Good afternoon, everyone, and welcome to the conference call on the nine-month 2023 results. Mr. Palermo, CEO, and Mrs. Bartolomeo, CFO, will be illustrating the main dynamics reported in the first nine months of 2023. At the end of the presentation, a Q&A session will follow. Now I'll hand you over to the CEO, our chair, for the introductory remarks. So please, sir, you have the floor.
Thank you very much, and good afternoon. First of all, I would like to make a short comment on the particularly challenging market environment that we have witnessed in Italy and in Europe at large. In the target markets, we have witnessed some changes in the field of regulation.
As far as water is concerned, the consultation was started by ARERA on the updating of the regulation of integrated water service tariffs for the fourth regulatory period, of 2024- 2029. As for networks and smart cities, the consultation on tariff regulation for electricity distribution for the sixth regulatory period, 2024- 2027, is continuing. And, as for waste, the new criteria have been drawn up for the regulation of the waste sector, for non-integrated providers, and timing of application is still uncertain. As for our commercial activity, the auction for non-vulnerable customers are expected in December 2023, with service due to start in 2024, and we are still waiting for a formal announcement in this regard.
So in all the areas where the group operates, we have witnessed an evolution in the field of regulation, and we are not aware of what the impact of such evolution will be, especially as far as the consultation on the water service tariffs are concerned, which may have a substantial impact on the group. As for commodity prices and inflation, as you might know, commodity prices rose in the quarter again, particularly PUN, this is the national electricity reference price, grew to 116 EUR/MWh in September, up 3% on the previous month, whereas the PUN Q3 2023 amounted to 113 EUR/MWh, up 7% on the previous two months period.
However, the PUN dropped substantially if compared to the period of January through September 2023, when it amounted to 129 EUR per MWh. Inflation in September grew by 0.2% versus the previous month, and grew 5.3% overall. So inflation between January and September 2023 amounted to 7% versus 2022. As for interest rates, interest rates were particularly challenging because, of course, they have driven up financial costs that are up versus 2022. And here you see figures concerning the mid swap at four years, and the comparison between 2023 and 2022. And you see there is a half percentage point delta between the two periods I've mentioned. So again, as already pointed out, a challenging market environment in terms of energy prices and interest rates.
And then also , the novelties that are upcoming as far as the regulation is concerned. Nevertheless, the group has managed to hold very well. EBITDA grew. EBITDA grew in terms of recurring EBITDA, that now stands at EUR 992 million, up EUR 29 million, versus nine months, the first nine months of 2022. I'm referring to the regulated business here. This achievement was driven mainly by a very attentive managing of operating costs. Net profit reached EUR 209 million , and not including the one-off items, so the recurring net profit has grown at 3%, which testifies that the EBITDA growth makes it possible to offset the growth of financial costs that are driven by rising interest rates, and also by higher depreciations that are related to investments made in the past years.
As I said, the group is holding very well, as is the net profit, and this despite the rise in interest rates that are being offset by the group, thanks to attention paid to operating cost. CapEx reached EUR 733 million, up across regulated business, in line with investment plan and with the average of 2022. These were the highlights for the first nine months of 2023, and now I would like to hand you over to Mrs. Di Bartolomeo, who will be providing us with more details.
Good afternoon. As already announced by Mr. Palermo, the first nine months of 2023 have been characterized by a challenging market, and nevertheless, the group managed to grow. The organic growth of EBITDA was mainly driven by the regulated business, which accounts for 87% of total EBITDA at H1, and it accounts for 88% of our total CapEx. So EBITDA grew more than 6% in the regulated business. CapEx were relaunched, particularly in the regulated business, so Water Italy and Grids and Smart Cities, and net profit grew 3% like for like, and this, thanks to an operating performance that has offset the increase in depreciation and financial costs. Net debt grew to EUR 4,843 million, with a ratio of 3.7%, in line with our guidance.
As for EBITDA, not considering no recurring items, please remember that last year, we reported roughly EUR 20 million related to the bonus for the technical quality in the water segment, and then we had the exemption from the obligation to purchase CO2 allowances amounting to EUR 8 million. Then we report an organic growth that is partially offset by higher energy prices. The drop in the PUN has an impact on the energy sale, and therefore it has an impact on the environment business in particular. That was characterized by a drop in EBITDA, which, however, was offset by a better operating performance of the regulated business. Moving on to the slide on net profit.
Again, we have managed to improve the efficiency and to grow the regulated business, that more than offset the increase in depreciation and interest rates, that, as you know, had an impact on our results of a total of EUR 54 million, which, however, were offset by our operating performance. Please remember that in 2022, we had non-recurring events amounting to roughly EUR 55 million, including also the capital gain on the sale of stake in the photovoltaic as the so-called Energy Box. And then, as I said, the bonus for technical quality and the exemption from the obligation to purchase the CO2 allowances. Moving on to CapEx, as already pointed out, the group has focused particularly on the regulated business.
And here you can see the evolution of CapEx, where roughly 88% is accounted for by the regulated business, namely water, electricity, and environment. This is because the group believes in these activities that account for the group's core business. The improvement of the grids, and the upgrading of the grids, will turn out to be an asset for the country as a whole, and also will translate into a better service provided to our customers. Investments focused mainly on extraordinary maintenance of plants and networks. We are focusing on the purifying systems in particular, and on the repair and widening of the water and the sewage pipes. This is our priority that we have been investing on.
We are well on track, and we are actually in line with the last year, as far as CapEx is concerned, and we will be continuing along this line until the end of the year. As for the cash flow, this time we report a different illustration of the cash flow. We provide probably more details than we used to do in the past. What you can see here is that the group has managed to generate EUR 24 million of operating free cash flow. And this testifies the ability of the group of accommodating high levels of CapEx, EUR 733 million, with an improvement of EUR 112 million versus 2022. The cash flow before M&A and IFRS 16 mainly reflect the outflows for dividends and financial charges following the rise in interest.
However, we are paying the utmost attention to cash flow. Cash flow is another priority. We'll go on focusing on optimizing our cash flow to achieve a better performance vis-à-vis the previous years. As for our debt structure, we confirm our guidance. The average cost of debt is roughly 2%. We haven't made any additional issuances on top of the ones that we already announced during the previous conference call. Our debt is mainly accounted for by fixed rate debt, as is customary in companies operating in regulated sectors. And you see that our duration, the average duration is 4.5 years, so we will be able to offset the increase in financial costs. Moving on to the different business units. As far as the Water Italy is concerned, we reported an organic EBITDA growth of 6%.
Almost exclusively driven by tariff adjustments, and also by some additional efficiency that we managed to achieve across the group. As for CapEx, we have privileged investments in the regulated businesses, as I already pointed out. So in the water business, we observe a growth of CapEx of 7% on the previous year. The overall RAB at the thirty-first of December 2022 was EUR 3.8 billion. Moving on to grids and smart cities now. EBITDA grew by 6%, so a substantial growth of the EBITDA was reported, driven by organic growth, roughly EUR 15 million. And these 15 million include a couple of millions of higher cost efficiency. And again, as I said, the group is now focusing on cost efficiency. CapEx were increased in the second half of the year.
We were running a little behind in the first half year, but now we have recovered almost fully. As for RAB, RAB amounted to EUR 2.5 billion at the 31st of December, 2022. As for the environment business, as is the case with all our competitors, environment, environmental services are a business that is being under pressure, mainly due to energy prices. Clearly, the sale of energy at a much lower price than the previous year, inevitably has an impact on the revenues of the environment business, and hence, an impact on the EBITDA of the business. Also, the compost disposal prices for Acea have an impact on the revenue of the environment business, as they dropped during the first nine months of the year.
We do hope that in the last part of the year, the prices, the compost prices, may recover. As for CapEx, we are in line with the previous year. As far as the environment business is concerned, in January, 35% of stake in Deco, in Abruzzo, was acquired, and now the group holds 100% of Deco, and 70% of Tecnoservizi, another company, was acquired by the group. And so you see the difference between this year and last year. As for production, as was the case with the environment business, the drop in EBITDA is almost exclusively driven by the energy scenario, net of the impact of increased production. In other words, especially as far as photovoltaic and hydroelectric energy are concerned, we have managed to increase the volumes.
Unfortunately, the price of energy was much lower this year, and this has inevitably driven downward our, the EBITDA in this business. As for the CapEx, they amount to EUR 31 million, substantially in line with last year. Actually, they are EUR 5 million higher this year on 2022. However, we have seen an increase in the authorized megawatt under construction and ready to build, that have achieved 280 megawatts, and installed capacity has reached 101 megawatts. As for commercial business, EBITDA grew 44%, mainly driven by the LD scenario, but also thanks to the great attention paid to cost reduction, and thanks to the policy adopted, transferring the risk, the energy risk to the customer.
So we have replaced the contract with a fixed tariff, with contracts with tariffs that are driven by the price of energy, and this has enabled us to increase our EBITDA and also protect the group, should fluctuations of prices occur. We have seen an increase in the number of electricity customers as well, and we want to retain our customer base, and that's why we'll be following the auctions with great attention. The auctions will take place in December, but will have an impact on the following months. And now, I leave the floor to the CEO. I hope I've been exhaustive in my presentation, and I think we can start the Q&A session now.
This is the conference call operator. We can now start the Q&A session. If you wish to ask a question, press star followed by one on your telephone. To leave the waiting queue, press star followed by two. Please ask your questions using your headsets. If you wish to ask a question, you can press star followed by one now. The first question by Javier Suarez at Mediobanca.
Hello, good evening. Thank you very much for your presentation. Thank you for taking my questions. In fact, I have three or four questions. The first refers to the update of the business plan. When, do you think you'll be updating your business plan? And why you haven't, disclosed the business plan as yet?
What are the issues that you have to solve before you can disclose the new business plan, leaving aside the regulations and the consultations that are ongoing, is everything related, or does the decision depend on the issue of the waste to energy plant in Rome, or are there other reasons why the business plan has not been disclosed as yet? And then I would like you to expand on the project in Rome. We've seen the cost of the project increasing substantially. What about the cost of the project in Rome, and how will the capital invested on the project be remunerated? That was my first question. My second question is the following: we heard the CEO mentioning the substantial investments that you are making in the water business.
So, is the group willing to become more nationwide as far as this business is concerned? And if it's so, what kind of changes would be required for Acea to become a nationwide player? And then the third question refers to the working capital. On page ten, can you please elaborate a little bit more on page ten? What measures is the management adopting so that the negative absorption of working capital can be disappear by the end of the year, or at least next year? Thank you very much.
Very well. First of all, thank you very much for your questions. I believe that, talking about the business plan, there are a number of elements that have to be taken into consideration. We plan, we'll be ready with a new business plan by end of January. As reported in the press, the group has gone through s ubstantial changes, not only management changes at all levels, and now the new managerial team, me included, is working on a business plan that, of course, has to be taken by this new management team.
And then we're still pending some decisions by the authority, because such decisions will have a substantial impact on our businesses. So in order to have a well-conceived business plan, we decided to wait for these decisions to be adopted. There's nothing to do with the waste-to-energy plant that is following a completely different direction, let's say. As for the waste-to-energy plant, well, we made a bid on March the first. We were the only bidders, also because there were substantial time constraints.
But following our bidding, a consultation followed with the municipality of Rome, to define the various aspects of the project that was analyzed by a technical committee. We have then fine-tuned the project as a consequence, and the costs were reduced as well. So the final call for bids should start soon, should start shortly. And at that point, we see what happens. In May, there will be a second bidding phase, and then the tender will be awarded after that. We are confident that the quality of our bid is such that Acea can be well positioned and very likely to be awarded the tender. As for your second question, I believe that Acea is already a nationwide player as far as the water business is concerned. We are present in a large number of Italian regions.
We are number one in terms of size. We are much larger than any other player in Italy. The second largest player is the Acquedotto Pugliese. Currently, we have nine million water customers, and we operate in a large number of Italian regions. Wherever we are present, we have been able to improve operations, and this is testified also by the opinions by ARERA, that has rewarded us also from an economic point of view, let's say. Definitely, water is one of the top businesses for the group. Not the only one, of course, as you know. The other two key businesses are energy and smart cities and the environment. So looking forward, the group is willing to continue along this line, as pointed out in the strategic guidelines that we announced July last.
So we confirm this general direction that we are following. As for the last question, over the past few months, in particular, and after the arrival of a new management team, we have proved able to, you know, be more effective in cash flow managing, and we are confident that this will lead to good results. Nevertheless, you know, this is by no means an easy task, but we are acting on all the levels that we have at our disposal. So we are. We have changed our approach to cash flow, and we are applying this approach to all the various entities of the group and to all the businesses of where the group operates.
Thank you very much. Next is by Emanuele Oggioni, Kepler Cheuvreux.
Good evening. Thank you very much for your presentation. I've got a couple of questions. The first is, again, about the guidance. If I remember correctly, water bonuses are not included in the guidance. So the bonus that you received recently amounted to EUR 25 million. That was, I mean, awarded a few weeks ago, and they will be factored in, in Q4, so we expected that this bonus would lead to, you know, the guidance being confirmed in the high range or even on top of the range. And then I would like you to specify a second point. How much working capital will you be able to recover in Q4? And therefore, is your guidance on debt lower than 3.8, conservative or not?
Well, I would like to start from your last question. As Fabrizio also pointed out, we go on focusing on cash flow management. As we already pointed out, this is by no means easy because we are a regulated business. We do hope we will be surprising you positively, and we'll definitely do our best to reward our shareholders. And make our shareholders happy. So, what we have been doing is managing carefully costs as well. I cannot tell you today whether we'll be able to exceed our guidance, but definitely we'll be doing our best to achieve our targets.
Okay, thank you very much.
Next question by Stefano Gamberini, Equita.
Thank you very much, and good evening. I also have a couple of questions about the full year guidance. First of all, you confirmed the EBITDA guidance. We have a EUR 25 million more than expected.
But can you provide us with a guidance on the EBITDA adjusted, considering that now you also provided some adjusted figures, what could be the EB- adjusted EBITDA for 2022 and for the full year 2023? And my second question, and do apologize for asking this question again, but is the worsening of leverage year-over-year. Early this year, the problem was the energy scenario, so you, the previous management, gave this guidance, because the implicit price of energy was above 200 EUR per kWh, which is no longer the case now. So the EUR 400 million of worsening of the working capital and other items that, if the guidance is confirmed, that 3.8 debt of the, of the debt on EBITDA, what are the causes?
Is it water? Is it energy? If it is sale or distribution that have any impact? And then my third question, can you please make us better understand the good performance of the water business, if we not include the equity consolidated companies that you have a growth of 11%, why? What drove this growth? And then as for grids and smart cities, I got the impression that in Q3, we reported a double-digit growth. What are the reasons why you reported such a good growth? And can we expect this growth to remain there also in the future? And then a final question, it is important for us to understand whether the dividends of 2022 could be a floor for 2023, or whether you still, let's say, discussing this point within the board. Thank you very much.
So first of all, the bonuses, the water bonus for this year amount between EUR 28 million and EUR 29 million, are included in EBITDA. So the EBITDA that was used as a basis for guidance was the budget that already included some efficiencies, and substantial efficiency, in particular, for all the costs of the P&L. So providing a different guidance today would be difficult. So that's why we are working to achieve our budget targets. Let's say that so far, we have been able to, let's say, make our shareholders happy. Definitely, we are on track. We are well on track with our budget, and we are delivering on our promises. We are proceeding along the lines that we already announced, and we have been able to improve quarter-on-quarter. As for our leverage, leverage had been announced at below 3.8.
We are currently at 3.7. As I already told the other analysts, we'll go on improving it. So we are on track. We do not change the guidance. We are on track with the existing guidance. And as I said, we may come with a surprise by the end of the year. The water business and the grids as smart cities business are doing very well, and this is thanks to the tariff policies and to the regulatory framework. We have been able to factor in also the inflation pressure on costs, by paying the utmost attention to cost efficiency. And we are focused on those costs that we could indeed reduce, and that's why we see this improvement that probably is not as apparent with other players.
As for dividends, well, this is something that I certainly cannot comment on, as this is a point that has not been debated as yet within the board of directors, so I cannot answer this question.
Okay, thank you very much.
Ladies and gentlemen, there are no questions on the waiting list. Actually, we have another question by Javier Suarez. We have a follow-up question.
See, I do apologize. I do apologize. I've got two questions about the regulatory framework. We heard that the consultation on water service tariffs are not clear yet. So I would like to know whether you expect an upgrade for water services that was observed for the grids in July. And then can you please comment on the document published by ARERA and the impact it could have on your business?
Well, as far as the water business is concerned, again, I believe that the ARERA consultation, and we actually participated, enabled us to draft a number of proposals about how the service tariffs, water service tariffs, should be updated in our opinion. I believe there is some interesting insight in that document, and, if implemented, the result will be a much more modern system, but also one that would make investments easier and quicker. So consultations are ongoing. We don't know what the final result will be, but definitely, a number of proposals for improvement have been tabled. And I do hope that some of such proposals will be taken into consideration. And the ARERA consultation is meant to improve the service tariffs, the water service tariffs, to improve the whole system of water tariffs. So I do expect this consultation to generate some improvement.
The scope and size of such improvement, well, it's too early to say. But at least we are witnessing serious and well-structured consultations with ARERA, and we have been among the leading parties in this, because we are one of the largest water player in Italy. And I do believe that the final result will be a system that will be able to meet the players, the market players' requirements. As for Grids and Smart Cities. Well, as for the ROSS. We believe that applying the ROSS could be useful for those companies that are focused on efficiency, and so it can account for a good opportunity. Of course, the regulations are still being drafted, and are still being updated. So, let's say that for companies that are efficient, the ROSS comes as an opportunity.
My final question was about the group's debt. Obviously, Acea has an investment opportunity, which is, however, in line with the needs of the country, because the country needs a substantial investment on the water system. So now we have a low debt as far as the water business is concerned, which is bound to decrease. But what is the ideal level of debt for Acea?
Well, that's true. The country needs to invest in water, on the water system, and there are great opportunities here. Water business is a regulated business, and regulated businesses have multiples that are different than our multiples, and they have a definitely more substantial leverage. As already pointed out, we still monitor attentively our debt. We don't want our debt to increase beyond what we deem a reasonable leverage. But, if we look at the infrastructures of Acea, for instance, we would like Acea to be considered as any other player with infrastructures.
Okay, thank you very much.
Next question by Davide Candela, Intesa Sanpaolo.
Good evening, and thank you very much for taking my question. I've got, in fact, two questions. First, the question refers to the full year 2023, full year financials, particularly net profit. If the EBITDA guidance, is, respected, we know that there are financial costs below the net profit line that can have an impact. So what about your net profit?
As far as I know, currently, the consensus is about EUR 295 million, which is a little bit high, in my opinion, so it would be useful for me to hear your comment on this net profit for full year 2023 and compared to 2022. And then, can you please quantify the regulatory working capital that you expected to recover, if not this year, in the following years? So as for net profit, we confirm the consensus. We are well on track, and we'll do our best to achieve a EUR 295 million target. Clearly, the growth of financial costs driven by interest rate rise is substantial, and so we'll do our best. This is what I can say about your first question.
As for the regulatory net working capital, the tariff increase that we expect would release some would free from some room to recover. Currently, we haven't got the definitive figures, so I cannot say how much we'll be able to recover. Then our goal is that of recovering a substantial amount over the next three, four years. So clearly this is something that we are following with the utmost attention.
For further questions, you can press star followed by one on your telephones. Ladies and gentlemen, there are no questions, no more questions.
Okay, thank you very much then for attending our conference call. The investor relation team is at your disposal for further requests. And thank you very much, and have a nice evening.