A2A (Milan:A2A) Q2 2026 Earnings Call

0:00 Good afternoon, ladies and gentlemen. Welcome to A2A's First Half twenty twenty six Consolidated Results. At this time, all participants are in a listen only mode. However, if you wish to ask a question,

0:17 Please be advised that today's conference is being recorded. Now I would like to hand the conference over to our host, Marco Porto, Head of Investor Relations. Please go ahead. Good afternoon, everyone, and thank you for joining us. Today, our CEO, Renato Mazzuncini and our CFO, Luca Moroni, will present our first half twenty twenty six results, which confirm

0:45 the group's operational and financial strength and the progress of our strategic investment. We will be happy to take your question at the end of the presentation. Let me leave the floor to Renato. Okay. Thank you, Marco, and good afternoon, everyone. And then thank you also from my side to for you for joining us. So reacting effectively, to change the levers of results today, challenging change over time is what beats sustainable results tomorrow. It is what distinguishes the short term responses from long term value creation. And I think this perfectly encapsulates the first half of twenty twenty six for A2A, continuing to deliver today while building the foundations for tomorrow's growth.

1:41 And to illustrate this, let me start with some of the key achievements delivered during the first half of twenty six across both our two pillars of energy transition and the circular economy. On renewables, we further scaled our REST platform adding 35 megawatts of wind capacity and bringing installed capacity in wind from resources to over 300 megawatts. We also continued to develop our PPA platform. This is really key for me. With agreements signed with the Sustaineo and Polytechnico of Milan, so large customer, as well as the launch of our first A2A open PPA designed to support the small business enterprises through long term contracts.

2:43 Through these initiatives, A2A promotes the development of renewable by making green energy more widespread, more accessible and less exposed to market dynamics. This is also a concrete example of how PTAs enable the integration of renewable sources into industrial consumption, promoting long term procurement models that provide a greater stability and sustainability. And today, Aurelia A2A is the only energy company that try to change this paradigm of renewable and with products for every kind of customers long term. So the TGA mass market 120,000 contracts signed, more or less two sixty gigawatt hours sold with this kind of PPAs.

3:46 Of course, PPA classical B2B and now also this small business enterprise that is a kind of customers super interesting that without standard PPAs can't really arrive to a change of paradigm of renewable. Also in this case, the duration of the contract is ten years or twenty years depending on the negotiation. And so we are really very happy to have in our market, let's say, a product PPA for every kind of customers.

4:33 At the same time, we increased our role as a strategic infrastructure operator. Some example of the two fifty construction sites that we have in this moment active. For example, Montcalcone construction site is running, as you know, is a QGT super large eight seventy megawatt of thermal capacity, is running at full capacity supported by extended shift partner with commercial operation confirmed for next year. Power network capacity increased by 5% reaching 9,300 megawatt ampere and two new water waste waste treatment plants had the treatment capacity for the equivalent of 30,000 inhabitants.

5:29 In this context, grid capacity is not just just a technical metric, you know, it is what makes the transition executable. By reinforcing our networks, we create the condition to connect more renewable energy, support the new electric uses of the demand and ensure continuity and quality services for the community that we serve. As water resources come under increasing pressure also in this month in Italy. Wastewater treatment plays a key role in protecting water quality and increase the resilience of integrated water cycle. But delivering today's results is only a part of the story.

6:17 At the same time, we are advancing a number of strategic initiatives that underpin long term value creation. So let's start at slide number three, talking about, our data center platform. So let me now turn in this in one of the areas where our industrial approach can unlock a significant future potential exactly the data center. Today, the sector is benefiting, you know, very well from a number of favorable structural trends. Growing attention to data, sovereignty and digital infrastructure resilience is driving demand for domestic and European data center capacity, making digital infrastructure an increasing strategic asset.

7:11 At the same time, Lombardy, our Korea area, an area which, you know, A2A is incumbent for both generation and network, offers a particular supportive environment for deployment development, promoting brownfield redevelopment and IT recovery solution. So this strategic team, let's say. Two areas that are fully aligned with A2A's industrial footprint and long term strategy. Against this backdrop, we believe A2A is a unique position to capture this opportunity. And our approach is based on energy efficient power shell solution developed, on A2A owned sites, owned sites near our electrical production generation.

8:08 We will connect them behind the meter, leveraging our generation assets. This enables us to offer faster time to market, lower energy cost, and to reduce environmental footprint. And so let's say also looking the knee b syndrome, this is a key point. And on our data center platform, we are well on track with our strategic roadmap. You remember the November 12 with the update of industrial plan that we launched our platform. Where we are now? Question mark. At two sites, Land Armour and Brescia is designed for around 20 megawatts of IT capacity, 30 megawatt electrical megawatt, serving I. Workloads and colocation services with a behind the meter connection to our waste to energy plants. Our waste to energy plants in Brescia is around seventy, eighty megawatt.

9:14 So it is ready to feed this new data center. And proximity to our DCTT network, that means to have a data center with QE super low and a WE approximate to zero. Casano, Casano Dada, province of Milano, is also moving forward with preliminary design already completed beside our site, once again, a site in our property for at least 80 megawatt IT, at least, is designed to support the AU workloads with potential for modular densification.

10:00 It will benefit us from a behind the meter connection to the adjacent CGT plant once again more or less 800 megawatt of CGT plant. And from the availability of existing gas picker as a backup power, 110 megawatt of picker that can work as backup power, providing potential advantages in term of permitting timelines that means no environment impact assessment required. So in this case, the time to market for this plant is really incredible because we have a connection in high voltage, we have a generation to feed the baseload the plant and we have a backup and we don't need the environment impact assessment.

10:56 Okay. In Slide four, we underline our strategic partnership with Equinix. Because our data center platform continues to progress, we are of course also advancing our role as an energy partner. And our partnership with Equinix is a clear example of this. We are in near Milano once again, Centimo Milanese and we will transform the heat produced by service hosted at AEMMF campus in Centimo Milanese into the energy resources for local communities. The model is a straightforward and effective.

11:42 It generates as a byproduct of data center workloads is captured by Equinix and transported to A2A energy center, where A2A upgrades it with 72 megawatts of larger scale heat pumps because the temperature that is coming out from the data center is not enough, Backed by, a storage, water storage, 6,000 cubic meters of thermal, thermal storage. The heat, is then delivered into the Milan district heating network. To understand the dimension of only one data center like this, the expected contribution is incredible up to two twenty five gigawatts hours of recovered thermal energy per year, enabling faster network expansion and increasing the decarbonized heat distributed in Milan around 20%.

12:43 So more 20% of district heating in Milan. That is also, let's say, the only way really to decarbonize Milano because it's not easy with typology of building that we have in Milano to substitute the thermal plant with heat pumps in every kind of building. It is a pioneering partnership with Equinix that illustrates how strategic collaboration can pave the way for future opportunity. Looking at Slide number five, let me turn now turn off our first half results. These results despite the different trends across our businesses, highlight the value of A2A's diversified industrial platform, enabling us to mitigate external pressure while capturing opportunities across our portfolio.

13:44 The EBITDA remained broadly stable at €1,200,000,000 despite higher contraction fees for hydro and less favorable energy price environment. Excluding this effect, the group EBITDA would have a growth by around 2% year on year. This was supported by the natural hedge in hydro generation, in particular, in this case, between Northern And Southern Italy And by continued EBITDA growing electricity distribution driven by ongoing investment because in this half, the production the relative production in the Southern Italy hydro was much, much higher than the average level of the last year. In the North,

14:39 we had a reduction due to less snow in the winter in the mountain. So strong financial discipline with net financial position to EBITDA ratio at 2.6 in line with our target supported the resilient results and continuous strategic evolution. So look at Slide number six, so to our investment program. In the first half, we continue to execute on our strategic roadmap with CapEx reaching in this $0.5.07 €18,000,000 up to 5% year on year.

15:31 This was mainly driven by the ramp up of investment at Mounfakora City, expected to be completed next year with an EBITDA contribution of €120,000,000 once fully operational, so imagine the second half of twenty twenty seven. The development of new Corteolona waste to energy plant, province of Pavia, Lombardy, expected to be commissioned in 2028 with a full run rate EBITDA of million dollars and a continued investment in electricity distribution and regulated asset. And I want to underline that we reached EUR 4,000,000,000 of RAB, considering the RAB coming from power grid, the most important gas grid and water cycles.

16:35 Development CapEx increased by 17% confirming the progress of the projects that will drive our future growth. Importantly,

16:51 9% of our future FEED investment are aligned with the EU taxonomy, confirming the strong sustainability profile of our growth plan. With that, let me turn to Luca for a more detailed analysis of our results. Please Luca. Thanks Renato. Good afternoon everyone. As Renato just highlighted, our first half results once again demonstrate the value of A2A diversified and integrated business model. The slide show how the strength of our portfolio allow us to balance different market dynamics, to seize opportunities and mitigate headwinds.

17:43 As a result, we delivered an EBITDA of $1,181,000,000 broadly in line with the last year. This reflects three main factors: higher solar and wind energy production the ability to capture trading opportunities and strong energy management performances, solid contribution from our regulated business, mainly electricity distribution and resilience in the market business despite the challenge competitive scenario. Albeit mitigated by the impact from higher hydroelectric concession fees and lower hour production, the lower waste contribution and the non organic reduction in gas distribution.

18:36 Now I will unpack our result in more detail, starting with generation and trading, where I walk you through the main driver of our performance. In Slide eight, generation and trading, increased wind and solar production and a strong performance in energy management helped offset the impact of our concession fees. EBITDA was $394,000,000 a decrease of $26,000,000 compared to the first half of twenty five million Starting with renewables.

19:21 We delivered high wind and solar production. However, it was partly offset by two factors: higher underwriting concession fees, which had a $37,000,000 impact, including around $25,000,000 related to prior years and lower hydroelectric production. On hydro production, there is also a positive point worth highlighting. Lower water availability in the Northern Italy, particularly in May and June, was partially offset by better hydrological conditions in Calabria.

20:01 This once again shows the value of our diversified generation portfolio and its ability to reduce local volatility. Moving to flexibility, a good performance in trading and energy management confirmed our ability to capture market opportunities. To sum up, our operational performance remains solid with our production volumes and effective trading execution, while higher concession fees and weaker hydro condition represented a headwind during the semester. Let me now move to market. Looking at the market segment, the first semester confirm the persistence of our commercial performance.

20:55 EBITDA was $232,000,000 with an increase of $3,000,000 compared to the first half of twenty twenty five. Performance was primarily driven by our electricity volumes, particularly in the free market segment. At the same time, unit margin were lower than last year, reflecting a more competitive market environment. While competition remained high, we have seen progressive reduction in churn rates over the last few months, in particular in July in June, July. Overall, the business delivered another solid set of results with volume growth offsetting margin pressures.

21:49 Let me now turn to performance of the circular economy. Adjusted EBITDA was $293,000,000 a decrease of $29,000,000 compared with the first half of twenty twenty five. The decline was mainly driven by temporary factor in waste, lower availability of Parona waste to energy and other treatment plants due to maintenance activities. New Acera service contract signed in February 2025, higher fuel cost in collection. On the positive side, treatment prices showed a slight increase, while the Integrated Water cycle benefited from higher or lower revenues.

22:41 In district heating, performances

22:44 were lower year on year, mainly due to the lower volumes and reduced contribution from white certificates. Overall, the softer result reflect temporary operational factors, primarily related to plant maintenance in waste. Excluding these effects, the underlying performance of the business remained broadly robust with a support from integrated water cycle, partially offsetting the pressure on waste.

23:18 Then let me turn to Smart Infrastructure. In Smart Infrastructure, the overall performance reflects growth in our low revenues that more than offset the negative perimeter effect in gas distribution. EBITDA of this business unit was $285,000,000 an increase of 3% compared to the first half of twenty twenty five. In electricity network, EBITDA benefited from higher load revenues driven by the new ROF tariff methodology, the regulatory lag alignment and the continued growth of RAB driven by CapEx deployment.

24:04 In Gas Network, we saw a negative year on year contribution, mainly due to the disposal of the distribution asset completing in July 2025 and the absence of non recurring OpEx recognition that have benefit the first half twenty twenty five. Okay. We have unpacked the result for each business unit. I'd like to conclude by illustrating the combined contribution to our EBITDA mix, group net profit and cash flow. So Slide 12, starting from EBITDA of $1,181,000,000 dollars G and A amounted to almost 500,000,000 up $21,000,000 versus last year, mainly reflecting the continued deployment of CapEx.

25:01 Provisions were $41,000,000 slightly higher than last year, mainly due to our result in the market business. Net financial expenses stood at $87,000,000 broadly in line with last year. Despite ongoing market volatility, the cost of debt remained stable at 2.7%.

25:25 Adjusted taxes amount to $165,000,000.18000000 dollars lower year on year. The tax rate stood at 29.5%, excluding the impact of the ERAB increase introduced by energy decree, which has been accounted for as a special item. As a result, adjusted group net profit came in at $374,000,000 compared with $419,000,000 in the first half of twenty twenty five. In the first half, we continue to deliver solid returns with a return on investment and return on equity around 911% respectively, well aligned with our targets.

26:19 Let me move to cash flows. In the first half twenty twenty five, the group recorded negative change in net financial position of €312,000,000 As of June 30, our net financial position stood at €5.8 with a leverage duration of 2.6 times, which confirm the overall stability of our financial profile and remain fully aligned with our capital structure target. Looking at the cash generation, we delivered an operating cash flows of €749,000,000 fully supporting the financing of our organic growth during the period.

27:11 So let me briefly walk through the main drivers, Starting with the net working capital, the variation of minus €287,000,000 was mainly driven by two one off events. The first was the reduction in payment terms to XEIA following the 2026 energy decree, the decretible letter. And the second was the payment of the past due state concession fees for hydroelectric concessions.

27:47 Moving below operating cash flows, we paid EUR 145,000,000 of taxes EUR 76,000,000 and net financial expenses EUR 69,000,000. After accounting for $718,000,000 of CapEx, the operating cash flow before dividends amounted to €31,000,000 Following the dividend payments, net free cash flows stood at

28:17 minus EUR $295,000,000. The change in the consolidation perimeter had a negative impact of EUR 2,000,000, mainly driven by $27,000,000 related to M and A, partially offset by the $25,000,000 price adjustment related to the partial disposal of our gas asset to Ascopiade completed in 2025. Finally, after also having taken into account the $15,000,000 spent on our share buyback program, the overall change in net financial position for the period amounted to minus $312,000,000 Looking ahead, we remain confident that the strength and the

29:06 diversification of our integrated business will continue to be a key competitive advantage. It provides the flexibility needed to navigate changing market condition. It reduced our exposure to market volatility. It bolster the stability of our cash flows and net financial position. So now I hand back to Renato for the final part of the presentation. Okay. Thank you. Thank you, Luca. And our guidance is confirmed. I am really confident to confirm our guidance for 2026 with an adjusted EBITDA between 2,200 and 10,000,000,000 and adjusted net profit between EUR 630,000,000 and $0.06 6,000,000,000, reflecting the robustness and visibility of our business mix.

30:05 The resilience of our diversified business portfolio and our ability to capture opportunities leave us really fully confident in achieving these targets our target.

30:18 And so let me conclude by bringing together all these elements that we have discussed. Our strategy aims to deliver today, while continually building tomorrow's growth. It is a strategy built on disciplined execution, industrial excellence and future fit growth. So disciplined execution underpins our ability to deliver our commitments with clear priorities and rigorous capital allocation. And we are on target. Industrial excellence is rooted in the strength of our integrated portfolio across energy, environment and infrastructure and we are on track. And future FEED growth comes from investing in platform that respond to long term structural trends from decarbonization and electrification to digitalization and we are on trend.

31:19 In short, business and architecture

31:23 built to last resilient, integrated and designed to convert opportunities into sustainable growth. So thank you very much for your attention. And now let's open the Q and A session.

31:49 The first question comes from the line of Javier Suarez Hernandez of Mediobanca. Please go ahead. Hi, everyone, and thank you for the presentation. I have several. The first one is on the generation business. There are probably two different dynamics. One is higher electricity prices. So and probably higher contribution from ancillary service activity positively impacting your activity. So I just wanted to have latest data on forward selling for electricity in 2026 and 2027? And was this upward pressure on electricity prices maybe impacting your business?

32:36 On the contrary, probably hydro conditions during the second quarter has been lower than versus previous year. So which is your expectation on the company production with hydroelectric facilities by the year end? And how that assumptions compare with your assumption in the recently presented business plan? That would be the first question. The second question is more strategically, so on the interest on renewable energy. So

33:09 can you help us to understand your latest views on developing new renewable energies in Italy, the value for the group and the relative preference for brownfield assets versus greenfield assets? So and also latest views on new battery system. And the third question is, if you have any comment on the consultation document opened by AERA on ROCE implementation for gas distribution in Italy from 2028? Thank you.

33:42 Okay, Xavier. Good afternoon. Talking about generation, consider and you know very well that we edge our production. So for '26, more or less is all hedged, not all because, you know, with a flexibility exactly in the hydro production, we maintain a margin to be able to not to arrive in a situation of over hedging, but the prices was fixed months ago. And also for '27, considering that the scenario in this moment seems high, but you know the volatility is super high, so it's enough that as probably all we hope tomorrow, between Trump and Iran may try to find a solution and the scenario prices come back normal, let's say. And so we have 70% of the production '27 all covered with a price higher than €100 per megawatt. So it's fine, but it's on budget, let's say.

35:08 And talking about the hydro condition in this moment for A2A in this first task that worked super well at the South. Consider that in March, as probably where I said in the last, in the last call, we did all the production of 25. And for this reason, in this moment, our forecast is around 3.9 terawatt hours compared with an average of 4.1. So, yes, there is a little reduction, but absolutely not really material. Talking about renewable, I think that absolutely we need in Italy and in Europe to increase the renewable production because it's the only way to come out, from this incredible situation of external dependencies in particular from gas, petrol, and so on.

36:11 And for a company like A2A, let's say, well both, brown feed and green feed. Overall, in Italy, of course, we need new renewable because, that means also repowering. For example, for wind, repowering is surely the key elements to increase the total production. And so we are absolutely committed in our plan, our 3,700,000,000 of investment for another three gigawatt of renewable production in the next year. And our pipeline is solid, is interesting, and is well balanced between the sun and wind.

37:04 Talking about battery, is a good question. I think that, the business of battery, can work inside the max tender because merchant is really too difficult to imagine to develop this business. The next tender is in November, as you know, we are working to participate in that. You'll see which way, in which configuration. But A2A, like other larger energy company, has some plans, some sites already connected with high voltage power grid that is key to develop larger scale storage plant, battery plant.

38:01 And so we think to be able to participate it, to the next tender with an interesting proposition. Okay. Yeah. Maybe the last, question was I guess. On the area document of consultation, gas distribution. I think you are referring to the introduction of the rough mechanism also on gas, which, frankly speaking, we think not affecting so much our, network. I remember that we manage today only Milan network, and we already did the the tender. So it is something that will affect player bigger player than us with a point of delivery higher than 300,000.

39:07 So it would not have any impact really on us. The next question comes from the line of Emanuele Occhioni of Kepler. Please go ahead and ask your question. Hello, can you hear me? Yes. Thank you for taking my questions. First one is on the guidance. Apart the numbers, figures, what are the moving parts expected in H2. We know that, for example, a part of the usual flexibility in the hedging volumes depending on the weather, depending on the water availability and the next weather, you are not included, the potential positive effect for power prices.

40:16 So what are the moving parts in general by business unit in waste that is in a recovery in waste expected or higher pressure in other energy supply, I don't know, in other business unit? This is the first more qualitative question on H2A outlook. The second is on the ETS reform, the EU ETS reform, which came out better than expected or not so bad than feared by investors. So what is your comment and opinion on this? And the third one is on the market supply. In q one, you were able to increase the by 1%, but in any case, it was still an increase, a small increase, but an increase in the free market customer base.

41:14 While, according to the h one data, there is a minus, so you lost, free free customer base in in q two. So what are the current dynamics for you and this turned down in, I don't know, compared with the q one in in q two. Thank you. K. Luca, start with the moving parts of China. Well, I I will give you an answer on on guidance and maybe some about market supply. So on guidance, we are pretty comfortable about the guidance.

42:02 So we confirm it with some positive expectation on generation and trading business unit. Having also considered the negative impact related to hydro concession fees with an impact for the total year of more than 50, €50,000,000. So we are able to offset it, and to, stay in line with the result of the last year. Market, have you have you seen that it has been performing very well with a strong resiliency on the the marginality even though they are slightly below last year, but with an increase on the volume sold.

43:14 The churn rate is going to improve in the next month with an expectation to stay below the end of the the the last year at the end of twenty twenty six. And with as a consequence, with the opportunity to revert somehow the number of acquisition and the total customer in particular in electricity market in the free market. So we we have a positive expectation also in term of marginality to stay slightly below or near the level of 2025.

44:09 Smart infrastructure, very good, very positive. The fact that the the ROS mechanism of the tariff have given us quite good result and opportunities, for the first semester and also for the second one. Offset the negative effect on the gas distribution. So all in all, with an opportunity to end the year higher than the last one. Secular economy, it is the business which is more suffering for, the maintenance activities of the first part of the year with a shape of recovery in the second half and ending in line with 2025.

45:13 So, all in all, this is, what let us comfortable on the ending of 2026 results. Yes. Yes. Okay. Talking about it, yes. The reformat in this moment presented by the commission is better than our expectation for a couple of things. So the first is that, talking about, you know, the proposal of change, the merit order of a plan to working on ATS, but it's the the answer from the commission was absolutely clear. So not touch ATS. And, what we need to, really give to renewable, the strong to win against the other sources.

46:06 The second, on the opposite side is because one of the discussion was about the the application of the TSR on the waste to energy plant that, was under discussion. And in this moment, the decision was to shift, this hypothesis from '28 to '31 or later. Because, frankly speaking, this moment, there are no technology worldwide to, better than the waste to energy plant to face the part of, waste, not, rather the new material.

46:52 And so, what we see is, in ATS that try to be more, useful for, for Europe, but but don't change the, strategic or rational that, brought ATS to be invented some years ago. Talking about supply, you know, our strong commitment is on free market electricity. And, also in, the in the second, quarter, so in in the second in in this first half, A2A energy pay attention, A2A energy growth, 0.2, 0.3%.

47:50 The little differences in this number number is linked to our second brand. In particular, the Mututility, you know, IB in the in Branza, the Northern Of Lombardy. But as some brands, that are not really able to to to stay with the stronger competition in terms of marketing, advertising, and so on. And we don't want to push second brand because, it's absolutely inefficient. So, frankly speaking, we are happy that with the situation of a churn rate so high like in the first half, the capacity of acquisition of A2A Energy remain high.

48:45 In June and July and August, the churn rate fall down, And so we expect it to be able this year to grow also with our electrical customer base. Thank you. The next question comes from the line of Roberto Letizia of Equita. Please go ahead and ask your question. Yes, thank you for taking my questions. I would like to go back briefly to a couple of questions already answered, but if you can tell us exactly how much is the coverage on your production in '27 and eventually in '28, if you did any for even the following year?

49:35 An additional clarification, because I had the same question, but actually, Javier, but partially, you skip it, so you want to recover it. So I got the sense of you being interested in the rest, the amount gigawatt you want to do and the pipeline which supports both solar and wind. Just wondering how much of that can be looked into brownfield deals rather than greenfield considering that the market is very open. This morning, Enel announced another acquisition of 85 megawatts in the country. We saw additional M and A deal for power generator trying to increase as rapid as possible their rest present. So wondering if any change in the strategy may occur from you by leading you in having a higher exposure of the growth through brownfield acquisition as there is a market and an opportunity.

50:36 If you can give us the most recent trend in retail long term PPA, just wondering if you keep going to growth on those kind of contracts. And then just wondering if there is any potential impact from the heat waves that we saw one month ago and also in this day, there was a fire in distribution connection center in Milan just this morning and a lot of accident during the heat wave. Just wondering if we have to consider any potential negative impact from extraordinary maintenance to the distribution plans that follow the heat wave?

51:22 Thanks a lot. Okay. Starting from, hedging, the coverage is 27, and 70%, the price is higher than 100. So it's it's good is online with our budget with our, scenario. And for '28, no. It's a it's a peanuts in this moment, but it's it's typical in to look, forward, eighteen months, let's say. Talking about renewable, consider that our strategy, since the first moment was a mix between brownfield that if if for you brownfield is m and a, let's say, and greenfield.

52:19 And you remember very well that we bought the pipeline octopus solar from, wind. We are working in repowering of some of the portfolio, wind from. And from the other side, pipeline and new, greenfield project, for example, in Philadelphia, Georgia, in the North, 106,106, 60 megawatt of solar plant, super interesting for the position and the strong demand that we have in the North Of Italy. So if you look our 700 megawatt today is a mix of a strategy. And and I think that, this is a a good solution also for the future probably.

53:10 We'll maintain a solution like this because if our opportunity is correct to to look, and, if there is an opportunity also to to buy something. But from the other side, it's fundamental to have a pipeline. And in this moment, we have a strong pipeline because to be able to deliver, our industrial plan, of course, we don't include into account the m and a. So our pipeline, must be enough to, deliver our industrial plan. Then m and a can be an opportunity to increase the return of investment, if there are opportunity against our pipeline, our, Greenfield development.

54:13 So I think that this is the situation. Looking Italy, once again, we need to increase the number of solar panel and wing capacity. So it's clear that there's not enough m and a in which you pass asset from one answer to the other. Talking about retail, yes, we are absolutely on track with PPA mass market. Consider that is interesting because the price, I remember, that, in this moment, the price of a PPA, let's say, with a normal profile, b to b is, can be around eighty, eighty five years for megawatt hours.

54:59 The mass market is around 105, and it's typical to have more marginality from b to c than from b to b. The number of contracts in this moment is, more than 150,000, and the number of gigawatt hours, that we are located with BTA's mass market is slightly higher than the, number of gigawatt hours allocated with b to b. In particular, if I were a member, is that 200, 63 gigawatt hours of, total allocation for, energy for PPA's mass market.

55:48 The reason why we decided to, put on the market also PPA for small businesses is that they think absolutely that, the change of paradigm for renewable is exactly the capacity to, fix the price for long term. And we absolutely, we must build products for every kind of customers. And, we absolutely know that for a large company, imagine a steel plant and so on, is normal to deal with our energy management to find the correct PPA, the correct profile, the correct price.

56:35 But for a retailer and those orders, also for a company, a small business without, expertise, know how in energy management, or you are able to put on the market standard a PPAs, or is it possible to sign a contract for ten years, twenty years, fifteen years, and so on? And so I think that really we'll arrive to have, 1,000,000 of customers in in with PPAs, mass market or or a small business. And talking about the heat, yes, in this moment, heat is crucial.

57:25 But if you look at the performance of our power grid in Milano compared with the last year is much better. The number of, blackout is absolutely minimum, and all the indicators for KPI, that underlying the performance are good. And absolutely, there are no, extraordinary maintenance that we have to do. Simply, we have to continue to invest in new secondary cabin, new, primary substation, so to, new cable and so on, but online with, our planned, plan.

58:11 So, and we are absolutely happy to to say that, also in situation in which there are 40,000 degrees, that is incredible, we are able to face the situation with a good level of satisfaction for customer. The only problem that we had, frankly speaking, was in the 2020, so in the company that we built last year, you know, from which company. And in Duality, we have not the track records of CapEx that we did in, Unality in the last years. Thanks a lot.

59:00 The next question comes from the line of Francesco Sala of Banco Acros. Please go ahead and ask your question. Good afternoon. Thank you for taking my questions. The first one is on the treatment business. When should we expect the treatment business to go back to normal? Whether it's gonna be something, already in the fourth quarter or, let's say, towards the end of the 2026. The second one is on the, single national price. But, Jessica, sorry. But, Jessica, sorry. Can you, come back? Because I I didn't understand the question, you know, the quality of Yeah. The first the first question is on the on food.

59:54 Sorry. The first question is on the treatment business. There have been some, yeah, some issues in the first half. I was just wondering when, should we expect the the business to be back to normal, whether it's a third quarter thing or more, let's say, towards the end of the year? The second question is on the single national price. There have been discussions for a while about the end of the single national price source on the demand side. I wonder if you can share with us your initial thoughts on the consequences you think they are gonna be for you and the market. And the third one, if, there are updates, if any, on the extension of hydro concession and also electricity distribution concessions?

1:00:40 Thank you. Okay. Coming from, starting from electricity and hydro. For electricity, the the last, activity is in charge of the minister to produce the final decree. And I spoke with the manager in the ministry, some some weeks ago. Is on on production, let's say, the.

1:01:27 You know, the tender the historical date for the tender was 2030. And, simply, the laws says that five years in advance, the government to to start working for the tender. This is the reason why, in 12/25/2425 in the, balance low pay included, below to change, the, needs of tender. Only to say, Francisco, probably is not the priority number one in this moment talking about, 2030.

1:02:21 But, we are confident to see, in September the the text of the decree coming in discussion, to be closed this year. Talking about the hydro concession is interesting because, the reason why we we didn't solve the problem of hydrocontraction till now is mainly due to the PNRR. Because you remember that inside the PNRR agreement, there was in the competition law, the commitment for the government to put a tender on hydro.

1:03:08 So my, personal position is that we see, something different after August because simply because in August, we land finally and totally the Vienna Rev, right, with the tenth, part of the money coming arriving from, from Europe. If the question is, there is a discussion, about the tender, frankly speaking, in this moment, not. The only super little, peanuts, homeopathic tender in in Lombardy in, one of our plants, in Baleka Monica, was stopped by the court the civic court of pressure because, Regent Lombardy didn't do correctly the procedure to put, on the market with concession.

1:04:15 So, I think that also this dossier, after August can come back on the correct table. Your question about the single national price. The question is that if we would think that it's possible for customer to have a a different price, which is your question. Yes. Exactly. Because, you know Yeah. Because, you know, in this moment, the the price is, zone by zone for the producer. But, if you ask, if I think that it's possible to have a different national price for final customers, I think that is impossible because, really, if in a country like Italy, in which of a discussion about the the the price of electricity, you divide it in seven different seven different part of the country, the price.

1:05:28 And, the different price is mainly linked to the power grid, the national power grid by TERNA. So let's say that is not enough stronger to to produce a unique market, you can you you can imagine what can happen because, no, it is not a structural problem because it's normal to produce more sun in the south or wind, especially on the in in southern event in in and more hydro production in or the or solemnites. But, we are a country, in which this different energy capacity of the single region can absolutely remain inside the unique market if, the power grid is enough stronger to to to connect, completely, the country exactly like in the plan, CapEx plan of of there.

1:06:41 I think, really, that is impossible to politically impossible to have, some something of different from the single, single pool. Treatment business, the question is, the performance. It was going Yeah. You know, in in the first half, in particular, we had the problem with the plant in, it was to energy plant in Pavia, Parona. It is not a economical problem because this were covered with an insulancer, But surely in the first half, we had some, problem of production of some plants, but we, forecast to recover in the second half. So, in particular, consider that one of the reason why we confirmed with confidence the guidance is because we are looking also in the treatment business, a situation, normalized in the second half.

1:08:04 Thank you. The next question comes from the line of David Gandella of Intesa Sanpaolo. Please go ahead and ask your question. Hi, good afternoon gentlemen. Thank you for taking my question and for the presentation. I have a few regarding the current energy scenario and so the curves and the dynamics of energy prices. You spoke briefly about generation, but I was wondering if you can provide a bit broader view also on other businesses like, for example, energy supply. If this current scenario is changing your approach approach commercially and this there are some emerging risks with regards to your potential sourcing cost from next year and so on, if you can provide a picture on that. And secondly, on waste, I was wondering if you can or maybe incur in some higher cost mostly related to oil prices increasing, and that could be bad by your numbers and recovery in the second time. So just a bit on that. And last one, still on renewables.

1:09:25 I was wondering if you can provide more visibility about your pipeline and which is the the breakdown in terms of how how many projects are ready to build or closer to final investment decision. And on that, on the the return environment, if apart from the the the high higher prices we are seeing in power, if the the high interest rates or the equipment cost are challenging in a way, the return environment also for you or this is not an issue at all? Thank you. Okay. Well, for the energy scenario, the situation in the last month is, a little bit incredible because from one side, all of us see price for gas and and, of course, electricity super high.

1:10:27 On the other side, if you look, the forward, 2728, the price, the price fall down. Why? Because the storytelling is that the war in the the go Pacific Gulf must finish. The effect of the decrease for reduce a little bit per full price in with, not with ATS, but with the gas distribution cost. So some some meters per megawatt hours and so on. And so we we we continue to to to be in a theme with real price super high and with forecast more more quiet, more consider that for a company like A2A that works with a strong hedging.

1:11:37 What I can say, David, is that we are able every time to remain on budget. So, you know, our end user plan and the target that we introduced in the industrial plan is absolutely confirmed. One years ago, the discussion was, if, the scenario embedded in our industrial plan, so more or less €100 per megawatt hours was correct or too high. And you remember what I said, for me, it's correct simply because we are linked to GNL. GNL in this moment has OpEx, so liquefaction, transport, regasification, that brings the base cost of, GNL to €30 for megawatt hours.

1:12:32 That means, 60 considering 50% of efficiency of a thermal plant and more ATS, more or less that you arrive to 100. In this moment, the price remain high for probably for speculation, for the situation that, you know, in the Pacific Gulf. And so, I can say simply that, if I look at the next two, three years, surely how our budget, is correct, and we are able to hedge the pool price, at the level that we have in our industrial plan. For the waste, I imagine you talk about collection considering the cost of oil. So gasoline, I I think.

1:13:20 Consider that, compared, for example, with the the public transport, our fleet, drew a number of kilometer super peanuts. If you look at a track or collection is every time stopped, and the number of kilometer is really not material. So also the total consumption of oil compared with the other cost is is not enough to change the result of our economics. Much more, for example, because of labor and, what is interesting is that last negotiation of on the cost of labor brings a total cost that is slightly lower than, our expectation.

1:14:26 We are not alone because there is a national negotiation. Probably we are the one, probably we are the the biggest company. And so the average cost for the other players remain lower, and this is a benefit also for us. So more or less, also on waste collection, we are absolutely on, on budget. And then both the pipeline, consider that our goal is to be able to build every year a 300 megawatt of new, solar and wind renewable. And the pipeline is 10 times more.

1:15:13 And, of course, like every, pipeline has a part of ready to build, a part of, advanced and the part on, let's say, on on ongoing. And in this moment, what is important is to, select well what really can be merchant and what is too high, like, LCOE to to be merchant. Because it's clear that the pressure on the electricity price brings all of us to build the plant with low FCOE to be able to stay well on the market, to be able to contribute really to reduce the boom price without reduction of our marginality.

1:16:12 And then the the best way is, to be able to build well, to build a plant with low, SUV. That means that to reduce the cost of, of, land, of, authorization, permitting, APS, and so on. So all the supply chain that reduce the final cost of energy because, the solar plant or also, the competition in the poll between some China's players and the historical AU is working and to reduce reflection also in this case. So, to close, surely, we are absolutely able to deliver our 300 megawatts every year starting from, through a regime, I think, from '28 to '29.

1:17:15 In this moment, for example, we have, under construction 100 megawatt of, solar plant in in the the North of, Trinidad and As we have seen, we delivered 35 new megawatt of wind capacity. So also in this alpha, '26, the the new quantity of renewable, is more than 100 megawatt. Yeah. I will answer to your last question regarding the cost of debt. We closed the first half with the same cost of debt as we closed the fiscal year '25.

1:18:04 That is 2.7%, and we are expecting to maintain it for all the year '26 considering the fact that we are funding ourselves with an average cost in line with our quantities as you've seen as the result of the the cash flows analysis, but with a slightly lower or or the same cost we already experienced in the first half of the year. We are also proactively managing the cost of that, taking some position on the market with some swap activities.

1:18:56 And this also help us to lower the impact of the cost. So we are comfortable about the future resiliency of the cost. I have to say also that generally speaking, the weighted average cost of capital has been lowered in such a way. And this give us the opportunity to stay currently to the spread of 200 basis point between the work with the return the average return of our capital allocation, our projects.

1:19:49 Thank you. At this time, we will not be taking any further questions. I will therefore hand the conference back to the speakers for any closing comments. So thank you everyone for participating to the first half results. If you need any additional follow-up, please contact the IR department and happy summer break to everyone. Bye bye. Thank you. Bye. Thank you very much.