Italgas S.p.A. (IG) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Italgas conference call on DEPA, the infrastructure. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Anna Maria Scaglia, Head of IR of Italgas. Please go ahead, madam.

Hello. Good afternoon, everyone. It's Anna Maria speaking here from Italgas. We are here with our CEO, Mr. Paolo Gallo; and our CFO, Gianfranco Amoroso, to present you some initial data on DEPA Infrastructure deal following the announcement of last 9th of September by the Hellenic Republic Asset Development Fund that Italgas has been selected as preferred bidder in the tender process for the acquisition of 100% of the share capital of DEPA Infrastructure S.A. I leave now the floor to Mr. Paolo Gallo, our CEO.

Thank you, Anna Maria, and good afternoon to everyone. Before getting into the presentation, I would like just to underline that all the data that you will see and we will comment during the presentation are made on our own elaboration. There is no data that are not public. All the other data are under a confidential agreement between ourselves and the fund, and we are not allowed to disclose to you. So sometimes you may ask questions where we will not be able to respond because of the confidentiality that covers our relationship with the Greek fund. Having said that, I'm very proud and pleased to open this conference because the Greek opportunity has been on our table since a long time. I remember, and we were just talking with Gianfranco right now that we started to look at the Greek opportunity back, it was spring 2018, so a long time ago. And then month after month, we demonstrated our interest and our passion in all the process. So you know that last week, the Greek fund has selected Italgas as the preferred bidder for DEPA Infrastructure. We will see in a moment the time line to get to the closing. As commented already in the strategic plan back in June when we talked about Greece, we said that this transaction is a perfect fit with our regulated business profile and our long-term strategic view. The acquisition for us is an important and incredible milestone, even though I would like to say we are back to Greece. You know very well that in part of the current Greek network, in particular the one related to EDA Thess, was built and with our support, Italgas, back in the beginning of the century when Italgas was a partner in that project. Let me say that the opportunity is a very nice opportunity because -- and I recall what I said during the strategic plan, Greece is very similar to the situation that we found in Sardinia in Italy. We have in front of us a lot of the investment to be carried out where we can deploy our competence, our technology, our skill in developing new fully digital network that will help Greece towards the energy transition. And I'm very proud that the all Italgas group has worked very hard to achieve such results. And we think that the deep commitment of our people is clearly evident in the results that we achieved up to now. Let's move to slide -- to Page #3 just for -- you know very well, which is the transaction, but just to recap some of the elements. The transaction involved the acquisition of 100% of DEPA Infrastructure shares that is currently owned by 65% by the Hellenic Republic Asset Development Fund and 35% by Hellenic Petroleum. DEPA Infrastructure owns 100% of 2 distribution company, EDA Attikis and DEDA, and 51% of the already mentioned EDA Thess. Italgas will acquire DEPA Infrastructure using a new code that has been already created, it was created last year. It's an Italian BidCo that is fully funded the intercompany equity. What we know about the remaining -- well, probably we know more than we can say. But what is known as public information, about 49% of EDA Thess owned by Eni is that on June 21, there was an agreement between DEPA Infrastructure and Eni gas e Luce about the selling of the 49% of EDA Thess to the winner of this tender. Terms, as I said, we know those terms, but are fully confidential and therefore, we cannot disclose them. Let's move to the following page. About the price, you know already, but Gianfranco will tell you more about later. Let's move to the time line, Page #4. So after the selection of Italgas as the preferred bidder, there are some steps between now and the closing date. The first one is that the court or the Greek Court of Audit should approve the transaction, and it is a condition precedent for signing the SPA. Once the SPA is signed, there are other 2 approval expected. The first one is the Greek antitrust approval, for which we do not expect any problem. In fact, Italgas is not present by no means in Greece. The second one is the regulatory approval. Again, considering the spending, the knowledge and the competency in Italgas in managing gas distribution network, I think we should not have any problem either with the regulator. Probably, on the contrary, they should be very happy about the transaction. Having said that, we expect, by year-end, the closing and the maximum at the beginning of 2022. Let's move more in details about the rationale of the transaction that is very well described on Page 5. As I've said, it's -- as I've already said, it's a perfect fit with Italgas long-term strategic vision and regulated core business profile. And it's also a unique opportunity. You can understand that we are going to be the only gas distributor serving the all market, gas distribution market in Greece. So we are not acquiring only 100% of DEPA infrastructure, but also we are acquiring the gas distribution in Greece. And it's not going to be for a short time because as of today, the current concession will expire in 2043, so 22 years from now. And there has been a recent legislation that allow to extend those concession for another 20 or 30 years. So we are talking about something, a concession that may last around 50 years from now, that it's a very long time and let us planning all the intervention needed to make this network fully digital and also ready for the energy transition. We are working -- we will work in a quite established and transparent regulatory framework that has a very attractive potential. As I said, when I made the comparison of the similarity with the Sardinia area, there is a strong opportunity to grow in term of investing in new network. And in fact, we noticed that, that -- you may notice that the penetration of the gas distribution is different from one area to the other. Significant number are in EDA Thess, more than 50%; very low number in the area of Athens, we are below 20% and negligible in data because the network is currently under construction. So there is plenty opportunity to increase the penetration and therefore, to invest and to bring the gas, the natural gas where, today, they don't have the opportunity to use. That opportunity to invest in new grid, you should see this opportunity coupled with the opportunity to realize a best-in-class digitization network and know-how. And it's also an opportunity to design, as we have done in Sardinia, those network ready to affect the future gases such as biomethane, hydrogen, green hydrogen and e-gases. So preparing Greece also for the energy transition. Last but not least, something that we have never considered but is inside the perimeter, there are other 2 additional activity. The DEPA Infrastructure owns more than 600 kilometers of optical fiber. It's similar of the activity that we have done in Sardinia. Just to remind if you want to set the value for that optical fiber, an average number is between EUR 40 to EUR 50 per meter is the cost -- additional cost to install an optical fiber when you develop the -- when you develop a new network, and then you consider the geographical situation of Greece. To support the gas distribution network inside the perimeter of DEPA Infrastructure, there is also the possibility and the opportunity to develop a small-scale LNG to support gas distribution. Another, it's an activity that we know very well. We have experienced that in Sardinia in an extensive way. So again, we can bring our competence to develop these at -- these additional businesses. If we move on and we go to Page 6, we try to give you, from a geographical point of view, the view of the 3 companies. And you can see where EDA Thess operates, where EDA Attikis operates and where DEDA operates under the other territories. Of course, the gas distribution penetration, as I said before, is not comparable to the one that we have in Italy. So there is ample margin of improvement. Thessaloniki area, the region, has the higher penetration, as I said before, more than 50%. So we expect that also the other region may achieve this number in a very short period of time. That is what we expect. And in fact, that is also supported, and you can see on Page 7, by the view of the market in Greece. If you look at the 2 graphs that we have shown, you can see on the top part the natural gas demand forecasted in Greece and the CAGR. So the average increase from 2021 until 2030 is significant. We expect an increase of 4% and probably, according to my opinion, it's even underestimated. The reason being is that we know that the Greek government has made a clear decision to phase out the use of lignite and coal that is not only used for power generation, but is also used for residential in -- by the residential customer or by the small industrial customer. To phase out lignite and coal, you need to provide to the Greek customer an alternative, and alternative is the natural gas. It's an alternative that is immediately available, also thanks to the project, they're very well known by the Italian citizen TAP that is bringing gas from Azerbaijan to Italy, passing through Turkey and Greece. So they have availability in gas and the gas may be used, natural gas, in the short term to replace either lignite and coal. And in fact, if you can look at the same projection about the use of natural gas in the household consumption, you can see that the natural gas is growing even on higher rate, 5% as an average per year. And that is very consistent with our view and probably it's either underestimate with our view with the fact that once that the gas distribution network will be available throughout Greece, all the citizen will take this as a very great opportunity today for the natural gas, tomorrow for biomethane and green hydrogen. And let me start talking about the regulatory framework, you are on -- we are on Page 8, and then I will pass the floor to Gianfranco. As I said before, we are -- we will be acting a very transparent regulatory ecosystem where there are similarity to the Italian system, and there are also some differences considering that there is a significant network to be developed. And that probably explain why there is such a long concessions in term of time and also the way that the regulatory is structured. First of all, it's a 4 years period. And the WACC recognized is more than 7%, but nominal. But if you wanted to compare with the current 6.3% of the Italian WACC, the current one, we need to adjust it by the inflation, but also we need to adjust it by the tax rate because the implied tax rate in our WACC is 31% while the implied tax rate in the WACC -- in the Greek WACC is 24%. So you can -- I will let you make the calculation. Armando Iobbi that is present here can help you to find out that the 7.03% is aligned with the current 6.3% or very close to 6.3% of today. But -- and that's an important -- but there is an additional 1.5% premium for investment that are going to meet certain criteria. And I can imagine that the Greek regulator will attach that to the digital transformation and to energy transition to support the view, the long-term view of the Greek government where we are very ready and prepared to do it. I will now leave the floor to Gianfranco, who will explain you more in details about the regulation and on the assumption that are included in our view, economic assumption -- technical economic assumption in our view of the -- of DEPA acquisition, and then we will open the floor for you to the question. Gianfranco, it's yours.

Thank you, Paolo. I will start providing you with some comments on what are the main difference, the main peculiarities of the system in Greece for the regulation. First of all, we have to consider that the regulation has different regulatory periods of 4 years. We are now in the middle. Current one is ending by the end of 2022, as Paolo was explaining before. The main difference compared to the Italian one is that the tariffs are set based on the approved business plan and are inflated annually. But basically, the distribution company is entitled to collect the revenues, the so-called required revenues, based on this projection for CapEx and operational costs. So the DSO at the beginning of the period has to agree, and this is the difference compared to Italy is to agree with the regulator in Greece, of the so-called RAE, the plan for the following 4 years. During each period of 4 years, there is the sharing of a revised plan just for, let's say, sharing the info with the regulator. But for the 4 years of each period, the revenues are set. Well, going to more details about the required revenues and commenting the [ single breaks ]. Well, the first one has been already partially commented by Paolo before regarding the WACC. WACC is nominal. This implies that the RAB is real. So RAB is not inflated. There is limited, let's say, exposure during these 4 years to the inflation due to the fact that differently than in Italy, the regulatory asset base is not inflated yearly. Then you had the WACC, which is set at 7.03% up to -- applying up to year 2022. Then you had the depreciation recognized in the revenues that are set according to the length of the license. Basically, I will simplify it like this way. Then you have the projected OpEx that are -- the OpEx that are assumed in the business plan shared with RAE for the 4-year period. Important to say here that we have the possibility to have outperformance in terms of operational costs because during this 4-year period, what you get in term of operational outperformance remain with you. There is not, in other word, a clawback mechanism applied to the 4-year period. Then, of course, they are deducted, all the components that are not to be double counted into the RAB, into the revenues like planned revenues related to servings to other companies or non-regulatory services. On top of that, for each period, there is another component, which is called recoverable difference. What does it mean? During the 4-year period, the DSO collect the actual revenues based on the actual volumes and the actual redelivery points. At the end of the 4-year period, there is a global calculation about the revenues and, let's say, some discussion and negotiation with the regulator. And if you have an underperformance, you have the possibility to recover it in the following -- in the forthcoming regulatory period of 4 years. The contrary, if you have an overperformance, of course. So to sum up, the achieved revenues, differently from the required revenues, are based on actual deal recollection. I will now go to Page 10 just to give you the main elements of our, I would call, acquisition business plan. The business plan is based on our understanding of the target and I would add also based on our expertise about the business. So we have told many times about the fact that a strong point of this deal rely with the potential for our company to play an industrial role. And this is confirmed by the numbers that we had in this chart, which show a significant growth in terms of redelivery point on the left side of the slide and also in terms of kilometers of the network. Both the indicators basically have doubled at the end of the period considered 2030 compared to the starting level or 2020. In terms of redelivery point, the number of 509 is the aggregate number -- just a clarification, the aggregated number of the 3 companies considering also 100% of redelivery point of EDA Thess. As I was saying, the growth is concentrated in the first period where we have a grow rate of 9% in terms of redelivery point and 8% in terms of kilometers. This is a consequence also of the figures that we show in the following slide, in Page 11. We have a substantial and very important plan for CapEx. Gross CapEx crossed EUR 1 billion and stand at EUR 1.1 billion in aggregate terms for the work period until -- from 2022 up to 2030. This is because -- well, our plan, our CapEx plan is front ended loaded -- front-end loaded. Meaning that we will start deploying our investment immediately after the acquisition. On the right side, you have the impact of that on the RAB -- on the level of the RAB. And the result of what also I was commenting before is that by the year 2026, the level of RAB will exceed EUR 1.1 billion. In the chart of the RAB, you have the first 3 elements. Green colored because these are the value already set by the regulator; the blue one, '26 and 2030, are our projection based on our assumption of the following years. Well, in terms of acquisition price, I would comment here on that. The acquisition price announced also by the fund -- the Greek fund is EUR 733 million. This imply, according to our calculation, by the way, I will comment immediately after, considering a proportionate firm value of around EUR 0.7 billion will drive us to a premium on the RAB 2021 just below 25%. In calculating it -- as it is explained in the footnote, in calculating the firm value, we make reference to the value reported for 2020, considering only 51% of EDA Thess. For the RAB, same principle apply. So just 51% of EDA Thess, but refer to the figure for the RAB estimated 2021 because we are buying basically based on the results of the current year. Well, let me go through the other slide on page -- we are on Page 12. We have here for you the level -- our projection in terms of revenues and EBITDA. This confirmed the potential -- growth potential that we have already seen in terms of CapEx for the first period of time up to 2026. The point to be noted in my opinion here is that if you compare the level of the EBITDA to the revenues, you see that we start from a margin -- an EBITDA margin of slightly more than 60% for the 2020 data. And we -- our assumption is to reach a level comparable to the level of our group already by the year 2026 when the ratio between EBITDA and revenue stands at 76%. In terms of impact on our accounts, in terms of EPS, the transaction is already accretive in the period of 2022, 2023, so the first year after the acquisition, in a range between 5% and 10%, more than 10% afterwards, after -- from the year -- by the year 2026. In terms of financing, the transaction is -- as we communicated to the market, is fully funded to a fully committed financing package for the entire amount. Then we will consider different options in the market to refinance this amount. And we confirm also our commitment to our solid investment-grade rating. Now I leave the floor to the -- to Paolo for the final and closing remarks.

Excuse me, this is the operator. We cannot hear you. Maybe your line is on mute.

Yes. You're right. I mean I made a mistake on the Microsoft. So I will say thank you to Gianfranco. Before opening the Q&A session, I would like just to remind the major point that is -- that are described in Page 13. It's a key milestone for us, the acquisition of DEPA. We always said that the DEPA was a perfect fit for an industrial player and the industrial player was the best positioned to affect this challenge. And we demonstrated by our -- by being the preferred investor that, that was true. We have in front of us enormous challenge, but it's the same challenge that we have in Italy, to bring the gas network toward the digital transformation and the energy transition and to position the gas network to be able to play a significant role, a primary role in the energy transition managing different kind of gases. But it's also for Italgas the opportunity to be accretive from a result point of view. Gianfranco show you our preliminary expectation. But always, as we have demonstrated in the past, I'm sure we'll do it even better than what Gianfranco talked to you. Now I'm leaving the floor to you to any questions you may have. We are ready to respond to your question. Thank you.

[Operator Instructions] The first question is from Javier Suarez with Mediobanca.

So the -- three questions. The first one is on the strategical fit of this acquisition within Italgas. So the question here is, Italy is a market on which the potential for investments on gas and consolidation on gas distribution is significant. And obviously, the company has decided to make an investment in another market that is also interesting because it's very small gas distribution in Greece. So the question here is that what you are saying on the new CapEx plan that you see in Greece is additional versus the -- what you announced in the previous business plan and there is an element of redirecting part of the investment that we have seen announced in Italy towards this new opportunity in Greece. That is the first question. The second question is more looking into the details of the transaction. If you could set us a -- set with us your assumption on the WACC nominal that we -- that you are expecting for this asset beyond 2022. You have to have a sense if in your numbers, this 7% nominal that we have seen is considered to be significantly different beyond 2022 or we can consider that number as stable. And the third question is, obviously, buying this company, my understanding is that this company has exclusive rights in their regions and in their area. So this means that in that region that is -- you have a kind of a regulated monopoly to develop the gas distribution network. And also you can clarify what happens in the Greek regulation at the end of the concession. And very, very final, if you could share with us the value that you have attributed to other operations that are included within DEPA but are not part of the RAB. I'm referring to -- I think that the CEO mentioned optic fiber, a small-scale LNG [ in Sardinia ]. You would -- you could share with us the value that you're attributing to those assets, that would be helpful.

Thank you, Javier, for your question. Let me say one thing. I mean we have studied a lot in these 2 years. But then we have not entered -- we are not part of the Greek market yet. We will soon be part. So you will probably see -- some of the answer may look reluctant, but it's not reluctant is because it's hard now to say what is going to happen in the future. But let me try to give you an answer and maybe Gianfranco can add something more details about that. On the first question, on the CapEx, we will review, of course, the -- as of today, they are additional. There's no doubt. But you know that every year, we are going to review our plan, strategic plan. So next June, we will review our strategic plan considering all the different elements that are in the plan, so -- which is the time line of the tenders in Italy. We have Greece now. How is going to be the work review by the regulator? So the fact that you just introduced Greece in the picture is a little bit, let me say, limiting our point of view. There are many elements that are affecting our consideration about CapEx investment. And the major one I told you is Greece. But before taking a position in Greece, we would like to enter into these 3 companies, understanding which are their plan, which are their priority and so forth. And then you know that starting from January next year, there should be a WACC review. We have already told that -- the regulator that based on the new numbers, we had to review for an equilibrium, the investment. And then, of course, there is the time line of the tenders that we always discuss every year. Regarding the future of the WACC after 2022, we just arrived in Greece now being able to view and to project what is going to happen upward and downward on the WACC. My only consideration -- and maybe Gianfranco can elaborate later. My only consideration is that Greece need a significant investment in developing the network if they want to achieve and phase out, as the government has said, lignite and coal. You cannot phase out 2 important fuel if you don't have the opportunity to replace them with something else. And therefore, I'm expecting and we have considered that a stability over time of the WACC to support those investments. Third and fourth question. On the exclusive concession, yes, we have an exclusive right. It's important that the concession is planned. I mean the development of the networking side, the concession is planned and the construction is starting in a certain period of time according to the current regulation in Greece. So that's the reason why we wanted to look very carefully inside, especially the DEDA company, understanding the priority and where we have to invest. Regarding optical fiber and small-scale LNG, we have not considered that in our evaluation. So it's going to be an upside. So the premium that was explained by Gianfranco a few minutes ago does not consider a value equal to 0 either to the optical fiber and to small-scale LNG. We feel and we think and I think you share this point that there is a value attached for that. I gave you the cost that we incurred in Sardinia to place the optical fiber in our network. So you can at least deduct a value in term of cost of those optical fiber, and you know there is a value if you have the right to develop small-scale LNG project. But I am again saying in the presentation made by Gianfranco about the premium, those 2 element, optical fiber and small-scale LNG project, have been considered equal to 0 as a value, that is not -- we know that is not correct. But we were not able, as of today, to price them.

The next question is from Enrico Bartoli with Stifel.

First question is on Slide 7, on the expected development of gas demand from the distribution network. If you can elaborate, let's say, how these projections are consistent with the national plan of the Greek government. And if you can provide details on the substitution of lignite and coal from the residential demand and from demand from the smaller companies and if you expect in Greece any competition in this demand for gas from the electrification process. Second question is on, let's say, the -- let's say, authorizational environment in Greece. Also, in this case, if you can elaborate some comments, particularly, I'm wondering, let's say, the risks in terms of execution that can be associated with your CapEx plan. So the complexity of the authorization process and the execution of the project. And then on the numbers, if it's possible to have the amount of the net debt of the company of DEPA at the end of 2020 and if you can provide us the contribution to the RAB value from EDA Thess, which is partially owned with -- by Eni.

Starting for the last one, saying that we are not allowed to disclose number that are not public that is under the confidentiality agreement we signed with the funds. We interact with the funds in the recent days because we know we had that meeting with you, and they have reaffirmed the fact that we can illustrate our elaboration, our projection, public number. We are not allowed to disclose to you, to anyone, numbers that are not public or our elaboration. Therefore, on the last question, we are not allowed to give you any number. We don't want to be in -- at this moment to breach our agreement with them. Going back to the first question, Page 7, the graph that is on the top has been elaborated by DESFA, and they have elaborated a graph. So an evolution of the natural gas demand based on the national plan, that is the one that you see on the bottom part where there is an increase in term of gas of 5%. So the 2 graphs are not our elaboration. Our elaboration, done by the Greek government, national plan in the bottom part, household energy consumption called and by DESFA, the transportation company, on the upper part of this national (sic) [ natural ] gas demand forecast in Greece, and they are fully consistent with. Regarding lignite and coal, well, we know very clear that has been declared by the government, that the government has the intention to phase out lignite and coal in all the segments very soon. How? The point is very clear. You need to bring alternative fuel. There's no other alternative. Again, I'm taking the similarity of Sardinia. We are phasing out the LPG consumption by bringing that -- by bringing gas distribution network or by converting, as in Sardinia, LPG distribution network in gas -- natural gas distribution network. That's the only way. There is no other way. You cannot invent other way. You need to bring a distribution network if they want -- if you want that the final customer, either residential, small industry, small commerce, will abandon fuel and lignite and will adopt natural gas. I think that the -- from what we understood that -- from the conversation we had with the government is that it's going to be a decision by the government itself to phase out. So it will be -- the final customer at the end of the day will be somehow forced to abandon the use of lignite and coal. About electrification, you are always trying. And that, to me, it's a pity always to remind you. You are always trying to put ourselves against the electrification. You don't understand that only a joint effort by the use of natural gas today in the future of biomethane and green hydrogen with electrification is the only way. There is no other way to reach the goal of the European Union. It's not a matter either electrification or gas. That is not the way to approach the problem of the energy transition. So I don't see the electrification competing with us. I see the electrification helping as we are going to have Greece to move toward a low-carbon or zero-carbon economy. It's the concept of sector coupling that has never been applied and it has always been used as a word, as a statement, but never be applied. So I don't take your point about electrification be a competitor. It's an help in reducing the CO2 emissions. On the last question, authorization process. Well, I'm sure that the authorization process is going to be difficult. I don't know if it's going to be more difficult in Italy or less difficult. Honestly, we have seen and we have faced this problem in Sardinia recently. And honestly, I discovered an authorization process that is very tough in Italy. So I can imagine that maybe Greece is easier, similar. Well, we have been trained and all our people have been trained many years to face difficult authorization process. On top of that, I think there are 700 people working in those 3 companies, and they are dealing every day with local and national government to get the authorization. The other element, the -- let me say, the -- to find the archeological discover, that's, again, it's something that we have to deal every day. We -- I visited recently an area that was discovered outside Rome where we found very ancient rest of the Roman era, and we were able to deal with that. So I don't think that we are accustomed to all this situation, and I'm sure that the Greek colleagues are accustomed also. Thank you.

The next question is from Stefano Gamberini with Equita.

A quick question also from my side. Is...

Excuse me, Mr. Gamberini, could you please get closer to the receiver, please?

Sorry. Could you hear me now?

Yes. Thank you.

Okay. Sorry for that. A few questions also from my side. Regarding the WACC, could you give us more information how this figure was reached? What I mean is what is the risk free, the cost of debt and the equity payment that was applied by the regulator in order to understand what could be some risk in 2022. The second, the strong increase of delivery point, so in 2026, mainly, which is double-digit growth, if I'm not wrong. So what is the visibility in order to reach this target as well as on the other side, the investments on the networks? What I mean is considering that the plan is already set for '22 and you have this visibility, what is the situation in term of also in this case of investments that you need to reach this level and visibility? Okay. Probably you already answered about authorization. I don't know if you have shared something more on this. Lastly, how the regulation works in term of a new redelivery point. What I mean is, in Italy, there is a certain amount that is a lower investment from the regulator. How does it work in Greece? Are this investment to be approved by the regulatory or not before you go ahead? And so what are the risks on this point of view? So if you have some commercial risk or working capital risk on your revenues. The very last question regarding the EPS accretion. Could you give us an idea why there is this wide range on 2022 and '23, clearly? But considering that the revenues, the RAB are already set for 2022, and so what are the variables that are still unknown?

Yes. Paolo will start. So...

It's on question -- first of all, Stefano, you made four questions, I believe. So you don't blame me for that.

Sorry for that.

But -- and then I will pass the floor to Gianfranco, our detailed question for you. Thank you, Stefano.

Yes.

Starting for the first one was you're kind of wrong about the WACC and the main element of the current level set by the Greek authority. Let me just -- I will give you the details, but please let me give you also, let's say, the statement that -- an explanation better that the current WACC that is up to 2022 will be then renegotiated together with all the other element of the business -- of the 4-year business plan. So it is not likely in Italy that you have a single element, in this case, the return, but all the elements will be negotiated. As for the Capex, the CapEx will be approved by the regulator. So let me say that, currently, we have -- in the current formula, we have a risk-free rate of 0.35%. The other element you asked, the cost of debt is, of course, nominal, like the other elements of the WACC has been set at 3.08%. And the country's premium was set as -- at the level of 1.50%. And lastly, but also important, the gearing implied in the formula is -- has been set at 20%. So second point about the visibility to achieve the result in terms of revenues in 2026, this will depend first for -- on the outcome of the negotiation and agreement on the new regulatory period starting from 2023. So our assumption has been set in our business plan, but we have to -- it has to be confirmed, of course, at the point in which the regulatory period will be renegotiated. For the time being, you have to consider that our target -- our assumptions. Behind that, we have maintained a continuity in the level of WACC also for the following regulatory period. Maybe as an additional point in your question, there was the point if our CapEx had to be approved. I do confirm, the CapEx differently than in Italy has to be approved by the RAE in the business plan. And well, about EPS accretion, the 4 one -- the 4 questions you made. Well, in the first period, we have set a range. But of course, we have -- in our business plan, we have a more restricted range than the figure. But just want to give you the idea of the lending point, something in the middle of the range, I would say. And then the progression is due to the fact that we expect to have a significant growth in the size of the business of the target company in the number of the redelivery point. So in the unit cost in terms of cost per redelivery point and operational performance. So basically, the EPS is growing in the following period of the business plan. I probably have touched all the point. I don't know if you have also other...

The cost for one redelivery point, I assume that's...

Yes. The system is different. System is different because everything is approved by RAE at the beginning of the period. And so also the operational costs for the period are estimated and approved, then you have the possibility to make some outperformance during the period. So there is not an amount set at each redelivery point, but there is an amount of operational cost recognizing the tariff for full year. In Greece, there is not a cap for the new grid. So you have not the same provisions that we have in Italy and this is regarding more the CapEx. And there are no standard for categories of CapEx at all.

[Operator Instructions] The next question is a follow-up from Javier Suarez with Mediobanca.

I'm sorry for coming back again with additional questions. One is on the current situation of the company. I think that Italgas has been very good introducing operational improvements on the different companies on distribution areas that manage through digitization. So the question for you is, how do you see the comparison between the asset or the company that you are valuing operational versus Italgas standard EI and that the company see, apart from the potential coming from the expansion of the distribution network, also an EPS enhancement coming from the operational improvement of the existing assets of the company? And the second thing that -- you mentioned during the presentation that on the remuneration system for the expansion of the network, there is a premium linked to the -- there is a premium attached to the digital transformation. So if you can clarify that 1.5% premium that you mentioned, to what that is related to, when is the debate on the utilization of gas infrastructure to transport different kinds of renewable gases in Greece in Europe in your view?

Yes. We can hear you. So please go ahead. I don't know if you...

No. Yes. Sorry, it's Anna Maria from Italgas. We had an issue with the line. I need to ask Javier, sorry, to repeat his question. We just hear him starting, but we couldn't hear the question.

No problem, Anna Maria. I would try to repeat the question. So the first question is on the current status or situation for the company that you have -- you are going to acquire. So I think that Italgas has been very good in improving the efficiency of the company that different distribution areas that manage through digitization. So the question for you is on your EPS consideration and assumption apart from the EPS enhancement coming from the CapEx expansion. What is the room that you see of improvement in the profitability of this company through putting the company -- moving the company to the same operational standards of Italgas? And the second question that I wanted to make is on your presentation, I think it was mentioned that apart from the 7% nominal remuneration for the asset, there is a 1.5% premium attached to digital transformation. So you can clarify to what aspect that premium is attached. And if this is related to the possible distribution of all kind of renewable gases, what is the debate on that future of renewable gases in Greece, as we speak?

Okay. Let me start from the last one, it's easier. There is already in the regulation 1.5% premium that is applied to certain investments that meet certain criteria. My opinion, so it's not the regulatory -- Greek's regulatory opinion. My opinion is that it should be smart. It should be very clever by the regulator to attach this premium to investment that are toward digital transformation of the network and the energy transition. That is my -- this is my opinion, and we will express this opinion to the Greek regulator. But the premium mix, it's the -- currently, to a certain investment, it meets certain criteria. Namely, it's investment that is new, has to be consistent with the plan presented to the regulator and then there are other criteria to demand. My position that I'm -- when we will have the opportunity to talk with the regulator is that the premium is a good idea, but it will be even a better idea to attach this premium also to other investments that are related to digital transformation and energy transition. Going back to the first question. In our assumption, there are 2 elements that you have to consider. We are going to merge 3 companies in 1 only. We are going to merge the 3 operating company in only 1 company. And we will bring to them our best technology and competence to align the cost of this company, the operating cost of this company to our operating cost. We have all the reference. And so we will do that the same as we have done in Italy. And we have incorporated in our business plan, of course, some of the cost efficiency that we feel we will be able to achieve, applying the same approach we have applied in Italy. You shall also consider what Gianfranco told you before that any -- there is no clawback clause that we bring the rest to share such efficiency to the regulator, to the system in the 4 years period. And therefore, we will immediately work to bring technologies and competence to them, achieving similar efficiency like we have achieved at the beginning of the Italgas journey back in 2016.

Operator, are there any further questions?

[Operator Instructions] Gentlemen, I confirm that there are no more questions registered at this time.

Okay. So many, many thanks to everyone. And as IR team, we are available for any follow-up you might need.

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