Good evening. This is the conference call operator, welcome to the presentation of the first year of 2026 of ACEA. All participants are in the listening mode only. After the initial presentation a Q&A session will follow. To be assisted by an operator during the conference call, press star followed by zero. Now I would like to leave the floor to Mr. Dario Michi, Head of Investor Relations at ACEA.
Good afternoon, welcome to the first year of our 2026 results presentation of the ACEA Group. Fabrizio Palermo, CEO and General Manager, Pier Francesco Ragni, Co-General Manager, Valentina Bracaglia, CFO, will illustrate in detail the financial highlights of the first year. Now I leave the floor to the CEO and General Manager, Fabrizio Palermo.
Good afternoon. Let's begin today's presentation with an overview of the regulatory and market environment. As for the regulatory front, we have witnessed overall positive developments, particularly in the water segment. The MTI-4 tariff approval process by local authorities has been completed, while ARERA is nearly completing the approval process across all group operations. As for the electricity networks in June 2026, the provisional regulatory tariff was published following the publication of the final 2024 tariff in April, both fully in line with our expectations. In the environment business, similar to the water business, tariff updates for the 2026 and 2029 period are currently underway. Turning to the commodity market, in the first half of 2026, electricity and gas prices posted increases of 6% and 2% respectively compared to the same period in 2025. Consumer prices reported an average increase of 2.2% year-on-year.
Finally, as per interest rates, as you can see on the slide, in H1 2026 the six-month Euribor and the eight-year mid-swap stood at 2.4% and 2.9% respectively, both reflecting a year-on-year increase. Moving to the next slide. Here you see the business performance. Growing, driven by strategic investments and by operational improvement. As for water, we further strengthened our market leadership through projects that wins both in Italy and internationally. In the electricity business, the sale of ACEA Energia was successfully completed in line with the group's strategic objectives. We have also accelerated our growth trajectory through the acquisition of Aquanexa, a leading service provider in the water sector. We have strengthened our presence in the water segment with additional ancillary services that are going to be strategic going forward.
As for people, ACEA entered the top 20 ranking of employers 2026 in Italy, underscoring our commitment to human capital ever since the beginning of the business plan. Our balance sheet was further bolstered by the successful execution of Italy's first public blue bond issuance. Fitch confirmed the BBB+ rating with a stable outlook and raised our FFO net debt ratio from 5.2 to 5.5 times, recognizing the group's enhanced financial flexibility and credit profile resilience. Then we set up the ACEA Foundation, that was then recognized as an historical brand of national interest, further enhancing the group's identity and heritage. Overall, these achievements underscore ACEA's ability to grow in a sustainable way while delivering long-term value for our community, stakeholders, and shareholders. As for the next slide, here you see the H1 2026 financial highlights.
Pro forma organic EBITDA grew by 4% compared to the first year after 2025, driven almost entirely by regulated businesses, which account for approximately 95% of total EBITDA. Please remember that the EBITDA organic figure of H1 2025 was restated to exclude the technical and contractual quality bonuses in the water sector and to account for business scope changes related to the high voltage and PV assets sales, as well as the deconsolidation of Publiacqua. We will come back to this point later on in the presentation. Net profit stood at EUR 454 million, up significantly year-on-year, benefiting from the capital gain generated by the disposal of ACEA Energia. Organic net profit, excluding non-recurring items, rose by [60%] to EUR 176 million, reflecting the strong operational momentum.
CapEx, net of public grants, reached EUR 500 million in line with the H1 2025. Over 90% of them are allocated to regulated activities and to support the infrastructure modernization and sustainable growth. Operating free cash flow is negative EUR 58 million. Our robust operational performance allows us to maintain a sound balance sheet structure with a pro forma net debt to EBITDA ratio of approximately 3.64 times, fully consistent with our full-year 2026 guidance. Moving on to slide six. Here, you see more details about the first year of performance. As already mentioned, pro forma organic EBITDA reached EUR 190 million up 4%, well in line with our clear targets and driven by regulated operations. Reported net profit reached EUR 464 million, taking out the one-offs and scope changes. Organic growth was 16%. It mirrors the strong operational performance.
Capital expenditures remained flat year-on-year. The share dedicated to regulated activities account for 91% of the total. Net financial positions stood at approximately EUR 5.2 billion, up by EUR 270 million compared to end of 2025, primarily driven by seasonal working capital dynamics. Net debt to EBITDA ratio, as I already pointed out, stood at 3.64 times, fully aligned with expectations and within our full-year guidance range. In the light of these results, we confirm our full-year 2026 guidance, namely EBITDA growth range between 3%-5%, gross CapEx EUR 1.5 billion roughly, and net debt to EBITDA ratio range between 3.5-3.6 times. I will now hand you over to our CFO, who will walk you through the detailed financial results. Valentina, the floor is to you.
Thank you very much. Let's now dive deeper into the EBITDA performance on slide seven. In H1 2026, we generated a reported EBITDA of EUR 721 million, with regulated businesses accounting for approximately 95% of the total EBITDA. Specifically, water accounts for 59%, network and public lighting 30%, and environment 6%. On the right hand of the slide, you can see the main one-offs and scope changes that in H1 2025 amounted to EUR 46 million. These were mainly related to the technical and contractual quality bonuses in water for 2022, 2023. The contributions from sold high voltage and PV assets, as well as the deconsolidation of Publiacqua that occurred end 2025.
As for H1 2026, the one-off items and scope changes totaled approximately EUR 2 million, reflecting the temporary plant downtime for revamping in the environmental business and the Aquanexa positive contribution following its closing in April. Slide eight, net profit.
In H1 2026, net profit reached EUR 454 million, boosted by the EUR 269 million capital gain realized after the disposal of ACEA Energia. Excluding non-recurring items and business scope variations, the recurring net profit grew double digits, namely 16%, reaching EUR 176 million, mirroring the underlying operating performance previously mentioned. Similar to the EBITDA, also in this slide you see on the right the detailed one-off components and scope of variations. On top of what I've already said, we have the capital gain deriving from the disposal of ACEA Energia, earnings from discontinued operations, and the impact of the IRES surcharge introduced by the so-called Decreto Legge. Let's now move on to capital expenditures, slide nine. In the first year, our gross CapEx, before public grants, totaled EUR 663 million, flat compared to last year. This highlights our focus on regulated assets, on infrastructure reliability and long-term resilience.
Particularly, water accounts for the main destination of our capital deploy, with EUR 379 million accounting for 57% of the total, primarily targeted at network developments and wastewater treatment facilities. Investments on networks and public lighting follow, amounted to EUR 209 million, focusing on grid modernization and IT and commercial systems. Then we go on investing in the environment business with the construction of Line 4 at the Sambuceto plant and the development of new PV projects, photovoltaic projects. Let's now move on to cash flow. It confirms the strength of our balance sheet. We generated EBITDA amounted to EUR 721 million, leading to EUR 512 million in operating cash flow before CapEx versus the EUR 570 million in FY 2025. Operating free cash flows took that minus [EUR 58] million, marking an improvement compared to both Q1 2026 and to the first year half of 2025.
As a reminder, Q2 cash outflows included annual tax and dividend payments, while absorbing the net proceeds from the sale of ACEA Energia and the acquisition of Aquanexa. Moving on to the financial structure on slide 11. The first year half results confirm the sustainability of the group's long-term growth profile, as well as a sound capital structure. As of June 30th, 2026, net financial debt stood at EUR 5.2 billion, up by EUR 217 million versus year-end at 2025. The pro forma net debt/EBITDA ratio was at 3.64 times, fully consistent with our target guidance range of 3.5-3.6. Our debt structure remains a core strength of our group. Roughly 80% of our debt is fixed rate, average cost of debt at 2.16%, and the average maturity of 3.8 years. This structure effectively shields us from interest rate volatility and offers strong cash flow visibility.
Rating agencies continue to confirm our strong investment grade profile with a stable outlook, BBB+ from Fitch Ratings and Baa1 from Moody's. During the first year half, we further strengthened our liquidity and financing flexibility with the June credit facilities. In June, we successfully placed a EUR 500 million blue bond. This accounts for the first Italian public issuance of a blue bond, and the success is testified by the fact that it was oversubscribed by more than three times, reaching an order book of EUR 2.6 billion. Slide 12, we have a look at the water business. Water remains the group's primary driver of growth, with sound results, with organic EBITDA posting a strong 8% year-on-year growth, largely driven by tariff indexation. At the same time, CapEx remained at a high EUR 379 million, broadly in line with H1 2025.
On slide 13, we see that networks and public lighting confirmed a solid growth path, backed by ongoing RAB expansion from capital deployed over recent years and efficiency gains. In H1 2026, EBITDA reached EUR 217 million with a 2% organic growth year-on-year, while CapEx accelerated further, reaching EUR 209 million. As for the environmental business, we recorded stable operational results, heavily impacted by scheduled plant maintenance. Operating EBITDA was EUR 42 million, minus EUR 1 million year-over-year. We go on investing on this business. CapEx rose by 14% versus H1 2025, supporting facility upgrades, revamping, and capacity expansion of our plants. As for generation on slide 15, we reported particularly strong performance. Organic EBITDA is up 22%, driven by higher volumes, mainly from renewable energy sources, and leading to a 90% hydroelectric power generation increase. CapEx increased by 33%, and in H1 2026, CapEx reached EUR 15 million.
This is it as far as the presentation is concerned. We can now start the Q&A session.
Thank you very much. This is the conference call operator.
We can now start the Q&A session. Attendees wishing to ask questions can press Star followed by one. To quit the waiting list, you can press Star followed by two. Sorry. Please use your headset when asking questions. If you want to ask a question, press Star followed by one now. First question by Francesco Sala, Banca Akros.
Good afternoon, and thank you very much for taking my questions. I got three. Can you please tell us what do you expect for the environmental business in the second year half, considering that there have been some factors that impacted on the performance of H1 because of some shutdowns of plants or maintenance?
When such a temporary problem are solved, what is going to happen? A second question about the guidance, considering the H1 result and the contributions by Aquanexa and the environment bonuses that we can expect in H2. Can we be confident with the higher end of the range rather than midpoint? The third question The WACC. Can you give us an update about WACC for 2027? Thank you very much.
Well, thank you. First of all, as far as the guidance is concerned, when I answer the question about the environment today on H1 net 2026 results, we are confident that we'll be reaching the high end of our guidance range. Thirdly, in H2, we won't have a linear development. The environment development will accelerate after the maintenance of the plants of the previous year after. We expect a slowdown of generation that grows substantially, remarkably in the first half of the year, that cannot be replicated in the second year after. Moreover, in the second year after, the contribution to the results will come mainly from some operating costs that support the projects provided for in our business plan and are mainly concentrated in the second part of the year. As for the WACC market, currently, the reduction of trigger of 30 basis points is active.
With the volatility of the markets following the Gulf conflict, gradually play a key role in the panel because we expect the removal of hazard from the tunnel. If this is going to be the case, then the opportunity to eliminate the trigger are certainly higher, but we have to wait and see.
Next question by Javier Suárez, Mediobanca.
Good evening, thank you very much for your presentation. I've got three questions. The first is a more general question, more strategic in nature, let's say. Rating agencies say that they feel confident with this net debt EBITDA ratio almost near to five times. What are the implications for you of this type of gearing that is substantially different than what you report now? Is it a matter of accelerating CapEx, or is it a matter of having a more proactive M&A approach or paying higher dividends? What is the company's view in a moment when it is clear that it is possible to absorb additional gearing? I would like to know when the company will decide to distribute an extraordinary dividend related to the capital gain deriving from the disposals.
The second question, adjusted EBITDA reported a 2% growth, the adjusted net income grew above 10%. Can you please explain us the difference? Why is there this difference? Why the growth of the bottom line is so strong? Is it due to lower provisioning and lower taxation, lower than ours? Can you please help us understand what are the factors implied to try and understand what happens below the EBITDA that enables you to increase net income so markedly? Third question follows up the answer you already gave. You reported a net income of EUR 170 million. You are a highly regulated business, of course, and I know that the generation performed very strongly. If we multiply EUR 170 million by two is this a good proxy of the performance of the second year after?
I would like to try and understand what do you see in the second year after that may limit the growth of the bottom line in the second year after versus the first year after. Thank you very much.
Thank you. First of all, as for the Fitch special review, this will lead us to a 4.5 time ratio, providing us more flexibility, and confirming that the rating agency see us as the regulated business we are. Moody's still has to revisit its specials. As for Moody's, we sit around the four time, but again, we are still pending the review by Moody's. We focus on regulated businesses, I should say. We would be focusing on growth in the regulated businesses, namely water and networks, first of all, and we'll be fueling the growth by grasping opportunities that may arise on market besides growing organically.
As for dividends, last year, the capital gain enabled us to pay an extraordinary dividend. Our dividend policy provides for 4% on top of the ordinary dividends. Towards the end of the year, we'll decide what to do for 2026. As far as the results, the acceleration on the profit before is mainly driven by provisioning, particularly the lost provision. Following the numerous projects that we are implementing, are definitely reducing, and this is a good signal. Also our financial management has remained unchanged despite the growing debt. This has given us the ability, once again, to have a non-linear dynamic, let's say, of what happens above and below our net profit. Our net income, sorry.
Following what we said about the EBITDA, considering that we are going towards the high end of the range, we do not expect a linear growth in the second year after. We have also depreciations and amortization in Q2 compared to Q1, we have seen an increase of roughly EUR 10 million. We have additional plants becoming operative, and this will need to lower amortization depreciations in the second year off. As for financial charges, we have been using them. We have involved over [EUR 3.7] and we'll be paying a bond in October with amount of [EUR 3.7]. This will have an impact on the financial charges. The performance at the high end of the guidance that we achieved, well, will slow down, and this can give you an idea of what we expect for the full year.
Next [question.]
By Emanuele Oggioni at Kepler Cheuvreux Thank you very much and good evening. Thank you very much for your presentation. I got a couple of questions. First, the so much waited for business plan. We haven't seen official dates yet, so I would like to know whether you confirm the idea of having a new business plan by the end of the year, and when exactly? Second, more strategic question, or let's say more general question related to the negotiations that you have with ARERA or the Italian government or a larger scale reform of the water segment, so that the problem in Italy, particularly in the south of Italy, is addressed, where house management do not have the money and the technical skills to make investments. Do you expect something may happen?
Again, you are constantly dialoguing with the regulators to eventually address these issues and adopt a large-scale reform that can drive your growth even further.
Good afternoon. Well, as for the business plan as you can imagine, we have been working on the new business plan, and we go on doing so over the next few months. We are still pending some pieces of information, especially as far as concessions of networks are concerned and so on. Anyway, we haven't got a definitive date. We expect it will be towards at the end of the year, early next year, as soon as we have more visibility, we'll be announcing the official date for the presentation of the new business plan. Then your question about ARERA.
Of course, ARERA, a new management team was recently appointed, they are certainly very aware what the situation is in the water segment, considering the role that the new chairman of ARERA used to play. We have a very fruitful dialogue with ARERA, and we are asking to give the opportunity to large infrastructure players like ACEA to have a regulatory framework considering the speed of change. The water crisis is not only related to climate, unfortunately, as we all know the water crisis Italy suffers from are much worse than that of other European countries. The players in infrastructure space in Italy must be given the opportunity to invest to offset the situation, because this situation is creating problems already in the south of Italy.
To such problems that may soon affect the center and the north of Italy, where there are some farming areas in the north of Italy for instance, that have been suffering from drought for some time now. This is a well-known problem, and we'll go on working with the regulator of the local, regional, and central governments to find the best way to enable us to increase our investments. As Valentina said during the presentation, finding capital for regulated businesses is something definitely not easy. Our blue bond actually testifies that it was very successful with this issue. Of course, it is important also for Italy to develop the water segment further.
Next question by Roberto Letizia at Equita.
Thank you very much. Just one question about the re-leveraging that Javier mentioned, considering that your regulated business accounted for 95% of the total. Can you elaborate a bit more about the opportunities that exist or they may materialize if the dialogue with ARERA leads somewhere? Can you please give us some more visibility about forthcoming trends or other targets like Acquaviva that might provide a further boost to your growth?
Opportunities in other words, that may emerge or materialize in the market that may drive your growth further. As for M&As, as I always say, difficult to make forecasts. The acquisition of Acquanexa , that is an important platform for us. The acquisition of Acquanexa are meant to strengthen our business.
There are other opportunities on the Italian market and also abroad, but this is not the real game changer, whereas as far as other type of transactions are concerned, well, it depends on what happens on the market, on the opportunities that materialize on the market, and they are not many. As the CFO repeatedly said, since this is a regulated business, this will enable us to invest increasingly on regulated businesses. For instance, electric networks and water networks is there room for further investment there? Having more resources available enabled us to speed up CapEx in these segments. As we repeat at every call, whenever there are M&A opportunities that arise in our core businesses, we'll certainly scout them. Of course, there must be always a willing buyer and a willing seller in such transactions.
Next question by the English conference by Anis Sakarya.[]
Hello. Yes, thank you for taking my question. I have mainly two questions. First one is on capital gain on the disposal of ACEA Energia, which came in significantly higher than expected. Could you explain what drove this positive surprise? My second question is on operating cash flow, which was as expected, impacted by seasonality on working capital. What are your projection or expectation for working capital in half two? Thank you.
Thank you very much, Anis. As for the cash flow, the early year absorption was mainly driven by two factors. One, the energy decree, the change in the timing for the payment of the contributions, this had a substantial impact. In the first quarter of the year, we paid EUR 25 million for extra profit on the sale of electric energy of 2022. There's been this absorption in the first part of the year. In line with the past years, we expect working capital absorption almost neutral towards the end of the year, this is going to offset the initial absorption we reported in the initial quarter of the year. As for the capital gains following disposal of ACEA Energia, as you said, the capital gains were higher than we had estimated based on the value of our stake in it.
This is due to the fact that because of the historical results of ACEA Energia, ACEA Energia contributed negatively to our consolidated results. In the consolidated result, we witnessed higher capital gains than we had estimated.
I remind participants that if you wish to ask a question, you can press star followed by one on your telephone. Ladies and gentlemen, there are no more questions? I'm sorry. We have Javier Suarez for a follow-up question. Javier Juarez at [Mediobanca].
I just wanted to ask you if the RAB water that you show on page 12, [EUR 5.2] at December 2025, can you break it down between the consolidated RAB and the equity consolidated company's RAB, then the amount of grants or subsidies? Do you have this breakdown at the 30th of June?
The same applies to networks, [EUR 3.1 billion] of RAB, or how much the grants are at the end of June 2026?
As far as the RAB breakdown is concerned, the subsidies amount to 20% for the whole group and includes all subsidies, both grants. As far as the water RAB is concerned, we're talking about EUR 5.2 billion here. Let's say that EUR 4.5 billion roughly is fully consolidated, the remaining part is the breakdown of the portfolio of the consolidated plus the contribution of gas that is fully consolidated. As for networks, you see the overall figure, including the subsidies.
Thank you very much.
No more questions for the time being. The floor to you for your conclusions.
Thank you very much for attending. As is customary, your investor relations is at your disposal for further questions. Thank you very much.
This is the conference call operator. The conference call is over. You can disconnect. Thank you very much.