Good afternoon, ladies and gentlemen. Welcome to A2A's nine months 2026 results presentation. At this time, all participants are in a listen-only mode. However, if you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. Please be advised that today's conference is being recorded. Now, I'd like to hand the conference over to our host, Marco Porro, Head of Investor Relations. Please go ahead, sir.
Good afternoon, everyone, and welcome to A2A nine months 2026 results presentation. Today, our CEO, Renato Mazzoncini, and our CFO, Luca Moroni, will review our financial and operating performance, highlighting how our diversified business model has helped us navigate a challenging environment and preserve earnings visibility. Let me leave the floor to Renato to start the conference call.
Okay. Thank you, Marco, and good afternoon, everyone. Okay. We start with this presentation from these slides, number two. The first message is that in the first nine months of the year unfolded against a challenging backdrop shaped in particular by lower hydro availability. Consider that this year is the second worst after 2022 in the last 10 years. Complicated, guys. Extreme weather conditions and volatility in energy price and higher hydroelectric concession fees. These are some elements absolutely challenging to face. Yet despite these headwinds, A2A continued to deliver a resilient performance, exactly supported by the strength and our diversified portfolio, and by the operational levers embedded in our integrated model. In particular, higher solar and wind linked to new plants that we delivered with our continuous CapEx in particular in generation.
CCGT generation, consider that every times in which there is few water, the CCGT perform well, are complementary, of course, because the total energy that we needs is always the same, and in this year is growing the demand. Opportunities captured through energy management, exactly because when there is a situation different from the forecast, there are more energy management opportunities to rebalance the system. Solid performance on electricity networks, in particular, Duereti are performing really very well, and also linked to the plan of acquisition that we did with Enel. Resilient mass market margins, and these four factors significantly mitigated external pressures. In addition, we also saw treatment plant performance stabilize during the third quarter because, as you know, because we talk about the problem of performance during the half presentation, but in this third quarter, the situation come back good in terms of performance.
This brings me to the central message today. Despite an increasingly volatile environment, our integrated model continues to ensure balance, flexibility, and earnings visibility. Looking at slide number three, in which there are our numbers, we have an adjusted EBITDA that reached EUR 1,673 million compared with EUR 1,729 million in the first nine months of 2025. A reduction around 3% of EBITDA. The year-on-year change reflect the operating dynamics I have just outlined, and this is a message very clear, very strong, because consider that only considering the concession fee in hydro and the reduction of water, we face a 2026 with around EUR 1 million of EBITDA less than 2025. The reduction is limited to half of this value. The year-on-year change reflected the operating dynamics, in particular the diversification of our portfolio helping to mitigate the impact of the group.
For example, in October, super interesting the performance of our CCGT, that once again are mitigating the effect of the hydro production. With a super performance that probably will arrive also in the next two months till December. Adjusted group net profit stood at EUR 473 million, excluding the impact of additional IRAP charge. We can discuss about IRAP later in the financial balance of our state. You know that there is a new increasing of IRAP for the next years. Net financial position was EUR 6 billion at the end of September, with a leverage of 2.8x compared with 2.4x at year-end 2025. The increase in debt reflects the investment deployment, working capital absorption, and dividend distribution. In a minute, Luca, we work with you through the earnings and the cash flow bridges in more detail.
First, let me underline slide number four about CapEx, so our investment plan. As you can see, we continued to execute our investment program with a total CapEx exceeding EUR 1 billion in the first nine months of the year. Investments, in particular electricity distribution networks, increased by 5% year on year. This is really interesting because it's the proof that the space to continue to invest and to improve the efficiency in the grid network is super key for us. While scaling back investment in gas networks. Around 70% of our CapEx is dedicated to development. Only 30% are maintenance, with an increase of 20% year on year, reflecting the progress of projects already underway across our businesses.
Alongside our network investment, we are enhancing the flexibility of our generation fleet, progressing towards a key milestone on the new Monfalcone CCGT plants and developing new solar assets. In particular, we have a large solar plant in Friuli-Venezia Giulia, 100 MW of new capacity. Super large, the biggest in the north of Italy, exactly near our actual plant of 60 MW. That means that we have in Friuli a plant with 160 MW. Monfalcone will arrive in operation in mid-2027 around. I remember that the EBITDA coming from Monfalcone will be more or less EUR 10 million every month. We are also expanding our circular economy businesses with, in particular, the new waste-to-energy plant in Corteolona that is under construction, also in this case till the end of 2028.
Our focus in increasing our execution and on bringing this investment into operation so that the capital deployed progressively translated into additional operating contribution. We remain disciplined in capital allocation, prioritizing projects that strengthen our asset base and support sustainable returns over time. Luca, if you want to explain the detail slides from the next.
Yeah. Thank you very much, Renato. Good afternoon, everyone. I would like to start from the statement Renato did. Our nine-month results show the balancing effect of A2A's diversified and integrated business model. This is very important because our portfolio gives us the opportunity to balance some bad situation with positive ones. Different trend across the businesses partially offset each other, limiting the reduction in the group adjusted EBITDA to EUR 56 million. Adjusted EBITDA was EUR 1,673 million, down around 3% year-on-year. Three contributions helped to mitigate external pressure. Higher wind, solar, and CCGT production, the ability to capture trading opportunities, and strong energy management performance, and the growth in electricity distribution due to the deployment of our CapEx plan. This partially offset the impact from higher hydroelectric concession fees and lower hydro production, price volatility, and lower contribution from the treatment sector.
Let me now walk through each business. Generation and trading. Generation and trading adjusted EBITDA stood at EUR 569 million, down around 9% year-on-year. The key point here is the balancing effect of our generation portfolio diversification. Within renewables, higher wind and solar production partially offset the lower hydroelectric contribution, EUR 40 million in terms of EBITDA, which in its turn was somehow mitigated by the hydro production in the southern Italy. Maybe you remember the very positive production in terms of volumes in Calabria, which compensated the less production in Valtellina. Higher hydroelectric concession fees also weighed on the result for EUR 47 million. Higher CCGT production, EUR 20 million, together with opportunities captured by energy management provided further support. This performance highlights the value of our diversified generation mix and our ability to capture opportunities through portfolio flexibility. Market.
Moving to the market business, performance remained resilient in a highly competitive environment. Adjusted EBITDA stood at EUR 321 million, down EUR 10 million compared to the first nine months 2025. Higher electricity volume supported the result, helping offset lower unit margin. In the third quarter, imbalance charges linked to energy price volatility and fees and a less favorable year-on-year comparison for retention cost weighed on performance. On the contrary, churn rate began to reduce during Q3, now almost aligned to the last year level, while stronger customer acquisition is supporting an improvement in the customer base trend. These developments are encouraging for entering the final quarter, alongside the continued support from higher electricity volumes. Let me now turn to circular economy business. Adjusted EBITDA was EUR 403 million compared to EUR 423 million in the first nine months 2025, a decline of around 5%.
The reduction mainly reflects negative H1 industrial effects due to lower plant availability, a performance stabilization of treatment plants in Q3, lower margin around the new Acerra service contract. These negative elements were partially offset by higher treatment prices. Collection recorded a slight increase, while integrated water cycle benefited from higher allowed revenues. District heating recorded lower heat volumes and reduced contribution from white certificates. All in all, the gradual return to normal operation in treatment plants, together with a positive contribution from district heating, support the outlook of the remainder of the year. Let me now turn to smart infrastructure. In smart infrastructure, our allowed revenues in electricity distribution more than offset the lower contribution for gas network due to perimeter and one-off effects. Adjusted EBITDA reached EUR 413 million, up EUR 28 million, around 7%, compared with EUR 385 million in the first nine months of 2025.
Electricity network benefited from growth in the regulated asset base and higher allowed revenues, reflecting the continued deployment of investment. In gas network, the lower contribution reflect asset disposal and the absence of non-recurring OpEx recognition recording in H1 2025. Overall, the result confirmed the visibility and quality of earnings provided by our regulated infrastructure platforms. That concludes our overview of the result of each business unit. Let me now move to adjusted EBITDA to group net profit before turning to cash flow. Starting from adjusted EBITDA of EUR 1,673 million, D&A amounted to EUR 768 million, up EUR 53 million year on year, mainly reflecting CapEx deployment over the period October 2025 to September 2026. Provisions were EUR 53 million, down EUR 16 million year on year, reflecting higher risk provision reversal in 2026 and lower bad debt provision related to the loss of safeguard tender.
Adjusted EBIT therefore amounted to EUR 852 million compared with EUR 945 million last year. Adjusted net financial expenses were EUR 145 million compared with EUR 128 million last year due to higher net financial debt. The average cost of debt remained stable at 2.7% despite rising market interest rates, reflecting our proactive management of refinancing needs. Including EUR 5 million from equity accounting investment, adjusted profit before tax was EUR 712 million. Adjusted taxes amounted to EUR 210 million, EUR 30 million lower year-on-year, with a tax rate of 29.5%, excluding the impact of IRAP increase introduced by Energy Decree, which has been accounted for as a special item. Adjusted group net profit was EUR 473 million compared with EUR 550 million in the first nine months of 2025.
Reported group net profit was EUR 476 million, including a net positive of EUR 3 million contribution from special items, mainly for the Netcity fair value revaluation and the Energy Decree tax effect. At the end of September, ROI was 8.7%, ROE 10.2%. Let me conclude by reviewing our cash flow performance. For the first nine months 2026, net financial position increased by EUR 589 million, resulting in closing net debt of EUR 6,063 million as of September 30. Despite persistent market volatility, our credit profile remained resilient, which leverage anchored at 2.8 x, aligned with our strategic capital structure threshold. During the period, the group generated EUR 937 million in operating cash flow, providing robust support for our organic growth initiatives. The primary driver of our cash performance are net working capital. Net working capital expanded by EUR 534 million, acting as a temporary cash absorber.
This dynamic was driven by price-induced inflation in retail receivables, seasonal gas storage, replenishment, and non-recurring regulatory events, especially the reduction of payment terms to CSEA under the 2026 Energy Decree and hydroelectric concession fee payments. Taxes and financing costs combined cash flows for taxes and net financial expenses totaled EUR 202 million, comprising EUR 76 million in corporate taxes and EUR 126 million in net financial expenses. Capital expenditure requirements represent a cash outflow of EUR 1,131 million, of which EUR 744 million for development projects. Operating cash flows before dividend, reflecting the intensive CapEx cycle, this metric stood at negative EUR 194 million. Net free cash flow, with result following the distribution of dividends and coupon payments on perpetual subordinated hybrid bonds, was negative for EUR 558 million. Change in consolidation perimeter had a net negative impact of EUR 16 million.
This reflects EUR 42 million in transaction-related outflows, partially offset by EUR 25 million price adjustment from the partial disposal of gas asset to Ascopiave, completed in 2025. Finally, share buyback. The execution of share buyback program accounted for a further cash allocation of EUR 15 million. Looking forward, we reiterate our confidence in the group cash flows outlook. This stability is underpinned by our integrated and diversified business model, which provided the optionality and operational flexibility required to mitigate market volatility, navigate energy sector uncertainties, and preserve balance sheet strength. I will hand back to Renato for the final part of the presentation.
Okay, thank you, Luca. Looking at the guidance, we confirm our 2026 guidance range, probably with result expected at the low end. Frankly speaking, it depends a lot of the quantity of water that will arrive in the next weeks till December. Group operating trends across our business support this outlook as we enter in the final quarter. In particular, in generation and trading, we expected a higher CCGT generation. In October, we are seeing this effect, and opportunities captured through energy management to support performance. We also expect to commission, as I said before, 100 MW of new solar capacity in Friuli-Venezia Giulia starting from next week. In market, the churn rate that is a problem since a couple of years has been improving since the third quarter. The reduction is visible with positive indication for the fourth quarter.
At the same time, the customer base trend is turning positive, means that is growing again in the last month of October, supported by stronger customer acquisition. In circular economy, the normalization of treatment plant performance, together with a positive contribution from district heating, should support fourth quarter results. Taken together, these fourth quarter opportunities provide a clear path to achieve our full-year guidance and demonstrate once again the resilience of our diversified business model.
Let me conclude by reiterating the central message of our presentation today, that we live in a time of constant change with a lot of problem, you know. Our integrated model, be it a robust foundation, continues to ensure balance, flexibility, and earnings visibility, and our capacity to face the future with a strong CapEx plan builds the path really for our future. Thank you very much, and we are now ready to take in your question. I imagine about the new Decreto Bollette or something else. Please.
Okay. Thank you very much. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key then six on your telephone keypad. The first question comes from the line of Francesco Sala of Banca Akros. Please, go ahead.
Good afternoon. Thank you for the opportunity of the questions. The first one is on the new regulations put forward by the Italian government. Can you help us quantify the impact of the higher IRAP tax and also the price cap on gas price? The second one is, I wonder how clean spark spreads have evolved during the first weeks of the fourth quarter compared to the third quarter, of course, and whether this is above or in line with your original assumptions. Third one, if you can give us an update on your hedging policy and how much of the expected generation for 2027, 2028 maybe was sold forward.
Finally, as regards the performance of the electricity distribution business, I wonder whether you can help us quantify the impact of the ROSS methodology and how big the fast money component is, and whether there is also a component related to still efficiencies after the purchase of the Milan network from Enel a couple of years ago. Thank you.
About the first question about the so-said Decreto Bollette, the reason why, if you open the newspaper today, the mainstream information is the impact for families is approximately zero, is the reason why the tope didn't work in Spain, in Portugal, because the cross-border energy market is not able to work if you try to reduce virtually the price of gas only one country. To be clear, consider that the level negotiated with Europe of EUR 58.9 for megawatt hours gas price, in which if the prices of gas is higher, this decree start working, can work only if the differences between Germany, Slovenia, Austria, France, and so on, is not more than EUR 7, EUR 8 for megawatt hours.
There is a technical relation linked to the decree that explain exactly why the effect is so limited and is linked to the fact that Europe said, "Okay, guys, you can try to apply the tope, but you can't produce flow cross-border." In this situation, the effect of the decree is really limited. What is the problem? In this moment, it's very difficult to be more clear because the decree consider this, that is a super high level, and then is ARERA, the authority that must apply the decree. To understand well the effect, we must know exactly how ARERA will decide to apply the decree. Because all the contract with variable price will pay completely the cost of the compensation, the thermo compensation, let's say.
The problem are the contract with the fixed price, because once again, Europe said, "Okay, guys, you can try to use this formula, but you can't put the cost on contract fix that has not any advantage from this decree." In Spain or in Portugal, was the general taxation to cover this part. Here in this decree, the government asked to our company that generated with fixed price, so hydro, aeolic, solar, so every kind of generation with fixed price to cover the compensation to the thermo, only for the contract with fixed price. Consider that overall in Italy, considering mass market and B2B, the total number of terawatt hours in fixed price is more or less 30%. That means that 70% of the measure is covered by the customers, 30% covered by our generation company.
Is not clear, once again, how large is the number of companies that must pay for the compensation with gas. Very complicated, once again, to define the effect, also because every times, for example, in Spain, in which someone try to introduce a decree like this, the effect is to increase the thermo production. As you know, A2A is the first player in thermo production in Italy. From one time, we have this, let's say, this kind of tax. From the other side, probably, it's possible to have a positive effect on the thermo generation. We have to see. To close, I'm sorry, but it's very difficult in this moment, also because the text of the decree arrived some hours ago during our board.
We study and we try to simulate the effect in the next hours, then my colleagues, Marco Porro and the team, will take contact with you to give more detail. I don't think to see an effect really material. Also because it's one shot, you know, that is 12 months, more six, so emergency. The other elements surely positive is that in the last 10 days, the gas price decrease of 20%. In this moment, Q4 2027 is already to EUR 60, EUR 61 for megawatt hours. So, more or less to the level in which the decree stop is effect. This is the other elements very important, because after the election in U.S., the tension in Hormuz seems to reduce a little bit, and the effect on the gas price arrived immediately. On the hedging policies, 2027, Luca, if you want to—
There is also the IRAP question related to the impact from Decreto Bollette. You have seen and read that it is a 5 percentage point in 2027, and three, 2028 and 2029. We see if considering then as a special item, as we did or we are doing for the 2 percentage point in 2026. This is also because it is not a structural reform, but it is temporary to face the current situation. The impact, you can count EUR 10 million each percentage point. So, five is EUR 50 million, as 20 is the 2 percentage point for this year. Clean spark spread, we achieved a low double-digit number for the nine months, and we are assisting to an increase peaking three times in the last two weeks.
That means that we can see for the end of the year an average increasing from low double digit to high double digit. Hedging policy, I recall to everybody, which is for 2026, the remainder part of the year, 85% hedging ratio with EUR 113 million average, sorry, euro per megawatt average. For 2027, 75% already hedged at EUR 103, and we start looking at 2028, considering the liquidity of the market. Electricity distribution, coming to the efficiencies and synergies made on the perimeter acquired by Enel, we can count roughly EUR 10 million a year.
So, as we said and we promised, the synergies are there, and the performance of the company is very good. The ROSS methodology gave us an opportunity in this year for a couple of year, previous couple of year, by EUR 30 million average, which is, we can consider EUR 15 and EUR 15. This is a nice flexibility we can exploit also in the future, considering the CapEx plan. I think that it's all.
Thank you very much. Our next question comes from the line of Emanuele Oggioni of Kepler Cheuvreux. Please go ahead.
Good afternoon. Thank you for the presentation. My first question is on the net working capital. We know that the drivers of the increase of the trade receivables are related to the energy commodity effect, and also the seasonality, the usual seasonality, not the gas storage, et cetera, and partially also one-off related still to the energy bill draft law. What are the guidance for the full year, and so the net debt, and for 2027, in case of, you already said the decline by 20 percentage point of the gas price. Probably we can see normalization in 2027, or already in early 2027, of the gas price, and so the price, or at least decline. This effect could be at least partially reabsorbed, in your opinion.
The second question is on the overall outlook on 2027, as regards the moving parts for the different business unit. We will see any slight increase in the achieved power or average power price year-on-year, for example, or the increase in the contribution from waste treatment after the demand, and also after the extra cost and the CapEx deployment occurred in 2026, the same as the natural organic growth in networks, et cetera. Another question is about the hydro concession update.
There was in the last few weeks some confusion about the interpretation of the proposal by the government, in this case related only to grants, but in general, what is your opinion about the fourth way, if the fourth solution will be a net positive for you, even including the Energy Release, probably at around 15% of the volume at EUR 70, EUR 75 per megawatt hour, et cetera, what will be, et cetera? In any case, you consider a net positive this solution based on the latest discussion with the authority. Thank you.
Emanuele, I start from your last question about the hydro concession. Starting from the Article 78 of our budget law, consider that the idea is to use a part of the EUR 14 billion of the flexibility that Europe said to Italy for the funds, let's say, linked to the energy investment to have more autonomy in Italy. The idea is to use a part of this money for hydro. Someone that probably don't know exactly what we need decided to try to put on the table EUR 800 million, so more or less EUR 1 billion, for extraordinary maintenance of the basin, in particular to reduce the sand in the lake, let's say.
The problem in this moment is that for us it's not a topic of money, because if you are able to increase the capacity of the basin, we have every kind of money to manage the extraordinary maintenance. The problem is simply that if we bring the sand coming from the mountain and coming in the lake, and we extract from the water, this sand become immediately a waste. So theoretically, we need a landfill. Imagine to take an helicopter to bring the sand from 2,00m in the mountain in a landfill near Milano. So it's foolish, you can understand. So we need simply a law. It is under working in the Ministry of Environment and Energy Security to change the taxonomy of this kind of product to be able to move outside the lake remaining in the mountain.
Then, chapter two of this article, if someone ask to use this EUR 800 million to compensate the cost that the government put on the table, must give between 50% and 80% of the energy in Hydro Release to the GSE. You can understand, of course, that no one will ask this money in the future. Exactly in the same days, last Friday, in which went out this article, immediately there was a note on the answer of the Ministry of Environment and Energy Security that give the correct interpretation saying that is voluntary the possibility to use this amount of EUR 800 million and linked to the use of the Hydro Release. So, the effect of this article in this situation is absolutely zero.
Talking about the other concession is interesting because once again, the fact that we reopen the discussion about hydro with this article produce another new discussion about the fourth way. In particular, because the idea of Hydro Release, as you know, is embedded in the fourth way idea, in a dimension of 15% of the energy, in particular to a price of EUR 70 for megawatt hours. So it's interesting in particular for Confindustria and for, in particular, our clients, energivori and so on, the steel producer and so on. I think that it's not impossible that exactly in this financial law, maybe that till December we'll have opportunity to reopen the discussion about the fourth way inside.
Also because in the last month, you have seen that in France, they found a way to reassign the concession, in this case using the instrument of authorization that is a little different from concession. In France and in Italy, the legislation is a little bit different, but the strategical idea is exactly the same. So to reassign the concession to the actual player with a CapEx plan and with a part of Hydro Release. This is the situation. We are working. The PNRR finished in August, and so also the vincoli linked to the PNRR are less strong. I hope really that in the next month, we can find a solution for the future. Also because 2029 is coming, and in 2029, as you know, expired all the concession, not only ours that expired some years ago.
The timeline now is the same for all, and this is, of course, you can understand, a big advantage.
Regarding net working capital, you already capture all the most important events impacting on September 30. For sure, some of those are one-off. Others will continue to have an effect also in the first quarter 2027. Coming to your question, first of all, the expectation we have for the end of the year is to a seasonal increase of the net working capital, more or less by EUR 100 million compared to the situation as of today. But remaining with a very strong 2.8x ratio, which is very satisfactory for us. If the prices will decrease in the first part of 2027, for sure we will have some release of cash, positive effect, because of the decreasing of the prices. But in any case, we continue to manage the situation in order to have a strong ratio in terms of net debt to EBITDA.
Of course, there are other potential impact on the net working capital. One for the increase of IRAP will affect also 2027. As I said, we continue to manage the situation in a proper way as we did in the previous year. Outlook 2027, as you have seen, we are able to manage a tough year like 2026 with some drawbacks we suffer from, also coming from external effects and decision. We are working on 2027 budget and the new plan. We are in the position to communicate in our CMD events, considering the current situation we have with the decree, the Decreto Bollette , the Energy Decree, and the other situation considering the volatility of the prices, we decided to postpone a little bit the presentation of the plan in order to have more visibility on 2027.
In any case, we are working to stay in line with the current business plan.
Yeah, consider that looking not only 2027, but our industrial plan, what is super clear in this moment in Europe is that we need more electrification, more power grid, more renewable generation, exactly in line with our plan. What is interesting is that looking this year, 2026, the demand is growing. It is growing not only for the weather condition, incredible weather condition that we suffered in July and in August, so condition and so on, but also because of growing electrical vehicle in terms of vehicles sold, the increasing is huge, the arrival of data center and so on. So we imagine that the curve of growth of the electrical demand is really a visible effect, and we are on the good way to face these opportunities. So looking our industrial plan, we trust absolutely in our numbers.
Thank you very much. Our next question comes from the line of Javier Suarez of Mediobanca. Please go ahead.
Thank you. Thank you for the presentation. Several questions. The first one is on the guidance. During the presentation, you have been guiding, confirming, or affirming the guidance, but probably at the lower end of the guidance. So I just wanted to understand which are the reasons that are leading you to guide towards the lower end of the guidance. Is that obviously a combination of lower hydro conditions? So if you can share with us your latest expectations on hydro production for 2026. Probably there is an element of some deterioration versus previous expectation in the supply business. Is that a fair statement? The third element probably is this thing of more working capital absorption that is denting your net income. So you can help us to understand why the company is now guiding towards the lower end of the range.
And the assumptions embedded into this new guidance. The second question is on the supply business. We have seen a certain contraction in the profitability of the supply business during the third quarter. If you can help us to understand the key dynamics, is this linked to fixed pricing offers in a context of higher commodity prices? Is that a consequence also? The question is, which is the combination of effect that are affecting the profitability of your supply business, and why are you saying in the presentation that you are expecting some of these trends turning positive during the fourth quarter of the year? The third question is on the balance sheet and the net debt to EBITDA. I think that the company has been guiding to 2.8x net debt to EBITDA.
That should be consistent with the debt by the year end, along the lines of EUR 6.2 billion. If you think that that is a fair statement for the debt by the year end, and in a context on which the net debt to EBITDA is moving towards a level closer to 3x versus 2.5 x, the company is screening any M&A opportunity through different lenses. Thank you.
Okay. Javier, guidance. Luca, do you want to say something about it?
Yeah. For sure, Javier, as we said, the first quarter has been affected in particular, but not only, by hydro volumes. Our projection for the end of the year is to have a production of 3.5 TW, 3.6 TW. Last year, we end the year at 3.7 TW, and the target, as you know, was to reach 4 TW. So, the difference is affecting the P&L of operation and trade division. For certain stance, we've been able to partially compensate it, and we continue to manage. We have some opportunities, as we talk about, we have seen in the month of October and in this first 10 days of November, in term of good prices on the market. But all in all, we are considering the lower boundaries of the guidance being a situation achievable for us.
Going down on the profit and loss, we have some volume effects on the financial expenses due to the higher rates, and also due to the situation related to net working capital absorption, but also to the margin calls, which affected us in particular in the last month. We need to manage as we are used to do in a proper way. All in all, this give us to have also in term of net profit, a guidance in the lower part of the boundaries.
Consider, Javier, that a fork of EUR 40 million EBITDA on EUR 2.2 billion is absolutely small. When we said in the low part is also because it is a fork very, very limited. Only the different quantity of water in a month like December can move EUR 10 million more or less in our balance. In this moment, prudently, we think that we can confirm the guidance. Last year I said, "Okay, we are in the high part." This year I said, "With all what happened, we stay in the low part." More or less, the fork is limited. Now, talking about supply, what happened in October in particular is that in October, we restart growing like customer base for two effect.
The first is a reduction of churn that is typical when the price grow, because when the price grow, all people that has a fixed price remain with his contract. It's a typical effect, the reduction of churn. I can say to joke that the war between U.S. and Iran has a lateral effect to reduce the churn in our Europe exactly because the price jump to an incredible level and people remain fixed in their contract. Typically in this situation, for the same reason, it's difficult to grow in acquisition. This is the positive effect, that despite a churn in reduction, not only in A2A but in all the market. We had a super large acquisition in the month. This is linked probably to the fact that the diversification in the products that A2A has for the customer base is unique on the market.
For example, we arrived to 150,000 contract PPA mass market, and we do, you know, bet in this moment as a price that is one-third compared with the gross price of the market. Of course, this is the reason why in this moment is easy if you have renewable energy or you are able to work like platform, buying renewable energy also from other producers to sell this kind of contract. In March 2026, we started also with PPA for small business. In February 2027, we start for the last part, so professionalist, partita IVA, and so on. Coming to be the only companies with PPAs for every kind of customer.
This linked with our capacity to stay on the market, our digital position, because we opened a lot of new shops all around Italy and so on, our presence in communication, our visibility, our awareness that in this moment is 67%, and so on, produce capacity of acquisition. In October, we turn on in a positive growing of the customer base. I think this is an effect that will remain for the next month also because in some products, for example, the PPA mass market, there is no other competitors that has this kind of product. Consider that in this moment on the market, a fixed price for a couple of years stay at EUR 108 or EUR 200 per megawatt hours compared with EUR 105 of our 10 years.
Last question was on the ratio net debt to EBITDA 2.8 x, which are considering feasible and this is something which give us an FFO to net debt in line with the older credit metrics, considering that the new ones giving us the opportunity to decrease the threshold from 24% to 20%, having availability for a financial flexibility of roughly EUR 1 billion. We have enough room to do a lot of things. The current situation is a temporary situation considering the commodity prices. As it happened at the end of 2022, in 2023, a release of cash could be there considering the time when the prices will start to decrease and normalize in a situation we consider around EUR 30-EUR 35 per megawatt, the gas price. I do not know if I have got the point of your question, but I am here to answer if not.
Thank you very much. The next question comes from the line of Roberto Letizia of Equita. Please go ahead, sir.
Yes, good evening. Thanks for taking my questions. I would like to go briefly to the Energy Decree. I know that we do not have the details, and of course, the devil is always in the detail. One thing that we have understood, and you mentioned also in your initial comment, is that part of the burden of the cost for reimbursing gas producer is on the player of the balancing system, which not transfer to the final customers the burden in case they serve the fixed price contract. The decree also specifically say that the potential extra cost of up to EUR 15 per megawatt hour applies also to the renewable energies before 2017, which basically refers to the hydro, that serves fixed price contract.
Of course, we need the clarification and potential eventual change, but as far as I read it in this way, your price contracts that are served with that kind of energy, so namely the hydro, and usually we know that operator tends to enter in fixed price contract only if this is served by renewable energy because this is the natural way of managing those type of contract. I would like to ask you, I've been a little bit long. First, a brief comment on that. If you can clarify how much terawatt-hours are actually locked in into fixed price contract on your customer base, and if you believe that as far as it is written today, that could be the maximum impact, then it can be only EUR 1 per megawatt-hour or up to EUR 15 per megawatt-hour.
If that is the risk that potentially may affect you in 2027. A second question, still remaining on the hydro concession, a more qualitative question for you, but the government is acting in a way that let us understand that they want to push lower prices for hydro. As the Article 78 said, as you explained, ask for a lock-in in very long-term contracts in case you use the money. We have the discussion on the fourth which regards the Energy Release. The discussion today is that it seems the government is not ready to leave you those advantages also in the negotiation of the hydro. You several times said that the eventual Energy Release then have to be paid at the expense of the concession fee.
Actually, the way the government is acting in the last month make understand that maybe the cost of extending is on the burden of the hydro producer. Is that the case? Can you please clarify this a little bit better? I have a final question on the refinancing. Looking into 2027, you now have 40% of variable debt, and you have around EUR 700 million of maturity next year that has to be refinanced, and we had higher cost of debt. Just wondering if you can give us the idea of how much higher cost of debt versus strategy expectations do you expect now into 2027? Thanks a lot.
Coming back to the Bollette Decree, I confirm that in this moment it's very difficult to forecast the impact, in particular because we need to see how ARERA will apply the decree. Also because there are some elements of the decree that in our personal opinion can't work. For example, for the new fixed price, you must maintain a same condition between producer integrated like us and subject that only sell, like Poste, Octopus, and so on. For example, this point is not clear. Coming back to the reimburse, starting from the fact that it's impossible to have more than seven, EUR 8 for megawatt-hours gas price differences between one country and another, the maximum cost for us is, as you said, and as is written in the decree, EUR 15 for megawatt-hours, electrical megawatt-hours.
Of course, the topic is which is the maximum effect for A2A, and this is a P for Q, terawatt-hours for price. In this moment, it's difficult both to say terawatt-hours than to say the price. Terawatt-hours, why? Because for sure are excluded all the terawatt-hours used for PPAs. Every kind of PPAs, mass market, small business, large business, and so on. But what is not clear is how to manage the energy already sold in, for example, 2027. This is to clarify. In this moment, consider that A2A has more or less, depending on the year, on the water, 6 TWh, 7 TWh, 15% covered with PPAs, another 60% sold in advance, and only 20%, 25% open to. So, the impact depends on how to consider the energy already sold on the market.
Surely, in this moment, surely only energy sold for PPAs is out of taxation, for sure. The other elements is EUR 15 for megawatt-hours, because EUR 15 is a maximum, but depends, once again, from the number of contract with fixed price, that in A2A is overall 30%, because it is 50% on mass market and less than 30% on B2B. You know that there is much more energy for us sold in B2B than in mass market. So overall, we have a 30%, 35% fixed price and 65% floating. On the part of floating, there is no cost, no impact. So, the 15% is correct to calculate the proportion between 15 and the percentage of contract with fixed price? Probably yes.
If you use this formula, the impact is EUR 5 for 6 TWh, EUR 30 million, but it's difficult really to say a number in this moment. But this is probably an estimation that with the elements that we have in this moment on the table, we can consider. Talking about the hydro concession, it's clear that the government push to find a solution because there is a law, and the region must apply the law. All the concessions are coming to 2029, and a solution is fundamental to find. France found a solution because we can't remain with a law that says standard without apply the law. But in this moment, for the government, it's much more interesting, no? You can see, for example, in this Article 78, to find a solution with the actual player to share, to do a profit sharing, let's say.
That is the same criteria of the fourth way. The fourth way is, there is a concession fee that now is super high because consider that in 2026 and 2027 and for the future, we pay more or less EUR 35 for megawatt-hours of concession fee. That is, I imagine, the maximum cost for the concession fee that is logical to appoint on the hydro production. Then the cost of production depending on the year, because it's super linked to the quantity of water, because you have a lot of fixed cost that increase the cost of production depending on the water. But EUR 50 for megawatt-hours of cost is normal to have like OpEx, let's say. Consider that we are selling the hydro production for 2027, as Luca said, at EUR 103 for megawatt-hours.
If you consider EUR 103 less EUR 35 of concession fee, we are around EUR 65, more or less. We are around our cost of production. It is very difficult to imagine to have a situation in which the economics of hydro will change significantly for us, because it is absolutely not true when Carlo Calenda says that we sell water at EUR 350 per megawatt hours. You know this is absolutely false. In this moment, we sell our water, like Enel and the other, at EUR 105, EUR 110, more or less. It is exactly online on every logical regulation for the future. When we discuss about project finance, fourth way and so on, with remuneration of CapEx , correct remuneration of the plants, more or less, we stay around this economics, that are the logical effect of a gas price, EUR 30 per megawatt hours.
A thermo price at EUR 100 per megawatt hour. A normal world in which in Italy, the cost of energy is around EUR 100, and also the hydro energy is around EUR 100.
Last point is refinancing for 2027. We managed this part of the year taking into consideration the rate effect increase. We work on the curve, managing in a proper way the situation, also through some activity on the interest rate. We did swapping some fixed to floating when the interest rate were very high and peaked very high in the last week and month. We manage proactively the situation. For sure, we will see the first part of the year the chance to go out for new issuance, and take into consideration the level of the rate at that point in time. We will manage the duration properly in order to stay with the average duration, but not with a tenor very long if it is not the case, not deteriorating the average cost of debt.
Thank you very much. Our last question comes from the line of Davide Candela of Intesa Sanpaolo. Please go ahead, sir.
Hi. Good afternoon, gentlemen. Thank you for taking my question for the presentation. I have a couple of high-level questions. The first one is on the dynamics of current power prices we have seen. Say that gas prices lowered in the last couple of weeks by 20%, but power ones remain broadly flat at EUR 270 per megawatt hour. That implies more or less clean spark spreads with regards to gas generation that are in the region of 50. I was wondering if you can share your view on these fundamentals with the fact that it seems like power prices are decoupling to the gas ones. I wonder which are the reason behind this kind of decoupling, say that the expectation or hydro are low, not only on Q4, but also going through the beginning of 2027. Just a view on that.
Related to that, on your hedging policy for 2027, it seems to me that the share of the hedging is broadly similar to what you shared with us at the first half results. I wonder if you are on purpose staying quite open on that, or the liquid is not there for the market in 2027, or disconnect again with the hydro that you may bear some further low production in 2027 as well, so you don't want to over-hedge that production. Final one, on the balance sheet side, we spoke about your flexibility provided by the credit metrics and so on. With regards to maybe asset rotation, we have seen your deal with the Dolomiti Energia or Retragas.
I wonder if you can share if you have some pipeline maybe to dispose some non-core assets and to collect money to push further on investments, notably as maybe data centers are getting more capital-intensive going into 2027 and 2028. Thank you.
First question, dynamics on gas prices and power prices. I think that the decoupling is related to temporary situations, specifically in North Europe, in Germany, because we were assisting to a particular situation. It already happened, by the way, related to the fact that lack of wind hit the plants and the situation there. The power prices peaked, and this generated a peak also in a way, also considering that the prices in Europe are linked, and we discuss a lot about Energy Decree, but this is, at the end, the reality of the market. Considering the peaking of the prices in Germany, the effect are also in Italy with the current situation of the opening between the prices between gas and power, so creating some opportunity for the spreads. Hedging. The hedging for 2027 is around 70%, 70%, 72%.
So, it is the normal share we are used to have every year, notwithstanding any specific situation, considering a standard production of hydro around 4 TW, which it could be variable from 3.9 TW to 4.2 TW, depending on the average we consider every year and which timeframe the average get into account. So, it is not because we want to keep a share open in particular or not. This is the normal hedging we are used to do without any specific situation considered. It come from the fact that at certain point in time during this year, we increased a little bit the share also in defending the prices, which decreased a lot because of the first Decreto Bollette, Energy Decree. Then after the war, the prices started to increase, and we did the second part of the hedging, balancing, and averaging the level of the coverage.
Regarding the balance sheet flexibility and the asset rotation, as usual, if there are opportunities, as it has been for Retragas, we can consider it, considering assets that are not strategic for us. We don't have a specific plan of asset rotation. Every time, every month, we sit down to consider if we have opportunities or not in order to see also according to market condition what will come, again, in opportunistic approach.
All right. Thank you very much. This brings us to the end of the Q&A session. I will therefore hand the conference back to the speakers for any closing remarks.
Yeah. Thank you, everyone, for joining us. If you need any additional information, please refer to the IR department, and have a very good evening to everyone. Thank you. Bye-bye.