ERG S.p.A. ($ERG)

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ERG First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Paolo Merli CEO of ERG. Please go ahead, sir.

Good afternoon, everybody, and welcome to our first quarter results webcast. Here with me, as usual, Michele, our CFO. Let me start with our economic results. EBITDA in Q1 closed at EUR 167 million, plus 16% year-on-year benefiting from the contribution of new installed capacity. And let me say like this, from an easy comparison in terms of wind production in light of the very weak conditions over Q1 2025. So to this extent, we can talk about the better wind conditions, but let me say, still below the historical average. But that trend was already captured in our full year guidance at the time of our previous webcast in mid-March. These positives were partially offset by lower clearing prices. I mean, the higher productions following this better wind conditions were partly compensated by lower capture price, in particular, clearing price linked to short-term hedging transactions as these contracts, as you know, are typically executed 3 years in advance of the delivery date. So therefore, in Q1 last year, value of hedging still benefited from the very high prices recorded in 2022 and 2023. It's worth noting the strong performance in U.K. U.K. contributed to the EBITDA with EUR 25 million basically 3x more than last year. This thanks to the higher installed capacity that was partly organic. I'm referring to the 47 megawatt greenfield we executed in Northern Ireland in the second part of last year and partly through M&A, the 73 megawatts wind portfolio that was acquired at the beginning of 2026 and contributing consolidated as of the beginning of the year. Conversely, we had a fairly weak performance in the U.S. impacted by exceptional weather events, translating to lower wind availability and then lower productions. And there were a lot of grid congestions in the grid and these are for the price mechanism that is in the market in U.S. had a negative impact on capture prices. Those events, so we tend to see those events as one-off. But nevertheless, they had a negative impact that we estimated at about EUR 6 million negative, minus EUR 6 million in the quarter EBITDA, so quite substantial. In Q1, we invested talking about CapEx, EUR 148 million. mainly related to the acquisition of the U.K. portfolio, I already mentioned, coupled, say, with the expenditures associated to our asset under construction, Italy, France, Germany. Adjusted net profit in Q1 was EUR 61 million, up 24% year-on-year reflecting the greater operating -- the better operating results and just commented partly offset by higher depreciation higher financial charges and taxes. Net financial position at the end of March was EUR 1.8 billion or less, down 4%, so slightly down compared to the end of last year, thanks to, let me say, solid -- a very solid cash generation over the period. I'm moving now to Page #5. Over the period, we also kept delivering on our strategy. We are progressing very well on our project pipeline. Let me say, on top of the already announced assets under construction, namely the 230 megawatts have already had the chance to explain during the last webcast, we made just yesterday -- just this morning in our Board of Directors, we made final investment decisions on a couple of projects that now and into the construction phase. I'm referring to a 25-megawatt greenfield wind farm in France and the revamping of 41 megawatts PV farm in Italy, farms because there are more than 1 -- farms that are still under the Conto Energia scheme. We also obtained a final authorization or so-called Algorithonica for our largest wind repowering project in Italy, the 121-megawatt in Sardinia will be page. Probably I already said that during the last webcast. But now in the meantime, we did properly the piece of paper from the region is the last word to this long -- very long process to obtain this authorization. Okay. on finance, let me say, discipline continues to be 1 of our key strengths. Yesterday, feature the rating agency reconfirmed our investment-grade status with a stable outlook. So we are quite proud, proud of these achievements, which reflects, say, the appreciation for the work we have done so far. In this regard, I would like also to mention that during the period, we further optimized our financial structure through liability management amounting to almost EUR 500 million, EUR 0.5 billion that was refinanced by extending maturity and improving cost of debt. So part of this refinance debt was subscribed as you can see, the low raw in the chart by CDP, which is a state-owned key financial institutions, so something we are, again, very proud of -- on ESG, Ergo was included in the top 5 of the electric utilities sector in the in the 2026 Standard & Poor Global Sustainability Yearbook. We are also proud to have completed together with Green piece installation of solar panels in kindergarten in Ukraine as part of our social purpose. As regards to shareholder remuneration, you already know, the AGM approved the EUR 1 per share dividend that is going to be paid next week with a yield of over 4%, which is, I may say, Arity within our peer group. So I now hand you over to Michele for his review of first quarter results.

Thank you, Paolo, and good afternoon, everyone. Let me walk you through the quarter, highlighting the key drivers of our financial performance and underlying trends across our portfolio. Looking at power markets, prices were lower year-on-year in almost all countries where we -- this trend, coupled with short-term hedging fixed at lower prices compared to last year's leads to reduction in the unitary revenues in most countries. However, as expected, the impact on our revenues was only partial foregoing nature of our portfolio, where a large share of volume is already secured through PPAs or needs I would like to highlight the higher capture price in the U.K., driven by our newly acquired asset in England, which benefits of renewable obligation certificate incentives. On the other hand, the trend of U.S. wind unitary revenues reflects an extraordinary increase of the basis cost due to temporary congestions, outages and constraints in the period. Moving to production. In the first quarter, ERG reached 2.2 terawatt hour of generation, 15% more than previous year. This trend is influenced by higher windiness compared to 2025 characterized by exceptionally weak wind conditions across all Europe, but also thanks to the contribution from new capacity. This was made possible by the continued expansion of our portfolio with roughly 90 megawatts of additional capacity contributing during the quarter. In the first quarter, we doubled the production in U.K. mainly thanks to the new acquisition in England and the production of a new greenfield plant entered into patient in Northern Ireland at the end of the year. On the negative side, U.S. was influenced by extraordinary weather events impacting the availability of the plant and compares with the first quarter 2025, influenced by very high maintenance. In conclusion, we had a quarter with a substantial increase in the European production, but there remains, in any case, below the long-term average of our assets in the sense, not representing the full potential of our portfolio. Now let's look at the EBITDA. In the first quarter, the EBITDA reached EUR 167 million, a very good result if we compare it with the first quarter 2025. But remember that as already commented, the first quarter 2025 was affected by windiness well below historical average in Ingo. The main driver was the windness coupled with the perimeter effect from new capacity in a more challenging price environment. After the new acquisition in England -- and after the new acquisition in England, and greenfield plant entered into operation in Northern Ireland, U.K. reached 3x the EBITDA of previous year. On the other hand, United States suffered the decrease in prices and the lower availability of the plant. Overall, the group recorded results higher than last year by EUR 23 million. A comment now on the investments. In the first quarter, we invested EUR 148 million, mainly for the acquisition in England for EUR 115 million. And for the ongoing activities on repowering and greenfield projects in France, Germany and in Italy. These investments are fully aligned with our strategy, combining selective M&A deals and organic growth, particularly in repowering and granted projects across all geographies. Let's take a look at the cash flow statement and the net financial position. The net financial debt at the end of the quarter is EUR 1.8 billion minus EUR 70 million versus the end of the year, also thanks to the disposal of the Swedish assets in January. This reflects a well-balanced combination of solid cash generation from EBITDA and continued investments to support growth. Finally, here, you have a snapshot of our debt -- of our debt structure, which has not changed in its component and it remains largely made up of green bonds, EUR 1.6 billion, but as corporate loans component for EUR 500 million has been materially improved. In April, we finished the liability management of our 2028 corporate loan maturities and the prepayment of the project financing of our latest U.K. acquisition. By way of repayment of the previous loan and draw down of new loans, including the 1 from the European Investment Bank for EUR 240 million at a significant lower margin for longer maturities we shifted all corporate loans beyond 2030, increasing the tenor and securing a significant saving in early financial charges. With average on existing hedges and exploited the credit all before the iron war to get the most out of this exercise, which will contribute to secure ERG competitive financial charges expected at 1.8% in 2026. Cost of gross debt will remain highly competitive until 2030, having only 1 maturity in 2027. Based on such financial strength, alongside our solid business profile, we got the confirmation of the investment-grade rating with a stable outlook by Fitch, which remain a cornerstone of our strategy. Indeed, our value opportunity will be processed consistently with our rating by leveraging on the option available to investment-grade corporate life energy. Thank you for your time. Now I leave the floor to Paolo for his final comments.

Thank you, Michele. Let me now conclude by looking at the guidance for -- guidance for 2026. Reality is a very simple quick exercise all our indications are confirmed. We still confirm EBITDA within a range of EUR 520 million, EUR 590 million. For sure, some upside could come from the current energy price environment, but please also consider our exposure to merchant power is limited as regard to 2026 because we have already our short-term hedging in place. So we still have roughly 1 terawatt hour of energy exposed to merchant. CapEx is expected within the range of EUR 330 million, EUR 380 million. And this in close also the the acquisition of the U.K. portfolio. And let me say the investments we approved that were being approved by the Board of Directors this morning we'll have just a marginal effect in 2006 -- in 2026 as most of the payments are expected in 2027 for next year. Finally, at year-end, we forecast a net financial position within a range of EUR 1.95 and EUR 2.5 billion including the above CapEx and, of course, the cash out for the dividend. So I concluded, and we are now ready to take your questions.

[Operator Instructions] The first question is from Beatrice Canola of Mediobanca.

I have 3. My first question is on the operational performance. The first quarter was good, as you commented and representing almost 30% of your midpoint guidance. So I was wondering what prevented you from upgrading it? And which elements do you see as critical to eventually reach the upper bound of such range. My second question is on the energy decree adopted by the government in mid-February. We know there are ongoing discussions between the Italian government and the European Union. So I wanted to have your thoughts and expectations in this regard. And then my last question is on M&A regarding the latest conference call, you mentioned that the company is working on an asset rotation strategy on defining an asset rotation strategy. So I was wondering whether you could provide an update on these, which assets and geographies could eventually be targeted in your view?

Okay. Let me start from the first question, the operational performance in the quarter. I confirm it was good. And say the first quarter, as you know, it's 1 of the most important throughout the year along with the 4 quarters. So I will start for sure. We are satisfied. It could have been even better if U.S. had performed in line with our expectations because in the end, the contribution of U.S. was short of roughly EUR 6 million, EUR 7 million compared to our expectations. But in the end, say, the good performance in U.K. better wind in January and February, in particular, in Italy, so allow us to post quite good performance in the quarter. We decided to stick on our guidance range. Because in the end, honestly, April was not particularly good in terms of window, even though over the last few days, wind seems to be back very strongly. And then we are quickly recovering. What -- so the question, if I understood well, you asked for what should happen to reach the upper part of the guidance. I say, as we like to define ourselves internally, we are a company people co, so price multiplied by volumes. And what I can do to help you, you analysts to make your best estimate is to provide you with a very simple sensitivity. And the sensitivity is EUR 10 per megawatt hour in prices higher of our internal estimates are worth basically EUR 10 million, EUR 9 million, EUR10 million of EBITDA because we just have roughly 1 terawatt hour of production still exposed to merchant. Why in terms -- as regards production, say, 100 gigawatt hour of more productions means -- of course, it works also the other way, the sensitivities, but 100 gigawatt hour is worth more or less EUR 10 million. So very simple. -- per megawatt hour price, EUR 10 million EBITDA, 100 gigawatt in production equal to EUR 10 million. So to reach the upper part of the guidance, we would need say from EUR 10 to EUR 20 per megawatt hour higher in the selling price as regards the merchant volumes and from 100 to 200 gigawatt hour of higher production. Is it that possible? Of course, yes, because in terms of forward prices for Q2, Q3 and Q4, in particular, in some countries, such as like Italy or U.K. that's our, by the way, our 2 main countries right now. We have already forward prices higher than from EUR 10 to EUR 20 compared to our budget. In terms of production, who knows, I would need a crystal ball. Difficult to predict how wind is going to blow especially in the fourth quarter because honestly, the fourth quarter usually is going to be the swing quarter. If you want, I can because we are becoming experts more and more on climate and metrological matters, experts and in particular, the world meterological association is expecting at least with 40%, 50% probability that Nino or Super Nino will come in -- during the fourth quarter of the year, actually in September after the summer. And this usually is associated to good wind in the past was like this. So let's see. But I repeat, I haven't got the crystal ball, but we had elements internally to be a little bit optimistic. I hope to have answered your questions. So about the guidance, please don't keep asking because the only thing I can say make your best estimates, I provide you with the parameters to calibrate it as best as possible. Energy decree, you open a subject that make me very angry because we are basically very, very negative on this decree. And fortunately, let me say, the European Commission just last week on May -- on the fifth of May, published on the official journal of the European Union communication, which is the -- I can review because of so want to be more precise because I got the document just in front of me. The Middle East crisis temporary state had framework. You can find it on the website. for sure, linked this document an official document, I repeat, loaded on the official journal of the European Union at Article 45 says states that the member states can -- I quote because I'm reading by the official document member states can consider, measure measures to mitigate the impact of high gas prices, but at certain conditions. And those conditions are 6, 7. The first 1 is they have to be time limited. I mean, these measures. The second condition, they are designed to prevent internal market distortions. The third condition is they preserve long-term investment signals for clean energy. The fourth condition is do not cover the compliance cost of ETS nor use ETS prices as a proxy to the terming compensation, that's a portal in contracts with the Italian decree. They include the fifth condition. They include safeguards to ensure full pass through of benefits to final consumers. And the last, if the member state decides to charge the cost of the measure on consumers, only consumers that benefit from the measure should contribute to its financing. I can tell you very, very sure of what I'm saying that none of these conditions are met by the Italian law. And I think I can stop here. So I'm quite confident that in the end, this law will be reduced in power because the European Commission is working on it. And I think the fact that this article, I repeat, published last week was so detailed, it's, to me, an implicit answer to the Italian law. And the third question, it was about M&A. In this respect, we are working. We are marking all our options, but I repeat, I can say much more than what I've already said in March because this is 1 of the main reason we decided to postpone the presentation of the business plan to the end of the year or more likely at the beginning of next year because we are working on this and this takes time of, as you can imagine. I hope to have answered all your questions.

The next question comes from Roberto Letizia with Equita.

One, the first 1 is on the U.K. So I'm just wondering if the very good results of the U.K. are simply because of the external and internal growth, so the new plants and the acquisitions under normal conditions that we can eventually project for the remaining of the part of the year, or if the good results of the U.K. includes any, say, one-off benefit in the sense that the condition has been above forecasted or budgeted expectation for the country. Just wondering if it's a normal, very good contribution of the U.K. or if that includes special condition, which anyway compensating, of course, the special negative in the U.S., but just wondering how to calibrate the performance of the U.K. You mentioned the Sardinia plant on the 121 megawatts. Can you tell us when eventually you expect this potentially to contribute to numbers? Then a question on the guidance, but I'm sorry for that. You said not that much on the guidance. But I just want to calibrate the indication that you provided us last time on the guidance, the expected lower the fact that you reduced the guidance on the current 590. But at the time you provided that guidance, the trend in the power price was not so strong. So basically, you already had some months ago a condition in which you were able to reach the EUR 590 million of EBITDA. But then we are adding something more on top, which is the sensitivity on the power price that you just provided us, which actually was not forecasted at the time you provided the guidance. So I'm trying to compose the puzzle if actually the sensitivity you provided us may also target anything above the EUR 590 million because you have the old condition under which you can ride at the EUR 590 million. And on top of that, you have the prolonged situation on the power price, which added the sensitivity you provided. I'm not sure if I have been clear, but just to compose the picture. Sorry, I have another question on the green certificates. Can you tell us how many green certificate you have this year and how many you have next year because unfortunately, we have the very crazy regulation in which next year, unfortunately, the green certificate price will suffer from the very high price that we have today. So if you can tell us on what could be the potential impact on the -- on that side?

So let me go in the order of the questions. The first 1 is U.K. U.K. number doesn't include any special item. It's correct number, reflecting the very good performance of the portfolio. We are very satisfied because I think it's quite clear that with the recent acquisition. We now have and we can now rely on a very well-spread portfolio across U.K. because we are in England, we are in Scotland, and we are in and it happened to be a good locations for the wind, especially in this first quarter. But let me say, behind this good performance because last year, we posted, if I remember well, EUR 8 million EBITDA and now EUR 26 million, almost EUR 25 million, EUR 26 million. So it's less, let's say, EUR 18 million EBITDA more than last year, 2/3 are associated with the new assets, I mean the 47 megawatts or lucky wind farm in Northern Ireland that we started up in the second part of last year plus the 73 megawatts of a portfolio in England that don't forget, is entitled to Rock, mean kind of green certificates. That was 1 of the reasons we explained at the announcement of this acquisition when we made this asset swap between Sweden and England and this is a part of the result. The 1/3 -- the other EUR 6 million came from, let me say, higher availability plans. Don't forget that our plants in the U.K. are all branded new. So they were started up, especially the 1 in Scotland and the 1 in Northern Ireland, just a couple of years ago. They suffer their ramp-up phase at the very beginning, and they got progressively recovering their -- a better performance in terms of availability and -- and maybe we are not completely at the full potential, but we are approaching it. We are getting better and better from this point of view. And the third point which is a dual point. But I would say, I summarize it in just 1 single point is the service market and the curcortainments were lower finally in Northern Ireland, where they are not refunded so any megawatt hour that are cut from your production is lost in our P&L. We are having a strong connection with the TSO there in order to prevent these congestions to happen from happening and some achievements have been reached from this point of view. And the other, which I put in the same point is the fact that the Scottish assets are participating to the balancing market that is a premium compared to the day-ahead market. I mean, the operator, the grid operator can ask plans to stop to reduce production. But this production, given that you are helping the system to be balanced is paid the price plus premium than translating to higher EBITDA. So -- but in the end, we expect these flows to remain in the picture. So I would say nothing -- not recurring in those numbers. About the oilage project. Again, we are very, very, very 3x because we submitted the first documents for authorization in 2018. 2018, I repeat it, and we received the formal authorization on from the Salvini region just over the last few weeks after a long tragic part to court of justice and blah, blah. So -- but in order to make the final investment decision on the investments, we need this is compliant with our business model to secure the route to market. So our energy management is working to find potential PPA or we can wait for the next Ferric auction that is expected to be by year-end but still uncertain because in Italy, there is no clear calendar for this kind of options while in other countries, such like Germany, there every 3 months, there is an auction. So we are waiting, but we are not -- still, we are not doing nothing. And nowadays, we are working to find PPA, a long-term PPA, which can guarantee say, the healthy of the plant. You said about the guidance. I knew you couldn't resist to ask something about the guidance. We decided not to change the range as we did last year. In the end, last year, we finished at the bottom part of the guidance because numbers can change very, very rapidly depending on the wind presence. And the fourth quarter, as I said, is the swing producer. I don't want to correct you, but let me say that forward prices were not that different compared to mid-March because the year-end situation was already broken up. And then there was no very big difference from this point of view. Even though in the meantime, you are right, we made some hedging -- short-term hedging at prices and values that were higher than we could expect for sure at the beginning of the year, but was already included in our guidance. About production I repeat the first months of the year were good compared to last year. And -- but below historical leverage. So to be frank and very transparent, we lost roughly 300 gigawatt hour in the first 3 months of the year. But that item was already fully included in our guidance because in mid-March, when we presented the guidance, we already knew the production over the first 2 weeks, and we had in our hands, forecast for the next 2 weeks. So this was already fully captured by our guidance. But this is just to say that 300 gigawatt hour less or more can happen very, very quickly according and based on our intelligence, say there is a good probability that in the fourth quarter, maybe instead of a minus plus could be there. But we are not taking this as an estimate right now. So let's leave the range as it is. And I provided you with all the the elements and the rule of thumbs to make your own estimates. Green certificates, Michael.

We have 1.1 terawatt hour in 2026 and 0.6 terawatt hour in 2027. These are the figures that we still in our -- for our Italian asset that benefit from this kind of intent.

The next question comes from Francesco Sala with Banca Akros.

The first one, I wonder whether you can split this on to tower of merchant exposure by country. And if you can give us an indication of your merchant exposure also for 2027. Secondly, you made a final investment decision or revamping of some sort of assets in Italy. I wonder what the impact will be in terms of stoppages and after the revamping new generation potential. Those are the 2 questions.

I'll start with the last 1 and I leave Michele to answer more details the first one. Mass this morning, the Board of Directors approved a couple of investments, 1 in France. It's a greenfield a 25 megawatts wind that has already got CFD for the next 20 years. I mean for the 20 years starting from the commercial operation date, which is expected to be in Q1 2008 -- sorry, in Q1 2028. This long time is just based on the connection time because we need to have the connection. In fact, the CapEx and the expenditure in '26 will be very, very limited. The CapEx -- the cash out for CapEx will be special in the second part of '27 and -- but as regards the PD investments, as you asked, this is 36 megawatts. Basically, we are revamping, we mean changing the panels, changing the inverters and most of the time, also adding is called the trackers, sorry, to help the plans to track and to follow the the direction of Sun. And given this kind of intervention, we can increase production of the order of 40%, 45%. So it's a very big amount with a big increase when you change everything, including the tracker, where tracker -- all trackers are maintained. Anyway, we are talking about an increase in production of 20%, 25% because the new panels are much more efficient, consider that the panels that are mounted in this kind of installations are -- were there since 2010. So a lot of steps from -- technological steps have been made over this wind over time. These investments is particularly interesting. So I mean the return is double digit because according to the norms and the low operating rules by Jes, Juston Electrical. The stoppage of the plant is permitted to be recovered with incentives, I mean, with contenergy incentives at the end of the period. And during the next years, all the production benefiting from the upgrade of the quality of the plants can enjoy the content here. So there is a big jump in EBITDA, a big jump in net profit. So that's why these investments sort return, which is above 15%, but it's normal. The regulator wants to support the rejuvenation of the fleet in the country. If not, at the end of the useful life, you shut the plants and blah, blah, so this is the nature. In terms of stoppage, I think you asked this. The impact is quite limited. It's less than EUR 1 million in 2026 because we want to stop, shut down the plants, say, in the last part of 2026 and then implement the revamping in the next few months of 2027 in order to add the plans under the new industrial layout for next summer when the Sun hit more, let's say, in order to maximize the return on the investments.

Yes. On the second question, we still have on 2026, 1 terawatt our merchant exposure. We do not expect to have a material hedging before the delivery because we need to maintain a merchant component to order to taking account the volatility of the production of our wind farms, mainly of this 1 terawatt hour production that is a merchant as of today, so for the remaining months of the year, 0.4% is in Italy. 01% between France and Spain, 0.3% in Eastern Europe, 0.2% in U.K., Scotland. On 2027, total merchant exposure is around 2.5 terawatt tower, 1% in Italy, 0.4% in France, 0.5% Eastern Europe, 0.3% in U.K. and the remaining Spain and Germany. Taking consideration that this 2027 exposure will be hedged during this year because you know that we have a policy of holding edge. So will start 2027 with the merchant exposure that will be much more limited than today essentially because in the next month, we will continue to hedge the production in 2027, mainly '28 and a minor extent, also 2029.

The next question comes from Emanuele Oggioni with Kepler Cheuvreux.

The first 1 is an update on the wind availability in April and May so far? What is the CP, what is the comparison year-on-year -- this is the first question. The second 1 is on Sidon27, but as regards to the ad part. So you can provide an update on the level of the pricing of the hedging at least in qualitative terms compared with the average of the hedging in 2026. So what is higher at what extent, et cetera? Then a third question is on the U.S. I suppose that the disruption affected weather conditions affected Q1 operation were only temporarily due to weather conditions. So we should expect a normal contribution in Q2 in the remaining part of the year. And still on the U.S. final question on the M&A side, the acquisition side, the opportunity. So there is an update, I think you are still exploring part of the opportunities to increase your capacity in the country. So there is some update on this.

Okay. About the wind availability, more or less already said, April was not particularly good as well at the very beginning of May, there was an antiquate situation over Europe, Continental Europe, but over the last few days, we win this back and is very strong now. So we are recovering. And the guidance we are saying today is fully including already the performance in April and the first day of May. So we are very confident about what I've already said, also because I repeat the fourth quarter will be the game changer. I mean, if the wind will be strong and we have some signs that it's going to be like this, at least according to institutions that are making this kind of long-term as we can be positive on the full year results in 2026. But I repeat we would need the crystal ball to know exactly how wind is going to blow in the fourth quarter or in the third quarter. About the U.S., I'm going to answering the 3 questions and then leaving Michele the hedging. The U.S. performance, yes, you are right. There were multiple events, not strict click or related each other. So in January, there was a blaze , there was a storm -- no storm and also a transformer paid is nearby substation where our wind farm is connected. This has got impact on the availability of the plants in February, but now the availability is back to normal, let's say. And at the end of -- the end of March, in March, in particular, also in February, there was a particular tough market conditions in terms of grid constraints, congestions that basically influenced a quite huge impact on the nodal price and the PPA, we have on the wind farm, there is a financial settlement between the real-time price in the nodal market versus the day ahead price in the hub market. Let's say, the 2 points got the same price based on supply and demand. I mean, like our day ahead market, there is just 1 price, so the 2 prices are aligned. But in the American market, the local price is affected by the congestions and the constraints. So if a certain node got congestions and blah, blah something hurting, say, the transmissions, et cetera, the TSO is going to charge this cost on the node. And then we are paying for that. The PPA is not providing hedging or covering this risk. This is exactly what happened during the first quarter. We had a light queue in April, the first weeks of April, but now it seems everything is back to normal. So we are confident that results going forward, there should be in line at least with our budget. And the third, again, as regards U.S. M&A, we keep working with OpEx. We have this preferential right agreement so far has dialed many deals because there was still a gap between what we were prepared to pay and what they wanted to achieve from the sale, I can say the gap is narrowing. So we are working on it, at least that's what we hope. We will see -- but for sure, it remains a point of a big attention for us. I hope to have answered all the 3 questions. Now let Michele for the fourth.

Yes. Regarding the hedging level, we currently have a mentioned level on the turn components or short-term hedging on 2027, lower than 2026 because as I explained before, the level of the hedging that was in place for 2027 is the result of an hedging policy that is the result of a buildup over 3 years. So today, the current level of the hedging are lower than in 2027 and are lower than 2026, but taking consideration that a large part of the hedging of 2027 will be executed during 2026. So the final number for 2027 is also the result of what we are doing in this month. Just to make -- to give you a figure, for example, in 2026 we have hedged on a short-term hedging 1.4 terawatt hour, while the amount already hedged in 2027, 0.5, this means that we still have to build up roughly 0.9 terawatt hour of hedging during 2026 to 2027. And so the final figures that we will have in 2027 will be the result of also the hedging that we are doing today in an environment that is, for sure, more positive than a few months ago. Just I would like to clarify a previous question regarding a number of green certificate because I need to be more specific, maybe just to be sure that I think it's clear. The figure that I've given to you is the total number of incentive in Italy, wind and solar, so green certificate on energia, so 1.1 terawatt hour in 2026 just the wind being certificate if it was the boom, I'm not sure, it's just 0.8%, and that while 2027, total incentive in Italy, 0.6%, of which $0.02, I hope that the explanation about hedging is clear. Otherwise...

The next question comes from Davide Candela with Intesa Sanpaolo.

Thank you for the presentation and for taking my questions as well. I have you explained very clearly about the ASC guidelines with regards to the energy market disruption I was wondering if you can share your view about the long-term perspective saying related to the so-called acceleration you planned. So what are your wishes or the elements that could really change or at least changing positive gain for renewables and for you as well over the next months and years. Second question related to the pipeline is just a clarification. If you update -- can update us on the, I would say, ready-to-build and execution projects you have on your hand we denied to this year and the next couple of years? And final question, very broad about the leverage. We used to see leverage in the threshold level in the regional 4x, 4.5x debt to EBITDA, that seems in the recent period changed a bit in the way that some peers have been deleveraging even maybe related to the fact there are less opportunities. And related to that, do you see this black kind of level still in place as good for you for rating agencies. This is, of course, related to the the potential you have on the balance sheet for further door may be coming for opportunities we can have in the future.

So let me start with the the pipeline because it's something we are working very hard on right now. And we have already 230 megawatts right now under construction, at which you have to add more or less 60, 36 plus 25 megawatts we have approved this morning. which brings the total above 300 megawatts basically under construction right now. On top of this, as we said, in mid-March, we are working on a pipeline of projects that is wide, but we are very now focused on roughly 700 megawatts, half of which are repowering projects, mainly wind, mainly in Italy. And part of them are roughly 200 megawatts or even more are already fully authorized. But I repeat it, we have to wait for the final investment decision. So I mean the startup of the site work to secure the production, to secure the revenues, to secure the P&L for the next 20 years or 15 years with either through our PPA or through SDF awarded through a public auction. So we are not still there, but we are working for that. It's not all our fault, let's say, because we were expecting a Ferris auction in Italy to take place in the first part of the year. But according to rumors, according to news coming from the industry, the energy transition ministry, this auction should be held at the end of the year. So we have to move accordingly to the market, the route-to-market option available. On top of the wind, we got -- we received just few weeks ago -- a few days ago, maybe full authorization also for 80 megawatts of battery storage system, which is quite a very nice project because it's close to our wind farms and it's close to a connection point that we know very well. So now we are -- and on top of this, we already had another 12 megawatts project already fully authorized, as always best. So now we are working on the procurement side and on the route-to-market side in order to define the business plan of these 2 plants with the aim of proving those investments again by the next the end of the year. In fact, that was the real reason we decided to postpone the business plan presentation because we want to gain a better idea of the potential of our pipeline in the very short, medium term. Connecting to the first part of your question, yes, something is changing. This geopolitical situation as is bringing to the table the fact that Europe did in particular, Italy, didn't do what was suggested to do when the Ukraine, Russia case broke out a few years ago. You should remember that we were all committed that to renewable. We were all committed to investing in win the best , et cetera, but that was not enough, especially in Italy, renewable has not grown as they should be. But now something is changing because I think this situation is bringing back on the table, on the agenda, the importance of developing and pushing on renewable because they are competitive in terms of cost of energy. I mean the is well below the current prices on the wholesale market that are set by gas technology. They provide for independence because we don't need to import wind and the radiation of water because those natural resources are available, while gas is mostly imported by U.S., by West, Middle East, still a bit from Russia. And -- but we need to have a clear calendar for auctions in order to proceed as we should in deploying megawatts. But now some headwinds are moving into tailwinds that make us more positive, let's say. Michele?

Yes. Regarding leverage, you -- for sure, you have noticed that yesterday feature has confirmed our rating and the financial policy that we are following is essentially to maintain this investment-grade rating and this translate in an FFO net leverage in the stay below 4.5x. But this translates in a roughly ratio net debt to EBITDA in the region of 4. We consider this as an appropriate level for our business. That is a business that has a strong component of OD-regulated revenues. So a good visibility, very good visibility on our flow. We do not see this at this moment as a strong constraint to our group because we have flexible opportunities also to increase to invest more where the other instruments are available on the financial market, like hybrid bond that can allow us to exploit even better our capital structure. And also asset rotation, as explained by Paul before, could be a way to create -- have a better portfolio, more concentrated in an area where we can get better synergies. So this is something that we have already commented 3 months ago. So again, we do not consider this leverage as excessive, but consistent with our quasi-regulated business profile.

If I may add, we are very satisfied about the confirmation of rating by Fitch in a time where there is more pressure on renewable players because the increasing interest rates, inflation expectations, et cetera. Some companies, I can mention them. But in order to maintain the target rating being forced to suspend the dividends or to transform it to a scrip dividend. It's not our case. Next week, we are going to pay EUR 1 per share dividend that has been approved by the -- our AGM. So I think it's a quite important achievement that is based on the quality of our portfolio and on our track record and credibility. But it was not to be taken for granted. I mean this result.

The last question comes from Andreas care with Lemanik. .

I have a couple of questions. The first 1 is on the postponement of the business plan. Could you please elaborate a little bit more the reasons behind the postponement of the presentation of the business plan because I struggle to understand why definition of the pipeline could be a valid argument to -- for the postponement of business plan. This is the first question. Second question, considering that basically from what I understood from this call, the glass is half full rather than half empty looking at your guidance. Could you please give us an update on potential buyback in addition to the dividend that you are paying next week?

I say probably Andrea, you hadn't had a chance to follow in our last webcast when I explained in more details the reason why we decided to just present to the more because it's not true that we didn't present anything. We present the guidance, and we confirm the objective to keep growing our renewable portfolio in accordance in line with '24, '26 business plan, which was the last plan basically we presented. But apart from the work we were doing on the pipeline, which is quite -- I don't see like to highly with you about this because it's make all the difference of the world. We have 700 megawatts fully permitted by the end of the year. We're going to -- we need to invest more than EUR 1 billion, and then we need to calibrate the business plan. And on top of that, as I said, more in details in mid-March webcast, we are working on mapping all the options we have in our pocket to generate value, including asset rotation and builder to sell assets, et cetera. So these are elements that will be part of the business plan, but we have not used to proclaiming targets without having a clear picture on them. This is part of our story. And then the third reason, which is very important, it's the fact that the Board of Director is going to terminate its mandate next April will be then renowned in 1 year its quite use of the house to present a business plan approaching this data. That's as simple as that. Yes, buyback is an option. Sorry, I forgot to say buyback is always an option. You said the buyback instead of dividends, it's an option. But as said, even recently, every year, when we closed the P&L for the year, we decide what best for us dividend, buyback, mix of the 2. This kind of decision will be taken early next year when we -- when we have a clear picture understanding of the balance sheet and the economics of the company. For the time being, we decided this year to pay on our dividend, which is pretty in line with our policy declared in the financial community. Thank you to you. I think we have -- Okay. So thank you very much for the attention and see you in August and August or end of July. Thank you very much, and I wish you all -- thank you. pleasant weekend.

Thank you for your attention.

Ladies and gentlemen, thank you for joining the conference. It's now over. You may disconnect your telephones. Thank you.