Good afternoon, welcome to Q1 2023 A2A key highlights results conference. I'm Zach, I will be with you during the presentation. Your lines will be muted. You will be allowed to ask questions at the end of the conference. You can record at any time by pressing star one on your keyboard. Let me just hand over to Marco Porro to open the meeting.
Good afternoon, everyone. Welcome. Thank you very much indeed for taking part in our call presenting our results. We will be talking and commenting results with our CEO, Renato Mazzoncini, and CFO, Luca Moroni. Without any further ado, I hand over to Dr. Mazzoncini.
Welcome, everyone. We are very happy with the results in Q1. You have received the slides. I will try to follow them as much as possible.
In this quarter, we have recorded very good results, confirming the soundness of the strategic decisions we have taken starting in 2022 with our business plan. In 2022, there could have been challenges. On the contrary, we have recorded a successful performance, even better performance in 2023. You see the first slide with the positive elements we wanted to highlight. We have had a very effective hedging, which has allowed to counteract a downturn energy scenario. Second item, the contribution from new acquisitions in the field of renewable energy sources, most notably wind installations, not only in 2022, so that we have extended the installed capacity of renewable energy sources by 12%. Third item, we have extended the mass-market customer base, recovering margins, most of all in retail.
Last but not least, there is our financial discipline, which has allowed to have a very good performance also in managing the net working capital. The negative notes. Again, there has been a shrinkage in hydropower production, which has been dragging since 2022. There has been a drought effect. We have produced about 550 megawatt hour as opposed to 660 in Q1 2022. Lower margins in district heating. We have had a mild winter, which has been useful to some regard considering the geopolitical scenario we had to face. This has had a negative impact on the quantity of sold heat. Next slide, you see the main achievements recorded in this quarter.
I would like to draw your attention to the fact that we have designed and launched onto the market of the first, innovative PPA offering in retail. As you know, the target is to have a natural energy hedging between customer base and renewable energy. To walk the talk, you need to find the right tools. Considering the relationship with the larger customers, you have the classical PPA tool. In Italy, we still have to develop them. There are some cultural barriers, there was no such tool allowing to do the same operation in retail. We have developed Noi2, a new offering, a V.I.P., Virtual Innovative Panel solution, enabling to understand contracts over 10 years for a fixed price for 70% of the production at a very interesting cost for customers, ensuring good return on the invested capital in our plans.
Among the positive notes in this quarter, we have also received authorization to build an important infrastructure, the new plant, the CCGT plant at Monfalcone, to replace the older coal plant. You will remember Monfalcone is in a strategic location for the country. It's along the line for blackout emergency revamping in an area of Italy, which has a high energy absorption, close to the city of Trieste, with energy demand increasing in the next few years. Another innovation that we would like to remind you relates to e-mobility. We now have designed a new object, City Plug, low charging stations. The car-making sector is now focused on low voltage, 7 kW, 11 kW power, and 100 kW. These are the volumes that are typically demanded.
The idea of continuing to develop urban facilities with this, with quick charging station with 22 kW involving some issues, some barriers for our customers, so that you have to leave the recharging station after 2 hours with your e-car. That's why we have introduced this new City Plug designed by Fabrizio Giugiaro, with a target of strongly reducing the committed CapEx for each charging station and have a more capillary distribution of these infrastructures in Italian cities. We have completed the first phase of completion of AGP for the power plant of Piacenza to become even more flexible. We have acquired 35,000 new digital customers using digital channels, a significant increase. Starting from April 1st, in our customer base, we will also include the customers that we have gained through tenders for the safeguard market.
Last but not least, thanks to our skills in the field of waste collection, we have won in a tender for waste collection outside our territory in the region of Liguria. We are talking about the region where we have Portofino, Rapallo, and Santa Margherita. After being awarded the order, we now have to undersign the legal agreement, which will hopefully take place very soon. We are also very happy with the initiatives in the field of ESG. We have increased the installed capacity by 12% and the capacity of the power grid by 378 MVA. We have reduced water loss by 3%. Emissions are on the rise because maximizing exploitation of coal, as recommended by the regulator, means acting on gas storage with an increase in CO2 emissions that will probably start to decrease in the next few weeks.
Next slide number 4. You can see the key results. As I said during the introduction, we are very proud of these results. Revenues are shrinking, of course. Luckily enough, I would say, for our economy, I'm talking about the European, the Italian economy overall. EBITDA, the reported EBITDA, has marked an increase by 30%, reaching for the first time EUR 500 million. Even without including special items, we record EUR 492 million, with an increase by 28%. We have the ordinary net income increasing by 63% to record EUR 173 million versus EUR 106 million in the same period last year.
Last year, the net income was benefiting from property gains, and therefore, the decrease by 14% that we see in net income relates to this extraordinary non-recurring item. Another very important element, we still have very strict financial discipline, and we have managed to further reduce the EBITDA debt ratio, reaching 2.7 on rolling basis. In the third quarter, we have completed an important acquisition. We have entered with a stake into the capital of a company to build a larger photovoltaic plant in Friuli-Venezia Giulia, 60 megawatt capacity, the largest one in Northern Italy. Consider that local prices are very attractive because the grid allows to have a little input from outside.
There are some restrictions on renewable energy sources dispatched from Sicily to Friuli-Venezia Giulia, even if the sunlight hours are of course, more reduced than in Sicily. The market is very attractive in these northern Italian regions. You have a good local price, and you don't need any storage, essentially, because the energy which is produced is immediately consumed by energy absorbing operators that are very numerous in the area. Let me just hand over to Luca Moroni, our CFO, who will add some details on the business units and on the breakdown of the EBITDA.
Thanks very much. Good afternoon, also on my side. As already underlined by Renato, this has been a very good quarter. EUR 492 million EBITDA, ordinary income, thanks to the very good performance of generation and trading business unit and by market. Good performance of waste.
We'll see the breakdown of the details of the various business segments within waste. There has been a slight downturn in smart infrastructures, most of all, as we will see, due to the mild winter temperatures, which have had an impact on volumes in district heating. Slide 6. Let's look at the detail of trading. We have confirmed the value of portfolio diversification in terms of power generation sources. There has been a decrease in produced volumes in hydro due to the water scarcity, to the lower rainfalls in the last few months. We have managed to counteract this with a positive impact from other energy sources, most notably coal, that I would like to remind you is important. At Monfalcone, we have a plant that is also working because of energy market stabilization imposed by the regulator.
The contribution has been positive, EUR 30 million positive contribution. On the top of which we have the positive effect arising from the hedging strategy. That has been very effective. We have deployed this strategy before the beginning of Q1. Photovoltaic and wind energy contribute for EUR 80 million. There has been a decrease in MSD contribution also because of the greater stability of the system, of the better planning by Terna. The other changes have had a minor impact. Let me just draw your attention to the fact that also trading continues to give a positive contribution, even if we expect it will stabilize in the course of the year. Market, slide 7.
The market was the area where we were actually expecting a rebound effect and a positive contribution after the first negative quarter of last year because of the commodity price scenario, where we were suffering most of all in two-year contracts. We have the expected effect. We have had an offset in terms of margins, and we have recovered margins, most of all with customers who last year were causing some difficulty to this business segment because of a higher consumption, as opposed to average customer profiling, most of all in the business customer segment. There is a contribution of about EUR 20 million arising from the new business after the tenders on the safeguarded market. There is a contribution on the customer base of about EUR 8 million.
We have also deployed retention activities among the customer base, thinking of customers, to those customers who still have a fixed price contract. Because of the rules imposed by the Italian government and by the Italian Antitrust Authority, we haven't been able to amend the terms and conditions also to the benefit of customers. We have adjusted the prices in the last part of the year, at the beginning of 2023, when the scenario has started downturning in terms of commodity prices. They might switch, and there we step in, and we launch retention activities, investing in our customer base. Slide 8. Treatment waste business. We have recovered in terms of waste collection.
We have recorded + EUR 3 million, there has been a slight decrease in the waste treatment and disposal because there have been some extraordinary stops of some plants, most of all at Parona. We believe we will close this gap in the second quarter and in the following quarters. Smart infrastructures, slide 9. The grids give a positive contribution of EUR 5 million in power and EUR 2 million in gas, thanks to the increase in the RAB investments that we have done in the grids, which is counteracted by the negative result. District heating, which as I said earlier, has suffered from milder temperatures in winter and by the downturn energy scenario. This has been partly offset by the good performance through the acquisition we have made of the heat management company for the airports in Milan.
We have completed the operation in the last part of 2022. Slide 10. You see the profit and loss account. We have EUR 500 million EBITDA. EUR 190 million are depreciations made in the period. EUR 22 million, the risk provision decreasing by about EUR 10 million versus last year, by EUR 6 million in terms of credit depreciation, EUR 4 million reduction for the risk fund, more financial charges because of interest rate curves. Most of all, the two bonds we have issued, one in January and the second in September last year, have produced this effect, which was actually expected when defining the targets. Considering the planned scenario, we have been able to get more efficiency to streamline the cost of coupons and the overall return on bonds. We have EUR 76 million tax.
Tax rate, about 30%, which is in line with the closing tax rate last year. Hence, a net result of EUR 173 million. Slide 11, I hand over to you. CapEx. You see Slide 11, with a detail of CapEx. They are a central element. As you know in the business plan, 2021-2030, was focusing on the increasing CapEx to support our development. Development CapEx are still on the rise, EUR 126 million. All in all, in this period, CapEx have recorded EUR 219 million, an increase by 18% versus last year, which as you remember, was a record period for our company. That's very important to us. It shows again, what kind of execution ability A2A has had in developing infrastructures.
Looking at the results, we have EUR 126 million +11% versus the same period in 2022, aiming at photovoltaic and wind plants at Matarocco, Marsala, among vineyards north of Marsala in Sicily, or to recover energy and matter and to improve the distribution grid. We have tripled investments in power grids. Power RAB is still on the rise, that's fundamental to guarantee decarbonization of Italian cities and attainment of decarbonization goals that we have set for ourselves. The cash flow. Next slide 12. Cash flow evolution is in line with our expectations, this allows us to respect the strict financial discipline. We have a 2.7 NFP EBITDA. Cash flow is affected in the first quarter also by a seasonal effect. There is a thorough active management of the working capital.
Considering the downturn energy scenario, there has been a reduction in debt towards suppliers, which is proportional to the decrease in credits towards customers. This has induced an increase in working capital by EUR 360 million, which is actually in line with our expectations. Operating cash flow, EUR 116 million, as already mentioned. Investments of EUR 219 million. Before acquisitions of EUR 103 million, we had a negative cash flow. We have bought the plant at Santo Stefano for about EUR 12 million. On the base of these figures, we have considered to review the guidance we had given you upwards. we have there, the EBITDA guidance is in a range between EUR 1,064 billion and EUR 1,068 billion, with an assumption to close with a net ordinary income between EUR 390 million and EUR 410 million.
Takeaways. Little to add. The guidance has been reviewed upward because of the performance in this quarter has gone beyond our expectations. We are investing significantly to support infrastructural growth in Italy and the decarbonization path that we had already started in January 21. After the pandemic, after the European energy crisis, this direction has proved to be the right one. Last but not least, the fact of having maintained a strong focus on financial discipline has enabled us to present our results to financial markets with much discipline, which was not to be taken for granted, considering the high levels of volatility for commodities and the high level of investments that we have performed so far. Now we start the Q&A, and we will be glad to take all of your questions. Thank you very much.
If you want to ask a question, you can select star one on your phone. The first question is from th e Analyst of Mediobanca.
Hello, good evening. I have a few questions, actually. The first is about generation and trading as a business. In your presentation, you talked about the effects and the strategies of the company. Can you provide details on the strategies that the company is going to put in place? I'm interested in the hedging level for the various technologies and the expectation for 2023 and 2024. I'm most interested in having an indication of the MSD market contribution for this year and for the coming few years. I also had a question on the supply market. There is a visible, remarkable improvement.
To what extent is this the result of different commercial strategies and management actions, and how much is it due to a normalization of commodity prices? I'm interested in knowing how 2022 changed the strategies that you put in place. What can we expect for 2023 and 2024? Regarding your slide, the FFO working capital absorption, I wanted to know EUR 360 million, how much is it due to district heating customers, the BUs, to understand how much this is capital is seasonal or how much this is a structural element that will be part of the company also due to a different type of contracting. As to the guidance, you've improved the EBITDA net ordinary income guidance upwards. Can you also confirm the targets also for the CapEx for this year? Thank you.
I will start from the last question and go backwards. Good afternoon. Well, I would say yes, we confirm the CapEx for the year. We confirm also the financial positions that we communicated in the guidance. In this respect, we confirm. The second question, I leave it to Luca to give an answer to that question. In my opinion, the managerial effect was strong on the supply segment. We have a part, if you remember, that we declared immediately imbalance between fixed price contracts between 2022 and 2023, which generated the automatic effects of lower EBITDA in 2022 to be recovered in 2023. This only partly accounts for such a positive result. The rest of the positive result is basically due to two elements. The first is totally related to the commercial ability, that is recovery of margins on large customers.
There has been a lot of work for key accounts. A lot of suppliers had to abandon them. Our policy was very cautious, but we were also very close to companies. On one hand, I mean, in the entire acquisition of new customers, we were willing to acquire them. A lot of competitors were not even willing to take on those customers, but we posed two conditions. First of all, they didn't have to worsen the working capital. We did it through payment mechanisms that were comparable to our historical methods. On the other hand, the margin spreads were larger, which basically remunerated the higher risk in which we were all working. The result is very positive in terms of overall margin. As I mentioned, we have new customers from the safeguarding area.
This is also a result of the managerial effect. The margin that we expect on the supply in the full year 2023 is certainly interesting. Let me take a step back to say something about CapEx EBITDA with regard to the guidance. In the plan in the 2023/2026, we presented EUR 1.3 billion-EUR 1.4 billion EBITDA, which is confirmed. As to net debt to EBITDA ratio, we will not exceed three as a ratio. That's our boundary for sustainable growth, also from a financial standpoint. As far as working capital is concerned, we have about EUR 250 million-EUR 280 million linked to the seasonality effect. We have about EUR 20 million linked to installment plans for customers. Customers are all paying regularly, including those who are subject to installments.
They pay installments on time, very punctually. We have no credit deterioration. Here, the effect is the combination of various factors also resulting from an active management that we had already put in place in the last quarter of 2022, which we kept and managed, and will continue to manage concerning this area. That's the first point. As to the contribution of MSD, we have a cautious view, as I said before, on different occasions, as compared to the results of 2022. The target was less than a half easily what was achieved in 2022, where we obtained a particularly high result. This is our style, our caution. We do MSD and trading activity. We standardize the figures, especially on MSD. The planning of the network management by the PTO needs to work correctly.
Of course, if you have less waterfall or other situations such as the volatility of commodity prices that we had last year, that generates special situations. One of the effects is MSD, because otherwise there would be no reason to think that MSD brings extra margins. As far as hedging is concerned, our hedging policy is unchanged, basically, which means that on fixed price production, both hydro, renewable and waste to energy, we are at about 70% with an average price of over 160 megawatt per hour. As to combined cycles, we are at about 44% with an average price of about EUR 31, which is slightly higher levels as compared to what we stated in the budget, we are fairly unconcerned for the year.
It's an activity that still follows up in line to what was done also in the past years, which is aimed at hedging with some flexibility, our requirements. Thank you very much.
The next question is Emanuele Oggioni.
Thank you. Thank you for the presentation, and good afternoon. I will focus on a few questions on renewables and on hydro. First of all, I'd like to have an update on the long-standing issues on hydro concessions. Apparently, only Italy has to put tenders as the only European country. The question is, do you think that the government may win a tug-of-war and so no tenders are going to be applied, or can you still, in any case, share your opinion on that? That's the first question. The second question is about the acquisition that you executed. You executed an acquisition for a EUR 12 million, a park to be developed. I wanted to know the overall CapEx and the entry into operation of the plant.
Can you also give us an update on your piping? You said in the past that it reached 1.5 GW pipeline in renewables that with different degrees of maturity. Can you give more details, updates on the pipeline and on the timing? What can be considered to be at a most advanced stage and therefore achievable and realizable in a matter of a few years? Thank you.
Good afternoon, Emanuele. As to hydro concessions, what we can recognize is that formally the regulatory framework has not changed. In law decree on competition, you still have hydroelectric concessions. Nothing has changed in that regard. The issue of energy independence of the country introduced doubts on the opportunity to have open tenders.
There is no difference in terms of tug of war with the center government. The regions are trying to understand the way forward. In addition to energy independence, also the drought played a role. There is awareness that we need to release investments to maintain the performance of these plants as they were or similar to the levels that we had in the beginning. It doesn't mean that we need new dams. Maybe we should intervene with new solutions like pumping stations. The solution I see further down the road is the one in Piedmont. We present to the project finance. The project has been declared to be of public interest. There is a tender with a preemptive right on the plans as part of the project, on the part of the proponent.
That could be a way to put the two elements together. The tender with the requirement of the law decree on the competition. On the other hand, this will guarantee the implementation of investments by operators who know the industry very well today. There is no final solution at the moment, but if I analyze what is happening empirically, I think this is the way we're going. As to the acquisition of the plant of Santo Stefano in Friuli Venezia Giulia, that was a plant of 59 megawatts, to be precise. It's a plant with an overall CapEx of about EUR 70 million. It's more or less the same level in which we think of the cost of megawatts, for photovoltaic energy. I'm talking about the overall cost, including the cost of authorization.
We just had the tender for the procurement of the panels. We are now considering the detailed plans and projects to try and introduce additional efficiency in the development of the plant, which includes also the compacting of the areas where the panels should be installed. We want to have a compact area. Since the plant is going to be big, it's going to be the biggest in northern Italy, we need the plant to be as symmetrical as possible. Also to be able to use panel cleaning systems efficiently. There are small rubbers traveling across the panels to clean them, and that's automatic, which increases performance incredibly. They require a very good symmetry of the plant. We are now working on this level of detail on the project.
However, we are very happy because it's an area where we have very high zone prices, and the quantity of energy that is consumed on the territory is such that we do not believe that we require storage size. The huge advantage of building a plant in northern Italy as compared to southern Italy. In southern Italy, we have more sunny hours, but they consume less. We need to consider storage systems or hydrogen production. The zone, the local prices are affected by the competition strongly. In those areas, as would be the case with plants of those sizes, also in Veneto, Lombardy, and Piedmont, you have situations where the return on investment is good because the local prices are high. The pipeline, we're working hard.
We are in a situation in which the pipeline continues to evolve. In January 2023, it's still growing. At that time, it was 1 giga 750. The funnel has different stages of development in our business plan. As you certainly remember, the goal is to reach 0.5 giga per year. We estimated that a success rate of a pipeline of 30% is more than reasonable, and therefore feeding the pipeline continuously where the size is this, allows you to achieve 0.5 with no major issues. That's the situation as of today. We confirm that the success rate is the one I just mentioned.
Thank you very much. Very clear.
Thank you very much. Next question by Stefano Gamberini from EQUITA.
Good evening, ladies and gentlemen. Thank you for taking my question. The first is about power generation. What are the margins on CCGT? Congratulations on EUR 32 per megawatt hours. Do you have pressures on these margins? That's the question. Can you still maintain certain levels on the market, or is there any recurring element? The market has changed after the prices last year. On power generation, I'd like to know more about the prices of renewables. It's mid-May, they should expire in June. Do you have the feeling that the government is moving somewhere, going somewhere, or what are the different scenarios that we can expect? The disappearance of a cap in June, the possibility to increase it to EUR 100, which would be very high as compared to the current market, or somewhere in between.
As to s ales, safeguard EUR 20 million in a quarter means EUR 80 million over the year. It sounds like a big amount. What can we expect from April, but especially from January? In your plan, you see a strong growth in the results of this division. In April, you're going to have these new customers from the liberalization of the markets, from small and medium-sized customers. In January, there will be probably the actual tender. Do you have any new updates? Is the authority starting to regulate you for the tenders? Can you help us understand whether January could be the turning point for you to achieve your targets as set out in the plan for this division? I have two more questions, if I may. One is about waste.
We have a flat first quarter. The target is EUR 13 million of growth over the year. Is this confirmed? What can we expect in the next quarters? If I'm not wrong, last year, we had positive impacts of the prices from power generation also in this division. Can you outline the elements, how can they be compensated? M&A is the next topic. GEI, you no longer have the exclusive power, the exclusive contract. What happened? Why? Did you find it differing from what you expected? Is it a blurred acquisition, or are you still running for that? What are the next M&A options? The leverage is under control. The CapEx is about EUR 1.3 billion. I'm thinking of ADES, but maybe that's further down the line. Is there any other deal in addition to GEI that may come to surface during the year? Thank you very much.
Well, Stefano, I will give some answers, and Luca will give the others. As far as the cap is concerned, we are keeping the cap at EUR 58 for the second half of the year. If you're asking me how realistic I believe it's going to remain, I'm saying not really. We don't have a clear sentiment on that. I don't know what will happen to that provision. You know, the work carried out by the European Union to reach a flat cap, talking about the EUR 180 that you mentioned, that's totally in contrast with the EUR 58.
Today, we are much lower, actually, and none of our forecasts indicate that the prices should increase above 150 over the year. However, if you're asking me whether this regulation can be replaced by something else, well, the answer is I don't know. In the next few days, we're going to pay a significant amount of extra profit, and we hear the government talking about down extra profits and so on. We believe that being cautious with our accounts at the moment. On renewable power generation is still the way to go. If we decide to use this provision, we can do it during the six-month period, during the presentation of six months results. On CCGT margins, Luca, do you have any updates?
Yes. As to the margins of combined cycles, if you look at the medium term, the projection is for reducing margins compared to what we are seeing and what we have discussed so far, which is part of hedging. This is also the result of a tail of the extraordinary effects of 2022 on the market, sometimes just by very high prices but poor liquidity. As the months evolve, it is likely that the margins may decline, but it's also indicated in our forecast, in our numerical forecast, is in the figures. Looking at 2024, there should be a sort of normalization, standardization, which is also part of our plans. As to waste, you asked whether the guidance on waste is confirmed or not. The answer is absolutely yes. Last year, we had a positive effect due to the energy scenario.
As we said before, the growth of this year is more linked to investments carried out. Last year, at the end of the year, we inaugurated new plants, new waste management plants. Lacchiarella and Cavaglià. Those were the new plants, which give a contribution to the management amounting to about EUR 20 million. We also have another, a new WTE line in Verona, and the smoke new line on Brescia WTE, which would give two major contributions over the year. That gives us a good peace of mind in terms of being able to reach the targets on waste. As to sales and M&A, the last two points, I would say the following.
First of all, the impact that we expect on safeguard is a bit lower, although it's significant because it's EUR 60 million approximately over the year. We expect the tender in January 2024. As you certainly remember, our business plan in 2021 already factored in an increase in the customer base with an important step in 2024, linked to the acquisition of about 1 million clients, customers from the tenders of the safeguard market. We maintain this assumption. There's no signal for a further delay in the timing. We exercise our abilities with the previous tenders, so we are likelier to win as compared to the share markets, so we're very happy.
We did the sales plan by lowering the expectations as compared to the 5 million clients that we originally expected, reducing them to 5, because somehow the competitive scenario for 2021 seemed to be very aggressive. We assumed 3% a year on commodity margins and a reduction on the customer base as compared to the original expectation. Today, to be honest, the scenario is slightly different because the tsunami of 2022 took a lot of operators out of the market, including resellers and players that were not vertically integrated with generation. On the one hand, margins went the opposite way. It increased and not decreased. On the other hand, there is more competition. We see much lower term rates as compared to what we expected. We had 2.99 term rates in the first quarter.
We expect it worse, so we are more aligned to what we thought about the market. The customer base, as a result, is growing more than expected. We expect a lot of satisfaction on the sales side in the next few years. As far as M&A is concerned, on Ijr, I cannot give you any information because we are part of a competitive procedure. It's true, we no longer have the exclusive rights. We transparently reported to the market, and we disclose it, we didn't have time to conclude an in-depth due diligence in the past few weeks, so we didn't have enough data to formulate a binding offer. We asked for an extension. Ijr, fair enough, from their viewpoint, asked to open the competitive process.
We expect Iran to be present since they also communicated this on papers, on the newspapers very clearly. There is a term until 12th of June. We will express our opinion after completing the due diligence, and we will consider whether or not a binding offer will be made. Today I cannot give any further details. As to M&A in general, I can say that in our plan, if you look at the update as at September 2022, we had not included any special M&A transaction. We focused all of our CapEx on industrial CapEx. You see that a reduction of M&A CapEx is coupled with an increase in industrial CapEx.
What we are seeing now is that the excellent development of EBITDA and the excellent evolution of TFM may allow us to increase our ambition on general investments, overall investments. We will evaluate that as part of the update of the business plan that of course we have already started. At that time, if we see enough opportunity to proceed with greenfield, we would prefer that because it means extracting the full value of the design and development and construction of the plants. If we have a shortage of short-term greenfield projects and long on finance, we do not exclude to also carry out M&A targeted to the sectors that we are interested in for sure, renewable energies, bio energy or special opportunities, if we see any on grids or water, there might be something interesting there. We will see.
Just one explanation concerning the issue of supply. Renato underlined that the contribution of safeguard of EUR 60 million. As I said before, when I talked about the supply market, we also decided to make an investment, a rather considerable investment of EUR 50 million approximately on the retention of our customer base, which we believe is a good investment for the future. Thank you very much.
A short comment on the statement you made before on financing DM. If you do so, you're going towards tender and not towards an extension and towards investment. Or did I get it wrong? I'm talking about electricity concessions. The extension, as a result of investment is not easy to achieve, in my opinion.
Exactly, because it would be against the provisions of the law decree called the Concorrenza competition, which is one of the reforms that was negotiated by our government for the PNRR, negotiated with the European Union. The possibility to remove a hydroelectric concession will go through a broader negotiation on PNRR, having our concessions as priority. They're very important, but if you look at the overall picture, you know. What is the benefit? What is the benefit of the finance and purchase mechanism if you have a motu proprio of the incumbent manager and on the other hand, a contracting entity of public interest that organizes a tender. The fact that you have a right to match, you know the concession and you know what investments need to be carried out. You offer investments that are consistent with the situation.
You can also propose a remuneration system mechanism to concessions or whatever, to the granting authority. On the other hand, when you participate in a tender, it's a full tender, but since it's based on your project document, allows you to have the right, the preemptive right on the proposal, which is the path that many are following today. Have I answered your question? Yes. The tender will be done in the end. Yes. Stefano, you can easily understand that a tender where you have the incumbent with the preemptive right, you know, it's. I understand. We'll see how it goes. Thank you very much.
Thank you. Last question from Davide Candela, from Intesa Sanpaolo
Good, good evening, and thank you for your presentation. I have three questions. The first is a clarification on the contribution of MSD normalized on 2023. We saw EUR 50 million in the first quarter. I'm wondering whether a normalized level in your guidance could be about EUR 200 million. More or less the same contribution quarter-over-quarter, compared with the EUR 380 on margin. That's about twice as much as we saw last year. Second question. On the tender one on waste collection in Liguria, can you explain the rationale of participating in that tender? Whether it's for a development of a separate business like waste collection as done recently, or do you also have a matching of the waste that you collect with plants, of course? The last question is again related to the liberalization of the market.
Assuming that in 2024 we actually get these new customers and more volumes as a consequence, in the short term, there will be a mismatch between sourcing and the volumes that you put up for sale. I'm wondering what strategy are you thinking of putting in place in playing with this? Are they going to be variable contracts as a basis so as to eliminate the commodity risk, or are you considering other solutions? Thank you.
As to the contribution of MSD, the calculation that you made is not far from the estimates that we have in mind, considering that there is some seasonality effect there. We will not reach the figures that you mentioned, but we're in between EUR 150 million and EUR 200 million. Which is what we assumed as target, and what you said is in between.
It's within that range. As to the tender for Liguria, I hand over to Renato. As to the Liguria tender. In Liguria, we started acting a few years ago, two or three years ago, by acquiring services with Aprica 2 , three years ago, with a tender. Aprica is a minor company as compared to AMSA, which provides the service and the cost structure is more competitive. That's the company that we typically rely on outside of our area as our tenders. The strategic goal was to acquire bigger volumes to then confirm the hedging between collected and treated volumes. In my personal opinion, today, it's dangerous to have collection without plans. The risk is to have difficulties in delivering waste. Today, there are no storage sites for waste, and after a few days, the cities are buried.
Also it's important to have collection plans. The risk is that you don't have plans with feedstock to work with. Today, we are in balance in favor of treated volumes, so acquiring some volumes as collection is good. It's an interesting area. We are very satisfied about the fact that after three years of work, the cities for which we worked openly manifested their satisfaction for the high quality of our service. When as a result of this achievement, when we were granted the contract like Portofino, Santa Margherita, Rapallo. There was a lot of consensus also on the newspapers in favor of Aprica, which proves that we can export our practices also outside of our territories. The business goal is to achieve a match and the hedging between collection and treatment.
To sales, obviously, if the customer base increases, we are imbalanced in favor of sales as compared to generation. It's also true that if we continue developing generation, it could grow forever. The customer base, you know, we have a high number of players there which are increasing, so it's important for us to acquire new customers. Once we win the tenders and we define a new market share, that would be the snapshot of the situation for the next few years, so we cannot miss this opportunity, 'cause otherwise we would be imbalanced in the opposite direction. At the moment, sales will be at variable price and procured from the market without the necessary hedging, and especially without risk. From today, we are totally imbalanced also in our customer base.
In the retail, variable price are imbalance as compared to fixed price, customers. We want to minimize all possible risks and guarantee a better situation for our group. Thank you very much.
Thank you.
Next question is from Suarez from Mediobanca.
Hello. It's a follow-up. With regard to the increase in the guidance or improvement of the guidance, I think the answer will be no. Are you taking any change as compared to previous guidances or with respect to the existing caps? If the answer is no, the assumption is the same. In your opinion, which is the underlying reason that leads you to increase the guidance? Can you list the top two or three reasons from your viewpoint? Thank you.
The answer is no, as you expected. We haven't changed the cap. The update of the guidance is linked to other factors.
I said it before in a previous answer. We are keeping a cautious, a prudent CapEx, because we realize that we are still in a normal situation of crisis. We don't know whether the government, our government, can take measures that are different from last year, also for the second half of the year. We have no visibility to change our decision today, so we prefer to be cautious. The update of the guidance, if I were to find a sole party responsible in a multi-business company, you never have one person or one entity that's responsible. I would say it's the market. The main change comes from the market. We are having excellent results. Also generation, thanks to the hedging, which are working very well, is performing better than the budget.
Today, we feel confident that the guidance can be updated just by the fact that we haven't changed the cap at 52 EUR. Thank you very much.
There are no further questions, so I hand over to Marco Porro to close.
Thank you very much for participating. If you have any further or additional question or if you need any more details, please contact the Investor Relations office. Thank you very much and enjoy your evening. Thank you and good evening.