Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the ERG Second Quarter and First Half twenty twenty one Results Conference Call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions.
Conference. Call. At this time, I would like to turn the conference over to Mr. Paulo Merli, CEO of ERG. Please go ahead, sir.
Call. Good afternoon, everybody, and welcome to ERG's webcast. Here with me is Michele, our CFO. I'll describe here, I'm at Page number 4, the performance of the group in a nutshell, focusing on the first half rather than the 2nd quarter, which I think gives you a more comprehensive view of how things are going this year. And let me clearly take you through the numbers in more detail for both the quarter and first half.
Conference. So first of all, let me start by expressing my satisfaction with this set of results, which are the highest conference ever recorded in a semester, at least since we became an independent power producer. Conference. EBITDA in first half was €281,000,000 up 7% year on year. Now just a quick comment segment by segment.
Wind closed with an EBITDA of 157, call. 5% down year on year, mainly as a result of much weaker productions abroad. But don't forget, last year was call. An extraordinary positive year, while we recorded better results in Italy, mainly driven by a much stronger price scenario, both for merchant and incentive price. Production where in Italy is likely up Year on year, but not very significantly.
Solar did its job with €34,000,000 of EBITDA, call. Basically in line year on year and very stable over time. Hydro was the real call. Outperformer of the period with an EBITDA of €84,000,000 more than double compared to the same period last year. That can simply be explained by heavy rains in 2021 against the dry year in 2020.
So as simple as that. As far as our CCGT is concerned, here we had the opposite situation with EBITDA of €15,000,000 which is half the result recorded in call. So this drop was mainly due to the end of the car period, which means no white certificates for 2021. This is a fact, I mean, could conference. Explains actually 12 out of EUR 15,000,000 GAAP year on year.
Conference. I shall also remind you that EBITDA of first half twenty twenty included a couple of positive call. 1 off items such as an insurance payout and a positive settlement related to captive contracts, conference, which led to a very tough comparison. But let me say in the end, we knew that 2021 conference. It was an year in the middle, in the middle between The end of last year of wife certificates and the we think the recovery of wife certificates call.
As of 2022, because let me remind you that there are important refurbishment Investments undergoing, which are expected to bring the plant back to its normal profitability as of next year. Then net profit, net profit in first call. Half 2021 is €100,000,000 so a quite big number, call. Up 42% year on year, which is, I think, a really impressive performance. And it's Surely, thanks to the EBITDA, but also the consequence on top of the comparative results of all the work done over the last few years to minimize our debt cost conference and non cash cost, respectively, thanks to the huge liability conference.
We launched over the last few years as well as the lifetime extension, which allow us to reduce call. The non cash cost amount. In the end, let me comment the net financial position, call. Which was at the end of June,
EUR 1,692,000,000,
call, which mainly reflects the dividend paid, the huge investments for development in the semester with CapEx conference in excess of EUR 300,000,000 which include the M and A in France and on top of the organic investments. So we return to invest quite significantly. Net financial position is also, let me say, inflated by the negative mark to market conference. This effect, let me say, will have call. An opposite effect going forward when hedging will enter in delivery given the settlement against the merchant prices.
So it's conference like an anticipation of cash flow. Now I'm moving to Page number 5, comment on recent developments. I'd like to give you sort of an update on the execution call. The business plan, which was presented just a couple of months ago or a little bit more than that. So although we presented it only conference.
Earlier recently, we have made some important steps forward, and I say, in the right direction. As such, I feel even more confident today about the solidity of the plan. Let me summarize these achievements. Conference. We completed just a couple of weeks after the planned presentation, the acquisition conference of our portfolio wind and solar assets with a total installed capacity of 80 megawatts in France, call.
58 wind and 22 solar. We became the 5th wind onshore player in the country. Call. The consideration paid for the acquisition, EUR 147,000,000 is already reflected conference and the net financial position at the end of the period, while its economic consolidation started as of call. July 1.
So you will see the benefit economically in the second half of the year. There is some other very good news. We obtained the BIA, the environmental green light conference for a proprietary greenfield wind projects of 47 Megawatts located in Sicily, call, which you may consider an improvement on what we had in our business plan. We are now working to bring it forward to the next options. As far as repowering, we are moving forward as well.
Call. We took part in the auction for res capacity held last June with 3 projects conference for a total capacity of 143 megawatts, which means 77 megawatts on a differential basis. Conference. Results, I mean, the outcome of the auction are expected to be published call by GSE at the end of September, but fingers crossed, we are call. Optimistic about the outcome.
In parallel, we are working on other projects of our pipeline. Call. As far as construction, you know that we had roughly we have roughly 400 megawatts under construction. All projects are conference. Moving forward schedule and in particular, we are finalizing the construction of 77 Megawatts, call.
Of which 70 in North Thailand, Craig and David Chagran and 7 Megawatts in France, which is an extension of our comp. Already existing wind farm Vale de la, which we expect, I mean, the 77 megawatts to be up and running by the end of the year, which is in line with our main objective for 2021. So execution is well on track call for the time being and even, let me say, ahead of schedule. Now over to Michele for his analysis of first half Conference and Q2 2021 results. Thank you, Paolo.
I'm on Page 7. Call. Our demand in Italy was up 14% year on year, mainly as a result of an easy comparison as the Q2 2020 was negatively impacted by lockdown. You see here that the contribution to production from wind and hydro at national level were 0% and -6% conference. Looking at ERG, our in production in Italy were down 2%, slightly worse than country average, while hydro was up 44% as opposed to the negative trend at national level due to its location in Central Italy, which benefited from strong hydro volumes.
Call. Almost flat year on year, in line with national level. As far as our CGT plant is concerned, volumes were comp, up 4% year on year, slightly worse than the national level. Electricity prices in Italy. Call.
In Q2 2021, there was a strong rise in electricity prices with the national price conference at €75 megawatt hour, strongly up year on year. The oil price from €124 to €184 benefited from the rise of electricity prices coupled with the rise of incentive. You know that incentive is calculated on the basis call. Last year, average national electricity prices recorded very low levels due to COVID-nineteen lockdown. Our CCGT clean spot spread was negative at minus €2 megawatt hour with rising gas and CO2 prices, only partially offset by a recovery of prices in SICI.
These numbers reflect the SICI premium versus the national price of EUR 6.4 versus EUR 2 last year. Abroad, you can see in Noting the generalized rise in prices in the Q2, in particular in countries where we have green certificate type mechanism call. Such as Romania, Poland Romania and Poland. I'm on Page 8 now. Call.
Here, as usual, a picture of the main driver per business of the EBITDA evolutions in the first half of the year. As we have said before, wind in Italy was up €8,000,000 due to mainly better electricity price at an higher value of incense, call, which as you know is inversely correlated with the last year very low electricity price. Conference. Wind abroad was down €80,000,000 mainly due to a drop in production, minus 19%. Conference that was exceptional in the Q1 2020.
Solar almost in line year on year with slightly lower volumes offset by better come. Plus 81%. Energy available in Lakes is 124 gigawatt hour, call, plus 10 gigawatt hour versus the end of 2020 and even higher versus historical average due to the easy rainfalls in the period. Conference. CCGT was down €15,000,000 as already commented due to mainly the white certificates phase out and the squeezing of spot focusing on the Q2 of the year.
EBITDA in the Q2 was €63,000,000 up
11% year on year. EBITDA
was up in Italy 10% and abroad 9%. Production was substantially in line year on year. As far as prices in Italy, beverage revenues the average unitary revenues were €129,000,000 conference. Abroad, it was €19 on average, strongly up year on year. So in the end, the rise year is correlated to a better scenario, both in Italy and abroad, coupled with a slight rise in production in France in the second quarter.
Call. No more to say here. Let's move on. On Page 10, I'm going to speak about Solar results. Conference.
EBITDA was almost flat year on year at EUR 22,000,000 for the following items: slightly lower production and higher unit revenue at €328 versus €3.11 in the second quarter 2020, year again as a result of the higher merchant price. Moving on, we are Now at Page 11, I'm going to translate the higher results. EBITDA was €30,000,000 81 percent up year on year, mainly as a result of higher volumes, plus 44%, coupled with a better price scenario and a higher value of incentives. Call. As such, Unit 3 revenues were €122 megawatt hour, higher than €115 megawatt hour in the quarter of 2020.
Moving on, I'm now at Page 12. I'm going to comment the results. EBITDA in the Q2 2021 was €9,000,000 down call. 37% year on year, which of course is a direct consequence of the end in 2020 of the 1st 10 years of validity of white certificate. Conference.
Let me elaborate a bit more on this. And there were 3 main effects: wide certificate results that account roughly minus €6,000,000 a better performance in MSC plus €5,000,000 and the comparison with the Q2 of 2020 conference. Benefit is affected negatively by €5,000,000 of positive one offs recorded in the Q2 of 2020 related
Conference.
Here is worth focusing on the first half of the year. We invested €311,000,000 versus €86,000,000 comes €86,000,000 over the same period last year. During the first half, CapEx are composed as follows: call. About EUR188,000,000 of M and A in wind and solar abroad. I'm speaking for an acquisition of a ready to build project in Sweden for €41,000,000 and the recent acquisition of wind and solar and solar capacity in France for 147,000,000 I remind you that the economical effect of this acquisition will start as second half of the year.
We expect a pro form a full year contribution to the EBITDA in the region of €11,000,000 call. About €109,000,000 is related to organic CapEx in wind, referred to construction activities mainly in UK, conference. About €4,000,000 is related to the refurbishment of Model 1 of the CGT plant in order to renew its eligibility for another 10 years period of life certificate as of 2022. Call. About EUR 10,000,000 are maintenance CapEx spread across all our technologies.
So moving to Page 15. Let's now move on to financial, commenting on profit and loss on a recurring basis. I've already commented on EBITDA. So going down to the profit and loss and looking at the Q2 of the year in particular. We have lower depreciation, minus cost.
That reflects the reduction in depreciation of some wind assets due to the end of amortization period, coupled with the review in depreciation plan of intangible index and the reduction in depreciation in the consolidated accounts of the hydro assets due to an increase of the amortization period without any tax Net financial expenses are at €8,000,000 versus €12,000,000 in the Q2 of 20 Thanks to a lower cost of gross debt, 1.7% versus 2.3%, mainly following the issuance of our 2nd green bond in September 2020 and those liability management exercise done in past years. Call. Taxes. Tax rate in the quarter was 23% against 12% in the Q2 2020. Taxation in the quarter benefited from Ace to the tune of €4,500,000 but taxes were negatively impacted by a tough comparison to the tune of €1,900,000 related to the positive effect on Europe in the Q2 2020.
Call. As a result of all of these, adjusted net profit amounted to €35,000,000 in the Q2 of 2021 versus €16,000,000 in the Q2 2020 and €100,000,000 for the first half of the year. Conference. And now on Page 16, finally, let's take a look at the cash flow statement, call. Net financial position for the first half.
Net financial debt closed at EUR 1,692,000,000 up by EUR 252,000,000 from the end of 2020. Starting from the left, we have our EBITDA come. EUR 281,000,000 the investment made over the period of EUR 311,000,000 change in working capital, conference. Euros 6,000,000 financial charges, euros 17,000,000 dividends of €113,000,000 and other items at minus €86,000,000 This item is negatively affected by over EUR 80,000,000 of mark to market of hedging future derivatives that reflects The strong increase of future commodity prices. Overall, the net financial position at the end of June accounts for a total amount of EUR 109,000,000 related to mark to market of derivatives.
So all these effects led to a net debt of call. EUR 1,692,000,000 I think I've touched on all the relevant items. Thank you for your conference. I will now hand over to Paolo for his final remarks.
Thanks, Michele. Here is a comment on 2021 guidance. Call. The good news here, things are better than are going better than previously expected. So we are conference.
In the position to revise upwards our guidance for the 2nd time in a row, more specifically. EBITDA, we revised it upward by EUR 15,000,000, say midpoint call. To take into account the better than expected results over the first half of the year as well as the stronger price scenario we see now for the remaining months of the year, coupled with the contribution that's important We expect from the newly acquired capacity in France consolidated as of July conference call. So all the benefits of this will be seen in the second half of the year. Conference.
CapEx. Here again, we are revising it up by almost EUR 200,000,000 call. To take into account the most recent M and A performed in late June for just under €150,000,000 call. While the reminder, like almost EUR 50,000,000 is linked to an acceleration in the execution call. We are adding on several organic projects from repowering in Italy to some developments in Sweden, UK, France and Poland.
So in the end, conference. Very positive news flow. Net financial position up by some 100 and €60,000,000 with respect to previous guidance, when looking at the midpoint, mainly as a consequence call. So Conference. We are all very pleased with both results and execution.
Thank you very much for listening, and we are now ready to take
Conference. Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer Conference Call. The first question is from Sara Piccinini with Mediobanca.
Please go ahead.
Call. Hi, good afternoon and thanks for the presentation. I have three questions. Conference. The first question is on the guidance.
So if you can please provide a call. This is contributing to the €15,000,000 midpoint guidance guide. And also, if you can give an indication of the level of captured prices that you expect for the period call. That's the first question. The second question is on the CCGP.
Can you remind us the contribution that you call. On the CCGT business from 2022 in terms of capacity market, that should be the years of the normalized contribution in terms of EBITDA for this business, so that would be helpful. And the final question is on the Call. Can you give an update in terms of authorizations in general? And if you have any color to provide regarding the latest auction.
Many thanks.
Okay, Sarah. Thank you for your questions. Conference. First of all, the guidance, yes, we raised €15,000,000 EBITDA and let me conference. Say more or less 1 third is due to the new installed capacity has already entered conference.
On stream since 1st July, because that was the date that we started consolidated call. The 80 megawatts we bought recently in France and 2 third mainly are due to the edged in 2021, but there is still a part floating. And the part The floating over the second half is exposed in the sense in a positive way to this scenario, which call. Maintain some buffers against the forwards because they're right now, the coming forward even for the second half of the year, incredibly high. And In our guidance, as usual, we keep some conservative approach.
Anyway, that's the question about 2021. Yes, it's true. We have also some productions They're hedged for 2022 and 2023 and which are basically in line with our hedging ratio. Now maybe I can remember exactly the figures, let's say, for 2022, we have more or less 70% already hedged at a price which is, let's say, between 50 €60 per megawatt hour. So if you take the average, you can't be wrong, maybe even a little bit comp.
Higher for 2023. And now say, I'm just looking at the numbers, Manuela is Showing me okay. No, the price is just below €60,000,000 for 2022 and 2023. And conference. Say, again, the scenario are proving to be much, much call.
I'll just give you some indication for 2021. There is time then to adjust the estimates for 2022 and conference. So we stick on the numbers we presented in our business plan for the time being. As far as the CCGT is concerned, Especially regarding the white certificates and capacity market, you are right. The plant last year call.
We participated to the auction for capacity market and resulted winner. So we had part of the in 2022 and 2023, which is subject to revenues from capacity markets, which are more or less in in the region of €10,000,000 per year. You can take this as a proxy. And on top of that, As you know, because it was already in our plan, we are finalizing just we are going to finalize the Investments for the module 1 for changing, say, the steam system with a very new call. Steam turbine, say in the next general shutdown, which is one of the longest in the history The plant, we're going
to start the
works early September and they're going to last a couple of months conference. Or maybe even more 70 days, something like that. So when you analyze the numbers of CCGT in 2021, you should have very clear in mind that this is a particular year. A year in the middle, conference. In the middle between two periods of white certificates and why not, you remember us before the Extreme revenues coming from capacity margin.
So I think should be seen 2021 for CCGT The third question was about the how it's Going, if I understood well, the our pipeline for especially for powering. And the answer is very good, Very good in the sense that but this was not a news. We had 143 megawatts already fully authorized because they got participate to make these assets, participate in the recent last auction, which was closed at the end of June. We analyzed the market and according to Our understanding, we are very optimistic because the capacity available in This option was massive, if I remember well, 2,300 megawatts because you know the mechanism of the decree, call. Which tend to reallocate the unsubscribed portion of the previous auction The next one and but the outcome of the auction will be released by call.
I have to underline. I don't know if it's worth it, but you know that The repowering and especially the projects, which like ours didn't participate to the Spalmann Gene TV call. Our program are, in my opinion, unfairly penalized in terms of tariffs because according to the decree, call. Our tariffs are subject to a further 5% discount compared to the base option. Call.
Given the very high quality of the projects, the return the economic return associated to these projects are Very satisfactory anyway, but we are trying to work with institution to explain them that there is no call. Reason, there is no sense in maintaining this clause because it's totally call. And fair, especially in a time where mersson prices are higher than the one awarded Sorry to have a little bit extended the question, but I took the chance call. To say this because I think it's very important. And apart from this 143 megawatts, conference.
Which participated to the auction, we are going we are moving forward even with other projects. And I mentioned in this chart, and this should come as a call. We obtained the Via Greenlight, the Via Commission Greenlight call. For a greenfield project, which was not included in our pipeline when presented the plan because that It was a wind farm project. We had been working, I don't know, call.
For 10 years, I don't know, something like that. And in the end, change in the layout, moving this and that, we obtained call. Finally, the Via and we are now expecting for the resolution of the authorization of the conference services. So I mean, the Conference. And we finger crossed that we expect to have the outcome of this conference.
In due time for in case it's approved to participate to the next auction in October. But also other projects for Repower are moving forward and moving faster than previously I think the new ministry for energy transition is quite aware to accelerate. So far, so good. I hope to have addressed your question.
Call. That's very clear. Many thanks. Sorry, really just a clarification to be sure. Regarding the CCGT, the contribution call.
From the energy efficiency certificates in 2022, can you give an indication of how much you
It's in the region of €20,000,000
Perfect. Many thanks.
Yes. That's Why I think as of 2022, the profitability of the plant should normalize call? Too hard to say the average of the last 3 years or something like that.
Call. Thanks a lot.
You're welcome.
The next question is from Roberto Letizia with Equita. Please go ahead. Call.
Thanks a lot for taking my questions. I would like to make a follow-up on Sarah's question on the repowering by focusing very quickly, if you Again, on the Sardinia repowering project, I was wondering if the most recent regulatory indication I'd like you, if possible, to elaborate a little bit more on the very big improvement on the financial charges from the Liabilities Management Program. And what's the level of interest strategy? Should we expect on the full year considering the advantages that you have obtained. And I was wondering if there is space and conditions conference.
Would it be possible to have an update on the timing of the disposal process? Markus speculating you entering in ask as you talks with Anna. I was wondering if you can provide for capital timing on when you expect it to be closed, whether within or without a player. You mentioned the Sicilian plant. I was asking myself when do you expect is going to be the COD of that plant call.
Because you're going to participate, I guess, maybe it's already 2022. Is that a possible Correct assumption. And if possible, a final general comment from you on the recent environment taken into consideration both the VF455 and Chingolani's indication just repeated today from newspaper call. About the new GSE decree on incentives, which will probably last 5 years, but today we saw also there, will possibly include the agricultural unused lands for solar assets that maybe can participate to tenders And if you feel this specific element is a positive for you. Thanks a lot.
Okay. Thank you, Roberto, for your questions. I try conference. I'll take note of them, and I follow the order. The first one was on repowering and especially on coming into our pipeline.
In reality, we are the least advantaged from this because we started up the process in Benefits or most of the benefits, but say, it's still positive. It's still positive for the country. It's still positive also for come from some of our projects because according to the simplifications, for instance, in case of repowering, conference. You don't need in our opinion that the lecture we gave to the replay, we still need the via Conference? Green light, even though there are other operators that are a little bit more aggressive in interpreting or in reading this decree.
But we think we still need the Via decree in order to go on. But for sure, For sure, this simplification, which allow you to construct The wind farm without having the authority that's in the The critical dimension of the plant is within certain threshold compared to the existing one. That's positive and that could accelerate some deployments of our projects as well. We call. Studying the application of the simplification decree to our projects in order conference to see if there is room to bring further megawatts in the next auction.
It's a little bit Too early to say, but we are working very much and very hard in order to call. We can bring another portfolio of assets to the next option. And please consider that this would be conference. Totally ahead of the schedule of the plan, because even the participation of the 143 We're already ahead of the timing we expected in the business plan. So we are not Changing the targets, but I'm saying that those targets can be deployed maybe faster than expected.
In terms of Financial charges, yes, you are right. It's quite amazing to see that the financial charges are going down conference. While the net financial position is a little bit higher on average than last year, but this is the results of an amazing job done conference by our finance department and here beside me, there is Michele, who is the main actor of this. Call. You know, we issued EUR 1,100,000,000 of green bonds over the last 24 months and the last 1 was in September, October last year, and we are now reaping the benefits of all these moves.
Call. And you ask also if there is still room to do something. Yes. I think if you I think you I read the press release today and the Board has approved the has given us The power, say, to explore further opportunity from this point of view. And for sure, yes, we have
Okay. So why not But did you include sorry, sorry conference. Did you include these potential additional benefits already in the plan only in case you get additional benefit that would come on top?
Call. No, no, no, no. It's always as we always did, we raised call. So the idea is always to associate to the issuance of a green bond, call. The closure or liability program call as you want in order to call.
Take the settlement between the cost of the two instruments. So it's not additional debt. I hope that was the question and my answer was
I was asking Actually, if did you imagine already those additional EMTN and issuance at the time of the plan? Call. Or in case the additional lower cost of debt will come on top of the strategy targets?
Conference. In part, the addition can be used for a reason. First, to finance the
conference. That we
have in our business plan for sure. And second, we have some possibility to refinance some existing facilities. Just to mention one, we have just a project series of assets in France and that has a project financing side. And so we can leverage on our financial capability to refinance this asset, this project facility with that capital market at better condition. That's just an example.
Or we can use this debt capital market funding to fund our new asset in Sweden that is under construction right now. So this is in line with our business plan and it doesn't not mean any additional debt in comparison to what we have conference. In our business plan, in line of principle.
Okay. Then you asked for an call. Update on the process, say here, I can just say what is written in our press We are moving forward. We enter in the very last phase. And but There is no confidential agreement, so I can say more than that.
But confirming our willingness conference. To proceed with this asset rotation because the strategic idea behind all this is the call. Repositioning of ERG as a pure player in the wind and solar and maybe storage. And conference. And I can tell you that we are going well and we are again positive call.
The final outcome will be very satisfactory for us. Call. Let's see. Then you asked for maybe call. Code for powering, say
No, it was the code for the Sicilian the new Sicilian recently authorized plant, the one you mentioned on top That you just got it, when you expect the COD?
You are right. So it depends, first of all, by call. The fact that for instance, the park will be fully authorized in due time call. It's a precondition, the fact that the plant is awarded with a tariff, because we want to be quasi regulated as we call. Define the strategy.
So the idea is to first make the project fully authorized with Autodesia Serna Monica conference. And then to bring it to the next auction. And but if I remember well, the planning in 2023 2020 3, the commercial operation date. And usually, but it's almost conference. The bottleneck is the connection.
So for conference? Took lots of time. If not, the commercial operation would have been much earlier. Call. And finally, you asked and I signed just agriculture.
So I tried to figure out The question is about the fact that the Ministry of Energy Transaction is pushing for Solar on agriculture territory for the time being they gave some green light For the vertical or so called vertical solar, which means that this combined with agriculture. And This on one hand will bring or should bring more megawatts to the So they will increase the competition even though according to our analysis, there is not very much Of that kind, the game changer would be they gave they would give the green light conference. For solar, normal solar, traditional photovoltaic on agricultural Soils, but it's not the case at least so far. But on the other hand, call. I tried to give it give to it a positive lecture in the sense that we as well, call.
We are interested in understanding more about solar because you know that out of targeting for 2025, one third will come should come from solar. So we are now starting The opportunities even in Italy for solar and so we are monitoring also the regulatory evolution in order to be ready to seize any opportunity may arise. Call. I think I completed the list of yours.
Yes, you did. Thanks a lot.
Thanks to you, Robert.
Call. Mr. Mehdi, there are no more questions registered at this time.
Perfect. Just perfect. Thank you very much call. Thank you for the attention and I hope and I wish you a very good holiday and see you probably in September.