A2A SpA Special Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Stefano Gamberini - Equita SIM S.p.A., Research Division - Analyst : [Interpreted] I've got a number of questions, too. The first is the following: Can you tell me more about the [Techno A] EUR 10 million EBITDA to EUR 180 million on the price, if I understood you correctly. And then I read in the press release that the target was EUR 40 million. Can you please tell us more about the return on this investment. Second question, going back to the transaction with Ardian. Probably I didn't hear about that. But what is the wind capacity and the solar capacity that were acquired? And what is the return you expect on this investment? And then -- what about the Ardian deal? There's no risk of dilution here of your net income if you join -- if you contribute your water plants to the joint venture. And did you factor this impact in considering that this transaction is going to be executed by March next. Has this been factored in, in the plan? And then final question, 1 about debt. In the annex is the last page of the annexus. I saw EUR 2.9 billion in 2021. We are currently EUR 4.1 billion and EUR 4.3 billion. And I can reconcile this with the EUR 1.7 billion acquisitions and investment for this year and a similar figure for next year too. So what is missing here that I didn't grasp? If there were the [colfor bids] at the end of '23 for the thermoelectric plants in Lombardy, what would the impact be? What kind of cash in would you expect to reach the target that you set in your plan? Anyway, congratulations on your plan. I do apologize for my numerous questions. Unidentified Company Representative [Interpreted] So Mr. Gamberini, as far as Techno A is concerned, that was the opportunity we grasped because of that plant processes 80,000 tonnes and has already received the authorization to reach 245,000 tonnes. So clearly, we've factored in this element in the value, namely the acquisition of this plant with these forthcoming authorizations. We planned additional EUR 70 million CapEx, EBITDA for expected EBITDA EUR 40 million. So we have a plant that is the only one in the center in the south of Italy able to treat special waste. We have [a benfilago] plant in Bergamo which is similar from a certain point of view. So we can achieve a greater efficiency also for this. So we're talking about EUR 350 million overall investment, generating EUR 40 million EBITDA per year. But has a lot of future growth prospects and EBITDA full year 2022 EUR 15 million. But again, the implementation of the new plant requires also a downturn of the plant. So it requires a stop of the plant, which will make possible an upgrade of the plant at the same time. But this is definitely a very good opportunity for us. So with this deal, A2A becomes the first player in waste cement in Italy, especially in an area that is the South of Italy. I mean Techno A also treats pharmaceutical waste from [Malazio],and this is another new market that is very interesting. As for the Ardian, please consider it's almost all wind, 430 megawatts of wind, 19 photovoltaic in Italy. And in Spain, we have 30 megawatts of wind and 10 of photovoltaic. So the acquisition of these 2 portfolios had as a main goal to develop more the wind part of our renewable business. We didn't factor in our plan anything more as far as Ardian is concerned. So this is the stand-alone plan of A2A that was factored in; namely, the acquisition of these 2 portfolios financed with our own resources, which would enable us to retain the rating that Andrea mentioned. And considering that this is what we're going to do, no dilution of dividends is expected as far as the Ardian transaction is concerned. It goes without saying that to prevent dilution of dividends, it is essential that the proceeds of the Ardian deal are immediately invested or progressively invested in activities that generate more EBITDA. So this means that we are not going to convert our debt with the equity coming from Ardian to prevent dilution, of course. So this plan is a standalone plan and all the economics that we mentioned, dividends included, are not diluted, have no impact whatsoever. And the Ardian deal can only improve this plan from an industrial and from the economics point of view. As for the return on investment for the Techno A, 7x EBITDA. So this is the multiple we're talking about here. And I answered the question about the debt. Actually, you already answered all the questions. But anyway, probably I wasn't clear enough when during the presentation, I mentioned financing. The plan factors in for 2022, the issuance of a hybrid bond for EUR 600 million, considering that a hybrid bond is accounted for as equity, so it is netted from the debt. So if you calculate the cash flows, there will be additional EUR 600 million, then you subtract the EUR 600 million and net financial position. So 3x is the result of the assumption of financing, EUR 600 million of cash flow with the issuance of a hybrid instrument. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2022 / 7:45AM, A2.MI - A2A SpA Special Call

Question: Stefano Gamberini - Equita SIM S.p.A., Research Division - Analyst : And if I may ask a follow-up question about the cost of this hybrid bond? If I understood you correctly, I have to add EUR 600 million to the EUR 4.3 billion debt. Is that correct? Unidentified Company Representative [Interpreted] Yes, this is exactly correct. This is exactly what you have to do. Then this EUR 600 million will account for 50% equity and 50% debt for the A -- rating agencies, I mean. Unidentified Company Representative Stefano, if I may add. If your question implied trying and model the financial charges as well, well financial charges on hybrid bonds do not go through or not factored in, in the P&L. It's, again, an instrument that is classified under equity. Anyway, we haven't issued it yet. It will probably be around 2%, definitely more than the senior debt. But again, it's a debt instrument. It does generate financial charges, but not accounted for under financial charges item, whereas the financial charges on the hybrid bond are included in the cash flow.