ERG S.p.A. ($ERG)

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the ERG Full Year 2025 Results and Strategic Guidelines Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Paolo Merli, Chief Executive Officer of ERG. Please go ahead.

Good morning, everybody, and welcome to our webcast. Here is the agenda for today. I will begin with an overview of the results and milestones achieved in 2025. I would then like to provide the financial community with the main strategic guidelines we are working on. Here with me, as usual, is Michele, our CFO; and Emanuela, Chief ESG, IR and Communications Officer, who will elaborate on the topics as per the agenda. So let me start by briefly outlining the context we are operating in. It's a rather uncertain and rapidly evolving business environment. Gas price volatility amplified by geopolitical tensions, the energy bill in Italy, which has begun the parliamentary process should be passed into law by mid-April. Therefore, it will take some time before we see in what form it will ultimately be approved, particularly I'm referring to the ETS clause, which is subject to the approval of the European Commission. In this scenario, our strategic direction is clear. We will push even further on wind repowering and organic battery systems development. In other words, if I may say, we are prioritizing organic developments over acquisitions. Looking ahead to 2026, our goals are clear, and there are 3 goals, 3 main goals in our head. We intend to proceed with the construction of 230 megawatts currently underway, some of which will be operational this year. We are also working hard to finalize the development of approximately 700 megawatts, equally split between wind repowering and BESS, some of which has already been fully authorized with the goal of making these projects eligible for either for auction or PPA by the end of the year. The third priority into 2026 is about the definition of the geographic scope on which our next 5 years industrial plan -- industrial business plan will be based. In fact, we aim to present the new business plan by the end of this year or the beginning of next year ahead also of the new Board of Directors term at the 2027 Annual General Meeting. Today, we want to offer a clear and transparent vision of the strategic lines approved yesterday by our Board of Directors on which the new business plan will be based. But let me start with our economic results in 2025. Looking at highlights for the year. EBITDA closed at EUR 540 million, slightly higher year-on-year, but at the bottom of our guidance range. The economic contribution from new assets, which was in excess of EUR 60 million was unfortunately largely offset by lower volumes due to an extraordinary lack of wind across our European markets. I'll comment on wind in the next chart. In 2025, we invested EUR 235 million, less than half the amount in 2024 that I remind you was characterized by the acquisition of the U.S. portfolio. '25, around 30% CapEx came through M&A, and I'm referring to the acquisition of a wind farm in the U.K., while the remaining 70% was allocated to organic developments. Adjusted net profit in 2025 closed at EUR 155 million, down 11% year-on-year, mainly due to higher depreciation linked to new assets, together with higher financial charges. Net financial position at the end of 2025 was EUR 1.882 billion, 5% higher compared to the end of '24, but bang in line with our guidance. Based on these results, the Board of Directors will propose a dividend of EUR 1 per share at the Annual General Meeting, in line with our dividend policy. I'm on Page #8, commenting on these particular wind conditions we had in 2025. Let's face it, was a rather disappointing year for wind availability across Europe. Unfortunately, the last 2 months, I mean, November and December, November when we announced the last -- the reaffirmation of the guidance. And typically, the last 2 months, as you know, are the windest of the year were no different. So according to a report by Terna, the Italian TSO, wind productions in Italy dropped by almost 50% year-on-year in December. The 2 maps clearly show how unusual this situation was with a prevalence of blue and dark blue areas, which indicate a wind speed below or well below the historical average. The long-term historical analysis, I'm referring to the graph below on the left side, reinforces how exceptional this year was. The chart, in fact, represents the average wind speed deviation compared to an historical baseline. And 2025 ranks clearly among the weakest years on record. Nevertheless, the very same analysis, and we gave you all the transparency on it led us to a couple of conclusions. First, wind speeds have always been erratic and historical data shows that this type of event has already occurred. It's true, and this is a point of great attention for us that this is the fifth consecutive year with this index lower than average, historical average. But the graph clearly shows that this has already occurred in the past. This is public satellite data, a fact, so everyone can form their own opinion and draw their own conclusions. In this specific situation, geographic diversification across Europe proved less effective because the wind route was well distributed all over the continent. So while this is not an unprecedented phenomenon, it clearly had a very significant impact on our full year results. So let's move to Page #9. During 2025, we kept delivering on our strategy. On growth, we added around 150 megawatts of new capacity since January 2025. We have open construction sites for another 230 megawatts currently under construction. We made progress in developing our pipeline, in particular, we refocus all our efforts towards wind repowering and battery storage systems. On route-to-market, 2025 was a solid year. We signed 8 PPAs with Tier 1 offtakers, both corporates and utilities, totaling 8.7 terawatt hour along the entire period, durations of those contracts. We secured 3 auctions for 40 megawatts new wind capacity in Germany. In Italy, we were awarded to repowering projects total of 141 megawatts in the last FER X auction. Finance, our discipline remains a key strength. We confirm a EUR 1 dividend per share. At the beginning of 2025, we completed 1.1 million share buyback. Fitch, the rating agency reaffirmed our BBB- rating with stable outlook, and we drew our first European investment bank corporate loan, further diversifying our funding sources. Finally, on ESG, our leadership is well recognized. We rank -- we ranked Tier 1 at least or top performer across major indexes. Overall, we are advancing our strategy with, I think, discipline and sustainability. Among the achievements -- recent achievements, let me mention these 2 transactions. I'm commenting on Page #10 because they are a quite clear example of what we mean by geographical refocus. With this move, in fact, we exited a noncore country, Sweden, and we acquired 73 megawatts of operating assets in Northern England under the ROC scheme with attractive repowering potential. We have strengthened our position in the U.K., which is now our third largest market with over 400 megawatts of installed capacity. So this is exactly how we intend to shape our strategy going forward. We are consolidating in markets where we have scale and industrial presence and reducing exposure to those markets with fewer possibility for further growth. This is an area we intend to work on more during 2026. Let me now, let's say, talk about the strategic guidelines that were approved yesterday by our Board of Directors. Page #12 here is just a snapshot of ERG's asset portfolio. It's a chart that you are familiar with, updated to today. I would say, a solid international renewable platform with around 4 gigawatts of installed capacity and a diversified European pipeline of about 5 gigawatts, focused on wind repowering and BESS, which are the technologies that will drive our next phase of growth. In 2026, we will focus on the first 2 histograms of the pipeline, the ones highlighted. On top of the European pipeline, we can still count on a preferential right agreement with Apex in the U.S., partly due to the context in the U.S., which makes us a little more cautious. This agreement hasn't brought any concrete results yet, but we are continuing to work with them to identify the right opportunity. I don't think there is much to add on this chart other than to say it's a starting point to work from. Now Page #13. I think this is a key chart in our presentation. Let me walk you through the 4 pillars, strategic pillars at the core of our strategy going forward: performance excellence; maximizing availability of our assets through predictive operational maintenance and digitalization. This remains the backbone of our industrial model in recent years and continuing today, we have invested in the digitalization of our portfolio. We are evaluating also how artificial intelligence can support the management and maintenance of our facilities. Organic development, our focus is clear, wind repowering to rejuvenate the fleet and secure long-term revenue visibility and battery storage system as a new strategic stream to capture market volatility and support system flexibility. Asset rotation and geographic repositioning. In 2026, we will explore any opportunity that could come from leveraging this pillar, which could range from exiting a country to selling a single asset or even a selective build and sale asset. It could be also a way to fund projects in our pipeline while -- to fund, sorry, projects in our pipeline while keeping a solid balance sheet. We don't know the end game yet, but we'll be working on it during 2026. Route-to-market, we confirm our commitment to have an 85%, 90% quasi-regulated profile with CfD s and PPAs as our preferred route-to-market options, together with an evolution of energy management model to extract value from flexibility. These are the 4 pillars our next business plan will be built on and then elaborate a little bit on each of them. Operational excellence remains a key value driver for ERG. The good news is, in 2025, performance in this area was positive with increased availability across our entire portfolio, confirming the effectiveness of our industrial approach. Over the course of the year, we work to promote digitalization. As said, we created a technical task force to manage actions aimed at mitigating the effects of fleet aging and introduce greater digitalization across all operation and maintenance process. We can now basically monitor each asset in real-time from our centralized control room no matter where they are located and thus minimize intervention times and their effectiveness. Okay. Let's move to Page #15. After a period -- I'm talking about the pipeline, the organic pipeline. After a period of strong growth, we added roughly 1.9 gigawatt over the last 5 years. We now want to grow more selectively by extracting value from projects developed in-house. We have around 230 megawatts already under construction, mostly repowering projects with route-to-market secured and CapEx fully committed for about EUR 300 million. We are also working hard on about 700 megawatts, 50-50 split between wind repowering projects and BESS projects, and we expect all of them to be ready to take part of the next auction rounds with a potential code commercial operation date, say, by 2028. We expect to take the final investment decision by the end of 2026. And the overall expected CapEx to cover the construction is in the region of EUR 700 million, which is a mixture an average between EUR 0.7 billion for BESS, less, even less and EUR 1.4 billion, EUR 1.5 billion per megawatt for wind. So we can rely on 1 gigawatt of highly visible projects to be potentially in operation by the end of 2028. And it's not said that we are going to construct all of them because it depends also on the associated returns. But part of it, part of the 700 megawatts for sure, will be included in our next 5 years business plan. Page #16, you have just the list of the 230 megawatts, so you can have a clear idea of the projects that are right now under construction. Importantly -- very important is that, all these assets have already been secured with a long-term tariff, either a CfD awarded at auction or a PPA negotiated with a private offtaker. Moving to Page #17. Here, we have more details on our repowering pipeline, which continues to grow as we extend screening and feasibility analysis to all our assets. The goal is twofold to rejuvenate our fleet while ensuring the route-to-market for these new productions. Looking at the table at the top left of the slide, I think you are familiar with the numbers that repowering can help achieve, reducing the number of turbines while increasing installed capacity and even more production, which is ultimately what we are aiming for. You will likely recall larger numbers, I mean, up to 2, 3x the capacity and over 3x for the production. But this is because the current pipeline also includes multi-megawatt turbines as shown in the picture below, whereas in the initial development phase, and I mean also the current megawatts are under construction consisted only of kilowatt turbines. So turbines equipped with turbine below 1 megawatt per tower. So where the gap with new technology is greater. Here, you can find a little bit more details on the current status of our pipeline, a total pipeline of 1,600 megawatts to be that compares to the existing assets of 890, so an increase of more than 700 megawatts. Looking at the most advanced on top of the 200 under construction, 285 are already fully permitted. And mainly are all wind power in Italy, most of them are still kilowatts. As I said, we may not build them all in line with our value over volume strategy. Projects will be pursued only when returns are consistent with our targets. Page 18, BESS, again, is becoming a new and essential stream of growth for ERG. We have our first asset in operation in Vicari, and we are learning from managing it. We can count on a solid European pipeline of roughly 1.5 gigawatt of storage under development, mainly in Italy, Spain as a second country and then U.K. Roughly 300 megawatts, particularly in Italy are at a very quite advanced stage of permitting. Storage, in our view, is crucial as it adds flexibility to the portfolio. We are starting a multitude of route-to-market options, I mean, ranging from MACSE auction that another auction would be held this year, a mixture of capacity market, tolling and even merchant. And we will assess the proper -- say, the proper choice to maximize profitability. I mean, by -- our objectives for '26, by the end of '26 to define a sustainable route-to-market to finalize our BESS developments. This is anyway without doubt, an area we intend to focus heavily from now on. Let's move to Page #19, a little bit more color on what we expect from asset rotation and geo focus. First of all, we expect 2026 to be a very important year to define the geographical scope of our long-term plan to be pursued through asset rotation. Also rotation can also become a source to finance, as I said, our main developments, wind repowering to rejuvenate our asset base and BESS to add flexibility to the portfolio. I know there will be some key questions, or at least I expect some key questions to come from you later on. Where will ERG grow? What is the final geographic scope of asset portfolio in the future? Is the United States part of it? Or could it be sold in the future? Which countries will ERG divest from and which will it invest in? Honestly, we don't know all the answers yet, which is why we said that we want to present a comprehensive business plan later. We need time to evaluate all options and find the best one to maximize value creation and the long-term sustainability of our industrial business model. I'm confident that asset rotation could help rebalance our geographic footprint and free up financial resources to support our organic developments. But we are only willing to pursue it under the right condition. That must be very clear. We are not forced, we are not obliged. We just will do it if there is value creation and convenience to do it. But that's why we need more time to assess its potential. We'll also explore an opportunistic build and sell approach, leveraging our industrial track record that said that we built roughly 900 megawatts internally in recent years. Last but not least, I'm on Page #20, the 4 pillar, the fourth pillar, the route-to-market. In a time of high volatility uncertainty, we think it's becoming particularly important to secure the route-to-market for our energy. In this respect, our track record speaks for itself. Over the last 4 years, we have signed several major PPAs with Tier 1 corporates, tech companies and utilities. As of today, about 40% of our entire portfolio is covered by long-term PPA. Our PPA portfolio is made up of contracts of various durations, ranging from short-term, 5 years, particularly for old assets to up to 20 years for brand-new assets. We have been able to attract large corporates and utilities, I think we think with a value -- thanks to a value proposition to cover needs to improve their carbon footprint. In a scenario of expected growing power demand over the next decades, driven by data centers, AI, cryptocurrency and all manner of new and energy-intensive technologies, we believe, based on our track record that we are very well positioned to capture this coming opportunity. As mentioned, 2026 will be a very important year. So I conclude this first part by saying that we need to, as we say, roll up our sleeves and continue to work hard in the coming months to develop a successful plan, that is going to be presented, as I said later this year or early next year. I'm confident we have everything we need to do so. And now I leave the floor to Emanuela for comments on our ESG strategy.

Thanks, Paolo, and good morning, everybody. We still believe ESG is important as long as we look at substance over form. ESG consider sustainability a strategic lever for growth and long-term value creation rather than simply a compliance requirement. In an increasingly complex global environment, ESG reaffirms its commitment to credible decarbonization pathways to advance the green transition. We continue sharing value, building partnerships with local communities and through initiatives like the ERG Academy, engaging the next generation in the energy transition. Safety, of course, is a top priority, and we have also a clear D&I goals to strengthen engagement and belonging across the organization. At the same time, we are enhancing our governance model to ensure integrity and transparency, and we are working with our supply chain to promote decarbonization, human rights and D&I. In a few words, ESG is not a separate track. It's how we run the company. Although decarbonization seems to have lost popularity, we not only confirm our net zero target in 2040, but we can also proudly say that we achieved 90% emissions target reduction 2 years in advance, so now in 2025. The strength of this approach is reflected in the recognition we continue to receive from leading ESG rating agencies, including top 5 positioning in the S&P Corporate Sustainability Assessment, inclusion in the S&P Global Sustainability Yearbook 2026 in the A list of CDP and the first place globally in the 100 global ranking by Corporate Knights. And now over to Michele for his comments on financial strategy and on full year and fourth quarter 2025 results.

Thank you, Emanuela. The phasing out of the incentives affects the oldest part of our portfolio and relates mainly to Italy, where in 2026, we expect 0.2 terawatt hour less of production with green incentive in comparison to 2025 budget figures. Obviously, this is already factored in, in our 2026 guidance. We are managing the otherwise increasing merchant exposure through the repowering of our assets and securing PPAs also for older assets. More precisely, in 2025, we took the final investment decision for the construction of 141 megawatts of wind repowering secured thanks to 20 years CfD. The Green Certificate of this asset expired some years ago. In the same period, we secured 5 to 10 years PPAs with Ferrovie dello Stato planning to [indiscernible] to cover 180 megawatts of assets whose incentive again expired last year. So a securitization strategy that delivers results. As you can see in the right part of the chart, most of our 2026 production is hedged, thanks to Green Certificates, long-term PPAs, CfD and short-term hedge. Only a limited portion of our production is still exposed to merchant volatility. That is unavoidable considering the nature of our sources wind and solar. And it can deliver some positive effects in case of sustained market prices. Credit-wise, our debt structure remains solid and competitive as before as we have significantly mitigated the impact of 2025 refinancing by pre-hedging the 2024 issuance. As a result, the average cost of our liabilities remain the lowest among power producer and it is almost entirely hedged. We remain solid investment grade as confirmed by Fitch. And at the beginning of 2026, we have exploited the very favorable credit conditions by shifting maturities on more than EUR 400 million corporate loans beyond 2030, while also improving their commercial terms, most notably by growing the EUR 243 million long-term EIB finances. Our liquidity position remains comfortable with basically no maturity in 2026 and is further strengthened by a fully undrawn EUR 600 million revolving credit facility maturing at the end of 2028 with the option to extend to end of 2029. Now a look to the last quarter of 2025 results. In the fourth quarter of the year, EBITDA reached EUR 147 million, slightly higher than Q4 2024, mainly thanks to perimeter effects, EUR 80 million linked to newly acquired assets and organic development. Overall, productions are substantially aligned to last quarter of last year that already reflected wind significantly below historical average. The quarter was also influenced by a widespread reduction of energy market prices. In Italy, EBITDA reached EUR 73 million, a decrease of EUR 14 million year-on-year, primarily driven by lower captured price due to lower short-term hedging and lower wind, partly offset by perimeter effect both in wind and solar. In France, the EBITDA is EUR 22 million higher than last year, supported by better wind conditions and perimeter growth, partially offset by lower captured price. In Germany, EBITDA is EUR 9 million, slightly lower than previous year, mainly due to a weak production. In East Europe, EBITDA is EUR 15 million, aligned with previous year, driven by lower wind resource offset by higher captured prices. In U.K. and Nordics, the EBITDA is higher than in Q4 2024, thanks to the perimeter effect coming from the plant entering operation in September in Northern Ireland and the acquisition made at the beginning of 2025 in Scotland. These adjusted figures include the contribution of the Sweden wind farm recently disposed for EUR 1 million in the quarter. In Spain, the EBITDA is lower than last year, impacted by reduced production and lower captured price. In U.S.A., EBITDA is EUR 13 million, in line with previous year. In 2025, EBITDA is EUR 540 million, higher than previous year by EUR 5 million, mainly driven by perimeter effect, partially offset by the extraordinary low wind condition in Europe and the lower capture prices, mainly in Italy and Spain. A comment now on the investments. In Q4 2025, we invested EUR 70 million, mainly due to new repowering projects in Italy and Germany and the ongoing construction activities in Germany and U.K. In particular, we spent organic CapEx for EUR 34 million in Italy for the beginning of activities on repowering wind farms and EUR 17 million in Germany for the construction of our greenfield and repowering projects. In 2025, investments amount to EUR 235 million, of which EUR 72 million for the acquisition in U.K. versus EUR 550 million of 2024, which included M&A for a total amount of EUR 390 million. In Q4 2025, amortization and depreciation are EUR 70 million, aligned with Q4 last year due to perimeter effect offset by the end of useful life of some older plant components. Net financial charges are at EUR 13 million versus EUR 9 million in Q4 '24. Financial charges versus bank and bondholders net of liquidity remuneration stand to EUR 9 million, plus EUR 5 million due to perimeter effect and lower remuneration on cash. The complement to EUR 13 million, EUR 5 million are noncash accounting items such as effects coming from tax equity partnership and curative is interest expenses according to IFRS 16. The tax rate in the quarter is 26%. The adjusted net profit of the quarter amount to EUR 46 million, aligned with last year, mainly driven by net financial charges net of fiscal effect. The adjusted net profit of 2025 amounts to EUR 155 million. The reported net profit for the year is EUR 65 million. These results include EUR 46 million of impairment on solar plants in Spain, EUR 26 million of write-down on Sweden asset sold in January and EUR 16 million of write-down on assets that will be dismantled for repowering in Italy. And now finally, let's take a look at the cash flow statement and the net financial position. The net financial debt at the end of the year is EUR 1.9 billion, plus EUR 89 million versus the end of 2024. The cash generation from EBITDA is offset by investment of the period, dividend payments and the change in net working capital, affected by ordinary dynamics also due to payable for invest. Thank you for your time and attention. Now I leave the floor to Paolo for his final comments.

Thank you, Michele. Let me conclude by looking at guidance for 2026. EBITDA, we expect it to be in the EUR 520 million, EUR 590 million range. We expect better wind conditions, more in line with the historical average. January and February were in line. March, unfortunately, was well below. We nevertheless expect larger production to more than compensate the phaseout of incentives and a more conservative price scenario, also including short-term hedging at lower levels compared to the previous year. Some upside, of course, could come from the current spikes in energy prices that are not factored in our scenario, but please consider our exposure to merchant power is limited as regards to 2026. As usual, the midpoint of this range represents our best estimate at the moment. We are fully aware that this may fall short of consensus expectations and our guidance provided last year. The gap is mainly due to 3 factors: a lower capture sales price, particularly in some countries, such as Spain and France and to a lesser extent in Germany. This item is worth around EUR 30 million compared to the previous scenario. It's not just the capture price, but it's also the -- a little bit lower value for the incentive in Italy, which came out from a mathematical formula and the much lower value and price for Origin Certificates. All in all, say, the downward revision of scenario accounts for around EUR 30 million in this bridge. Fewer megawatts installed, including the sale in Sweden that was not factored in before. And the third factor is a greater number of repowering projects in the decommissioning phase in 2026, representing approximately EUR 10 million less EBITDA than our previous forecast. So I mean, in the old indication for EBITDA was not factored all these repowering projects. And when you have a repowering project, first of all, you have to shut down the plant and dismantle the old turbines before erecting the new ones. This is an impact that was not factored in the previous plan. CapEx is expected within the range of EUR 330 million, EUR 380 million, including the recent acquisition U.K. and the investments associated to the asset currently under construction. Finally, at year-end, we forecast a net financial position within a range of EUR 1.95 billion and EUR 2.05 billion, including, of course, the above CapEx and an ordinary dividend at EUR 1 per share. We are now ready to take your questions.

[Operator Instructions] The first question comes from Beatrice Gianola of Mediobanca.

Actually, I have some questions. The first one is on the European power price outlook. In recent months, there have been several discussions at European level regarding the ETS mechanism and more generally political debate on potential measures to contain energy prices. So in light of the guidance you provided for 2026, could you share with us what price evolution scenario you are currently incorporating into your assumptions compared to your last business plan? And then looking further ahead, for example, towards 2030, how do you expect the European energy price environment to evolve? That would be my first question. The second one is on the outlook beyond 2026. You have provided some indications for this year. It would be helpful to understand your thinking for 2027, maybe on the EBITDA or just even qualitatively, let's say, do you expect some of the drivers influencing 2026 to be somehow absorbed in 2027? Or do you anticipate that some of these dynamics may persist beyond this year? And then the third and last one is on the governance structure and growth opportunities. Recently, some articles have circulated regarding a possible change in the company's governance structure. The question is not whether you think this will happen, but rather whether you believe the current governance structure allows the company to fully size growth opportunities. In particular, where do you see the main expansion opportunities primarily domestically in Italy or abroad? And if abroad, which geographies do you currently consider most attractive?

Okay. Beatrice, thank you for your questions. So let me start in order. I say ETS evolution and outlook is really $1 million question in the sense that it's a fully regulated market depends on several mechanisms that have been set in Europe like the reserve adjustment mechanism or the free allowances. So based on the current market framework, we should have expected a growing price for ETS because over time, the constraints for emitters are growing and then in this kind of market with this kind of rules, every, say, price scenarios were expecting this price to go up. But the discussion is open now in the U.S. and -- sorry, in Europe next week, at the European Parliament, they will open this kind of discussion about the mechanism because on the one hand, there are consumers that are putting pressures to soft the mechanism and then reducing the charges associated to ETS. And on the other hand, there are producers like us that are pushing to keep the ETS mechanism as it is. In fact, yesterday, I think 100 companies involved in -- mainly involved in renewable generation, but not just that, sent a letter to the European Commission in order to say, "Hey, guys, let's keep this ETS system because it has worked very well." In fact, if you look at the emissions in Europe have been declining hugely over time. But let me try to give you a more pragmatical answer. I think you know that the energy bill that has been issued by the Italian government and is still now under the journey of -- to be converted into law. There is an article, the Article 6, which is the most controversial. That basically is trying to artificially lower the cost of producing energy from gas by reimbursing some elements, some cost and charges to gas producers. I mean, energy producers from gas. And one of this component is ETS. But this clause is subject to the approval of the European Commission. And I -- that's my personal view. This clause was put in the energy decree just to open a discussion because I suppose Europe -- European Commission can't accept this clause because it's going down exactly the opposite way any European policy is going towards. So let's see what is going on. This is one of the reason we want to postpone -- we postpone the presentation of a full comprehensive business plan because we need to understand how the regulatory and then the price scenario is going to pan out because of all these points of discussion. In our, let's say, short-term scenario, I mean, '26 and '27, we still expect ETS to be a contributor of the electricity price, but we are not assuming price that is skyrocketing because the energy price we are factoring in our '26 and '27 numbers are basically in line with the current forward for electricity. Let me even say that we are now conservative because over the last few weeks because of the year-end situation, we have seen spikes in the TTF gas price in Netherlands. Now it's trading above EUR 50 per thermal megawatt hour. So that has pushed the forward also for electricity up quite substantially, and this is not factored in our guidance, neither in our guidance nor in our projections going forward. So I hope to have answered your questions. For sure, we will see next week if the President of the European Commission on the line is going to open a table to discuss this ETS. But we are quite confident that ETS will remain there. Probably they will soften just some mechanisms in order to lower a little bit the price compared to the expectations for all the stakeholders. '27, please, we don't want to give an indication because as said, in '26, we are -- we'll be working a lot on defining the geographical scope for the future and long-term. So we will assess any opportunities that can create value in reshaping our geographical footprint. So it's very difficult. I don't want to give a number, say, because we are still working on the geographical portfolio going forward. So for instance, transparently said is U.S. there or we should reinvest even further in the U.S. or we should take into consideration to sell the portfolio? My premise is, we are very satisfied with the performance of the U.S. portfolio. The relationship with Apex, which is our partner in the U.S. are very good. We became a little bit more cautious because with Trump administration, there is a little bit hostile environment, at least in the narrative. But we are -- on the other hand, we are positive about the fundamentals because there the electricity demand is growing. The electrification is growing more than in Europe is a real market not influenced by, I mean, CfD awarded in auctions because there -- it's all based on PPA. So it's a market that still is very interesting for us. And 2026 will be spent to understand if there are real opportunities to increase our positioning in the U.S. So your third question is basically the same where ERG wants to invest, but I repeat, for sure, there are some markets like Italy that is evergreen for us for sure because we have a strong industrial positioning, France, U.K. But I repeat, we will be very flexible in deciding the long-term geographical scope also based on tactical and opportunistic opportunities. So, Beatrice, I hope to have answered your questions. You asked also about the rumors and the governance of ERG. I think the governance of ERG is recognized excellence also in all the ratings. But when it comes to rumors, let me say, as per our policy, we are not commenting any rumors. But in this case, let me say that ERG and its management are currently not involved in any discussion, say, regarding merger, business combination or whatever. So we are not a company to which ask this question, as you may understand.

The next question, sir, is from Roberto Letizia of Equita.

The first one is on 2026 number and specifically the U.S., you just said U.S. is a pending decision, but that's, I guess, beyond '26. Just wonder if you can clarify where the guidance for 2026 is based on the same perimeter of U.S. assets. So that meaning that you're not so far, including additions on M&A or new assets from that geographical area? The second one is on '25 results. I see that actually net income includes a lot of nonrecurring. So particularly the reported net income is much lower because of the write-down of assets. But the adjusted net income also includes the EUR 27 million contribution from the asset held for sale. And I need here some clarification on how should we read the underlying net income for '27. So should we exclude as a base for '27 accountancy, those EUR 27 million or these are not going to be then finally included in '26? So can you please clarify how should we read this contribution in '26 rather than '25 figures? Then you introduced on the strategic guidelines, this idea of asset rotation and build and sell opportunity if it comes. Can you just say to us from a qualitative perspective, if this means that potentially you are growing more, but then the net effect will be unchanged because you're going to sustain potential higher new addition through also the asset rotation. Can you qualitatively just indicate this for us? And then 2 very, very quick questions, but the BESS contribution is becoming very, very strong. Can you help us just to understand what's the order of magnitude of or a range maybe of EBITDA contribution per megawatt, just as a reference, market reference, if you want not to be too much precise on ERG-specific figures? And then what is the total amount? You just mentioned qualitatively, but can you tell us how much of the production is still open in '26 and '27 because forward curve are increasing also for next year, which is a positive on the open position?

Okay. Roberto, I'll try to answer the list of questions. So the first one, I confirm you that the guidance for 2026 is based exactly on the same perimeter of assets in the U.S. And basically, it's based on the current assets and not including any M&A. I mean, not just in U.S., but any M&A. And for sure, a couple of points, we know and we acknowledge the guidance is lower than the consensus and also lower to the indication we gave ourselves, honestly. Please consider that the guidance for '26 includes also some one-off effects. One is associated to the fact that we have several projects, several wind repowering projects that are in the dismantling phase, and that was not included in our previous indication because exactly we didn't know at that time if we were going to invest in greenfield M&A or repowering. Now we are more oriented to repowering because repowering is a way to, on the one hand, rejuvenate the fleet, and on the other hand, to secure with 20 years CfD or PPA, the value of production over a long period of time. So this -- the fact that we right now have roughly 120 megawatts that are going to be dismantled soon and for downtime in the area of 6 to 8 months. That's usually the downtime expected when you repower a wind farm. We should have an impact in 2026 EBITDA of around EUR 10 million or even more because 120 megawatts in Italy, in France, in Germany because right now, we have projects of repowering, but there is a list in a chart in the webcast. If you apply the simple rule of thumb multiplying by 2 because we're not assuming 2,000 equivalent hours per year and then divide it by 2 because more or less the downtime is 6 months, you arrive to 120 gigawatt hour lost one-off for this effect, and this is value roughly EUR 10 million. About the write-down, yes, you are right. There is a write-down of EUR 46 million in Spain, which is very much related to the current business environment, not at all related to the performance of the assets because the assets are performing quite well. But it's a matter of captured price in the wholesale market in Spain. We have some PPA covering assets, but they got a floor. And this floor is not in line with the expectation, the price expectation we had at the time of the acquisition of the construction of these plants. And this is -- this write-down has been included all in the '25 reported net profit. And the very same is for the EUR 26 million in Sweden because the asset has been already sold. And this write-down, which is a noncash item has already been accounted in the 2025 reported net profit. So no effects in 2027 P&L -- sorry, '26 P&L. About BESS, we are not in the position to provide any guidance on this because for the time being, we have just got a small plant, 12 megawatts in Sicily. But the objective going forward is to push on this revenue stream. For the time being, as I said, we have 1.5 gigawatts of pipeline. But let me say the objective for 2026 is to get at least 300, 350 megawatts at a ready-to-build status, which means to participate to auction, MACSE auction or because we are starting other route-to-market for these kind of assets or tolling agreement or even merchant because they are very flexible and you can manage these kind of assets as compensatory, let me say, and complementary asset with the rest the traditional wind and solar assets you have in the portfolio. So depending on which route-to-market you pick, you have different returns, different multiples, different EBITDA contribution. Let me say, MACSE, at least according to the outcome of the last auction, is yielding the lower return because it's a fully regulated business model. We are now more oriented something in-between because we can also have a business model that is partly secured through capacity market or through tolling agreement and part left merchant. In this case, we are looking at return high single-digit unlevered returns. In this case, given the lifetime technical -- useful technical life of these plants are lower than a traditional wind or solar, you can assume an EBITDA multiple much lower even when the plant is at its beginning of the life. So the contribution in terms of CapEx per -- EBITDA per million invested in BESS should be higher than for wind or solar. But give us time to perfectionate our business plan and later this year or early next year, when we'll present a comprehensive business plan, we'll give more details on it. About the open production, maybe Michele can give you more precise...

Yes. For 2026, we have an open production of 1.8 terawatt hour spread over the various countries. As you can imagine that the large majority of this open position is in Italy. At current market price, we can consider also substantially open also the production that is covered by one-way CfD because in a certain moment, the current market price are above the floor of this one-way CfD. And the total amount for 2026 of these volumes is around 0.7 terawatt hour, for 2026 again. Figures, as you can imagine, increase for 2027 because we have 2.6 of merchant exposure in 2027.

Next question is from Emanuele Oggioni of Kepler.

The first one is still more details on -- I struggle to understand basically the effect, the bridge, the negative bridge compared with your old targets on '26 EBITDA as regards to the power price scenario and power price impact. You mentioned before Spain or Germany, for example, weaker than expected 1 or 2 years ago. But overall, if you consider the other countries in Italy compared with 1 or 2 years ago, overall, the spot and the forward prices have increased compared with 1 or 2 years ago, even before the war against Iran. So even before this short-term movement. So -- and in the mule is true that the formula, the T plus 1 formula, if you have a higher price the year before you get lower incentives the year after, okay? But in the meanwhile, in '25, you should have hedged or should have had the opportunity to partially hedge at higher level for '26 onwards. So it's a bit difficult for me to understand all these moving parts. So this is the first question, basically. The second one is on the more high-level considering that you are now prioritizing the organic development rather than acquisitions. And in the meanwhile, you are saying that you are in a new mode of asset rotation, asset rotation could become more structural, et cetera. So I wonder why now you basically are changing the historical strategy considering that your leverage is still far lower than your peers. So you are not in a hurry to sell assets to finance the growth or to -- or why you are you -- you have the intention to reshape in geographical terms your portfolio also considering that compared with other companies are still in a buyer mood a buyer's market for brownfield assets, et cetera. So it seems that also for you could be still interesting to buy assets in the market, brownfield assets.

Emanuele, thank you for your question. So I try to explain a little bit with more details, say, there is a bridge with the guidance, because it is really important. So compared to the previous, say, indication, there is roughly EUR 50 million, more or less. If you take the midpoint of our guidance as our best, say, estimate right now for EBITDA. Let me say, first of all, I said the price scenario all in all was about EUR 30 million. Yes, you are right, the -- I mean, the national -- the expected national price in Italy for '26 is not lower than it used to be 1 year ago, but we are an international platform. So when saying EUR 30 million compared to the previous scenario, we are basically referring to other countries such as Spain, where the captured price is very, very low. Right now, all the scenarios are expecting a recovery in the medium-, long-term because of boom in demand coming from data centers. But right now, the market is really under stress. And there, we have, yes, a little bit of protection from our PPA, but they got a floor. So part of the upside based on the forward that we had 1 year or 1.5 years ago is not there anymore. This is true in Spain. This is true in France because in France, if you look at the price now are much lower than they used to be 1 year and 1.5 years ago. And this is the same in Eastern Europe. So there are several markets on top of Italy. Italy, it's right what you are saying. You correctly said that the value of the incentive a bit lower. This is one other item we have to consider because it comes -- it stems from a mathematical formula based on the actual price in 2025 because it's conversely proportional to it, and bring it higher than results in a lower green incentive value in 2026. But also consider that part of the revenues for a renewable company is also associated to Origin Certificates, which means basically the price consumers or offtakers are ready to pay for having energy that is produced from green assets. And the Origin Certificates is in a European market. And the value of Origin Certificates collapsed from EUR 2, EUR 3 to less than EUR 1 per megawatt hour. And this is affecting all the production of renewable company. So all in all, these effects accounts for roughly EUR 30 million compared to the previous scenario. But I stimulate you to take any scenarios I know, I mean, Baringa, AFRY, Aurora or whatever and compare the last release of price scenario, I mean, in the countries where we are present, compare it to the scenario they issued 1 year ago, and you will see a gap and the revision is for sure downward. That's the first moving part. The second, I already explained, the repowering projects right now under the dismantling phase, this is basically worth roughly EUR 10 million. This is totally one-off because next year, when they will enter into operations, they will keep -- will start generating revenue. So this is a one-off, let me say. Sweden was not included in our previous guidance, while the acquisition in U.K. that we made in January was already included in our unknown megawatts because if you look at the indication we gave 1 year ago, they were based on a number of megawatts installed higher than the current one. I mean, very similar net of Sweden, but Sweden is not there anymore because we decided to exit that gas. And this cost -- this item is worth roughly EUR 6 million. Last but not least, maybe this, I wasn't clear enough or probably I didn't say in my speech, but we also factored the production year-to-date, say, yesterday. And while January and February were in line with our estimates over the last 3 weeks, you are in Italy. So just look outside the window, there is a wind drought over the last 3 weeks, and we lost roughly 150 gigawatt hour compared to our analysis. So we factored this item into our guidance for an impact of roughly EUR 10 million. So this is already factored in our guidance, and we cautiously -- we didn't assume any recovery going forward of this effect registered, say, over the last 3 weeks. It can be taken as a cautious stance, but we -- after the experience of 2025, we prefer like this. So, Emanuele, I hope to have given a little bit more color on -- that was important.

[Operator Instructions]

[indiscernible] other questions from Emanuele. The organic, yes, I confirm we are now more oriented in developing organic projects. It's not just a matter of organic versus M&A. It's a matter that through organic and in particular, repowering we can rejuvenate our fleet and secure it for a long period of time. Please consider that all the assets we have currently under construction, they all got a tariff, either a CfD or PPA, securing the production and the value of the production for the next 20 years. And this is the model we are looking at also when developing other projects in our pipeline. Asset rotation, why asset rotation now enters into our business model. I'd say, even last year, we said asset rotation will be part of it, but we had to study. We then made our exercise. We did our homework, say. And now we believe that reshaping our portfolio, maybe having a stronger presence in some countries and exiting countries maybe where we have just one asset can provide for a more robust business model. But again, we do not yet the end game because we are assessing with flexibility all the opportunities that can help us create value. So we hope to be, by the end of the year, in a position to be more precise on the geographical scope going forward.

Maybe just you are right that our leverage is below our peers. But -- and you are right that we are not in a hurry to sell for -- to defend our rating or something like that. But at the same time, we have a financial discipline to be maintained. We have an investment-grade rating that we want to maintain. And so we will continue to manage our growth and consistently also with our financial discipline.

The next question gentlemen is from Davide Candela of Intesa Sanpaolo.

Actually, I have one that is quite high level and perhaps a bit provocative. It regards what you said, what you answered first with regards to the ETS mechanism. So it is true that helped the emissions to go down over the years. But in the end, it looks like has been burdening the industrial backbone of Europe with regards to the cost related to that transfer to the final energy prices. And my question would be, do you see a scenario in which if there won't be deep change in ETS, but in the end, there could be opening discussion with regards to decoupling the -- at least the renewable power prices for the formation of the final power prices from the gas and CO2 components because I would say, at the end of the day, renewables are the ones that are truly benefiting from the higher gas and higher CO2 costs because they are not system hit. So maybe if you can elaborate on this and how it is your view on that apart from the impact that you could see on ERG in general?

Okay. Davide, this is quite complex question because it involves many factors that are at the base, say, of the price formation in the market. I repeat ETS is something Europe is going to discuss. I don't think that's our view. ETS is a system we can accept to be eliminated. Europe can accept to be eliminated because ETS -- an ETS mechanism is also in the U.S., in some states in the U.S., in China, in Korea, in other parts of the world. For sure, the cost of ETS in Europe is stronger than in other geographies is because Europe was super committed in increasing the renewable presence in the portfolio also because we can't rely on our own reserves of gas or oil. We are more dependent on imports, gas imports than all these geographies that I mentioned. So our outlook, if you know, the ETS market is very complex and very super regulated, and there are at least 3 elements in the ETS market that in the end are creating the price. One is the market stability reserve. It's a kind of mechanism that absorb or release allowances depending if the market is long or short. Then there is the free allowances. I mean, basically, it's kind of shield for some companies. And there is also the so-called obliged quotas. So how much every segment, the industrial segment has to pay for their emissions. By leveraging on these 3 elements, Europe can, for sure, modulate and adapt the price of ETS. In fact, if you look at the forward market for ETS is expected to remain in the region of EUR 70, EUR 80 per ton, while if you take all the price scenarios issued by the big names, I mean, AFRY, Baringa, Aurora, the most famous one, they are all pointing at EUR 120, EUR 130, EUR 140 per ton in 2030. Why? Because this value of CO2, I mean, EUR 130, EUR 140 is the one that should trigger the switch from gas to hydrogen or to other form of energy substituting the gas, I mean, a fossil fuel with a zero carbon fuel. So the question in the end is, are we still looking at becoming net zero or not? That's the point. I don't know the answer. I hope so, but I don't know the answer. So let's see what's going on. But I'm quite confident. Maybe I'm wrong, but I'm quite confident the Article 6 proposed in the energy decree by the Italian government is not acceptable for Europe. And being subject to its approval, we do not expect to be implemented like it has been proposed.

The final question is a follow-up from Roberto Letizia of Equita.

Yes, very quickly. I just want to know if the write-down of EUR 26 million are generating any benefits on the D&A this year and how much?

No. EUR 26 million Sweden, no effect.

I mean all the write-down. I mean, all the [indiscernible], no benefit of the D&A.

No. For the EUR 46 million regarding Spain, we have a very limited write-down -- a very limited benefit on depreciation because part of it will -- a part is goodwill and other part is not goodwill and so we have a limited benefit also on depreciation in 2026.

Mr. Merli, there are no more questions registered at this time, sir.

Okay. Thank you very much to all for listening, and we will see a catch-up in May, probably with the first quarter results. Thank you very much.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.