A2A SpA Q2 2023 Earnings Call (English, Italian) 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 : I have a question concerning 2024. Luca, can you help us understand those 120 million of annual improvement in terms of EBITDA? I think that part of it may come from this hedging of more than 50% of production so there is no more clawback. I was wondering about margins in CCGT because this year we have exit margins helping us with lower volumes. So what should we expect for next year [as delta]? The other element I wanted to understand was on Market. This year, in the Market area, you said there are EUR 50 million as an effect of the existing contracts which will probably disappear next year, so can we expect a further improvement in Market or not for next year? And also concerning estimates, I have a question on Waste, on Waste division. You said that we were flat in the first half, but you have a guidance of 380 million, 390 million of EBITDA in the first part of the year, a 10% growth. Do -- you confirm this, thanks to the new plant, so will it be possible to have an additional improvement next year? The other topic is renewal of concessions. I wanted to understand whether there is some innovation here or some novelty. Can we expect something to happen in the summer time, or is everything going to be postponed? I think it's an important topic. Since there is a change in senior management [of Iren], I was wondering whether there is some novelty in this respect too. Unidentified Company Representative Stefano, I will [start around] the tail of your questions. As to the renewal of concessions, I would say we are in line with what we said a few months ago or for the previous quarter end and during the meetings we had in interim. We are confident that we will find a positive path for the concessions where the deal leading to the engagement [and the] necessary investments to guarantee the performance of this plant won't suffer or -- affected by some changes. For instance, in the alps and glaciers lying above, they require hydraulic interventions and works in order to go back to the original power. And also these plants have to be equipped with pumping stations, if possible, to guarantee storage mechanisms that would help with the development of renewable sources. We are working on that. I don't think we will see anything new this summer, but we expect to have notice by year-end. As to Waste, the guidance says, and it dictates it by the facts, that there are some plants that recorded some delays, which we didn't see that much in the first half, but they are going to reach their full potential this year already. I'm thinking of Parona district heating system or other plants that we commissioned at the end of last year, which they -- which have their own learning curve that must be completed, but this year, we believe, is the year in which all these investments will come to full capacity. Well, first of all, for the whole year, we are enjoying the effects of the safeguarded, and next year, we will have auctions for the protected area. So we take it for granted that it's going to be a year of major growth, so we are working on the 2024 forecasts and we expect an increase. As to the second question, I didn't understand what you were referring to, so I hand over to Luca. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 28, 2023 / 1:30PM, A2.MI - Q2 2023 A2A SpA Earnings Call (English, Italian)

Question: Stefano Gamberini - Equita SIM S.p.A., Research Division - Analyst : One last question, about district heating. There we can have a surprise in terms of changes in regulations affecting EBITDA. Or do you think that with the new regulations there are no risk in terms of EBITDA? Unidentified Company Representative Well, we have a positive view. We are happy to see the possibility of regulations here. Today, district heating is -- in some cities and especially Milan, we see it as the main source of decarbonization of cities from the viewpoint of heating systems, which is, after mobility, the #1 problem in cities. So district heating has a very good effect also in terms of reduction of CO2. It's more effective than heat pumps. We have to push on this side because Milan has the biggest potential because today we only have 20% of district heating. So the regulation here, if carried out correctly -- and we have no reason to think that it will not be carried out correctly. The latest regulation was on water; and it brought new investments and good remuneration, as far as I know. This sector, when we talk about this sector with rating agencies, it's [enormous] regulated sector, so we should actually go for fully regulated. We are thinking in terms of [RAB-based], so it will have an impact on EBITDA. Being a regulated EBITDA, the value will be different. The ratios will be different, so we are assisting and contributing to in-depth studies on regulation. I had a talk yesterday with the president of the regulatory bodies and it was quite good.

Question: Stefano Gamberini - Equita SIM S.p.A., Research Division - Analyst : 2 quick questions. Talking about Waste, can you give us a snapshot of the situation of the authorizations? You have biomethane plants that need to start operating. Are they all on schedule, or could there be delays? If I remember correctly, there was an upgrade of the plant for waste, special waste, treatment in Calabria region which should increase the conferral during 2024 by about EUR 30 million contribution to the EBITDA. Is it confirmed? And always talking about waste: Can you spend a couple of words about possible additional growth in this sector? There is very strong demand. You are a bit weak in the field of special waste, where there is probably room for growth. And then next question is about the asset rotation. Can we expect any changes in the field of gas networks to have easier leverage so low or less than 2.8x compared -- on the EBITDA? So maybe you are considering, [I'm joking], an improvement in your dividend policy. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 28, 2023 / 1:30PM, A2.MI - Q2 2023 A2A SpA Earnings Call (English, Italian) Unidentified Company Representative Waste, first. What you have said makes sense. On the one hand, we have products in the pipeline that are proceeding as per schedule or with minor delays. (inaudible) so 100,000 tonne should be the future capacity. And the reason why they have -- there has been some delay is that in our business plan of -- for acquiring the plant, we had envisaged to stop the plant at 35,000 tonnes and to replace it with the new one, while we have managed to find a technical solution and to get the authorization so as to start building the new plant without stopping the old one. The old one, of course, will be then -- will then be converted into a chemical physical plant that should have been built elsewhere. So it's a constructive delay which helps us to have a higher -- a better-performing plant. Next year, we will see the work streams and we will see completion in the scheduled time. In the meantime, we are receiving permits. We have just received the permit or the authorization for the biomethane plant at San Filippo del Mela, in the area where we have our main power plant. And also, the activities to convert agri power plants, as you will probably remember, they are a major development in the field of [bioenergy], starting from Biofor plant in Cremona and also including other plans in the pipeline where the timing is confirmed. As to the asset rotation, let me just put it so: As of today, I don't see any minorities scenario for gas. We don't need that, and therefore we stay as we are now. And later on, we'll -- might consider future opportunities.