Ascopiave SpA

MIL:ASC

Earnings Call Transcript 2021-Q3

[Operator]

Good morning. Here is the operator of Chorus Call. Welcome to the presentation of the results as of 30th September 2021 of Ascopiave. [Operator Instructions]

Now Dr. Nicola Cecconato, the Chairman and Chief Executive Officer of Ascopiave will give a speech.

[Nicola Cecconato, executive]

Good morning, everyone. I will start with a summary of the economic and financial results as of 30 September 2021. Let me go to slide, Page 4. The slide illustrates the results. The slide illustrates the corporate structure of the group as at 30 September 2001 (sic) [ 2021 ] as it appears following the reorganization deriving from the Ascopiave-Hera partnership and [indiscernible] transactions completed in 2020.

Ascopiave has acquired 5% of the company listed in Acsm Agam S.p.A. active in the utility sector, and 100% of Cart Acqua S.r.l., technological partner of Cogeide S.p.A., which operates in the management of the integrated water service in 15 municipalities of the province of Bergamo. With reference to the energy sector, it should be noted that in September 2021, EstEnergy purchased 11% of Ascotrade from Bim Gestione Servizi Pubblici and now it controls 100% of the capital.

Slide on Page 5, consolidated income statement of the first 9 months of 2021. During this period, the group achieved revenues of EUR 99.7 million, achieving a gross operating margin of EUR 49.5 million and an operating result of EUR 22.9 million. The balance between financial income and expense shows a positive value of EUR 2 million, of which EUR 3.5 million relate to dividends received by the invested companies Hera Comm S.p.A., EUR 2.7 million, and Acsm Agam S.p.A., which is EUR 0.8 million. The income deriving from companies consolidated using the equity method in the first 9 months of 2021 equal to EUR 10.5 million is a representative of the prior quarter result of the equity investment held by Ascopiave in the EstEnergy Group, EUR 10.3 million and of the prior quarter result of the investments held by Cart Acqua and Cogeide, EUR 0.2 million.

Taxes beyond the income statement were EUR 5.7 million, resulting in a tax rate of 26.8%, a value calculated by normalizing pretax result of the effects of the consolidation of the company's consolidated with the equity method and of the dividends received on the equity investments held in Hera Comm and Acsm Agam.

Slide on Page 6, consolidated balance sheet. As at 30 September 2021, the group has invested capital of EUR 1.186 billion. This consists of EUR 34 million from tangible fixed assets; EUR 634.3 million from intangible fixed assets; EUR 511 million from the value of minority interest held in EstEnergy, EUR 424.2 million; Hera Comm, 54 million; Acsm Agam, EUR 24.9 million; Cogeide, EUR 7.9 million; EUR 34.4 million from other fixed assets; for EUR 28.2 million from the negative balance of working capital items and provisions set aside.

The intangible fixed assets shown in the assets equal to EUR 634.3 million mainly consists of gas distribution networks and plants on to the tune of EUR 572.8 million, and goodwill recognized following business combination of EUR 49.3 million. The net financial position is equal to EUR 334 million and records a decrease of EUR 4.4 million compared to 31st of December 2020. The debt-equity ratio as of 30 June 2021 is 0.39.

Companies consolidated on a line-by-line basis, slide on Page 8, operating data. As of 30th September 2021, distribution companies managed approximately 776,400 users. In the first 9 months of 2021, the group distributed 1.069 billion cubic meters of gas through its networks, amounting to plus 13%.

Slide on Page 9, revenue bridge. Revenues equal to EUR 99.7 million, show a decrease of EUR 29.7 million due to the reduction in revenues from energy efficiency certificates for EUR 31.5 million, a change mainly explained by the lower targets for the year in 2021. The growth in other revenues, EUR 1.9 million.

Operating results slide on Page 10. The operating result equal to EUR 22.9 million, show an increase of EUR 2.9 million due to the increase in depreciation of EUR 1.4 million, the reduction in net operating costs of EUR 4.3 million.

Slide on Page 11, tariff revenues and other net operating costs. Tariff revenues from gas distribution amounted to EUR 81.6 million, in line with those of the same period of the previous year. Net operating costs equal to EUR 32.1 million, recorded a reduction of EUR 4.3 million, determined by the cost, net operating result, lower personnel costs, greater margin on the management of energy efficiency certificates for EUR 2.1 million; lower contributions for safety (sic) [ security ] incentives for EUR 0.4 million; higher [indiscernible] consultancy for EUR 0.6 million; lower provisions for risks of EUR 0.4 million; lower nonrecurring costs of EUR 1.6 million; and lower charitable donations for EUR 0.2 million; higher revenues from services from distributors of EUR 0.7 million; other changes for EUR 0.8 million.

Slide on Page 12, number of employees. As at 30 September 2021, the group had 475 employees, an increased 12 compared to 31st of December 2020.

Slide on Page 13, cost of personnel. Personnel costs equal to EUR 13.6 million, recorded a reduction of EUR 0.1 million due to the higher cost of capitalized labor for EUR 0.7 million. The higher cost of current personnel was EUR 0.6 million.

Slide on Page 14, investments. Investments made in the first 9 months of 2021, equal to EUR 33.7 million, [ record ] EUR 7.6 million. Most of the technical investments concern the development, maintenance and modernization of gas distribution networks and plants for EUR 24.2 million. Of which, EUR 9.2 million in connections; EUR 14.4 million in expansion and upgrading of the network; and EUR 0.6 million in reduction plans. Investments in measuring equipment amounted to EUR 8.3 million.

Slide on Page 15, net financial position and cash flow. Net financial position as at 30 September 2021 was equal to EUR 334 million, down by EUR 4.4 million compared to 31st December 2020. During the first 9 months of 2021, cash flow generated financial resources to the tune of EUR 56.2 million; net investment cash flows for EUR 33.4 million; management of net operating working capital generated resources of EUR 1.3 million; the management of fiscal net capital absorbed resources for EUR 6.1 million; dividends collected from investee companies resulting in financial income of EUR 20.9 million; asset management, distribution of dividends to shareholders and purchase sale of treasury shares involved financial outflows of EUR 34.4 million.

Slide on Page 16, the financial position and cash flow. Bank debt 30 September 2021 was EUR 334.8 million. [ 0.1% ] of the loans are at a variable rate, and the weighted average cost of debt in the first 9 months of 2021 was 0.27%.

EstEnergy, economic and financial data, slide on Page 18, financial and economic data. The slide illustrates the consolidated income statement for the first 9 months of 2021. Consolidated balance sheet EstEnergy with the weighted data of Ascopiave's stake in the company, the competitive economic data for the first 9 months of 2020 and the balance sheet figures as of 31st December 2020 are also illustrated. In the first 9 months of 2021, EstEnergy achieved revenues of EUR 279.9 million, achieving gross operating margin of EUR 27.8 million and an operating result of EUR 14.9 million.

As of 30th September 2021, EstEnergy holds invested capital of EUR 290.7 million. Loans consist of EUR 1.6 million from tangible fixed assets, EUR 313.3 million from intangible fixed assets; EUR 8.3 million from the value of equity investments; EUR 0.2 million from other fixed assets; and EUR 32.7 million from the negative balance of the items of working capital and of the provisions that have been set aside. The net financial position is positive, for cash, EUR 51.1 million.

I have finished my presentation.

[Operator]

[Operator Instructions] The first question is from Robert Letizia of Equita SIM.

[Roberto Letizia, analyst]

About the indications that we received last year about some interest in the assets, can you give us some guidance about your joint ventures, joint participation in gas tenders that you have won? What is the financial involvement of Ascopiave in future investments? Can you give us a guidance about Hera consulting documents, which ought to be published today? Can we anticipate -- since we're already in mid-November, can you give us a guidance on profits and debt? And another question on debt. Please, can you tell us how you are going to cover your debts, especially the pre-aging on your loans?

[Unknown Executive]

Thanks a lot for the questions. Regarding the tender for the assets on gas distribution, you know there are assets distributed principally on the most significant part in North Italy in Lombardy, Veneto, Friuli-Venezia Giulia and Emilia. And there is another share, another portion, a significant portion, less relevant in South Italy in Campania, Molise. So it is obvious that the split -- the breakdown of our investments will be based on what operators need actually, the operators that work with Ascopiave in a joint venture. And the breakdown will also depend on the geographical location of where we are going to invest. We believe that all our partnerships can bear fruit in the consortiums, in the associations, in the joint ventures that we have signed. We -- our main goal is production generation of value.

And now our investor relator, Dr. [indiscernible], will speak to you.

[Unknown Executive]

Regarding the regulatory aspects, we are waiting for what the authority has got to say. Over the past weeks, we have had the opportunity to liaise with the authorities and to tell them what our demands, our proposals, our requirements are. So -- and the authority, we found them quite keen on listening to our demands, to our requirements. Our conclusions, the evaluations, we proposed it to the authority. As you can imagine, all of the visions that we proposed was to give them some assistance, our conclusions based on experience. So the authority was very -- let us -- are very helping here, you can say.

So now, of course, we have to wait for the documents. Let's see what documents they are going to publish at the end of the year. We are also looking forward to listening, to reading what the authorities have got to say on that. So now based on the documents that the authority is going to issue, we hope that they're going to be, the authority, is going to be very specific and give us the right estimate of how exactly the market should be. And in conclusion -- and what we will do, obviously, will be in compliance with what authority issues.

As you know, you know exactly how that works, what are the terms and conditions. You know that the trade associations in the sector have all availed themselves of expert consultancy in the sector. So we should say that also the level of the interaction has gone up. So now let's see what the authority has got to say.

[Riccardo Paggiaro, executive]

I'm the CFO of Ascopiave. About 2021, as you know, we don't give any forecast. But now that we work with institutions, the forecasts for the year are also going to -- are easy because from the month of September, you can -- based on the information that you have, you can easily draw the conclusions.

Regarding the debt, the 2 year -- the length of our debt -- of the repayment is 2 years. As of 30 September, we -- in the month of October, as of 13th of October, we decided to restructure our debt. We have issued bonds for EUR 25 million. We have -- the bonds have been issued with an average length of 8 years. So the total is -- the global total is $200 million. And there is still room for EUR 150 million. So when -- since we -- if we have got to issue bonds for the remaining EUR 150 million, we can -- we have room to do it.

Okay. You have been reconnected. So you have already spoken about the private placement. So that's what I wanted to say.

[Operator]

Next question is from Emanuele Oggioni.

[Emanuele Oggioni, analyst]

I have a couple of questions. The first thing is about the loss of EUR 4 million in equity participation and relating to outlook for 2022 and energy efficiency projects, what impact can they have on revenues? So what are the information you can give us in 2022?

[Riccardo Paggiaro, executive]

I'm the CFO. Regarding the negative impact in this period, as you know, EstEnergy, which had a stake in Ascopiave trade now has a minority stake. So this had an influence on the derivatives. And so there was this consequences on the balance sheet. So we can say is, as we said in the slides, EstEnergy had also then done a good result. It is growing. As you see in the accounting representation, you have to go into the details. And in the past 3 months, there have been some impact. But EstEnergy, anyway, doing well.

The fiscal -- yes, yes, we can hear you. As I was saying, the accounting impact has had -- there's been an -- on the network balance sheet, on the dividends from EstEnergy. So on the delta -- on the balance sheet delta, there has been an impact. So the variation, the delta variation, could have been connected to the accounting principles. So maybe you get the impression that there has been a negative result, but in reality, it's not so. The contribution of EstEnergy will become dividends by spring 2022.

EstEnergy, in 2020, has had some operations which purely weighed on its balance sheet. But by the beginning of 2022, these investments will bear fruit as expected, as forecasted. So all the investments that we've done have been spread out in 2021 on the accounting tables. So giving the impression that there has been a negative result, but it's not so.

[Emanuele Oggioni, analyst]

So you mean to say now that all the negative impact of the investments is over? And from next year, EstEnergy is going to have positive results?

[Riccardo Paggiaro, executive]

Yes. Yes, absolutely. So I can assure you that from the operating viewpoint, EstEnergy is going well. In our balance sheet, you will see that everything is going well from the beginning of 2022. EstEnergy and subsidiaries have been represented in the balance sheet tables in a prudential manner. The balance sheet of EstEnergy shows a big reserve that has been set aside, but it is going to have no negative impact on the income statement. Of course, we don't have -- we cannot do 100% sure what happens in the next 3 months. It depends on the climatic conditions. If it's going to be very cold or not, but all said and done, we are positive.

[Operator]

Next question is a follow-up from Roberto Letizia from Equita SIM. Sorry, he has canceled the question. [Operator Instructions]

Next question is a follow-up from Emanuele Oggioni.

[Emanuele Oggioni, analyst]

What I wanted to know -- I wanted to know about the energy efficiency impact on 2022.

[Unknown Executive]

The energy efficiency certificates, as we said in the document that had an important evolution in 2021 in the month of May, there was a decree about a significant reduction in the obligations that distribution companies are bound to have. So compared to the old system, all certificates that we were bound to follow this year, the legislation has changed, and it has -- and the obligations for companies has been made easier. So this has had a positive impact on our performance.

Historically, the energy efficiency certificates had a negative balance historically because the price that we paid for the purchase was higher than the performance. But now that the legislation has changed, things have turned positive for us. And over the past weeks, there's been a positive contribution from the authority and these positive obligations will translate into cash over the next few weeks. And it has actually been higher than what we expected.

For the next years, the number of certificates that we have got to present is going to be lower compared to the past. So we don't think it's going to have any negative impact on our income statement.

[Operator]

Mr. Cecconato, there are no further questions.

[Nicola Cecconato, executive]

Okay. Thank you very much. If there are no questions, so we can close our presentation here.

[Operator]

This is Chorus Call, the conference is over. Thanks a lot. You can disconnect your phones. Thanks a lot.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]