ERG SpA

MIL:ERG

Earnings Call Transcript 2021-Q2

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ERG Second Quarter and First Half 2021 Results Conference Call. [Operator Instructions]

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

[Paolo Merli, executive]

Good afternoon, everybody, and welcome to ERG's webcast. Here, with me, is Michele, our CFO. I describe here, I'm at Page #4, the performance of the group in a nutshell, focusing on the first half rather than the second quarter, which I think gives you a more comprehensive view of how things are going this year. Then I'll let Michele clearly take you through the numbers in more detail for both the quarter and first half.

So first of all, let me start by expressing my satisfaction with this set of results, which are the highest ever recorded in a semester, at least since we became an independent power producer. EBITDA first half was EUR 281 million, up 7% year-on-year.

Now just a quick comment segment by segment. Wind closed with an EBITDA of EUR 157 million, 5% down year-on-year, mainly as a result of much weaker productions abroad. But don't forget, last year was an extraordinary positive here, while we recorded better results in Italy, mainly driven by a much stronger price scenario, both for merchant and incentive price. Production where in Italy is likely up year-on-year, but not very significantly.

Solar did its job with EUR 34 million of EBITDA, basically in line year-on-year and very stable over time. Hydro was the real outperformer of the period with an EBITDA of EUR 84 million, more than double compared to the same period last year. That can simply be explained by heavy rains in '21 against the dry year in 2020, so as simple as that.

As far as our CCGT is concerned, here we had the opposite situation with EBITDA of EUR 15 million, which is half the result recorded in first half of 2020. So this drop is mainly due to the end of the CAR period, which means no white certificates for 2021. This effect, I mean, could explain -- explains actually EUR 12 million out of EUR 15 million gap year-on-year. I shall also remind you that EBITDA of first half 2020 included a couple of positive one-off items such as an insurance payout and a positive settlement related to captive contracts which led to a very tough comparison. But let me say, in the end, we knew that 2021 was a near in the middle between the end of last year of white certificates and we think the recovery of white certificates as of 2022. Because, let me remind you, that there are important refurbishment investments undergoing which are expected to bring the plant back to its normal profitability as of next year.

Then, net profit. Net profit in first half 2021 is EUR 100 million, so quite a big number, up 42% year-on-year, which is, I think, a really impressive performer and is surely thanks to the EBITDA, but also the consequence on top of the comparative results of all the work done over the last few years to minimize our debt cost and noncash cost, respectively, thanks to the huge liability programs we launched over the last few years as well as the lifetime extension, which allow us to reduce the noncash cost amount.

In the end, let me comment on the net financial position, which was, at the end of June, EUR 1,692 million, which mainly reflects the dividend paid, the huge investments for development in the semester with CapEx in excess of EUR 300 million, which include the M&A in France and Sweden on top of the organic investments. So we returned to invest quite significantly. Net financial position is also, let me say, inflated by the negative market-to-market of derivatives on energy prices. This effect, let me say, will have an opposite effect going forward when hedging will enter in delivery, given the settlement against the merchant prices. So it's like an anticipation of cash flow.

Now moving to Page #5, commenting on recent developments. I'd like to give you sort of an update on the execution of the business plan, which was presented just a couple of months ago or a little bit more than that. So although we presented it only fairly recently, we have made some important steps forward, and I say in the right direction. As such, I feel even more confident today about the solidity of the plan.

Let me summarize these achievements. We completed, just a couple of weeks after the planned presentation, the acquisition of our portfolio of wind and solar assets with the total installed capacity of 80 megawatts in France, 58 wind and 22 solar. We became the fifth wind onshore player in the country. The consideration paid for the acquisition, EUR 147 million is already reflected in the net financial position at the end of the period, while its economic consolidation started as of July 1. So you will see the benefit economically in the second half of the year.

There is some other very good news. We obtained the [ EIA ], the environmental green light for our proprietary greenfield wind projects of 47 megawatts located in Sicily, which you may consider an improvement on what we had in our business plan. We are now working to bring it forward to the next options.

As far as repowering, we are moving forward as well. We took part in the auction for RES capacity held last June with 3 projects for a total capacity of 143 megawatts, which means 77 on a differential basis. Results -- I mean, the outcome of the auction are expected to be published by GSE at the end of September, but fingers crossed. We are optimistic about the outcome.

In parallel, we are working on other projects of our pipeline. As far as construction, you know that we had roughly -- we have probably 400 megawatts under construction. All projects are moving forward as scheduled. And in particular, we are finalizing the construction of 77 megawatts, of which 70 in North Ireland, Craiggore and Evishagaran, and 7 megawatts in France, which is an extension of our already existing wind farm Vallée de l'Aa, which we expect, I mean, the 77 megawatts to be up and running by the end of the year, which is in line with our main objective for 2021. So execution is well on track for the time being. And even, let me say, ahead of schedule.

Now over to Michele for his analysis of first half and second quarter 2021 results.

[Michele Pedemonte, executive]

Thank you, Paolo. I'm on Page 7. Our demand in Italy was up 14% year-on-year, mainly as a result of an easy comparison as the second quarter 2020 was negatively impacted by lockdown. You see here that the contribution to production from wind and hydro at national level were 0 and minus 6% year-on-year, respectively.

Looking at ERG, our wind production in Italy were down 2%, slightly worse than country average, while hydro was up 44%, as opposed to the negative trend at national level, new relocation in Central Italy, which benefited from strong hydro volumes. Solar, almost flat year-on-year, in line with national leverage. As far as our CCGT plant is concerned, volumes were up 4% year-on-year, slightly worse than the national level.

Electricity prices in Italy. In the second quarter 2021, there was a strong rise in electricity prices with international price at EUR 75-megawatt hour, strongly up year-on-year. The all-in price from EUR 124 million to EUR 184 million, benefited from the rise of electricity prices, coupled with the rise of incentive. You know that incentive is calculated on the basis of last year's average national electricity price that recorded very low levels due to COVID-19 lockdown.

Our CCGT clean spark spread was negative at minus EUR 2 megawatt hour with rising gas and CO2 prices, only partially offset by a recovery of prices in Sicily. These numbers reflect the Sicilian premium versus the national price of EUR 6.4 versus EUR 2 last year.

Abroad, you can see in the graph at the bottom right of the chart, the average reference selling price for our production country by country. Yes, it's worth noting the generalized rising prices in the second quarter, in particular in countries where we have been green certificate type mechanisms such as Romania, Poland, Romania and Poland.

I'm on Page 8 now. Here, as usual, a picture of the main driver, the business of the EBITDA evolution in the first half of the year. As we have said before, wind in Italy was up EUR 8 million due to mainly better electricity price at a higher value of incentive, which, as you know, is inversely correlated with the last year very low electricity price.

Wind abroad was down EUR 18 million, mainly due to a drop in production, minus 19%. That was exceptional in the first quarter 2020. Solar, almost in line year-on-year with slightly lower volumes, offset by better prices in the period. Hydro, up EUR 43 million, thanks mainly to strong rising volume, plus 81%. Energy available in lakes is 124 gigawatt hour, plus 10 gigawatt hour versus the end of 2020 and even higher versus historical average due to the easy reinforce in the period.

CCGT was down EUR 15 million, as already commented due to mainly the white certificate phase-out and the squeezing of spot spread in the period due to CO2 and gas price increases [ Schneider ] effect for the CCGT in particular, was mitigated by the hedging policy of the group.

Now on Page 9, I'm going to comment the wind results, focusing on the second quarter of the year. EBITDA in the second quarter was EUR 63 million, up 11% year-on-year. EBITDA was up in Italy, 10%; and abroad, 9%. Production were substantially in line year-on-year. As far as prices in Italy, the average revenues -- the average unitary revenues were EUR 129 megawatt hour, higher than EUR 117 megawatt hour. Abroad, it was EUR 19 on average, struggling up year-on-year. So in the end, the right year is related to a better scenario, both in it and abroad, coupled with a slight rise in production in France in the second quarter. No more to say here.

Let's move on, on Page 10, I'm going to speak about the solar results. EBITDA was almost flat year-on-year at EUR 22 million for the following items: slightly lower production and higher unitary revenues at EUR 328 versus EUR 311 in the second quarter 2020. Here, again as a result of the higher merchant price.

Moving on, we are now at Page 11. I'm going to commentate the hydro results. EBITDA was EUR 30 million, 81% up year-on-year, mainly as a result of higher volumes, plus 44%, coupled with a better price scenario and a higher value of incentives. As such, unitary revenues were EUR 122 megawatt hour, higher than EUR 115 megawatt hour in the second quarter 2020. The main takeaway here is still the same: strong hydro availability vis-à-vis a very particular dry season in the second quarter of 2020.

Moving on. I'm now at Page 12. I'm going to comment thermo results. EBITDA in the second quarter 2021 was EUR 9 million, down 37% year-on-year, which, of course, is a direct consequence of the end in 2020 of the first 10 years of validity of white certificate. Let me elaborate a bit more on this, and there were 3 main effects: white certificate phaseout that account roughly minus EUR 6 million; a better performance in MSC, plus EUR 5 million; and the comparison with the second quarter 2020, benefit is affected negatively by EUR 5 million of positive one-off recorded in the second quarter of 2020 related to the sale of steam to captive customers in the site.

Now I'm on Page 13 and I'm commenting investments. Here it's worth focusing on the first half of the year. We invested EUR 311 million versus EUR 86 million over the same period last year. During the first half, CapEx are composed as follows: about EUR 188 million of M&A in wind and solar abroad, I'm speaking for acquisition of ready-to-build project in Sweden for EUR 41 million; and the recent acquisition of wind and solar installed capacity in France for EUR 147 million. I remind that the economical effect of this acquisition will start at the second half of the year. We expect a pro forma full year contribution to the EBITDA in the region of EUR 11 million.

About EUR 109 million is related to organic CapEx in wind referred to construction activities, mainly in U.K., then France, Poland and Sweden. About EUR 4 million is related to the refurbishment of module 1 of the CCGT plant in order to renew its eligibility for another 10 years period of white certificates as of 2020. About EUR 10 million are maintenance CapEx spread across all our technologies.

So moving to Page 15. Let's now move on to financials, commenting on profit and loss on a recurring basis. I've already commented on EBITDA. So going down to the profit and loss and looking at the second quarter of the year in particular. We have lower depreciation, minus EUR 8 million, that reflects the reduction in depreciation of some wind assets. Due to the end of amortization period, coupled with a review in depreciation plan of some intangible [indiscernible] , and the reduction in depreciation in the consolidated accounts of the hydro assets due to an increase of the amortization period without any tax effect.

Net financial expenses are at EUR 8 million versus EUR 12 million in the second quarter 2020, thanks to a lower cost of gross debt, 1.7% versus 2.3%, mainly following the issuance of our second green in September 2020 and to the liability management exercise done in past years.

Taxes. Tax rate in the quarter was 23% against 12% in the second quarter of 2020. Taxation in the quarter benefited from [indiscernible] to the tune of EUR 4.5 million, but taxes were net -- the taxes were negatively impacted by a tough comparison to the tune of EUR 1.9 million related to a positive effect on Europe in the second quarter 2019. As a result of all these, adjusted net profit amounted to EUR 35 million in the second quarter 2021 versus EUR 16 million in the second quarter 2020, and EUR 100 million for the first half of the year.

And now on Page 16. Finally, let's take a look at the cash flow statement, the net financial position for the first half. Net financial debt closed at EUR 1,692 million, up by EUR 252 million from the end of 2020. Starting from the left, we have our EBITDA, EUR 281 million; the investment made over the period of EUR 311 million; change in working capital, EUR 6 million; financial charges, EUR 17 million; dividends of EUR 113 million; and other items at minus EUR 86 million. This item is negatively affected by over EUR 80 million of market-to-market of hedging future derivatives that reflects the strong increase of future commodity prices.

Overall, the net financial position at the end of June accounts for a total amount of EUR 109 million related to market-to-market of derivatives. So all these effects led to a net debt of EUR 1,692 million. I think I touched on all the relevant items. Thank you for your attention.

I will now hand over to Paolo for his final remarks.

[Paolo Merli, executive]

Thanks, Michele. Here is a comment on 2021 guidance. The good news here, things are better, then are going better than previously expected. So we are in the position to revise upwards our guidance for the second time in a row.

More specifically, EBITDA, we revised it upward by EUR 15 million, same midpoint, to take into account the better-than-expected results over the first half of the year as well as the stronger price scenario we see now for the remaining months of the year, coupled with the contribution, that's important. We expect from the newly acquired capacity in France consolidated as of July 1. So all the benefits of this will be seen in the second half of the year.

CapEx. Here, again, we are revising it up by almost EUR 200 million to take into account the most recent M&A performed in late June for just under EUR 150 million. While the remainder, like almost EUR 50 million is linked to an acceleration in the execution we are having on several organic projects from repowering in Italy to some development in Sweden, U.K., France and Poland. So in the end, very positive news flow.

Net financial position, up by some EUR 160 million with respect to the previous guidance. When looking at the midpoint, mainly as a consequence of the higher investments, partly mitigated by the higher cash flow. So we are all very pleased with both results and execution. Thank you very much for listening, and we are now ready to take your questions.

[Operator]

[Operator Instructions] The first question is from Sara Piccinini with Mediobanca.

[Sara Piccinini, analyst]

I have three questions. The first question is on the guidance. If you can please provide a separate contribution from the higher prices for the upgrade in guidance, so how much is the higher prices contributing to the EUR 15 million midpoint guidance revised? And also, if you can give an indication of the level of capture rate price that you expect for the period 2023 for the part of the production that is exposed to power prices? That's the first question.

The second question is on the CCGT. Can you remind us the contribution that you expect for -- on the CCGT business from 2022 in terms of capacity market, so that should be the year 2022 and '23? And from the white certificates and inventory from the MSD? So maybe can you provide a guidance of the normalized contribution in terms of EBITDA for this business, so that would be helpful.

And the final question is on the repowering. Can you give an update in terms of authorization in general? And if you have any color to provide more regarding the latest auction, many thanks.

[Paolo Merli, executive]

Okay, Sara, thank you for your questions. First of all, the guidance, yes, we raised EUR 15 million, the EBITDA. And let me say, more or less, 1/3 is due to the new installed capacity has already entered onstream since 1st July because that was the date that we started consolidated the 80 megawatts we bought recently in France. And 2/3 mainly are due to the scenario because, say, we have 70% more or less, our production hedged in 2021, but there is still a part floating. And the part floating over the second half is exposed in this sense in a positive way to this scenario, which is higher than the one predicted in the previous forecast.

We maintained some buffers against the forwards because there are, right now, the forwards even for the second half of the year are incredibly high. And in our guidance, as usual, we keep some conservative approach anyway.

That's the question about 2021. Yes, it's true. We have also some productions hedged for '22 and '23, and which are basically in line with our hedging ratio. Now maybe I can't remember exactly the figures, but say, for 2022, we have more or less 70% already hedged at a price which is, let's say, between EUR 50 and EUR 60 per megawatt hour. So if you take the average, you can't be wrong, maybe even a little bit higher for 2023. And not say, I'm just looking at the numbers Emanuela is showing me, okay. No, the price is just below EUR 60 for '22 and '23.

And -- but say, again, the scenario are proving to be much, much stronger than we expected before. Even though today, we just give you some indication for 2021, there is time then to adjust the estimates for '22 and '23. So we stick on the numbers we presented in our business plan for the time being.

As far as the CCGT is concerned, especially regarding the white certificates and capacity market, you are right. The plan last year participated to the auction for capacity market and resulted winner. So we had part of the capacity in '22 and '23, which is subject to revenues from capacity markets, which are more or less in the region of EUR 10 million per year. You can take this as a proxy.

And on top of that, as you know, because it was already in our plan, we are finalizing just -- we are going to finalize the investments for the module 1 for changing the steam system with a very new steam turbine, say in the next general shutdown, which is one of the longest in the history of the plant. We're going to start the works early September, and they are going to last a couple of months or maybe even more, 70 days, something like that. So when you analyze the numbers of the CCGT in 2021, you should have very clearly in mind that this particular year, a year in the middle between 2 periods of white certificates. And why not, you remember us before the [ steam ] revenues coming from capacity mark. So I think, should be seen 2021 for CCGT as the lowest year.

The third question was about the how it's going -- if I understood well the -- our pipeline for -- especially for repowering. And the answer is very good. Very good in the sense that -- but this was not a news. We had 143 megawatts already fully authorized because they got the Autorizzazione Unica in April. And as such, we arranged everything to participate to make these assets participate the recent last auction, which was closed at the end of June.

We analyzed the market and according to our understanding, we are very optimistic because the capacity available in this auction was massive. If I remember well, 2,300 megawatts because you know the mechanism of the decree which tend to reallocate the undersubscribed portion of the previous auction to the next one. And -- but the outcome of the auction will be released by the GSE by the end of September. So let's wait, but finger crossed, we are very positive on the outcome.

I have [ jaunt ] line. I don't know if it's worth, but you know that the repowering and especially the projects which like ours didn't participate to the [indiscernible] program are, in my opinion, unfairly penalized in terms of tariffs because according to the decree, our tariffs are subject to a further 5% discount compared to the base auction. But given the very high quality of the projects, the return, the economic return associated to these projects are very satisfactory anyway. But we are trying to work with institutions to explain them that there is no reason -- there is no sense in maintaining this clause because it's totally unfair, especially in a time where [ mecum ] prices are higher than the one awarded through auction. Sorry to have a little bit extended the question, but I took the chance to say this because I think it's very important.

And apart from this 143 megawatts, which participated to the auction, we are going -- we are moving forward even with other projects. And I mentioned in this chart and this should come as a surprise, we obtained the [ EIA ] green light the [ EIA ] commission green light for a greenfield project, which was not included in our pipeline when presented the plan because that was a wind farm project. We had been working, I don't know, for 10 years, I don't know, something like that. And in the end, changing the layout, moving this and that, we obtained finally the [ EIA ] and we are now expecting for the resolution of the authorization complementary services.

So I mean, the Autorizzazione Unica, and we --finger crossed we expect have the outcome of this in due time for in case it's approved to participate to the next auction in October, but also other projects for power and moving forward and moving faster than previously expected.

I think the new ministry for energy transition is quite aware of the severe and the subscription, especially in experience in the last auction, and they are trying to do their best to accelerate. So far, so good. I hope to have addressed your question.

[Sara Piccinini, analyst]

That's very clear. Sorry, really just a clarification to be sure regarding the CCGT, the contribution from the energy efficiency certificates in 2022. Can you give an indication of how much you expect?

[Paolo Merli, executive]

It's in the region of EUR 20 million.

[Sara Piccinini, analyst]

Perfect. Many thanks.

[Paolo Merli, executive]

Yes. That's why I think, as of '22, the profitability of the plant should normalize to worth to say the average of the last 3 years or something like that.

[Operator]

The next question is from Roberto Letizia with Equita.

[Roberto Letizia, analyst]

I would like to make a follow-up on Sara's question on the repowering by focusing very quickly, if you can, on the Sardinia repowering project. I was wondering if most recent regulatory indication are speeding up in some way the project you presented in the region? I would like you, if possible, to elaborate a little bit more on the very big improvement on the financial charges from the liabilities management program. And what's the level of strategy should we expect on the full year considering the advantages that you have obtained?

And I was wondering if there is space and conditions to do more on additional debt outstanding? And if we can assume that, that additional improvement will come in the next year? Would it be possible to have an update on the timing of the disposal process? Market speculating you entering in [indiscernible] talks with Enel. I was wondering if you can provide for a better timing on when you expect it to be closed, whether with Enel or with other player?

You mentioned the Sicilian plans. I was asking myself when do you expect is going to be the COD of that plant? Because you're going to participate, I guess, maybe it's already 12,000 in '22? Is that a possible correct assumption? And if possible, a final general comment from you on the recent environment that you're taking into consideration both the [indiscernible] and Cingolani indication just repeated today from newspaper about the new GSE, the decree on incentives, which will probably last 5 years today? We saw also there will possibly include the agricultural unused length for solar assets that maybe can participate to tenders? And if you feel this specific element is a positive for you?

[Paolo Merli, executive]

Okay. Thank you, Roberto, for your questions. I tried to take note of them and I follow the order. The first one was on repowering and especially on the impact of the simplification decree just under probation right now is bringing to our pipeline. In reality, we are the least advantaged from this because we started up the process in due time, a few years ago. So I think others can reap the benefits or most of the benefits. But say, it's still positive. It's still positive for the country. It's still positive also for some of our projects because according to the simplifications, for instance, in case of repowering, you don't need, in our opinion, that the lecture we gave to the decree, we still need the [ EIA ] green light even though there are other operators that are a little bit more aggressive in interpretating and reading this decree. But we think we still need [ EIA ] decree in order to go on.

But for sure, for sure, this simplification, which allow you to construct the wind farm without having the Autorizzazione Unica in case I mentioned the geometrical dimension of the plant is within a certain threshold compared to the existing one. That's positive, and that could accelerate some deployments of our projects as well. We are studying the application of this simplification decree to our projects in order to see if there is room to bring further megawatts in the next auction. It's a little bit too early to say, but we are working very much and very hard in order to see if we can bring another portfolio of assets to the next auction.

And please consider that this would be totally ahead of the schedule of the plan because even the participation of the EUR 143 million were already ahead of the timing we expected in the business plan. So we are not changing the targets, but I'm saying that those targets can be deployed and may be faster than expected.

In terms of financial charges, yes, you are right. It's quite amazing to see that the financial charges are going down while the net financial position is a little bit higher on average than last year, but this is the result of an amazing job than by our finance department and here beside me, there is Michele, who is the main actor of this. You know we issued EUR 1.1 billion of green bonds over the last 24 months. And the last one was in September, October last year. And we are now reaping the benefits of all these moves.

And you asked also if there is still room to do something? Yes. I think if you -- I think you have read the press release today, and the Board has approved the -- give us the power, say, to explore further opportunity from this point of view. And for sure, yes, we are still a part of project financing, with which -- with a cost higher than the one expected to be raised in the debt capital market. So why not...

[Roberto Letizia, analyst]

But did you include -- sorry, did you include these potential additional benefits already in the plan only in case you get additional benefit that would come on top?

[Paolo Merli, executive]

No, no, no. It's always, as we always did, we raised money in order to close down other [ investor ] loans, which are say, more expensive. So the idea is always to associate to the issuance of a green bond, the closure or liability program, call as you want, in order to take a settlement between the cost of the 2 instruments. So it's not additional debt. I hope that was the question and my answer was...

[Roberto Letizia, analyst]

I was asking actually if did you imagined already those additional EMTN issuance at the time of the plan? Or in case the additional lower cost of debt that will come on top the structure targets?

[Michele Pedemonte, executive]

In part, [indiscernible] can use for reason. First, to finance the CapEx that we have in our business plan for sure. And second, we have some possibility to refinance some existing facilities. Just to mention one, we have just acquired a project -- a series of assets in France and as the project financing side, so we can leverage on our financial capability to refinance this asset. This project facility with that capital market at better conditions, just an example.

Or we can use this -- that capital market cost of funding to fund our new asset in Sweden that is under construction right now, so -- this is in line with our business plan, and it doesn't -- not mean any additional debt in comparison to what we have in our business plan in line of principle.

[Paolo Merli, executive]

Okay. Then you asked for an update on the process. I say here, I can just say what is written in our press release. We are moving forward. We entered in the very last phase and -- but there is no confidential agreement. So I can't say more than that, but confirming our willingness to proceed with this asset rotation because the strategic idea behind all this is the repositioning of ERG as a pure player in the wind and solar and maybe storage. And I can tell you that we are going well, and we are again, positive that the final outcome will be very satisfactory for us. Let's see.

Then you asked for maybe COD for repowering, say...

[Roberto Letizia, analyst]

No, it was the COD for the Sicilian -- the new Sicilian recently authorized plant, the one you mentioned on top of the plan that you just got it, when you expect the COD?

[Paolo Merli, executive]

You are right. So depends, first of all, by the fact that, for instance, the part will be fully authorized in due time to participate to the next auction because according to our business model, it's a precondition, the fact that the plant is awarded with a tariff because we want to be quietly regulated as we define the strategy. So the idea is to first make the project fully authorized without Autorizzazione Unica. And then to bring it to the next auction. And -- but the -- if I remember well, are the planning in 2023. 2023, the commercial operation date.

And usually, but it's almost a rule, the bottleneck is the connection. So for instance, even the largest project, [indiscernible] in Sicily, 101 megawatts, which participated to the last auction as a COD in 2023 because the length of the connection took a lot of time. If not, the commercial operation would have been much, much earlier.

And finally, you asked a sign just agricultural. So I tried to figure out the question is about the fact that the Ministry of Energy consumption is pushing for solar on agricultural territory for the time being, they gave some green light for the vertical or so-called vertical solar, which means that is combined with agriculture. And this, on one hand, will bring or should bring more megawatts to the next auctions, so they will increase the competition, even though according to our analysis, there is not very much of that kind.

The game changer would be the -- they gave -- they would give the green light for solar -- normal solar, traditional photovoltaic on agricultural soils. But it's not the case at least so far. But on the other hand, I tried to give to it a positive lecture in the sense that we as well, we are interested in understanding more about solar because you know that out of our 1.5 gigawatt of additional capacity, we have -- we are targeting for 2025, 1/3 will come -- should come from solar. So we are now starting the opportunities even in Italy for solar. And so we are monitoring also the regulatory evolution in order to be ready to seize any opportunity may arise. I think I've completed the list of your...

[Operator]

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

[Paolo Merli, executive]

Perfect, perfect. Thank you very much for the attention. And I hope and I wish you a very good holiday and see you probably in September.