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 Full Year 2023 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Anna Maria Scaglia, Head of IR. Please go ahead, madam.

Hi, good afternoon, everyone, and thank you for joining us. Today, we'll walk you through our full year 2023 results. I'm Anna Maria Scaglia, head of IR, joined by Mr. Paolo Gallo, our CEO; and Mr. Gianfranco Amoroso, our CFO. We will address any questions you might have at the end of the presentation. I give now the floor to our CEO, Mr. Gallo.

Good afternoon to everybody. And I'm very pleased today to share with you the Italgas 2023 results that has been just approved a couple of hours ago by our Board of Directors. I believe that our numbers through the -- and confirm the strain, reliability, and the soundness of our business model, understanding the fact that we are acting, as you know, in a very volatile environment. And still, our regulation does not recognize. It's not recognized because of the time like all the macro, the inflation, the deflator and everything, interest rate that has been, in fact, included in our 2023 result. The 2 elements that has been the driver of our growth are Greece, and we will talk in a moment, in the energy efficiency company, even though relevant to this the latest one of the energy efficiency company, we have had an impact -- negative impact on our cash flow due to the super bonus is something that we have gone through every quarter of 2023. And as we said in October, we have anticipated to you the possibility not to sell the related receivables due to the market condition and in fact, we decided not to do that because market conditions were not there. And therefore, we prefer to keep our receivables and our balance sheet. On -- even though we were able to bring our leverage regarding the regulated business below 65%. And I would like also to underline I'm sure that we will talk more in details about the water business. As you know, we closed the [indiscernible] assets. We closed the acquisition of the all the assets. And we have already started working very -- with a very intense way in order to bring our good expertise also into the water sector. We will take a look at the sustainability numbers. Some of the 2028 and 2030 objectives been already achieved. So win in advance, we are very happy about that. And finally, I think it's important to recognize that in 2024, the new regulatory elements will, of course, bring to us what we have already, let me say, discounted in 2022, 2023. I'm referring to inflation interest rate in the other macro. Finally, our Board of Directors will propose to the next general assembly that will take place on May 6, a dividend of EUR 0.352 per share that represents an increase of more than 11% in respect of last year results. Let's go and look at the line by line about the result if we are on Page 3. Revenues were up by more than 15%. But the focus on the costs have been extremely strong. We will see that on a like-for-like basis, we were able to understanding inflation rate was significant to reduce our cost in respect to 2022. Of course, the boost in revenues are coming from our energy efficiency activity and by the consolidation of our Greek operation for 12 months. The company, I remind you that has been remained Enaon. EBITDA and EBIT were buying in line with the guidance. Overall, considering our cost of debt and the positive fiscal impact of the patent box, Gianfranco will explain later in details. We were able to achieve an adjusted net income growth of 11.1% in respect to the previous year. If we move on the next page, Page 4, as we have already done in the previous quarter, we are representing the operating cash flow that is slightly below last year, but also the operating cash flow without the energy efficiency business. And in fact, in that second situation, we have seen an increase -- a significant increase in respect to the previous year of 22% despite the negative impact of lower volume distributed. The difference is driven by Geoside was sold about a little bit more than EUR 250 million of operating cash flow. CapEx that includes 12 months of Greece are higher than last year, have passed again the EUR 900 million. And as a result of the dividend paid in the second quarter of the CapEx and the absorption of cash by Geoside, we closed the net financial position at EUR 6.56 billion. If we take a look at the CapEx, the CapEx shows that all the areas have seen an increase development purpose in digitization and the others. And very pleased that digitization is still going -- still increasing. It is about 18% more than last year. But also, we have nearly reached over 1,000 new kilometers out of which nearly 600 kilometers have been built and put -- what we said and put in operation in Greece. As usual, the development and repurposing attracts the majority of the CapEx. In this, Greek represent over 12% of the overall CapEx. And there is also a significant development in Sardinia that is relevant to the area that we are not completely and in particular to the acquisition of Janagas and the transformation of the existing net of the previous network based on entity into our natural gas network. But now let's take a look about the result in the net energy consumption that are extremely impressive. It is the case in which we have already achieved the target set by 2028. If we look at the Italian network only, the drop in energy consumption was absolutely remarkable, minus 15%. We mean in adding the contribution of Greece, the drop is 12%. If we compare such a result with the 2030 -- in 2028, sorry, objective, we are down by 31%, that is above the target of 27% that we set back in 2020. We are extremely pleased by these results because it's demonstrated that the action that we put in place on a daily basis to control, to measure of the energy consumed has been extremely effective in bringing down the reduction. The main contributions are coming from the industrial gas consumption, you see 24 [indiscernible], thanks to all the actions that we implemented in our rating system, but also the city consumption is significant, minus 12 [indiscernible] efficiency that we achieve in the management of the building, both in winter and mid-summer, but even more important than the daily monitoring of the performance. Electricity consumption were also down, thanks to our water company. And thanks to the fact that with the gridding systems, we are producing also electricity that we use for our own consumption, service consumption. And finally, there is also a small reduction in the consumer gasoline and natural gas for our fleet, thanks to the improved travel planning, but also thanks to the fact that -- thanks to our remote control system done that has reduced significantly the number of own field activity by our workforce. Subsequently of the energy consumption, there is the CO2 emission. Everything that you have seen before about reducing energy consumption will translate into reduction in terms of CO2 emission. But as you know, the majority source of CO2 emission are the gas leaks. Gas leaks decreased by 11%. That is the one that you see in the first column, gas leak, with the unchanged global warming potential. Global warming potential has changed the parameters. So what does it mean? It means that for each of cube meter of CH4 emitted, the correspondence, you have to admit it is higher than before. So they have adjusted the parameter. That's the reason why you see an increase of 7 kiloton of CO2, an increase due to the change of the parameter. Without that, the gas leaks was reduced by 14 kiloton. We have been able to achieve this significant result in reducing farther the gas leak, thanks to the network -- the number of network inspected, the kilometers of network inspected. We reach 120%. So not only we inspect the overall of the network, but we were able during 2023 to inspect 20% more. And so some of the portion of the area that we consider more, let me say risky, we decided to inspect the 2 times unit year. What is important is that the reduction in gas leaked per kilometer survey dropped 23% in respect of last year. The remaining, you see there are a reduction everywhere in [indiscernible] to vehicles in gas consumption. Of course, there is the grid perimeter that increase the overall CO2 emissions. Scope 1 and Scope 2 by 18, nearly 19 kiloton. In respect of the previous year, we had the full year consolidated in our perimeter while in 2022, only 4 months were consolidated. So if we look at the overall numbers, CO2 emission are increasing by 1.5%, including Greece. If you look Italy only, the reduction is nearly 7%. But ESG evaluation is not limited to that. We want us to present through some other targets that are relevant to the training hours and the number of women in respond -- in a role of responsibility. As you can see, we have already achieved or we are very close to achieve the 2029 objective. If we look at the training hours, the number of hours averagely to spend for each of the single employee increases from 35 hours per year to 40. Our target is 45. So I'm sure we'll be reached earlier than expected. If you look at the overall numbers, we spend nearly 180,000 hours in training. That is a huge number that you have to keep in mind. And if we look at the other element, the woman in responsibility role, we have already reached 29%. It is higher and above the target that we set for 2029. Now, let's take a look at the more detail inside the numbers. So let's start with the ratings as usual. Ratings were up more than 50% in respect of the previous year, mainly driven by -- let's look one by one. Rapid growth and deflator that are positive as well as the inflation on net of X-factor. You know that during the -- for 2022, the inflation recognized by the regulator was 3.98%, while the X-factor was 53%. So the inflation has been nearly completely offset by the X-factor. Negatively, there are the disposal and M&A, in particular, the EUR 87.2 milion are relevant to the disposal of Naples either in term of capital gain and in term of less revenue that were reported last year in the fourth quarter of 2022. On top, there are also Gaxa disposal and Janagas acquisition. On the positive side, you have the contribution of the Greek activity reach about EUR 120 million in 2023. And then the additional performance of our business eco energy efficiency business of EUR 140 million incremental revenues that are relating mainly to the super bonus activity. That is the view of the revenues. If you look at the view of the operating expenses on a -- as I told you, on a [indiscernible] basis, we were able to reduce the cost by 6 million or 1.5%. That is an achievable numbers considering the level of inflation that we have experienced in 2023. The disposal, the Gaxa disposal and the Naples disposal account for EUR 7 million of less cost. And of course we have the full 2023 of Enaon, the former debt infrastructure, that accounts for 34 million. And the number that we have seen before about increasing revenues in the energy efficiency business also is being reflected into an additional cost of EUR 115 million. And you say that on the energy efficiency, I think that we will talk in a moment with Gianfranco, we have kept the same EBITDA margin of 2022. So if we look in -- and then I will pass the floor to Gianfranco. If we look at the EBITDA numbers, the EBITDA grown more than 90% in respect of last year. Digital distribution is negative by 8.3 million. But if negative, because we have -- as we said before, we have the disposal of Naples. And Naples represent both in term of capital gain and business activity. Otherwise, the Italy distribution would've been up of about EUR 60 million. And then we have the contribution of Greece and the contribution of Geoside. So at the end of the day, our -- the picture that we represent about our EBITDA, the Italy distribution represent 86% of the total. While we, in respect of last year, we are seeing either data increasing and also Geoside increase in the number and the percentage on the overall EBITDA. I'm leaving now the floor to Gianfranco.

Thank you, Paolo. We are on Slide 12. Commenting the EBIT 2023 that reached EUR 681 million, marking an increase of more than 9% [indiscernible] was likely in line with the growth rate of the EBITDA. In the period, we saw an increased EBITDA of the Italian perimeter of about EUR 80 million as a result of the variance of the revenues and OpEx already commented Paolo, whereby the EBITA scotivity increased of EUR 26 million. On the column of the D&A, excluding Greece, the impact was negative of about EUR 16 million. This impact is mainly related to the CapEx that we have deployed in 2023 in addition to the carryover impact of the CapEx already expected in the year in the previous year. Consider please that in this [indiscernible], the disposal of Naples is neutral as the [indiscernible] discontinued last year after the first quarter. EBITDA incremental contribution of data is around EUR 57 million, also due to the full 12-month consolidation period. Moving now to the following slides about commenting around the adjusted net profit after minority that reached EUR 440 million, with a growth of 11.1% compared to the previous year. As the -- the main element behind this growth, the net financial expenses were up almost EUR 42 million, mainly due to, first, the impact of the rising interest rates on our floating rate debt. We did expect that the percentage of floating rate debt was approximately 8% at the end of 2023. On top of that, we had the rollover of the credit lines raised by Enaon by the end of 2022, and the full impact of the ESG loan executed in December '22 for Geoside. Commenting on the new debt in 2023, we have accounted the new bond issued in June for EUR 500 million at a coupon of 4.125%. Finally, on the opposite direction, our liquidity position because the market turned back to a positive remuneration and the liquidity, that has partially offset the negative impact that we have seen above. In the net financial expenses, we also accounted for cost linked to the factoring of VAT receivables related to 2022 in the first quarter of 2023, generated by the bonds, gas, and revenue incentives to the benefit of final users. Looking at the net contribution from associates, this increased by EUR 2.4 million. We have accounted for the contribution of the water assets acquired from the earlier for EUR 1.6 million. Please note that [indiscernible] the only company in which we have a majority stake as of today is consolidated data. We will keep the equity accounting at the share agreements that currently in place are modified to get the line by line consolidation. Finally, we accounted for EUR 120 million of income taxes, marking a decrease of EUR 32 million versus previous year, due to a lower tax rate of 20%, as we book the other benefit of the patent box for EUR 39 million. This is a tax benefit schemes that is linked to the profit coming from certain well identified IT projects internally developed as a company. And to this, we signed an agreement with the tax authority in Italy in 2023. And this agreement covers all the projects executed until the 2020. For 2021, we will have one more other patent box, and then this benefit will elapse and will be replaced by other incentives to IT projects. Moving to the following page. We can summarize what we said so far. These are figures adjusted without the one-off special items that I will comment shortly after. I will also remark that the EBITDA marked growth like as the EBIT of 9%, which is absolutely in line with the growth rate that we have shown in our strategic plan on average 9% for sales period. Commenting the following page, let me spend some words on the special items that we have booked in 2023. As you can see, there is no -- they have no impact on the figures at the level of the EBIT. The explanation of that is that the resolution of the authority #7, 37 has recognized the receivable value of the 40 smart meters built before 2016 and installed until 2018. So you see the effect in our revenues as a positive component in the OpEx and in D&A for the related charges and impairment. Some comments on Page 16 about -- around the performance of Geoside. As expected that with the completion of all the projects within the [indiscernible] side by the government. The revenues reached the target of EUR 300 million, of course, mainly thanks to the traction of the super bonus. These revenues were almost 2x the level of last year, and EBITDA has reached an impactive figure of EUR 54.6 million. Going now to the cash flow on Slide 17. Let me say that in line with what we commented last October to make more -- to increase the clarity without the representation and in consideration of the different types of our business. So we have divided the cash flow of our distribution business from the operational cash flow coming from the U.S. activity. Cash flow dynamics is core in having you reconcile our full year net debt to EBITDA guidance, that as you will remember, assumed the no working capital change for the Scobie at the end of the year. So nothing of that to surprise you as we anticipate the topping during a call for the results at the end of September. While our distribution business remains strongly cash flow generative, covering the majority of the CapEx needs, Geoside has been absorbing cash for an amount of around EUR 250 million in 2025 due to the super bonds-related activity was completed as Iain line with the deadline. More in detail, the distribution assets generated cash flow from operation of around EUR 800 million despite the working capital absorption of EUR 170 million in the period, mainly due to lower volumes distributed on the back of mind weather conditions. The other side of the phase, Geoside cash generation was negative for around EUR 50 million, but consider that those receivables will be repaid to tax deduction in the [indiscernible] following the generation, as I described to you during the previously quarterly reporting. As already said by Paolo, taking into account the market condition, we have opted not to sell to the banks this super bonus related to receivables. Next June, as a consequence, our cash tax payment will be reduced by approximately EUR 130 million. Finally, going back to the numbers. Net cap generated a cash outflow of almost EUR 800 million, and all these coupled with the dividend and other payments of EUR 310 million. And the cash out from mainly to the M&A activity, the acquisition of the other assets resulted in a net debt increase of approximately EUR 650 million. How our debt is composed, you will see it on Slide 18. In February 2024, we issued a EUR 650 million bond, 10 or 5 years that we cover part of the finance net of this year and the EUR 300 million bond expiring this month. You can reconcile this with the chart that you see in this page. We also signed last week, EUR 600 million sustainability-linked revolving credit facility to beat future financing needs for rating parts. Those sum to the bond that we issued last year in June '22. As a consequence, the -- our utility position can be considered adequate. In terms of cost, 2023, it reached 1.4%, mainly as a consequence of the bond of last June and the bank facility subscriber reflecting the rise in the short-term market pace. Consolidated net debt was EUR 6.6 billion, including IFRS 16 part approximately EUR 80 million. For as the structure is concerned, our debt composition remains broadly unchanged with 8% floating and 92%. I leave now the floor back to Paolo.

Thank you, Gianfranco. I would like just to say close this presentation with the outcome of the Board of Directors. We have Board of Directors approved the proposal that will be submitted to the next general assembly of a dividend of EUR 10.52 per share. That is a significant increase in respect of the last year is more than 11% and is significantly above the DPS policy that you remember was confirmed last year with the strategic plan and the floor was set up 4%. So another time has been the same for the last -- since 2017, let me say, we were able to deliver value for our shareholder higher than the floor that we have submitted. Let me recall also that in June, we will present our strategic plan. And as always, during the strategic plan, we will give you the guidance for 2024. So please do not with the guidance of 20 today because I will not be able to respond to you. I will give the floor back to Anna Maria.

Yes. Thank you. Thank you, operator. We are ready now for the Q&A session.

This is the Chorus Call conference operator. [Operator Instructions] The first question is from John Campbell of Bank of America.

The first one I wanted to start on is kind of a typical update on your views for allowed returns in Italy. 2025 should see somewhat of a reset. Do you have a sort of a market-to-market view? And then the second part to that question is, would you expect the trigger mechanism to be repeated in 2026 or 2027, because theoretically, you'd like to have the allowed return locked in? So that was my first question. I'll let you answer that and then I've got another one on taxes.

Yes. John, you can tell us all the questions, please.

Sure, sure. So I'm trying to kind of perfectly understand your point about the patent box related to your P&L taxes. So it seems to have been some benefits for full year 2023. My impression, if I understood, Mr. Amoroso properly was that in 2024, there should also be some P&L benefit. I know you're not going to release guidance, but is that correct, just as a statement? And could you perhaps give some view on the benefit to cash taxes? I heard EUR 130 million. How long can we model that for going forward? Presumably, they might taper off in years to come. Those are all my questions.

Okay. On the first one, I'm going to respond, and then I will leave to Gianfranco to answer to you about patent box and the tax benefit. Regarding 2025, let me say that the one that we expect based on the number that we have and the forward curve that we have is going to be in line more or less on the -- with the one that we have in 2024. So we do not expect significant difference as of today based on the number that we have today. Regarding what is going to happen in 2016 and 2027, I -- that is really my guess. I would guess that the regulator will maintain this trigger mechanism. Considering that up to now has been -- this mechanism has been demonstrated to be able, even with a time lag that it is normally in our regulation is able to capture the different, let me say, phenomenon that we have experienced. So I'm talking about inflation. I'm talking about interest rate inflation is on the other side. Of course, interest rate, the let me say, country with premium and all the other stuff based on a forward-looking not on the back quarter looking. Let me say, the only element that is the fact that we're recognized with some time like delay, but at this norm. So if I have to guess that this trigger mechanism that has been in place for U.S. only probably will continue to be applied also after 2026, but it is only my guess.

Going to your question about the around the patent box, yes, you are right. There is still 1 year to be covered, which is 2021. We are working now on the relevant documentation. And hopefully, we will give you some more information in June or let's say, later on this year. But for sure, there will be something also in 2024. As far as the cash tax benefit that you mentioned, you can make a projection for 2024 going forward, 2025 and 2026 for an amount of around EUR 130 million, which is very straightforward. It is the wallet in terms of receivable that we have at the end of 2023. And in addition to that, the receivable value of the wallet of tax receivable in 2022.

The next question is from Alessandro Di Vito of Mediobanca.

I have 3. The first one is related to the evolution of working capital. So I wanted to understand what's your assumption on the reabsorption of the Asco-related net working capital for the following years? The second question is related to gas stand, it's more regulatory related gas standards. So I already launched a consultation to simplify gas distribution tenders. So I wanted to understand what's your view on this matter and if you believe that maybe this would be sufficient to speed up the delays in the gas distribution tenders. And the last one is on the Greek business. I wanted to have some color on maybe you have an operational update on the evolution of the Greek business and maybe the next steps that you plan to implement?

Yes. Maybe I will also because of your question is partially link to the answer that I gave to the previous one. As I explained, the amount of working capital will be, let's say, converted into cash according to the profile that the law provides for this kind of receivable. So basically, you can consider a rate of cash generated by this working capital, around EUR 130 million per year this year and the following 2 years.

[indiscernible], of course, considering that the super forms has been completed by the end of this year. There will be no more increase in working capital. But as Gianfranco said, there will be year after year, if you don't decide to sell these receivables to the banks, there will be EUR 130 million every May, June when we pay the taxes that will become cash. Regarding the other 2 questions. The first one, I mean we know and we have looked very positive about the consultation set by the regulator in order to simplify the process, especially from their side because the consultation was set in order to simplify all the responsibility or the activities to be performed by [indiscernible] in order to make the tenders -- the process of the tenders move free and quicker. I think that -- and that is my point of view that we will not see a significant increase in terms of number of tenders to become. We're still talking about 4 to 5 to 6 and the 3 years maximum. So we don't -- I mean everything that we like to make the process simple, and then it will have to have maybe some few tenders in addition to come. But of course, this process is complex, as we have already explained several times. And it relies on the let me say, the goodwill of the local municipality to move it forward. Unfortunately, we have not seen over several years, several notification of the current process. We have not seen a significant improvement in terms of speed of producing these tenders. The other element that has to be considered is that the mass, the ministry that is taking care of energy that is taking care of this tender is currently changing the parameters under which the tenders are evaluated. And that, for us, is a good news because, of course, it focused mainly on new technology, innovation, and digitalization. It should be approved by the Ministry of Energy and by the Ministry of Regional Affair and then it will become law. We will see new criteria to assign and to evaluate the different vendors. Last on the Greek business. Well, as we have already anticipated during the presentation of the new branding in Greece, we are very pleased about the process of the reorganization from one side of the companies. As you know, there is only one DSO. We have been pleased by the fact that recently the regulator has approved the new tariff with the WACC that will last until 2026. So we are fully covered for 2024, '5 and '6. And we are pleased also with our investment that are growing. If you look at 2023, the overall investment has been up in respect of 2021 that was the last year of full management by the previous shareholder of 78%. So operations are going well. The investment will even grow this year, will mark a significant growth in 2024. So as of today, we are doing better than what our acquisition plan in terms of operation.

The next question is from Bartlomiej Kubicki of Societe Generale.

Maybe 3 things from my side. I would like to elaborate a little bit more on CapEx. And if you said operationally in Greece, you are doing better in '23 versus your expectations. But actually, if we look at the CapEx, if you can maybe mention the key sort of challenges you are seeing versus your original expectations in Greece. Secondly, perhaps if you can give us a little bit of the outlook on the nonregulated activities in '24 following the expiration of the super bonus. And lastly, on Page 29 of your press release, where you mentioned different resolutions. In one of those, you are talking about the 6.5% allowed to work for '24 and there is a sentence saying that you have appealed against this resolution. So I wonder what is the basis for the appeal and why you are not apparently satisfied with the 6.5% allowed WACC for '24?

Okay. And I'm talking about the first question, CapEx in Greece. As I told you, 2023, we have increased our CapEx plan by 78% in respect of 2021. So that number show the different speed at which we are moving. Are we are pre-satisfied? No. In a sense that we want, based on our plan that is about EUR 900 million that was all our last strategic plan to be deployed in Greece. We want to even increase this number. So we expect by 2024 to be in the range of EUR 118 million of investment in Greece. The difficulties is always when you ramp the investment is that you have to have the full organization that starts from the engineering, moves to procurement, and then to construction to be fully aligned in order to achieve those results. 2020 has demonstrated that we are able to do that. We need to speed up even at a higher speed than the CapEx. In 2024, ASCO, maybe Gianfranco can respond. I can tell you that we will see a significant drop in revenues because of the super bonus, but we are working on trying to give a different direction about the energy efficiency, please.

Yes. The point for us is to -- for the company to reveal, let's say, a backlog of activity after being deeply involved in the completion activity of all the works that were to be completed within a day on the end of 2023. So the strategy of the company will be now more directed towards the so-called value-added services and also the type of clients will change moving the shifting to, let's say, the large corporate clients and not only the private MPVs was the case for the one activities. So I can confirm it will be a decline as expected and also projected in our strategic plan. Notwithstanding that we need to maintain our, let's say, profitability, choosing the carefully all the business opportunities and also on the profitability of the activity side.

Regarding the last question that you raised, I think the synthetic language that we have used was not clear. We just redid that. And of course, during the position may be correct, but it's not because of human because the language was not properly. On the 6.5%, we are okay because it's just a matter of calculation. So we cannot -- we have not appealed against the 6.5%. The appeal has been done with some minor issues that were inside the resolution of the area. So it's not relevant to the WACC.

The next question is from Stefano Gamberini of Equita.

The first is just coming back to the super bonus impact on net working capital. Do I understand correctly that the net working capital is the sum of these 3 installments, we can say, of savings in the payment of taxes in the region of EUR 120 million per year for the next years. Am I right or not? The second regarding the tenders that you expected this year, are there some tenders that could arrive shortly in 2024 or at the end of the day, the situation is always the same with continuous postponement. then I have 2 curiosity. The first regarding the decision in Germany to introduce stranded deposition in order to depreciate the gas distribution by 2024-2045. I don't know if it is something on the table also in Italy or never discussed by the regulator? And very lastly, regarding the press release from F2i, where they declared that Italgas is starting the process for listing. So this means that probably the fund we exit from this company. Could you just remind us when -- there were some rumors in the part of possible merger between Italgas and [indiscernible] where the opposition from the antitrust and if you think that these oppositions could still be actual.

Gamberini, I think that we need to discuss about the numbers because you always say 3 questions, and you... First one, I will give you Gianfranco. First of all, it's EUR 130, 130 million, not 120, okay?

So you can easily make the -- you're right, you can make this calculation for these 3 years, plus will be received well in 2027, but the methodology is correct.

No, it's EUR 130 million every year 2024, 2025, 2026, and there is a [indiscernible] going in 2027. That is -- how much is -- EUR 90 million in 2027 to close the super bonds. On the tender side, what we expect this year, we expect that will be around 5 to 6 new tenders, and we expect a couple of awards on the current tenders. So that is the range. So if you compare with 2023, well, we have the names, but considering that some will be eventually delayed, it may happen. So that's the reason why we say this number. In this year, in 2024, it's slightly higher than 2023. So we are moving a little bit ahead of what we expected last year. On Germany, the question that you raised is becoming always difficult in a sense that we don't know which is the status of these grids. So I don't know why they are talking about accelerating the depreciation. So honestly, this kind of discussion are -- there are no -- there's no discussion at all in Italy on that subject. So honestly, I cannot comment. I don't know which is -- I don't know which is the -- which is the status in terms of physical status of those assets. Last question, it's really I'm very happy that we at Italgas will be a quarter of stock exchange because there will be another [indiscernible] stock exchange. Regarding about the past discussion that those discussions were before I arrived at Italgas. So let me think about something probably in 2015, something like that because I arrived at least 2016, and those discussions were not on the table anymore. So I cannot comment on emerging opportunities that were back nearly 10 years ago, and I don't know why it didn't end up with a positive result.

The next question is from Davide Candela, Intesa Sanpaolo.

I have 3. First one is a clarification on the Slide 17. I'm looking at the negative working capital effect on the distribution activities. [indiscernible] it is just related to the consolidation of the degree assets, or there is something more inside those numbers? The second one is on M&A. I'm aware that you just closed an operation in Italy with regard to the water, but it's more broad also involving gas distribution, also and the fact that the gas [indiscernible] are still lagging. And so the question is, if you are looking at something, if there are [indiscernible] for both gas distribution and water on the table. And the third one is, I was wondering if you can share your view about the gas consumption notably in 2023. This declined again and also due to a bit of a slowdown of industrial activities looking at maybe a soft landing in 2024. I was wondering if you think that demand could pick up in this year or in the next year? And how you see the balances in terms of volumes?

Well, on the -- your first question about the net working, capital absorption in the -- excluding the efficiency, the energy efficiency. This is mainly linked to, let's say, the usual mechanism of the receivable towards the companies and towards the system to the [indiscernible] value. And this main link to, let's say, a lower level of consumption, as explained due to milder weather condition during the year.

Well, let me say -- let me add to this point. If we look at the numbers that -- to the market that we serve, the reduction has been down by nearly 8%. Generally speaking, if you remember, 2023 has been in the first, let me say, first 4 months of the year, the consumption has been produced, thanks to the mild weather that is true by Gianfranco but also to the extraordinary actions taken by the government at the time to reduce the consumption. Remember that the number of hours per day allowed for heating system was reduced. The temperature was reduced by 1 census, and there was anticipated the closing of a system at the end of March. So all these measures, if you remember, we discussed that during the different quarter contributed by about 2/3 of the reduction in consumption. Also, boosted by the price that the time the gas was very high. It is not true anymore. So 2003 has been affected by the first, let me say, 4 months of 2023 in terms of reduction of volume. Regarding our -- so our, let me say, customer base, if you want the reduction has been overall during the year, minus 8%. Regarding M&A, I forgot I didn't take notes. If you do it because I didn't take note about that. I remember it was M&A, but I didn't take note about what you were asking, please. If you take it at it.

So it was just a view about the M&A market in gas distribution and water in Italy, if you are looking at something, there is something on the table and if the market is quite dynamic, also especially looking at the gas distribution that tenders are still lagging. And so if there is something that you can consolidate more.

Well, as we told you, we are looking -- we are very, let me say, very disciplined in the M&A that we are doing. So any opportunity that we take a look, we take a look at the opportunity in term, which is finally the price in a sense that we -- there is a big difference between the [indiscernible]. Let me say, the owner would like to sell a beer, we are not available to pay that. So we are very selective in that. And based on such a selection, we are looking around. We are always hoping to discuss opportunities. As of today, we don't have anything real that we are discussing in terms of gas distribution. On the gas consumption, that is your last question, I have already responded to you when we were talking about the working capital negative that you mentioned and the answer that Gianfranco gave to you. If you want to have more details or other stuff about gas consumption, please ask me.

The next question is from [ Alberto de Antonio Gardeta ].

I have 2. The first one is related to the water business. I wanted to know what's your expectation in terms of operational performance for the fiscal year 2024. And also, if could give us some light in terms of financial performance. And the second question will be related in cost of debt. It has increased substantially during the fiscal year 2023. I wanted to know what's your view in the coming years? And if you can give us some guidance.

Regarding the first question on the water. Let me say that what we are doing right now, and we just started. As you know, we closed the acquisition of [indiscernible] just end of October of last year. So there are very few months that we are working. And we are working mainly focused on 2 things. The first one is because both of the company received the funds from the recovery release from PNR and doing a quicker resilience fund, we are supporting them in order to deploy this investment in time because, as you know, the plan should end by June 2026. So we are supporting them on the execution side. On the other side, we are supporting them in implementing our digital transformation of the network and the digital application relevant to this transformation. So we are working on a daily basis with them with the management of the 2 companies, and we are supporting them in all the IT area, in the asset area in terms of transforming them with the object to significantly reduce the water leakages. Regarding the numbers starting from the first quarter of 2024, we will present to you the full 100% result of the 3 companies together. And of course, which is our pro forma based on the percentage that we only the 3 companies.

On the cost of debt and the evolution during 2024, consider that we have already done one bond in February that give you the idea that refinancing the EBIT maturities cost more, of course, than in the past because we reach the bond around 3%, and we have to repay the outstanding of a bond that was below 1%. This was the fixed rate. For the floating rate, we will -- all the market, we will expect to decrease potential in the second half. And so compared to the rate that we had in 2025, we have some recovery in the second part of the year. So -- and on top of that, we -- in 2024, we will benefit from the trigger of the WACC with the 90 basis points more than in 2023. So I would expect some, let's say, trajectory increasing but not for the same huge amount of 2023. Of course, I will be more precise in the strategic plan we do some guidance for the year.

[Operator Instructions] Ms. Scaglia, gentlemen, there are no more questions registered at this time. So thank you very much for everyone attending. As by our team, I'm available for whoever wants to [indiscernible] our call, and thank you very much for your time. Ladies and gentlemen, thank you for joining the conference. It's now over. You may disconnect your phones. Thank you.