Italgas SpA

MIL:IG

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Italgas First Quarter 2023 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Ms. Anna Maria Scaglia, Head of Investor Relations of Italgas. Please go ahead, ma'am.

[Anna Scaglia, executive]

Hi. Good afternoon, ladies and gentlemen, and thank you for joining us. Today, we will walk you through Italgas' fourth quarter 2023 results. I'm Anna Maria Scaglia, Head of IR team, joined by Mr. Paolo Gallo, our CEO; and Mr. Gianfranco Amoroso, our CFO. We will address any questions you might have at the end of the presentation. I leave now the floor to our CEO, Mr. Gallo.

[Paolo Gallo, executive]

Thank you, Anna Maria, and good afternoon to everybody. I move to Slide 2, starting the comments on our first quarter results. As you can see from the slide, we have achieved an impressive growth in the quarter with a double-digit increase regarding all key operating income drivers. Adjusted revenues were up more than 35%, led by the strong growth of the energy efficiency company. And in addition, the consolidation of the DEPA, the Greek DSOs, proving the benefit of the diversification action that we put in place in the last few years. 

In the Italian distribution business, the main drivers were the up growth and the positive impact of inflation that were partially offset by the dilution from the disposal of the Naples theater that we lost last year. While OpEx were up year-on-year, this is not surprising considering the development of the energy efficiency activity and the Greece activity. For the rest of the business, costs remain under control, notwithstanding the inflation impact. Overall, considering our cost of debt, our adjusted net impact grew by more than 16% in the quarter. 

If we move to the following slide, Page #3, we can take a look at the investment we made during the quarter. CapEx were around EUR 175 million, slightly below last year, but with a different mix. We can see a significant impact about the working capital. It's a negative impact. The main drivers were the impact of the energy efficiency company growth and the VAT that was linked to the bonus gas payment. Gianfranco will explain later in more details. On top of the escrow and the VAT, billing seasonality was also less pronounced than in previous year due to the milder weather. As a result of the cash flow evolution, as you can see, net debt increased by nearly EUR 90 million, just above EUR 6 billion if we exclude the impact of the IFRS 16. 

Going forward, take a look at the CapEx components. Out of EUR 175 million, EUR 25 million are relevant to Greece. And regarding Greece, it's mainly an expansion/building of a new network. As you can see, there is a significant increase in digitization if we compare the amount invested in 2022. The amount invested in 2023 in comparison with the first quarter of 2022. Development repurposing attracted the majority of the CapEx around EUR 84 million. The number includes also EUR 4 million of relevant to Sardinia. Overall, Greece and Italy, we added more than 200 kilometers of new pipes in both countries. 

If we now move into the results, ESG results. So we start from the energy consumption. Let me make a comment, first of all, that those data include the numbers coming from Greece. So the perimeter is not the same as it was in 2022. So nevertheless, the net energy consumption dropped by more than 15%. If we take out the Greek part, the consumption dropped even further by more than 20%. The main contribution came from industrial gas consumption, which was almost 23 [indiscernible] lower, thanks to all the actions we put in place. We have already explained some of them last year to improve the performance of our operating system. And this is one of the core actions implemented that has not been concluded yet to reach the long-term goal that we announced in June about the energy consumption in other way, energy efficiency.

Electricity consumption was lower, as you can see, mainly driven by the lower consumption, all the activity that we put in place regarding our activity in the Italgas Acqua, so water distribution and building management, but mainly water distribution. As I said, Greece has been included, and that's the reason why vehicles represent the only part of the energy consumption that is higher than last year. In other terms, the efficiency that we've achieved in Italy, we're not able to fully compensate offset the additional contribution company from Greece. Still, the reduction in efficiency is remarkable.

[indiscernible] on the following page. A similar situation is relevant to CO2 emissions. Again, here, there is a difference in perimeter between first quarter 2022 and first quarter of 2023, that is represented by the Greek activities. Overall, we reduced our overall emissions by more than 6%. Without Greece, it would have been around 12%. And the decrease is mainly driven by the fact that we have adopted a different approach regarding civil industrial gas consumption, as we just described before. If we look at the main component about CO2 emission that is the leakages. In the first quarter, we continue setting more stringent targets regarding localization, in terms of the time of the leakages and in time, again, in terms of removal of such leakages. While we increase materially the kilometer of network inspected, in fact, we inspected in the first quarter, 24% more kilometers, bringing the overall perimeter inspected to more than 25,000 kilometers out of which nearly 1,000 are relevant to Greece. 

So we have started already in Greece to deploy our technology, the [indiscernible] to research, find and fix the leakages. Thanks to the results achieved. The gas-liquid per kilometer survey dropped by around 22% to 35 standard cubic meters per kilometer. We are, and I will probably say we are the only DSO in the European Union well prepared to adopt the new metal emission regulation that will probably be released by year-end, in which their requirements are far more stringent in terms of the number of times per year, you are requested to inspect your own network. We are the only one that are doing more than once per year. All other DSOs are doing far less frequent inspections.

Now let's go on the economic results. Total revenues, we have already seen increased by EUR 126 million, led by Greece, operation and energy efficiency operation. I will explain in the next slide. Overall expenses increased by EUR 79 million, driven by the same main drivers, Greece and Energy Efficiency. D&A was up by EUR 70 million, mainly due to higher CapEx that we -- so the increase of RAB derived from the higher CapEx that we invested last year and the data contribution. Tax rate, more or less is in range in the line of what we explained, but Gianfranco will give you more details later. And the net profit showed a very robust increase by more than 16.5% year-over-year. 

If we go more in details about the revenue, we can look at that distribution in Italy growth in RAB nearly achieved more than EUR 8 million higher revenues. EUR 6 million are coming from inflation or the deflator and the inflation on the OpEx. While we can see that disposal are relevant to the Naples concession and Gaxa, they represent in terms of revenue, and we will see also in terms of the EBITDA, representing term of revenues minus nearly 20% -- EUR 20 million, EUR 19 million. The contribution of debt has been positive by EUR 44 million, and the main contribution is coming from [indiscernible] with an additional value of EUR 88 million in the quarter.

You can see the same numbers in the following one, the same numbers, line by line, where there are distribution and the different tariff [indiscernible] other distribution revenues compared quarter-by-quarter. Other revenues here, they represent mainly [indiscernible], and then you have the contribution that we have already commented about the infrastructure. If we take a look at the cost we have a fee -- as you know, we represent like-for-like basis, like-for-like increased by EUR 3.4 million. Out of this EUR 3.3 million, EUR 1.8 million are related to cost that has been reflected also in the revenues.

Therefore, we have close to 0 impact on the EBITDA, which kind of cost their cost regarding gas trucks in Sardinia and the cost of meters that we sold to a subsidiary in the central part of Italy. So if we take out this effect, we still have an increase of about EUR 1.6 million One of the drivers, as you can expect, is the higher utility cost. I should recall you that last year until September, we were enjoying a very low cost of gas, thanks to a couple of year contract that we signed with a very low price. 

Let me make a comment. The inflation impact is everywhere in our cost, but the impact in terms of percentage is extremely limited, at least for the time being. But that means that we were able to control the cost and nearly absorb all the inflation impact, including the increase of the cost of personnel following the agreement that we reached last year with trade unions. As you can see, there is also a reduction of cost due to the disposal that is relevant to the Naples and Gaxa. Then there is the contribution of DEPA, the cost of the infrastructure. And the major block is the increase of the cost for our energy efficiency company, around EUR 70 million. I would like to remind you that if you compare the, let me say, profit and loss up to the EBITDA of our energy efficiency company, we have reached a higher margin in terms of EBITDA in respect of last year, we are at 19% in terms of margin. 

If you want to take a look at the cost from a different perspective, you have the table in Page 11, where we have allocated the cost relevant to the distribution activities in Italy. The other activities, mainly energy efficiency company and water distribution, and then you have a mix of other costs like other cost energy efficiency certificate and concession fees and finally, the data infrastructure. So our EBITDA has shown a very significant, very robust growth of nearly 19% where there is a clear contribution coming from the energy efficiency company and the infrastructure. Somebody may notice that let me say, what we call Italgas distribution, they show very little increase in terms of EBITDA. It's a remarkable result considering that we lost Naples, and Naples represents nearly EUR 11 million of EBITDA. So we were able to completely offset such a loss and be able to gain a little bit in respect of last year. 

So the increase of EBITDA, if we consider a similar perimeter, has been more than EUR 11 million. So remarkable results. The other element that I would like to comment that is the first time that we show a chart like that is that why last year, Italgas distribution represented 99% of the total. ESCo was a few million in terms of EBITDA, if I remember well, EUR 3.5 million. This year, Italgas distribution represents 83% of the total. And then the remaining 17 million is split between energy efficiency contribution and data contribution, so this is the result of the densification effort that we put in place in the last couple of years and as a result of significant numbers coming from the energy efficiency company and end the Greek operations. I will now let the floor to Gianfranco that will continue the presentation. Thank you.

[Gianfranco Amoroso, executive]

Thank you, Paolo. Coming to the EBIT on Page 13. EBIT reached in the first quarter EUR 172 million with an increase of around 22%. This is a result of an increase in EBITDA of our Italian meter of more than EUR 17 million as a result of the variance of revenues and OpEx that Paolo already explained. Then we have EUR 8 million of higher D&A that are mainly related to the CapEx executed in the last 12 months. Finally, deeper incremental EBIT contribution of EUR 21 million. And please note that the EBITDA contribution of data in the period has been around EUR 30 million. 

Moving now to Page 14. Our adjusted net profit after minorities reached EUR 104 million, with an increase of 16.5%. It is remarkable that net adjusted financial expense at the market level of almost EUR 20 million, EUR 5.9 million higher than last year's same period, mainly due to the impact of the rising short term interest rates on the floating rate portion of our debt.

Contributions from associates was almost unchanged. Finally, we accounted for EUR 41 million of income taxes, a market increase of approximately EUR 7 million due to a higher taxable income. So tax rate was 26.9%, well in line with the level of last year. Now looking at the evolution of the cash flow on Page 15. First, you can see that the cash flow from operation was around EUR 107 million, quite a low position if compared to what is the usual level of cash flow in this period of the year. This is a consequence of a negative evolution of net working capital that brought a negative contribution of almost EUR 160 million. Out of this cash outflow, around EUR 100 million are explained by higher VAT receivables correlated to the bonus gas and other similar measures put in place to support the value chain. Other working capital uses were super bonus and eco-bonus receivables for more than EUR 100 million linked to the significant growth of our activity in this quarter.

On top of that, we reported a lower cash contribution by the billing seasonality only 20 million if compared to last year's same quarter. This is due to mild weather and to structure serving the areas of the final users. We also booked around EUR 70 million of positive evolution on the payables in the quarter mainly for [indiscernible] and tax payables. After that, net CapEx generated a cash outflow of almost EUR 197 million. All this resulted in a debt increase of approximately $90 million. Let me now make an update of our debt structure at the end of March, as represented on Page 16. First, let me recap the main debt transaction of 2022, a new ESG loan EUR 250 million floating rate, a new loan EUR 150 million fixed rate, and the new multi tranches facilities packaged with EPI borrower floating rate. The last 2 deals were executed in December, replacing short-term uncommitted banking lines and securing a long-term turn. 

Liquidity provides us with an adequate buffer to cover short-term maturities. Looking forward, we do not have any major refinancing needs this year, considering that the first bond repayment is due for March 24. Looking finally at the cost of debt. The rise in the short-term market rate explained the increase close to 1.3%. Since the majority of the banking facility has been drawn or rolled over towards the end of the year, as I explained before, the current composition of our indebtedness is almost unchanged, 91% fixed and 9% growth. 

Finally, moving to the balance sheet on Page 17. Just to comment that the net invested capital amounts to almost EUR 8.6 billion with an increase of almost EUR 200 million compared to year-end 2022, mainly related to the incremental CapEx and working capital that we have commented. On the liability side, consolidated net debt was just above EUR 6 billion or EUR 6.9 billion, including the IFRS 16 impact of approximately $72 million. I leave now the floor back to Paolo.

[Paolo Gallo, executive]

Thank you, Gianfranco. Let me close this presentation with a few remarks before opening the floor for questions. If you look at the different elements, you can see that there has been an outstanding quarter for retail gas. You can start seeing the significant contribution of our diversification, and that is mainly driven by Greece and the energy efficiency company. Even though we have registered a significant reduction in the EBITDA, as was explained before by the fact that Naples was given away was lost. So we were able to completely offset such a reduction in EBITDA and still increasing, thanks to the other activity. 

If you look at the ESG performance really are also impressive, considering that the perimeter has been enlarged by the Greek operation. And that is thanks to all the actions that we put in place in 2022. I will finally [indiscernible] active in the water sector, we should submit a final binding offer before the end of the exclusivity period. And as a final comment, we will have our strategic plan presentation in June '14 in London, and we are expecting you to come and visit us. We will give you more details while we were, of course, in the days to come. And at that time, as usual, we will disclose also our 2023 guidance. So please don't raise any questions about the guidance because the answer is already here. I will leave the floor to Q&A.

[Operator]

[Operator Instructions] The first question is from Javier Suarez with Mediobanca.

[Javier Suarez Hernandez, analyst]

Three questions. The first one is on the level of digital transformation for the gas distribution network in Italy. I think that in the latest conference call, you mentioned that the target was to complete that process by 2024. If you can give us an update on the evolution of that process of completion, the digital transformation of the network. And a related question to that is a comment on DEPA. And I'm particularly interested on the opportunity for operational improvement that you see there for our subsidiary that has been consolidated for 2 quarters now. Also related to DEPA, if you can give us an update on the regulatory discussion with the regulator there on the allowed return on the asset base expected for this year?

And the second question is related to the evolution of [indiscernible] efficiency activity. We have seen some increase in working capital absorption that see structural. So the question here would be, which is the level by the year-end that you think is correct to assume in terms of working capital absorption as a consequence of the structural growth on the energy efficiency activity? And do you think that this working capital absorption is something structural to Italgas in the medium term? And the first question is on the water distribution activity. So it is public that you are in negotiations for the acquisition of several subsidiaries there in Italy in that activity. So the question for you is do you see that as something opportunistic or part of a strategic switch to compensate the low development in the gas auction.

[Paolo Gallo, executive]

First of all, you have raised 5 questions, not 3. So just to make it clear that you hide some of the questions one after the other. So thank you for the question. I will respond to all of the 5. First one, quite easy to respond. And you have also on the CapEx side, you have also seen an increase of the CapEx investment on the digital side. That is the signal of acceleration of our digital transformation by the end of this year, we should have digitized more than 80% of our network by 2024, we should completed it. What does it mean that by next year, all of our networks will be in our system called DANA, for which we can remotely control, remotely give instruction to the network in a completely different way with respect to the past. We have already moved, for example, all the network existing in Sardinia is already sitting on DANA, so it is fully controlled and remotely instructed by our Torino center that covers the old Sardinia activities. We are moving week after week portion of the network that is completely digitized into the DANA. As I told you by this year-end, we should be at 80%. 

You asked a couple of questions about DEPA. DEPA, we are starting significantly to, let me say, try to increase our operational efficiency. We have a plan that should be completed by year-end, again, to merge the 3 DSO in one single DSO. And that you can understand, is going to be a significantly efficient in a sense that you don't have to replicate 3x the same function that today we have. We will have just one single function covering the DSO. We will keep the DEPA infrastructure. We are going to change the name also during the year that we are going to keep the infrastructure as a holding for the time being. And then the 3 DSO will be merging one single one. We issued a take significant savings, not an efficiency not this year but starting from 2024. 

Regarding the WACC, there are current discussions with the regulator. As you know, the Greek government has recently released a new law under which the regulator is allowed to issue WACC limited for the 2023 instead of covering the 4 years and, of course, to be reviewed later on. That for us is extremely important because setting WACC for 4 years, it's a risk in the sense that we know which is the inflation and interest rate today. We don't know what is going to happen in the next 3 years. So the [indiscernible], similar to what is happening in Italy, if you want, less mechanistic. But of course, again, issuing the same kind of concern that we may have considering the high volatility regarding inflation rate and interest rates. 

Regarding the ESCo working capital, that has been driven by an effect that there has been a completely stop in terms of selling the fiscal credit hopefully by -- I will first say before the end of June, if not in the second half of 2023, we should be able to sell some of our credits. So we should be able to reduce the working capital impact. So your question is going to be, let me say, part of our, let me say, structure of this working capital. The answer is no. It's going to be reduced significantly. We are going to already offset before June around EUR 40 million, that is fiscal credit. So that will help us to reduce the working capital. 

To say that the water, the diversification in the water is opportunistic. That is not true. We have been talking about the water entering into the water industry since more than 2 years, probably 3 years. If you go back to our strategic plan, you will probably see 2 years ago, we presented maybe the first idea to enter into water distribution in the water industry. We feel it's very similar to our core business, probably easier from a certain point of view. We feel that our technology that if we bring our technology into the water industry, we should see an incredible upward in terms of reduction of leakages are starting and our ability to invest.

I mean, we have demonstrated over the years, Sardinia is a clear demonstration of what we can do. So applying to the water industry. I mean we will probably do a very good job. And we will have the country to really use in the proper way, all the funds that's been allocated under the resilience recovery plan allocated to the water industry. I think I've responded to all your 5 questions.

[Operator]

The next question is from Mark Freshney with Credit Suisse.

[Mark Freshney, analyst]

Firstly, in terms of balance sheet capacity, if opportunities present themselves, how much balance sheet capacity or debt headroom would you have to explore potential options if and when they come up? And just secondly, on the inflation rates on your asset bases and your OpEx, which are similar right over the long term, how is your true underlying inflation rate of your cost base comparing to that? Can we assume that you're able through digitization to take out costs and offset that outperform essentially the general rate of inflation with efficiencies?

[Paolo Gallo, executive]

Let me start with the second one. It is probably easier to tell you. The other one is more general. The inflation recognized by the regulator on the first quarter has been, let me say, not 4, but 98%, so 4%. So what does it mean? That the regulator has recognized to us based on the rules, an increase of the OpEx recognition about 4%, reduced by the ex-factor of 3.53%. So mainly for the first time, we have seen an increase, even small of the revenues of the OpEx. On the other side, as I told you, as of today, the inflation is more or less everywhere. We've been able to really reduce it. One example that I wanted to bring to you is that we have agreed with our trade unions, an increase of 3% on the average wages for 2023, the 3% for 2024, another 3% for 2025. So we are significantly below the inflation rate. We are managing that. 

Nevertheless, we have seen in the first quarter, a slight increase in our cost. It could have been bigger without the digital transformation. I'm sure, yes, we are able to compensate it. So I will say that the cost on a like-for-like basis is very similar. So limited, the extremely limited increase, notwithstanding the inflation that, of course, is eating us as the others. I hope I have responded to you. Regarding future options and now the balance sheet as our availability, let me say, depending, I mean, I cannot answer to you. If you ask me, could you do another Greece today? The answer would have been no. It's clear. Our balance sheet cannot be so big for another Greek activity, similar, let me say, in terms of size. While as you see, we are pursuing other opportunities like the water one. And therefore, what we can do, we will take some opportunities that are compatible with our balance sheet. But to give you an idea, EUR 1 billion is not compatible with our balance sheet, just to be straightforward. EUR 100 million is compatible. So just to give you 2 extremes in terms of opportunity.

[Operator]

The next question is from Emanuele Oggioni with Kepler Cheuvreux.

[Emanuele Oggioni, analyst]

I have 2 questions left. The first one is on a standard process. What is your opinion about the new government willingness to solve this issue? And so to debottleneck regards distribution tenders. We could expect something to happen in the next few months or not? And the second question is on Toscana Energia. I think you are interested in increasing your stake and buying out part or total of the minority in Toscana Energia. So if you can add more color on that.

[Paolo Gallo, executive]

Regarding the gas tender, I will give you to perspective. The first one is we see for the 2023 203 tenders to happen. And when I say [indiscernible], that's more or less the size of what we expect for 2023. In the meantime, I mean, we judge extremely positively, the step forward taken by the minister, the relevant minister to review and update the guidelines. [indiscernible]. In the meantime, the world has completely changed. Technology has made a step forward. I mean our digital transformation is no comparison all over Europe. So we expect the guidelines, the new guidelines, or in other terms, the parameter under which to evaluate the different offers will be probably aligned to this new world. And we are in a situation that nobody else is able to match. So we welcome that. And that is away also from the, let me say, the government's point of view to support the transformation of our industry into a truly digital one. 

Regarding Toscana Energia, you know that the stake of commodity differential has been transferred to the new multi-utilities called Alia for which we have an agreement that we have a call option that can be the size starting from January 2025 eventually, if we agree, if you want to do it, of course. So we have an opportunity, but it's not now is, let me say, 1.5 years in front of us to increase our share in Toscana Energia. And that is relevant to the participation of the percentage of the community fencing that has been transferred to Alia. But that is something that we will take a look at the right time, so 2025.

[Operator]

The next question is from Stefano Gamberini with Equita SIM.

[Stefano Gamberini, analyst]

2 questions. The first is regarding energy efficiency revenues. What is the breakdown between the so-called super bonds and other, we can say, more recurring activities, if you can divide in these 2 main areas, the energy efficiency activities? And could we expect the sort of seasonality in this kind of business or not? The second question is regarding the regulation because the authority defined the general criteria for the introduction of the so-called simplified TotEx, the loss based from 2024. Do you have any comment about this new regulation and in particular regarding the fact that the regulator want to monitor the return on RAB of regulated companies and introduced this ratio called return on regulatory equity for each company probably to decide to -- we will see what to do if a company exceeds returns compared to regulated ones. If you can share with us what is your view on this new regulation.

[Paolo Gallo, executive]

Regarding the first question, if you want to, let me say, just to have an idea, let me say, the relationship between -- if you take a look at the contribution margin between what is the contribution margin in this quarter coming from the super bonus and the other activity is about [indiscernible]. So that is what it is, more or less. So in other terms, the contribution coming from what is not so super bonus is around in line with what we have achieved last year. Seasonality, you are right. I mean we will probably have a peak between this quarter and the next quarter in terms of revenues. Those are contracts that we have. Some of them will be completed already by the, let me say, the end of June. Some others will be completed by the end of September and then a few of them by year-end. So you will probably see that -- I mean the overall revenue is not the first quarter multiplied by 4. That's by sure. We will have probably a similar second quarter similar to the first one, and then you will see a decline in terms of revenues. 

What's interesting is that the margin will remain between 19% and 20%. The question on the TotEx is, let me say, a little bit more complicated. First of all, let me say that we didn't see that application on us before 2006. And considering our industry, we will be the latest at which this TotEx concept will be applied not because we are different from the others, but only because we are the most -- we have the largest number of DSO in respect to any other DSO, for example, from electricity. So it's going to be more difficult for the regulator to apply when there is a number like we have today in the number of DSO. If I have to say -- I mean, you mentioned in particular, you comment in particular the fact that the regulator will look at the return and will eventually adjust it in case the return is too high. 

Honestly, the general comment, we need to see how it's going to be applied. So I preserve my comments for later when we will have more details. If I have to say, generally speaking, I love the TotEx approach because you can play between CapEx and OpEx, and the companies that are more efficient than the other are able to decide if they expected to CapEx or OpEx, depending on the efficiency that they are able to achieve. So the flexibility is to me, it's welcome for the people or for the company that are able to manage properly this flexibility. But honestly, to get into details and discuss about the TotEx today, it seems to me a little bit earlier. We are not going to be the first industry at which is going to be applied. We're going to be the last. We're going to see how it is going to be applied to the others, and we will learn from that.

[Operator]

[Operator Instructions] The next question is from Bartlomiej Kubicki Societe Generale.

[Bartlomiej Kubicki, analyst]

2 things, please. Firstly, on Greece. I mean, you said the regulatory framework is to be agreed, but I just wanted to know how technically are you accounting for revenues and EBITDA right now. Is it based on the old framework from last year? Or is it somehow based on your forecast for this year? And consequently, if just based on last year's, if there is going to be an upward revision in the allowed WACC whether you are going to potentially book additional revenues and EBITDA going in, let's say, in the second half if this is great in this half? And if you can remind us whether in Greece, there is any seasonality in terms of EBITDA? Or is it more like Italy that EBITDA is flat in each quarter, more or less? And secondly, on digitization and OpEx, what you mentioned that by 2024, the network will be fully digitized. Do you think in 2025, as a consequence of that, there will be a significant decrease in OpEx? Or do you think this is more like a gradual process, the more you invest, the less OpEx you spend.

[Paolo Gallo, executive]

Okay. Let me start with the last one also because I've already talked about that. Let me say that the digital result in terms of efficiency is not very predictable as we have demonstrated. The reason is very simple. We are the only ones that are doing that. So we will become the benchmark for the others. We don't have any benchmark. So from an efficiency point of view, it's difficult today to predict what we are going to achieve. What I can tell you is that our history has demonstrated that we are able to achieve significant numbers, irrespective of our forecasts. And similar, the similar view is on the CapEx side. Year after year, we have discovered a new area where we can invest and don't forget that in 2025, we should have our new smart meters in operations. And so we will start replacing some of the older smart meters with the smart meter generation right now, 4.0, if you want to call it, that will be by year-end in 2023. We will start prototype production of 20,000 that will be installed in 2024, tested for 10 months earlier year. And then if everything will go fine, we will start using -- we will start the mass production. 

Regarding Greece, how we have accounted for Greece today, let me say, a little bit higher in terms of the numbers that the existing one to so the 7%. So we have already -- I'm not going to disclose this number to you, but we have already increased a little bit the WACC. And while we are expecting the final decision by the regulator, but I'm not going to disclose this number to you for obvious reasons. In terms of seasonality, we don't have -- the way that we have accounted the numbers doesn't show any seasonality in terms of EBITDA. EBITDA is very similar to the Italian regulation. So it's quite obvious that the overall year EBITDA at the DEPA is more or less 4x what we have already achieved in the first quarter, except that this if, depending also on the WACC that is going to be recognized by the regulator.

[Operator]

[Operator Instructions] Ms. Scaglia, there are no more questions registered at this time.

[Anna Scaglia, executive]

Thank you. Thank you, everyone, for participating. And as IR we are available. And as Mr. Gallo said, we will wait for you all on the 14th of June in London. Thank you.

[Operator]

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