A2A (Milan:A2A) Q1 2026 Earnings Call

0:01 Hello, ladies and gentlemen, and welcome to the A2A twenty twenty six Q1 Results Presentation Conference Call. My name is Zack and I will be your operator for today's event. Please note that this conference is being recorded. For the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing pound key five on your telephone keypad. I will now hand you over to your host, Marco Porro, Head of Investor Relations to begin the conference. Please go ahead. Good afternoon everyone and thank you for joining for the first quarter twenty twenty six results. Today, the results will be illustrated by our CEO, mister Renato Mazzoncini, and the CFO, Luca Moroni.

0:50 I will immediately leave the floor to Renato. Okay. Thank you. Thank you, and good afternoon, everyone. Thank you for joining our call today. Let's start with the statement. Alfred North, we said, once said that the art of progress is to preserve order amid change and to preserve change amid order. And let's say, in the last three months, we have seen a lot of changing inside the energy landscape in Italy and in Europe. So let me start with a brief overview of the macro scenario and how we are responding to preserve both order and change in our mission to be ready to power.

1:45 So in Q1, Q1 was marked by certainty and the sugar like volatility in the energy market, fueled principally by two external factors. The first is the proposed measures in Italy and in Europe to mitigate the impact of rising energy cost and industrial competitiveness. In Italy, it's also said the decree for the creditable net, the decree for the tariff. And after a couple of days, the geopolitical tension in The Middle East in in Iran. So what happened in the slide number two is that, for example, the PSU gas price peaked at around €6 per megawatt hours while the spot price ranges around 80 to €170 per megawatt hours, amid continued moves in the forward curves.

2:52 So visibility is still limited, but conditions are well below the 22 extremes you can see in the graph at slide two in the left part of the slide. Against this backdrop, our action are a job to support short term system stability and to delivery on the targets we have communicated to shareholders. And our first step was to give customers, especially our drugs, greater stability by maintaining our fixed price contract offers. And this now account for around half of our mass market exposure. So consider that 50% of our customer base mass market is in fixed price.

3:52 Our 26 renewal generation in line with our policy is already hedged for more than 70%, giving us full visibility for this year. We will continue to closely monitor developments and to respond as necessary, navigating an environment that really is highly fluid. So, that's the short term picture. But as you know, A2A's vision is built on long term resilience. And this commitment remains unchanged. Let me say that exactly in this situation to have a ten years industrial plan is fantastic because in this situation, the short term is a problem to face, but is not, let's say, the Polastar.

4:52 So the contingent geopolitical phenomenon of today only start to underscore the long term importance of Italy's energy independence. And for this reason, the expansion of our renewable and high efficiency flexible capacity remains a key driver. For example, during the quarter, we commissioned the Terps de Bansi plant, adding around 30 megawatt of wind capacity in Southern Italy. And we reiterated our investment strategy, almost half of the quarter spending direct towards the generation plants and in our power grid to remain the backbone of the energy transition.

5:42 Electrification of consumption remains a sector trend underpinning our capital allocation choices And it's super interesting, the fact that in Italy, the demand was up to 3% in Q1. You know that there is sometimes a discussion if really the demand will grow. And we can say that in this Q1, there is a visible growth of the demand, especially in Lombardy, in which the growth rise in double digit 10%. And this is encouraging, an encouraging signal, of course.

6:28 Equally encouraging is the fact that data centers will continue to emerge as a new high consumption customer segment. And we see confirmation of this in the fact that the connection request in our electricity distribution network, in particular, and in the province of Milan, in particular, Duality, that is the company, you know, that we bought two years ago from A and L, now around three thirty megawatt. Consider that is medium voltage, let's say, not more than 10 megawatt. That means 33 new data center, at least that ask for new connection only around MINAR.

7:14 So despite ongoing volatility, I can confirm that our resilient business model, diversification and the long term perspective, supported by strong execution, enable us to maintain our investment commitments. So let me give you a few highlights looking at slide number three, in which you can see our numbers, our economics. Also, we see both positive and downward variance in these figures taken together, they underscore the two crucial factors, our financial resilience and our commitment on targeted investments.

8:03 And I think the most evident metric of this is our net financial position, which remains sound and under control At $5,600,000,000 versus $5,500,000,000 until year end 2025, the movement is entirely consistent with the typical business seasonality. The leverage ratio holds 2.5, broadly stable year on year, confirming the group financial discipline and balance sheet resilience, even in a quarter of active capital deployment. In short, the figures confirm our resilience with which is far confirmed by our continued commitment to targeted investments.

8:56 And in slide number four, we continue in our CapEx plan deployment, confirming our commitment on our long term strategy vision, you can see 4% more of CapEx compared with last year. But what is super important is that in Q1, we have 21% of growth in the development CapEx, euros $210,000,000 refers to development project. And the key pillars of our investment strategy are improving the efficiency of power distribution networks, accelerating our development path towards renewable energy, increasing the flexibility of generation plants, And, of course, the CapEx in circular economy that you remember is also the and water water cycle.

10:03 So that's a big picture. Now let me turn to Luca for a more detailed analysis of the results. Please, Luca. Thank you, Renato. Thank you, everybody, and good afternoon. As Renato pointed out, the beginning of twenty twenty six presented a challenging conversion of contingent external factors. So as I unpack our EBITDA performance, I wish to emphasize how we respond to this. I think this slide is a clear summary of how a diversified and integrated portfolio of activities underpins our ability to optimize our risk profile. By leveraging the diversification of our business, we were able to face negative effects, including some unpredictable costs, delivering an EBITDA of million. In particular, this reflects our higher renewable energy production, the ability to capture trading opportunities and the strong performance in market and electricity solution business mitigated the adverse impact from higher electric concession fees, lower price, and lower contribution from treatment plans.

11:27 Naturally, this performance start with how we generate and optimize energy. So let me turn to generation and trading. In generation and trading, increased production during the quarter helped offset the impact of adverse headwinds. EBITDA was $2.00 $2,000,000 a decrease of $22,000,000 compared to Q1 twenty twenty five. Starting with renewables, we delivered higher renewable production. Also, this positive contribution was impacted by two contingent factor beyond our control. Higher hydroelectric concession fees, which affected by €11,000,000 of which €6,000,000 related to previous years and lower achieved price based on the scenario.

12:22 Moving to flexibility, a good performance in trading confirm our ability to capture market opportunities. Although, this was partially undermined by fewer chance in gas portfolio management. To sum up, operational performance remained solid with our production volume and effective trading execution in face of market condition and regulated cost component that represent headwind in the quarter. Overall, this confirm both the resilience of our integrated model and the importance of diversification across generation and trading activities to take our volatility. But of course, generation energy is only half of the equation.

13:10 The real impact happen when we connect it to customers. So, me turn to the encouraging results that emerged in Q1 for supply business. Looking at the market segment, the first quarter confirmed the persistence of our commercial performance. EBITDA was 136,000,000 with an increase of $3,000,000 compared to Q1 twenty twenty five. In market, our pro form a was primarily supported by the growth in electricity volumes, particularly in the free market segment. At the same time, profitability was partially impacted by lower unitary margins, reflecting a more competitive environment on pricing dynamics.

13:58 Overall, the quarter was marked by solid volume driven growth with margin pressure partially offset by the underlying strength of the business. But of course, the future of the energy isn't just about consumption. It is also by secularity. So let me turn to the performance of the circular economy. In the circular economy, the quarter shows a performance affected by a lower margin in treatment segment in particular. Adjusted EBITDA was 190,000,000 a decrease of $12,000,000 compared to Q1 twenty twenty five. The pressure on margin in treatment was mainly due to the new Acera service contract signed in February 2025 and the lower availability of Perona and Trezza plant for maintenance activities.

14:50 Prices showed a slight increase and we also saw positive contribution from district heating, in particular related to wire certificates sold, some wire certificates sold, and higher allowed returns from the integrated worker cycle. Overall, performance was slightly softer, mainly due to operational and contractual factors in waste to energies, with some support from positive trend in other activities. That said, let me turn to smart infrastructure. In smart infrastructure, the overall performance reflects growth in unload revenues, partially offset by a change in the gas distribution perimeter, as you remember.

15:39 The EBITDA on the business unit was 129,000,000 an increase of 6% on the Q1 twenty five. In electricity network, EBITDA took advantage from higher load revenues, driven by the new ROS tariff methodology and the continued growth in the ROB driven by CapEx development. In gas network, we saw a negative contribution, mainly due to the perimeter effect following the asset disposal completed in July 2025. Now, you will look at the profit and loss starting from adjusted EBITDA, $647,000,000.

16:25 So we recorded $250,000,000 of G and A, 12,000,000 plus compared to the same period of 2025. The increase is mainly due to the higher CapEx deployed. Provision and net financial expenses were equal to 25,000,000 and $41,000,000 respectively, in line with the same period of 2025. Adjusted taxes amounted to $98,000,000 a decrease of $10,000,000 compared to 2025, driven by lower taxable base. The tax rate stood at 29.5% excluding the impact of the ERAB increase introduced by the energy decree accounting for as a special item as we said already.

17:13 Adjusted group net profit was $221,000,000 a decrease of 11% compared to 2025 at $249 And finally, in Q1, we achieved a solid ROI and ROE above 910% respectively, well aligned with our targets. So, me conclude my comments, giving you an overview on the net free cash flows. Cash flow Q1 twenty six showed a negative change in net financial position of €154,000,000 as a result of business seasonality. As of March 31, the group reported a net financial position of EUR 5,628,000,000 with a leverage ratio of 2.5 times, ensuring the full stability of the leverage position.

18:12 During the period, operating cash flow generated €149,000,000 Let me give you an explanation in which way. Net working capital variation was minus $460,000,000 primarily driven by the increase of trade receivables due to the business seasonality and the energy prices increase starting from March 2026, following the escalation of the conflict in Iran. Payment of net financial expenses, 8,000,000. Operating cash flow stand at $149,000,000 Accounting CapEx $315,000,000 The net free cash flow amounts at $166,000,000 negative.

19:02 The change in the consolidation perimeter during the period was positive and amounted to $22,000,000 mainly due to the price adjustment of $25,000,000 related to the sale of the part of the gas assets to Astopia in 2025, partially offset by $3,000,000 in other transactions. Overall, considering $10,000,000 spent on the share buyback, the total change in the net financial position amounts to €154,000,000 So to conclude my comments, our businesses are not separate stories, but rather one integrated system that assure our financial results.

19:47 Results that show out by leveraging the resilience and diversification of business, we were able to navigate the challenges of geopolitical effects, including the ones that nobody saw coming and to deliver an EBITDA of €647,000,000 Let me now hand back to Renato for the final part of the presentation. Renato Okay. Thank you, Luca. So to close, guys, slide number 12, we confirm our 'twenty six guidance. The slide number that you know, Slide number 13. Only some concept about our robust industry execution.

20:35 So let me now briefly really focus on the key highlights supporting our performance and outlook. Starting with execution year to date, we have seen solid operational trends across our core businesses. Production benefited from the geographical diversification across Italy. It is interesting the fact that this year is Calabria, the first class of our hydro production. And more and more, it's difficult to have all the plants from the South to the North, Northeast, Northwest at the same level of production. So to have diversification like A2A, but it's Julienne and Calabria is super nice because it's easier to maintain our target.

21:27 On the commercial side, electricity volumes have recorded double digit growth. And in particular, free mass market customer base continue to expand. And starting from Q2, we are seeing early signs of improving churn rate dynamics. You can imagine is, of course, also linked to the exceptional growth at PUN. And the typical situation in this case is that the churn fall down. And our visibility in June is a reduction of the churn super strong. But what is important for us is that you remember our strategy is to increase the market share of electricity customer, and our strategy is on track.

22:18 Our power grid activities delivered a sound performance, supported by ongoing CapEx deployment. And as I said in our last call, in particular, Duality, the company that we bought from AEMMF is working very well in terms of CapEx deployment and also EBITDA. At the same time, we continue to deliver on our strategic projects. In power generation, we are progressing in Montfort Corner, the new Class H thermal plant. Corteolona is a new energy plant.

23:05 It will remain the only company in the last years that is working to build new waste to energy plant and further renewable deploy development. And we have also identified the brownfield sites for our data center platform. In data center, we are working quickly. You remember, we have three projects on track, and we are working to be able to start with some site next year. And all the suitable for the end of meter connection, enabling so faster grid assets and competitive energy cost, as you know.

23:59 Finally, our electricity distribution business is well on track reach a 28% CAGR target that is high. Overall, this confirms our ability to execute consistently across all businesses, while continuing to invest where it matters most in order to generate sustainable value. In the last slide, the number 14, I need to say that, let's see the architecture that support our strategy over time. First, a diversified and integrated portfolio of activities, enabling us to optimize our risk profile. You know, all our natural hedging in generation, in collection and treatment, in regulated market, regulated business and business on the market.

24:57 Second, Exaltinib exposure to regulated businesses, providing stability and clear visibility on cash generation and third, our discipline in capital allocation to unlock new growth opportunities. So I began today by underpinning our commitment to preserve the delicate balance between order and change. And to do so, our takeaway today is we will continue to invest where it matters most while maintaining financial resilience and control, turning the megatrend that are reshaping the energy landscape into sustainable result over time and reshaping the role of the multi utility company in this new landscape.

25:57 Thank you very much. And I'm sure that there is space and the interest for Q and A. So the floor is yours. Thanks. Thank you very much. And the first question comes from the line of Emmanuel Oggione of Kepler Cheuvreux. Please go ahead. Good afternoon and thank you for the presentation and for taking my question as well. The first one is on the '26 guidance. To what extent, you know, what is the visibility considering that, if I remember well in your guidance, it's not included the change of the scenario for the short term at least. So apart Q1, but starting from Q2, indeed, starting from March, the wholesale price will be higher year on year at least for Q2 than we see in H1 in H2.

27:07 And for this 30% roughly merchant exposure for the expected volume from hydro and waste to energy in 2026, we should expect a benefit from this situation, which is not included in the guidance. So my question is about the outlook for the next three quarters with an update of the guidance compared with the updated macro scenario? This is the first question. The second one is still on the generation business and the market design, but in this case more in '27 was we know that the Italian government is under discussion with European Commission to define a new market design in the coupling of the power price from gas or the renewables from gas will be through EPS, general will be through other component of the price of the gas, etcetera, we see. But in any case, it's under study. So that is what is your update and your opinion on this situation.

28:28 And finally, in the market supply, I saw a good resilience in profitability in spite of a slightly down number in customer. But indeed, it was related only to STG and the protect market, not to the free market experienced a slight increase. So the commercial policy seemed to be effective in at least in Q1. And so what is the update about the competitive pressure and your commercial strategy in this respect? Also considering that you think that there are also portfolio, at least according to the Italian press, there are also portfolio of customers in the to be sold in the market, you know, if you are interested in that.

29:21 Thank you. Okay. Thank you, Manuela. Well, on question number one, I say, you know, we are for 26. So it's clear that and consider that in this moment, our age, as I said, is more or less 70%. That means that, yes, if there will remain till the end of 'twenty six, and I think that all of us hope that in Iran, something can change in the next weeks. I don't know, but we have to see. But we can have an upside that is, is that limited due to our hedging.

30:12 And so this is for the first question. For the second, talking about ATS. Talking about ATS, I can answer using the communication from the commission about the temporary iron crisis energy framework 23 of AEMMFRIEL. Okay. Let's say that the member states can also consider transitory measures to mitigate the impact of high gas prices on electricity generation. But, let's say, not only limited only to '26. And you consider that the formula linked to the ETS proposed by our government will start from '27.

31:08 And this is enough to say that it's impossible to, okay. But it's also interesting that the EU Commission understood perfectly the risk and says that there are some conditions. The first is that that the transitory measures, they are clearly defined and time limited, so not structural. The second, they are designed to prevent internal market distortion, ensuring no impact on the merit order and no restrictions to cross border trade and electricity flow. The third, they preserve long term investment signals for clean energy.

31:56 The fourth, they only compensate certain gas cost increase and do not cover ETS cost before maintaining the obligation and the incentives in of the ATS. Okay. So without reading more, I can say that we may deem that it's impossible to have structural changes and also due to the road map 2627. We we don't think that the decree, the Italian decree can have effect and that that can change the position of EU. That is very clear.

32:45 Also, because, speaking, Italy is the only industrial country in which ATS is really attacked because it's the only, country in which 2,900,000,000 or 3,500,000,000 is really used, to serve the public debt. In all the other countries, starting from Germany or France, 100 of ATS is a cap and trade system. And so there are companies, corporate, that receive money from ATS. This is the easy reason for why this country says, no, thanks. We don't want to change ATS. Talking about mass market, your analysis is correct.

33:35 For us in this moment, it's clear that the good news is that we have a 1% of increasing of the free mass market electrical in a phase in which the churn in the first quarter was high in all the market and in a situation in which our visibility of the churn in the second half of the year is much, much lower. And so we, we imagine to be able to, reach our budget. That is a budget in which the customer base electricity free market will grow.

34:22 The pressure, the competitiveness, the pressure is a reality, and this is the reason for why since the first inducement plan, every year we imagine to have a reduction of marginality of 3%. You remember is a discussion that we'll we did a lot of times. Till now, frankly speaking, a reduction of marginality is not on the table. But in our industrial plan, including 'twenty six and 'twenty seven, we forecast reduction and we see, let's say, in this moment, we are happy to have, in particular, some interesting products, for example, the PPA mass market for our customer.

35:18 The customer base for PPA mass market in this moment is more than 100,000, so 110,000,120,000. But to understand how is important in this moment, the total energy sold in PPA mass market is slightly higher than the PPA P2D. So it's a proof that working in the customer base also out of the box with instruments like PPAs mass market ten years long is a good idea and works well. Thank you.

36:07 Just a follow-up on the first question. The first question was not only on generation and achieved power price compared with the embedded in the guidance, but also the other moving parts in H2A for Q2 onwards compared with the expectation of the business when you provided the guidance for the first time? Thank you. Yeah, Emanuele, will take the lead to answer to your question. So, we see generation more or less in line with the previous year result, taking into consideration maybe some opportunities we can get in the market.

36:55 As you correctly pointed out, the spot price could give us some opportunities. So, let's say around 700 is more or less the area we are targeting. Market supply business is likely behind in our projection by now compared last year, but slightly, I mean, few millions. That means that there is still a good visibility, high resilience on the marginality, which stay there, but also on the volumes we are able to sell, which are growing and giving us opportunity to expand also the market share.

37:53 Secular economy is pretty stable due to the fact that we have incorporated some maintenance works already in the first quarter. They were planned. So, the target incorporated this maintenance. You have to consider that these plans are working with full capacity. So, from time to time they need to have maintenance activities. And finally, smart infrastructure, again, more or less in line with last year considering that in the $518,000,000 of the last year, we had 22,000,000 related to Aesco Piave deal on the gas network and some one offs that are not recurring. But we decided last year to consider this nonrecurring item embedded in our results. So, all in all, are in line with the guidance we gave at the beginning of the year.

39:26 And we have nice visibility by now. Let's see what happen in the next quarter. And we can have an update of last year. Thank you very much. Yeah, maybe just to give you also a flavor on the fees asked by the region Lombardy. We have an impact in the area of $40,000,000 $50,000,000 Half of those are related to previous years, meaning twenty one, twenty four years. So, these are, as I said, the nonrecurring even though we consider that amount in the guideline, in our expectation.

40:18 And on the remaining part, the alpha, again, has been already provided in the previous year. So, it is not an impact. It has not an impact on the net profit, but only on the EBITDA. But already consider what I already said. Thank you. The next question comes from the line of Javier Suarez of Mediobanca. Please go ahead. Hi everyone and thank you for the presentation. Three questions. The first one is on generation business and electricity prices. If you can share with us the level, the pricing level for your hedging in 2026 and eventually 2027 as well? I'm interested in the absolute level of electricity pricing hedging.

41:16 And also your latest expectations for electricity prices towards the end of the decade and beyond in a context on which there is a high level of concern on higher electricity prices impacting competitiveness of Europe, which are your latest thought on potential impact of electricity prices in Italy? That would be the first question. The second question is on the comment that you make on electricity demand increase during the first quarter. That is quite remarkable. So, if you can help us to understand in your area, in your region, in the regions in which you operate, which are the key dynamics that are underpinning this increase in electricity demand and maybe splitting that increase in electricity demand by the different segments.

42:01 And in this context, when the company thinks that we'll be able to update the market with latest update on potential development of new data centers in Northern Italy. And the final question is more of a general one. There has been a press articles mentioning the potential interest of the company in M and A activity being involved in M and A activity without entering in names and second names. Just as a general concept, the question for you is which would be the entity of a potential M and A target that could the company management press the button on that deal? Thank you. Okay, Xavier. I talking about generation price, your question is the level of price of our hedging '26 and '27. Correct?

42:59 Correct. Okay. Okay. Okay. Yeah. For '26, in this moment, we have, as I said, 7072%, and the level is 111. So it's absolutely nice, slightly higher than our budget. And talking about 2627 is around 60% and is a little bit higher than 100. So also in this case, we are in a pace in which we are online with our industrial plan.

43:50 In this moment, there is a few liquidity to cover more '27, but let's say 60% in May 26 is a good level of hedging. The demand is interesting because it's clear that in this moment, for the size, data centers surely have the key elements to increase the demand. Because if you consider that a full cities like, let's say, Cremona has a peak power of 100 megawatt and is not base base load like consumption, it's clear that easy enough to have a new data center of 30 megawatt to have an increasing of demand more or less similar to whole cities like Cremona.

45:03 So in this moment, what is happening is that the data center are growing. The revenue data center not really super big till now in Lombardy, but are growing. And and and so surely, the increasing of demand is mainly linked to artificial intelligence and all the digitalization. Also talking about e mobility, something is happening, in particular due to the high reduction of prices of the electrical vehicle due to the competition with, in particular, DAD, LEAP Motor and others because the price fall down. A good example is the price of the segment city car of Renault, for example, starting from the Renault Joy to the new F5 electrical, slightly price 30% lower.

46:17 And and so what is happening is that really also the immobility is growing. The last but not least, is that looking at the gas distribution, year by year, there are 1%, between 12%, depending where of reduction of the DDR. And, of course, people that decided to electrify something. That means cooking, eat pants, or others. And so it's it's normally to see this increasing of demand.

47:04 Why so concentrated in Lombardy? See, I I think because Lombardy is every time to the local of Italy, and so all the new trend start typically from from Lombardy talking about economy and growth. That's all. And to close with M and A, let's say, you know, that we we we can't say nothing about these topics. We do full disclosure through, exactly, through the media of what is correct to say to the shareholders.

47:55 So for example, the last news about our nonbinding for the plans of biogas is not historically true. Of course, we are a player in this sector, and we are interested to see to see the number, to to to have more information about the business because it's useful also for us to to define our strategy, let's say. But I have not more information, Xavier, to to share. Okay. And on question on the timing for latest views on timing for our final or the announcement of an agreement with data center development?

48:46 Yes. This is correct. In this moment, you remember that during our presentation, we put on the slide three projects. In this moment, we can say that one project is in in Brescia. One project is in Casa Nodada, so near our super big thermal plant, and the survey is under definition. So it's it's ongoing, let's say. We are working for authorization, of course, but consider that is also interesting that the both the national law and the regional law put some conditions to have acceleration in virtualization.

49:47 And the condition more easy for us to face because it is a greenfield sorry, brownfield and greenfield, is to reduce the impact on the power grid, so to affect the behind the meter connection, connection with the. And, you know, we have the sole operator able to to do this. And with a a good mix of renewable and sorry. A mix of the carbonized electricity and the water cycle efficiency.

50:34 And reason why A2A is a good player in data center is exactly because we are able to move all these parts and so to move quickly in the authorization. Because we are exactly full committed in these elements. So we are working for authorization. And our goal can be to start the first plant, the construction of the first plant next year to be able to see the first EBITDA at the end of 'twenty eight.

51:23 Interesting. Many thanks. All right. The next question comes from the line of Francisco Sala of Banco Acos. Please go ahead. Yes, good afternoon and thank you for taking my question. The first one is if you can give us an update on the concession renewals, especially in Lombardy. The second one, if you can give us quantify the impact of the new A share of service contract both for the full year because there was an impact in Q1. So if we can have an estimate for the full year. And then on the retail business, I wonder what is what your commercial strategy is now in terms of fixed price versus variable price contracts and whether there has been a change in the market or at least in your approach in the last few months?

52:30 And secondly, finally, as you have thermal generation and more in general, your electricity volumes that went up a lot in Q1, whether this is related to strong demand in Lombardy or whether there are other drivers behind this increase? Thank you. Okay. For the hydrocontraction, the situation is more or less the same as you know. So we are waiting to open the diss the discussion for the first first way, you know, the long body model, let's say.

53:18 And frankly speaking, I imagine that it's much easier to open the discussion in the second part of this year after the closing of the PNR. You can understand that without the vincula from the P and L there is much easier. Also because, frankly speaking, every time we say that the fourth way is a way to accelerate the CapEx, and so it's completely online with target of the P and L because of the fact that the hydro concession was introduced in the competition law was, in the original idea, a way to accelerate the CapEx.

54:09 But at the end of the day, it's the opposite because till the tender, no one invest €1 in the concession. So in this moment, all the public authorities understood that the only way to really to accelerate the CapEx is to reassign to the actual players the concession with a investment plan linked to the new twenty years long concession. Talking about Acera, the impact full year is €15,000,000 Consider guys that Acera is the only plant not owned by XV.

54:56 So we are talking about the plant in which the return on investment is super high, probably the higher in the group simply because there are no CapEx allocation from A2A. And talking about the our strategy in this moment, surely for our customer is interesting, the fixed price, because, as you know, the calendar '27 maintain still a good price for energy. And so when you sign, for example, a two years contract, the price is the average between the all the quarter till now from now till '28.

55:46 And so the price is interesting and of course, stable. This is the reason for why 50% of our customers ask for fixed price. But our strategy is really to push more responsible the Telia's contract. And as currently yesterday, we signed the first PPA for for a small business. It is interesting because in this moment, we have PPA for corporate, for large business, steel production and so on. We had the product for mass market, but we haven't the product for small business.

56:36 And this is very simple why we decided to build a PPA also for small business. And exactly yesterday started this new prog product, and immediately, we signed the first contract. It's it's really important in my idea because for small business, it's very difficult to be to to deal with us PPA profile and so on. And so they need exactly like mass market standard products. And, the idea to to give the opportunity also to small business to understand that with renewable, you can fix the price for a really long term, in my opinion, is a real change of politics of renewable.

57:32 And so it's very important that every categories of customers can have a possibility to sign a contract linked to renewable for long term. And we are doing that. And I I think that we are the only company that is working in this in this strategy. Thank you. The next question comes from the line of Roberto Ordiccia of question, which is still on the retail commercial approach. Just wondering if you can share with us how much of the current fixed sales price are expiring within the end of the year for which you will go into price negotiation?

58:30 And if you can tell us what kind of approach will you prefer now? So will you be more aggressive on the price even because you can by serving those contracts through renewable trying, as you said, push the PPA at very low price from a higher starting point because prices in the next six months will be high. So maybe you will have a chance to maybe aggressive, not decreasing the offer price that much in order to bring a quarter market share and then build up on the strategy of the long term contracts. So can you elaborate a bit how much this is a window of opportunity by having the pool price that is pushed by the end of the year with a mix of expiring fixed contract that can be renewed at those conditions? Thanks a lot.

59:37 Consider that starting from the fact that today, customer are divided as and as between mix and variable. And starting from the fact that in my idea, in the looking in 2030, let's say, I imagine a world with a lot of PJ mass market. So fixed price, but not two years, but longer linked to renewable and the rest variable. So in this moment, surely, the fact that we are able to beat PTA mass market and small business give us the opportunity to sign PPA to a higher price than the PPA that we are able to sign with steel product, with data centers and so on. Because, you know, the marginality in mass market and small business is like that.

1:00:44 So to give a numbers, for example, the PPA the PPA mass market is €105 per megawatt hours. The typical PPA in this moment, b to b for a typical profile for a steel product is 85. So the difference is huge, 20%. And the price of a small business is in the middle. So the capacity to put on the market products, able to face the needs of mass market and small business, in my opinion, is an incredible opportunity to sell our green energy to a good price.

1:01:39 Remaining on the one year or two years fixed price, A2A, you know, is surely not the company with the lowest price because our strategy remain to give good services. And we are recognized like a company, both for mass market and B2B, able to give value in our ancillary services starting from the fact that there is someone that is able to respond clearly to our call center when you have a problem.

1:02:26 So our strategy is this one and seems to work well because if you look at the three market, the fact that in this quarter, with the huge churn that we saw and with the result also looking our traditional competitors, I am absolutely happy to see our numbers. Thank you very much. The next question comes from the line of David Candela of Intesa Sanpaolo. Please go ahead.

1:03:17 Hi, good afternoon gentlemen. Thank you for the presentation and for taking my question. I have three. The first one is regards what you said on the power demand evolution in first quarter. I was wondering if you can share some flavor about your ability of capturing this demand increase in the region? And maybe if this will be served through your own plans you have in the region like the new renewable developments you expect or your cities per capacity? That is the first one. Second one, with regards to the disruption in energy markets. First one, with the increase in energy prices, I was wondering if you can share some data regarding April and May consumption if actually the high price level is pushing the clients to reduce consumption in order to contain the expense related to that.

1:04:20 And basically, if you see a trend according to that. And last point with regards to this topic, We have seen that some rumors about other countries in Europe that are thinking about putting some useful taxes with regard to the high energy prices. Maybe it would much more related to the hot sector, but electricity seems not to be excluded at all or at least a basic level. So what is your position on that? Do you think that this risk is still there also for Italy and even though the fact that this could be temporary as you mentioned in your speech before? Thank you.

1:05:10 Hey, David. I will take the lead to answer your question. For the power demand evolution and the prices on the market, you know very well that we are managing different technologies. We are on the market with constructive approach of our management department. So if you consider that January and February has been months in which the prices went down because of the creditable letter that the energy decree and there has been a lot of pressure and also some speculation regarding a possible conclusion on the Ukraine war with Russia.

1:06:04 So we take the opportunity to work with the market to hedge part of our exposure for '27, for example. Immediately after the war with Iran, and, again, we were in the market and we got again another opportunity. And in particular, with our way to sell the market, we optimized our position in the market taking creating value for the company by roughly 15 to 20,000,000. So this is the way we continue to see the future quarters.

1:06:56 Of course, volatility in a certain way create opportunities, but creates also some stress. The visibility on the April and mid May was quite good for the production levels in terms of quantities like it has been in the first quarter with good prices, but we need to keep taking into consideration the hedging share we have available, so to offset some peak with the hedging average. Regarding the windfall taxes, well, let me say, apart from having two percentage point increase on Europe, hope that this is the end of the story.

1:08:01 Nevertheless, we will see and we will follow closely what happened also in Europe, but we don't see and we haven't heard any rumors for a potential new tax or cap for the energy prices. Also, take into consideration the fact that we are not in the same situation of 2022. Yeah. Also, the discussion on the was super tough, and the result was a couple of point of year up for a couple of year. So imagine that today, the government, in the situation in which, you know, there are only a few months of the government will reopen the dossier of the windfall, in my personal opinion, is impossible.

1:09:08 And we do have a follow-up question from the line of Emmanuel Augoni of Kepler Cheuvreux. Please go ahead. Thank you. Just a quick question about the electricity networks. I showed that in Q1, the electricity network benefited from allowed higher allowed revenue from the ROS mechanism. The question is to what extent that these were included in the guidance and what will be the benefit for full year? Thank you. Yeah, it has been included in the guidance in our target. It comes from part of the new regulation considering the fast money.

1:09:54 And it is related to the fact that we are deploying CapEx maybe to a higher extent, also considering the fact that as Renato said in the presentation, we are able to move CapEx in the electrification of the grid. Whenever it is the case, there is a chance because other business may be behind the target. So we have this kind of flexibility and it is a very positive aspect of the regulation because give us some flexibility.

1:10:43 Thank you. Thank you. At this point, there are no more questions. I will hand it over back to these Ithos for any closing remarks. Thank you everyone for taking your attention to our results. If you need any follow-up, please contact the IR department, and we will be available shortly. Thank you. Bye. Bye bye. Bye bye.