Ascopiave SpA

MIL:ASC

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Good morning. This is Chorus Call. Welcome to the presentation of the financial results of Ascopiave. [Operator Instruction] Now Dr. Nicola Cecconato, Chairman of Ascopiave, is going to talk to you.

[Nicola Cecconato, executive]

Thank you. Good morning, everyone. Let me start with the consolidated results as of 31st March, 2024, and the comparison with 31st March, 2023. Slide Page 4, result of Ascopiave Group of 31st March, 2024. The slide shows the [ benefit ] of consolidation has undergone some changes compared to the first quarter of 2023 due to some extraordinary transaction finalized last year.In January [ 2023 ] [ as ] part of an overall territorial rationalization of its portfolio of gas distribution concession, [ Iren ] Group acquired the minority shareholding, Romeo Gas and transferred it to the business activity related to the management of a number of concessions in Piedmont, Liguria and Emilia-Romagna. In March 2023, Ascopiave acquired the majority stake in Asco TLC, [ a ] company operating in the information and communication technology sector..In June 2023, the company's Board of Directors approved the plan for its merger by incorporation into our control, which was subsequently approved by the shareholders' meeting of the company's involved with effect [ from ] 1st October, 2023. Following the transaction, the group holds 11.35% of Acantho's capital. In November 2023, Ascopiave partially exercised its put option on the EstEnergy shareholding, earning 15% of the company's capital through Hera Comm and thus reducing its shareholding from 40% to 25%.Lastly, in the same month, the group acquired the minority interest [ held ] by third-parties in Salinella Eolico S.r.l. 40%, Serenissima Gas, 20.63%, becoming the sole shareholder of both companies.Slide Page 5, consolidated income statement for the first quarter 2024. In the first quarter of 2024, the group realized revenues of EUR 47.4, achieving an EBITDA of EUR 23.3 million and an EBIT of EUR 10.9 million. The balance of financial expenses and income [ rode ] a negative value of EUR 4.5 million, up by EUR 1.8 million compared to the first quarter of 2023.This change is mainly explained by the increase in interest rates payable. Income from companies consolidated using the equity method amounting to EUR 2.8 million is representative of the pro rata result of the shareholdings [ held ] [ by ] Ascopiave Estenergy Group and [ JV ] increased by EUR 2.2 million compared to the same period last year.Taxes weigh on the income statement by EUR 2.5 million. The tax rate calculated by normalizing the pre-tax result in the effects of consolidation of the company consolidated using the equity method and the capital gain realized in 2023 as part of the rationalization of the cash distribution concession [ goes ] from 41.8% as of the 31st March, 2023 to 38.9% as of the 31st March 2024.Slide Page 6, consolidated balance sheet as of 31st March, 2024. As of 31st March 2024, the Group has invested capital of [ EUR 1.273 billion ]. The [indiscernible] consist of EUR 154.7 million in tangible fixed assets, EUR 770.3 million from intangible fixed assets, EUR 311.8 million from the [indiscernible] in Estenergy, EUR 206.3 million, Hera Comm, [ EUR 53.3 million ], Acinque, EUR 21.6 million, Cogeide, to EUR 8.2 million and Acantho, EUR 22.3 million. EUR 42.9 million from other fixed assets, EUR 6.3 million from the negative balance of working capital items and provisions.Intangible assets shown under assets equal to EUR 770.3 million, consists of gas distribution networks and plants owned by the Group, EUR 693.3 million, could be recognized foreign business combinations EUR 61.7 million. Tangible assets consists mainly of real estate and the value of renewable land between production facilities. Shareholders equity as at 31st March, 2024, amounted to EUR 861.3 million, of which EUR 9.6 million was attributable to minority changes. Net financial position amounted to EUR 412.2 million and increased by EUR 22.8 million compared to the 31 December, 2023. The [ debt-equity ] ratio is 0.48.Slide Page 8, operating data in gas distribution. As of the 31st March, 2024, the Group's distribution companies managed approximately 872,800 customers, decrease of 0.2% compared to 31st December, 2023. In the first quarter of 2024, [ electricity ] production was [ 597 ] million cubic meters of gas.Slide Page 9, operational data renewable energy. The Group has 29 plants for the production of electricity from renewable hydro and wind power and installed capacity of 84.1 million, 1 megawatt. In the first quarter of 2024, electricity production amounted to 48 gigawatt [ to reach ] the regular rainfall and the commissioning.The commissioning of a new wind farm in Calabria also contributed. Like the extent revenue development, revenues of EUR 47.4 million showed an increase of EUR 6.7 million determined by the increase of gas distribution tariff revenues EUR 4.1 million, growth revenue from the [ sale ] of electricity from renewable sources EUR 3.7 million, growth of revenue from energy efficiency certificates, EUR 0.1 million and the decrease in other revenue, EUR 1.2 million.Development operating results Slide Page 11. The [ operating ] result EUR 10.9 million has an increase of EUR 2.5 million as a result of increase in gas distribution tariff revenue, EUR 4.1 million, growth in revenues from the sale of electricity from renewable sources, EUR 3.7 million, the increase in depreciation and provisions of [ EUR 0.6 million ], growth in net operating cost, EUR 4.7 million.Tariff revenues from the distribution of sale of renewable energy, Slide Page 12. Gas distribution tariff revenues amount to EUR 283.8 million, showing increase of EUR 4 million compared to the previous year. EUR 1.9 million for the change in the rate of remuneration of the regulatory invested capital, EUR 1.7 million from the monetary adjustments of the various tariff components.Renewable energy sales revenue of EUR 6.2 million increased by EUR 3.7 million. This is due to a growth in production. Revenues realized in the segment in the first quarter of 2023 were affected by the government audit price containment measures which is to take effect on the 1st July, 2023.Slide Page 13, other net operating costs. Net operating core expenses EUR 16.6 million, increase by EUR 4.7 million due to the change in the following revenue [ cost ] cycle: increase in concession fees to municipalities, EUR 0.4 million; higher margin on energy efficiency bond, EUR 0.1 million; lower consulting costs, EUR 0.1 million; lower personnel cost, EUR 0.3 million; lower gas and electricity utility cost, EUR 0.4 million; higher meter reading cost, EUR 0.4 million; capital gain recognized in the first quarter 2023 for the sale of certain assets and distribution [indiscernible], EUR 4.1 million.Loss of revenue realized in 2023 for services landed in connection with the [indiscernible] transaction, EUR 0.6 million. Lower other non-recurring costs, EUR 0.7 million. Other changes with the negative impact, EUR 0.8 million.Number of employees, Slide Page 14. As of 31st March, 2024, the group had 493 employees, a decrease of 10 from 31st December, 2023.Slide Page 15, personnel cost. EUR 5.1 million, the cost of personnel decreased by EUR 0.3 million due to an increase in current costs.Slide Page 16, capital expenditure. Tangible and intangible assets realized during the year amounted EUR 15.2 million, increased by EUR 1.3 million. Most of the technical investments under development, maintenance and modernization of gas [ distribution ] networks and plants [ was ] EUR 10.1 million, EUR 4 million in connections, EUR 5.5 million in network expansion and upgrades, EUR 0.5 million in reduction plants.Investment in [ meters ] [ expense ] amounted EUR 3.4 million, while investments in the renewable energy sector related to the development of new photovoltaic park in Veneto and the completion of the wind farm in Calabria amounted to EUR 1.3 million.Net financial position and cash flow, Slide Page 17. The net financial position 31st March, 2024, was EUR 412.2 million, a decrease of EUR 22.8 million. In the quarter, cash flow generated financial resources of EUR 16.3 million. Net investments in tangible and intangible assets result in cash outflows of EUR 15.2 million. Net working capital management absorbed resources of EUR 24 million.Net financial position and cash flow, Slide Page 18. Financial debt as of 31st March, 2024, amount is EUR 409.3 million. The loans are 50% variable rate and the weighted average cost of debt in the quarter was 3.41%.EstEnergy, Slide Page 20, income statements and balance sheet. The slide shows the income statement for the first quarter of 2024 and the balance sheet as of the 31st March, 2024, Estenergy Group. Comparative income statement figures are also stated for the first quarter of 2023 and balance sheet figures as of 31st December, 2023. In the quarter, EstEnergy realized revenues of EUR 377.2 million with an EBITDA and EUR 31.5 million and an EBIT of EUR 16.6 million.As of 31st March, 2024, [ EstEnergy ] has invested capital of EUR 428.8 million, which consists of EUR 5.4 million with tangible assets, [ EUR 624.4 million ] in intangible assets, EUR 18.5 million [indiscernible] participation, EUR 0.7 million in the other fixed assets and EUR 220.2 million in the negative balance of working capital items and provisions. The net financial position was positive cash by EUR 225.1 million.I have finished the presentation of the first quarter of 2024. Now we can start the q&a session.

[Operator]

[Operator Instructions] First question is from Enrico Bartoli, Mediobanca.

[Enrico Bartoli, analyst]

Can you give us an outlook for the full year 2024? Some indication, some guidance on the [ rub ] and how is your take on the renewable energy? Please tell us something also about the white certificates. Regarding Estenergy there has been an improvement in results. Can you tell us as to what has contributed to it? How can you explain the performance of Estenergy for the full year? And then give us an update on the put options? If you would like to exercise it in the year 2024 and the possible timing about your next steps?

[Nicola Cecconato, executive]

Thank you for your questions. I will start with the put option. As we have already said in the past, the put option depends on the possibility of reinvesting this months, which will then be liquidated. Consequently, from the moment we are verifying the possibility of realizing on our investment projects. If this investment project are successful, we will exercise the put option. We will exercise the put option anyway. Anyway, we will exercise the put option undoubtedly by 31st December, 2027.Relating to Estenergy results, since we are in a market situation where the price is under control and the volatility of the previous [indiscernible]. The results are aligned with the budget of Estenergy. The results can be -- we are confident that we can have a good results for the rest of the year. Of almost all the results will be [ odd ] as per expectations.Outlook for 2024, regarding distribution on the like-to-like basis, the result should be positive. We have been looking for new investment opportunities in all fields. If there is a possibility of investing also in this field of distribution, we will not hesitate and our results will surely improve.Relating to renewable energy, as you know, we have started a diversification policy of our business relating to gas distribution, relating to hydroelectric plants and relating to renewable energy. There haven't been any government measures even if prices have come down significantly compared to previous financial years. There's been an important recovery of production and the drought situation as we no longer [ existed ]. Because of abundant rainfall, prices as well as volumes in these situations can be maintained until the end of the year.Relating to the question that you asked before, there has been some variations in the results. There will be no impact on the margins. In 2024 the margins and any variations has been 0. So nothing will have an impact worthy of mention.

[Operator]

Next question is from Letizia Roberto, Equita.

[Roberto Letizia, analyst]

The first is your illustration on your debt. What is the trend on working capitals? What is your view on the investment that you think you will do in 2024? And what can be the variation compared to 2023 on an annual basis? What about your tax credits and the super bonus that the newspapers were speaking about this morning? What's the volume of your tax credits? Can you give us some indications on tax credits? And what about Estenergy? So what's going to be the profit of Estenergy on an annual basis? What is your comment on [indiscernible] Gas, Reti Gas? Do you have any investment opportunities along with [indiscernible] Gas and with [indiscernible] Gas? So considering they're going to have a big portion of the market share, if the 2 of them start collaborating together?

[Nicola Cecconato, executive]

I'll start with your last question about [indiscernible] Gas and [indiscernible] Gas. About [ Edigas ] issues, there could be an interest on our part about the acquisition of some assets that can be sold, disposed off by these companies because of [ Reti ] Gas issues. Also, the geographical fact is also very important.We want to know if geographically it is viable for us. We cannot have investments a bit in the north, a bit in the south. We need to optimize a rational line, our investments. The answer is yes, we could be interested in buying the assets that [ Reti ] Gas disposes of.Relating to questions on indebtedness, its EUR 412 million, an increase of EUR 12 million compared to 2023. On 31st of December, we had an operation relating to indebtedness in order to reduce our level of debt. So I would like to know -- to tell you that we have a liquidity of EUR 16 million. It can -- this is related to the factoring issue. And then we had investments of EUR 15 million in gas distribution.So the debt has been influenced by the performance and the net current assets. About December 2023, there were some tariff components that had a peculiar performance in 2023. So we had a [indiscernible] graduate, thanks to it. So now we are gradually recouping. So we don't think there will be significant variations relating to current assets.Relating to investment, we have carried out investments for EUR 90 million. And the gap is to be filled where there has been a constant trend, which helps us to invest, because the trend is very steady relating to renewable energies.About photovoltaic park in the province of Treviso, the photovoltaic park is really a good investment for us. So now we also depending on some clearances from the government. Fiscal credits, tax credits as we have had a bonus in the documents. So there were some disputes with the inlet revenue service, which we would like to settle first.

[Roberto Letizia, analyst]

What I want to know is about the tax credit. How are you going to manage it if there is a new regulation on tax credit and renewable energy? What is your -- how much would you like to invest in this field?In photovoltaic plants we have been using -- we are using only decommissioned industrial areas. So even the 50 hectare plants that we are building in the province Treviso, it's in a decommissioned industrial area. The [indiscernible] of photovoltaic, the investment that we have made. We have had agreements with the association of farmers. So anyway, this is not something which relates to us of our performance. Performance and tax credit, we have already used it. It's not an issue that can affect our tax credits or our economic performance.

[Operator]

[Operator Instructions] Dr. Cecconato, the questions are over.

[Nicola Cecconato, executive]

Thank you. Thank you very much. Have a great day.

[Operator]

This is Chorus Call. The conference is over. You can disconnect your phones.[Statements in English on this transcript were spoken by an interpreter present on the live call.]