production of a wind turbine moves proportionally to the wind speed with a multiplication factor of 2 to 2.5x, which translated in simpler words means that if the wind speed drops by 5%, the production will drop by 10% to 12% on average. According to national public data, these are data published by the national TSO, wind power production during the period on a like-for-like basis decreased year-on-year by 17% in Italy, as shown in the chart, those are the data published by Terna. And I tell you, they are not here, but in France, the same, minus 15%, minus 25% in Germany and minus 25% in Poland. Those, I repeat, are national data, even though our own trends over the period were pretty similar. As said, we conducted an internal analysis to understand better. Also in light of the magnitude of the event, the graph below shows the average wind speed recorded over the first half of the last 85 years in Europe, dating back to 1940. We were inspired by some public study issued by other independent institution to do this analysis. The result confirmed that this semester, '25 first half was extraordinarily weak. We repeated the analysis in every European country where we operate and the result was very similar. In each country, the wind drought over the period was among the worst ever recorded, not the worst, but among. Then in Europe, as an aggregate that is shown here in the chart is lower because this phenomenon was all over Europe. So this analysis led us to a couple of conclusions, very simple. First, wind speeds have always been erratic and historical data show that this type of event has already occurred in the past. Now we and nations are more sensitive because of the more installed wind capacity. But this event was always there. So difficult to say there is a clear trend related to climate change. These are the same conclusions other independent third-party analysis came to. And among the institutions that said that I would include also the international energy hands. The second consideration is that in this specific case, geographic diversification across Europe proved less effective because, as I already said, the wind drought was well distributed all over the continent. The good news is that over the last couple of months, wind speed have gone back to normal, and this make us confident about our full year guidance, which I anticipate will be confirmed. I move to Page #6. Here, over the period, we continued to deliver on our strategy. We are very pleased with the completion of our first battery storage plant in Vicari, Sicily, 13 megawatts as flexibility is becoming increasingly important. We also completed construction of the Corlacky wind farm in Northern Ireland. The 47-megawatt plant is now operational and in its ramp-up phase, and we expect it to reach its full potential over the next few months. We are also advancing our project pipeline with 50 megawatts of greenfield and repowering projects in France, Germany, Italy, fully authorized. I'm also very pleased to say that we, this morning, signed a long-term PPA, pay is produced with A2A, which will cover about 90% of the expected production from the Castelvetrano Salemi wind farm in Sicily again, a repowering project that has been operational since December last year. The PPA will be effective as of January 1, 2027, and will substitute the CfD tariff that was awarded in an auction held a couple of years ago under the fair 2019 decrease. In addition to that, we have been awarded the largest part of the first auction launched by FS Group, which is the state-owned railways company. Through 3 different PPA with an aggregate amount of about 180 gigawatt hour per year with a tenor of 5 to 10 years. This is an extremely important achievement as it refers to existing wind projects already out of the incentive scheme. Overall, in the first half, we proved once again successful in securing an attractive condition both new capacity and existing one, leveraging on our expertise in the PPA market. Regarding ESG, we have once again confirmed our position among the top-tier companies in all aspects of our sustainability strategy. We ranked first in the Identity Corporate Index. We were confirmed on the CDPA list and renewed our gender equality certification in Italy, clearly recognizing our strong commitment to the topic. Now to Michele for his review of results in more details.

Thank you, Paolo. In second quarter, power market prices have been slightly higher than second quarter 2024 across all countries where ERG operates. However, as you know, this trend has only limited effect on our all-in unitary revenues due to the positive regulated nature of our business model. In Italy, the wind unitary revenues stood at EUR 120 megawatt hour, in line with the second quarter of 2024. Despite the increase of the green incentive value rising to EUR 55 megawatt hour against 42 megawatt hour and the higher power market price, overall, the unitary revenues remained stable. This was mainly due to short-term hedging strategies executed at lower prices compared to the previous year. In France, the increase in unitary revenues was driven by higher short-term hedging prices, combined with a more favorable market environment captured by a few merchant assets. In Germany, capture price in second quarter are aligned to second quarter 2024 at EUR 94 megawatt hour. In Poland, unitary revenues increased during the second quarter, primarily driven by the short-term hedging. In U.K., the capture price is around EUR 74 megawatt hour, higher than second quarter 2024, thanks to higher short-term hedging. Note that this figure, as usual, does not include revenues from balancing services. As for solar or in unitary revenues, we recorded a decrease in second quarter in Italy, mainly due to lower hedging prices. In Spain, capture prices were impacted by the current market environment with a significant profile effect during daylight hours. In France, solar revenues are sold at [ feed ] prices compared against '24 when the energy produced by assets acquired in '24 was sold at merchant prices. Energy plants in the United States have unitary revenues that reflects the PPA prices, so very stable. Now focus on production. In the second quarter of 2024, the group's overall production was in line with previous year. This stability was mainly driven by perimeter effects, which offset the persistent low wind conditions across Europe. In Italy, we have 654 gigawatt hour, plus 2%, mainly due to perimeter effect coming from repowered and revamped assets, both in wind and solar, offset by low wind. France, 266 gigawatt hour, thanks to new assets entering operation during 2024 and the second quarter of 2025 and the solar plant acquired in 2024, again, offset by low wind conditions. In Germany, 107 gigawatt hour, minus 6% due to lower wind condition. In U.K. and Nordics, 137 gigawatt hour in line with last year, mainly thanks to the new assets acquired in January in Scotland, partially offset by low maintenance in U.K. In Spain, 149 gigawatt hour due to lower aviation, minus 11%. In U.S.A., 248 gigawatt hour, minus 6% due to lower wind conditions. Eastern Europe was the only region where we recorded improved wind conditions with production reaching 106 gigawatt hour, up 15% year-on-year. In the first half, the production has been 3.7 terawatt hour, aligned with first half 2024, mainly due to perimeter effect of 0.6 terawatt hour, of which 0.3 terawatt hour in U.S.A., partially offset by extremely low wind condition in Europe. Please note that we began to consolidate this asset in the second quarter of 2024. In the second quarter of the year, EBITDA reached EUR 128 million, EUR 12 million more than second quarter 2024. This growth was mainly due to perimeter effect, EUR 9 million, linked to newly acquired assets and organic development as well as higher capture prices. These positive drivers were partially offset by the already mentioned weak wind conditions across Europe. In Italy, EBITDA reached EUR 85 million, an increase of EUR 5 million year-on-year, primarily driven by new investments in both wind and solar. This was partially offset by unfavorable wind conditions and lower capture price on solar assets. In France, EBITDA is EUR 5 million higher than last year, supported by higher capture price in wind asset and perimeter growth, partially offset by low wind availability again. In Germany, EBITDA is EUR 5 million, EUR 2 million lower than previous year, mainly due to persistently weak wind conditions. In Eastern Europe, EBITDA is EUR 11 million, EUR 3 million higher than previous year, mainly driven by higher wind resource. U.K. Nordics, EBITDA is EUR 7 million, up to EUR 2 million, thanks to the contribution of the new acquired asset in Scotland. In Spain, EBITDA is EUR 2 million lower than last year, impacted by reduced production and lower capture price. This was due to both intraday profile effects and short-term hedging at less favorable price levels compared to previous year. In U.S.A., the EBITDA is EUR 10 million, EUR 2 million lower than previous year due to lower production in the quarter. In first half 2025, EBITDA is EUR 274 million, lower than previous year by EUR 7 million, mainly driven by the persistent low wind condition in Europe, partially offset by perimeter effect. The second quarter allow us to partially recover the underperformance of the first quarter, easily affected by poor maintenance across Europe. Let's comment now on the investment. In the second quarter, we invested EUR 28 million, mainly due to ongoing construction in U.K., France and Italy. In particular, we spent organic CapEx for EUR 10 million in U.K., mainly for the construction of the Corlacky wind farm, 47 megawatts, EUR 12 million in Italy, refer in particular to our first storage project and some revamping and repowering activities. And for EUR 4 million for the beginning of our first repowering project in France. Second quarter include -- second quarter 2024, includes EUR 235 million for the acquisition in U.S. In the first half 2025, investments amount to EUR 143 million, of which EUR 72 million of acquisition in U.K. versus EUR 444 million of first half 2024, which includes the acquisition in France and U.S. for a total amount of EUR 319 million. Let's now move on to the financial commenting on the other items of the profit and loss. In the second quarter, amortization of depreciation is EUR 69 million, in line with second quarter of 2024. Net financial charges are EUR 12 million versus EUR 7 million in second quarter last year. Financial charges versus banks and bondholders, net of remunerations stands at EUR 8 million, EUR 4 million up in comparison with last year due to perimeter effect and lower remuneration on cash. The complement to EUR 12 million, EUR 4 million are noncash accounting items such as effects coming from tax equity partnership in U.S. or figurative lease interest expenses according to IFRS 16. Tax rate in the quarter is 26%, lower than 30% of last year due to different contribution of various countries to taxable results. The adjusted net profit of the quarter amounts to EUR 34 million, higher than last year, EUR 28 million, mainly driven by the already commented EBITDA, partially compensated by higher financial charges. The adjusted net profit for the first half amounts to EUR 83 million. Finally, let's take a look at the cash flow statement and net financial position. The net financial debt at the end of the first half is EUR 1.9 billion, EUR 0.2 billion higher than the end of 2024, mainly driven by the dividend payment and the investment of the period, partially netted by the cash generation from EBITDA. The net working capital is affected by dynamics due to payable for investments. Thank you for your time. Now I leave the floor to Paolo for his final comments.

Thank you, Michele. Now let's see our guidance for the full year. As you know, the EBITDA guidance given during the last webcast already took into account the low wind since April. Unfortunately, this trend continue, although to a lesser extent in May. June was almost near budget, while July is doing well. So it seems that some sort of return to normality is taking place. When assuming windiness in line with the historical average from now on, we are still confident that we can approach the midpoint of the guidance range. To reach the upper part of the range, however, we would need windiness above the historical average, then assuming a recovery or at least a partial recovery in the second half of the year of what we have lost in the first. With this caveat, we confirm our EBITDA guidance within a range of EUR 540 million -- sorry, EUR 540 million, EUR 600 million. CapEx is also confirmed within the range of EUR 190 million to EUR 240 million as well as net financial position at year-end within the range of EUR 1.85 billion to EUR 1.95 billion. So thank you for listening, and we are now ready to take your questions.

[Operator Instructions] the first question comes from Enrico Bartoli of Mediobanca.

Actually, I have 3. The first one is related to the ForEx auctions that are expected to be held shortly. If you can share with us your response for the process and let's say, the amount of capacity that you are planning to participate to the tenders and some comments if possible on the level of competition that you expect from the first auction. The second question is related to the U.S. There were several changes in the regulation recently. If you can share with us, let's say, your view on the potential for ERG in this market and, let's say, the possibility to access the 1 gigawatt pipeline that you have in the country. And the third one is related to battery storage. You highlighted that actually, you had the first battery storage in operation in the past quarter. I'm wondering, let's say, if you think that even, let's say, there could be an acceleration in the investments by ERG in this technology. If I remember well, you had 0.6 gigawatts pipeline in March. And if you are planning to participate to the MAX auctions and maybe some comment on the level of profitability that you think can be achieved in the Italian market. Sorry for the many questions.

Thank you, Enrico. So, yes, sure, we have a few projects that are going to take part to the auction all in all, we think roughly 130 or a little bit more -- 130 megawatts or a little bit more than that. Most of them basically 95% wind and repowering projects. We expect a fierce competition because based on the manifestation of interest, there are 2.9 gigawatts of wind capacity that is going to take part in the auction and 17 to the PV auction, even though we are more focused now on wind. Of course, the price at which we are going to bid is very confidential. The auction is already open and is going to close. So the last day it's possible to submit bids is on the 12th of September. And the outcome of the results should be published by GSE within November.

December.

So let's see how it's going. But I think even today with the PPA signed with A2A, there is a clear knowledge and capacity of the company to find other route to market. So we are confident that either through the -- CfD award 2 options or PPA, we will be able to carry on our project. We would have liked to bring more capacity to the Forikswa, but fortunately, we are in Italy, and we have some Autorizzazione Unica on some projects, for instance, in Sardinia that are struggling to find the right framework to be implemented because of the hostile behavior, say, of the region that has issued the Autorizzazione Unica for our Niploag wind farm, which is more than 100 megawatts, but subject to several condition precedents that makes basically the project, say, not feasible. You know that we have been fighting on this project for the last 6, 7 years because we submitted the first document for the permitting in 2018. And I make the story short, but through ups and downs, the project was authorized in '22 by the Prime Minister, Mario Draghi, to, say, find an equilibrium between the different opinion of different institutions around the project. The decision was appealed by the Sardinia region and avoiding to say what is in between, the last move was the administrative court that ruled in our favor, forcing the region to issue the permit. And if not, the prefect would have been -- would have issued the permit on behalf of the region. The region yesterday issued the Autorizzazione Unica, but as I said, full of tricks and preconditions. So the most likely scenario, we want to go through it, but it's that we are going to appeal or challenge this Autorizzazione Unica to the Supreme Court. And we are absolutely confident that we are on the right part of the reality. And we are quite confident that this Autorizzazione Unica was issued, say, intentionally to be challenged in order to prevent the prefect to issue the Autorizzazione Unica that in that case would have been, for sure, clean and not subject to all these conditions. So we are really, say, annoyed by this situation, but we keep going on because we are confident that in the end, our rights and interest will be safeguarded by the appropriate authorities. But for the time being, this project that we thought it was going to take part to the auction, we decided to not because before we have to make clear the situation around it. it's not just a business case. It's more -- it's becoming a matter of principle now. Okay. So the first question was this. In U.S.A., yes, the regulation is evolving. Mr. Trump, the President is quite clear that it's a little bit against the development of renewables. In particular, there is an executive order or a law that is envisaging the phaseout, say, of the tax equity schemes in a couple of years. But say, based on our business model and based on our approach to the country, we don't expect direct consequences on us. I mean, we do not expect any retroactive actions. So the portfolio we are running now is not going to be affected by this new regulation. For sure, this new regulation would make harder for developers to install new capacity, authorize new capacity. But still, you know that our model is to buy assets on a totally derisked framework. I mean, when they have already the PPA, when they have already called the commercial operation date. And end in case there is no tax equity schemes, we would price this new layout and the project. So we do not expect any particular direct consequence for sure, even for us would be tougher to grow, but we are also in this moment, in these days, we are elaborating some offers to submit to our partner, Apex because this was part of the agreement. Let's see if we can find, say, an agreement. But the targets we set out for our business plan remains the same. But, yes, we are very happy and satisfied that we put in operation our first storage system, 13 megawatts in Vicari, Sicily nearby our wind farm. It's also an occasion for us to learn how to manage this kind of asset and there -- it's intercorrelation with the wind asset. And we are working very hard to carry on our pipeline of BES. I would say more. We are trying to switch some solar projects into battery storage project. This is true for -- in Spain, for sure, but also in Italy. Because flexibility, we think is going to be a game changer in the market. We see every day the duck curve in the 24 hours price profile that is very much influenced by the penetration of solar plants that are producing just on a daily hour. So battery storage, we are quite sure that there's a stream that is going to be under strong growth for the years to come. So I hope to have answered your question, Enrico?

Yes. Just a comment on, let's say, the participation to the market and what you think that the profitability could be in that auction?

Yesterday, they published a new number for the MAX. They set out the EUR 7,000 per megawatt hour, which is a little bit higher than what we were expecting. So we see -- we look at it, I mean, at MAX with high interest. We have not that much capacity with which we wish to participate in this auction, but just some -- just more projects. I'm talking about some tens of megawatts and not more than that. But we are trying to explore also on the secondary market, if there are projects to buy, I mean, in terms of permission -- in terms of permitting that are eligible to participate to the auction. Let us work and we need a couple of months to understand better what we can do in this auction. But looking forward, for sure, but it's a new stream of revenues, a new stream of business.

The next question is from Emanuele Oggioni of Kepler.

I have a first one on the hedging policy for 2026. If you can update on next year because basically, this year is already fully hedged. The second question is an depreciation, but basically, you have already answered before about the recent study. Today, signed PPAs with A2A and in general, your policy based on your previous states. Also the -- when you sign a PPA in Italy, basically, this means that the level of power price agreed, obviously, it's not disclosed, I will not ask for it. So the level of the PPA, the power price of the PPA is higher than what you expect from other auctions or other level of profitability you expected, for example, for the next auction, et cetera. So I could confirm this. And finally, a question on the share buyback. If you -- I know you have a dividend policy and attached also an additional share buyback plan. But I wonder if considering the depressed level and depressed valuation, could it be the right time to think about an increase in this share buyback plan?

Okay. Regarding hedging, we are carrying at a level of 70% of our hedging for 2026. So we are building up our short-term hedging position in order to begin the new year. So 2026 with a planned levering in the region of 80%. So we are progressing following our usual policy also on short-term hedging. For sure, we take in account also the long-term hedging that we have just disclosed with Ferbidos Auto, A2A and take this in consideration for our hedging percentage. So overall, the target is to reach by the end of the year roughly.

Okay. I can just elaborate a little bit more on your second question on top of what Michele just said. Yes, we're quite happy about the PPA with A2A and also the PPA -- the 3 PPAs we have been awarded through an auction system with Grupo Ferrovie dello Stato, the railway corporate. This is particularly interesting for us because basically, it's covering production coming from old assets, so assets that have already phased out from an incentive scheme and then make their business case more sustainable for the long term. And we think this kind of market is going to develop quite substantially going forward. And even the government in the [Foreign Language], I don't know to say, decree bullet was envisaging in the Article 3, the possibility for GSE to launch a tender for a long-term contract between private offtakers and producers. So we think that decoupling, the so-called decoupling between the day ahead market and long-term mechanisms will develop along this way. The share buyback, I can just say that the last general meeting ruled for 10% share buyback. So the optionality to buy back own shares up to 10% of the capital, but this De Libera should translate when and if in De Libera of our Board of Directors that so far has not decided anything about this. By the end of the year, we will make a point on this. I can say -- sorry, just to touch a point you raised in your previous question about PPA. Of course, I can't say the price. I confirm that we are talking about the fixed price on a pay as produced formula, say, for the A2A contract. And the other one is more base load, but still we can provide this energy coming from the power portfolio. But about the price, don't forget, the Castelvetrano Salemi was already awarded a tariff of EUR 64 per megawatt hour. So it's easy to understand that the pricing should be better than that. If not, there was no point in signing this contract.

Very clear. If I may, a follow-up on the hedging as regards the pricing. The moving average, I think the rolling moving average of the hedging, I think, has improved for '26 considering the year-to-date higher power prices, at least higher than expected for me.

Yes, you are right. There is -- you're right, there is a mild increase, but consider that we build up the position week by week. So we tend to follow the price that -- the progress of the price during the months. So you don't have to take the fund for position today to consider our level of hedging for 2026.

The next question is from Roberto Letizia of Equita.

The first question is a follow-up on the U.S. market. Just wondering if without taking into consideration incentives. So just looking at market conditions and also taking into consideration the new trends of demand based on data centers, if any way market conditions justify buildup of plants out of your pipeline so that you cannot be worried about local policies and just look into the market conditions through PPAs as normal merchant positions. Just wondering if the market is envisaging and is supporting this optionality. The second question is more strategic. I was wondering what would you consider as the right market conditions in order to go back to a different growth rate path, so being less focused on the balance sheet and maybe use it a bit more to follow additional optionalities that may arrive, which may be the best as well or different technologies or different countries that offer growth opportunities. So if you can tell us what would be the best market condition for you to expand the balance sheet and pursue a higher growth rate?

About U.S., it's very difficult to say how the market will pan out given the changes that are now undergoing there. But honestly, I have to say that when looking at the projects, I mean, when we are making our due diligence exercise, we have noticed that most of the projects struggle to have a fair value that is in line with the CapEx the developers have spent to bring the asset into operation because the IRA, honestly, with all these tax benefits and so on, paid upfront. It's like our Superbonus 110. I mean, I think you know what I mean. This has created a big inflation. Sometimes when comparing the CapEx per megawatt, both for solar and wind in the U.S. versus Europe, you see that there in U.S., I mean, this ratio is much, much higher than in Europe. So of course, if the -- all these fiscal benefits will be eliminated or will progressively phase out, for sure, the U.S. market would need to rebalance, I mean, in terms of CapEx per megawatt and so on. So difficult to say, but we are in a -- I don't want to be -- to appear too optimistic, but we are in a kind of safe haven because we are not obliged to buy. And for sure, the only point I believe is not moving is our financial discipline. So we want to grow there. We still believe it's a great market because consumptions and the economy is very hot there, but still at the right condition. And that leads me to your last question. Which are the right market conditions? So the thing is worry me the most is the missing electrification of consumptions. So I mean, in Europe, but all around the world, we keep installing renewable capacity, but we are not seeing the same growth in terms of electricity demand. So I think we need to push on electrification. This is very important. And so far, we haven't seen signs and the right commitment also of the European Commission towards this point. So till there, there is no -- there are no other conditions to accelerate on the deployment of investments. When there is a turning point on this and sooner or later, it will happen, I'm sure, because the decarbonization is an unstoppable process. But this speed is an important point. Whenever we have a sign, a clear sign that this trend is changing, we can consider an acceleration.

The next question is from Alex Roncier of Bank of America.

I just had one simple one, if I may. It was regarding wind speed condition in July. I think on some of the data that I can get, it looks like wind conditions are actually quite good and actually much better than historical average. And I know your guidance is kind of at normal condition for the rest of the year. But have you seen similar -- better wind condition trends as of July? Or is that just you think a little bit of a data phasing or perhaps a sporadic data point?

So I confirm that over the last couple of weeks, wind is strong, in particular in Italy. And you know that Italy is very important for us because here, prices are higher and also a portion of our production are still getting the green certificate, let me call it like this. But also in France and in Germany, U.K. and even Sweden, we are now seeing better conditions. It seems like we are getting back to normal, I mean, in terms of wind speed. It's very difficult, and we conducted an internal analysis, which is much more, say, in depth of the executive summary that we have shown through this webcast. And basically, the analysis confirms that this kind of volatility in wind presence has always been there. In Italy, we had a wind drought like the current one in the '80s, in Germany in the '60s. So back in time, that means probably that climate change is not the main driver behind it. This is also the outcome of other institutions that said that there is -- it's impossible to find a clear and straightforward link between climate change and the wind speed. In fact, not 10 years ago, but 1 year ago, in the first 4 months of '24, wind was exceptionally good. So the other way. So I hope that we have answered your question.

The next question is from Davide Candela of Intesa Sanpaolo.

The first one is a follow-up on the answer you gave on the demand side and on electrification. I was wondering if you can broaden your answer sharing your view about what is preventing electrification in your view to build up. Actually, it is the fact that the prices are high, so they are preventing for more consumption or there are energy efficiency that is going the opposite way. Just your view on that will be helpful. And second question with regards to M&A. it looks like to me that the market is enhanced a little bit or at least the window between the buy and the sell side have approached -- that the parties have approached. Are you seeing that sort of evolution in the market? And if that's so, if you are willing or considering some little opportunities in Europe and just for that an update to build up growth.

Okay. So about the electrification of consumption, say, the streams the electrification should come from are the heating and cooling, air conditioning through pump -- heat pumps instead of gas boilers. So a switch that would allow a switch from gas to electricity, electric vehicles and data center that if the only stream is going well. Green hydrogen produced -- green means that hydrogen is produced through an electrolysis process, supplied by green energy, renewable energy. So all these streams are not growing at the speed needed to support the electrification of consumption as initially expected by the European Commission. Now the European Commission has allocated EUR 100 billion to sustain the electrification of consumption. You asked for my view. My view is it's not enough because EUR 100 billion for 27 countries that are part of the union in the end is peanuts, let me use this term compared to the EUR 700 billion they want to invest in military services or the EUR 300 billion Ursula von der Leyen committed to Mr. Trump for buying gas from U.S. So I think we must do more. But I'm sure that sooner or later will happen because if not, the industry will slow down very, very significantly. And then the market will become more a biased market. And to come to your last question, yes, the M&A will become easier than it's now. For the time being, the market, the private market, the secondary market is still tight. Supply and demand are not matching in the sense that the expectation of sellers are still very high, while the buyers are a little bit more cautious in allocating certain value. So the M&A transactions, I'm not saying, it's not my opinion. There are public data showing this are quite slowing down quite considerably. But this could be an opportunity for us that we have a strong balance sheet sooner or later and we are -- we keep scouting the market. And even in these days, we have submitted several nonbinding offers to see if there are good opportunity for us. Let's see. So M&A, for sure, has always been a successful tool through which company create value and we still believe it's the case.

The next question is from Francesco Sala of Banca Akros.

What have you seen in the last few weeks or months in terms of wind turbine and solar panel costs and more in general construction cost? And secondly, I wonder whether you have seen, in particular, some disruptions or bottlenecks from China also in the light of the Chinese government push to reduce capacity.

Maybe I'll let Michele to elaborate more because he's in charge of procurement for the group. But I'm happy to say that over the last months, we are seeing for the first time a change in direction in the CapEx trend for wind. So European OEMs are becoming more aggressive now because they want to place orders and they want to prevent Chinese competition to prevail on the market. So they want to avoid what already happened in the solar field. So for -- both technology, but for solar was more expected, say, we are seeing a downward trend in the CapEx line. I mean, the CapEx per megawatt. Michele is more precise on that.

Yes. In addition, I would add that we don't see any particular disruption on the supply, in particular for wind, that is our core technology. Regarding wind technology, you know that we are always counting also alternative to traditional Western suppliers. So we are open. We consider also alternative suppliers. The key point that we look at this opportunity from an industrial standpoint. So we don't value just the CapEx cost at the beginning, but also the production in the long term, the efficiency of the wind turbine in the long term, and we put all the elements in our evaluation. And so on a case by case, we try to find the right technology for each specific wind project because every wind project is different to another in terms of characteristic of the sites, characteristics of the wind, permitting constraints and so on. So we consider all the technologies and as said by Paolo, we are seeing some improvement in the scenario in the last month because the competition is increasing in the market. And from our standpoint, this is a positive element.

Gentlemen, at this time, there are no more questions registered.

So thank you all for listening, and I wish you a super summer and see you in October or November.