Iren SpA (IRE) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Iren First Quarter 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Massimiliano Bianco, CEO of Iren. Please go ahead, sir.

Good afternoon, everybody, and thank you for attending Iren's conference call on first quarter 2020 results. Due to the persistent emergency scenario and taking into consideration the difficulties of coordination with the colleagues because each one is remotely connected from a different location, we are forced to adjust also this time the Q&A session methodology. As anticipated by the Investor Relations team, today, the Q&A session will not be in a live mode. But we have already received the questions for investors and analysts, and I'm going to answer them after the slide presentation. Like every time after the conference call, our Investor Relations team will be available to answer to your follow-up questions. Moving to the results of the period. The extraordinary downtrend in energy scenario affected the first quarter. But despite this element, the group reported an EBITDA at EUR 274 million, in line with last year. Considering the growth factors reported in the period, the most important was the margin normalization of our customer base portfolio profitability that led the positive contribution of EUR 18 million. The organic growth equal to EUR 9 million had a positive impact on all business units. We reached EUR 3 million of synergies also in presence of emergency costs related to digital projects, new skill and people hired in our staff and the extraordinary current situation. On the negative side, we reported a difficult energy scenario for EUR 14 million due to a drop in PUN and the normalization of heat spark spread compared to last year when it was extraordinarily high. The climatic effects negatively affected by -- the EBITDA for EUR 2 million because the lower heat and gas volume sold were only partially compensated by higher winter volumes. The EBITDA was also negatively impacted by the absence of a nonrecurrent element for EUR 15 million reportedly in '19 in the Energy business. Going deeper in the business unit analysis. Networks reported a positive result, thanks to the organic growth and synergies. The investments done made possible to increase the RAB and consequently the allowed revenues. The results have been partially reduced because of the lower operational cost recognized in tariffs by the regulator. The business unit waste reported a slight positive outcome compared to last year. The cost efficiency achieved in the business collection and the saturation of capacity in our waste-to-energy through the reorganization of the urban special waste flows made possible to exceed the negative impact of the lower electricity price. The Energy business unit reported a negative result due to the severe scenario downward trend, leading to an overall reduction in both prices and volumes. The winter just ended with the hottest ever, leading to lower heat volume, while on the other hand, we reported higher volume in hydroelectric production. It is important to highlight that the negative outcome of the business unit was also due to the absence of positive nonrecurrent element reported in '18. As far as the Market business unit is concerned, the positive result achieved was expected as anticipated during the business plan presentation. First quarter numbers reflect the full contribution of our client portfolio composed by 1.84 million retail clients. The good results have been achieved thanks to the effectiveness of our commercial activities based on fixed sale price combined with our back-to-back hedge. The focus on retail customer has allowed us to obtain positive results despite the overall lower volumes of electricity sold. Below the EBITDA, the EBIT and net profit reported a negative outcome that our CFO will explain deeper later. I would just like to highlight the strategic choice made by our group to allocate part of our investment plan to digital projects in order to reshape our company with a more dynamic and scalable framework. We have a strong CapEx plan in each business unit composed also by a portfolio of digital projects that are about to go live, which will contribute to boost the future growth and also to take care of our increasing business complexity. Now we can move to the business unit economics. Let's start the business unit section, as usual, with the network sector, Page 3, which during the first quarter 2020 reported a growth in EBITDA of 5.5%. Excluding the negative impact generated by regulation of close to EUR 3 million, EBITDA would have been 8%. In particular, the decline reported in the first quarter of 2020 is related firstly to the water sector that contributed for EUR 3 million. The organic growth of EUR 2 million is based in the increase in RAB, plus 7%, compared to full year '19, supported by the important investment made in previous years that allowed the company to raise the regulated revenues. The continuing implementation of the performance improvement initiatives allowed us to achieve EUR 1 million of synergy. Secondly, the electricity sector benefited from EUR 1 million of synergies, also in this case, thanks to the performance improvement initiatives implemented. Finally, the gas sector that reported a result in line with last year because the increase in allowed revenue was partially offset by the lower cost recognized in tariff by the regulator. On top of this, the positive trend in investment continues, plus 12%, mainly for water electricity networks, in line with the growth prospects outlined in our business plan. The larger investments are located to improve the resilience of the energy infrastructure and to reduce the leakage and increase the efficiency of the water system. The slight delay of CapEx pushed by COVID-19 in these months will effectively be recovered by the end of the year, confirming the investment plan. Two initiatives regarding the investment in digitalization are worth mentioning. The [ Iren way ] program to standardize and level up the processes and systems supporting conferential activities involving both [ ECT ] and organizational changes, it is at an advanced stage of execution, foreseeing new lease for gas streams in June 2020 and the remaining stream during 2021. The implementation of workforce and asset management projects with focus concerning the standardization and the modernization of systems supporting operational activities completed in '19 for [ U-80 ] is underway for [ San Germano ] and [ Amaseno ] state companies. During the COVID-19 in emergency, we have been guaranteeing the essential service. Keeping our petition to operate safely and also running the activities in different ways. For these reasons, we have got the lower efficiencies and some emergency costs. As far as the outlook is concerned, the 2020 full year results will be slightly lower than '19 and benefited from some extraordinary elements such as water balances and other nonrecurrent elements for EUR 18 million. Moreover, as I mentioned before, we have to consider the effect of the new regulation measures, negative of around EUR 10 million, and the COVID-19 impact. On the other hand, the negative outcome will be mitigated by the increase in allowed revenues and incentives on technical quality. Moving on the waste sector, Page 4. The 4.7% of the EBITDA rise was generated only by the collection activities as the growing treatment and disposal activities was offset by lower prices on waste-to-energy production. Going deeper in each activity sector, the increase in collection activities were mainly related to the higher efficiency, in particular, from San Germano consolidation and to the higher margins compared to the same period of '19. In the first quarter 2020, we reported a slight increase in -- a slight decrease in waste collected. However, the percentage of sorted waste rose to 68.2%, up over 0.9% compared to full year '19. The COVID-19 lockdown is leading to a decline in urban waste that will be even more evident in the second quarter. To explain the impact on the treatment and disposal activities, we have to consider 2 aspects: the industrial progress and the waste-to-energy revenues. In the first case, responding into the current situation, we have reorganized -- we have reorganized the special waste flows between landfill and waste-to-energy plants. The volumes reduction in urban waste collected allowed to free up capacity in our waste-to-energy plant. This availability of disposal has been filled by special waste in order to saturate the plants and keep margins. In this way, we plan to use our landfill when the price of special waste will be higher. Taking into account waste-to-energy revenues, the reduction of urban waste volumes generated a lower disposal cost and accordingly, minor revenues. These effects are not evident in our situation, thanks to the higher revenue for special waste disposal activities. On top of this, the decrease in PUN price affected the activities for EUR 1 million. The strong increase in investment of almost double compared to first quarter '19 is both to improve collection and plant construction. Investment plan suffered a slight delay caused by COVID-19, was down, which would be almost completely recovered by the end of the year. As far as the utilization is concerned, in 2020, it is expected to kick off from just year-end. This strategic initiative concerns the full innovation and rationalization of waste management processes with a significant impact on operation efficiency. Smart bins, optimization roads and new customer experience will completely renew our operational model, enabling a strong increase in quality of services and important synergies. Furthermore, through advanced analytics technique, also the waste flows and their allocation to plants will be optimized. As regards the outlook, we expect a result in line with last year due to the COVID impact for higher extra cost, lower revenue recognizing type and a likely reduction in special waste prices. In addition to this, the lower PUN price will have a negative effect, higher than EUR 5 million. The favorable impact on consolidation, organic growth and synergy, mainly on collection activities, will counterbalance the negative effects already described. The positive contribution from the consolidation of I.Blu that we are confident to close shortly and the other M&A transaction closed in '19, San Germano, FG Ferrania Ecologia and Territorio E Risors, will be roughly EUR 15 million. This margin will rise up to EUR 25 million in 2023, thanks to the full outcome from the revamping activities to the double treatment capacity of FG Ferrania Ecologia and Territorio E Risors plants and higher synergy with respect to FG. Moving to Page 5 concerning the energy business unit. The decline in the energy scenario factors combined with a negative impact from nonrecurrent elements for EUR 15 million led to a negative result. It's worth to highlight that stripping out the nonrecurrent elements of EUR 15 million, the decline would have been of about 15%, which compare with a far higher plan in the main and additional indicators, led by the weakness in national consumption, PUN down by more than 30% and heat spark spread down by 40%. The main highlights for each line of business are the following. In the hydroelectric and renewables generation, a reduction of EUR 1 million was due to the decrease in PUN with an effect of EUR 6 million, which was partially counterbalanced by the increase in hydroelectric volumes, plus 28%. The cogeneration sector reported a negative result for EUR 12 million, mainly due to the decrease in this segment. The latter reported negative volumes of heat distributed because of the hottest winter ever and reduction in margins compared to the first quarter '19 when they were, for a short period, extraordinarily high. On the electricity sector, the lower volumes were offset by higher margin on the ancillary service market. The thermoelectric production reported a decrease in efficiency produced, offset by higher margin on MSD market. Overall, the MSD market contribution was equal to EUR 18 million, with an increase of EUR 9 million compared to last year. The outcome of payment is a result of an opportunistic policy for the management of our plants made possible by the flexibility. On the other hand, the heat spark spread achieved in the market was down by EUR 2 for megawatt hour compared to the same period last year. Investments in the period were EUR 38 million, a huge increase compared to last year. EUR 26 million are related to the repower of our bigger power plant. The rest are related to the extension of distributing networks and small operation on our cogeneration fleet in order to improve the efficiency. As far as the outlook is concerned, given the assumption that the COVID emergency will be over by the end of June, a severe negative impact is expected to last until the end of the year. As a matter of fact, on top of EUR 20 million of negative impact from nonrecurrent elements, we expect a further scenario weakening, leading to lower price volume for about EUR 30 million compared to '19, of which EUR 10 million are due to COVID impact. The underlying drivers are the following. As far as this repeating is concerned, the reduction of heat volume distributor will be almost offset by a recovery in the heat spark spread, which we expect in line with last year. Once again, with this heating, which is the main energy business unit contributor, it's expected to confirm EBIT resilience. Coming to hydroelectric generation. The negative impact of PUN growth combined with a slight increase in volume will be of about minus EUR 15 million. Finally, regarding the cogenerative and thermoelectric production, the negative impact of lower volumes and lower spark spread is expected, higher than EUR 10 million. The last business unit to examine is Market, Page 6, which reported an EBITDA of EUR 55 million. The remarkable goal achieved in this plus 66% compared to last year was widely expected as already included in our business plan assumption. The underlying factors are related to the strategic choices made by management. First of all, the strengthened focus on retail client, which provides for more than 80% of the same margin. Secondly, leveraging our commercial approach, it's been possible to exploit the full value of our retail client portfolio through a combination of repricing and back-to-back hedge activity and reducing the margins volatility. It's worth mentioning that also our clients' growth path is in line with our targets. We added more than 27,000 clients to our customer base, now at 1.84 million, almost all in the electricity sector, thanks also to SanremoLuce acquisition. In this first quarter, we reported a positive trend in the web and tele selling channel, which followed the development of our commercial activities, plus 5,000 contracts outside our reference areas. Going to the sector breakdown. The main factor for the period were the following. In the electricity sector, the reduction in volumes of electricity sold where you -- to lower volumes sold to this client because of, on one hand, the strategic choice of repositioning in the business segment; and on the other hand, the reduction of public administration volumes for less than 100 regions compared to previous consent tender. In additional, the small enterprise volume reported a reduction mainly related to the closure of production activities in the last month. Moreover, the electricity sold to retail client was up by 11%, thanks also to new retail plan obtained from the acquisition of SanremoLuce. The gas sector was affected by lower volumes sold to business client for EUR 1 million and by lower gas used in generation activities. The new downstream segment reported a strong increase compared to previous year, confirming the effectiveness of our commercial strategy with the aim to retain our customer base. Despite the difficult period, we confirmed the launch plan for new products. The CapEx increase, now at EUR 11 million, plus 10% compared to last year, were mainly related to extend our commercial policy in new areas and to develop the project called [Foreign Language], which aims to give to the business unit new management tools and new technological platform. Concerning the outlook of the business unit, we foresee a stabilization of the margin achieved in this quarter, leading to a higher EBITDA. The future positive contribution related to the expansion of our customer base and our commercial proposal will be partially offset by the presence of emerging costs given by digital projects. We also expect that the current scenario would lead to a reduction in the volumes and electricity -- of electric and gas sold. Now I hand over to Massimo Levrino, CFO of the group, to comment on the financial performance of the group.

Good afternoon, everybody. We are going to Page 7. The chart shows the result from EBITDA to net profit. EBIT stands at EUR 145.5 million, and that's a decrease of EUR 26.2 million, which is due to the growth of depreciation and provision. Starting from depreciation and amortization, it increased by -- from EUR 97.8 million to EUR 107.9 million, plus EUR 9.1 million, mainly related to the growth of fixed assets. Provision to bad debt stands at EUR 22 million compared with 2019, and there was a growth of EUR 17.3 million. Provision was very low in '19, but the strong growth is due, for EUR 12 million, to the first adjustment of the provision to the expected losses related to COVID emergency. We forecast a further adjustment that will be accounted in the next quarters. The forecast of the provision for the full year 2020 related to COVID emergency is an amount of EUR 25 million in addition to the usual provision foreseen, about EUR 35 million. So the total provision foreseen in 2020 are EUR 60 million. EBT stands at EUR 126.8 million. It was EUR 151.8 million in '19 and showed a decrease of EUR 25 million, a bit lowered by the decrease of EBIT, thanks to reduction of the financial charges of the long-term loan that stands at EUR 15.2 million, shows an improvement of EUR 1.5 million. This was due to lower cost of financial debt. And the reduction of CapEx was 15% compared with the first quarter '19. That was -- the decrease was partially offset by the increase of the average financial debt. The other financial charges of EUR 3 million, they had a stable trend compared to '19, and that's important to report about net profit of the company consolidated using the equity method and participation adjustment. Now we are going to net profit. It decreased by EUR 16.1 million. The tax rate had a slight reduction from EUR 29.8 million to EUR 29.5 million (sic) [ 29.8% to 29.5% ]. We forecast that the tax rate for the full year 2019 could be in the -- at the same level. Minority was EUR 6.6 million, and they had a slight decrease of EUR 1 million. Now we are going to the next stage, Page 8. You can see the cash flow and the net financial position. The net financial position at the 31st of March 2020 had a growth of EUR 102 million from EUR 2,706 million to EUR 2,807 million. The worsening of the debt is related to the increase of net working capital and of investment. The investments were EUR 130 million compared to EUR 86 million in '19. So we had a strong growth of EUR 44 million, so about 50% increase. As regards net working capital, there was a growth of EUR 160 million. This increase is mainly due to the growth of trade receivables linked to seasonality. In fact, also in 2019, there was an increase of trade receivables, as usual, in the first quarter. Indeed, in the first quarter '19, the growth in financial receivable was higher, but it was offset by the growth in trade payables and in some fiscal elements like tax payables and reduction of VAT credit, which did not occur in 2020. In addition, we reported an increase of VAT credit, which is expected to be recovered by the end the effect of 2020. The effect of COVID-19 on the growth of trade receivables was marginal in the first Q. But we expect that the impact on trade receivables will be roughly EUR 80 million for the few years, and we expect a decrease on them and then a complete recovery by the end of 2021. These estimates are made under the assumption that the emergency will be over by the end of June of this year but with a negative impact lasting in the second half of the year at least. Moving to derivatives. We had a negative impact of EUR 16 million. The tax rate derivatives affected negatively the results for about EUR 6 million. In the same way, the commodities derivatives contributed to higher financial debt for EUR 9 million. Now we are going to Page 9. You'll see the interest rate and the debt structure. The first pie chart on the left is the breakout of the gross debt. You can see only 4% of gross debt is at variable rate. The 80% is at fixed rate and 16% is hedged with a swap. The average duration of long-term debt is 5.6 years versus 5.2 years in 2019. The cost of debt was 2.2% from 2.6% in the first quarter '19. The reduction of 15% is thanks to the liability management carried out in '19 that had full effect in the first quarter 2020. The second pie chart is the same -- is the breakdown of the debt structure. The pie chart shows that the debt is formed by bond for 80%. That's thanks also to the last issue in October '19 of the third green bond, EUR 500 million and 10-year tenor. The other financial sources are EIB funds for EUR 80 million and loans from other banks for only 2%. On the 27th of March, there was the catching of another EIB loan of an amount of EUR 75 million, 15-year tenure. About maturities, first of all, you can see that in the bar chart on the right, we have a low amount of funding maturities that are in 2020, EUR 212 million; in 2021, EUR 229 million. Then I'd like to point out that the cash in February 2020 of EUR 330 million related to the, say, reinforcement of the financial strength of Iren, giving a positive impact on the ratio -- also giving a positive impact on the ratio that the rating agency take into consideration. Moreover, we had a total amount of EUR 200 million of undrawn committed long-term credit lines, of which EUR 120 million is from EIB and the other EUR 80 million are long-term credit facility derived from a new contract signing a few days ago with an international congregation, the Council of Europe Development Bank [Foreign Language], which has the aim to finance among other infrastructure. All these loans have a maturity of 15 years amortizing at a very low condition. So adding the total -- the long-term committed credit line of EUR 200 million to the liquidity available, now we are in EUR 280 million. We can say that the financial year of 2020 and 2021 has been already refinanced totally. This situation is enforced without considering the impact of further M&A deal and also COVID effect on working capital that I mentioned before. However, we think that the increase of working capital due to COVID could be financed through the committed credit lines available for a total amount of EUR 500 million. Even if they are uncommitted, the availability on them is quite sure because of the very long-term and good relationship with the bank. And lastly, given the 2 sustainability link and the available facility for a total amount of EUR 150 million, that in case we need it, it could be withdrawn. Now I hand the call over to Massimiliano for the closing remarks.

Thank you, Massimo. The negative effects of the current extraordinary scenario are not fully reflected in the first quarter numbers as the complete lockdown started at the end of the quarter. The first half result will be very important to assess the real impact of COVID-19 in terms of emerging costs and lower volumes of activity. We estimate the following negative COVID impacts over the next months: EBITDA reduction of EUR 25 million, EUR 30 million due to worsening of the energy scenario, extra cost for safety and equipment, spread of working stations, lower efficiency from non-ordinary operational environment, lower revenue because of some service slowdown in the wind business and in the new service launch; net working capital increase of EUR 80 million due to an extension of payments and some credit losses affecting all the business units but was major assets that are attributable to the Market business unit; provision to bad debt of EUR 25 million, mainly referring to some smaller business shutdown. Under the previous assumptions, our full year 2020 guidance is EBITDA at EUR 880 million, EUR 890 million; net financial position to EBITDA ratio at around 3.4, 3.5x; CapEx at EUR 650 million. I'd like to remark the company effectively is taking such a stable scenario while keeping pushing on the growth options included in our business plan. Indeed, it's important to underline that the net financial position to EBITDA ratio guidance takes into account the M&A investment related to the cash-out of around EUR 50 million for I.Blu company operating in the waste sector. The positive contribution on EBITDA level of this deal is EUR 4 million in 2020, following the assumption of consolidation from July, which will go up to EUR 7.5 million in 2021. Furthermore, thanks to the resilience of our business model and the capabilities we built over the last years, we can play an important role supporting investments according to new green deals and possibly supported by ARERA in the following year, new infrastructure in the waste treatment and material recovery, distribution network facilities aimed at improving the environmental impact, digital technologies devoted to exploit efficiency and improve the service quality. Finally, some other opportunities could come from the ongoing consolidation process that could be supported by some incentives or by getting the tender project start with streamlined procedures. All the previous options are compliant with our strategic clients, and we are ready to follow suit. Now I'm going to answer questions previously gathered from analysts and investors.

We collected the question in different groups, and now I'm going to address each cluster. In this session, I'm going to cover also what is not included during the slide explanation. Most question are related to the generation business unit in order to better understand the energy performance and the hedging activities. In addition to what I've already explained during the business unit result presentation regarding the level of hedging, about 40% of the thermoelectric plants and 10% of hydro volumes, I'd like to explain the underlying logic. 50% of the cogeneration volumes combined with the hedging of sales volumes above approximately 85% allow us to comply with our policy, which provides for the power of the supply chain at 15% overall portfolio stock. Leaving open positions in the past has always allowed us to take advantage of market-related opportunities. The coverage of hydro volumes of 10% is linked to the strategy, which by exploring the modularity of the systems is aimed at selling energy doing peak hours with normally weekly programming. It is, therefore, more difficult to cover in advance. In a condition like this, with a sharp development price, the power situation for hedging have not been achieved. Therefore, production has remained more uncovered. Exploiting the natural hedging linked to diversification of the generation plants had allowed us to respond with the most appropriate technologies in the volatility of demands by seizing opportunity both on MGP and on MSP. It is clear that in favor of the operational indicators such as the one we are experiencing, performance should be in the current context. As far as the outlook is concerned, which is worse than expected, we are reacting in this time by exploiting the flexibility of the thermoelectric plants by increasing the coverage in the third and fourth quarter to higher spark spread than they were in the past. It is notable that the drop in prices, as important as that which has taken place, has a significant influence on the result. But this has also been the case in the past. For example, in '18, the prices went up. And thanks to the fact that either was not covered, we were able to achieve an exceptional result, which compensated for other negative factor within the supply chain. In light of the current scenario, which totally satisfied increasing with [ Iren ] program or renewable, we confirm the effect of our investment in the repower of 2 giga for 400 megawatt. It's remarkable that even in this extraordinary situation, the gas technology is proving to be essential for the system of legacy by the positive performance on Energy and Market, which are in line with last year. We are temporarily impacted by volume reduction led by weak demand. But when the normal situation will be recovered, all the investment assumption will be confirmed, take into account the repower that we wanted to really kick off in 2022. By the time, it's also expected the start of the capacity market, and it's worth to highlight that the new 2-giga capacity has been granted. So the new capacity premium at EUR 93 per 1,000 megawatt lasting for 15 years. The second class, the current situation related to COVID-19 impacts the effect on 2020 forecast, the second issue on which I'd like to go deeper. We have estimated the possible impact of COVID-19 emergency, assuming that it will last until June. We foresee emergencies costs related to personal safety, devices, disinfection and other operating activities in the region of EUR 5 million, EUR 9 million including all the business units and the holding company. Going deeply in the further effects found in every business, the lighter reduction in electricity volumes sold and the expectation of a further reduction in commodity price, both PUN and spark spread, will lead to a negative outcome of EUR 10 million on Energy business unit. The severe lockdown related to a decrease in waste volume produced, both in urban and special waste. This event will imply a reduction of special waste prices and urban waste revenues recognized in tariff. Overall, the negative impact in the waste have been issued. It will be around EUR 5 million. The downward trend scenario and the economic difficulties that could slow down the build-out expected for a new -- for our new line of business is linked to our customer base, reducing sales volume by around EUR 2 million. Finally, regarding networks, we expect lower margin around EUR 2 million, deriving from capitalization of cost due to the closure of construction site during the lockdown period. The further class. Regarding the opportunities coming from the recovery of the economy and getting a new deal. The utility sector, in particular, in Iren could be an interesting flywheel for economic recovery. Our group has a large portfolio investment options that could boost the future growth with government and regulator with faster authorization processes. In the business networks, we propose to accelerate the investment of ordinary and extraordinary maintenance and the development of new infrastructure for -- as a new [ drain ] or catchment areas. Moreover, the consolidation process between companies in the sector can also be covered by the launch of the gas tenders. In the waste sector, the structural shortage of treatment and disposal plants are more digitalized industrial process and a binding definition of regional flows could create important opportunities. In addition, it would be important to encourage corporate combination to create important industrial player at the national level. In the Energy business, the extensions of the hydroelectric concession could free important CapEx in order to improve the efficiency of the structures. Thanks to the energy efficiency project and the extension of this to heating, we can play an important role in the renewal of this perspective, pushing the decarbonization target. Finally, a national consolidation process would also favor the business unit market. Now the sector has more than 500 operators, most of which are small operators. In an industry where a large customer base is critical to be efficient, the aggregation process will be very important to reduce fixed cost and implement new digital strategies required by consumers. It's a question we collected regarding M&A activities. In line with our last business plan in which we assumed the small and medium companies M&A target for an overall contribution over the business frame of EUR 100 million on EBITDA, we are now working, as you already know, on I.Blu transaction that we are confident to consolidate from July. The positive 2020 contribution of this bill will be a return of EUR 4 million. Furthermore, we have an open dialogue for the acquisition of Sidigas customers, 55,000 gas retail clients in Avellino program. But at the moment, still it's ongoing, and we expect to conclude the transaction in the first half of 2020. The acquisition of new customers will allow the group to increase this customer portfolio, strengthen our place in Campania and enhancing development in the South and Central Italy. As we previously commented, we are also looking at bigger companies such as Sidigas. Regarding these operations, it's important to note that the driver have been suffered a stop due to the postponement of the election in the region. Now we don't see the visibility on the new kind of election likely in next call. But we are interested to take up the net with the region, and we believe that our proposal has a solid strategic industrial rationale. Finally, the last important issue to talk about is the impact from ARERA regulation. Under the current scenario of the Italian government approval of health, security, aimed to protect cities and health, the regulator adopted solutions based on 2 main pillar: first, protection of customers and utility worker health; and second, continuity of essential public services with these kind of issues. First, protection of domestic customer due to the increasing risk of the full payment by domestic customers, deferral of payment terms or possibility to pay bills by installments, opening an account to fund these clients of electricity, gas and water held by [ Casa con Valle ] sales with an ability of EUR 1.5 billion guarantee is going to be approved within the so-called regulatory launch, additional EUR 1.6 billion aimed to finance an emerging account to purchase small nondomestic customer bill reduction and a suspension of ongoing proceeding against default payment. For instance, a temporary limitation of water supply to domestic customers. Second related issues adopted by the regulator, protection of regulated companies. Combined with a general statement on cost completion mechanism in favor of DSO affected by the limitation for the COVID-19 emergency in order to stabilize the economic effect for reduced penalty, delay of payments, default procedure for amount during March to May period to small customers and allowed the reduced payment to [ GSA ] in relation to lower collection by commercial companies. So the expected legislative measures related to incentive for energy efficiency and small solar plants could represent an opportunity to increase biddings for energy efficiency level through fiscal incentive-based on bond system to be recognized and at the time of filing the tax return and in constant annual installments; and second, the utilization of energy bill to transfer the benefit directly to customers. This could be very interesting opportunity incentive on energy efficiency for our Iren Smart Solution business inside the energy business. So I hope I answered all the questions collected. In any case, for further questions, the Investor Relations team is available. Thank you for your attention, and good evening, everybody.