Terna S.p.A. (TRN) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the Terna First Half 2021 Consolidated Results Conference Call. [Operator Instructions] I must advise you that the conference call is being recorded today, Thursday 29 July 2021. I would now like to hand over to the speaker for today, Mr. Stefano Donnarumma, CEO. Please go ahead.

Good afternoon, everybody, and welcome to Terna's first half 2021 presentation. Let me start, as usual, with an overview of the Italian electricity market. As you can see in this chart, in the first 6 months of 2021, national demand was about 155 terawatt hours, an increase of 7.8% versus the same period of 2020 when national demand was about 144 terawatt hours. Let me highlight that in the month of April, we measured the strongest increase over the last 12 months, namely about 22% compared to April 2020. This was mainly due to the impact of COVID during spring 2020. Regarding national net total production, this stood at 154 terawatt hours with a noticeable increase in wind production, which grew by 4%. Moreover, let me also underline that in the first half of 2021, renewable sources covered at about 58% of the demand and about 44% of the national net total production, confirming the strong growth trend for renewables in Italy. To cope with the deep transformation due to the increase in renewables, Terna has answered with the investments focusing in this new 10-year development plan. In this regard, I would like to give you an overview of our new 2021 development plan presented just a few weeks ago. Turning to the next slide. The new 2021 development plan provides for a strong acceleration in investments, the highest ever, reflecting the important historical moment we are living. This plan is fundamental to achieve the carbonization target set by Italy and Europe. Specifically, as shown in the chart, the new 10-year development plan foresees more than EUR 18 billion investments over the next 10 years for the Italian electricity grid, an increase of 25% compared to the previous 10-year plan. This will support and enable to energy transition following the development and integration of renewable sources, contributing significantly to achieving the ambitious target of European Green Deal, thus strengthening our role as a director and enabler of the transition -- energy transition process. The plan for foresees over new strategic projects, including the increase of transport capacity, the rationalization of the main metropolitan areas, the strengthening of following interconnections, and the increase of system safety and resiliency. Moreover, please bear in mind that the transmission grid investments are directly related to the reduction of emissions and consider sustainable according European taxonomy criteria. The benefit for the system that this plan will generate are significant, as I am going to show you in the next slide. First of all, according to our estimates, the project foreseen over the planned period will allow a 5.6 million tons reduction of CO2 emissions per year. Moreover, I will allow the removal over almost 5,000 kilometers of infrastructure that will progressively become obsolete with the great benefit for the impacted territories. In order to increase the exchange capacity across the borders, the plant foresees 6 gigawatt more coming from interconnections with foreign countries. Whilst at the national level, it produces 48 gigawatts of exchange capacity between market zones. In addition, there will be a big push towards the integration of renewables. Indeed, fortunately 40 gigawatts of new renewable capacity have been planned. At the same time, the plan will also support the gradual closure of most polluted plants, in line with the national and European decarbonization targets. All the above-mentioned elements will ensure an increasing grid resiliency, quality of service and efficiency with the reduction of energy not supplied in the region of 70%. Finally, let me underline that all our main investments are subject to a cost benefit analysis. This will not just guarantee the achievement of Italian and European decarbonization targets in full safety, but will also be crucial to reduce the energy bill to the final users. Now after this introduction, let's move to the first half 2021 key features, turning to the next slide. In the first half of 2021, group revenues and EBITDA were up by 6% and 4% respectively compared to last year, which means EUR 76 million and EUR 34 million higher than first half 2020. Moreover, we reported a group net income of EUR 385 million, EUR 7 million higher versus last year. Group CapEx stood at EUR 602 million, 41% more versus first half 2020. This robust CapEx acceleration driven by system needs once again confirms Terna as the director and enabler of the energy transition, in line with our 2021, 2025 industrial plan. To support this double-digit acceleration, our net debt stood at EUR 9.7 billion versus about EUR 9.2 billion at 2020 year-end. Now I leave the floor to the CFO, Agostino Scornajenchi, for a deeper analysis of the futures, turning to the next slides.

Thank you, Stefano, and welcome again, everybody. Let's start with revenues analysis. Total revenues in the first half of 2021 increased by 6.4%, reaching EUR 1,259 million, up by EUR 76 million versus last year. The growth was mainly attributable to regulated and nonregulated activities, which contributed for EUR 68 million and EUR 17 million, respectively. Let's now go into the details, moving to the next slide. Regulated revenues reached EUR 1,093 million, EUR 68 million better than last year. The increase was mainly due to the investment acceleration realized in the national grid to cope with ongoing energy transition process, as explained by Stefano. Nonregulated and international revenues reached EUR 165 million, 4.7% higher than last year. Nonregulated growth was mainly attributable to the increased contribution coming from Tamini and Brugg, and higher revenues from connectivity services. International revenues decreased by EUR 10 million, mainly as a consequence of slowdown of activities of construction sites in Brazil caused by COVID-19 pandemic. Now let's go through operating cost analysis at Page 11. As you can see in the chart, total operating cost stood at EUR 348 million, 13.4% higher than last year. The increase probably reflects the business acceleration delivered. Indeed, regulated operating of expenses were up by EUR 15 million, mainly as a consequence of the increase of our asset base and one-off items. Nonregulated OpEx dynamic was mainly related to perimeter extension effect connected with the full consolidation of Brugg. Let me now analyze EBITDA, moving to the next slide. Considering the above-mentioned effects, first half '21 group EBITDA reached EUR 910 million, EUR 34 million better than last year. The increase was mainly attributable to regulated activities, which contributed for about EUR 53 million versus last year, showing an EBITDA of EUR 882 million in the first half of 2021. Please be remind that first half 2020 nonregulated activities were positively impacted by an off component related to Brugg acquisition. Let's now have a look to the lower part of the profit and losses. Turning to the next slide. Depreciation and amortization amounted to EUR 326 million. The increase versus last year was mainly due to the impact of new asset becoming operational in the period. As a consequence, EBIT reached EUR 585 million, EUR 11 million higher versus first half 2020. We reported net financial expenses of EUR 41 million, substantially in line with the same period of last year. Taxes stood at EUR 158 million, EUR3 million higher versus last year. As a consequence, tax rate stood at 29%, almost in line with the same period of 2020. As a result, group net income reached EUR 385 million, EUR 7 million higher versus the same period of last year despite higher depreciation and amortization linked to the investment acceleration. Thanks to this result, we can confirm all 2021 provided guidance. Moving to CapEx analysis at Page 14. In the first 6 months of 2021, total CapEx amounted to EUR 602 million, 41% higher than last year, showing a double-digit acceleration to drive the ongoing energy transition process and to contribute to the Italian economic recovery. Indeed, we invested about EUR 571 million in regulated activities. Among the main projects of the period, it is worth mentioning the realization of new lines, as example, the Paterno-Pantano-Priolo in Eastern Sicily, the Italy-France interconnection and the rationalization of Turin's metropolitan area. On top of that, the investment in stabilization devices such as synchronous compensator mainly located in Southern Italy that will allow to enhance grid stability. Nonregulated and other CapEx stood at EUR 31 million. This includes capitalized financial charges and other investments. Regarding net debt and cash flow analysis, net debt at the end of June '21 was EUR 9,735 million, EUR 562 million higher than 2020 year-end level, mainly as a consequence of the CapEx acceleration made on the national grid, the payment of the 2020 final dividend made in June and the cash taxes payment. We generated an operating cash flow of EUR 672 million, thanks to which we were able to more than cover the CapEx spending of the period. Let's now make a deeper analysis of our debt profile, moving to Page 16. As you know, Terna follows prudent and proactive debt management approach aimed at keeping a solid and diversified financial structure. Indeed, at the end of this first half, we registered a fixed over floating ratio of gross debt of 89% and an average duration of more than 5 years. In line with our strategy of combining sustainability and growth to promote energy transition, let me just remind you that in June, Terna successfully launched a new wind bond for a nominal amount of EUR 600 million and an effective cost equal to 0.398%. The issuing was very successful in the market with an order book at peak of over EUR 2.2 billion, 4x more the offer amount. Moreover in July, Terna signed an agreement for a EUR 300 million loan with the European Investment Bank, very competitive condition; a 22-year loan to strengthen and develop the national transmission grid supporting the '21 and '25 industrial. Thank you very much for your attention. Now before the Q&A session, let me leave the floor to Stefano for his closing remarks. Thank you.

Thank you, Agostino. Let me conclude this presentation with some closing remarks. Firstly, as you appreciated from the previously illustrated chart, we again reflected important signs of recovery of the Italian electricity demand with an 8% increase in the first half of 2021 compared to the same period last year. This is also the evidence of the Italian economy relaunch. In this regard, it's important to underline that our investments will be fundamental to launch our country's economic growth, employment and technological innovation. Indeed, let me highlight that every EUR 1 billion invested in infrastructures generates between EUR 2 billion and EUR 3 billion in terms GDP and allows for the creation of new jobs. Moreover, to our investment, we will also contribute to the achievement of the challenged carbonization target set at the national and European level. These targets are CUSO as confirmed also by the Fit for 55 package presented just a few days ago by the European Commission. This new package is a comprehensive set of measures to achieve the ambitious target over 55% emissions reduction by 2030. Within this context, Terna will keep strengthening its role as a director and the enabler of the transition. In the meantime, we are committed to maintain a solid financial structure and another greater return for our shareholders. Moreover, we can also confirm all the provided guidance for 2021. Thank you for your attention. We are now ready to open the Q&A session.

[Operator Instructions] We have the first question coming from the line of Enrico Bartoli from Stifel.

First of all, of course, a question regarding the consultation document that has been published by the authority recently regarding regulation. The first side, it seems a bit tough, considering the wide range that is implied in terms of a low return. I was wondering any comments that you can have a possible improvement on this that you are going to propose to the regulator and in general, if you think that the document is consistent with the general strategic goal to foster investments related to decarbonization. And of course, you are the main player on this side. Second question, regarding -- you mentioned the Fit for 55 package. You announced last month, the new development plan for the electricity admission grid. If you think that the new package would provide some additional potential for you to invest in the logistic grid and to accelerate the carbonization linked to the Fit for 55. And the third question is related to results. Just, let's say, the trend that we saw in EBITDA, the composition between the regulated one and the nonregulated was also affected by the one-off last year, but regulated EBITDA is going in a very robust way while even stepping up the one-off nonregulated would be down in the first half. Can you comment on this? And if we can expect a similar projection for the second half of the year?

Well, regarding the first question and probably Mr. Donnarumma will comment, let me say on what we see. The first document really describes methodologies, processes and all the variables that are showing a very wide range, without any kind of indication of precise values. Therefore, we do not consider possible to identify significant ranges or indicative lending points for the what you see there. I think that we will have more precise indication after the completion of the second consultation document expected in October and more than deals at the end of the year when we will receive the final resolution from the authority. Let me say that we with the methodologic approach proposed by the authority. That, as you have seen, is fully based on the continuity of regulatory principle. And with the concept of graduality in order to avoid -- and I am looking to the resolution -- avoid sudden changes in return levels. This is what is written in the document. As expected, there are several elements that can positively or negatively impact the final return level. Let me give you some examples. For instance, on one hand, the intention of the regulator to take into account the reduction of the cost of corporate debt compared to 2015, that is fact. And on the other hand, the openness to redefine the observation periods in order to consider the extraordinary situation we are experiencing due in COVID-19 pandemic and also due to the role that central banks has played with their monetary policies last year. I don't know if Stefano --

Yes. Enrico, as you mentioned, the final figure will be the result of all these variables. And so the landing point and consequently the impact cannot be estimated at the moment. But in any case, a reasonable and the gradual impact can be compensated with our managerial actions. Speaking about the Fit for 55 and the possible opportunities, I think that sure maybe an impact not in a few years, more in the second part of this 10 years, next 10 years. More is increased the target for renewables views and installations more. We have to consider a possible investment to new investments to allow the transition and to enter the system. And so for sure, I think that during the next 10, 15 years, the possible increase of our investments is not only in line with the plan, the 10-year's plan that we have presented. Speaking about the third question, Agostino, if you want to add.

Yes. Regarding the evolution of our results and the composition of result, let me refer to Page 12 of the presentation. So the inquiries in regulated EBITDA is mainly conducted with the increase of the asset base. As you know, after the entry in operation of several assets at the end of 2020, now the tariff has recognized additional revenues on a wider asset base. Regarding nonregulated and international to make a long story short, on one side we are pretty satisfied about the performance of Tamini-Brugg that has been fully integrated in the period and we are also squeezing already relevant synergies. On the other hand, as anticipated before, we are facing some delay in the realization in our projects in Brazil as a consequence of the pandemic.

We have the next question coming from the line of Javier Suarez from Mediobanca.

The first one is a follow-up after Enrico's question on the regulatory document that I guess is a very popular thing these days. It's on the -- assuming, I don't know, a theoretical cut of 100 basis points, that seems a worst-case scenario looking at the Arera document. I was wondering if you can give us a sunlight on the possible managerial decision after that regulatory cut. What would be the decision process making for a company like Terna? What would be the priority and thinking about decisions on CapEx and also on dividends? That would be the first question. The second question is on the 10-year plan for the electricity transmission network. Obviously, that is giving plenty of visibility to the company on a significant CapEx for the next decade. I was wondering if also there could be some additional and significant upside coming from the recovery fund. So you can give us your latest thought on the possible -- positive implication of the recovery fund for a company like Terna. And the third question is you can -- and that is more on the numbers of the second quarter. The thing that has called my attention more is the significant increase of CapEx. If you can help us to understand why the company has managed to accelerate capital? Is that coming from the recently approved simplification decree or -- and that is having a positive impact on the capacity of the company to accelerate on CapEx.

So again speaking about the WACC review, I think first of all it's too early to define the level and the possible impact. But in any case, my opinion, and I just said in the past, my opinion is that the regulators track record has always proven to adopt the reasonable resolutions that have been able to catch both a historical moment that is so particular to the moment and the needs of the system. Today, more than even considering the ongoing energy transition process and our central role. Then you asked about the and yes, recovery fund. No, I just said also in the last month that the recovery fund doesn't impact directly on our activities. We have also presented some projects, but my opinion is that our scan also for the moderation and for planning may be an enabler for recovered main projects. What I think is that it's a good opportunity for the system to invest on parts of the system that are necessary for -- to guarantee the energy transition process. And we can go to the same speed altogether. Something interesting may arrive from the definition of rules for storage, for example, in the next future. And I hope that all together with the system and operators who will find the right way to allow also this kind of implementation because it's really important for the system. On other side, no direct impact for us.

Yes. Indeed, the first semester was really a very good one in terms of CapEx consideration. Let me say that at the end of the semester, more or less 50% of the investment has been related to the asset renewal and efficiency and the other 50% is related with development targets. In the first 3 months, we have seen, and we already commented in May if I'm not wrong, that we have registered a massive increase in renewable investment. In the second part of the semester also we speed up a lot of relevant development companies. Among the main infrastructure, let me mention the new power lines link in Melilla in Sicily and Priolo, the connection between Moderno and Moderna [ Este ] in the north part of the country, Finline and [ Preleri ] close to [ Flor ] and [ Saribo ] and [ Parach ] close to Torin, those assets entered into operation the first semester. Of course, the construction of these new lines are included in the '21, '25 in the supplement, we continue including the completion of [indiscernible] online and also with the rationalization of the main metropolitan areas, as mentioned by Stefano a few minutes ago. We have also contemplating the implementation of the installation of a new synchronous compensator, especially in the southern part of the count.

We have following questions coming from the line of Harry Wyburd from Bank of America.

I've got 2. The first one, I apologize for those who are also on the same call earlier. That's sort a copy and paste question, but I think it's equally relevant. I just wanted to ask very specifically, having seen the initial proposals, I guess is obviously the range, but probably there's a fair idea of what the worst-case scenario is. So if you look at that worst case, how do you feel about your dividend policy? Because I guess you've got one of the highest dividend growth policies in the sec arguably. Do you feel -- or would you be confident to sort of reiterate that policy now, having seen the initial documents? And then the second one is just on the surge in Capex. And it looks like your annual CapEx could almost triple relative to the very long term average? And I guess this is occurring in a potentially inflationary environment. What are your views on operational risks in ramping up that quickly? Do you feel confident that you can actually do that and get the necessary I guess head count to do that, the necessary access to raw materials and project management sort of skills and teams in place to actually do that? Or is this something that does require a little bit of higher bringing a little bit of higher operational risk into the business?

Stefano, it's me. Answering your first question again, the document that we have in front of us is describing methodology, processes, general variables. It is not possible to provide any kind of precise indication about the value. That's it. We cannot identify ranges of lending point, worst case, I think that it makes sense to do that now.

Thank you. And speaking about the planning CapEx plan for this year, I would like to emphasize that just now after the first 6 months of the plan that is 5 years plan, we have more than 70%, 75% of the project just approved. And in the meantime, also just covered with material and all the activities that we need. So it's also the reason why we are running in a good speed at a good speed. And I think that we'll finalize correctly this year this way and we will have no big problems for the next future. So I don't see any particular city.

We have the next question coming from Jose Ruiz from Barclays.

The first one is a question to Terna as a TSO. Do you have an estimate of electricity demand growth for Italy for 2021? And the second question is a clarification. Do you have the cost of debt of the first half? I cannot see in the press release.

Okay. About energy consumption, what we see during this month is really a behavior that is similar to a couple of years ago before the COVID period. Sometimes, it's also more. But I think the average will be near to a couple of years ago. That means also that Italy system production system and so on is arriving gradually to the same rate of the previous pre-COVID period. What is really interesting is that, for example, during the last month, there was a coverage of renewables that was more than 40%. This is a good scenario in terms of, I would say, the energy transition process is going on.

So regarding the cost of debt of the period, we are fully in line with business plan expectation. Remember you that we set 1.3 on the business plan horizon, 1.3. Now we are in the region of 1.1, 1.2, so fully in line.

We have the next question coming from the line of Alberto Gandolfi from Goldman Sachs.

Apologies to go back again to regulation. But clearly I take the point that we cannot put specific figures on what the regulator did. But talking about the philosophy, do you believe there is an attempt to narrow the gap between the allowed cost of debt and the actual cost of debt of the company in the new methodology? I'm asking that because I noticed that the regulator is now using an average between 7 years and 10 years as opposed to 10 years. And your average duration of the debt is on 5 years. So do you believe this could be the beginning towards the elimination of any debt outperformance? And the second question is related to, again, to regulation, apologies about that. But would you mind elaborating maybe very high level -- clearly you can't disclose at this stage because you don't even know the outcome -- what would be -- would those managerial actions towards? Would it be on costs? Would it be on leverage again? What could you do to mitigate a below expectation outcome from regulation?

Well, so regarding the first question, the impact on cost of debt and the reflection and the impact of the evolution of cost of that in the formula. I think that there is something that we already mentioned before, but let me repeat. It is true that the regulator want to take in account the reduction of the cost of corporate debt with respect to the period of the previous period, in respect 2015. This is a fact. So that the cost of debt, the cost of money is cheaper than before. So it's rationale that the authority will keep this in consideration. But it is also true that the observation period is a sort of nonsense because if you look how the observation period is shaped now, it started in September 2020 and will end in October '21, that probably is the worst possible observation period ever, given that in this period, the market was not a real market, but was fully impacted by extraordinary decision taken by central authorities. This is another factor. And we believe that the authority will make a reasonable approach on this and will propose a reasonable solution. I think that we cannot say more than that. We trust on this reasonable approach as we believe that this statement is fully reasonable. Regarding the media. As said several times by Mr. Donnarumma, we have taken a conservative approach in the incentives that we've taken in the business plan assumption. We have confirmed the EUR 220 million. We hope to get something more from the authority. There is some process ongoing. There is some discussion that will be completed in the coming months. So let's see, but we are quite positive on this.

Sorry, just to add that just in these hours is starting another possible consultation. It's also interesting in this end. Sorry.

No, not least. And of course, the standard tool of companies has cost discipline and strict control on our expenses. So we are ready to do all is necessary to confirm our guidance.

We have the next question coming from the line of James Brand from Deutsche Bank.

I have 2 questions. The first was actually going to be on incentive and the timing, which you kind of touched upon in the answer to that last question. But I'm still a little bit and I think probably most people are a little bit unclear exactly what to be expecting from these kind of new documents on incentives. Should we be expecting just kind of one more documents later this year that sets out a set of new incentives? Or is it a case that we're going to get a kind of drip-drip of there might be one paper later this year that has one new incentive and then maybe there'll be another one next year and it will progressively build? Or -- so is that that we'll get more all in one go later this year? Or we'll just get a drip-drip over the next coming years of new incentives? That's the first question. And then the second question is on the new investment plan. I was just wondering how that fits with what you've outlined already. Obviously, it's a bigger number. So should we be expecting when you present your new business plan in Q4 for the overall CapEx spend to be going up? And previously, you were looking at kind of getting up to a run rate of around EUR 2 billion per annum or maybe a little bit more of CapEx by the mid-2020s. How high could that go now? Could that be more like EUR 2.5 billion run rate by the mid-2020s? Or perhaps you want to just wait until Q4 and the new business plan to answer that? But I thought I'd just see whether you want to say anything on that now.

Okay. Regards to incentives, as I said before, is a start during this hour, the first consultation on this topic. And I think pressure will be some other documents and the consultation during the next month. This is a process that is -- and I think it's also okay in parallel to the WACC definition process. And so it's possible for us in the next months to better understand the complete scenarios and to define our actions and position. And speaking about this, I can say that also for a review of the plan, it will be better to wait for the closing of these definitions. So I believe more in the beginning of the next year at the moment.

Does that answer your question, James?

Yes. On the incentives, I guess on the investment plan, sorry, did you say you wanted to wait for the -- to give updated guidance on the CapEx? Or I didn't catch the answer to the second question that I asked.

Sorry, can you kindly repeat that? We have some noise on the line. Sorry.

The second question. Yes, I didn't catch -- perhaps, perhaps I just missed it, but I didn't catch the answer to my second question, which was on where could CapEx get to by the mid-2020s?

Yes, sorry, for sure, as you have seen also from the development CapEx, we will see a quarter acceleration on our investment plan. This is something that we will disclose more in detail at the moment of the update of the business plan. But I said several times, that's for sure that we will continue and increase the current investment plan.

So we have the next question coming from the line of Stefano Gamberini from Equita Sim.

A few questions also from my side. First of all, regarding the statements from the regulator that they want to support the energy transition. Many times they wrote this and also during the consultation paper for the lower work. So on your side, you are at the heart of this transition. You are the enabler of the growth of also renewables. What are the measures that you are asking to a regulator on the other side regarding the development of all the investment that you have to support clearly, beside the outperformance in sense that are already on the table? The second question regarding the authorization. In your new 10-year business plan, you added -- if not from 3 new interconnectors. There is one of these -- that is very important, the Tyrrhenian Link and the second one, the Adriatic still waiting for all the authorizations. So did you find some novelties in the recovery fund that could help or accelerate the authorization process for all these interconnectors? And the third one, what is your view still again on the acceleration of investments in the renewables. If I'm not wrong, you underlined many times that you have a lot of request. At the end of the day, the authorization is still waiting the process going on with the new recovery plan in your view, the measures that have been introduced could accelerate this process or not?

On the role that the Terna has in the system, I think at this moment, no doubt, coming from nobody. If you think that a few weeks ago, we presented the 10 years plan of Terna, and it was also the first time, if I remember well, that together with us they were present in person that the Minister and the President of Arera, and we discussed it together in front of everybody on the really how important this kind of plan to allow the transition. So I am absolutely sure that this is one of the main aspects that confirm my opinion on the reasonable and the gradual impact and the decisions coming from authority. Then you asked about the authorization. Yes, we are absolutely on track on this also for the big projects because a lot of phases of this authorization are not well known to everybody. So we have divided this process in some -- really some hundred of phases and we are going on week with all the institutions and all the subjects that are involved in this. And we see that everything is going in a good way. So like I said before, I'm not afraid about this. I think we are in line with this. And in the meantime, there are also some possible accelerations coming from the new rules also related to the recovery plan and the new rules that government is fixed step-by-step to allow this process and this plan. So I think that also the new CapEx that the system and all the operators are advertising to put on the table. And this will be not only possible, but for sure are necessary. So in any case, everybody -- we have to find solutions and to help together the system to reach the start-ups.

Just a quick follow-up, if I may. Regarding the investments in Tyrrhenian Link, when this will arrive and could accelerate, if I understood correctly, all the investment in the sector. Do you see some risk about the leverage of Terna in these years, '24, '25, considering the huge amount of investment that you have on the side and on the other possible changes in load WACC or incentives that you should receive?

Well, Stefano for sure, there are relevant investments in the business plan, the Tyrrhenian Link is one of the most important. We are talking about EUR 1.9 billion out of EUR 3.9 million on the total investment cost. That's for sure, we'll have an impact. If you remember what we said when we presented the business plan. The business plan is fully funded. It's fully sustainable from a financial perspective. Now we have something to be checked. On one hand, the evolution of the interest rates. That, of course, we are looking some expectation of a certain level of increase. And the second one, as said before, will be the approach, a reasonable approach, let me mention it again, expected by the authority to cover also this. Having said that, we are not worried about this. We already announced when you presented the business plan that even if the business plan is fully sustainable based on the judgment driven by the 3 rating agencies, we consider the level of our rating importance, and we already announced that if needed, we are also ready to introduce some different tools or some different actions including some nonstandard financing instrument as an hybrid or something similar like that.

There are no further questions at this time. Please continue.

Well, thank you very much for your time and see you next time. Thank you.

Thank you to everybody. See you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you very much and have a good day.