ERG SpA

MIL:ERG

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, and this is the Chorus Call conference operator. Welcome, and thank you for joining the ERG First Quarter 2020 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Luca Bettonte, CEO of ERG. Please go ahead, sir.

[Luca Bettonte, executive]

Good morning, and thanks in advance for coming to this call conference related to our first quarter results. Here with me, as usual, is the Corporate General Manager, Paolo Merli.

First of all, in order to comply with the government decree to limit the diffusion of COVID-19, we are talking to you from different locations, exploiting, at most, our remote connection system. Anyhow, I apologize in advance for any potential misfunctioning during the webcast. However, if it might be the case, our Investor Relations Manager is at your disposal for further, deeper and clearer information.

Let's start with Chart #4 that reports the list of actions that we have implemented in order to take on virus outbreak while granting business continuity in accordance with the authority instructions and in agreement with trade unions.

We produce power. Then since the day one of the outbreak, we were asked to keep producing electricity, thus our first and main goal was to implement all safety measures and to allow ERG's people as possible to run our assets to keep working safely. We did our best for both individual protection tools, timely supplied, and by adapting existing operating procedures to face the new risks.

Our plan have worked with no interruptions so far, and we have had no contagions on the job so far. Keep our fingers crossed.

At the same time, we extended ahead of the legal provisions the existing smart working to as many employees as possible without incurring any operating problem. Just to say that all our people that were not deemed essential to run the plants, almost 100% of office staff, accepted immediately this way of working. Today, about 70% of ERG's employees are still at home. Despite our Phase 2 has begun, they still prefer to keep working in their houses.

ERG neither applied for any supporting measures promised by the government, such as Cassa Integrazione and the like, nor reduced, even temporarily, the number of employees. On the opposite, in March and April, we hired 11 people, and we also provided that our people with a COVID-19 health insurance.

Moreover, in order to fight the war directly involved and in containing the outbreak of COVID-19, ERG donated EUR 2 million to the health care organizations located in the territories where we operate our assets. San Quirico, our main shareholder, did the same for EUR 1 million for the health care system in Liguria. While ERG's people donated some 2,300 hours of their job to Civil Protection Department. On the one hand, we could say that we replied in due course to this unexpected emergency from health and care perspective, granting business continuity. On the other hand, COVID-19 outbreak could affect the renewable industry going forward. And making reference to ERG, we will discuss it later.

On Chart #5 now. There is a snapshot of some impacts of COVID-19 outbreak on the power industry so far. As you see, it has been bringing about a significant reduction of the fixed demand in both Italy and the rest of the world, with an increasing weight of renewable production in the supply mix but with a drop of power prices in Italy as well as in the rest of Europe. Moreover, the lockdown in all European countries is unevenly affecting the job of the authorities that are core for issuing the findings and the authorization to proceed with the development of wind farms, affecting TSO operations and investment deployment and affecting some construction companies and component suppliers to provide their services and products in due course.

This new normal, tougher environment, in our opinion, has the potential to negatively influence the renewable industry performance going forward. That will also depend on how long the COVID-19 will keep spreading for. In this respect, we have made our in-house analysis as we determine to what extent ERG performance for 2020 could be affected by. We will see the outcome later where we will be discussing with you our revised guidance.

On Chart #6 now. As usual, I'll give you a quick overview of the main figures of the first quarter, while Paolo will take you through them in depth.

To develop an understanding on the first quarter performance, it is important to look at it amid the new context drawn by COVID-19 outbreak. This effect, it was underlining that energy prices in Italy dropped by 33% in the quarter, and that was a similar trend in Europe-wide.

Natural gas price had reached its lowest level in the quarter, although, in April it went down more. Power demand dropped all across Europe. Market clean spark spreads of thermal power plants became negative in March. As for our -- as for the ERG performance, we had, in Italy, significant lower wind availability than last year. But I remind you, it was one of the company -- one of the best wind quarter ever.

In wind abroad, we had a significant better performance than last year due to both higher wind availability and larger installed capacity. Hydropower kept suffering of low water availability. The production has been slightly higher than last year, but still way below its historical 10 years.

Clean spark spread has been in line year-on-year. Solar power performance was similar to what achieved 2019. Italian power price performance trend have been partly offset by higher GRIN unit value and by a heightened strategy executed in the previous 3 years.

All in all, EBITDA in the first quarter '20 came in at EUR 156 million, minus 4% versus last year and in line with management expectations. I would say that ERG's business resilience is confirmed also in a quite tough and uncertainly -- uncertain scenario.

Going to the profit and loss. Net profit came in at EUR 53 million, I'd say, like last year. Lower EBITDA and higher depreciation were offset by lower financial charges and taxes, the latter, thanks to the reintroduction of the ACE in Italy. The net indebtedness was EUR 61 million lower than at the end of 2019. We invested some EUR 60 million along the line of our business plan. Better trend, net working capital and the reduction of financial charges have allowed us to reduce our net financial position.

And now, I will hand you over to Paolo for his analysis.

[Paolo Merli, executive]

Thanks, Luca, and good morning, everybody. I hope all of you are well and safe. So let me start as usual by commenting on the price scenario over the period, which, as Luca mentioned, has been progressively penalized under the lockdown measures. I'll try to provide you with all the insights needed to better understand the underlying performance of our business in the period.

On Page #8, power demand in Italy was down 5% year-on-year in Q1, so quite a huge drop, very much related to the lockdown. Here, you see the trends for the different sources covering the demand. Basically, they were all down year-on-year, with the exception of hydro whose production was up 17%. So this trend in hydro is explained by 2 simple reasons. An easy comparison, as last year was quite weak for every plants across the countries, but also the heavy rains over the period -- in the period in the North of the country.

Looking at our assets. Hydro was up only 7% year-on-year, so less than the national average and well below our plants’ historical level as in South and Central, the dry season, unfortunately, continued.

As regards wind, our production declined 26%, which may seem a big number, but more or less, is in line with the trend in the country, net of the new capacity additions by the operators.

Solar, slightly better. While as far as the CCGT plant is concerned, our volumes were up year-on-year due to the specificity of our plant, which has got, as you know, a quite important captive markets toward the industrial side in Priolo, which makes the plant, at least for a portion, say, a sort of must run.

Electricity prices in Italy. The chart, I think, is self-explanatory, fairly price scenario as a consequence of the downturn. Say that the all-in price from EUR 152 to EUR 139. I'll let you notice that went down less in relative terms to PUNs given the higher value of incentive, which is calculated, as you know, on the basis of the previous year's average national price. Given the current trend, let me say, the value of incentive is expected to be even higher next year.

But let me go back to first quarter. It's important, I think, to underline here that most of the merchant effect, say, roughly 70%, was neutralized by the hedging actions taken over the period.

The CCGTs clean spark spread you see here is broadly in line year-on-year, the euro. This includes the premium recorded in Sicily with EUR 6 per megawatt hour, which is a number, more or less, in line with the previous year. I think it's important, though, to underline the fact that in March, the business environment for the CCGT worsened significantly given the COVID-19 crisis.

Now let me comment on prices abroad. In the graph at the bottom right of the chart, you can see here the average reference selling prices for our productions country by country. I think it's worth noting the significant downward trend in prices in Romania where there is a green certificate mechanism in place, so discounting all the weaker merchant price on top of the green certificates. And in Bulgaria, where there is a feed-in tariff mechanism where the value of the production is inversely related to the volume. That explains, say, the lower price. While in France and Germany, as you know, we got a fixed feed-in tariffs. So no impact, say, from the current scenario.

Now I move to Page #9, commenting on economics. In a nutshell, EBITDA at the end closed at EUR 156 million, down 4.5% year-on-year. The main items here are the one maybe are already clear but wind -- weaker wind in Italy, coupled with a very weak price scenario, as already commented. Conversely, fortunately, also contribution from wind abroad was much stronger year-on-year, thanks to our larger installed capacity in France and Germany, coupled with better wind conditions, say, more or less across all the countries we are in outside Italy.

Hydro, slightly better year-on-year. But say, given the very easy comparison, that's not the performance we hoped for with volumes still well below historical average and well below our budget. Contribution of solar, more or less in line with last year. While CCGT is down as a result of the lower contribution of white certificates. So this is a -- was already known in our budget, for sure, but this is the main effect explaining the couple of millions less compared to the previous year quarter.

I go now segment by segment, starting with wind, wind results that are on Page #10. EBITDA was EUR 109 million, down 5% year-on-year. I think I've already explained the reasons, weaker wind in Italy, weaker price scenario, merchant price scenario in Italy, fortunately, in part offset by the higher contribution abroad for the higher installed capacity.

Just to give you the order of magnitude, the new assets brought in our P&L about EUR 10 million of fresh EBITDA versus the last year quarter.

Now a very quick overview on production, but I say, I've already said just the occasion to say that, unfortunately, weak wind conditions continued in April. But this is going to be totally factored in our guidance that Luca is going to comment later on. Conversely, production overseas was extremely positive in all of the country in which we operate, though I'm afraid to say that in April, that was not the case. But again, this is going to be captured by the updated guidance. So no more to say here.

Let us move on, on Page #11, commenting on solar. I think here, the only value-added comment I can make is explaining why EBITDA is slightly lower year-on-year despite the slightly higher volumes. So the reason is simply related to FX: on one hand, the lower merchant price, net of hedging actions, which is slightly a negative effect; on the other hand, the lower value of incentive given the different production mix. So any -- say, each plant has got its own incentive scheme, so the total value, the unitary level, say, of incentives depends on the production mix. It's just -- so it happened that the plants enjoying higher incentive schemes produced relatively less compared to others during this quarter. So as a consequence of those 2 effects, the unitary revenues, on average, were about EUR 310 per megawatt hour in this quarter compared to the EUR 327 in the Q1 '19, so explaining all the gap in terms of EBITDA. Please also keep in mind that Q1, as well maybe Q4, for solar, is usually the weakest quarter given the typical seasonality.

So now moving on hydro. Here, EBITDA was EUR 24 million, up 2% year-on-year, driven by the higher volumes. But this is not of great satisfaction for us because, as I already explained, that although the volumes are up year-on-year, they are very well below, say, well below the -- our budget and the historical average considering that a very dry season continued over the last 9 months, I would say, but still in the first quarter of the year. Unfortunately, again, this dry season kept going in April. Let's see what's going on in May, which usually is a good month for rains.

As I said, the weaker price scenario didn't support either the economic performance for the reasons I've already, I think, very well commented. One positive piece of news is that our water reservoirs at the end of the quarter were still filled with an equivalent amount of energy of about 100 gigawatt hour versus the average level, so excess that we expect to use in the forthcoming months.

So moving on, CCGT plant on Page #13. EBITDA was EUR 15 million, down 11%. And as already said, the reduction in the EBITDA was mainly related or totally related to the reduction of white certificates as 1 of the 2 modules ended the incentivized period at the end of 2019. Please consider for your analysis that the phase-out of one of the two modules doesn't mean to cut in half the production of white certificates, rather you should consider a reduction for the full year more in the region of 30%. But again, all these effects are very well captured by the guidance revision, including the performance in April, which was severely impacted by the lockdown measures. But Luca will explain everything in a moment.

Let me now comment investments. I am on Page #14. We invested EUR 61 million against EUR 233 million in Q1 '19, when I remind you we had roughly EUR 220 million of CapEx in the solar business. As far as Q1 2020, CapEx has been spent in the following items: EUR 44 million in the M&A, which mostly includes the Trinity acquisition in France, 38 megawatts; and the acquisition of the authorization of Laszki projects in Poland, the 36 megawatts, which is now under construction. We spent about EUR 8 million organically in wind development, which include all the start-up phases of the construction of the 200 megawatts in U.K. and the 36 megawatts in Poland. A few millions were spent as preparatory jobs for the refurbishment that we expect to implement for module 1 of our CCGT plant, an investment that at the end will allow the plant to be eligible, the module 1 to be still eligible for another wave of white certificates as of 2023. And then finally, we spent also about EUR 5 million of maintenance CapEx spread across all our technologies.

Now moving to financials, commenting on P&L on a recurring basis. I'm on Page #16. Let me, as usual, remind you that these figures are shown on an adjusted basis, so without including the effects of IFRS 16 and 9 as we believe this gives you a representation that is more consistent with our cash profile. In any case, all the related effects of the 2 accounting principles are reported and I hope explained very well in details in our profit and loss statements.

So that said, let us continue. I've already commented on EBITDA. So going down, higher depreciation, mainly reflecting the higher installed capacity. Net financial expenses were at EUR 13 million, so a significantly lower number compared to the previous year. That was made possible thanks to the lower cost of gross debt, which went down quite considerably, mainly as a result of the swap of project finance with corporate debt at much better conditions. You remember the liability management program that we concluded over the course of 2019 and the parallel issue of EUR 500 million green bond in April 2019.

Taxes. Tax rate in the quarter was 22% against 27% in Q1 2019. This difference mainly reflects the reintroduction of the tax breaks known as ACE. But please consider, but I think you already know, that this positive effect will be reversed in Q4 2020 as last year, all the benefits associated to this tax break was released in the fourth quarter given the abolition of the law at the very beginning of the year, 2019, and then the reintroduction of the law at the end of 2019.

So looking at the full year, you should expect more or less a tax rate which is in line year-on-year. Minorities refer to the 21.5% stake in Andromeda held by Soles Montalto. And bottom line, say, the result, the adjusted net profit amounted to EUR 53 million, which was slightly, slightly down, or less in line with Q1 2019.

Finally, let's take a look at the cash flow statement for the quarter. I'm on Page #17. Your net financial debt closed at EUR 1.415 billion, down by EUR 61 million in absolute terms with leverage of 43% at the end of the period.

Touching on all the items from left to right. We have our EBITDA, the investments made over the period, the negative working capital trend, which is mainly related to the seasonality in the timing of cashing in incentives, which are stronger at year-end and weaker in Q1; financial charges and other items, the EUR 10 million, which are mainly related to cash flow hedge and other minority effects, cash flow hedge associated to the step down of the interest rate curve. So all these effects led to a net debt of EUR 1.415 billion, pretty much in line with our trajectory expected for the full year, even a little bit less as Luca will comment in a moment.

So I think I've touched all the relevant items and now ready to hand you over to Luca for his final remarks. Thank you very much.

[Luca Bettonte, executive]

Thanks, Paolo. It's time for the guidance to year-end that, to begin, it deserves a downward fine tuning in light of the COVID-19 outbreak. To this end, looking at the ERG business, we have put under discussion our original assumptions. For the energy prices trend, in light of the drop of both energy demand and commodities prices, let me anticipate that April was a very bad month in this respect.

Under discussion our original assumption for the timing and potential delays to get permits and authorization due to the reduced public entities workforce availability. The potential delay that TSO may have to meet the timetable to connect to the reconnection of our wind farms under construction, the timing and potential delays that our suppliers may have in delivering their products and services. We, as usual, have also factored in the new projection the performance we had in April that I inform you it was bad, mainly due to very low wind and water availability associated with a drop-down of energy prices and commodities. Let me drink a bit.

And the revised guidance for 2020. EBITDA would come in between EUR 480 million and EUR 500 million, down 4% versus the previous interval. Main reasons are energy prices have been revised downward: narrowing the price forward curve for 2020, production has been kept consistent with the initial forecast for the next 8 months to go, then consolidating a loss of production back in 2019 in the first 4 months of the year, particularly in Italian wind output and price reduction. Clean spark spread are still seen in line with budget and in contraction with 2019 for the remaining part of the year.

CapEx, foreseen in the range of EUR 150 million, EUR 180 million, down by some EUR 35 million that was previous projections. We have made an in-depth analysis of each project we are carrying on. Also, contacting the relevant counterparts, both public and private. As a result, our best estimate leads to a delay of about 6 months on average in deploying our CapEx plan. The delays mainly refer to the U.K. assets under construction due to TSO's slower pace to finish their works. This represents by nature a delay that will be recovered in the months afterward. Such longer time frame, as it affects assets that they will be up and running by '21 and '22. It does not imply a reduction in 2020 EBITDA.

The net financial position is seen between EUR 1.35 billion and EUR 1.43 billion, lower of EUR 10 million versus the initial guidance. This slight downward revision is as a result of the 2 opposite effects, on one hand, lower EBITDA; on the other hand, lower CapEx, plus some minor adjustments, financial charges and net working capital.

As for the latter, while we sell our power both on the regulated markets and to big corporations, we do not forecast any problem to cash in trade receivables. We recognize that it might be difficult to make projections in this context. And we understand some of our peers' decision to partly or utterly suspend their guidance. Nevertheless, we hardly agree that COVID-19 outbreak wouldn't have an impact on the industry even though the economic recovery took place in the second half of '20.

In the context of such uncertainty related to the COVID-19 pandemic situation, we believe it's worth being cautious as we refer to our guidance, while we continue to be focused on ensuring business continuity as usual, along with the long-term sustainability growth [indiscernible].

And now we are ready to take your questions.

[Operator]

[Operator Instructions] The first question is from Roberto Letizia with Equita SIM.

[Roberto Letizia, analyst]

Yes. First, clarification on the guidance provided in the reduction. Can you split how much the reduction that you implemented actually comes from the worse wind and hydro conditions versus budget and versus what you did in Italy? And how much is actually related to the COVID effect, which way would quantify more on the price. So let's say, how much is from the quantities and how much is from the price? The first one is, of course, weather condition, and the second one is more related to the COVID. Can you please split this?

Can you give us an indication of how is the hedging going so far? Meaning for the remaining part of the year, it's still -- you're still exposed somewhat during the year? Or did you make already something on 2021? Or are you currently blocked as you wait to see what happens on the power price for the coming months and the next year. Have you -- can you provide us any indication on the M&A side? Are you accelerating or not on the M&A side considering that market condition may be potentially favorable in this moment for new projects coming on the market that cannot be realized or have developed their own financial troubles that put those in the market rather than make their own development?

And wondering if you have any indication on how have finally gone the second tenders for RES in Italy, is there any indication because we didn't actually saw the final results? When do you expect them? And what kind of message is probably will emerge?

[Luca Bettonte, executive]

Okay. Thanks. Going through your different questions, starting from the first. Say that in terms of volumes, we -- what the performance was for first quarter, that Paolo and myself have already commented, and that we had also a bad performance in terms of volumes in April. Having said that, it's -- our projections are based on the budget for the next -- for the remaining 8 months. And budgets are -- and budget is based on the historical production for different technologies. So in the end, we are factoring in the loss of production that we had in the first 4 months of this year.

While we expect -- we expect -- we hope that we can achieve the budget forecast has been done at the beginning -- for the remaining part of the year. In this respect, I say that we -- our plan to achieve very good results abroad based on the good results that we had in the first quarter and to, say, crystallize what we had in negative terms as for the production in Italy. So I guess that -- but for the loss that we had in April that accounts for some, say, 40 megawatts less than expected in Italy, offset by some 20 megawatts abroad. The number are already visible to you.

In terms of price, I can tell you that what is the price for the energy that we are considering in our projections. Of course, we had reviewed, based on our, say, tools, our software and our analysis what the price for energy could be, in particular, in Italy because you know that abroad, we have mainly assets under incentivized schemes. And say that going forward, we see -- we saw a quite low level on the energy prices in April. And I think that you got already the numbers.

We are still experiencing low prices also into the first decade of May. But we see, going forward, a recovery which should led by -- from now to the end of the year to have on average a price which is in the range of EUR 40, EUR 42 per megawatt hour. So these are the 2 main and important, say, figures in terms of -- as for the projection. We crystallize the -- what we lost in the first 4 months of this year as for the volumes. And we plan to have an impact as for the fastest base on the trends that we see for the remaining 8 months. So going back to what I just said, EUR 40, EUR 42 per megawatt hour.

But for the hedging in this -- that we have a 3-year rolling hedging decision. So as for -- and we have to expect this procedure because it's based on statistical analysis. And so for 2020, talking about renewable, some 67%, 68% of the production is hedged. And so the remaining portion is, let's say, under the margin risk. While for the CCGT, we covered the clean spark spread, and say, almost 100%, 96% is hedged. Based on this 3-year rolling hedging procedure, we are still hedging '21 and also '22. So far, for '21, we've covered 35% of the production of the renewables and 56% of CCGT, and a lower portion for 2022 because we’ve got still a couple of years to do the exercise.

For sure, the hedging has been very good for this year. Although as you have seen we have had some, say, impact also from the price perspective as for our figures in the first quarter. But anyhow, though we have squeezed as much as we could, the amount of production under the merchant risk, the prices that you see on Spain on the market are so low that it's quite difficult to go with, say, in full, let me say it that way.

Looking out to 2021, we've already covered that amount, and we are working on that. Of course, that we have time to do the exercise and so we are waiting for a recovery most of the price of the next 2 years. But anyhow, we will comply with our procedure. So by the end of 2020, we will have achieved the minimum amount of coverage that the procedure will ask us to put in place.

[Paolo Merli, executive]

Luca, maybe it's important to say that according to Basel IV for 2021, that based on our forecast for the energy price in 2020, remember that based on the current mechanism in Italy, the incentive value next year is expected to go up quite considerably because it's based on a formula which is inversely related to the actual price. So part of the hedging is natural and embedded in our portfolio.

[Roberto Letizia, analyst]

What I would have asked immediately when you were saying there, can you just tell us, eventually, if the 35% you currently hedge, which I presume is at lower market...

[Paolo Merli, executive]

100% of the production. The number Luca gave, 35%, 40% is based on the total expected production on RES.

[Roberto Letizia, analyst]

No. Yes. Yes. But yes, that's clear to me. I was wondering if the prices that you got on that hedge part, including the higher price that you're going to get on the green certificate basically leaves you in line with the budget forecast regardless of the much lower power prices from COVID also on the forward curve.

[Paolo Merli, executive]

What can I say that the price at which we hedge the 2021 production is more or less in line with the one we hedged, the 65%, 70% production in 2020 because those hedging actions were taken in a time where the COVID effect on scenarios wasn't yet evident. Sorry, Luca, to have interrupted you.

[Luca Bettonte, executive]

No, you're welcome, Paolo. Any time you want. Right. So M&A side, I'd rather speak about -- try to speak about flexibility rather than simple M&A. M&A is something that we pay the right attention to when events on how this market will be available to -- for a new, say, transaction. In the sense that, today, to do M&A transaction is a bit more difficult -- it's a bit more difficult simply because it's difficult to identify a value for the assets. So it could become a sort of opportunistic market while, if you have money and the know-how and maybe someone that needs money, you can, say, raise to the occasion. Anyhow, we are looking at potential transaction along the line of our business plan.

So business plan is based on a -- mainly on an organic growth going forward. But this, say, organic growth for greenfield project, a pipeline to be developed, as you see, for the time being, we are telling you that there may be some delays. And then it open up -- it opens up the opportunity to, say, fill the gap with some M&A transactions like we did in the past. Of course, we have to look at carefully at our, say, financial position, financial indebtedness to our investment-grade rating, which is quite important for us to fund our growth. And then if and when we will perform, we will make any transaction in the M&A, it will be consistent with the triple B rating and will be consistent with the business plan we are, say, complying -- we are in compliance.

So if this respect, the M&A transaction, they should be going in a way to support also the organic growth. So for sure, we may be looking for, say, stable and regulated assets going forward. Of course, this is the trend of the industry. There may be some delays in -- so the different countries in Europe may have a different pace going forward. But every and each country is supportive from a CFD auction mechanism. I'm telling you that some countries could be a bit later than others. I'm referring to Italy in this specific moment because I'm referring to the possibility for repowering -- for the powerable assets to take part in the auction.

But we are working hard, and I'm quite confident that something that could change in the future because it's of a paramount relevance if we, as Europeans, all want to achieve the targets set forth by the European Union and that the plan needs. So M&A is an opportunity. But it must be consistent and in line with our expectation in terms of growth, in terms of financial stability, investment-grade rating and the like. We have some interesting transactions we are looking at. But as usual, when they will be cooked enough so we come back and share with you.

As for the second center in Italy, personally, I don't know anything about because no information has been released so far -- that it may imply that, as based on some rumors, the auction didn't go well or as good as expected by the regulator. But despite of that and also in case that the auction was gone well, it wouldn't change our view going forward that we keep investing and we keep working in order to get the authorization for the repowering and waiting for a change of mind of the regulator as for the status -- allowed to take part in the auction because it's not a matter of ERG, it's a matter of the country to relaunch the infrastructure investments and the like. So to reply simply to your question, no, I don't -- I'm really sorry, but I don't have any information about the second auction in this country.

[Operator]

The next question is from Sara Piccinini with Mediobanca.

[Sara Piccinini, analyst]

The first question is about the -- obviously, the current situation and the possibility of further slowdown in CapEx. My question is if you see a potential slowdown regarding your plans for repowering? And also if the current scenario of low prices can change your plans or the returns that you expect for repowering. And the second is if you see the PPA market evolving in Italy or if there is any opportunity to fix the long-term prices through PPAs?

[Luca Bettonte, executive]

Right. Right. Say, slowdown in CapEx, I think that so far, in the guidance, we put our best estimate. We got in touch with all the relevant authorities and with all our suppliers. And this is, I think, a good estimate of the potential delay that it's -- we may even have. As for -- in this guidance, in particular, for 2020, we have given you the impact in terms of, say, amount of money to be spent. For sure, it could -- this delay -- the reason -- the basis of this potential delay could also have an impact on our repowering process cause the, let's say, the availability of a workforce in the public sector during this -- the last 3 months, the 3 months was, let's say, to be polite, quite slow. And -- but now they are going back to work. And we've heard some good news from the Vice Minister of the Environmental of -- the Ministry of the Environment that should -- that there should be some good news going forward for the permitting process, and they would like to accelerate it. But wait and see. But for sure, we're not to say that some delay could also affect our repowering process.

Now we are moving into a further area from a timing perspective, so talking about '21 and 22. I say that I'm not worried about that simply because the 6-month delay, a potential 6-month delay, but I don't see it so far in our repowering program. It shouldn't have any relevant impact on our EBITDA for the business plan because, as you know, most of this of these plants, the power plants will be -- their construction will be finalized in the second half of, say, 2022. And then the contribution to the EBITDA will be on the less -- the lower contribution to EBITDA in case of delay will be, for sure, not significant.

The question that's for -- importantly, the scenario is a good question. Because we made the decision to repower our assets accepting to the risk to go merchant. Now for sure, these scenarios are quite tougher. And so we have to careful thinking about that. But it doesn't mean that we change our mind because the real strength on the repowering is based on the jump of the upgrade of the technology. And so the, say, equal or lower amount of investment per megawatt and the -- by far, 3, 4 for the power generated compared to the existing one. So the theory is still valid.

Also, because like everybody is saying, and I agree on that, is that the COVID-19 should be -- should imply a short-term impact. And that's, I think, we've captured through this guidance from now to the end of the year. And then from '22 on, because repowered assets will be up and running by April, I think that situation could be, say, come back to normality. For sure, I accept the question. It's a good question, but I think that it is also a good answer.

PPA could help. But it's difficult to see in the short term that there will be the solution because they are -- the number of PPAs because the load is increasing, but not, let's say, so fast as we need. And as you know, we signed a PPA with ACEA a couple of months ago, quite a very good price. But it's a short-term PPA that lasts 3 years, 4 years, 5 years. Because it's very difficult to identify an agreement, but for you, introduce some quite complicated mechanism, such a floor or cap for the [ price ] in order to share the risk related to the price. And in this specific context with the price that's so low, it's even more difficult. So PPA is something that in the future could be useful.

But I guess that it will be possible once the RES industry will be perceived and will have finalized its evolutionary path forward to become more and more infrastructure-like than it is today. Infrastructure-like means that, in my opinion, RES are already infrastructures. But they need a more -- an environment, a regulatory environment to become more consistent with this concept. What I mean? I mean to ease the permit process, to ease the possibility to get the grid connection, so to push on the TSO to invest and to say decoupling the renewables as for the way to sell the power to the other source of energy. So we can't have a -- we can't keep on having a competition among the different source of energy.

The powering -- sorry, renewable are the future. And the other source of energy should be, say, consistent with this evolution. That's what European Union would like to do. I had the opportunity to talk directly to Mr. Timmermans a couple of weeks ago through WindEurope, and these are the arguments and the subjects under discussion. So I can keep saying that we are in the right industry. COVID is, say, put under the public eye, let's say, that this industry needs more attention from the regulator, European-wide. But not just for the industry itself, but in particular, to pay more attention to the environment surrounding and to sustain the renewable in terms of authorization, taking part in auctions and to facilitate the grid connection. Maybe that's afterwards PPA could be, say, easier to depict regulation that allows PPA to grow faster and to be more and more the way to sell power going forward.

[Operator]

Mr. Bettonte, there are no more questions registered at this time.

[Luca Bettonte, executive]

Good. Thanks a lot to each of you. Please stay well, and thanks a lot for being with us today.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.