ERG SpA

MIL:ERG

Earnings Call Transcript 2018-Q3

[Operator]

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the ERG Third Quarter 2018 Results Conference Call. [Operator Instructions]

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

[Luca Bettonte, executive]

Good morning, everybody, and thanks for coming to this conference call on our third quarter '18 results. As usual last year, with me is the Chief Financial Officer, Paolo Merli.

This quarter, we grew in terms of both the gross operating margin and net profit. Our high-quality generation portfolio, when managed through the energy management, along with our growing European footprint and technological diversification, is allowing us to keep posting higher results through the quarters.

Anyhow, in order to understand our performance, it's important to recall some specific factors that have had in these 9 months a relevant impact on our business.

In wind generation, the phase out from incentivized regulation of our wind factories. Some 286 megawatts were out on the September 30, 93 more than at the end of September 2017. As a result, the yearly production no longer eligible to get incentives has been of some 170 gigawatt hours whose value was calculated was around EUR 17 million.

Let me just remind you that until 2022, this number will not change much as just 55 megawatts will lose the incentives over the next 4 years.

Again in wind generation of the changing unbalancing cost regulation with a negative impact in the 9 months of some 7 -- minus EUR 7 million to be compared with the, on the contrary, positive effect of some plus EUR 9 million of last year.

In thermal generation, the reduction of the unit price, also called White Certificate, due to new regulation. On 9 months basis, the combined effect of the growing price standing 2017 with decline in [ won ] in 2018 brought about a negative impact of some EUR 11 million.

In hydro generation, we had last year a one-off positive item of some EUR 80 million relating to the recovery of past wind certificates as regard to some hydro plant.

All in all, say the total value of this negative differential items sum up to some EUR 52 million on a 9-month basis. Say that these items should no longer have a significant impact in the future years, at least on a comparison basis.

Despite such a long list of negative items, so we posted anyhow EUR 381 million EBITDA at the end of September 2018, higher than EUR 356 million of last year and EUR 105 million EBITDA versus EUR 98 million over the third quarter.

Paolo later will bring you through an in-depth analysis of the specific reasons why. On my side, let me simply summarize that as for the 9 -- in the last 9 months, what we lost in wind and thermal generation, it was even more than offset from what we got from hydro generation, plus EUR 53 million EBITDA versus 2017 like-for-like, excluding the one-off item associated to the past wind certificate in 2017. Thanks to the very rainy season, higher unit electricity price that peaked in the Northern and Central zone and an appropriate use of the water storage.

Wind brought back plus EUR 4 million EBITDA versus 2017 due to higher production and a larger perimeter in France and temporarily also in the U.K. Solar new plants plus EUR 28 million EBITDA, and as usual, the energy management contribution of some EUR 19 million in these first 9 months.

Going down along the profit loss. At the end of September, the net result was again up EUR 4 million versus last year. The main reason has to do with the better performance at the gross operating margin level, just commented, underpinned by financial charges, they're slightly up versus last year despite of the larger gross indebtedness sustaining from the investments and acquisitions. Thanks to the positive impact of the cost side from the releveraging and the renegotiation of relevant portion of the gross debt made over the last 12 months.

And in the end, the net financial position, debt grew over some of EUR 157 million, mainly for the acquisition and the investments made in the period by entering the Solar in Italy and growing significantly in France and Scotland, plus some EUR 170 million dividend distributed. Those cash-outs, as you, know were only partly financed through the disposal of Brockaghboy in the U.K. and the sale of TotalErg in Q1 2018. So again, I'd say a very good, good, good quarter despite everything.

And now Paolo, it is up to you to go ahead.

[Paolo Merli, executive]

Thanks, Luca. Good morning, everybody. I'll try giving you some more details about the third quarter by commenting with the power scenario, say, power demand. I'm commenting top left table of the chart on Page #6.

Demand was slightly up year-on-year, 1% in the quarter, a quarter characterized very much by higher water availability, slightly higher solar radiation, flat thermal and strong, strong decline in wind production, as you can see. Our performance, to some extent, was in line with those trends with some exceptions, though. In particular, our hydro operations outperformed quite significantly being up 73% year-on-year. That performance was prompted by our plant's specific location, and above all, the exploitation of the reservoirs, which in our case are basically lakes during the period.

Our thermal generation was down 7%, maybe more than you could expected, and this was driven by some maintenance works, which took place in July at the steam turbines of our plant. Both in Italy and over the border, I want to repeat that wind conditions were really exceptionally weak, minus 24% in Italy and minus 15% outside Italy, which is quite weak availability for wind resource.

Let's comment now prices vice versa. The scenario -- the price scenario was very, very solid, with the average national price in Italy at EUR 69 per megawatt hour, which means plus 33% year-on-year. As prices are finally starting to reflect the rising cost of gas and CO2. Price indicator for renewables, including feed-in premium, I'm always talking about Italy, was EUR 168 per megawatt hour, which means plus 6% year-on-year as the decline in the incentive price from EUR 107 to EUR 99 per megawatt hour was more than offset by rising electricity prices. And again, important for us, for our portfolio, price in Sicily still traded at large premium versus bond by EUR 15 per megawatt hour, when last year -- same period of last year was EUR 11.

Our CCGT's clean spark spread, which is the net, say, margin for the plant, was down slightly, say, from EUR 18 to EUR 16 per megawatt hour, and this dip was squeezed on one end by a time lag in absorbing rising gas prices and CO2 costs, and on the other hand, positive inflated by the higher premium prices. The net result of these 2 effects was anyway negative for us. Price for White Certificate remained in the range of EUR 250, EUR 260 per unit.

Let's now comment price scenario abroad. Here, you have the last graph, the one in right bottom end of the chart. You can see the average reference selling prices for our production country-by-country are the one showed, say, in the picture. Let me make the same comment as always. In France, Germany and Bulgaria, the impact of this scenario is 0 or nil as our assets are all eligible for feed-in tariffs. The only exceptions are Poland and Romania where a Green Certificate mechanism is in place. In Poland, Origin certificates were up consistently, very, very important -- importantly. And in Romania, I have to underline that from this year -- since this year, we just enjoyed 1 Green Certificate instead of 2 as it was the case of 2017.

Let's now comment on economics. In a nutshell, I am on Page #7. EBITDA was EUR 105, up 7%. And if I should say, I would underline 3 positive effects, which, say, driven our results. The higher -- much higher hydro production. Also thanks to the use of our reservoirs during the summer, the contribution of solar assets, which is an additional stream of revenues for us this year, and positive merchant prices for electricity across our operations, in particular, as I said, in Italy.

These positive effects were partly compensated by some negatives, most of them already expected, say, in our budget, but for sure are negative on a year-on-year basis. I'm talking about the lower price value for incentives, EUR 99 from EUR 107 in 2017. The phase-out of some megawatts of installed capacity in Italy from incentive scheme, the higher imbalanced costs in wind following the change in regulations and also bit lower revenues deriving from White Certificates. But in particular, I have to mention the major effect during the quarter negative, which was the significantly lower wind production in Italy and abroad.

So all in all, and once again, anyway, we are very satisfied with our results because despite the weakness in wind condition, are stronger than last year, and above all, better than our budget. So this pretty much, in my opinion, gives an idea of why our diversified portfolio is of great value. Sometimes, there is no wind, by either water or solar or spark spreads in CCGT as it was in the past can make up for this -- for any shortage.

Let's move now to Page 8, commenting very, very quickly the portfolio. During the first 9 months, ERG managed roughly 10.2 terawatt hour of energy, out of which 5.7 was generated by our portfolio of assets. The reminder was purchased on the market in order to adjust our supply profiles, optimize the portfolio and perform hedging strategies in line with our risk management policies.

Looking at the sales. Our model is based, most of all, on wholesales market, which represent big portion -- the biggest portion of our sales. For the remaining 0.4 terawatt hour was sold to site customers in Sicily and 1 terawatt hour abroad outside the border.

Let's now comment business by business. I'm on Page #9, commenting wind operations. EBITDA in Q3 was EUR 40 million, down 30% year-on-year, which is a quite important figure. But let me say that most of it is due to the drop in volumes. Recall that during the quarter cause of the absence of lack of wind in Italy -- both in Italy and outside Italy. These effects accounted, let me say, for about EUR 20 million, a bit less than EUR 20 million. Then we have lower contribution from incentives and higher imbalanced costs, which account, let's say, for 1/3 of the GAAP -- the year-on-year GAAP in terms of negative. These negatives were partly offset by a bad electricity price scenario, both in Italy and abroad. But let me stress once again how important the production effect was during this quarter. Then in few minutes, I comment, which was the driver that allow us to totally offset this negative effect.

But in the meantime, let me comment also the solar, Page #10, which is basically in line with our expectation, in line with our budget. There is no comparison -- year-on-year comparison because you know that the assets entered into our scope of consolidation since the beginning of the year. Anyway here, I'm commenting on Page #10. Production in Q3 was 45 gigawatt hour, with a load factor of almost 23%, quite important one, because as you know, third quarter is usually the strongest in the year.

The revenues -- the unitary revenues of our plants are in the region of EUR 300 per megawatt hour. This is because this is an incentivized scheme of so-called Conto Energia, our assets are entitled to. In the end, last but not least, the EBITDA was EUR 12 million in the quarter and EUR 28 million year-to-date. So pretty much in line with our budget, as already commented.

Now Page #11, hydro operations. EBITDA was EUR 38 million in this segment, double year-on-year, driven by -- essentially by higher production, which was up 73% year-on-year. You should remember that at the beginning of my review, I commented that the country was up 9% or something like that, so it's a quite impressive performance. And this was driven by the usage, say, of our reservoirs during the summer.

Unitary revenue for the plants was EUR 119 per megawatt hour, more or less slightly lower than the last year, reflecting, say, the lower unitary price for incentives.

Let's move now to CCGT to our thermal operations. I am on Page #12. Here, EBITDA was EUR 18 million, again, minus 22% year-on-year. So again, quite a disappointing number, but consider last year was a bit solid quarter. And this year, we had some maintenance in the steam turbines, which in some way, limited our upside during the quarter. Anyway, the factors, say, are clearly evident from the charts, 7% drop in production due as said to some maintenance activities, a bit lower clean spark spread following the rise of gas and CO2 cost. But I think we are happy, say, to be located in Sicily because our other competitors are located in the mainland probably have suffered much more during this quarter.

And the third aspect, which more or less is in line with last year, but still represents a solid stream of our revenues, are the White Certificates, which are in the region of EUR 250 per certificate.

Okay. And we also have some efficiency in terms of fixed cost with a relief of EUR 1 million, which helped to limit, say, the underperformance compared to last year, for the reason I hope I have fairly, fairly explained.

Let's move to Page #13, commenting investments. We have -- we invested EUR 484 million, which is a quite significant amount of money during the first 9 months. While looking at the quarter, this amount is a bit smaller, say, EUR 37 million and is related to the progress on some projects under construction. But say, it's more represented the commented the full number year-to-date, which includes EUR 345 million for the acquisition in solar and EUR 130 million in wind business, part of which related to the acquisition of Epuron, our developing, say, company venture in France. So this number, anyway, should give you a clear evidence of the execution and the progress towards our business plan.

Let's now commenting on profit and loss. I'm on Page #15. I've already commented on adjusted EBITDA. So going down, we have higher depreciation, which are consistent with the larger portfolio of assets, in particular solar. Net financial expenses at EUR 15 million. It's quite important number because despite the higher net debt, you see financial charges remaining more or less in line with last year. And this is because all the liability management we have announced late in the semester -- in the first semester, which are, say, going into service, delivering results we expected.

Taxes. Tax rate in the quarter was 26%, better year-on-year. Minority practically disappeared as we acquired 25% of minorities from Renvico, a venture in France [ and that's the ] SPA. As a result of all this, say, adjusted net profits came at EUR 17 billion, 6% higher than same period of last year.

Let's now comment the cash flow statement. I'm on Page #16. Here, I like to underline the net deleverage, whenever we stop paying dividends or investing a lot of money in the grow, this company starts delivering an important deleverage. That's the case of the third quarter. Net deleverage was EUR 77 million, which reflects the EBITDA, already mentioned, partly absorbed by the CapEx, already discussed, and a positive contribution from net working capital, EUR 36 million, which is consistent with the nature of our business, which pays in the third quarter, we cash in all the incentives generated in Q1, which is, as you know, a very strong quarter, especially for wind.

So in the end, say, the net debt at the end of September was EUR 1,389,000,000, with a leverage for the group at 43% from the previous 45%.

So I hope I have touched on all the key items, so I will now hand you over to Luca for his final remarks.

[Luca Bettonte, executive]

Thanks a lot, Paolo. Now we are at the guidance, and that's for the guidance that we simply confirmed on what we started just 3 months ago.

So as for EBITDA, we forecast a value in the range between EUR 490 million and EUR 500 million. As regard CapEx, the ranges for year-end would be EUR 520 million to EUR 540 million. And net indebtedness at year-end, we expect it to be at about EUR 1.35 billion.

[ More on the case of ] EBITDA. We see for the EBITDA, the year-end result higher than last year. We forecasted lower gross operating margin in wind generation in Italy due to lower productions, the adverse effect of the new regulation of the unbalancing costs, along with the phase-out of some 72 megawatt hour incentivized schemes.

And we see also a weaker result for the thermal generation, mainly due to the negative impact from the lower White Certificate prices and the reduction of the generation margins in the fourth quarter. These weaker results in wind and thermal generation should be more than offset by much higher results from hydro, thanks to the high availability of water, the contribution from the new solar plant and the slightly higher result in wind abroad, stemming from a larger perimeter in France and the overall better energy price scenario, just partly offset by a lower wind development. All that said, underpinned by a good energy price scenario in Italy overall.

As for the CapEx, [ we keep less guys ] unchanged as well complying with the business plan, project investment -- projected investments and filing the completion of the agreement with Quercus, set to create a partnership between part of the consolidation of the solar industry in Italy.

And as for the net financial position, the increase versus 2017 is simply the result of the mentioned changes in EBITDA and CapEx, along with the dynamic of the net working capital associated with it. So nothing new, but good -- no news is a good news, let's say.

So now we are as usual ready to take your questions.

[Operator]

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

[Roberto Letizia, analyst]

I have several questions. I will start with some and maybe with some follow-up later on. The first one relates to the new assets of Vallée de l'Aa and Torfou. I would like to understand when do you expect them to start production and if you expect any kind of contributions already this year. I would like to have an update on the Quercus JV, asking when this JV is going to be signed finally and, again, when do you expect the first contribution to come from the assets of this JV. A detailed explanation on the hydro productions on the third quarter. I was wondering if the use of the reservoir is going to affect negatively the fourth quarter production or if you believe that the trend in rainfalls is already allowing you to forecast a normalized trend in hydro production from your assets also during the fourth quarter of the year. Another one on the PTA agreement you recently signed on E.ON. If you can better clarify to ask which kind of benefits are going to take from this PTA versus, say, the strategy plan assumption, whether the pricing underlying the PTA is better than what you were forecasting or because this allows you a better energy management overall, which kind of quantitative benefits can we extrapolate from this PTA?

[Luca Bettonte, executive]

Right. Very quickly as for the Torfou and Vallée del’Aa, the COD as for Vallée del’Aa is forecast January next year, and the Torfou, December this year. So at the end of the day, we are not having any benefit in this year as for these 2 wind farms. Quercus JV -- Quercus JV, we are operating -- we are working with our counterparts in order to finalize the agreement. As you may have seen on the news, there is some delay due to some, say, reshuffling, let's say, or changing the management of Quercus. So we are waiting for that procedure. This is more delay, this is a short delay, but at the end of the day, we are working top line in order to get the agreements done, let's say, by year-end than now. Anyhow, we have already, say, informally worked -- we have already started working with them, signing this agreement because at the end of the day, we don't see any problem signing these agreements. And so far, let's say, so good. As for the hydro production. Yes, we have benefited in this quarter with the use of the reservoir. Of course, at the end of the day, the large production that we had during the first, say, 6 months of the year, say, suggested us to use the reservoirs as soon as possible in order to have our reservoirs, say, ready to receive more water during the fourth quarter when -- based on the forecast, was on the 10-year average forecast [ understanding ] from the past, we may have more water and so to have space to store it is going to be quite important. And then the production that you have seen in our reports included -- includes the use of reservoirs in the fourth quarter. As for E.ON agreement, it's an agreement on the 3-year basis up to 1 gigawatt hour per year and is an agreement through which we can, say, provide E.ON with our production. It's -- the price will be defined during, say, the exploitation of this agreement. There's no specific price defined. What we have agreed with E.ON is that we are a preferred vendor, because of the production profile of our, say, generating portfolio, in particular and in reference to the production from [ Brescia ] is, say, quite aligned with the consumption profile that E.ON has provided us with in reference to E.ON's customers. That's the value of this agreement. And then we think based on this specific, say, picture quality, countries of our generation portfolio will be in a good position to provide them with 1 terawatt hour per year over the next 3 years.

[Roberto Letizia, analyst]

Sorry, I did not understand the explanations on the water. Let me ask the question in a different way. So would you expect the EBITDA of the fourth quarter from the hydro segment to be higher than last year?

[Luca Bettonte, executive]

Yes. In the fourth quarter, yes. Yes was enough. Hello?

[Roberto Letizia, analyst]

Yes, I didn't get the answer, sorry.

[Luca Bettonte, executive]

Yes. The answer was yes.

[Operator]

The next question is from Sara Piccinini with Mediobanca.

[Sara Piccinini, analyst]

I also have some questions. The first one is on the imbalanced cost for wind. You have already mentioned it in the first half that this increase in the imbalanced cost is related to with some changes in the regulation. Is there any improvement so far or any signal from the regulator that this could be reversed in the future? So this is the first question. The second question is, what is your expectation for the level of spark spread for the fourth quarter? And also, if you are seeing a lower, let's say, further pressure on the pricing of White Certificates and if you can give us the level of the contribution of White Certificate for the full year. The third question is on working capital, there is a positive contribution from working capital, as you have well explained. What is the level of working capital that you expect for the full year? And finally, on the guidance of the CapEx. Is the...

[Luca Bettonte, executive]

Right. As for the unbalancing cost regulation, unfortunately, I don't think that we should expect any, say, positive investment change as for the existing one. So we are, say, coping with this regulation, we are improving our way to, say, predict the production. That's the only way that we are working going forward, and that's all for the time being.

[Paolo Merli, executive]

If can I add, the regulation in a way is still evolving, and we should expect in the coming year, since probably, as of say, mid-2019. The bidding system will be, say, evaluated towards more, say, pretty short bidding before the delivery time. So this could help us as long as the other -- all the other operators to reduce the impact of imbalanced cost.

[Luca Bettonte, executive]

Right. In terms of spark spread, yes. For the fourth quarter, say, we -- our expectation is to have a lower spark spread than what we got over the first 9 months. That's how the results of the dynamics of the natural gas price and the CO2 price in the end of the day. Price. In terms of national average price is up, is going to be good for the fourth quarter. But as you know, there's different zones in Italy. So the impact of the higher price in the Northern of Italy is going to be lower in terms of lower pricing in Southern Italy. That say, is affecting our performance in the fourth quarter. So nothing new, but in the end of the day, lower, say, spark spread in the fourth quarter. As for the White Certificates, in the end, I think that situation is basically stabilized because based on the regulation and you can see this impact also looking at the results of the [ distribution either ], I'd say, monthly or weekly auctions. The same of the prices converging to some EUR 250, EUR 260 per kilowatt hour. This is the -- what we have forecasted. So at the end of the day, having a production of more or less 100,000 certificates per year, the impact is, on average, EUR 25 million or EUR 26 million per annum. In terms of net working capital, say, at the end of the day, we don't have any, say, specific provision, but for, say, it's quite easy to be managed in terms of, say, production sold in the official markets and the incentives that we receive, but the payment relating to the CapEx and the like. So at the end of the day, say, item in our cash flow was, say, stable, under control with no specific, say, problem relating to that. Plus, this year, we paid EUR 40 million of the debt we had to the oil company. That's the last portion of volume we had in our business plan by the end of the day.

[Paolo Merli, executive]

Which was importantly extraordinary item. So whenever you want to figure out how our working capital works, you have to consider that we are going to cash in the incentives 6 months later than the production time. So that means the third quarter, usually is a positive one for our working capital, because we cash in the generation of the wind generation, which is usually strong in Q1, while the fourth quarter vice versa is usually be absorbing considering that the production during the summer for wind, especially, is a bit weaker. But it's normal and physiologic, say, volatility of our working capital.

[Luca Bettonte, executive]

Right. So the CapEx -- the guidance for the CapEx, you have asked me for telling you whether or not that is included, it's not.

[Paolo Merli, executive]

Absolutely not.

[Luca Bettonte, executive]

It's not included.

[Operator]

The next question is from [ Emanuelle Ojuili with Banco Group ].

[Unknown Analyst]

Actually, some of my questions have been already answered, but I have maybe more on strategic long-term view about the evolution of the technology curiosity. As I noted as how wind power producer started the -- to use factories for storage of solar energy power. So I wonder if you are looking for this kind of new technology for the storage. Do you have something on this matter?

[Luca Bettonte, executive]

Say, it's a $1 million -- $1 billion question. At the end of the day, we are having to look at, so we have put any eye, say, put an eye on this technology, but in my opinion, progress is there, but it's going to take longer in order to have something that's on economic and industrial plant is going to be used. On a small case, I guess, is going to be something that could be used and that should be experimented and trials based on that. So for us, it's going to be important, but now we are simply, say, looking at what is happening. We're not investing because we can't afford such kind of, say, resource. And that's all I'll say. The only say, the storage we have are our lakes and we have already discussed about that.

[Operator]

The next question is a follow-up from Roberto Letizia with Equita SIM.

[Roberto Letizia, analyst]

I have some follow-up. As the wind conditions has been poor during the third quarter, I was wondering if you can provide us with an indication of how it has gone in October and November, if you are experiencing a recovery or if the conditions for wind last year were poor. I am wondering if you can provide us with a guidance on the net income for the full year because then we are now approaching the end of the year, maybe you have a better picture and can drive us on a range at least for the net income level. On the possible deal that you may be involved in with the press talking about the bid for the Glennmont asset, which we are expecting to be announced. I was wondering if you can give us an indication of what kind of EBITDA is associated to Glennmont asset. So what type of contribution are you looking to bid and especially can advise if the deals got closed? And my last one, I promise, is, here again a bit more strategic, but with reference to your repowering and re-blading activity, can you first provide an update on how these activities are proceeding? And when do you expect to have the first asset fully repowered or re-blade? And then I was wondering if the repowering and re-blade gives you an optionality for an extension of the useful life and will allow you to have lower depreciation going forward because now, I guess, you are a little bit more than 20 years on the depreciation, but useful life is proving to be much longer. And I was wondering if the repowering and re-blading offer you the occasions to fully revisit your depreciation policy, which means some positive element may arrive on the net income going forward.

[Luca Bettonte, executive]

You cannot raise any more questions. The specific one [ advancement of power ] before providing you with his answers, let's say we are not going down the direction, but starting from wind. Wind production was very good in October, so happy. But of course, just 1 month, the trend is good. But if you consider the very, very, very weak wind availability, low wind availability in the quarter, we are commenting the third quarter, at the end of the year, the production forecast is a bit lower than previous year in Italy. So far so good, as for the fourth quarter. So wait for the next, say, week when there's going to be a big change in the temperature, the country should bring us some wind. But so then in the numbers, the figures just for October, October went well. In terms of net earnings, net profit, we don't give any, say, forecast for year-end. So based on that -- you know very well how's the, say, contribution of our profit and losses. So it's going to be quite easy for you to, say, identify what's going to be the likely that say, very good results also as for the last row in the profit and loss. Going -- skipping the Glennmont question, because I let Paolo to answer you at the end. Repower and re-blading, say, we are going to give you an update of the business plan in the every 6 months. So please wait, officially speaking, to the end of March of this year because we gave you an update at the end of the first half. Anyhow, let me tell you that so far so good. We are working very hard in order to get the authorization, so I don't have anything to say different from what I told you 3 months ago. Now we are in the first and second phase getting authorization in across Italy. Feedback that I received from the meetings that I had with the Chairman of the regions, with the Minister of the, say, Culture, Art and Tourism was very, very good and positive, so [ in case ] the region changed and, say, took away the previous bond to 122 days was provisions in there, positively oriented the requirements. So, so far so good, but nothing more than that. In terms of longer use of life, for sure, because we are installing new technology, we are improving the way that we run the business in terms of use of life, that was about 30 to 35 years, or 30 years, say, for the time being. As for the depreciation is the main dimension of tax, say, allowance. So the shorter, the better. And of course, we want to [indiscernible] more so the fact sheet relating to, but [ I'm going to miss that ] and they're going to say think a bit better when the first to answer is going to be put in place. And as you know, if you look at the CapEx deployment plan, that's going to be no earlier than, say, late 2020, mainly 2021. And then Paolo, it's up to you to say something about Glennmont.

[Paolo Merli, executive]

More a joke than not in the sense that we have signed no confidential agreements, so we are not allowed to say anything about the targets. Sorry.

[Operator]

The next question is a follow-up from Sara Piccinini with Mediobanca.

[Sara Piccinini, analyst]

I have just a question. If you can comment on the decree on the renewables that the government is going to approve in the next month, just to have a sense from you being the main operator in Italy. What is a -- what are the positives and negatives of this decree?

[Luca Bettonte, executive]

For sure, the decree is something that is positive. We have to look at it positively. I say, they're working very hard. What is a very important for us is what is going to be in the decree as for the repower and re-blading, repowering mainly, which is basically [ innovation ] process and the like. In terms of potential investment in the country, I'm referring to new assets that are going to be auctions. They're working to, say, define this auction in a way to allow all the technologies to take part to them also with a minimum level, like that something not they really, say, fair from a competition point, if a source of energy could be have some advantage towards the other one because at the end of the day, the [ imposing ] impact also on the way that the [ DSO's ] going to -- has to say run its business so to manage the grid. But in the end, we are mainly focused on looking at what is coming out as for repower and re-blading rather than to the new, say, potential for capacity. As for the [ administered ] capacity, you have to see that there's a lot of, say, gigawatts to be put under the auction process. But as you know, our business plan is mainly focused on growing abroad, but for -- to reinforce our position in the solar business, mainly for generation portfolio mix optimization.

[Operator]

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

[Luca Bettonte, executive]

Thanks a lot everybody for taking part of this conference. And speak to you in March. See you. Bye.

[Paolo Merli, executive]

Thanks. Bye.

[Operator]

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