Iren SpA ($IRE)

Hello, and welcome to Iren's Conference Call for results of the first quarter of 2026. [Operator Instructions] I will now hand the floor over to Carlo Dubini Dacco, Head of IR, to begin to this call. Please go ahead.

Good afternoon, everybody, and thank you for joining this conference call presenting Iren Group's results as of March 31, 2026. The results will be presented by our Executive Chairman, Luca Fabbro; and our CFO, Giovanni Gazza. At the end of the presentation, there will be the customer Q&A session. I will now hand the floor over to Luca to present the results of the period.

Thank you. Good afternoon, everybody. And thank you for being welcome today. The Board of Directors, which met earlier today approved results as of March 31, 2026, characterized by an EBITDA [indiscernible] with the previous year, were laying the foundations for the growth expected in the coming months, allowing us to confirm the 2026 guidance, as we will see later. The first quarter EBITDA performance also stands out [indiscernible] of regulated summer-related activities, which increased from 69% to 73%, up 4 percentage points and for achievement of synergy targets in line with the expectations of the business plan. Net financial debt, down compared to year-end 2025 stood below EUR 4.2 billion. Thanks to solid cash flow generation, which more than covered in investments during the period. Investments amounted to EUR 190 million, up 2% compared to last year. Moving to the next slide, we analyze in detail the main financial and genomic results. EBITDA reached EUR 480 million, in line with last year, driven by organic growth, following investments made in regulated network businesses and renewable generation, contributing EUR 4 million. This is the contribution from the optimization plan for waste material recovery plants up EUR 5 million, partially offset by leisure. Higher profitability, this is which, however, did not fully offset lower hydroelectric production and the slowdown in energy efficiency accreted, positive results from the synergy plan, which contributed EUR 4 million during the quarter and good competition in supply activities. And the related normalization of margins. EBIT amounted to EUR 212 million, down 5% due to higher depreciation and amortization and increased provisions for that reserve. Group net profit amounted to EUR 129 million, now 5% of EBIT performance and the tax is below 30%. Technical investments during the period totaled EUR 100 million, up 2% and are mainly allocated to water networks, waste collection and [indiscernible] products. Net financial debt decreased by EUR 4.4 million thanks to the operating cash flow, which more than covered investments during the period. I will now hand over to Giovanni for a more detailed [indiscernible] of single business dynamics.

Thank you, Luca, and good afternoon to all of you from me as well. As usual, we'll begin with the results of the network business unit on Page 4. In the first quarter of the year, EBITDA increased by over 5%. A driven almost entirely by the integrated water service, mainly due to organic growth, up EUR 3 million linked to investments made in the resulting increase in RAB. The overall business in RAB reached EUR 5 billion, up 4% compared to the previous year. Investments during the period amounted to EUR 82 million and were in line with the business plan. They were aimed at improving service quality through network modernization and efficiency improvements. Investments in electricity distribution showed a superdown compared to last year, which will be recovered to the remainder of the year. Regarding the Environment business unit on Page 5. Results were substantially in line with last year. because first, growth [indiscernible] collection activity was offset by higher personnel costs. related to increases provided for in the recent renewal or collected level agreements. Second, WT brand ServerPort EBIT substantially stable at approximately EUR 20 million [indiscernible] that impacted by the external shutdown of the FibonCW plant, which limited operations during this period. Third, profitability recovery in waste return plants amounted to approximately EUR 5 million. This demonstrates the expected turnaround and the operational improvement of these assets. This also comprises the assumption of an incremental annual contribution of approximately EUR 10 million. The improvement in treatment plants was partially set by the lower contribution from landfills due to the situation during 2025. This trend also reflected the decrease in waste volumes managed. On the other hand, during the period, we obtained authorization to expand certain landfills, allowing for additional disposals of approximately 100,000 tonnes, and we expect to fully seize these volumes by the end of the year. The Energy business unit on Page 6, closed the first quarter with EBITDA of EUR 112 million, down 4% compared to last year, mainly due to lower hydro volumes and fewer energy efficiency projects. Nevertheless, we benefited from increasing -- looking at the various business lines in weather detail. Renewables [indiscernible] side recorded an EBITDA decrease of EUR 10 million due to lower hydrate volumes, down 94 gigawatt hours caused by as being particularly ended at the start of the year because on [indiscernible] work was carried out. And this resulted in a basis at the end of 2025. We also note the negative effects associated with the expiry of a cyclical portion of green certificates, down 30 gigawatt hours in the quarter and 200 gigawatt hours over the year. These engage factors were partially offset by higher energy prices and increase in portable type volumes [indiscernible] the notable tax plan which has become operational in which with the available capacity of 20 megawatt, we also provide a greater contribution in the coming quarters. Production for CCGT and [indiscernible] plants was overall in line with last year. The merchant plant in Turbigo increased electricity sold by 7%, up 50 gigawatt hours, benefiting both from improved capital crystal spreads and a greater number of hours with positive spared. In fact, we continue to serve [indiscernible] improving only during the delivery periods, which does not allow us to implement a preventive hedging policy. CCGT production, on the other hand, was flat quarter-on-quarter, positioned with the most is mainly linked to heat production. The capacity market and the balancing services market were in line with last year, contributing EUR 24 million and EUR 4 million, respectively. An increase in unit margins mainly related to positive hedging Hynamics compared to the first quarter of 2025. Energies more than 150 million cubic meters of dissected volumes. And we point out that during the first quarter, [indiscernible] affected commercial campaign we increased connected volumes by 282,000 cubic meters, and the carding volumes amounted to approximately 600,000 cubic meters, which will be connected to the network before the next heating season. Finally, to the lack of a transfer of tax incentives for new energy efficiency projects. We conclude the license of business units with the Market business unit a -- we reported EBITDA of EUR 6 million, down 4% compared to 2025. This change is mainly due to the previously mentioned normalization of unit [indiscernible] and a 1% decline in the customer base, which was impacted the reduction in [indiscernible]. Increasing competition in the sector, which led to a net loss of approximately 20,000 customers in last quarter was addressed by implementing a more selective and value-focused acquisition policy. In particular, the group slowdown mass acquisition campaigns, and restructured investments in work channels characterized by higher acquisition costs and higher churn rates. We're continuing the development of physical branches, both in historical and prospect areas. The group currently manages approximately 1,450 direct and in our respective sales and continues to focus on the high quality of customer service in support of customer retention to minimize churn rate to analyze the elements from EBITDA to group net profit. We move to Page 8, where we note an increase of approximately EUR 9 million in depreciation and amortization, the investments made last year, higher bad debt to provisions of approximately EUR 3 million may related to the environment BU due to the transition for environmental hygiene service revenues from our tax collection by the municipality to direct billing by the group, which has direct effect on our credit a stable cost of debt at 2.35%. Lower contribution from equitaccounted companies now approximately EUR 5 million. [indiscernible] that despite increase of the IRAP rate remains below 30%. And finally, a reduction of approximately EUR 2 million in minorities due to the lower result for certain companies. This is us to group net profit of EUR 139 million, down 5% compared to the same period last year. we conclude the financial analysis as usual, with the evolution of the net financial position on Page 9. This position stood at EUR 4,177 million. slightly down compared to year-end 2025. The EUR 45 million decrease in the period is attributable mainly to a solid cash generation, which more than covered investment cash outs, totaling EUR 192 million in the quarter. Second, to the disposal of our first portion of tax credits accrued under the Ecobonuscheme. And we note that by year-end, we will monetize additional [indiscernible] tax credit for approximately EUR 7 million. Third to [indiscernible] in working capital -- in net working capital. However, we confirm expectations for year-end net working capital to increase by approximately EUR 100 million, mainly related to growth in medium and longer tariff receivables in the water and waste collection success. I will handover to Luca the conclusion of the presentation.

Thank you, Giovanni. We conclude the presentation by looking ahead to the coming months. Unlike last year, which was characterized by a very strong growth in the first quarter, this year's trend will be different. The first quarter which, as we have seen was substantially in line with last year. List foundations for the growth expected in the second part of the year. In particular, the coming months with the characteristic by the continuing growth and overgenerated businesses, the covering profitability of material repowered plants for approximately EUR 7 million, the positive contribution from the energy value chain, essentially in the second half the positive contribution from the codes already launched the implementation of planned investments with the nallocation to [indiscernible] is already launched. Therefore, we confer the guidance announced at the end of March and in 2 we expect a growth of 4% comp, technical investments of approximately EUR 150 million. at the EBITDA ratio, which would be stable at approximately 2.1x. And as customer quarter results, we brought an indication of group net profit expected to grow over 2% at year-end compared to 2025 including impacts arising from the energy bill. We can now move on to the Q&A session. Thank you.

[Operator Instructions] The first question comes from Roberto Letizia by Equita.

I have 2 questions. On the credit side, you gave some detail about the components of the growth. And the 4% results as compared Coseloand it's very important result for the EBI today and the revenues. Can you give us a bit more richer also on the quantity side on the components that will constitute the growth of 1% on the year and on the network. Power prices are a bit on it. So can you give an expectation of what impact this can have on the remaining covers made this year? And also the power prices as parts to conclude, we can see the improvement of treatment and activities, which were not the last report? And can you please say us -- what is the expected trend on the business side for the next years.

Yes, I would like to start by the covers to confirm that in 2026, we covered 70% renewable production. We expect renewable production of 2,500 gigawatts per hour. We have about 500 gigawatts per hour. That today are not covered. So at the [indiscernible] device per watt hour, we have an increase of EBITDA of about EUR 5 million. So this is our position concerning thermoelectric production. The coverage at the moment is very low as we already communicated in March because the forward continue to do foresee negative faxes. So if we had to finance coverages, the margins would be negative. We won't do that, especially because in delivery, as you have seen also in our results on the -- for the first quarter. On the thematic side, we have positive results. So we will have to manage [indiscernible] spending on margins in delivery without having to do some coverages. Concerning 2027, we foresee a growth also in renewables production from [indiscernible] to 2,200 gigawatts per hour. And this will be linked also to the development of the photovoltans. And as you have seen, we have the auto plant and in 2026, our other plants will become operational. So today, we have covered 40% of this production. And we did it at a value of about EUR 100. So we have an exposure of about 1,200 gigawatt per hour on [indiscernible] the conditions for thematic oncologists are not there, especially not in 2027 because far spreads are all negative. We foresee that the if we won't be in a condition to distribute these coverages. In 2026, we estimate about EUR 3, EUR 4 per megawatt hour because we see that the term electric plants are in demand, especially in some -- at some times of the day. And we also cause some opportunities as to improve the positive hours which refers to treatment plans. You've seen an improvement of EUR 5 million in the first quarter. And we foresee that this improvement will increase during the rest of the year up to, I don't know, EUR 10 million. So this will not be a linear growth about EUR 5 million in the first quarter and EUR 10 million for the year. Coming back to the first question, where will the growth to be focused in the second quarter? Because also during the second quarter, the dynamics will not be fully clear. This growth is due to the synergies. As you have seen, we have EUR 4 million in the first quarter, and we foresee 20 million in the full year. We have an organic growth linked to networks but also to photovaltic. So in this case, we see about EUR 4 million for the full year. And we also have they recovered the EUR 10 million that we were talking about before. And this is due to the dynamics of more marginality on margins in the supply chain, but also in the company market, which is forecasted to grow by about EUR 50 million. So it would grow from EUR 85 million to EUR i10 million. So the capacity market is a very important aspect of these margins where we have full visibility.

The next question comes from Emanuele Oggioni by Kepler Cheuvreux.

I also have some questions. The first one is about the [indiscernible] the consideration in the Energy business unit. Recently, there were some articles on [indiscernible] potential on the market over 2 million customers. And without mentioning any customs, if you are interested at the moment in assessing some of these [indiscernible] and if you're interested in growing by excel line. So with our next single portfolio of customers. This was my first question. And the second question is a clarification about the hedging in 2026. It wasn't clear the price. I assume 70% of volumes. But I wanted to ask if you confirm the EUR 15 per megawatt hour that you stated in the full year presentation for 2025. And also clarifation on hydraulic production despite the maintenance, the first part of the year there is -- are we in the outs in the North of Italy, also during the second quarter, and I wanted to ask an update on this point of view. You already said that you confer this per hour, but what is the possibility that the visibility will be a bit lower with regard to the target that you confirm. And our last question on the market business unit -- on the organic side, the acquisition side. Could you give us an update because I have seen there is a 1% decrease in customer base compared to the year-end, and so could you give us an update on the competitive side for year-end in the markets?

I will begin. I will then give the floor to Giovanni. About the strengthening of the energy supply, there meant on the table. Both on the customer portfolio side and on generation. We are out or the sales because our approach is not to leave anything aside. Today, we have to grow a lot on our organic also. If we had to decide first, we would who would look at the organic side and then on the nonorganic lines. But we are looking at [indiscernible] without leaving anything aside. Okay. I will go to the second question concerning our confirmation of the price for the coverage in this right is EUR 105 per megawatt hour and on 30% of the hypothesis production. Concerning [indiscernible] production, we have an important as no amount in our reference area. So the plants in [indiscernible], but we are seeing that the meltdown of the snow is a bit late. So there could be the production could be postponed from the second to the third quarter. But on the year side, looking at a good year. Our estimates are about 1,200 gigawatts per hour, and they are confirmed also taking into account the rate that will come in the autumn. But the single base is due to the low gives us peace of mind regarding this forecast. Considering the customer base, we had a meeting concerning customer base and around 1,000 customers this quarter. This reduction is focused mainly on the geographic side in the Central and the southern part of Italy, also because we decided to change our acquisition channels. The churn rate, and we foresee customer base at the end of the year, such stable compared to the 1 presented at 31st of March. Our churn rate is about 6%, 7%, so we noticed a slight decrease compared to the first quarter of 2025. Competition, however, is noticeable. And as we said, talking about the results of the first quarter, we decided to adopt a more selective commercial policy. Considering also that the investments to acquire new customers and some channels are starting to be very high. And here, churn rate is even higher. Then the one, I communicated as an overall average for the business unit.

Next question comes from Francesco Sala from Banca Akros.

I also have a few questions. The first 1 is on the renewal of excoconcessions. Could you give us an update about the current situation and the trends that you foresee for the next few months. The second one is on the improvement of the EBITDA margins for the 2 plants -- can you give us an idea of the drivers for this improvement? Is it in terms of efficiency capacity or final prices that make the business more competitive. And finally, I want to ask something on the transfer that will be cooperation in the next quarter. What are the percentages -- where will they be sold?

[indiscernible] sessions after the European Court access their opinion. The payment region decided to open a bit for the post conception. We are assessing at the moment. We would like to do and in the next few weeks, we will consolidate our decision about what do you want to do. At the moment, this is an coplantin SanMar, which is rather a small 8 megawatt. So we are monitoring the situation. We are discussing with the region. We hope our solution in a fourth way that will allow operators to continue with the current management, but also has been the local area in terms of lower costs on [indiscernible] and impairment, we have a 7% production. So at the moment, this is a pretty liquid situation. Giovanni?

Yes, concerning their treatment plans, we have 3 types of plans with different dynamics. -- depending on the type of product, we have a polite plant, starting from the recovery would and finance pilots, and this improves the [indiscernible] because we will bring to produce any line of blocks and this will allow us to have industrial efficiency. Then we have -- we don't have an increase in prices because the market is in line with tenant, but we have some plants that will become a portion, in particular, the Galata plant [indiscernible] and we have an improvement of income inflows, and on the other hand, a reduction of the organic flows that now we have to dispose of in external plants because these plans are also functional to the so that we generate with supplied risk collection. Then we have alternate is pertaining to plastic. The market even after the beginning of the war gave no important signal of increase in prices. There is a high competition of countries outside the EU but we have an improvement of 10% of the prices also concerning plastics. Concerning the photovoltaic plants. We have plant for 7 megawatt that will be conversional and this is located in the province already media. -- we have another plant of 8.5 megawatts that has become version in the first quarter, but that still has generated production. And this is located in the province of [indiscernible]. So overall, about 60 megawatts will be conversion of static. These are -- so they are all merchant plants with no incentives, but in 2026, we will attend for the photo vacant AeroVigofor 150 megawatts and this will become operational by the mid 2027. So first quarter -- first half of the 2027.

The last questions comes from Javier Suarez by Mediobanca.

I still have a few questions. I would like to ask first of all I think about the business supply. I had an impression that the business invite is becoming more competitive? maybe the poise our customer attention, we have to become more competitive. And what are the measures that you are undertaking to face this competitiveness in the market supply? This is the first question. The second question concerns synergies, you talked about EUR 4 million synergies in the first quarter of the year. The target for the whole year is 20 million. I wanted to ask if you could give us an indication of where do these formulas come from? And where I would like to push in the next quarters to reach EUR 40 million of target. And the last question concerning the estimates. I was surprised by the tax rate, which is lower than what I expected. So could you explain a bit better the tax rate? And what should the tax rate be for the whole year?

[indiscernible] We also see more competitiveness and our action is to give presence to physical acquisition channels. This was a strategy that began 2 years ago. This brought us to 1,400 per of sales, both higher than the direct. And this is a channel where we have seen lower churn rates, lower acquisition costs. And so we managed to have an overall marginality also considering the investment costs. And we've seen some improvements. Besides higher competitiveness that impacts customer base. We also had a reduction in margins annuation of about EUR 6, EUR 7, margin, a reduction of EUR 6, EUR 7 in margins in 2026, compared to 2025 -- the reconsented synergies. We related our cost management plan and a task force to support synergies. As you may remember, we have about in the business plan and the EUR 20 million foreseen in 2026 and the EUR 4 million already which are in line with the strategy of dual improvement of our efficiency and the many concern projects, about 50% concern projects on the network side, so hydrolytic gas and electric energy, but also about EUR 5 million, EUR 6 million for commercial activities. So to answer the first question, we have competitiveness, but we are also trying to maintain the cost in our market business units. -- and the market business contributes to the EUR 20 million for about 1 quarter. Concerning tax rate, I will try to be very clear in expand, but if you have any further questions let me know. The tax rate is at 29.6% in the first quarter. And this is, of course seen also for the full year. It also includes the additional 2% foreseen by the energy build degree. This new amount has an impact of 2.6% on the full year base. But our group also has some recoveries that are very important in the tax acquisition they were early made in 2025. So we had this recovers, but we couldn't monetize this anticipated taxes at [indiscernible] had not already become low to follow the usual IRP rate of [indiscernible]. So in 2026, we will have a negative effect of EUR 7 million coming from this additional 2%. But on the other hand, we'll have results on the country side of about EUR 5 billion. These were not pose in the 1095 budget, but we show the effects in 2026. To complete this clarification, I would also talk about 2027. In 2027, we will have EUR 7 million or but we will also have a reverse effect, a negative effect of EUR 5 million that are the positive side of 26%. So to sum up, the results that the group will have in 2026 are about EUR 40 million, but they are distributed in a nonlinear way. So EUR 2 million in 2026 and EUR 2 million in 2027, [indiscernible] 2028, I will come back to 4%.

The next question comes from Davide Candela from Intesa Sanpaolo.

I also have a couple of questions. The first 1 is reading -- you talked about the power generation, but I wanted to ask if you could give us more information about the supply side, if I remember correctly, the 2026, we are almost entirely covered but I wanted to forecast for '27 and to the increase in energy prices. On the other side of the value chain, do you foresee any downside? And we have a sensitivity on this side. Concerning the centers, we have seen that the connection of us continue to increase areas, you have a quote of the demand, I think, and also some available plants. For example, [indiscernible] could you give us some more detail about how you will handle this initial business? What is your approach? And last question about the volumes of they are hitting in the first quarter. January was very cold, so was it only a higher conversion on the electrical side in the first quarter?

Considering supply to complete the hedging framework, I would like to say that we have a 70% variable and 30% of fixed. So this is not a very high percentage of sales. Our portfolio is 70%, 30%. In this 30% of fixed due to our policy, we have a coverage from 95% to 100%. So we don't have a significant upside risk and the coverages concern all the contracts for '26 and '27. So we minimize the risks of a size on the supply a fix rate, and before giving the floor back to reparations. I would like to talk about the volumes of sedating. It's true the channel was very cold, but February was warmer. And we believe that the dynamics are also due to the war. Certainly anticipating increase of costs that in the construction anomic on plating of the consumption. But I would like to stress that the volumes, the large structural indicators that are not linked to the progression of cold and warm well climate and to the monetary cases were stable.

Thank you, Giovanni. [indiscernible] for example, in the turn area for several tens of meats we are discussing about the plans in the areas of twin and apartments -- our business model at the moment is of giving iEnergy to other centers to recover the value. So we are not one of the best operators on this side because we have 3 but energy plans and 1 of the larger plants in [indiscernible] but we are discussing of these projects with values, and we would like to develop this project, especially in our.

At the moment, there are no further still questions. I will give the back for the final comments.

First of all, thank you for all these questions and for your attention. We are available for further questions and would like to say goodbye to you and wish you good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]