Good evening to all the people connected. Welcome to the nine-month 2026 result presentation. Enel CFO Stefano De Angelis will present economic and financial results for the period. We ask those connected to the webcast to send questions only via email at investor.relations@enel.com. Before we start, let me remind you that media is listening both the presentation and the Q&A session. Thank you. Now, let me hand over to the CFO.
Thank you, Omar, and welcome everybody. Over the past nine months, we have confirmed our consistent growth trajectory with earnings per share marking an 8% growth year-on-year, supported by a resilient business performance, enhanced by the execution of the new investments plan and the continued improvement of the existing asset return. Our investment reached EUR 10.6 billion, a record compared to our peers, including greenfield development, brownfield, and shares buyback at subsidiary level, with a 30% increase compared to last year.
The improved risk profile and the higher visibility on investment returns is backed by two ratios. 75% of spending was allocated in Europe and United States, while business-wise, grids account for 70% on total. Our restructured international operation delivered another quarter of remarkable results, supporting the profitability of the group amid the volatile market context. Our friends from the rating agencies define this as diversification.
Lastly, our disciplined investment deployment is shaping a visible future trajectory and will continue to drive our growth path, thanks to 2.5 GW currently under construction or ready to be built, and 1.5 GW of brownfield assets already addressed that started to contribute to our result and will be fully visible from Q1 2027. Let me now dive into the recent development of our capital allocation across both greenfield and brownfield investments.
Overall investments are up by EUR 2.3 billion compared to last year, and this include a 19% increase in greenfield, a 16% increase in brownfield, and the EUR 1.3 billion shares buyback executed by Endesa and Enel Américas this year. Networks remain our main focus, recording a 15% increase year-on-year and accounting for around 70% of the total EUR 8.2 billion investments. This allowed a strong expansion of our regulated asset base, up by EUR 4.7 billion year-on-year, further improving our visibility going forward.
In renewables, we are continuing to apply the principles highlighted during the Capital Markets Day, discipline allocation on greenfield, selecting projects with securing earning profile, supported by either PPAs or a solid customer base. Lastly, on consumer, the fair pricing of our fixed offer portfolio have reshaped the customer base in Italy, resulted in a 200 basis point reduction in the level of the churn, which is now at 14.7%. This imply that the average customer's lifetime reached seven years, a duration which is equal or even higher than a PPA in Europe.
Just to remember that in 2023, beginning of 2024, the average life of our residential customer base in Italy was something more than three years. Now I'm moving to page four. We are well on track to reach planned target on brownfield acquisitions. Already, we expect to reach this target in 2027, delivering 100% of the earning per share contribution set in February at the Capital Markets Day. Since the beginning of the year, we have signed agreements to expand our asset base. These transactions will add 1.5 GW of renewable capacity and, on the retail side, 350,000 customers.
We have completed almost all of the signed deals, mainly in the U.S., where the group will reach more than 13 GW of installed renewable capacity by the end of 2026, following the recently completed and announced acquisitions. The shares buyback I mentioned before, executed at subsidiary level, are a minorities buyout investment, as they allow us to reduce the earnings dilution. Over the past two years, we have invested EUR 2 billion in our subsidiaries, and this investment will generate around EUR 200 million of additional group net income in 2027 and 2028.
I am referring to the group net income post-minorities. The deal were executed at appealing returns with net income on CapEx ratio standing at around 10% on average, demonstrating the profitability of the investment made. I will now move on the next page, five, where we talk about the economic performances. In this quarter, I again discuss the performance separately from the trading and wholesale segment.
This is to reflect our shift towards an energy management model reshaped to support our core business, optimizing the profile of the different sources with sales focused on retail, B2C, and small business customers with offer at fixed price. This approach has clearly enhanced earnings quality, with EBITDA from grids and integrated business increasing by EUR 1.4 billion year on year. As a result, our EBITDA mix is now almost entirely derived from regulated activities and generation and supply, where the most of our generation is matched with our best customers.
Strong operating performance combined with the managerial action implemented drove earnings per share to a year-on-year ratio of 8%, bringing the result in terms of EUR per share to 61 cent for the nine-month period. Let us now move on page six, where we show you the performance of grids. The EBITDA reached EUR 7.3 billion, increasing 12% versus the same period of 2026, and accounting for 41% of the total group EBITDA.
Looking at the evolution by geography, in Italy, investments are up by EUR 200 million, driving the RAB expansion boosted also by improved capital mix and RAB-in/RAB-out ratio. Worth to remind that the outcome of the WACC review is expected by year-end. Spain was up by 26%, driven by a structural improvement of the regulatory framework and previous year regulatory settlements. In this context, Spain is starting to show the first evidence of a long-term cycle of higher CapEx, higher RAB, and higher returns.
The huge amount of investment deployed in grids boosted the value of our RAB, as I was saying before, which has now reached more than EUR 15 billion, increasing the resiliency and visibility of our EBITDA, also for the forthcoming periods. Worth to mention that Europe weighs more than 70% of both EBITDA and RAB.
On page seven, I will comment the generation supply EBITDA results, and I will split the comments by geography. In Latin America, the growth has been supported by the positive hydro resources in Colombia, partially offset by the increased level of curtailment and lower resource availability in Brazil and Chile.
On this, it is worth to highlight that geographical diversification support our result, as well as El Niño affect one region and La Niña may affect another. Iberia recorded a high double-digit growth year-on-year, thanks to the introduction along the year of a reshaped sourcing model, the same that we are already applying by last year in Italy, coupling retail volumes with renewables and nuclear production, and based on a best-to-best flexible matching of the generation and supply profiles. This allowed to more than offset the weaker wind and hydro availability recorded in Q3.
Italy was down 5% year-on-year, has record high demand and low hydro resources availability. We are next to the 2022 negative record, something better, but far from the 2024 record high. Today, at September, we are down approximately 2 TW compared to 2025, and this affected both renewables and retail margins. In retail, we have detailed the volumes sold in order to underline the new portfolio strategy.
As you can see in the figure and the graph in the slide, the decline aims to reduce the top and large indexed contracts, yielding a very low profitability, while focusing on integrated B2C and small-medium business fixed-price offers that is matched with our renewables generation. Worth to highlight that the hedging strategy implemented reduces wholesale price volatility impacts and secure medium long-term returns. At the same time, restrain short-term speculative trading.
Lastly, in the other country perimeter, we recorded a positive performance thanks to the portfolio streamlining executed in the last years. In particular, U.S. market the positive trend also thanks to higher output and improved PPA price. Now let us have a look at the net income and earning per share. On page eight, we see that EPS growth is supported by both a sound industrial operational business delivery and, as I said before, the execution of our share buyback programs, both at Enel S.p.A and subsidiary level.
The remarkable 8% EPS increase in the nine months is half associated with the EBITDA expansion deeply analyzed in the recent slide I have commented. Two percentage points driven by the net income EBITDA conversion as a consequence of the improved capital allocation strategy and the reshaped historical asset portfolio. In fact, below EBITDA, and especially on D&A and cost of debt, we have a clear evidence of the quality of the returns on invested capital.
An example is Endesa, in which we observed a dramatic improved conversion, having at the same time a reduced amount of investment in asset development. So it is important to match these two evidences. Lastly, the other two percentage points deriving from Enel's shares buyback execution, just Enel S.p.A, because as I said before, the subsidiary is included into the CapEx, so it is part of the group net income growth.
Looking at the net income, it came at EUR 6 billion with a solid 6% growth year-on-year, improving from the 3% of the first half results, thanks to the EBITDA trend improvement and the bad debt evolution. On taxes, worth to remind that IRAP impact is included in the reported numbers. Regarding this item, let me clarify that even including the expected IRAP additionality into the ordinary figure, the earning per share will end to EUR 0.74 per share. I will now focus on cash flow. The group cash generation continues to support the expected releverage of the group.
As highlighted during the Capital Markets Day, we are funding current and future accelerated growth also through the use of our financial flexibility. Keep in mind that roughly EUR 20 billion of sourcing represented in the Capital Markets Day as additional net debt by the end of 2028. As of today, if we consider the expected and historical fourth quarter positive net cash flow, we will end the fiscal year having used less than one-third of this budget.
At the same time, we are at the top end of the guidance range with EUR 0.74, having already covered most of the buyback programs with the total outflows of EUR 4.2 billion, including programs at subsidiary level, and the first outflow of the brownfield acquisition plan that we expect to be EUR 1.5 billion by the year end of 2026. Notwithstanding this financial flexibility that has been used and the exogenous dynamics impacting net debt, namely the impact of FX and the Energy Decree, our balance sheet remains strong with leverage standing at 2.8x net debt on EBITDA, below the sector average.
At year end, we expect to maintain this solid ratio and to land at an FFO net debt ratio higher than 22%. I go to the closing remarks, finally. For what concerns these closing remarks, the messages in the slide are simple and clear, but I want to avoid any doubt, so I think that it is useful to post two comments. The first is that the translation of managerial action and plans means that there is already a file on the CEO desk with the specific initiatives to offset the 2027 incremental tax burden in Italy. I refer to the 5% of the IRAP additionality.
The second point is that the exact size of the new energy bill, the Energy Decree, still has to be declined to specific rules and technicalities by ARERA. This action plan will be unveiled next February when, with our CEO, we will update you about our industrial plan. But let me tell you that we unveil much more than this topic. Thank you for your attention, and let's now open the Q&A session.
Thank you, Stefano. Let's open the Q&A session. We receive a lot of questions for the call we have summarized by topic. Most of the questions are on the recent news flow in Italy. Could you please sum up all the measures to be implemented in Italy, including the cap on gas and those included in the budget law? Considering all the measures, what could be the overall impact on your numbers?
The new Energy Decree includes two completely different updates. The first one is related to the incremental tax burden related to IRAP, and this was part of the financial law, the financial budget law in Italy, that have updated the Energy Decree. This budget law extends the additional IRAP until 2029. This is the first point. The previous one was until 2027, 2026 and 2027, and introduces a different additionality starting from 2027, while there is no changes for 2026, where we continue to pay the 2% additional IRAP already foreseen.
For 2027, the new additional tax rate, as I said before, is 5%, meaning three percentage point higher than the initial provision. And for 2028 and 2029, the measure points to an increase of three percentage points. To sum up, compared to the previous decree, we expect to have three percentage points higher burden applied to 2027, 2028, and 2029, with the difference that in 2027, we already have a 2% additionality, totaling 5%. It seems complicated, but unfortunately, it's quite easy. We have to pay more taxes.
For what concern the measure introduced to reduce the energy bills for final customers, as expected, ETS offset mechanism has been removed due to the non-compliance with the EU regulation and has been substituted by a measure to mitigate the spot prices with the subsidy to the thermal generation applied only if the TTF is higher than about EUR 59 per megawatt hour. That is the reference. This mechanism is similar to the gas tope, as they called, applied in Spain in 2022. The reimbursement paid by the renewable generators to the gas-driven generation has been limited to EUR 15 per megawatt.
This is a cap in the gas cap. The reimbursement that could be paid along the 18 months by the renewable generators that have to cover the fixed price portion of the consumption in Italy is capped at EUR 15 per megawatt. It is important because this could not be billions of euro and also including any working capital potential impact on the system. Therefore, to be clear, until TTF reach around EUR 60 per megawatt hour, there will be no impact. Hence, any potential downside depend on the evolution of the gas price.
It is worth to highlight that the two measures, comparing the previous, what we have in front of us when we were at the Capital Markets Day on February, and this one, have the same goal, that is to partially decouple gas and renewable generation. But the ETS offset would have impacted energy price independently from the spot market condition, while the new measure turns on only when the TTF market price reach about EUR 59 per megawatt. This is an important differences, as it will translate into a power price cap that, to make the basic calculation, considering the price generated by thermal plant.
It is 2x the gas per megawatt hour price, so it means 120 plus 37% of ETS that today is around something more than EUR 40. It means approximately EUR 160 for the generation and for the price fixed by gas that in Italy means last year average 75% of the PUN fixing. Again, as I told in the presentation, even if the goal is clear, the framework and the specific rules to be applied will be regulated by ARERA, so we will update the market looking forward.
But the framework is clear, again, I think the most important thing, this is a cap, so it starts from a scenario that is something in the range of 150, 140, if we have to apply the percentage of price fixing of the gas. It is a measure that works in situation where the market is high, let me say, looking in the next 18 months starting from 1st of January 2027. A longer answer, but a complex question.
Thank you, Stefano, for the clarification. Let's move to WACC. WACC in Italy.
This is easy.
for distribution should be revised. Which is the impact compared to 2026, 2028 plan assumption?
We have to split the plan because in 2027, we are expecting the final decision from ARERA, also considering the present situation of the energy sector. The trigger should be activated. The risk to have, let me say, 40 basis points is now no more on the table because the inflation rate used bring to a potential reduction of 30 basis points. It is about EUR 25 million per 10 basis points.
What is important on the other side that you see the inflation rate growing, and this will have an impact not directly and immediately on the WACC, but on the adjustment of the tariff and the RAB for inflation. In 2028, we have the new regulatory cycle, so the WACC will be redefined, and it will take into account also the movement of the interest rate of the last six months.
Thank you, Stefano. You mentioned the regulatory review in 2028. We have a question about that. The new regulatory framework for networks in Italy will start in 2028. What is the expected timeline for the consultation process? In your view, could the new framework be less supportive than the current one?
For sure, no, because the goal is the same. We do not see in ARERA any change in terms of approach to the network resilience and quality needed by the Italian system. For what regard the ETS, that is the big change that we have, we do not expect any significant change. The new percentage in terms of CapEx on OpEx is already working, so it is not part of the new regulation because we have already started from this year to have a different percentage of admitted CapEx on TOTEX. Again, we expect minor changes.
The extraordinary CapEx plan that you know is under discussion also for the extension is already set with ARERA. Again, we may expect something that is more focused on efficiency that is not at the center of the discussion today, meaning that today there is an investment, strong investment needed. Maybe that tomorrow, looking forward, there will be more focus on the OpEx remuneration that in Italy is not bad, but let me say, it is not the state of the art worldwide.
Thank you, Stefano. Now let us move to another hot topic, data center. Demand for connection increased. Should we expect an update on this front?
Data center is a complicated topic because you have two different players on the both side. As you know, I tell you immediately one thing, we will include the data center now in next business plan because now for us it is clear the route and the pathway. The discussion are going forward.
The problem is that we have changed our, let me say, perimeter because we started to work on the permitting for the data center because sometimes our permitting is, let me say, have a short time to power, as we say, and the permitting of the data center, the technical one, have some delay because some player that work in the U.S. have some difficulties in managing the Italian regional bureaucracy.
What we are doing in order to extract more value from our assets is to include into the package that we offer to the developer and to the data center operator also part of the permitting related to the data center, because in the last two years, we have, let me say, a good experience and a good acknowledgment of what we are talking about.
Because again, we are working in some of our sites with some of the developer jointly for the permitting related to the data center. Clear, this update will be bring on the February Capital Markets Day. As I said before, we expect to unveil not just efficiencies to cover the taxes.
Thank you. Let's move to artificial intelligence. How do you consider the use of AI is a risk or an opportunity?
Well, as we said at the Capital Markets Day and in the meeting we have with the investors recently, the transformation is increasingly driven by artificial intelligence, with initiative already covering 50% of the business processes. That is more than we have announced on the Capital Markets Day that was targeting full coverage on 2030, and probably we will accelerate also this target. The adoption is focused on high-value use cases across customer operation, digital sales, and network management.
Again, in workforce productivity, we have to manage also the unions because this part of the difficulties you have, because there is always the issue of you control too much the workers. But again, it's an amazing capabilities that the AI offer also in the workforce management. But for us, the greatest impact is related to cost optimization and customers' loyalty through a top-class customer service quality.
In terms of potential risk for more effective and marketing capability, that I understood that is a worry from the investors, because I received from an investor the same question, "Are you worried about?" I have a bad news for the sponsor and for the new players, because to play the flexibility that could be supported by the AI, you need to have a flexible offer in sourcing. The problem is that if until you sell electrons based on calendar's contract, it's very difficult to be effective, because differently, to know how much is the consumption, how much is in February, in April, this is not something you need AI.
It's a basic capability that all the player and the comparators offer in the market. Energy at the moment, it could create a differential in terms of offer and pricing just using the flexibility. But in order to use the flexibility, you need to have the platforms, and then you need to have the energy, a flexible energy generation. It's very difficult to have. Also, we have this difficulties in flexibility, for example, in hydro when you have a run-of-river hydro, it's not flexible. It's a complex topic, and this is part of our transformational plan that, again, we will unveil in February.
Thank you, Stefano. We receive a question regarding share buyback. A portion of Enel share buyback is still to be launched. Any detail on timing, even considering the current level of share price?
At the moment, we are very happy with the results achieved at both Enel S.p.A and at subsidiaries level. In this specific moment, our priorities, considering that we already spent more than EUR 4 billion into share buyback, is to allocate capital to expand and improve our asset base. We see there today more opportunities than in buying back our shares or the shares of Endesa or Enel Américas.
We continue to monitor the market because we are always interested in creating value with the flexibility, and you know that part of the flexibility, and we still have available approved buyback programs in Enel S.p.A and also at Endesa level. Again, we are very happy with the results achieved as of today.
Thank you. Stefano, now let's move to net debt. In the nine months, net debt reached EUR 66 billion. Could you please provide some color on the evolution at year end?
As I mentioned in the presentation, in order to avoid this question, it's clear that it's an important topic, I put the target for Serena to help her in the relation with you of the end of year 2026. As you know, in the fourth quarter, we will deliver, as always, a seasonal spike. In the free cash flow, net free cash flow, not only the FFO, and this will be through a rebound of the working capital. Consequently, we expect to land to an FFO, I'll give you also the number, so Serena is more happy, of around EUR 14.5 billion adjusted.
In terms of net debt, this cash flow rebound will allow us to reduce the net financial position compared to September. I don't take responsibility about the FX, clearly. The leverage will be, you can make your calculation, you know the guidance and the target, so we will stay around 2.8 x. That is a very good ratio compared to our peers and for the sector.
Thank you, Stefano. Let's move to the EPS. Could you please guide us on the evolution of the last quarter?
Well, in this case, again, you have the guidance, you have the results in September, so it is easy to make the calculation, keeping in mind that in the fourth quarter, we have a seasonal impact in the commercial costs for the Christmas campaign, the close of the year targets of everybody, and also in provision. So look at what happened last year, and more or less, we expect to stay at the same level of net income at group level for the fourth quarter.
Thank you. We cover all No, there is one more. Interest rate environment points to higher cost of debt going forward. Have you already covered your financing needs? How could financial expenses evolve versus plan expectation?
But the refinancing need is public, so you know that we have more or less EUR 7 billion in 2026, and I'm including the hybrid portion. Mathematically, at the present market condition, we could have a higher expected cost for 2027, but this apply in an inertial scenario. You know that we don't love to be inertial.
So, what we are doing in order to offset this inertial incremental cost of debt, we are planning to use the flexibility related to the variable portion of debt, through which today we may offset more than 100 basis point the cost of debt at fixed rate with a duration of seven years. It is worth to highlight that at the end of 2027, the incremental debt related to the brownfield acquisition was already expected to bear a 5.5 interest rate. So, you know that we are naturally prudent. So, having in mind that we have acquisition in the U.S., we already put in EUR 5.5.
So let me say, we are mostly covered for the incremental debt, because before we were talking about, I know that is a complex because we have refinancing and then incremental debt. So incremental debt, we are covered, let me say, more or less at the present rates that was already included. Then we have, let me say, an inertial negative impact that we expect more or less to offset using our low variable rates share in terms of gross debt. So net-net, the impact related to rates, I expect to be negligible or something that is for sure less than EUR 100 million.
Then there is again, don't forget, also Serena, that we have to spend more, we are spending more, so the interest, the cost of debt will increase. So, because sometimes I have problem understanding with what you have in your model, I'm referring to the analyst. So, and remember that there is also the other financial debt that also for me is quite complicated, but listen to the IR because they can drive you through the complicated matter that is other financial cost, hyperinflation in Argentina, et cetera, et cetera.
But trust in me, the cost will grow as projected into the plan because we were prudent and we included the additional debt at the rate of 5.5% compared to the four point something percent of our cost of debt today. That means excluding Colombia and Brazil, 3.5%, 3.6%.
Okay, thank you. There are no more questions, so Q&A session is over. We covered all the main topic, but if something is missing, the IR team is available for follow-ups after the call. Thank you, everybody.
Thank you and bye-bye.