ERG SpA

MIL:ERG

Earnings Call Analysis

ERG's Strong Q1 2024 Driven by Wind Conditions and Strategic Acquisitions

ERG reported a promising Q1 2024, achieving an EBITDA of €165 million, a small increase from the prior year. This growth was driven by enhanced wind conditions and new assets, partly offset by lower market prices. Notably, their recent acquisition of a wind and solar portfolio in the U.S. is expected to boost future results, potentially raising EBITDA by 8%. Investments doubled to €154 million, emphasizing organic growth and strategic acquisitions in France. Despite facing lower electricity market prices, ERG remains committed to its 2024 guidance with an adjusted net profit of €78 million and a solid financial structure supported by strong cash flow.

Strong Start to 2024

The earnings call highlights ERG's solid performance in Q1 2024, with EBITDA of EUR 165 million, slightly exceeding the previous year's figure. Growth was primarily driven by improved wind conditions and contributions from new assets, despite facing lower market prices. The company reported a positive net profit of EUR 78 million, in line with last year. The production output saw favorable trends in Italy and the UK, while France experienced a minor decline due to lower wind conditions.

Strategic Investments

ERG invested EUR 154 million in Q1 2024, considerably up from EUR 67 million last year, mainly for acquiring wind and solar assets in France. Specifically, the capex allocation included EUR 84 million for acquisitions and EUR 67 million for organic construction projects. This aligns with the company’s commitment to enhancing its portfolio and investing in growth-oriented strategies.

Growing Revenue Guidance

The company has set an ambitious EBITDA guidance of EUR 520 million to EUR 580 million for 2024, which could increase to EUR 540 million to EUR 600 million with the full-year contribution from its newly acquired U.S. assets. Additionally, the EBITDA target for 2026 has been set between EUR 600 million and EUR 650 million, suggesting a clear growth trajectory supported by strategic acquisitions and operational efficiency.

Navigating Market Conditions

Despite experiencing downward pressure from reduced electricity market prices across all regions, ERG's unit revenues showed resilience. In Italy, wind unit revenues rose to EUR 120 per megawatt hour, largely attributed to new green incentives. Nonetheless, this was offset elsewhere, particularly in France and Germany, where market scenarios reduced captured prices. The management remains cautious but optimistic, eyeing stabilized prices as a foundation for future growth.

Commitment to Sustainability

ERG has completed its transition to becoming a purely renewable player, with capital employed now at 100% renewables. This transformation positions the company to focus strategically on sustainability, enhancing its market presence in the renewable space. The roadmap aims toward net-zero emissions by 2040, showcasing ERG's commitment to integrating ESG factors into its operational strategies.

Strong Capital Structure

The company maintains a robust balance sheet with a net financial position of EUR 1.5 billion at the end of Q1 2024. This reflects a slight increase from the previous year due to strong cash generation. ERG is committed to maintaining an investment-grade rating, which it believes will provide flexibility for further growth and investments while mitigating financial risks.

Future Prospects and Challenges

Looking ahead, ERG faces challenges from the phase-out of incentives, particularly in Italy, which will require the company to adapt its profitability strategy. With more than half of the expected new asset contributions secured, the company is optimistic about its capacity targets, which aim for a total of 4.5 gigawatts by 2026, emphasizing its selective and value-driven growth strategy.

Enhanced Shareholder Returns

ERG is launching an enhanced dividend policy with a minimum of EUR 1 per share, potentially increasing to EUR 1.3 depending on performance metrics. This flexibility in shareholder remuneration aims to attract long-term investment while ensuring the company retains sufficient capital for its growth objectives.

Earnings Call Transcript 2024-Q1

[Operator]

This is the conference operator. Welcome, and thank you for joining the ERG First Quarter 2024 Results and 2024-2026 business plan presentation. [Operator Instructions]. At this time, I would like to turn the conference over to Ms. - Emanuela Delucchi,, Chief ESG, IR and Communications Officer of ERG. Please go ahead, Madam.

[Emanuela Delucchi, executive]

Good afternoon, everybody, and welcome to ERG First Quarter 2024 Results and 2024-2026 business plan presentation. Here with me, as usual, there are our Executive Vice President, Alessandro Garrone, our CEO, - Paolo Merli; and our CFO, Michele Pedemonte. Now let's see the agenda of today's meeting. Paolo will start with a brief introduction on the first quarter key figures. Then Michele will drive you through the analysis of the full set of results. Afterwards, Alessandro will show all the important steps we did in the latest 3 years having completed the energy transition into a pure renewable player. Paolo will show our strategy, putting it into the current context, and then will show even our key figures and the targets for the coming years. Then Michelle will focus on our capital structure and financial policy in the planned period. As usual, I will focus on the ESG strategy, which continues to be at the core of ERG. Paolo will then conclude with 2024 guidance and his closing remarks, focusing on the key pillars of the business plan. And as usual, there will be a Q&A session at the end of the event. So let's start. And now over to Paolo...

[Paolo Merli, executive]

Good afternoon, everybody, and my warmest welcome to our Investor Day. I'll start by looking at the first quarter results. EBITDA closed at EUR 165 million, in line with our budget slightly up year-on-year, mainly driven by the larger installed capacity and better wind conditions that offset the lower capture prices. As you know, we finalized the acquisition of the U.S. asset portfolio in April. As such, those figures do not include any contribution from it. But given that the sale purchase agreement was based on a lockbox date at 30 June 23, we are owners of any cash flow and the economics generated by the portfolio ever since, including the first quarter results.So as such we indicate here what our EBITDA would have been in case of our proactive consolidation as of January 1. EUR 177 million that would have been up 8% year-on-year. CapEx in the period amounted to EUR 154 million, more than 2x the amount of the same period of last year. Let's consider that in the quarter, we spent roughly EUR 84 million related to the recent acquisition of a wind & solar portfolio in France as an M&A. The other organic CapEx over the period were mainly related to the works for assets under construction, both repowering and greenfield projects. Adjusted net profit was EUR 78 million in line year-on-year, reflecting the operating results, lower financial charges, but higher taxes due to the cancellation of some fiscal benefits in Italy, known as ACE. The net financial position at the end of Q1 was EUR 1.5 billion, just slightly higher year-on-year, mainly influenced by the strong cash flow generation over the quarter absorbed by investments and the conclusion of the buyback program. And now over to Michele for his comments on results.

[Michele Pedemonte, executive]

Thank you, Paolo. In Q1, electricity market prices have been significantly lower than previous year in all markets. This trend has partially influenced our all-in unit revenues, which are, in any case, mainly dependent on incentive, [filling] schemes, long-term PPAs and short-term matching. In Italy, wind All-in unit revenues increased from EUR 116 megawatt hour to EUR 120 megawatt hour, mainly influenced by the value of the green incentive, which is EUR 42 megawatt hour this year against 0 in 2023, and partially offset by the lower market prices captured in Q1 2024 compared to Q1 2023. In France, the unit revenues decreased because of the lower market scenario that impacts on assets, which do not benefit anymore of the 2-way half mechanism. In Germany, captured price in Q1 are strongly lower than previous year. Because in previous year, we had high short-term hedging prices, while 2024 prices are aligned to one-way CFD floor. East Europe unit revenues decreased in Q1, driven by Bulgaria and Poland mainly due to lower merchant prices and lower prices of [indiscernible] in Poland. Romania is in line with previous year because the government there set a compulsory PPA scheme at a cap price around EUR 90 megawatt hour. U.K., capture price mainly reflects our PPA prices and close at EUR 85 megawatt hour, in line with previous year. In Sweden, the Olin unitary revenues reflects lower energy market prices. As regards the solar All-in unit revenues, there is an increase of value in Italy, thanks to a higher hedging price year-on-year. In Spain, the captured price suffered the current market scenario and compared with the Q1 2023, which benefited of higher hedging prices. And now a focus on production. As regard Q1, in Italy, we have 875 gigawatt hour, plus 12% year-on-year, thanks to better wind condition compared to Q1 2023, coupled with new asset contribution related to the powering plants enter into operation in the second half of 2023, and the new greenfield plant enter in operation at the beginning of this year. In France, 391 gigawatt hour, minus 1% due to lower wind conditions versus a previous year, particularly wind, partially offset by a perimeter effect coming from a new wind & solar portfolio acquired at the beginning of 2024. In Germany, 202 gigawatt hour in line with previous year and also in Eastern Europe, volume in line with previous year. In U.K. and Nordics, 166 gigawatt hour, plus 26%, thanks to production of assets, which we are commissioning or ramp-up phase in the beginning of 2023. Production in U.K. are also influenced by a remunerated balancing services market in Scotland and not remunerated grid curtailment in Northern Ireland. In Spain, 80 gigawatt hour more than doubled year-on-year, thanks to the production of newly acquired plants that entered in operation between July and December 2023. In the first quarter of the year, we have an overall EBITDA net of drawback, equal to EUR 165 million, EUR 1 million higher than Q1 23 million, thanks to better wind condition and the new asset contribution, partially offset by lower market scenario. In Italy, the EBITDA is EUR 101 million, higher than 83 million by EUR 18 million, thanks to the impact of green incentive, which is EUR 42 megawatt hour in this year, coupled with the new asset contribution, as already commented. In France, EBITDA is EUR 22 million lower than previous year because of worse-wind conditions and lower capture price due to lower market scenario. In Germany, EBITDA is EUR 13 million lower than previous year, which was influenced by higher hedging prices. In Eastern Europe, EBITDA is EUR 18 million, slightly lower than previous year, with lower sales prices that are partially offset by better wind conditions in the area. U.K. and Nordics EBITDA is higher than previous year by EUR 7 million, mainly due to the production of the new Scotland assets. In Spain, EBITDA is EUR 2 million lower than previous year because of lower capture price, partially offset by perimeter effect coming from new acquisitions. Now a comment on the investment in the period. In Q1, we invested EUR 154 million, an amount which is higher than one invested in Q1 '23, mainly due to the acquisition of wind & solar plants in France for EUR 84 million. In Q1, we made about EUR 67 million of organic CapEx, of which EUR 48 million in Italy for repowering of wind assets, EUR 7 million related to our first storage plant in CSD and $8 million in France for greenfield projects, 3 wind farms of 60 megawatts under construction. Let's now move on to the financial commenting on the other item of the protein loss. Amortization and depreciation at EUR 59 million, in line with the previous year as an effect of the lifetime extension program on French and German assets, offset by higher depreciation for new plants in operation. Net financial charges are EUR 2 million versus EUR 5 million in Q1 2023, mainly influenced by increased liquidity remuneration in a scenario of higher interest rates with a structure almost completely a very competitive fixed rate. We have a gross debt cost of around 1.5%. Tax rate in the quarter is 25%, higher than 22% of Q1 2023 due to the cancellation of ACE benefit in Italy. As a result, the adjusted net profit of the quarter amounts to EUR 78 million, in line with Q1 2023. Finally, let's take a look at the cash flow statement and the net financial position. The net financial debt closed at EUR 1.5 billion, EUR 55 million higher than the end of 2023, mainly driven by a solid cash generation meted by the recommended investment of the period and the last part of the share buyback for EUR 37 million that ended in February. Thank you again for your attention...

[Alessandro Garrone, executive]

Thank you, Michele. Good afternoon, everybody. I'm very happy to share with you the significant steps we made since end of 2020, a very remarkable path. First of all, in 2023, we finally completed our energy transition, and we became an independent poor renewable and international player. Further, for the very first time in our history, we made our entry into the U.S. renewable energy market with a wind & solar portfolio, thanks to the partnership with Apex Clean Energy. Our execution was impressive, having added to our portfolio 1.2 gigawatt. Capital employed is now 100% renewables. It's worth mentioning that after the disposal of our CCGT plant, we basically became zero carbon for scope 1 and 2. So our road map towards net zero in 2040 certified by SBTi will lever on the supply chain, which constitute scope 3 emissions. And our ESG plan will cover this issue as we will see afterwards with Emanuela. Let's now have a look at our new shareholding structure. In April, following the completion of the sale and purchase agreement executed among San Quirico and IFM, IFM itself increased its stake in San Quirico, renewable from 35% to 49%. And so San Quirico stake went from 65% to 51%. This was part of the original agreement signed in 2022. The role of IFM into ERG shareholding is positive due to the strong track record of IFM in the industry, its long-term perspective and the possible insights in new geographies, coupled with its commitment towards a net zero target. Further, the ordinary shareholders' meeting appointing the new 12 member Board of Directors based on the new shareholding structure for the next 3 years period. We believe the new Board of Directors gathers new skills, which are very useful to face the challenges of the current environment. In addition, we enhanced gender diversity at the Board of Directors level with the entry of 4 women and reaching gender equality. We even strengthened our best-in-class governance with all the internal committees made up by internal managers to oversee all the areas of our strategy. We added a new committee focused on asset performance as our primary objective will be on optimizing our asset base and maximizing production.Here a quick, and I would add really impressing summary of that -- of what ERG has done over the last 3 years since we announced our unprecedented transformation into a pure wind & solar player. And here, we are now -- since the end of 2020, we have managed to add 1.2 gigawatt of new installed capacity in wind & solar in different geographies through a good mix of organic repowering and greenfield and M&A. Over the same period, we disposed more than 1 gigawatt of conventional assets and namely our hydro and gas-fired plants, definitely a strong, very strong executionSince we integrated the ESG strategy into the business plan and recognize the ESG area reporting to the CEO, all the ratings have gradually improved, outperforming the sector average, confirming our positioning in the top tiers in all the leading international ESG rating agencies. Amongst them, let me spend a few words on some examples. We received an advanced rating from Moody's, the most used rating for the second-party opinion on sustainable finance. We also achieved the AAA on MSCI, the most used rating by institutional investors. Moreover, CDP, the international agency focused on evaluating company's climate change performance and strategies, recognized ERG in the leadership list. ESG isn't just about appearance in ERG, but it's a genuine substance driven by our belief in its importance. We are really implementing our ESG strategy through a concrete action plan in all the items of ESG, ranging from environment, people, engagement and governance. All these recognitions, coupled with the results achieved so far makes us confident that we can successfully continue our journey. Thank you, again, for your attention so far. Now it's over to Paolo, who will go over our 24-26 business plan.

[Paolo Merli, executive]

Thanks, Alessandro. Before analyzing our strategy and goals for the future, I think it's worth putting everything into context. The current price scenario as well as the regulatory framework are both significantly different from what we or anyone else would have expected 1 year ago or even a few months ago. As far as price scenario, we have never seen such volatility over the last few months. European electricity markets have experienced very low prices, which we believe should be at least partially a temporary effect.As far as the regulatory framework, the rollout of the green policy is not as fast as needed. Just to give you an example, we are still waiting for the Ferric decree in Italy that should set CFD auctions for the period 24-28. In other words, it means that we still don't know at what prices we can sell energy from either our new greenfield or repowering projects. Also, given this uncertainty, we opted to focus our business plan on the next 3 years, 24-26, with just a few projections on 28. So let's get started by showing what ERG is today. ERG is an independent power producer of clean energy from wind & solar sources with 3.7 gigawatts of installed capacity right now. For the very first time, we are officially in the U.S. with a quite sizable asset portfolio and the ambition to further develop it. We can rely on a pipeline of projects for around 5 gigawatts, which keeps improving in size and quality. A pipeline well spread across Europe and U.S. made wind, solar, battery storage and hybridization projects. Repowering, as you know, represent a significant part of this as well as co-development agreements in Spain and U.S. When talking about the pipeline, the key message is we are definitely advancing in the permitting of projects, but we will move them into the construction phase just under certain conditions, among which returns should be in line with our new objectives to create value. That's what we are today, and this is the platform we want to expand from. So we have seen what we have done over '21, '23 - an impressive growth. Looking forward, and for a moment, just considering fully secured projects. I mean the ones where we already took a final investment decision, we expect to reach about 4 gigawatts of installed capacity in 2025. So about 700 megawatts of fresh capacity or plus up 20% compared to the end of 2023.I repeat, this projection all includes fully secured assets, either already operational because we bought them through M&A transactions or currently under construction. So let's see them Here, you have a list of assets currently under construction for a total amount in excess of 300 megawatts - greenfield, repowering and also our first installation in battery storage. Those assets are in Italy, France, U.K., Germany as geographical diversification remain central on our -- in our strategy. Still, as you can see, we can count on a visible growth and projects, say, in the short term. Let's moving on. Another pillar of our strategy is our commitment to securing the route to market for our productions. This is especially important at a time of high volatility and unprecedented uncertainty around energy prices. Since '21, we have signed several long-term contracts or PPAs with major corporate counterparts. And we did this in different geographies, proving our capacity to deliver successfully on our commercial strategy. As of today, almost 3 terawatt hour of productions are secured through PPA, which means more or less or even more than 30% of our entire portfolio. We think this one is one of our strengths. Looking at the future, we expect to expand the PPA portfolio by leveraging on our expertise and track record so far. So let's move on, in preparing our business plan, we analyzed the cost base and operating model with the ambition of reaching a level of operational excellence. We came to the conclusion that ERG is already quite efficient from a cost point of view, especially in the operational maintenance field as shown in the chart. We found a little room to extract some synergies on G&A costs. But as regards to O&M, ERG has mostly, as you know, adopted an internalized model that allows us to minimize cost and enhance asset performance. 50% of our fleet is fully internalized. 5% is based on a hybrid model, and 45% is externalized with full service agreement, in particular, the new assets. Given that our asset portfolio has grown rapidly over the last 2, 3 years, we need now to increase focus and effort in particular on the new platform of wind turbines that are operated through full service agreements. So we believe a proactive approach can lead to better technical availability and load factors allowing us to extract additional value. So -- and because the TCM, so the Technical And Commercial Activities And Management of all our assets is internalized, we can leverage on a full set of that. With this in mind, we recently created an internal technical management committee to oversee the performance of wind & solar farms with the goal to reach the full technical potential of our asset portfolio. And now let's have a look at the business environment we operate in. So the renewables market remains one of the pillars of the energy transition, growing double digit in the EU, in U.S. with positive growth prospects in the coming years. So still a promising outlook. Given that we believe, for sure, in those trends and as we believe the wind & solar technology will play -- will keep playing a major role in the energy transition. We also believe, let's face it, that regulatory frameworks and electricity market mechanisms, especially in Europe are not yet where they need to be. And they must be adopted, adapted and evolved to attract all the investments needed to reach those targets. But I'll comment in a moment on our policy asks. Let's first focus on electricity market. As I said, although less is a growing market, it undoubtedly faces several challenges. One is the increased volatility in energy prices as rest penetration rises as well as increased hours with negative prices. In the last few years, we have grown custom to dealing with this uncertainty. Recent months have not been exceptional. As shown in the chart, over the last 6, 7 months, there has been a strong downward trend for both gas and CO2, which are basically setting out the price for electricity in the European market. As a consequence, electricity prices in recent months have dropped significantly. In this context, it's pretty difficult to have a clear view on the scenario going forward, with volatility for sure, expected to remain high. As you can see, the price scenario, our business plan is based on falls at the bottom end of last year's price volatility range. We'll be working on our strategy to stabilize revenues in order to have our target, 85%, 90% of quasi-regulated EBITDA, which means basically backed by CFD, PPA or other mechanisms.Moving forward, on top of price scenario, -- there are other macro challenges we are facing as an industry, the higher capital intensity and the higher cost of capital. Any tension on the supply chain has led to quite dramatic cost inflation with a sharp increase in the full cost to install a new megawatt both for wind & solar. For sure, wind is under more pressure. You can see from the chart, although we now see a certain degree of stabilization and a slight reduction for solar PV.Cost of capital has increased quite significantly by 400, 500 bps in the last 2 years, and we expect it to remain higher over the planned period. With just partial cutbacks expected of interest in the next 12, 14 -- 24 months. But at the same time, we think ERG is in an enviable position to face those 2 macro challenges. We can rely on a diversified pipeline of projects and on a sound financial structure. As far as asset portfolio, I've already said, we have 5 gigawatt of pipeline, which can be activated through a flexible approach, targeting more challenging project IRR. I say more about this in a moment. As far Cost of capital, we have a strong and fully hedged balance sheet and an investment-grade rating, leading to highly competitive cost of debt. Michele will elaborate more on this. Our main commitment is to create value through a selective and cherry-picking approach and leveraging on our sound financial structure. Now a quick outlook on the regulatory framework. Let me talk about our policy asks. As I said in this context, an important role should be played by regulators. There are some challenges that, in our opinion, still need to be addressed. Here, we listed the 4 challenges we see and we expect regulators to fix as soon as possible. Route to market, some countries, Italy, but also Northern Ireland, for example, still need to approve their multiannual support scheme for as investments. In Italy, we have been waiting almost 2 years for the Ferric decree to be approved. And we are still waiting. This is causing uncertainty and it's lowering visibility. Repowering, we believe that bespoke targets in national plans and dedicated actions in addition to an accelerated permitting are needed. But this is not happening in Italy. Repowering is even penalized by an additional 5% mandatory discount applied to awarded CFD tariffs. The measure makes no sense as repowering means, as you know, dismantling an existing asset and building a new one basically from scratch. So it's an unfair disadvantage. We'll be going on with our new repowering projects only if and when the right conditions arise. So we'll be waiting in Italy, for instance, for the issuance of the ferric decree.Storage, basically the same issue -- we're still waiting for a clear regulation and mechanisms to support this kind of development that we receive as a necessary to accompany the energy transitions. Then grid connections that represents a challenge in many countries we operate in Europe. There is a tremendous need to accelerate investment deployment on grade, again, to accompany the growing penetration of renewable assets in the systems. Our side, we are developing some hybrid projects to optimize the use of our connection and particularly in Italy and France. More in general, and the recent negative power price phenomenon across Europe is telling us this. A market redesign would be needed more than ever to adapt it to the new reality made of higher and higher renewable penetration. So definitely, among our objectives is most certainly the advocacy to sustain this policy asks an Italian and European level with the support of the relative national and European associations. So it's now time to see how ERG has decided to respond to this changing environment. We have decided to adopt a selective and more flexible approach to seize market opportunities. Having completed the transformation of the group into a pure renewable player, we have now evolved our strategy by shifting the focus from volume to value. And later on, I will explain and elaborate more on this concept. So let's move to the next chart here, our strategy for 24 and 26 is summarized. Growth, we aim to reach 4.5 gigawatts of installed capacity by 26 with a projection of about 5 gigawatts in 28 through a selective approach on our large pipeline. Investments EBITDA, we expect to invest EUR 1.2 billion in the period, and we target an EBITDA range of EUR 650 million in 26. Route to market, we confirm our target to have 85%, 90% of quasi regulated EBITDA, which means repeated backed by CFD, PPA or other price mechanisms. This is consistent with an investment-grade profile and a financial policy with a 4x net debt-EBITDA ratio. Value creation - in the spirit of value over volume, we are targeting an unlevered return for our projects of 200, 400 bps over the cost of capital. As far as geographical diversification, we are prioritizing key core countries and U.S. in order to maximize our value creation. In U.S., we are targeting 0.5, 0.7 gigawatts of capacity by the end of 2026. Asset rotation can be an opportunity to be captured in the business plan period. Storage and hybridization to increase asset portfolio flexibility, we are pushing on digitalization as well to optimize asset performance. ESG remains at the core of our strategy, but Emanuela will elaborate more about it. And finally, say, least but not -- last but not least, sorry, enhanced the shareholder remuneration. So a new distribution policy within a floor of EUR 1 per share in the form of cash dividend and a cap of EUR 1.3 per share with potential upside defined year-by-year based on a yearly performance and prospective. That upside could be paid even through buyback.So really, flexible approach with a potential upside compared to the previous one, which, in my opinion, was already at a premium compared to most of our peers. Now a little bit more on our target capacity, so 4.5 gigawatt in '26, which means adding 1.2 gigawatt in the period, which is basically what we have done in '21-'23, of which roughly 700 megawatts already secured, basically already in operations coming from M&A or currently under construction. Capacity in 28. I've already said, but this is a projection should be expected at around 5 gigawatts. CapEx we expect to invest roughly EUR 1.2 billion in Italy, Europe and U.S. and the projection for the period 248 is about EUR 2 billion. So we believe those are challenging targets, but also at the same time, concrete and visible. So thanks to our sound financial structure, we believe to be in the position to accelerate this if and when opportunities arise. A little bit more visibility on our pipeline that could be broken down exactly what we did in our exercise into different layers, which includes assets under construction, greenfield, repowering, co-developments. We added the pipeline in the U.S., which is basically regulated by the preferential right agreement we signed with our partner Apex to further develop our portfolio. The pipeline is made up of projects at different stages of permitting, some already fully authorized, in particular, the repowering layer. Seeking value over volume means having a selective approach in picking projects from the pipeline. It must meet some predefined criteria such as focus on countries with a clear regulatory framework already defined a secured route to market, landing CapEx, well defined, maybe also through an EPC contract and prove technology to optimize production. So flexibility, selectivity sharpened, call it what you want, but that's the approach we want to pursue when making our final investment decision. The final objective is to reach our IRR project target, as mentioned before. This selective approach across the board will be key in our strategy. We will keep growing internationally, consolidating key geographies with a clear focus in the U.S., where we'll adopt a learn and grow approach. That's also the spirit with which we selected Apex as our partner in the continent because we believe it's a best-in-class operator. We consider new opportunities to enhance our returns, also take into account asset rotations opportunities. Nothing has been defined yet, but this is an option to be explored as long as it will create value. Now a little bit -- a couple of words more on our entry in the U.S. We see our agreement with Apex, just as a first step in a market that offers interesting growth and return opportunities. We aim to make the U.S. one of our largest markets abroad, counting on a favorable regulatory environment and highly attractive and qualitative resources zones. As said, we are targeting 0.5 or 0.7 gigawatts of installed capacity in the business plan period, which basically means doubling the current existing capacity. Apex has a strong track record in the U.S., and we are looking forward to working with them to explore further opportunities. Moving now to repowering, which is a hallmark of our pipeline. Through repowering, we enhanced the efficiency of wind assets by replacing outdated turbines with new state-of-the-art ones that are more powerful, more efficient because they are capable of catching wind in a larger span of velocity. This facilitates an increase in energy production. In the end, we like, as you know, to summarize the power in 3 numbers, doubling the installed capacity, occupying the same soil, halving the number of wind turbines and tripling the output or the electricity production. So those are the usual 3 magic numbers that goes around repowering. Over the last few months, we have brought into operation, 3 repowering projects. Some are still under construction, some are fully authorized, but still waiting for clarity on the regulatory side, I've already said about the fair degree. So we are talking about a sizable pipeline of about 750 megawatts. Here, I insist with our value over volume approach projects will be pursued only when yield is coherent or consistent with our target and the risk profile of this new business environment. As said, over the business plan, we expect to explore the opportunity to increase the flexibility of our asset portfolio by developing projects, both in the battery storage and hybridization. As for [indiscernible], we have more than 200 megawatts in the pipeline between Italy, Spain, France and U.K. Same issue here. We are still waiting, as I already said, for a GRIN scheme and mechanism to be set. In the meantime, we are building our first project in Italy in Vizziny. It will be on stream in '25. Basically, the same idea on hybridization. We have more than 150 megawatts in the pipeline in Italy, mainly concentrated in Italy and France. Here, again, to start, we are developing a plant of 34 megawatts in one of our existing wind farms in Italy. So we believe these kinds of projects will help stabilize the renewable penetration into the systems, contributing to a faster and more sustainable energy transition. Now route to market. As I said, we want to leverage on our energy management expertise to optimize the route-to-market strategy. Our aim is to preserve quasi-regulated business model with the objective to secure 85%, 90% of our portfolio production through CFD or PPAs. The preferred route to market is a CFD. Of course, in those countries where auctions are run at sustainable levels of pricing. That wasn't the case over the last 2 years.ERG will pursue derisking of its portfolio, also through PPAs, in particular, for already existing assets that phase out from incentives that are not allow any longer to participate to the auctions. Although we already proved to be successful in closing PPAs, we are starting a wider commercial proposition to expand our PPA portfolio. At the same time, short-term hedging will remain part of our business model. Now back to Michele, who will walk you through our financials...

[Michele Pedemonte, executive]

Thanks, Paolo. And now let's look at the main targets and KPI for the 2024 - 2026 business plan. Here, we show the trend from 2023 EBITDA to 2026. We expect an EBITDA in the range of EUR 600 million, EUR 650 million. Out of the total, we expect 25% to come from solar with a more or less 50-50 split between Italy and abroad. As far as our EBITDA abroad, we are expecting 15% from the U.S. and the remaining in EU. So it's easy to say that a big part of our growth will be in the U.S. We keep on targeting a strategy of EBITDA securitization to maintain 85% share of quarterly regulated EBITDA, thanks to price stabilization mechanism, such as CFD and PPAs, as Paolo explained before. And here, just a bridge on 2026 EBITDA versus 2023. First of all, EBITDA will benefit from contribution of new assets addition planned in the business plan. More than half of the expected new asset contribution can be considered as secured as it refers to assets under construction or already acquired. We are expecting a smooth normalization of production, but all those positives will be partly offset by a negative functionality in the business plan and by the incentive phase out. A driver of our economics in the business plan period is, of course, represented by the phasing out of the incentives.It is not something new. We knew we have to deal with it. The incentive phase out relates mainly to Italy, but also to our oldest wind farm in France, Germany and Bulgaria. In the business plan, 640 megawatts of incentives are fading out. We believe that we can manage and reduce the otherwise increasing merchant exposure through a combination of PPAs and repowering. First of all, we can secure the sales of our old assets through PPAs, both corporates and utilities, maybe of shorter tenor of 5 years, as we have already done in the past in Italy and in France. Or alternatively, we can secure our top line to the repowering of the assets that, as you know, after repowering becoming invisible for long-term CFDs. As you can see in this chart, most of our 2024-2026 production is hedged through short-term hedging green certificates, long-term PPA and CFDs. Some CFDs are one-way CFDs, which basically means that they are partially exposed to the market whenever prices are above the guaranteed floor. I think that it's worth noting that a portion, though limited of our portfolio production is still exposed to margin volatility. That's unavoidable, also considering the intermittent nature of our sources, wind & solar. Here, we have some details on our financial structure. From this point of view, the storytelling hasn't changed. We have an investment-grade rating from Fitch, and we want to maintain it. In other words, we will keep seeking sustainable growth also from a financial standpoint. Our gross debt is fully hedged and for more than 90% realized on sustainable sources like green bonds and ESG loans. The first refinancing need is in 2025, when expires our first EUR 500 million green bond -- the new issue will benefit of EUR 250 million prehedged at a rate of 0.4%, well below the current market rates. We are targeting a net financial position at 2026, below EUR 2 billion, in line with our financial policy and above all, with the metrics for the investment-grade rating, the pillar of our financial strategy. As you can see, there is still headroom in our debt capacity that we can exploit to accelerate our growth in line with our financial discipline, but at the same time, always delivering an enhanced shareholder remuneration. We can lever on our highly competitive cost of capital, which we expect to remain under control during the business plan period, and marks an additional distinctive point versus our peers. And here, you can see what I mean when talking about a highly competitive financing costs. Our cost of debt is the lowest compared to our peers, and we have the highest portion of sustainable sources, which is also one of our ESG targets. The financial structure is the result of the financial transition of the group made in last years of low interest rates from project finance to a green and sustainable corporate debt structure. As a result, we can deliver and enhance the net profitability for our shareholders. And now over to Emanuela for her comments on ESG strategy.

[Emanuela Delucchi, executive]

Thanks, Michele. And now let's focus on ESG. So I will drive you through our ESG strategy, which I remember is really in ERG really means a substantial choice fully embedded in our business model. We have here in this chart, 18 May targets, consistent with 14 out of 17 social development goals. So as far as planned, we are still committed to become net zero in 2024, and we will see more details in the following chart, where we will also see the enough commitment to circular economy. We also strengthened our commitment to natural capital and entails 3 main strategies here: [indiscernible] areas, no net deforestation by 2025, no net loss on biodiversity by 2030. So here is our strategy means minimizing natural losses and compensating where possible, aiming at achieving a nonnegative impact on nature by 2030. In engagement, which is the other pillar, we continue to support local communities where we operate, sharing value for the social development, not only through economical contribution, but also ensuring an involvement of local younger generation in educational program on sustainable development through our ERG Academy, which has been launched in 2023. Regarding people, Here, our top priority is health and safety, of course, of our people. In addition to that, we even aim and created a more international and inclusive ERG, and I will explain our D&I strategy afterwards in the chart. As far as governance, we want to further enhancing our best-in-class governance in all the areas of the business model, ranging from strengthening our tax transparency together with the focus on the supply chain and even on the green financing, like Michele just explained. To sum up, I would say, a solid ESG strategy based on what defined KPIs, continuing the successful journey we saw as of 2021. I Here, you find our strategy in Planet. So it is, for sure, evident that climate change is one of the main risk the planet is facing and our commitment in decarbonization remains a key priority for ERG. After disposal of the CCGT plant, we are now at 0 on Scope 1 and 2 emissions, so of course, an important achievement for ERG. As a result, the carbon index reduced by 88% in 2023, aligned with our net zero strategy, which has been approved by science-based targets. We are now confirming to reach net zero by 2040. And in the business plan, of course, we will be working on the supply chain, which in 2023 was responsible for over than 98% of our remission. Through our sustainable procurement program, we are engaging our supply chain to improve all the ESG performances, but with a clear focus on reducing their carbon footprint. Circular economy is another pillar of our strategy in planet. And of course, we are here strengthening as far as wind. So for our wind repowering projects, our commitment for the circular economy is now enhanced and it becomes zero waste to landfill, maximizing the use of the wind turbines. For our solar revamping projects, we are exploring our new recycling technologies. And our commitment here is to promote the reuse if it's possible, of course, recycling recovery of materials, minimizing force, the environmental impact and is posing less than 10% of materials to landfills.Our project, the social purpose for solar revamping, which has been launched and implemented in 2023, and it continues to be part of our business plan. It is based on the fact that we have 2 megawatts of partners, about 9,500 models that can be used in projects with a social impact, leveraging on partnership with the nongovernmental organizations and other industrial players, ERG logistics and electrical equipment. The social purpose projects are one of the peculiarity of or ESG plan, and they go beyond the circular economy. So we met a lot of ethos amongst the NGO and living in our partners who helped us in developing our first project we launched and partly implemented in 2023, 2 in Italy already completed, another 2, 1 in Malawi to supply the hospital, which is now under installation and another in Madagascar to supply school even here under installation. We are scouting for the new business plan, several projects in Italy and in Africa and even in Ukraine to support international NGOs to ensure energy sales efficiency for disadvantaged communities. We are working to continue developing this project throughout the plan and even beyond. And here, our part to -- for the D&I. Of course, in ERG, diversity is essential to manage complexity. Since the end of 2020, we have taken many steps forward and then worked on D&I with a 360-degree approach. Gender equality is still crucial for us, and we have adopted a substantial and sustainable approach that is helping has overcome buyers and in the qualities. We enormously improved, as you can see in this chart, all the KPIs by implementing policies, setting goals, constantly monitoring them and also guaranteeing equity in all the parts of the HR processes. Our history and our cultural transformation demand continuous commitment to this team, setting goals for ourselves. And here, you see our new goals and also we are also porin training programs to evolve our corporate culture. In 2024, we are even planning to reach the gender quality certification for the Italian legal entities. And in the business plan period, we are targeting to get an international one. Inclusion is not all gender, of course, but it covers all the diversity driving to a cultural evolution. We foster interaction among different generation. And you can see here also our target for the ERG Academy, but internal and external, we are doing this in all the countries to foster an international approach and to spread over the culture of sustainable development. We managed that people with disabilities are allowed to provide for a meaningful contribution to the company based on their abilities, motivation and even aspirations. So for this reason, every person with visibility in ESG can continue working in the employability and skill through an individual development plan for 100% of the population. Our aim is to evolve and become an international and fully inclusive group. And now over to Paolo for his final remarks...

[Paolo Merli, executive]

Thank you, Emanuela. Now let's see our updated guidance for 24, and then I'll wrap up with my final remarks summarizing what we have seen and said and presented so far. So guidance 24, I keep it short. The guidance is unchanged compared to the last time. EBITDA expected in the range of EUR 520 million, EUR 580 million, which would become EUR 540 million and EUR 600 million, including the full year contribution from the U.S. asset portfolio. CapEx is expected within the range of EUR 550 million and EUR 600 million, including the cash out for the acquisition in USA and in France in Q1 as well as the CapEx associated to the assets currently under construction. This translates into a net financial position expected at the end of the year in the range of EUR 1.75 and EUR 1.85 billion. So coming to the conclusions, the key message I want to repeat it behind this business plan is to keep creating value despite a challenging environment. And we have summarized it with value over volume. Here in this chart, there is also a summary of the main targets. We want to maintain a selective growth, targeting an additional 1.2 gigawatt out of which 60% secured.We have a solid pipeline pinning the target, and we'll be considering. I already said potential asset rotation opportunity if this unlock value. Then we want to stick a say on our quasi-regulated business model, EBITDA at EUR 600 million, EUR 650 million expected in '26 with 85%, 90% of it secured through CFD or PTA or kind of quasi regulated. Strong balance sheet. We want to maintain financial solidity. We are committed also to maintaining an investment-grade rating and a competitive cost of financing. This will give us further room to releverage and accelerate growth. Last but not least, we want to launch an enhanced dividend policy. We are providing a flexible annual shareholder remuneration with a floor of EUR 1 per share paid through a cash dividend and a cap of up to EUR 1.3 per share. The upside could be payable either through an extra dividend or buyback -- buying back shares. So thank you very much for listening. Now a very quick video, then we'll be ready to take your questions. Thank you. [ Video Presentation ]

[Operator]

So thanks for your attention. [Operator Instructions] The first question is from Paul Chabran of Kempen.

[Paul Chabran, analyst]

Yes. Thank you. And I have a couple of questions related to your value creation target. First of all, the spread that you are targeting 200 to 400 basis points, I think is among -- if you take the average is among the highest in the space, higher than some established players like EDPR, for instance, but also higher than what you were targeting before. So what do you think -- what would you say, change as compared to before? And what do you think will be the main component of this outperformance compared to peers? And a second question, which is on CapEx. So also related to value creation. What are your assumptions in terms of unit CapEx for the next 2 years, considering that panel prices are still at an all-time low. And as you say, the price of turbines are stabilized. And related to that, would you be open to use Chinese turbines instead of turbines from Investas or Nordics? Those are my 2 questions.

[Paolo Merli, executive]

Okay. Thank you for your questions. So let's start from the first one, the other rates and the target in terms of IRR return we set for our projects. But say, we think we are not the only one according to our benchmark. But apart from others, say, we believe we are in a time where having a buffer, a higher buffer is consistent with the volatility -- the current volatility of the market and the other risks associated with the business, in particular, the regulatory one and the market in the long term because right now, across the board, we are not weak, but the regulators is discussing about market redesign and everything. So we think it's very, very consistent with the current trend. And even before we had a buffer in the region of 150 to 100 bps. And the range depends on different characteristics, the country where -- we are investing the stage of the project. I mean, if it's already operational or ready to build or even before the ready-to-build status. So we are quite confident that we have everything we need to reach those targets, looking at our pipeline. And opportunistically, we will see also on the M&A market if we can say, extract that kind of value About the second one, but I think CapEx, maybe you need a little bit of more details in order to reconstruct, say, the exact CapEx per megawatt because consider that there are roughly 200 megawatts that are currently under construction, but roughly EUR 100 million of CapEx related to those constructions were spent and allocated in '23 profit and loss, say. Then you have to add this EUR 200 million to the amount if you want to do this kind of division, I mean, a number of megawatts CapEx divided by a number of megawatts. On top of that, please don't forget that the assets currently under construction more or less 150 megawatts, we're still kind of protected by the framework agreement we signed in 2020 with US as that are enjoying. That means they are enjoying a super competitive pricing for the wind turbine. Last but not least, also consider the part of the CapEx is associated to our entry in the U.S. We publicly announced $270 million, which means roughly EUR 240 million. If you divide that amount for the 317 megawatts, you will reach roughly EUR 0.7 million per megawatt. So if you put all these together, you will arrive so the value to reconstruct the right value of CapEx per megawattFor the remaining assets, say, on top of the one already fully secured, we are assuming a cost per megawatt in the region of EUR 1.6 million for wind and roughly EUR 0.8 million for solar PV. I hope this answers your - the Chinese -- sorry, yes, we met them. We met some -- I don't like to say names about some OEM, Chinese OEM. But for the time being, we are just exploring what the market has to offer. And for the time being, we are more confident with our traditional say, OEMs. So let's see what the future will bring. But for the moment, our projects are covered with Western, say, technology in the wind. While in solar, but that was not probably the question that in solar, 90% of our solar plants, the recently the most recent ones were equipped with Chinese manufacturers and material sale.

[Paul Chabran, analyst]

Yes. That was helpful. I just have a quick follow-up, if I may. You are mentioning that for projects that are not secured yet for solar, your assumption in terms of CapEx would be around 0.8 million per megawatt. So I'm a bit curious here because it's a little bit higher than what you could achieve in the past few years. And at the same time, as discussions before, that the price of panels are limited over the past 12 months. So I'm trying to understand what would be driving a higher CapEx per megawatt while the cost of the main component is decreasing.

[Paolo Merli, executive]

Is the assumption in our plan because it's -- from the outside, it's simple to simplify like you did, but actually, it means also of the kind of solar PV depends it's based on a tracker. It depends on its agreeable take. It depends on the details of the technology. For the time being, we are quite confident that our estimates, I repeat, 0.8 in the region of EUR 0.8 not I million is a sound assumption. If it's going to be less, we'll be happy for thatI don't know if Michele wants to add

[Michele Pedemonte, executive]

I want to Yes. If I may, you're right, there is that there was a strong decline in the price of panels, but maybe it is not anymore at least for the size of the plant that we have in Italy, the main pricing factor. More relevant is the EPC cost today for a plant in Italy and connection costs, for example, plays a role if the size of the plant is not huge. So it is true that the price of the panels are much lower than in the past. But at the same time, we don't see a similar trend in the other component of the CapEx structure of the solar plant. So this is the reason why we are assuming as a business plan assumption. So from a prudential point of view, the figures that Paolo was mentioning before.

[Paul Chabran, analyst]

That's very clear.

[Operator]

The next question is from Roberto Letizia of Equita.

[Roberto Letizia, analyst]

Yes. I would like to remain on the previous demand on the IRR of the projects which are ramping up well, not ramping up, you are focusing on those projects having 200, 400 spread over the walk. But where are exactly what do you think this project are coming from? Because you didn't change significantly. You only slightly reduced from 4.6 to 4.5 gigawatts of the target in 2026, but the very first part of the growth, so namely 24 potentially 25% is made up of all projects, for which the order rate was set already in the past. So I actually don't think that those that are entering onstream. And if I'm wrong, I would like you to explain it are getting this much higher IRR versus the old target of 100 to 200 basis points spread over WACC. So what actually the most profitable assets are coming from? Is it mainly the U.S., which is the novelty of the plan? Or what are actually the project you are expecting to get such a high IRR return. Then my second question has to do, it is still linked to the previous one, but actually, you have the balance sheet, as you mentioned. You even have reduced the targeted debt EBITDA, which is now 3x at the end of the plan versus the old target, which was 3.5x debt EBITDA. But at least with your investment grade, you still have space for your balance sheet to be more on the assets. So in this condition, I don't really fully understand why you are not realizing also projects that have 100 to 200 basis points above WACC, -- they will still be profitable, you have the space into your balance sheet. Maybe you have some in your pipeline. But actually, I don't not fully understand why -- if your balance sheet allows it you are not doing them because they are still profitable at a slightly lower IRR spread. Then a clarification or explanation basically because you have reduced the EBITDA target in 2026, roughly by 7% like-for-like adjusted for the IFRS recognition and the change in the perimeter. But actually, you have increased quite significantly the assumption on power prices because on average, your previous assumptions were in the region of EUR 60 - 80 per megawatt hour. But now you're assuming some country to be in the region of 100. So just looking at Italy, there is EUR 20 per megawatt hour higher power price assumption in 26 versus what the old plan was showing. So I don't fully reconcile the EBITDA with a higher price. So what am I missing in the puzzle for having increased the power prices, but reduced the expected EBITDA at the end of the plan? And one final question. In case the ferric arrives in the coming months, actually, it should be -- if it's approved in the way we saw it at the beginning, it could be one of the most profitable incentive scheme out there with inflated prices for 20 years, starting at EUR 25 per megawatt hour, that's for solar and having a 20-year lifetime with inflated and protection against volume. So just wondering if this arises in a few months, how many projects in Italy, do you currently have to capture in the last -- in the next 2 years, this very profitable framework beyond the repowering project that you already showed in the previous plan, the residual repowering project that you have -- so would you be able to capture that significant return with pipeline in the country beyond, say, the residual 400 megawatts of repowering...

[Paolo Merli, executive]

Okay. Roberto, I try to go through the least of your questions. The first, I don't know why you are so surprised about the buffer we set on top of the worker because I think this is very consistent with the volatility and the phenomenon we are looking at right now in the markets of negative hours, volatility in prices and so on, also the regulatory uncertainty. And let me say even more that also in the past, the projects I have in mind, the recent ones that enter into our scope of consolidation, for instance, the repowering projects, the one we activated and put on stream last year, they had all almost a double-digit return, maybe thanks to the effort, the management put in switching from CFD or through the auctions a few years ago, switching to a PPA.So in the end, considering that the WACC is in the region of 5%, 6% means having project return, an unlevered return in the region of, let's say, 7%, 10% shouldn't be that surprising. So say, the buffer.

[Roberto Letizia, analyst]

Let me correct. I mean I'm not surprised at all. So I'm with you. So I fully understand just looking at where the question pertains more or which project or where a do you see those projects having this higher return? So I fully understand the level of higher return required by the market condition.

[Paolo Merli, executive]

I say we have a lot of projects. For instance, we have a good one in the repowering layer. And as you said, we are still waiting for the Ferrics I do not completely share the view that the first draft of the fair degree was so appealing for wind installations because they set the price in the region of EUR 85 per megawatt, while there are other geographies where prices are much higher, for instance, in Northern Ireland, not in Northern Ian, sorry, in Ireland or even in U.K., but also in Germany, because you have to consider, for instance, in Germany that you -- they tell you, the price -- the reference price. But in the end, the German mechanism has got some correction factors that brings the overall CFD tariff much higher than the reference value. So we have currently a small wind farm under construction and it was awarded through an auction last year. The external I tried to remind that the reference price was 70%, but the actual tariff was above EUR 100 because of the correction factor. So you have to compare on a like-for-like basis. But as I repeat, as far as the Ferric is concerned, we are still waiting the final decree which may be different from the draft that has been circulated a few months ago. We expect it to become in force, say within the end of the year, but still when -- at the time right now, when we are presenting the plan, we have no clear visibility on the tariffs. But I agree with you, there are some aspects of the decree, which are very positive and the one you mentioned, the link indexation to the CPI is a quite positive aspect of the decree. About the balance sheet. Yes, you are right. In 26 according to our projection, there would be still room to releverage the balance sheet of the group. But as I said during my speech, M&A is still seen as a way to accelerate our deployment even beyond the target, but just in case there are the right opportunities. So the ones that are in line and consistent with the returns we are targeting. And also consider that we approved yesterday in the board, a policy remuneration policies, which intakes EUR 1 as a floor, then the projection, just to be clear, the projection you have seen in the chart are based on a distribution of EUR 1 per share. Then we will see year-by-year, if there is more room based on the yearly performance of the group to distribute a little bit more either through cash dividend or buyback. So we like to have this headroom, and we think is a nice issue, let me [indiscernible] to have. Then about the target of installed capacity, yes, there is a small difference, let me say, 4.5% versus 4.6%. But in the end, we think is coherent with the value over volume strategy and still are quite challenging to me target because it would mean basically to install about 1.2 gigawatt, which is exactly the same what we have done over the last 3 years. What's... I can remember. I think if that's all...

[Roberto Letizia, analyst]

The power price.

[Paolo Merli, executive]

The one on the power price... No. Maybe here, there is a little bit of a misunderstanding because in our -- the numbers you mentioned or, say, the one we presented in the business plan of 21-25, but in April '21. And at that time, we had completely different numbers. So 1 year ago, we presented our business plan, which was based on a much higher prices, and we are -- we have revised them downwards compared to 1 year ago. Absolutely, I think there is also a chart in the business plan presented in March last year that is showing what I'm saying. So fortunately, I think many analysts are writing about this. We are now experiencing a period and the time of lower prices across Europe, more or less, there are some countries that are suffering a little bit more, but more or less, it's a phenomenon that we are leaving across the board in Europe.

[Operator]

The next question is from Enrico Bartoli of Mediobanca.

[Enrico Bartoli, analyst]

The first one, I would like to go back to the target in terms of CapEx. Out of the EUR 1.2 billion in '24 -'26 million, actually EUR 600 million is going to be spending in 24 million. So that means that the additional 0.6 gigawatts that you are planning to add in '25 - '26 will require the EUR 600 million or less EUR 600 million. I understand that there will be maybe some anticipation in this year. But could you try to understand in terms of also technology mix, what is going to be? And actually, to help us to reconcile better this figure, considering that the cost of the new wind turbines that you are going to have will be definitely higher than what you had so far because of the agreement with wind providers.Second question is related about 25%. Actually, you indicated that actually with the current projects under execution, there would be 0.1 gigawatt increase in capacity. I was wondering if you can give us a hint of what you expect the evolution of EBITDA could be next year, considering that the capacity increase will be a bit slowing down. There will be different prices that you highlighted. And actually, there will be the different maybe price of the Green Certificate in Italy next year. And third one is mainly for the Executive Vice President, you highlighted that IFM has increased its weight in the holding control of the company. If you can give us some comments on actually what is the strategic approach of the fund within the strategic decisions of the company. And also what was their contribution to the elaboration to the current business plan?

[Paolo Merli, executive]

Okay. Enrico I will start by giving a little bit more detail on the CapEx. You are right, the EUR 600 million in '24, the remaining EUR 600 million in '25 and 26 I've already said that part of the megawatts -- so the CapEx for '24 is fully crystallized because we are talking about M&A already completed, the U.S. one or the one in France in January and the remaining our assets under construction where we have basically full visibility on the CapEx per megawatt. And all in all, is very low, given the U.S. one. I've already calculated and the fact that the current -- the assets under construction are enjoying the framework agreement advantages. Going forward, I think this is part of your questions. Going forward, the new capacity is expected to be installed at a cost of 1.6% on average per megawatt in wind and 0.8% in solar PV. And the mix between solar and wind for the new -- the current one is crystal clear, I think that what we are bringing into operation in '24. But going forward, I would say, 60-40, something like that, 60 wind and 40 solar, because half of the growth should come in the U.S. And there, the pipeline under the preferential right agreement we had we have with Apex, let's consider that it's more or less 50-50 between the 2 technologies, wind & solar. EBITDA, about EUR 25 million say we expect throughout the period of the plan, the EBITDA keep growing to reach, say, the range of the target in '26. So if you consider the range given for 24 of, EUR 580 million, you should assume growth of EBITDA in '25 approaching the targets we gave for 26. Please consider, but Michele has showed this in his part of the presentation that every year, we have some phaseout of incentives, in particular in Italy. And then that means we are losing part of EBITDA backed by this kind of incentive. So the trick is to substitute more than substitute this trend in order to keep the company growing steadily over time.

[Alessandro Garrone, executive]

Okay. My turn. Yes, about IFM, as I said, they grew in the participation of San Quirico renewable from 35% to 49%. So today, San Quirico has the 51% and they have the 49% of San Quirico renewables, which controls ERG. The approach to decisions of IFM, I would say, of some critical renewable because we work together is really a long-term and industrial approach. And about the contribution they give to -- and they have given to this business plan, consider that IFM has 4 members of the Board of Directors of ERG and 2 of them are in the strategic committee. So they give a very good contribution going inside of the business plan and, of course, taking all their experience in the renewable sector to help our business plan to evaluate our business plan.

[Operator]

The next question is from Roberto Ranieri of Banca Stifel. Please go ahead.

[Roberto Ranieri, analyst]

Yes. afternoon of the presentation. Just a couple of questions on the U.S. market. We are seeing that in the U.S. market, there is a kind of a new team, which is supported by the data center, which is data centers, which are also increasing the demand in the U.S. My question is pretty general. Do you see this thing to be disruptive in the U.S. market? And do you see that this could be also translate into the and transfer also in the European market. My second question is on permitting and just would like to know if the permitting process in the U.S. is easier or -- and in particular, which is the process, which is the time frame you have in order to access to that -- to the viability of the project. So basically, which is the time frame time to market of the project in U.S. typically. My last question is on grids. U.S. is probably not, in my opinion, not the perfect place for grid, which is not so integrated like in Italy for instance or also in Europe. So I'm wondering if something is also changed in that place in order to facilitate the investments renewables in the country.

[Paolo Merli, executive]

Okay, Roberto, say, you can imagine given the ups and downs of the market, of the electricity markets, how many analysis on many deep dive, we had around the fundamentals of the market. So we had the chance to share views with the main scenario providers, Europe and U.S. And for sure, there is a common view that despite the current phase of weak prices, the future prices should be driven significantly from the electrification of the world given the energy transition, but in particular to the growing demand driven by data warehouse, artificial intelligence and all these kind of things. In fact, if you see the most recent PPA that enter in our scope, both in Europe and U.S., you can see that Google, Microsoft, all this company because they are very, very energy intensive. That's why also during my speech, I said this current market phase should be seen or at least we see as a temporary effect. So the answer is absolutely yes. Even though we also think that the regulator must fix something in the regulation of the market because the rules governing the electricity market basically are the same of 30 years ago, more or less, while the market in the meantime, has changed quite significantly. About the permitting for sure, in the U.S., that's our feeling and our understanding is much easier than in general in Europe and Europe can be broken down in different geographies with different issues about the permitting. But let me also add that the way we decided to enter in the U.S. is a little bit detached from the issues of the permitting because we have this preferential -- this kind of preferential agreement with Apex that is in charge of developing the projects. And we, as ERG, we are buying them. We will find the right price together just when the project is in accordance already in operation, basically. And that means the project has to have a PPA, long-term PPA as to have, say, already a credit tax credit scheme and also the fully, fully constructed. So we are not taking any risk before, say, the operation. That was part of the agreement. The last question was about the grid, if I remember well, I'm not sure to have got it completely, but grids are an issue across the board, let me say, in Europe and in U.S. an issue -- a natural issue in the sense that the penetration of renewable is going very fast. And then there is a huge need of deploying capital in grids, and we are leaving some situation, for instance, in Northern Ireland, where there is higher-than-expected curtailments because the grids are not going -- the deployments of investments in the grids are not going as fast as needed. But we also think it takes time, but we expect all these bottlenecks that are slowing down, as you said, the deployment of renewable as well should be addressed as soon as possible. I don't know if I answer your question, Roberto...

[Roberto Letizia, analyst]

Yes, perfectly. Yes, that was the point. So basically, in the future, would be easier and no issues anyway for from restructuring in the U.S. Thank you very much.

[Operator]

The next question is from Francesco Sala of Banca Akros.

[Francesco Sala, analyst]

Just 2 or 3 questions. The first one is on first quarter results. I can't square the numbers between unit revenues, production and revenues in the U.K. and Nordics region. So I wonder whether there is some element, I should consider that I can't understand with the numbers. The second one is, I noticed some sizable cost reduction, especially in Italy in Q1. I wonder whether I should consider these efficiencies as recurring and, let's say, calculate them or taking them into account for the next few quarters, at least. And lastly, a clarification. The net debt targets 2025, 2026, include EUR 1 of dividend per share and no, let's say, no improvement above this level. Is that correct?

[Paolo Merli, executive]

Okay. Starting from the first one. We don't know -- we don't give this kind of details. But let me see... The difference... But most of the EBITDA came from U.K. because, as you know, the assets in Sweden, which is equipped with a new platform of Siemens Gamesa is still not performing as expected. So the contribution is below, say, the -- not our budget because in our budget was already included because it takes a little bit of time to be fully repaired. But let me say, more than 80% of the EBITDA, the one you mentioned came from U.K. The second one, yes, we are...

[Francesco Sala, analyst]

So if I add maybe you have to consider that in U.K., we have some balancing services revenues that are on top of the revenues coming from the sale of electricity. And we have also some extraordinary revenues coming from some performance bond executed in the period. So there are some specific elements in this quarter that explain the result of U.K. and Nordics.

[Paolo Merli, executive]

Correct. The cost is under our spotlight because we have been working to make the cost base as efficient as possible, probably could be that on a year-on-year basis, there should be some differences in geography, depending also the expenditure related to O&M. But in general, let me say, you're right, costs in general have been a bit lower than our budget, as I showed during my presentation, especially for operating costs, we feel we are very well positioned. And I confirm the financial position, the cash flow and all the projections 26 are based on a hypothesis of EUR 1 per share distribution.

[Operator]

The next question is from Emanuele Oggioni of Kepler Cheuvreux.

[Emanuele Oggioni, analyst]

First of all, about the business, the CapEx plan. Compared with the previous plan, if I remember well, some billion of CapEx on cash out was for acquisitions. While this -- in this plant, this EUR 1.2 billion is only organic. And so the potential leverage from 3x in the debt on EBITDA towards 4x is on top related to the potential possible acquisitions -- so in the current targets, there are no acquisitions or only organic growth? This is the first question. The second is on the governance, -- still on the IFM increase in the stake in San Quirico renewables. If I correct in '22, the employee valuation of ERG for that transaction was some 30 to at least EUR 32 per share in the implied valuation of ERG. So I wonder if in the -- for the second deal in April this year, the implied value was in line or even higher compared with that value. The third question is about the... The change in the scenario. So you reacted well to the new scenario, more volatile, more difficult, et cetera. But in case of improvement in the future, so lower CapEx per megawatt lower interest rate, et cetera, could you reconsider to be back to growth to more to additional capacity each year so to speed up further the greenfield projects like in the past, I mean. And finally, if I may, a question on the asset rotation. Just to clarify, when assertation refers to also include part of the 5 gigawatt projects in the pipeline, which have lower IRAC spread or less profitable for you or only existing capacity?

[Paolo Merli, executive]

See, I'm going to answer your first, third and fourth question then I give Alessandro about your second about the governance and IFM. But say the philosophy behind the CapEx has changed. I tried to explain a little bit better. In the CapEx, we inserted basically all the megawatts that are already fully secured and then we know exactly the CapEx. Then the further CapEx, I don't know yet at which project will be allocated simply because, for instance, the repowering, we have fantastic projects, okay? They are fantastic products. But there are also uncertainty. For instance, one of the best projects we have in Sardinia, was now authorized by the [indiscernible] because we want to claim that has kept the projects up in the area for a couple of years, but then the moratoria is there. And then we have to wait this to be clarified this aspect. But also, we are still waiting for the tariffs. So given this uncertainty, we decided to change the philosophy through which we planned our CapEx. So the remaining CapEx to the EUR 600 million are based on an assumption for U.S., as I already mentioned, in line with our understanding of the preferential rights. And in Europe, picking just those projects from the pipeline that are yielding the right returns. But in this precise moment, I don't know which one because for sure, a part of it is already clear but not everything. So this is the spirit with which we set our target for the next 2 years. And then elaborate a little bit more on, I can soon now with the question, the changing scenario. Yes, we changed the approach, and that's just the philosophy I'm talking about behind our CapEx and targets. But absolutely, yes. So the answer to your question, if or when the scenario -- and in particular, the regulatory surrounding the scenario is gaining visibility and clarity and probably the European election right now is not helping the business case, but let's wait for it. For sure, if there are the right condition, we will be more than happy to accelerate our growth. You have seen the balance sheet. There is still room to accelerate, but we want to wait for the right moment to do it. Asset rotation in this approach, flexible approach, cherry-picking approach or the willingness to create value for our shareholders, asset rotation could be an angle could be a point to be explored. There is nothing already defined and decided but can be vary, can be really different can be in the -- for the operational assets can be also in the pipeline. You made the right example. If a project or a bunch of projects are not yielding the returns we expect to extract from the projects, we can decide to sell if there is somebody else that maybe is investing with a lower harder rate than ours. So we are super flexible. Let us work on this point. because we just launched the business plan, but that's the spirit behind the plan.

[Alessandro Garrone, executive]

Okay. Yes, my answer, sorry, will be very short, sorry, but I cannot disclose on the price of the last acquisition that I made of some critical renewable shares. The only thing I can say is that in the agreement, there are no other possibility for IFM to grow in this shares. So 51%, and 49%. IFM is the final shareholder structure of sub renewables.. Thank you...

[Operator]

The next question is from David Candela of Intesa Sanpaolo.

[Davide Candela, analyst]

I have 3. The first one is on M&A. I was wondering if you can share your view about the current condition of the market that may be in the market there are more sellers now. And looking -- starting from this point, I was wondering if you can share or which will be the multiples you'd be willing to buy something if there is an opportunity, of course, that will create value for the company.The second one is on regulation. Of course, you're still waiting maybe for some improvement. I was wondering if you can share which are your expectation on the time frame on the timeline that for the change in the electricity market mechanism and also from other supports that could drive maybe a new wave or an acceleration for investments of renewables in Europe not only.And the third one is on the cost per megawatt and mainly relates to the technology on wind turbines. In these last years, we assisted to a strong acceleration in innovation to increase the capacity of each single turbine I was wondering if you expect that the consolidation of the technology maybe in the next few years could drive toward the cost per megawatt net, of course, of the inflation that could still be on the cost of the equipment?

[Paolo Merli, executive]

So about the M&A, we still are not seeing that shift from being a seller market being a bias mark because the interest in the sector is still high. Maybe transactions have a little bit slowdown given the uncertainty, but you have also seen that over the last few months, there has been quite important acquisitions of companies even listed at very premium multiples compared to the ones currently the stocks, the renewable stocks are trading in the equity markets. So since there is a quite large mismatch between the valuations that funds or other industrial players are putting in this asset class compared to the one we see every day from the screens in the equity markets. The time frame and so -- and to complete the answer in the M&A. So for the time being, we are very flexible. We are not under pressure to make any acquisition please consider that we have just completed our transformation. Maybe a couple of years ago, we were a little bit more under pressure because we needed to substitute the 1,000 megawatts that were going out from our portfolio. But now we are quite happy of what we did over the last few years. So the 24 is fully covered by quite significant growth. So we will analyze very, very carefully any acquisition at the right conditions I've already mentioned before. About the time frame, yes, this is a very important point of attention. I mean the time frame of regulations. It's difficult to make a prediction. We have been waiting for a couple of years, for instance, for the Creto the decree Ferrics. We think now we are very close to it. And by the end of the year, we should expect, I say should because we are not the minister. So we have to wait for the ministry to issue the decree, but we are quite confident that after the European election, this rollout of green policies should accelerate, not just at Italian level, but also at European levels. And there is a lot to do, not just for wind & solar, but also, for instance, for battery storage and hybridization and whatever can simplify and accelerate the energy transition. The cost per megawatt, I've already elaborated about it. For the time being, we are not expecting a decrease in the capital intensity for wind, which is expected in the more or less in the region of EUR 1.6 million per megawatt, all included, I mean the wind turbines, the BOP, the logistics and whatever, final cost to -- for the megawatt to be installed. In the solar, we see a little bit of reduction, but we expect to remain in the region of 0.7, 0.8, not for the panels that are much lower than 1 year ago, but because the -- is and the logistics is the part of the projects that cost more because there is a quite shortage in the market. Everybody wants to install and then the workforce able and capable of doing this kind of activities are not yet as wide as needed. I don't know if Michele is in charge of procurement in the group one to add something.

[Michele Pedemonte, executive]

No, probably I said everything. Just a quick comment on wind -- for sure, we see at least a stabilization of the cost per megawatt. So at least we can say that the steep increase in cost is over. Maybe we can see in the future some improvement in the market. As of now, the assumption is what Paulo has commented...

[Operator]

Thank you... Mr. Merle, there are no more questions registered at this time.

[Paolo Merli, executive]

Thank you very much, and we will keep in touch in a few -- in a month, a couple of months for the results of the first half of the year. Thank you very much. Thank you.

[Operator]

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