Ladies and gentlemen, good evening. This is the conference call operator. Welcome and thank you for joining the conference call of Acea Group for the presentation of results as of the 31st of March 2025. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they will be seen and operated by pressing star and zero. I would like to give the floor to Mr. Dario Michi, Head of Investor Relations of Acea.
Ladies and gentlemen, good afternoon and welcome to the presentation of the results of the first quarter of 2025 of Acea. Now, I have here with me the CFO, Mr. Francesco Ragni, and I have the Head of Control. They will go through the presentation with me. At the end of the presentation, there will be a Q&A session. I'll give the floor to Mr. Pier Francesco Ragni, CFO of the Group.
Ladies and gentlemen, good afternoon to you all. We'll start the presentation by starting with an overview of the regulatory and market environment. Versus what we said in March, let me highlight that in the water business, over and above the approval of the ARERA tariffs, we also have the approval of the integrated system of tariffs. As to grids, provisional tariffs will be approved or expected to be approved by the end of this month. For the electricity production, now ARERA has re-evaluated the RAB. That is, from 2025 tariffs, it is possible to adopt the Italian IPCA, which has been calculated for Italy, and the review of tariffs for 2024 because of the review of tariffs 2022 of IPCA.
As to commodity prices, now the price of electricity and gas in Q1 2025 have recorded a strong increase versus the previous year. That is, + 50% and + 60% respectively. At the end of March of 2025, the long-term rates are about 2.5%, which are going down versus the previous year. Now, the dynamic is due to the decrease of rates of the ECB that started in June last year and which proceeded in the first quarter of this year. Let me now go on to present the dates of 2025. Revenues are EUR 344 million, up 8% versus the first quarter of Q1, and + 7% versus the recurrent results of last year. Now, the result has been adjusted because of the approvals of the MT-4 tariffs, also because of the downside of Terni WTE. And then the EBITDA contribution is due to all of the business units.
Now, EBITDA up by 19% and 3% versus the previous quarter, the quarter of the first quarter of 2024. Now, the cash flow is negative by EUR 127 million, which has allowed us to maintain a solid financial structure with a net debt EBITDA, which is stable versus the data of 2024. As to the overview of Q1 2025 results, the next slide, let me point out that the EBITDA in Q1 2025 grew by 7% versus 2024, adjusted by one-offs and perimeter changes. CapEx, EUR 242 million, equal to those of last year, and investments overall go up to EUR 262 million in the quarter. Net profit up 3% versus Q1 2024, thanks to the operating performance and to the amortization of regulated business because of the growth of RAB. The net financial position up EUR 123 million versus 2024. The net debt EBITDA ratio is stable at two times.
Now, thanks to the results obtained in Q1, we confirm the guidance of 2025 that we announced in May last when we presented the results of 2024. Now, let me go on to show you the EBITDA for Q1. Now, in Q1, we had an organic growth of EUR 24 million versus the 2024 recurring data because of four items: the growth of water tariffs, the improving of the commercial margin, which is due to the improvement of unit margin, and the growth of public lighting because of the investments that we have made and the operating efficiency, and then the contribution of the production because of increase of volume produced hydroelectric and photovoltaic. Now, let's see the only right of the slide. You see the one-offs and the change of perimeter versus 2024, which amounted to EUR 3 million, three factors.
Now, EUR 15 million positive, the retroactive application of the tariff update relating to the MT-4 regulation, which were accounted for in Q3 2024, the consolidation at equity of Aquedotto del Fiora, -EUR 15 million, and the shutdown for revamping of the Terni WTE, EUR 3 million. As to the net profit, now the net profit went up by EUR 3 million versus the same period of last year. This is due to the growth of EBITDA, which accounted for the amortizations made in the years. Now, as for the EBITDA, on the right of the slide, you see the details of non-recurring events in Q1 2024, which amounted to EUR 12 million, which is related to the retroactive application of the tariff update related to the MT-4 regulation, EUR 10 million, and EUR 2 million positive downtime for revamping of the Terni WTE plant.
As to CapEx, now in Q1, as I said before, we invested EUR 262 million, 6% up versus 2024. Such investments, 92%, are accounted for by the regulated businesses of water, grids, and environment. Now, out of EUR 262 million of CapEx, EUR 20 million financed by public interventions, all of them in the water business. Without such contributions, the CapEx would have been EUR 242 million stable versus last year. In the slide, you see the different initiatives taken in the different sectors. For instance, in the water business, the interventions on purification system and in the grids, the strengthening and the upgrade of the grid.
Now, as to the cash flow of Q1, now the cash absorption in the quarter amounted to EUR 163 million, which is affected negatively to the working capital relating to commercial events related to CapEx, which went up in Q4 2024, as we said in the presentation of March. Moreover, we recorded an increase of long-term credits, regulatory credits in the water business and grids. Next, let's move on to the financial structure. Next slide. The average cost of debt, as of the 31st of March this year, is 2.10%, which is in line with the period of 2024, which was related also to the consolidation at equity of Aquedotto del Fiora. Variable floating rate is 11% of our debt exposure, and this is made up for the interest rate on the debt, which is lower than the debt which is maturing.
In 2024, we reimbursed EUR 300 million within the EMTN program, and in February this year, we reimbursed a loan which was issued in March 2010. Moreover, now within the financing that we had in 2024, EUR 10 million in February this year, we subscribed to long-term financing with the European Investment Bank, EUR 180 million, one direct financing, EUR 120 million, and one with the SACE guarantee for the remaining EUR 55 million. Let me now move on to give you the overview of the different business lines. The business of the water business in Italy in Q1 2024 were recalculated to get the tariffs adjusted. Now, in Q1 2024, the data did not include the adjustment of tariffs, and then also did include the Aquedotto del Fiora that is now posted at equity. So you can see water business revenues + 6%, which is due to tariff growth and investments that we made.
Net of public contributions, CapEx go down by EUR 22 million, and this is due to different interventions planned versus last year. We intend to recover what was done in Q1 going forward. As grids and public lighting, despite the reduction of WACC by 40 basis points, the EBITDA grows by 2% to EUR 107 million, and this is mainly due to investments made and therefore to the growth of RAB and because of the improvement of RAB starting in 2025. Now, for the movement from the ISTAT Index to the IPCA index, CapEx are growing by EUR 27 million + 47%, thanks to the upgrade of the grid. As to the environment, net of one-offs due to the non-availability of the Terni WTE because of the shutdown for revamping, the EBITDA is growing by EUR 1 million, that is 6% versus Q1 2024, thanks to the increase in margins of the WTE.
CapEx are going down by EUR 2 million because of the revamping operations on the WTE of Terni in Q1 2024. As to the generation, slide number 14, EBITDA is growing by EUR 7 million, which is due to the more favorable energy scenario and greater production of the hydroelectric and photovoltaic business. Let me remind you that last year we exploited the decrease of volumes because of the lack of raining in Abruzzo. Now, energy produced has grown by 18% from 174 GWh- 200 GWh, thanks to the greater hydroelectric output and photovoltaic output. Now, as to the photovoltaic energy versus the same quarter of last year, we have 155 MW versus 102 MW. CapEx are going down by EUR 2 million versus the same quarter last year because of the change in interventions program versus the same period of last year. As to the commercial business, the EBITDA in Q1 2025 went up by EUR 7 million, + 16%, and this is due to the greater margins on the free market and the growth of customers, 90,000 customers more in the electric business and 65,000 customers more in the gas business. CapEx are stable year on year. That is EUR 15 million. Now, this is the end of the presentation. Thank you very much for your attention. We can now open the Q&A session.
Thank you very much. This is the correspondent operator. I'd like to start now the Q&A session. If you have a question to ask, press star and one on your phone. To be removed from the question queue, please press star and two. We would like to ask you to ask a question using the telephone receiver. Anyone who has a question, please press star and one at this time. The first question is from Javier Suárez from Mediobanca.
Now, good evening. Good evening to you all. I have two or three questions to ask. First of all, a context-related slide. Can you please share with us your expectations about the process related to extending the useful life of concessions for electricity distribution in Italy? I would like to know what are your latest information you have on the process and the impact on Acea. I would like to know what kind of expectations also you have about the future concessions in Italy for electricity and what implications this might have in your company. Now, second question about the working capital absorption that we have seen in Q1, EUR 200 million. Could you please give us an indication about the working capital absorption by the end of the year and how the dynamic Q1 compared to Q1 of last year? Last question about the guidance that you gave us in March. 2%-3% of EBITDA growth in Q1, which are much higher than that. Now, do you think the guidance is conservative, or are there factors that we need to take into account that might slow down the data that you give us for Q1? Thank you very much.
Thank you very much, Javier. Let's start from your question about the concessions in the electricity business. Now, we, as all operators in the industry, we are waiting for the indications of ARERA and from the Ministry of Economy and Finance. Give us indications about the concessions relating to the process and the process that should come to an end in June this year, and then we will understand how we can access the mechanism. Now, secondly, for Acea, the extension to 20 years of the concession of the low to middle voltage networks is very important. This is the business which, after the water business, is the most important one. Let me also remind you what happened in Spain, the electricity blackout, which lasted more than one day, and which had a strong impact on two, if not three, parties. It is quite clear that investing in electricity networks can no longer wait. We are in the situation now where electricity consumption is going to increase. Therefore, the grids are to be updated.
As far as Acea is concerned, above the methods used to extend by 20 years the concession and the amounts requested. As far as Acea is concerned, we see no problem to be part of such an important program so as to be able to guarantee something which is important, the efficiency and resiliency of the grids. As I told you, we are waiting for further details from the authorities, and at that point, we shall tell you how we are going to approach that opportunity, which is an opportunity for us. As for hydroelectric concessions, now let's start from CapEx. There have been recently three tenders for hydroelectric concessions, and we submitted our bid to these tenders. Now, a few months have elapsed. We have been admitted to the second stage, second phase, but we are still waiting for the service conference for the technical details.
These are usually very long processes. Now, the hydroelectric business is an area where we are present, although in a limited manner. There are plans, but if there are opportunities, we shall assess such opportunities, as we always do, returns to investments in infrastructures for the production of energy. Now, let's now move on to the question about the networking capital from now to the end of the year. Going forward, in the next quarters, we expect a further absorption of networking capital to make up for the improvement that we've seen in the last quarter of 2024. There will be a normalization by the end of the year when we expect a neutral dynamic. There is a neutral change in the networking capital. As to the peak of absorption of networking capital in Q1 2025, this is related mainly to two factors.
First of all, the payment of CapEx that were accounted for in Q1 2024, which generated a positive networking capital, which we disclosed in March. Then greater commercial receivables. However, the monetary effect we've seen going forward. As to the question about the guidance, now, today, we are disclosing the EBITDA for normalized at 7%, which is versus the data provided from March this year, 3%. In this moment, we are not going to review the guidance. We are going to confirm this in the next quarters of the year. There will be factors that will negatively affect the progression of the data. First of all, the progression of PUN. We have seen a strong growth of PUN in Q1 that will be reabsorbed going forward in May, which will reabsorb the growth we've seen in Q1. There is also an issue of margins for the commercial business. It is quite clear that our results are very good results. What we see on the market, there is a strong and increasing competitive pressure, the entry, for instance, of new operators, which are acquiring quite a large customer base. You need to take into account that our operating costs relating to operations do not have a linear dynamic. In the next quarters of the year, there will be higher operating costs. I think I answered all of the questions here.
Thank you very much for your answers. Yes, you answered all my questions.
Now, the next question by Francesco Sala with Banca Akros.
Good evening to you all. Thank you very much. I do really appreciate you asking questions. I have a question about margins. You said that there is a pressure on margins. Can we see going forward, at least in the next few months, let's say Q2, in line with Q1, or whether we are going to see a reduction of margins in Q2 already? Second question about the WTE. Now, the tender has been awarded. Can you give us an update about the incinerator and what we can expect going forward? That is when the WTE is going to be completed. An update of the multi-market of work for the water and electricity business. What are you seeing in this moment, and do you expect any variations going forward, any change going forward?
Novw, as to commercial margins, the question was about commercial margins. We do not have the figures of Q2 as yet, but we expect, as I said before, we expect a reduction of margins or a growth, which is not going to be similar to that of Q1, already Q2. Now, as to the WTE in Rome, the tender was awarded on the 5th of May to a number of companies, including Acea Ambiente. Now, the main concession was awarded, as we said, this is an investment of around EUR 1 billion. It is a concession lasting 33 years. Now, we are going to start the preliminary activities to supply or to provide the works, which should be completed by the end of this year. Now, the project is going to be financed by project financing. As we said different times, the WTE is not going to be consolidated within Acea numbers because we do not have the control exclusivity. There is going to be a joint control with the other partners. I would like to, together with us, to be a concession. Now, as to the market of the electricity business, the threshold is 30 days for this project. It has not been reached, and therefore our estimate will remain at 5.7%. As to the work, at the moment, we cannot make any or give you any forecast about the evolution of work because there are parameters with the Water Risk Premium, which are not related to measurable parameters.
Thank you.
Now, the next question by Emanuele Oggioni with Kepler Cheuvreux.
Thank you. Thank you very much. I have a question about the process related to the renewal of concessions for electricity distribution. The Antitrust Authority yesterday gave a negative opinion on the automatic renewal. I'd like to know your opinion about this negative opinion on the part of the Antitrust Authority and what kind of implications this has, or do you believe that this has no risk related to this and whether the government is going to extend nonetheless the concessions by 20 years? The second question is about gas distribution. You are not very much present in this field. I’d like therefore to know whether you might be interested in acquiring assets of gas distribution. I am referring to those assets which are going to be sold following the merger of ECO GAS. Conceptually speaking about this, are you open to any opportunity? I mean, conceptually speaking, are you open to make investments in the gas distribution business, or whether you're not interested in this? I have a question on the business plan update. When are you going to update your business plan? If I may, I'd like to ask a question about the Aqueduct of Peschiera. In the press release, you mentioned that that aqueduct has received the go ahead. Now, within the current business plan, you have EUR 700 million of CapEx. To what extent is this project included within your CapEx? What about the project development itself? Can you give us some indications about this?
As to electricity concessions, I'm not going to make any comments about the opinion of the authority. This is beyond our business. I just confirm what I said before. The extension of concessions is something which is extremely important to guarantee the resilience of a service, which is increasingly important to support the growth of consumption. As to the question about gas distribution, in March of this year, the same question was asked. I gave you the same reply. We are not present in the gas distribution business, with the exception of a few limited realities. As we said in March, we do not rule out anything by itself a priori. We shall assess any opportunity case by case, and especially we shall assess whether these opportunities can provide synergies with our water and electricity grids. We will see whether any opportunity comes up and whether these opportunities fit within our strategy. Now, within our business plan, the focus of Acea is within infrastructure and distribution business. As to the update of our business plan, as I said, we are waiting for the development of non-secondary events, which is, for instance, the extension of the concession of the electricity grids.
Now, we do not have any figure about the impact of any concession. I feel that this is a significant event with a meaningful impact on our business. About what we said in our conference call in March when we said that we were going to update our business plan in fall this year, we shall perhaps generate a conference call that will give you necessary updates. Now, the aqueduct in Peschiera. We confirmed that we received the go ahead. We need to clarify the dynamics of the Aqueduct of Peschiera. This is the biggest strategic investment for this country. It's a project which provides the modernization and the updating safety of the aqueduct in Peschiera. There is an extraordinary commissioner appointed by the government itself. The project envisages an overall CapEx of EUR 1.4 billion-EUR 1.5 billion. 850 million is going to be financed by public contributions. As we said during the presentation of our business plan in March last year, the Aqueduct of Peschiera will not be part of, will not fit in the business plan horizon of Peschiera because, first of all, there will be the contribution of public funds, and then the rate CapEx will be financed by TAEES. We are in the process of preparing all of the necessary documentation to prepare the tender to start the Aqueduct of Peschiera project. Thank you.
Thank you very much. The next question by Davide Candela with Intesa Sanpaolo.
Good afternoon to you all, and thank you very much for the presentation and for taking my questions. Now, the first question about the leverage. Can you please remind us what for you is a comfortable level of leverage versus the EBITDA and whether there are any covenants on the debt which do not allow you to go up to certain levels? Second question related to the first one. By assuming M&As, there might be a contribution on your part and on the part of companies' contribution to electric consumption concession leverage amount up to EUR 3.5 billion. Now, I wonder whether you are going to think about issuing hybrid debt to take care of the leverage, which is not included in your business plan, and perhaps you have an update about this as well. Thank you.
Now, in this moment, within our guidance, our leverage is between EUR 3.4 billion-EUR 3.5 billion. As usual, we are going to assess the cases one by one. As more than once, the issue of extension of the concessions, as I mentioned, it all depends on the concession fees, and it depends on the mechanism which is being thought of. Now, on the basis of this, Acea can tolerate the investment. As to the funding means, we certainly are thinking about this because you need to act in advance when it comes to these events. At the moment, we have a number of lines which have not been withdrawn. We can certainly go on to issue bonds or green bonds or blue bonds. As recently, we have updated our framework to include also the idea of blue bond. Let me remind you that most of our investments are related to the hybrid world where we have investments around EUR 1.5 billion a year, and we have the capability to attract investors to bonds.
Now, blue bonds have not been issued in high numbers in Europe. Certainly, they have not issued in high numbers in the United States. Of course, we could resort to hybrid debt. We do not rule out anything. Acea, as I said, has the possibility to face up to investments which it has to make for the concession fees for electricity grids. Let me continue by saying that grids and related concession fees is a regulated business. We constantly have a dialogue, a very constructive dialogue with the agency authority. Now, the greater the weight of its regulated business of Acea, it would be quite normal that our capability to have a positive discussion with the authority. You know that regulated businesses have a higher EBITDA than ours. Of course, we also establish or have established a positive constructive dialogue with the rating agencies. There is room for improvement of the ratings if our regulated business goes up. However, we will give you all the necessary information when the time comes.
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